424B3 1 d629637d424b3.htm 424B3 424B3

Filed Pursuant to Rule 424(b)(3)

Registration No. 333-274349

Prospectus Supplement

(to prospectus dated September 25, 2023)

 

LOGO

Up to 15,000,000 Shares of Common Stock

This prospectus supplement (this “Prospectus Supplement”) is being filed to update and supplement the information contained in the prospectus dated September 25, 2023 (as may be supplemented or amended from time to time, the “Prospectus”), with the information contained in our Quarterly Report on Form 10-Q, which we filed with the Securities and Exchange Commission (“SEC”) on November 20, 2023 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this Prospectus Supplement.

The Prospectus and this Prospectus Supplement relate to the offering and resale by Alumni Capital LP (“Alumni Capital” or the “Selling Shareholder”) of up to 15,000,000 shares of our common stock, par value $0.001 per share, which includes shares of our common stock issued to the Selling Shareholder as commitment shares (the “Commitment Shares”).

The shares of common stock being offered by the Selling Shareholder have been or may be issued and sold to the Selling Shareholder pursuant to the purchase agreement, dated August 23, 2023, that we entered into with Alumni Capital (the “Purchase Agreement”). The prices at which Alumni Capital may resell the shares offered hereby will be determined by the prevailing market price for the shares or in negotiated transactions. We are not selling any securities under this prospectus and will not receive any of the proceeds from the sale of shares of common stock by the Selling Shareholder.

This Prospectus Supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This Prospectus Supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this Prospectus Supplement, you should rely on the information in this Prospectus Supplement.

Our common stock is listed on the OTC Pink Open Market under the symbol “BXRX.” On November 21, 2023, the last reported sale price of our common stock on the OTC Pink Open Market was $0.0611 per share.

INVESTING IN OUR SECURITIES INVOLVES RISKS. SEE THE “RISK FACTORS” ON PAGE 11 OF THE PROSPECTUS.

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if the Prospectus or this Prospectus Supplement is truthful or complete. Any representation to the contrary is a criminal offense.

Prospectus dated November 22, 2023


 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

 

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

For the Quarterly Period Ended: September 30, 2023

 

 

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

Commission File Number: 001-39101

 

Baudax Bio, Inc.

(Exact name of registrant as specified in its charter)

 

 

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)

 

(484) 395-2440

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol

Name of Exchange on Which Registered

Common Stock, par value $0.01

BXRX

Nasdaq Capital Market*

 

 

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.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

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 17, 2023, there were 43,593,082 shares of common stock, par value $0.01 per share, outstanding.

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

1

 


 

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

 

2

 


 

TABLE OF CONTENTS

Index

 

 

 

 

 

 

Page

 

 

 

Forward-Looking Statements

 

4

 

 

 

PART I. FINANCIAL INFORMATION

 

6

 

 

 

 

 

 

 

Item 1.

 

Consolidated Financial Statements (Unaudited)

 

6

 

 

 

 

 

 

 

Item 2.

 

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

 

37

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

47

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

47

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

48

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

48

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

48

 

 

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

48

 

 

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

49

 

 

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

49

 

 

 

 

 

 

 

Item 5.

 

Other Information

 

49

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

49

 

 

 

 

 

 

SIGNATURES

 

51

 

 

 

 

 

 

 

 

3

 


 

Cautionary Note Regarding Forward-Looking Statements

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:

our estimates regarding expenses, revenue, capital requirements and timing and availability of and the need for additional financing;
our ability to continue as a going concern for the next twelve months;
whether our cash resources will be sufficient to fund our continuing operations;
our ability to operate under significant indebtedness;
the suspension and anticipated delisting of our common stock from the Nasdaq Capital Market;
our ability to obtain regulatory approval for any product candidates that we may develop, and any related restrictions, limitations, or warnings in the label of any approved product candidates;
our ability to successfully market, commercialize and achieve broad market acceptance for any of our product candidates once approved;
our ability and that of our third-party manufacturers to successfully transfer or scale-up our clinical and commercial manufacturing processes for our product candidates;
the results, timing and outcome of our clinical trials of our product candidates, and any future clinical trials and preclinical studies;
our ability to source materials needed for our product candidates, optimize formulations for stability and other characteristics;
our relationships with licensors, collaborators, other third parties and our employees;
our ability to successfully integrate the operations of our recent acquisition, TeraImmune, Inc., or TeraImmune, and realize anticipated benefits of the acquisition of TeraImmune;
the effects of changes in our effective tax rate due to changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, tax impacts and net operating loss utilization related to the separation from Societal CDMO’s acute care business and transfer of such assets to us, or the Separation, and changes in the tax laws;
our ability to comply with the regulatory schemes applicable to our business and other regulatory developments in the United States and foreign countries;
the performance of third-parties upon which we depend, including third-parties involved with clinical trial execution, and third-party suppliers, manufacturers, supply chain and logistics providers;
our ability to obtain and maintain patent protection and defend our intellectual property rights against third-parties;
our ability to obtain regulatory exclusivity periods for our products post approval, or our ability to obtain orphan drug status for certain of our product candidates;
our ability to develop relationships with potential collaborators and development partners;
our ability to defend any material litigation filed against us and avoid liabilities resulting from any material litigation;
our ability to recruit or retain key scientific, technical, and management personnel or to retain our executive officers;
our ability to raise future financing for continued development of our business and our product candidates and to meet any required debt payments, and any milestone payments we may owe;

