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Item 8. Financial Statements and Supplementary Data

2024-03-29 compared with 2023-03-31 · 687 added, 462 removed, 391 unchanged (75% of the section changed)

Financial Statements and Supplementary Data

NRX Pharmaceuticals, Inc.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB firm ID.

Report of Independence Registered Public Accounting Firm (PCAOB firm ID.

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of:

NRX Pharmaceuticals, Inc.:

Opinion on the Financial Statements

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

and subsidiary (the “Company”) as of December 31, 2023, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficit) and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

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

As discussed in Note 2 to the consolidated financial statements, the Company has no revenues, has suffered operating losses since inception and in fiscal 2023 has a net loss of $30.2 million and cash used in operations of $21.7 million.

The Company also had an accumulated deficit, stockholders’ deficit and working capital deficit as of December 31, 2023 of $253.2 million, $11.7 million and $12.2 million, respectively.

These matters raise substantial doubt about the Company’s ability to continue as a going concern.

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

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

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

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

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

Fair Value of the Convertible Note

As described in Note 3 “Convertible Note Payable” and in Notes 7 and 11 to the consolidated financial statements, the Company uses a Monte Carlo simulation model to estimate the fair value of its convertible note.

We identified the valuation of fair value of the convertible note as of December 31, 2023 as a critical audit matter.

Auditing management’s assumptions and estimates relating to the Monte Carlo simulation model is especially challenging, complex and subjective.

The primary procedures we performed to address this critical audit matter included (a) gained an understanding of management’s process to develop an estimate of the fair value of the convertible note, (b) tested the data and assumptions used as inputs to the Monte Carlo simulation model for reasonableness, (c) computed an independent expectation of the fair value of the convertible note and (d) compared management’s valuation to our independent expectation.

We agreed with management’s estimate.

/s/ Salberg & Company, P.A .

SALBERG & COMPANY, P.A.

We have served as the Company’s auditor since 2023 .

Boca Raton, Florida

March 29, 2024

2295 NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431-7326

(561) 995-8270 • Toll Free:

(866) CPA-8500 • Fax:

(561) 995-1920

www.salbergco.com • info@salbergco.com

Member National Association of Certified Valuation Analysts • Registered with the PCAOB

Member CPAConnect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

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

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

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

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

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

generally accepted accounting principles.

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March 31, 2023

PART I FINANCIAL INFORMATION

Financial Statements

NRX PHARMACEUTICALS, INC.

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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

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Total liabilities

Commitments and Contingencies (Note 8)

Stockholders’ (deficit) equity:

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

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

Series A convertible preferred stock, $ 0.001 par value, 12,000,000 shares authorized;

3,000,000 and 0 shares issued and outstanding at December 31, 2023 and 2022, respectively

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

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Additional paid-in capital

Accumulated other comprehensive loss

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 consolidated financial statements.

NRX PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share data)

Years ended December 31,

Operating expenses:

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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

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Total other (income) expenses

Loss before tax

Provision for income taxes

Deemed dividend

Deemed dividend - warrants

Net loss attributable to common stockholders

Comprehensive loss:

Change in fair value of convertible note attributed to credit risk

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.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY

(in thousands, except share data)

Accumulated Other

Preferred Stock

Series A Preferred Stock

Comprehensive

Stockholders’

Balance - December 31, 2020

Common stock issued

Reclassification of settlement liability upon issuance of warrant

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

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

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

Common stock issued for consulting services

Stock-based compensation

Income (Loss)

Equity (Deficit)

Balance - December 31, 2021

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Retired Earnout Shares

( 1,247,930 )

Stock-based compensation

Balance December 31, 2022

Common stock and warrants issued, net of issuance costs $2,519

Preferred stock and warrants issued, net of issuance costs $27

Change in fair value of convertible note attributed to credit risk

Shares issued as repayment of principal and interest for convertible note

Common stock issued to settle GEM settlement liability

Adjustment for deferred offering cost settlement

Stock-based compensation

Balance - December 31, 2023

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

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Stock-based compensation

Gain on extinguishment of debt

Change in fair value of warrant liabilities

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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

Increases (decreases) in operating assets and liabilities:

Prepaid expenses and other assets

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Proceeds from stock option exercise

Proceeds from issuance of common stock for exercise of warrant

Effect of Merger, net of transaction costs

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

Repayment of note payable

Repayment of convertible note

Repayment of insurance loan

Proceeds from issuance of insurance loan

Proceeds from issuance of Series A preferred stock and warrants issued in private placement, net of issuance costs

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

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Supplemental disclosure of cash flow information:

Cash paid for interest

Cash paid for taxes

Non-cash investing and financing activities

Reclassification of settlement liability upon issuance of warrant

Issuance of common stock as principal and interest repayment for convertible notes

Issuance of common stock warrants as offering costs

Extinguishment of Paycheck Protection Program Loan

Issuance of common stock for consulting services

Issuance of common stock for settlement of accrued liability

The accompanying notes are an integral part of these 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”), Big Rock Merger Corp., a Delaware corporation and wholly-owned, direct subsidiary of BRPA (“Merger Sub”), pursuant to which Merger Sub was merged with and into NeuroRx, with NeuroRx surviving the Merger.

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

Upon the closing of the Merger, we changed our name to NRX Pharmaceuticals, Inc., with the stockholders of NeuroRx becoming stockholders of NRX Pharmaceuticals, Inc.

Unless the context suggests otherwise, references to “NRx Pharmaceuticals,” “NeuroRx”, “NRXP,” “we,” or the “Company” refer to NRX Pharmaceuticals, Inc.

and, where appropriate, its subsidiaries.

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company's foundation product, NRX-101 (D-cylcoserine/Lurasidone), for the treatment of bipolar depression in patients with suicidality, has been awarded Fast Track designation, Breakthrough Therapy designation, a Special Protocol Agreement, and a Biomarker Letter of Support by the U.S.

The Company's foundation product, NRX-101 (D-cycloserine/Lurasidone), for the treatment of bipolar depression in patients with suicidality, has been awarded Fast Track designation, Breakthrough Therapy designation, a Special Protocol Agreement, and a Biomarker Letter of Support by the U.S.

Food and Drug Administration (the “FDA”).

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and foreign patents, including a Composition of Matter patent (U.S.

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

10,583,138) that was transferred to NRx Pharmaceuticals by Glytech, LLC (see Note 13).

The Company’s drug development activities have expanded from its original focus on development of NRX-101, a fixed dose combination of D-cycloserine (DCS) and lurasidone for the treatment of suicidal bipolar depression to encompass the development of NRX-101 for the treatment of Chronic Pain and Complicated Urinary Tract Infection (cUTI) and the development of intravenous ketamine (NRX-100) for the treatment of suicidal depression.

These additional indications have been added as the Company has gained access to clinical trials data funded by governmental entities in France and potentially in the United States which has the potential to afford the Company potential safety and efficacy data on key indications at low cost to shareholders.

Going Concern

As of December 31, 2023, the Company had $ 4.6 million in cash.

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

With the completion of enrollment in its clinical trial of NRX-101 for bipolar depression, the Company anticipates a reduction in its monthly cash expenditure.

Since inception, the Company has experienced net losses and negative cash flows from operations each fiscal year and has a working capital deficit at December 31, 2023.

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

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

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

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

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

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

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

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

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

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

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

Payments may be made by the Company, at the Company’s option, (a) in cash with a 10% premium for the amount redeemed, (b) by paying the redemption amount in the form of shares of Common Stock with the number of redemption shares being equal to the portion of the applicable redemption amount divided by the Redemption Conversion Price or (c) a combination of cash and shares of Common Stock.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Company’s ability to support its ongoing capital needs is dependent on its ability to continue to raise equity and/or debt financing, which may not be available on favorable terms, or at all, in order to continue operations.

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

The Company plans to pursue additional equity or debt financing or refinancing opportunities in 2024 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 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 Company cannot make any assurances that additional financing will be available to it and, if available, on acceptable terms or at all which could negatively impact the Company’s business and operations and could also lead to a reduction in the Company’s operations.

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

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

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

From February 20, 2024, to March 11, 2024, the Company sold 345,829 shares of common stock under the 2020 At The Market (“ATM”) offering at a range of $0.46 - $0.71 per share, for which the Company received net proceeds of $0.2 million, after deducting commissions, fees and expenses.

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On February 27, 2024, NRx Pharmaceuticals, Inc.

entered into an underwriting agreement (the “Underwriting Agreement”) with EF Hutton LLC (the “Representative”), as the representative of the several underwriters named therein (the “Underwriters”), relating to an underwritten public offering (the “February 2024 Offering”) of 5,000,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (“Common Stock”).

The public offering price for each share of Common Stock was $0.30 and the Underwriters purchased the shares of Common Stock pursuant to the Underwriting Agreement at a price for each share of Common Stock of $0.276.

Pursuant to the Underwriting Agreement, the Company also granted the Representative a 45-day option to purchase up to an additional 750,000 shares (the “Option Shares”) of the Common Stock on the same terms as the Shares sold in the Offering.

