NRX Pharmaceuticals Inc

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

1. Organization

The Business

NRx Pharmaceuticals, Inc. (Nasdaq: NRXP) (“NRX” or the* “Company”) is a clinical-stage bio-pharmaceutical company which develops and intends to distribute, through its wholly-owned operating subsidiaries, NeuroRx, Inc., (“NeuroRx”) and HOPE Therapeutics, Inc. (“HOPE”, and collectively with NRX and NeuroRx, the “Company”, “we”, “us”, or “our”), novel therapeutics for the treatment of central nervous system disorders including suicidal depression, chronic pain, and post-traumatic stress disorder (“PTSD”) and now schizophrenia. All of our current drug development activities are focused drugs that modulate on the N-methyl-D-aspartate (“NMDA”) receptor in the brain and nervous system, a neurochemical pathway that has been disclosed in detail in our annual filings. NeuroRx is organized as a traditional research and development (“R&D”) company, whereas HOPE is organized as a specialty pharmaceutical company intended to distribute ketamine and other therapeutic options to clinics that serve patients with suicidal depression and PTSD. The Company hastwo* lead drug candidates that are expected to be submitted by year end for Food and Drug Administration (“FDA”) approval with anticipated FDA decision dates under the Prescription Drug User Fee Act ("PDUFA") by the end of* June**2025:* NRX-101, an oral fixed dose combination of D-cycloserine and lurasidone and NRX-100, a preservative-free formulation of ketamine for intravenous infusion. In* February 2024,the Company incorporated HOPE as a wholly-owned subsidiary and in August 2024completed a carve-out audit of HOPE's financial statements which are necessary for the intended Spin-Off (as defined in Note7*) of HOPE to the Company's shareholders at a future date.

Operations

The Company’s drug development activities have expanded from its original focus on development of NRX-101, a fixed dose combination of D-cycloserine (DCS) and lurasidone for the treatment of suicidal bipolar depression to encompass the development of NRX-101 for the treatment of chronic pain and PTSD and to the development of intravenous ketamine (NRX-100/HTX-100) for the treatment of suicidal depression. These additional indications have been added as the Company has gained access to clinical trials data funded by governmental entities in France and potentially in the United States which has the potential to afford the Company potential safety and efficacy data on key indications at low cost.

2. Going Concern

Since inception, the Company has experienced net losses and negative cash flows from operations each fiscal year and has a working capital deficit at* June 30, 2024*. The Company hasno revenues and expects to continue to incur operating losses for the remainder of2024. Although the Company projects operating income to be derived from the operation of clinical facilities through its HOPE subsidiary and sales of its pharmaceutical products in2025, these projections are subject to completion of anticipated clinical acquisitions in thefirst case and regulatory approvals in the latter case. In the absence of these projected developments, the Company’s ability to support its ongoing capital needs is dependent on its ability to continue to raise equity and/or debt financing, which* may**not* be available on favorable terms, or at all, in order to continue operations.

As of* June 30, 2024*, the Company had $1.9 million in cash and cash equivalents. Subsequently, on* August 12, 2024,the Company signed an agreement with Anson Funds for$16.3* million in Senior Secured Debt financing. Concurrently, the Company signed a settlement agreement with Streeterville Capital, LLC to retire its remaining debt for a settlement amount of $5.6 million and to settle outstanding litigation. This settlement amount was substantially less than the amounts claimed by Streeterville in litigation.

The Company has now secured operating capital that it anticipates as sufficient to fund its drug development operations through year end and to finance submission of FDA New Drug Applications for NRX-100 and NRX-101 in2024. The Company* maypursue additional equity or debt financing or refinancing opportunities in2024* to fund ongoing clinical activities, to meet obligations under its current debt arrangements and for the general corporate purposes. Such arrangements* maytake the form of loans, equity offerings, strategic agreements, licensing agreements, joint ventures or other agreements. The sale of equity could result in additional dilution to the Company’s existing shareholders. The Company cannot make any assurances that additional financing will be available to it and, if available, on acceptable terms, or that it will be able to refinance its existing debt obligations which could negatively impact the Company’s business and operations and could also lead to a reduction in the Company’s operations. The Company will continue to carefully monitor the impact of its continuing operations on the Company’s working capital needs and debt repayment obligations. As such, the Company has concluded that substantial doubt exists regarding the Company’s ability to continue as a going concern for a period of at leasttwelve* months from the date of issuance of these condensed consolidated financial statements.

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The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The condensed consolidated financial statements donot include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that* may*be necessary if the Company is unable to continue as a going concern.

3. Summary of Significant Accounting Policies

On* April 1, 2024,the Company effected a reverse stock split (the “Reverse Stock Split”) of the Company’s common stock, $0.001 par value (“Common Stock”), at a ratio of1*-for-10. All historical share amounts, with the exception of the Company’s Series A Preferred Stock, disclosed in this Quarterly Report on Form10-Q have been retroactively adjusted to reflect the Reverse Stock Split. No fractional shares were issued as a result of the Reverse Stock Split, as fractional shares of Common Stock were rounded up to the nearest whole share. See Note9. Equity for additional information.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they donot include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the consolidated balance sheet, statements of operations and cash flows for the interim periods presented. The results of operations for any interim periods arenot necessarily indicative of the results that* may*be expected for the entire fiscal year or any other interim period.

Use of Estimates

The preparation of condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in its consolidated financial statements and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’s condensed consolidated financial statements relate to the fair value of the convertible note payable, fair value of stock options and warrants, and the utilization of deferred tax assets. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that arenot 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, butnot limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, reliance onthird party manufacturers, protection of proprietary technology, and compliance with regulatory requirements.

Fair Value of Financial Instruments

FASB ASC Topic820, Fair Value Measurements(“ASC820**”), 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.

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The accounting guidance classifies fair value measurements inone of the followingthree categories for disclosure purposes:

Level1: Quoted prices in active markets for identical assets or liabilities.

Level2: Inputs other than Level1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

Level3: Unobservable inputs which are supported by little orno 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 Note11)

Concentration of Credit Risk and Off-Balance Sheet Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. Cash equivalents are occasionally invested in certificates of deposit. The Company maintains each of its cash balances with high-quality and accredited financial institutions and accordingly, such funds arenot exposed to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. Deposits in financial institutions* may,from time to time, exceed federally insured limits. As of June 30, 2024* the Company’s cash and cash equivalents balance within money market accounts was in excess of the U.S. federally insured limits by $1.3 million. The Company hasnot experienced any losses on its deposits of cash. The Company maintains a portion of its cash and cash equivalent balances in the form of a money market account with a financial institution that management believes to be creditworthy.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity ofthree months or less at the time of initial purchase to be cash equivalents, including balances held in the Company’s money market accounts. The Company maintains its cash and cash equivalents with financial institutions, in which balances from time to time* may*exceed the U.S. federally insured limits. The objectives of the Company’s cash management policy are to safeguard and preserve funds to maintain liquidity sufficient to meet the Company’s cash flow requirements, and to attain a market rate of return.

Revenue Recognition

The Company accounts for revenue under FASB ASC Topic606, Revenue for Contract with Customers (“ASC606**”) or other accounting standards for revenuenot derived from customers. Arrangements* mayinclude licenses to intellectual property, research services and participation on joint research committees. The Company evaluates the promised goods or services to determine which promises, or group of promises, represent performance obligations. In contemplation of whether a promised good or service meets the criteria required of a performance obligation, the Company considers the stage of research, the underlying intellectual property, the capabilities and expertise of the customer relative to the underlying intellectual property, and whether the promised goods or services are integral to or dependent on other promises in the contract. When accounting for an arrangement that contains multiple performance obligations, the Company must develop judgmental assumptions, which may*include market conditions, timelines and probabilities of regulatory success to determine the stand-alone selling price for each performance obligation identified in the contract.