4

 


 

the volatility of capital markets and other macroeconomic factors, including inflationary pressures, banking instability issues, geopolitical tensions or the outbreak of hostilities or war;
our ability to operate under leverage and comply with associated lending covenants; to pay existing required interest and principal amortization payments when due; and/or to obtain acceptable refinancing alternatives; and
our expectations regarding continuing effects of the COVID-19 pandemic, including manufacturing and supply chain interruptions, adverse effects on healthcare systems and disruption of the global economy, and the overall impact of the COVID-19 pandemic on our business, financial condition and results of operations.

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, 2022 filed with the SEC on February 23, 2023, or the 2022 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.

5

 


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BAUDAX BIO, INC.

Consolidated Balance Sheets

(Unaudited)

 

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

 

September 30, 2023

 

 

December 31, 2022

 

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

363

 

 

$

5,259

 

Prepaid expenses and other current assets

 

 

975

 

 

 

303

 

Current assets of discontinued operation

 

 

 

 

 

785

 

Total current assets

 

 

1,338

 

 

 

6,347

 

Property and equipment, net

 

 

3,671

 

 

 

9

 

Right-of-use asset, net

 

 

2,877

 

 

 

854

 

Intangible asset

 

 

3,900

 

 

 

 

Goodwill

 

 

8,797

 

 

 

2,127

 

Non-current assets of discontinued operation

 

 

 

 

 

695

 

Total assets

 

$

20,583

 

 

$

10,032

 

Liabilities, Non-Voting Convertible Preferred Stock and Shareholders' Deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

7,822

 

 

$

3,198

 

Accrued expenses and other current liabilities

 

 

3,652

 

 

 

2,133

 

Current portion of long-term debt, net

 

 

4,228

 

 

 

5,600

 

Current portion of operating lease liability

 

 

341

 

 

 

231

 

Contingent consideration

 

 

83

 

 

 

 

Convertible bond payable

 

 

1,000

 

 

 

 

Derivative instrument

 

 

1,659

 

 

 

 

Other current liabilities

 

 

266

 

 

 

 

Current liabilities of discontinued operation

 

 

 

 

 

10,298

 

Total current liabilities

 

 

19,051

 

 

 

21,460

 

Long-term debt, net

 

 

 

 

 

1,519

 

Long-term operating lease liability

 

 

2,528

 

 

 

585

 

Deferred tax liability

 

 

202

 

 

 

 

Other long-term liabilities

 

 

 

 

 

13

 

Non-current liabilities of discontinued operation

 

 

 

 

 

10,697

 

Total liabilities

 

 

21,781

 

 

 

34,274

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

Mezzanine equity:

 

 

 

 

 

 

Series X non-voting convertible preferred stock, $0.01 par value, Authorized,
   27,090 shares; issued and outstanding 20,066 shares at September 30, 2023

 

 

9,040

 

 

 

 

Shareholders’ deficit:

 

 

 

 

 

 

Preferred stock, $0.01 par value. Authorized, 10,000,000 shares; shares issued and outstanding, 36,267 at September 30, 2023 and 0 December 31, 2022

 

 

 

 

 

 

Common stock, $0.01 par value. Authorized, 190,000,000 shares; issued and
   outstanding, 12,164,753 shares at September 30, 2023 and 1,623,913 shares at December 31, 2022

 

 

122

 

 

 

16

 

Additional paid-in capital

 

 

178,940

 

 

 

166,646

 

Accumulated deficit

 

 

(189,300

)

 

 

(190,904

)

Total shareholders’ deficit

 

 

(10,238

)

 

 

(24,242

)

Total liabilities, non-voting convertible preferred stock and shareholders’ deficit

 

$

20,583

 

 

$

10,032

 

 

See accompanying notes to unaudited consolidated financial statements.

6

 


 

BAUDAX BIO, INC.

