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 2, 2021,~~August 9, 2022, there were ~~84,423,699~~8,069,001 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 that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Quarterly Report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would,” “could,” “should,” “potential,” “seek,” “evaluate,” “pursue,” “continue,” “design,” “impact,” “affect,” “forecast,” “target,” “outlook,” “initiative,” “objective,” “designed,” “priorities,” “goal,” or the negative of such terms and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated.

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

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 and Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020~~2021 filed with the SEC on ~~February~~March 16, ~~2021,~~2022, or the ~~2020~~2021 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, except share and per share data)	September 30, 2021			December 31, 2020			June 30, 2022			December 31, 2021
							Unaudited
Assets
Current assets:
Cash and cash equivalents	$	14,772		$	30,342		$	5,210		$	15,891
Short-term investments		10,150			0
Accounts receivable, net		422			51			616			542
Inventory		4,310			2,978			5,255			5,002
Prepaid expenses and other current assets		1,484			3,346			1,398			2,059
Total current assets		31,138			36,717			12,479			23,494
Property, plant and equipment, net		4,933			5,052			4,941			5,015
Intangible assets, net		22,322			24,254			20,390			21,678
Goodwill		2,127			2,127			2,127			2,127
Other long-term assets		979			583			897			963
Total assets	$	61,499		$	68,733		$	40,834		$	53,277
Liabilities and Shareholders' Deficit
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	1,819		$	3,653		$	3,064		$	1,468
Accrued expenses and other current liabilities		4,568			5,326			3,812			5,540
Current portion of long-term debt, net		1,389			683			3,611			2,222
Current portion of contingent consideration		6,666			8,467			7,694			6,416
Total current liabilities		14,442			18,129			18,181			15,646
Long-term debt, net		6,913			8,469			5,099			6,309
Long-term portion of contingent consideration		60,059			56,576			12,692			17,446
Other long-term liabilities		813			358			632			650
Total liabilities		82,227			83,532			36,604			40,051
Commitments and contingencies (Note 12)
Shareholders’ deficit:
Preferred stock, $0.01 par value. Authorized, 10,000,000 shares; NaN issued and outstanding		0			0
Common stock, $0.01 par value. Authorized, 190,000,000 shares; issued and outstanding, 84,423,342 shares at September 30, 2021 and 48,688,480 shares at December 31, 2020		844			487
Shareholders’ equity:
Preferred stock, $0.01 par value. Authorized, 10,000,000 shares; issued and outstanding, 0 shares at June 30, 2022 and 8,289 shares at December 31, 2021								0			0
Common stock, $0.01 par value. Authorized, 190,000,000 shares; issued and outstanding, 8,068,853 shares at June 30, 2022 and 2,807,239 shares at December 31, 2021								81			28
Additional paid-in capital		139,951			97,034			156,578			145,287
Accumulated deficit		(161,523	)		(112,320	)		(152,429	)		(132,089	)
Total shareholders’ deficit		(20,728	)		(14,799	)
Total liabilities and shareholders’ deficit	$	61,499		$	68,733
Total shareholders’ equity								4,230			13,226
Total liabilities and shareholders’ equity							$	40,834		$	53,277


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
(amounts in thousands, except share and per share data)	2021			2020			2021			2020			2022			2021			2022			2021
Revenue, net	$	281		$	68		$	680		$	417		$	300		$	201		$	722		$	399

Operating expenses:
Cost of sales		462			540			1,869			1,190			361			586			1,009			1,407
Research and development		658			1,469			2,623			5,889			912			857			2,205			1,965
Selling, general and administrative		11,074			13,763			33,770			33,026			4,029			10,608			18,219			22,696
Amortization of intangible assets		644			643			1,932			1,502			644			644			1,288			1,288
Change in warrant valuation		(6	)		(11,182	)		(47	)		2,863			(1	)		(59	)		(6	)		(41	)
Change in contingent consideration valuation		3,829			(17,427	)		9,551			14,252			1,327			3,881			(2,476	)		5,722
Total operating expenses		16,661			(12,194	)		49,698			58,722			7,272			16,517			20,239			33,037
Operating (loss) income		(16,380	)		12,262			(49,018	)		(58,305	)
Operating loss														(6,972	)		(16,316	)		(19,517	)		(32,638	)
Other expense:
Other expense, net		(582	)		(577	)		(185	)		(753	)
Net (loss) income	$	(16,962	)	$	11,685		$	(49,203	)	$	(59,058	)
Other (expense) income, net														(559	)		987			(823	)		397
Net loss													$	(7,531	)	$	(15,329	)	$	(20,340	)	$	(32,241	)

Per share information:
Net (loss) income per share of common stock, basic	$	(0.20	)	$	0.64		$	(0.66	)	$	(3.84	)
Net (loss) income per share of common stock, diluted	$	(0.20	)	$	0.62		$	(0.66	)	$	(3.84	)
Net loss per share of common stock, basic													$	(1.05	)	$	(7.17	)	$	(3.63	)	$	(16.43	)
Net loss per share of common stock, diluted													$	(1.05	)	$	(7.18	)	$	(3.63	)	$	(16.43	)

Weighted average common shares outstanding, basic		84,400,156			18,374,604			74,008,574			15,366,861			7,181,640			2,137,191			5,610,037			1,962,655
Weighted average common shares outstanding, diluted		84,400,156			18,768,376			74,008,574			15,366,861			7,181,640			2,138,100			5,610,037			1,962,655


For the Nine Months Ended September 30, 2021
For the Six Months Ended June 30, 2022
	Common Stock				Additional									Preferred Stock					Common Stock				Additional
(amounts in thousands, except share data)	Shares		Amount		paid-in capital			Accumulated Deficit			Total			Shares			Amount		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
Balance, December 31, 2021															8,289		$	—		2,807,239	$	28	$	145,287		$	(132,089	)	$	13,226
Stock-based compensation expense		—		—		975			—			975			—			—		—		—		521			—			521
Issuance of common stock and warrants for public offering, net															—			—		3,508,772		35		8,784			—			8,819
Issuance of common stock and warrants for registered direct offerings, net		11,000,000		110		16,317			—			16,427			—			—		—		—		(13	)		—			(13	)
Issuance of shares pursuant to vesting of restricted stock units, net of shares withheld for income taxes		42,159		—		(41	)		—			(41	)		—			—		2,234		—		(1	)		—			(1	)
Exercise of warrants		10,411,969		104		12,051			—			12,155
Conversion of preferred stock															(8,289	)		—		94,734		1		(1	)		—			—
Net loss		—		—		—			(16,912	)		(16,912	)		—			—		—		—		—			(12,809	)		(12,809	)
Balance, March 31, 2021		70,142,608	$	701	$	127,537		$	(129,232	)	$	(994	)
Balance, March 31, 2022															0		$	—		6,412,979	$	64	$	154,577		$	(144,898	)	$	9,743
Stock-based compensation expense		—		—		854			—			854			—			—		—		—		325			—			325
Issuance of common stock and warrants for registered direct offerings, net		14,028,520		141		10,760			—			10,901
Issuance of common stock and warrants for public offering, net															—			—		—		—		(28	)		—			(28	)
Issuance of common stock and warrants for registered direct offerings and private placements, net															—			—		1,646,091		16		1,704			—			1,720
Issuance of shares pursuant to vesting of restricted stock units, net of shares withheld for income taxes		102,094		1		(6	)		—			(5	)		—			—		9,783		1		—			—			1
Net loss		—		—		—			(15,329	)		(15,329	)		—			—		—		—		—			(7,531	)		(7,531	)
Balance, June 30, 2021		84,273,222	$	843	$	139,145		$	(144,561	)	$	(4,573	)
Stock-based compensation expense		—		—		874			—			874
Issuance of common stock and warrants for registered direct offerings, net		—		—		(38	)		—			(38	)
Issuance of restricted stock units, net of shares withheld for income taxes		150,120		1		(30	)		—			(29	)
Net loss		—		—		—			(16,962	)		(16,962	)
Balance, September 30, 2021		84,423,342	$	844	$	139,951		$	(161,523	)	$	(20,728	)
Balance, June 30, 2022															0		$	—		8,068,853	$	81	$	156,578		$	(152,429	)	$	4,230


For the Nine Months Ended September 30, 2020
For the Six Months Ended June 30, 2021
	Common Stock				Additional									Preferred Stock				Common Stock				Additional
(amounts in thousands, except share data)	Shares		Amount		paid-in capital			Accumulated Deficit			Total			Shares		Amount		Shares		Amount		paid-in capital			Accumulated Deficit			Total
Balance, December 31, 2019		9,350,709	$	94	$	19,405		$	(36,220	)	$	(16,721	)
Balance, December 31, 2020															0	$	—		1,391,099	$	14	$	97,507		$	(112,320	)	$	(14,799	)
Recro Pharma allocation - stock-based compensation		—		—		456			—			456			—		—		—		—		1,201			—			1,201
Stock-based compensation expense		—		—		2,177			—			2,177			—		—		—		—		975			—			975
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 common stock and warrants for registered direct offerings, net															—		—		314,286		3		16,424			—			16,427
Issuance of shares pursuant to vesting of restricted stock units, net of shares withheld for income taxes															—		—		1,205		—		(41	)		—			(41	)
Exercise of warrants															—		—		297,484		3		12,152			—			12,155
Net loss															—		—		—		—		—			(16,912	)		(16,912	)
Balance, March 31, 2021															0	$	—		2,004,074	$	20	$	128,218		$	(129,232	)	$	(994	)
Stock-based compensation expense															—		—		—		—		854			—			854
Issuance of common stock and warrants for registered direct offerings, net															—		—		400,815		4		10,897			—			10,901
Issuance of shares pursuant to vesting of restricted stock units, net of shares withheld for income taxes		39,130		—		(95	)		—			(95	)		—		—		2,917		0		(5	)		—			(5	)
Net loss		—		—		—			(40,298	)		(40,298	)		—		—		—		—		—			(15,329	)		(15,329	)
Balance, March 31, 2020		17,569,988	$	176	$	40,450		$	(76,518	)	$	(35,892	)
Recro Pharma allocation - stock-based compensation		—		—		445			—			445
Stock-based compensation expense		—		—		1,864			—			1,864
Stock issuance costs		—		—		(3	)		—			(3	)
Warrants issued in connection with financing facility		—		—		1,423			—			1,423
Exercise of warrants		804,616		8		3,196			—			3,204
Net loss		—		—		—			(30,445	)		(30,445	)
Balance, June 30, 2020		18,374,604	$	184	$	47,375		$	(106,963	)	$	(59,404	)
Recro Pharma allocation - stock-based compensation		—		—		444			—			444
Stock-based compensation expense		—		—		2,045			—			2,045
Net income		—		—		—			11,685			11,685
Balance, September 30, 2020		18,374,604	$	184	$	49,864		$	(95,278	)	$	(45,230	)
Balance, June 30, 2021															0	$	—		2,407,806	$	24	$	139,964		$	(144,561	)	$	(4,573	)

~~Baudax Bio launched ANJESO, which is indicated for~~On February 16, 2022, the ~~management~~Company effected a reverse split of ~~moderate to severe pain in~~shares of the Company’s common stock on a 21-for-35~~020,~~ basis (the “Reverse Stock Split”). All issued and outstanding shares of common stock, warrants, common stock options, and unvested restricted stock units and the ~~Centers for Medicare and Medicaid Services (“CMS”) granted a J-code to ANJESO~~related per share amounts contained in the ~~fourth quarter~~financial statements have been retroactively adjusted to reflect this Reverse Stock Split for all periods presented. The par value and authorized shares of ~~2020.~~common stock were not adjusted as a result of the Reverse Stock Split. Additionally, the authorized, issued and outstanding shares of preferred stock and their related per share amount, other than the conversion price per share, was not adjusted as a result of the Reverse Stock Split.

~~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 settings.~~

~~Note 3:~~ Summary of Significant Accounting Principles

(a) Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with U.S. 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 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~~six months ended ~~September~~June 30, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the full year ending December 31, ~~2021.~~2022.

The accompanying unaudited interim 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, ~~2020~~2021 included in the Company’s Form 10-K.

(b) Use of Estimates

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

(d) Investments

Investments generally consist of government money market funds and commercial paper with maturity of greater than three months when acquired and does not meet the definition of a cash or cash equivalents. The Company has historically classified its entire investment portfolio as available-for-sale debt securities and is carried at fair value with unrealized gains and losses included in comprehensive loss in the consolidated statement of operations and realized gains and losses included in other income/expense, if applicable.

The Company uses benchmark inputs and industry standard analytical models to derive the fair value of its commercial paper.

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

~~(d)~~(e) Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which are as follows: three to seven years for furniture and office equipment; six 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.

~~(e)~~(f) Goodwill and Intangible Assets

Goodwill represents the excess of purchase price over the fair value of net assets acquired by the 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 1 reporting unit.

The Company performs its annual goodwill impairment test as of November 30th, or whenever an event or change in circumstances occurs that would require reassessment of the recoverability of 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. ~~As a result~~The Company performed an impairment test as of ~~the latest impairment tests, November~~June 30, ~~2020, the Company determined that there~~2022 after identifying indicators of impairment. There was 0 impairment to goodwill ~~or intangible assets. There were no indicators of impairment since our last impairment test.~~based on the analysis.