On February 28, 2024, the February 2024 Offering closed with gross proceeds of $1.5 million and net proceeds to the Company of $1.3 million after offering costs.

On March 5, 2024, the underwriters of the previously announced underwritten public offering of NRx Pharmaceuticals, Inc.

exercised their option in accordance with the Underwriting Agreement, dated February 27, 2024, by and between the Company and EF Hutton LLC, as representative of the several underwriters named therein, to purchase up to an additional 750,000 shares of the Company’s common stock, par value $0.001 per share, at a public offering price of $0.30 per share (the “Overallotment Exercise”).

The Overallotment Exercise closed on March 6, 2024.

Aggregate net funds received from the transaction were approximately $0.2 million.

On February 29, 2024, we entered into a securities purchase agreement with an investor providing for the issuance and sale of 2,700,000 shares of Common Stock and warrants to purchase up to 2,700,000 shares of Common Stock (the “February Warrants”) at a price of $0.38 per share of Common Stock and accompanying warrant, which represents a 26.7% premium to the offering price in February 2024 Public Offering .

The Common Stock and the February Warrants were offered pursuant to a private placement (the “February 2024 Private Placement”) under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

The February Warrants will have an exercise price of $0.38 per share, are initially exercisable beginning six months following the date of issuance, and will expire 5 years from the date of issuance.

The aggregate net cash proceeds to the Company from the February 2024 Private Placement were approximately $1.0 million.

The accompanying 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 consolidated 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

Basis of Presentation

The Company’s financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) as determined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

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.

NeuroRx was determined to be the accounting acquirer based on the following predominant factors:

● NeuroRx’s shareholders have the largest portion of voting rights in the Company;

● the Board and Management are primarily composed of individuals associated with NeuroRx;

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

The consolidated 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.

Basis of Presentation and Principles of Consolidation

The Company’s financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

The consolidated financial statements include the accounts of NRX Pharmaceuticals, Inc.

and its wholly owned subsidiary.

All intercompany transactions and balances have been eliminated in consolidation.

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 convertible note payable, Earnout Cash liability, valuation of common and preferred stock, stock options, warrants, and the valuation allowance of deferred tax assets resulting from net operating losses.

The preparation of consolidated 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 consolidated financial statements and the reported amounts of expenses during the reporting period.

The most significant estimates in the Company’s consolidated financial statements relate to the fair value of the convertible note payable, earnout cash liability, fair value of stock options and warrants, and the utilization of deferred tax assets.

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

Actual results may differ materially and adversely from these estimates.

Actual results may differ

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

materially and adversely from these estimates.

To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

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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.

As of December 31, 2023 the Company’s cash and cash equivalents balance within money market accounts was in excess of the U.S.

federally insured limits by $4.1 million.

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.

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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.

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

The Company accounts for revenue under ASC 606, Revenue for Contract with Customers (“ASC 606”) or other accounting standards for revenue not derived from customers.

Arrangements may include licenses to intellectual property, research services and participation on joint research committees.

The Company evaluates the promised goods or services to determine which promises, or group of promises, represent performance obligations.

In contemplation of whether a promised good or service meets the criteria required of a performance obligation, the Company considers the stage of research, the underlying intellectual property, the capabilities and expertise of the customer relative to the underlying intellectual property, and whether the promised goods or services are integral to or dependent on other promises in the contract.

When accounting for an arrangement that contains multiple performance obligations, the Company must develop judgmental assumptions, which may include market conditions, timelines and probabilities of regulatory success to determine the stand-alone selling price for each performance obligation identified in the contract.

The Company enters into contractual arrangements that may include licenses to intellectual property and research and development services.

When such contractual arrangements are determined to be accounted for in accordance with ASC 606, the Company evaluates the promised good or services to determine which promises, or group of promises, represent performance obligations.

The License Agreement with Alvogen as further discussed in Note 6 below is accounted for in accordance with ASC 606.

In accordance with ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, it performs the following five steps:

identify the contract(s) with a customer;

identify the performance obligations in the contract;

determine the transaction price;

allocate the transaction price to the performance obligations within the contract; and

recognize revenue when (or as) the entity satisfies a performance obligation.

The Company only applies the five-step model to contracts when it determines that it is probable it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within the contract to determine whether each promised good or service is a performance obligation.

The promised goods or services in the Company’s arrangements typically consist of a license to intellectual property and research services.

The Company may provide options to additional items in such arrangements, which are accounted for as separate contracts when the customer elects to exercise such options, unless the option provides a material right to the customer.

Performance obligations are promises in a contract to transfer a distinct good or service to the customer that (i) the customer can benefit from on its own or together with other readily available resources, and (ii) is separately identifiable from other promises in the contract.

Goods or services that are not individually distinct performance obligations are combined with other promised goods or services until such combined group of promises meet the requirements of a performance obligation.

The Company determines transaction price based on the amount of consideration the Company expects to receive for transferring the promised goods or services in the contract.

Consideration may be fixed, variable, or a combination of both.

At contract inception for arrangements that include variable consideration, the Company estimates the probability and

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extent of consideration it expects to receive under the contract utilizing either the most likely amount method or expected amount method, whichever best estimates the amount expected to be received.

The Company then considers any constraints on the variable consideration and includes in the transaction price variable consideration to the extent it is deemed probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The Company then allocates the transaction price to each performance obligation based on the relative standalone selling price and recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied.

For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress.

The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

The Company records amounts as accounts receivable when the right to consideration is deemed unconditional.

When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded as deferred revenue.

The Company’s revenue arrangements include the following:

Milestone Payments:

At the inception of an agreement that includes milestone payments, the Company evaluates each milestone to determine when and how much of the milestone to include in the transaction price.

The Company first estimates the amount of the milestone payment that the Company could receive using either the expected value or the most likely amount approach.

The Company primarily uses the most likely amount approach as that approach is generally most predictive for milestone payments with a binary outcome.

Then, the Company considers whether any portion of that estimated amount is subject to the variable consideration constraint (that is, whether it is probable that a significant reversal of cumulative revenue would not occur upon resolution of the uncertainty.) The Company updates the estimate of variable consideration included in the transaction price at each reporting date which includes updating the assessment of the likely amount of consideration and the application of the constraint to reflect current facts and circumstances.

For arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Research Services:

The Company is incurring research costs in association with the Alvogen agreement.

After the First Milestone Payment (as defined in Note 6 below), the Company will be reimbursed for certain costs incurred related to reasonable and documented out-of-pocket costs for clinical and non-clinical development activities.

The Company will recognize revenue for the reimbursed costs when the First Milestone Payment contingencies have been achieved and the Company has an enforceable claim to the reimbursed costs.

See Note 6, “Alvogen Licensing Agreement”, for further information on the application of ASC 606 to the License Agreement.

Research and Development Costs

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Research and development costs are expensed as incurred.

Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received.

Advance payments

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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.

Non-cancellable Contracts

The company may record certain obligations as liabilities related to non-cancellable contracts.

If appropriate the offsetting costs may be recorded as a deferred cost asset.

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.

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 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.

expected term) 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 equity and volume volatility based on the historical volatility of both our common stock price and common stock trading volume 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.

The risk-free interest rate is determined based on 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.

Interest expense is included within the fair value of the convertible note payable.

Management believes those assumptions are reasonable but if these assumptions change, it could materially affect the fair value.

Stock-Based Compensation

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Stock-based awards with graded-vesting schedules are recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award.

The Company estimates the fair value of stock option grants using the Black-

Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

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.

The Company estimates the fair value of restricted stock award grants using the closing trading price of the Company’s common stock on the date of issuance.

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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(“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.

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

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

The fair value of the Private Placement Warrants (as defined below) was estimated using a Black Scholes valuation approach and the fair value of the Substitute Warrants (as defined below) was estimated using a modified Black Scholes valuation approach which applies a probability factor based on the probabilities of achieving earnout cash milestone and/or earnout shares milestone at each reporting period (see Notes 9 and 11).

Modification of Warrants

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

Preferred Stock

In accordance with ASC 480, Distinguishing Liabilities from Equity , the Company’s Series A Preferred Stock is classified as permanent equity as it is not mandatorily redeemable upon an event that is considered outside of the Company’s control.

Further, in accordance with ASC 815-40, Derivatives and Hedging – Contracts in an Entity’s Own Equity , the Series A Preferred Stock does not meet any of the criteria that would preclude equity classification.

The Company concluded that the Series A Preferred Stock is more akin to an equity-type instrument than a debt-type instrument, therefore the conversion features associated with the convertible preferred stock were deemed to be clearly and closely related to the host instrument and were not bifurcated as a derivative under ASC 815.

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

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When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority.

The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well

as consideration of the available facts and circumstances.

The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.

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

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Loss Per Share

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

Diluted 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.

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Restricted stock awards

Convertible preferred stock

Common stock warrants

Earnout Shares

Earnout Shares from exercised Substitute Options and Substitute Warrants

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

Reverse Recapitalization

As discussed in Note 1, on May 24, 2021 (the “Closing Date”), BRPA 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 consists of 50,000,000 shares (“Closing Consideration”) of BRPA common stock, par value $ 0.001 per share (“Common Stock”).