Consolidated Statements of Operations

(Unaudited)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

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

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

1,901

 

 

$

622

 

 

$

6,597

 

 

$

2,196

 

General and administrative

 

 

3,639

 

 

 

2,953

 

 

 

7,664

 

 

 

12,785

 

Change in fair value of warrants and derivatives

 

 

(3,587

)

 

 

 

 

 

(717

)

 

 

(7

)

Change in contingent consideration valuation

 

 

(177

)

 

 

 

 

 

(35

)

 

 

 

Total operating expenses

 

 

1,776

 

 

 

3,575

 

 

 

13,509

 

 

 

14,974

 

Operating loss from continuing operations

 

 

(1,776

)

 

 

(3,575

)

 

 

(13,509

)

 

 

(14,974

)

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

Other expense, net

 

 

(115

)

 

 

(512

)

 

 

(3,069

)

 

 

(1,652

)

Net loss from continuing operations

 

$

(1,891

)

 

$

(4,087

)

 

$

(16,578

)

 

$

(16,626

)

Income (loss) on discontinued operation

 

 

(43

)

 

 

(25,120

)

 

 

18,673

 

 

 

(32,920

)

Net income (loss)

 

$

(1,934

)

 

$

(29,207

)

 

$

2,095

 

 

$

(49,546

)

 

 

 

 

 

 

 

 

 

 

 

 

Per share information:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share from continuing operations, basic and diluted

 

$

(0.29

)

 

$

(13.81

)

 

$

(3.36

)

 

$

(86.53

)

Net income (loss) per share from discontinued operations, basic and diluted

 

$

(0.01

)

 

$

(84.89

)

 

$

3.69

 

 

$

(171.34

)

Net income (loss) per share, basic and diluted

 

$

(0.30

)

 

$

(98.70

)

 

$

0.33

 

 

$

(257.87

)

Weighted average common shares outstanding, basic and diluted

 

 

7,993,522

 

 

 

295,903

 

 

 

5,065,759

 

 

 

192,135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited consolidated financial statements.

7

 


 

BAUDAX BIO, INC.

Consolidated Statements of Non-voting Convertible Preferred Stock and Shareholders’ Deficit

(Unaudited)

For the Nine Months Ended September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series X Convertible Preferred Stock

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

 

(amounts in thousands, except share data)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

paid-in
capital

 

 

Accumulated
Deficit

 

 

Total

 

Balance, December 31, 2022

 

 

 

 

$

 

 

 

 

 

$

 

 

 

1,623,913

 

 

$

16

 

 

$

166,646

 

 

$

(190,904

)

 

$

(24,242

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

194

 

 

 

 

 

 

194

 

Issuance of common stock and warrants for
   public offering, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(55

)

 

 

 

 

 

(55

)

Issuance of shares pursuant to vesting of restricted
   stock units, net of shares withheld for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

961,787

 

 

 

10

 

 

 

4,318

 

 

 

 

 

 

4,328

 

Issuance of warrants for MAM debt amendment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,058

 

 

 

 

 

 

1,058

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,404

 

 

 

11,404

 

Balance, March 31, 2023

 

 

 

 

$

 

 

 

-

 

 

$

 

 

 

2,585,702

 

 

$

26

 

 

$

172,161

 

 

$

(179,500

)

 

$

(7,313

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

208

 

 

 

 

 

 

208

 

Issuance of common stock and warrants for
   public offering, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,478,262

 

 

 

35

 

 

 

3,222

 

 

 

 

 

 

3,257

 

Issuance of Series X convertible preferred stock upon acquisition of TeraImmune

 

 

20,066

 

 

 

9,040

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon acquisition of TeraImmune

 

 

 

 

 

 

 

 

 

 

 

 

 

 

897,903

 

 

 

9

 

 

 

535

 

 

 

 

 

 

544

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,375

)

 

 

(7,375

)

Balance, June 30, 2023

 

 

20,066

 

 

$

9,040

 

 

 

-

 

 

$

 

 

 

6,961,867

 

 

$

70

 

 

$

176,126

 

 

$

(186,875

)

 

$

(10,679

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

253

 

 

 

 

 

 

253

 

Issuance of common stock and warrants for
   registered direct offering, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,401,787

 

 

 

34

 

 

 

1,577

 

 

 

 

 

 

1,611

 

Sale of common stock under equity
   line of credit, net of transaction costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,794,170

 

 

 

18

 

 

 

493

 

 

 

 

 

 

511

 

Issuance of shares pursuant to vesting of restricted
   stock units, net of shares withheld for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,929

 

 

 

 

 

 

 

 

 

 

 

 

 

Deemed dividend on warrant modification

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

455

 

 

 

(455

)

 

 

 

Stock dividend

 

 

 

 

 

 

 

 

36,267

 

 

 

 

 

 

 

 

 

 

 

 

36

 

 

 

(36

)

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,934

)

 

 

(1,934

)

Balance, September 30, 2023

 

 

20,066

 

 

$

9,040

 

 

 

36,267

 

 

$

 

 

 

12,164,753

 

 

$

122

 

 

$

178,940

 

 

$

(189,300

)

 

$

(10,238

)

See accompanying notes to unaudited consolidated financial statements

8

 


 

BAUDAX BIO, INC.

