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,~~May 3, 2021, there were ~~100~~70,152,898 shares of common stock, par value $0.01 per share, outstanding.

This Quarterly Report on Form 10-Q, or Quarterly Report, contains 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:

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.

You should also read carefully the factors described in the “Risk Factors” included in Part II, Item 1A of this Quarterly Report, Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on February 16, 2021, or the 2020 Annual Report, 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 Quarterly Report and you should not place undue reliance on any forward-looking statements.

(amounts in thousands)	September 30, 2019			December 31, 2018
(amounts in thousands, except share and per share data)							March 31, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	—		$	—		$	30,690		$	30,342
Short-term investments								7,495			—
Accounts receivable, net								163			51
Inventory, net								2,773			2,978
Prepaid expenses and other current assets		1,658			2,514			2,569			3,346
Total current assets		1,658			2,514			43,690			36,717
Property, plant and equipment, net		4,968			3,982			5,039			5,052
Right-of-use asset		832			—
Intangible assets		26,400			26,400
Intangible assets, net								23,610			24,254
Goodwill		2,127			2,127			2,127			2,127
Other long-term assets								520			583
Total assets	$	35,985		$	35,023		$	74,986		$	68,733
Liabilities and Parent Company Net Investment
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	361		$	2,653		$	1,140		$	3,653
Accrued expenses and other current liabilities		4,500			9,773			4,680			5,326
Current operating lease liability		356			—
Current portion of long-term debt, net								1,196			683
Current portion of contingent consideration		—			10,354			7,107			8,467
Total current liabilities		5,217			22,780			14,123			18,129
Long-term operating lease liability		520			—
Long-term debt, net								8,185			8,469
Warrant liability								83			65
Long-term portion of contingent consideration								53,348			56,576
Other long-term liabilities		—			32			241			293
Long-term portion of contingent consideration		65,671			80,558
Total liabilities		71,408			103,370			75,980			83,532
Commitments and contingencies (Note 10)
Parent company net investment		(35,423	)		(68,347	)
Total liabilities and parent company net investment	$	35,985		$	35,023
Commitments and contingencies (Note 12)
Shareholders’ equity:
Preferred stock, $0.01 par value. Authorized, 10,000,000 shares; NaN issued and outstanding								—			—
Common stock, $0.01 par value. Authorized, 100,000,000 shares; issued and outstanding, 70,142,608 shares at March 31, 2021 and 48,688,480 shares at December 31, 2020								701			487
Additional paid-in capital								127,537			97,034
Accumulated deficit								(129,232	)		(112,320	)
Total shareholders’ equity (deficit)								(994	)		(14,799	)
Total liabilities and shareholders’ equity							$	74,986		$	68,733

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended March 31,
(amounts in thousands)	2019			2018			2019			2018
(amounts in thousands, except share and per share data)													2021			2020
Revenue, net													$	198		$	—

Operating expenses:
Cost of sales														821			—
Research and development	$	1,845		$	9,838		$	18,578		$	25,664			1,108			3,070
General and administrative		4,524			5,107			21,809			24,170
Selling, general and administrative														12,088			8,046
Amortization of intangible assets														644			215
Change in warrant valuation														18			1,378
Change in contingent consideration valuation		3,909			4,115			(15,241	)		7,030			1,841			27,626
Total operating expenses		10,278			19,060			25,146			56,864			16,520			40,335
Operating loss		(10,278	)		(19,060	)		(25,146	)		(56,864	)		(16,322	)		(40,335	)
Other income (expense):
Other income (expense)		(37	)		(32	)		(86	)		(122	)
Other expense:
Interest and other expense														(590	)		37
Net loss	$	(10,315	)	$	(19,092	)	$	(25,232	)	$	(56,986	)	$	(16,912	)	$	(40,298	)

Per share information:
Net loss per share of common stock, basic and diluted													$	(0.27	)	$	(4.03	)
Weighted average common shares outstanding, basic and diluted														62,584,129			10,001,228

~~Combined~~Consolidated Statements of ~~Parent Company Net Investment~~Shareholders’ Equity

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 Three Months Ended March 31, 2021
	Common Stock				Additional
(amounts in thousands, except share data)	Shares		Amount		paid-in capital			Accumulated Deficit			Total
Balance, December 31, 2020		48,688,480	$	487	$	97,034		$	(112,320	)	$	(14,799	)
Recro Pharma allocation - stock-based compensation		—		—		1,201			—			1,201
Stock-based compensation expense		—		—		975			—			975
Issuance of common stock and warrants for registered direct offerings, net		11,000,000		110		16,317			—			16,427
Issuance of shares pursuant to vesting of restricted stock units, net of shares withheld for income taxes		42,159		—		(41	)		—			(41	)
Exercise of warrants		10,411,969		104		12,051			—			12,155
Net loss		—		—		—			(16,912	)		(16,912	)
Balance, March 31, 2021		70,142,608	$	701	$	127,537		$	(129,232	)	$	(994	)

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
)

For the Three Months Ended March 31, 2020
	Common Stock				Additional
(amounts in thousands, except share data)	Shares		Amount		paid-in capital			Accumulated Deficit			Total
Balance, December 31, 2019		9,350,709	$	94	$	19,405		$	(36,220	)	$	(16,721	)
Recro Pharma allocation - stock-based compensation		—		—		456			—			456
Stock-based compensation expense		—		—		2,177			—			2,177
Issuance of common stock and warrants for public offering, net		7,692,308		77		14,899			—			14,976
Sale of common stock under equity facility, net of transaction costs		441,967		4		3,608			—			3,612
Issuance of common stock upon Separation		45,874		1		—			—			1
Issuance of shares pursuant to vesting of restricted stock units, net of shares withheld for income taxes		39,130		—		(95	)		—			(95	)
Net loss		—		—		—			(40,298	)		(40,298	)
Balance, March 31, 2020		17,569,988	$	176	$	40,450		$	(76,518	)	$	(35,892	)

	For the Nine Months Ended September 30,						For the Three Months Ended March 31,
(amounts in thousands)	2019			2018			2021			2020
Cash flows from operating activities:
Net loss	$	(25,232	)	$	(56,986	)	$	(16,912	)	$	(40,298	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		4,254			3,370			2,304			2,633
Non-cash interest expense								229			—
Depreciation expense		369			273			86			105
Amortization								644			215
Change in warrant valuation								18			1,378
Change in contingent consideration valuation		(15,241	)		7,030			1,841			27,626
Changes in operating assets and liabilities:
Inventory								205			—
Prepaid expenses and other current assets		857			770			777			184
Right-of-use asset		342			—			63			99
Accounts receivable								(112	)		—
Accounts payable, accrued expenses and other liabilities		(7,109	)		(1,305	)		(3,081	)		1,848
Operating lease liability		(344	)		—			(67	)		(104	)
Net cash used in operating activities		(42,104	)		(46,848	)		(14,005	)		(6,314	)
Cash flows from investing activities:
Purchase of property and equipment		(1,633	)		(2,118	)		(73	)		—
Acquisition of license agreement		(165	)		(82	)
Purchase of short-term investments								(7,495	)		—
Net cash used in investing activities		(1,798	)		(2,200	)		(7,568	)		—
Cash flows from financing activities:
Proceeds from Parent Company Investment		53,902			49,048
Proceeds from equity facility, net of transaction costs								—			3,612
Proceeds from public offering, net of transaction costs								—			23,341
Proceeds from registered direct offerings, net of transaction costs								16,236			—
Proceeds from warrant exercises								12,155			—
Payment of contingent consideration		(10,000	)		—			(6,429	)		—
Payments of withholdings on shares withheld for income taxes								(41	)		(95	)
Net cash provided by financing activities		43,902			49,048			21,921			26,858
Net decrease in cash and cash equivalents		—			—
Net increase in cash and cash equivalents								348			20,544
Cash and cash equivalents, beginning of period		—			—			30,342			17,740
Cash and cash equivalents, end of period	$	—		$	—		$	30,690		$	38,284
Supplemental disclosure of cash flow information:
Purchase of property, plant and equipment included in accrued expenses and accounts payable	$	—		$	449
Fair value of warrants issued in connection with public offering							$	—		$	8,111
Offering costs included in accounts payable and accrued expenses							$	38		$	254

Baudax Bio, Inc. ~~(Baudax Bio~~(“Baudax Bio” or the ~~Company) represents the Acute Care Business of Recro Pharma, Inc. (Recro) and will be~~“Company”) is a pharmaceutical company primarily focused on developing and commercializing innovative products for acute care ~~settings and~~settings. Baudax Bio believes it can bring valuable therapeutic options ~~for~~to patients, prescribers and payers, such as its lead product, ~~candidate, intravenous (IV) meloxicam,~~ANJESO^® (meloxicam) injection.

In June 2020, Baudax Bio announced the commercial launch of ANJESO, which is indicated for the management of moderate to severe pain, alone or in combination with other non-NSAID analgesics and that the Centers for Medicare and Medicaid Services (“CMS”) approved transitional pass-through status and established a new reimbursement C-code for ANJESO.

In October 2020, the J-code for ANJESO facilitating reimbursement in the hospital outpatient, ambulatory surgery center and physician office settings of care took effect and replaced the previously issued C-code.

The Company has determined that it operates in a single segment involved in the commercialization and development of innovative products for hospital and other acute care ~~markets following the spin-off of Baudax Bio by Recro.~~ settings.

Pursuant to the Separation Agreement ~~to be entered into~~ between Recro Pharma, Inc. (“Recro”) and Baudax Bio, Recro ~~will transfer~~transferred the assets, liabilities, and operations of its Acute Care business to the Company (the “Separation”) and, on November 21, 2019, the distribution date, each Recro shareholder ~~will receive one~~received 1 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 November 15, 2019, the record date for the distribution (the ~~Distribution)~~“Distribution”). Following the Distribution and Separation, Baudax Bio ~~will operate~~operates as a separate, independent company.

The accompanying unaudited combined financial statements are derived from Recro’s consolidated financial statements and accounting records and should be read in conjunction with the annual audited financial statements and related notes as of and for the year ended December 31, 2018 included in Recro’s 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 filed with the Securities and Exchange Commission. The Recro Acute Care Business did not consist of a separate, standalone group of legal entities for public company reporting and certain other corporate functions in the periods presented and, accordingly, allocations were required. These combined financial statements reflect the Company’s historical financial position, results of operations and cash flows as the business was operated as part of Recro prior to the planned spin-off, in conformity with U.S. generally accepted accounting principles (U.S. GAAP).

