Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☐ ☒ No ☒☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November ~~12, 2019,~~17, 2023, there were ~~100~~43,593,082 shares of common stock, par value $0.01 per share, outstanding.

*As previously reported, November 16, 2023, the registrant's common stock has been suspended from trading on the Nasdaq Capital Market. The registrant expects that its shares will be delisted from the Nasdaq Capital Market after the Nasdaq Stock Market LLC

files a Form25-NSE with the SEC and the resgistrant's common stock will no longer be registered pursuant to Section 12(b) of the Act following the effectiveness of such filing. The registrant's common stock is currently being quoted on the OTC Pink Open Market under the symbol "BXRX".

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Quarterly Report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would,” “could,” “should,” “potential,” “seek,” “evaluate,” “pursue,” “continue,” “design,” “impact,” “affect,” “forecast,” “target,” “outlook,” “initiative,” “objective,” “designed,” “priorities,” “goal,” or the negative of such terms and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated.

These forward-looking statements in this Quarterly Report include, among other things, statements about:

~~Combined Statements~~successfully market, commercialize and achieve broad market acceptance for any of ~~Cash Flows~~

Any forward-looking statements that we make in this Quarterly Report speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events. Comparisons of results for ~~every two~~current and ~~one-half shares~~any prior periods are not intended to express any future trends or indications of ~~Recro common stock held of record at the close of business on November 15, 2019, the record date for the distribution (the Distribution). Following the Distribution, Baudax Bio will operate~~future performance, unless expressed as ~~a separate, independent company.~~

T~~he accompanying unaudited combined financial statements are derived from Recro’s consolidated financial statements and accounting records~~such, and should only be viewed as historical data.

You should also read carefully the factors described in ~~conjunction with~~ the ~~annual audited financial statements and related notes as of and for the year ended December 31, 2018~~ “Risk Factors”included in ~~Recro’s~~Part II, Item 1A of this Quarterly Report and Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018 and the Company’s Registration Statement on Form 10, as amended and~~2022 filed with the ~~Securities~~SEC on February 23, 2023, or the 2022 Annual Report, to better understand significant risks and ~~Exchange Commission.~~uncertainties inherent in our business and underlying any forward-looking statements. As a result of these factors, actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements in this Quarterly Report and you should not place undue reliance on any forward-looking statements.

(1) Background

Business

Baudax Bio, Inc. (“Baudax Bio” or the “Company”) is a biotechnology company focused on developing T cell receptor (“TCR”) therapies utilizing human regulatory T cells (“Tregs”), as well as a portfolio of clinical stage Neuromuscular Blocking Agents (“NMBs”) and an associated reversal agent. The ~~Recro Acute Care Business did not consist~~Company’s TCR Treg programs primarily focus on immune modulating therapies for orphan diseases or complications associated with such diseases, as well as the treatment of autoimmune disorders. The Company believes that its TCR Treg programs have the potential to provide valuable therapeutic options to patients suffering from diseases for which there are limited treatment options and significant unmet need, as well as to prescribers and payers in these markets.

On June 29, 2023, the Company acquired TeraImmune, Inc. (“TeraImmune”), a Delaware corporation (the “Acquisition”). TeraImmune was a privately-held biotechnology company focused on discovery and development of novel Treg-based cell therapies for autoimmune diseases. TeraImmune’s proprietary and patented technology platforms include a method for expansion of the Treg without losing its function and stability, as well as a method to target specific receptors including TCRs, Chimeric Antigen Receptors (“CARs”) and B cell Antigen Receptors (“BARs”). TeraImmune has also in-licensed through an exclusive, sublicensable, royalty-bearing license, a patent family covering methods of producing T cell populations enriched for regulatory T cells and cell culture compositions from U.S. Department of Health and Human Services, as represented by National Institute of Allergy and Infectious Diseases of the National Institutes of Health. In addition, TeraImmune has developed Treg manufacturing procedures in accordance with regulatory guidance from the U.S. Food and Drug Administration (“FDA”). In June 2022, TeraImmune’s Investigational New Drug (“IND”) application to commence clinical trials of a ~~separate, standalone group~~Factor VIII (“FVIII”) TCR-Treg treatment for Hemophilia A with inhibitors was cleared by the FDA. For additional information on the Acquisition, see Note 5.

The Company also holds exclusive global rights to two new molecular entities, which are centrally acting neuromuscular blocking agents (“NMBs”), BX1000, an intermediate duration of ~~legal entities~~action NMB that recently completed a successful Phase II clinical trial, and BX2000, an ultra-short acting NMB currently undergoing a Phase I clinical trial. A proprietary blockade reversal agent, BX3000, is currently being evaluated in preclinical studies intended to support an IND filing in 2023. BX3000 is an agent that is expected to rapidly reverse BX1000 and BX2000 blockade. All three agents are licensed from Cornell University. The Company believes these agents, when an NMB and BX3000 are administered in succession, allow for ~~public company reporting~~a rapid onset of centrally acting neuromuscular blockade, followed by a rapid reversal of the neuromuscular blockade with BX3000. These novel agents have the potential to meaningfully reduce time to onset and ~~certain other corporate functions~~reversal of blockade and improve the reliability of onset and offset of neuromuscular blockade. This can potentially reduce time in operating rooms or post operative suites (PACU), resulting in potential clinical and cost advantages, as well as valuable cost savings for hospitals and ambulatory surgical centers and has the potential for an improved clinical profile in terms of safety.

In mid-2020, the Company launched its first commercial product, ANJESO, in the ~~periods presented~~United States. ANJESO was the first and ~~accordingly, allocations were required. These combined financial statements reflect~~only 24-hour, intravenous, or IV, analgesia agent. The Company discontinued commercial sales of ANJESO in December 2022 and further withdrew its New Drug Application (“NDA”) related to ANJESO in late March 2023. See Note 4 for discussion on the ~~Company’s historical financial position, results of operations and cash flows as the business was operated as part of Recro prior~~discontinued operation related to ~~the planned spin-off, in conformity with U.S. generally accepted accounting principles (U.S. GAAP).~~our ANJESO commercial business.

The Company has determined that it operates in a single segment involved in ~~the development of~~ innovative products predominantly for ~~hospital~~orphan and ~~other acute care settings.~~rare diseases.

The combined financial statements include certain assets and liabilities that have historically been held at the Recro corporate level, but which are specifically identifiable or allocable to the Company. All intracompany transactions and accounts have been eliminated. All intercompany transactions betweenReverse Stock Splits

On February 16, 2022, the Company effected a reverse split of shares of the Company’s common stock on a 1-for-35 basis (the “Reverse Stock Split”). On December 1, 2022, the Company effected a second reverse split of shares of the Company’s common stock on a 1-for-40 basis (the “December Reverse Stock Split”). All issued and ~~Recro are considered to be effectively settled~~outstanding shares of common stock, warrants, common stock options, and unvested restricted stock units and the related per share amounts contained in the combined financial statements at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the combined statements of cash flows as a financing activity and in the combined balance sheet as parent company net investment. The Company does not record interest expense on amounts funded by Recro. Long-term debt held at the Recro corporate level will be retained by Recro and will not be assumed by the Company.

Historically, certain corporate level activity costs have been incurred and reported within the legal entity that includes the Recro Acute Care Business. A portion of these costs have been allocated out and the Company’s combined financial statements include a remaining allocation of expenses related to these certain Recro corporate functions, including senior management, legal, human resources, finance, and information technology. These expenses are included in general and administrative expense and have been allocated based on direct usage or benefit where identifiable, with the remainder allocated on a pro rata basis of expenses, headcount, or other measures. The Company considers the expense allocation methodology and results to be reasonable for all periods presented, however, the allocations may not be indicative of the actual expense that would have been incurred had the Company operated as an independent, publicly-traded company for the periods presented. For the three and nine months ended September 30, 2019, a total of $1,516 and $6,467, respectively, of costs have been allocated to Recro’s contract manufacturing and development segment (the CDMO business). For the three and nine months ended September 30, 2018, a total of $1,151 and $3,760, respectively, of costs have been allocated to the CDMO business.

~~The income tax amounts in these combined~~ financial statements have been ~~calculated based on~~retroactively adjusted to reflect these reverse stock splits for all periods presented. The par value and authorized shares of common stock were not adjusted as a ~~separate return methodology and presented as if the Company was a standalone taxpayer in each of its tax jurisdictions. Because~~result of the ~~Company’s history~~reverse stock splits. Additionally, the authorized, issued and outstanding shares of ~~losses~~preferred stock and their related per share amount, other than the conversion price per share, was not adjusted as a ~~standalone entity, a full valuation allowance is recorded against deferred tax assets in all periods presented.~~

~~Recro maintains its stock-based compensation plan at a corporate level. The Company’s employees participate in those programs and a portion~~result of the ~~cost of those plans is included in the Company’s combined financial statements using an allocation methodology similar~~reverse stock splits.

Notes to the ~~methodology used to allocate the~~Consolidated Financial Statements

(2) Development Activity Risks, Liquidity and Going Concern

The Company has incurred operating losses since inception and has negative cash ~~compensation of the related employees.~~

~~The parent company net investment balances in these combined financial statements represents the~~flows, working capital and equity, including an accumulated deficit of $189,300, as of September 30, 2023.

Additionally, TeraImmune failed to pay its Convertible Bond Agreement, dated March 22, 2022, with EoFlow Co., Ltd. (the ‘‘5% Convertible Term Loan’’), on the ~~Recro Acute Care Business and the net funding provided to the Company, which are reflected as net transfers from parent in the combined statements~~stated maturity date of ~~parent company net investment.~~

In April 2019, after receipt of a Complete Response Letter (CRL), received from the U.S. Food and Drug Administration (FDA), regarding the New Drug Application (NDA), for IV meloxicam, the Company announced it had implemented a strategic

restructuring initiative, and corresponding reduction in the Acute Care segment workforce, aimed at reducing operating expenses, while maintaining key personnel needed to partner and obtain FDA approval of IV meloxicam.

On October 31, 2019, the Company announced that it had received a written decision from the FDA granting its appeal of the CRL relating to the NDA seeking approval for IV meloxicam. The FDA granted the Company’s appeal and indicated that the Company’s application provides sufficient evidence of effectiveness and safety to support approval. November 30, 2022. The Company is ~~now~~offering conversion of the notes with an outstanding balance, including accrued interest, of $1,239 at September 30, 2023, into shares of the Company's common stock or by providing the noteholders with a repayment plan. This debt was part of the liabilities assumed by the Company in ~~the process of preparing a comprehensive response to the FDA that includes proposed labeling that aligns~~connection with the ~~FDA guidance received in the written decision letter.~~

~~(2)~~

~~Development-Stage Risks and Liquidity~~

acquisition of TeraImmune (see Notes 5 and 11).

The Company has ~~a history of operating losses~~raised funds from debt and ~~negative cash flows while operating as part of Recro~~equity transactions and ~~accordingly, was dependent upon Recro for its capital funding and liquidity needs. Recro~~ will contribute $19,000 to the Company immediately prior to the Distribution, which management believes is sufficient to maintain operations of the Company for at least one year from the date of the spin-off. Recro has not committed any additional funding to the Company beyond the $19,000 to be contributed as of the Distribution date and the Company may be required to raise additional funds ~~needed~~to continue to operate as a standalone ~~entity beyond one year from the Distribution date. The Company’s ability~~entity. In order to generate cash inflows is highly dependent on the approval and commercialization of IV meloxicam and there can be no assurance that such approval will be obtained or that IV meloxicam can be successfully commercialized. In addition,fund development activities, and clinical and pre-clinical testing, ~~and commercialization of~~ the ~~Company’s product candidates, if approved,~~Company will require significant additional funding. The Company could delay clinical trial activity or reduce funding of specific programs in order to reduce cash needs. Insufficient funds may cause the Company to delay, reduce the scope of or eliminate one or more of its development, future commercialization, or expansion activities. The Company may raise such funds, if available, through debt financings, bank or other loans, through strategic research and development, licensing (including out-licensing) and/or marketing arrangements or through public or private sales of equity or debt securities from time to time. Financing may not be available on acceptable terms, or at all, and failure to raise capital when needed could materially adversely impact the Company’s growth plans and its financial condition or results of ~~operations.~~operations and ability to continue as a going concern. Additional debt or equity financing, if available, may be dilutive to ~~future~~ holders of ~~its~~the Company’s common stock and may involve significant cash payment obligations and covenants that restrict the Company’s ability to operate its business.

The Company's management assesses the Company’s ability to continue as a going concern for one year after the date the consolidated financial statements are issued. Based on the Company’s available cash and cash equivalents as of September 30, 2023, management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for one year from the date these financial statements are issued. The Company ~~may be required~~expects to ~~wind down~~seek additional funding to sustain its future operations ~~if IV meloxicam~~and while the Company has successfully raised capital in the past, the ability to raise capital in future periods is not ~~approved~~assured. The Company is not expected to be able to maintain its minimum liquidity covenant over the next twelve months without additional inflows of funds or ~~cannot be successfully commercialized.~~capital financing. The consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

(3) Summary of Significant Accounting Principles

~~(3)~~

~~Summary of Significant Accounting Principles~~

~~(a)~~

~~Basis of Presentation~~

(a) Basis of Presentation and Principles of Consolidation

The accompanying unaudited ~~combined~~consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with U.S. ~~GAAP,~~generally accepted accounting principles (“U.S. GAAP”), for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all of the information and notes required by U.S. GAAP for complete annual financial statements. In the opinion of management, the accompanying ~~combined~~unaudited consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s results for the interim periods. The Consolidated Balance Sheet as of December 31, 2022 has been derived from audited financial statements. Operating results for the three and nine months ended September 30, ~~2019~~2023 are not necessarily indicative of the results that may be expected for the full year ending December 31, ~~2019.~~2023. The Company’s consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

The accompanying unaudited interim ~~combined~~consolidated financial statements should be read in conjunction with the annual audited financial statements and related notes as of and for the year ended December 31, ~~2018~~2022 included in the Company’s Form ~~10.~~10-K.

~~(b)~~

~~Use of Estimates~~

The preparation of unaudited consolidated financial statements and the notes to the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates.

~~(c)~~

~~Cash and Cash Equivalents~~

Cash and cash equivalents represent cash in banks and highly liquid short-term investments that have maturities of three months or less when ~~acquired.~~acquired to be cash equivalents. These highly liquid short-term investments are both readily convertible to known amounts of cash and so near to their maturity that they present insignificant risk of changes in value because of the changes in interest rates.

~~(d)~~

~~Property and Equipment~~

Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which are as follows: three to seven years for furniture and office equipment; ~~six~~ three years for computer and software; three to ~~ten~~seven years for manufacturing equipment; and the shorter of the remaining lease term or useful life for leasehold improvements. Repairs and maintenance costs are expensed as incurred.

~~(e)~~

~~Business Combinations~~

In accordance with Financial Accounting Standards Board ~~(FASB)~~(“FASB”), Accounting Standards Codification ~~(ASC)~~(“ASC”), Topic 805, “~~Business~~“Business Combinations,,” or (“ASC ~~805,~~805”), the Company allocates the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. Valuations are performed to assist in determining the fair values of assets acquired and liabilities assumed, which requires management to make significant estimates and assumptions, in particular with respect to intangible ~~assets and contingent consideration.~~assets. Management makes estimates of fair value based upon assumptions believed to be reasonable. These estimates are based in part on historical experience and information obtained from management of the acquired companies and expectations of future cash flows. Transaction costs ~~and restructuring costs~~ associated with the transaction are expensed as incurred. In-process research and development ~~(IPR&D),~~(“IPR&D”) is the value assigned to those projects for which the related products have not received regulatory approval and have no alternative future use. Determining the portion of the purchase price allocated to IPR&D requires the Company to make significant estimates. In a business combination, the Company capitalizes IPR&D as an intangible ~~asset,~~asset.

(f) Goodwill and ~~for an asset acquisition the Company expenses IPR&D in the Combined Statements of Operations on the acquisition date.~~Intangible Assets

~~(f)~~

~~Goodwill and Intangible Assets~~

Goodwill represents the excess of purchase price over the fair value of net assets acquired by the ~~Company (see Note 4).~~Company. Goodwill is not amortized but assessed for impairment on an annual basis or more frequently if impairment indicators exist. The impairment model prescribes a one-step method for determining impairment.

The one-step quantitative test calculates the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The Company has one reporting unit.

The Company’s intangible asset was acquired through the Acquisition and is classified as an IPR&D asset. Intangible assets related to IPR&D are considered indefinite-lived intangible assets and are assessed for impairment annually or more frequently if impairment indicators exist. If the associated research and development effort is abandoned, the related assets will be written-off, and the Company will record a noncash impairment loss on its ~~Combined~~Consolidated Statements of Operations. For those compounds that reach commercialization, the IPR&D assets will be amortized over their estimated useful ~~lives~~. lives. The impairment test for indefinite-lived intangible assets is a one-step test ~~which~~that compares the fair value of the intangible asset to its carrying value. If the carrying value exceeds its fair value, an impairment loss is recognized in an amount equal to the excess.

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

(amounts in thousands, except share and per share data)

(Unaudited)

The Company performs its annual goodwill and indefinite-lived intangible asset impairment ~~test~~tests as of November 30th, or whenever an event or change in circumstances occurs that would require reassessment of the recoverability of those assets. In performing the evaluation, the Company assesses qualitative factors such as overall financial performance of its reporting unit, anticipated changes in industry and market conditions, including recent tax reform, intellectual property protection, and competitive environments. ~~Due to the receipt of the CRL in March 2019, an indicator of potential impairment, the~~The Company performed ana goodwill impairment test as of ~~March 31, 2019, which indicated that there~~September 30, 2023 after identifying indicators of impairment. There was no impairment to goodwill ~~or indefinite-lived intangible assets. There have been no additional triggering events~~based on the Company's analysis as of September 30, ~~2019.~~2023.

(g) Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. The Company ~~will perform~~manages its ~~annual test as of November 30, 2019.~~cash and cash equivalents based on established guidelines relative to diversification and maturities to maintain safety and liquidity.

~~(g)~~

~~Research and Development~~

Research and development costs for the Company’s proprietary ~~products/product~~products candidates are charged to expense as incurred. Research and development expenses consist ~~primarily~~ of internal costs and funds incurred internally or paid to third parties for the provision of services for pre-commercialization and manufacturing scale-up activities, drug development, pre-clinical activities, clinical trials, statistical analysis, ~~and~~ report writing and regulatory filing fees and compliance costs. At the end of the reporting period, the Company compares payments made to third-party service providers to the estimated progress toward completion of the research or development ~~objectives.~~project. Such estimates are subject to change as additional information becomes available. Depending on the timing of payments to the service providers and the progress that the Company estimates has been made as a result of the service provided, the Company may record net prepaid or accrued expenses relating to these costs.

Upfront and milestone payments made to third parties who perform research and development services on the Company’s behalf are expensed as services are rendered. Costs incurred in obtaining product technology licenses are charged to research

and development expense as acquired in-process research and development (“IPR&D&D”) if the technology licensed has not reached technological feasibility and has no alternative future use.

~~(h)~~

~~Stock-Based Awards~~

Share-based compensation included in the unaudited consolidated financial statements is based upon the ~~Recro share-based compensation plan. The Recro plan includes~~Baudax Bio, Inc. 2019 Equity Incentive Plan (the “Baudax Bio 2019 Plan”) and the TeraImmune 2019 Equity Incentive Plan (the “TeraImmune 2019 Plan”). These plans include grants of stock options, time-based vesting restricted stock units ~~(RSUs)~~(“RSUs”) and performance-based ~~vesting~~ RSUs. These carve out financial statements reflect share-based compensation related to stock options and RSUs issued to Baudax Bio employees as well as an allocation of a portion of share-based compensation issued to corporate employees and members of the Board of Directors.

The Company measures employee stock-based awards at grant-date fair value and recognizes employee compensation expense on a straight-line basis over the vesting period of the award. The Company accounts for forfeitures as they occur.

Determining the appropriate fair value of stock options requires the input of subjective assumptions, including the expected life of the option and expected stock price volatility. The Company uses the Black-Scholes option pricing model to value its stock option awards. 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. As a result, if factors change and/or management uses different assumptions, stock-based compensation expense could be materially different for future ~~awards~~.awards.

The expected life of stock options was estimated using the “simplified method,” as the Company has limited historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock options grants. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. For stock price volatility, the Company uses ~~the historical~~an average of its peer group’s volatility ~~of our publicly traded stock~~ in order to estimate future stock price trends. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the ~~option~~. option. The Company has never declared or paid cash dividends and has no plans to do so in the foreseeable future, therefore the dividend yield is zero.

(amounts in ~~these combined financial statements have been calculated based on a separate return methodology~~thousands, except share and ~~presented~~per share data)

(j) Redeemable Preferred Stock

The Company applies ASC 480 when determining the classification and measurement of its preferred stock. Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares, including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, and consisting of Series X Non-Voting Convertible Preferred Stock ("Series X Preferred Stock") are classified as temporary equity as of September 30, 2023. At all other times, preferred shares are classified as stockholders’ equity.

(k) Equity-method Investment

The Company uses the equity method of accounting for equity investments if the ~~Company was a standalone taxpayer~~investment provides the ability to exercise significant influence, but not control, over operating and financial policies of the investee. The Company’s proportionate share of the net income or loss of these investees is included in the Company's statements of operations. Judgment regarding the level of influence over each equity method investment includes considering key factors such as the Company’s ownership interest, legal form of the investee, representation on the board of directors, participation in policy-making decisions and material intra-entity transactions.

The Company’s equity-method investment includes its ~~tax jurisdictions. Because~~investment in TeraImmune Therapeutics, Co., Ltd., ("TIT"). The carrying value of the Company’s ~~history of losses as a standalone entity, a full valuation allowance~~investment in TIT is recorded ~~against deferred tax assets~~ in ~~all periods presented.~~ equity method investments in the consolidated balance sheet and is immaterial as of September 30, 2023.

(l) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance is recorded to the extent it is more likely than not that some portion or all of the deferred tax assets will not be realized. Because of the Company’s history of losses as a standalone entity, a full valuation allowance is recorded against deferred tax assets in all periods presented.

Unrecognized income tax benefits represent income tax positions taken on income tax returns that have not been recognized in the ~~combined~~consolidated financial statements. The Company recognizes the benefit of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit is recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company does not anticipate significant changes in the amount of unrecognized income tax benefits over the next year.

Under the Tax Reform Act of 1986, as amended (the “Act”), the utilization of a corporation’s net operating loss is limited following a greater than 50% change in ownership during a three-year period. Any unused annual limitation may be carried forward to future years for the balance of the carryforward period. The Company is evaluating whether the Acquisition triggered an ownership change under these rules.

(m) Net Income (Loss) Per Common Share

Net loss per common share is computed using the two-class method required due to the participating nature of the Series X Preferred Stock. Although the shares of the Series X Preferred Stock are participating securities, such securities do not participate in net losses and therefore do not impact the Company’s net loss from continuing operations per share calculation as of September 30, 2023.