The Company enters into contractual arrangements that* mayinclude licenses to intellectual property and research and development services. When such contractual arrangements are determined to be accounted for in accordance with ASC606,* the Company evaluates the promised good or services to determine which promises, or group of promises, represent performance obligations. When accounting for an arrangement that contains multiple performance obligations, the Company must develop judgmental assumptions, which* may*include market conditions, timelines and probabilities of regulatory success to determine the stand-alone selling price for each performance obligation identified in the contract.

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The License Agreement (the “License Agreement”) with Alvogen Pharma US, Inc., Alvogen, Inc. and Lotus Pharmaceutical Co. Ltd. (collectively, “Alvogen”) (as further discussed in Note6 below) was accounted for in accordance with ASC606. In accordance with ASC606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC606, it performs the followingfive steps:

i. identify the contract(s) with a customer;

ii. identify the performance obligations in the contract;

iii. determine the transaction price;

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

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

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

At contract inception, once the contract is determined to be within the scope of ASC606, the Company assesses the goods or services promised within the contract to determine whether each promised good or service is a performance obligation. The promised goods or services in the Company’s arrangements typically consist of a license to intellectual property and research services. The Company* mayprovide options to additional items in such arrangements, which are accounted for as separate contracts when the customer elects to exercise such options, unless the option provides a material right to the customer. Performance obligations are promises in a contract to transfer a distinct good or service to the customer that (i) the customer can benefit from on its own or together with other readily available resources, and (ii) is separately identifiable from other promises in the contract. Goods or services that arenot* individually distinct performance obligations are combined with other promised goods or services until such combined group of promises meet the requirements of a performance obligation.

The Company determines transaction price based on the amount of consideration the Company expects to receive for transferring the promised goods or services in the contract. Consideration* maybe fixed, variable, or a combination of both. At contract inception for arrangements that include variable consideration, the Company estimates the probability and extent of consideration it expects to receive under the contract utilizing either the most likely amount method or expected amount method, whichever best estimates the amount expected to be received. The Company then considers any constraints on the variable consideration and includes in the transaction price variable consideration to the extent it is deemed probable that a significant reversal in the amount of cumulative revenue recognized willnot* occur when the uncertainty associated with the variable consideration is subsequently resolved.

The Company then allocates the transaction price to each performance obligation based on the relative standalone selling price and recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied. For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

The Company records amounts as accounts receivable when the right to consideration is deemed unconditional. When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded as deferred revenue.

The Company’s revenue arrangements* may*include the following:

Milestone Payments: At the inception of an agreement that includes milestone payments, the Company evaluates each milestone to determine when and how much of the milestone to include in the transaction price. The Companyfirst estimates the amount of the milestone payment that the Company could receive using either the expected value or the most likely amount approach. The Company primarily uses the most likely amount approach as that approach is generally most predictive for milestone payments with a binary outcome. Then, the Company considers whether any portion of that estimated amount is subject to the variable consideration constraint (that is, whether it is probable that a significant reversal of cumulative revenue wouldnot occur upon resolution of the uncertainty.) The Company updates the estimate of variable consideration included in the transaction price at each reporting date which includes updating the assessment of the likely amount of consideration and the application of the constraint to reflect current facts and circumstances.

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

Research Services: The Company incurred research costs in association with the License Agreement. After the First Milestone Payment (as defined in Note6 below), the Company would have been reimbursed for certain costs incurred related to reasonable and documented out-of-pocket costs for clinical and non-clinical development activities. The Company would have recognized revenue for the reimbursed costs when the First Milestone Payment contingencies had been achieved and the Company had an enforceable claim to the reimbursed costs.

Research and Development Costs

Research and development expense consists 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.

Non-cancellable Contracts

The Company* mayrecord certain obligations as liabilities related to non-cancellable contracts. If appropriate the offsetting costs may*be recorded as a deferred cost asset.

Convertible Note Payable and Fair Value Election

As permitted under FASB ASC Topic825, Financial Instruments (“ASC825**”), the Company elected to account for its promissory note, which meets the required criteria, at fair value at inception. Subsequent changes in fair value are recorded as a component of non-operating loss in the consolidated statements of operations. The portion of total changes in fair value of the note attributable to changes in instrument-specific credit risk are determined through specific measurement of periodic changes in the discount rate assumption exclusive of base market changes and are presented as a component of comprehensive income in the accompanying condensed consolidated statements of operations and comprehensive loss. As a result of electing the fair value option, direct costs and fees related to the promissory notes are expensed as incurred.

The Company estimates the fair value of the note payable using a Monte Carlo simulation model, which uses as inputs the fair value of its Common Stock and estimates for the equity volatility and volume volatility of its Common Stock, the time to expiration (i.e., expected term) of the note, the risk-free interest rate for a period that approximates the time to expiration, and probability of default. Therefore, the Company estimate its expected future equity and volume volatility based on the historical volatility of both its Common Stock price and Common Stock trading volume utilizing a lookback period consistent with the time to expiration. The time to expiration is based on the contractual maturity date, giving consideration to the mandatory and potential accelerated redemptions beginningsix months from the issuance date. The risk-free interest rate is determined based on the U.S. Treasury yield curve in effect at the time of measurement for time periods approximately equal to the time to expiration. For the valuation as of* December 31, 2023,the probability of default was estimated using Bloomberg’s Default Risk function which uses its financial information to calculate a default risk specific to the Company. For the valuation as of June 30, 2024,*the probability of default was based on management's estimates which include, the Company's current cash runway, current efforts to raise financing, and current economic environment. Interest expense is included within the fair value of the note payable. Management believes those assumptions are reasonable but if these assumptions change, it could materially affect the fair value.

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Stock-Based Compensation

The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards. The Company accounts for forfeitures as they occur. Stock-based awards with graded-vesting schedules are recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. The Company estimates the fair value of restricted stock award grants using the closing trading price of the Company’s Common Stock on the date of issuance. All stock-based compensation costs are recorded in general and administrative or research and development costs in the condensed consolidated statements of operations and comprehensive loss based upon the underlying individual’s role at the Company.

Warrants

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC Topic480, Distinguishing Liabilities from Equity (“ASC480**”) and FASB ASC Topic815, Derivatives and Hedging (“ASC815**”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC480, meet the definition of a liability pursuant to ASC480, and whether the warrants meet all of the requirements for equity classification under ASC815, 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 donot meet all the criteria for equity classification, the warrants are required to be liability classified and recorded at their initial fair value on the date of issuance and remeasured at fair value and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the Private Placement Warrants (as defined below) was estimated using a Black Scholes valuation approach and the fair value of the Substitute Warrants (as defined below) was estimated using a modified Black Scholes valuation approach which applies a probability factor based on the probabilities of achieving earnout cash milestone and/or earnout shares milestone at each reporting period (see Notes9 and11).

Modification of Warrants

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

Preferred Stock

In accordance with ASC480, the Company’s Series A Preferred Stock was classified as permanent equity as it wasnot mandatorily redeemable upon an event that is considered outside of the Company’s control. Further, in accordance with ASC815-40, Derivatives and Hedging–* Contracts in an Entity*’s Own Equity, the Series A Preferred Stock didnot meet any of the criteria that would preclude equity classification. The Company concluded that the Series A Preferred Stock was more akin to an equity-type instrument than a debt-type instrument, therefore the conversion features associated with the convertible preferred stock were deemed to be clearly and closely related to the host instrument and werenot bifurcated as a derivative under ASC815.

