NRX Pharmaceuticals, Inc. 10-K

Item 8. Financial Statements and Supplementary Data ​ ​ 102 Table of Contents NRX Pharmaceuticals, Inc. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ ​ Report of Independent Registered Public Accounting Firm (PCAOB firm ID. 106) 104 ​ ​ Report of Independence Registered Public Accounting Firm (PCAOB firm ID. 185 ) 106 ​ ​ Consolidated Balance Sheets 108 ​ ​ Consolidated Statements of Operations and Comprehensive Loss 109 ​ ​ Consolidated Statement of Changes in Stockholders’ Equity (Deficit) 110 ​ ​ Consolidated Statement of Cash Flows 111 ​ ​ Notes to Consolidated Financial Statements 112 ​ ​ ​ ​ ​ 103 Table of Contents 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. ​ 104 Table of Contents 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 Phone: (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 105 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors NRX Pharmaceuticals, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of NRX Pharmaceuticals, Inc. 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. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses and net cash outflows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. 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 audits 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 its internal control over financial reporting. As part of our audits, 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 audits 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 audits 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 audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 106 Table of Contents Assessment of the fair value of the convertible note As discussed in Notes 7 and 11 to the consolidated financial statements, the Company completed a convertible note offering during the year ended December 31, 2022. The Company received net proceeds of $10.0 million from the offering and elected to account for this convertible note at fair value under the fair value option. The estimated fair value of the convertible note as of December 31, 2022 is $10.5 million. The Company used a Monte Carlo simulation model to estimate the fair value of the convertible note. We identified the assessment of the measurement of fair value of the convertible note as of December 31, 2022 as a critical audit matter. This matter required the involvement of valuation professionals with specialized skills and knowledge to assess the Company’s model used to value the convertible note. The following is the primary procedure we performed to address this critical audit matter. We involved valuation professionals with specialized skills and knowledge who assisted by independently developing a range of fair values of the convertible note using a discounted cash flow model and comparing it to the amount recorded by the Company. /s/ KPMG LLP ​ We have served as the Company’s auditor since 2018. Short Hills, New Jersey March 31, 2023 ​ ​ 107 Table of Contents PART I FINANCIAL INFORMATION ITEM 1. Financial Statements NRX PHARMACEUTICALS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ASSETS ​ ​ Current assets: ​ ​ ​ Cash and cash equivalents ​ $ 4,595 ​ $ 20,054 Prepaid expenses and other current assets ​ 2,289 ​ 5,741 Total current assets ​ 6,884 ​ 25,795 Other assets ​ 431 ​ 21 Total assets ​ $ 7,315 ​ $ 25,816 LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY ​ ​ Current liabilities: ​ ​ Accounts payable ​ $ 4,632 ​ $ 2,076 Accrued and other current liabilities ​ 4,714 ​ 4,855 Accrued clinical site costs ​ 524 ​ 914 Convertible note payable and accrued interest - short term ​ ​ 9,161 ​ ​ 7,703 Warrant liabilities ​ ​ 17 ​ ​ 37 Total current liabilities ​ 19,048 ​ 15,585 Convertible note payable and accrued interest - long term ​ — ​ 2,822 Total liabilities ​ $ 19,048 ​ $ 18,407 ​ ​ ​ ​ ​ ​ ​ Commitments and Contingencies (Note 8) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ (deficit) equity: ​ ​ Preferred stock, $ 0.001 par value, 50,000,000 shares authorized; ​ $ — ​ $ — 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 ​ ​ 3 ​ ​ — Common stock, $ 0.001 par value, 500,000,000 shares authorized; 83,919,554 and 66,442,989 shares issued and outstanding at December 31, 2023 and 2022, respectively ​ 84 ​ 67 Additional paid-in capital ​ 241,330 ​ 230,339 Accumulated other comprehensive loss ​ ​ ( 3 ) ​ — Accumulated deficit ​ ( 253,147 ) ​ ( 222,997 ) Total stockholders’ (deficit) equity ​ ( 11,733 ) ​ 7,409 Total liabilities and stockholders' (deficit) equity ​ $ 7,315 ​ $ 25,816 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 108 Table of Contents NRX PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ 2023 2022 Operating expenses: ​ ​ ​ Research and development ​ ​ $ 13,371 ​ $ 17,027 General and administrative ​ ​ 14,216 ​ 27,308 Settlement expense ​ ​ 250 ​ — Total operating expenses ​ ​ 27,837 ​ 44,335 Loss from operations ​ ​ ( 27,837 ) ​ ( 44,335 ) Other (income) expenses: ​ ​ ​ ​ ​ Interest income ​ ​ ( 494 ) ​ ( 249 ) Interest expense ​ ​ 120 ​ — Change in fair value of convertible note payable ​ ​ ​ 2,707 ​ ​ 505 Change in