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

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 between the Company and Recro are considered to be effectively settled 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.

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

The parent company net investment balances in these combined financial statements represents the accumulated deficit of 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 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. The Company is now in the process of preparing a comprehensive response to the FDA that includes proposed labeling that aligns with the FDA guidance received in the written decision letter.

The Company has ~~a history of~~incurred operating losses and negative cash flows ~~while operating as part~~since inception and has an accumulated deficit of Recro 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$129,232 as of ~~the Distribution date~~March 31, 2021.

The Company has raised funds from debt and ~~the Company may~~equity transactions and will be required to raise additional funds ~~needed~~to continue to operate as a standalone ~~entity beyond one year from the Distribution date.~~entity. The Company’s ability 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.~~ANJESO, which is in its early launch stage. In addition, development activities, clinical and pre-clinical testing and, if approved, commercialization of the Company’s other product candidates, ~~if approved,~~ 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, 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. 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 ~~may be required~~follows the provisions of Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”), Topic 205-40, “Presentation of Financial Statements — Going Concern”, or ASC 205-40, which requires management to ~~wind down~~assess the Company’s ability to continue as a going concern for one year after the date the consolidated financial statements are issued. The Company expects to 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 or cannot be successfully commercialized.~~assured. Based on the Company’s available cash, cash equivalents and short-term investments as of March 31, 2021, 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 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.

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~~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. Operating results for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2021 are not necessarily indicative of the results that may be expected for the full year ending December 31, ~~2019.~~2021.

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~~2020 included in the Company’s Form ~~10.~~10-K.

The preparation of financial statements and the notes to the 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.

Cash and cash equivalents ~~represent~~represents cash in banks and highly liquid short-term investments that have maturities of three months or less when acquired. 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.

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 to ten 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.

~~In accordance with Financial Accounting Standards Board (FASB), Accounting Standards Codification (ASC), Topic 805, “Business Combinations~~,” or ASC 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. 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), 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, and for an asset acquisition the Company expenses IPR&D in the Combined Statements of Operations on the acquisition date.

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~~1 reporting unit.

~~The~~As of March 31, 2021, the Company’s intangible asset is classified as an ~~IPR~~asset resulting from R&D ~~asset. Intangible assets related~~activities. The Company determined the useful life of its asset resulting from R&D activities to ~~IPR&D are considered indefinite-lived intangible assets~~be approximately 10 years, which is based on the remaining patent life 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~~being amortized on a straight-line basis. The Company will record a noncash impairment loss on its Combined Statements of Operations. For those compounds that reach commercialization, the IPR&D assets will be amortized over their estimated useful lives. ~~The impairment test for indefinite-lived intangible assets~~ is ~~a one-step test, which compares the fair value of the intangible asset~~required to ~~its carrying value. If~~review the carrying value ~~exceeds its fair value,~~of assets resulting from R&D activities for recoverability whenever events occur or changes in circumstances indicate that the carrying amount of an ~~impairment loss is recognized in an amount equal to the excess.~~asset or asset group may not be recoverable.

The Company performs its annual goodwill ~~and indefinite-lived intangible asset~~ impairment test as of November 30^th, or whenever an event or change in circumstances occurs that would require reassessment of the recoverability of ~~those assets.~~goodwill. 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~~As a result of the ~~CRL in March 2019, an indicator of potential~~latest impairment tests, November 30, 2020, the Company ~~performed an~~determined that there was 0 impairment ~~test~~to goodwill or intangible assets. Additionally, there were no indicators of impairment as of March 31, ~~2019,~~2021.

Subsequent to regulatory approval for ANJESO from the FDA, the Company began selling ANJESO in the U.S. through a single third-party logistics provider (“3PL”), which ~~indicated that there was no impairment~~takes title to ~~goodwill or indefinite-lived intangible assets. There have been no additional triggering events as~~and control of ~~September 30, 2019.~~the goods. The Company recognizes revenue from ANJESO product sales at the point the title to the product is transferred to the customer and the customer obtains control of the product. The transaction price that is recognized as revenue for products includes an estimate of variable consideration for reserves, which result from discounts, returns, chargebacks, rebates, and other allowances that are offered within contracts between the Company and end-customers, wholesalers, group purchasing organizations and other indirect customers. The Company’s payment terms are generally between thirty to ninety days.

The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of its anticipated performance and all information (historical, current and forecasted) that is reasonably available. These reserves reflect the Company’s best estimate of the amount of consideration to which the Company is entitled based on the terms of the contracts. The amount of variable consideration that is included in the transaction price may be constrained and is included in the net sales price only to the extent that is considered probable that a significant reversal in the amount of the cumulative revenue recognized will ~~perform its annual test as~~not occur in a future period. Actual amounts of ~~November 30, 2019.~~consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, cash equivalents, short-term investments, and accounts receivable. The Company manages its cash, cash equivalents and short-term investments based on established guidelines relative to diversification and maturities to maintain safety and liquidity.

The Company’s accounts receivable balance is compromised solely from transactions with the Company’s 3PL.

Research and development costs for the Company’s proprietary products/product candidates are charged to expense as incurred. Research and development expenses consist primarily of funds 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. 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.

Share-based compensation included in the consolidated financial statements following the Separation is based upon the ~~Recro share-based compensation plan.~~Baudax Bio, Inc. 2019 Equity Incentive Plan (the “2019 Plan”). The ~~Recro~~ plan includes 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 an average of its peer group’s volatility 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.

The Recro Pharma, Inc. 2018 Amended and Restated Equity Incentive Plan (the “Recro Equity Plan”) includes grants of stock options, time-based vesting RSUs and performance-based vesting RSUs granted to the Company’s employees prior to the Separation. The consolidatedfinancial statements reflect share-based compensation expense based on an allocation of a portion of Recro share-based compensation issued to the Company’s employees based on where their services are performed.

Recro 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. Forfeitures are accounted for 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. Recro 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.

The expected life of stock options was estimated using the “simplified method,” as Recro 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, Recro uses the historical volatility of ~~our~~its 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 income tax amounts in these combined financial statements have been calculated based on a separate return methodology and presented as if the Company was a standalone taxpayer in each of its tax jurisdictions. 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. 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.

Basic net loss per common share is determined by dividing net loss applicable to common shareholders by the weighted average common shares outstanding during the period. Outstanding warrants, common stock options and unvested restricted stock units have been excluded from the calculation of diluted net loss per share because 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.

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

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

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

~~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).

~~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 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 is currently assessing the impact of adopting this standard, but based on a preliminary assessment, does not expect the adoption of this guidance to have a material impact on its ~~combined~~consolidated financial statements.

In August 2020, the FASB issued ASU No. 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity,” or ASU 2020-06. ASU 2020-06 simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for such exception. ASU 2020-06 also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years and early adoption is permitted in annual reporting periods ending after December 15, 2020. The Company is currently assessing the impact of adopting this standard.

The Company follows the provisions of FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” 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, short-term investments, 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:

~~On April 10, 2015, Recro completed~~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 March 31, 2021:
Assets:
Cash equivalents (See Note 5)
Money market mutual funds	$	12,794	$	—	$	—
Commercial paper		—		15,221		—
Total cash equivalents	$	12,794	$	15,221	$	—
Short-term investments (See Note 5)
Commercial paper		—		7,495		—
Total financial assets	$	12,794	$	22,716	$	—
Liabilities:
Warrants (See Note 13(c))	$	—	$	—	$	83
Contingent consideration (See Note 12(b))		—		—		60,455
	$	—	$	—	$	60,538

At December 31, 2020:
Assets:
Cash equivalents (See Note 5)
Money market mutual funds	$	24,210	$	—	$	—
Commercial paper		—		4,500		—
Total cash equivalents	$	24,210	$	4,500	$	—
Liabilities:
Warrants (See Note 13(c))	$	—	$	—	$	65
Contingent consideration (See Note 12(b))		—		—		65,043
	$	—	$	—	$	65,108

The reconciliation of the ~~acquisition of~~warrant liability and contingent consideration measured at fair value on a ~~manufacturing facility in Gainesville, Georgia~~recurring basis using unobservable inputs (Level 3) is as follows:

	Warrants			Contingent Consideration
Balance at December 31, 2019	$	—		$	66,358
Additions		8,111			—
Exercise of warrants		(2,922	)		—
Payment of contingent consideration		—			(3,560	)
Remeasurement		16,734			2,245
Reclassification to equity upon warrant exchange		(21,858	)		—
Balance at December 31, 2020	$	65		$	65,043
Payment of contingent consideration		—			(6,429	)
Remeasurement		18			1,841
Total at March 31, 2021	$	83		$	60,455

Current portion as of March 31, 2021	$	—		$	7,107
Long-term portion as of March 31, 2021		83			53,348

See Note 13(c) for the significant assumptions and ~~the licensing and commercialization rights~~inputs used to IV meloxicam (the Gainesville Transaction). The consideration paid in connection with the Gainesville Transaction consisted of $50,000 cash at closing, a $4,000 working capital adjustment and a seven-year warrant to purchase 350,000 shares of Recro’s common stock at an exercise price of $19.46 per share. In addition, the Company may be required to pay up to an additional $125,000 in milestone payments including $45,000 upon regulatory approval of IV meloxicam, as well as net sales milestones related to IV meloxicam and a 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). Under the acquisition method of accounting, the consideration paid anddetermine the fair value of the contingent consideration and royalties were allocated to the fair value of the assets acquired and liabilities assumed. The contingent consideration obligation is remeasured each reporting date with changes in fair value recognized as a period charge within the statement of operations (see Note 6 for further information regarding fair value).

The assets acquired, including goodwill, and liabilities assumed in the Gainesville Transaction were allocated to Recro’s reporting units as of the date of the acquisition. The accompanying combined financial statements reflect the IPR&D asset of $26,400 and goodwill of $2,127 that were recorded by Baudax Bio related to the Gainesville transaction. The liability ~~for the contingent consideration will be assumed by Baudax Bio following the spin-off and is included in the Company’s Combined Balance Sheets.~~

~~The warrant associated with the transaction remains on Recro’s Consolidated Balance Sheets with no allocation to the Company as it is a warrant to purchase Recro common stock.~~

In December 2018, Recro entered into a second amendment to the purchase and sale agreement among Alkermes Pharma Ireland Limited, Alkermes US Holdings (together with Alkermes Pharma Ireland Limited, Alkermes), Daravita Limited, Recro and Recro Gainesville LLC (Recro Gainesville) that restructured the $45,000 milestone to $60,000 therefore increasing the amount the Company may be required to pay Alkermes to $140,000, however, the amendment spread the payments of the development milestone over a seven-year period. In addition, Recro amended the warrant agreement with Alkermes, which decreased the exercise price of the warrant to $8.26 per share.classified warrants.