Basic net loss per common share is determined by dividing net loss attributable to common shareholders by the weighted average common shares outstanding during the period. Diluted net loss per common share is determined using the weighted average common shares outstanding during the period plus the weighted average number of shares of common shares that would be issued assuming exercise or conversion of all potentially dilutive instruments. The Company uses income from continuing operations as the control number in determining whether potential common shares are dilutive or antidilutive. The same number of potential common shares used in computing the diluted per-share amount for income from continuing operations is used in computing all other reported diluted per-share amounts even if those amounts will be antidilutive to

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

(amounts in thousands, except share and per share data)

(Unaudited)

their respective basic per-share amounts. Outstanding warrants, common stock options, unvested restricted stock units and convertible redeemable preferred shares are excluded from the calculation of diluted net loss per share when their effect would be anti-dilutive.

For purposes of calculating basic and diluted loss per common share, the denominator includes the weighted average common shares outstanding, the weighted average common stock equivalents for warrants priced at par value, or $0.01, as the underlying common shares will be issued for little cash consideration and the conditions for the issuance of the underlying common shares are met when such warrants are issued, and, with regard to diluted loss per common share, the number of common stock equivalents if the inclusion of such common stock equivalents would be dilutive.

~~(j)~~

~~Recent Accounting Pronouncements~~

The following table sets forth the computation of basic and diluted income (loss) per share:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Basic and Diluted Income (Loss) Per Share
Net loss from continuing operations	$	(1,891	)	$	(4,087	)	$	(16,577	)	$	(16,626	)
Deemed dividend	$	(455	)	$	—		$	(455	)	$	—
Net loss attributable from continuing operations to common shareholders	$	(2,346	)	$	(4,087	)	$	(17,032	)	$	(16,626	)
Net income (loss) from discontinued operation	$	(43	)	$	(25,120	)	$	18,673		$	(32,920	)
Net income (loss) attributable to common shareholders	$	(2,389	)	$	(29,207	)	$	1,641		$	(49,546	)

Net loss per share from continuing operations	$	(0.29	)	$	(13.81	)	$	(3.36	)	$	(86.53	)
Net income (loss) per share from discontinued operation	$	(0.01	)	$	(84.89	)	$	3.69		$	(171.34	)
Net income (loss) per share of common stock, basic and diluted	$	(0.30	)	$	(98.70	)	$	0.33		$	(257.87	)

Weighted average common shares outstanding, basic and diluted		7,993,522			295,903			5,065,759			192,135

The following potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding as they would be anti-dilutive:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Options and restricted stock units outstanding		977,491		606,652		977,491		606,652
Warrants		13,239,805		31,298,007		13,239,805		31,298,007
Series X Preferred Stock		20,066,208		—		20,066,208		—

Amounts in the table above reflect the common stock equivalents of the noted instruments.

(n) Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB and rules are issued by the SEC that the Company has or will adopt as of a specified date. Unless otherwise noted, management does not believe that any other recently issued accounting pronouncements issued by the FASB or guidance issued by the SEC had, or is expected to have a material impact on the Company’s present or future consolidated financials.

Recently Adopted Accounting Pronouncements

~~In June 2018, the FASB issued ASU No. 2018-07, “Compensation – Stock Compensation (Topic 718)~~” or ASU 2018-07. ASU 2018-07 simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The new guidance expands the scope of ASC 718 “~~Compensation—Stock Compensation” to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in an entity’s own operations and supersedes the guidance in ASC 505-50 “Equity-Based Payments to Non-Employees~~”. The guidance is effective for public business entities in annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted, including in an interim period for which financial statements have not been issued, but not before an entity adopts ASU 2014-09 “~~Revenue from Contracts with Customers (Topic 606)”. The Company adopted this guidance effective June 30, 2018. There was no impact upon adoption~~.

~~In May 2017, the FASB issued ASU No. 2017-09, “Stock Compensation – Scope of Modification Accounting”~~ or ASU 2017-09. ASU 2017-09 provides guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The new standard was effective for fiscal years beginning after December 15, 2017. The Company adopted the guidance effective January 1, 2018. There was no impact upon adoption.

~~In January 2017, the FASB issued ASU No. 2017-04 “Intangibles – Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment~~,” or ASU 2017-04. ASU 2017-04 allows companies to apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The amendments of the ASU are effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted this guidance as of October 1, 2018 and there was no impact on its combined financial statements.

~~In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)~~,” or ASU 2016-02. ASU 2016-02 establishes a wholesale change to lease accounting and introduces a lease model that brings most leases on the balance sheet. It also eliminates the required use of bright-line tests in current U.S. GAAP for determining lease classification. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), ~~Targeted Improvements~~, which provides an alternative transition method permitting the recognition of a cumulative-effect adjustment on the date of adoption rather than restating comparative periods in transition as originally prescribed by Topic 842. The new guidance is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The Company adopted this guidance as of January 1, 2019. The Company elected the optional transition method to account for the impact of the adoption with a cumulative-effect adjustment in the period of adoption and did not restate prior periods. The Company opted to elect the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs, and certain other practical expedients, including the use of hindsight to determine the lease term for existing leases and in assessing impairment of the right-of-use asset, and the exception for short-term leases. For its current classes of underlying assets, the Company did not elect the practical expedient under which the lease components would not be separated from the nonlease components. At January 1, 2019, the Company recorded a right-of-use asset of $1,174 and an operating lease liability of $1,219. For additional information regarding how the Company is accounting for leases under the new guidance, refer to Note 10 (d).

~~Accounting Pronouncements Not Yet Adopted~~

~~In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement,” or ASU 2018-13. ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820 “Fair Value Measurement~~”. ASU 2018-13 eliminates certain disclosures related to transfers and the valuations process, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements, including the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the potential impact on its disclosures.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,”or ASU 2016-13. ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires consideration of a range of reasonable information to estimate credit losses on certain types of financial instruments, including trade receivables and available-for-sale debt

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

(amounts in thousands, except share and per share data)

(Unaudited)

securities. ASU 2016-13 is effective for fiscal years beginning after December 15, ~~2019,~~2022, including those interim periods within those fiscal years. The Company adopted this guidance as of January 1, 2023 and noted no impact to the Company or its disclosures.

(6) Fair Value of Financial Instruments

The Company accounted for the transaction as an asset acquisition based on an evaluation of the accounting guidance (ASC Topic 805) and considered the early clinical stage of the novel and unproven NMBA Related Compounds. The Company concluded that the acquired IPR&D of Cornell did not constitute a business as defined under ASC 805 due to the incomplete nature of the inputs and the absence of processes from a market participant perspective. Substantial additional research and development will be required to develop any NMBA Related Compounds into a commercially viable drug candidate, including completion of pre-clinical testing and clinical trials, and, if such clinical trials are successful, application for regulatory approvals and manufacturing repeatability and scale-up. There is risk that a marketable compound may not be well tolerated and may never be approved.

~~Acquired IPR&D in the asset acquisition was accounted for in accordance with FASB ASC Topic 730, “Research and Development.” At the date of acquisition, the Company determined that the development of the projects underway at Cornell had~~

not yet reached technological feasibility and that the research in process had no alternative future uses. Accordingly, the acquired IPR&D was charged to expense in the Combined Statements of Operations on the acquisition date. The acquired IPR&D charge is expected to be deductible over a 15-year period for income tax purposes.

~~(6)~~

~~Fair Value of Financial Instruments~~

The Company follows ~~the provisions of FASB ASC Topic 820, “Fair Value Measurements and Disclosures~~,”a three-level fair value hierarchy for fair value measurement recognition and disclosure purposes for its financial assets and financial liabilities that are remeasured and reported at fair value each reporting period. The Company measures certain financial assets and liabilities at fair value on a recurring basis, including cash equivalents, warrants, and contingent consideration. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy. Categorization is based on a three-tier valuation hierarchy, which prioritizes the inputs used in measuring fair value, as follows:

•

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities;

•

Level 2: Inputs that are other than quoted prices in active markets for identical assets and liabilities, inputs that are quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are either directly or indirectly observable; and

•

Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company has classified assets and liabilities measured at fair value on a recurring basis as follows:

Fair value measurements at reporting date using

Quoted prices
in active
markets for
identical
assets
(Level 1)

Significant
other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)

At December 31, 2018:

Liabilities:

Contingent consideration (See Note 4)

$
—

$
—

$
90,912

$
—

$
—

$
90,912

At September 30, 2019:

Liabilities:

Contingent consideration (See Note 4)

$
—

$
—

$
65,671

$
—

$
—

$
65,671


	Fair value measurements at reporting date using
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
At September 30, 2023:
Assets:
Cash equivalents (See Note 7)
Money market mutual funds	$	53	$	—	$	—
Total cash equivalents	$	53	$	—	$	—
Liabilities:
Derivative liability	$	—	$	—	$	1,659
Contingent consideration (See Note 5)		—		—		83
	$	—	$	—	$	1,742

At December 31, 2022:
Assets:
Cash equivalents (See Note 7)
Money market mutual funds	$	2,241	$	—	$	—
Total cash equivalents	$	2,241	$	—	$	—

~~The reconciliation of~~21

BAUDAX BIO, INC.

Notes to the ~~contingent consideration measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows:~~Consolidated Financial Statements

Contingent
Consideration

Balance at December 31, 2018

$
90,912

Payment of contingent consideration

(10,000
)
Remeasurement

(15,241
)
Total at September 30, 2019

$
65,671

Current portion as of September 30, 2019

—

Long-term portion as of September 30, 2019

$
65,671

The Company does not expect a portion of the contingent consideration to become payable within one year as of September 30, 2019 (see Note 4 for additional information). The Company plans to continue to reevaluate this classification(amounts in thousands, except share and ~~measurement as it progresses through discussions with the FDA regarding IV meloxicam.~~per share data)

(Unaudited)

~~The Company follows the disclosure provisions of FASB ASC Topic 825, “Financial Instruments” (ASC 825), for disclosure purposes for financial assets and financial liabilities that are not measured at fair value.~~

As of September 30, ~~2019,~~2023, the financial assets and liabilities recorded on the ~~Combined~~Consolidated Balance Sheets that are not measured at fair value on a recurring basis include accounts payable and accrued expenses, ~~and~~which approximate fair value due to the short-term nature of these instruments. The fair value of debt, where a quoted market price is not available, is evaluated based on, among other factors, interest rates currently available to the Company for debt with similar terms, remaining payments and considerations of the Company’s creditworthiness. The Company determined that the recorded book value of debt approximated fair value at September 30, 2023 due to the fact that the debt arrangements reflect market terms from recent transactions.

~~(7)~~

~~Property, Plant and Equipment~~

The reconciliation of liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows:


	Contingent Consideration and Derivative Liability
Balance at December 31, 2022	$	—
Acquisition of contingent consideration and derivative liability		2,494
Remeasurement		(752	)
Total at September 30, 2023	$	1,742

Current portion as of September 30, 2023	$	1,742
Long-term portion as of September 30, 2023		—

See Note 5 for discussion on contingent consideration.

(7) Cash Equivalents

The following is a summary of cash equivalents:


	September 30, 2023
	Amortized		Gross Unrealized				Estimated
Description	Cost		Gain		Loss		Fair Value
Money market mutual funds	$	53	$	—	$	—	$	53
Total cash equivalents	$	53	$	—	$	—	$	53


	December 31, 2022
	Amortized		Gross Unrealized				Estimated
Description	Cost		Gain		Loss		Fair Value
Money market mutual funds	$	2,241	$	—	$	—	$	2,241
Total cash equivalents	$	2,241	$	—	$	—	$	2,241

As of September 30, 2023 and December 31, 2022, the Company’s cash equivalents had maturities of one month.

(8) Property, Plant and Equipment

Property, plant and equipment consists of the following:


	September 30, 2019		December 31, 2018		September 30, 2023		December 31, 2022
Building and improvements	$	196	$	196	$	3,366	$	166
Furniture, office and computer equipment		1,665		1,688		292		306
Manufacturing equipment		101		101
Construction in progress		3,814		2,469
Manufacturing and laboratory equipment						532		—
		5,776		4,454		4,190		472
Less: accumulated depreciation and amortization		808		472		519		463
Property, plant and equipment, net	$	4,968	$	3,982
Property and equipment, net					$	3,671	$	9

Depreciation and amortization expense for the three and nine months ended September 30, 2023 was $131 and $135, respectively. Depreciation expense for the three and nine months ended September 30, ~~2019~~2022 was ~~$123~~$9 and ~~$369,~~$38, respectively. ~~Depreciation expense for three and nine months ended September 30, 2018 was $161 and $273, respectively.~~

~~(8)~~

~~Intangible Assets~~

~~The following represents the balance of the intangible assets at September 30, 2019 and December 31, 2018:~~22

BAUDAX BIO, INC.

Cost

In-process research and development

$
26,400

Total

$
26,400

~~There was no amortization expense for the nine months ended September 30, 2019 or the nine months ended September 30, 2018.~~

~~(9)~~

~~Accrued Expenses and Other Current Liabilities~~

~~Accrued expenses and other current liabilities consist of the following:~~

September 30,

December 31,

2019

2018

Clinical trial and related costs

$
101

$
683

Professional and consulting fees

1,012

671

Payroll and related costs

1,753

2,172

Accrued restructuring costs

1,386

—

Property, plant and equipment

—

278

Pre-commercialization scale-up costs

—

4,445

Other research and development costs

136

678

Other

112

846

$
4,500

$
9,773

After the receipt of the second CRL, the Company incurred approximately $7,200 in restructuring costs (all which was incurred in the first half of 2019), of which $1,386 remains accrued and unpaid as of September 30, 2019.

~~(10)~~

~~Commitments and Contingencies~~

~~(a)~~

~~Licenses and Supply Agreements~~

Recro is party to an exclusive license with Orion for the development and commercialization of Dexmedetomidine for use in the treatment of pain in humans in any dosage form for transdermal, transmucosal (including sublingual and intranasal), topical, enteral or pulmonary (inhalational) delivery, but specifically excluding delivery vehicles for administration by injection or infusion, worldwide, except for Europe, Turkey and the CIS (currently includes Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan), referred to herein as the Territory. Recro is required to pay Orion lump sum payments of up to €20,500 ($22,380 as of September 30, 2019) on the achievement of certain developmental and commercial milestones, as well as a royalty on net sales during the term, which varies from 10% to 20% depending on annual sales levels. Through September 30, 2019, no such milestones have been achieved.

Recro is also party to an exclusive license agreement with Orion for the development and commercialization of Fadolmidine for use as a human therapeutic, in any dosage form in the Territory. Recro is required to pay Orion lump sum payments of up to €12,200 ($13,320 as of September 30, 2019) on achievement of certain developmental and commercial milestones, as well as a royalty on net sales during the term, which varies from 10% to 15% depending on annual sales levels. Through September 30, 2019, no such milestones have been achieved.

Recro is party to a license agreement with Cornell for the exclusive license of the NMBA Related Compounds. Under the terms of the agreement, Recro will pay Cornell an initial upfront fee and Cornell is also entitled to receive additional milestone payments, annual license maintenance fees as well as royalties. See Note 5 for further information regarding these payment obligations.

~~These obligations will be transferred~~Notes to the ~~Company~~Consolidated Financial Statements

(amounts in ~~connection with the spin-off.~~thousands, except share and per share data)

(Unaudited)

~~(b)~~

~~Contingent Consideration for the Gainesville Transaction~~

~~Pursuant to the purchase and sale agreement and subsequent amendment governing the Gainesville Transaction, Recro agreed to pay to Alkermes up to an additional~~ ~~$140,000 in milestone payments including $50,000~~ ~~upon regulatory approval payable over a seven-year period~~, as well as net sales milestones related to IV meloxicam and royalties on future product sales of injectable meloxicam between 10% and 12% (subject to a 30% reduction when no longer covered by patent). As of September 30, 2019, the Company has paid $10,000 in milestone payments to Alkermes.(9) Leases

Recro is party to a Development, Manufacturing and Supply Agreement (Supply Agreement), with Alkermes (through a subsidiary of Alkermes), pursuant to which Alkermes will (i) provide clinical and commercial bulk supplies of IV meloxicam formulation and (ii) provide development services with respect to the Chemistry, Manufacturing and Controls section of an NDA for IV meloxicam. Pursuant to the Supply Agreement, Alkermes will supply Recro with such quantities of bulk IV meloxicam formulation as shall be reasonably required for the completion of clinical trials of IV meloxicam. During the term of the Supply Agreement, Recro will purchase its clinical and commercial supplies of bulk IV meloxicam formulation exclusively from Alkermes, subject to certain exceptions, for a period of time.

~~These obligations will be transferred to the Company in connection with the spin-off.~~

~~(c)~~

~~Litigation~~

Recro and the Company are involved, from time to time, in various claims and legal proceedings arising in the ordinary course of its business. Except as disclosed below, Recro and the Company are not currently a party to any such claims or proceedings that, if decided adversely to it, would either individually or in the aggregate have a material adverse effect on its business, financial condition or results of operations.

On May 31, 2018, a securities class action lawsuit was filed against Recro and certain of its officers and directors in the U.S. District Court for the Eastern District of Pennsylvania (Case No. 2:18-cv-02279-MMB) that purported to state a claim for alleged violations of Section 10(b) and 20(a) of the Exchange Act and Rule 10(b)(5) promulgated thereunder, based on statements made by Recro concerning the NDA for IV meloxicam. The complaint seeks unspecified damages, interest, attorneys’ fees and other costs. On December 10, 2018, lead plaintiff filed an amended complaint that asserted the same claims and sought the same relief but included new allegations and named additional officers and directors as defendants. On February 8, 2019, Recro filed a motion to dismiss the amended complaint in its entirety, which the lead plaintiff opposed on April 9, 2019. On May 9, 2019, Recro filed its response and briefing was completed on the motion to dismiss. On June 26, 2019, the judge heard oral arguments on the motion to dismiss. The judge asked the plaintiffs to file a supplemental brief by August 30, 2019, and Recro will have 30 days to submit a reply brief. This matter will be transferred to the Company in connection with the spin-off. Recro and the Company believe that the lawsuit is without merit and intends to vigorously defend against it. The lawsuit is in the early stages and, at this time, no assessment can be made as to its likely outcome or whether the outcome will be material to Recro or the Company.

~~(d)~~

~~Leases~~

The Company is a party to various operating leases in (i) Malvern, Pennsylvania, ~~and~~(ii) Dublin, Ireland and (iii) Germantown, Maryland for office and lab space and office equipment.

The Company determines if an arrangement is a lease at ~~inception.~~inception or upon acquisition of previous arrangements through a merger. The arrangement is a lease if it conveys the right to the Company to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Lease terms vary based on the nature of ~~operations, however, all~~operations. All leased facilities recorded on the unaudited consolidated balance sheet are classified as operating leases with remaining lease terms between 14 and ~~3 years.~~8 years. Most leases contain specific renewal options where notice to renew must be provided in advance of lease expiration or automatic renewals where no advance notice is required. Periods covered by an option to extend the lease were included in the non-cancellable lease term when exercise of the option was determined to be reasonably certain. Costs determined to be variable and not based on an index or rate were not included in the measurement of operating lease liabilities. As most leases do not provide an implicit rate, the ~~Company's~~Company’s effective interest rate was used to discount its lease liabilities.

The Company’s leases with an initial term of 12twelve months or less that do not have a purchase option or extension that is reasonably certain to be exercised are not included in the right of use asset or lease liability on the ~~Combined~~Consolidated Balance Sheets. Lease expense is recognized on a straight-line basis over the lease ~~term~~.term.

As of September 30, ~~2019,~~2023, undiscounted future lease payments for non-cancellable operating leases are as follows:

Lease payments

2019

$
121

2020

401

2021

362

2022

373

Total lease payments

1,257

Less imputed interest

(381
)
Total operating liabilities

$
876


	Lease payments
Remainder of 2023	$	168
2024		690
2025		702
2026		724
2027		745
2028 and thereafter		1,897
Total lease payments		4,926
Less imputed interest		(2,057	)
Total operating lease liability	$	2,869

As of ~~December 31, 2018 under legacy ASC 840 “Leases”, undiscounted future lease payments for non-cancellable operating leases were as follows:~~

Lease payments

2019

$
517

2020

414

2021

367

2022

373

Total

$
1,671

~~For the nine months ended~~ September 30, ~~2019,~~2023, the weighted average remaining lease term was 3 7 years and the weighted average discount rate was ~~16%~~17%.

The components of the Company’s lease cost were as ~~follows~~follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating lease cost	$	171	$	70	$	311	$	215
Short-term lease cost		-		33		36		106
Total lease cost	$	171	$	103	$	347	$	321

Cash paid for amounts included in the measurement of lease liabilities, which is included in operating cash flows, was $431 and $254 for the nine months ended September 30, 2023 and 2022, respectively.

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

(amounts in thousands, except share and per share data)

(Unaudited)

(10) Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:


	September 30,		December 31,
	2023		2022
Payroll and related costs	$	1,016	$	656
Professional and consulting fees		1,562		789
Other research and development costs		636		593
Interest payable		314		94
Other		124		1
	$	3,652	$	2,133

(11) Debt

Credit Agreement

The following table summarizes the components of the carrying value of the Company's credit agreement:


	September 30,			December 31,
	2023			2022
Credit Agreement	$	10,000		$	10,000
Payment of principal		(6,294	)		(2,244	)
Unamortized deferred issuance costs		—			(828	)
Accrued amendment fee		284			—
Exit fee accretion		238			191
Total debt	$	4,228		$	7,119

Current portion	$	4,228		$	5,600
Long-term portion, net		—			1,519

On May 29, 2020 (the “Credit Agreement Closing Date”), the Company entered into a $50,000 Credit Agreement (the “Credit Agreement”) by and among the Company, Wilmington Trust, National Association, in its capacity as the agent (“Agent”), and MAM Eagle Lender, LLC, as the lender (together with any other lenders under the Credit Agreement from time to time, collectively, the “Lenders”). The Credit Agreement provides for a term loan in the original principal amount of $10,000 (the “Tranche One Loans”) funded on the Credit Agreement Closing Date. Pursuant to the terms of the Credit Agreement, there are four additional tranches of term loans, in an aggregate original principal amount of $40,000 (the “Tranche Two Loans”, “Tranche Three Loans”, “Tranche Four Loans” and the “Tranche Five Loans”, and collectively with the Tranche One Loans, the “Term Loans” and each a “Term Loan”). As of September 30, 2023, no funds have been drawn from the additional tranches and are not expected to be drawn in the future.

The Term Loans will bear interest at a per annum rate equal to 13.5%, with monthly, interest-only payments until the date that is three years prior to the Maturity Date (as defined below) (the “Amortization Date”). The maturity date of the Credit Agreement is May 29, 2025, but may be extended to May 29, 2026 provided that the EBITDA (as defined in the Credit Agreement) for the consecutive twelve-month period ending on or immediately prior to May 29, 2022 is greater than $10,000 (such date, “Maturity Date”), which the Company did not achieve. Beginning on the Amortization Date, the Company was obligated to pay amortization payments (in addition to the interest stated above) on such date and each month thereafter in equal month installments of principal based on an amortization schedule of thirty-six months. Any unpaid principal amount of the Term Loans is due and payable on the Maturity Date.

