You should read the following discussion and analysis of NRx Pharmaceuticals'
financial condition and plan of operations together with NRx Pharmaceuticals'
unaudited, condensed consolidated financial statements and the related notes
appearing elsewhere herein. In addition to historical information, this
discussion and analysis contains forward looking statements that involve risks,
uncertainties and assumptions. NRx Pharmaceuticals' actual results may differ
materially from those discussed below. Factors that could cause or contribute to
such differences include, but are not limited to, those identified below, and
those discussed in the section entitled "Risk Factors" included elsewhere
herein.

Overview



On May 24, 2021, Big Rock Partners Acquisition Group ("BRPA"), a special purpose
acquisition company, consummated the Agreement and Plan of Merger (as amended,
the "Merger Agreement") with NeuroRx, Inc., a Delaware corporation ("NeuroRx"),
and Big Rock Merger Corp., a Delaware corporation and wholly-owned, direct
subsidiary of BRPA ("Merger Sub"). Pursuant to the Merger Agreement, on May 24,
2021 (the "Closing Date"), which has been accounted for as a reverse
recapitalization, Merger Sub was merged with and into NeuroRx, with NeuroRx
surviving the merger (the "Merger" and, together with the other transactions
contemplated by the Merger Agreement, the "Business Combination"). On the
Closing Date, BRPA changed its name to NRX Pharmaceuticals, Inc. ("NRx
Pharmaceuticals" or the "Company").

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

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

NRX-101 has been awarded Fast Track designation, Breakthrough Therapy
designation, a Biomarker Letter of Support, and a Special Protocol Agreement by
the FDA. Peer-reviewed and published results from Phase II clinical studies
demonstrate a significant decline and stabilization in symptoms of depression
and suicidality following administration of DCS. Findings from one of these
studies found that bipolar patients who were already receiving a 5-HT2a
antagonist demonstrated more than a 50% reduction in symptoms of depression and
a 75% reduction in suicidal ideation when ketamine and DCS were added to their
treatment regimen. Side effects for patients in a P2a combination study of DCS
and 5HT2a included mild sedation, headaches and hypomania. Breakthrough Therapy
designation was awarded based on data from the STABIL-B study (NCT02974010) that
demonstrated a statistically significant advantage of NRX-101 vs. lurasidone
(the current standard of care) in maintaining remission from depression and
suicidality following a single stabilizing dose of ketamine. NRx Pharmaceuticals
initiated a Phase II SSIB clinical study in the second quarter of 2022 for which
enrollment has begun. The Company plans to initiate a Phase III registrational
ASIB study in the second half of 2022.

In March 2020, NRx Pharmaceuticals initiated development of RLF-100 (aviptadil
acetate) (now reformulated as ZYESAMI by NRx Pharmaceuticals) in partnership
with Relief Therapeutics Holding AG ("Relief Therapeutics"). ZYESAMI is based on
50 years of research, pioneered by Professor Sami Said, on the role of
Vasoactive Intestinal Peptide/Aviptadil in preventing and treating acute lung
injury by protecting the Type II cell in the lung. The rights to Professor
Said's scientific work are licensed by the Company from the Research Foundation
for the State University of New York.

NRx Pharmaceuticals and Relief Therapeutics entered into a collaboration
agreement on September 18, 2020 (the "Collaboration Agreement") for the clinical
development and, if approved, the sale of Aviptadil. The Collaboration Agreement
provided for funding by Relief Therapeutics of certain clinical trials,
formulation and manufacturing of Aviptadil, as well as established sales
territories for each party and share of the profits in those territories for
"Product" as

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defined in the Collaboration Agreement. Relief Therapeutics has reimbursed the
Company approximately $10.9 million but has subsequently declined to reimburse
the Company for additional costs.

