NRX Pharmaceuticals(NRXP) - 2024 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements NRx Pharmaceuticals' unaudited condensed consolidated financial statements and detailed accounting notes are presented Condensed Consolidated Balance Sheets | Metric | March 31, 2024 (Unaudited) (in thousands) | December 31, 2023 (in thousands) | | :-------------------------------- | :--------------------------------------- | :------------------------------- | | Cash and cash equivalents | $1,319 | $4,595 | | Total current assets | $3,347 | $6,884 | | Total assets | $3,788 | $7,315 | | Total liabilities | $18,857 | $19,048 | | Total stockholders' deficit | $(15,069) | $(11,733) | - The company's cash and cash equivalents decreased significantly from $4.595 million at December 31, 2023, to $1.319 million at March 31, 2024, indicating a substantial reduction in liquidity[9] - Total stockholders' deficit worsened from $(11.733) million to $(15.069) million, reflecting continued net losses[9] Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss | Metric | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | Change (YoY) (in thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :-------------------------- | | Research and development | $1,748 | $3,650 | $(1,902) | | General and administrative | $4,250 | $5,785 | $(1,535) | | Total operating expenses | $5,998 | $9,435 | $(3,437) | | Loss from operations | $(5,998) | $(9,435) | $3,437 | | Net loss | $(6,528) | $(11,039) | $4,511 | | Basic and diluted net loss per share | $(0.74) | $(1.66) | $0.92 | - Net loss decreased by $4.511 million, from $(11.039) million in Q1 2023 to $(6.528) million in Q1 2024, primarily due to reduced operating expenses and a smaller loss from the change in fair value of convertible note payable[12] - Research and development expenses decreased by $1.902 million (52.1%) year-over-year, and general and administrative expenses decreased by $1.535 million (26.5%) year-over-year[12] Unaudited Condensed Consolidated Statements of Changes in Stockholders' Deficit | Metric | Balance December 31, 2023 (in thousands) | Balance March 31, 2024 (in thousands) | | :------------------------------------------------ | :--------------------------------------- | :------------------------------------ | | Total Stockholders' Deficit | $(11,733) | $(15,069) | | Stock-based compensation | — | $242 | | Conversion of Series A preferred stock | $3 | — | | ATM offering, net | — | $179 | | Common stock and warrants issued, net | — | $1,344 | | Common stock and warrants issued in private placement | — | $1,027 | | Shares issued as repayment of convertible note | — | $400 | | Net loss | $(253,147) | $(6,528) | - The total stockholders' deficit increased from $(11.733) million at December 31, 2023, to $(15.069) million at March 31, 2024, primarily due to the net loss incurred during the quarter, partially offset by capital raises[15] - The company issued common stock and warrants through ATM offerings and private placements, generating approximately $2.545 million in additional paid-in capital during the quarter[15] Unaudited Condensed Consolidated Statements of Cash Flows | Metric | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities | $(3,671) | $(6,089) | | Net cash used in investing activities | $0 | $(4) | | Net cash provided by financing activities | $395 | $2,545 | | Net decrease in cash and cash equivalents | $(3,276) | $(3,548) | | Cash and cash equivalents at end of period | $1,319 | $16,506 | - Net cash used in operating activities decreased from $6.089 million in Q1 2023 to $3.671 million in Q1 2024, reflecting reduced net loss and changes in operating assets and liabilities[17] - Net cash provided by financing activities significantly decreased from $2.545 million in Q1 2023 to $0.395 million in Q1 2024, primarily due to higher convertible note repayments in 2024[17] - Cash and cash equivalents at the end of the period decreased to $1.319 million from $4.595 million at the beginning of the period, indicating continued cash burn[17] Notes to Unaudited Condensed Consolidated Financial Statements 1. Organization - NRx Pharmaceuticals, Inc. is a clinical-stage biopharmaceutical company focused on novel therapeutics for central nervous system disorders, including suicidal depression, chronic pain, PTSD, and schizophrenia[19] - The company operates through two subsidiaries: NeuroRx, Inc. (R&D) and HOPE Therapeutics, Inc. (specialty pharmaceutical for ketamine distribution)[19] - Drug development activities are centered on the NMDA receptor, with expanded indications for NRX-101 (suicidal bipolar depression, chronic pain, PTSD) and intravenous ketamine (NRX-100/HTX-100) for suicidal depression[20] - A Memorandum of Understanding was signed with Fondation FundaMental to co-develop an NMDA-targeted treatment for schizophrenia[20] 2. Going Concern - As of March 31, 2024, the Company had $1.3 million