NRX Pharmaceuticals, Inc. NRXP US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of NRx Pharmaceuticals’ financial condition and plan of operations together with NRx Pharmaceuticals’ consolidated financial statements and the related notes appearing elsewhere herein. In addition to historical information, thisdiscussionandanalysiscontainsforward-lookingstatementsthatinvolverisks,uncertaintiesandassumptions. NRx Pharmaceuticals’ actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section entitled “Risk Factors” included elsewhere herein.

Overview

On May 24, 2021, Big Rock Partners Acquisition Group (“BRPA”), a special purpose acquisition company, consummated the Agreement and Plan of Merger (as amended, the “Merger Agreement”) with NeuroRx, Inc., a Delaware corporation (“NeuroRx”), and Big Rock Merger Corp., a Delaware corporation and wholly-owned, direct subsidiary of BRPA (“Merger Sub”). Pursuant to the Merger Agreement, on May24,2021(the“ClosingDate”),whichhasbeenaccountedforasareverserecapitalization,MergerSub wasmergedwithandintoNeuroRx,withNeuroRxsurvivingthemerger(the“Merger”and,togetherwiththe other transactions contemplated by the Merger Agreement, the “Business Combination”). On the Closing Date, BRPA changed its name to NRX Pharmaceuticals, Inc. (“NRx Pharmaceuticals” or the“Company”).

NRx Pharmaceuticals is a clinical stage pharmaceutical company that is developing, through its wholly-owned operating subsidiary, NeuroRx, NRX-100 and NRX-101, the first oral therapeutic for the treatment of Bipolar Depression in patients with Acute Suicidal Behavior/Ideation (ASIB) and Sub-Acute Suicidal Ideation and Behavior (“SSIB”), and ZYESAMI (aviptadil), an intravenous and inhaled drug to treat respiratory failure in COVID-19 and potentially other respiratory disorders.

NRX-100 and NRX-101 were developed based upon 30 years of basic science and clinical expertise contributed by Dr. Daniel Javitt, MD, PhD,related to the role of the brain’s N-methyl-D-aspartate (“NMDA”) receptor in regulating human thought processes in general and in regulating depression and suicidality. The NRX-100 and NRX-101 therapy begins with a single dose of ketamine (NRX-100), an FDA approved anesthetic, followed by approximately six weeks of daily oral NRX-101. NRX-101 is being developed as a rapid-onset andsustainedtreatmentforbipolardepression with ASIB and SSIB.NRX-101combinesDCS, a NMDA receptor modulator, and lurasidone, a 5-HT2a receptor antagonist.

NRX-101hasbeenawardedFastTrackdesignation,BreakthroughTherapydesignation,a Biomarker Letter of Support, andaSpecial ProtocolAgreementbytheFDA.Peer-reviewedandpublishedresultsfromPhaseIIclinicalstudies demonstrateasignificantdecline and stabilization in symptomsofdepressionandsuicidalityfollowingadministrationof DCS.Findingsfromoneofthesestudiesfoundthatbipolarpatientswhowerealreadyreceivinga5-HT2a antagonist demonstrated more than a 50% reduction in symptoms of depression and a 75% reduction in suicidalideationwhenketamineandDCSwereaddedtotheirtreatmentregimen.Sideeffectsforpatients in a P2a combination study of DCS and 5HT2a included mild sedation, headaches and hypomania. Breakthrough Therapy designation was awarded based on data from the STABIL-B study (NCT02974010) that demonstrated a statistically significant advantage of NRX-101 vs. lurasidone (the current standard of care) in maintaining remission from depression and suicidality following a single stabilizing dose of ketamine.

In March 2020, NRx Pharmaceuticals initiated development of RLF-100 (aviptadil acetate) (now reformulated as ZYESAMI by NRx Pharmaceuticals) in partnership with Relief Therapeutics Holding AG (“Relief Therapeutics”). ZYESAMI is based on 50 years of research, pioneered by Professor Sami Said, on the role of aviptadil in preventing and treating acute lung injury byprotectingtheTypeIIcellinthelung.TherightstoProfessorSaid’sscientificworkarelicensedbythe Companyfrom the Research Foundation for the State University of New York.

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NRx Pharmaceuticals and Relief Therapeutics entered into a Binding Collaboration Agreement on September 18, 2020 (the “Collaboration Agreement”) for the clinical development and, if approved, the sale of aviptadil. The Collaboration Agreement provided for funding by Relief Therapeutics of certain clinical trials, formulation and manufacturing of aviptadil, as well as established sales territories for each party and share of the profits in those territories for “Product” as defined in the Collaboration Agreement. Relief Therapeutics has reimbursed the Company approximately $10.9 million for expenses but has subsequently declined to reimburse the Company for additional costs.

On October 6, 2021, Relief Therapeutics filed a complaint in New York State Court, claiming that the Company failed to honor its obligations under the Collaboration Agreement. Relief Therapeutics’ complaint seeks several remedies, including damages for alleged breaches of the terms of the Collaboration Agreement. The Company believes that the claims are baseless and without merit. On January 10, 2022 the Company filed a complaint in New York State Court, claiming Relief Therapeutics breached and repudiated the Collaboration Agreement. The Company’s complaint seeks damages of at least $185.0 million. However, the parties to the lawsuits agreed to engage in an effort to amicably resolve the litigation, held a mediation meeting on February 22, 2022, and plan to hold an additional mediation meeting in the coming months. If the mediation does not resolve the dispute, the Company intends to defend itself vigorously and to prosecute significant claims against Relief Therapeutics.

In an open-label, single center trial at Houston Methodist Hospital, ZYESAMI demonstrated a statistically significant 9-fold advantage in probability of survival and recovery from respiratory failure compared to the standard of care among patients with COVID-19 respiratory failure.

On June 1, 2021, NRx Pharmaceuticals reported Phase IIb/III study results of ZYESAMI in patients with respiratory failure due to critical COVID-19. The study identified a statistically significant increase in the likelihood that patients treated with ZYESAMI would be alive and free of respiratory failure at 60 days, compared to those treated with placebo, and identified a significantly shorter median hospital stay. The clinical study report filed with the FDA further documented statistically significant advantages for ZYESAMI on all major secondary endpoints.

On the basis of these results, NRx Pharmaceuticals applied for FDA Emergency Use Authorization (“EUA”) on May 31, 2021. In November 2021, the FDA notified us that it was unable to issue the EUA at that time due to insufficient data regarding the known and potential benefits of ZYESAMI and the known and potential risks of ZYESAMI in patients suffering from critical COVID-19 with respiratory failure. In response, in February 2022, the Company filed a new request for EUA in patients with COVID-19 respiratory failure who are at immediate risk of death despite treatment with remdesivir and other approved therapies. As of the date of this annual report, that request is still pending.

Should an EUA be granted, this would provide NRx Pharmaceuticals with a one-year period during which ZYESAMI could be marketed for the treatment of COVID-19 in the U.S. in advance of the filing a new drug application (“NDA”) with the FDA for formal approval of ZYESAMI for the treatment of COVID-19basedontherecentlycompletedclinicaltrialandtheadditionalclinicaltrialscurrentlyunderway, including the NIH ACTIV3b/TESICO trial (NCT 04843761). If authorized for use, ZYESAMI would fill a high unmet need in the U.S. specifically for COVID-19 patients who are critically ill with respiratoryfailure, as current options have only limited applicability in this patient segment.

On October 8, 2021, the Company submitted an updated manufacturing module to its FDA Investigational New Drug file documenting this change in manufacture and stability. On November 8, 2021, the FDA communicated with the Company that the manufacturing update had been reviewed and that no “clinical hold” items had been identified (this is the regulatory language that allows an investigational product to be given to patients). The Company initiated a parallel manufacturing process to conform to EU and UK standards. In October 2021, the Company announced that a European Qualified Person audit was conducted, and no major deficiencies were identified, thus clearing ZYESAMI’s use in EU investigational programs.

Although NRx Pharmaceuticals’ initial focus has been on the use of intravenous ZYESAMI, NRx Pharmaceuticals also received permission from the FDA to test inhaled ZYESAMI in a phase II/III clinical trial for patients with early disease. NRx Pharmaceuticals believes that the inhaled drug may be more convenient for some patients to self-administer than receiving the intravenous drug. ThisclinicaltrialcommencedinJanuary2021but has been temporarily paused

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pending a review of technical issues about the optimal delivery of the drug to the trial patients. In July 2021, the Company signed an agreement for a Phase II Inhaled clinical trial of ZYESAMI in the nation of Georgia, but the Company has decided not to proceed with this trial. In addition, a separate inhaled study being conducted by I-SPY was stopped after it showed futility, most likely driven by the challenges of administering nebulized medication to patients receiving high flow oxygen support although other factors may also play a role. Based on the data received from the two incomplete studies, we plan to explore the application of this form in patients with earlier forms of COVID-19 and other respiratory diseases who are still able to inhale normally anddonothaveinflammatorydebriscloggingtheiralveoli.

On July 11, 2021, NRx Pharmaceuticals entered into a Memorandum of Understanding with the Ministry of Defense of the State of Israel (the “MoU”) for an exclusive, worldwide licensetodevelopanovelCOVID-19vaccine(BriLifeTM)developedbytheIsraelInstituteforBiologicalResearch (“IIBR”). However, after investigating the manufacturing requirements of the vaccine, the expected regulatory path for approval in Israel and the EU, the commercial opportunity, and the financial commitment required for development of the vaccine, the Company decided not to continue with the project. We plan to effect a transition in consultation with the IIBR. This decision was communicated to the IIBR in a letter dated March 20, 2022.

As part of the Company’s consideration of the vaccine project, the Company entered into a Shareholder Agreement, dated October 15, 2021 (the “Agreement”), with Shimshon Hen and David Sepiashvili, each an Israeli citizen (the “Consultants”), under which the Consultants agreed to provide certain consulting services, and which set out a framework for establishing a potential joint venture between the Consultants and the Company that would have been responsible for the development and commercialization of the BriLife vaccine. Pursuant to the terms of the Agreement, the Company issued an aggregate of 4,000,000 shares of the Company’s Common Stock to the Consultants on October 20, 2021 under the Company’s 2021 Omnibus Incentive Plan. The Company is evaluating its options with respect to the Consultants.

Since inception, NRx Pharmaceuticals has incurred significant operating losses. For the years ended December 31, 2021 and 2020, NRx Pharmaceuticals’ net loss was $93.1 million and $51.8 million, respectively. As of December 31, 2021, NRx Pharmaceuticals had an accumulated deficit of $183.2 million.