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

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

On March 29, 2021, NRx Pharmaceuticals reported top-line Phase IIb/III study
results of ZYESAMI in patients with respiratory failure due to Critical
COVID-19. Though it did not meet statistical significance for the pre-specified
primary endpoint of "alive and free of respiratory failure" (P=.08), the study
identified a two-fold statistically significant odds of survival at day 60
(P=.03), and significant advantages on secondary endpoints, for those treated
with ZYESAMI compared to those treated with placebo.

On the basis of these results, the National Institute for Allergy and Infectious
Diseases selected NRx Pharmaceuticals as an industry partner for participation
in the ACTIV3b/TESICO trial (NCT 04843761) in which patients with Critical
COVID-19 are randomized to aviptadil, remdesivir, and placebo. NRx
Pharmaceuticals provides doses of aviptadil as the industry partner and the U.S.
Government funds all other costs of research. As of March 2022, approximately
465 patients with Critical COVID-19 were enrolled and treated with either
aviptadil or placebo. The endpoint of the trial is superiority on an ordinal
scale that includes survival and recovery from respiratory failure at 90 days.
 As of the February 25, 2022 the Data Safety and Monitoring Board ("DSMB")
meeting, no unexpected adverse events were identified in association with
ZYESAMI and the trial was cleared to continue enrolling. To date, the DSMB has
not declared futility of the aviptadil arm of the ACTIV-3b trial, although
futility has been declared for all other investigational products selected in
the ACTIV-3b trial studying Critical COVID-19 patients. The DSMB is scheduled to
review the data again on May 25, 2022. A previously targeted DSMB meeting for
end of April was moved to this new date to allow for the vast majority of
enrolled patients to have reached 90 days.

NRx Pharmaceuticals applied for FDA Emergency Use Authorization ("EUA") on May
31, 2021. In November 2021, the FDA notified us that it was unable to issue the
EUA at that time due to insufficient data regarding the known and potential
benefits of ZYESAMI and the known and potential risks of ZYESAMI in patients
suffering from critical COVID-19 with respiratory failure. In November 2021, the
FDA also declined a request for Breakthrough Therapy designation, mentioning in
its reply that the request did not adequately compare the safety and efficacy of
aviptadil to existing therapies in Critical COVID-19 patients, such as
remdesivir. In response, in February 2022, the Company filed a new request for
EUA in patients with COVID-19 respiratory failure who are at immediate risk of
death despite treatment with remdesivir and other approved therapies. This new
request is based on a post-hoc analysis of the approximately 70% of patients in
the randomized study that were also treated with remdesivir and included safety
data on approximately 750 patients treated with ZYESAMI in our clinical trials,
our Expanded Access Programs, our Right To Try Program and the ACTIV-3b trial.
On April 20, 2022, the Company submitted a new Breakthrough Therapy designation
request focused on this narrower population of patients that are at immediate
risk of death despite treatment with remdesivir. As of the date hereof, these
requests are still pending.

Should an EUA be granted, this would provide NRx Pharmaceuticals with a one-year
period during which ZYESAMI could be marketed for the treatment of COVID-19 in
the United States in advance of the filing a new drug application ("NDA") with
the FDA for formal approval of ZYESAMI for the treatment of COVID-19. If
authorized for use, we believe ZYESAMI would fill a high unmet need for COVID-19
patients who are critically ill with respiratory failure, as current options
have only limited applicability in this patient segment.

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Manufacturing and scalability of ZYESAMI are a major focus of the Company.
Working with its manufacturing partners, the Company has the capability to
produce batch sizes of 1.5kg and potentially larger of the active pharmaceutical
ingredient (API) of ZYESAMI. In addition to producing ZYESAMI API at a scale
suitable for commercial quantities, the Company has gained insights into how to
address the chemical basis for the instability of the formulated drug product
ZYESAMI in solution. The Company has now demonstrated a formulation of ZYESAMI
with refrigerated stability of up to 8 months and expected multi-year frozen
stability (-20°C). In January 2022, the Company filed a Composition of Matter
patent application that describes this extended stability form of aviptadil. In
the process, the Company has identified specific aspects of the manufacturing
process that it believes are key to preserving the stability of aviptadil for
stockpiling and commercial supply chain purposes.