in cash and cash equivalents and a working capital deficit, with no revenues and expected continued operating losses[21] - The Company's ability to continue operations is dependent on raising additional equity and/or debt financing, which may not be available on favorable terms or at all[22] - Management concluded that substantial doubt exists about the Company's ability to continue as a going concern for at least twelve months from the financial statement issuance date[22] 3. Summary of Significant Accounting Policies - On April 1, 2024, the Company effected a 1-for-10 reverse stock split, retroactively adjusting all historical share amounts (except Series A Preferred Stock)[26] - Key estimates in financial statements relate to the fair value of convertible note payable, stock options, warrants, and utilization of deferred tax assets[28] - Revenue recognition follows ASC 606, with a five-step model for contracts with customers, evaluating performance obligations, transaction price, and timing of revenue recognition[38][44] - The convertible note payable is accounted for at fair value, with subsequent changes recorded in non-operating loss, and changes due to credit risk in comprehensive income[52] - Warrants are classified as equity or liability based on specific terms and accounting guidance, with liability-classified warrants remeasured at fair value each period[56][57] 4. Prepaid Expense and Other Current Assets | Category | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------------ | :---------------------------- | :----------------------------- | | Prepaid clinical development costs | $823 | $871 | | Prepaid insurance | $638 | $1,078 | | Other prepaid expense | $433 | $334 | | Other current assets | $128 | $0 | | Other current receivables | $6 | $6 | | Total | $2,028 | $2,289 | - Total prepaid expense and other current assets decreased from $2.289 million at December 31, 2023, to $2.028 million at March 31, 2024[68] 5. Accrued and Other Current Liabilities | Category | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------------ | :---------------------------- | :----------------------------- | | Professional services | $2,766 | $2,686 | | Accrued research and development expense | $992 | $1,112 | | Accrued employee costs | $959 | $835 | | Other accrued expense | $579 | $81 | | Total | $5,296 | $4,714 | - Total accrued and other current liabilities increased by $0.582 million, from $4.714 million at December 31, 2023, to $5.296 million at March 31, 2024, primarily due to an increase in 'Other accrued expense'[69] 6. Alvogen Licensing Agreement - The Company granted Alvogen an exclusive worldwide license for NRX-101 for bipolar depression with suicidality, with a term of 20 years from first commercial sale[70] - Alvogen was obligated to pay an initial $9 million First Milestone Payment, with $5 million advanced in February 2024 in exchange for warrants to purchase 419,598 shares of Common Stock[76] - The remaining $4 million of the First Milestone is due upon a positive response to the Company's planned end of phase 2 meeting with FDA[76] - Additional milestone payments up to $315 million and tiered royalties (low to mid-teens) on net sales are contingent upon regulatory approval and sales targets[76][79] - As of March 31, 2024, the Company has not recognized any revenue from the License Agreement, and the $5 million advance is recorded as a refund liability of $0.5 million due to significant uncertainty[77][86] 7. Debt - The Company issued a 9% redeemable promissory note to Streeterville Capital, LLC for $11.0 million in November 2022, maturing in 18 months[87] - The note allows for monthly redemptions up to $1.0 million, payable in cash (with a 10% premium) or common stock at a discounted conversion price[88] - Amendments in March 2023, July 2023, and February 2024 modified redemption provisions, including cash payments and the ability to pay with common stock[91][92][95] - As of March 31, 2024, the remaining principal balance of the note was $5.4 million, down from $8.3 million at December 31, 2023[103] - During Q1 2024, the Company made cash payments of $0.1 million for interest and $0.2 million for redemption premiums, plus $2.2 million in cash principal repayments and $0.3 million in stock principal repayments[101][102] - A loss of $0.3 million was recorded from the change in fair value of the convertible note payable for Q1 2024, compared to $1.7 million in Q1 2023[100] 8. Commitments and Contingencies - The Company has a license agreement with Sarah Herzog Memorial Hospital (SHMH) requiring milestone payments (up to $0.8 million per milestone) upon clinical trial completion and commercial sales, plus annual maintenance fees ($0.15 million) and royalties (1% to 2.5% of revenues)[104][105][107] - An exclusive license agreement with Apkarian Technologies for a patent on D-cycloserine for chronic pain involves future