COVID-19 Outbreak

On January 30, 2020, the WHO announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 Outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 Outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 Outbreak continues to evolve. As such, NRx Pharmaceuticals cannot estimate the full magnitude, whether positive or negative, that the pandemic will have on our business. If the COVID-19 Outbreak continues, it may have a material adverse effect on our financial condition, liquidity, and future results of operations for the year ending December 31, 2022 and beyond. Management is actively monitoring the impact of the global pandemic on its financial condition, liquidity, operations, industry, and workforce. Alternatively, the COVID-19 Outbreak could have a material positive effect on market demand for ZYESAMI. Given the daily evolution of the COVID-19 Outbreak, the uncertainty around the emergence of new strains, the global responses to curb its spread, and the uncertainty of the authorization / approval of ZYESAMI by the FDA, NRx Pharmaceuticals is not able to estimate the effects of the COVID-19 Outbreak on its results of operations, financial condition, or liquidity for the year ending December 31, 2022 and beyond. Aside from our COVID-19 related trials, as a result of the COVID-19 Outbreak, our other trials have been halted, although we expect to resume our trials for NRX-100 and the registrational and NRX-101 study in the second half of 2022. We are currently initiating a Phase II study of NRX-101 in patients with bipolar depression and sub-acute Suicidality (SSIB). This study will enroll patients that do not need to be hospitalized and certain study visits can be done remotely. This will enable us to better prepare for the start of our registrational P2/3 SPA studies of NRX-100 /NRX-101 in patients with severe bipolar depression and acute suicidal ideation and behavior (“ASIB”).

Components of Results of Operations

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Operating expenses

Research and development expenses

NRx Pharmaceuticals’ research and development expenses consist primarily of costs associated with clinical trials, salaries, payroll taxes, employee benefits, and equity-based compensation charges for individuals involved in ongoing research and development efforts. Research and development costs are expensed as incurred. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been used.

General and administrative expenses

General and administrative expenses consist primarily of salaries, stock-based compensation, consultant fees, and professional fees for legal and accounting services.

Settlement Expense

Settlement expense consists primarily of settlement expenses related to the GEM Warrant as further discussed in footnote 9 to the Company’s 2021 Audited Financial Statements under “Share Subscription Facility Agreement – GEM”.

Reimbursement of expenses from Relief Therapeutics

Reimbursement of expenses from Relief Therapeutics consists of reimbursable expensesas part of the Collaboration Agreement.

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Results of operations for the years ended December 31, 2021 and 2020

The following table sets forth NRx Pharmaceuticals’ selected statements of operations data for the following periods (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years ended December 31, ​ ​ ​

​ ​ ​ ​ ​ ​

Operating expenses: ​ ​ ​ ​ ​ ​

Reimbursement of expenses from Relief Therapeutics ​ (771) ​ (10,160) ​ ​ 9,389

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Other (income) expenses: ​ ​ ​

Gain on extinguishment of debt ​ (121) ​ — ​ ​ (121)

Interest expense ​ 18 ​ 56 ​ ​ (38)

Change in fair value of warrant liability ​ ​ (1,692) ​ ​ — ​ ​ (1,692)

Change in fair value of Earnout Cash liability ​ ​ (20,938) ​ ​ — ​ ​ (20,938)

Change in fair value of embedded put ​ — ​ 27 ​ ​ (27)

Loss on conversion of convertible notes payable ​ — ​ 307 ​ ​ (307)

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Operating expenses

Research and development expenses

For the year ended December 31, 2021, we recorded $20.3 million of research and development expenses compared to $10.6 million for the year ended December 31, 2020. The increase of $9.6 million related primarily to an increase of $6.9 million in clinical trials and development expenses related to ZYESAMI; an increase of $2.1 million related to fees paid to regulatory and process development consultants, an increase of $0.9 million in stock-based compensation expense, partially offset by a decrease of $0.3 million in other regulatory and process development costs. The $20.3 million and $10.6 million of research and development expenses for the years ended December 31, 2021 and 2020 respectively, include $1.3 million and $0.4 million, respectively, of non-cash stock-based compensation.

General and administrative expenses

For the year ended December 31, 2021, we recorded $74.9 million of general and administrative expensescomparedto$11.4 million fortheyearendedDecember31,2020.Theincreaseof$63.5 million related primarily to $56.0 million of consultant fees, of which $41.0 million relates to the fair value of common stock issued related to the Shareholder Agreement described in footnote 10 of the Company’s 2021 Audited Financial Statements under “VaccineCo Agreement and Issuance of Shares”, an increase of $6.2 million in stock-based compensation, an increase of $4.0 million in insurance expense, an increase of $1.5 million in legal and professional fees, an increase of $0.8 million for employee expenses, and an increase of $0.4 million in other general and administrative expenses, partially offset by a decrease of $5.4 million of warrant expense for warrants issued to board members for services. The $74.9 million and $11.4 million of general and administrative expenses for the years ended December 31, 2021 and 2020 respectively, include $60.3 million and $5.7 million, respectively, of non-cash stock-based compensation, consulting fees, and warrant expense.

Settlement Expense

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For the year ended December 31, 2021, we recorded $21.4 million of settlement expense compared to $39.5 million of settlement expense for the year ended December 31, 2020. Settlement expense is a non-cash expense related to the GEM Warrant.

Reimbursement of expenses from Relief Therapeutics

For the year ended December 31, 2021, we recorded $0.8 million of reimbursement of expenses from Relief Therapeutics compared to $10.2 million of reimbursement of expenses from Relief Therapeutics for the year ended December 31, 2020.

Gain on extinguishment of debt

For the year ended December 31, 2021, NRx Pharmaceuticals recorded $0.1 million of gain on extinguishment of debt and did not record a gain or loss for the year ended December 31, 2020. The increase of $0.1 million related to the forgiveness of the PPP Loan which resulted in a gain on extinguishment for the outstanding principal and accrued and unpaid interest.

Interest expense

For the year ended December 31, 2021, we recorded less than $0.1 million of interest expense compared to $0.1 million for the year ended December 31, 2020. The decrease of less than $0.1 million related primarily to the conversion of convertible notes payable in 2020.

Change in fair value of warrant liability

For the year ended December 31, 2021, NRx Pharmaceuticals recorded a gain of $1.7 million related to the change in fair value of the warrant liability and did not record any gain or loss for the year ended December 31, 2020. The gain related to the decrease in the fair value of the Placement Warrants assumed pursuant to the Merger Agreement.

Change in fair value of Earnout Cash liability

For the year ended December 31, 2021, NRx Pharmaceuticals recorded a gain of $20.9 million related to the decrease in fair value of the Earnout Cash liability and did not record any gain or loss for the year ended December 31, 2020. The gain primarily resulted from a decrease in the probability of achieving the Earnout Cash milestones by December 31, 2022 due to changes to the anticipated re-start date of the NRX-101 Phase III clinical trial, slower enrollment in the NIH’s ZYESAMI clinical trial, and the FDA’s November decision not to approve EUA for ZYESAMI.

Loss on conversion of convertible notes payable

For the year ended December 31, 2021, we did not record a loss on conversion of convertible notes payable and recorded $0.3 million of loss on conversion of convertible notes payable for the year ended December 31, 2020. The decrease of $0.3 million relatedtothelossonextinguishmentforthedifferencebetweenthecarryingvalueoftheconvertible notes, unamortized debt discount, and the fair value of the embedded put option, and the fair value of common sharesissued.

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Liquidity and Capital Resources

The following table presents selected financial information and statistics as of and for the years ended December 31, 2021 and 2020 (in thousands):

​ ​ ​ ​ ​ ​ ​

​ ​ Years ended December 31,

​ ​ ​

Balance Sheet Data: ​ ​ ​ ​ ​ ​

Earnout cash liability ​ ​ 4,582 ​ ​ —

Total stockholders' equity (deficit) ​ ​ 20,806 ​ ​ (43,771)

Statement of Cash Flow Data: ​ ​ ​ ​ ​ ​

Net cash used in operating activities ​ ​ (37,703) ​ ​ (2,265)

Net cash used in investing activities ​ (7) ​ (2)

Net cash provided by financing activities ​ ​ 63,456 ​ ​ 3,249

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We believe our cash will be sufficient to fund our planned operations and capital expenditure requirements for at least the next 12 months after the date the financial statements are issued. We have based this estimate on assumptions that may prove to be wrong and we could utilize our cash sooner than we currently expect.

NRx Pharmaceuticals has generated no revenues, has incurred operating losses since inception, and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. Until such time as NRx Pharmaceuticals is able to establish a revenue stream from the sale of its therapeutic products, NRx Pharmaceuticals is dependent upon obtaining necessary equity and/or debt financing to continue operations. NRx Pharmaceuticals cannot make any assurances that sales of ZYESAMI will commence in the near term or that additional financings will be available to it and, if available, on acceptable terms or at all. This could negatively impact NRx Pharmaceuticals' business and operations and could also lead to the reduction of NRx Pharmaceuticals' operations.

NRx Pharmaceuticals expects to continue to incur operating losses and net cash outflows until such time as it generates a level of revenue from sale or licensing of drug products to support its cost structure. There is no assurance that NRx Pharmaceuticals will achieve profitable operations and if achieved, whether it will be sustained on a continued basis.

NRx Pharmaceuticals intends to fund ongoing activities by raising additional capital through equity or debt financings. There can be no assurance that NRx Pharmaceuticals will be successful in raising that additional capital or that such capital, if available, will be on terms that are acceptable to NRx Pharmaceuticals. If NRx Pharmaceuticals is unable to raise sufficient additional capital, NRx Pharmaceuticals may be compelled to reduce the scope of its operations and planned capital expenditures.