~~BAUDAX BIO, INC.~~

~~Notes to the Consolidated Financial Statements~~

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

~~(Unaudited)~~

~~As of September 30, 2021, the~~The Company’s intangible asset is classified as an asset resulting from R&D activities. The Company determined the useful life of its asset resulting from R&D activities to be approximately 10 years, which is based on the remaining patent life and is being amortized on a straight-line basis. The Company is required to review the carrying value of assets resulting from R&D activities for recoverability whenever events occur or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The Company performed an impairment test as of June 30, 2022 after identifying indicators of impairment. There was no impairment to intangible assets based on the analysis as of June 30, 2022.

~~(f)~~(g) Revenue Recognition

~~Subsequent to regulatory approval for ANJESO from the FDA, the~~The Company ~~began selling~~sells ANJESO in the U.S. through a single third-party logistics provider (“3PL”), which takes title to and control of the ~~goods.~~goods, and is considered the customer. 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,~~end-user 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 not occur in a future period. Actual amounts of 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.

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

~~(g)~~(h) Concentration of Credit Risk

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 as of June 30, 2022 and December 31, 2021 is compromised solely from transactions with the Company’s 3PL.

~~(h)~~(i) Research and Development

Research and development costs for the Company’s proprietary products/product candidates are charged to expense as incurred. Research and development expenses consist of internal costs and 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 project. Such estimates are subject to change as additional information becomes available. Depending on the timing of payments to the service providers and the progress that the Company estimates has been made as a result of the service provided, the Company may record net prepaid or accrued expenses relating to these costs.

Upfront and milestone payments made to third parties who perform research and development services on the Company’s behalf are expensed as services are rendered. Costs incurred in obtaining product technology licenses are charged to research and development expense as acquired in-process research and development (“IPR&D”) if the technology licensed has not reached technological feasibility and has no alternative future use.

~~BAUDAX BIO, INC.~~

~~Notes to the Consolidated Financial Statements~~

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

~~(Unaudited)~~

~~(i)~~(j) Stock-Based ~~Awards~~

~~Baudax~~ Awards

Share-based compensation included in the consolidated financial statements ~~following the Separation~~ is based upon the Baudax Bio, Inc. 2019 Equity Incentive Plan (the “2019 Plan”). The plan includes grants of stock options, time-based vesting restricted stock units (“RSUs”) and performance-based RSUs. 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.

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.

~~Recro Awards~~

The ~~Recro Pharma, Inc. 2018 Amended~~Company has never declared or paid dividends and ~~Restated Equity Incentive Plan (the “Recro Equity Plan”) includes grants of stock options, time-based vesting RSUs and performance-based vesting RSUs granted~~has no plans to do so in the ~~Company’s employees prior to~~foreseeable future, therefore the ~~Separation. The consolidated~~financial 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 methoddividend yield 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 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.zero.

~~(j)~~(k) Income Taxes

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

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

Unrecognized income tax benefits represent income tax positions taken on income tax returns that have not been recognized in the 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.

~~(k)~~ (l) Net ~~(Loss) Income~~Loss Per Common Share

Net loss per common share is computed using the two-class method required due to the participating nature of the Series A Preferred Stock (as defined and discussed in Note 13(b)). Except with respect to voting and conversion, the rights of the holders of the Company’s common stock and the Company’s Series A Preferred Stock are identical. Each class of shares has the same rights to dividends. Although the Preferred Stock are participating securities, such securities do not participate in net losses and therefore do not impact the Company’s net loss per share calculation as of June 30, 2022.

Basic net ~~(loss) income~~loss per common share is determined by dividing net ~~(loss) income applicable~~loss attributable to common shareholders by the weighted average common shares outstanding during the period. Diluted net loss per common share is determined using the weighted average common shares outstanding during the period plus the weighted average number of shares of common shares that would be issued assuming exercise or conversion of all potentially dilutive instruments. Outstanding warrants, common stock options and unvested restricted stock units are excluded from the calculation of diluted net loss ~~(income)~~ per share when their effect would be anti-dilutive.

For purposes of calculating basic and diluted ~~(loss) income~~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) income~~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) income~~loss per share:

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Basic (Loss) Income Per Share

Net (loss) income

$
(16,962
)

$
11,685

$
(49,203
)

$
(59,058
)
Weighted average common shares
   outstanding, basic

84,400,156

18,374,604

74,008,574

15,366,861

Net (loss) income per share of
   common stock, basic

$
(0.20
)

$
0.64

$
(0.66
)

$
(3.84
)

Diluted (Loss) Income Per Share

Net (loss) income

$
(16,962
)

$
11,685

$
(49,203
)

$
(59,058
)
Change in warrant valuation

0

0

0

0

Diluted net (loss) income

$
(16,962
)

$
11,685

$
(49,203
)

$
(59,058
)
Weighted average common shares
   outstanding, basic

84,400,156

18,374,604

74,008,574

15,366,861

Dilutive effect of warrants

0

0

0

0

Dilutive effect of equity awards,
   based on treasury stock
   method

—

393,772

—

—

Weighted average common shares
   outstanding, diluted

84,400,156

18,768,376

74,008,574

15,366,861

Net (loss) income per share of
   common stock, diluted

$
(0.20
)

$
0.62

$
(0.66
)

$
(3.84
)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Basic Loss Per Share
Net loss	$	(7,531	)	$	(15,329	)	$	(20,340	)	$	(32,241	)
Weighted average common shares outstanding, basic		7,181,640			2,137,191			5,610,037			1,962,655
Net loss per share of common stock, basic	$	(1.05	)	$	(7.17	)	$	(3.63	)	$	(16.43	)

Diluted Loss Per Share
Net loss	$	(7,531	)	$	(15,329	)	$	(20,340	)	$	(32,241	)
Change in warrant valuation		0			(17	)		0			0
Diluted net loss	$	(7,531	)	$	(15,346	)	$	(20,340	)	$	(32,241	)
Weighted average common shares outstanding, basic		7,181,640			2,137,191			5,610,037			1,962,655
Dilutive effect of warrants		0			909			0			0
Weighted average common shares outstanding, diluted		7,181,640			2,138,100			5,610,037			1,962,655
Net loss per share of common stock, diluted	$	(1.05	)	$	(7.18	)	$	(3.63	)	$	(16.43	)

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

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


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Options and restricted stock units outstanding		4,794,738		2,098,316		4,794,738		1,694,889		613,580		146,399		613,580		146,399
Warrants		38,360,429		15,107,100		38,360,429		15,199,605		7,065,509		299,006		7,065,509		299,925

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

~~(l)~~(m) Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

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 reducing the number of accounting models available for convertible debt instruments. ASU 2020-06 also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. 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 adopted this guidance as of January 1, 2022, using the full retrospective method of adoption. The adoption eliminated the presentation of the beneficial conversion feature on the consolidated statement of operations and had no other material impact to the Company.

In May 2021, the FASB issued ASU No. 2021-04, “Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options,” or ASU 2021-04. ASU 2021-04 clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options, such as warrants, that remain equity classified after modification or exchange. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years and early adoption is permitted. The Company adopted this guidance as of January 1, 2022, using the prospective method of adoption. This adoption did not have a material impact to the Company or its disclosures.

In November 2021, the FASB issued ASU No. 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance,” or ASU 2021-10. ASU 2021-10 requires entities to provide disclosures on government assistance transactions for annual reporting periods. The disclosures include information around the nature of the transaction, the related accounting policies used to account for the transaction, the effect of the transaction on the entity’s financial statements, and any significant terms and conditions of the agreements, including commitments and contingencies. ASU 2021-10 is effective for fiscal years beginning after December 15, 2021 and early adoption is permitted. The Company adopted this guidance as of January 1, 2022, using the prospective method of adoption. This adoption did not have a material impact to the Company or its disclosures.

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

Accounting Pronouncements Not Yet Adopted

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, 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 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.

In May 2021, the FASB issued ASU No. 2021-04, “Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options,” or ASU 2021-04. ASU 2021-04 clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options, such as warrants, that remain equity classified after modification or exchange. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years and early adoption is permitted. The Company is currently assessing the impact of adopting this standard.

~~Note 4:~~(4) Fair Value of Financial Instruments

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:

~~BAUDAX BIO, INC.~~

~~Notes to the Consolidated Financial Statements~~

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

~~(Unaudited)~~

•

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

•

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

•

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

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


	Fair value measurements at reporting date using						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)		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
At September 30, 2021:
At June 30, 2022:
Assets:
Cash equivalents (See Note 5)
Money market mutual funds	$	12,262	$	0	$	0	$	3,613	$	0	$	0
Commercial paper		0		1,500		0
Total cash equivalents	$	12,262	$	1,500	$	0	$	3,613	$	0	$	0
Short-term investments (See Note 5)
Commercial paper		0		10,150		0
Total financial assets	$	12,262	$	11,650	$	0
Liabilities:
Warrants (See Note 13(c))	$	0	$	0	$	18	$	0	$	0	$	1
Contingent consideration (See Note 12(b))		0		0		66,725		0		0		20,386
	$	0	$	0	$	66,743	$	0	$	0	$	20,387

At December 31, 2020:
At December 31, 2021:
Assets:
Cash equivalents (See Note 5)
Money market mutual funds	$	24,210	$	0	$	0	$	10,110	$	0	$	0
Commercial paper		0		4,500		0
Total cash equivalents	$	24,210	$	4,500	$	0	$	10,110	$	0	$	0
Liabilities:
Warrants (See Note 13(c))	$	0	$	0	$	65	$	0	$	0	$	7
Contingent consideration (See Note 12(b))		0		0		65,043		0		0		23,862
	$	0	$	0	$	65,108	$	0	$	0	$	23,869

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

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

Warrants

Contingent
Consideration

Balance at December 31, 2019

$
0

$
66,358

Additions

8,111

0

Exercise of warrants

(2,922
)

0

Payment of contingent consideration

0

(3,560
)
Remeasurement

16,734

2,245

Reclassification to equity upon warrant exchange

(21,858
)

0

Balance at December 31, 2020

$
65

$
65,043

Payment of contingent consideration

0

(7,869
)
Remeasurement

(47
)

9,551

Total at September 30, 2021

$
18

$
66,725

Current portion as of September 30, 2021

$
0

$
6,666

Long-term portion as of September 30, 2021

18

60,059


	Warrants			Contingent Consideration
Balance at December 31, 2020	$	65		$	65,043
Payment of contingent consideration		0			(7,869	)
Remeasurement		(58	)		(33,312	)
Balance at December 31, 2021	$	7		$	23,862
Payment of contingent consideration		0			(1,000	)
Remeasurement		(6	)		(2,476	)
Total at June 30, 2022	$	1		$	20,386

Current portion as of June 30, 2022	$	0		$	7,694
Long-term portion as of June 30, 2022		1			12,692

See Note 13(c) for the significant assumptions and inputs used to determine the fair value of liability classified warrants.

Based on the amended terms of the Alkermes agreement (see Note 12(b)), the remaining contingent consideration payments include the second components, which became payable upon regulatory approval, and includes remaining payments of $45,000 payable in 7 equal annual payments of approximately $6,400 of which the first payment was made in 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~~do 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. The fair value of the remaining second consideration component is estimated by applying a risk-adjusted discount rate to the 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 ~~September~~June 30, ~~2021,~~2022, the fair value calculations used a discount ~~rates in the range~~rate of ~~17.53% to~~ ~~36.46%, with a weighted average of~~ ~~27.53~~35.00%.

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 ~~September~~June 30, ~~2021.~~2022. 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.

The Company follows the disclosure provisions of FASB ASC Topic 825, “Financial Instruments”, for disclosure purposes for financial assets and financial liabilities that are not measured at fair value. As of ~~September~~June 30, ~~2021,~~2022, the financial assets and liabilities recorded on the Consolidated Balance Sheets that are not measured at fair value on a recurring basis include accounts receivable, accounts payable and accrued expenses, which approximate fair value due to the short-term nature of these instruments. The fair value of debt, where a quoted market price is not available, is evaluated based on, among other factors, interest rates currently available to the Company for debt with similar terms, remaining payments and considerations of the Company’s creditworthiness. The Company determined that the recorded book value of debt approximated fair value at ~~September~~June 30, ~~2021~~2022 due to the fact that the debt arrangements reflect market terms from recent transactions.