milestone and royalty payments[108] - The Collaboration Agreement with Relief Therapeutics for Aviptadil was settled in November 2022, transferring all ZYESAMI interest to Relief Parties in exchange for potential milestone payments up to $13.0 million and royalties capped at $30.0 million[112][113][115] - The Company is involved in various legal actions incidental to its business but believes none will have a material adverse effect on its financial position or results of operations as of the report date[119] 9. Equity - A 1-for-10 reverse stock split was effective April 1, 2024, reducing outstanding common shares from approximately 95.7 million to 9.6 million[120][121] - All 3.0 million Series A convertible preferred stock shares were converted into 300,000 common shares in March 2024, leaving no Series A preferred stock outstanding[123] - The Company issued 143,648 common shares for $0.4 million in principal and interest payments on the Streeterville Note in January 2024[124] - From February to March 2024, the Company raised approximately $0.2 million net cash from ATM offerings (34,584 shares) and $1.0 million net cash from a private placement (270,000 shares) and warrants[125][128] - A public offering in February 2024 raised approximately $1.3 million net cash (500,000 shares) and an additional $0.2 million from an overallotment exercise (75,000 shares)[129] - Warrants issued to Alvogen in February 2024 (419,598 shares) had a fair value of $1.3 million, recorded in additional paid-in capital[140] | Warrant Type | Outstanding as of Dec 31, 2023 | Issued (Q1 2024) | Expired (Q1 2024) | Outstanding as of Mar 31, 2024 | Weighted Average Exercise Price (Mar 31, 2024) | | :----------------------- | :----------------------------- | :--------------- | :---------------- | :----------------------------- | :--------------------------------------------- | | Total Warrants | 3,321,499 | 718,348 | (5,510) | 4,034,337 | $19.61 | 10. Stock-Based Compensation - Stock-based compensation expense decreased from $0.695 million in Q1 2023 to $0.242 million in Q1 2024[154] | Category | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | | :-------------------------- | :----------------------------------------------- | :----------------------------------------------- | | General and administrative | $211 | $591 | | Research and development | $31 | $104 | | Total | $242 | $695 | - As of March 31, 2024, total unrecognized compensation expense for stock options was $0.3 million (expected over 1.1 years) and for RSAs was $0.2 million (expected over 1.3 years)[150][153] 11. Fair Value Measurements | Description | Level | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------------ | :---- | :---------------------------- | :----------------------------- | | Assets: | | | | | Money Market Account | 1 | $566 | $3,874 | | Liabilities: | | | | | Warrant liabilities | 3 | $26 | $17 | | Convertible note payable | 3 | $6,779 | $9,161 | - The fair value of the convertible note payable decreased from $9.161 million at December 31, 2023, to $6.779 million at March 31, 2024, primarily due to conversions and repayments[156][158] - Warrant liabilities increased from $17 thousand to $26 thousand, with a $9 thousand loss upon remeasurement in Q1 2024[156][161] - Fair value measurements for warrant liabilities and convertible note payable use Level 3 inputs, relying on models like Black-Scholes and Monte Carlo simulations with significant management judgment[157][159][160] 12. Income Taxes - The Company recorded no provision or benefit for income tax expense for the three months ended March 31, 2024 and 2023, due to pretax losses and a valuation allowance against deferred tax assets[162][163] 13. Related Party Transactions - The Company licenses patents from Glytech, LLC, owned by a co-founder, and paid $0.1 million for scientific support and patent expenses in Q1 2023 (no payment in Q1 2024)[164] - Dr. Jonathan Javitt, Chief Scientist and major shareholder, received $0.2 million in compensation in Q1 2024 (vs. $0.3 million in Q1 2023) under a consulting agreement[166] - Zachary Javitt, son of Dr. Jonathan Javitt, received $0.1 million in Q1 2024 (vs. $0.1 million in Q1 2023) for website, IT, and marketing support[170] 14. Subsequent Events - In April 2024, the Company issued 73,040 common shares to existing stockholders due to fractional share rounding from the reverse stock split[172] - On April 24, 2024, Streeterville Capital alleged an Event of Default on the convertible note, citing a proposed spin-off of Hope Therapeutics and failure to make a minimum payment, and filed a lawsuit seeking repayment of at least $6.5 million[173][176] - In April 2024, the Company increased its ATM offering agreement by $4.9 million and sold an additional $1.3 million in common stock subsequent to March 31, 2024[177][213] - An April 2024 public offering raised approximately $2.0 million