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Income Taxes

Income taxes are recorded in accordance with FASB ASC Topic740, Income Taxes (“ASC740**”), 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 thannot that some or all of the deferred tax assets willnot be realized. The Company accounts for uncertain tax positions in accordance with the provisions of ASC740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely thannot be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely thannot 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

The Company applies thetwo-class method when computing net income or loss per share attributable to common stockholders. In determining net income or loss attributable to common stockholders, thetwo-class method requires income or loss allocable to participating securities for the period to be allocated between common and participating securities based on their respective rights to share in the earnings as if all of the income or loss allocable for the period had been distributed. In periods of net loss, there isno allocation required under thetwo-class method as the participating securities donot have an obligation to fund the losses of the Company.

Basic loss per share of Common Stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of Common Stock outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if stock options, restricted stock awards and warrants were to vest and be exercised. Diluted earnings per share excludes, when applicable, the potential impact of stock options, Common Stock warrant shares, convertible notes, and other dilutive instruments because their effect would be anti-dilutive in the periods in which the Company incurs a net loss.

The following outstanding shares of Common Stock equivalents were excluded from the computation of the diluted net loss per share attributable to Common Stock for the periods in which a net loss is presented because their effect would have been anti-dilutive.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and are adopted by the Company as of the specified effective date. For thesix months ended* June 30, 2024*, there wereno new accounting pronouncements or updates to recently issued accounting pronouncements that management believes materially affect the Company’s present or future results of operations, overall financial condition, liquidity or disclosures.

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4. Prepaid Expense and Other Current Assets

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

5. Accrued and Other Current Liabilities

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

6. Alvogen Licensing Agreement

In* June**2023,* the Company entered into a License Agreement with Alvogen. Under the License Agreement, the Company granted Alvogen certain license rights to develop, manufacture, and commercialize the Company’s candidate therapeutic product, NRX-101, for the treatment of bipolar depression with suicidality. In exchange for the license granted and the participation of the Company in certain development, regulatory and commercial activities, Alvogen was obligated to pay the Company specified regulatory and commercial milestones, thefirst of which was $9 million upon the later of a positive data read-out from the Company’s ongoing Phase2b/3 clinical trial and completion of the Type B meeting with the FDA (the “First Milestone Payment”). In* February 2024,the parties executed an amendment accelerating payment of up to $5 million related to the First Milestone Payment, with the remaining $4 million due upon the original agreement’s terms (see below for advances received through June 30, 2024).As compensation for advancing the milestone, Alvogen received warrants to purchase up to 419,598 shares of the Company's Common Stock, at a strike price of $4.00 with athree year term (See Note9*). The grant date fair value of the warrants was approximately $1.3 million, which the Company planned to account for as consideration paid to a customer (see below). Thesecond portion of thefirst milestone was to be $4 million and, as before, triggered by a positive response to the Company's planned end of phase2 meeting with FDA. If thefirst milestone wasnot achieved by* September 3, 2024,the Company would be obligated to repay any amount received against the $5 million advance of the First Milestone Payment to Alvogen. As there was significant uncertainty relative to approval of any drug candidate in development, the Company concluded that it wasnot* probable that a significant reversal of revenue wouldnot occur if the Company were to include the First Milestone Payment, or any advances thereof, in the transaction price prior to receiving FDA approval. Accordingly, the transaction price was fully constrained and advances from Alvogen were recorded as a refund liability until such time as the refund right expired. Further, the Company accounted for the warrants issued to Alvogen within additional paid-in capital consistent with the accounting for unfunded stock subscription agreements until such time as the uncertainty around the First Milestone was resolved.

Termination

Under the License Agreement, as amended, Alvogen was granted early termination rights. On* June 21, 2024,the Company received a notice of termination from Alvogen effective immediately. Following the termination of the License Agreement by Alvogen, the amounts advanced pursuant to the amendment became due and payable to Alvogen. Accordingly, the refund liability hasnot* been reclassified as deferred revenue or recorded as revenue as of* June 30, 2024.*

Upon termination of the License Agreement, the intellectual property rights licensed to Alvogen under the License Agreement reverted to the Company, and all other rights and obligations of each of the parties immediately ceased, except for outstanding amounts owed as of the time of such expiration or termination. As of* June 30, 2024,the refund liability due to Alvogen was $3.8 million, which represent all payments made by Alvogen through June 30, 2024,and is included as a component of accrued expense and other current liabilities on the condensed consolidated balance sheet. Following the early termination by Alvogen, the Company doesnot* anticipate recognizing any revenue under the License Agreement. Additionally, the Company wrote-off the unfunded stock subscription receivable of $1.3 million related to the warrants previously classified in additional paid-in capital to research and development expense following the termination.

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7. Debt

Convertible Note

On* November 4, 2022,*the Company issued an 9% redeemable promissory note (as amended, the “Note”) to Streeterville Capital, LLC, a Utah limited liability company (“Streeterville”), for an aggregate principal amount of $11.0 million. The Note originally matured 18 months from the date of issuance subject to certain acceleration provisions. The Note carries an original issue discount of $1.0 million which was deducted from the principal balance of the Note. The net proceeds from the issuance of the Note was $10.0 million after transaction costs including the original issue discount, legal and other fees are included.

The initial terms of the Note included the following provisions, certain of which have subsequently been modified as described below. The Company has the option to prepay the Note during the term by paying an amount equal to 110% of the principal, interest, and fees owed as of the prepayment date. The noteholder has the right to redeem up to $1.0 million of the outstanding balance of the Note per month startingsix months after the issuance date (the “Maximum Monthly Redemption Amount”). Payments* maybe made by the Company at their option in: (i) in cash with a 10% premium (the “Redemption Premium”) for the amount redeemed, (ii) by paying the redemption amount in the form of shares of Common Stock with the number of redemption shares being equal to the portion of the applicable redemption amount divided by the Redemption Conversion Price (as defined below), or (iii) a combination of cash and shares of Common Stock. The “Redemption Conversion Price” on any given redemption date equals 85% multiplied by the average of thetwo* lowest daily volume weighted average prices per share of the Common Stock during theten trading days immediately preceding the date that the noteholder delivers notice electing to redeem a portion of the Note. Beginning* May 1, 2023,in the event (a) the daily dollar trading volume of the Common Stock of the Company on any given trading day is at leastfifty* percent (50%) greater than the lower of (i) the median daily dollar trading volume over the previousten (10) trading days or (ii) the daily dollar trading volume on the trading day immediately preceding the date of measurement or (b) if the closing trade price on any given trading day is at leastthirty percent (30%) greater than the Nasdaq Minimum Price, then the lender will be entitled to redeem over the followingten (10) trading days an amount of indebtedness then outstanding under the Note equal to twice the monthly redemption amount of $1.0 million solely by payment by stock, if permitted under the agreement, subject to the Maximum Percentage (as defined in the Note) and other ownership limitations.

The Note contains certain Trigger Events (as defined in the Note) that generally, if uncured withinfive trading days,* mayresult in an event of default in accordance with the terms of the Note (such event, an “Event of Default”). Upon an Event of a Default, the Lender mayconsider the Note immediately due and payable. Upon an Event of Default, the interest rate may*also be increased to the lesser of 18% per annum or the maximum rate permitted under applicable law (see below).

Due to these embedded features within the Note, the Company elected to account for the Note at fair value at inception. Subsequent changes in fair value are recorded as a component of other income (loss) in the consolidated statements of operations.