Reverse Recapitalization Merger

Pursuant to the terms of the Merger Agreement, NeuroRx’s securityholders (including option holders and warrant holders) who own NeuroRx securities immediately prior to the Effective Time will have the contingent right to receive their pro rata portion of (i) an aggregate of 25,000,000 shares of Common Stock (the “Earnout Shares”) if, prior to December 31, 2022, ZYESAMI receives emergency use authorization by the “FDA” and NeuroRx submits and the FDA files for review a new drug application for ZYESAMI (theoccurrenceoftheforegoing,the“EarnoutSharesMilestone”),and(ii)anaggregateof$100.0 millionin cash (the “Earnout Cash”) upon the earlier to occur of (x) FDA approval of ZYESAMI and the listing of ZYESAMI in the FDA’s “Orange Book” and (y) FDA approval of NRX-100 and NRX-101 andthe listing of the NRX-100 and NRX-101 in the FDA’s “Orange Book,” in each case prior to December 31, 2022 (the occurrence of either of clauses (x) or (y), the “Earnout Cash Milestone”). If the Earnout Shares Milestoneisachieved,the

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EarnoutShareswillbeissuedwithinfive(5)businessdaysaftertheoccurrenceof the Earnout Shares Milestone. If the Earnout Cash Milestone is achieved, the Merger Agreementdoes not require the Earnout Cash to be delivered to NeuroRx securityholders within any specified period of time, and the Board of Directors of NRx Pharmaceuticals will use its good faith judgment to determine the date to pay the Earnout Cash. At December 31, 2021, the fair value of the Earnout Cash liability has been estimated to be $4.6 million. Upon closing of the Merger, the estimated fair value of the Earnout Shares was $253.1 million with such amount recognized as a deemed dividend. As NRx Pharmaceuticals is in anaccumulated deficit position as of the measurement date, the resulting deemed dividend is recorded as a reduction of additional paid-in capital with a corresponding offset recorded to additional paid-in capital (i.e., net impact to additional paid-in capital of $0). The benefit of the contingent right to receive Earnout Cashfor option and warrant holders occurs through the option exchange ratio and therefore the amount of Earnout Cash for common stockholders is approximately $88.8 million.

In connection with the Merger, a number of subscribers (each, a “PIPE Subscriber”) purchased from NRx Pharmaceuticals an aggregate of 1,000,000 shares of Common Stock, for a purchase price of $10.00 per share (the “PIPE Investment”) and an aggregate purchase price of $10.0 million (the “PIPE Shares”), pursuant to subscription agreements (each, a “Subscription Agreement”) entered into prior to the Closing Date. NRx Pharmaceuticals received $8.1 million in net proceeds from the PIPE Investment after transaction costs.

Private Placements

On August 23, 2021, the Company completed a private placement (the “2021 Private Placement”) and issued 2,727,273 shares of common stock for a purchase price of $11.00 per share and preferred investment options to purchase up to an aggregate of 2,727,273 shares of common stock for a purchase price of $12.00. NRx Pharmaceuticals received $27.4 million in net proceeds from the 2021 Private Placement.

On February 2, 2022, the Company completed a private placement (the “2022 Private Placement”) and issued 7,824,727 shares of common stock and preferred investment options to purchase up to an aggregate of 7,824,727 shares of common stock. The purchase price for one share of common stock and one preferred investment option was $3.195. The investment options have an exercise price of $3.07 per share. The aggregate gross proceeds to the Company from the 2022 Private Placement were approximately $25.0 million, before deducting placement agent fees and other offering expenses.

The Company sold 3,642,727 shares of common stock during the year ended December 31, 2021, generating gross proceeds of $37.0 million.

The Company issued 3,830,586 shares of common stock pursuant to warrants and Unit Purchase Options exercised during the year ended December 31, 2021, and received gross proceeds from the warrant exercise of $16.7 million. The Company issued 4,834,045 shares of common stock for consulting services during the year ended December 31, 2021, and recognized non-cash consulting expense in general and administrative expenses of $53.8 million.

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

The Company issued 1,138,199 shares of common stock to settle the conversion of notes payable during the year ended December 31, 2020, and recorded a loss of $0.3 million. The Company issued 30,020 shares of common stock with a fair value of $0.1 million in settlement of accounts payable worth $0.1 million.

Milestone Payments

Pursuant to the legal settlement with Sarah Herzog Memorial Hospital Ezrat Nashim (“SHMH”) in September 2018, which included the license of intellectual property rights from SHMH, an ongoing royalty of 1% to 2.5% of NRX-101 gross sales shall be due to SHMH, together with milestone payments upon completion of Phase II trials, Phase III trials and commercial sale of NRX-101. The milestone payments for developmental and commercial milestones range from $0.1 million to $0.8 million. Annual maintenance fees range up to $0.2 million.

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NRx Pharmaceuticals is not party to any off-balance sheet transactions. NRx Pharmaceuticals has no guarantees or obligations other than those which arise out of normal business operations.

Operating activities

During the year ended December 31, 2021, operating activities used $37.7 million of cash, primarily resultingfromanetlossof$93.1 million reducedby (a) non-cashchargesof$60.3 million,including (i) $53.8 million of non-cash consulting fees paid in common stock, (ii) $21.4 million of non-cash settlement expense related to GEM Warrant, (iii) $7.8 million of stock-based compensation expense, (iv) $20.9 million in change in fair value of Earnout Cash liability, partially offset by (i) gains for the change in fair value of the warrant liability of $1.7 million and (ii) $0.1 million in extinguishment of debt related to the PPP loan, and (b) changes in operating assets and liabilities of $4.9 million, including increases of $4.8 million and less than $0.1 million in prepaid expenses and other assets and accounts payable, respectively, partially offset by decreases of $0.9 million and $0.8 million in accrued expenses and other liabilities and accounts receivable, respectively.

During the year ended December 31, 2020, operating activities used $2.3 million of cash, primarily resulting from a net loss of $51.8 million reduced by non-cash charges of $46.1 million, including$39.5 million of non-cash settlement expense related to the GEM Warrant, $5.4 million of warrant expense for warrants issued to board members for services, $0.7 million of stock-based compensation expense,$0.3 million oflossonconversionofnotes payable,andchangesinoperatingassetsandliabilitiesof $3.5 million, including increases of $3.2 million in accrued expenses and other liabilities, $0.1 million in prepaid expenses and other assets.

Financing activities

DuringtheyearendedDecember31,2021,financingactivitiesprovided$63.5 million ofcash,primarily resulting from $27.4 million from the issuance of shares of our common stock and warrants in private placement, $16.7 million proceeds from issuance of common stock for exercise of the GEM Warrants, $11.1 million for the effect of the Merger, PIPE financing, net of transaction costs, $9.6 million from proceeds from issuance of shares of NRx Pharmaceuticals’ common stock, partially offset by $1.1 million from repayment of notes payable assumed in the Merger, and a $0.2 million repayment of a note payable plus accrued and unpaid interest with a vendor.

DuringtheyearendedDecember31,2020,financingactivitiesprovided$3.2 million ofcash,primarily resulting from $2.6 million of proceeds from the issuance of shares of NRx Pharmaceuticals’ common and preferred stock, and $0.6 million in proceeds from notespayable.

Critical Accounting Policies and Significant Judgments and Estimates

NRx Pharmaceuticals’ management’s discussion and analysis of its financial condition and results of operations is based on its financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires NRx Pharmaceuticals to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the balance sheet and the reported amounts of expenses during the reporting period. In accordance with U.S. GAAP, NRx Pharmaceuticals evaluates its estimates and judgments on an ongoing basis. The most significant estimates relate to the valuation of Earnout Cash Liability, conversion features of convertible notes and Common Stock and the valuation of stock options and warrants. NRx Pharmaceuticals bases its estimates and assumptions on current facts, historical experiences, and various other factors that NRx Pharmaceuticals believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

NRx Pharmaceuticals defines its critical accounting policies as those accounting principles that require it to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on its financial condition and results of operations, as well as the specific manner in which NRx Pharmaceuticals applies those principles. While its significant accounting policies are more fully described in Note 2 to its financial statements appearing

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elsewhere in this annual report, NRx Pharmaceuticals believes the following are the critical accounting policies used in the preparation of its financial statements that require significant estimates and judgments.

Earnout Cash Liability

The fair value of the Earnout Cash liability has been estimated using probability-weighted discounted cash flow models (DCFs) with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. The most significant inputs include whether (a) the FDA approves the Company’s NDAs for ZYESAMI and/or NRX-101, (b) if such approval is granted, whether such approval will be received on or before December 31, 2022, and (c) if such approval is granted, whether ZYESAMI and/or NRX-101 will be listed in the FDA’s Orange Book on or before December 31, 2022. The DCFs incorporate Level 3 inputs including estimated discount rates that we believe market participants would consider relevant in pricing and the projected timing and amount of cash flows, which are estimated and developed in consideration of the uncertainties associated with the obligations. Changes in the estimated fair value of the Earnout Cash Liability are recognized as a gain or loss in the statements of operations.

Fair Value of Common and Preferred Stock

Prior to the Merger, in order to determine the fair value of shares of its Common Stock, the Board of NRx Pharmaceuticals considered, among other things, contemporaneous valuations of its Common Stock and preferred stock based on arms-length transactions with third party investors. Subsequent to the Merger, the Board determines the fair value of the Common Stock based on the closing market price on the date of grant.

Stock-Based Compensation

We measure stock option awards granted to employees and directors based on the fair value of the award on the date of the grant and recognize compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. The straight-line method of expense recognition is applied to awards with service-only conditions. We account for forfeitures as they occur.

We estimate the fair value of each stock option award using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our stock-based awards, the risk-free interest rate for a period that approximates the expected term of our stock-based awards, and our expected dividend yield. Therefore, we estimate our expected volatility based on the implied volatility of publicly traded warrants on our common stock and historical volatility of a set of our publicly traded peer companies. We estimate the expected term of our options using the "simplified" method for awards that qualify as "plain-vanilla" options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that we have never paid cash dividends on common stock and do not expect to pay any cash dividends in the foreseeable future.

The assumptions used in determining the fair value of stock-based awards represent reasonable estimates, but the estimates involve inherent uncertainties and the application of our judgment. As a result, if factors change and we use significantly different assumptions or estimates, our stock-based compensation expense could be materially different in the future.

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Warrant Liability

NRx Pharmaceuticals 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“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 Common Stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the control of NRx Pharmaceuticals, 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 recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the Placement Warrants was estimated using a Black-Scholes-Merton valuation model, which requires the use of subjective assumptions that could materially impact the estimation of fair value and related expense to be recognized. These assumptions include (i) the expected volatility of our stock price, (ii) the period of time over which the holders are expected to hold their Placement Warrants prior to exercise (expected lives), (iii) expected dividend yield on our common stock, and (iv) risk-free interest rates, which are based on quoted U.S. Treasury rates for securities with maturities approximating the options’ expected lives. Developing these assumptions requires the use of judgment. NRx Pharmaceuticals, both prior to and after the Merger, lacks company-specific historical and implied volatility information. Therefore, we estimate our expected stock volatility based on the historical volatility of a publicly traded set of peer companies. Expected lives are principally based on our historical exercise experience with previously issued stock-based awards. The expected dividend yield is zero as we have never paid dividends and do not currently anticipate paying any in the foreseeable future.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

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Item 8. Financial Statements and Supplementary Data

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Report of Independent Registered Public Accounting Firm

​

To the Stockholders and Board of Directors

NRX Pharmaceuticals, Inc.:

​

1Opinion on theConsolidated Financial Statements

We have audited the accompanying consolidated balance sheets of NRX Pharmaceuticals, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years then ended, in conformity with U.S. generally accepted accounting principles.