Based on the amended terms of the Alkermes agreement (see Note 12(b)), the remaining contingent consideration ~~consists of four separate components. The first component is (i) a $5,000 payment made in the first quarter of 2019 and (ii) a $5,000 payment made in~~payments include the second ~~quarter of 2019. The second~~ components, ~~will be~~which became payable upon ~~certain~~ regulatory approval, and ~~include (i) a $5,000 payment~~includes remaining payments of $1,440 due ~~within 180 days following regulatory approval for IV meloxicam~~on or prior to June 20, 2021 and ~~(ii)~~ $45,000 payable in ~~seven~~7 equal annual payments of approximately $6,400 beginning onin February 2021, the first anniversary of such approval. The third component consists of three potential payments, based on the achievement of specified annual revenue targets, the last of which represents over 60% of these milestone payments and currently does not have a fair value assigned to its achievement. The fourth component consists of a royalty payment between 10% and 12% (subject to a 30% reduction when no longer covered by patent) for a defined term on future injectable meloxicam net sales. ~~During the nine months ended September 30, 2019, the Company paid the first component consisting of two payments of $5,000 each to Alkermes.~~

The fair value of the contingent consideration liability is measured as the reporting date using inputs and assumptions as of the date of the financial statements. Events and circumstances impacting the fair value of the liability that occur after the balance sheet date, but before the date that the financial statements are available to be issued are adjusted in the period during which such events and circumstances occur. ~~The fair value of the~~remaining second ~~contingent~~ consideration component is estimated by applying a risk-adjusted discount rate to the ~~probability-adjusted contingent payments and the expected approval dates.~~scheduled remaining payments. The fair value of the third contingent consideration component is estimated using the Monte Carlo simulation method and applying a risk-adjusted discount rate to the potential payments resulting from probability-weighted revenue projections based upon the expected revenue target attainment dates. The fair value of the fourth contingent consideration component is estimated by applying a risk-adjusted discount rate to the potential payments resulting from probability-weighted revenue projections and the defined royalty percentage. As of March 31, 2021, the fair value calculations used discount rates in the range of 17.47% to 36.67%, with a weighted average of 27.03%.

The fair value of the contingent consideration liability is measured using inputs and assumptions as of the date of the financial statements. The current portion of the contingent consideration represents the estimated probability-adjusted fair value that is expected to become payable within one year as of March 31, 2021. Events and circumstances impacting the fair value of the liability that occur after the balance sheet date, but before the date that the financial statements are available to be issued, are adjusted in the period during which such events and circumstances occur.

These fair values are based on significant inputs not observable in the market, which are referred to in the guidance as Level 3 inputs. The contingent consideration components are classified as liabilities and are subject to the recognition of subsequent changes in fair value through the results of operations.

In June 2017, the Company acquired the exclusive global rights to two novel neuromuscular blocking agents, or NMBAs, and a proprietary reversal agent from Cornell University, or Cornell. The NMBAs and reversal agent are referred to herein as the NMBA Related Compounds. The NMBA Related Compounds include one novel intermediate-acting NMBA that has initiated Phase I clinical trials and two other agents, a novel short-acting NMBA, and a rapid-acting reversal agent specific to these NMBAs.

The transaction was accounted for as an asset acquisition, with the total cost of the acquisition of $766 allocated to acquired IPR&D. The Company recorded an upfront payment obligation of $350, as well as operational liabilities and acquisition-related costs of $416, primarily consisting of reimbursement to Cornell for specified past patent, legal and pre-clinical costs.

In addition, the Company is obligated to make: (i) an annual license maintenance fee payment until the first commercial sale of the NMBA Related Compounds; and (ii) milestone payments upon the achievement of certain milestones, up to a maximum, for each NMBA, of $5,000 for U.S. regulatory approval and commercialization milestones and $3,000 for European regulatory approval and commercialization milestones. The Company is also obligated to pay Cornell royalties on net sales of the NMBA Related Compounds at a rate ranging from low to mid-single digits, depending on the applicable NMBA Related Compounds and whether there is a valid patent claim in the applicable country, subject to an annual minimum royalty amount. Further, the Company will reimburse Cornell ongoing patent costs related to prosecution and maintenance of the patents related to the Cornell patents for the NMBA Related Compounds.

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.

~~The Company follows the provisions of FASB ASC Topic 820, “Fair Value Measurements and Disclosures~~,” 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 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:

~~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

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

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 and measurement as it progresses through discussions with the FDA regarding IV meloxicam.

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,~~March 31, 2021, 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 receivable, 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 March 31, 2021 due to the fact that the debt arrangements reflect market terms from recent transactions.

Short-term investments as of March 31, 2021 consist of government money market funds and commercial paper. A portion of short-term investments is included in cash and cash equivalents due to its original maturity of three months or less when acquired. In accordance with FASB ASC Topic 320, “Investments – Debt and Equity Securities,” the Company has classified its entire investment portfolio as available-for-sale securities with secondary or resale markets, and, as such, its portfolio is reported at fair value with unrealized gains and losses included in Comprehensive Income in stockholders’ equity and realized gains and losses included in other income/expense, if applicable. The following is a summary of cash equivalents and short-term investments:

Short-term investments are included in cash and cash equivalents when their original maturities are three months or less when acquired. As of March 31, 2021 and December 31, 2020, the Company’s cash equivalents had maturities of one to three months. To derive the fair value of its commercial paper, the Company uses benchmark inputs and industry standard analytical models.

Inventory is stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method. The Company expensed costs related to inventory within the Research and development line in the Consolidated Statements of Operations until it received approval from the FDA to market a product, at which time the Company commenced capitalization of costs relating to that product. Adjustments to inventory are determined at the raw material, sub-assemblies and finished goods levels to reflect obsolescence or impaired balances.

	September 30, 2019		December 31, 2018		March 31, 2021		December 31, 2020
Building and improvements	$	196	$	196	$	196	$	196
Furniture, office and computer equipment		1,665		1,688		934		934
Manufacturing equipment		101		101
Manufacturing and laboratory equipment						717		717
Construction in progress		3,814		2,469		4,526		4,453
		5,776		4,454		6,373		6,300
Less: accumulated depreciation and amortization		808		472
Less: accumulated depreciation						1,334		1,248
Property, plant and equipment, net	$	4,968	$	3,982	$	5,039	$	5,052

Depreciation expense for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2021 and 2020 was ~~$123~~$86 and ~~$369, respectively. Depreciation expense for three and nine months ended September 30, 2018 was $161 and $273,~~$105, respectively.

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

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

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.

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 to the Company in connection with the spin-off.~~

~~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.

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.~~

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.

The ~~Company~~Company is a party to various operating leases in Malvern, Pennsylvania, and Dublin, Ireland for office space and office equipment. Right-of-use assets are recorded on the Consolidated Balance Sheet in other long-term assets. Operating lease liabilities are recorded on the Consolidated Balance Sheet in accrued expenses and other current liabilities and other long-term liabilities, based on the timing of expected cash payments.

The Company determines if an arrangement is a lease at inception. 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. The current leased ~~facilities are~~facility recorded on the Consolidated Balance Sheet is classified as an operating ~~leases~~lease with a remaining lease ~~terms between 1 and 3~~term of 2 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 effective interest rate was used to discount its lease liabilities.

The Company’s leases with an initial term of 12 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.

As of ~~September 30, 2019,~~March 31, 2021, undiscounted future lease payments for non-cancellable operating leases are as follows:

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

~~For the nine months ended September 30, 2019,~~2021, the weighted average remaining lease term was 32 years and the weighted average discount rate was 16%.

The following represents the balance of the intangible assets at March 31, 2021:

Amortization expense for the three ~~and nine~~ months ended ~~September 30, 2019:~~March 31, 2021 and 2020 was $644 and $215, respectively.

In November 2020, the Company implemented a reduction in force impacting approximately 40 employees and resulted in a charge of $1,753, primarily related to severance, of which $359 remains accrued and unpaid as of March 31, 2021.

The following table summarizes the components of the carrying value of debt as of March 31, 2021:

On April 13, 2020, the Company applied to PNC Bank, National Association (the “Lender”) under the Small Business Administration (the “SBA”) Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”) for a loan of $1,537 (the “Loan”). On May 8, 2020, the Company entered into a promissory note with respect to the Loan in favor of the Lender (the “PPP Loan”).

The PPP Loan has a two-year term, matures on May 8, 2022, and bears interest at a stated rate of 1.0% per annum. Monthly principal and interest payments, less the amount of any potential forgiveness (discussed below), will commence on the earlier of September 15, 2021, or the date on which a forgiveness decision is received from the Lender. The Company did not provide any collateral or guarantees for the PPP Loan, nor did the Company pay any facility charge to obtain the PPP Loan. The PPP Loan provides for customary events of default, including, among others, those relating to failure to make payment, bankruptcy, breaches of representations and material adverse effects. The Company may prepay the principal of the PPP Loan at any time without incurring any prepayment charges.

The PPP Loan may be partially or fully forgiven if the Company complies with the provisions of the CARES Act and related guidance including using the PPP Loan proceeds for covered payroll costs, rent, utilities, and certain other expenses, and using at least 60% of the PPP Loan proceeds to pay covered payroll costs as defined by the CARES Act. Any forgiveness of the PPP Loan will be subject to approval by the SBA and the Lender will require the Company to apply for such treatment in the future. According to the terms of the Credit Agreement, as defined below, if any amount less than $1,100 is not forgiven, the Company will be required to promptly repay the unforgiven amount of the PPP Loan that is less than $1,100.

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”).

The Tranche Two Loans in an amount not to exceed $5,000 may be drawn upon on or before August 29, 2021 provided that the Company generates at least $5,000 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 $5,000 may be drawn upon on or before November 29, 2021 provided that the Company generates at least $10,000 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 $10,000 may be drawn upon, subject to the consent of the Lenders, on or before August 29, 2022 provided that the Company generates at least $20,000 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 $20,000 may be drawn upon, subject to the consent of the Lenders, on or before March 1, 2023 provided that the Company generates at least $100,000 in net revenue in the twelve consecutive calendar months immediately preceding the date such Tranche Five Loans are funded.