(5) Cash Equivalents

~~Note 5: Cash Equivalents and Short-Term Investments~~

Short-term investments consist of government money market funds and commercial paper with original maturities of greater than three months. 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 carried 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:~~

September 30, 2021

Amortized

Gross Unrealized

Estimated

Description

Cost

Gain

Loss

Fair Value

Money market mutual funds

$
12,262

$
—

$
—

$
12,262

Commercial paper

11,650

—

—

11,650

Total cash equivalents and short-term investments

$
23,912

$
—

$
—

$
23,912

December 31, 2020

Amortized

Gross Unrealized

Estimated

Description

Cost

Gain

Loss

Fair Value

Money market mutual funds

$
24,210

$
—

$
—

$
24,210

Commercial paper

4,500

—

—

4,500

Total cash equivalents and short-term investments

$
28,710

$
—

$
—

$
28,710

equivalents:

~~Short-term investments are included in cash and cash equivalents when their original maturities are three months or less when acquired.~~


	June 30, 2022
	Amortized		Gross Unrealized				Estimated
Description	Cost		Gain		Loss		Fair Value
Money market mutual funds	$	3,613	$	—	$	—	$	3,613
Total cash equivalents	$	3,613	$	—	$	—	$	3,613


	December 31, 2021
	Amortized		Gross Unrealized				Estimated
Description	Cost		Gain		Loss		Fair Value
Money market mutual funds	$	10,110	$	—	$	—	$	10,110
Total cash equivalents	$	10,110	$	—	$	—	$	10,110

As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company’s cash equivalents ~~and short-term investments~~ had maturities of one to ~~four months~~ month. ~~The Company uses benchmark inputs and industry standard analytical models to derive the fair value of its commercial paper.~~

~~Depreciation expense for the three and nine months ended September 30, 2021 was $~~46 ~~and $195, respectively. Depreciation expense for the three and nine months ended September 30, 2020 was $104~~ ~~and $315, respectively.~~

~~Note 8:~~(8) Leases

The 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. The current leased facility recorded on the Consolidated Balance Sheet is classified as an operating lease with a remaining lease term of 6 years~~, which was extended during the three months ended September 30, 2021.~~. Most leases contain specific renewal options where notice to renew must be provided in advance of lease expiration or automatic renewals where no advance notice is required. Periods covered by an option to extend the lease were included in the non-cancellable lease term when exercise of the option was determined to be reasonably certain. Costs determined to be variable and not based on an index or rate were not included in the measurement of operating lease liabilities. As most leases do not provide an implicit rate, the ~~Company's~~Company’s effective interest rate was used to discount its lease liabilities.

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

As of ~~September~~June 30, ~~2021,~~2022, undiscounted future lease payments for non-cancellable operating leases are as follows:


	Lease payments			Lease payments
Remainder of 2021	$	158
2022		383
Remainder of 2022				$	211
2023		270			270
2024		278			278
2025 and thereafter		858
2025					278
2026					287
2027					295
Total lease payments		1,947			1,619
Less imputed interest		(941	)		(754	)
Total operating lease liability	$	1,006		$	865

As of ~~September~~June 30, ~~2021,~~2022, the weighted average remaining lease term was 6 years and the weighted average discount rate was 23%.

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Operating lease cost	$	71	$	89	$	145	$	177
Short-term lease cost		35		39		73		78
Total lease cost	$	106	$	128	$	218	$	255

19Cash paid for amounts included in the measurement of lease liabilities, which is included in operating cash flows, was $187 and $171 for the six months ended June 30, 2022 and 2021, respectively.

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Operating lease cost

$
79

$
87

$
255

$
306

Short-term lease cost

52

38

130

68

Total lease cost

$
131

$
125

$
385

$
374

~~Cash paid for amounts included in the measurement of lease liabilities, which is included in operating cash flows, was $258~~ ~~and $~~78 ~~for the nine months ended September 30, 2021 and 2020, respectively.~~

~~Note 11:~~(11) Debt

The following table summarizes the components of the carrying value of ~~debt as of September 30, 2021:~~debt:


	September 30,			December 31,			June 30,			December 31,
	2021			2020			2022			2021
Paycheck Protection Program Loan	$	0		$	1,537
Credit Agreement		10,000			10,000		$	9,722		$	10,000
Unamortized deferred issuance costs		(1,794	)		(2,427	)		(1,162	)		(1,583	)
Exit fee accretion		96			42			150			114
Total debt	$	8,302		$	9,152		$	8,710		$	8,531

Current portion	$	1,389		$	683		$	3,611		$	2,222
Long-term portion, net		6,913			8,469			5,099			6,309

(a) ~~Paycheck Protection Program Loan~~

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.~~

During the nine months ended September 30, 2021, the Company received a Notice of PPP Forgiveness Payment from the SBA regarding the approval of their application for forgiveness of the PPP Loan of $1,537 and accrued interest. As a result, the Company recognized a gain on extinguishment of the PPP Loan of $~~1,553~~ ~~during the nine months ended September 30, 2021.~~

~~(b)~~ Credit Agreement

On May 29, 2020 (the “Credit Agreement Closing Date”), the Company entered into a $50,000 Credit Agreement (the “Credit Agreement”) by and among the Company, Wilmington Trust, National Association, in its capacity as the agent (“Agent”), and MAM Eagle Lender, LLC, as the lender (together with any other lenders under the Credit Agreement from time to time, collectively, the “Lenders”). The Credit Agreement provides for a term loan in the original principal amount of $10,000 (the “Tranche One Loans”) funded on the Credit Agreement Closing Date. Pursuant to the terms of the Credit Agreement, there are four additional tranches of term loans, in an aggregate original principal amount of $40,000 (the “Tranche Two Loans”, “Tranche Three Loans”, “Tranche Four Loans” and the “Tranche Five Loans”, and collectively with the Tranche One Loans, the “Term Loans” and each a “Term Loan”). As of ~~September~~June 30, ~~2021,~~2022, 0 funds have been drawn from the additional tranches.

~~BAUDAX BIO, INC.~~

~~Notes to the Consolidated Financial Statements~~

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

~~(Unaudited)~~

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.

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

Subject to certain exceptions, the Company is required to make mandatory prepayments of the Term Loans, with the proceeds of asset sales, extraordinary receipts, debt issuances and specified other events. The Company may make voluntary prepayments in whole or in part, subject to a prepayment premium equal to (i) with respect to any prepayment paid on or prior to the third anniversary of the Tranche One Loan (or, in the case of each of the Tranche Two Loans, Tranche Three Loans, Tranche Four Loans or Tranche Five Loans, the third anniversary of the date each such loan is funded), the remaining scheduled payments of interest that would have accrued on the Term Loans being prepaid, repaid or accelerated, but that remained unpaid, in no event to be less than 5.0% of the principal amount of the Term Loan being prepaid, and (ii) with respect to any prepayment paid after the third but prior to the fourth anniversary of the Tranche One Loan (or, in the case of each of the Tranche Two Loans, Tranche Three Loans, Tranche Four Loans or Tranche Five Loans, the fourth anniversary of the date each such loan is funded), 3.0% of the principal amount of the Term Loan being prepaid. In addition, an exit fee will be due and payable upon prepayment or repayment of the Term Loans (including, without limitation, on the Maturity Date) equal to the lesser of 2.5% of the sum of the aggregate principal amount of the Term Loans advanced or approved to be advanced by the Lenders and $700; provided that such exit fee will be equal to $700 if fee is paid in conjunction with a change of control that occurs in connection with the payoff or within 6 months thereof. As of ~~September~~June 30, ~~2021,~~2022, the Company will have to pay a 2.5% exit fee, which is $250 at the current outstanding loan balance and is being accreted to the carrying amount of the debt using the effective interest method over the term of the loan.

The Credit Agreement contains certain usual and customary affirmative and negative covenants, as well as financial covenants including a minimum liquidity requirement of $5,000 at all times (the “Minimum Liquidity Covenant”) and minimum EBITDA levels that the Company may need to satisfy on a quarterly basis beginning in September 2021, subject to borrowing levels. As of ~~September~~June 30, ~~2021,~~2022, the Company was in compliance with the ~~required covenants for minimum liquidity~~Minimum Liquidity Covenant as the minimum EBITDA criteria is not applicable until additional tranches are drawn. As of ~~September~~June 30, ~~2021,~~2022, borrowings under the Credit Agreement are classified based on their schedule maturities.

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

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~~comply with the Minimum Liquidity Covenant, as amended, over the next twelve months without additional capital financing. If the Company is unable to maintain its ~~minimum liquidity covenant,~~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.

~~BAUDAX BIO, INC.~~

~~Notes to the Consolidated Financial Statements~~

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

~~(Unaudited)~~

In connection with the Credit Agreement, the Company issued a warrant to MAM Eagle Lender, LLC to purchase ~~527,100~~15,060 shares of the Company’s common stock, at an exercise price equal to $~~4.59~~160.65 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 Consolidated Statements of Operations. As of ~~September~~June 30, ~~2021,~~2022, the effective interest rate was 22.67%, 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~~209 and $~~633~~421 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021, respectively. The Company recorded debt issuance cost amortization related to the Credit Agreement of~~2022, respectively, and $211 and $~~281~~422 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively.

(a) Licenses and Supply Agreements

The Company is party to an exclusive license with Orion Corporation, a company incorporated under the laws of Finland (“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 ($~~23,756~~21,420 as of ~~September~~June 30, ~~2021)~~2022) 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~~June 30, ~~2021,~~2022, 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 ($~~14,140~~12,749 as of ~~September~~June 30, ~~2021)~~2022) 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~~June 30, ~~2021,~~2022, 0 such milestones have been achieved.

In June 2017, the Company acquired the exclusive global rights to two novel neuromuscular blocking agents (“~~NMBAs”~~NMBs”) and a proprietary reversal agent from Cornell University (“Cornell”). The ~~NMBAs~~NMBs and reversal agent are referred to herein as the ~~NMBA~~NMB Related Compounds. The ~~NMBA~~NMB Related Compounds include one novel intermediate-acting ~~NMBA~~NMB that has initiated Phase I clinical trials and two other agents, a novel short-acting ~~NMBA,~~NMB, and a rapid-acting reversal agent specific to these ~~NMBAs.~~NMBs. The Company is obligated to make: (i) an annual license maintenance fee payment to Cornell in the remaining range of $70 to $125 until the first commercial sale of the ~~NMBA~~NMB Related Compounds; and (ii) milestone payments to Cornell upon the achievement of certain milestones, up to a maximum, for each ~~NMBA~~NMB Related Compound, of $5,000 for U.S. regulatory approval and commercialization milestones and $3,000 for European regulatory approval and commercialization milestones. The Company is obligated to pay Cornell royalties on net sales of the ~~NMBA~~NMB Related Compound at a rate ranging from low to mid-single digits, depending on the applicable ~~NMBA~~NMB Related Compounds and whether there is a valid patent claim in the applicable country, subject to an annual minimum royalty amount. Further, the Company ~~will reimburse~~reimburses Cornell for its ongoing patent costs related to prosecution and maintenance of the patents related to the Cornell patents for the ~~NMBA~~NMB Related Compounds. Through June 30, 2022, no such milestones have been achieved.

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.

~~BAUDAX BIO, INC.~~

~~Notes to the Consolidated Financial Statements~~

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

~~(Unaudited)~~

The Company is party to a Master Manufacturing Services Agreement and Product Agreement with Patheon UK Limited, a company incorporated under the laws of England (“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.

(b) Contingent Consideration for the Alkermes Transaction

On April 10, 2015, ~~Recro~~Societal CDMO 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.

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

Based on the amended terms of the Alkermes agreement, the contingent consideration consists of four separate components. The first component iswas (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,~~paid in three installments during 2020 and 2021, 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 Company paid $1,000 of the second payment, which was due in the first quarter of 2022, and will make monthly payments of $200 thereafter until the second payment is fully paid, as agreed between the Company and Alkermes. 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~~do 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.~~sales, which is paid quarterly.

~~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 December 20, 2020; and (iii) $1,440~~ ~~paid June 18, 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 ~~September~~June 30, ~~2021,~~2022, the Company has paid $~~21,429~~22,429 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. The Company accrues for any legal costs as they are incurred. 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. In connection with the Separation, the Company accepted assignment by ~~Recro~~Societal CDMO of all of ~~Recro’s~~Societal CDMO’s obligations in connection with a securities class action lawsuit (the “Securities Litigation”) and agreed to indemnify ~~Recro~~Societal CDMO for all liabilities related to the Securities Litigation.

~~BAUDAX BIO, INC.~~

~~Notes to the Consolidated Financial Statements~~

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

~~(Unaudited)~~

On May 31, 2018, the Securities Litigation was filed against ~~Recro~~Societal CDMO and certain of ~~Recro’s~~Societal CDMO’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~~Societal CDMO 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~~Societal CDMO 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~~Societal CDMO 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~~Societal CDMO 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~~Societal CDMO filed a reply in support of the motion to dismiss. On March 1, 2021, ~~Recro’s~~Societal CDMO’s second motion to dismiss was denied. On June 21, 2021, the defendants filed an answer and affirmative defenses to the second amended complaint. ~~A Preliminary Pretrial Conference was held on August 3, 2021. The~~Since then, the parties have ~~begun~~been engaged in discovery, ~~and class certification briefing,~~ which ~~the Court has ordered to be completed by December 30, 2021. All expert and fact discovery must be completed~~concluded by March 15, 2022. The Company has recorded a liability equal to the estimated fair value of the indemnification to Recro related to this Securities Litigation. The Company believes 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 ofOn September 30, 2021, the ~~Company has recorded~~plaintiff filed a ~~guarantee liability~~motion for class certification and appointment of $class representative. Societal CDMO filed an opposition to the plaintiff’s motion on November 30, 2021. On January 6, 2022, the plaintiff filed a reply in support of the motion for class certification.

On March 24, 2022, the plaintiff informed the Court that the parties had reached an agreement-in-principle to settle the Securities Litigation and requested that the court stay all deadlines. On May 10, 2022, plaintiff filed an unopposed motion for preliminary approval of the class action settlement. The Court entered an order preliminarily approving the settlement and providing for notice on May 12, 2022. A hearing for final approval of the settlement is set for October 26, 2022.~~635, which represents the present value estimate of our expected obligation related to this matter.~~

(d) Purchase Commitments

As of ~~September~~June 30, ~~2021,~~2022, the Company had outstanding non-cancelable and cancelable purchase commitments in the aggregate amount of $~~6,231~~4,621 primarily related to ~~inventory~~manufacturing and development activities and other goods and ~~services, predominantly manufacturing activities.~~services. The timing of certain purchase commitments cannot be estimated as it is dependent on the outcome of other strategic evaluations and agreements.