​

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.

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/s/ KPMG LLP

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

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Short Hills, New Jersey

March 31, 2022

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NRX PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

​

​ ​ ​ ​ ​ ​ ​

​ December 31,

ASSETS ​ ​

Current assets: ​ ​

Account receivable, net of allowance of $257 as of December 31, 2020 ​ — ​ 831

Prepaid expenses and other current assets ​ 5,109 ​ 240

Other assets ​ 15 ​ 11

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) ​ ​

Current liabilities: ​ ​

Accrued and other current liabilities ​ 2,375 ​ 1,729

Accrued clinical site costs ​ 469 ​ 1,547

Earnout Cash liability ​ ​ 4,582 ​ ​ —

Warrant liabilities ​ ​ 292 ​ ​ —

Notes payable and accrued interest ​ 518 ​ 249

Accrued settlement expense ​ — ​ 39,486

Notes payable and accrued interest ​ — ​ 548

Stockholders’ equity (deficit): ​ ​

Total stockholders’ equity (deficit) ​ 20,806 ​ (43,771)

Total liabilities and stockholders' equity (deficit) ​ $ 32,729 ​ $ 2,941

​

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

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NRX PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ Year ended

​ ​ ​ ​ ​ ​ ​ December 31,

Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​

Research and development ​ ​ ​ ​ ​ ​ ​ $ 20,257 ​ $ 10,625 ​

General and administrative ​ ​ ​ ​ ​ ​ ​ 74,944 ​ 11,436 ​

Total operating expenses ​ ​ ​ ​ ​ ​ ​ 115,796 ​ 51,387 ​

Loss from operations ​ ​ ​ ​ ​ ​ ​ (115,796) ​ (51,387) ​

Other (income) expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Gain on extinguishment of debt ​ ​ ​ ​ ​ ​ ​ (121) ​ — ​

Interest expense ​ ​ ​ ​ ​ ​ ​ 18 ​ 56 ​

Change in fair value of warrant liability ​ ​ ​ ​ ​ ​ ​ (1,692) ​ — ​

Change in fair value of Earnout Cash liability ​ ​ ​ ​ ​ ​ ​ (20,938) ​ — ​

Change in fair value of embedded put ​ ​ ​ ​ ​ ​ ​ — ​ 27 ​

Loss on conversion of convertible notes payable ​ ​ ​ ​ ​ ​ ​ — ​ 307 ​

Total other (income) expenses ​ ​ ​ ​ ​ ​ ​ (22,733) ​ 390 ​

Loss before tax ​ ​ ​ ​ ​ ​ ​ ​ (93,063) ​ ​ (51,777) ​

Provision for income taxes ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ — ​

Deemed dividend - warrants ​ ​ ​ ​ ​ ​ ​ ​ (2,692) ​ ​ — ​

Deemed dividend - Earnout Shares ​ ​ ​ ​ ​ ​ ​ ​ (253,130) ​ ​ — ​

Net loss per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Basic and diluted ​ ​ ​ ​ ​ ​ ​ $ (1.98) ​ $ (1.51) ​

Basic and diluted ​ ​ ​ ​ ​ ​ ​ $ (7.44) ​ $ (1.51) ​

Weighted average common shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​

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

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NRX PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share data)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Series A ​ Series B-1A ​ Series B-1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Convertible ​ Convertible ​ Convertible ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Total

Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (51,777) ​ ​ (51,777)

Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ ​ ​ ​ (93,063) ​ ​ (93,063)

​

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

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NRX PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

​ ​ ​ ​ ​ ​ ​

​ ​ Year ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​

Depreciation expense ​ 2 ​ 2

Stock-based compensation ​ 7,785 ​ 730

Warrant expense ​ ​ — ​ ​ 5,383

Gain on extinguishment of debt ​ (121) ​ —

Change in fair value of warrant liabilities ​ ​ (1,692) ​ ​ —

Change in fair value of earnout cash liability ​ ​ (20,938) ​ ​ —

Change in fair value of embedded put ​ — ​ 27

Amortization of debt discount ​ — ​ 17

Non-cash interest expense ​ 19 ​ 65

Non-cash consulting expense ​ 53,837 ​ —

Loss on common stock issued to settle accounts payable ​ ​ — ​ ​ 42

Loss on conversion for notes payable ​ — ​ 307

Changes in operating assets and liabilities: ​ ​ ​ ​

Accounts receivable ​ 831 ​ (831)

Prepaid expenses and other assets ​ (4,809) ​ (143)

Accounts payable ​ (19) ​ 1,183

Accrued expenses and other liabilities ​ (901) ​ 3,244

Net cash used in operating activities ​ ​ (37,703) ​ ​ (2,265)

CASH FLOWS FROM INVESTING ACTIVITIES ​ ​ ​ ​ ​ ​

Purchase of computer equipment ​ ​ (7) ​ ​ (2)

Net cash used in investing activities ​ ​ (7) ​ ​ (2)

CASH FLOWS FROM FINANCING ACTIVITIES ​ ​ ​ ​ ​

Proceeds from notes payable ​ ​ — ​ ​ 620

Proceeds from issuance of series B-2 preferred stock ​ — ​ ​ 50

Proceeds from issuance of common stock for exercise of warrant ​ ​ 16,699 ​ ​ —

Effect of Merger, PIPE financing, net of transaction costs ​ ​ 11,050 ​ ​ —

Repayment of notes payable assumed in Merger ​ ​ (1,100) ​ ​ —

Repayment of notes payable - related party ​ ​ (176) ​ ​ —

Net cash provided by financing activities ​ 63,456 ​ ​ 3,249

​ ​ ​ ​ ​ ​ ​

Cash at beginning of period ​ 1,859 ​ ​ 877

Supplemental disclosure of cash flow information: ​ ​ ​ ​

Non-cash investing and financing activities ​ ​ ​ ​

Issuance of common stock warrants as offering costs ​ ​ 1,027 ​ ​ 31

Extinguishment of Paycheck Protection Program Loan ​ ​ 121 ​ ​ —

Conversion of notes payable into common stock ​ ​ — ​ ​ 3,655

Common stock issued to settle accounts payable ​ ​ — ​ ​ 145

​

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

​

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1. Organization

The Business

On May 24, 2021 (“Effective Time”), we consummated the business combination (“Merger”) contemplated by the Agreement and Plan of Merger (as amended, the “Merger Agreement”), dated December 13, 2020, by and among our company (formerly known as Big Rock Partners Acquisition Corp. (“BRPA”)), NeuroRx, Inc., a Delaware corporation (“NeuroRx”), Big Rock Merger Corp., a Delaware corporation and wholly-owned, direct subsidiary of BRPA (“Merger Sub”), pursuant to which Merger Sub was merged with and into NeuroRx, with NeuroRx surviving the Merger. As a result of the Merger, and upon consummation of the Merger and other transactions contemplated by the Merger Agreement, NeuroRx became a wholly-owned, direct subsidiary of BRPA. Upon the closing of the Merger, we changed our name to NRX Pharmaceuticals, Inc., with the stockholders of NeuroRx becoming stockholders of NRX Pharmaceuticals, Inc. Unless the context suggests otherwise, references to “NRx Pharmaceuticals,” “NeuroRx”, “NRXP,” “we,” or the “Company” refer to NRX Pharmaceuticals, Inc. and, where appropriate, its subsidiaries.

The Company is a clinical-stage pharmaceutical company that develops novel therapeutics for the treatment of central nervous system disorders and both the treatment and prevention of life-threatening pulmonary diseases through its wholly-owned operating subsidiary, NeuroRx. The Company's foundation product, NRX-101 (d-Cycloserine/Lurasidone), for the treatment of suicidal bipolar depression, has been awarded Fast Track designation, Breakthrough Therapy designation, a Special Protocol Agreement, and a Biomarker Letter of Support by the US Food and Drug Administration (FDA). NRX-101 is covered by multiple US and foreign patents, including a Composition of Matter patent (U.S. Patent No. 10,583,138) that was transferred to NRx by Glytech, Inc. On September 18, 2020, the Company entered into a collaboration agreement with Relief Therapeutics Holding AG (“Relief”) for the clinical development and, if approved, the sale of aviptadil. The collaboration agreement provides for funding by Relief of certain clinical trials, formulation and manufacturing of aviptadil, as well as establishing specified sales territories for each party and share of the profits in those territories. Relief has reimbursed the Company $10.9 million for expenses but has subsequently declined to reimburse the Company for additional costs of the IV clinical trial, the inhaled clinical trial, formulation and manufacture of aviptadil (reformulated as ZYESAMI®). The Company advised Relief that the Company is funding those costs with other capital. See Note 9 “Commitments and Contingencies” for additional Information regarding the Company and Relief.In July 2021 the Company was granted exclusive worldwide development rights to an investigational COVID-19 vaccine called BriLifeTM pursuant to a Memorandum of Understanding with the Ministry of Defense of the State of Israel. After investigating the manufacturing requirements of the vaccine, the expected regulatory path for approval in Israel and the EU, the commercial opportunity, and the financial commitment required for development of the vaccine, the Company decided not to continue with the project. We plan to effect a transition in consultation with the IIBR. This decision was communicated to the IIBR in a letter dated March 20, 2022.

​

2. Liquidity

As of December 31, 2021, the Company had $27.6 million in cash. Since inception, the Company has experienced net losses and negative cash flows from operations each fiscal year. The Company has no revenues and expects to continue to incur operating losses for the foreseeable future and may never become profitable. The Company is dependent on its ability to continue to raise equity and/or debt financing to continue operations.

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

On August 23, 2021, the Company completed a private placement and issued 2,727,273 shares of common stock and preferred investment options to purchase up to an aggregate of 2,727,273 shares of common stock. The purchase price for one share of common stock and one preferred investment option was $11.00. The preferred investment options have an exercise price of $12.00. The net proceeds to the Company from the Private Placement were approximately $27.4 million.

