(1) Background and Basis of Presentation Baudax Bio, Inc. (Baudax Bio or the Company) represents the Acute Care Business of Recro Pharma, Inc. (Recro) and will be a pharmaceutical company primarily focused on developing and commercializing innovative products for acute care settings and believes it can bring valuable therapeutic options for patients, prescribers and payers, such as its lead product candidate, intravenous (IV) meloxicam, to the acute care markets following the spin-off of Baudax Bio by Recro. Pursuant to the Separation Agreement to be entered into between Recro and Baudax Bio, Recro will transfer the assets, liabilities, and operations of its Acute Care business to the Company and, on November 21, 2019, the distribution date, each Recro shareholder will receive one share of the Companys 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). Following the Distribution, Baudax Bio will operate as a separate, independent company. T he accompanying unaudited combined financial statements are derived from Recros consolidated financial statements and accounting records and should be read in conjunction with the annual audited financial statements and related notes as of and for the year ended December 31, 2018 included in Recros Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and the Companys Registration Statement on Form 10, as amended and filed with the Securities and Exchange Commission. The Recro Acute Care Business did not consist of a separate, standalone group of legal entities for public company reporting and certain other corporate functions in the periods presented and, accordingly, allocations were required. These combined financial statements reflect the Companys historical financial position, results of operations and cash flows as the business was operated as part of Recro prior to the planned spin-off, in conformity with U.S. generally accepted accounting principles (U.S. GAAP). The Company has determined that it operates in a single segment involved in the development of innovative products for hospital and other acute care settings. The combined financial statements include certain assets and liabilities that have historically been held at the Recro corporate level, but which are specifically identifiable or allocable to the Company. All intracompany transactions and accounts have been eliminated. All intercompany transactions between the Company and Recro are considered to be effectively settled in the combined financial statements at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the combined statements of cash flows as a financing activity and in the combined balance sheet as parent company net investment. The Company does not record interest expense on amounts funded by Recro. Long-term debt held at the Recro corporate level will be retained by Recro and will not be assumed by the Company. Historically, certain corporate level activity costs have been incurred and reported within the legal entity that includes the Recro Acute Care Business. A portion of these costs have been allocated out and the Companys combined financial statements include a remaining allocation of expenses related to these certain Recro corporate functions, including senior management, legal, human resources, finance, and information technology. These expenses are included in general and administrative expense and have been allocated based on direct usage or benefit where identifiable, with the remainder allocated on a pro rata basis of expenses, headcount, or other measures. The Company considers the expense allocation methodology and results to be reasonable for all periods presented, however, the allocations may not be indicative of the actual expense that would have been incurred had the Company operated as an independent, publicly-traded company for the periods presented. For the three and nine months ended September 30, 2019, a total of $1,516 and $6,467, respectively, of costs have been allocated to Recros contract manufacturing and development segment (the CDMO business). For the three and nine months ended September 30, 2018, a total of $1,151 and $3,760, respectively, of costs have been allocated to the CDMO business. The income tax amounts in these combined financial statements have been calculated based on a separate return methodology and presented as if the Company was a standalone taxpayer in each of its tax jurisdictions. Because of the Companys history of losses as a standalone entity, a full valuation allowance is recorded against deferred tax assets in all periods presented. Recro maintains its stock-based compensation plan at a corporate level. The Companys employees participate in those programs and a portion of the cost of those plans is included in the Companys combined financial statements using an allocation methodology similar to the methodology used to allocate the cash compensation of the related employees. The parent company net investment balances in these combined financial statements represents the accumulated deficit of the Recro Acute Care Business and the net funding provided to the Company, which are reflected as net transfers from parent in the combined statements of parent company net investment. In April 2019, after receipt of a Complete Response Letter (CRL), received from the U.S. Food and Drug Administration (FDA), regarding the New Drug Application (NDA), for IV meloxicam, the Company announced it had implemented a strategic restructuring initiative, and corresponding reduction in the Acute Care segment workforce, aimed at reducing operating expenses, while maintaining key personnel needed to partner and obtain FDA approval of IV meloxicam. On October 31, 2019, the Company announced that it had received a written decision from the FDA granting its appeal of the CRL relating to the NDA seeking approval for IV meloxicam. The FDA granted the Companys appeal and indicated that the Companys application provides sufficient evidence of effectiveness and safety to support approval. The Company is now in the process of preparing a comprehensive response to the FDA that includes proposed labeling that aligns with the FDA guidance received in the written decision letter.