NRX Pharmaceuticals, Inc. Commitments Disclosure

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

 

End of Phase I Clinical Trials of Licensed Product (completed)		$	100,000
End of Phase II Clinical Trials of Licensed Product (completed)		$	250,000
End of Phase III Clinical Trials of Licensed Product		$	250,000
First Commercial Sale of Licensed Product in U.S.		$	500,000
First Commercial Sale of Licensed Product in Europe		$	500,000
Annual Revenues Reach $100,000,000		$	750,000

 

The milestone payments due above may be reduced by 25% in certain circumstances, and by the application of certain sub-license fees. As of the years ended December 31, 2024 and 2023, the total cumulative payments made under the SHMH License Agreement were $0.4 million, with no payments made during the year ended December 31, 2024, and $0.2 million and $0.2 million payments made during the years ended December 31, 2023 and 2022, respectively. 

 

Royalties

 

A royalty in an amount equal to: (a) 1% of revenues from the sale of any product incorporating a Licensed Product when at least one Licensed Patent remains in force, if such product is not covered by a Valid Claim (as defined below) in the country or region in which the sale occurs, or (b) 2.5% of revenues from the sale of any Licensed Product that is covered by at least one Valid Claim in the country or region in which such product is manufactured or sold. A “Valid Claim” means any issued claim in the Licensed Patents that remains in force and that has not been finally invalidated or held to be unenforceable. The royalty rates above may be doubled if we commence a legal challenge to the validity, enforceability or scope of any of the Licensed Patents during the term of the SHMH License Agreement and do not prevail in such proceeding.

 

Royalties shall also apply to any revenues generated by sub-licensees from sale of Licensed Products subject to a cap of 8.5% of the payments received by us from sub-licensees in connection with such sales. During the years ended December 31, 2024 and 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. The Company paid $150,000 in annual maintenance fees in each of the years ended December 31, 2024 and 2023, expensed through Research and Development expenses in the accompanying Consolidated Statement of Operations.

 

Exclusive License Agreement

 

The Company has entered into a License Agreement with Apkarian Technologies to in-license US Patent 8,653,120 that claims the use of D-cycloserine for the treatment of chronic pain in exchange for a commitment to pay milestones and royalties as development milestones are reached in the field of chronic pain. The patent is supported by extensive nonclinical data and early clinical data that suggest the potential for NMDA antagonist drugs, such as NRX-101 to decrease both chronic pain and neuropathic pain while potentially decreasing craving for opioids. For the years ended December 31, 2024 and 2023, the Company has recorded no expenses relating to the licensure of the patent. 

 

Operating Lease

 

The Company leases office space on a month-to-month basis. The rent expense for the years ended December 31, 2024 and 2023 was $0.1 million and $0.1 million, respectively.

 

Legal Proceedings

 

From time to time the Company is involved in litigation, claims, and other proceedings arising in the ordinary course of business. Litigation and other disputes are inherently unpredictable and subject to substantial uncertainties and unfavorable resolutions could occur.

 

The Company was a defendant in litigation filed by Streeterville in the Third Judicial District Court of Salt Lake County, Utah. See Note 7, Debt, for additional information. The Complaint sought, 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 Streeterville Note and other unspecified amounts of damages, costs and fees, but no less than $6,537,027, or the amounts currently outstanding under the Streeterville Note.

 

On July 29, 2024, in connection with the alleged Event of Default that Streeterville claimed occurred with respect to the Streeterville 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 national exchange. The arbitrator also denied Streeterville’s petition to enjoin the Company from selling additional shares of Common Stock to finance ongoing operations.

 

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 Note 7). As of September 30, 2024, the fair value of the Streeterville Note was adjusted to the settlement amount which was repaid in October 2024. Such adjustment is included within the change in fair value of convertible notes payable on the consolidated statement of operations, therefore no gain or loss on the settlement was recorded.

 

On July 17, 2023, NeuroRx and GEM entered into a settlement and release agreement (the “Settlement Agreement”) pursuant to which the parties agreed to dismiss the arbitration proceeding with prejudice. Pursuant to the Settlement Agreement on August 31, 2023, the Company issued 67,568 shares of Common Stock, the fair value of which was approximately $0.3 million based on the quoted trading price on the grant date, to GEM in full satisfaction of the Settlement Agreement which was approximately $0.3 million and was expensed as “Settlement expense” in fiscal 2023. The shares are registered under a prospectus supplement to the Company’s registration statement on Form S-3 and are subject to a restriction that they cannot be sold or traded for a period of six months from the effective date of the Settlement Agreement.

 

The Company is currently involved in and may from time to time become involved in various legal actions incidental to our business. As of the date of this report, the Company, other than as set forth above, is not 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.