Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Jul. 31, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | ROCKWELL MEDICAL, INC. | |
Entity Central Index Key | 1,041,024 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 51,740,040 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
ASSETS | ||
Cash and Cash Equivalents | $ 8,327,695 | $ 17,180,594 |
Investments available for sale | 34,914,331 | 40,759,703 |
Accounts Receivable, net of a reserve of $7,000 in 2017 and $5,000 in 2016 | 4,880,969 | 6,393,228 |
Inventory | 13,774,065 | 12,141,072 |
Other Current Assets | 1,907,270 | 2,034,598 |
Total Current Assets | 63,804,330 | 78,509,195 |
Property and Equipment, net | 1,529,639 | 1,391,575 |
Inventory, Non-Current | 2,725,958 | 1,826,554 |
Intangible Assets | 4,205 | 4,382 |
Goodwill | 920,745 | 920,745 |
Other Non-current Assets | 490,738 | 501,187 |
Total Assets | 69,475,615 | 83,153,638 |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||
Accounts Payable | 3,869,646 | 5,858,234 |
Accrued Liabilities | 3,585,198 | 4,210,151 |
Customer Deposits | 212,320 | 77,217 |
Total Current Liabilities | 7,667,164 | 10,145,602 |
Deferred License Revenue | 17,962,468 | 20,051,737 |
Shareholders' Equity: | ||
Common Shares, no par value, 51,740,040 and 51,527,711 shares issued and outstanding | 270,302,780 | 268,199,939 |
Accumulated Deficit | (226,166,099) | (214,341,092) |
Accumulated Other Comprehensive Income | (290,698) | (902,548) |
Total Shareholders' Equity | 43,845,983 | 52,956,299 |
Total Liabilities And Shareholders' Equity | $ 69,475,615 | $ 83,153,638 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
CONSOLIDATED BALANCE SHEETS | ||
Allowance for reserve, accounts receivable (in dollars) | $ 7,000 | $ 5,000 |
Common Shares, par value (in dollars per share) | $ 0 | $ 0 |
Common Shares, shares issued | 51,740,040 | 51,527,711 |
Common Shares, shares outstanding | 51,740,040 | 51,527,711 |
CONSOLIDATED INCOME STATEMENTS
CONSOLIDATED INCOME STATEMENTS - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
CONSOLIDATED INCOME STATEMENTS | ||||
Sales | $ 13,243,107 | $ 13,452,517 | $ 27,835,361 | $ 27,079,565 |
Cost of Sales | 11,744,819 | 11,962,989 | 23,979,601 | 23,895,111 |
Gross Profit | 1,498,288 | 1,489,528 | 3,855,760 | 3,184,454 |
Selling, General and Administrative | 6,541,179 | 5,014,370 | 12,641,894 | 10,001,111 |
Research and Product Development | 1,675,494 | 2,063,324 | 2,890,345 | 3,377,754 |
Operating Income (Loss) | (6,718,385) | (5,588,166) | (11,676,479) | (10,194,411) |
Interest and Investment Income, net | (364,599) | 227,020 | (148,528) | 413,582 |
Income (Loss) Before Income Taxes | (7,082,984) | (5,361,146) | (11,825,007) | (9,780,829) |
Income Tax Expense | 404,527 | |||
Net Income (Loss) | $ (7,082,984) | $ (5,361,146) | $ (11,825,007) | $ (10,185,356) |
Basic Earnings (Loss) per Share | $ (0.14) | $ (0.11) | $ (0.23) | $ (0.20) |
Diluted Earnings (Loss) per Share | $ (0.14) | $ (0.11) | $ (0.23) | $ (0.20) |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||
Net Income (Loss) | $ (7,082,984) | $ (5,361,146) | $ (11,825,007) | $ (10,185,356) |
Unrealized Gain (Loss) on Available-For-Sale Securities | 500,122 | 242,965 | 612,124 | 195,732 |
Foreign Currency Translation Adjustments | (65) | (274) | ||
Comprehensive Income (Loss) | $ (6,582,927) | $ (5,118,181) | $ (11,213,157) | $ (9,989,624) |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - 6 months ended Jun. 30, 2017 - USD ($) | COMMON SHARES | ACCUMULATED DEFICIT | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | Total |
Balance at Dec. 31, 2016 | $ 268,199,939 | $ (214,341,092) | $ (902,548) | $ 52,956,299 |
Balance (in shares) at Dec. 31, 2016 | 51,527,711 | 51,527,711 | ||
Increase (Decrease) in Shareholders' Equity | ||||
Net Loss | (11,825,007) | $ (11,825,007) | ||
Unrealized Gain (Loss) on Available-For-Sale Securities | 612,124 | 612,124 | ||