Consolidated Statements of Shareholders’ (Deficit) Equity

(Unaudited)

 

For the Nine Months Ended September 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

 

(amounts in thousands, except share data)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

paid-in
capital

 

 

Accumulated
Deficit

 

 

Total

 

Balance, December 31, 2021

 

 

8,289

 

 

$

 

 

 

70,181

 

 

$

1

 

 

$

145,314

 

 

$

(132,089

)

 

$

13,226

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

521

 

 

 

 

 

 

521

 

Issuance of common stock and warrants for
   registered direct offerings, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13

)

 

 

 

 

 

(13

)

Issuance of common stock and warrants for
   public offering, net

 

 

 

 

 

 

 

 

87,719

 

 

 

1

 

 

 

8,817

 

 

 

 

 

 

8,818

 

Issuance of shares pursuant to vesting of restricted
   stock units, net of shares withheld for income taxes

 

 

 

 

 

 

 

 

56

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of preferred stock

 

 

(8,289

)

 

 

 

 

 

2,368

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,809

)

 

 

(12,809

)

Balance, March 31, 2022

 

 

 

 

$

 

 

 

160,324

 

 

$

2

 

 

$

154,639

 

 

$

(144,898

)

 

$

9,743

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

325

 

 

 

 

 

 

325

 

Issuance of common stock and warrants for
   registered direct offerings, net

 

 

 

 

 

 

 

 

41,152

 

 

 

 

 

 

1,720

 

 

 

 

 

 

1,720

 

Issuance of common stock and warrants for
   public offering, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28

)

 

 

 

 

 

(28

)

Issuance of shares pursuant to vesting of restricted
   stock units, net of shares withheld for income taxes

 

 

 

 

 

 

 

 

245

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,531

)

 

 

(7,531

)

Balance, June 30, 2022

 

 

 

 

$

 

 

 

201,721

 

 

$

2

 

 

$

156,656

 

 

$

(152,429

)

 

$

4,229

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

874

 

 

 

 

 

 

874

 

Issuance of common stock and warrants for
   registered direct offerings, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(38

)

 

 

 

 

 

(38

)

Issuance of shares pursuant to vesting of
   restricted stock units, net of shares
   withheld for income taxes

 

 

 

 

 

 

 

 

4,289

 

 

 

 

 

 

(29

)

 

 

 

 

 

(29

)

Stock dividend

 

 

20,004

 

 

 

 

 

 

 

 

 

 

 

 

20

 

 

 

(20

)

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,207

)

 

 

(29,207

)

Balance, September 30, 2022

 

 

20,004

 

 

$

 

 

 

206,010

 

 

$

2

 

 

$

157,483

 

 

$

(181,656

)

 

$

(24,171

)

See accompanying notes to unaudited consolidated financial statements.

9

 


 

BAUDAX BIO, INC.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

For the Nine Months Ended September 30,

 

(amounts in thousands)

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

2,095

 

 

$

(49,546

)

(Income) loss on discontinued operation

 

 

(18,673

)

 

 

32,920

 

Adjustments to reconcile net income (loss) from continuing operations to net cash used in operating activities from continuing operations:

 

 

 

 

 

 

Stock-based compensation

 

 

642

 

 

 

1,062

 

Non-cash interest expense

 

 

297

 

 

 

652

 

Depreciation expense

 

 

135

 

 

 

38

 

Non-cash loss on retirement of fixed assets

 

 

5

 

 

 

(86

)

Loss on extinguishment of debt

 

 

2,196

 

 

 

 

Change in fair value of warrants and derivatives

 

 

(717

)

 

 

(7

)

Right-of-use asset

 

 

111

 

 

 

 

Change in contingent consideration valuation

 

 

(35

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(404

)

 

 

923

 

Accounts payable, accrued expenses and other liabilities

 

 

4,750

 

 

 

947

 

Operating lease liability

 

 

(82

)

 

 

 

Net cash used in operating activities, continuing operations

 

 

(9,680

)

 

 

(13,097

)

Cash flows from investing activities:

 

 