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

(e) Certain Compensation and Employment Agreements

The Company has entered into an employment ~~agreements~~agreement with ~~certain~~one of its named executive officers. As of ~~September~~June 30, ~~2021, these~~2022, this employment ~~agreements~~agreement provided for, among other things, annual base ~~salaries~~salary in an aggregate amount of not less than $~~1,317~~927, from that date through ~~March~~December 2023.

~~Note 13:~~(13) Capital Structure

(a) Common Stock

On November 21,21, 2019, the Company separated from ~~Recro~~Societal CDMO as a result of a special dividend distribution of all the outstanding shares of its common stock to ~~Recro~~Societal CDMO shareholders. On the distribution date, each ~~Recro~~Societal CDMO shareholder received 1 share of Baudax Bio’s common stock for every two and one-half shares of ~~Recro~~Societal CDMO common stock held of record at the close of business on November 15, 2019. Upon the Distribution, ~~9,396,583~~268,473 shares of common stock were issued, of which ~~45,874~~1,311 were distributed after December 31, 2019.

The Company is authorized to issue 190,000,000 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 “ATM Facility”) 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. On May 27, 2021, the Company voluntarily terminated the ATM Facility with the Agent. During the term of the ATM Facility, the Company sold an aggregate of ~~441,967~~12,628 shares of common stock under the ATM Facility for net proceeds of $3,612. The Agent was paid a sales commission of 3% for such sales under the ATM Facility. The ATM Facility was terminable at will by the Company with no penalty.

~~BAUDAX BIO, INC.~~

~~Notes to the Consolidated Financial Statements~~

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

~~(Unaudited)~~

On March 26, 2020, the Company closed an underwritten public offering of ~~7,692,308~~219,780 shares of its common stock, Series A Warrants to purchase ~~7,692,308~~219,780 shares of common stock (the “March Series A Warrants”) and Series B Warrants to purchase ~~7,692,308~~219,780 shares of common stock (the “March Series B Warrants”), at an exercise price of $~~4.59~~160.65 per share for the March Series A Warrants and at an exercise price of $~~3.25~~113.75 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~~81,429 shares of its common stock, warrants to purchase ~~10,126,583~~289,330 shares of common stock (the “November Series A Warrants”) at an exercise price of $~~1.20~~42.00 per share, pre-funded warrants to purchase ~~7,276,583~~207,902 shares of common stock (the “November Series B Warrants”) at an exercise price of $~~0.01~~0.35 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~~17,357 shares of common stock (the “November Placement Agent Warrants”) at an exercise price of $~~1.48125~~51.84375 per share.

On December 18, 2020, the Company closed a registered direct offering of ~~4,250,000~~121,428 shares of its common stock, warrants to purchase ~~10,300,430~~294,298 shares of common stock (the “December Series A Warrants”) at an exercise price of $~~1.18~~41.30 per share, pre-funded warrants to purchase ~~6,050,430~~172,869 shares of common stock (the “December Series B Warrants”) at an exercise price of $~~0.01~~0.35 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~~17,654 shares of common stock (the “December Placement Agent Warrants”) at an exercise price of $~~1.45625~~50.96875 per share.

On February 8, 2021, the Company closed a registered direct offering of ~~11,000,000~~314,286 shares of common stock (the “February Offering”) at an offering price of $~~1.60~~56.00 per share for net proceeds to the Company of $~~16,173~~16,187. 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~~18,854 shares of common stock (the “February Placement Agent Warrants”) at an exercise price of $~~2.00~~70.00 per share.

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

On May 31, 2021, the Company closed a registered direct offering of ~~14,028,520~~400,815 shares of common stock (the ~~"May Offering"~~“May Offering”) at an offering price of $~~0.85~~29.75 per share and warrants to purchase ~~14,028,520~~400,812 shares of common stock (the “May Warrants”) at an exercise price of $~~0.90~~31.50 per share, for net proceeds to the Company of $~~10,900~~10,861. 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 May Offering, plus a management fee equal to 1.0% of the gross proceeds raised in the May Offering and reimbursement of certain expenses and legal fees. The Company also issued to designees of the Placement Agent warrants to purchase ~~841,711~~24,046 shares of common stock (the “May Placement Agent Warrants”) at an exercise price of $~~1.0625~~37.1875 per share. The May Warrants and May Placement Agent Warrants ~~will be~~were exercisable on the six-month anniversary of the closing date of the May Offering.

On December 28, 2021, the Company closed a registered direct offering (the “December 2021 Offering”) of 42,289.3 shares of the Company’s Series A Preferred Stock, par value $0.01 per share (the “Preferred Stock”), at a stated value of $100.00 per share and warrants to purchase 362,479 shares of common stock of the Company (the “December 2021 Warrants”) for net proceeds of $3,658. The shares of Preferred Stock are convertible, on the date after the issuance thereof, into an aggregate of 483,306 shares of common stock at a conversion price of $8.75 per share, of which 34,000 shares of Preferred Stock were converted to common stock on December 29, 2021 and the remaining were converted in the first quarter of 2022. The Preferred Stock have no voting rights, other than the right to vote as a class on certain matters, and each share of Preferred Stock will have the right to cast 3,571 votes per share of Preferred Stock on an amendment to the Company’s Amended and Restated Articles of Incorporation, as amended, to effect a reverse stock split of the Company’s outstanding shares of common stock by a ratio to be determined by the Board of Directors of the Company, voting together with the common stock as a single class; and in accordance with Nasdaq Stock Market LLC Listing Rules, the votes cast by holders of the Preferred Stock must be counted by the Company in the same proportion as the aggregate shares of Common Stock voted on the proposal. The holders of Preferred Stock are entitled to dividends, on an as-if converted basis, equal to dividends actually paid, if any, on shares of common stock. The Company recognized a beneficial conversion charge of $2,422 during the year ended December 31, 2021, which represents the in-the-money value of the conversion rate as of the date of issuance. As compensation to the Placement Agent, the Company agreed to pay the Placement Agent a cash fee of 7.0% of the gross proceeds raised in the December 2021 Offering, plus a management fee equal to 1.0% of the gross proceeds raised in the December 2021 Offering and reimbursement of certain expenses and legal fees. The Company also issued to designees of the Placement Agent warrants to purchase 28,996 shares of common stock (the “December 2021 Placement Agent Warrants”). The December 2021 Warrants and the December 2021 Placement Agent Warrants have an exercise price of $11.20 per share and were exercisable upon the six-month anniversary of their issuance.

On March 1, 2022, the Company closed an underwritten public offering of 1,831,631 shares of its common stock, pre-funded warrants to purchase 1,677,141 shares of common stock at an exercise price of $0.01 per share and warrants to purchase 3,508,772 shares of common stock at an exercise price of $3.25 per share, as well as up to 526,315 additional shares of common stock and/or additional warrants to purchase up to 526,315 shares of common stock, which may be purchased pursuant to a 30-day option to purchase additional securities granted to H.C. Wainwright & Co., LLC (the “Underwriter”) by the Company. The public offering price for each share of common stock and accompanying warrant to purchase one share of common stock was $2.85, and the public offering price for each pre-funded warrant and accompanying warrant was $2.84. As compensation to the Underwriter, the Company agreed to pay to the Underwriter a cash fee of 7.0% of the gross proceeds, plus a cash management fee equal to 1.0% of the gross proceeds and reimbursement of certain expenses and legal fees. The Company also issued to designees of the Underwriter warrants to purchase 210,526 shares of common stock at an exercise price of $3.5625 per share. On February 28, 2022, the Underwriter partially exercised its option to purchase an additional 113,896 warrants. Net proceeds to the Company, after deducting underwriting discounts and commissions and offering expenses, was $8,791.

On May 17, 2022, the Company entered into a securities purchase agreement with institutional investors named therein, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “May 2022 Offering”), 1,646,091 shares of the Company’s common stock, par value $0.01 per share, and, in a concurrent private placement, warrants exercisable for up to an aggregate of 1,646,091 shares of Common Stock at a combined offering price of $1.215 per share and associated warrant. The warrants have an exercise price of $1.09 per share. Each warrant is exercisable for one share of common stock and was exercisable immediately upon issuance. The warrants will have a term of five years from the issuance date. As compensation to H.C. Wainwright & Co., LLC as placement agent in connection with the offering, the Company agreed to pay to the placement agent a cash fee of 7.0% of the aggregate gross proceeds raised in the offering, plus a management fee equal to 1.0% of the gross proceeds raised in the offering and certain expenses. The Company also issued to designees of the placement agent warrants to purchase up to 6.0% of the aggregate number of shares of common stock sold in the transactions, or warrants to purchase up to 98,765 shares of common stock. The placement agent warrants have substantially the same terms as the warrants, except that the placement agent warrants have an exercise price equal to 125%

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

of the offering price per share (or $1.5188 per share). The placement agent warrants will expire on May 17, 2027. Net proceeds to the Company, after deducting underwriting discounts and commissions and offering expenses, was $1,720.

(b) Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, with a par value of $0.01 per share. As of ~~September~~June 30, ~~2021,~~2022, 0 shares of preferred stock ~~was~~were issued or outstanding.

See Note 13(a) for additional information regarding the December 2021 Offering.

On May 29, 2020, in connection with the Credit Agreement, the Company issued a warrant to MAM Eagle Lender, LLC to purchase ~~527,100~~15,060 shares of common stock, at an exercise price equal to $~~4.59~~160.65 per share (see Note 11(b)).

~~BAUDAX BIO, INC.~~

~~Notes to the Consolidated Financial Statements~~

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

~~(Unaudited)~~

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~~0.0057 shares of the Company’s common stock per warrant (rounded up to the nearest whole share) (the “Exchange”). The Company issued ~~1,186,774~~33,908 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~~0.35, 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~~294,298 shares of common stock of the Company (the “January Warrants”) at an offering price of $~~0.125~~4.375 per warrant in exchange for the exercise of the institutional investor’s existing December Series A warrants that were issued to them on December 21, 2020, at an exercise price of $~~1.18~~41.30 per warrant. The January Warrants have an exercise price of $~~1.60~~56.00 per share.

As compensation to the Placement Agent, ~~as placement agent~~ in connection with the January Offering, the Company agreed to pay to the Placement Agent a cash fee of 6.0% of the aggregate gross proceeds raised in the January Offering (including the proceeds relating to the exercise of the December Series A Warrants), plus a management fee equal to 1.0% of the gross proceeds raised in the January Offering (including the proceeds relating to the exercise of the December Series A Warrants) and reimbursement of certain expenses and legal fees. The Company also issued to designees of the Placement Agent warrants to purchase ~~618,026~~17,654 shares of common stock (the “January Placement Agent Warrants”) at an exercise price of $~~2.00~~70.00 per share.

During the year ended December 31, 2020, the Company issued ~~8,836,663~~252,476 shares of common stock upon exercise of the 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~~207,902 shares of common stock upon exercise of the November Series B Warrants for proceeds of $73 and ~~6,050,430~~172,869 shares of common stock upon exercise of the December Series B Warrants for proceeds of $60.

During the ~~nine months~~year ended ~~September 30,~~December 31, 2021, the Company issued ~~111,539~~3,189 shares of common stock upon exercise of the March Series B Warrants for net proceeds of $1 and ~~10,300,430~~294,298 shares of common stock upon exercise of the December Series A Warrants for proceeds of $12,155.

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

As of ~~September~~June 30, ~~2021,~~2022, 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	Number of Shares		Exercise Price per Share		Expiration Date
March Series A Warrants (non-participating holders)		32,438	$	0.01	March 26, 2025		919	$	0.35	March 26, 2025
MAM Eagle Lender Warrant		527,100	$	4.59	May 29, 2027		15,060	$	160.65	May 29, 2027
November Series A Warrants		10,126,583	$	1.20	November 24, 2025		289,330	$	42.00	November 24, 2025
November Placement Warrants		607,595	$	1.48125	November 24, 2025		17,357	$	51.84375	November 24, 2025
December Placement Warrants		618,026	$	1.45625	December 18, 2025		17,654	$	50.96875	December 18, 2025
January Warrants		10,300,430	$	1.60	January 21, 2026		294,298	$	56.00	January 21, 2026
January Placement Warrants		618,026	$	2.00	January 21, 2026		17,654	$	70.00	January 21, 2026
February Placement Warrants		660,000	$	2.00	February 8, 2026		18,854	$	70.00	February 8, 2026
May Warrants		14,028,520	$	0.90	June 1, 2027		400,812	$	31.50	June 1, 2027
May Placement Warrants		841,711	$	1.06250	May 31, 2026		24,046	$	37.1875	May 31, 2026
December 2021 Warrants							362,479	$	11.20	June 27, 2027
December 2021 Placement Agent Warrants							28,996	$	11.20	December 27, 2026
March 2022 Warrants							3,622,668	$	3.25	March 1, 2027
March 2022 Underwriter Warrants							210,526	$	3.56	February 24, 2027
May 2022 Warrants							1,646,091	$	1.09	May 19, 2027
May 2022 Placement Agent Warrants							98,765	$	1.52	May 17, 2027

With the exception of the March Series A Warrants to purchase ~~32,438~~919 shares of common stock related to the public offering and held by non-participating investors in the Exchange that are liability classified as they contain antidilution provisions that do not meet the standard definition of antidilution provisions, the remaining warrants outstanding are equity classified. ~~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.~~

~~Note 14:~~(14) Stock-Based Compensation

The Company has adopted the 2019 Plan that allows for the grant of stock options, stock appreciation rights and stock awards for aan initial total of ~~3,000,000~~85,714 shares of common stock. On December 1st of each year, pursuant to the “Evergreen” provision of the 2019 Plan, the number of shares available under the plan shall be increased by an amount equal to 5% of the outstanding common stock on December 1st of that year or such lower amount as determined by the Board of Directors. In December ~~2020,~~2021, the number of shares available for issuance under the 2019 Plan was increased by ~~1,522,171~~120,605. The total number of shares authorized for issuance under the 2019 Plan as of ~~September~~June 30, ~~2021~~2022 is ~~4,989,706~~263,167. As of ~~September~~June 30, ~~2021,~~2022, ~~251,754~~112,019 shares are available for future grants under the 2019 Plan.