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

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

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

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

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

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

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

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

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

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

The following table reconciles the elements of the Merger to the Consolidated Statement of Cash Flows for the year ended December 31, 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 Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the year ended December 31, 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 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 year ended December 31, 2023, there were no new accounting pronouncements or updates to recently issued accounting pronouncements 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

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Other prepaid expenses

Prepaid legal expenses

Other current receivables

Prepaid manufacturing expenses

Prepaid legal expenses

Total prepaid expenses and other current assets

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Accrued and Other Current Liabilities

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Accrued and other current liabilities:

Other accrued expenses

Professional services

Accrued research and development expenses

Accrued employee expenses

Professional services

Other accrued expenses

Total accrued and other current liabilities

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.

Alvogen Licensing Agreement

On June 2, 2023, the Company entered into the License Agreement with Alvogen.

The Company and Alvogen are referred to below individually as a “Party” and collectively as the “Parties.”

License Grant

Under the License Agreement, the Company granted Alvogen an exclusive (even as to the Company and its affiliates) worldwide, transferable and sublicensable license under certain intellectual property (including patents, know-how and trademarks) owned or controlled by the Company to develop (with certain limitations), manufacture, and commercialize the Company’s candidate therapeutic product, NRX-101, for the treatment of bipolar depression with suicidality.

The term of the license is, on a country-by-country basis, 20 years from the first commercial sale of NRX-101 in such country, extendable by Alvogen for a two-year period upon its request made prior to the expiration of such 20-year period.

During the term of the License Agreement, the Parties agree (on behalf of themselves and their affiliates) not to research, develop, seek or obtain any regulatory approval for the manufacturing, marketing, sale, or other commercialization of any product containing a fixed dose combination of D-cycloserine and lurasidone in the treatment of bipolar depression with suicidality, nor to authorize or assist (including by investing in or otherwise providing funding to) any third party to do so.

During the term, the Company is permitted to develop additional products containing D-cycloserine in combination with one or more other active antidepressant or antipsychotic ingredients for use outside of the field of treatment of bipolar depression with suicidality, such as in post-traumatic stress disorder (PTSD) or chronic pain in depression, in which case, if the Company wishes to license rights to develop or commercialize such additional products or indications, Alvogen has a right of first negotiation to obtain such a license.

Term and Termination

The License Agreement will remain in force until the earlier to occur of (i) 20 years following the first commercial sale of NRX-101 on a country-by-country basis (which may be extended for a two-year period at Alvogen’s request), and (ii) the date that the agreement is terminated under its early termination provisions.

Early termination grounds include, subject to applicable cure periods, a material breach of agreement by the other Party, the bankruptcy or insolvency of the other Party, or a party’s reasonable belief that there is an unacceptable risk for harm in humans based upon preclinical safety data or the observation of serious adverse effects in humans.

In addition, Alvogen has the right to early termination if (i) the phase 2 study relating to NRX-101 is not completed and/or a successful read out from the study does not occur by March 31, 2024, or (ii) there is no completion of a Type B meeting with the FDA by March 31, 2024.

Alvogen may also terminate upon sixty (60) days’ prior written notice to the Company at any time after the First Milestone Payment (as defined below) has been made.

The Company also has the right to

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terminate the License Agreement if the current phase 2 study successfully concludes prior to March 31, 2024 and the Type B meeting with the FDA is completed by March 31, 2024 and Alvogen does not notify the Company within 60 days that it wishes to proceed with the development of NRX-101 or has not paid the First Milestone Payment.

Upon expiration or termination of the License Agreement, the intellectual property rights licensed to Alvogen under the License Agreement will revert to the Company, and all other rights and obligations of each of the parties will immediately cease, except for outstanding amounts owed as of the time of such expiration or termination.

Upon termination, Alvogen will grant to the Company an exclusive irrevocable, perpetual, worldwide, royalty-bearing, sublicensable, transferrable license under the NDA rights to develop, manufacture, have manufactured, or commercialize the product in the field of bipolar depression with suicidality.

Such reversion license would be granted by Alvogen to the Company in exchange for an equitable royalty payable by the Company to Alvogen that would be negotiated and agreed in good faith by the parties within 30 business days of such matter being presented to them.

Milestone Payments

In exchange for the license grant and the participation of the Company in the development, regulatory and commercial activities described below, Alvogen was obligated to pay the Company an initial $ 9 million cash payment upon the later of a positive data read-out from the Company’s ongoing Phase 2b/3 clinical trial and completion of the Type B meeting with the U.S.

FDA (the “First Milestone Payment”).

In February 2024, the parties executed an amendment accelerating payment of $5 million related to the First Milestone Payment, with the remaining $4 million due upon the original agreement’s terms.

Refer to Note 14 for more information regarding the amendment.

A second milestone payment of $ 5 million (the “Approval Payment”) is due upon Alvogen’s receipt of a copy of the FDA’s notice of NDA Approval for Product with the label indication for the treatment of bipolar depression with sub-acute or acute suicidality.

Additional bonus milestone payments of increasing amounts up to $ 315 million will be payable upon the achievement of net sales targets measured over the trailing four quarters.

Alvogen also will pay royalties (as described below) to the Company based on the net sales of NRX-101, with a reduction in royalties on a country-by-country basis upon expiration or termination of the Company’s patent protection on the NRX-101 composition.

Subject to certain adjustments for sublicensing and other deductions, commencing on the first commercial sale of NRX-101, Alvogen has agreed to pay to the Company tiered royalties calculated on the basis of a percentage, ranging from the low to mid-teens, of annual net sales of NRX-101 measured over the trailing four quarters.

In addition, if Alvogen sublicenses NRX-101 in any country other than the U.S.

(in which the royalty rates described above will apply), Alvogen will pay the Company a percentage of any and all consideration received by Alvogen or its affiliates from sublicensing any of the rights granted.

Development and Regulatory Activities

Prior to payment of the First Milestone Payment by Alvogen to the Company, each Party has agreed to perform, at its own cost, certain development activities using diligent efforts and in accordance with applicable then-current good manufacturing and other applicable practices, laws and regulations, with the goal of supporting the preparation and filing of an NDA and obtaining regulatory approval for NRX-101.

Until the payment of the First Milestone Payment, the Company has the sole right to control and responsibility for all regulatory matters relating to NRX-101, at its sole cost and expense, and the Company shall own all regulatory materials and own all worldwide regulatory approvals for NRX-101.

After the payment of the First Milestone Payment, Alvogen has the sole right and responsibility, at its cost and expense, for all regulatory matters relating to NRX-101, and Alvogen will own all regulatory materials and all regulatory approvals for the product in the licensed territory (and the Company will assign all of its rights in any regulatory materials to Alvogen).

Each party has committed to reasonably cooperate with the other in carrying out the development and regulatory

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activities outlined in the development plan.

In addition, Alvogen has agreed to fund the next registrational study of NRX-101 in the field of treatment of bipolar depression with suicidality.

Upon NDA approval of the product in the U.S., Alvogen has agreed to use diligent efforts to commercialize NRX-101 in the U.S., and, for 24 months following such approval, in other countries in the territory upon regulatory approval in each such country.

If Alvogen does not commercialize NRX-101 in a country outside of the U.S.

in the foregoing 24-month period, then the license may revert back to the Company with respect to such country and the Company would pay Alvogen tiered royalties in the low to mid-teens based on net sales of NRX-101 in such country.

The Parties will also enter into a pharmacovigilance agreement to ensure compliance with safety reporting requirements of all applicable regulatory agencies globally with respect to the commercialization of NRX-101.

Commercial Activities

Under the License Agreement, the Company is responsible for and will control the manufacturing of the NRX-101 commercial product and for qualification and regulatory-related activities necessary for the manufacture of the product.

The Parties intend to enter into a clinical supply agreement (and a related quality agreement) on reasonable and customary terms, in which the Company will supply Alvogen raw materials and/or finished product without any markup to the future supply price from the Company’s current contract manufacturer.

Similarly, prior to initiation of the first Phase 3 study for the commercial product, the Parties will enter into a commercial supply agreement (and a related quality agreement) on reasonable and customary terms, in which the Company will supply Alvogen raw materials and/or finished product without any markup to the future supply price from NRx’s current contract manufacturer.

At any time after NDA approval, Alvogen may elect to manufacture, fill and package the product itself or through a third-party supplier subject to the prior approval of the Company.

In such case, the parties may also work together to establish a written manufacturing technology transfer plan to transfer manufacturing technology from the Company or the Company’s contract manufacturer to Alvogen or Alvogen’s designated third party supplier.

The Company has agreed, as a part of its manufacturing commitments, to make available its qualified technical personnel to consult with Alvogen to complete transfer of the manufacturing technology if required under the License Agreement.

Following NDA approval, Alvogen will control and be responsible for advertising, marketing, promotion and marketing, pricing, and terms of sale for the product, all at Alvogen’s sole expense.