Convertible Note Amendments

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

On* July 7, 2023,the Company entered into Amendment#2* to the Note with Streeterville (the “Second Amendment”). Pursuant to the Second Amendment, the Company agreed to amend the redemption provisions of the Note to provide that the Company would pay to Streeterville an amount in cash equal to $1.8 million on or before* July 10, 2023,which amount was paid on July 10, 2023.In addition, the Company agreed that, beginning on or before July 31, 2023,and on or before the last day of each month until December 31, 2023 (the Company would pay Streeterville an amount equal to $0.4 million in cash), less any amount satisfied by the delivery of Redemption Conversion Shares (as defined below). Notwithstanding the foregoing, Streeterville mayalso submit a request for redemption of up to an aggregate of $1.0 million per month in accordance with the terms of the note amendment. However, the portion of each payment that isnot* satisfied by the delivery of Redemption Conversion Shares is the maximum amount of cash the Company will be required to pay in accordance with the Second Amendment during the period from* July 31, 2023and on or before the last day of each month until December 31, 2023.The redemption of the Maximum Monthly Redemption Amount in excess of the Minimum Amount may*be satisfied by the delivery of additional Redemption Conversion Shares.

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On* February 9, 2024,the Company entered into Amendment#3* to the Note (the “Third Amendment”), with Streeterville. In accordance with the Third Amendment, the Company and Streeterville agreed to amend the redemption provisions of the Note to provide that the Company would pay to Streeterville an amount in cash equal to $1.1 million on* February 12, 2024,which the amount was paid on February 12, 2024.In addition, beginning on or before February29,* 2024, and on or before the last day of each month until* July 31, 2024,the Company shall pay Streeterville an amount equal to $0.4 million in cash, less any amount satisfied by the delivery of Redemption Conversion Shares. During thefirst* three months of this amended payment period, Streeterville* maynot* request to redeem amounts greater than $0.4 million per month.

After* April**30,* 2024, and for the remainder of the payment period through* July 31, 2024,Streeterville mayredeem any Redemption Amount (as defined in the Note), including an amount in excess of the Minimum Payment, subject to the Maximum Monthly Redemption Amount. During the period through July 31, 2024,the Company is permitted to pay the Redemption Amounts by delivery of the Redemption Conversion Shares (as defined below) without regard to the existence of any Equity Conditions Failure, to the extent Streeterville submits redemption notices during such month pursuant to the terms of the Note, and only for the Redemption Amounts covered by such notices. Moreover, the Redemption Premium will continue to apply to the Redemption Amounts. To the extent there is an outstanding balance under the Note after July 31, 2024,the Company will be required to pay such outstanding balance in full in cash by August 31, 2024.As a result of the alleged Event of Default mentioned below, the Company didnot* pay any Redemption Amounts during thethree months ended* June 30, 2024.*

During the Minimum Payment Period (defined in the Note, as amended), the Company is permitted to pay the Redemption Amounts in the form of shares of Common Stock of the Company (the “Redemption Conversion Shares”) calculated on the basis of the Redemption Conversion Price (as defined in the Note) without regard to the existence of an Equity Conditions Failure. Moreover, the Redemption Premium (as defined in the Note) will continue to apply to the Redemption Amounts.

Both the Second Amendment and the Third Amendment (considered cumulatively with the Second Amendment) were deemed to be debt modifications in accordance with FASB ASC Topic470, Debt, which will be accounted for prospectively. The modification doesnot result in recognition of a gain or loss in the consolidated statement of operations but does impact interest expense recognized in future periods.

Convertible Note Fair Value Measurements

The Company estimates the fair value of the Note using a Monte Carlo simulation model, which uses as inputs the fair value of its Common Stock and estimates for the equity volatility and volume volatility of its Common Stock, the time to expiration of the Note, the risk-free interest rate for a period that approximates the time to expiration, and probability of default. Therefore, the Company estimates its expected future volatility based on the actual volatility of its Common Stock and historical volatility of its Common Stock utilizing a lookback period consistent with the time to expiration. The time to expiration is based on the contractual maturity date, giving consideration to the mandatory and potential accelerated redemptions beginningsix months from the issuance date. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of measurement for time periods approximately equal to the time to expiration. Probability of default is estimated using Bloomberg's Default Risk function which uses its financial information to calculate a default risk specific to the Company.

The discount to the principal amount is included in the carrying value of the Note. During2022, the Company recorded a debt discount of approximately $1.0 million upon issuance of the Note for the original issue discount of $1.0 million. As a result of electing the fair value option, any direct costs and fees related to the Note were expensed as incurred. For thethree andsix months ended* June 30, 2024,the Company recorded a loss from the change in fair value of the Note of less than $0.1 million and $0.3 million, respectively, which was recognized in other (income) expense on the condensed consolidated statements of operations as a result of the Company’s election of the fair value option. For thethree* andsix months ended* June 30, 2023,*the Company recorded a loss from the change in fair value of the Note of $0.7 million and $2.4 million, respectively, which was recognized in other (income) expense on the condensed consolidated statements of operations as a result of the Company’s election of the fair value option.

During thethree andsix months ended* June 30, 2024*, the Company made cash payments for coupon interest on the Note of approximately $0.1 million, and $0.2 million of redemption premiums, issued shares of Common Stock as coupon interest repayment of $0.1 million, and incurred a default penalty of $0.8 million. During thethree andsix months ended* June 30, 2023*, the Company made interest payments on the Note of approximately $0.1 million and issued shares of Common Stock as principal and interest repayments on the Note of $0.2 million.

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As of* June 30, 2024*, and* December 31, 2023*, the Note carried a remaining principal balance of $6.5 million and $8.3 million, respectively. Refer to Note11 for the reconciliation of the fair values for the periods presented.

Alleged Default

On* April 24, 2024,the Company received written notice from counsel for Streeterville that an alleged event of default occurred with respect to Note issued by the Company in favor of Streeterville (the “Notice”). The Notice alleges that, among other things, (i) the announcement of the plan to partially spin-off of HOPE (the “Spin-Off”), constituted a “Fundamental Transaction” (as defined in the Note) for which the Company failed to obtain Streeterville’s prior written consent before undertaking such transaction; and (ii) the Company failed to pay the Minimum Payment, as defined in the Note, by April 8, 2024,following a Redemption Notice issued on April 3, 2024*by Streeterville to the Company, each of which resulted in the failure to cure a Trigger Event and subsequent Event of Default of the Note, resulting in the acceleration of all of the outstanding amounts due thereunder.

Streeterville also filed a complaint (the “Complaint”) naming the Company as a defendant in the Third Judicial District Court of Salt Lake County, Utah. The Complaint is seeking, among other things: (i) declaratory relief for an order enjoining the Company from undertaking any Fundamental Transaction, including the Spin-Off, or otherwise issuing Common Stock or other equity securities (such as the shares of HOPE pursuant to the announced Spin-Off); and (ii) repayment of the Note and other unspecified amounts of damages, costs and fees, butno less than $6,537,027, or the amounts currently outstanding under the Note.

On* July 29, 2024,in connection with the alleged Event of Default that Streeterville claimed occurred with respect to the Note, the Company announced an order of the Utah arbitrator denying the petition of Streeterville to enjoin Spin-Off of 49% of shares in HOPE to current shareholders of the Company. The purpose of the proposed Spin-Off was to provide the Company’s shareholders with valuable consideration and to provide HOPE (currently a wholly-owned subsidiary) with a sufficient shareholder base to enable future listing on a a national exchange. The arbitrator also denied Streeterville’s petition to enjoin the Company from selling additional shares of Common Stock to finance ongoing operations (see Note14*).

8. Commitments and Contingencies

Sarah Herzog Memorial Hospital License Agreement

The Company is required to make certain payments related to the development of NRX-101 (the "Licensed Product") in order to maintain the license agreement with the Sarah Herzog Memorial Hospital Ezrat Nashim (“SHMH”) (the "SHMH License Agreement"), including:

Milestone Payments

The milestone payments due above* maybe reduced by 25% in certain circumstances, and by the application of certain sub-license fees. During thethree* months andsix months ended* June 30, 2024and2023*, no payments were made.