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

Since inception, NRx Pharmaceuticals has incurred significant operating losses.
For the three months ended March 31, 2022 and 2021, NRx Pharmaceuticals' net
loss was $13.4 million and $25.5 million, respectively. As of March 31, 2022,
NRx Pharmaceuticals had an accumulated deficit of $196.7 million.

Components of Results of Operations

Operating expenses

Research and development expenses

NRx Pharmaceuticals' research and development expenses consist primarily of
costs associated with NRx Pharmaceuticals' clinical trials, salaries, payroll
taxes, employee benefits, and equity-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.

General and administrative expenses



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

Settlement Expense


Settlement expense consists primarily of settlement expenses related to the GEM
Warrant. See Note 8 "Commitments and Contingencies - Share Subscription Facility
Agreement - GEM" of the notes to the Company's unaudited condensed consolidated
financial statements included elsewhere in this report for further information.

Reimbursement of expenses from Relief Therapeutics


Reimbursement of expenses from Relief Therapeutics consists of reimbursable
expenses as part of the Collaboration Agreement. See Note 8 "Commitments and
Contingencies - Relief Therapeutics Collaboration Agreement" of the notes to the
Company's unaudited condensed consolidated financial statements included
elsewhere in this report for further information.

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Results of operations for the three months ended March 31, 2022 and 2021

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



                                                              Three months ended March 31,          Change
                                                                2022                2021           Dollars

                                                                       (Unaudited)
Operating expenses:

Research and development                                   $         5,483     $         2,909    $    2,574
General and administrative                                          10,222               2,101    $    8,121
Settlement expense                                                       -              21,366    $ (21,366)
Reimbursement of expenses from Relief Therapeutics                       -               (771)    $      771
Total operating expenses                                   $        15,705     $        25,605    $  (9,900)
Loss from operations                                       $      (15,705)

$ (25,605) $ 9,900



Other (income) expenses:
Gain on extinguishment of debt                                           -               (121)    $      121
Interest expense                                                         3                   5    $      (2)
Change in fair value of warrant liability                            (157)                   -    $    (157)
Change in fair value of Earnout Cash liability                     (2,103)                   -    $  (2,103)
Total other (income) expenses                                      (2,257) 

             (116)    $  (2,141)
Net loss                                                   $      (13,448)     $      (25,489)    $   12,041


Operating expenses

Research and development expenses



For the three months ended March 31, 2022, NRx Pharmaceuticals recorded $5.5
million of research and development expenses compared to $2.9 million for the
three months ended March 31, 2021. The increase of $2.6 million related
primarily to an increase of $2.1 million in clinical trials and development
expenses related to ZYESAMI, an increase of $0.2 million in stock-based
compensation expense, and an increase of $0.3 million in other regulatory and
process development expenses. The $5.5 million and $2.9 million of research and
development expenses for the three months ended March 31, 2022 and 2021,
respectively, include $0.2 million and less than $0.1 million, respectively, of
non-cash stock-based compensation.

General and administrative expenses



For the three months ended March 31, 2022, NRx Pharmaceuticals recorded $10.2
million of general and administrative expenses compared to $2.1 million for the
three months ended March 31, 2021. The increase of $8.1 million was primarily,
related to an increase of $4.4 million in legal, professional and accounting
fees, an increase of $2.2 million in insurance expense, an increase of $0.8
million in stock-based compensation expense, and an increase of $0.7 million in
other general and administrative expense. The $10.2 million and $2.1 million of
general and administrative expenses for the three months ended March 31, 2022
and 2021, respectively, include $1.1 million and $0.3 million, respectively, of
non-cash stock-based compensation.

Reimbursement of expenses from Relief Therapeutics


For the three months ended March 31, 2022, NRx Pharmaceuticals recorded no
reimbursement of expenses from Relief Therapeutics compared to $0.8 million of
reimbursement of expenses from Relief Therapeutics for the three months ended
March 31, 2021.