Alvogen has committed to not shift, allocate, price or discount sales of the product for the purpose of reducing or disadvantaging the net sales of the product in order to reduce the payments owed by Alvogen to the Company under the License Agreement.

As of December 31, 2023, the Company has not achieved any milestones nor recognized any revenue associated with the License Agreement (see Note 14).

Convertible Note

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

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

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

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

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

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

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

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

Beginning May 1, 2023, in the event (a) the daily dollar trading volume of the Common Stock of the Company on any given trading day is at least fifty percent (50%) greater than the lower of (i) the median daily dollar trading volume over the previous ten (10) trading days or (ii) the daily dollar trading volume on the trading day immediately preceding the date of measurement or (b) if the closing trade price on any given trading day is at least thirty percent (30%) greater than the Nasdaq Minimum Price (as defined in the Note), then the Lender will be entitled to redeem over the following ten (10) trading days an amount of indebtedness then outstanding under the Note equal to twice (2x) the monthly redemption amount of $1.0 million solely by payment by Common Stock, subject to maximum percentage (4.99%) and other ownership limitations under the SPA and the Note.

On November 4, 2022, we issued an 9 % redeemable promissory note (as amended, the “Note”) to Streeterville Capital, LLC, a Utah limited liability company (“Streeterville”), for an aggregate principal amount of $ 11.0 million.

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

The Note carries an original issue discount of $ 1.0 million which was deducted from the principal balance of the Note.

The net proceeds from the issuance of the Note was $ 10.0 million 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 $ 1.0 million of the outstanding balance of the Note per month starting six months after the issuance date.

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

(i) in cash with a 10 % premium for the amount redeemed, (ii) by paying the redemption

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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 the monthly redemption amount of $ 1.0 million solely by payment by stock, if permitted under the agreement, subject to the Maximum Percentage (as defined in the Note) and other ownership limitations.

On March 30, 2023, the Company entered into an Amendment to the Note (the “First Amendment”), pursuant to which the Maximum Percentage was set at 9.99 % of the number of shares of Common Stock outstanding on a given date.

On July 7, 2023, the Company entered into Amendment #2 to the Note with Streeterville (the “Second Amendment”).

Pursuant to the Second Amendment, the Company agreed to amend the redemption provisions of the Note to provide that the Company would pay to Streeterville an amount in cash equal to $ 1,800,000 on or before July 10, 2023, which amount was paid on July 10, 2023.

In addition, the Company agreed that, beginning on or before July 31, 2023, and on or before the last day of each month until December 31, 2023 (the “Minimum Payment Period”), we would pay Streeterville an amount equal to $ 400,000 in cash (a “Minimum Payment”), less any amount satisfied by the delivery of Redemption Conversion Shares (as defined below).

Notwithstanding the foregoing, Streeterville may also submit a request for redemption of up to an aggregate of $ 1,000,000 per month (the “Maximum Monthly Redemption Amount” and, together with the Minimum Payment Amount, the “Redemption Amounts”) in accordance with the terms of the Note.

However, the portion of each Minimum Payment that is not satisfied by the delivery of Redemption Conversion Shares is the maximum amount of cash we will be required to pay in accordance with the Second Amendment during the Minimum Payment Period.

The redemption of the Maximum Monthly Redemption Amount in excess of the Minimum Amount may be satisfied by the delivery of additional Redemption Conversion Shares.

Moreover, the Redemption Premium (as defined in the Note) will continue to apply to the Redemption Amounts.

This amendment was deemed to be a debt modification in accordance with ASC 470, Debt, which will be accounted for prospectively.

The modification does not result in recognition of a gain or loss in the consolidated statement of operations but does impact interest expense recognized in the future.

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

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Therefore, we estimate our expected future volatility based on the actual volatility

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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

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

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

December 31, 2022

For the years ended December 31, 2023 and 2022, the Company recorded a change in fair value of the Note of approximately $2.7 and $ 0.5 million, respectively, which was recognized in other (income) expense on the Consolidated Statement of Operations as a result of the Company’s election of the fair value option.

During the year ended December 31, 2023, the Company made cash interest payments on the Note of approximately $0.9 million, including $0.1 million of redemption premiums and issued shares of Common Stock as interest repayment of $ 0.2 million.

During the year ended December 31, 2023, the Company made cash principal repayments on the Note of approximately $2.3 million, and issued shares of Common Stock as principal repayment of $0.7 million.

As of December 31, 2023, the Note carried a remaining principle balance of $8.3 million.

The following table presents the Convertible Note as of December 31, 2023 and 2022 (in thousands):

Par value of the Note

Debt discount, net

Carrying value of the Note

Change in fair value of Note

Unamortized debt discount

Conversions and repayments of principal and interest (shares and cash)

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

Fair value adjustment through earnings

Fair value adjustment through accumulated other comprehensive loss

Total carrying value of Note

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Convertible note payable, net of current portion

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies

Sarah Herzog Memorial Hospital License Agreement

The Company is required to make certain payments in order to maintain the SHMH license agreement, including:

Milestone Payments

End of Phase I Clinical Trials of Licensed Product

End of Phase II Clinical Trials of Licensed Product

End of Phase III Clinical Trials of Licensed Product

First Commercial Sale of Licensed Product in U.S.

First Commercial Sale of Licensed Product in Europe

Annual Revenues Reach $100,000,000

The milestone payments due above may be reduced by 25% in certain circumstances, and by the application of certain sub-license fees.

As of December 31, 2023, $0.4 million in payments have been made.

A royalty in an amount equal to:

(a) 1% of revenues from the sale of any product incorporating a Licensed Product when at least one Licensed Patent remains in force, if such product is not covered by a Valid Claim (as defined below) in the country or region in which the sale occurs, or (b) 2.5% of revenues from the sale of any Licensed Product that is covered by at least one Valid Claim in the country or region in which such product is manufactured or sold.

A “Valid Claim” means any issued claim in the Licensed Patents that remains in force and that has not been finally invalidated or held to be unenforceable.

The royalty rates above may be doubled if we commence a legal challenge to the validity, enforceability or scope of any of the Licensed Patents during the term of the SHMH License Agreement and do not prevail in such proceeding.

Royalties shall also apply to any revenues generated by sub-licensees from sale of Licensed Products subject to a cap of 8.5% of the payments received by us from sub-licensees in connection with such sales.

Annual Maintenance Fee

A fixed amount of $100,000 was paid on April 16, 2021 and, thereafter, a fixed amount of $150,000 is due on the anniversary of such date during the term of the SHMH License Agreement.

The Company paid $150,000 in annual maintenance fees in each of the years ended December 31, 2023 and 2022.

Exclusive License Agreement

The Company has entered into a License Agreement with Apkarian Technologies to in-license US Patent 8,653,120 that claims the use of D-cycloserine for the treatment of chronic pain in exchange for a commitment to pay milestones and royalties as development milestones are reached in the field of chronic pain.

The patent is supported by extensive nonclinical data and early clinical data that suggest the potential for NMDA antagonist drugs, such as NRX-101 to decrease both chronic pain and neuropathic pain while potentially decreasing craving for opioids.

As of December 31, 2023, the Company has recorded $0.2 million worth of expenses relating to the licensure of the patent recorded in Research and development expenses on the Consolidated Statements of Operations and Comprehensive Loss.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating Lease

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

The rent expense for the years December 31, 2022 and 2021 was $ 0.1 million and $ 0.1 million, respectively.

The rent expense for the years ended December 31, 2023 and 2022 was $ 0.1 million and $ 0.1 million, respectively.

Sponsored Research Agreement with National Jewish Health

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

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

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

In return for performance of the Study under the Research Agreement, the Company has committed to pay NJ Health approximately $ 0.4 million upon finalization of the work.

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

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

Relief Therapeutics Collaboration Agreement

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

On November 12, 2022, NRx Pharmaceuticals, Inc.

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

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.

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

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

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

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

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

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

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

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

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.

No royalties have been received under this agreement as of December 31, 2023.

In addition, Relief is obligated to use commercially reasonable efforts to continue the Company’s existing Right to Try Program until December 2024.

With respect to the Company, there is an

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

The parties closed the APA in December 2022 at which time all claims and counterclaims between the Company and the Relief Parties were dismissed with prejudice.

Legal Proceedings

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Share Subscription Facility Agreement - GEM

NeuroRx entered into a share subscription facility agreement (“GEM Agreement”) with GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, referred to as “GEM”) with a three-year term which expired in October 2022.

Subject to the successful listing of the shares of NeuroRx on an Exchange (any nationally recognized stock exchange or exchange platform in the world on which the Company will list its shares), GEM grants NeuroRx an option to require GEM to subscribe for shares from the Company for up to an aggregate value of approximately $ 95.6 million.

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

requirements to issue registered shares thus preventing its usage.

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

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

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

In November 2020, GEM introduced NeuroRx to BRPA.

To resolve uncertainties around the application of the GEM Agreement post-Merger, NeuroRx and GEM agreed in March 2021 to issue a warrant to GEM and for the parties to use their good faith efforts to amend the GEM Agreement to meet U.S.

requirements to issue registered shares.