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”). Beginning on the Amortization Date, the Company will be 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.

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 March 31, 2021, 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 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 March 31, 2021, the Company was in compliance with the required covenants. As of March 31, 2021, borrowings under the Credit Agreement are classified based on their schedule maturities. As a result of the liquidity conditions discussed in Note 2, the Company is not expected to be able to maintain its minimum liquidity covenant 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.

In connection with the Credit Agreement, the Company issued a warrant to MAM Eagle Lender, LLC to purchase 527,100 shares of the Company’s common stock, at an exercise price equal to $4.59 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 are being amortized using the effective interest method over the term of Credit Agreement. Debt issuance cost amortization is included in interest expense within the ConsolidatedStatements of Operations. As of March 31, 2021, the effective interest rate was 23.12%, which takes into consideration the non-cash amortization of the debt issuance costs and accretion of the exit fee. The Company recorded debt issuance cost amortization related to the Credit Agreement of $211 for the three months ended March 31, 2021.

The Company 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. The Company is required to pay Orion lump sum payments of up to €20,500 ($24,039 as of March 31, 2021) 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 March 31, 2021, 0 such milestones have been achieved.

The Company 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. The Company is required to pay Orion lump sum payments of up to €12,200 ($14,308 as of March 31, 2021) 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 March 31, 2021, 0 such milestones have been achieved.

In June 2017, the Company acquired the exclusive global rights to two novel neuromuscular blocking agents (“NMBAs”) and a proprietary reversal agent from Cornell University (“Cornell”). The NMBAs and reversal agent are referred to herein as the NMBA Related Compounds. The NMBA Related Compounds include one novel intermediate-acting NMBA that has initiated Phase I clinical trials and two other agents, a novel short-acting NMBA, and a rapid-acting reversal agent specific to these NMBAs. The Company is obligated to make: (i) an annual license maintenance fee payment to Cornell until the first commercial sale of the NMBA Related Compounds; and (ii) milestone payments to Cornell upon the achievement of certain milestones, up to a maximum, for each NMBA 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 NMBA Related Compound at a rate ranging from low to mid-single digits, depending on the applicable NMBA Related Compounds and whether there is a valid patent claim in the applicable country, subject to an annual minimum royalty amount. Further, the Company will reimburse Cornell ongoing patent costs related to prosecution and maintenance of the patents related to the Cornell patents for the NMBA Related Compounds.

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

The Company is party to a Master Manufacturing Services Agreement and Product Agreement with Patheon, collectively the Patheon Agreements, pursuant to which Patheon provides sterile fill-finish of injectable meloxicam drug product at its Monza, Italy manufacturing site. The Company has agreed to purchase a certain percentage of its annual requirements of finished injectable meloxicam from Patheon during the term of the Patheon Agreements.

On April 10, 2015, Recro completed the acquisition of a manufacturing facility in Gainesville, Georgia and the licensing and commercialization rights to injectable meloxicam (the “Alkermes Transaction”). Pursuant to the purchase and sale agreement and subsequent amendment with Alkermes, as amended, governing the Alkermes Transaction, the Company agreed to pay to Alkermes up to an additional $140,000 in milestone payments including $60,000 upon regulatory approval payable over a seven-year period, as well as net sales milestones related to injectable meloxicam and royalties on future product sales of injectable meloxicam.

Based on the amended terms of the Alkermes agreement, the contingent consideration consists of four separate components. The first component is (i) a $5,000 payment made in the first quarter of 2019 and (ii) a $5,000 payment made in the second quarter of 2019. The second components became payable upon regulatory approval in February 2020 and include (i) a $5,000 payment due within 180 days following regulatory approval for ANJESO, of which timing of payment was amended as noted below, and (ii) $45,000 payable in 7 equal annual payments of approximately $6,400 beginning on the first anniversary of such approval, of which the first payment was made in the first quarter of 2021. The third component consists of three potential payments, based on the achievement of specified annual revenue targets, the last of which represents over 60% of these milestone payments and currently does not have a fair value assigned to its achievement. The fourth component consists of a royalty payment between 10% and 12% (subject to a 30% reduction when no longer covered by patent) for a defined term on future injectable meloxicam net sales.

In August 2020, the Company entered into an Amendment to the Purchase and Sale Agreement that restructured the timing of payment of the $5,000 milestone development earn-out consideration due to Alkermes as a result of achievement of approval of the NDA for ANJESO to be paid in three installments of (i) $2,500 paid August 18, 2020; (ii) $1,060 paid on December 20, 2020; and (iii) $1,440 on or prior to June 20, 2021. In consideration of amending the timing of this development milestone earn-out payment, the Company paid Alkermes a one-time, non-refundable and non-creditable fee of $285 at the time of entering into the Amendment to the Purchase and Sale Agreement.

As of March 31, 2021, the Company has paid $19,989 in milestone payments to Alkermes.

The Company is involved, from time to time, in various claims and legal proceedings arising in the ordinary course of its business. Except as disclosed below, the Company is 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 (the “Securities Litigation”) 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 Recro concerning the NDA for ANJESO. The complaint seeks unspecified damages, interest, attorneys’ fees, and other costs. On December 10, 2018, the lead plaintiff filed an amended complaint that asserted the same claims and sought the same relief but included new allegations and named additional officers 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. In response to questions from the Judge, the parties submitted supplemental briefs with regard to the motion to dismiss the amended complaint during the fall of 2019. On February 18, 2020, the motion to dismiss was granted without prejudice. On April 25, 2020, the plaintiff filed a second amended complaint. Recro filed a motion to dismiss the second amended complaint on June 18, 2020. The plaintiff filed an opposition to the motion to dismiss on August 17, 2020. On September 16, 2020, Recro filed a reply in support of the motion to dismiss. On March 1, 2021, Recro’s second motion to dismiss was denied. The parties are engaged in discussions to see if the matter can be resolved, and all deadlines in the case have been continued until June 21, 2021. In connection with the Separation, the Company accepted assignment by Recro of all of Recro’s obligations in connection with the Securities Litigation and agreed to indemnify Recro for all liabilities related to the Securities Litigation. Recro and the Company has recorded a liability equal to the estimated fair value of the indemnification to Recro related to this Securities Litigation. The Company believe that the lawsuit is without merit and intends to vigorously defend against it, unless and until a resolution satisfactory to Recro and the Company can be achieved. At this time, no assessment can be made as to its likely outcome or whether the outcome will be material to the Company.

As of ~~September 30, 2019,~~March 31, 2021, the Company had outstanding non-cancelable and cancelable purchase commitments in the aggregate amount of ~~$4,863~~$6,680 related to inventory ~~capital expenditures~~ and other goods and services, including ~~pre-commercial/~~manufacturing ~~scale-up~~ and clinical activities. 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 and agreements.

The Company has entered into employment agreements with certain of its named executive officers. As of ~~September 30, 2019,~~March 31, 2021, these employment agreements provided for, among other things, annual base salaries in an aggregate amount of not less than ~~$624,~~$1,317, from that date through ~~June 2020.~~September 2022.

~~Certain employees~~On November 21, 2019, the Company separated from Recro as a result of a special dividend distribution of all the outstanding shares of its common stock to Recro shareholders. On the distribution date, each Recro shareholder received 1 share of Baudax Bio’s 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. Upon the Distribution, 9,396,583 shares of common stock were issued, of which 45,874 were distributed after December 31, 2019.

The Company is authorized to issue 100,000,000 shares of common stock, with a par value of $0.01 per share.

On February 13, 2020, the Company entered into a Sales Agreement (the “Sales Agreement”) with JMP Securities LLC, as sales agent (the “Agent”), pursuant to which the Company may, from time to time, issue and sell shares of its common stock, par value $0.01 per share, in an aggregate offering price of up to $25,000 through the Agent. As of March 31, 2021, 441,967 shares of common stock have been sold under the Sales Agreement for net proceeds of $3,612, none of which were sold in the three months ended March 31, 2021. The Agent was paid a sales commission of 3% for such sales under the Sales Agreement.

On March 26, 2020, the Company closed an underwritten public offering of 7,692,308 shares of its common stock, Series A Warrants to purchase 7,692,308 shares of common stock (the “March Series A Warrants”) and Series B Warrants to purchase 7,692,308 shares of common stock (the “March Series B Warrants”), at an exercise price of $4.59 per share for the March Series A Warrants and at an exercise price of $3.25 per share for the March Series B Warrants, for net proceeds to the Company of$23,085, after deducting underwriting discounts and commissions and offering expenses.

On November 24, 2020, the Company closed a registered direct offering of 2,850,000 shares of its common stock, warrants to purchase 10,126,583 shares of common stock (the “November Series A Warrants”) at an exercise price of $1.20 per share, pre-funded warrants to purchase 7,276,583 shares of common stock (the “November Series B Warrants”) at an exercise price of $0.01 per share, for net proceeds to the Company of $10,763. As compensation to H.C. Wainwright & Co., LLC (the “Placement Agent”) as placement agent, the Company agreed to pay to the Placement Agent a cash fee of 6.0% of the aggregate gross proceeds, plus a management fee equal to 1.0% of the gross proceeds and reimbursement of certain expenses and legal fees. The Company also issued warrants to purchase 607,595 shares of common stock (the “November Placement Agent Warrants”) at an exercise price of $1.48125 per share.

On December 18, 2020, the Company closed a registered direct offering of 4,250,000 shares of its common stock, warrants to purchase 10,300,430 shares of common stock (the “December Series A Warrants”) at an exercise price of $1.18 per share, pre-funded warrants to purchase 6,050,430 shares of common stock (the “December Series B Warrants”) at an exercise price of $0.01 per share, for net proceeds to the Company of $10,933. As compensation to the Placement Agent, the Company agreed to pay to the Placement Agent a cash fee of 6.0% of the aggregate gross proceeds, plus a management fee equal to 1.0% of the gross proceeds and reimbursement of certain expenses and legal fees. The Company also issued warrants to purchase 618,026 shares of common stock (the “December Placement Agent Warrants”) at an exercise price of $1.45625 per share.