fair value of warrant liabilities ​ ​ ( 20 ) ​ ( 255 ) Change in fair value of Earnout Cash liability ​ ​ — ​ ( 4,582 ) Total other (income) expenses ​ ​ 2,313 ​ ( 4,581 ) Net loss ​ ​ ​ ( 30,150 ) ​ ​ ( 39,754 ) Deemed dividend - warrants ​ ​ ​ ( 9 ) ​ ​ — Net loss attributable to common stockholders ​ ​ $ ( 30,159 ) ​ $ ( 39,754 ) Comprehensive loss: ​ ​ ​ ​ ​ ​ ​ Net loss ​ ​ ​ ( 30,150 ) ​ ​ ( 39,754 ) Change in fair value of convertible note attributed to credit risk ​ ​ ​ 3 ​ ​ — Comprehensive loss ​ ​ $ ( 30,153 ) ​ $ ( 39,754 ) Net loss per share: ​ ​ ​ ​ ​ ​ ​ Basic and diluted ​ ​ $ ( 0.40 ) ​ $ ( 0.60 ) Weighted average common shares outstanding: ​ ​ ​ ​ ​ ​ ​ Basic and diluted ​ ​ ​ 75,761,763 ​ ​ 65,766,786 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ ​ 109 Table of Contents NRX PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY (in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Accumulated Other ​ Total ​ ​ Preferred Stock ​ Series A Preferred Stock ​ Common Stock ​ Paid-in- ​ Accumulated ​ Comprehensive ​ Stockholders’ ​ ​ Shares ​ Amount ​ Shares ​ Amount ​ Shares ​ Amount ​ Capital ​ Deficit Income (Loss) Equity (Deficit) Balance - December 31, 2021 ​ — ​ $ — ​ — ​ $ — ​ 58,810,550 ​ $ 59 ​ $ 203,990 ​ $ (183,243) ​ $ — ​ $ 20,806 Common stock and warrants issued in private placement, net of issuance costs of $2,283 ​ — ​ ​ — ​ — ​ ​ — ​ 7,824,727 ​ ​ 8 ​ ​ 22,694 ​ ​ — ​ ​ — ​ ​ 22,702 Common stock issued for consulting services ​ — ​ ​ — ​ — ​ ​ — ​ 6,037 ​ ​ — ​ ​ 17 ​ ​ — ​ ​ — ​ ​ 17 Common stock issued for exercise of stock options ​ — ​ ​ — ​ — ​ ​ — ​ 49,605 ​ ​ — ​ ​ 10 ​ ​ — ​ ​ — ​ ​ 10 Restricted stock awards granted ​ — ​ ​ — ​ — ​ ​ — ​ 1,000,000 ​ ​ 1 ​ ​ (1) ​ ​ — ​ ​ — ​ ​ — Retired Earnout Shares ​ — ​ ​ — ​ — ​ ​ — ​ (1,247,930) ​ ​ (1) ​ ​ 1 ​ ​ — ​ ​ — ​ ​ — Stock-based compensation ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 3,628 ​ ​ — ​ ​ — ​ ​ 3,628 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (39,754) ​ ​ — ​ ​ (39,754) Balance December 31, 2022 ​ — ​ $ — ​ — ​ $ — ​ 66,442,989 ​ $ 67 ​ $ 230,339 ​ $ (222,997) ​ $ — ​ $ 7,409 Common stock and warrants issued, net of issuance costs $2,519 ​ — ​ ​ — ​ — ​ ​ — ​ 13,536,668 ​ ​ 13 ​ ​ 8,109 ​ ​ — ​ ​ — ​ ​ 8,122 Preferred stock and warrants issued, net of issuance costs $27 ​ — ​ ​ — ​ 3,000,000 ​ ​ 3 ​ — ​ ​ — ​ ​ 1,168 ​ ​ — ​ ​ — ​ ​ 1,171 Change in fair value of convertible note attributed to credit risk ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ (3) ​ ​ (3) Shares issued as repayment of principal and interest for convertible note ​ — ​ ​ — ​ — ​ ​ — ​ 3,264,221 ​ ​ 3 ​ ​ 979 ​ ​ — ​ ​ — ​ ​ 982 Common stock issued to settle GEM settlement liability ​ — ​ ​ — ​ — ​ ​ — ​ 675,676 ​ ​ 1 ​ ​ 249 ​ ​ — ​ ​ — ​ ​ 250 Adjustment for deferred offering cost settlement ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 99 ​ ​ — ​ ​ — ​ ​ 99 Stock-based compensation ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 387 ​ ​ — ​ ​ — ​ ​ 387 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (30,150) ​ ​ — ​ ​ (30,150) Balance - December 31, 2023 ​ — ​ $ — ​ 3,000,000 ​ $ 3 ​ 83,919,554 ​ $ 84 ​ $ 241,330 ​ $ (253,147) ​ $ (3) ​ $ (11,733) ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 110 Table of Contents NRX PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ Net loss ​ $ ( 30,150 ) ​ $ ( 39,754 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ Depreciation expense ​ 5 ​ 4 Stock-based compensation ​ 387 ​ 3,628 Change in fair value of warrant liabilities ​ ​ ( 20 ) ​ ​ ( 255 ) Change in fair value of earnout cash liability ​ ​ — ​ ​ ( 4,582 ) Change in fair value of convertible promissory note ​ ​ 2,707 ​ ​ 505 Non-cash settlement expense ​ 250 ​ — Increases (decreases) in operating assets and liabilities: ​ ​ ​ ​ Prepaid expenses and other assets ​ 3,040 ​ ( 632 ) Accounts payable ​ 2,655 ​ ( 1,611 ) Accrued expenses and other liabilities ​ ( 531 ) ​ 2,942 Net cash used in operating activities ​ ​ ( 21,657 ) ​ ​ ( 39,755 ) CASH FLOWS FROM INVESTING ACTIVITIES ​ ​ ​ ​ ​ ​ Purchase of computer equipment ​ ​ ( 3 ) ​ ​ ( 10 ) Net cash used in investing activities ​ ​ ( 3 ) ​ ​ ( 10 ) CASH FLOWS FROM FINANCING ACTIVITIES ​ ​ ​ ​ ​ Proceeds from convertible notes payable, net of discount ​ ​ — ​ ​ 10,020 Proceeds from stock option exercise ​ ​ — ​ ​ 10 Repayment of note payable ​ ​ — ​ ​ ( 518 ) Repayment of convertible note ​ ​ ( 3,092 ) ​ ​ — Repayment of insurance loan ​ ​ ( 943 ) ​ ​ — Proceeds from issuance of insurance loan ​ ​ 943 ​ ​ — Proceeds from issuance of Series A preferred stock and warrants issued in private placement, net of issuance costs ​ ​ 1,171 ​ ​ — Proceeds from issuance of common stock and warrants issued in private placement, net of issuance costs ​ ​ 8,122 ​ ​ 22,702 Net cash provided by financing activities ​ 6,201 ​ ​ 32,214 ​ ​ ​ ​ ​ ​ ​ Net decrease in cash and cash equivalents ​ ( 15,459 ) ​ ​ ( 7,551 ) Cash and cash equivalents at beginning of year ​ 20,054 ​ ​ 27,605 Cash and cash equivalents at end of year ​ $ 4,595 ​ $ 20,054 Supplemental disclosure of cash flow information: ​ ​ ​ ​ Cash paid for interest ​ $ 885 ​ $ — Cash paid for taxes ​ $ — ​ $ — Non-cash investing and financing activities ​ ​ ​ ​ Issuance of common stock as principal and interest repayment for convertible notes ​ $ 982 ​ $ — Issuance of common stock warrants as offering costs ​ $ 75 ​ $ 726 Issuance of common stock for consulting services ​ $ — ​ $ 17 Issuance of common stock for settlement of accrued liability ​ $ 250 ​ $ — ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 111 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization The Business 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-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”). NRX-101 is covered by multiple U.S. and foreign patents, including a Composition of Matter patent (U.S. Patent No. 10,583,138) that was transferred to NRx Pharmaceuticals by Glytech, LLC (see Note 13). ​ Operations ​ 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. ​ 2. Going Concern As of December 31, 2023, the Company had $ 4.6 million in cash. 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’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. 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. 112 Table of Contents 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. 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. ​ 3. Summary of Significant Accounting Policies 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 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 113 Table of Contents 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. Certain Risks and Uncertainties The Company’s activities are subject to significant risks and uncertainties including the risk of failure to secure additional funding to properly execute the Company’s business plan. The Company is subject to risks that are common to companies in the pharmaceutical industry, including, but not limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, reliance on third party manufacturers, protection of proprietary technology, and compliance with regulatory requirements. Fair Value of Financial Instruments ASC 820, Fair Value Measurements , provides guidance on the development and disclosure of fair value measurements. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace. Level 3: Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. (Refer to Note 11) Concentration of Credit Risk and Off-Balance Sheet Risk Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. Cash equivalents are occasionally invested in certificates of deposit. The Company maintains each of its cash balances with high-quality and accredited financial institutions and accordingly, such funds are not exposed to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. 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. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less at the time of initial purchase to be cash equivalents, including balances held in the Company’s money market accounts. The Company maintains its cash and cash equivalents with financial institutions, in which balances from time to time may exceed the U.S. federally insured limits. The objectives of the Company’s cash management policy are to safeguard and preserve funds to maintain liquidity sufficient to meet the Company’s cash flow requirements, and to attain a market rate of return. 114 Table of Contents 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. 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 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: ​ i. identify the contract(s) with a customer; ii. identify the performance obligations in the contract; iii. determine the transaction price; iv. allocate the transaction price to the performance obligations within the contract; and v. 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 115 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. ​ Royalties: 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 ​ The Company’s research and development expenses consist primarily of costs associated with the Company’s clinical trials, salaries, payroll taxes, employee benefits, and stock-based compensation charges for those individuals involved in ongoing research and development efforts. Research and development costs are expensed as incurred. Advance payments 116 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 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 (i.e. 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 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 The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards. The Company accounts for forfeitures as they occur. Stock-based awards with graded-vesting schedules are recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. 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. Warrants The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity 117 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be liability classified and recorded at their initial fair value on the date of issuance and remeasured at fair value and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the 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. 