On February 2, 2022, the Company completed a private placement and issued 7,824,727 shares of common stock and preferred investment options to purchase up to an aggregate of 7,824,727 shares of common stock. The purchase price for one share of common stock and one preferred investment option was $3.195. The preferred investment options have an

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exercise price of $3.07 per share. The aggregate gross proceeds to the Company were approximately $25.0 million, before deducting placement agent fees and other offering expenses.

The Company believes that it currently has sufficient funds and, if necessary, the ability to reduce expenditures, to support operations through the next twelve months from the date the consolidated financial statements are issued. The Company is dependent upon obtaining necessary equity and/or debt financing to continue operating. The Company cannot make any assurances that additional financing will be available to it and, if available, on acceptable terms or at all. This could negatively impact the Company’s business and operations and could also lead to the reduction of the Company’s operations.

COVID-19 Outbreak

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

Aside from our COVID-19 related trials, as a result of the COVID-19 Outbreak, most of our other trials have been halted. Except as otherwise discussed in the preceding sentence and otherwise in this annual report, there have been no material changes or impact of COVID-19 on our business. However, the full impact of the COVID-19 Outbreak continues to evolve as of the date hereof. If the COVID-19 Outbreak continues, it may have a material adverse effect on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global pandemic on its financial condition, liquidity, operations, industry, and workforce.

3. Summary of Significant Accounting Policies

Basis of Presentation

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

The Merger was accounted for as a reverse recapitalization in accordance with GAAP (the “Reverse Recapitalization”). Under this method of accounting, BRPA is treated as the “acquired” company and NeuroRx is treated as the acquirer for financial reporting purposes.

Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of NeuroRx issuing stock for the net assets of BRPA, accompanied by a recapitalization. The net assets of BRPA are stated at historical cost, with no goodwill or other intangible assets recorded.

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

The consolidated assets, liabilities, and results of operations prior to the Reverse Recapitalization are those of NeuroRx. The shares and corresponding capital amounts and losses per share, prior to the Merger, have been retroactively restated based on shares reflecting the exchange ratio established in the Merger.

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Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in its financial statements and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’s financial statements relate to the valuation of common and preferred stock, stock options, warrants, and Earnout Cash liability. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. 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, compliance with regulatory requirements, and overall geopolitical, economic and pandemic risks.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. As of December 31, 2021 and 2020, the Company does not have any cash equivalents.

Fair Value of Financial Instruments

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 12)

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Foreign Currency

The Company’s functional currency is the U.S. dollar. The functional currency of our foreign operation is the respective local currency. Assets and liabilities of foreign operation denominated in local currencies are translated at the spot rate in effect at the applicable reporting date. The consolidated statements of operations are translated at the weighted average rate of exchange during the applicable period. The resulting unrealized cumulative translation adjustment is not material to the financial statements.

Accounts Receivable

Accounts receivable consist of balances due from collaborative partners. In determining collectability, historical trends are evaluated, and specific partner issues are reviewed on a periodic basis to arrive at appropriate allowances.

Concentration of Credit Risk and Off-Balance Sheet Risk

Cash is the only financial instrument that is potentially subject to concentrations of credit risk. The Company’s cash is deposited in accounts at large financial institutions, and amounts may exceed federally insured limits. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash is held. The Company has no financial instruments with off-balance sheet risk of loss.

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

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to interest rate, market, or foreign currency risks. The Company evaluates all of its financial instruments, to determine if such instruments contain features that qualify as embedded derivatives. Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract. Bifurcated embedded derivatives are recognized at fair value, with changes in fair value recognized in the statement of operations each period. Bifurcated embedded derivatives are classified with the related host contract in the Company’s balance sheet.

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 reasonable estimates and involve inherent uncertainties and the application of management’s judgment. Stock-based compensation costs are recorded in general and administrative or research and development costs in the consolidated statements of operations based upon the underlying individual’s role at the Company.

Modification of stock options and warrants

A change in any of the terms or conditions of stock options and warrants is accounted for as a modification. Incremental stock-based compensation cost is measured as the excess, if any, of the fair value of the modified option/warrant over the fair value of the original option/warrant immediately before its terms are modified, measured based on the fair value of

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the ordinary shares and other pertinent factors at the modification date. For vested stock options and warrants to board members, we recognize incremental compensation cost in the period the modification occurs. For unvested stock options, we recognize over the remaining requisite service period, the sum of the incremental compensation cost and the remaining unrecognized compensation cost for the original award on the modification date. If the fair value of the modified option is lower than the fair value of the original option immediately before modification, the minimum compensation cost we recognize is the cost of the original award. The accounting for incremental fair value of warrants is based on the specific facts and circumstances related to the modification which may result in a reduction of additional paid-in capital, recognition of costs for services rendered, or recognized as a deemed dividend.

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 (“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 recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the Placement Warrants was estimated using a Black-Scholes valuation approach (see Notes 10 and 12).

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.

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

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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.

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​ ​ ​ ​

​ Year Ended December 31,

​

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes. This guidance removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This guidance also clarifies and simplifies other areas of ASC 740. This ASU will be effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company does not expect this guidance to have a significant impact on its financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. The ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020 and adoption must be as of the beginning of the Company’s annual fiscal year. We adopted ASU 2020-06 on January 1, 2021, with no material impact on our financial statements.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718) and Derivatives and Hedging - Contracts in an Entity's Own Equity (Subtopic 815-40) - Issuer's Accounting for Certain Modifications or Exchange of Freestanding Equity-Classified Written Call Options, which provides guidance for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share (EPS) effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. The amendments in this ASU are effective January 1, 2022, including interim periods. Early adoption is permitted. We adopted ASU 2021-04 on January 1, 2021, with no material impact on our financial statements.

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4. Reverse Recapitalization

As discussed in Note 1, on May 24, 2021 (the “Closing Date”), BRPA closed the Merger with NeuroRx, as a result of which NeuroRx became a wholly-owned subsidiary of BRPA. While BRPA was the legal acquirer of NeuroRx in the Merger, for accounting purposes, the Merger is treated as a Reverse Recapitalization, whereby NeuroRx is deemed to be the accounting acquirer, and the historical financial statements of NeuroRx became the historical financial statements of BRPA (renamed NRX Pharmaceuticals, Inc.) upon the closing of the Merger. Under this method of accounting, BRPA is treated as the “acquired” company and NeuroRx is treated as the acquirer for financial reporting purposes. Accordingly, for accounting purposes, the Merger was treated as the equivalent of NeuroRx issuing stock for the net assets of BRPA, accompanied by a recapitalization. The net assets of BRPA were stated at historical cost, with no goodwill or other intangible assets recorded.

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

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Agreement, each share of NeuroRx common stock, par value $0.001 per share, and each share of the NeuroRx convertible preferred stock that was convertible into a share of NeuroRx common stock at a one-to-one ratio pursuant to the NeuroRx certificate of incorporation, was converted into Common Stock equal to 3.16 (the “Exchange Ratio”). Each option and warrant of NeuroRx that was outstanding and unexercised immediately prior to the Effective Time (whether vested or unvested) was assumed by BRPA and converted into an option or warrant to acquire an adjusted number of shares of Common Stock at an adjusted exercise price per share, in each case, pursuant to the terms of the Merger Agreement (the “Substitute Options” and the “Substitute Warrants,” respectively), based on an exchange ratio of 4.96:1 (the “Option Exchange Ratio”), and will continue to be governed by substantially the same terms and conditions, including vesting, as were applicable to the original instrument.

In addition, the securityholders of NeuroRx (including option holders and warrant holders) who own NeuroRx securities immediately prior to the Effective Time received the contingent right to receive the Earnout Shares and Earnout Cash (each as defined below). At the Effective Time, each outstanding share of NeuroRx common stock, including shares of NeuroRx common stock resulting from the conversion of outstanding shares of NeuroRx preferred stock (as calculated pursuant to the NeuroRx certificate of incorporation), immediately prior to the Effective Time, was converted into the right to receive a pro rata portion of the Closing Consideration and the contingent right to receive a pro rata portion of the Earnout Shares and Earnout Cash.

Pursuant to the terms of the Merger Agreement, NeuroRx’s securityholders (including option holders and warrant holders) who own NeuroRx securities immediately prior to the Effective Time will have the contingent right to receive their pro rata portion of (i) an aggregate of 25,000,000 shares of Common Stock (“Earnout Shares”), of which 935,608 and 1,920,492 are subject to the terms and conditions of the Substitute Options and Substitute Warrants, if, prior to December 31, 2022, the NRX COVID-19 Drug (as defined in the Merger Agreement) receives emergency use authorization by the FDA and NeuroRx submits and the FDA files for review, a new drug application for the NRX COVID-19 Drug (the occurrence of the foregoing, the “Earnout Shares Milestone”), and (ii) an aggregate of $100.0 million in cash (“Earnout Cash”) upon the earlier to occur of (x) FDA approval of the NRX COVID-19 Drug and the listing of the NRX COVID-19 Drug in the FDA’s “Orange Book” and (y) FDA approval of the NeuroRx Antidepressant Drug Regimen (i.e., NRX-100/101) and the listing of the NeuroRx Antidepressant Drug Regimen (i.e., NRX-100/101) in the FDA’s “Orange Book,” in each case prior to December 31, 2022 (the occurrence of either of clauses (x) or (y), the “Earnout Cash Milestone”). If the Earnout Shares Milestone is achieved, the Earnout Shares will be issued within five (5) Business Days after the occurrence of the Earnout Shares Milestone. If the Earnout Cash Milestone is achieved, the Merger Agreement does not require the Earnout Cash to be delivered to NeuroRx securityholders within any specified period of time, and the board of directors of NRx Pharmaceuticals will use its good faith judgment to determine the date to pay the Earnout Cash. The Earnout Cash Milestone was recognized as a contingent liability and measured at an estimated fair value at the Closing Date and will be each period end thereafter until earned or December 31, 2022 (see Note 12). The Earnout Shares Milestone was recognized in equity and, upon closing of the Merger, the estimated fair value of the Earnout Shares was $253.1 million with such amount recognized as a deemed dividend (see Note 12). The benefit of the contingent right to receive Earnout Shares and Earnout Cash for option and warrant holders occurs through the Option Exchange Ratio and therefore the amount of Earnout Shares and Earnout Cash for common stockholders is approximately 22,209,280 shares and $88.8 million.