Royalties

A royalty in an amount equal to: (a)1% of revenues from the sale of any product incorporating a Licensed Product when at leastone Licensed Patent remains in force, if such product isnot covered by a Valid Claim (as defined below) in the country or region in which the sale occurs, or (b)2.5% of revenues from the sale of any Licensed Product that is covered by at leastone Valid Claim in the country or region in which such product is manufactured or sold. A “Valid Claim” means any issued claim in the Licensed Patents that remains in force and that hasnot been finally invalidated or held to be unenforceable. The royalty rates above* maybe doubled if we commence a legal challenge to the validity, enforceability or scope of any of the Licensed Patents during the term of the SHMH License Agreement and donot* prevail in such proceeding.

Royalties shall also apply to any revenues generated by sub-licensees from sale of Licensed Products subject to a cap of 8.5% of the payments received by us from sub-licensees in connection with such sales. During thethree andsix months ended* June 30, 2023*, no royalty payments were made.

Annual Maintenance Fee

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

Exclusive License Agreement

The Company has entered into a License Agreement with Apkarian Technologies to in-license US Patent8,653,120 that claims the use of D-cycloserine for the treatment of chronic pain in exchange for a commitment to pay milestones and royalties as development milestones are reached in the field of chronic pain. The patent is supported by extensive nonclinical data and early clinical data that suggest the potential for NMDA antagonist drugs, such as NRX-101 to decrease both chronic pain and neuropathic pain while potentially decreasing craving for opioids. For thethree andsix months ended* June 30, 2024and2023*, the Company has recordedno expenses relating to the licensure of the patent.

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Legal Proceedings

The Company is a defendant in litigation filed by Streeterville in the Third Judicial District Court of Salt Lake County, Utah. See Note7, Debt, for additional information. The Complaint seeks, among other things: (i) declaratory relief for an order enjoining the Company from undertaking any Fundamental Transaction, including the Spin-Off, or otherwise issuing Common Stock or other equity securities (such as the shares of HOPE pursuant to the announced Spin-Off); and (ii) repayment of the Note and other unspecified amounts of damages, costs and fees, butno less than $6,537,027, or the amounts currently outstanding under the Note.

On* July 29, 2024,in connection with the alleged Event of Default that Streeterville claimed occurred with respect to the Note, the Company announced an order of the Utah arbitrator denying the petition of Streeterville to enjoin the planned Spin-Off of 49% of shares in HOPE to current shareholders of the Company. The purpose of the proposed Spin-Off was to provide the Company’s shareholders with valuable consideration and to provide HOPE (currently a wholly-owned subsidiary) with a sufficient shareholder base to enable future listing on a a national exchange. The arbitrator also denied Streeterville’s petition to enjoin the Company from selling additional shares of Common Stock to finance ongoing operations. This matter was settled subsequent to June 30, 2024.*

On* August 12, 2024,the Company signed a settlement agreement with Streeterville to retire its remaining debt for a settlement amount of $5.6 million and to settle outstanding litigation. This settlement amount was substantially less than the amounts claimed by Streeterville in its Compliant (see Note14*).

The Company is currently involved in and* mayfrom time to time become involved in various legal actions incidental to our business. As of the date of this report, the Company, other than as set forth above, isnot* involved in any legal proceedings that it believes could have a material adverse effect on its financial position or results of operations. However, the outcome of any current or future legal proceeding is inherently difficult to predict and any dispute resolved unfavorably could have a material adverse effect on the Company’s business, financial position, and operating results.

9. Equity

Common Stock Reverse Stock Split

On* March 21, 2024,the Board approved a reverse stock split ratio of1*-for-10. On* March 28, 2024,the Company filed an amendment to its certificate of incorporation in the State of Delaware (the “Amendment”), which provided that, effective as of4:30* p.m. Eastern Standard Time on* April 1, 2024 (the “Effective Time”), everyten shares of its issued and outstanding Common Stock will automatically be combined intoone* issued and outstanding share of Common Stock, without any change in the par value per share.

At the Effective Time of* April 1, 2024,every 10 issued and outstanding shares of the Company’s Common Stock were converted automatically intoone* share of the Company’s Common Stock, without any change in the par value per share. The Reverse Stock Split reduced the number of shares of Common Stock issued and outstanding from approximately 95.7 million to approximately 9.6 million.

No fractional shares were issued in connection with the Reverse Stock Split. Shareholders who otherwise would have been entitled to receive a fractional share instead became entitled to receiveone whole share of Common Stock in lieu of such fractional share. As a result of the Reverse Stock Split,73,040 additional shares of common stock were issued in lieu of fractional shares. All share and per share amounts in the accompanying condensed consolidated financial statements and footnotes have been retrospectively adjusted for the reverse split.

Preferred Stock

Pursuant to the terms of the Company’s Second Amended and Restated Certificate of Incorporation, the Company has 50,000,000 shares of preferred stock with a par value of $0.001, of which 12,000,000 were designated Series A Convertible Preferred Stock ("Series A Preferred"). In* August 2023,the Company sold and issued 3.0 million shares of Series A Preferred for an aggregate cash purchase price of $1.2 million. During March 2024holders of the Company’s Series A Preferred elected to convert 3,000,000 shares of Series A Preferred into 300,000 shares of Common Stock. As of June 30, 2024*, no shares of Series A Preferred remained issued or outstanding.

Common Stock

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

On* January 2, 2024,*the Company issued 143,648 shares of Common Stock as payment for the $0.4 million minimum payment to Streeterville related to principal and interest payments on the Streeterville Note.

From* February 20, 2024to April 15, 2024,the Company announced that it entered into multiple purchase agreements (the “ATM Purchase Agreements”) subject to standard closing conditions where accredited investors purchased 282,452 shares of unregistered Common Stock at a range of $4.643 – $7.10 per share. On April 15, 2024,the Company increased the maximum aggregate offering amount of the shares of Common Stock issuable under that certain At the Market Offering Agreement, dated August 14, 2023 (the “Offering Agreement”), with H.C. Wainwright & Co., and filed a prospectus supplement (the “Current Prospectus Supplement”) under the Offering Agreement for an aggregate of $4.9 million. Through June 30, 2024,*the aggregate net cash proceeds to the Company from the ATM Purchases Agreements were approximately $1.4 million.

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On* February29,* 2024, the Company entered into a securities purchase agreement with an investor providing for the issuance and sale of 270,000 shares of Common Stock and warrants to purchase up to 270,000 shares of Common Stock (the “ FebruaryWarrants”) at a price of $3.80 per share of Common Stock and accompanying warrant, which represents a 26.7% premium to the offering price in* February 2024Public Offering. The Common Stock and the FebruaryWarrants were offered pursuant to a private placement (the “** February 2024Private Placement*”) under Section4(a)(2) of the Securities Act of1933, as amended (the “Securities Act”). The aggregate net cash proceeds to the Company from the* February 2024Private Placement were approximately $1.0 million. As of June 30, 2024*, the shares of Common Stock hadnot been issued.