On February 8, 2021, the Company closed a registered direct offering of 11,000,000 shares of common stock (the “February Offering”) at an offering price of $1.60 per share. As compensation to the Placement Agent, the Company agreed to pay the Placement Agent a cash fee of 6.0% of the gross proceeds raised in the February Offering, plus a management fee equal to 1.0% of the gross proceeds raised in the February Offering and reimbursement of certain expenses and legal fees. The Company also issued to designees of the Placement Agent warrants to purchase 660,000 shares of common stock (the “February Placement Agent Warrants”) at an exercise price of $2.00 per share. The February Placement Agent Warrants will be exercisable immediately upon approval by the Company’s board of directors and shareholders of an increase in the number of shares of the Company’s authorized common 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 March 31, 2021, 0 preferred stock was issued or outstanding.

On May 29, 2020, in connection with the Credit Agreement, the Company issued a warrant to MAM Eagle Lender, LLC to purchase 527,100 shares of common stock, at an exercise price equal to $4.59 per share (see Note 11(b)).

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 1,186,774 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 par value, or $0.01, 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 10,300,430 shares of common stock of the Company ~~participate~~(the “January Warrants”) at an offering price of $0.125 per warrant in ~~Recro’s stock-based compensation plan, which provides~~exchange for the ~~grants~~exercise of ~~stock options and RSUs.~~the institutional investor’s existing December Series A warrants that were issued to them on December 21, 2020, at an exercise price of $1.18 per warrant. The ~~expense associated~~January Warrants have an exercise price of $1.60 per share.

As compensation to the Placement Agent, as placement agent in connection with the ~~Company’s employees who participate~~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 ~~plan is included~~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 ~~accompanying combined statements of operations. A portion of these costs have been allocated out~~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 ~~as they relate~~also issued to ~~employees responsible for corporate level activities that historically were incurred by~~designees of the ~~entity that represents~~Placement Agent warrants to purchase 618,026 shares of common stock (the “January Placement Agent Warrants”) at an exercise price of $2.00 per share.

During the ~~Company. Additionally, the entity that represents~~year ended December 31, 2020, the Company ~~historically incurred~~issued 8,836,663 shares of common stock upon exercise of the ~~costs~~March Series A and Series B Warrants for net proceeds of $2,538.

During the year ended December 31, 2020, the Company issued 7,276,583 shares of common stock upon exercise of the November Series B Warrants for proceeds of $73 and 6,050,430 shares of common stock upon exercise of the December Series B Warrants for proceeds of $60.

During the three months ended March 31, 2021, the Company issued 111,539 shares of common stock upon exercise of the March Series B Warrants for net proceeds of $1 and 10,300,430 shares of common stock upon exercise of the December Series A Warrants for proceeds of $12,155.

As of March 31, 2021, 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)		32,438	$	0.01	March 26, 2025
March Series B Warrants (non-participating holders)		32,438	$	0.01	April 26, 2021
March Series A and Series B Warrants (participating holders)		437,692	$	0.01	April 26, 2021
MAM Eagle Lender Warrant		527,100	$	4.59	May 29, 2027
November Series A Warrants		10,126,583	$	1.20	November 24, 2025
November Placement Warrants		607,595	$	1.48125	November 24, 2025
December Placement Warrants		618,026	$	1.45625	December 18, 2025
January Warrants		10,300,430	$	1.60	January 21, 2026
January Placement Warrants		618,026	$	2.00	January 21, 2026

With the exception of the March Series A Warrants to purchase 32,438 shares of common stock and March Series B Warrants to purchase 32,438 shares of common stock related to the ~~board~~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 ~~directors, which~~antidilution provisions, the remaining warrants outstanding are equity classified. There were 470,130 warrants to purchase shares of common stock that were unexercised at the expiration date and as a result cancelled as of April 26, 2021.

The following table summarizes the fair value and the assumptions used for the Black-Scholes option-pricing model for the liability classified warrants.

The Company has ~~also been partially allocated out of~~adopted the ~~Company.~~

~~In October 2013, Recro established the 2013 Equity Incentive~~2019 Plan ~~(the 2013 Plan), which~~that allows for the grant of stock options, stock appreciation rights and stock awards for a total of ~~600,000~~3,000,000 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~~1^st of each year, pursuant to the “Evergreen” provision of the ~~A&R~~2019 Plan, the number of shares available under the plan ~~may~~shall be increased ~~by the Recro Board~~ by an amount equal to 5% of the outstanding common stock on December ~~1st~~1^st of that ~~year.~~year or such lower amount as determined by the Board of Directors. In December ~~2018 and 2017~~2020, the number of shares available for issuance under the ~~A&R~~2019 Plan was increased by ~~1,082,972 and 956,341, respectively.~~1,522,171. The total number of shares authorized for issuance under the ~~A&R plan~~2019 Plan as of ~~September 30,~~March 31, 2021 is 4,989,706. As of March 31, 2021, 748,715 shares are available for future grants under the 2019 ~~is 8,119,709.~~ Plan.

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 Baudax Bio options awarded to employees during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 was $0.79 and $1.58, respectively.

Under the 2019 ~~and 2018 was $5.53 and $6.18, respectively. The~~Plan, the fair value of the Baudax Bio options was estimated on the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions:

	September 30,				March 31,
	2019		2018		2021		2020
Range of expected option life	5.5 - 6 years		5.5 - 6 years
Expected option life					5.5 years		6 years
Expected volatility	74.69% - 80.59%		74.05% - 81.47%		75.68%		72.85%
Risk-free interest rate	1.42 - 2.66%		2.32 - 2.98%		0.68%		0.46%
Expected dividend yield		—		—		—		—

The following table summarizes Baudax Bio stock option activity during the ~~nine~~three months ended ~~September 30, 2019:~~March 31, 2021:

	Number of shares			Weighted average exercise price		Weighted average remaining contractual life	Number of shares			Weighted average exercise price		Weighted average remaining contractual life
Balance, December 31, 2018		3,092,606		$	7.32	7.3 years
Balance, December 31, 2020								2,284,298		$	3.10	9.1 years
Granted		1,094,756		$	7.95			994,877		$	1.28
Exercised		(408,170	)	$	5.94
Expired/forfeited/cancelled		(678,645	)	$	7.84			(101,852	)	$	1.76
Balance, September 30, 2019		3,100,547		$	7.61	6.9 years
Balance, March 31, 2021								3,177,323		$	2.58	8.6 years
Vested		1,973,108		$	7.31	5.9 years		429,292		$	4.47	5.4 years
Vested and expected to vest		3,100,547		$	7.61	6.9 years		3,177,323		$	2.58	8.6 years

Included in the table above are ~~482,876~~355,503 stock options outstanding as of ~~September 30, 2019~~March 31, 2021 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).

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~~three months ended ~~September 30, 2019.~~March 31, 2021:

Included in the table above are ~~18,625~~191,208 time-based RSUs outstanding as of ~~September 30, 2019~~March 31, 2021 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).

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:

Stock-based compensation expense for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 was $2,304 and $2,633, respectively. For the current year, this represents stock-based compensation for the Baudax Bio awards, including $128 of liability-classified awards, as well as stock-based compensation from the Recro Equity Plan for the acceleration of vesting for Baudax Bio employees in their Recro awards. For the prior year, this represents stock-based compensation from the 2019 ~~and 2018 was $4,254 and $3,370, respectively.~~Plan as well as stock-based compensation from the Recro Equity Plan for certain Baudax Bio employees who were continuing to vest in their Recro awards but were not performing services to Recro.

As of ~~September 30, 2019,~~March 31, 2021, there was ~~$7,532~~$5,931 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 years. As of ~~September 30, 2019,~~March 31, 2021, there was ~~$1,621~~$1,783 of unrecognized compensation expense related to unvested performance-based ~~RSUs and will be expensed if the performance criteria are met.~~RSUs.

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,~~March 31, 2021, the aggregate intrinsic value of the ~~vested and~~ unvested options was ~~$7,514 and $3,331, respectively.~~$196. There was 0 aggregate intrinsic value of the vested options.

A Non-Executive Director of the Company’s Irish subsidiary is a Managing Director and a majority shareholder of HiTech Health Ltd ~~(HiTech Health)~~(“HiTech Health”), a consultancy firm for the biotech, pharmaceutical and medical device industry. Since 2016, HiTech Health has provided the Company with certain consulting services and in November 2017 both parties entered into a Service Agreement to engage in both regulatory and supply chain project support and consultancy. In consideration for such services, the Company recorded ~~$11~~$17 and ~~$25~~$88 for the three months ended ~~September 30, 2019~~March 31, 2021 and ~~2018, respectively. For the nine months ended September 30, 2019 and 2018 the Company recorded $115 and $278, in consideration for such services,~~2020, respectively. A portion of the amount relates to consultancy services provided by the Non-Executive Director.

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% of the employee contributions up to a maximum of 5% of employee compensation. Total Company contributions to the 401(k) plan for the three months ended ~~September 30, 2019~~March 31, 2021 and ~~2018~~2020 were ~~$45~~$270 and ~~$90,~~$141, respectively. ~~Total Company contributions to the 401(k) plan for the nine months ended September 30, 2019 and 2018 were $281 and $364, respectively.~~

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~~2020 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, 2020, filed with the ~~Securities and Exchange Commission, or~~ SEC on ~~October 22, 2019, which is referred to herein as the “Form 10.”~~February 16, 2021. 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.

This Quarterly Report on Form 10-Q contains forward-looking statements. We may, in some cases, use terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements.

~~These forward-looking statements in this quarterly report on Form 10-Q include, among other things, statements about:~~

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.

We are a pharmaceutical company primarily focused on developing and commercializing innovative products for hospital and related 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 hospital and related acute care markets.

The launch of our first commercial product ANJESO began in mid-2020 in the U.S. ANJESO is the first and only 24-hour, intravenous (IV) COX-2 preferential non-steroidal anti-inflammatory (NSAID) for the management of moderate to severe pain, which can be administered alone or in combination with other non-NSAID analgesics. We ~~believe we can create value for our shareholders through the development, registration~~have successfully completed three Phase III clinical trials, including two pivotal efficacy trials, a large double-blind Phase III safety trial and ~~commercialization of IV meloxicam~~a Phase IIIb program evaluating ANJESO and ~~our other pipeline product candidates.~~its health economic impact in specific surgical settings. In addition to ~~our~~ANJESO, we have a pipeline weof other innovative pharmaceutical assets including two novel neuromuscular blocking agents (NMBAs) and a proprietary chemical reversal agent specific to these NMBAs, which is currently in preclinical studies. We continue to evaluate ~~acquisition, out-licensing~~strategic partnerships to commercialize ANJESO outside of the United States.