 

 

 

 

Cash acquired in acquisition of TeraImmune

 

 

142

 

 

 

 

Purchase of property and equipment

 

 

(21

)

 

 

 

Net cash provided by investing activities, continuing operations

 

 

121

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Payment of deferred financing costs

 

 

(291

)

 

 

 

Proceeds from public offering, net of transaction costs

 

 

3,494

 

 

 

14,270

 

Proceeds from registered direct offerings, net of transaction costs

 

 

1,712

 

 

 

1,762

 

Payments on long-term debt

 

 

(4,050

)

 

 

(1,112

)

Proceeds from warrant exercises

 

 

4,328

 

 

 

69

 

Proceeds from equity line of credit, net of transaction costs

 

 

313

 

 

 

 

Payments of withholdings on shares withheld for income taxes

 

 

 

 

 

(3

)

Net cash provided by financing activities, continuing operations

 

 

5,506

 

 

 

14,986

 

Net (decrease) increase in cash and cash equivalents from continuing operations

 

 

(4,053

)

 

 

1,889

 

Discontinued operation:

 

 

 

 

 

 

Cash flows used in operating activities

 

 

(843

)

 

 

(10,913

)

Cash flows used in investing activities

 

 

 

 

 

(20

)

Cash flows used in financing activities

 

 

 

 

 

(1,200

)

Net decrease in cash and cash equivalents from discontinued operations

 

 

(843

)

 

 

(12,133

)

Cash and cash equivalents, beginning of period

 

 

5,259

 

 

 

15,891

 

Cash and cash equivalents, end of period

 

$

363

 

 

$

5,647

 

Deferred financing costs included in accounts payable

 

$

168

 

 

$

 

Acquisition of TeraImmune through issuance of Series X convertible preferred stock and common stock

 

$

9,584

 

 

$

 

Offering costs included in accounts payable and accrued expenses

 

$

1,053

 

 

$

213

 

 

See accompanying notes to unaudited consolidated financial statements.

 

10


BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

 

(1) Background

Business

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

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

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

In mid-2020, the Company launched its first commercial product, ANJESO, in the United States. ANJESO was the first and only 24-hour, intravenous, or IV, analgesia agent. The Company discontinued commercial sales of ANJESO in December 2022 and further withdrew its New Drug Application (“NDA”) related to ANJESO in late March 2023. See Note 4 for discussion on the discontinued operation related to our ANJESO commercial business.

The Company has determined that it operates in a single segment involved in innovative products predominantly for orphan and rare diseases.

Reverse Stock Splits

On February 16, 2022, the Company effected a reverse split of shares of the Company’s common stock on a 1-for-35 basis (the “Reverse Stock Split”). On December 1, 2022, the Company effected a second reverse split of shares of the Company’s common stock on a 1-for-40 basis (the “December Reverse Stock Split”). All issued and outstanding shares of common stock, warrants, common stock options, and unvested restricted stock units and the related per share amounts contained in the financial statements have been retroactively adjusted to reflect these reverse stock splits for all periods presented. The par value and authorized shares of common stock were not adjusted as a result of the reverse stock splits. 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 splits.
 

11


BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

 

(2) Development Activity Risks, Liquidity and Going Concern

The Company has incurred operating losses since inception and has negative cash flows, working capital and equity, including an accumulated deficit of $189,300, as of September 30, 2023.

Additionally, TeraImmune failed to pay its Convertible Bond Agreement, dated March 22, 2022, with EoFlow Co., Ltd. (the ‘‘5% Convertible Term Loan’’), on the stated maturity date of November 30, 2022. The Company is offering conversion of the notes with an outstanding balance, including accrued interest, of $1,239 at September 30, 2023, into shares of the Company's common stock or by providing the noteholders with a repayment plan. This debt was part of the liabilities assumed by the Company in connection with the acquisition of TeraImmune (see Notes 5 and 11).

The Company has raised funds from debt and equity transactions and will be required to raise additional funds to continue to operate as a standalone entity. In order to fund development activities, and clinical and pre-clinical testing, the Company will require significant additional funding. The Company could delay clinical trial activity or reduce funding of specific programs in order to reduce cash needs. Insufficient funds may cause the Company to delay, reduce the scope of or eliminate one or more of its development, future commercialization, or expansion activities. The Company may raise such funds, if available, through debt financings, bank or other loans, through strategic research and development, licensing (including out-licensing) and/or marketing arrangements or through public or private sales of equity or debt securities from time to time. Financing may not be available on acceptable terms, or at all, and failure to raise capital when needed could materially adversely impact the Company’s growth plans and its financial condition or results of operations and ability to continue as a going concern. Additional debt or equity financing, if available, may be dilutive to holders of the Company’s common stock and may involve significant cash payment obligations and covenants that restrict the Company’s ability to operate its business.