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

The warrant was issued March 28, 2021, for 3,329,812 shares of NeuroRx common stock at an exercise price of $ 3.19 per share (the “GEM Warrant”) and the parties agreed that GEM would immediately partially exercise the warrant for the purchase of 1,496,216 shares (“Initial Exercised Shares”) for $ 7.5 million.

The GEM Warrant will be valid for a period of three years from the date NeuroRx’s stock is listed for trading on a national securities exchange or consummation of a reverse merger transaction of the type contemplated by the Merger Agreement.

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

Specifically, as the amount was deemed probable and estimable at December 31, 2020, NeuroRx recorded a liability and settlement expense of $ 39.5 million to reflect the fair value of the expected GEM Warrant to be issued.

On March 28, 2021, when the GEM Warrant was issued, the Company recorded an additional charge of $ 21.4 million to reflect the increased fair value of the GEM Warrant on its grant date.

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

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

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

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

NeuroRx entered into a share subscription facility agreement (the “GEM Agreement”) with GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, referred to as “GEM”) with a three-year term which expired in October 2022.

The GEM Agreement was never activated because of differences between the Hong Kong law under which the agreement was drafted and US Securities law.

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

The Demand claims that the Company’s subsidiary, NeuroRx, failed to satisfy its obligation to pay GEM a commitment fee in the amount of HK$ 15.0 million (approximately US$ 1.9 million at current exchange rates) pursuant to the GEM Agreement.

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

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

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

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

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

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

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

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

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

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

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

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

The BCMA Amendment Agreement provided that, in lieu of the cash fee payable to EBC pursuant to the BCMA, BRPA will issue to EBC at the Effective Time an aggregate of 200,000 shares of Common Stock and the BCMA (as amended by the BCMA Amendment Agreement) will terminate immediately following the Effective Time.

The Company recognized the fair value of the 200,000 shares of Common Stock issued pursuant to the BCMA of $ 4.8 million within general and administrative in the Consolidated Statements of Operations for the year ended December 31, 2021.

Refer to Note 12 for discussion of fair value measurement of the warrant liabilities.

BriLife Vaccine, VaccineCo Agreement and Issuance of Shares

On July 11, 2021, the Company entered into a Memorandum of Understanding (the “MOU”) with the Ministry of Defense of the State of Israel that granted NRx the right to negotiate an exclusive worldwide license to develop and market the BriLife TM vaccine, which has been developed by the Israel Institute for Biological Research (“IIBR”).

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

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

As part of the Company’s consideration of the vaccine project, the Company entered into a Shareholder Agreement, dated October 15, 2021 (the “Agreement”), with Shimshon Hen and David Sepiashvili, each an Israeli citizen (the “Consultants”), under which the Consultants agreed to provide certain consulting services, and which set out a framework for establishing a potential joint venture between the Consultants and the Company that would have been responsible for the development and commercialization of the BriLife vaccine.

Pursuant to the terms of the Agreement, the Company issued an aggregate of 4,000,000 shares of the Company’s Common Stock to the Consultants on October 20, 2021 under the Company’s 2021 Omnibus Incentive Plan.

The Company is evaluating its options with respect to the Consultants.

The Demand claimed that NeuroRx, failed to satisfy its obligation to pay GEM a commitment fee in the amount of HK$ 15,000,000 (approximately US$ 1,920,885 at the then-current exchange rates) pursuant to the GEM Agreement.

On July 17, 2023, NeuroRx and GEM entered into a settlement and release agreement (the “Settlement Agreement”) pursuant to which the parties agreed to dismiss the arbitration proceeding with prejudice.

Pursuant to the Settlement Agreement on August 31, 2023, the Company issued 675,676 shares of Common Stock, the fair value of which was approximately $0.3 million based on the quoted trading price on the grant date, to GEM in full satisfaction of the Settlement Agreement which was approximately $ 0.3 million and was expensed as “Settlement expense” in fiscal 2023.

The shares are registered under a prospectus supplement to the Company’s registration statement on Form S-3 and are subject to a restriction that they cannot be sold or traded for a period of six months from the effective date of the Settlement Agreement.

Other Legal Actions:

We are currently involved in and may from time to time become involved in various legal actions incidental to our business.

As of the date of this report, we are not involved in any legal proceedings that we believe could have a material adverse effect on our financial position or results of operations.

However, the outcome of any current or future legal proceeding is inherently difficult to predict and any dispute resolved unfavorably could have a material adverse effect on our business, financial position, and operating results.

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Preferred Stock

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

The Company has no shares of preferred stock outstanding.

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

Prior to the Merger, the Company had authorized and issued 1,000,000 shares of Series A convertible preferred stock, 1,050,695 shares of Series B-1 convertible preferred stock, and 316,848 shares of Series B-1A convertible preferred stock, par value of $ 0.001 per share, which was convertible into one share of common stock for each preferred share (collectively, the “Preferred Stock”) at any time, at the option of the holder.

The Preferred Stock were not redeemable and the related stockholders were entitled to a subordinated liquidation preference should NeuroRx liquidate or wind up operations.

The preferences also included voting rights on an as-converted basis, ride-along rights, and an anti-dilution provision.

The liquidation preference was $ 1.00 per share for the Series A convertible preferred stock, $ 7.58 per share for the Series B-1 convertible preferred stock, and $ 6.82 per share for the Series B-1A convertible preferred stock, plus any declared but unpaid dividends.

Upon an initial public offering or merger under certain conditions the Preferred Stock automatically converted into common stock.

On May 24, 2021, pursuant to the Merger (as described in Note 4), 2,367,543 outstanding shares of Preferred Stock were automatically converted into 7,480,836 shares of common stock pursuant to the Exchange Ratio.

Series B-2 Preferred Stock

In 2020, the Company authorized the issuance of 100,000 shares of Series B-2 Convertible Preferred Stock (the “B-2 Preferred Stock”), par value of $ 0.001 per share, convertible into one share of common stock for each share of B-2 Preferred Stock held.

In March 2020, 4,167 shares of B-2 Preferred Stock were issued.

The B-2 Preferred stock were not redeemable and the related stockholders were entitled to a subordinated liquidation preference should NeuroRx liquidate or wind-up operations.

The preferences also included voting rights on an as-converted basis, ride-along rights, and an anti-dilution provision.

The liquidation preference was $ 12.00 per share plus any declared but unpaid dividends.

The B-2 Preferred Stock could be converted into one share of common stock (subject to adjustments for stock splits, recapitalization) at any time, at the option of the holder.

Upon an initial public offering or merger under certain conditions the B-2 Preferred Stock automatically converted into common stock.

On May 24, 2021, pursuant to the Merger (as described in Note 4), 4,167 outstanding shares of B-2 Preferred stock were automatically converted into 13,168 shares of common stock pursuant to the Exchange Ratio.

Pursuant to the terms of the Company’s 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 .

Series A Convertible Preferred Stock

On August 30, 2023, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (“Series A Preferred Stock”) with the Delaware Secretary of State (the “Certificate of Designation”) authorizing up to 12,000,000 shares of Series A Preferred Stock.

During the year ended December 31, 2023, the Company sold and issued 3,000,000 shares of Series A Preferred Stock.

Each share of Series A Preferred Stock was sold with one warrant (a “Unit"), see investor warrant section below for terms, for an aggregate cash purchase price of $1.2 million or $0.40 per Unit.

Dividend Rights

The holders of Series A Preferred Stock are not entitled to receive any dividends in respect to the Series A Preferred Stock.

Voting Rights

The holders of Series A Preferred Stock have no voting rights other than for an affirmative vote in order for the Company to (a) disproportionally alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock or alter or amend the Certificate of Designation, (b) amend its certificate of incorporation or other charter documents in any manner that disproportionally adversely affects any rights of the Holders, (c) increase or decrease the number of authorized shares of Series A Preferred Stock or (d) enter into any agreement with respect to any of the foregoing.

Conversion Rights

Each share of Series A Preferred Stock shall be convertible into a number of shares of Common Stock equal to the number of shares of Series A Preferred Stock being converted.

Notwithstanding the foregoing, no share of Series A Preferred Stock shall be convertible during the six (6) month period following the issuance date;

provided, however, if the Common Stock trades at or above $1.20 per share (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events), as reported on Bloomberg, L.P.

on any trading day, holder may convert the Series A Preferred Stock prior to the six (6) month anniversary of the issuance date.

No fractional shares will be issued upon conversion.

Conversion is subject to certain limitations, including the holder not owning more than 4.9% of the outstanding shares of Common Stock.

Liquidation Rights

Upon any liquidation, dissolution or winding up of the Company (a “Liquidation”), whether voluntary or involuntary, each holder of Series A Preferred Stock shall be entitled to receive the amount of cash, securities or other property to which such holder would be entitled to receive if such shares had been converted to Common Stock immediately prior to such Liquidation, subject to certain rights and limitations.

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to the terms of the Company’s 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, NRx Pharmaceuticals entered into a securities purchase agreement with the March Investors, providing for the issuance and sale of 3,866,666 shares of Common Stock and the March Investor Warrants to purchase up to 3,866,666 shares of Common Stock in a registered direct offering priced at-the-market under Nasdaq rules for a purchase price of $ 0.75 per share.

