Baudax Bio, Inc. (“Baudax Bio” or the “Company”) is a pharmaceutical company primarily focused on developing and commercializing innovative products for acute care settings.  Baudax Bio believes it can bring valuable therapeutic options for patients, prescribers and payers, such as its lead product, ANJESO^® (meloxicam) injection, to the acute care markets.

On February 20, 2020, the Company announced that the U.S. Food and Drug Administration (“FDA”) approved the New Drug Application (“NDA”) for ANJESO, which is indicated for the management of moderate to severe pain, alone or in combination with other non-NSAID analgesics. On June 15, 2020, Baudax Bio announced the commercial launch of ANJESO and that the Centers for Medicare and Medicaid Services (“CMS”) approved transitional pass-through status and established a new reimbursement C-code for ANJESO.

On August 6, 2020, the Company announced the CMS established a new permanent J-code for ANJESO facilitating reimbursement in the hospital outpatient, ambulatory surgery center and physician office settings of care. The code, J1738 (Injection, meloxicam, 1 mg), took effect on October 1, 2020 and replaced the previously issued C-code.

The Separation

Pursuant to the Separation Agreement between Recro Pharma, Inc. (“Recro”) and Baudax Bio, Recro transferred the assets, liabilities, and operations of its Acute Care business to the Company (the “Separation”) and, on November 21, 2019, the distribution date, each Recro shareholder received one share of the Company’s common stock for every two and one-half shares of Recro common stock held of record at the close of business on November 15, 2019, the record date for the distribution (the “Distribution”).  Additionally, Recro contributed $19,000 of cash to Baudax Bio in connection with the Separation. Following the Distribution and Separation, Baudax Bio operates as a separate, independent company. References to “the Company” represent Baudax Bio or the Acute Care Business of Recro for periods prior to the Separation.

Basis of Presentation

For all periods prior to the Separation, the accompanying combined financial statements represent the Acute Care Business of Recro and are derived from Recro’s consolidated financial statements. The Acute Care Business of Recro did not consist of a separate, standalone group of legal entities for public company reporting and certain other corporate functions in the periods prior to the Separation and, accordingly, allocations were required through the Distribution date. These combined financial statements, prior to the Separation, reflect the Company’s historical financial position, results of operations and cash flows as the business was operated as part of Recro prior to the Separation, in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). See Note 16 for a description of the agreements entered into between Recro and Baudax Bio following the Separation.

Prior to the Separation, all intercompany transactions between the Company and Recro were considered to be effectively settled in the combined financial statements at the time the transaction was recorded. The total net effect of the settlement of these intercompany transactions is reflected in the combined statements of cash flows as a financing activity. The Company did not record interest expense on amounts funded by Recro. Long-term debt held at the Recro corporate level was retained by Recro and was not assumed by the Company.

Historically, certain corporate level activity costs have been incurred and reported within the legal entity that included the Recro Acute Care Business. The Company’s combined financial statements, prior to the Separation, include an allocation of these expenses related to these certain Recro corporate functions, including senior management, legal, human resources, finance, and information technology through the distribution date. These expenses are included in general and administrative expense and have been allocated based on direct usage or benefit where identifiable, with the remainder allocated on a pro rata basis of expenses, headcount, or other measures. The Company considers the expense allocation methodology and results to be reasonable for all periods presented, however, the allocations may not be indicative of the actual expense that would have been incurred had the Company operated as an independent, publicly-traded company for the periods presented prior to the Separation. For the year ended December 31, 2019 (prior to the Separation), a total of $7,278 of costs have been allocated to Recro’s contract manufacturing and development segment (the “CDMO business”).

The income tax amounts in these combined financial statements for periods prior to the Separation have been calculated based on a separate return methodology and are presented as if the Company was a standalone taxpayer in each of its tax jurisdictions prior to the Separation. 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.

Upon the Separation, the Company adopted its own share‑based compensation plan. Recro maintains its stock-based compensation plan at a corporate level. The Company’s employees participated in Recro’s stock-based compensation plans prior to the Separation and a portion of the cost of those plans is included in the Company’s combined financial statements using an allocation methodology similar to the methodology used to allocate the cash compensation of the related employees.

The parent company net investment balances in these combined financial statements represents the accumulated deficit of the Recro Acute Care Business and the net funding provided to the Company, which are reflected as net transfers from parent in the combined statements of parent company net investment prior to the Separation.

Subsequent to the Separation, the accompanying consolidated financial statements are presented on a consolidated basis and include all of the accounts and operations of Baudax Bio and its subsidiaries. The consolidated financial statements reflect the financial position, results of operations and cash flows of Baudax Bio in accordance with U.S. GAAP. All significant intercompany accounts and transactions are eliminated in consolidation.

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