gross proceeds (607,000 shares), with net proceeds intended for working capital, general corporate purposes, and potential repayment of the convertible note[178][179] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operations, and outlook, highlighting drug pipeline, financing, and liquidity challenges Overview - NRx Pharmaceuticals is a clinical-stage biopharmaceutical company developing novel therapeutics for CNS disorders, including suicidal depression, chronic pain, and PTSD, through its subsidiaries NeuroRx (R&D) and HOPE Therapeutics (specialty pharma)[184] - The company reported positive Phase 2b/3 trial data for NRX-101 in Treatment Resistant Bipolar Depression, showing comparable antidepressant efficacy and a significant reduction in akathisia (P=0.025)[186][188] - Plans are underway to file a New Drug Application (NDA) for Accelerated Approval of NRX-101 for bipolar depression patients at risk of akathisia, based on Phase 2b/3 and STABIL-B data[186][188] - HOPE Therapeutics, a wholly-owned subsidiary, is progressing towards a separate Nasdaq listing and share dividend, focusing on an FDA-approved IV ketamine (HTX-100) for suicidal depression, with an NDA planned for H1 2024[198][218][219][220] - NRX-101 received QIDP, Fast Track, and Priority Review designations for Complicated Urinary Tract Infection (cUTI) and demonstrated in vitro effectiveness against antibiotic-resistant pathogens without compromising the intestinal microbiome[203][205] - The company secured a non-binding term sheet for up to $7.5 million in debt capital to replace existing debt, facilitating the proposed spin-off of HOPE, with potential for an additional $22.5 million for pipeline funding[186] Recent Events - A 1-for-10 reverse stock split became effective on April 1, 2024, retroactively adjusting all share and per share amounts[206] - An April 2024 public offering raised approximately $2.0 million gross proceeds, intended for working capital, general corporate purposes, and potential repayment of the convertible promissory note[208] - The ATM offering agreement was increased by $4.9 million in April 2024, with $1.3 million in additional shares sold subsequent to March 31, 2024[213] - February 2024 offerings, including a public offering and a private placement, generated approximately $1.7 million and $1.0 million in gross proceeds, respectively, used for working capital and debt repayment[214][217] Financial Results | Metric | March 31, 2024 (in millions) | March 31, 2023 (in millions) | | :-------------------- | :--------------------------- | :--------------------------- | | Net loss | $(6.5) | $(11.0) | | Accumulated deficit | $(259.7) | N/A | | Stockholders' deficit | $(15.1) | N/A | | Working capital deficit | $(15.5) | N/A | - The Company incurred a net loss of $6.5 million for the three months ended March 31, 2024, an improvement from $11.0 million in the prior year period[221] - As of March 31, 2024, the Company had an accumulated deficit of $259.7 million, a stockholders' deficit of $15.1 million, and a working capital deficit of $15.5 million[221] Going Concern - The Company continues to generate losses and negative cash flows from operations, leading to substantial doubt about its ability to continue as a going concern for the next twelve months[222] - Future operations depend on securing additional equity or debt financing, strategic agreements, or licensing deals, which may dilute existing shareholders[222] Nasdaq Listing Compliance - The Company regained compliance with Nasdaq's minimum bid price requirement on April 17, 2024, following a 1-for-10 reverse stock split effective April 2, 2024[224] - The Company's listing was transferred from the Nasdaq Global Market to the Nasdaq Capital Market on January 19, 2024[224] Components of Results of Operations - Research and development expenses primarily consist of clinical trial costs, salaries, and stock-based compensation, expensed as incurred[225][226] - General and administrative expenses include salaries, stock-based compensation, consultant fees, and professional fees[227] Results of operations for the three months ended March 31, 2024 and 2023 | Metric | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | Change (YoY) (in thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :-------------------------- | | Research and development | $1,748 | $3,650 | $(1,902) | | General and administrative | $4,250 | $5,785 | $(1,535) | | Total operating expense | $5,998 | $9,435 | $(3,437) | | Loss from operations | $(5,998) | $(9,435) | $3,437 | | Interest income | $(27) | $(156) | $129 | | Interest expense | $230 | $0 | $230 | | Change in fair value of convertible note payable | $318 | $1,772 | $(1,454) | | Change in fair value of warrant liabilities | $9 | $(12) | $21 | | Total other (income) expense | $530 | $1,604 | $(1,074) | | Net loss | $(6,528) | $(11,039) | $4,511 | - Total operating expenses