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

The March Investors agreed not to transfer the Common Stock for six months following the date of issuance.

The aggregate net cash proceeds to the Company from the March Offering were approximately $2.5 million net of offering costs of approximately $0.4 million.

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

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

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

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

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

Wainwright & Co., LLC.

Although they did not act as the placement agent with respect to the March 2023 Offering, H.C.

Wainwright & Co., LLC was paid a cash fee equal to 3.0 % of the amount raised, or approximately $ 0.1 million, pursuant to the letter agreement, which was charged against the proceeds in additional paid-in capital.

On June 6, 2023, the Company entered into a securities purchase agreement with the June Investors, providing for the issuance and sale of 9,670,002 shares of the Company’s Common Stock and the June Investor Warrants to purchase up to 9,670,002 shares of Common Stock.

The Common Stock was issued in a registered direct offering for a purchase price of $ 0.65 per share and the June Investor Warrants were offered pursuant to a private placement under Section 4(a)(2) of the Securities Act.

The aggregate net cash proceeds to the Company from the June Offering were approximately $5.6 million.

The Company used the net proceeds from the June Offering for working capital and general corporate purposes.

Wainwright & Co.

LLC acted as the exclusive placement agent (the “Placement Agent”) for the June 2023 Offering.

The Placement Agent was paid a cash fee equal to 6.5 % of the gross proceeds received by the Company from the sale of the securities at the closing of the June Offering or approximately $ 0.6 million which was charged against the proceeds in additional paid-in capital.

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

In connection with the Note issued to Streeterville, on May 15, 2023 the Company issued 408,673 Common Stock to Streeterville in repayment of interest on the Note.

Additionally on August 4, 2023 and August 30, 2023, the Company issued 1,312,658 and 1,542,890 respectively to Streeterville for repayment of principal and interest under the Note.

Refer to Note 7 for further details.

On July 17, 2023, the Company and GEM entered into a settlement agreement where the Company issued 675,676 shares of Common Stock to GEM in full satisfaction of its obligation.

Refer to Note 8 for further details.

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

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

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Common Stock Warrants

Substitute Warrants

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

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

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

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

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

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

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

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

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

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

For the incremental portion of the warrants with a performance-based vesting conditions (i.e., the achievement of the Earnout Cash Milestone and/or Earnout Shares Milestone), the Company determined it was not probable that the Earnout Cash Milestone or Earnout Shares Milestone would be met on the Effective Date and was not met on December 31, 2022.

Therefore no expense has been recognized for this portion.

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

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

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

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

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

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

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

In connection with the Merger in 2021, each warrant to purchase shares of common stock 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”).

There were 3,792,970 warrants outstanding and unexercised at the effective time.

As these Substitute Warrants meet the definition of a derivative as contemplated in ASC 815, based on provisions in the warrant agreement related to the Earnout Shares Milestone and the Earnout Cash Milestone and the contingent right to receive additional shares for these provisions, the Substitute Warrants were recorded as derivative liabilities on the consolidated 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 and a loss on the change in fair value of the Substitute Warrants for the years ended December 31, 2023 and 2022 of less than $ 0.1 million and less than $ 0.1 million, respectively.

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

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

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

Original Warrants

Substitute Warrants

$ 7.58 -$ 15.84

$ 1.53 -$ 3.19

Volatility rate

Risk-free rate

0.03 %- 0.32 %

Expected term

Dividend yield

Assumed Public Warrants

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

Prior to the Merger, the Company had 3,450,000 Public Warrants outstanding (the “Public Warrants”).

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

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

Assumed Placement Warrants

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

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

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

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

The Company classifies the Placement Warrants as derivative liabilities in its Consolidated Balance Sheet as of December 31, 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 years ended December 31, 2022 and 2021 of $ 0.3 million and $ 1.7 million, respectively.

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

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

Intrinsic Value

Total Warrants

Exercise Price

(in thousands)

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

Retroactive application of reverse recapitalization (Note 4)

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

( 3,330,956 )

Outstanding as of December 31, 2021

( 1,036,830 )

Outstanding as of December 31, 2022

Preferred Investment Options (included in above warrants table)

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 years ended December 31, 2023 and 2022 no Public Warrants were exercised.

The outstanding balance of these warrants remains in equity.

Assumed Private Placement Warrants

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

The Private 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 Private Placement Warrants as derivative liabilities in its Consolidated Balance Sheet as of December 31, 2023 and 2022.

The Company measures the fair value of the Private 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 Private Placement Warrants for the years ended December 31, 2023 and 2022 of less than $ 0.1 million and $ 0.3 million, respectively.

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

Investor Warrants

As discussed above, on March 8, 2023, in conjunction with the issuance and sale of 3,866,666 shares of the Company’s Common Stock, the Company issued 3,866,666 March Investor Warrants which were classified in stockholder’s equity.

The measurement of fair value of the March Investor 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 and a half years, volatility of 123.6 %, risk-free rate of 4.34 %, and expected dividend rate of 0 %).

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Investor Warrants had an original exercise price of $ 0.75 per share, are initially exercisable beginning six months following the March Initial Exercise Date and will expire five and a half years from the March Initial Exercise Date.

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

As discussed above, on June 6, 2023, in conjunction with the issuance and sale of 9,670,002 shares of the Company’s Common Stock, the Company issued 9,670,002 June Investor Warrants which were classified in stockholder’s equity.

The measurement of fair value of the June Investor Warrants were determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $0.53, exercise price of $0.65, term of five and a half years, volatility of 175.1%, risk-free rate of 3.85%, and expected dividend rate of 0%).

The grant date fair value of these June Investor Warrants was estimated to be $3.1 million on June 6, 2023, and is reflected within additional paid-in capital.

The Company issued 193,400 warrants to the Placement Agent with an exercise price of $ 0.81 (the “June Placement Agent Warrants”).

As these June Placement Agent Warrants were issued for services provided in facilitating the June Offering, the Company recorded the fair value of such June Placement Agent Warrants of approximately $ 0.1 million as a cost of capital on the issuance date.

The measurement of fair value was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $ 0.53 , exercise price of $ 0.81 , term of five and a half years, volatility of 175.1 %, risk-free rate of 3.85 %, and expected dividend rate of 0 %).

In connection with the June Offering, the Company also entered into a warrant amendment agreement (the “Warrant Amendment Agreement”) with certain investors to amend certain existing warrants to purchase up to 9,622,778 shares of Common Stock that were previously issued in August 2021 and February 2022 to such investors, with an exercise price of $ 3.07 and $ 12.00 per share, respectively (the “Amended Warrants”) as follows:

(i) lower the exercise price of the Amended Warrants to $ 0.6525 per share, and (ii) provide that the Amended Warrants, as amended, will not be exercisable until six months following the closing date of the June Offering, and (iii) extend the original expiration date of the Amended Warrants so that they will terminate five and one half years from the closing of the June Offering.

The Company recorded the incremental change in fair value of such Amended Warrants of $ 1.5 million as a cost of capital to issue the June Investor Warrants.

The measurement of fair value for the Amended Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $ 0.53 , exercise price of $ 0.65 , term of five and a half years, volatility of 175.1 %, risk-free rate of 3.85 %, and expected dividend rate of 0 %).

As discussed above, on August 28, 2023, in conjunction with the issuance and sale of 3,000,000 shares of the Company’s Series A Convertible Preferred Stock, the Company issued 3,000,000 August Investor Warrants which were classified in stockholder’s equity.

Each Investor Warrants had an exercise price of $0.40 and term of five years.

The measurement of fair value of the August Investor Warrants were determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $ 0.30 , exercise price of $ 0.40 , term of five years , volatility of 175.1 % , risk-free rate of 4.38 % , and expected dividend rate of 0 % ).

The grant date fair value of these August Investor Warrants was estimated to be $ 0.8 million on August 28, 2023 and is reflected within additional paid-in capital.

On October 24, 2023, in connection with the Securities Purchase Agreement dated March 8, 2023, the Company entered into a warrant amendment agreement (the “October Warrant Amendment Agreement”) with certain Investors to amend the existing Investor Warrants to purchase up to 3,866,666 shares of Common Stock that were previously issued in March 2023 adjusted from the original exercise price of $0.75 to $0.6525 per share (the “October Amended Warrants”) .

The Company recorded the incremental change in fair value of such October Amended Warrants of approximately $9.0 thousand as a deemed dividend and an adjustment to arrive at net income available to common stockholders on the statement of operations.

As the Company is in an accumulated deficit position, in the absence of retained earnings, the

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company recorded the reduction to additional paid-in capital (i.e., a net zero impact to additional paid-in capital).

The measurement of fair value for the October Amended Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of amendment (i.e., share price of $0.28, exercise price of $0.6525, term of five years, volatility of 159.4%, risk-free rate of 4.85%, and expected dividend rate of 0%).

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.

6 unchanged sentences

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%).