Stock Options:

Stock options are exercisable generally for a period of 10 years from the date of grant and generally vest over four years. There were no options granted during the six months ended June 30, 2022. The weighted average grant-date fair value of ~~the Baudax Bio~~ options awarded to employees during the ~~nine~~six months ended ~~September~~June 30, 2021 ~~and 2020~~ was $~~0.72~~27.45 ~~and $~~.~~2.22, respectively.~~

BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

Under the 2019 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,

2021

2020

Expected option life

5.6 years

6 years

Expected volatility

75.16%

73.77%

Risk-free interest rate

0.84%

0.41%

Expected dividend yield

0

0


	June 30,
	2021
Expected option life	5.5 years
Expected volatility	75.37%
Risk-free interest rate	0.78%
Expected dividend yield		0

The following table summarizes Baudax Bio stock option activity during the ~~nine~~six months ended ~~September~~June 30, ~~2021:~~2022:


	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, 2020		2,284,298		$	3.10	9.1 years
Granted		1,737,563		$	1.17
Balance, December 31, 2021								125,418		$	76.05	8.6 years
Expired/forfeited/cancelled		(417,519	)	$	1.74			(35,756	)	$	49.85
Balance, September 30, 2021		3,604,342		$	2.33	8.4 years
Balance, June 30, 2022								89,662		$	86.50	7.6 years
Vested		1,254,511		$	2.92	7.2 years		61,610		$	85.63	7.1 years
Vested and expected to vest		3,604,342		$	2.33	8.4 years		89,662		$	86.50	7.6 years

Included in the table above are ~~799,065~~6,106 stock options outstanding as of ~~September~~June 30, ~~2021~~2022 that were granted outside of the plan. The grants were made pursuant to the Nasdaq inducement grant exception in accordance with Nasdaq Listing Rule 5635(c)(4).

Restricted Stock Units (RSUs):

The following table summarizes Baudax Bio RSUs activity during the ~~nine~~six months ended ~~September~~June 30, ~~2021:~~2022:


	Number of shares
~~Balance, December 31, 2020~~		~~991,012~~
~~Granted~~		~~683,143~~
~~Vested and settled~~		(~~366,866~~	)
~~Expired/forfeited/cancelled~~		(~~116,893~~	)
~~Balance, September 30, 2021~~		~~1,190,396~~
~~Expected to vest~~		~~1,190,396~~


	Number of shares			Weighted average grant date fair value
Balance, December 31, 2021		41,069		$	63.79
Granted		501,209			0.76
Vested and settled		(11,337	)		44.77
Expired/forfeited/cancelled		(7,023	)		57.22
Balance, June 30, 2022		523,918		$	3.99
Expected to vest		508,792

In June 2022, the Company granted 501,209 time-based RSUs, which may be settled in cash, stock, or a combination of cash and stock, solely at the election of the Company. These awards are classified as Other long-term liabilities on the Consolidated Balance Sheet due to insufficient shares available for grant in the 2019 Plan.

Included in the table above are ~~241,612~~683 time-based RSUs outstanding as of ~~September~~June 30, ~~2021~~2022 that were granted outside of the plan. The grants were made pursuant to the Nasdaq inducement grant exception in accordance with Nasdaq Listing Rule 5635(c)(4).

Stock-Based Compensation Expense:

Stock-based compensation expense for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 was $~~4,132~~858 and $~~7,431~~3,207, ~~respectively. For~~respectively, which for the current year ~~this represents stock-based compensation~~also includes expense for the ~~Baudax Bio awards, including $228~~ ~~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~~liability classified awards. For the prior year, this represents stock-based compensation from the 2019 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~~June 30, ~~2021,~~2022, there was $~~4,618~~2,374 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 ~~2.2~~2.0 years. As of ~~September~~June 30, ~~2021,~~2022, there was $~~1,683~~450 of unrecognized compensation expense related to unvested performance-based 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~~June 30, ~~2021,~~2022, there was 0 aggregate intrinsic value of the vested and unvested options.

~~Recro~~Societal CDMO became a related party to the Company following the Separation. As part of the Separation, the Company entered into a transition services agreement with ~~Recro,~~Societal CDMO, which terminated on December 31, 2020. Under the transition services agreement, the Company provided certain services to ~~Recro,~~Societal CDMO, each related to corporate functions, which were charged to Recro. Additionally, Recro may incur expenses that are directly related to the Company after the Separation, which are billed to the Company. For the three and nine months ended September 30, 2020, the Company recorded income of $~~516~~ ~~and $1,548, respectively, related to the transition services agreement, which is recorded as a reduction in selling, general and administrative expenses in the prior year.~~Societal CDMO.

In connection with the Separation, ~~Recro~~Societal CDMO and Baudax Bio entered into an Employee Matters Agreement. The Employee Matters Agreement allocates liabilities and responsibilities relating to employee compensation and benefits plans and programs and other related matters in connection with the Distribution including, without limitation, the treatment of outstanding ~~Recro~~Societal CDMO equity awards.

In connection with the Separation, ~~Recro~~Societal CDMO and Baudax Bio entered into a Tax Matters Agreement that governs the parties’ respective rights, responsibilities and obligations with respect to taxes, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes for any tax period ending on or before the Distribution date, as well as tax periods beginning after the Distribution date.

The Company has a voluntary 401(k) Savings Plan (the “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~~June 30, ~~2021~~2022 and ~~2020~~2021 were $~~148~~51 and $~~188~~151, respectively. Total Company contributions to the 401(k) plan for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 were $~~569~~341 and $~~449~~421, respectively.

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the interim unaudited financial statements contained in Part I, Item 1 of this Quarterly Report, and the audited financial statements and notes thereto for the year ended December 31, ~~2020~~2021 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, filed with the SEC on ~~February~~March 16, ~~2021.~~2022. As used in this Quarterly Report, unless the context suggests otherwise, “we,” “us,” “our,” the “Company” or “Baudax Bio” refer to Baudax Bio, Inc. and its consolidated subsidiaries.

We are a pharmaceutical company primarily focused on ~~commercializing and developing~~ innovative products for hospital and related acute care settings. We believe that we can bring valuable therapeutic options for patients, prescribers and payers to the hospital and related acute care markets.

In mid-2020, we launched our first commercial product, ANJESO, in the ~~U.S.~~United States. ANJESO is the first and only 24-hour, intravenous, ~~(IV)~~or IV, analgesia agent. ANJESO is a cyclooxygenase-2, or COX-2, preferential, non-steroidal anti-inflammatory, ~~(NSAID)~~or NSAID, for the management of moderate to severe pain, which can be administered alone or in combination with other non-NSAID analgesics. We have successfully completed three Phase III clinical trials, including two pivotal efficacy trials, a large double-blind Phase III safety trial and atwo Phase IIIb ~~program~~programs evaluating ANJESO clinical safety and efficacy along with its health economic ~~impact~~impacts in specific surgical settings. In addition to ANJESO, we have a pipeline of 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. The clinical dosing portion of the BX1000 dose escalation study has been completed and is in the data analysis stage. We continue to evaluate strategic partnerships to commercialize ANJESO outside of the United States.

~~During~~We utilize our internal field team and collaborate with contracted third parties, to market ANJESO to health care professionals at key targeted institutions for the ~~third quarter~~commercialization of ~~2021, despite the COVID-19 delta impact during July and August affecting over 40% of our business, we continued to see solid growth~~ANJESO in the total number of vials sold to end-users. Demand for ANJESO demonstrated strong growth and deepening usage patterns based on several key quarter-over-quarter metrics. Despite extensive outbreaks of COVID-19 delta variant in much of the south and selected other regions, and its impact on elective surgeries in July and August, there was growth in estimated end-user demand units sold to all customers in the third quarter of 2021 compared to the second quarter of 2021 of approximately 16% and vials sold to end-user hospitals and ambulatory surgery centers (ASCs) combined was up 17% in the same period. Vials sold to existing hospitals increased 11% and vials sold to existing ASCs increased 66% from the third quarter of 2021 compared the second quarter of 2021. In addition, the month of September 2021 was our single largest month of ANJESO end-user demand units sold launch-to-date for the product.

United States. The Centers for Medicare and Medicaid Services, or CMS, ~~granted~~established a unique J-code tofor ANJESO in the fourth quarter of 2020. ANJESO has transitional pass-through status under traditional Medicare plans for a period of 3 years, thereby providing separate reimbursement for ANJESO when used for surgical procedures in the outpatient setting. We have also entered into agreements with leading group purchasing organizations in the U.S., including Vizient Inc., Premier Inc., and HealthTrust, as well as one of the top 3three integrated delivery networks ~~for terms~~that serves over twelve million patients nationwide, for availability of ANJESO to their member ~~institutions. In September 2021, we signed an agreement for terms of availability~~institutions and with a leading operator of surgical facilities and ancillary services nationally, with over 150 locations nationwide. In addition, ANJESO is currently approved for use within the Department of Veterans Affairs, the Department of Defense, Indian Health Service, 340B covered entities, and multiple state Medicaid programs. We are continuing to evaluate strategic partnerships for the commercialization of ANJESO both in the United States and outside the United States.

We have seen continued growth of ANJESO in the second quarter of 2022 through deepening usage at existing accounts, particularly in the hospital setting where we saw a growth of 12% in vials sold to hospitals compared to the first quarter of 2022. Further, this growth came through the addition of several new key accounts as well as a resurgence by some accounts that ordered early on in the commercialization of ANJESO. The second quarter of 2022 was our second best quarter since launch, a decrease of 9% from the first quarter of 2022, which ~~became effective October 1, 2021.~~was our strongest quarter to date. The number of vials sold to end-users increased approximately 67% in the second quarter of 2022 compared to the second quarter of prior year.

Our costs consist primarily of expenses incurred in conducting our manufacturing, commercialization of ANJESO, public company and personnel costs, clinical trials and preclinical studies, and regulatory activities. We expect to incur 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, including our clinical, non-clinical and formulation development activities. Our expenses over the next several years are expected to primarily relate to ~~the~~ commercialization ~~of ANJESO~~activities 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.

31Our pipeline also includes other early-stage product candidates, including two novel NMBs and a related proprietary chemical reversal agent and Dex-IN, a proprietary intranasal formulation of dexmedetomidine, or Dex, an alpha-2 adrenergic agonist that we are evaluating for possible partnering.

Our efforts to commercialize ANJESO ~~have been~~were impacted in 2020, 2021, and continue to impact us in 2022 on a variable basis depending on the timing, location and extent of the outbreaks. There may continue to be impact from the COVID-19 pandemic, particularly in light of the surge of new COVID-19 cases relating to new variants, ~~such as the delta variant.~~and any new and potentially more virulent variants that may emerge. Intermittent impacts in the reduction of elective surgeries have occurred and this has had an impact in the recent quarter, especially in ~~July~~January and ~~August.~~February. Overall, many centers have yet returned to pre-COVID levels of surgeries even where the impact of COVID-19 and its variants have not been as ~~impactful.~~great. In addition, COVID-19 has impacted revenue for many 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~~has impacted and will continue to impact our marketing and commercialization efforts. Further, hospitals and ambulatory surgical centers may experience staffing shortages as a result of employee non-compliance with government or employer mandated vaccination requirements, which could reduce the number of elective surgeries that can be performed at hospitals with staffing shortages. We believe a reduction in elective surgeries during the COVID-19 pandemic has impacted and may continue to impact 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, including for personal protective equipment and ventilators, and this impact may result in ongoing decreased revenue. If fewer elective procedures are being performed, we believe this may negatively impact ANJESO growth rates. In addition, in some areas the absence of hospital formulary meetings where new drugs can be adopted has had ongoing variable impact on our efforts to commercialize ANJESO. Many hospital formularies ~~recently~~have resumed meetings after a 6-month, or longer, absence. Despite the existence of a backlog of products scheduled to be reviewed, we believe we will make progress with having ANJESO added to additional hospital formularies over 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 August 2019, Recro announced its plans~~Due to ~~separate its acute care business from its contract manufacturing and development business through~~our current cash position, in March of 2022, we implemented a ~~pro rata distribution~~reduction in workforce by approximately 66 employees (representing approximately 80% of our ~~common stock to shareholders~~total workforce), including 43 members of ~~Recro. As a part~~our sales force. The reorganization was substantially completed by the end of the ~~Separation, Recro transferred the assets, liabilities~~second quarter and ~~operations~~approximately $4.1 million of ~~its acute care segment~~charges were incurred for severance and other related costs. The reduction in force was designed to ~~us, pursuant to the terms of a Separation Agreement. On November 21, 2019, the distribution date, each Recro shareholder received one share of~~substantially reduce our ~~common stock for every two~~operational expenses 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. As a result of the Distribution, we became an independent public company whose shares of common stock are trading under the symbol “BXRX” on The Nasdaq Capital Market.conserve cash resources.