Effective October 2020, the Centers for Medicare and ~~in-licensing opportunities.~~Medicaid Services, or CMS, established a new permanent J-code for ANJESO, facilitating reimbursement in the hospital outpatient, ambulatory surgery center and physician office settings of care. We have ~~no revenue~~also entered into agreements with leading group purchasing organizations in the U.S., including Vizient Inc., Premier Inc., and ~~our~~HealthTrust, as well as one of the top 3 integrated delivery networks for terms for availability of ANJESO to their member institutions. In the first quarter of 2021 we have seen more meaningful progress in deepening usage of ANJESO in early users as reflected in sales to existing hospitals and ambulatory surgery centers, which doubled in the first quarter of 2021 compared to the fourth quarter of 2020. The number of vials sold to end-customers has increased 40% in the first quarter of 2021 versus the fourth quarter of 2020 and the re-order rate was nearly 70% for the same comparable period. During the first quarter, formulary wins grew by 22 institutions, for a total of 90 institutions as of March 31, 2021, an increase of over 30% from the fourth quarter of 2020.

Our costs consist primarily of expenses incurred in conducting our manufacturing scale-up, commercialization of ANJESO, clinical trials and preclinical studies, regulatory activities, ~~pre-commercialization of meloxicam, public-company~~and public company and personnel costs.

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

Our efforts to commercialize ANJESO have been impacted and may continue to be impacted by the COVID-19 pandemic. Even as vaccines for COVID-19 are being rolled out, an average of over 50,000 new cases are being reported in the United States every day. Hospitals have reduced elective surgeries, and many have not yet returned to their prior number of surgeries even where the pandemic has, for a time, abated. In addition, COVID-19 has, in many cases, impacted revenue for hospitals, caused a reduction in hospital staffing, lead to a diversion in resources from other normal activities to patients suffering from COVID-19 and caused a limitation in hospital access for nonpatients, including our sales professionals, which we believe is impacting our marketing and commercialization efforts. We believe a reduction in elective surgeries during the COVID-19 pandemic has caused and may continue to result in decreased demand for ANJESO.

We anticipate that many hospitals and health care providers will continue to suffer negative financial consequences due to an increase in unexpected costs, personal protective equipment, and ventilators, along with an ongoing reduction in revenue due to fewer elective procedures being performed, which may result in a decreased demand for ANJESO. While access restrictions have eased in some locations, cycling spikes of COVID-19 cases in certain states or regions may further impact our sales force as access to hospitals may be restricted and elective surgeries may be limited in those areas. In addition, the absence of hospital formulary meetings where new drugs can be adopted has impacted our efforts to commercialize ANJESO. Many hospital formularies recently resumed meetings after a 6-month, or longer, absence. Despite the existence of a backlog of agents scheduled to be reviewed, we believe we will make progress getting ANJESO added to additional hospital formularies in the near term. Due to the rapidly evolving environment, continued uncertainties from the impact of the COVID-19 global pandemic, and the recent regional outbreaks that are impacting the recovery, we cannot estimate the full extent to which our commercialization of ANJESO and financial results may be adversely impacted.

In ~~November~~August 2019, Recro announced its plans to separate its acute care business from its ~~CDMO~~contract manufacturing and development business through a pro rata distribution of our common stock to shareholders of Recro. ~~In preparation for~~As a part of the Separation, Recro ~~will transfer~~transferred the assets, liabilities and operations of its acute care ~~business~~segment to us, pursuant to the terms of a Separation ~~Agreement, entered into between Recro and Baudax Bio.~~Agreement. On November 21, 2019, the distribution date, each Recro shareholder ~~will receive~~received one share 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~~As a result of the ~~application~~Distribution, we are now an independent public company whose shares of common stock are trading under the symbol “BXRX” on The Nasdaq Capital Market, or Nasdaq.

Subsequent to regulatory approval for ANJESO from the FDA, we began selling ANJESO in the U.S. through a single third-party logistics provider, or 3PL, which takes title to and control of the ~~distribution ratio. Following~~goods. We recognize revenue from ANJESO product sales at the ~~Distribution, we will operate as a separate, independent company. The Distribution is subject~~point the title to the ~~satisfaction or waiver by Recro of certain conditions. For a more detailed description of these conditions, see “The Separation and Distribution—Conditions~~product is transferred to the ~~Distribution”~~customer and the customer obtains control of the product. The transaction price that is recognized as revenue for products includes an estimate of variable consideration for reserves, which result from discounts, returns, chargebacks, rebates, and other allowances that are offered within contracts between us and our end-customers, wholesalers, group purchasing organizations and other indirect customers.

Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of its anticipated performance and all information (historical, current and forecasted) that is reasonably available. These reserves reflect our best estimate of the amount of consideration to which we are entitled based on the terms of the contracts. The amount of variable consideration that is included in the ~~Form 10.~~transaction price may be constrained and is included in the net sales price only to the extent that is considered probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

~~Our historical combined financial statements have been prepared on~~Cost of sales includes product costs, manufacturing costs, transportation and freight, royalty expense, qualification costs for a ~~stand-alone basis~~secondary manufacturing suite for increased available capacity to meet anticipated demand and indirect overhead costs associated with the manufacturing and distribution of ANJESO including supply chain and quality personnel costs. Cost of sales may also include period costs related to certain manufacturing services and inventory adjustment charges. We expensed a significant portion of the cost of producing ANJESO that we are ~~derived from Recro’s consolidated financial statements~~using in the commercial launch as research and accounting records and are presented in conformity with U.S. GAAP. Our financial position, results of operations and cash flows historically operated, and will continue to operate, as part of Recro’s financial position, results of operations and cash flowsdevelopment expense prior to ~~and until~~ the ~~Distribution to Recro’s shareholders. These historical combined financial statements may not be indicative~~regulatory approval of our future performance and do not necessarily reflect what our combined results of operations, financial condition and cash flows would have been had we operated as a separate company during the periods presented.ANJESO. We expect ~~that changes will occur in our operating structure and our~~ ~~capitalization~~cost of sales to increase as ~~a result of the Separation from Recro.~~

Research and development expenses currently consist primarily of costs incurred in connection with the development of ~~IV meloxicam~~ANJESO and other pipeline activities. These expenses consist primarily of:

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, 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:

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~~ANJESO, including required pediatric post-marketing studies, as ~~we seek to obtain regulatory approval for IV meloxicam, and if successful in obtaining regulatory approval, advance IV meloxicam through the commercialization scale-up~~well as development and other ~~activities.~~ ~~We also expect to have expenses~~ related ~~to work for maintenance~~activities of our other product candidates. 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.~~pipeline.

Selling, general and administrative expenses consist of sales and marketing expenses and general and administrative expenses.

Sales and marketing expenses primarily consist of compensation and benefits for our sales force and personnel that support 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 include 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,~~medical affairs, regulatory, finance and information technology 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.

We expect our selling, general and administrative expenses to increase in the future as a result of our commercial launch of ANJESO.

Due to the impacts of COVID-19 and the resultant slower than expected commercial ramp of ANJESO, in November of 2020, we implemented a reduction in workforce by approximately 40 employees. We expect that the reorganization will result in annualized savings of an estimated $10.6 million in personnel and other related costs. There were also significant cost reductions made in manufacturing and launch related activities. The reorganization was completed in November 2020 and we incurred approximately $1.7 million of charges for severance and other costs relating to such reorganization activities during the fourth quarter of 2020.

~~Pursuant~~In connection with the Separation, we entered into an Assignment and a Partial Assignment, Assumption and Bifurcation Agreement, or the Alkermes Agreements, relating to the Purchase and Sale Agreement ~~entered into~~ for the acquisition of acertain assets, including the worldwide rights to injectable meloxicam and Recro’s development, formulation and manufacturing ~~facility in Gainesville, Georgia and the licensing and commercialization rights for IV meloxicam,~~business from Alkermes, or the ~~Gainesville~~Alkermes Transaction, as amended in December 2018 ~~among~~and August 2020. Pursuant to the Alkermes ~~Pharma Ireland Limited and Alkermes US Holdings, or Alkermes, Daravita, Recro and Recro Gainesville LLC,~~Agreements, we are required to pay up to ~~an additional~~ $140.0 million in milestone payments, including $10.0 million that was paid during ~~the first half of~~ 2019, another ~~$5.0~~$3.6 million paid in 2020, $1.4 million which becomes due ~~within 180 days of approval of IV meloxicam~~June 20, 2021, and $45.0 million over seven years beginning one year after approval, of which the first payment was made in the first quarter of 2021, as well as net sales milestones and a royalty percentage of future product net sales related to IVinjectable meloxicam between 10% and 12% (subject to a 30% reduction when no longer covered by patent). The estimated fair value of the initial $54.6 million payment obligation was recorded as part of the purchase price for the ~~Gainesville~~Alkermes Transaction. We have continued to reevaluate the fair value each subsequent period and as of ~~September 30, 2019~~March 31, 2021 recorded a ~~$65.7~~$60.5 million payment obligation, representing the estimated probability adjusted fair ~~value.~~value of the liability. 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,~~ March 31, 2021, we have paid ~~$10.0~~$20.0 million in milestone payments to Alkermes.

Interest expense for 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:~~

Comparison of the Three Months Ended ~~September 30, 2019~~March 31, 2021 and ~~2018~~2020

	Three Months Ended September 30,						Three Months Ended March 31,
	2019			2018			2021			2020
	(amounts in thousands)						(amounts in thousands)
Revenue, net							$	198		$	—

Operating expenses:
Cost of sales								821			—
Research and development	$	1,845		$	9,838			1,108			3,070
General and administrative		4,524			5,107
Selling, general and administrative								12,088			8,046
Amortization of intangible assets								644			215
Change in warrant valuation								18			1,378
Change in contingent consideration valuation		3,909			4,115			1,841			27,626
Total operating expenses		10,278			19,060			16,520			40,335
Operating loss		(10,278	)		(19,060	)		(16,322	)		(40,335	)
Other income (expense):
Other income (expense), net		(37	)		(32	)
Other expense:
Interest and other expense								(590	)		37
Net loss	$	(10,315	)	$	(19,092	)	$	(16,912	)	$	(40,298	)

Revenue, net. For the three months ended March 31, 2021, net product revenue was $0.2 million, related to sales of ANJESO in the U.S. While utilizing the title model of distribution, product revenue represents shipments to our 3PL provider. For the three months ended March 31, 2020, we did not recognize any product revenue.