On* February 27, 2024,the Company entered into an underwriting agreement (the “* FebruaryUnderwriting Agreement”) with EF Hutton LLC (the “Representative”), as the representative of the several underwriters named therein (the “** FebruaryUnderwriters”), relating to an underwritten public offering (the “** February 2024Public Offering”) of 500,000 shares (the “** FebruaryShares”) of the Company’s Common Stock. The public offering price for each share of Common Stock was $3.00 and the* FebruaryUnderwriters purchased the shares of Common Stock pursuant to the FebruaryUnderwriting Agreement at a price for each share of Common Stock of $2.76. Pursuant to the FebruaryUnderwriting Agreement, the Company also granted the Representative a45*-day option to purchase up to an additional 75,000 shares (the “** FebruaryOption Shares”) of the Common Stock on the same terms as the* FebruaryShares sold in the February 2024Public Offering (the “** FebruaryOver-Allotment Option*”). On* February 28, 2024,the February 2024Public Offering closed (the “** FebruaryClosing Date*”). The aggregate net cash proceeds to the Company from the* February 2024Offering proceeds were approximately $1.3 million after offering costs of approximately $0.4 million. On March 5, 2024,the FebruaryUnderwriters of the previously announced underwritten public offering of the Company exercised their option in accordance with the FebruaryUnderwriting Agreement, dated February 27, 2024,by and between the Company and the Representative, as representative of the several underwriters named therein, to purchase up to an additional 75,000 shares of the Company’s Common Stock, at a public offering price of $3.00 per share (the “* FebruaryOverallotment Exercise”). The* FebruaryOverallotment Exercise closed on March 6, 2024.The aggregate net cash proceeds to the Company from the February*Overallotment Exercise were approximately $0.2 million. The Company accrued additional offering costs of approximately $0.2 million.

OnApril 18, 2024, the Company entered into an underwriting agreement (the “** AprilUnderwriting Agreement”) with the Representative, as the representative of the several underwriters named therein (the “** AprilUnderwriters”), relating to an underwritten public offering (the “** April 2024Public Offering”) of 607,000 shares (the “A**pril Shares”) of Common Stock. The public offering price for each share of Common Stock was $3.30. Pursuant to the* AprilUnderwriting Agreement, the Company also granted the Representative a45*-day option to purchase up to an additional 91,050 shares (the “** AprilOption Shares”) of the Common Stock on the same terms as the* AprilShares sold in the April 2024Public Offering (the “** AprilOver-Allotment Option*”). OnApril 19, 2024, the Offering closed (the “** AprilClosing Date”). Net proceeds from the* April 2024Public Offering were approximately $1.6 million after offering costs of approximately $0.4 million. On May 23, 2024,the AprilUnderwriters of the previously announced underwritten public offering of the Company exercised their option in accordance with the AprilUnderwriting Agreement, dated April 18, 2024,by and between the Company and the Representative, as representative of the several underwriters named therein, to purchase up to an additional 91,050 shares of the Company’s Common Stock, at the public offering price of $3.30 per share (the “* AprilOverallotment Exercise”). The* AprilOver-Allotment Exercise was exercised in full and closed on May 23, 2024.The net cash proceeds to the Company from the April*Overallotment Exercise were approximately $0.2 million which include offering costs of less than $0.1 million.

Common Stock Warrants

Substitute Warrants

In connection with the Merger in2021, each warrant to purchase shares of Common Stock of NRx that was outstanding and unexercised immediately prior to the effective time (whether vested or unvested) was assumed by Big Rock Partners Acquisition Corp. ("BRPA") and converted into a warrant, based on the exchange ratio (of 0.316), that will continue to be governed by substantially the same terms and conditions, including vesting, as were applicable to the former warrant (the “Substitute Warrants”). There were 3,792,970 warrants outstanding and unexercised at the effective time. As these Substitute Warrants meet the definition of a derivative as contemplated in FASB ASC Topic815, based on provisions in the warrant agreement related to the Earnout Shares Milestone and the Earnout Cash Milestone and the contingent right to receive additional shares for these provisions, the Substitute Warrants were recorded as derivative liabilities on the consolidated balance sheet and measured at fair value at inception (on the date of the Merger) and at each reporting date in accordance with FASB ASC Topic820, with changes in fair value recognized in the statements of operations in the period of change.

The Company recognized a loss on the change in fair value of the Substitute Warrants for thethree months ended* June 30, 2024and2023* of less than $0.1 million and less than $0.1 million, respectively. The Company recognized a gain on the change in fair value of the Substitute Warrants for thesix months ended* June 30, 2024and2023* of less than $0.1 million and less than $0.1 million, respectively. Refer to Note11 for further discussion of fair value measurement of the warrant liabilities.

Assumed Public Warrants

Prior to the Merger, the Company had 3,450,000 warrants outstanding (the “Public Warrants”) to purchase up to 345,000 shares of Common Stock. Each Public Warrant entitles the holder to purchaseone-tenth share of Common Stock at an exercise price of $115 per share. The Public Warrants became exercisable at the effective time of the Merger and expirefive years after the effective time on or earlier upon their redemption or liquidation of the Company.

During thethree andsix months ended* June 30, 2024and2023* no Public Warrants were exercised. The outstanding balance of these public warrants remains in equity. At* June 30, 2024* and* December 31, 2023*, there were 3,448,856 Public Warrants outstanding to purchase up to 344,886 shares of Common Stock.

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Assumed Private Placement Warrants

Prior to the Merger, the Company had outstanding 136,250 Private Placement Warrants (the “Private Placement Warrants”) to purchase up to 13,625 shares of Common Stock. The Private Placement Warrants arenot indexed to the Company’s common shares in the manner contemplated by FASB ASC Topic815-40-15 because the holder of the instrument isnot an input into the pricing of a fixed-for-fixed option on equity shares. The Company classifies the Private Placement Warrants as derivative liabilities in its condensed consolidated balance sheets as of* June 30, 2024* and* December 31, 2023*. The Company measures the fair value of the Private Placement Warrants at the end of each reporting period and recognizes changes in the fair value from the prior period in the Company’s statements of operations for the current period.

The Company recognized a loss on the change in fair value of the Private Placement Warrants for thethree months ended* June 30, 2024and2023* of less than $0.1 million and less than $0.1 million, respectively. The Company recognized a loss on the change in fair value of the Private Placement Warrants for thesix months ended* June 30, 2024and2023* of less than $0.1 million and less than $0.1 million, respectively. Refer to Note11 for discussion of the fair value measurement of the Company’s warrant liabilities.

Investor Warrants

As discussed above, on* February 28, 2024,in conjunction with the sale of 270,000 shares of the Company’s Common Stock, the Company issued FebruaryWarrants to purchase up to 270,000 shares of Common Stock which were classified in stockholder’s equity. The FebruaryWarrants have an exercise price of $3.80 per share, are initially exercisable beginningsix* months following the date of issuance, and will expire five years from the date of issuance. 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 $3.59, exercise price of $3.80, term of 5 years, volatility of 178.10%, risk-free rate of 4.26%, and expected dividend rate of 0%). The allocated fair value of the* February*Warrants on the grant date was $0.5 million and is recorded within additional paid-in capital.

On* February 28, 2024,the Company issued to the Representative the Underwriter’s Warrant to purchase up to 25,000 shares of Common Stock (the “* FebruaryUnderwriter Warrant Shares”). The Underwriter’s Warrant is exercisablesix months following the date of the Underwriting Agreement and terminates on thefive-year anniversary of the date of the Underwriting Agreement. 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 $3.05, exercise price of $3.30, term of 5 years, volatility of 178.10%, risk-free rate of 4.26%, and expected dividend rate of 0%). The allocated fair value of the Underwriter's Warrants on the grant date was $0.1 million and is recorded as a charge to additional paid-in capital.

On* March 5, 2024the Company issued Underwriter’s Warrant to purchase up to 3,750 shares of Common Stock in relation to the exercise of the February*Over-Allotment Option. 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 $3.05, exercise price of $3.30, term of 5 years, volatility of 178.10%, risk-free rate of 4.12%, and expected dividend rate of 0%). The allocated fair value of the Underwriter's Warrants on the grant date was less than $0.1 million and is recorded as a charge to additional paid-in capital.