~~Subsequent to regulatory approval for ANJESO from the FDA, we began selling~~We sell ANJESO in the U.S. through a single third-party logistics provider, or 3PL, which takes title to and control of the ~~goods.~~goods, and is considered our customer. We recognize 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 us and our ~~end-customers,~~end-user 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 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.

Cost of sales includes product costs, manufacturing costs, transportation and freight, royalty expense, qualification costs for a 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 using in the ~~commercial launch~~commercialization as research and development expense prior to the regulatory approval of ANJESO. We expect that over time, product costs in cost of sales will increase as sales increase and inventory associated with the units manufactured prior to FDA approval are sold.

Research and development expenses currently consist primarily of costs incurred in connection with the pediatric development of ANJESO and ~~other pipeline~~the NMB portfolio 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 ~~development~~pre-commercial products, analysis and testing of product candidates and patent costs. We expense costs related to clinical inventory and ~~development~~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. 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 ~~required for ANJESO, which~~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 ~~for our product candidates~~ continue to be recorded within research and development.

The development of 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 our product candidate’s commercial potential and our available capital resources. 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.

We expect our research and development costs to relate to ANJESO, including required pediatric post-marketing studies, as well as development and ~~other related activities~~commercialization scale-up 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.

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 ~~health care professionals.~~our indirect customers.

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

WeOur selling, general and administrative expenses decreased in the quarter ended June 30, 2022 as a result of a reduction in personnel and marketing costs, and we expect our selling, general and administrative expenses to ~~increase~~remain relatively constant in the ~~future as a result of our commercial launch of ANJESO.~~

Due to the impacts of COVID-19 and the resultant impact to the 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.near term.

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 for the acquisition of certain assets, including the worldwide rights to injectable meloxicam and ~~Recro’s~~Societal CDMO’s development, formulation and manufacturing business from Alkermes, or the Alkermes Transaction, as amended in December 2018 and August 2020. Pursuant to the Alkermes Agreements, we are required to pay up to $140.0 million in milestone payments, including $10.0 million that was paid during 2019, ~~another~~ $3.6 million paid in 2020, another $1.4 million ~~which becomes due June 20,~~paid in 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 and a partial payment was made on the second payment of $1.0 million, which was due in the first quarter of 2022, with monthly payments of $0.2 million paid thereafter until fully paid, as well as net sales milestones and a royalty percentage of future product net sales related to injectable meloxicam between 10% and 12% (subject to a 30% reduction when no longer covered by patent)., which is paid quarterly. The estimated fair value of the initial $54.6 million payment obligation was recorded as part of the purchase price for the Alkermes Transaction. We have continued to reevaluate the fair value each subsequent period and as of ~~September~~June 30, ~~2021~~2022 recorded a ~~$66.7~~$20.4 million payment obligation, representing the estimated probability adjusted fair 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~~June 30, ~~2021,~~2022, we have paid ~~$21.4~~$22.4 million in milestone payments to Alkermes.

Interest expense for the periods presented primarily includes interest expense incurred on our Credit Agreement with MAM Eagle Lender, the amortization of related financing costs, and interest expense on a promissory note with PNC Bank under the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”) administered by the Small Business Administration (the “SBA”), which ~~has been~~was fully forgiven ~~as of September 30,~~during the year ended December 31, 2021.

We maintained a valuation allowance against our deferred tax assets as of ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.

Comparison of the Three Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021

Revenue, net. For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, net product revenue was $0.3 million and ~~$0.1~~$0.2 million, respectively, related to sales of ANJESO in the U.S. While utilizing the title model of distribution, product revenue is recognized as shipments are made to our 3PL provider. The increase of ~~$0.2~~$0.1 million was attributable to securing additional formulary approvals and generating trial and adoption of ANJESO, as well as increased end-user demand leading to increased purchasing by direct customers.

Cost of Sales. Our cost of sales was ~~$0.5~~$0.4 million and $0.6 million for ~~both~~ the three months ended ~~September~~June 30, 2022 and 2021, ~~and 2020,~~respectively, 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 ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 were expensed prior to FDA approval of ANJESO in February 2020, and therefore are not included in cost of sales during the related periods. We expect that over time, product costs in cost of sales will increase as sales increase and inventory associated with the units manufactured prior to FDA approval are sold. The decrease of $0.2 million was primarily a result of the reduction in manufacturing costs, including production and storage costs, in the current year compared to the prior year of $0.2 million.

Research and Development. Our research and development expenses were ~~$0.7~~$0.9 million ~~and $1.5 million~~ for each of the three months ended ~~September~~June 30, 2022 and 2021, ~~and 2020,~~ respectively. ~~The decrease of $0.8 million~~There was ~~primarily due to a decrease~~no significant change in ~~personnel costs of $0.5 million as well as a decrease in clinical costs of $0.5 million, which were partially offset by an increase in pre-clinical costs of $0.2 million.~~the comparable periods.

Selling, General and Administrative. Our selling, general and administrative expenses were ~~$11.1~~$4.0 million and ~~$13.8~~$10.6 million for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The decrease of ~~$2.7~~$6.6 million was primarily ~~due to decrease~~a result of a reduction in personnel costs of ~~$3.1~~$3.9 million, a decrease in marketing costs of $1.3 million, a decrease in public company costs of $1.0 million, and a decrease in ~~public company~~both consulting and ~~other related costs~~travel expenses of $0.2 million, which was partially offset by an increase of $0.5 million as the three months ended September 30, 2020 included reimbursed general and administrative expenses related to the Transition Services Agreement with Recro Pharma, which ended on December 31, 2020.million.

Amortization of Intangible Assets. Amortization expense was $0.6 million for each of the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, 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 September 30, 2021. Our warrant valuation decreased $11.2 million for the three months ended September 30, 2020 due to a decrease in the Black-Scholes values as a result of a decrease in our stock price for the related period.

Change in Contingent Consideration Valuation. The change in contingent consideration valuation was an increase in value of ~~$3.8~~$1.3 million for the three months ended ~~September~~June 30, ~~2021~~2022 and an ~~decrease~~increase in value of ~~$17.4~~$3.9 million for the three months ended ~~September~~June 30, ~~2020.~~2021. The non-cash charge for contingent consideration in each period related to the revaluation of the probability-adjusted fair value of the Alkermes Transaction payment obligation. The increase in contingent consideration value for the three months ended ~~September~~June 30, ~~2021~~2022 was primarily due tothe time value of money as we progress closer to payment of the contingent consideration liability. The ~~decrease~~increase in contingent consideration valuation for the three months ended ~~September~~June 30, ~~2020~~2021 was primarily due to the ~~adjusted timing~~time value of ~~estimated milestone~~money and ~~royalty payments due to updated forecasts reflecting an estimate of the launch trajectory of ANJESO.~~change in interest rates.

Other Expense, net. Other expense was $0.6 million for ~~each of~~ the three months ended ~~September~~June 30, 2022 and other income was $1.0 million for the three months ended June 30, 2021, ~~and 2020, which~~The change in other income (expense) of $1.6 million was ~~related~~primarily due to the ~~interest expense incurred~~gain on extinguishment of the PPP Loan of $1.6 million in the previous year upon the approval of our ~~Credit Agreement with MAM Eagle Lender and the amortization of related financing costs.~~application for forgiveness.

Comparison of the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021

Revenue, net. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, net product revenue was $0.7 million and $0.4 million, respectively, related to sales of ANJESO in the U.S. While utilizing the title model of distribution, product revenue is recognized as shipments are made to our 3PL provider. The increase of $0.3 million was attributable to securing additional formulary approvals and generating trial and ~~adoptions~~adoption of ANJESO, as well as increased end-user demand leading to increased purchasing by direct customers.

Cost of Sales. Our cost of sales was ~~$1.9~~$1.0 million and ~~$1.2~~$1.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and consists of product costs, royalty expense and certain fixed costs associated with the manufacturing of ANJESO, including supply chain and quality costs. ~~Based on our policy, we expense~~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 ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 were expensed prior to FDA approval of ANJESO in February 2020, and therefore are not included in cost of sales during the related periods. We expect that over time, product costs in cost of sales will increase as sales increase and inventory associated with the units manufactured prior to FDA approval are sold. The decrease of $0.4 million was primarily a result of the reduction in scrap expense recorded in the current year compared to the prior year of $0.2 million and a decrease in manufacturing costs, including reductions in production and storage costs, of $0.2 million.

Research and Development. Our research and development expenses were ~~$2.6~~$2.2 million and ~~$5.9~~$2.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The ~~decrease~~increase of ~~$3.3~~$0.2 million was primarily due to a decrease in personnel costs of $2.6 million, a decrease of $0.8 million in pre-commercialization manufacturing costs for ANJESO and a decrease of $0.1 million in clinical costs. This was partially offset by an increase in ~~pre-clinical~~clinical trials costs associated with our ANJESO pediatric program of $0.2 million.

Selling, General and Administrative. Our selling, general and administrative expenses were ~~$33.8~~$18.2 million and ~~$33.0~~$22.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The ~~increase~~decrease of ~~$0.8~~$4.5 million was primarily a result of ~~the prior period including $1.5~~a reduction in personnel costs of $1.6 million, ~~in reimbursed general and administrative expenses related to the Transition Services Agreement with Recro Pharma, which ended on December 31, 2020. This increase as well as an increase~~a decrease in public company costs of ~~$1.2~~$1.4 million, ~~were partially offset by~~ a decrease in ~~personnel~~marketing costs of $1.1 million, and a decrease in consulting expenses of ~~$1.9~~$0.4 million.

Amortization of Intangible Assets. Amortization expense was ~~$1.9 million and $1.5~~$1.3 million for each of the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020, respectively,~~2021, 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 nine months ended September 30, 2021. Our warrant valuation increased $2.9 million for the nine months ended September 30, 2020 due to an increase in the Black-Scholes values as a result of an increase in our stock price for the related period.life.

Change in Contingent Consideration Valuation. The change in contingent consideration valuation was a decrease in value of $2.5 million for the six months ended June 30, 2022 and an increase in value of ~~$9.6~~$5.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021 as compared to an increase in value of $14.3 million for the nine months ended September 30, 2020.~~2021. The non-cash charge for contingent consideration in each period related to the revaluation of the probability-adjusted fair value of the Alkermes Transaction payment obligation. The ~~increase~~decrease in contingent consideration value for the ~~nine~~six months ended ~~September~~June 30, 2022 was primarily due toupdated forecasts for ANJESO due to the significant reduction of our commercial team, partially offset by the increase for the time value of money. The increase in contingent consideration valuation for the six months ended June 30, 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 due to updated forecasts reflecting an estimate of the launch trajectory of ANJESO. The increase in contingent consideration valuation for the nine months ended September 30, 2020 was primarily due to the increase in the probability of success of milestones tied to the FDA approval of ANJESO, partially offset by a decrease due to updated forecasts reflecting an estimate of the launch trajectory in the third quarter of 2020.

Other Expense, net. Other expense ~~for the nine months ended September 30, 2021~~ was ~~$0.2 million compared to other expense of~~ $0.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2022 and other income was $0.4 million for the six months ended June 30, 2021. The change in other ~~expense~~income (expense) of ~~$0.6~~$1.2 million was primarily due to the gain on extinguishment of the PPP Loan of ~~$1.5~~$1.6 million in the previous year upon the approval of our application for forgiveness, partially offset by other income in the current year ~~partially offset by an increase~~for the settlement of ~~$0.9 million in interest expense and debt issuance cost amortization related to our Credit Agreement with MAM Eagle Lender.~~a patent infringement claim of $0.3 million.

As of ~~September~~June 30, ~~2021,~~2022, we had ~~$24.9~~$5.2 million in cash and cash ~~equivalents~~equivalents.

On May 17, 2022, we closed a registered direct offering of 1,646,091 shares of our common stock, par value $0.01 per share, and ~~short-term investments.~~in a concurrent private placements, warrants exercisable for up to an aggregate of 1,646,091 shares of common stock at a combined offering price of $1.215 per share and associated warrant. The warrants have an exercise price of $1.09 per share. Each warrant is exercisable for one share of common stock and was exercisable immediately upon issuance. The warrants have a term of five years from the issuance date. As compensation to H.C. Wainwright & Co., LLC as placement agent in connection with the offering, we agreed to pay to the placement agent a cash fee of 7.0% of the aggregate gross proceeds raised in the offering, plus a management fee equal to 1.0% of the gross proceeds raised in the offering and certain expenses. We also issued to designees of the placement agent warrants to purchase up to 6.0% of the aggregate number of shares of common stock sold in the transactions, or warrants to purchase up to 98,765 shares of common stock. The placement agent warrants have substantially the same terms as the warrants, except that the placement agent warrants have an exercise price equal to 125% of the offering price per share (or $1.5188 per share). The placement agent warrants will expire on May 17, 2027. Net proceeds, after deducting underwriting discounts and commissions and offering expenses, was $1.7 million.