Cost of sales. Our cost of sales was $0.8 million for the three months ended March 31, 2021 and consists of product costs, royalty expense and certain fixed costs associated with the manufacturing of ANJESO, including supply chain and quality costs. We expensed costs associated with the manufacturing of our products as research and development prior to regulatory approval. Certain product costs of ANJESO units recognized as revenue during the three months ended March 31, 2021 were incurred prior to FDA approval of ANJESO in February 2020, and therefore are not included in cost of sales during the period. We expect that over time, our cost of sales will increase as sales increase and as inventory values change to include all direct and indirect costs and expenses post FDA approval. No product cost of sales was recorded for the three months ended March 31, 2020.

Research and Development. Our research and development expenses were ~~$1.8~~$1.1 million and ~~$9.8~~$3.1 million for the three months ended ~~September 30, 2019~~March 31, 2021 and ~~2018,~~2020, respectively. The decrease of ~~$8.0~~$2.0 million ~~resulted from~~was primarily due to a decrease ~~in pre-commercialization manufacturing~~of $1.7 million as a result of re-allocating costs related to supply chain, regulatory, quality, and ~~clinical costs for IV meloxicam~~medical affairs associated with support of ~~$4.8 million, a decrease in~~the commercial launch of ANJESO from research and development ~~costs for other pipeline products~~expense to cost of ~~$2.2 million~~sales and selling, general and administrative expense and a decrease in personnel costs of ~~$1.0~~$0.3 million.

Selling, General and Administrative. Our selling, general and administrative expenses were ~~$4.5~~$12.1 million and ~~$5.1~~$8.0 million for the three months ended ~~September 30, 2019~~March 31, 2021 and ~~2018,~~2020, respectively. The ~~decrease~~increase of ~~$0.6~~$4.1 million was primarily due to ~~decreased~~the commercial ~~team~~launch of ANJESO, specifically, an increase in personnel related costs of ~~$1.2~~$1.6 million, an increase of $1.3 million attributable to medical affairs and ~~pre-commercial consulting costs~~regulatory support reallocated from research and development expense post FDA approval, an increase of ~~$0.4~~$0.3 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~~an increase of ~~$1.0 million.~~$0.3 million in marketing costs. In addition, the first quarter of 2020 included $0.5 million in reimbursed general and administrative expenses related to the Transition Services Agreement with Recro Pharma, which ended on December 31, 2020.

Amortization of Intangible Assets. Amortization expense was $0.6 million for the three months ended March 31, 2021 and $0.2 million for the three months ended March 31, 2020, which was related to the amortization of our intangible asset resulting from research and development activities over its estimated useful life beginning in the first quarter of fiscal 2020.

Change in Warrant Valuation. There was not a material change in warrant valuation for the three months ended March 31, 2021. Our warrant valuation increased $1.4 million for the three months ended March 31, 2020 due to an increase in the Black-Scholes values.

Change in Contingent Consideration Valuation. ~~Our~~The change in contingent consideration valuation was an increase ofin value of ~~$3.9~~$1.8 million for the three months ended ~~September 30, 2019~~March 31, 2021 and an increase in value of ~~$4.1~~$27.6 million for the three months ended ~~September 30, 2018.~~March 31, 2020. The non-cash charge for contingent consideration in each period related to the revaluation of the ~~probability adjusted~~probability-adjusted fair value of the ~~Gainesville Transaction payment obligation.~~

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 million and $25.7 million for the nine months ended September 30, 2019 and 2018, respectively. Excluding $2.8 of costs 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 and clinical costs for IV meloxicam of $6.7 million, a decrease in personnel costs of $1.9 million, and a decrease in development costs for other pipeline products of $1.3 million.

~~General and Administrative.~~ Our general and administrative expenses were $21.8 million and $24.2 million for the nine months ended September 30, 2019 and 2018, respectively. Excluding $4.4 million of costs associated with the strategic restructuring initiative recorded in the nine months ended September 30, 2019, the decrease of $6.8 million was due to a reduction in commercial team personnel of $5.5 million and reduced pre-commercial consulting costs of $2.5 million in preparation of the anticipated launch of IV meloxicam following the receipt of the second CRL. These decreases in costs were partially offset 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 million for the nine months ended September 30, 2019 as compared to an increase in value of $7.0 million for the nine months ended September 30, 2018. The non-cash charge for contingent consideration in each period related to the revaluation of the probability adjusted fair value of the GainesvilleAlkermes Transaction payment obligation. The ~~decrease of $22.2 million~~increase in contingent consideration value for the three months ended March 31, 2021 was primarily due to the time value of money and change in interest rates, partially offset by adjusted timing of estimated milestone and royalty payments ~~after the receipt~~due to updated forecasts reflecting an estimate of the ~~second CRL from~~launch trajectory of ANJESO. The increase in contingent consideration valuation for the three months ended March 31, 2020 was primarily due to the increase in probability of success of milestones tied to the FDA ~~in March 2019.~~approval of ANJESO during the first quarter of fiscal 2020.

~~Historically,~~As of March 31, 2021, we had $38.2million in cash, cash equivalents and short-term investments.

On February 8, 2021, we entered into an agreement to issue and sell 11,000,000 shares of common stock, or the ~~primary source~~February Offering, at an offering price of ~~liquidity~~$1.60 per share. As compensation to H.C. Wainwright & Co., LLC, or the Placement Agent, as placement agent in connection with the February Offering, we agreed to pay the Placement Agent a cash fee of 6.0% of the gross proceeds raised in the February Offering, plus a management fee equal to 1.0% of the gross proceeds raised in the February Offering and reimbursement of certain expenses and legal fees. We also issued to designees of the Placement Agent warrants to purchase up to 660,000 shares of common stock, or the February Placement Agent Warrants. The February Placement Agent Warrants have an exercise price of $2.00 per share. The February Placement Agent Warrants will be exercisable immediately upon approval by our board of directors and shareholders of an increase in the number of shares of our authorized common stock.

On January 21, 2021, we entered into an agreement to issue and sell warrants exercisable for ~~our business was cash flow allocated~~an aggregate of 10,300,430 shares of common stock, or the January Warrants, at an offering price of $0.125 per warrant in exchange for the exercise of the institutional investor’s existing December Series A warrants that were issued to usthem on December 21, 2020, at an exercise price of $1.18 per warrant. The January Warrants have an exercise price of $1.60 per share. The January Warrants are immediately exercisable and will expire five years from ~~Recro. Prior~~the issuance date. As compensation to the ~~Separation, transfers~~Placement Agent, we agreed to pay a cash fee of ~~cash to and from Recro are reflected in Net Parent Investment~~6.0% of the aggregate gross proceeds raised in the ~~historical combined balance sheets, statements~~January Offering (including the proceeds relating to the exercise of ~~cash flows and statements~~the December Series A Warrants), plus a management fee equal to 1.0% of ~~changes in Net Parent Investment. We have not reported cash or cash equivalents for~~ the ~~periods presented~~gross proceeds raised in the ~~combined balance sheets.~~January Offering (including the proceeds relating to the exercise of the December Series A Warrants) and reimbursement of certain expenses and legal fees. We ~~expect Recro~~also issued to ~~continue~~designees of the Placement Agent warrants to ~~fund our~~purchase up to 618,026 shares of common stock, or the January Placement Agent Warrants. The January Placement Agent Warrants have substantially the same terms as the January Warrants, except that the January Placement Agent Warrants have an exercise price equal to $2.00 per share.

On November 24, 2020, we closed a registered direct offering of 2,850,000 shares of common stock, warrants to purchase 10,126,583 shares of common stock, or the November Series A Warrants, at an exercise price of $1.20 per share, pre-funded warrants to purchase 7,276,583 shares of common stock, or the November Series B Warrants, at an exercise price of $0.01 per share, for net proceeds of $10.8 million. As compensation to the Placement Agent, we agreed to pay to the Placement Agent a cash ~~needs through~~fee of 6.0% of the aggregate gross proceeds, plus a management fee equal to 1.0% of the gross proceeds and reimbursement of certain expenses and legal fees. We also issued warrants to purchase 607,595 shares of common stock, or the November Placement Agent Warrants, at an exercise price of $1.48125 per share.

On May 29, 2020, we entered in a $50.0 million Credit Agreement with MAM Eagle Lender, pursuant to which we have drawn $10.0 million as of the date of ~~the Separation.~~

~~Under the terms~~this Quarterly Report and may draw upon four additional tranches 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 isterm 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 ~~estimate will, based on our current plans and expectations, meet our cash needs for~~generate at least 12$5.0 million in net revenue in the three consecutive calendar months ~~after~~immediately preceding the ~~completion~~date such Tranche Two Loans are funded. The Tranche Two Loans may also be drawn on a subsequent date with the satisfaction of the ~~Separation. Subsequent~~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 ~~Separation,~~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 May 8, 2020, we entered into a promissory note for $1.5 million under the PPP of the CARES Act administered by the SBA. We have used the loan proceeds for covered payroll costs in accordance with the relevant terms and conditions of the CARES Act and related guidance. Accordingly, this Loan may be partially or fully forgiven if we are deemed to have complied with the provisions of the CARES Act including the use of Loan proceeds for payroll costs, rent, utilities, and other expenses, and at least 60% of the loan proceeds is used for payroll costs as defined by the CARES Act. Any forgiveness of the Loan will be subject to approval by the SBA and the Lender will require us to apply for such treatment in the future. Should we meet the requirements for forgiveness, we would extinguish the note upon receiving legal release from PNC Bank and record a gain on extinguishment in the period. We expect that the full $1.5 million balance of the PPP Loan will be forgiven, however, no assurance can be given that we will ~~no longer participate~~obtain forgiveness of the PPP Loan in ~~Recro’s centralized cash management~~whole or ~~benefit from direct funding from Recro. Our ability~~in part.

On February 13, 2020, we entered into a Sales Agreement with JMP Securities LLC, as sales agent, or the Agent, pursuant 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 securitieswhich we may, from time to ~~time. Financing may not be available on acceptable terms, or at all,~~time, issue 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 holderssell shares of our common stock, in an aggregate offering price of up to $25.0 million through the Agent, or the ATM Program. As of March 31, 2021, 441,967 shares have been sold under the ATM Program for net proceeds of $3.6 million, none of which were sold in the three months ended March 31, 2021. The Agent was paid a sales commission of 3% for such sales under the Sales Agreement.