Other (income) expenses

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Gain on extinguishment of debt


For the three months ended March 31, 2022, NRx Pharmaceuticals recorded no gain
on extinguishment of debt compared to $0.1 million for the three months ended
March 31, 2021. The decrease of $0.1 million related to the forgiveness of the
PPP Loan which resulted in a gain on extinguishment for the outstanding
principal and accrued and unpaid interest for the three months ended March 31,
2021.

Change in fair value of warrant liability



For the three months ended March 31, 2022, NRx Pharmaceuticals recorded a gain
of $0.2 million related to the change in fair value of the warrant liability.
The gain of $0.2 million related to the decrease in the fair value of the
Placement Warrants assumed pursuant to the Merger Agreement.

Change in fair value of Earnout Cash liability



For the three months ended March 31, 2022, NRx Pharmaceuticals recorded a gain
of $2.1 million related to the change in fair value of the Earnout Cash
liability. The gain related to the decrease in the fair value of the Earnout
Cash liability pursuant to the Merger Agreement.

Liquidity and Capital Resources

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

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

Private Placement

On February 2, 2022, the Company sold 7,824,727 shares of common stock and preferred investment options to purchase up to an aggregate of 7,824,727 shares of common stock, and received net proceeds of $23.0 million.

Reverse Recapitalization Merger and Subsequent Equity Issuances



Pursuant to the terms of the Merger Agreement, NeuroRx's securityholders
(including option holders and warrant holders) who own NeuroRx securities
immediately prior to the Effective Time will have the contingent right to
receive their pro rata portion of (i) an aggregate of 25,000,000 shares of
Common Stock ("Earnout Shares") if, prior to December 31, 2022, the NeuroRx
COVID-19 Drug (i.e., ZYESAMI) receives emergency use authorization by the Food
and Drug Administration ("FDA") and NeuroRx submits and the FDA files for review
a new drug application for the NeuroRx COVID-19 Drug (i.e., ZYESAMI) (the
occurrence of the foregoing, the "Earnout Shares Milestone"), and (ii) an
aggregate of $100.0 million in cash ("Earnout Cash") upon the earlier to occur
of (x) FDA approval of the NeuroRx COVID-19 Drug (i.e., ZYESAMI) and the listing
of the NeuroRx COVID-19 Drug in the FDA's "Orange Book" and (y) FDA approval of
the NeuroRx Antidepressant Drug Regimen (i.e., NRX-100/101) and the listing of
the NeuroRx Antidepressant Drug Regimen (i.e., NRX-100/101) in the FDA's "Orange
Book," in each case prior to December 31, 2022 (the occurrence of either of
clauses (x) or (y), the "Earnout Cash Milestone"). If the Earnout Shares
Milestone is achieved, the Earnout Shares will be issued within five (5)
Business Days after the occurrence of the Earnout Shares Milestone. If the
Earnout Cash Milestone is achieved, the Merger Agreement does not require the
Earnout Cash to be delivered to NeuroRx securityholders within any specified
period of time, and the board of directors of NRx Pharmaceuticals will use its
good faith judgment to determine the date to pay the Earnout Cash. At March 31,
2022, the fair value of the Earnout Cash liability has been

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estimated to be $2.5 million. Upon closing of the Merger, the estimated fair
value of the Earnout Shares was $253.1 million with such amount recognized as a
deemed dividend. As the Company is in an accumulated deficit position as of the
measurement date, the resulting deemed dividend is recorded as a reduction of
additional paid-in capital with a corresponding offset recorded to additional
paid-in capital (i.e., net impact to additional paid-in capital of $0). The
benefit of the contingent right to receive Earnout Cash for option and warrant
holders occurs through the Option Exchange Ratio and therefore the amount of
Earnout Cash for common stockholders is approximately $88.8 million.