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

(amounts in thousands, except share and per share data)

(Unaudited)

Subject to certain exceptions, the Company is required to make mandatory prepayments of the Term Loans, with the proceeds of asset sales, extraordinary receipts, debt issuances and specified other events. The Company may make voluntary prepayments in whole or in part, subject to a prepayment premium equal to (i) with respect to any prepayment paid on or prior to the third anniversary of the Tranche One Loan (or, in the case of each of the Tranche Two Loans, Tranche Three Loans, Tranche Four Loans or Tranche Five Loans, the third anniversary of the date each such loan is funded), the remaining scheduled payments of interest that would have accrued on the Term Loans being prepaid, repaid or accelerated, but that remained unpaid, in no event to be less than 5.0% of the principal amount of the Term Loan being prepaid, and (ii) with respect to any prepayment paid after the third but prior to the fourth anniversary of the Tranche One Loan (or, in the case of each of the Tranche Two Loans, Tranche Three Loans, Tranche Four Loans or Tranche Five Loans, the fourth anniversary of the date each such loan is funded), 3.0% of the principal amount of the Term Loan being prepaid. In addition, an exit fee will be due and payable upon prepayment or repayment of the Term Loans (including, without limitation, on the Maturity Date) equal to the lesser of 2.5% of the sum of the aggregate principal amount of the Term Loans advanced or approved to be advanced by the Lenders and $700; provided that such exit fee will be equal to $700 if fee is paid in conjunction with a change of control that occurs in connection with the payoff or within 6 months thereof. As of September 30, 2023, the Company will have to pay a 2.5% exit fee, which is $250 at the current outstanding loan balance and is being accreted to the carrying amount of the debt using the effective interest method over the term of the loan.

The Credit Agreement contains certain usual and customary affirmative and negative covenants, as well as financial covenants including a minimum liquidity requirement of $5,000 at all times (the “Minimum Liquidity Covenant”) and minimum EBITDA levels that the Company may need to satisfy on a quarterly basis beginning in September 2021, subject to borrowing levels. As of September 30, 2023, the Company was in compliance with the Minimum Liquidity Covenant as the minimum EBITDA criteria is not applicable until additional tranches are drawn. As of September 30, 2023, borrowings under the Credit Agreement are classified based on their schedule maturities.

In connection with the Credit Agreement, the Company issued a warrant to MAM Eagle Lender, LLC to purchase 376 shares of the Company’s common stock, at an exercise price equal to $6,426.00 per share. See Note 13(c) for additional information. The warrant is exercisable through May 29, 2027.

The Company recorded debt issuance costs for the Credit Agreement of $1,496 plus the fair value of warrants of $1,423, which were being amortized using the effective interest method over the term of Credit Agreement prior to the Fifth Amendment, as defined below. Debt issuance cost amortization is included in interest expense within the Consolidated Statements of Operations. The Company recorded debt issuance cost amortization related to the Credit Agreement prior to the Fifth Amendment of $263 for both the three and nine months ended September 30, 2023. The Company recorded debt issuance cost amortization related to the Credit Agreement of $209 and $421 for the three and nine months ended September 30, ~~2019:~~2022, respectively.

On August 1, 2022, the Company entered into Amendment No. 1 and Waiver to Credit Agreement, (the "First Amendment"), with MAM Eagle Lender. Pursuant to the terms of the First Amendment, the lenders waived any default under the credit agreement (including the imposition of a default interest rate with respect to the default) resulting from the Company's failure to comply with the Minimum Liquidity Covenant. In addition, the First Amendment, among other items, (i) provided that 30% of any cash proceeds received by the Company from certain potential strategic licensing transactions shall be used to prepay amounts outstanding under the credit agreement; and (ii) decreases the amount of cash the Company is required to maintain pursuant to the Minimum Liquidity Covenant to $3,000 for a period beginning on August 1, 2022, and ending on August 31, 2022, at which point the amount required pursuant to the Minimum Liquidity Covenant shall increase to $5,000.

Three Months Ended
September 30, 2019

Nine Months Ended
September 30, 2019

Operating lease cost

$
121

$
363

Short-term lease cost

-

14

Total lease cost

$
121

$
377

~~(e)~~

~~Purchase Commitments~~

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

(amounts in thousands, except share and per share data)

(Unaudited)

On October 24, 2022, the Company entered into Amendment No. 2 and Waiver to Credit Agreement, (the "Second Amendment"), with MAM Eagle Lender. Pursuant to the terms of the Second Amendment, the Credit Agreement was amended such that the Company must repay the principal thereunder (i) on the first business day of each month until the Interest Payment Date on December 1, 2022, in equal monthly installments of principal based on an amortization schedule of 36 months, (ii) an additional payment of principal in the amount of $300 prior to December 31, 2022 and (iii) commencing on the Interest Payment Date on January 2, 2023 and on each Interest Payment Date thereafter until the obligations have been repaid in full, the principal amount of $500. In addition, the Second Amendment decreased the minimum cash covenant the Company is required to maintain under the Credit Agreement to (i) $3,000 for the period beginning on October 1, 2022, and ending on November 30, 2022, (ii) $4,500 for the period beginning on December 1, 2022, and ending on February 28, 2023, and (iii) $4,000 from and after March 1, 2023. Further, the Company agreed that prior to December 31, 2022, it shall not, without the prior written consent of the Lenders, make or permit any payment under its agreements with Alkermes. In consideration for the Second Amendment, the Company agreed to pay the Agent an amendment fee of $5 and the Lender an amendment fee of $200.

On December 1, 2022, the Company entered into Amendment No. 3 to Credit Agreement with MAM Eagle Lender (the "Third Amendment"). Pursuant to the terms of the Third Amendment, the Third Amendment decreased the minimum cash covenant the Company is required to maintain under the credit agreement to (a) from October 1, 2022 to December 6, 2022 to not be less than $3,000 at any time, (b) from December 7, 2022 to February 28, 2023 to not be less than $4,500, and (c) from and after March 1, 2023 to not be less than $4,000.

In January 2023, the Company entered into Amendment No. 4 to Credit Agreement with MAM Eagle Lender (the "Fourth Amendment"). Pursuant to the terms of the Fourth Amendment, the Credit Agreement was amended such that the Company agreed to make (i) a payment of principal in the amount of $500 on January 3, 2023, (ii) a payment of principal in the amount of $300 on February 1, 2023 and March 1, 2023, and (iii) on the interest payment date on April 3, 2023 and on each interest payment date thereafter until the obligations are repaid in full, a payment in the principal amount of $500. In addition, the Fourth Amendment decreased the Minimum Liquidity Covenant to (i) $3,000 for the period beginning on October 1, 2022, and ending on December 6, 2022, (ii) $4,500 for the period beginning on December 7, 2022, and ending on January 10, 2023, (iii) $2,225 for the period beginning on January 11, 2023, and ending on February 28, 2023, and (iv) $3,000 from and after March 1, 2023. Further, the Company agreed that prior to April 30, 2023, it will not, without the prior written consent of MAM Eagle Lender, make or permit any payment under its agreements with Alkermes.

On March 29, 2023, the Company entered into Amendment No. 5 and Consent to Credit Agreement, (the "Fifth Amendment") whereby MAM Eagle Lender consented to the transactions contemplated by the Transfer Agreement (as defined above) and agreed to release and discharge any liens granted or held by the lenders in respect of the assets discussed in the Transfer Agreement. The parties also agreed to, among other things, amend the Minimum Liquidity Covenant to require that the Company maintains $2,500 of liquidity at all times. In connection with Fifth Amendment, the Company issued warrants to MAM Eagle Lender to purchase an aggregate of 785,026 shares of the Company’s common stock, par value $0.01 per share at an exercise price equal to $1.8951 per share.

In connection with the Acquisition, the Company entered into a Forbearance Agreement, dated as of June 29, 2023, by and among the Company, the Lenders and the Agent, solely in its capacity as administrative and collateral agent for the Lenders (the "Forbearance Agreement"), pursuant to which the Lenders agreed to forbear their rights to exercise any rights and remedies with respect to any default under the Credit Agreement, resulting from the Acquisition, for a period of up to 30 days following the closing of the Acquisition. On July 30, 2023, the parties entered into Amendment No. 1 to the Forbearance Agreement and Amendment No. 6 to Credit Agreement, whereby such deadline was extended until October 31, 2023. On October 31, 2023, the parties entered into Amendment No. 2 to the Forbearance Agreement and Amendment No. 8 to Credit Agreement to extend such deadline until March 31, 2024.

On August 31, 2023, the Company entered into Amendment No. 7 to Credit Agreement with MAM Eagle Lender, (the "Seventh Amendment". Pursuant to the Seventh Amendment, the Lenders agreed to, among other things, defer certain loan amortization payments and waive the Minimum Liquidity Covenant until December 31, 2023.

As a result of Fifth Amendment, the Company performed a cash flow analysis to determine if the terms of the amended agreement were substantially different from those of the previous debt agreement. Due to the amendment fee and the fair value of the warrants issued, the Company concluded the terms are substantially changed in accordance with ASC 470-50, Debt – Modifications and Extinguishments. ASC 470-50 requires accounting for the Fifth Amendment as a debt extinguishment and not a debt modification. The Company recorded a loss on debt extinguishment of $2,196 in the first quarter of 2023, which represents the difference between the net carrying value of the existing debt and the reacquisition

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

(amounts in thousands, except share and per share data)

(Unaudited)

cost of the amended terms of the Credit Agreement and is attributable to unamortized debt issuance costs, the fair value of the warrants issued in connection with the Fifth Amendment and the Fifth Amendment fee.

Based on the terms of the amended agreement, as of September 30, 2023, the effective interest rate was 19.30%, which takes into consideration the accretion of the exit fee.

As a result of the liquidity conditions discussed in Note 2, the Company is not expected to be able to comply with the Minimum Liquidity Covenant, as amended, over the next twelve months without additional capital financing. If the Company is unable to maintain its Minimum Liquidity Covenant, it is reasonably possible that the Lenders could demand repayment of the borrowings under the Credit Agreement during the next twelve months.

Bond Payable

On March 22, 2022, TeraImmune entered into the 5% Convertible Term Loan pursuant to which it borrowed an aggregate of $1,000 and accrued interest at a rate of 5% per annum during the period from April 8, 2022 to the maturity date of November 30, 2022, at which date the principal and accrued interest was to be paid in a lump sum. TeraImmune failed to repay the loan on the maturity date and, as a result, the note became subject to a default interest penalty of 20% on the defaulted balance as of November 30, 2022. The bond is convertible into 83,128 shares of common stock and 1,858 Series X Preferred Shares of the Company. Accrued interest of $239 as of September 30, 2023 is included in the Accrued expenses and other current liabilities line on the balance sheet. See additional discussion in Note 5.

Employee Promissory Notes

In October 2022, TeraImmune entered into promissory note agreements for accrued salaries with its employees (the “Employee Promissory notes”). The Employee Promissory notes deferred the payment of salaries of all TeraImmune employees and management by between 20-50% until such time as defined in the note agreements. The Employee Promissory notes provide that if TeraImmune is unable to repay these notes by December 31, 2022, 5% simple interest would be paid along with the accrued amounts of deferred compensation. As of September 30, 2023, the Employee Promissory notes totaled $241 and is included in the Accrued expenses and other current liabilities line on the balance sheet.

(12) Commitments and Contingencies

(a) Licenses and Supply Agreements

NMB License

In June 2017, the Company acquired the exclusive global rights to two novel neuromuscular blocking agents (“NMBs”) and a proprietary reversal agent from Cornell University (“Cornell”). The NMBs and reversal agent are referred to herein as the NMB Related Compounds. The NMB Related Compounds include one novel intermediate-acting NMB that has initiated Phase I clinical trials and two other agents, a novel short-acting NMB, and a rapid-acting reversal agent specific to these NMBs. The Company is obligated to make: (i) an annual license maintenance fee payment to Cornell in the remaining range of $70 to $125 until the first commercial sale of the NMB Related Compounds; and (ii) milestone payments to Cornell upon the achievement of certain milestones, up to a maximum, for each NMB Related Compound, of $5,000 for U.S. regulatory approval and commercialization milestones and $3,000 for European regulatory approval and commercialization milestones. The Company is obligated to pay Cornell royalties on net sales of the NMB Related Compound at a rate ranging from low to mid-single digits, depending on the applicable NMB Related Compounds and whether there is a valid patent claim in the applicable country, subject to an annual minimum royalty amount. Further, the Company reimburses Cornell for its ongoing patent costs related to prosecution and maintenance of the patents related to the Cornell patents for the NMB Related Compounds. Through September 30, 2023, no such milestones have been achieved.

HA FVIII TCR Agreement

On August 5, 2019, TeraImmune entered into an exclusive worldwide license agreement (the “HA FVIII TCR Agreement”) with the Henry M. Jackson Foundation for the Advancement of Military Medicine, Inc. (“HJF”) for certain technologies used to create FVIII specific TCR or BAR expressing Tregs for human uses. Pursuant to the FVIII TCR Agreement, TeraImmune has a license royalty fee and annual royalties of $50 due to HJF annually.

BML Agreement

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

(amounts in thousands, except share and per share data)

(Unaudited)

On August 26, 2019, TeraImmune entered into the non-exclusive Biological Materials License Agreement (“BML Agreement”) with the National Cancer Institute (“NCI”), a part of National Institute for Health (“NIH”), which is part of the U.S. Government Department of Health and Human Services. This agreement allows TeraImmune to use the pMSGV1 vector for the production of T cell products transduced with the retroviral vectors. Pursuant to the BMLA Agreement, TeraImmune has a license execution fee and annual royalties of $11 due to NIH annually.

HA ODN Agreement

On June 18, 2020, TeraImmune entered into an exclusive license agreement (the “HA ODN Agreement”) with National Institute of Allergy and Infectious Diseases (“NIAID”), a part of NIH. This license agreement allows TeraImmune to use the rights of patent for producing T cell populations enriched for stable regulatory Tregs aimed at developing Treg cell therapy for patients with hemophilia A who have inhibitory anti-FVIII auto-antibodies. Pursuant to the HA ODN Agreement, TeraImmune has a license royalty fee and annual royalties of $60 due to NIAID annually. The HA ODN Agreement also requires the payment of milestones and royalties upon the achievement of certain regulatory and commercialization milestones.

iTreg Agreement

On November 11, 2020, TeraImmune entered into an exclusive worldwide license agreement (the “iTreg Agreement”) with HJF for technology used for producing methods of induced regulatory T cells (“iTreg”) and the use of such technology in humans. The license was pending the status of provisional filing on the signing date, and TeraImmune agreed to take responsibility for the maintenance and prosecution of the Patent Rights in consultation with HJF on all strategic global filing and prosecution decisions.

(b) Purchase Commitments

As of September 30, 2023, the Company had outstanding non-cancelable and cancelable purchase commitments in the aggregate amount of ~~$4,863~~$64 primarily related to ~~inventory, capital expenditures and other~~ goods and services ~~including pre-commercial/manufacturing scale-up~~from development activities.

(13) Capital Structure

(a) Common Stock

On November 21, 2019, the Company separated from Societal CDMO as a result of a special dividend distribution of all the outstanding shares of its common stock to Societal CDMO shareholders. On the distribution date, each Societal CDMO shareholder received one share of Baudax Bio’s common stock for every two and ~~clinical activities.~~ one-half shares of Societal CDMO common stock held of record at the close of business on November 15, 2019. Upon the distribution, 6,712 shares of common stock were issued.

The ~~timing~~Company is authorized to issue 190,000,000 shares of common stock, with a par value of $0.01 per share.

On March 1, 2022, the Company closed an underwritten public offering of 45,791 shares of its common stock, pre-funded warrants to purchase 41,929 shares of common stock at an exercise price of $0.40 per share and warrants to purchase 87,719 shares of common stock at an exercise price of $130.00 per share, as well as up to 13,158 additional shares of common stock and/or additional warrants to purchase up to 13,158 shares of common stock, which may be purchased pursuant to a 30-day option to purchase additional securities granted to H.C. Wainwright & Co., LLC (the “Underwriter”) by the Company. The public offering price for each share of common stock and accompanying warrant to purchase one share of common stock was $114.00, and the public offering price for each pre-funded warrant and accompanying warrant was $113.60. As compensation to the Underwriter, the Company agreed to pay to the Underwriter a cash fee of 7.0% of the gross proceeds, plus a cash management fee equal to 1.0% of the gross proceeds and reimbursement of certain ~~purchase commitments cannot be estimated as it is dependent on timing of FDA approval or the outcome of other strategic evaluations~~expenses and ~~agreements.~~

~~(f)~~

~~Certain Compensation and Employment Agreements~~

legal fees. The Company ~~has~~also issued to designees of the Underwriter warrants to purchase 5,263 shares of common stock at an exercise price of $142.50 per share. On February 28, 2022, the Underwriter partially exercised its option to purchase an additional 2,847 warrants. Net proceeds to the Company, after deducting underwriting discounts and commissions and offering expenses, was $8,791.

On May 17, 2022, the Company entered into ~~employment agreements~~a securities purchase agreement with institutional investors named therein, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “May 2022 Offering”), 41,152 shares of the Company’s common stock, par value $0.01 per share, and, in a concurrent private placement, warrants

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

(amounts in thousands, except share and per share data)

(Unaudited)

exercisable for up to an aggregate of 41,152 shares of Common Stock at a combined offering price of $48.60 per share and associated warrant. The warrants have an exercise price of $43.60 per share. Each warrant is exercisable for one share of common stock and was exercisable immediately upon issuance. The warrants will have a term of five years from the issuance date. As compensation to H.C. Wainwright & Co., LLC as placement agent in connection with the offering, the Company agreed to pay to the placement agent a cash fee of 7.0% of the aggregate gross proceeds raised in the offering, plus a management fee equal to 1.0% of the gross proceeds raised in the offering and certain expenses. The Company also issued to designees of the placement agent warrants to purchase up to 6.0% of the aggregate number of shares of common stock sold in the transactions, or warrants to purchase up to 2,469 shares of common stock. The placement agent warrants have substantially the same terms as the warrants, except that the placement agent warrants have an exercise price equal to 125% of the offering price per share (or $60.75 per share). The placement agent warrants will expire on May 17, 2027. Net proceeds to the Company, after deducting underwriting discounts and commissions and offering expenses, was $1,720.

On September 1, 2022, the Company closed a best efforts public offering of: (i) 188,872 shares of its common stock, par value $0.01 per share and accompanying Series A-1 warrants (“Series A-1 warrants”) to purchase 188,872 shares of Common stock and Series A-2 warrants (“Series A-2 warrants”, and together with the Series A-1 warrants, “Series A warrants”) to purchase 188,872 shares of Common Stock, at a combined public offering price of $21.00 per share and Series A warrants and (ii) Series B pre-funded warrants (“Series B pre-funded warrants”) to purchase 106,607 shares of Common Stock and accompanying Series A-1 warrants to purchase 106,607 shares of Common Stock and Series A-2 warrants to purchase 106,607 shares of Common stock at a combined public offering price of $20.60 per Series B pre-funded warrant and Series A warrants, which is equal to the public offering price per share of Common Stock and accompanying Series A warrants less the $0.01 per share exercise price of each such Series B pre-funded warrant. The Series A warrants have an exercise price of $21.00 per share of Common Stock. The Series A-1 warrants are exercisable upon issuance and will expire five years from the date of issuance. The Series A-2 warrants are exercisable upon issuance and will expire thirteen months from the date of issuance. The exercise price of the Series A warrants is subject to adjustment for stock splits, reverse splits, and similar capital transactions as described in the Series A warrants. Subject to certain ownership limitations, the Series B pre-funded warrants are immediately exercisable and were exercised at a nominal consideration of $0.40 per share of Common Stock upon the closing of the transaction. As compensation to H.C. Wainwright & Co., LLC, as the exclusive placement agent in connection with the Offering, the Company paid a cash fee of 7.0% of the aggregate gross proceeds raised in the offering, plus a management fee equal to 1.0% of the gross proceeds raised in the offering, and reimbursement of certain expenses and legal fees. The Company also issued to designees of the placement agent warrants to purchase up to 17,728 shares of common stock. The placement agent warrants have substantially the same terms as the Series A warrants, except that the placement agent warrants have an exercise price equal to $26.25 per share and expire on August 29, 2027. Net proceeds to the Company, after deducting underwriting discounts and commissions and offering expenses, was $5,044.

On December 6, 2022 the Company closed a best efforts public offering of: (i) 54,787 shares of its common stock, par value $0.01 per share and accompanying Series A-3 warrants to purchase 54,787 shares of common stock and Series A-4 warrants to purchase 54,787 shares of common stock, at a combined public offering price of $4.795 per share and accompanying series A warrants and (ii) series C pre-funded warrants to purchase 988,000 shares of common stock and accompanying series A-3 warrants to purchase 988,000 shares of common stock and series A-4 warrants to purchase 988,000 shares of common stock at a combined public offering price of $4.785 per series C pre-funded warrant and accompanying series A warrants, which was equal to the public offering price per share of common stock and accompanying series A warrants less the $0.01 per share exercise price of each such series C pre-funded warrant. The series A warrants have an exercise price of $4.50 per share of common stock. The series A-3 warrants are exercisable upon issuance and will expire on December 6, 2027. The series A-4 warrants are exercisable upon issuance and will expire on January 8, 2024. The exercise price of the series A warrants is subject to adjustment for stock splits, reverse splits, and similar capital transactions as described in the Series A Warrants. The Series C prefunded warrants have been exercised in full as of December 31, 2022. As compensation to H.C. Wainwright & Co., LLC as the exclusive placement agent in connection with the offering, the Company paid the placement agent a cash fee of 7.0% of the aggregate gross proceeds raised in the offering, plus a management fee equal to 1.0% of the gross proceeds raised in the offering, and reimbursement of certain expenses and legal fees. The Company also issued to designees of the placement agent warrants to purchase up to 62,567 shares of common stock. The Placement Agent Warrants have substantially the same terms as the series A warrants, except that the placement agent warrants have an exercise price equal to $5.99375 per share and expire on December 2, 2027. Net proceeds to the Company, after deducting underwriting discounts and commissions and offering expenses, was $3,916.

On May 1, 2023 the Company closed a best efforts public offering of: (i) 1,326,175 shares of its common stock, par value $0.01 per share and accompanying Series A-5 warrants to purchase 1,326,175 shares of Common stock and Series A-6 warrants to purchase 1,326,175 shares of common stock, at a combined public offering price of $1.15 per share and

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

(amounts in thousands, except share and per share data)

(Unaudited)

accompanying Series A warrants and (ii) Series D pre-funded warrants to purchase 2,152,087 shares of common stock and accompanying Series A-5 warrants to purchase 2,152,087 shares of common stock and Series A-6 warrants to purchase 2,152,087 shares of common stock at a combined public offering price of $1.14 per Series D pre-funded warrant and accompanying Series A warrants, which is equal to the public offering price per share of Common Stock and accompanying Series A warrants less the $0.01 per share exercise price of each such Series D pre-funded warrant. The Series A warrants have an exercise price of $1.15 per share of common stock. The Series A-5 warrants are exercisable upon issuance and will expire on May 1, 2028. The Series A-6 warrants are exercisable upon issuance and will expire on November 1, 2024. Subject to certain ownership limitations described in the Series D pre-funded warrants, the Series D pre-funded warrants were immediately exercisable and were fully exercised at a nominal consideration of $0.01 per share of common stock upon closing. As compensation to H.C. Wainwright & Co., LLC, as the exclusive placement agent in connection with the offering, the Company paid the placement agent a cash fee of 7.0% of the aggregate gross proceeds raised in the offering, plus a management fee equal to 1.0% of the gross proceeds raised in the offering, and reimbursement of certain expenses and legal fees. The Company also issued to designees of the placement agent warrants to purchase up to 208,696 shares of common stock. These warrants have substantially the same terms as the Series A warrants, except that the placement agent warrants have an exercise price equal to $1.4375 per share and expire on April 26, 2028. Net proceeds to the Company, after deducting underwriting discounts and commissions and offering expenses, was $3,257.