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

(3) Summary of Significant Accounting Principles

(a) Basis of Presentation and Principles of Consolidation

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 unaudited consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s results for the interim periods. The Consolidated Balance Sheet as of December 31, 2022 has been derived from audited financial statements. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023. The Company’s consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

The accompanying unaudited interim 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, 2022 included in the Company’s Form 10-K.

12


BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

 

(b) Use of Estimates

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

(c) Cash and Cash Equivalents

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

(d) Property and Equipment

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

(e) Business Combinations

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

(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 one reporting unit.

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

13


BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

 

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

(g) Concentration of Credit Risk

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

(h) Research and Development

Research and development costs for the Company’s proprietary products candidates are charged to expense as incurred. Research and development expenses consist of internal costs and funds incurred internally or paid to third parties for the provision of services for pre-commercialization and manufacturing scale-up activities, drug development, pre-clinical activities, clinical trials, statistical analysis, 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.

(i) Stock-Based Awards

Share-based compensation included in the unaudited consolidated financial statements is based upon the Baudax Bio, Inc. 2019 Equity Incentive Plan (the “Baudax Bio 2019 Plan”) and the TeraImmune 2019 Equity Incentive Plan (the “TeraImmune 2019 Plan”). These plans include grants of stock options, time-based vesting restricted stock units (“RSUs”) 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. The Company has never declared or paid cash dividends and has no plans to do so in the foreseeable future, therefore the dividend yield is zero.

14


BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

 

(j) Redeemable Preferred Stock

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

(k) Equity-method Investment

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

The Company’s equity-method investment includes its investment in TeraImmune Therapeutics, Co., Ltd., ("TIT"). The carrying value of the Company’s investment in TIT is recorded in equity method investments in the consolidated balance sheet and is immaterial as of September 30, 2023.

(l) Income Taxes

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

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

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

(m) Net Income (Loss) Per Common Share

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

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

15


BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

 

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

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

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

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Basic and Diluted Income (Loss) Per Share

 

 

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations

 

$

(1,891

)

 

$

(4,087

)

 

$

(16,577

)

 

$

(16,626

)

Deemed dividend

 

$

(455

)

 

$

 

 

$

(455

)

 

$

 

Net loss attributable from continuing operations to common shareholders

 

$

(2,346

)

 

$

(4,087

)

 

$

(17,032

)

 

$

(16,626

)

Net income (loss) from discontinued operation

 

$

(43

)

 

$

(25,120

)

 

$

18,673

 

 

$

(32,920

)

Net income (loss) attributable to common shareholders

 

$

(2,389

)

 

$

(29,207

)

 

$

1,641

 

 

$

(49,546

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share from continuing operations

 

$

(0.29

)

 

$

(13.81

)

 

$

(3.36

)

 

$

(86.53

)

Net income (loss) per share from discontinued operation

 

$

(0.01

)

 

$

(84.89

)

 

$

3.69

 

 

$

(171.34

)

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

 

$

(0.30

)

 

$

(98.70

)

 

$

0.33

 

 

$

(257.87

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, basic
   and diluted

 

 

7,993,522

 

 

 

295,903

 

 

 

5,065,759

 

 

 

192,135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Options and restricted stock units outstanding

 

 

977,491

 

 

 

606,652

 

 

 

977,491

 

 

 

606,652

 

Warrants

 

 

13,239,805

 

 

 

31,298,007

 

 

 

13,239,805

 

 

 

31,298,007

 

Series X Preferred Stock

 

 

20,066,208

 

 

 

 

 

 

20,066,208

 

 

 

 

 

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

(n) Recent Accounting Pronouncements

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

Recently Adopted Accounting Pronouncements

In June 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

16


BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

 

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

4) Discontinued Operations

In March 2023, the Company entered into an Asset Transfer Agreement with Alkermes Pharma Ireland Limited (“Alkermes”) (the “Transfer Agreement”). Under the terms of the Transfer Agreement, the Company transferred the rights to certain patents, trademarks, equipment, data and other rights related to ANJESO (the “Assets”) to Alkermes. The Company also withdrew the New Drug Application (“NDA”) related to ANJESO and agreed, if elected by Alkermes at a later date, to transfer such withdrawn NDA to Alkermes at no additional cost.