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. 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 Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense. 118 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Loss Per Share Basic loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if stock options, restricted stock awards and warrants were to vest and be exercised. Diluted earnings per share excludes, when applicable, the potential impact of stock options, common stock warrant shares, convertible notes, and other dilutive instruments because their effect would be anti-dilutive in the periods in which the Company incurs a net loss. The following outstanding shares of common stock equivalents were excluded from the computation of the diluted net loss per share attributable to common stock for the periods in which a net loss is presented because their effect would have been anti-dilutive. ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Stock options 2,649,828 2,548,849 Restricted stock awards ​ 1,241,667 ​ 1,000,000 Convertible preferred stock ​ 3,000,000 ​ — Common stock warrants 33,214,991 16,484,923 ​ 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, 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. ​ 4. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following at the dates indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ Prepaid expenses and other current assets: ​ ​ Prepaid insurance ​ $ 1,078 ​ $ 3,167 Prepaid clinical development expenses ​ ​ 871 ​ ​ 1,966 Other prepaid expenses ​ ​ 334 ​ ​ 331 Other current receivables ​ 6 ​ 7 Prepaid legal expenses ​ ​ — ​ ​ 270 Total prepaid expenses and other current assets ​ $ 2,289 ​ $ 5,741 ​ ​ 119 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. Accrued and Other Current Liabilities Accrued and other current liabilities consisted of the following at the dates indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 ​ 2022 Accrued and other current liabilities: ​ ​ ​ ​ ​ ​ Professional services ​ $ 2,686 ​ $ 342 Accrued research and development expenses ​ 1,112 ​ 974 Accrued employee expenses ​ ​ 835 ​ ​ 923 Other accrued expenses ​ ​ 81 ​ ​ 2,616 Total accrued and other current liabilities ​ $ 4,714 ​ $ 4,855 ​ ​ 6. 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 120 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Royalties 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 121 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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). 7. Debt Convertible 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 122 Table of Contents 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. 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 an Equity Conditions Failure. 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”). Upon an Event of a Default, the Lender may consider the Note immediately due and payable. Upon an Event of Default, the interest rate may also be increased to the lesser of 18 % per annum or the maximum rate permitted under applicable law. ​ Due to these embedded features within the Note, the Company elected to account for the Note at fair value at inception. Subsequent changes in fair value are recorded as a component of other income (loss) in the Consolidated Statements of Operations. ​ The 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 123 Table of Contents 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. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of measurement for time periods approximately equal to the time to expiration. Probability of default is estimated using Bloomberg's Default Risk function which uses our financial information to calculate a default risk specific to the Company. The discount to the principal amount is included in the carrying value of the Note. During 2022, the Company recorded a debt discount of approximately $ 1.0 million upon issuance of the Note for the original issue discount of $ 1.0 million. As a result of electing the fair value option, any direct costs and fees related to the Note was expensed as incurred. For the 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 ​ 2022 Par value of the Note ​ $ 11,020 ​ $ 11,020 Unamortized debt discount ​ ​ ( 497 ) ​ ​ ( 1,000 ) Conversions and repayments of principal and interest (shares and cash) ​ ​ ( 4,072 ) ​ ​ — Carrying value of the Note before current period change in fair value ​ ​ 6,451 ​ ​ 10,020 Fair value adjustment through earnings ​ ​ 2,707 ​ ​ 505 Fair value adjustment through accumulated other comprehensive loss ​ ​ 3 ​ ​ — Total carrying value of Note ​ $ 9,161 ​ $ 10,525 ​ ​ ​ ​ ​ ​ ​ Convertible note payable - current portion ​ $ 9,161 ​ $ 7,703 Convertible note payable, net of current portion ​ $ — ​ $ 2,822 ​ ​ ​ 124 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. 