In the event that either the Earnout Shares Milestone or the Earnout Cash Milestone does not occur prior to December 31, 2022, each Substitute Option and Substitute Warrant will be adjusted such that the number of shares of Common Stock subject to each adjusted Substitute Option or Substitute Warrant, the exercise price per share of each adjusted Substitute Option or Substitute Warrant and the aggregate intrinsic value of each adjusted Substitute Option or Substitute Warrant will equal the respective number of shares, exercise price per share and aggregate intrinsic value that would have resulted following the adjustment of the applicable underlying option or warrant had the conversion of the legacy NeuroRx option and warrants into the Substitute Options or Substitute Warrants been applied using the Exchange Ratio (3.16:1). If neither the Earnout Shares Milestone nor the Earnout Cash Milestone occurs, each Substitute Option and Substitute Warrant will be adjusted based on the Exchange Ratio. If any Substitute Options or Substitute Warrants are exercised prior to the earlier of (i) the date that both the Earnout Shares Milestone and Earnout Cash Milestone occur and (ii) December 31, 2022, a sufficient number of shares of Common Stock will be held in escrow pending the applicable adjustment to such Substitute Options or Substitute Warrants. Following the determination of that adjustment, NRx Pharmaceuticals will retain any

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shares forfeited by the option or warrant holder in connection with the adjustment and return any remaining shares to the option or warrant holder.

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

The following table reconciles the elements of the Merger to the Consolidated Statement of Cash Flows for the year ended December 31, 2021 (in thousands):

​ ​ ​ ​

​ Recapitalization

Cash - BRPA trust and cash, net of redemptions ​ $ 4,363

Cash - PIPE financing, net of transaction costs ​ 8,100

Less: transaction costs and advisory fees allocated to NRXP equity ​ (1,413)

Effect of Merger, net of redemptions and transaction costs ​ $ 11,050

​

The following table reconciles the elements of the Merger to the Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the year ended December 31, 2021 (in thousands):

​ ​ ​ ​

​ Recapitalization

Cash - BRPA trust and cash, net of redemptions ​ $ 4,363

Non-cash net working capital assumed from BRPA ​ (962)

Less: notes payable assumed from BRPA ​ (1,100)

Less: fair value of assumed Placement Warrants ​ (1,984)

Less: fair value of Earnout Cash ​ (25,520)

Less: transaction costs and advisory fees allocated to NRXP equity ​ (1,413)

Effect of Merger, net of redemptions and transaction costs ​ $ (26,616)

​

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

​ ​ ​

​ Number of Shares

Common stock, outstanding prior to Merger 552,412

Less: redemption of BRPA shares (216)

BRPA Founder and private shares, net of forfeited shares of 875,216 1,260,284

Shares issued in PIPE Financing 1,000,000

Shares issued for services 200,000

Shares issued pursuant to conversion of Public and Private Rights 717,250

Merger and PIPE financing shares - common stock 3,729,730

Total shares of common stock immediately after Merger 48,603,585

​

​

​

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5.Prepaid Expenses and Other Current Assets

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

​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ December 31,

Prepaid expenses and other current assets: ​ ​ ​

Prepaid insurance ​ $ 3,224 ​ $ 49

Prepaid manufacturing expenses ​ 1,028 ​ —

Prepaid clinical development expenses ​ ​ 512 ​ ​ —

Other prepaid expenses ​ 345 ​ 165

Other current assets ​ — ​ ​ 26

Total prepaid expenses and other current assets ​ $ 5,109 ​ $ 240

​

​

6. Accrued and Other Current Liabilities

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

​

​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

​ ​ ​ ​ ​ ​

Accrued and other current liabilities: ​ ​ ​ ​ ​ ​

Accrued research and development expenses $ 1,055 $ 586

Professional services ​ ​ 743 ​ ​ 531

Accrued employee expenses ​ ​ 456 ​ ​ —

Other accrued expenses ​ 113 ​ 5

Accrued insurance expenses ​ ​ 8 ​ ​ 607

Total accrued and other current liabilities ​ $ 2,375 ​ $ 1,729

​

​

7. Convertible Notes Payable

On February 12, 2020, a Qualified Financing Event occurred when the Company received cumulative investment proceeds in excess of $10.0 million from the sale and issuance of common shares. The fair value of the Company’s common shares was $10.63 per share. The 2017 Notes (as defined below) and the 2018 Notes (as defined below) in the aggregate principal amount of $2.8 million were converted into 1,005,458 common shares (at the discounted price of $2.78 per share), and the related unpaid and accrued interest totaling $0.4 million were also converted into 132,739 common shares of the Company (at the discounted price of $2.78 per share). Additionally, the Company recognized a loss on extinguishment for the difference between the carrying value of the convertible notes, unamortized debt discount, and the value of the embedded put option and the fair value of the common shares of $0.3 million during the year ended December 31, 2020. The Company issued the shares of common stock pursuant to this conversion on September 23, 2020.

2017 Convertible Notes Payable

On November 16, 2017 and November 19, 2017, the Company issued convertible notes (“2017 Notes”), as amended for aggregate gross proceeds of $2.5 million. The 2017 Notes accrued interest at a rate of 6% per annum and principal and interest were due and payable four years from the date of issuance. Upon either a sale of the Company’s assets or all of its capital stock, or a change of control, the principal balance would double and be repaid. Upon closing of either a sale of the Company’s shares for at least $10.0 million or a public offering of the Company’s securities (“Qualified Financing Event”), the outstanding principal balance will be converted into the number of such securities sold at a conversion price equal to 80% of the securities negotiated share price.

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2018 Convertible Notes Payable

On January 5, 2018 and April 25, 2018, the Company issued convertible notes (“2018 Notes”), as amended for aggregate gross proceeds of $0.3 million. The 2018 Notes accrued interest at a rate of 6% per annum and were due and payable four years from the date of issuance. Upon either a sale of the Company’s assets or all of its capital stock, or a change of control, the principal balance would double and be repaid. Upon closing of a Qualified Financing Event, the outstanding principal balance will be converted into the number of such securities sold at a conversion price equal to 80% of the securities negotiated share price. The January 5, 2018 note for $0.1 million was not amended and interest was unpaid, as such, the January 5, 2018 note and related accrued interest were classified as current liabilities. The April 25, 2018 note for $0.2 million was amended similar to the 2017 Notes to accrue interest and to be paid at maturity with the principal.

8. Notes Payable

Relief Therapeutics Loan

On April 6, 2020, the Company entered into a loan agreement with Relief (the “Relief Therapeutics Loan”) in the amount of $0.5 million. The loan matures on April 6, 2022 and bears interest at 2% per annum payable in arrears.

Paycheck Protection Program Loan

On April 28, 2020, the Company received $0.1 million in loan funding from the Paycheck Protection Program (the “PPP Loan”), established pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and administered by the U.S. Small Business Administration (“SBA”). The term of the PPP Loan is two years. To the extent the loan amount is not forgiven under the PPP Loan, the Company is obligated to make equal monthly payments of principal and interest, beginning seven months from the date of the PPP Loan note, until the maturity date. The PPP Loan amount may be eligible for forgiveness in the event that (1) at least 75% of the PPP Loan proceeds are used to cover payroll costs and the remainder is used for mortgage interest, rent and utility costs over the eight-week period after the PPP Loan is made, and (2) the number of employees and compensation levels are generally maintained. Forgiveness of the PPP Loan is dependent on the Company having initially qualified for the PPP Loan and qualifying for the forgiveness of such PPP Loan based on future adherence to the forgiveness criteria. The Company used the entire PPP Loan for qualifying payroll expenses and filed for loan forgiveness on December 30, 2020.

The Company received full forgiveness of all outstanding principal and accrued and unpaid interest on the PPP Loan as of February 11, 2021. The forgiveness of the PPP Loan qualified for debt extinguishment in accordance with ASC 470-50, Debt Modifications and Extinguishments, and as a result, the outstanding principal and accrued and unpaid interest was written off in the amount of $0.1 million and less than $0.1 million, respectively, and the Company recorded a gain on extinguishment totaling $0.1 million for the year ended December 31, 2021.

​

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Note Payable -- Vendor

On July 1, 2019, the Company converted certain accounts payable into a loan (the “Note Payable — Vendor”) with a vendor in the amount of $0.2 million. The loan matured on July 1, 2020. As of December 31, 2021, the note payable was paid in full.

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

​ ​ ​ ​ ​ ​ ​

​ December 31,

​ ​ ​ ​ ​ ​

Paycheck Protection Program loan ​ — ​ 120

Note payable - vendor ​ ​ — ​ ​ 154

Carrying value of notes payable ​ 500 ​ 774

Accrued interest ​ ​ 18 ​ ​ 23

Notes payable and accrued interest, current ​ $ 518 ​ $ 249

Notes payable and accrued interest, non-current ​ $ — ​ $ 548

​

​

​

9. Commitments and Contingencies

Operating Lease

The Company leases office space on a month-to-month basis. The rent expense for the years December 31, 2021 and 2020 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, NRx Pharmaceuticals agreed to sponsor a research study at NJ Health relating to the impact of NRx Pharmaceuticals' Aviptadil on propagation of SARS-CoV-2 in alveolar type II cells in vitro (the “Study”). In return for performance of the Study under the Research Agreement, NRx Pharmaceuticals has committed to pay NJ Health approximately $0.4 million. During the year ended December 31, 2021, NRx Pharmaceuticals paid NJ Health $0.3 million of the total committed amount.

ZYESAMI Manufacturing, Production, Supply and Distribution Agreements

On August 25, 2020, the Company and Nephron Pharmaceuticals Corporation (“Nephron”) signed an agreement for the manufacturing of finished pharmaceutical product of ZYESAMI intravenous formulation and the development of an inhaled (nebulizer) formulation of ZYESAMI. Nephron will serve as the primary supplier of the product for both clinical and commercial purposes. The Company has agreed to purchase products from Nephron for a fixed price.

On September 29, 2020, the Company and Cardinal Health signed an exclusive distribution agreement, as well as a 3rd party logistics agreement on October 1, 2020. Cardinal Health will manage warehousing, distribution, invoicing for the potential sale of Aviptadil in the U.S. and Puerto Rico.