We expect to seek additional funding to sustain our future operations and ~~may involve significant cash payment obligations and covenants that restrict our~~while we have successfully raised capital in the past, the ability to ~~operate~~raise capital in future periods is not assured. Based on our ~~business or access~~available cash as of March 31, 2021, we will need to ~~capital.~~raise additional capital in the next twelve months to continue as a going concern.

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

Cash used in operations was ~~$42.1~~$14.0 million and ~~$46.8~~$6.3 million for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2021 and ~~2018,~~2020, respectively, which represents our operating losses less our non-cash items including: stock-based compensation, non-cash interest expense, depreciation, amortization, changes in warrant valuations, and changes in fair value of contingent consideration, as well as changes in operating assets and liabilities.

Cash used in investing activities was ~~$1.8 million and $2.2~~$7.6 million for the ~~nine~~three months ended ~~September 30, 2019 and 2018, respectively. During~~March 31, 2021, which was primarily due to purchases of short-term investments. There was no cash used in investing activities for the ~~nine~~three months ended ~~September 30, 2019 and 2018, our capital expenditures were $1.6 million and $2.1 million, respectively.~~March 31, 2020

There was ~~$43.9~~$21.9 million of cash provided by financing activities in the ~~nine~~three months ended ~~September 30, 2019 from~~March 31, 2021 consisting of net proceeds of $16.2 million from ~~parent company investment~~registered direct offerings of ~~$53.9~~common stock and warrants and net proceeds of $12.2 million ~~which was~~from warrant exercises, partially offset by ~~$10.0 million~~a payment of contingent consideration ~~payments.~~of $6.4 million. There was ~~$49.0~~$26.9 million of cash provided by financing activities infor the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2020 from net proceeds ~~from parent company investment.~~of the public offering of $23.3 million and net proceeds of our equity facility of $3.6 million.

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

We might use existing cash and cash equivalents on hand, debt, equity financing, sale of assets or out-licensing revenue or a combination thereof to fund our ~~ability to operate as a standalone company and execute~~operations or product acquisitions. If we increase our ~~strategic priorities;~~

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from 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,” 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.

The table below reflects our contractual commitments as of ~~September 30, 2019:~~March 31, 2021:

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

	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):
Debt	$	11,537	$	1,196	$	6,730	$	3,611	$	—
Interest on Debt		3,873		1,395		2,099		379		—

Purchase Obligations (2):	$	6,680	$	3,202	$	451	$	—	$	—
Operating Leases (3)		711		431		280		—		—
Other Long-Term Liabilities:
Other License Commitments and Milestone payments (4), (5)		54,875		60		150		190		125
Alkermes Payments (6)		120,011		7,869		19,286		12,857		—
Employment Agreements (7)		1,317		1,008		309		—		—

Total Contractual Obligations	$	199,004	$	15,161	$	29,305	$	17,037	$	125

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

Our critical accounting policies and estimates are disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of ~~the Form 10.~~ our 2020 Annual Report. In the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2021, therewere no significant changes to the application of critical accounting policies previously disclosed in ~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Information Statement.~~our 2020 Annual Report.

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.~~March 31, 2021. 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,~~March 31, 2021, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

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.

We are involved, from time to time, in various claims and legal proceedings arising in the ordinary course of its business. Except as disclosed below, we 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, or the Securities Litigation, 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 usRecro concerning the NDA for ~~IV meloxicam.~~ANJESO. The complaint seeks unspecified damages, interest, attorneys’ fees, and other costs. On December 10, 2018, the 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~~Recro filed its response and briefing was completed on the motion to dismiss. In response to questions from the Judge, the parties submitted supplemental briefs with regard to the motion to dismiss the amended complaint during the fall of 2019. On February 18, 2020, the motion to dismiss was granted without prejudice. On April 25, 2020, the plaintiff filed a second amended complaint. Recro filed a motion to dismiss the second amended complaint on June ~~26, 2019, the judge heard oral arguments~~18, 2020. The plaintiff filed an opposition to Recro’s motion to dismiss on August 17, 2020. On September 16, 2020, Recro filed a reply in support of the motion to dismiss. On March 1, 2021, Recro’s second motion to dismiss was denied. The ~~judge asked~~parties are engaged in discussions to see if the ~~plaintiffs to file a supplemental brief, which was completed on August 30, 2019,~~matter can be resolved, and ~~Recro submitted a reply brief on September 27, 2019. As part of~~all deadlines in the case have been continued until June 21, 2021. In connection with the Separation, we ~~are assuming~~accepted assignment by Recro of all of Recro’s obligations in connection with the Securities Litigation and agreed to indemnify Recro for all liabilities related to ~~this litigation from Recro. We~~the Securities Litigation. Recro and we believe that the lawsuit is without merit and ~~intends~~intend to vigorously defend against ~~it. The lawsuit is in the early stages~~it, unless and atuntil a resolution satisfactory to Recro and us can be achieved. At this time, no assessment can be made as to its likely outcome or whether the outcome will be material to us.

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 wereThere have been no material changes ~~during the quarter ended September 30, 2019 to the~~in our risk factors ~~reported in the “Risk Factors” section of the Information Statement.~~

Our appeal relating to the NDA for IV Meloxicam has been granted, however, there can be no certainty that our proposed labeling will address the FDA’s concerns in order to successfully commercialize IV meloxicam.

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, we received a CRL from the FDA regarding the NDA, which stated that 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 there can be no guarantee that we will be able to do so 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 terms or timeline currently contemplated, if at all, and will involve significant time, effort and expense, which could harm our business, results of operations and financial condition.

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. and Baudax Bio, Inc. 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 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 resultas previously disclosed 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.~~

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 time2020 Annual Report.

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.

Exhibit No.	Description	Method of Filing

4.1	Form of Series C Warrant, issued January 25, 2021.	Incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 22, 2021 (File No. 001-39101).

4.2	Form of Placement Agent Warrant, issued January 25, 2021.	Incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on January 22, 2021 (File No. 001-39101).

4.3	Form of Placement Agent Warrant, issued February 10, 2021.	Incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 9, 2021 (File No. 001-39101).

10.1	Employment Agreement, dated March 8, 2021, between Baudax Bio, Inc. and Richard S. Casten.	Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 11, 2021 (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	Inline XBRL ~~Instance Document~~Taxonomy Extension Schema Document.	Filed herewith.

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

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

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

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

~~101 PRE~~104	Cover Page Interactive Data File (formatted as inline XBRL ~~Taxonomy Extension Presentation Linkbase Document~~and contained in Exhibit 101).	Filed herewith.

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.

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

Large accelerated filer	☐	Accelerated filer	☒☐

Non-accelerated filer	☐ ☒	Smaller reporting company	☒

		Emerging growth company	☒

			Page

~~PART I. FINANCIAL INFORMATION~~Forward-Looking Statements			3

PART I. FINANCIAL INFORMATION			5

	Item 1.	~~Combined~~Consolidated Financial Statements (Unaudited)	35

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2027

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2735

	Item 4.	Controls and Procedures	2735

PART II. OTHER INFORMATION			2836

	Item 1.	Legal Proceedings	2836

	Item 1A.	Risk Factors	2836

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2936

	Item 3.	Defaults Upon Senior Securities	2936

	Item 4.	Mine Safety Disclosures	2936

	Item 5.	Other Information	2936

	Item 6.	Exhibits	2936

SIGNATURES			3138

	Three Months Ended March 31,
	2021		2020
Options and restricted stock units outstanding		4,314,310		2,320,480
Warrants		22,862,636		15,384,616

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	)

	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

	March 31, 2021
	Amortized		Gross Unrealized				Estimated
Description	Cost		Gain		Loss		Fair Value
Money market mutual funds	$	12,794	$	—	$	—	$	12,794
Commercial paper		22,716		—		—		22,716
Total cash equivalents	$	35,510	$	—	$	—	$	35,510

	March 31, 2021			December 31, 2020
Raw materials	$	68		$	130
Sub-assemblies		2,482			2,476
Finished goods		788			928
		3,338			3,534
Provision for inventory obsolescence		(565	)		(556	)
	$	2,773		$	2,978

	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

	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 2021	$	272
2022		373
Total lease payments		645
Less imputed interest		(86	)
Total operating lease liability	$	559

	Cost		Accumulated Amortization		Net Intangible Assets
Asset resulting from R&D activities	$	26,400	$	2,790	$	23,610
Total	$	26,400	$	2,790	$	23,610

	Amortization
Remainder of 2021	$	1,932
2022		2,576
2023		2,576
2024		2,576
2025 and thereafter		13,950
Total	$	23,610

Paycheck Protection Program Loan	$	1,537
Credit Agreement		10,000
Unamortized deferred issuance costs		(2,216	)
Exit fee accretion		60
Total debt	$	9,381

Current portion as of March 31, 2021	$	1,196
Long-term portion, net as of March 31, 2021		8,185

	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

	March 31, 2021
	Series A Warrants			Series B Warrants
Fair value	$	42		$	41
Expected dividend yield		—	%		—	%
Expected volatility	76.25		%	59.57		%
Risk-free interest rates	.64		%	.01		%
Remaining contractual term	4.0 years			0.1 years

	Number of shares
Balance, December 31, ~~2018~~2020		~~981,453~~991,012
Granted		~~664,210~~265,046
Vested and settled		(~~421,552~~87,509	)
Expired/forfeited/cancelled		(~~455,437~~31,562	)
Balance, ~~September 30, 2019~~March 31, 2021		~~768,674~~1,136,987
Expected to vest		~~517,474~~1,136,987

	Nine Months Ended September 30,
	2019			2018
	(amounts in thousands)
Operating expenses:
Research and development	$	18,578		$	25,664
General and administrative		21,809			24,170
Change in contingent consideration valuation		(15,241	)		7,030
Total operating expenses		25,146			56,864
Operating income (loss)		(25,146	)		(56,864	)
Other income (expense):
Other income (expense), net		(86	)		(122	)
Net loss	$	(25,232	)	$	(56,986	)

	BAUDAX BIO, INC.

Date: ~~November 14, 2019~~May 5, 2021	By:	/s/ Gerri A. Henwood
		Gerri A. Henwood
		President and Chief Executive Officer
		(Principal Executive Officer)



Date: ~~November 14, 2019~~May 5, 2021	By:	/s/ ~~Ryan D. Lake~~Richard S. Casten
		~~Ryan D. Lake~~Richard S. Casten
		Chief Financial Officer
		(Principal Financial and Accounting Officer)