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 $ 100,000 End of Phase II Clinical Trials of Licensed Product ​ $ 250,000 End of Phase III Clinical Trials of Licensed Product ​ $ 250,000 First Commercial Sale of Licensed Product in U.S. ​ $ 500,000 First Commercial Sale of Licensed Product in Europe ​ $ 500,000 Annual Revenues Reach $100,000,000 ​ $ 750,000 ​ 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. Royalties 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. ​ 125 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Operating Lease The Company leases office space on a month-to-month basis. 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' 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, 2023, the Company has fully paid NJ Health the total committed amount under this agreement. ​ Relief Therapeutics Collaboration Agreement On September 18, 2020, the Company entered into a collaboration agreement (the “Collaboration Agreement”) with Relief Therapeutics for the clinical development and, if approved, the sale of Aviptadil. The Collaboration Agreement provides for funding by Relief Therapeutics of certain clinical trials, formulation and manufacturing of Aviptadil, as well as establishing specified sales territories for each party and share of the profits in those territories for “Product” as defined in the Collaboration Agreement. On October 6, 2021, Relief Therapeutics filed a lawsuit against the Company and its former CEO claiming that the Company failed to honor its obligations under the Collaboration Agreement, which was followed by a counter claim from the Company for breach and repudiation of the Collaboration Agreement by Relief Therapeutics. On November 12, 2022, the Company 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, 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 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. Mutual indemnity provisions in the APA will protect each party from any breaches of the settlement arrangements by the other party, provided, that the Company’s indemnity obligations will not start until the Relief Parties have begun making royalty or milestone payments to the Company, subject to certain exceptions. With respect to the Company, there is an 126 Table of Contents 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 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 From time to time the Company is involved in litigation, claims, and other proceedings arising in the ordinary course of business. Litigation and other disputes are inherently unpredictable and subject to substantial uncertainties and unfavorable resolutions could occur. Share Subscription Facility Agreement - GEM NeuroRx 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 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. ​ 127 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. Equity Preferred Stock ​ 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. ​ 128 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Common Stock 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. ​ H.C. 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. 129 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Common Stock Warrants ​ Substitute Warrants 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. Assumed Public Warrants 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 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 %). The March 130 Table of Contents 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 131 Table of Contents 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. The Preferred Investment Options have an exercise price of $3.07 per share and may be exercised any time on or after August 2, 2022. The form of the Preferred Investment Option is a warrant. The measurement of fair value was determined utilizing a Black-Scholes model considering all relevant assumptions current at February 2, 2022, the date of issuance (i.e., share price of $2.94, exercise price of $3.07, term of five years beginning August 2, 2022, volatility of 82.8%, risk-free rate of 1.60%, and expected dividend rate of 0%). The grant date fair value of these Preferred Investment Options was estimated to be $15.5 million on February 2, 2022 and is reflected within additional paid-in capital as of June 30, 2022. In addition, on February 2, 2022, the Company issued fully vested Preferred Investment Options to the placement agent with an exercise price of $3.99. As these Preferred Investment Options were issued for services provided in facilitating the private placement, the Company recorded the fair value of such Preferred Investment Options as a cost of capital on the issuance date. The measurement of fair value was determined utilizing a Black-Scholes model considering all relevant assumptions current at February 2, 2022, the date of issuance (i.e., share price of $2.94, exercise price of $3.99, term of five years beginning August 2, 2022, volatility of 82.8%, risk-free rate of 1.60%, and expected dividend rate of 0%). ​ The following table provides the activity for all warrants for the respective periods. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ Average ​ Weighted ​ Aggregate ​ ​ ​ Remaining ​ Average ​ Intrinsic Value ​ Total Warrants ​ Term ​ Exercise Price ​ (in thousands) Outstanding as of December 31, 2022 16,484,923 ​ 3.59 ​ $ 6.49 ​ $ — Issued 16,730,068 ​ 4.38 ​ ​ 0.61 ​ ​ 180 Outstanding as of December 31, 2023 33,214,991 ​ 3.91 ​ $ 2.30 ​ $ 180 ​ ​ 10. Stock-Based Compensation 2016 Omnibus Incentive Plan Prior to the Merger, NeuroRx maintained its 2016 Omnibus Incentive Plan (the “2016 Plan”), under which NeuroRx granted incentive stock options, restricted stock awards, other stock-based awards, or other cash-based awards to employees, directors, and non-employee consultants. The maximum aggregate shares of common stock that were subject to awards and issuable under the 2016 Plan was 3,472,000 . In connection with the Merger, each option of NeuroRx that was outstanding and unexercised immediately prior to the Effective Time (whether vested or unvested) was assumed by BRPA and converted into an option to acquire an adjusted number of shares of Common Stock at an adjusted exercise price per share, based on the Exchange Ratio (of 3.16 ). 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. 132 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2021 Omnibus Incentive 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. 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 awards or other cash-based awards to employees, directors, and non-employee consultants. Option Awards ​ The fair value of each employee and non-employee stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company is a public company and has limited company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the limited company-specific historical volatility and implied volatility as well as historical volatility of a publicly traded set of peer companies. The expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Additionally, certain options granted contain terms that require all unvested options to immediately vest a) upon the approval of a New Drug Application (NDA) by the FDA for NRX-101, or b) immediately preceding a change in control of the Company, whichever occurs first. The following assumptions were used for the years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ 2023 ​ ​ 2022 Exercise price ​ $0.30 - $1.18 ​ ​ $ 0.51 - $ 3.10 Risk-free rate of interest ​ 3.83 % - 4.79 % ​ 1.8 % - 4.36 % Expected term (years) ​ 0.5 - 7.0 ​ 5.3 - 6.5 Expected stock price volatility ​ 150.3 % ​ 94.9 % - 147.8 % Dividend yield ​ — ​ — ​ 133 Table of Contents 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 ​ Weighted average remaining contractual life (in years) ​ Aggregate intrinsic value (in thousands) Outstanding as of December 31, 2022 ​ 2,548,849 ​ $ 0.20 ​ 3.2 ​ $ 2,549 Options granted ​ 900,000 ​ 0.64 ​ — ​ — Forfeited ​ ( 790,021 ) ​ ( 5.28 ) ​ — ​ — Expired ​ (9,000) ​ - ​ — ​ — Outstanding as of December 31, 2023 ​ 2,649,828 ​ $ 1.83 ​ 7.7 ​ $ 75 Options vested and exercisable as of December 31, 2023 ​ 1,511,323 ​ $ 2.31 ​ 6.4 ​ $ 42 ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ Awards ​ Weighted Average Grant Date Fair Value Balance as of December 31, 2022 (unvested) ​ 1,000,000 ​ $ 0.57 Granted ​ 575,000 ​ 0.46 Vested ​ ( 333,333 ) ​ 0.57 Balance as of December 31, 2023 (unvested) ​ 1,241,667 ​ $ 0.52 ​ 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. 134 Table of Contents 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): The following table summarizes the Company’s recognition of stock-based compensation for the following periods (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 2022 Stock-based compensation expense ​ ​ General and administrative ​ $ 572 ​ $ 3,002 Research and development ​ (185) ​ 626 Total stock-based compensation expense ​ $ 387 ​ $ 3,628 ​ 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. ​ 11. Fair Value Measurements Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the years ended December 31, 2023 and 2022. The carrying amount of accounts payable approximated fair value as they are short term in nature. 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 The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. The estimated fair value of the money market account represents a Level 1 measurement. The estimated fair value of the warrant liabilities and 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, Description Level 2023 ​ 2022 Assets: ​ ​ ​ ​ ​ ​ ​ Money Market Account ​ 1 ​ $ 3,874 ​ $ 15,249 ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Warrant liabilities (Note 9) ​ 3 ​ $ 17 ​ $ 37 Convertible note payable (Note 7) 3 ​ $ 9,161 ​ $ 10,525 ​ 135 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Convertible Note Payable The significant inputs used in the Monte Carlo simulation to measure the convertible note liability that is categorized within Level 3 of the fair value hierarchy are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 ​ 2022 Stock price on valuation date ​ $ 0.46 ​ ​ $ 0.83 ​ Time to expiration ​ 0.34 ​ ​ ​ 1.50 ​ Note market interest rate ​ 9.0 % ​ ​ 9.0 % Equity volatility ​ 85.0 % ​ ​ 165.0 % Volume volatility ​ 590 % ​ ​ 580 % Risk-free rate ​ 5.35 % ​ ​ 4.71 % Probability of default ​ 10.7 % ​ ​ 7.6 % ​ 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 ​ 2022 Par value of the Note ​ $ 11,020 ​ $ 11,020 