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

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The following table presents selected financial information and statistics for each of the periods shown below:



                                              March 31, 2022      December 31, 2021
                                               (Unaudited)
Balance Sheet Data:
Cash                                         $         40,202    $            27,605
Total assets                                           43,601                 32,729
Earnout cash liability                                  2,479                  4,582
Total liabilities                                      11,912                 11,923

Total stockholders' equity (deficit)                   31,689              

  20,806

                                                            March 31,
                                                   2022                 2021

                                                           (Unaudited)
Statement of Cash Flow Data:

Net cash used in operating activities        $       (10,380)    $

(3,015)


Net cash used in investing activities                     (3)

-


Net cash provided by financing activities              22,980              

  14,427
Net increase in cash                         $         12,597    $            11,412


Operating activities

During the three months ended March 31, 2022, operating activities used $10.4
million of cash, primarily resulting from a net loss of $13.4 million, increased
by net non-cash gains of $1.0 million, including $2.1 million of gain from the
change in fair value of earn out liability and $0.2 million of gain from the
changes in fair value of warrant liability, partially offset by $1.3 million of
stock-based compensation expense, and an increase in net operating assets of
$4.0 million.

During the three months ended March 31, 2021, operating activities used $3.0
million of cash, primarily resulting from a net loss of $25.5 million, reduced
by non-cash charges of $21.6 million, including $21.4 million of non-cash
settlement expense related to the GEM Warrant, $0.4 million of stock-based
compensation expense, partially offset by a gain on extinguishment of debt of
$0.1 million; and an increase in net operating assets of $0.9 million.

Financing activities


During the three months ended March 31, 2022, financing activities provided
$23.0 million of cash resulting from the net proceeds received by the Company
from the issuance of common stock and preferred investment options in a private
placement.

During the three months ended March 31, 2021, financing activities provided
$14.4 million of cash, primarily resulting from $6.9 million of proceeds from
the issuance of shares of NeuroRx common stock and $7.5 million of the issuance
of NeuroRx common stock for the exercise of the GEM Warrants.

Contractual Obligations and Commitments



See Note 8, Commitments and Contingencies, of the notes to NRx Pharmaceuticals'
unaudited condensed consolidated financial statements as of and for the three
months ended months ended March 31, 2022 included elsewhere in this report for
further discussion of NRx Pharmaceuticals' commitments and contingencies.

Milestone Payments


Pursuant to the legal settlement with Sarah Herzog Memorial Hospital Ezrat
Nashim ("SHMH") in September 2018, which included the license of intellectual
property rights from SHMH, an ongoing royalty of 1% to 2.5% of NRX-101 gross
sales is due to SHMH, together with milestone payments of $0.3 million, upon
completion of phase 3 trials and commercial sale of NRX-101. The milestone
payments for developmental and commercial milestones range from $0.1 million to
$0.8 million. Annual maintenance fees are up to $0.2 million.

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Off-Balance Sheet Arrangements

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

Critical Accounting Policies and Significant Judgments and Estimates

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

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

Earnout Cash Liability



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

Fair value of common and preferred stock


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

Stock-based compensation


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

We estimate the fair value of each stock option award using the Black-Scholes
option-pricing model, which uses as inputs the fair value of our common stock
and assumptions we make for the volatility of our common stock, the expected
term of our stock-based awards, the risk-free interest rate for a period that
approximates the expected term of our stock-based

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

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

Warrant liability


We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in ASC 480, Distinguishing Liabilities from
Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815"). The
assessment considers whether the warrants are freestanding financial instruments
pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and
whether the warrants meet all of the requirements for equity classification
under ASC 815, including whether the warrants are indexed to the Company's own
common stock and whether the warrant holders could potentially require "net cash
settlement" in a circumstance outside of the Company's control, among other
conditions for equity classification. This assessment, which requires the use of
professional judgment, is conducted at the time of warrant issuance and as of
each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the
statements of operations. The fair value of the Placement Warrants was estimated
using a Black Scholes valuation approach.

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