Additionally, under the Transfer Agreement, the Company granted Alkermes a non-exclusive, perpetual and irrevocable, royalty-free and fully paid-up worldwide license, to the additional intellectual property owned by the Company necessary to or useful to exploit ANJESO. In consideration of the transfer of the Assets, the parties agreed to the termination of (i) the Purchase and Sale Agreement, dated March 7, 2015 by and among Alkermes, the Company and the other parties thereto (as amended, the “PSA”), (ii) the Asset Transfer and License Agreement, dated April 10, 2015 by and among Alkermes, the Company and the other parties thereto (as amended, the “ATLA”); and (iii) the Development, Manufacturing and Supply Agreement, dated as of July 10, 2015 by and between the Company and Alkermes (as amended, the “Manufacturing Agreement”) between the parties related to ANJESO (the PSA, ATLA and Manufacturing Agreement, collectively, the “ANJESO Agreements”). In connection with the termination of the ANJESO Agreements, no further payments of any kind pursuant to the ANJESO Agreements are payable by the Company to Alkermes.

The accounting requirements for reporting the abandonment of ANJESO as a discontinued operation were met when the agreements with Alkermes were executed. Accordingly, the accompanying consolidated financial statements for all periods presented reflect this business as a discontinued operation.

The historical consolidated balance sheet and statements of operations of the Company and the related notes to the consolidated financial statements have been presented as discontinued operations in the consolidated financial statements and prior periods have been recast. Discontinued operations include results of the Company’s commercial business except for certain corporate overhead costs, which are included in continuing operations.

There were no assets or liabilities of discontinued operations as of September 30, 2023. The following table shows amounts included in assets and liabilities of discontinued operations, respectively, on the Company’s Consolidated Balance Sheet at December 31, 2022:

 

 

 

December 31, 2022

 

 

 

 

 

Current assets of discontinued operation:

 

 

 

Accounts receivable, net

 

$

336

 

Prepaid expenses and other current assets

 

 

449

 

Total current assets of discontinued operation

 

 

785

 

Non-current assets of discontinued operation:

 

 

 

Property and equipment, net

 

 

695

 

Total non-current assets of discontinued operation

 

 

695

 

Total assets of discontinued operation

 

$

1,480

 

 

 

 

 

Current liabilities of discontinued operation:

 

 

 

Accounts payable

 

$

730

 

Accrued expenses and other current liabilities

 

 

365

 

Current portion of contingent consideration

 

 

9,203

 

Total current liabilities of discontinued operation

 

 

10,298

 

Non-current liabilities of discontinued operation:

 

 

 

Long-term portion of contingent consideration

 

 

10,697

 

Total non-current liabilities of discontinued operation

 

 

10,697

 

Total liabilities of discontinued operation

 

$

20,995

 

 

17


BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

 

The results of operations from discontinued operations for the three and nine months ended September 30, 2023 and 2022, have been reflected as discontinued operations in the consolidated statements of operations and consist of the following:

 

 

 

For the Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue, net

 

$

 

 

$

238

 

 

$

16

 

 

$

959

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

43

 

 

 

1,208

 

 

 

552

 

 

 

2,217

 

Research and development

 

 

 

 

 

23

 

 

 

 

 

 

654

 

Selling, general and administrative

 

 

 

 

 

855

 

 

 

 

 

 

9,242

 

Amortization of intangible assets

 

 

 

 

 

644

 

 

 

 

 

 

1,932

 

Change in contingent consideration valuation

 

 

 

 

 

1,222

 

 

 

(19,900

)

 

 

(1,254

)

Loss on impairment of property and equipment

 

 

 

 

 

3,663

 

 

 

485

 

 

 

3,662

 

Impairment of Intangible Asset

 

 

 

 

 

17,746

 

 

 

 

 

 

17,746

 

Total operating expenses

 

 

43

 

 

 

25,361

 

 

 

(18,863

)

 

 

34,199

 

Operating gain (loss) from discontinued operation

 

 

(43

)

 

 

(25,123

)

 

 

18,879

 

 

 

(33,240

)

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

Other expense, net

 

 

 

 

 

3

 

 

 

(206

)

 

 

320

 

Net income (loss) from discontinued operation

 

$

(43

)

 

$

(25,120

)

 

$

18,673

 

 

$

(32,920

)

 

The Company sold ANJESO in the U.S. through a single third-party logistics provider (“3PL”), which took title to and control of the goods, and was considered the customer. The Company recognized 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 was recognized as revenue for products includes an estimate of variable consideration for reserves, which result from discounts, returns, chargebacks, rebates, and other allowances that were offered within contracts between the Company and end-user customers, wholesalers, group purchasing organizations and other indirect customers. The Company’s payment terms were generally between thirty to ninety days.