Unamortized debt discount ​ ​ ( 497 ) ​ ​ ( 1,000 ) Conversions and repayments of principal and interest (shares and cash) ​ ​ ( 4,072 ) ​ ​ — Carrying value of the Note before current period change in fair value ​ ​ 6,451 ​ ​ 10,020 Fair value adjustment through earnings ​ ​ 2,707 ​ ​ 505 Fair value adjustment through accumulated other comprehensive loss ​ ​ 3 ​ ​ — Total carrying value of Note ​ $ 9,161 ​ $ 10,525 ​ ​ ​ ​ ​ ​ ​ Convertible note payable - current portion ​ $ 9,161 ​ $ 7,703 Convertible note payable, net of current portion ​ $ — ​ $ 2,822 ​ Warrant Liabilities 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. The Company estimates the volatility of its common stock based on historical and peer company volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero -coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero. 136 Table of Contents 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, ​ ​ 2023 ​ 2022 Stock price on valuation date ​ $ 0.46 ​ $ 1.11 Exercise price per share ​ $ 11.50 ​ $ 11.50 Expected life ​ 2.40 ​ 3.40 Volatility ​ 150.3 % ​ 100.0% Risk-free rate ​ 4.14 % ​ 4.17% Dividend yield ​ 0.00 % ​ 0.00% Fair value of warrants ​ $ 0.13 ​ $ 0.26 ​ A reconciliation of warrant liabilities is included below (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ Balance as of December 31, 2021 ​ $ 292 Gain upon re-measurement ​ ​ (255) Balance as of December 31, 2022 ​ ​ 37 Gain upon re-measurement ​ ​ ( 20 ) Balance as of December 31, 2023 ​ $ 17 ​ ​ 12. Income Taxes The Company maintains a full valuation allowance on its net deferred tax asset due to the uncertainty of future taxable income. The Company did not recognize an income tax benefit in the years ended December 31, 2023 and 2022 due to the uncertainty of future taxable income. In the years ended December 31, 2023 and 2022, the difference between the statutory tax rate and the Company’s effective tax rate was due primarily to the valuation allowance recorded to offset any potential tax benefit. A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate consist of the following: ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ 2023 ​ 2022 Federal statutory rate ( 21.00 ) % ​ ( 21.00 ) % Permanent items 0.18 % ​ 0.08 % Fair market value earnout — % ​ ( 2.42 ) % Settlement warrants ( 0.02 ) % ​ 0.00 % Stock compensation 3.21 % ​ ( 0.01 ) % Foreign rate differential — % ​ 0.33 % State taxes 4.74 % ​ ( 1.62 ) % Increase in valuation allowance 9.45 % ​ 24.64 % R&D credit 1.66 % ​ — % Convertible Note 1.89 % ​ — % Other ( 0.11 ) % ​ — % Effective tax rate 0.00 % ​ 0.00 % ​ 137 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The components of income tax provision (benefit) are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ 2023 ​ 2022 Federal $ ​ ​ $ ​ Current ​ — ​ ​ — Deferred ​ ( 4,278 ) ​ ​ ( 9,295 ) Foreign ​ ​ ​ ​ ​ Current ​ — ​ ​ — Deferred ​ — ​ ​ 133 State and Local ​ ​ ​ ​ ​ Current ​ — ​ ​ — Deferred ​ 1,428 ​ ​ ( 647 ) Change in Valuation Allowance ​ 2,850 ​ ​ 9,809 Total $ — ​ $ — ​ Deferred income taxes reflect the net tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. The temporary differences that give rise to deferred tax assets and liabilities are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2023 ​ 2022 Deferred tax assets (liabilities): ​ ​ ​ ​ ​ ​ Net operating loss carryforwards ​ $ 35,860 ​ $ 33,640 Common stock warrants ​ ​ 1,822 ​ ​ 1,894 174 capitalization ​ ​ 5,169 ​ ​ 3,410 Stock-based compensation ​ ​ 1,400 ​ ​ 2,411 Bonus accrual ​ ​ 167 ​ ​ 202 Other ​ ​ 488 ​ ​ — R&D credit ​ ​ — ​ ​ 500 Depreciation ​ ​ ( 2 ) ​ ​ ( 3 ) ​ ​ ​ 44,904 ​ ​ 42,054 Valuation allowance ​ ​ ( 44,904 ) ​ ​ ( 42,054 ) Deferred tax assets, net of allowance ​ $ — ​ $ — ​ 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. Utilization of the net operating loss carryforwards may be subject to an annual limitation according to Section 382 of the Internal Revenue Code of 1986 as amended, and similar provisions. 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 138 Table of Contents 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 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. In the normal course of business, the Company is subject to examination by federal and foreign jurisdictions where applicable based on the statute of limitations that apply in each jurisdiction. As of December 31, 2023, open years related to all jurisdictions are 2022, 2021, 2020, & 2019. The Company has no open tax audits with any taxing authority as of December 31, 2023. 