On October 9, 2020, the Company signed an agreement with PolyPeptide Group, North America for the supply of Good Manufacturing Practice (GMP) grade Active Pharmaceutical Ingredient (API) Aviptadil (VIP). This gives NRx Pharmaceuticals a significant reduction in the cost of procuring API. The Company has agreed to purchase a total of $5.3 million worth of product and services, of which $3.3 million had not been paid as of December 31, 2021.

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On January 4, 2021, the Company and Aerogen Limited (“Aerogen”) signed a supply agreement for the supply of certain products, including the Aerogen Solo Nebulizer System and Aerogen Ultra, solely for the purposes of carrying out clinical trials relating to inhalation delivery of ZYESAMI for treatment of pulmonary insufficiency and respiratory distress in COVID-19 patients. Pill Tracker Ltd. (PillTracker) is an agent of the Company per the supply agreement (see Note 14) and is managing the supply agreement at the Company’s request.

On July 1, 2021, NRx Pharmaceuticals and BriLife LLC signed an agreement for a Phase II Inhaled clinical trial of Aviptadil in the nation of Georgia with a total cost of approximately $7.4 million. The contract is cancelable with 60 days’ notice. The Company intends to cancel this contract and not to proceed with a Phase II Inhaled clinical trial of Aviptadil in the nation of Georgia.

Relief Therapeutics Collaboration Agreement

On September 18, 2020, the Company entered into a collaboration agreement with Relief for the clinical development and, if approved, the sale of aviptadil. The collaboration agreement provided for funding by Relief of certain clinical trials, formulation and manufacturing of aviptadil, as well as establishing specified sales territories for each party and share of the profits in those territories for “Product” as defined in the collaboration agreement. Relief reimbursed the Company $10.9 million for expenses related to COVID-19 but subsequently declined to reimburse the Company for additional costs of Research and Development, including the IV clinical trial, the inhaled use trial, the formulation and manufacture of ZYESAMI (aviptadil), statistical analysis, and regulatory filings. The Company advised Relief that the Company is funding those costs with other capital. On October 6, 2021, Relief filed a lawsuit against the Company and its former CEO, Jonathan Javitt, claiming that the Company failed to honor its obligations under the collaboration agreement. Relief’s complaint seeks several remedies, including damages for alleged breaches of the terms of the collaboration agreement. The Company believes the lawsuit is baseless and without merit. On January 10, 2022 the Company filed a complaint in New York State Court, claiming Relief breached and repudiated the collaboration agreement. The Company’s complaint seeks damages of at least $185.0 million. However, the parties to the lawsuits agreed to engage in an effort to amicably resolve the litigation, held a mediation meeting on February 22, 2022, and plan to hold an additional mediation meeting in the coming months. If the mediation does not resolve the dispute, the Company intends to defend itself vigorously and to prosecute its claims against Relief.

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

Share Subscription Facility Agreement - GEM

NeuroRx previously entered into a share subscription facility agreement (“GEM Agreement”) with GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, referred to as “GEM”) with a three-year term. Subject to the successful listing of the shares of NeuroRx on an Exchange (any nationally recognized stock exchange or exchange platform in the world on which the Company will list its shares), GEM grants NeuroRx an option to require GEM to subscribe for shares from the Company for up to an aggregate value of approximately $95.6 million. The agreement also included certain provisions which would not meet the U.S. requirements to issue registered shares. If NeuroRx was listed or completes a private transaction which results in a change of control of the Company, NeuroRx would issue GEM a warrant and pay a commitment fee of $1.9 million. Absent a listing of NeuroRx shares or a private transaction with a change of control during the three-year term, NeuroRx would have no obligations under the agreement. The reverse merger contemplated by the Merger Agreement would not have resulted in a listing of NeuroRx shares or a change in control.

In November 2020, GEM introduced NeuroRx to BRPA. To resolve uncertainties around the application of the GEM Agreement post-Merger, NeuroRx and GEM agreed in March 2021 to issue a warrant to GEM and for the parties to use their good faith efforts to amend the GEM Agreement to meet U.S. requirements to issue registered shares. The warrant is not conditional upon any further events or completion of the merger.

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The warrant was issued March 28, 2021, for 3,329,812 shares of NeuroRx common stock at an exercise price of $3.19 per share (the “GEM Warrant”) and the parties agreed that GEM would immediately partially exercise the warrant for the purchase of 1,496,216 shares (“Initial Exercised Shares”) for $7.5 million. The GEM Warrant was valid for a period of three years from the date NeuroRx’s stock is listed for trading on a national securities exchange or consummation of a reverse merger transaction of the type contemplated by the Merger Agreement.

This contingent liability at December 31, 2020, represented an obligation that resulted in the issuance of certain equity at a discounted per share price. As the amount was deemed probable and estimable at December 31, 2020, NeuroRx recorded a liability of $39.5 million to reflect the fair value of the GEM Warrant. On March 28, 2021, NeuroRx recorded additional settlement liability of $21.4 million to reflect the change in the fair value of the Company’s common stock. On March 28, 2021, NeuroRx reclassed the settlement liability to equity upon the issuance of the GEM Warrant.

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

10. Equity

Common Stock

Upon closing of the Merger, pursuant to the terms of the Second Amended and Restated Certificate of Incorporation, the Company authorized 500,000,000 shares of common stock with a par value $0.001. As discussed in Note 4, we have retroactively adjusted the shares issued and outstanding prior to May 24, 2021 to give effect to the Exchange Ratio established in the Merger Agreement to determine the number of shares of common stock into which they were converted.

The Company sold 3,642,727 shares of common stock during the year ended December 31, 2021, generating gross proceeds of $37.0 million. Of the 516,025 shares of common stock issued for the exercise of stock options, 185,472 shares of common stock are contingently issuable Earnout Shares and are excluded from the weighted average shares outstanding for computing EPS until the contingent conditions are satisfied. There are 1,044,453 shares of common stock issued pursuant to the GEM warrants which are contingently issuable Earnout Shares and are excluded from the weighted average shares outstanding for computing EPS until the contingent conditions are satisfied.

The Company issued 3,830,586 shares of common stock pursuant to warrants and Unit Purchase Options exercised during the year ended December 31, 2021, and received gross proceeds from the warrant exercise of $16.7 million. The Company issued 4,834,045 shares of common stock for consulting services during the year ended December 31, 2021, and recognized non-cash consulting expense in general and administrative expenses of $53.8 million.

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

The Company issued 1,138,199 shares of common stock to settle the conversion of notes payable during the year ended December 31, 2020, and recorded a loss of $0.3 million. The Company issued 30,020 shares of common stock with a fair value of $0.1 million in settlement of accounts payable worth $0.1 million and recognized a loss of less than $0.1 million in general and administrative expenses for the difference during the year ended December 31, 2020.

Pursuant to the Merger Agreement, BRPA and EarlyBirdCapital, Inc., the representative of the underwriters of BRPA’s initial public offering (“EBC”), entered into an amendment (“BCMA Amendment Agreement”) to the Business Combination Marketing Agreement, dated as of November 20, 2017 (“BCMA”), by and between BRPA and EBC. The BCMA Amendment Agreement provided that, in lieu of the cash fee payable to EBC pursuant to the BCMA, BRPA will issue to EBC at the Effective Time an aggregate of 200,000 shares of Common Stock and the BCMA (as amended by the BCMA Amendment Agreement) will terminate immediately following the Effective Time. The Company recognized the fair value of the 200,000 shares of Common Stock issued pursuant to the BCMA of $4.8 million within general and administrative in the Consolidated Statements of Operations for the year ended December 31, 2021. Refer to Note 12 for discussion of fair value measurement of the warrant liabilities.

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BriLife Vaccine, VaccineCo Agreement and Issuance of Shares

On July 11, 2021, the Company entered into a Memorandum of Understanding (the “MOU”) with the Ministry of Defense of the State of Israel that granted NRx the right to negotiate an exclusive worldwide license to develop and market the BriLifeTM vaccine, which has been developed by the Israel Institute for Biological Research (“IIBR”). However, after investigating the manufacturing requirements of the vaccine, the expected regulatory path for approval in Israel and the EU, the commercial opportunity, and the financial commitment required for development of the vaccine, the Company decided not to continue with the project. We plan to effect a transition in consultation with the IIBR. This decision was communicated to the IIBR in a letter dated March 20, 2022.

As part of the Company’s consideration of the vaccine project, the Company entered into a Shareholder Agreement, dated October 15, 2021 (the “Agreement”), with Shimshon Hen and David Sepiashvili, each an Israeli citizen (the “Consultants”), under which the Consultants agreed to provide certain consulting services, and which set out a framework for establishing a potential joint venture between the Consultants and the Company that would have been responsible for the development and commercialization of the BriLife vaccine. Pursuant to the terms of the Agreement, the Company issued an aggregate of 4,000,000 shares of the Company’s Common Stock to the Consultants on October 20, 2021 under the Company’s 2021 Omnibus Incentive Plan. The Company is evaluating its options with respect to the Consultants.

Preferred Stock

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

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

Prior to the Merger, the Company had authorized and issued 1,000,000 shares of Series A convertible preferred stock, 1,050,695 shares of Series B-1 convertible preferred stock, and 316,848 shares of Series B-1A convertible preferred stock, par value of $0.001 per share, which was convertible into one share of common stock for each preferred share (collectively, the “Preferred Stock”) at any time, at the option of the holder. The Preferred Stock were not redeemable and the related stockholders were entitled to a subordinated liquidation preference should NeuroRx liquidate or wind up operations. The preferences also included voting rights on an as-converted basis, ride-along rights, and an anti-dilution provision. The liquidation preference was $1.00 per share for the Series A convertible preferred stock, $7.58 per share for the Series B-1 convertible preferred stock, and $6.82 per share for the Series B-1A convertible preferred stock, plus any declared but unpaid dividends. Upon an initial public offering or merger under certain conditions the Preferred Stock automatically converted into common stock.

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

Series B-2 Preferred Stock

In 2020, the Company authorized the issuance of 100,000 shares of Series B-2 Convertible Preferred Stock (the “B-2 Preferred Stock”), par value of $0.001 per share, convertible into one share of common stock for each share of B-2 Preferred Stock held. In March 2020, 4,167 shares of B-2 Preferred Stock were issued. The B-2 Preferred stock were not redeemable and the related stockholders were entitled to a subordinated liquidation preference should NeuroRx liquidate or wind-up operations. The preferences also included voting rights on an as-converted basis, ride-along rights, and an anti-dilution provision. The liquidation preference was $12.00 per share plus any declared but unpaid dividends. The B-2 Preferred Stock could be converted into one share of common stock (subject to adjustments for stock splits, recapitalization) at any time, at the option of the holder. Upon an initial public offering or merger under certain conditions the B-2 Preferred Stock automatically converted into common stock.