On March 1, 2022, we closed an underwritten public offering of 1,831,631 shares of common stock, pre-funded warrants to purchase 1,677,141 shares of common stock at an exercise price of $0.01 per share and warrants to purchase 3,508,772 shares of common stock at an exercise price of $3.25 per share, as well as up to 526,315 additional shares of common stock and/or additional warrants to purchase up to 526,315 shares of common stock which may be purchased pursuant to a 30-day option to purchase additional securities granted to H.C. Wainwright & Co., LLC (the “Underwriter”) by us. The public offering price for each share of common stock and accompanying warrant to purchase one share of common stock was $2.85, and the public offering price for each pre-funded warrant and accompanying warrant was $2.84. As compensation to the Underwriter, we agreed to pay to the Underwriter a cash fee of 7.0% of the gross proceeds, plus a cash management fee equal to 1.0% of the gross proceeds and reimbursement of certain expenses and legal fees. We also issued to designees of the Underwriter warrants to purchase 210,526 shares of common stock at an exercise price of $3.5625 per share. On February 28, 2022, the Underwriter partially exercised its option to purchase an additional 113,896 warrants. Net proceeds, after deducting underwriting discounts and commissions and offering expenses, was $8.8 million.

On December 28, 2021, we closed a registered direct offering of 42,289.3 shares of Series A Preferred Stock, par value $0.01 per share, or the Preferred Stock, and warrants to purchase 362,479 shares of common stock, or the December 2021 Warrants, for net proceeds of $3.7 million. The shares of Preferred Stock will have a stated value of $100.00 per share and are convertible, on the date after the issuance thereof, into an aggregate of 483,306 shares of common stock at a conversion price of $8.75 per share. As compensation to H.C. Wainwright & Co., LLC, or the Placement Agent, we agreed to pay the Placement Agent a cash fee of 7.0% of the gross proceeds raised in the December 2021 Offering, plus a management fee equal to 1.0% of the gross proceeds raised in the December 2021 Offering and reimbursement of certain expenses and legal fees. We also issued to designees of the Placement Agent warrants to purchase 28,996 shares of common stock, or the December 2021 Placement Agent Warrants. The December 2021 Warrants and the December 2021 Placement Agent Warrants have an exercise price of $11.20 per share and will be exercisable upon the six-month anniversary of their issuance.

On May 31, 2021, we closed a registered direct offering of ~~14,028,520~~400,815 shares of common stock, or the May Offering, at an offering price of ~~$0.85~~$29.75 per share and warrants to purchase ~~14,028,520~~400,812 shares of common stock, or the May Warrants, at an exercise price of $0.90 per share, for net proceeds of $10.9 million. As compensation to ~~H.C. Wainwright & Co., LLC, or~~ the Placement Agent, ~~as placement agent in connection with the May Offering,~~ we agreed to pay the Placement Agent a cash fee of 6.0% of the gross proceeds raised in the May Offering, plus a management fee equal to 1.0% of the gross proceeds raised in the May Offering and reimbursement of certain expenses and legal fees. We also issued to designees of the Placement Agent warrants to purchase ~~841,711~~24,076 shares of common stock (the “May Placement Agent Warrants”) at an exercise price of ~~$1.0625~~$37.1875 per share. The May Warrants and May Placement Agent Warrants ~~will be~~were exercisable on the six-month anniversary of the closing date of the May Offering.

On February 8, 2021, we entered into an agreement to issue and sell ~~11,000,000~~314,286 shares of common stock, or the February Offering, at an offering price of ~~$1.60~~$56.00 per share, for net proceeds of $16.2 million. As compensation to the Placement Agent, 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~~18,854 shares of common stock, or the February Placement Agent Warrants. The February Placement Agent Warrants have an exercise price of ~~$2.00~~$70.00 per share.

On January 21, 2021, we entered into an agreement to issue and sell warrants exercisable for an aggregate of ~~10,300,430~~294,298 shares of common stock, or the January Warrants, at an offering price of ~~$0.125~~$4.375 per warrant in exchange for the exercise of the institutional investor’s existing December Series A warrants that were issued to them on December 21, 2020, at an exercise price of ~~$1.18~~$41.30 per warrant. The January Warrants have an exercise price of ~~$1.60~~$56.00 per share. The January Warrants are immediately exercisable and will expire five years from the issuance date. As compensation to the Placement Agent, we agreed to pay a cash fee of 6.0% of the aggregate gross proceeds raised in the January Offering (including the proceeds relating to the exercise of the December Series A Warrants), plus a management fee equal to 1.0% of the gross proceeds raised in the January Offering (including the proceeds relating to the exercise of the December Series A Warrants) and reimbursement of certain expenses and legal fees. We also issued to designees of the Placement Agent warrants to purchase up to ~~618,026~~17654 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 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$70.00 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 this Quarterly Report and may draw upon four additional tranches of term loans. The Tranche Two Loans in an amount not to exceed $5.0 million may be drawn upon on or before August 29, 2021 provided that we generate at least $5.0 million in net revenue in the three consecutive calendar months immediately preceding the date such Tranche Two Loans are funded. The Tranche Two Loans may also be drawn on a subsequent date with the satisfaction of the conditions for the Tranche Three Loans, Tranche Four Loans, or Tranche Five Loans, as applicable, provided that the Tranche Two Loans may not be drawn more than once. The Tranche Three Loans in an amount not to exceed $5.0 million may be drawn upon on or before November 29, 2021 provided that we generate at least $10.0 million in net revenue in the three consecutive calendar months immediately preceding such date such Tranche Three Loans are funded. The Tranche Three Loans may also be drawn on a subsequent date with the satisfaction of the conditions for the Tranche Four Loans or Tranche Five Loans, as applicable, provided that the Tranche Three Loans may not be drawn more than once. The Tranche Four Loans in an amount not to exceed $10.0 million may be drawn upon, subject to the consent of the Lenders, on or before August 29, 2022 provided that we generate at least $20.0 million in net revenue in the three consecutive calendar months immediately preceding the date such Tranche Four Loans are funded. The Tranche Four Loans may also be drawn on a subsequent date with the satisfaction of the conditions for the Tranche Five Loans provided that the Tranche Four Loans may not be drawn more than once. The Tranche Five Loans in an amount not to exceed $20.0 million may be drawn upon, subject to the consent of the Lenders, on or before March 1, 2023 provided that we generate at least $100.0 million in net revenue in the twelve consecutive calendar months immediately preceding the date such Tranche Five Loans are funded.

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

On 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~~Act. This Loan may be partially or fully forgiven if we ~~are deemed to have complied~~comply 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~~must be 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.~~ During the ~~nine months~~year ended ~~September 30,~~December 31, 2021, we received a Notice of PPP Forgiveness Payment from the SBA regarding the approval of our application for forgiveness of the PPP Loan of ~~$1,537~~$1.5 million and accrued interest. As a result, we recognized a gain on extinguishment of the PPP Loan of ~~$1,553~~$1.5 million during the ~~nine months~~year ended ~~September 30,~~December 31, 2021.

~~On February 13, 2020, we entered into a Sales Agreement with JMP Securities LLC, as sales agent, or the Agent, pursuant to which we may, from time to time, issue and sell shares~~We anticipate that our principal uses of our common stock, in an aggregate offering price of up to $25.0 million through the Agent, or the ATM Facility. On May 27, 2021, we voluntarily terminated the ATM Facility with the Agent. During the term of the ATM Facility, we sold an aggregate of 441,967 shares of common stock under the ATM Facility for net proceeds of $3.6 million, none of which were soldcash in the ~~nine months ended September 30, 2021. The Agent was paid a sales commission of 3% for such sales under the Sales Agreement. The ATM Facility was terminable at~~future will ~~by the Company with no penalty.~~be primarily to fund our operations, pipeline development activities, ongoing modest ANJESO commercialization, working capital needs, capital expenditures and other general corporate purposes.

We expect to seek additional funding to sustain our future operations and while we have successfully raised capital in the past, the ability to raise capital in future periods is not assured. Based on our available cash as of ~~September~~June 30, ~~2021,~~2022, we will need to 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 ~~$36.6~~$20.1 million and ~~$29.4~~$24.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, which represents our operating losses less our non-cash items including: stock-based compensation, non-cash interest expense, ~~gain on extinguishment of debt in the current year,~~ depreciation, amortization, changes in warrant valuations, and changes in fair value of contingent consideration, as well as changes in operating assets and liabilities. ~~The increase in~~

There was no significant cash used ~~from operations was primarily due to decreases~~ in ~~accounts payable, which was partially offset by a decrease in operating loss.~~

investing activities for the six months ended June 30, 2022. Cash used in investing activities ~~was $10.2 million~~ for the ~~nine~~six months ended ~~September~~June 30, 2021 was $12.2 million, which was primarily due to purchases of short-term investments in the current ~~year,~~year.

There was $9.5 million of cash provided by financing activities in the six months ended June 30, 2022 consisting of net proceeds of $8.9 million from a public offering of common stock and warrants and $1.8 million of net proceeds from a registered direct offering of common stock and concurrent private placement of warrants, partially offset by ~~the maturities~~a payment of ~~these short-term investments. Cash used in investing activities for the nine months ended September 30, 2020 was $0.3~~contingent consideration of $1.0 million ~~which was primarily due to capital expenditures.~~

and payments on long-term debt of $0.2 million. There was $31.3 million of cash provided by financing activities infor the ~~nine~~six months ended ~~September~~June 30, 2021 consisting of net proceeds of $27.1 million from registered direct offerings of common stock and warrants and net proceeds of $12.2 million from warrant exercises, partially offset by a payment of contingent consideration of $7.9 million. There was $36.6 million of cash provided by financing activities for the nine months ended September 30, 2020 from net proceeds of the public offering of $23.1 million, net proceeds of $1.5 million from the issuance of the PPP Loan, net proceeds of $8.5 million from the incurrence of long-term debt under the Credit Agreement with MAM Eagle Lender, net proceeds of $3.6 million from our ATM Facility, and net proceeds of $2.5 million from warrant exercises, partially offset by a payment of contingent consideration of $2.5$7.8 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, ~~short-term investments,~~ debt, equity financing, sale of assets or out-licensing revenue or a combination thereof to fund our operations or product acquisitions. If we increase our debt levels, we might be restricted in our ability to raise additional capital and might be subject to financial and restrictive covenants. Our shareholders may experience dilution as a result of the issuance of additional equity or debt securities. This dilution may be significant depending upon the amount of equity or debt securities that we issue and the prices at which we issue any securities.

The table below reflects our contractual commitments as of ~~September~~June 30, ~~2021:~~2022:


	Payments Due by Period (in 000s)										Payments Due by Period (in 000s)
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Debt Obligations (1):
Debt	$	10,000	$	1,389	$	6,667	$	1,944	$	—	$	9,722	$	3,611	$	6,111	$	—	$	—
Interest on Debt		3,160		1,372		1,651		137		—		2,140		1,182		958		—		—

Purchase Obligations (2):	$	6,231	$	1,616	$	388	$	21	$	—	$	4,621	$	819	$	126	$	18	$	—
Operating Leases (3)		1,947		444		576		560		367		1,619		345		552		573		149
Other Long-Term Liabilities:
Other License Commitments and Milestone payments (4), (5)		54,365		—		240		225		—		50,565		80		190		125		—
Alkermes Payments (6)		118,571		6,429		19,286		12,857		—		117,571		9,029		22,114		6,429		—
Employment Agreements (7)		1,317		1,008		309		—		—		927		618		309		—		—

Total Contractual Obligations	$	195,591	$	12,258	$	29,117	$	15,744	$	367	$	187,165	$	15,684	$	30,360	$	7,145	$	149

~~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 our ~~2020~~2021 Annual Report. In the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, there were no significant changes to the application of critical accounting policies previously disclosed in our ~~2020~~2021 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~~June 30, ~~2021.~~2022. 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~~June 30, ~~2021,~~2022, 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~~Societal CDMO and certain of ~~Recro’s~~Societal CDMO’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~~Societal CDMO concerning the NDA for ~~ANJESO.~~injectable meloxicam. 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~~Societal CDMO 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~~the Company 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~~Societal CDMO filed a motion to dismiss the second amended complaint on June 18, 2020. The plaintiff filed an opposition to ~~Recro’s~~Societal CDMO’s motion to dismiss on August 17, 2020. On September 16, 2020, ~~Recro~~Societal CDMO filed a reply in support of the motion to dismiss. On March 1, 2021, ~~Recro’s~~Societal CDMO’s second motion to dismiss was denied. On June 21, 2021, the defendants filed an answer and affirmative defenses to the second amended complaint. ~~A Preliminary Pretrial Conference was held on August 3, 2021. The~~Since then, the parties have ~~begun~~been engaged in discovery, ~~and class certification briefing,~~ which ~~the Court has ordered to be completed by December 30, 2021. All expert and fact discovery~~ must ~~be completed~~conclude by March 15, 2022. On September 30, 2021, the plaintiff filed a motion for class certification and appointment of class representative. Societal CDMO filed an opposition to the plaintiff’s motion on November 30, 2021. On January 6, 2022, the plaintiff filed a reply in support of the motion for class certification. In connection with the Separation, we accepted assignment by ~~Recro~~Societal CDMO of all of ~~Recro’s~~Societal CDMO’s obligations in connection with the Securities Litigation and agreed to indemnify ~~Recro~~Societal CDMO for all liabilities related to the Securities Litigation. ~~Recro and we believe~~

On March 24, 2022, plaintiff informed the Court that the ~~lawsuit~~parties had reached an agreement-in-principle to settle the Securities Litigation and requested that the court stay all deadlines. On May 10, 2022, plaintiff filed an unopposed motion for preliminary approval of the class action settlement. The Court entered an order preliminarily approving the settlement and providing for notice on May 12, 2022. A hearing for final approval of the settlement is without merit and intend to vigorously defend against it, unless and until 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. As of September 30, 2021, the Company has recorded a guarantee liability of $635, which represents the present value estimate of our expected obligation related to this matter.set for October 26, 2022.