13. Related Party Transactions Glytech Agreement The Company licenses patents that are owned by Glytech, LLC (“Glytech”), pursuant to a license agreement (the “Glytech Agreement”). Glytech is owned by a co-founder and former director of the Company. The Glytech Agreement requires that the Company pay Glytech for ongoing scientific support and also reimburse Glytech for expenses of obtaining and maintaining patents that are licensed to NRx Pharmaceuticals. During the years ended December 31, 2023 and 2022, the Company paid Glytech $ 0.3 million and $ 0.3 million, respectively, for continuing technology support services and reimbursed expenses. These support services are ongoing. The Fourth Amendment to the Glytech Agreement, effective as of December 31, 2020, includes an equity value-triggered transfer of Excluded Technology from Glytech to NRx Pharmaceuticals. The Excluded Technology is defined in the Glytech Agreement as any technology, and any know-how related thereto, covered in the licensed patents that do not recite either D-cycloserine or lurasidone individually or jointly. This definition would cover pharmaceutical formulations, including some that NRx Pharmaceuticals considers “pipeline” or “future product” opportunities, that contain a combination of pharmaceutical components different from those contained in NRX-100 and NRX-101. 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. Jonathan Javitt, is a major shareholder in the Company and a member of the Board of Directors. Therefore, his services are deemed to be a related party transaction. He served the Company on a full-time basis as CEO under an employment agreement with the Company until March 8, 2022 and currently serves under a Consulting Agreement with the Company as Chief Scientist thereafter and received compensation of $ 0.9 million and $ 0.9 million during the years ended December 31, 2023 and 2022, respectively. On March 29, 2023, the Consulting Agreement dated March 8, 2022 (the “Javitt Consulting Agreement”) between the Company and Dr. Jonathan Javitt was amended to extend the term of the Agreement until March 8, 2024 with automatic annual renewals thereafter unless one party or the other provides notice of non-renewal. The amendment also provided for 139 Table of Contents 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. The amendment also provides, subject to the approval of the Board of Directors, for a grant of 500,000 shares of restricted stock of the Company under the Company’s 2021 Omnibus Incentive Plan. The restrictions are performance based, and half of the restricted shares ( 250,000 ) shall have the restrictions removed on the New Drug Application Date (as defined below) and the remaining half ( 250,000 ) will have the restrictions removed on the New Drug Approval Date (as defined below). As of 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. 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. 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, 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. 14. 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 140 Table of Contents 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 $ (30,159) ​ $ (39,754) Basic and diluted weighted average shares outstanding ​ 75,761,763 ​ ​ 65,766,786 Basic and diluted net loss per share $ (0.40) ​ $ (0.60) ​ ​ ​ ​ ​ ​ ​ Historical per share data – (Post- Split basis) (UNAUDITED) ​ December 31, 2023 (Unaudited) ​ ​ December 31, 2022 (Unaudited) ​ ​ ​ ​ ​ ​ Net loss attributable to Common Stockholders $ (30,159) ​ $ (39,754) Basic and diluted weighted average shares outstanding ​ 7,576,181 ​ ​ 6,574,730 Basic and diluted net loss per share $ (3.98) ​ $ (6.05) ​ ​ 141 Table of Contents 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 (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets $ 7,315 ​ $ — ​ $ 7,315 ​ ​ ​ ​ ​ ​ ​ ​ ​ Total liabilities ​ 19,048 ​ ​ — ​ ​ 19,048 ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ (deficit) equity: ​ ​ ​ ​ ​ ​ ​ Series A convertible preferred stock ​ 3 ​ ​ — ​ ​ 3 Common stock ​ 84 ​ ​ (76) ​ ​ 8 Additional paid-in capital ​ 241,330 ​ ​ 76 ​ ​ 241,406 Accumulated other comprehensive loss ​ (3) ​ ​ — ​ ​ (3) Accumulated deficit ​ (253,147) ​ ​ — ​ ​ (253,147) Total stockholders’ (deficit) equity ​ (11,733) ​ ​ — ​ ​ (11,733) Total liabilities and stockholders' (deficit) equity $ 7,315 ​ $ — ​ $ 7,315 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ 1:10 adjustment ​ Pro-Forma Effect December 31, 2022 (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets $ 25,816 ​ $ — ​ $ 25,816 ​ ​ ​ ​ ​ ​ ​ ​ ​ Total liabilities ​ 18,407 ​ ​ — ​ ​ 18,407 ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ (deficit) equity: ​ ​ ​ ​ ​ ​ ​ ​ Series A convertible preferred stock ​ — ​ ​ — ​ ​ — Common stock ​ 67 ​ ​ (60) ​ ​ 7 Additional paid-in capital ​ 230,339 ​ ​ 60 ​ ​ 230,399 Accumulated other comprehensive loss ​ — ​ ​ — ​ ​ — Accumulated deficit ​ (222,997) ​ ​ — ​ ​ (222,997) Total stockholders’ (deficit) equity ​ 7,409 ​ ​ — ​ ​ 7,409 Total liabilities and stockholders' (deficit) equity $ 25,816 ​ $ — ​ $ 25,816 ​ ​ 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. 142 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ​ ATM Closings ​ 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 ​ 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. ​ 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”). 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 (the “Over-Allotment Option”). 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 143 Table of Contents 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. ​ ​ ​ 144 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. ​