On August 16, 2023, the Company, entered into a securities purchase agreement with institutional investors named ~~executive officers.~~therein pursuant to which the Company agreed to issue and sell, in a registered direct offering, (the "August 2023 Offering"), 2,006,544 shares of the Company’s common stock, par value $0.01 per share and 1,395,243 Series E pre-funded warrants to purchase 1,395,243 shares of common stock, at an offering price of $0.56 per share and $0.55 per Series E Pre-Funded Warrant. In a concurrent private placement, the Company agreed to issue and sell to the investors unregistered Series A-7warrants to purchase up to 3,401,787 shares of common stock. The Series A-7 warrants have an initial exercise price of $0.56 per share and are exercisable until October 12, 2028. Upon the Company effecting a reverse stock split, the exercise price of the Series A-7 warrants will be reduced to the lowest daily volume weighted average price of the common stock during the five trading days following such Reverse Stock Split, and the number of shares issuable upon exercise of the Series A-7 warrants will be increased such that the aggregate exercise price payable as a result of the adjustment is equal to the aggregate exercise price payable prior to the adjustment. Net proceeds to the Company, after deducting underwriting discounts and commissions and offering expenses, was $1,611.

On August 23, 2023, the Company entered into a purchase agreement (the “ELOC Purchase Agreement”) with Alumni Capital LP (“Alumni Capital”). Pursuant to the ELOC Purchase Agreement, the Company may sell to Alumni Capital up to $50,000 (the “Investment Amount”), of shares (the “Purchase Notice Shares”) of the Company’s common stock, par value $0.01 per share (the “Common Stock”), from time to time during the term of the ELOC Purchase Agreement. In consideration for Alumni Capital’s execution and delivery of the ELOC Purchase Agreement, the Company (i) issued 579,710 shares to Alumni Capital on September 25, 2023; (ii) issued 750,000 shares to Alumni Capital on October 13, 2023; (iii) issued 750,000 shares to Alumni Capital on October 18, 2023; and (iv) agreed to issue 818,840 shares to Alumni Capital within one business day after the earlier of (a) December 1, 2023 or (b) the day in which the Company' trading volume exceeds 5,000,000 shares of common stock, provided such day is after November 1, 2023 (collectively, the "Commitment Shares").

Pursuant to the ELOC Purchase Agreement, until December 31, 2024, the Company may, at its discretion, direct Alumni Capital to purchase on any single business day on which the closing price of its common stock on The Nasdaq Capital Market is equal to or greater than $0.25 for no amount less than $100 in shares of common stock and no greater than $1,000 in shares of common stock ($2,000 for the initial purchase thereunder), unless waived upon mutual discretion between the Company and Alumni Capital, up to an amount no greater than $5,000. The purchase price in respect of any purchase notice shall equal the lowest traded price of the common stock during the five business days prior to the closing of any purchase thereunder, multiplied by 90%.

The ELOC Purchase Agreement also prohibits the Company from directing Alumni Capital to purchase any shares of common stock if those shares, when aggregated with all other shares of common stock then beneficially owned by Alumni Capital and its affiliates, would result in Alumni Capital and its affiliates having beneficial ownership, at any single point in time, of more than 9.99% of the then total outstanding shares of common stock. The Company may terminate the ELOC Purchase Agreement at any time, without any cost or penalty, upon written notice to Alumni Capital. The ELOC Purchase Agreement does not include any of the following: (i) limitations on the Company’s use of amounts it receives as the purchase price for shares of common stock sold to Alumni Capital; (ii) financial or business covenants; (iii)

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

(amounts in thousands, except share and per share data)

(Unaudited)

restrictions on future financings (other than restrictions on its ability to enter into other equity line of credit transactions or transactions that are similar thereto); (iv) rights of first refusal; or (v) participation rights or penalties.

The Company’s net proceeds under the ELOC Purchase Agreement for the nine months ended September 30, 2023 were $313, as $200 of common stock was issued to pay the commitment fee and recorded as a prepaid asset.

(b) Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, with a par value of $0.01 per share. As of September 30, ~~2019, these employment agreements provided for, among other things, annual base salaries in an aggregate amount~~2023, there were 36,267 shares of ~~not less than $624, from that date through June 2020.~~Preferred Stock issued and outstanding.

~~(11)~~

~~Stock-Based Compensation~~

~~Certain employees~~On September 19, 2022, the board of directors of the Company ~~participate in Recro’s stock-based compensation plan, which provides~~declared a dividend of one one-thousandth (1/1,000th) of a share of Series B Preferred Stock, par value $0.01 per share (“Series B Preferred Stock”), for each outstanding share of the ~~grants~~Company’s common stock, par value $0.01 per share to shareholders of ~~stock options and RSUs.~~record on September 29, 2022 (the “Record Date”). The ~~expense associated~~shares of Series B Preferred Stock were distributed to such recipients on October 3, 2022. Each share of Series B Preferred Stock entitles the holder thereof to 1,000,000 votes per share. The outstanding shares of Series B Preferred Stock vote together with the ~~Company’s employees who participate in the plan is included in the accompanying combined statements~~outstanding shares of ~~operations. A portion of these costs have been allocated out~~Common Stock of the Company as ~~they relate~~a single class exclusively with respect to ~~employees responsible~~(1) any proposal to adopt an amendment to the Company’s Amended and Restated Articles of Incorporation, as amended, to reclassify the outstanding shares of common stock into a smaller number of shares of common stock at a ratio specified in or determined in accordance with the terms of such amendment (the “Reverse Stock Split”) and (2) any proposal to adjourn any meeting of shareholders called for ~~corporate level activities that historically~~the purpose of voting on the Reverse Stock Split. The Series B Preferred Stock will not be entitled to vote on any other matter, except to the extent required under the Pennsylvania Business Corporation Law.

In September 2022, 20,003.745 shares of Series B Preferred Stock were ~~incurred by~~declared as a stock dividend and issued on October 3, 2022. On November 3, 2022, all of the ~~entity that represents~~outstanding shares of Series B Preferred Stock were redeemed for nominal consideration pursuant to the ~~Company. Additionally,~~terms of the ~~entity that represents the Company historically incurred the costs related to~~Series B Preferred Stock.

On August 23, 2023, the board of directors ~~which has also been partially allocated out~~of the Company declared a dividend of one one-thousandth (1/1,000th) of a share of Series C Preferred Stock, par value $0.01 per share ("Series C Preferred Stock"), for each outstanding share of the Company's common stock, par value $0.01 per share to shareholders of record on September 5, 2023 (the "Record Date"). The shares of the Series C Preferred Stock were distributed to such recipients on September 7 , 2023. Each share of Series C Preferred Stock entitled the holder thereof to 1,000,000 votes per share. The outstanding shares of Series C Preferred Stock voted together with the outstanding shares of common stock of the Company as a single class exclusively with respect to the proposal to effect the Reverse Stock Split at the Company's special meeting of shareholders on October 12, 2023.

On September 7, 2023, 36,267 shares of Series C Preferred Stock were declared as a stock dividend and issued on September 7, 2023. On October 12, 2023, all of the outstanding shares of Series C Preferred Stock were redeemed for nominal consideration pursuant to the terms of the Series C Preferred Stock.

Non-voting Convertible Preferred Stock

In connection with the acquisition of TeraImmune, the Company issued 27,089.719 shares of Series X Preferred Stock (including 7,024 escrow shares). Holders of Series X Preferred Shares are not entitled to vote except for specific corporate matters including (i) changes to the rights and preferences of the Series X Preferred Stock, (ii) issuance of additional Series X Preferred Stock, and (iii) enter into a fundamental transaction such as a sale of the Company. Other key provisions of the Series X Preferred Stock are as follows:

•

Conversion - each share of Series X Preferred Stock will convert into 1,000 shares of common stock, subject to beneficial ownership limitations and approval of the common shareholders.

•

Dividends - Series X Preferred Stock did not participate in any dividends with common shareholders on an as-converted basis.

•

Liquidation - The Series X Preferred Stock ranked on parity with the Company's common stock upon any liquidation, dissolution or winding up of the Company.

•

Redemption - In the event the Company did not obtain an affirmative shareholder vote to permit conversion, each holder of Series X Preferred Stock may have elected, at the holder’s option, to have the shares of Series X Preferred Stock be redeemed by the Company and equal to the estimated fair value of the Series X Preferred

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

(amounts in thousands, except share and per share data)

(Unaudited)

Stock share at the time of redemption. Due to this redemption feature, the Series X Preferred Stock was classified within temporary equity on the consolidated balance sheet at September 30, 2023.

On October 12, 2023, the shareholders approved the conversion of the Series X preferred stock and on November 14, 2023 the 27,089.719 outstanding shares of Series X Preferred Stock converted into 27,089,719 shares of common stock.

On May 29, 2020, in connection with the Credit Agreement, the Company issued a warrant to MAM Eagle Lender, LLC to purchase 376 shares of common stock, at an exercise price equal to $6,426.00 per share (see Note 11).

On October 19, 2020, the Company entered into Warrant Exchange Agreements (each, an “Exchange Agreement”) with certain holders (each, a “Holder”) of the Company’s outstanding March Series A Warrants and March Series B Warrants. Pursuant to the Exchange Agreements, the Holders, at their election, agreed to a cashless exchange of either all of their March Series A Warrants or March Series B Warrants, in each case for 0.2 shares of the Company’s common stock per warrant (rounded up to the nearest whole share) (the “Exchange”). The Company issued 848 shares of its common stock to the participating Holders as a result of the Exchange.

As a result of the Exchange, pursuant to certain price adjustment provisions in the warrants, the exercise price of each of the March Series A Warrants or March Series B Warrants (including warrants held by holders not participating in the Exchange) that were not exchanged were adjusted to $1.8951, for each share of common stock underlying such warrant. Pursuant to the Exchange Agreements, any outstanding warrant held by a Holder participating in the Exchange (i) was amended to remove certain anti-dilution and variable pricing protections and (ii) in the case of March Series A Warrants not exchanged by a participating Holder, was amended to adjust the expiration date of such March Series A Warrants to April 26, 2021 (which is the expiration date of the March Series B Warrants). The March Series A and Series B warrants were liability classified prior to the Exchange because they contained anti-dilution provisions that did not meet the standard definition of anti-dilution provisions. The Company recorded a mark-to-market adjustment to record the March Series A and Series B warrant at their fair values immediately prior to the Exchange and then reclassified the remaining balance of $21,858 to equity as a result of the issuance of shares and the removal of the anti-dilution and variable pricing protections in the Exchange.

On January 21, 2021, the Company entered into an agreement with an institutional investor, pursuant to which the Company agreed to issue and sell, in an offering (the “January Offering”), warrants exercisable for an aggregate of 7,358 shares of common stock of the Company (the “January Warrants”) at an offering price of $175.00 per warrant in exchange for the exercise of the institutional investor’s existing December Series A warrants that were issued to them on December 21, 2020, at an exercise price of $1,652.00 per warrant. The January Warrants have an exercise price of $2,240.00 per share.

As compensation to the Placement Agent, in connection with the January Offering, the Company agreed to pay to the Placement Agent a cash fee of 6.0% of the aggregate gross proceeds raised in the January Offering (including the proceeds relating to the exercise of the December Series A Warrants), plus a management fee equal to 1.0% of the gross proceeds raised in the January Offering (including the proceeds relating to the exercise of the December Series A Warrants) and reimbursement of certain expenses and legal fees. The Company also issued to designees of the Placement Agent warrants to purchase 441 shares of common stock (the “January Placement Agent Warrants”) at an exercise price of $2,800.00 per share.

On August 24, 2022, the Company entered into warrant amendment agreements (the “Warrant Amendment Agreements”) with certain holders of the Company’s (i) Series A Warrants to purchase 7,234 shares of common stock with an exercise price of $1,680.00 per share, (ii) Warrants to purchase 7,358 shares of common stock with an exercise price of $2,240.00 per share, (iii) Warrants to purchase 10,021 shares of common stock with an exercise price of $1,260.00 per share, (iv) Warrants to purchase 9,062 shares of common stock with an exercise price of $448.00 per share, and (v) Warrants to purchase 88,615 shares of common stock with an exercise price of $130.00 per share (the “Existing Warrants”). Under the Warrant Amendment Agreements, the Company agreed to amend the Existing Warrants by lowering the exercise price of the Existing Warrants to $23.92 per share. The warrant modification resulted in an increase in the fair value of warrants of $1,151. Subsequent to the warrant amendment, the Company issued 2,875 shares of common stock upon exercise of a portion of the amended warrants for net proceeds of $69.

On December 2, 2022, the Company entered into a warrant amendment agreement (the “December Warrant Amendment Agreement”) with a certain holder of the Company’s (i) warrants to purchase 7,234 shares of common stock with an exercise

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

(amounts in thousands, except share and per share data)

(Unaudited)

price of $23.92 per share, (ii) warrants to purchase 7,358 shares of common stock with an exercise price of $23.92 per share, (iii) warrants to purchase 6,013 shares of common stock with an exercise price of $23.92 per share, (iv) Warrants to purchase 5,143 shares of common stock with an exercise price of $23.92 per share, (v) warrants to purchase 48,246 shares of common stock with an exercise price of $23.92 per share, (vi) Series A-1 warrants to purchase 14,404 shares of common stock with an exercise price of $43.60 per share, (vii) Series A-2 warrants to purchase 142,858 shares of common stock with an exercise price of $21.00 per share and (viii) warrants to purchase 142,858 shares of common stock with an exercise price of $21.00 per share (collectively, the “December Existing Warrants”). Under the December Warrant Amendment Agreement, the Company (i) agreed to amend the December Existing Warrants by lowering the exercise price of the December Existing Warrants to $4.50 per share and (ii) amend the expiration date of the December Existing Warrants to December 6, 2027, in each case effective on December 6, 2022. The warrant modification resulted in an increase in the fair value of warrants of $746.

In ~~October 2013, Recro established~~January 2023, the ~~2013~~Company issued 961,787 shares of common stock upon the exercise of warrants for proceeds of $4,328.

In March 2023, in connection with Amendment No. 5, the Company issued warrants to MAM Eagle Lender to purchase an aggregate of 785,026 shares of the Company’s common stock, par value $0.01 per share at an exercise price equal to $1.8951 per share.

In August 2023, the Company amended the terms of its Series A-5 warrants to purchase 3,478,262 shares of the Company’s common stock and Series A-6 warrants to purchase 3,478,262 shares of the Company’s common stock. The exercise price of the Series A-5 warrants was lowered from $1.15 per share of common stock to $0.56 per share of common stock, and the exercise price of the Series A-6 warrants was lowered from $1.15 per share of common stock to $0.56 per share of common stock. The expiration date of the Series A-5 warrants was extended to August 21, 2028, and the expiration date of the Series A-6 warrants was extended to February 21, 2025. The warrant modification resulted in a increase in the fair value of warrants of $455 and is recorded as a deemed dividend to holders of the warrants.

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

(amounts in thousands, except share and per share data)

(Unaudited)

As of September 30, 2023, the Company had the following warrants outstanding to purchase shares of the Company’s common stock:


	Number of Shares		Exercise Price per Share		Expiration Date
March Series A Warrants (non-participating holders)		15	$	0.56	March 26, 2025
MAM Eagle Lender Warrant		376	$	6,426.00	May 29, 2027
November Series A Warrants		7,234	$	4.50	December 6, 2027
November Placement Warrants		433	$	2,073.75	November 24, 2025
December Placement Warrants		441	$	2,038.75	December 18, 2025
January Warrants		7,358	$	4.50	December 6, 2027
January Placement Warrants		441	$	2,800.00	January 21, 2026
February Placement Warrants		471	$	2,800.00	February 8, 2026
May Warrants		4,008	$	23.924	June 1, 2027
May Warrants, repriced		6,013	$	4.50	December 6, 2027
May Placement Warrants		601	$	1,487.50	May 31, 2026
December 2021 Warrants		3,918	$	23.924	June 27, 2027
December 2021 Warrants, repriced		5,143	$	4.50	December 6, 2027
December 2021 Placement Agent Warrants		724	$	448.00	December 27, 2026
March 2022 Warrants		1,952	$	130.00	March 1, 2027
March 2022 Warrants, repriced		37,492	$	23.924	March 1, 2027
March 2022A Warrants, repriced		48,246	$	4.50	December 6, 2027
March 2022 Underwriter Warrants		5,263	$	142.50	February 24, 2027
May 2022 Warrants		26,748	$	43.60	May 19, 2027
May 2022 Warrants, repriced		14,404	$	4.50	December 6, 2027
May 2022 Placement Agent Warrants		2,469	$	60.752	May 17, 2027
August 2022 Series A-1 Warrants		152,612	$	21.00	September 1, 2027
August 2022 Series A-1 Warrants, repriced		142,858	$	4.50	December 6, 2027
August 2022 Series A-2 Warrants		152,612	$	21.00	October 2, 2023
August 2022 Series A-2 Warrants, repriced		142,858	$	4.50	December 6, 2027
August 2022 Placement Agent Warrants		17,728	$	26.25	August 29, 2027
December 2022 Series A-3 Warrants		1,042,787	$	4.50	December 6, 2027
December 2022 Placement Agent Warrants		62,567	$	5.99375	December 2, 2027
MAM Eagle Lender Amendment No. 5 Warrant		785,026	$	1.89510	March 29, 2033
April 2023 Series A-5 Warrants		3,478,262	$	0.56	August 21, 2028
April 2023 Series A-6 Warrants		3,478,262	$	0.56	February 21, 2025
April 2023 Placement Agent Warrants		208,696	$	1.43750	April 26, 2028
August 2023 Series A-7 Warrants		3,401,787	$	0.56	October 12, 2028

With the exception of the March Series A Warrants to purchase 15 shares of common stock related to the public offering and held by non-participating investors in the Exchange that are liability classified as they contain antidilution provisions that do not meet the standard definition of antidilution provisions, the remaining warrants outstanding are equity classified. As of September 30, 2023 the liability warrants had a nominal fair value.

(14) Stock-Based Compensation

The Baudax Bio 2019 Equity Incentive Plan ~~(the 2013 Plan), which~~

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

(amounts in thousands, except share and per share data)

(Unaudited)

The Company adopted the Baudax Bio 2019 Plan that allows for the grant of stock options, stock appreciation rights and stock awards for aan initial total of ~~600,000~~2,142 shares of common stock. In June 2015, Recro’s shareholders approved the Amended and Restated Equity Incentive Plan (the A&R Plan), which amended and restated the 2013 Plan and increased the aggregate amount of shares of common stock available for issuance to 2,000,000. On December ~~1st~~1st of each year, pursuant to the “Evergreen” provision of the ~~A&R~~Baudax Bio 2019 Plan, the number of shares available under the plan ~~may~~shall be increased ~~by the Recro Board~~ by an amount equal to 5%5% of the outstanding common stock on December ~~1st~~1st of that ~~year. In December 2018 and 2017~~year or such lower amount as determined by the ~~number~~Board of ~~shares available for issuance under the A&R Plan was increased by 1,082,972 and 956,341, respectively.~~Directors. The total number of shares authorized for issuance under the ~~A&R plan~~Baudax Bio 2019 Plan as of September 30, 2023 is 31,581 shares. As of September 30, 2023, 19,220 shares are available for future grants under the Baudax Bio 2019 ~~is 8,119,709.~~ Plan.

Stock Options:

Stock options are exercisable generally for a period of 10 years from the date of grant and generally vest over four ~~years. As of September 30, 2019, 2,524,235 shares are available for future grants under Recro’s A&R Plan.~~

All shares described herein represent shares of Recro. The share information included in this disclosure includes 100% of the shares issued to Baudax Bio employees, corporate employees and Board members of Recro; however, a portion of the expenses related to the corporate employees and Board members of Recro have been allocated out of share-based compensation expense in these carve out financial statements using an allocation methodology similar to the allocation methodology used to allocate cash compensation expense.

~~The weighted average grant-date fair value of the~~years. There were no options ~~awarded to employees~~granted during the nine months ended September 30, ~~2019 and 2018 was $5.53 and $6.18, respectively. The fair value of the options was estimated on the date of grant using a Black-Scholes option pricing model with the following assumptions:~~2023 or 2022.

September 30,

2019

2018

Range of expected option life

5.5 - 6 years

5.5 - 6 years

Expected volatility

74.69% - 80.59%

74.05% - 81.47%

Risk-free interest rate

1.42 - 2.66%

2.32 - 2.98%

Expected dividend yield

—

—

The following table summarizes Baudax Bio stock option activity during the nine months ended September 30, ~~2019:~~2023:

Number of
shares

Weighted
average
exercise
price

Weighted
average
remaining
contractual life
Balance, December 31, 2018

3,092,606

$
7.32

7.3 years
Granted

1,094,756

$
7.95

Exercised

(408,170
)

$
5.94

Expired/forfeited/cancelled

(678,645
)

$
7.84

Balance, September 30, 2019

3,100,547

$
7.61

6.9 years
Vested

1,973,108

$
7.31

5.9 years
Vested and expected to vest

3,100,547

$
7.61

6.9 years


	Number of shares			Weighted average exercise price		Weighted average remaining contractual life
Balance, December 31, 2022		1,939		$	3,509.06	6.5 years
Expired/forfeited/cancelled		(402	)	$	3,891.09
Balance, September 30, 2023		1,537		$	3,412.09	7.4 years
Vested		1,268		$	3,523.09	7.3 years
Vested and expected to vest		1,537		$	3,412.09	7.4 years

Included in the table above are ~~482,876~~28 stock options outstanding as of September 30, ~~2019~~2023 that were granted outside of the plan. The grants were made pursuant to the ~~NASDAQ~~Nasdaq inducement grant exception in accordance with ~~NASDAQ~~Nasdaq Listing Rule 5635(c)(4).

Restricted Stock Units (RSUs):

As a result of the Company’s reduction in workforce announced in April 2019, the Company cancelled approximately 600,000 unvested stock options upon termination, which are reflected in the table above.