Historically, the Company’s intangible asset was 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 was based on the remaining patent life, and was amortized on a straight-line basis. The Company performed an impairment test as of December 31, 2022 after identifying indicators of impairment, such as a decline in share price, the termination of the dedicated commercial team, sustained impacts of COVID-19 on the market and the discontinuation of commercialization of ANJESO, and based on the quantitative analysis an impairment loss of $19,681 was recorded during the year ended December 31, 2022, eliminating the remaining carrying value of the intangible asset.

On April 10, 2015, Societal CDMO, Inc. (“Societal CDMO”), formerly Recro Pharma, Inc., 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.

Historically, the contingent consideration consisted of four separate components. The first component was (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 included (i) a $5,000 payment, which was paid in three installments during 2020 and 2021, and (ii) $45,000 payable in seven 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 $1,200 of the second payment in 2022. The third component consisted of three potential payments, based on the achievement of specified annual revenue targets. 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, which was paid quarterly. In connection with the Transfer Agreement, the Company was relieved of its milestone payments previously owed to Alkermes in connection with the transaction and in the first quarter of 2023 reversed its contingent consideration balance, which was $19,900.

18


BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

 

Additionally as part of the Transfer Agreement, the Company wrote off its inventory balance as of March 31, 2023, which was fully reserved for as of December 31, 2022, and the remaining property and equipment balance related to equipment at the Alkermes facility that was transferred as part of the Transfer Agreement of $485.

(5) Business Acquisition

On June 29, 2023 ("Effective Date"), the Company acquired TeraImmune, Inc., in accordance with the terms of the Agreement and Plan of Merger (the “Merger Agreement”). Under the terms of the Merger Agreement, at the closing of the Acquisition the Company issued to the common stockholders of TeraImmune (the “Target Stockholders”) an aggregate of 1,212,185 shares of common stock of Baudax Bio and 27,089.719 shares of Series X Preferred Stock, each share of which is convertible into 1,000 shares of common stock (subject to certain conditions as described below), of which 314,282 of common stock and 7,024 of preferred stock are classified as escrow shares at Closing. Under the terms of the Merger Agreement, all options to purchase or acquire shares of TeraImmune held by continuing employees (as defined in the Merger Agreement) were assumed by the Company and converted into options to purchase shares of common stock and Series X Preferred Stock on the same terms and conditions as applied to such options and restricted stock awards immediately prior to the Acquisition. Following the closing of the Acquisition, the Company had 6,961,867 shares of common stock issued and outstanding.

Pursuant to the Merger Agreement, the Company held a special meeting of shareholders (the “Special Meeting”) to submit (i) the approval of the conversion of the Series X Preferred Stock into shares of common stock in accordance with Nasdaq Listing Rule 5635(a) and (ii) the approval to effect a reverse stock split of all of the Company’s issued and outstanding shares of common stock, among other matters, to its shareholders for their consideration. The special meeting was held on October 12, 2023 and shareholders approved both the conversion of the Series X Preferred Stock into shares of common stock in accordance with Nasdaq Listing Rule 5635(a) and the reverse stock split of all of the Company’s issued and outstanding shares of common stock, among other matters.

The Company incurred transaction costs of $575 for the three and nine months ended September 30, 2023, which are included in the Company’s condensed consolidated statement of operations.

The transaction was accounted for under the acquisition method of accounting with Baudax Bio as the acquirer under the guidance of ASC 810-10, "Consolidation". Under the acquisition method, the total purchase price of the acquisition is allocated to the net identifiable tangible and intangible assets acquired and liabilities assumed based on the fair values as of the date of such acquisition. The preliminary fair value of the consideration totaled approximately $9,702, summarized as follows:

 

 

 

 

 

Amount

 

Common stock issued to TeraImmune’s stockholders

 

$

476

 

Series X Convertible Preferred Stock issued to TeraImmune stockholders

 

 

9,040

 

Contingent consideration

 

 

118

 

Stock options and restricted stock allocated to total consideration paid

 

 

68

 

Total consideration paid

 

$

9,702

 

 

The Series X Preferred Shares are measured at fair value by taking the common stock equivalents at the Company's closing stock price on the Effective Date and discounting the value by 15% for a lack of marketability.

The Company recorded the assets acquired and liabilities assumed as of the date of the Acquisition based on the information available at that date. The following table presents the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed as of the Acquisition date:

 

19


BAUDAX BIO, INC.

Notes to the Consolidated Financial Statements

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

(Unaudited)

 

Assets acquired:

 

As Initially Reported

 

Measurement Period Adjustments

 

As Adjusted

 

Cash and cash equivalents

 

$

142

 

$

 

$

142

 

Prepaid expenses and other current assets

 

 

52

 

 

 

 

52

 

Property and equipment, net

 

 

3,781