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

Intrinsic Value

Total Warrants

Exercise Price

(in thousands)

Outstanding as of December 31, 2022

Outstanding as of December 31, 2023

Stock-Based Compensation

2 unchanged sentences

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 were held back pending the outcome of the contingencies and were not released as such contingencies were not achieved.

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

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

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

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

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

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 was not achieved at December 31, 2022.

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

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

For unvested Substitute Options, the Company will recognize incremental compensation over the remaining requisite service period, the sum of the incremental compensation cost and the remaining unrecognized compensation cost for the original award on the modification date.

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2021 Omnibus Incentive Plan

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

As of December 31, 2022, 6,049,178 shares of Common Stock are authorized for issuance pursuant to awards under the 2021 Plan.

As of December 31, 2023, 8,713,608 shares of Common Stock are authorized for issuance pursuant to awards under the Company’s 2021 Omnibus Incentive Plan (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.

On December 28, 2023 the first amendment to the 2021 Omnibus Plan was executed which increased the maximum number of Shares (i) available for issuance under the Plan, by an additional 2,000,000 Shares, and (ii) that may be delivered pursuant to the exercise of Incentive Stock Options granted under the Plan to be equal to 100% of the Share Pool.

As of December 31, 2023, 6,579,613 shares have been awarded and 2,133,995 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.

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

Option Awards

7 unchanged sentences

Additionally, certain options granted contain terms that require all unvested options to immediately vest a) upon the approval of a New Drug Application (NDA) by the FDA for NRX-101, or b) immediately preceding a change in control of the Company, whichever occurs first.

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

The following assumptions were used during the following periods:

The following assumptions were used for the years ended December 31, 2023 and 2022:

Exercise price

7 unchanged sentences

94.9 % - 147.8 %

80.0 %- 85.9 %

Dividend yield

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the Company’s employee and non-employee stock option activity under the 2021 Plan for the following periods:

Number of shares

Weighted average

exercise price

(in thousands)

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

Retroactive application of reverse recapitalization (Note 4)

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

Options granted

Weighted average remaining contractual life (in years)

Aggregate intrinsic value (in thousands)

Outstanding as of December 31, 2022

2 unchanged sentences

Options vested and exercisable as of December 31, 2023

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

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

Stock-based compensation expense related to stock options was approximately $0.1 million during the year ended December 31, 2023.

The weighted average grant date fair value per share for employee stock and non-employee option grants during the years ended December 31, 2023 and 2022 was $0.35 and $ 1.12 , respectively.

At December 31, 2023, the total unrecognized compensation related to unvested employee and non-employee stock option awards granted, was $ 0.3 million, which the Company expects to recognize over a weighted-average period of approximately 1.3 years.

Restricted Stock Awards

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

Weighted Average Grant Date Fair Value

Balance as of December 31, 2022 (unvested)

Balance as of December 31, 2023 (unvested)

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.

On December 28, 2023, the Company granted 575,000 RSAs to a consultant for services provided.

The RSAs will vest after six months from the grant date.

The shares were valued on the grant date based on the quoted price of $0.46 or approximately $0.3 million which will be amortized over the vesting term.

As of December 31, 2023, total unrecognized compensation expense related to RSAs was approximately $0.4 million, which is expected to be recognized over a weighted-average period of approximately 0.9 years.

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-based compensation expense related to RSAs was approximately $0.3 million during the year ended December 31, 2023.

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

Years Ended December 31,

3 unchanged sentences

Total stock-based compensation expense

Restricted Stock Awards

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

Weighted Average Grant Date Fair Value

Balance as of December 31, 2021

Unvested Balance as of December 31, 2022

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

As of December 31, 2022, total unrecognized compensation expense related to unvested RSAs granted was approximately $ 0.5 million, which is expected to be recognized over a weighted-average period of approximately 2.5 years.

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

Research and development related stock-based compensation expenses carried a negative balance for 2023 due to reversals of unvested stock options related to 2023 terminations in accordance with our policy.

Fair Value Measurements

1 unchanged sentence

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 years ended December 31, 2022 and 2021.

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

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

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

The fair value of stock options and warrants issued for services are estimated based on the Black-Scholes model during the years ended December 31, 2023 and 2022.

The fair value of the Note was estimated utilizing a Monte Carlo simulation during the years ended December 31, 2023 and 2022.

Fair Value on a Recurring Basis

1 unchanged sentence

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

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

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

The estimated fair value of the warrant liabilities and convertible note payable 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 years ended December 31, 2023 and 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 9)

Earnout Cash liability (Note 4)

Convertible note payable (Note 7)

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Convertible Note Payable

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

December 31, 2022

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:

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 Convertible Note categorized within Level 3 of the fair value hierarchy (in thousands):

Par value of the Note

Debt discount, net

Carrying value of the Note

Change in fair value of Note

Unamortized debt discount

Conversions and repayments of principal and interest (shares and cash)

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

Fair value adjustment through earnings

Fair value adjustment through accumulated other comprehensive loss

Total carrying value of Note

2 unchanged sentences

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 Private 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.

There were no transfers between levels within the fair value hierarchy during the periods presented.

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

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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 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:

December 31, 2022

December 31, 2021

Stock price on valuation date

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

December 31, 2022

Balance as of December 31, 2021

Additions pursuant to Merger

Gain upon re-measurement

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Balance as of December 31, 2023

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.

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

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

December 31, 2022

Balance as of December 31, 2020

Additions pursuant to Merger

Gain upon re-measurement

Balance as of December 31, 2021

Gain upon re-measurement

Balance as of December 31, 2022

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

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Increase in valuation allowance

Convertible Note

Effective tax rate

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of income tax provision (benefit) are as follows (in thousands):

8 unchanged sentences

Common stock warrants

Foreign net operating loss carryforwards

174 capitalization

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Bonus accrual

Settlement liability

Valuation allowance

Deferred tax assets, net of allowance

As of December 31, 2022 and 2021, the Company had federal net operating losses of approximately $ 152.4 million and $ 127.4 million and state net operating loss carryforwards of approximately $ 30.2 million and $ 23.0 million, respectively.

As of December 31, 2022 and 2021, the Company had approximately $ 0.0 million and $ 0.6 million of foreign net operating loss carryforwards, respectively.

The federal, state and foreign net operating loss carryforwards generated in the tax years from 2015 to 2018 will begin to expire, if not utilized, by 2035.

As of December 31, 2023 and 2022, the Company had federal net operating losses of approximately $168.5M and $152.4M and state net operating loss carryforwards of approximately $10.4M and $30.2M, respectively.

The federal and state net operating loss carryforwards generated in the tax years from 2015 to 2018 will begin to expire, if not utilized, by 2035.

Certain Net Operating Losses in these jurisdictions are not subject to expiration.

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ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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

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

In the next twelve months, the Company plans to file amended returns to reduce a portion of its uncertain tax position recorded in the current year.

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of its federal and state deferred tax assets, primarily due to its history of cumulative net losses incurred since inception and its lack of commercialization of products or generation of revenue from product sales since inception.

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

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

The Company accrued total penalties and interest of $0 during the years ended December 31, 2023 and 2022 and in total, as of December 31, 2023 and 2022 has recognized penalties and interest of $0.

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

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Related Party Transactions

Glytech Agreement

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

5 unchanged sentences

The Excluded Technology is defined in the Glytech Agreement as any technology, and any know-how related thereto, covered in the licensed patents that do not recite either D-cycloserine or lurasidone individually or jointly.

This definition would cover pharmaceutical formulations, including some that NRx Pharmaceuticals considers “pipeline” or “future product” opportunities, that contain a

combination of pharmaceutical components different from those contained in NRX-100 and NRX-101.

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

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

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

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

On November 6, 2022 the Glytech Agreement was amended whereby Glytech agreed to transfer and assign the remainder of the Licensed Technology and the Excluded Technology to NRx Pharmaceuticals for no additional consideration at any time upon receipt of written notice from the Company if, on or prior to March 31, 2024, (i) the value of the Glytech equity holdings in NRx Pharmaceuticals (the “Glytech Equity”) has an aggregate liquidity value of at least $ 50 million for twenty (20) consecutive trading days immediately preceding any given date and (ii) there are no legal or contractual restrictions on selling all of the securities represented by the Glytech Equity then applicable to Glytech (or reasonably foreseeable to be applicable to Glytech within the following twenty trading days).

Consulting Agreement with Dr.

Jonathan Javitt

The Chief Scientist of the Company, Dr.

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He served the Company on a full-time basis as CEO under an employment agreement with the Company until March 8, 2022 and currently serves under a Consulting Agreement with the Company as Chief Scientist thereafter and received compensation of $ 0.9 million and $ 0.9 million during the years ended December 31, 2023 and 2022, respectively.

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

Zachary Javitt is the son of Dr.

Jonathan Javitt.

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

The Company paid this family member a total of $ 0.1 million and $ 0.1 million during the years ended December 31, 2022 and 2021, respectively.

These services are ongoing.

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

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

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

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

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

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

Subsequent Events

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

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

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

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

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

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

Amendment to Convertible Note Payable

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

Material Contract Amendment

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

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

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

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

The amendment also provided for

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 discretionary bonus for 2023, if any, may be approved by the board in 2024 and 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.