The following table summarizes ~~restricted stock units (RSUs),~~Baudax Bio RSUs activity during the nine months ended September 30, ~~2019.~~2023:

	~~Number of~~ ~~shares~~
~~Balance, December 31, 2018~~		~~981,453~~
~~Granted~~		~~664,210~~
~~Vested and settled~~		~~(421,552~~	)
~~Expired/forfeited/cancelled~~		~~(455,437~~	)
~~Balance, September 30, 2019~~		~~768,674~~
~~Expected to vest~~		~~517,474~~


	Number of shares			Weighted average grant date fair value
Balance, December 31, 2022		10,611		$	88.19
Granted		—			—
Vested and settled		(7,558	)		3.41
Expired/forfeited/cancelled		(386	)		1,318.71
Balance, September 30, 2023		2,667		$	150.34
Expected to vest		2,667

Included in the table above are ~~18,625~~2 shares of time-based RSUs outstanding as of September 30, ~~2019~~2023 that were granted outside of the plan. The grants were made pursuant to the ~~NASDAQ~~Nasdaq inducement grant exception in accordance with ~~NASDAQ~~Nasdaq Listing Rule 5635(c)(4).

Stock-Based Compensation Expense:

As a result of the Company’s reduction in workforce announced in April 2019, the Company cancelled approximately 300,000 shares related to RSUs upon termination, which is reflected in the table above.

Stock-based compensation expense from continuing operations for the nine months ended September 30, ~~2019~~2023 and ~~2018~~2022 was ~~$4,254~~$595 and ~~$3,370,~~$1,062, respectively.

As of September 30, ~~2019,~~2023, there was ~~$7,532~~$240 of unrecognized compensation expense related to unvested options and time-based RSUs that are expected to vest and will be expensed over a weighted average period of ~~2.0~~0.6 years. ~~As of September 30, 2019, there was $1,621 of unrecognized compensation expense related to unvested performance-based RSUs and will be expensed if the performance criteria are met.~~

The aggregate intrinsic value represents the total amount by which the fair value of the common stock subject to options exceeds the exercise price of the related options. As of September 30, ~~2019, the~~2023, there was no aggregate intrinsic value of the vested and unvested options.

The TeraImmune 2019 Equity Plan

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

(amounts in thousands, except share and per share data)

(Unaudited)

In 2019, TeraImmune adopted the TeraImmune 2019 Stock Option and Restricted Stock Plan (the “TeraImmune 2019 Plan”) that provides for the granting of incentive stock options, non-statutory stock options and restricted stock awards. As of September 30, 2023, there were no shares available for future issuance. The TeraImmune 2019 Plan was ~~$7,514 and $3,331, respectively.~~

~~(12)~~

~~Related Party Transactions~~

~~A Non-Executive Director~~assumed by the Company through the Merger Agreement. Under the terms of the ~~Company’s Irish subsidiary is a Managing Director and a majority shareholder~~Merger Agreement, all options to purchase or acquire shares of ~~HiTech Health Ltd (HiTech Health), a consultancy firm for~~TeraImmune held by continuing employees (as defined in the ~~biotech, pharmaceutical and medical device industry. Since 2016, HiTech Health has provided~~Merger Agreement) were assumed by the Company ~~with certain consulting services~~ and ~~in November 2017 both parties entered~~converted into ~~a Service Agreement~~options to ~~engage in both regulatory~~purchase shares of common stock and ~~supply chain project support~~Series X Preferred Stock on the same terms and ~~consultancy. In consideration for~~conditions as applied to such ~~services,~~options and restricted stock awards immediately prior to the ~~Company recorded $11~~Acquisition.

Stock Options:

Options generally vest and ~~$25 for~~become exercisable over two years and expire seven years from the ~~three months ended September 30, 2019 and 2018, respectively. For~~date of grant. The weighted average grant-date fair value of the options awarded to employees during the nine months ended September 30, 2023 was $0.24. Under the TeraImmune 2019 ~~and 2018~~Plan, the ~~Company recorded $115 and $278, in consideration for such services, respectively. A portion~~fair value of the ~~amount relates to consultancy services provided by~~options was estimated on the ~~Non-Executive Director.~~date of grant using a Black-Scholes option pricing model with the following weighted average assumptions:


~~(13)~~	~~Retirement Plan~~	September 30,
		2023
Expected option life		5.6 years
Expected volatility		105%
Risk-free interest rate		4.38%
Expected dividend yield			—

The following table summarizes the stock option activity during the nine months ended September 30, 2023:


	Number of shares		Weighted average exercise price		Weighted average remaining contractual life
Balance, December 31, 2022		—	$	—		—
Granted		973,287	$	2.37	5.6 years
Expired/forfeited/cancelled		—	$	—
Balance, September 30, 2023		973,287	$	2.37	5.4 years
Vested		275,370	$	2.22	4.1 years
Vested and expected to vest		973,287	$	2.37	5.4 years

Stock-Based Compensation Expense:

Stock-based compensation expense from continuing operations for the nine months ended September 30, 2023 was $47.

As of September 30, 2023, there was $116 of unrecognized compensation expense related to unvested options that are expected to vest and will be expensed over a weighted average period of 2.1 years.

The aggregate intrinsic value represents the total amount by which the fair value of the common stock subject to options exceeds the exercise price of the related options. As of September 30, 2023, there was no aggregate intrinsic value of the vested and unvested options.

(15) Retirement Plan

The Company has a voluntary 401(k) Savings Plan (the ~~401(k) Plan)~~“401(k) Plan”) in which all employees are eligible to participate. The Company’s policy is to match ~~100%~~100% of the employee contributions up to a maximum of 5%5% of employee compensation. Total Company contributions to the 401(k) plan for the three months ended September 30, ~~2019~~2023 and ~~2018~~2022 were ~~$45~~$19 and ~~$90,~~$17, respectively. Total Company contributions to the 401(k) plan for the nine months ended September 30, ~~2019~~2023 and ~~2018~~2022 were ~~$281~~$77 and ~~$364,~~$161, respectively.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the interim unaudited financial statements contained in Part I, Item 1 of this ~~quarterly report,~~Quarterly Report, and the audited financial statements and notes thereto for the year ended December 31, ~~2018~~2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in ~~the Company’s Registration Statement~~our Annual Report on Form ~~10, as amended and~~10-K for the year ended December 31, 2022, filed with the ~~Securities and Exchange Commission, or~~ SEC on ~~October 22, 2019, which is referred to herein as the “Form 10.”~~February 23, 2023. As used in this ~~report,~~Quarterly Report, unless the context suggests otherwise, “we,” “us,” “our,” the “Company” or “Baudax Bio” refer to Baudax Bio, Inc. and its ~~combined~~consolidated subsidiaries.

~~Cautionary Note Regarding Forward-Looking Statements~~Overview

~~This Quarterly Report~~We are a biotechnology company focused on ~~Form 10-Q contains forward-looking statements.~~developing T cell receptor, or TCR, therapies utilizing human regulatory T cells, or Tregs, as well as having a portfolio of clinical stage Neuromuscular Blocking Agents, or NMBs, and an associated reversal agent. Our TCR Treg programs primarily focus on immune modulating therapies for orphan diseases or complications associated with such diseases, as well as the treatment of autoimmune disorders. We ~~may,~~believe that our TCR Treg programs have the potential to provide valuable therapeutic options to patients suffering from diseases for which there are limited treatment options and significant unmet need, as well as to prescribers and payers in some cases, use terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplates,” “believes,” “estimates,” “predicts,” “potential”these markets.

On June 29, 2023, we acquired TeraImmune, Inc., or ~~“continue” or other words that convey uncertainty~~TeraImmune, a Delaware corporation. TeraImmune was a privately-held biotechnology company focused on discovery and development of ~~future events or outcomes to identify these forward-looking statements.~~

~~These forward-looking statements in this quarterly report on Form 10-Q~~novel Treg-based cell therapies for autoimmune diseases. TeraImmune’s proprietary and patented technology platforms include ~~among other things, statements about:~~

~~the completion and timing~~a method for expansion of the ~~separation~~Treg without losing its function and stability, as well as a method to target specific receptors including TCRs, Chimeric Antigen Receptors, or CARs and B cell Antigen Receptors, or BARs. TeraImmune has also in-licensed through an exclusive, sublicensable, royalty-bearing license, a patent family covering methods of ~~Recro Pharma, Inc.’s Acute Care business~~producing T cell populations enriched for regulatory T cells and ~~transfer~~cell culture compositions from U.S. Department of ~~such assets to the Company, or the Separation, our business~~Health and ~~operations following the Separation~~Human Services, as represented by National Institute of Allergy and ~~any benefits or costs~~Infectious Diseases of the ~~Separation, including the tax treatment;~~

~~our post-Separation relationships~~National Institutes of Health. In addition, TeraImmune has developed Treg manufacturing procedures in accordance with ~~Recro Pharma, Inc., or Recro, third parties, licensors, collaborators and our employees;~~

~~our ability to operate as a standalone company and execute our strategic priorities;~~

~~potential indemnification liabilities we may owe to Recro after the Separation;~~

the tax treatment of the distribution to each Recro shareholder of one share of the Company’s common stock for every two and one-half shares of Recro common stock held of record at the close of business on the record date for the distribution, or the Distribution, and any limitations imposed on us under the tax matters agreements that we intend to enter into with Recro;

~~whether~~regulatory guidance from the U.S. Food and Drug Administration, or ~~FDA will approve our amended new drug~~the FDA.

In June 2022, TeraImmune’s Investigational New Drug, or IND, application ~~or NDA, for IV meloxicam and, if approved, the labeling under any such approval that we may obtain;~~

~~our ability~~ to ~~successfully commercialize IV meloxicam before approval or upon regulatory approval;~~

our ability to generate sales and other revenues from IV meloxicam or any of our other product candidates, once approved, including setting an acceptable price for and obtaining adequate coverage and reimbursement of such products;

~~the results, timing and outcome of our~~commence clinical trials of ~~IV meloxicam~~a Factor VIII, or ~~our other~~FVIII, TCR-Treg treatment for Hemophilia A with inhibitors was cleared by the FDA.

Tregs are designed to recognize and target certain cells through the engagement of target-specific receptors by peptide antigens presented on the surface of the target cell by the major histocompatibility complex. Our proprietary and patented technology platform consists of two approaches: (1) which involves the isolation of natural Tregs, and (2) which involves engineering effector T, or Teff, cells into antigen-specific Tregs. Each approach is intended to recognize and attack antigens while avoiding an attack on healthy cells and tissues. The lead product ~~candidates,~~candidate we acquired in the acquisition with TeraImmune, TI-168, is being developed for the treatment of Hemophilia A with inhibitors, which received IND clearance in 2022. We have in-licensed two patent families relating to TI-168, nucleic acids constructs encoding T cell receptors, methods of producing TI-168, immunosuppressive induced regulatory T cells from the Henry M. Jackson Foundation for the Advancement of Military Medicine, Inc., or HJF, under two worldwide, exclusive, sublicensable royalty-bearing licenses. We also exclusively license a family of pending U.S. and foreign patent applications directed to immunosuppressive induced regulatory T cells and methods of producing these cells, which if issued would expire in 2041 subject to any ~~future~~applicable disclaimer or extensions.

We also hold exclusive global rights to two new molecular entities, which are NMBs, BX1000, an intermediate duration of action NMB that recently completed a successful Phase II clinical trial, and BX2000, an ultra-short acting NMB currently undergoing a Phase I dose escalation clinical trial. A proprietary blockade reversal agent, BX3000, is currently being evaluated in preclinical studies intended to support an IND filing in 2023. BX3000 is an agent that is expected to rapidly reverse BX1000 and BX2000 blockade. All three agents are licensed from Cornell University. We believe these agents, when an NMB and BX3000 are administered in succession, allow for a rapid onset of centrally acting neuromuscular blockade, followed by a rapid reversal of the neuromuscular blockade with BX3000. These novel agents have the potential to meaningfully reduce time to onset and reversal of blockade and improve the reliability of onset and offset of neuromuscular blockade. This can potentially reduce time in operating rooms or post operative units, resulting in potential clinical and ~~preclinical studies;~~cost advantages, as well as valuable cost savings for hospitals and ambulatory surgical centers and has the potential for an improved clinical profile in terms of safety.

In mid-2020, we launched our ~~ability to comply with the regulatory schemes applicable to our business and other regulatory developments~~first commercial product, ANJESO, in the United ~~States~~States. ANJESO was the first and ~~foreign countries;~~

~~the performance~~only 24-hour, intravenous, analgesia agent. We discontinued commercial sales of ~~third-parties upon which we depend, including third-party contract research organizations,~~ANJESO in December 2022 and ~~third-party suppliers, manufacturers, distributers and logistics providers;~~

~~our ability to obtain and maintain patent protection and defend our intellectual property rights against third-parties;~~

~~our ability to maintain our relationships and contracts with our key commercial partners;~~

~~our ability to defend the securities class action lawsuit filed against Recro,~~further withdrew its New Drug Application, or ~~any future material litigation filed against us;~~

~~our ability to recruit or retain key scientific, technical, commercial, and management personnel or to retain our executive officers; and~~

the effects of changes in our effective tax rate due to changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, tax impacts and net operating loss utilizationNDA, related to ~~the Acute Care segment separation and changes~~ANJESO in ~~the tax laws.~~

Any forward-looking statements that we make in this Quarterly Report speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.late March 2023.

You should also read carefully the factors described in the “Risk Factors” included in the Company’s Information Statement furnished to the SEC on October 22, 2019, as amended, to better understand significant risks and uncertainties inherent in our business

and underlying any forward-looking statements. As a result of these factors, actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements in this report and you should not place undue reliance on any forward-looking statements.

~~Overview~~

We are a pharmaceutical company primarily focused on developing and commercializing innovative products for acute care settings. We believe that we can bring valuable therapeutic options for patients, prescribers and payers, such as our lead product candidate, IV meloxicam, to the acute care markets. We believe we can create value for our shareholders through the development, registration and commercialization of IV meloxicam and our other pipeline product candidates. In addition to our pipeline, we continue to evaluate acquisition, out-licensing and in-licensing opportunities. WeOur costs have ~~no revenue and our costs consist~~consisted primarily of expenses incurred in conducting our manufacturing ~~scale-up,~~and commercialization of ANJESO, which was discontinued in December 2022, as well as public company and personnel costs, clinical trials and preclinical studies, regulatory activities, ~~pre-commercialization~~and manufacturing costs for our NMB blocking and reversal agents. We intend to begin a trial of ~~meloxicam, public-company and personnel costs.~~TI-168 in patients with Hemophilia A with inhibitors in 2024.

We expect to incur ~~significant and increasing~~ operating losses for at least the next ~~few~~several years. We expect substantially all of our operating losses to result from costs incurred in connection with our development programs, including our clinical, nonclinical, preclinical and manufacturing ~~clinical trials, public-company and pre-commercialization~~related activities. Our expenses over the next several years are expected to primarily relate to developing our product candidates. In addition, we may incur costs associated with the acquisition or in-license of ~~a product~~products and successful commercialization of the developed, acquired or in-licensed ~~product, obtaining regulatory approval for IV meloxicam and, if approved, successfully commercializing IV meloxicam, and continuing to develop our other current and future product candidates.~~products.

Business Acquisition

~~Separation from Recro Pharma, Inc.~~

In November 2019, Recro announced its plans to separate its acute care business from its CDMO business through a pro rata distribution of our common stock to shareholders of Recro. In preparation for the Separation, Recro will transfer the assets, liabilities and operations of its acute care business to us, pursuant toOn June 29, 2023, in accordance with the terms of an Agreement and Plan of Merger, or the Merger Agreement, we acquired 100% of the outstanding security interests of TeraImmune in a ~~Separation Agreement, entered into between Recro and Baudax Bio. On November 21, 2019,~~“stock-for-stock” transaction, or the ~~distribution date, each Recro shareholder will receive one share~~Acquisition, whereby all TeraImmune outstanding equity interests were exchanged for a combination of our common stock for every two and one-half shares of Recro common stock held of record at the close of business on November 15, 2019, the record date for the Distribution. Registered shareholders will receive cash in lieu of any fractional shares of our common stock ~~that they would have received as a result~~and shares of Series X Non-Voting Convertible Preferred Stock, or Series X Preferred Stock. Under the terms of the ~~application~~Merger Agreement, TeraImmune stockholders, or Target Stockholders, received (i) 1,212,185 shares of our common stock and (ii) 27,089.719 shares of Series X Preferred Stock, of which 314,282 of common stock and 7,024 of preferred stock are classified as escrow shares at Closing. In addition, all outstanding options to purchase or acquire shares of TeraImmune common stock were assumed by us and converted into restricted stock awards and options to purchase shares of common stock and Series X Preferred Stock on the same terms and conditions as applied to such options and restricted stock awards immediately prior to the Acquisition. Each share of Series X Preferred Stock convert into 1,000 shares of common stock upon conversion and shareholder approval. On a pro forma basis and based upon the number of shares of our common stock and Series X Preferred Stock issued in the Acquisition, our shareholders immediately prior to the Acquisition will own approximately 18% of the ~~distribution ratio. Following~~combined company (on an as-converted, fully-diluted basis and excluding certain out-of-the-money warrants held by our shareholders) immediately after these transactions. The Acquisition was unanimously approved by our Board of Directors and the ~~Distribution, we will operate as a separate, independent company.~~Board of Directors of TeraImmune. The ~~Distribution is~~closing of the transaction was not subject to the ~~satisfaction or waiver by Recro~~approval of ~~certain conditions. For a more detailed description of these conditions, see “The Separation and Distribution—Conditions~~our shareholders.

Pursuant to the ~~Distribution” included~~Merger Agreement, we agreed to hold a special meeting of shareholders, or the Special Meeting, to submit certain matters to our shareholders for their consideration, including: (i) the approval of the conversion of the Series X Preferred Stock into shares of common stock in accordance with Nasdaq Listing Rule 5635(a), or the ~~Form 10.~~Conversion Proposal, and (ii) the approval to effect a reverse stock split of all of our issued and outstanding shares of common stock, or the Reverse Stock Split Proposal, together with the Conversion Proposal, the “Merger Agreement Meeting Proposals”. On October 12, 2023 the shareholders approved both the Conversion Proposal and the Reverse Stock Split Proposal. On November 14, 2023, the 27,089.719 outstanding shares of Series X Preferred Stock converted into 27,089,719 shares of common stock

~~Our historical combined financial statements have been prepared on~~ANJESO Transfer Agreement

In March 2023, we entered into an Asset Transfer Agreement with Alkermes Pharma Ireland Limited, or Alkermes, or the Transfer Agreement. Under the terms of the Transfer Agreement, we transferred the rights to certain patents, trademarks, equipment, data and other rights related to ANJESO, or the Assets to Alkermes. We also withdrew the New Drug Application, or NDA, related to ANJESO and agreed, if elected by Alkermes at a ~~stand-alone basis~~later date, to transfer such withdrawn NDA to Alkermes at no additional cost.

2022 Reduction in Force

Due to our cash position, in March 2022, we implemented a reduction in workforce by approximately 17 employees related to our continuing operations. The reorganization was substantially completed by the end of the second quarter of 2022 and ~~are derived from Recro’s~~approximately $1.7 million of charges were incurred for severance and other related costs. The reduction in force was designed to substantially reduce our operational expenses and conserve cash resources.

Discontinued Operation

Upon executing the Transfer Agreement, we met the criteria for discontinued operations related to our commercial business. Accordingly, the accompanying consolidated financial statements ~~and accounting records and are~~for all periods presented ~~in conformity with U.S. GAAP. Our financial position,~~reflect this business as a discontinued operation. Discontinued operations include results of ~~operations and cash flows historically operated, and will continue~~our commercial business except for certain corporate overhead costs, which are included in continuing operations. See Note 4 to ~~operate, as part of Recro’s financial position, results of operations and cash flows prior~~the Consolidated Financial Statements included in this Quarterly Report for additional information.

Financial Overview

Revenue

We sold ANJESO in the U.S. through a single third-party logistics provider, or 3PL, which took title to and control of the goods and was considered our customer. We recognized revenue from ANJESO product sales at the point the title to the product is transferred to

the customer and the customer obtained control of the product. The transaction price that was recognized as revenue for products included an estimate of variable consideration for reserves, which result from discounts, returns, chargebacks, rebates and other allowances that were offered within contracts between us and our end-user customers, wholesalers, group purchasing organizations and other indirect customers. In December 2022, we discontinued the commercialization of ANJESO and the majority of expenses associated with the discontinuation were incurred by the end of the first quarter of 2023.

Cost of Sales

Historically, cost of sales included product costs, manufacturing costs, transportation and freight, royalty expense, qualification costs for a secondary manufacturing suite and indirect overhead costs associated with the manufacturing and distribution of ANJESO including supply chain and quality personnel costs. Cost of sales also included period costs related to certain manufacturing services and inventory adjustment charges. We discontinued commercialization of ANJESO in December 2022. We believe there is very modest inventory held at the wholesaler level and accepted product returns until the Distribution to Recro’s shareholders. These historical combined financial statements may not be indicative of our future performance and do not necessarily reflect what our combined results of operations, financial condition and cash flows wouldJune 30, 2023, which have been ~~had we operated~~recorded as ~~a separate company during the periods presented. We expect that changes will occur in our operating structure and our~~ ~~capitalization as a result~~ of ~~the Separation from Recro.~~September 30, 2023.

~~Financial Overview~~

Research and Development Expenses

Research and development expenses ~~currently consist~~have consisted primarily of costs incurred in connection with the NMB portfolio and in previous years, the FDA required pediatric development of ~~IV meloxicam and other pipeline~~ANJESO activities. These expenses consist primarily of:of:

•

expenses incurred under agreements with ~~contract research organizations,~~ investigative sites, consultants and ~~consultants~~other service providers that conduct or support our clinical ~~trials~~ and ~~a substantial portion of our preclinical studies;~~

pre-clinical trials;

•

the cost of acquiring and manufacturing clinical trial drug supply and related manufacturing ~~services and pre-commercial product validation and inventory manufacturing expenses;~~

services;

•

costs related to facilities, depreciation and other allocated expenses;

•

~~acquired in-process research and development;~~

costs associated with ~~non-clinical~~regulatory activities and ~~regulatory activities;~~responses to the FDA; and

•

salaries and related costs for personnel in research and development and pre-commercial regulatory functions.

The majority of our external research and development costs have related to clinical trials, manufacturing of drug supply for pre-commercial products, analysis and testing of product candidates and patent costs. We expense costs related to clinical inventory and pre-commercial inventory until we receive approval from the FDA to market a product, at which time we commence capitalization of costs relating to that product to inventory. Costs related to facilities, depreciation and support are not charged to specific ~~programs~~.programs. Subsequent to regulatory approval of ANJESO and prior to the withdrawal of the NDA, we allocated or recategorized certain personnel and overhead expenses related to medical affairs, supply chain, quality and regulatory support functions that had previously been recorded within research and development, to cost of sales or selling, general and administrative expenses in support of the commercialization of ANJESO. Pre-commercial activities directly utilizing personnel and overhead expenses from the medical affairs, supply chain, quality and regulatory support function continue to be recorded within research and development.