On* April 19, 2024,the Company issued to the Representative the AprilUnderwriter’s Warrant to purchase up to 30,350 shares of Common Stock (the “** AprilUnderwriter Warrant Shares*”). The* AprilUnderwriter’s Warrant is exercisablesix months following the date of the Underwriting Agreement and terminates on thefive-year anniversary of the date of the Underwriting Agreement. 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 $3.04, exercise price of $3.63, term of 5 years, volatility of 178.10%, risk-free rate of 4.66%, and expected dividend rate of 0%). The allocated fair value of the April*Underwriter's Warrant on the grant date was less than $0.1 million and is recorded as a charge to additional paid-in capital.

On* May 23, 2024the Company issued Underwriter’s Warrant to purchase up to 4,553 shares of Common Stock in relation to the exercise of the April*Over-Allotment Option. 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 $3.62, exercise price of $3.63, term of 5 years, volatility of 178.10%, risk-free rate of 4.52%, and expected dividend rate of 0%). The allocated fair value of the Underwriter's Warrants on the grant date was less than $0.1 million and is recorded as a charge to additional paid-in capital.

Alvogen Warrants

In conjunction with the amended Alvogen licensing agreement discussed in Note6, on* February 7, 2024the Company issued warrants to purchase up to 419,598 shares of Common Stock. The warrants have an exercise price of $4.00 per share, are exercisable immediately following the date of issuance, will expire three years from the date of issuance, and mayalso be exercised on a cashless basis if there isno* effective registration statement available for the resale of the shares of Common Stock underlying the warrants. The warrants are subject to a beneficial ownership limitation of 4.99% post-exercise, with the exception that the beneficial ownership limitation* maybe waived up to a maximum of 9.99% at the election of the holder, withnot* less than61 days prior notice. 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 $4.10, exercise price of $4.00, term of 3 years, volatility of 138.0%, risk-free rate of 4.2%, and expected dividend rate of 0.0%). The fair value of the warrants on the grant date was $1.3 million and was recorded within additional paid-in capital as of* March 31, 2024.Upon termination of the Alvogen Agreement on June 21, 2024,*the offsetting amount recorded within additional paid-in capital as an unfunded stock subscription receivable was expensed to research and development.

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10. Stock-Based Compensation

2016 Omnibus Incentive Plan

Prior to the Merger, NRx maintained its2016 Omnibus Incentive Plan (the “2016 Plan”), under which NeuroRx granted incentive stock options, restricted stock awards, other stock-based awards, or other cash-based awards to employees, directors, and non-employee consultants. The maximum aggregate shares of Common Stock that were subject to awards and issuable under the2016 Plan was 347,200.

In connection with the Merger, each option of NeuroRx that was outstanding and unexercised immediately prior to the Effective Time (whether vested or unvested) was assumed by BRPA and converted into an option to acquire an adjusted number of shares of Common Stock at an adjusted exercise price per share, based on the Exchange Ratio (of 0.316:1).

Upon the closing of the Merger, the outstanding and unexercised NeuroRx stock options became options to purchase an aggregate 289,542 shares of the Company’s Common Stock at an average exercise price of $51.00 per share.

2021 Omnibus Incentive Plan

As of* June 30, 2024*,955,281 shares of Common Stock are authorized for issuance pursuant to awards under the Company’s2021 Omnibus Incentive Plan (the “2021 Plan”). As of* January 1,2024,83,920 shares were added to the2021 Plan under an evergreen feature that automatically increases the reserve with additional shares of Common Stock for future issuance under the Incentive Plan each calendar year, beginning January 1, 2022and ending on and including January 1, 2031,equal to the lesser of (A)1% of the shares of Common Stock outstanding on the final day of the immediately preceding calendar year or (B) a smaller number of shares determined by the Board. On December 28, 2023thefirst* amendment to the2021 Omnibus Plan was executed which increased the maximum number of shares (i) available for issuance under the Plan, by an additional 200,000 shares, and (ii) that* maybe delivered pursuant to the exercise of Incentive Stock Options granted under the Plan to be equal to100%* of the Share Pool. As of* June 30, 2024*, an aggregate 608,365 shares have been awarded net of forfeitures, and 346,916 shares remain available for issuance under the2021 Plan. The2021 Plan permits the granting of incentive stock options, restricted stock awards, other stock-based awards or other cash-based awards to employees, directors, and non-employee consultants.

Option Awards

The fair value of each employee and non-employee stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company is a public company and has limited company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the limited company-specific historical volatility and implied volatility. The expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve. Expected dividend yield iszero based on the fact that the Company has never paid cash dividends and doesnot expect to pay any cash dividends in the foreseeable future. Additionally, certain options granted contain terms that require all unvested options to immediately vest a) upon the approval of an NDA by the FDA forNRX‑101, or b) immediately preceding a change in control of the Company, whichever occurs first.

The Company issuedno stock options during thethree orsix months ended* June 30, 2024*.

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The following table summarizes the Company’s employee and non-employee stock option activity under the2021 Plan for the following periods:

Stock-based compensation expense related to stock options was $0.1 million and $0.3 million for thethree andsix months ended* June 30, 2024*, respectively.

At* June 30, 2024*, the total unrecognized compensation related to unvested employee and non-employee stock option awards granted, was $0.1 million, which the Company expects to recognize over a weighted-average period of approximately 1.2 years.

Restricted Stock Awards

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

On* July 12, 2022,the Board granted an award of 100,000 restricted shares of the Company (“RSAs”) as an inducement to the newly appointed CEO, pursuant to a separate Restricted Stock Award Agreement. The RSAs will vest in approximately equal installments overthree* (3) years from the grant date, subject to continued service through the applicable vesting date.

On* December 28, 2023,the Company was authorized to grant 57,500 RSAs to a consultant for services provided. The RSAs vested aftersix months from September 4, 2023,*the date the services began. The shares were valued on the grant date based on the quoted price of $4.60 or approximately $0.3 million which was amortized over the vesting term.

Stock-based compensation expense related to RSAs was less than $0.1 million for thethree andsix months ended* June 30, 2024* respectively.

As of* June 30, 2024*, total unrecognized compensation expense related to RSAs was approximately $0.2 million, which is expected to be recognized over a weighted-average period of approximately 1.0 years.

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

11. Fair Value Measurements

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during thethree andsix months ended* June 30, 2024and2023*. The carrying amount of accounts payable approximated fair value as they are short term in nature. The fair value of stock options and warrants issued for services are estimated based on the Black-Scholes model. The fair value of the Note was estimated utilizing a Monte Carlo simulation.

Fair Value on a Recurring Basis

The Company follows the guidance in ASC820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. The estimated fair value of the money market account represents a Level1 measurement. The estimated fair value of the warrant liabilities and convertible note payable represent Level3 measurements. The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at* June 30, 2024* and* December 31, 2023*, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value (in thousands):

Convertible Note Payable

The significant inputs used in the Monte Carlo simulation to measure the convertible note liability that is categorized within Level3 of the fair value hierarchy are as follows:

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The following table sets forth a summary of the changes in the fair value of the Note categorized within Level3 of the fair value hierarchy (in thousands):

Warrant Liabilities

The Company utilizes a Black-Scholes model approach to value the Private Placement Warrants and Substitute Warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liabilities is determined using Level3 inputs. There wereno transfers between levels within the fair value hierarchy during the periods presented. Inherent in a Black Scholes options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its Common Stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasuryzero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.

The significant inputs used in the Black-Scholes model to measure the warrant liabilities that are categorized within Level3 of the fair value hierarchy are as follows:

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

12. Income Taxes

The Company recordedno provision or benefit for income tax expense for thesix months ended* June 30, 2024and2023*, respectively.

For all periods presented, the pretax losses incurred by the Company receivedno corresponding tax benefit because the Company concluded that it is more likely thannot that the Company will be unable to realize the value of any resulting deferred tax assets. The Company will continue to assess its position in future periods to determine if it is appropriate to reduce a portion of its valuation allowance in the future.