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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 December 31, 2023, the Board of Directors has 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.

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

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.

Consulting Agreement with Zachary Javitt

Zachary Javitt is the son of Dr.

Jonathan Javitt.

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

The Company paid this family member a total of $0.2 million and $ 0.1 million during the years ended December 31, 2023 and 2022, respectively.

These services are ongoing.

Agreements with PillTracker

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

Zachary Javitt and Dr.

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

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

NRx Pharmaceuticals paid PillTracker $ 0.2 million during the year ended December 31, 2022.

No Pilltracker-related expenses have been recognized in 2023.

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

Subsequent Events

Reverse Stock-split

On March 21, 2024, the Company’s stockholders approved an amendment to the Company’s Second Amended and Restated Certificate of Incorporation to effect, at the discretion of the Board of Directors of the Company (the “Board”), a reverse stock split of all of the outstanding shares of the Company’s Common Stock, $0.001 par value per share, at a ratio in the range of 1-for-2 to 1-for-15, with such ratio to be determined by the Board in its discretion.

On March 21, 2024, the Board approved a reverse stock split ratio of 1-for-10 (the “Reverse Stock Split”).

Proportional adjustments for the Reverse

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Split will be made to the Company’s outstanding stock options, restricted stock, warrants and equity incentive plans upon effectiveness.

Though the necessary approvals have been made, the Reverse Stock Split is not yet effective.

The following is the unaudited pro-forma effect of the 1:10 Reverse Stock Split on the basic and diluted net loss per share:

Historical per share data – (Pre- Split basis)

December 31, 2023

December 31, 2022

Net loss attributable to Common Stockholders

Basic and diluted weighted average shares outstanding

Basic and diluted net loss per share

Historical per share data – (Post- Split basis) (UNAUDITED)

December 31, 2023

December 31, 2022

Net loss attributable to Common Stockholders

Basic and diluted weighted average shares outstanding

Basic and diluted net loss per share

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is the unaudited pro-forma effect of the 1:10 Reverse Stock Split on the consolidated balance sheets (in thousands, except share and per share data):

December 31, 2023

1:10 adjustment

Pro-Forma Effect

December 31, 2023

Total liabilities

Stockholders’ (deficit) equity:

Series A convertible preferred stock

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Total stockholders’ (deficit) equity

Total liabilities and stockholders' (deficit) equity

December 31, 2022

1:10 adjustment

Pro-Forma Effect

December 31, 2022

Total liabilities

Stockholders’ (deficit) equity:

Series A convertible preferred stock

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Total stockholders’ (deficit) equity

Total liabilities and stockholders' (deficit) equity

Conversion of Preferred Shares

In March 2024, holders of the Company’s Series A convertible preferred stock elected to convert 3,000,000 shares of Series A convertible preferred stock into 3,000,000 shares of Common Stock.

Following the conversion, no shares of Series A convertible preferred stock remained issued or outstanding.

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

From February 20, 2024 to March 11, 2024, the Company announced that it entered into multiple purchase agreements (the “ATM Purchase Agreements”) subject to standard closing conditions where accredited investors purchased 345,829 shares of unregistered common stock at a range of $0.4643 – $0.71 per share.

The final ATM Purchase Agreement closed on March 11, 2024.

The aggregate net cash proceeds to the Company from the ATM Purchases Agreements were approximately $0.2 million.

February 2024 Purchase Agreement

The February Warrants will have an exercise price of $0.38 per share, are initially exercisable beginning six months following the date of issuance, and will expire 5 years from the date of issuance.

The aggregate net cash proceeds to the Company from the February 2024 Private Placement were approximately $1.0 million.

February 2024 Offerings

On February 27, 2024, NRx Pharmaceuticals, Inc.

(the “Company”) entered into an underwriting agreement (the “Underwriting Agreement”) with EF Hutton LLC (the “Representative”), as the representative of the several underwriters named therein (the “Underwriters”), relating to an underwritten public offering (the “Offering”) of 5,000,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (“Common Stock”).

On February 28, 2024, the Offering closed (the “Closing Date”).

The aggregate net cash proceeds to the Company from the Offering proceeds were were approximately $1.3 million.

On March 5, 2024, the underwriters of the previously announced underwritten public offering of NRx Pharmaceuticals, Inc.

(the “Company”) exercised their option in accordance with the Underwriting Agreement, dated February 27, 2024, by and between the Company and EF Hutton LLC, as representative of the several underwriters named therein, to purchase up to an additional 750,000 shares of the Company’s common stock, par value $0.001 per share, at a public offering price of $0.30 per share (the “Overallotment Exercise”).

The Overallotment Exercise closed on March 6, 2024.

The aggregate net cash proceeds to the Company from the Overallotment Exercise were approximately $0.2 million.

Streeterville Amendment

On February 9, 2024, the Company entered into Amendment #3 to Convertible Promissory Note (the “Third Amendment”), with Streeterville Capital, LLC (“Streeterville”).

Pursuant to the Third Amendment, the Company and Streeterville agreed to further amend the terms of that certain Convertible Promissory Note dated November 4, 2022, in the original principal amount of $11,020,000, as amended by the amendments to the Convertible Promissory Note dated March 30, 2023 and July 7, 2023 (as amended, the “Note”).

In accordance with the Third Amendment, the Company and Streeterville agreed to amend the redemption provisions of the Note.

In particular, the Company agreed to pay Streeterville an amount in cash equal to $1,100,000 on February 12, 2024.

In addition, beginning on or before February 29, 2024, on or before the last day of each month until July 31, 2024 (the “Minimum Payment Period”), the Company shall pay Streeterville an amount equal

NRX PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to $400,000 in cash (a “Minimum Payment”), less any amount satisfied by the delivery of Redemption Conversion Shares (as defined in the Note).

Notwithstanding the foregoing, after April 30, 2024, and for the remainder of the Minimum Payment Period, Streeterville may redeem any Redemption Amount (as defined in the Note), including an amount in excess of the Minimum Payment, subject to the Maximum Monthly Redemption Amount (as defined in the Note).

During the Minimum Payment Period, the Company is permitted to pay the Redemption Amounts in the form of shares of common stock of the Company (the “Redemption Conversion Shares”) calculated on the basis of the Redemption Conversion Price (as defined in the Note) without regard to the existence of any Equity Conditions Failure to the extent Streeterville submits redemption notices during such month pursuant to the terms of the Note, and only for the Redemption Amounts covered by such notices.

Moreover, the Redemption Premium (as defined in the Note) will continue to apply to the Redemption Amounts.

To the extent there is an outstanding balance under the Note after the expiration of the Minimum Payment Period, the Company will be required to pay such outstanding balance in full in cash by August 31, 2024.

Streeterville Note Payment

Since December 31, 2023 and through March 25, 2024, the Company has made aggregate principal and interest payments of $2.9 million to Streeterville, consisting of cash payments of $2.5 million and the issuance of 1,436,472 shares of common stock with a value of $0.4 million.

Alvogen Agreement Amendment

As of February 7, 2024, the Alvogen agreement was amended and the company became eligible to receive $5 million as an advance of the first Milestone completion within the Alvogen Agreement.

As compensation for advancing the milestone, Alvogen and Lotus will receive 4.1 million warrants to purchase the Company's common stock, at a strike price of $0.40 with a three year term.

The second portion of the first milestone will be $4 million and, as before, be triggered by a positive response to the Company's planned end of phase 2 meeting with FDA.

A second milestone payment of $5 million (the “Approval Payment”) is due upon Alvogen’s receipt of a copy of the FDA’s notice of NDA Approval for Product with the label indication for the treatment of bipolar depression with sub-acute or acute suicidality.

NRx then remains eligible to receive up to $315 million in future development and sales milestones, as well as royalty payments escalating to mid-teen percentages on Net Sales, subject to achievement of certain sales volumes.

Hope Therapeutics

The Company announced on February 5, 2024 that the incorporation of HOPE Therapeutics™ (HOPE), a biotechnology company dedicated to bring NRX-100 (IV Ketamine), will be re-designated HTX-100, a potentially lifesaving treatment option for patients with Suicidal Depression.

The company will initially be owned by NRx and its current shareholders, who will receive their shares in the form of a dividend with an accompanying royalty coupon tied to future sales of HTX-100, subject to Board approval.

HOPE is dedicated to providing an FDA-approved presentation of IV Ketamine, manufactured to current federal standards, in a diversion- and abuse-deterrent presentation.

A New Drug Application (NDA) is planned for the first half of 2024, based on more than 1,000 patients treated in well-controlled trials of ketamine in Suicidal Depression together with HOPE's expertise in sterile products formulation.

Compliance with Nasdaq Listing Requirements

On February 3, 2024, the Company announced that it has been granted an exception by the Nasdaq Hearing Panel to meet compliance requirements by April 16, 2024.

This is conditional upon the Company completing a transfer of its listing from The Nasdaq Global Market to the Nasdaq Capital Market, which was approved and took effect at the opening of business on January 19, 2024.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data