The ~~successful~~ development of ~~IV meloxicam and~~ our other product candidates is highly uncertain and subject to a number of risks, including, but not limited to:

•

the costs, timing and outcome of regulatory review of a ~~product;~~

product candidate;

•

the duration of clinical trials, which varies substantially according to the type, complexity and novelty of the product candidate;

•

substantial requirements on the introduction of pharmaceutical products imposed by the FDA and comparable agencies in foreign countries, which require lengthy and detailed laboratory and clinical testing procedures, sampling activities and other costly and time-consuming procedures;

•

the possibility that data obtained from pre-clinical and clinical activities at any step in the testing process may be adverse and lead to discontinuation or redirection of development activity or may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval;

•

risk involved with development of manufacturing processes, FDA pre-approval inspection practices and successful completion of manufacturing batches for clinical development and other regulatory purposes;

•

the emergence of competing technologies and products, including obtaining and maintaining patent protections, and other adverse market developments, which could impede our commercial efforts; and

•

the other risks disclosed in the ~~section~~sections titled “Risk Factors” ~~section~~ of ~~the Form 10.~~

our 2022 Annual Report and this Quarterly Report.

Development timelines, probability of success and development costs vary widely. As a result of the uncertainties discussed above, we will assess ~~additional information as we progress through~~ our ~~discussions with the FDA regarding obtaining regulatory approval for IV meloxicam, as well as assess IV meloxicam’s~~product candidate’s commercial potential and our available capital resources. Accordingly, we cannot currently estimate with any degree of certainty the amount of time or costs that we will expend in the future on IV meloxicam prior to regulatory approval, if such approval is ever granted. As a result of these uncertainties surrounding the timing and outcome of any approval, we are currently unable to estimate precisely when, if ever, any of our product candidates will generate revenues and cash ~~flows~~.flows.

We expect our research and development costs to ~~continue to~~ relate to ~~IV meloxicam as we seek to obtain regulatory approval for IV meloxicam,~~the development and ~~if successful in obtaining regulatory approval, advance IV meloxicam through the~~ commercialization scale-up ~~and other activities.~~ ~~We also expect to have expenses related to work for maintenance~~ of our ~~other~~Treg-based cell therapy portfolio and NMB product ~~candidates.~~ candidate portfolio. We may elect to seek collaborative relationships in order to provide us with a diversified revenue stream and to help facilitate the development and commercialization of our product candidate pipeline.

Selling, General and Administrative Expenses

Selling, general and administrative expenses have historically consisted of sales and marketing expenses related to ANJESO and general and administrative expenses.

Sales and marketing expenses primarily consisted of compensation and benefits for our sales force and personnel that supported our sales and marketing efforts as well as third party consulting costs for the promotion and sale of ANJESO. In addition, sales and marketing expenses included expenses related to communicating the clinical and economic benefits of ANJESO and educational programs for our indirect customers.

General and administrative expenses consist principally of salaries and related costs for personnel in executive, ~~pre-commercial,~~ finance and information technology functions, and additionally in the prior year, the commercial portion of the medical affairs and regulatory functions. General and administrative expenses also include public company costs, directors and officer’s insurance, professional fees for legal, including patent-related expenses, consulting, auditing, and tax services.

~~Change in Fair Value of Contingent Consideration~~Interest Expense

~~Pursuant to the Purchase and Sale Agreement entered into~~Interest expense for the ~~acquisition~~periods presented primarily includes interest expense incurred on our Credit Agreement with MAM Eagle Lender, the amortization of ~~a manufacturing facility~~related financing costs, and in ~~Gainesville, Georgia and~~ the ~~licensing and commercialization rights for IV meloxicam, or~~current year the Gainesville Transaction, as amended in December 2018, among Alkermes Pharma Ireland Limited and Alkermes US Holdings, or Alkermes, Daravita, Recro and Recro Gainesville LLC, we are required to pay up to an additional $140.0 million in milestone payments, including $10.0 million during the first halfresulting loss on extinguishment of 2019, another $5.0 million due within 180 days of approval of IV meloxicam and $45.0 million over seven years beginning one year after approval, as well as net sales milestones and a royalty percentage of future product net sales related to IV meloxicam between 10% and 12% (subject to a 30% reduction when no longer covered by patent). The estimated fair valuedebt from Amendment No. 5 of the ~~initial $54.6 million payment obligation was recorded as part of the purchase price for the Gainesville Transaction.~~ Credit Agreement.

Income Taxation

We ~~have continued to reevaluate the fair value each subsequent period and~~ maintained a valuation allowance against our deferred tax assets as of September 30, ~~2019 recorded a $65.7 million payment obligation~~, representing the estimated probability adjusted fair value. Each reporting period, we revalue this estimated obligation with changes in fair value recognized as a non-cash operating expense or gain. As of September 30, 2019, ~~we have paid $10.0 million in milestone payments to Alkermes.~~

~~Income Taxation~~2023 and December 31, 2022.

In December 2017, the federal government enacted numerous amendments to the Internal Revenue Code of 1986 pursuant to the Tax Cuts and Jobs Act, or the Tax Act. The Tax Act will impact our income tax expense/(benefit) from operations ~~in the current and~~ ~~in future periods. The Tax Act resulted in the following impacts to us:~~

~~Our federal statutory income tax rate was reduced from 34% to 21% for 2018 and tax years following.~~

We will be able to claim an immediate deduction for investments in qualified fixed assets acquired and placed in service beginning September 27, 2017 through 2022. This provision phases out through 2026.

Given our taxable losses in the U.S., we will be limited in our ability to deduct interest expense, and any disallowed interest expense for 2018 and tax years following will result in an indefinite carry forward until such time as we meet the taxable income thresholds required to deduct interest expense.

Results of Operations

Comparison of the Three Months Ended September 30, ~~2019~~2023 and ~~2018~~2022


	Three Months Ended September 30,						Three Months Ended September 30,
	2019			2018			2023			2022
	(amounts in thousands)						(amounts in thousands)
Operating expenses:
Research and development	$	1,845		$	9,838		$	1,901		$	622
General and administrative		4,524			5,107			3,639			2,953
Change in fair value of warrants and derivatives								(3,587	)		—
Change in contingent consideration valuation		3,909			4,115			(177	)		—
Total operating expenses		10,278			19,060			1,776			3,575
Operating loss		(10,278	)		(19,060	)
Other income (expense):
Other income (expense), net		(37	)		(32	)
Operating loss from continuing operations								(1,776	)		(3,575	)
Other expense:
Other expense, net								(115	)		(512	)
Net loss from continuing operations								(1,891	)		(4,087	)
Loss on discontinued operation								(43	)		(25,120	)
Net loss	$	(10,315	)	$	(19,092	)	$	(1,934	)	$	(29,207	)

Research and Development. Our research and development expenses were ~~$1.8~~$1.9 million and ~~$9.8~~$0.6 million for the three months ended September 30, ~~2019~~2023 and ~~2018,~~2022, respectively. The ~~decrease~~increase of ~~$8.0~~$1.3 million ~~resulted from~~was a ~~decrease~~result of an increase in ~~pre-commercialization manufacturing~~clinical trials costs associated with our NMB and ~~clinical costs for IV meloxicam~~with our Treg portfolios related to our acquisition of ~~$4.8 million, a decrease in development costs for other pipeline products of $2.2 million and a decrease in personnel costs of $1.0 million.~~TeraImmune.

General and Administrative. Our general and administrative expenses were ~~$4.5~~$3.6 million and ~~$5.1~~$3.0 million for the three months ended September 30, ~~2019~~2023 and ~~2018,~~2022, respectively. The ~~decrease~~net increase of $0.6 million was ~~primarily due to decreased commercial team personnel costs~~a result of ~~$1.2~~an increase of $1.0 million ~~and pre-commercial consulting costs of $0.4 million following the receipt of the second complete response letter, or CRL, for IV meloxicam. These decreases were partially offset by increases~~ in public company costs ~~including legal fees and CRL response costs of $1.0 million.~~

~~Change in Contingent Consideration Valuation.~~ ~~Our change in contingent consideration valuation was~~as well as an increase of $0.2 million associated with our recent acquisition of TeraImmune and its facility, offset by a

reduction in personnel costs of $0.3 million related to our reduction in headcount in 2022 and a decrease in consulting costs of $0.3 million.

Change in Fair Value of Warrants and Derivatives. Our derivative liability is our obligation to issue shares of our common stock upon the conversion of the Series X Preferred Stock and is revalued at each reporting period. The fair value ~~of $3.9~~decreased by $3.6 million for the three months ended September 30, ~~2019~~2023 as a result of an decrease in our share price.

Change in Contingent Consideration valuation. Our contingent consideration is related to shares held in escrow as a result of the Merger and ~~an increase in~~is revalued at each reporting period. The fair value ~~of $4.1~~decreased by $0.2 million for the three months ended September 30, ~~2018.~~2023 as a result of a decrease in our share price.

Other Expense, net. Other expense was $0.1 million and $0.5 million for the three months ended September 30, 2023 and 2022, respectively. The ~~non-cash charge~~decrease in other expense of $0.4 million was primarily related to a decrease of $0.3 million in the amortization of financing costs and a decrease of $0.1 million in interest expense related to our Credit Agreement with MAM Eagle Lender due to the reduction in principal balance.

Loss on discontinued operations. Loss from discontinued operations for ~~contingent consideration~~the three months ended September 30, 2023 and 2022 was $0.1 million and $25.1 million, respectively, which relates to our discontinued commercial business of ANJESO. The decrease in ~~each period~~loss from the discontinued operation of $25.0 million was primarily the result of a decrease of $23.0 million in expense related to the ~~revaluation of the probability adjusted~~change in fair value of contingent consideration, a decrease of $1.0 million in reduced selling expenses due to the ~~Gainesville Transaction payment obligation.~~discontinuation of commercialization of ANJESO, and a decrease of $1.0 million in amortization expense.

Comparison of the Nine Months Ended September 30, ~~2019~~2023 and ~~2018~~2022


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2023			2022
	(amounts in thousands)						(amounts in thousands)
Operating expenses:
Research and development	$	18,578		$	25,664			6,597			2,196
General and administrative		21,809			24,170			7,664			12,785
Change in fair value of warrants and derivatives								(717	)		(7	)
Change in contingent consideration valuation		(15,241	)		7,030			(35	)		—
Total operating expenses		25,146			56,864			13,509			14,974
Operating income (loss)		(25,146	)		(56,864	)
Other income (expense):
Other income (expense), net		(86	)		(122	)
Net loss	$	(25,232	)	$	(56,986	)
Operating loss from continuing operations								(13,509	)		(14,974	)
Other expense:
Other expense, net								(3,069	)		(1,652	)
Net loss from continuing operations								(16,578	)		(16,626	)
Income (loss) on discontinued operation								18,673			(32,920	)
Net income (loss)							$	2,095		$	(49,546	)

Following the receipt of the second CRL, we implemented a strategic restructuring initiative, and corresponding reduction in workforce, aimed at reducing operating expenses, while maintaining key personnel needed to select a partner and obtain FDA approval of IV meloxicam. The restructuring initiative included a reduction of approximately 50 positions. During the nine months ended September 30, 2019, we have incurred approximately $7.2 million (all $7.2 million was incurred in the first half of 2019) of costs in connection with the strategic restructuring plan which includes severance and related termination benefits and canceled marketing and production costs

Research and Development. Our research and development expenses were ~~$18.6~~$6.6 million and ~~$25.7~~$2.2 million for the nine months ended September 30, ~~2019~~2023 and ~~2018,~~2022, respectively. ~~Excluding $2.8~~The increase of ~~costs~~$4.4 million was primarily due to an increase in operational expenses associated with ~~the strategic restructuring initiative recorded in the nine months ended September 30, 2019, the decrease of $9.9 millionresulted from a decrease in pre-commercialization manufacturing~~our NMB program, including clinical and ~~clinical costs for IV meloxicam of $6.7 million, a decrease in personnel~~preclinical trials costs of ~~$1.9~~$2.8 million and ~~a decrease~~an increase in ~~development costs for~~general expenses, including consulting, recent acquisition of personnel and other ~~pipeline products~~outside service expenses of ~~$1.3~~$1.6 million.

General and Administrative. Our general and administrative expenses were ~~$21.8~~$7.7 million and ~~$24.2~~$12.8 million for the nine months ended September 30, ~~2019~~2023 and ~~2018,~~2022, respectively. ~~Excluding $4.4 million of costs associated with the strategic restructuring initiative recorded in the nine months ended September 30, 2019, the~~The decrease of ~~$6.8~~$5.1 million was ~~due to~~primarily a result of a reduction in ~~commercial team~~ personnel ~~of $5.5 million and reduced pre-commercial consulting~~ costs of ~~$2.5~~$4.1 million, a decrease in consulting expenses of $1.2 million, a decrease in legal expenses of $0.2 million, offset by an increase of $0.3 million in ~~preparation~~facility, legal and other expenses.

Change in Fair Value of Warrants and Derivatives. Our derivative liability is our obligation to issue shares of our common stock upon the conversion of the ~~anticipated launch of IV meloxicam following the receipt of the second CRL. These decreases in costs were partially offset~~Series X Preferred Stock and is revalued at each reporting period. The fair value decreased by increases in costs associated with the public company costs including legal fees, of $0.9 million as well as increased professional fees associated with addressing the first and second CRLs issued by the FDA regarding our NDA for IV meloxicam of $0.3 million.

~~Change in Contingent Consideration Valuation.~~ ~~Our change in contingent consideration valuation consisted of a reduction of value of $15.2~~$0.7 million for the nine months ended September 30, ~~2019~~2023 as ~~compared~~a result of an decrease in our share price.

Change in Contingent Consideration valuation. Our contingent consideration is related to ~~an increase~~shares held in escrow as a result of the Merger and is revalued at each reporting period. The fair value ~~of $7.0~~decreased by $0.1 million for the nine months ended September 30, ~~2018.~~2023 as a result of an decrease in our share price.

Other Expense, net. Other expense was $3.1 million and $1.7 million for the nine months ended September 30, 2023 and 2022, respectively. The ~~non-cash charge~~increase in other expense of $1.4 million was primarily due to the loss on extinguishment of debt as a result of the fifth amendment to the MAM credit agreement of $2.1 million, partially offset by a decrease in financing expenses also related to our MAM credit agreement of $0.3 million.

Income (loss) on discontinued operations.Income from discontinued operations for ~~contingent consideration~~the nine months ended September 30, 2023 was $18.7 million, compared to a loss from discontinued operation for the nine months ended September 30, 2022 of $33.2 million, an increase in ~~each period~~income of $51.6 million, which relates to our discontinued commercial business of ANJESO. The increase in income from the discontinued operation was primarily the result of a decrease of $18.6 million in expense related to the ~~revaluation of the probability adjusted~~change in fair value of ~~the Gainesville Transaction payment obligation. The~~contingent consideration, a decrease of ~~$22.2~~$10.2 million ~~was~~in reduced selling expenses due to the ~~adjusted timing~~discontinuation of ~~estimated milestone~~commercialization of ANJESO, and ~~royalty payments after~~a decrease of $1.9 million in amortization expense, and a decrease of $20.9 million in expense related to the ~~receipt~~impairment of ~~the second CRL from the FDA~~property and equipment in ~~March 2019.~~2023 related to ANJESO.

Liquidity and Capital Resources

~~Historically, the primary source~~As of ~~liquidity for our business was~~September 30, 2023, we had $0.4million in cash ~~flow allocated to us from Recro. Prior to the Separation, transfers of~~and cash to and from Recro are reflected in Net Parent Investment in the historical combined balance sheets, statements of cash flows and statements of changes in Net Parent Investment. We have not reported cash or cash equivalents for the periods presented in the combined balance sheets. We expect Recro to continue to fund our cash needs through the date of the Separation.equivalents.

Under the terms of the Separation Agreement, prior to or upon the completion of the Distribution, Recro will make a cash capital contribution of $19 million to us to fund our operations. This cash capital contribution is in an amount that we estimate will, based on our current plans and expectations, meet our cash needs for at least 12 months after the completion of the Separation. Subsequent to the Separation, we will no longer participate in Recro’s centralized cash management or benefit from direct funding from Recro. Our ability to fund our operations and capital needs will depend on our ability to raise additional funds through debt financings, bank or other loans, licensing, including out-licensing activities, sale of assets and/or marketing arrangements or through public or private sales of equity or debt securities from time to time. Financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could materially adversely impact our growth plans and our financial condition or results of operations. Additional debt or equity financing, if available, may be dilutive to the holders of our common stock and may involve significant cash payment obligations and covenants that restrict our ability to operate our business or access to capital.

We anticipate that our principal uses of cash in the future will be primarily to fund our operations, pipeline development activities, working capital needs, ~~capital expenditures~~ and other general corporate purposes.

We expect to seek additional funding to sustain our future operations and while we have successfully raised capital in the past, the ability to raise capital in future periods is not assured. Based on our available cash as of September 30, 2023, we will need to raise additional capital in the next twelve months to continue as a going concern.

On August 23, 2023 we entered into a purchase agreement, or the ELOC Purchase Agreement, with Alumni Capital LP, or Alumni Capital. Pursuant to the ELOC Purchase Agreement, we may sell to Alumni Capital up to $50.0 million, or the Investment Amount, of shares, or the Purchase Notice Shares, of our common stock from time to time during the term of the ELOC Purchase Agreement. In consideration for Alumni Capital’s execution and delivery of the ELOC Purchase Agreement, we issued 579,710 shares to Alumni Capital on September 25, 2023; (ii) issued 750,000 shares to Alumni Capital on October 13, 2023; (iii) issued 750,000 shares to Alumni Capital on October 18, 2023; and (iv) agreed to issue 818,840 shares to Alumni Capital within one business day after the earlier of (a) December 1, 2023 or (b) the day in which the Company' trading volume exceeds 5,000,000 shares of common stock, provided such day is after November 1, 2023, or collectively, the "Commitment Shares").

Pursuant to the ELOC Purchase Agreement, until December 31, 2024, we may, at our discretion, direct Alumni Capital to purchase on any single business day on which the closing price of our common stock on The Nasdaq Capital Market is equal to or greater than $0.25 for no amount less than $100,000 in shares of common stock and no greater than $1.0 million in shares of common stock ($2.0 million for the initial purchase thereunder), unless waived upon mutual discretion between us and Alumni Capital, up to an amount no greater than $5.0 million. The purchase price in respect of any purchase notice shall equal the lowest traded price of our common stock during the five business days prior to the closing of any purchase thereunder, multiplied by 90%. Our net proceeds under the ELOC Purchase Agreement for the nine months ended September 30, 2023 were $0.3 million.

On August 16, 2023, we, entered into a securities purchase agreement with institutional investors named therein pursuant to which we agreed to issue and sell, in a registered direct offering, 2,006,544 shares of our common stock, par value $0.01 per share and 1,395,243 Series E pre-funded warrants to purchase 1,395,243 shares of common stock, at an offering price of $0.56 per share and $0.55 per Series E Pre-Funded Warrant. In a concurrent private placement, we agreed to issue and sell to such investors unregistered Series A-7 warrants to purchase up to 3,401,787 shares of common stock. The Series A-7 warrants have an initial exercise price of $0.56 per share and are exercisable until October 12, 2028. The exercise price of the Series A-7 warrants was reduced upon the Reverse Stock Split, to $[ ], which was the lowest daily volume weighted average price of the common stock during the five trading days following such Reverse Stock Split, and the number of shares issuable upon exercise of the Series A-7 warrants was increased such that the aggregate exercise price payable as a result of the adjustment is equal to the aggregate exercise price payable prior to the adjustment. Net proceeds to us, after deducting underwriting discounts and commissions and offering expenses, was $1.6 million.

On May 1, 2023 we closed a best efforts public offering of: (i) 1,326,175 shares of our common stock, par value $0.01 per share and accompanying Series A-5 warrants to purchase 1,326,175 shares of Common stock and Series A-6 warrants to purchase 1,326,175 shares of common stock, at a combined public offering price of $1.15 per share and accompanying Series A warrants and (ii) Series D pre-funded warrants to purchase 2,152,087 shares of common stock and accompanying Series A-5 warrants to purchase 2,152,087 shares of common stock and Series A-6 warrants to purchase 2,152,087 shares of common stock at a combined public offering price of $1.14 per Series D pre-funded warrant and accompanying Series A warrants, which is equal to the public offering price per share of Common Stock and accompanying Series A warrants less the $0.01 per share exercise price of each such Series D pre-funded warrant. The Series A warrants have an exercise price of $1.15 per share of common stock. The Series A-5 warrants are exercisable upon issuance and expire on May 1, 2028. The Series A-6 warrants are exercisable upon issuance and expire on November 1, 2024. Subject to certain ownership limitations described in the Series D pre-funded warrants, the Series D pre-funded warrants were immediately exercisable and were fully exercised at a nominal consideration of $0.01 per share of common stock shortly after closing. As compensation to H.C. Wainwright & Co., LLC, as the exclusive placement agent in connection with the offering, we paid the placement agent a cash fee of 7.0% of the aggregate gross proceeds raised in the offering, plus a management fee equal to 1.0% of the gross proceeds raised in the

offering, and reimbursement of certain expenses and legal fees. We also issued to designees of the placement agent warrants to purchase up to 208,696 shares of common stock. These warrants have substantially the same terms as the Series A warrants, except that the placement agent warrants have an exercise price equal to $1.4375 per share and expire on April 26, 2028. Net proceeds after deducting underwriting discounts and commissions and offering expenses, was $3.3 million.

On December 6, 2022 we closed a best efforts public offering of: (i) 54,787 shares of our common stock, par value $0.01 per share and accompanying Series A-3 warrants to purchase 54,787 shares of common stock and Series A-4 warrants to purchase 54,787 shares of common stock, at a combined public offering price of $4.795 per share and accompanying series A warrants and (ii) series C pre-funded warrants to purchase 988,000 shares of common stock and accompanying series A-3 warrants to purchase 988,000 shares of common stock and series A-4 warrants to purchase 988,000 shares of common stock at a combined public offering price of $4.785 per series C pre-funded warrant and accompanying series A warrants, which was equal to the public offering price per share of common stock and accompanying series A warrants less the $0.01 per share exercise price of each such series C pre-funded warrant. The series A warrants have an exercise price of $4.50 per share of common stock. The series A-3 warrants are exercisable upon issuance and expire on December 6, 2027. The series A-4 warrants are exercisable upon issuance and expire on January 8, 2024. The exercise price of the series A warrants is subject to adjustment for stock splits, reverse splits, and similar capital transactions as described in the Series A Warrants. The Series C prefunded warrants have been exercised in full as of December 31, 2022. As compensation to H.C. Wainwright & Co., LLC as the exclusive placement agent in connection with the offering, we paid the placement agent a cash fee of 7.0% of the aggregate gross proceeds raised in the offering, plus a management fee equal to 1.0% of the gross proceeds raised in the offering, and reimbursement of certain expenses and legal fees. We also issued to designees of the placement agent warrants to purchase up to 62,567 shares of common stock. The Placement Agent Warrants have substantially the same terms as the series A warrants, except that the placement agent warrants have an exercise price equal to $5.99375 per share and expire on December 2, 2027. Net proceeds after deducting underwriting discounts and commissions and offering expenses, was $4.0 million.