The Company hasno open tax audits with any taxing authority as of* June 30, 2024*.

13. Related Party Transactions

Glytech Agreement

The Company licenses patents that are owned by Glytech, LLC (“Glytech”), pursuant to a license agreement (the “Glytech Agreement”). Glytech is owned by Daniel Javitt, a co-founder and former director of the Company. The Glytech Agreement requires that the Company pay Glytech for ongoing scientific support and also reimburse Glytech for expenses of obtaining and maintaining patents that are licensed to the Company. During both thethree months ended* June 30, 2024* and2023, the Company paid Glytech $0.1 million for continuing technology support services and reimbursed expenses. During both thesix months ended* June 30, 2024* and2023, the Company paid Glytech $0.1 million for continuing technology support services and reimbursed expenses. These support services are ongoing.

The Fourth Amendment to the Glytech Agreement, effective as of* December**31,* 2020, includes an equity value-triggered transfer of Excluded Technology from Glytech to the Company. The Excluded Technology is defined in the Glytech Agreement as any technology, and any know-how related thereto, covered in the licensed patents that donot recite either D-cycloserine or lurasidone individually or jointly. This definition would cover pharmaceutical formulations, including some that the Company considers “pipeline” or “future product” opportunities, that contain a combination of pharmaceutical components different from those contained inNRX‑100 andNRX‑101. On* November 6, 2022the Glytech Agreement was amended whereby Glytech agreed to transfer and assign the remainder of the Licensed Technology and the Excluded Technology to the Company forno* additional consideration at any time upon receipt of written notice from the Company if, on or prior to* March 31, 2024, (i) the value of the Glytech equity holdings in the Company (the “Glytech Equity”) has an aggregate liquidity value of at least $50 million fortwenty* (20) consecutive trading days immediately preceding any given date and (ii) there areno legal or contractual restrictions on selling all of the securities represented by the Glytech Equity then applicable to Glytech (or reasonably foreseeable to be applicable to Glytech within the followingtwenty trading days). The option wasnot exercised and expired on* March 31, 2024.*

Consulting Agreement with Dr. Jonathan Javitt

The Chief Scientist of the Company, Dr. Jonathan Javitt, is a major shareholder in the Company and is the Chairman of the Board of Directors. Therefore, the services provided to the Company are deemed to be a related party transaction. He served the Company on a full-time basis as CEO under an employment agreement with the Company until* March 8, 2022and currently serves under a Consulting Agreement with the Company as Chief Scientist and received compensation of $0.2 million and $0.1 million during thethree* months ended* June 30, 2024and2023*, respectively, and $0.4 million and $0.5 million during thesix months ended* June 30, 2024* and2023, respectively.

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On* March 29, 2023,the Consulting Agreement dated March 8, 2022between the Company and Dr. Jonathan Javitt was amended to extend the term of the Agreement until March 8, 2024with automatic annual renewals thereafter unlessone* party or the other provides notice of non-renewal (the “Javitt Amendment”). The Javitt Amendment also provided for payment at the rate of $0.6 million per year, payable monthly (i.e., less than $0.1 million per month), and a performance-based annual bonus with a minimum target of $0.3 million, at the discretion of the Board and upon satisfactory performance of the services. The annual discretionary bonus for2023, if any,* maybe approved by the Board in2024* and is payable in* March 2024,will be pro-rated from the start of the extension period and is subject to Dr. Javitt’s continued engagement by the Company. As of June 30, 2024and December 31, 2023*, the annual discretionary bonus of $0.3 million and $0.2 million is accrued and included within accrued and other current liabilities on the condensed consolidated balance sheets, respectively.

The Javitt Amendment also provides, subject to the approval of the Board of Directors, for a grant of 50,000 shares of restricted stock of the Company under the Company’s2021 Omnibus Incentive Plan. The restrictions are performance based, and half of the restricted shares (25,000) shall have the restrictions removed on the New Drug Application Date (as defined below) and the remaining half (25,000) will have the restrictions removed on the New Drug Approval Date (as defined below). As of* June 30, 2024*, the Board of Directors hasnot approved the grant of restricted stock.

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

Consulting Agreement with Zachary Javitt

Zachary Javitt is the son of Dr. Jonathan Javitt. Zachary Javitt provides services related to website, IT, and marketing support under the supervision of the Company’s CEO who is responsible for assuring that the services are provided on financial terms that are at market. The Company paid this family member a total of less than $0.1 million during thethree andsix months ended* June 30, 2024and2023*, respectively. These services are ongoing.

Included in accounts payable were less than $0.1 million due to the above related parties as of* June 30, 2024* and* December 31, 2023*, respectively.

14. Subsequent Events

At-The Market Offering Agreement

From* July 11, 2024to July 30, 2024,the Company announced that it entered into multiple purchase agreements (the “ATM Purchase Agreements”) subject to standard closing conditions where accredited investors purchased 103,063 shares of unregistered Common Stock at a range of $2.421 – $2.528 per share. Subsequent to June 30, 2024,*the Company sold additional shares of Common Stock at an aggregate sales price of $0.3 million.

Nasdaq Listing Compliance

On* August 6, 2024,the Company received a letter (the “Letter”) from the Listing Qualifications Staff of The Nasdaq Stock Market, LLC (“Nasdaq”) indicating the from June 14, 2024to August 5, 2024,the Company's Market Value of Listed Securities (“MVLS”) was below the minimum of$35* million required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule5550(b)(2) (the “MVLS Requirement”). In accordance with the Nasdaq Listing Rule5810(c)(3)(C), the Company has180 calendar days from the date of the Letter, or through* February 3, 2024*to regain compliance with respect to the MVLS Requirement.

Securities Purchase Agreement

On* August 12, 2024,the Company executed a Securities Purchase Agreement (the “SPA”) and related agreements, under which the Company agreed to sell and issue, and certain purchasers agreed to purchase, an aggregate of $16.3 million of securities. The consideration payable by the purchasers under the SPA will be comprised ofthree* equal closings, each subject to certain closing conditions. The securities to be issued and sold by the Company include up to$16.3 million of senior secured convertible notes (the “Notes”) and warrants to purchase 1.4 million shares of the Company’s common stock (the “Warrants”). The proceeds are expected to be used to settle the Company’s outstanding amounts owed to Streeterville and other working capital needs. The Company has received thefirst tranche as of the date of this filing.

The Notes bear interest at the rate of 6% per annum and mature in 15 months following their date of issuance. The Notes* maybe settled in cash or in shares of the Company’s common stock, at the sole discretion of the holder, at the applicable conversion price. The Note may**not* be prepaid by the Company however, the holders of the Note* mayelect to convert the Notes, in whole or in part, into shares of the Company’s common stock at any time after the original issuance date. The conversion price will equal the lower of (i)$2.4168 or (ii) a price equal to 92% of the lowest volume-weighted average price during theseven*-trading day period immediately preceding the applicable conversion date. The Notes include certain redemption, protection features and default interest and penalties. The Notes are secured by all assets of the Company, including its intellectual property.

The Warrants have a term of 5 years, and exercise price of$2.42 and are exercisable immediately upon issuance. The Company is the process of assessing the accounting treatment of the transaction.

Settlement Agreement

On* August 12, 2024 (the “Effective Date”), the Company entered into a settlement agreement and release of claims (the “Agreement”) with Streeterville. Under the terms of the Agreement, the Company will settle the Note for $5.6 million throughtwo* installments. Thefirst installment of $2.5 million is due withinfive days of the Effective Date, and thesecond installment of $3.1 million is due within60 days of the Effective date. The Company agreed that it willnot complete the Spin-Off, or any similar transaction, until after it has paid the settlement amount in full.

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