decreased by $3.437 million (36.4%) year-over-year, driven by a $1.902 million reduction in R&D and a $1.535 million reduction in G&A[228][229][230] - The decrease in R&D was primarily due to a $1.6 million decrease in clinical trials and development expenses[229] - The decrease in G&A was mainly due to a $1.2 million decrease in insurance expense and $0.4 million in stock-based compensation expense[230] - Other expense decreased by $1.074 million, largely due to a $1.454 million reduction in the loss from the change in fair value of the convertible note payable[228][233] Liquidity and Capital Resources - The Company has no revenues and relies on equity and/or debt financing to fund operations, with no assurance of future availability on acceptable terms[235] - Recent financing activities include an April 2024 public offering ($2.0 million gross proceeds), increased ATM offering ($4.9 million aggregate, $1.3 million sold post-Q1), and February 2024 offerings ($1.7 million public, $1.0 million private)[213][237][239][241] - The convertible note with Streeterville Capital had a remaining principal balance of $5.4 million as of March 31, 2024, with $2.9 million in principal, premium, and interest payments made since December 31, 2023[103][248] - The Alvogen License Agreement provides for potential milestone payments up to $330 million and royalties, with a $5 million advance received in February 2024[255][256] | Cash Flow Activity | Three months ended March 31, 2024 (in thousands) | Three months ended March 31, 2023 (in thousands) | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities | $(3,671) | $(6,089) | | Net cash used in investing activities | $0 | $(4) | | Net cash provided by financing activities | $395 | $2,545 | | Net (decrease) increase in cash | $(3,276) | $(3,548) | - Operating activities used $3.7 million cash in Q1 2024, an improvement from $6.1 million in Q1 2023[259][260] - Financing activities provided $0.4 million cash in Q1 2024, a decrease from $2.5 million in Q1 2023, due to higher debt repayments[262][263] Critical Accounting Policies and Significant Judgments and Estimates - Critical accounting policies involve subjective estimates and judgments, particularly for stock-based compensation, warrant liabilities, and the convertible note payable[270] - Stock-based compensation fair value is estimated using the Black-Scholes model, relying on assumptions for volatility, expected term, risk-free rate, and dividend yield[272] - Warrant liabilities are classified as equity or liability based on specific terms, with fair value remeasurement for liability-classified warrants using Black-Scholes or modified Black-Scholes models[274][275] - The convertible note payable is measured at fair value using a Monte Carlo simulation model, incorporating inputs like stock price, volatility, time to expiration, risk-free rate, and probability of default[276][277] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, NRx Pharmaceuticals is exempt from detailed market risk disclosures - The Company is exempt from providing detailed market risk disclosures as a smaller reporting company[279] ITEM 4. Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2024, with no material changes in internal control - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2024[282] - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2024[284] PART II - OTHER INFORMATION ITEM 1. Legal Proceedings The company is involved in legal actions, detailed in Note 8, but expects no material adverse financial impact - The Company is involved in various legal actions incidental to its business, as detailed in Note 8, but does not believe any will have a material adverse effect on its financial position or results of operations[119][286] ITEM 1A. Risk Factors No material changes to risk factors were disclosed from the prior Annual Report on Form 10-K - No material changes have occurred from the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023[287] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities or use of proceeds occurred during the reporting period[288] ITEM 3. Defaults Upon Senior Securities No previously unreported defaults on senior securities occurred during Q1 2024 - No defaults upon senior securities occurred during the three months ended March 31, 2024, that were not previously reported[289] ITEM 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[290] ITEM 5. Other Information No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by officers/directors - No directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended March 31, 2024[291] ITEM 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including agreements, certifications, and data files - Exhibits include the Underwriting Agreement dated April 18, 2024, Form of Underwriter's Warrant, certifications of principal executive and financial officers, and interactive data files[292][293]