Except as set forth below, there have been no material changes in the risk factors disclosed in our 2021 Annual Report.

Our losses, negative cash flows from operations and accumulated deficit raise substantial doubt about our ability to continue as a going concern absent obtaining adequate new debt or equity financings.

Management has concluded that substantial doubt exists about our ability to continue as a going concern for the next twelve months from the date of this Quarterly Report on Form 10-Q. As of June 30, 2022, we had an accumulated deficit of $152.4 million, cash and cash equivalents of $5.2 million and current liabilities of $18.2 million. Based on available resources, we believe that our cash and cash equivalents on hand are sufficient to fund our currently anticipated operating and capital requirements through the third quarter of 2022.

We did not become a revenue-generating company until the second quarter of 2020, following the commercial launch of ANJESO. We expect to continue to incur losses for the foreseeable future as we continue our efforts to monetize ANJESO and develop our other current and future product candidates. We have also incurred significant indebtedness. As of June 30, 2022, we had an outstanding balance of $9.7 million under our credit facility with MAM Eagle Lender. These factors, individually and collectively, raise substantial doubt about our ability to continue as a going concern, and therefore, could materially limit our ability to raise additional funds through an issuance of debt or equity securities or otherwise.

Our forecast of the period of time through which our financial resources will be adequate to support our operating requirements is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this “Risk Factors” section and Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K filed with the SEC on March 16, 2022, as revised or supplemented by our subsequent quarterly reports on Form 10-Q or our current reports on Form 8-K, each as filed with the SEC. We have based this estimate on a number of assumptions that may prove to be wrong, and ~~Quarterly Reports for the quarters ended March 31, 2021 and~~changing circumstances beyond our control may cause us to consume capital more rapidly than we currently anticipate. Our inability to obtain additional funding when we need it could seriously harm our business.

We have incurred significant indebtedness, which could adversely affect our business, including as a result of any default thereof.

As of June 30, ~~2021.~~2022, we had an outstanding balance of $9.7 million under our credit agreement with MAM Eagle Lender. Our indebtedness could have important consequences to our shareholders. For example, it:

Any of the above-listed factors could materially adversely affect our business, financial condition, results of operations and cash flows.

IfOur credit agreement with MAM Eagle Lender also contains certain financial and other covenants, and includes limitations on, among other things, additional indebtedness, paying dividends in certain circumstances, and making certain acquisitions and investments. The credit agreement provides for certain mandatory prepayment events, including with respect to the net proceeds of asset sales, extraordinary receipts, casualty payments and other specified events, based on the terms of the credit agreement with MAM Eagle Lender.

Any failure to comply with the terms, covenants and conditions of the credit agreement, as amended, including the Minimum Liquidity Covenant, may result in an event of default under such agreement, which could have a material adverse effect on our business, financial condition and results of operation, and could result in the filing of a voluntary or involuntary bankruptcy petition.

If we are unable to regain compliance with the listing standards of Nasdaq, our common stock may become delisted, which could have a material adverse effect on the liquidity of our common ~~stock.~~stock and our ability to raise funding.

The listing standards of the Nasdaq Capital Market provide that a company, in order to qualify for continued listing, must maintain a minimum closing bid price of $1.00 and satisfy standards relative to minimum shareholders’ equity, minimum market value of publicly held shares and various additional requirements. On ~~June 17, 2021,~~July 6, 2022, we received a deficiency letter from the Listing Qualifications Department of Nasdaq, or the Staff, notifying us that, for the last 30 consecutive business days, the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued ~~inclusion~~listing on the Nasdaq Capital ~~Market.~~

Market pursuant to Nasdaq Listing Rule 5550(a)(2), or “Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we ~~have been provided a period of~~were given 180 calendar days, or until ~~December 14, 2021, in which to regain compliance. In order~~January 2, 2023, to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must be at least $1.00 per share for a minimum of ten consecutive business days during this 180-day period. In the event that we do not regain compliance within this 180-day period, we may be eligible to seek an additional compliance period of 180 calendar days if we (i) meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exceptionRule 5550(a)(2). As of the ~~bid price requirement, and (ii) provide written notice to Nasdaq~~date of ~~our intent to cure the deficiency during~~ this ~~second~~Quarterly Report on Form 10-Q, we were not in compliance period, including by effecting a reverse stock split, if necessary. However, if it appears to the Staff that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq will provide notice to us that we will not be eligible for the additional compliance period and our common stock will be subject to delisting. We would then be entitled to appeal the determination to a Nasdaq Listing Qualifications Panel and request a hearing.with Rule 5550(a)(2).

There can be no assurance that we will be able to ~~regain~~achieve and maintain compliance with ~~the minimum bid price requirement~~Rule 555(a)(2) or ~~maintain compliance with~~ the other Nasdaq listing requirements. If we do not ~~regain~~achieve and maintain compliance with the Nasdaq continuing listing requirements, our common stock will be delisted from the Nasdaq Capital Market and it could be more difficult to buy or sell our securities and to obtain accurate quotations, and the price of our common stock could suffer a material decline. In addition, a delisting would impair our ability to raise capital through the public markets, could deter broker-dealers from making a market in or otherwise seeking or generating interest in our securities and might deter certain institutions and persons from investing in our securities at all.

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


			Page

Forward-Looking Statements			3

PART I. FINANCIAL INFORMATION			5

	Item 1.	Consolidated Financial Statements (Unaudited)	5

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41

	Item 4.	Controls and Procedures	41

PART II. OTHER INFORMATION			42

	Item 1.	Legal Proceedings	42

	Item 1A.	Risk Factors	42

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43

	Item 3.	Defaults Upon Senior Securities	43

	Item 4.	Mine Safety Disclosures	4344

	Item 5.	Other Information	4344

	Item 6.	Exhibits	4344

SIGNATURES			4445


	For the Nine Months Ended September 30,
(amounts in thousands)	2021			2020
Cash flows from operating activities:
Net loss	$	(49,203	)	$	(59,058	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		4,132			7,431
Non-cash interest expense		673			306
Gain on extinguishment of debt		(1,553	)		—
Depreciation expense		195			315
Amortization		1,932			1,502
Change in warrant valuation		(47	)		2,863
Change in contingent consideration valuation		9,551			14,252
Changes in operating assets and liabilities:
Inventory		(1,332	)		(1,784	)
Prepaid expenses and other assets		1,474			(90	)
Accounts receivable		(371	)		—
Accounts payable, accrued expenses and other liabilities		(2,075	)		4,837
Net cash used in operating activities		(36,624	)		(29,426	)
Cash flows from investing activities:
Purchase of property and equipment		(76	)		(307	)
Purchase of short-term investments		(19,641	)		—
Proceeds from maturity of short-term investments		9,500			—
Net cash used in investing activities		(10,217	)		(307	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net of transaction costs		—			10,041
Proceeds from equity facility, net of transaction costs		—			3,612
Proceeds from public offering, net of transaction costs		—			23,085
Proceeds from registered direct offerings, net of transaction costs		27,059			—
Proceeds from warrant exercises		12,155			2,458
Payment of contingent consideration		(7,869	)		(2,500	)
Payments of withholdings on shares withheld for income taxes		(74	)		(95	)
Net cash provided by financing activities		31,271			36,601
Net (decrease) increase in cash and cash equivalents		(15,570	)		6,868
Cash and cash equivalents, beginning of period		30,342			17,740
Cash and cash equivalents, end of period	$	14,772		$	24,608
Supplemental disclosure of cash flow information:
Purchase of property, plant and equipment included in accrued expenses and accounts payable	$	—		$	22
Fair value of warrants issued in connection with public offering	$	—		$	8,111
Fair value of warrants issued in connection with financing facility	$	—		$	1,423
Right-of-use assets acquired	$	575		$	—


	For the Six Months Ended June 30,
(amounts in thousands)	2022			2021
Cash flows from operating activities:
Net loss	$	(20,340	)	$	(32,241	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		858			3,207
Non-cash interest expense		449			458
Depreciation expense		86			149
Amortization		1,288			1,288
Non-cash loss on retirement of fixed assets		8			—
Gain on extinguishment of debt		—			(1,553	)
Change in warrant valuation		(6	)		(41	)
Change in contingent consideration valuation		(2,476	)		5,722
Changes in operating assets and liabilities:
Inventory		(253	)		(580	)
Prepaid expenses and other assets		734			1,529
Accounts receivable		(74	)		(168	)
Accounts payable, accrued expenses and other liabilities		(396	)		(1,826	)
Net cash used in operating activities		(20,122	)		(24,056	)
Cash flows from investing activities:
Purchase of property and equipment		(20	)		(76	)
Purchase of short-term investments		—			(12,147	)
Net cash used in investing activities		(20	)		(12,223	)
Cash flows from financing activities:
Proceeds from public offering, net of transaction costs		8,925			0
Proceeds from registered direct offerings, net of transaction costs		1,816			27,109
Payments on long-term debt		(278	)		—
Proceeds from warrant exercises		—			12,155
Payment of contingent consideration		(1,000	)		(7,869	)
Payments of withholdings on shares withheld for income taxes		(2	)		(46	)
Net cash provided by financing activities		9,461			31,349
Net decrease in cash and cash equivalents		(10,681	)		(4,930	)
Cash and cash equivalents, beginning of period		15,891			30,342
Cash and cash equivalents, end of period	$	5,210		$	25,412
Supplemental disclosure of cash flow information:
Offering costs included in accounts payable and accrued expenses	$	213		$	7


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


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


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☒


	Warrants			Contingent Consideration
Balance at December 31, 2019	$	0		$	66,358
Additions		8,111			0
Exercise of warrants		(2,922	)		0
Payment of contingent consideration		0			(3,560	)
Remeasurement		16,734			2,245
Reclassification to equity upon warrant exchange		(21,858	)		0
Balance at December 31, 2020	$	65		$	65,043
Payment of contingent consideration		0			(7,869	)
Remeasurement		(47	)		9,551
Total at September 30, 2021	$	18		$	66,725

Current portion as of September 30, 2021	$	0		$	6,666
Long-term portion as of September 30, 2021		18			60,059


	June 30, 2022		December 31, 2021
Building and improvements	$	166	$	196
Furniture, office and computer equipment		841		952
Manufacturing and laboratory equipment		717		717
Construction in progress		4,642		4,622
		6,366		6,487
Less: accumulated depreciation		1,425		1,472
Property, plant and equipment, net	$	4,941	$	5,015


	September 30, 2021			June 30, 2022
	Series A Warrants			Series A Warrants
Fair value	$	18		$	1
Expected dividend yield		—	%		—	%
Expected volatility	77.37		%	79.89		%
Risk-free interest rates	.76		%	2.99		%
Remaining contractual term	3.5 years			2.7 years


Exhibit No.	Description	Method of Filing

~~3.1~~4.1	~~Articles~~Form of ~~Amendment to the Amended and Restated Articles of Incorporation of Baudax Bio, Inc.~~Warrant, issued May 17, 2022.	Incorporated herein by reference to Exhibit ~~3.1~~4.1 to the Company’s Current Report on Form 8-K filed on ~~August 11, 2021~~May 18, 2022 (File No. 001-39101).

4.2	Form of Placement Agent Warrant, issued May 17, 2022.	Incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on May 18, 2022 (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.SCH	Inline XBRL Taxonomy Extension Schema Document.	Filed herewith.

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

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

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

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

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


	BAUDAX BIO, INC.

Date: ~~November 4, 2021~~August 11, 2022	By:	/s/ Gerri A. Henwood
		Gerri A. Henwood
		President and Chief Executive Officer
		(Principal Executive Officer)



Date: ~~November 4, 2021~~August 11, 2022	By:	/s/ ~~Richard S. Casten~~Jillian Dilmore
		~~Richard S. Casten~~Jillian Dilmore
		~~Chief Financial Officer~~Corporate Controller
		(Principal Financial and Accounting Officer)


	September 30, 2021			December 31, 2020			June 30, 2022			December 31, 2021
Raw materials	$	13		$	130		$	26		$	53
Sub-assemblies		3,997			2,476			4,011			4,656
Finished goods		654			928			1,655			645
		4,664			3,534			5,692			5,354
Provision for inventory obsolescence		(354	)		(556	)		(437	)		(352	)
Inventory	$	4,310		$	2,978		$	5,255		$	5,002