On September 1, 2022, we closed a best efforts public offering of: (i) 188,872 shares of its common stock, par value $0.01 per share and accompanying Series A-1 warrants to purchase 188,872 shares of Common stock and Series A-2 warrants, and together with the Series A-1 warrants to purchase 188,872 shares of Common Stock, at a combined public offering price of $21.00 per share and Series A warrants and (ii) Series B pre-funded warrants to purchase 106,607 shares of Common Stock and accompanying Series A-1 warrants to purchase 106,607 shares of Common Stock and Series A-2 warrants to purchase 106,607 shares of Common stock at a combined public offering price of $20.60 per Series B pre-funded warrant and Series A warrants, which is equal to the public offering price per share of Common Stock and accompanying Series A warrants less the $0.01 per share exercise price of each such Series B pre-funded warrant. The Series A warrants have an exercise price of $21.00 per share of Common Stock. The Series A-1 warrants are exercisable upon issuance and will expire five years from the date of issuance. The Series A-2 warrants are exercisable upon issuance and will expire thirteen months from the date of issuance. The exercise price of the Series A warrants is subject to adjustment for stock splits, reverse splits, and similar capital transactions as described in the Series A warrants. Subject to certain ownership limitations, the Series B pre-funded warrants were immediately exercisable and were exercised at a nominal consideration of $0.01 per share of Common Stock upon the closing of the transaction. As compensation to H.C. Wainwright & Co., LLC, as the exclusive placement agent in connection with the Offering, we paid a cash fee of 7.0% of the aggregate gross proceeds raised in the offering, plus a management fee equal to 1.0% of the gross proceeds raised in the offering, and reimbursement of certain expenses and legal fees. We also issued to designees of the placement agent warrants to purchase up to 17,728 shares of common stock. The placement agent warrants have substantially the same terms as the Series A warrants, except that the placement agent warrants have an exercise price equal to $26.25 per share and expire on August 29, 2027. Net proceeds, after deducting underwriting discounts and commissions and offering expenses, was $5.0 million.

On May 17, 2022, we closed a registered direct offering of 41,152 shares of our common stock, par value $0.01 per share, and in a concurrent private placements, warrants exercisable for up to an aggregate of 41,152 shares of common stock at a combined offering price of $48.60 per share and associated warrant. The warrants have an exercise price of $43.60 per share. Each warrant is exercisable for one share of common stock and was exercisable immediately upon issuance. The warrants have a term of five years from the issuance date. As compensation to H.C. Wainwright & Co., LLC as placement agent in connection with the offering, we agreed to pay to the placement agent a cash fee of 7.0% of the aggregate gross proceeds raised in the offering, plus a management fee equal to 1.0% of the gross proceeds raised in the offering and certain expenses. We also issued to designees of the placement agent warrants to purchase up to 6.0% of the aggregate number of shares of common stock sold in the transactions, or warrants to purchase up to 2,469 shares of common stock. The placement agent warrants have substantially the same terms as the warrants, except that the placement agent warrants have an exercise price equal to 125% of the offering price per share (or $60.75 per share). The placement agent warrants will expire on May 17, 2027. Net proceeds, after deducting underwriting discounts and commissions and offering expenses, was $1.7 million.

On March 1, 2022, we closed an underwritten public offering of 45,791 shares of common stock, pre-funded warrants to purchase 41,929 shares of common stock at an exercise price of $0.01 per share and warrants to purchase 87,719 shares of common stock at an exercise price of $130.00 per share, as well as up to 13,158 additional shares of common stock and/or additional warrants to purchase up to 13,158 shares of common stock which may be purchased pursuant to a 30-day option to purchase additional securities granted to H.C. Wainwright & Co., LLC, or the Underwriter, by us. The public offering price for each share of common stock and accompanying warrant to purchase one share of common stock was $114.00, and the public offering price for each pre-funded warrant and accompanying warrant was $113.60. As compensation to the Underwriter, we agreed to pay to the Underwriter a cash fee of 7.0% of the gross proceeds, plus a cash management fee equal to 1.0% of the gross proceeds and reimbursement of certain expenses and legal fees. We also issued to designees of the Underwriter warrants to purchase 5,263 shares of common stock at an exercise price of $142.50

per share. On February 28, 2022, the Underwriter partially exercised its option to purchase an additional 2,847 warrants. Net proceeds, after deducting underwriting discounts and commissions and offering expenses, was $8.8 million.

On May 29, 2020, we entered in a $50.0 million Credit Agreement with MAM Eagle Lender, or the Credit Agreement, pursuant to which we have drawn $10.0 million as of the date of this Quarterly Report and may draw upon four additional tranches of term loans. The Tranche Two Loans in an amount not to exceed $5.0 million may be drawn upon on or before August 29, 2021 provided that we generate at least $5.0 million in net revenue in the three consecutive calendar months immediately preceding the date such Tranche Two Loans are funded. The Tranche Two Loans may also be drawn on a subsequent date with the satisfaction of the conditions for the Tranche Three Loans, Tranche Four Loans, or Tranche Five Loans, as applicable, provided that the Tranche Two Loans may not be drawn more than once. The Tranche Three Loans in an amount not to exceed $5.0 million may be drawn upon on or before November 29, 2021 provided that we generate at least $10.0 million in net revenue in the three consecutive calendar months immediately preceding such date such Tranche Three Loans are funded. The Tranche Three Loans may also be drawn on a subsequent date with the satisfaction of the conditions for the Tranche Four Loans or Tranche Five Loans, as applicable, provided that the Tranche Three Loans may not be drawn more than once. The Tranche Four Loans in an amount not to exceed $10.0 million may be drawn upon, subject to the consent of the Lenders, on or before August 29, 2022 provided that we generate at least $20.0 million in net revenue in the three consecutive calendar months immediately preceding the date such Tranche Four Loans are funded. The Tranche Four Loans may also be drawn on a subsequent date with the satisfaction of the conditions for the Tranche Five Loans provided that the Tranche Four Loans may not be drawn more than once. The Tranche Five Loans in an amount not to exceed $20.0 million may be drawn upon, subject to the consent of the Lenders, on or before March 1, 2023 provided that we generate at least $100.0 million in net revenue in the twelve consecutive calendar months immediately preceding the date such Tranche Five Loans are funded.

On August 1, 2022, we entered into Amendment No. 1 and Waiver to Credit Agreement, or the First Amendment, with MAM Eagle Lender. Pursuant to the terms of the First Amendment, the lenders waived any default under the Credit Agreement (including the imposition of a default interest rate with respect to the default) resulting from our failure to comply with the minimum cash covenant, or the Minimum Liquidity Covenant, which requires us to maintain at least $5.0 million in a liquidity account. In addition, the First Amendment, among other items, (i) provided that 30% of any cash proceeds received by us from certain potential strategic licensing transactions shall be used to prepay amounts outstanding under the Credit Agreement; and (ii) decreases the amount of cash we are required to maintain pursuant to the Minimum Liquidity Covenant to $3.0 million for a period beginning on August 1, 2022, and ending on August 31, 2022, at which point the amount required pursuant to the Minimum Liquidity Covenant shall increase to $5.0 million.

On October 24, 2022, we entered into Amendment No. 2 and Waiver to Credit Agreement with MAM Eagle Lender, or the Second Amendment. Pursuant to the terms of the Second Amendment, the Credit Agreement is amended such that we agreed to repay the principal thereunder (i) on the first business day of each month until the Interest Payment Date on December 1, 2022, in equal monthly installments of principal based on an amortization schedule of 36 months, (ii) an additional payment of principal in the amount of $0.3 million prior to December 31, 2022 and (iii) commencing on the Interest Payment Date on January 2, 2023 and on each Interest Payment Date thereafter until the obligations have been repaid in full, the principal amount of $0.5 million. In addition, the Second Amendment decreased the Minimum Liquidity Covenant to (i) $3.0 million for the period beginning on October 1, 2022, and ending on November 30, 2022, (ii) $4.5 million for the period beginning on December 1, 2022, and ending on February 28, 2023, and (iii) $4.0 million from and after March 1, 2023. Further, we agreed that prior to December 31, 2022, we will not, without the prior written consent of the Lenders, make or permit any payment under its agreements with Alkermes. In consideration for the Second Amendment, we paid the Agent an amendment fee of $0.01 million and the Lender an amendment fee of $0.2 million.

On December 1, 2022, we entered into Amendment No. 3 to Credit Agreement with MAM Eagle Lender, or the Third Amendment. Pursuant to the terms of the Third Amendment, the Third Amendment decreased the Minimum Liquidity Covenant to (a) from October 1, 2022 to December 6, 2022 to not be less than $3.0 million at any time, (b) from December 7, 2022 to February 28, 2023 to not be less than $4.5 million, and (c) from and after March 1, 2023 to not be less than $4.0 million.

In January 2023, we entered into Amendment No. 4 to Credit Agreement with MAM Eagle Lender, or the Fourth Amendment. Pursuant to the terms of the Fourth Amendment, the Credit Agreement was amended such that we agreed to make (i) a payment of principal in the amount of $0.5 million on January 3, 2023, (ii) a payment of principal in the amount of $0.3 million on February 1, 2023 and March 1, 2023, and (iii) on the interest payment date on April 3, 2023 and on each interest payment date thereafter until the obligations are repaid in full, a payment in the principal amount of $0.5 million. In addition, the Fourth Amendment decreased the Minimum Liquidity Covenant to (i) $3.0 million for the period beginning on October 1, 2022, and ending on December 6, 2022, (ii) $4.5 million for the period beginning on December 7, 2022, and ending on January 10, 2023, (iii) $2.225 million for the period beginning on January 11, 2023, and ending on February 28, 2023, and (iv) $3.0 million from and after March 1, 2023. Further, we agreed that prior to April 30, 2023, we will not, without the prior written consent of MAM Eagle Lender, make or permit any payment under our agreements with Alkermes.

On March 29, 2023, we entered into Amendment No. 5 and Consent to Credit Agreement, or the Fifth Amendment, whereby MAM Eagle Lender consented to the transactions contemplated by the Transfer Agreement (as defined above) and agreed to release and discharge any liens granted or held by the lenders in respect of the assets discussed in the Transfer Agreement. The parties also agreed to, among other things, amend the Minimum Liquidity Covenant to require that we maintain $2.5 million of liquidity at all times.

In connection with the Acquisition, we entered into a Forbearance Agreement, dated as of June 29, 2023, by and among us, the Lenders and the Agent, solely in its capacity as administrative and collateral agent for the Lenders, pursuant to which the Lenders agreed to forbear their rights to exercise any rights and remedies with respect to any default under the Credit Agreement, resulting from the Acquisition, for a period of up to 30 days following the closing of the Acquisition. On July 30, 2023, we entered into Amendment Not. 1 to the Forbearance Agreement and Amendment No. 6 to Credit Agreement, whereby such deadline was extended until October 31, 2023. On October 31, 2023, we entered into Amendment No. 2 to the Forbearance Agreement and Amendment No. 8 to Credit Agreement to extend such deadline until March 31, 2024.

On August 31, 2023, we entered into Amendment No. 7 to Credit Agreement with MAM Eagle Lender, or the Seventh Amendment. Pursuant to the terms of the Seventh Amendment, the Lenders agreed to, among other things, defer certain loan amortization payments and waive the Mimimum Liquidity Covenant until December 31, 2023

Sources and Uses of Cash

Cash used in operations was ~~$42.1~~$9.7 million and ~~$46.8~~$13.1 million for the nine months ended September 30, ~~2019~~2023 and ~~2018,~~2022, respectively, which represents our operating losses less our non-cash items including: stock-based compensation, non-cash interest expense, depreciation, loss on extinguishment of debt, and changes in ~~fair value of contingent consideration,~~warrant valuations, as well as changes in operating assets and liabilities.

Cash ~~used in~~provided by investing activities was ~~$1.8 million and $2.2 million~~$0.2 for the nine months ended September 30, ~~2019~~2023 and ~~2018, respectively. During~~was attributable to the acquisition of TeraImmune. There was no cash provided by investing activities for the nine months ended September 30, ~~2019 and 2018, our capital expenditures were $1.6 million and $2.1 million, respectively.~~2022.

There was ~~$43.9~~$5.5 million of net cash provided by financing activities in the nine months ended September 30, ~~2019 from~~2023 consisting of net proceeds of $4.3 million from ~~parent company investment~~warrant exercises, net proceeds of ~~$53.9~~$3.4 million ~~which was~~from a public offering of common stock and warrants, $1.8 million of net proceeds from a registered direct offering of common stock and concurrent private placement of warrants, and net proceeds of $0.3 million from our equity line of credit with Alumni Captial, partially offset by ~~$10.0~~$4.1 million in long-term debt principal payments and $0.3 million in payments of deferred financing costs. There was $15.0 million of ~~contingent consideration payments. There was $49.0 million of~~net cash provided by financing activities for the nine months ended September 30, 2022 consisting primarily of net proceeds of $14.2 million from public offerings of common stock and warrants and $1.8 million of net proceeds from a registered direct offering of common stock and concurrent private placement of warrants, partially offset by a payment on long-term debt of $1.1 million.

Cash used in operations from discontinued operations was $0.8 million and $11.2 million for the nine months ended September 30, 2023 and 2022, respectively, which represents our operating losses from discontinued operation less our non-cash items including: stock-based compensation, depreciation, amortization, changes in fair value of contingent consideration, and impairment losses on property and equipment and intangible asset, as well as changes in operating assets and liabilities.

There was no significant cash used in investing activities from discontinued operation for the nine months ended September 30, 2023 and 2022.

There was no cash used in financing activities from discontinued operation in the nine months ended September 30, ~~2018~~2023. There was $1.2 million of cash used in financing activities from ~~net proceeds from parent company investment.~~discontinued operation in the nine months ended September 30, 2022 attributable to the payment of contingent consideration of $1.2 million.

Our future use of operating cash and capital requirements will depend on many forward-looking factors, including the following:

•

our relationships with third parties, licensors, collaborators, and our employees;

•

our ability to ~~operate as a standalone company and~~ execute our strategic priorities;

•

~~potential indemnification liabilities we may owe to Recro after the Separation;~~

our ability to ~~resolve the deficiencies identified by the FDA in the second CRL, for IV meloxicam;~~

fund our continuing operations and successfully integrate TeraImmune’s technology;

•

~~whether~~ the ~~FDA will approve an amended NDA~~scope, progress, results, and costs of development for ~~IV meloxicam and, if approved, the labeling under any such approval that we may obtain;~~

our product candidates;

•

the cost, timing and outcome of regulatory review of our product candidates;

•

the ~~Gainesville Transaction regulatory milestone payments~~cost of manufacturing for our Treg product candidate, acquiring components and other ~~contingent consideration;~~

capital equipment for our product candidates;

•

~~the costs of~~ ~~manufacturing scale-up and~~ ~~commercialization activities,~~ ~~for IV meloxicam, if approved~~;

~~the level of market acceptance of IV meloxicam, if approved;~~

the extent to which we in-license, acquire or invest in products, businesses and technologies;

•

our ability to raise additional funds through equity or debt financings or the sale of certain ~~assets~~;

assets;

•

our ability to ~~defend~~regain compliance with the ~~securities class action lawsuit filed against Recro, or any future material litigation filed against us;~~

listing requirements of the Nasdaq Capital Market;

•

our ability to comply with our debt covenants;

•

the extent to which holders of our warrants exercise their warrants resulting in the payment of cash proceeds to us;

•

the costs of preparing, submitting and prosecuting patent applications and maintaining, enforcing and defending intellectual property claims; and

•

the effect of any changes in our effective tax rate due to ~~changes in the mix of earnings in countries with differing statutory tax rates,~~ changes in the valuation of deferred tax assets and liabilities, tax impacts and net operating loss utilization related to the ~~Acute Care segment separation~~Separation and changes in tax laws.

We may ~~not actually achieve the plans, intentions~~use existing cash and cash equivalents on hand, debt, equity financing, sale of assets or ~~expectations disclosed~~out-licensing revenue or a combination thereof to fund our operations or product acquisitions. If we increase our debt levels, we might be restricted in our ~~forward-looking statements,~~ability to raise additional capital and ~~you should not place undue reliance on our forward-looking statements. Actual results~~might be subject to financial and restrictive covenants. Our shareholders may experience dilution as a result of the issuance of additional equity or ~~events could differ materially from~~debt securities. This dilution may be significant depending upon the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report, particularly under “Risk Factors,”amount of equity or debt securities that we ~~believe could cause actual results or events to differ materially from~~issue and the ~~forward-looking statements that~~prices at which we ~~make. Our forward-looking statements do not reflect the potential impact of~~issue any ~~future acquisitions, mergers, dispositions, joint ventures, collaborations or investments we may make.~~securities.

Contractual Commitments

The table below reflects our contractual commitments as of September 30, ~~2019:~~2023:


	Payments Due by Period (in 000s)
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Debt Obligations (1):
Credit Agreement	$	3,706	$	3,706	$	—	$	—	$	—
Interest and Fees on Credit Agreement		806		806		—		—		—
Convertible Bond Payable		1,000		1,000		—		—		—
Interest on Bond Payable		239		239		—		—		—

Purchase Obligations (2):	$	64	$	64	$	—	$	—	$	—
Operating Leases (3)		4,926		685		1,417		1,748		1,076
Other Long-Term Liabilities:
Other License Commitments and Milestone payments (4)		16,395		80		315		—		—

Total Contractual Obligations	$	27,136	$	6,580	$	1,732	$	1,748	$	1,076

Payments Due by Period (in 000s)

Contractual Obligations

Total

Less than
1 year

1-3 years

3-5 years

More than
5 years

Purchase Obligations (1):

$
4,863

$
1,816

$
—

$
—

$
—

Operating Leases (2)

1,257

434

730

93

—

Other Long-Term Liabilities:

Other License Commitments and Milestone
payments (3), (4)

52,265

40

130

170

225

Alkermes Payments (5)

130,000

—

—

—

—

Employment Agreements (6)

624

624

—

—

—

Total Contractual Obligations

$
189,009

$
2,914

$
860

$
263

$
225

(1)

Debt obligations consist of principal, an exit fee of 2.5% of that principal, interest on the $4.3 million outstanding term loan under our Credit Agreement and the unpaid portion of the Fifth Amendment fee. Debt obligations also consists of a principal balance of $1,000 in convertible bond payable, accrued interest at a rate of 5% per annum during the period from April 8, 2022 to the maturity date of November 30, 2022, and a default interest penalty of 20% on the defaulted balance as of November 30, 2022. In accordance with U.S. GAAP, the future interest obligations are not recorded on our Consolidated Balance Sheet. See Note 11 to the Consolidated Financial Statements included in this Quarterly Report.

~~(1)~~

These obligations consist of cancelable and non-cancelable purchase commitments related to capital expenditures and other goods or services. The timing of certain purchase commitments cannot be estimated as it is dependent on timing of FDA approval or the outcome of other strategic evaluations. In accordance with U.S. GAAP, these obligations are not recorded on our Combined Balance Sheets. See Note 10(e) to the Combined Financial Statements included in this Quarterly Report on Form 10-Q.

(2)

These obligations consist of cancelable and non-cancelable purchase commitments related to development activities and other goods or services. In accordance with U.S. GAAP, these obligations are not recorded on our Consolidated Balance Sheets. See Note 12(b) to the Consolidated Financial Statements included in this Quarterly Report.

~~(2)~~

We have become party to certain operating leases for the leased space in Malvern, Pennsylvania, and Dublin, Ireland, as well as for office equipment, for which the minimum lease payments are presented.

(3)

We are party to certain operating leases for the leased space in (i) Malvern, Pennsylvania (ii) Dublin, Ireland, and (iii) Germantown, Maryland, for which the minimum lease payments are presented. See Note 9 to the Consolidated Financial Statements included in this Quarterly Report.

~~(3)~~

We are party to exclusive licenses with Orion for the development and commercialization of certain pipeline product candidates, under which we may be required to make certain milestone and royalty payments to Orion. See Note 5 and Note 10(a) to the Combined Financial Statements included in the Form 10-Q. The amount reflects only payment obligations that are fixed and determinable. We are unable to reliably estimate the timing of these payments because they are dependent on the type and complexity of the clinical studies and intended uses of the products, which have not been established. In accordance with U.S. GAAP, these obligations are not recorded on our Combined Balance Sheets.

(4)

We license NMBs, from Cornell University pursuant to a license agreement under which we are obligated to make annual license maintenance fee payments, milestone payments and patent cost payments and to pay royalties on net sales of the NMBs. The amount reflects only payment obligations that are fixed and determinable. We are unable to reliably estimate the timing of certain of these payments totaling a maximum of $16,000 across three compounds because they are dependent on the type and complexity of regulatory filing approvals in the U.S. and Europe and the number of product candidates approved, which have not been established, and as such are only included in the total. In accordance with U.S. GAAP, certain of these obligations are not recorded on our Consolidated Balance Sheets. See 12(a) to the Consolidated Financial Statements included in this Quarterly Report.

~~(4)~~

We license the neuromuscular blocking agents, or NMBAs, from Cornell University pursuant to a license agreement under which we are obligated to make annual license maintenance fee payments, milestone payments and patent cost payments and to pay royalties on net sales of the NMBAs. The amount reflects only payment obligations that are fixed and determinable. We are unable to reliably estimate the timing of certain of these payments because they are dependent on the type and complexity of the clinical studies and intended uses of the products, which have not been established. In accordance with U.S. GAAP, certain of these obligations are not recorded on our Combined Balance Sheets. See Note 5 and 10(a) to the Combined Financial Statements included in this Form 10-Q.

~~(5)~~

Pursuant to the purchase and sale agreement governing the Gainesville Transaction, we agreed to pay to Alkermes milestone and royalty payments. The amount reflects only payment obligations that are fixed and determinable. We are unable to reliably estimate the timing of these payments because they are in some instances, events that are not in our control and dependent on the commercial success of the product. In accordance with U.S. GAAP, the fair value of these obligations is recorded as contingent consideration on our Combined Balance Sheets. See Note 4 and Note 10(b) to the Combined Financial Statements included in this Form 10-Q.

~~(6)~~

We have entered into employment agreements with certain of our named executive officers. As of September 30, 2019, these employment agreements provided for, among other things, annual base salaries in an aggregate amount of not less than this amount, from that date through June 2020. In accordance with U.S. GAAP, these obligations are not recorded on our Combined Balance Sheets. See Note 10 (f) to the Combined Financial Statements included in this Form 10-Q.

~~Off-Balance Sheet Arrangements~~

~~We do not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.~~

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 2022 Annual Report. As a result of the ~~Form 10.~~ InAcquisition, we believe that the ~~nine months ended September 30, 2019, there were no significant changes~~following should be added to ~~the application of~~our critical accounting policies ~~previously disclosed~~given the level of judgments and estimates used in ~~“Management’s Discussion~~preparation of our financial statements:

Indefinite-lived Intangible Assets

Indefinite-lived intangible assets consist of In Process Research & Development ("IPR&D"). We determined the estimated fair values for our IPR&D assets as of the Acquisition Date using the income approach. This is a valuation technique that provides an estimate of fair value of the asset, based on the market participant's expectations of the cash flows that the asset are forecasted to generate. The cash flows are discounted at a rate commensurate with the level of risk associated with its projected cash flows. We believe the assumptions are representative of those a market participant would use in estimating fair value. The fair value of IPR&D was capitalized as of the Acquisition date and ~~Analysis~~accounted for as indefinite-lived intangible assets until completion or disposition of ~~Financial Condition~~the assets or abandonment of the associated research and ~~Results~~development efforts. Upon successful completion of ~~Operations” in~~ the ~~Information Statement.~~development efforts, the useful lives of the IPR&D assets will be determined based on the anticipated period of regulatory exclusivity and will be amortized within operating expenses. Until that time, the IPR&D assets will be subject to impairment testing and will not be amortized.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures About Market Risk~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not ~~applicable~~applicable.