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

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Common Stock Warrants

On July 6, 2020, the Company issued 4,000 fully vested common stock warrants, exercisable at a per share price of $15.25 until they expire on July 5, 2023, to a vendor for financial advisory services provided in connection with the sale of the Company’s common stock. The fair value on the date of issuance was $7.63 per warrant for a total fair value of less than $0.1 million.

On July 15, 2020, the Company issued 279,291 fully vested common stock warrants, exercisable at a per share price of $15.25 until they expire on July 14, 2025, to a board member. The fair value on the date of issuance was $9.63 per warrant for a total fair value of $2.7 million.

On October 23, 2020, the Company issued 139,645 fully vested common stock warrants, exercisable at a per share price of $15.25 until they expire on October 22, 2025, to a board member, respectively. The fair value on the date of issuance was $9.64 per warrant for a total fair value of $2.7 million.

On March 28, 2021, NeuroRx issued 3,329,812 fully vested common stock warrants, exercisable at a per share price of $3.19 until they expire on March 27, 2024 to GEM (See Note 9). The fair value on the date of issuance was $60.9 million. Upon issuance, 1,496,216 warrants were immediately exercised generating gross proceeds of $7.5 million. On July 27, 2021, GEM exercised the remaining GEM Warrant for the purchase of 1,833,596 shares for gross proceeds of $9.2 million and the GEM Warrant was extinguished.

Substitute Warrants

In connection with the Merger, each warrant of NeuroRx that was outstanding and unexercised immediately prior to the Effective Time (whether vested or unvested) was assumed by BRPA and converted into the Substitute Warrants, based on the Option Exchange Ratio (of 4.96), and will continue to be governed by substantially the same terms and conditions, including vesting, as were applicable to the former warrant. Each Substitute Warrant will be exercisable for a number of whole shares of Common Stock equal to the product of the number of shares of NeuroRx common stock underlying such NeuroRx warrant multiplied by the Option Exchange Ratio, and the per share exercise price of such Substitute Warrant will be equal to the quotient determined by dividing the exercise price per share of NeuroRx common stock by the Option Exchange Ratio. As discussed in Note 4, this ratio incorporates the achievement of the Earnout Shares Milestone and Earnout Cash Milestone. The incremental shares above the Exchange Ratio (of 3.16) upon exercise would be held back pending the outcome of the contingencies and only released if such are achieved. The percentage of total shares of Common Stock subject to each Substitute Warrant that is vested immediately following the Effective Time will equal the percentage of total shares of NeuroRx common stock subject to each NeuroRx warrant that is vested immediately prior to the Effective Time.

In the event that either the Earnout Shares Milestone or the Earnout Cash Milestone does not occur prior to December 31, 2022, each Substitute Warrant will be adjusted such that the number of shares of Common Stock subject to each adjusted Substitute Warrant, the exercise price per share of each adjusted Substitute Warrant and the aggregate intrinsic value of each adjusted Substitute Warrant will equal the respective number of shares, exercise price per share and aggregate intrinsic value that would have resulted following the adjustment of the applicable underlying Substitute Warrant had the conversion of NeuroRx warrants into the Substitute Warrants been applied using the Exchange Ratio (3.16:1) as adjusted accordingly to reflect the impact of the respective milestone not being met. If neither the Earnout Shares Milestone nor the Earnout Cash Milestone occurs, each Substitute Warrant will be adjusted based on the Exchange Ratio.

If any Substitute Warrants are exercised prior to the earlier of (i) the date that both the Earnout Shares Milestone and Earnout Cash Milestone occur and (ii) December 31, 2022, a sufficient number of shares of Common Stock will be held back pending the applicable adjustment to such Substitute Warrants. Following the determination of that adjustment, NRx Pharmaceuticals will retain any shares forfeited by the warrant holder in connection with the adjustment and return any remaining shares to the warrant holder.

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

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Company accounted for the Substitute Warrants as a modification of the existing warrants. Incremental fair value, measured as the excess, if any, of the fair value of the modified warrants over the fair value of the original warrants immediately before its terms are modified, is measured based on the fair value of the underlying shares and other pertinent factors at the modification date. The fair value of the original NeuroRx warrants and Substitute Warrants was determined using the Black-Scholes option-pricing model with the following assumptions for each:

​

​ ​ ​ ​ ​ ​ ​ ​

​ Original Warrants Substitute Warrants

Volatility rate ​ 80.0% ​ 80.0% ​

Dividend yield ​ — ​ — ​

​

With respect to warrants held by certain members of our Board of Directors, the Substitute Warrants were determined to be within the scope of ASC 718 and were fully vested at the Effective Date. Further, the Substitute Warrants were determined to contain both service-based and performance-based vesting conditions (i.e., the achievement of the Earnout Cash Milestone and/or Earnout Shares Milestone). The Company determined it was not probable that the Earnout Cash Milestone or Earnout Shares Milestone would be met on the Effective Date and at December 31, 2021. Accordingly, the Company will only recognize incremental compensation cost related to the portion of the Substitute Warrants subject to service-based vesting conditions only. The Company will reevaluate the probability of the Earnout Cash Milestone and/or Earnout Shares Milestone being met and recognize any unamortized incremental compensation cost accordingly in the period during which it becomes probable the milestones will be met. The Company recognized incremental compensation on the modification date totaling $2.3 million which was recognized in general and administrative in the Consolidated Statements of Operations for the year ended December 31, 2021. Unamortized compensation costs related to performance-based vesting conditions of the Substitute Warrants as of the modification date was $23.8 million.

With respect to the remaining outstanding warrants, the incremental fair value of the Substitute Warrants of $2.7 million was recognized as a deemed dividend as the Company concluded there is a transfer of value from the common shareholders to the holders of the Substitute Warrants as the change in the number of underlying shares and the decreased exercise price would result in the common shareholders becoming more diluted if and when the Substitute Warrants are converted. As the Company is in an accumulated deficit position as of the modification date, the resulting deemed dividend is recorded as a reduction of additional paid-in capital with a corresponding offset recorded to additional paid-in capital (i.e., net impact to additional paid-in capital of $0). Further, in the event the Earnout Shares Milestone and Earnout Cash Milestones are met, the Company will recognize an additional deemed dividend of $24.4 million and $3.1 million, respectively, if and when such conditions are met.

Assumed Public Warrants

Prior to the Merger, the Company had outstanding 3,450,000 Public Warrants. Each Public Warrant entitles the holder to purchase one share of Common Stock at an exercise price of $11.50 per share. The Public Warrants became exercisable at the Effective Time and expire five years after the Effective Time or earlier upon redemption or liquidation.

The Company may redeem the Public Warrants:

● in whole and not in part;

● at a price of $0.01 per warrant;

● at any time during the exercise period;

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

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Certain of the above conditions have not been met to redeem the Public Warrants. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.

The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants.

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

Assumed Placement Warrants

Prior to the Merger, the Company had outstanding 136,250 Placement Warrants. The Placement Warrants are identical to the Public Warrants except that the Placement Warrants (i) are not redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, so long as they are held by the initial purchaser or any of its permitted transferees. If the Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

The Placement Warrants are not indexed to the Company’s common shares in the manner contemplated by ASC 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. The Company classifies the Placement Warrants as derivative liabilities in its Consolidated Balance Sheet as of December 31, 2021. The Company measures the fair value of the warrants at the end of each reporting period and recognizes changes in the fair value from the prior period in the Company’s operating results for the current period.

The Company recognized a gain on the change in fair value of $1.7 million for the year ended December 31, 2021 and did not record any gain or loss for the year ended December 31, 2020. Refer to Note 12 for discussion of fair value measurement of the warrant liabilities.

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

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Weighted ​ ​ ​ ​

​ ​ ​ Average ​ Weighted ​ (in thousands)

​ ​ ​ Remaining ​ Average ​ Aggregate

​ Total Warrants ​ Term ​ Exercise Price ​ Intrinsic Value

​

Assumed Unit Purchase Options

Prior to the Merger, the Company had outstanding options to purchase up to 600,000 Units exercisable at $10.00 per Unit (or an aggregate exercise price of $6.0 million) commencing at the Effective Time. On July 23, 2021, the outstanding 600,000 Units were converted on a cashless basis into 499,630 shares of the Company’s common stock.

Conversion of Rights

Prior to the Merger, the Company had outstanding 6,900,000 and 272,500 Public Rights and Placement Rights, respectively. At the Effective Time, each holder of a right received one-tenth (1/10) of one share of Common Stock at the Effective Time, even if the holder of such right redeemed all shares held by it in connection with the Merger, resulting in the issuance of 717,250 shares of Common Stock to holders of such rights. No fractional shares were issued upon conversion of the rights. No additional consideration was paid at the Effective Time, as the consideration related thereto had been included in the original unit purchase price paid for by investors in the Company's Initial Public Offering or the concurrent private placement, as applicable.

August 2021 Private Placement

On August 23, 2021, the Company completed a Private Placement and issued 2,727,273 shares of common stock for a purchase price of $11.00 per share and the Preferred Investment Options (warrants) to purchase up to an aggregate of 2,727,273 shares of common stock for a purchase price of $12.00 per share until they expire on August 23, 2024. The net proceeds to the Company from the Private Placement were approximately $27.4 million.

In connection with the Private Placement, the Company entered into a Registration Rights Agreement with the purchasers of the Securities. The Company’s registration statement on Form S-1 to register the Securities became effective on September 15, 2021.

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Preferred Investment Options (included in above warrants table)

The form of the Preferred Investment Option is a warrant. The measurement of fair value was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $13.78, exercise price of $12.00, term of three years, volatility of 85.9%, risk-free rate of 0.43%, and expected dividend rate of 0%). The grant date fair value of these Preferred Investment Options was estimated to be $21.7 million on August 23, 2021 and is reflected within additional paid-in capital as of December 31, 2021.

As noted above, the Company issued fully vested Preferred Investment Options to the placement agent with an exercise price of $13.75. As these Preferred Investment Options were issued for services provided in facilitating the Private Placement, the Company recorded the fair value of such Preferred Investment Options as a cost of capital on the issuance date. The measurement of fair value was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $13.78, exercise price of $13.75, term of three years, volatility of 85.9%, risk-free rate of 0.43%, and expected dividend rate of 0%).