~~Item 4.~~

~~Controls and Procedures~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of September 30, ~~2019.~~2023. We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

A control system, no matter how well conceived and operated, can provide only reasonable, and not absolute, assurance that the objectives of the control system will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. However, our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. Based on the evaluation of our disclosure controls and procedures as of September 30, ~~2019,~~2023, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were not effective atdue to an identified material weakness in our internal control over financial reporting in the second quarter related to certain technical accounting treatment of the TeraImmune Acquisition related to the lease liability and derivative liability. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable ~~assurance level.~~possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Remediation Plan

Management and our Board of Directors are actively engaged in implementing a remediation plan to address the material weakness over the implementation of purchase price accounting related to the Acquisition of TeraImmune. We are enhancing and implementing new processes, controls, and systems to strengthen our internal control over financial reporting, related to technical accounting transaction. Additionally, we have added to and intend to seek additional internal and external resources to aid in our mitigation and increase the level of review over financial reporting and technical accounting.

Changes in Internal Control over Financial Reporting

~~There~~On June 29, 2023, we completed the Acquisition. Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company. Based on those guidelines, our assessment of the effectiveness of our internal control over financial reporting will exclude TeraImmune. We are in the process of integrating TeraImmune into our system of internal control over financial reporting.

Other than as set forth above, there has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings.~~

~~We are involved, from~~Item 1. Legal Proceedings.

From time to time, we may become involved in ~~various claims and~~ legal proceedings arising in the ordinary course of ~~its~~our business. ~~Except as disclosed below, we~~Our management believes that there are ~~not~~ currently ~~a party to any such~~no claims or ~~proceedings that, if decided adversely to it,~~actions pending against us, the ultimate disposition of which would ~~either individually or in the aggregate~~ have a material adverse effect on ~~its business,~~our results of operations, financial condition or ~~results of operations.~~cash flows.

On May 31, 2018, a securities class action lawsuit was filed against Recro and certain of Recro’s officers and directors in the U.S. District Court for the Eastern District of Pennsylvania (Case No. 2:18-cv-02279-MMB) that purported to state a claim for alleged violations of Section 10(b) and 20(a) of the Exchange Act and Rule 10(b)(5) promulgated thereunder, based on statements made by us concerning the NDA for IV meloxicam. The complaint seeks unspecified damages, interest, attorneys’ fees and other costs. On December 10, 2018, lead plaintiff filed an amended complaint that asserted the same claims and sought the same relief but included new allegations and named additional officers and directors as defendants. On February 8, 2019, Recro filed a motion to dismiss the amended complaint in its entirety, which the lead plaintiff opposed on April 9, 2019. On May 9, 2019, the Company filed its response and briefing was completed on the motion to dismiss. On June 26, 2019, the judge heard oral arguments on the motion to dismiss. The judge asked the plaintiffs to file a supplemental brief, which was completed on August 30, 2019, and Recro submitted a reply brief on September 27, 2019. As part of the Separation, we are assuming all liabilities related to this litigation from Recro. We believe that the lawsuitItem 1A. Risk Factors.

Other than what is without merit and intends to vigorously defend against it. The lawsuit is in the early stages and, at this time, no assessment can be made as to its likely outcome or whether the outcome will be material to us.

~~Item 1A.~~

~~Risk Factors.~~

Information regarding risk factors appears in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Information Related to Forward-Looking Statements,” in Part I – Item 2 of this Form 10-Q and in the “Risk Factors” section of the Form 10. Except as set forth below, there ~~were~~have been no material changes ~~during~~in our risk factors from those disclosed in our Annual Report on Form 10-K for the ~~quarter~~year ended ~~September 30, 2019~~December 31, 2022.

The potential delisting of our common stock from The Nasdaq Capital Market and our trading on the OTC Pink Open Market is expected to result in a more limited market and lack of liquidity for our securities and may make it more difficult to raise funds on terms acceptable to us, or at all.

On November 14, 2023, we received a determination letter, or the Delisting Notification, stating that the Nasdaq Hearings Panel, or the Panel, has determined to delist our common stock from the Nasdaq Capital Market, and Nasdaq suspended trading in our common stock, as of the opening of trading on November 16, 2023, because we did not demonstrate compliance with the Nasdaq initial listing requirements by or before November 13, 2023.

Pursuant to the ~~risk factors reported~~Delisting Notification, we have a period of 15 days from the date of the Delisting Notification to submit a written request for a review of the Panel’s delisting determination by the Nasdaq Listing and Hearing Review Council, or the Listing Council. Unless we submit a timely request for the Listing Council’s review of the Panel’s delisting determination, a Form 25-NSE will be filed with SEC, which will remove our common stock from listing and registration on Nasdaq. We do not intend to file an appeal of the Panel’s determination. Accordingly, we expect that our common stock will be delisted from Nasdaq after the Form 25-NSE is filed with the SEC. Our common stock is currently trading on the OTC Pink Open Market under the symbol “BXRX.”

The trading of our common stock in the ~~“Risk Factors” section~~OTC Pink Open Market may have an unfavorable impact on our stock price and the liquidity of our stock. The OTC Pink Open Market is a significantly more limited market than Nasdaq. The quotation of our stock in OTC Pink Open Market is expected to result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could further depress the ~~Information Statement.~~

~~Our appeal relating~~trading price of our common stock, and could have a long-term adverse impact on our ability to raise capital in the ~~NDA for IV Meloxicam has been granted, however, there~~future. There can be no ~~certainty~~assurance that our ~~proposed labeling~~securities will ~~address~~be listed on a national securities exchange or a national quotation service in the ~~FDA’s concerns~~future.

We may be unsuccessful in ~~order~~obtaining a waiver or amendment to ~~successfully commercialize IV meloxicam.~~our Credit Agreement with respect to any existing events of default thereunder. The failure to obtain such a waiver or amendment, or otherwise cure any event of default under our Credit Agreement, could allow the lender to take enforcement action against us or certain of its assets, including accelerating the loans and other obligations under the Credit Agreement and taking any other remedial actions permitted under the Credit Agreement or applicable law, which would have a material adverse effect on our business, financial condition and results of operations and could require us to curtail or cease operations.

~~In July 2017 we submitted an NDA for IV meloxicam for the management of moderate to severe pain to the FDA.~~

On May ~~23, 2018,~~29, 2020, we ~~received a CRL from~~entered into the ~~FDA regarding~~Credit Agreement. In connection with the ~~NDA,~~Acquisition, we entered the Forbearance Agreement, pursuant to which ~~stated that~~Agent and Lender agreed to forbear form exercising their rights and remedies with respect to certain events of default under the FDA determined it could not approve the NDA in its present form. In October 2019 we received written notification from the FDA that our appeal relating to the NDA seeking approval for IV meloxicam has been granted. The FDA’s letter states that the appeal was granted and that the NDA provides sufficient evidence of effectiveness and safety to support approval. We are working to prepare a comprehensive response to the FDA that includes refiling the NDA with proposed labeling that addresses the FDA’s concerns and to provide the relevant evidence from the filed NDA that supports the proposed label, but thereCredit Agreement until March 31, 2024.

There can be no ~~guarantee~~assurance that weAgent and Lender will ~~be able~~provide us with a waiver of any events of default or agree to ~~do so~~amend the Credit Agreement in a timely manner, or at all. In addition, if the approved labeling of IV meloxicam is for a more limited indication or different dosing interval than we originally requested, our ability to market to our full target market may be reduced. We could need to significantly revise our launch and commercialization strategy, which could delay commercial launch of IV meloxicam, if approved, and could significantly limit our ability to realize the full market potential of IV meloxicam. The approved labeling could decrease the target market to a point where we would be unable to achieve profitability from IV meloxicam, in which case we may be forced to limit or discontinue the commercialization of IV meloxicam, or seek a collaboration partner for the commercialization of IV meloxicam, all of which would have an adverse impact on ~~our business.~~

Should we fail to obtain regulatory approval of IV meloxicam, we may be forced to rely on our other product candidates, which are at an earlier development stage and will require significant additional time and resources to obtain regulatory approval and proceed with commercialization.

~~Our planned spin-off from Recro is subject to various risks and uncertainties and may not be completed on the~~acceptable terms, ~~or timeline currently contemplated,~~ if at all to the extent any events of default have occurred and are continuing under the Credit Agreement. If we do not obtain an amendment or waiver of such events of default under the Credit Agreement, if any future events of default occur and are continuing or if the Lenders take the position that we have not complied with the terms of the Forbearance Agreement, there can be no assurance that the Lenders will ~~involve significant time, effort and expense,~~not take action to collect payment of our debt or dispose of collateral securing the obligations under the Credit Agreement, which ~~could~~would harm our business, financial condition and results of operations and ~~financial condition.~~could require us to curtail or cease operations.

~~In November 2019, Recro announced the intent to spin-off its acute care segment from its CDMO segment, resulting in two independent, publicly traded companies, Recro Pharma, Inc.~~

Item 2. Unregistered Sales of Equity Securities and ~~Baudax Bio, Inc.~~ Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

(a)

The ~~separation of its business segments is expected to be completed in the fourth quarter of 2019 and is subject to the satisfaction of certain conditions. Adverse market conditions~~following exhibits are filed herewith or delays or difficulties effecting the planned separation could delay or prevent, or adversely impact the anticipated benefits from, the planned separation. We may not complete the separation on the terms or on the timeline that we announced, or may, for any or no reason and at any time until the planned separation is complete, abandon the separation or modify or change its terms. Any of the foregoing may result in our not achieving the operational, financial, strategic and other benefits we anticipate, and in each case, our business, results of operations and financial condition could be adversely affected.incorporated by reference herein:

We have incurred and will continue to incur significant expenses in connection with the planned separation, and such costs and expenses may be greater than we anticipate. In addition, completion of the spin-off will require a significant amount of management timeEXHIBIT INDEX

and effort which may disrupt our business or otherwise divert management’s attention from other aspects of our business. Any of the foregoing could adversely affect our business, results of operations and financial condition.

~~Item 2.~~Exhibit

No.

~~Unregistered Sales of Equity Securities and Use of Proceeds.~~

~~None.~~

~~Item 3.~~

~~Defaults Upon Senior Securities.~~

~~None.~~

~~Item 4.~~Description

~~Mine Safety Disclosures.~~

~~Not applicable.~~

~~Item 5.~~

~~Other Information.~~

~~None.~~

~~Item 6.~~

~~Exhibits.~~

~~(a)~~

~~The following exhibits are filed herewith or incorporated by reference herein:~~

~~EXHIBIT INDEX~~

~~Exhibit~~ ~~No.~~	~~Description~~	Method of Filing

~~31.1~~ 2.1∆	Agreement and Plan of Merger, dated June 29, 2023, by and among Baudax Bio, Inc., Bounce Merger Sub I, Inc., Bounce Merger Sub II, LLC and TeraImmune, Inc.	Incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on July 5, 2023 (File No. 001-39101).

3.1	Certificate of Designations of Series X Non-Voting Convertible Preferred Stock.	Incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on July 5, 2023 (File No. 001-39101).

4.1	Form of Series E Pre-funded Warrant.	Incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on August 21, 2023 (File No. 001-39101).

4.2	Form of Series A-7 Common Stock Purchase Warrant	Incorporated herein by reference to Exhibit 4.2 to the Company’s Currnet Report on Form 8-K filed on August 21, 2023 (File No. 001-39101).

10.2	Amendment No. 1 to Forbearance Agreement and Amendment No. 6 to Credit Agreement, dated as of July 30, 2023, by and among Baudax Bio, Inc, Baudax Bio N.A. LLC, Baudax Bio Limited, Wilmington Trust, National Association, and the Lender party hereto.	Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 5, 2023 (File No. 001-39101).

10.3	Amendment No. 7 to Credit Agreement, dated as of August 31, 2023, by and among Baudax Bio, Inc, Baudax Bio N.A. LLC, Baudax Bio Limited, Wilmington Trust, National Association, and the Lender party hereto.	Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 5, 2023 (File No. 001-39101).

10.4	Purchase Agreement, dated August 23, 2023, between Baudax Bio, Inc. and Alumni Capital LP	Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed on August 25, 2023 (File No. 001-39101).

31.1	Rule 13a-14(a)/15d-14(a) certification of Principal Executive Officer.	Filed herewith.

31.2	Rule 13a-14(a)/15d-14(a) certification of Principal Financial and Accounting Officer.	Filed herewith.

32.1	Section 1350 certification, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed herewith.

~~101 INS~~101.SCH	~~XBRL Instance Document~~	~~Filed herewith.~~

~~101 SCH~~	Inline XBRL Taxonomy Extension Schema Document.	Filed herewith.



101.CAL
~~101 CAL~~	Inline XBRL Taxonomy Extension Calculation Linkbase Document.	Filed herewith.

~~101 DEF~~101.LAB	~~XBRL Taxonomy Extension Definition Linkbase~~	~~Filed herewith.~~

~~101 LAB~~	Inline XBRL Taxonomy Extension Label Linkbase Document.	Filed herewith.

~~101 PRE~~101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.	Filed herewith.

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.	Filed herewith.

104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).	Filed herewith.

~~SIGNATURES~~

∆ Schedules have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. Baudax Bio agrees to furnish supplementally a copy of any omitted schedule to the SEC upon its request; provided, however, that Baudax Bio may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any schedule so furnished.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.


	BAUDAX BIO, INC.

Date: November ~~14, 2019~~20, 2023	By:	/s/ Gerri A. Henwood
		Gerri A. Henwood
		President and Chief Executive Officer
		(Principal Executive Officer)



Date: November ~~14, 2019~~20, 2023	By:	/s/ ~~Ryan D. Lake~~ Natalie McAndrew
		~~Ryan D. Lake~~Natalie McAndrew
		Interim Chief Financial Officer
		(Principal Financial and Accounting Officer)

3151


Pennsylvania	47-4639500
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

490 Lapp Road, Malvern, Pennsylvania	19355
(Address of principal executive offices)	(Zip Code)


Title of Each Class	Trading Symbol	Name of Exchange on Which Registered
Common Stock, par value $0.01	BXRX	Nasdaq Capital ~~Market~~Market*

(amounts in thousands)	September 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	—		$	—
Prepaid expenses and other current assets		1,658			2,514
Total current assets		1,658			2,514
Property, plant and equipment, net		4,968			3,982
Right-of-use asset		832			—
Intangible assets		26,400			26,400
Goodwill		2,127			2,127
Total assets	$	35,985		$	35,023
Liabilities and Parent Company Net Investment
Current liabilities:
Accounts payable	$	361		$	2,653
Accrued expenses and other current liabilities		4,500			9,773
Current operating lease liability		356			—
Current portion of contingent consideration		—			10,354
Total current liabilities		5,217			22,780
Long-term operating lease liability		520			—
Other long-term liabilities		—			32
Long-term portion of contingent consideration		65,671			80,558
Total liabilities		71,408			103,370
Commitments and contingencies (Note 10)
Parent company net investment		(35,423	)		(68,347	)
Total liabilities and parent company net investment	$	35,985		$	35,023

For the Nine Months Ended September 30, 2019
	Parent Company
(amounts in thousands)	Net Investment
Balance, December 31, 2018	$	(68,347	)
Net loss		(4,335	)
Net transfer from parent		19,823
Parent allocation - share-based compensation		1,527
Balance, March 31, 2019	$	(51,332	)
Net loss		(10,582	)
Net transfer from parent		31,052
Parent allocation - share-based compensation		1,675
Balance, June 30, 2019	$	(29,187	)
Net loss		(10,315	)
Net transfer from parent		3,027
Parent allocation - share-based compensation		1,052
Balance, September 30, 2019	$	(35,423	)

For the Nine Months Ended September 30, 2018
	Parent Company
(amounts in thousands)	Net Investment
Balance, December 31, 2017	$	(62,457	)
Net loss		(17,457	)
Net transfer from parent		18,609
Parent allocation - share-based compensation		1,006
Balance, March 31, 2018	$	(60,299	)
Net loss		(20,437	)
Net transfer from parent		14,514
Parent allocation - share-based compensation		1,096
Balance, June 30, 2018	$	(65,126	)
Net loss		(19,092	)
Net transfer from parent		15,925
Parent allocation - share-based compensation		1,268
Balance, September 30, 2018	$	(67,025	)


☒		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


☐		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Large accelerated filer	☐	Accelerated filer	☒☐

Non-accelerated filer	☐ ☒	Smaller reporting company	☒

		Emerging growth company	☒


			Page

Forward-Looking Statements			4

PART I. FINANCIAL INFORMATION			36

	Item 1.	~~Combined~~Consolidated Financial Statements (Unaudited)	36

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2037

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2747

	Item 4.	Controls and Procedures	2747

PART II. OTHER INFORMATION			2848

	Item 1.	Legal Proceedings	2848

	Item 1A.	Risk Factors	2848

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2948

	Item 3.	Defaults Upon Senior Securities	2949

	Item 4.	Mine Safety Disclosures	2949

	Item 5.	Other Information	2949

	Item 6.	Exhibits	2949

SIGNATURES			3151

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(amounts in thousands)	2019			2018			2019			2018
Operating expenses:
Research and development	$	1,845		$	9,838		$	18,578		$	25,664
General and administrative		4,524			5,107			21,809			24,170
Change in contingent consideration valuation		3,909			4,115			(15,241	)		7,030
Total operating expenses		10,278			19,060			25,146			56,864
Operating loss		(10,278	)		(19,060	)		(25,146	)		(56,864	)
Other income (expense):
Other income (expense)		(37	)		(32	)		(86	)		(122	)
Net loss	$	(10,315	)	$	(19,092	)	$	(25,232	)	$	(56,986	)


For the Nine Months Ended September 30, 2023
	Series X Convertible Preferred Stock				Preferred Stock				Common Stock				Additional
(amounts in thousands, except share data)	Shares		Amount		Shares		Amount		Shares		Amount		paid-in capital			Accumulated Deficit			Total
Balance, December 31, 2022		—	$	—		—	$	—		1,623,913	$	16	$	166,646		$	(190,904	)	$	(24,242	)
Stock-based compensation expense		—		—		—		—		—		—		194			—			194
Issuance of common stock and warrants for public offering, net		—		—		—		—		—		—		(55	)		—			(55	)
Issuance of shares pursuant to vesting of restricted stock units, net of shares withheld for income taxes		—		—		—		—		2		—		—			—			—
Exercise of warrants		—		—		—		—		961,787		10		4,318			—			4,328
Issuance of warrants for MAM debt amendment		—		—		—		—		—		—		1,058			—			1,058
Net income		—		—		—		—		—		—		—			11,404			11,404
Balance, March 31, 2023		—	$	—		-	$	—		2,585,702	$	26	$	172,161		$	(179,500	)	$	(7,313	)
Stock-based compensation expense		—		—		—		—		—		—		208			—			208
Issuance of common stock and warrants for public offering, net		—		—		—		—		3,478,262		35		3,222			—			3,257
Issuance of Series X convertible preferred stock upon acquisition of TeraImmune		20,066		9,040		—		—		—		—		—			—			—
Issuance of common stock upon acquisition of TeraImmune		—		—		—		—		897,903		9		535			—			544
Net loss		—		—		—		—		—		—		—			(7,375	)		(7,375	)
Balance, June 30, 2023		20,066	$	9,040		-	$	—		6,961,867	$	70	$	176,126		$	(186,875	)	$	(10,679	)
Stock-based compensation expense		—		—		—		—		—		—		253			—			253
Issuance of common stock and warrants for registered direct offering, net		—		—		—		—		3,401,787		34		1,577			—			1,611
Sale of common stock under equity line of credit, net of transaction costs		—		—		—		—		1,794,170		18		493			—			511
Issuance of shares pursuant to vesting of restricted stock units, net of shares withheld for income taxes		—		—		—		—		6,929		—		—			—			—
Deemed dividend on warrant modification														455			(455	)
Stock dividend		—		—		36,267		—		—		—		36			(36	)		—
Net income		—		—		—		—		—		—		—			(1,934	)		(1,934	)
Balance, September 30, 2023		20,066	$	9,040		36,267	$	—		12,164,753	$	122	$	178,940		$	(189,300	)	$	(10,238	)


	December 31, 2022

Current assets of discontinued operation:
Accounts receivable, net	$	336
Prepaid expenses and other current assets		449
Total current assets of discontinued operation		785
Non-current assets of discontinued operation:
Property and equipment, net		695
Total non-current assets of discontinued operation		695
Total assets of discontinued operation	$	1,480

Current liabilities of discontinued operation:
Accounts payable	$	730
Accrued expenses and other current liabilities		365
Current portion of contingent consideration		9,203
Total current liabilities of discontinued operation		10,298
Non-current liabilities of discontinued operation:
Long-term portion of contingent consideration		10,697
Total non-current liabilities of discontinued operation		10,697
Total liabilities of discontinued operation	$	20,995


	Amount
Common stock issued to TeraImmune’s stockholders	$	476
Series X Convertible Preferred Stock issued to TeraImmune stockholders		9,040
Contingent consideration		118
Stock options and restricted stock allocated to total consideration paid		68
Total consideration paid	$	9,702


Assets acquired:	As Initially Reported		Measurement Period Adjustments			As Adjusted
Cash and cash equivalents	$	142	$	—		$	142
Prepaid expenses and other current assets		52		—			52
Property and equipment, net		3,781		—			3,781
Goodwill		7,109		(439	)		6,670
In-process research and development assets		3,500		400			3,900
Operating lease right-of-use assets		2,135		—			2,135
Total assets	$	16,719	$	(39	)	$	16,680
Liabilities assumed:
Accounts payable	$	515	$	(39	)	$	476
Accrued expenses and other current liabilities		789		—			789
Convertible bond payable		1,000		—			1,000
Deferred tax liability		202		—			202
Operating lease liabilities		2,135		—			2,135
Derivative instrument		2,376		—			2,376
Total liabilities assumed	$	7,017	$	(39	)	$	6,978
Net assets acquired	$	9,702	$	—		$	9,702


	Nine Months Ended September 30, 2023
Operating expenses	$	15,146
Loss from operations		(15,146	)
Net loss from continuing operations		(18,082	)
Net income		592

	Contingent Consideration
Balance at December 31, 2018	$	90,912
Payment of contingent consideration		(10,000	)
Remeasurement		(15,241	)
Total at September 30, 2019	$	65,671

Current portion as of September 30, 2019		—
Long-term portion as of September 30, 2019	$	65,671

	Lease payments
2019	$	121
2020		401
2021		362
2022		373
Total lease payments		1,257
Less imputed interest		(381	)
Total operating liabilities	$	876

	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease cost	$	121	$	363
Short-term lease cost		-		14
Total lease cost	$	121	$	377