Foreign Currency Translation Adjustments | (274) | (274) | ||
Shares Issued in Exchange for Services | $ 88,487 | 88,487 | ||
Shares Issued in Exchange for Services (in shares) | 50,000 | |||
Stock Option Based Expense | $ 2,203,686 | 2,203,686 | ||
Stock Tendered in Satisfaction of Tax Liabilities | $ (2,287,231) | (2,287,231) | ||
Stock Tendered in Satisfaction of Tax Liabilities (in shares) | (317,671) | |||
Restricted Stock Amortization | $ 2,097,899 | 2,097,899 | ||
Restricted Stock Amortization (in shares) | 480,000 | |||
Balance at Jun. 30, 2017 | $ 270,302,780 | $ (226,166,099) | $ (290,698) | $ 43,845,983 |
Balance (in shares) at Jun. 30, 2017 | 51,740,040 | 51,740,040 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash Flows From Operating Activities: | ||
Net (Loss) | $ (11,825,007) | $ (10,185,356) |
Adjustments To Reconcile Net Loss To Net Cash Used In Operating Activities: | ||
Depreciation and Amortization | 259,084 | 395,990 |
Share Based Compensation - Non-employee | 88,487 | |
Share Based Compensation- Employees | 4,301,585 | 5,222,723 |
Restricted Stock Retained in Satisfaction of Tax Liabilities | (2,287,231) | |
Loss on Disposal of Assets | 3,634 | 258 |
Loss (gain) on Sale of Investments Available for Sale | 368,519 | (3,302) |
(Gain) on Sale of Investments Available for Sale | 504,994 | |
Changes in Assets and Liabilities: | ||
(Increase) Decrease in Accounts Receivable | 343,993 | (2,543,404) |
(Increase) in Inventory | (2,532,397) | (3,137,896) |
(Increase) in Other Assets | 349,378 | (54,132) |
Increase (Decrease) in Accounts Payable | (1,988,717) | 980,981 |
Increase (Decrease) in Other Liabilities | (489,857) | 106,441 |
Increase (decrease) Deferred License Revenue | (996,240) | (963,372) |
Increase (decrease) in deferred drug license revenue | (136,362) | 3,886,365 |
Changes in Assets and Liabilities | (5,450,202) | (1,725,017) |
Cash (Used In) Operating Activities | (12,253,900) | (6,294,704) |
Cash Flows From Investing Activities: | ||
Purchase of Investments Available for Sale | (27,262,362) | (9,259,648) |
Sale of Investments Available for Sale | 33,351,339 | 8,328,987 |
Purchase of Equipment | (401,055) | (229,287) |
Proceeds from Sale of Assets | 450 | 1,000 |
Cash Provided by (Used In) Investing Activities | 5,688,372 | (1,158,948) |
Cash Flows From Financing Activities: | ||
Proceeds from the Issuance of Common Shares and Purchase Warrants | 77,250 | |
Cash Provided By (Used In) Financing Activities | (2,287,231) | 77,250 |
Effects of exchange rate changes | (140) | |
(Decrease) Increase In Cash | (8,852,899) | (7,376,402) |
Cash At Beginning Of Period | 17,180,594 | 31,198,182 |
Cash At End Of Period | $ 8,327,695 | 23,821,780 |
Supplemental Cash Flow Information: | ||
Income Taxes Paid | $ 404,527 |
Description of Business
Description of Business | 6 Months Ended |
Jun. 30, 2017 | |
Description of Business | |
Description of Business | Rockwell Medical, Inc. and Subsidiaries Notes to Consolidated Financial Statement 1. Description of Business Rockwell Medical, Inc. and Subsidiaries (collectively, “we”, “our”, “us”, or the “Company”) is a fully-integrated pharmaceutical company targeting end-stage renal disease and chronic kidney disease with innovative products for the treatment of iron deficiency, secondary hyperparathyroidism and hemodialysis. We are currently marketing and developing unique, proprietary renal drug therapies. These novel renal drug therapies support disease management initiatives to improve the quality of life and care of dialysis patients and are designed to deliver safe and effective therapy, while decreasing drug administration costs and improving patient convenience and outcome. We have also obtained licenses for certain dialysis related drugs which we are developing and planning to market globally. We are also an established manufacturer and leader in delivering high-quality hemodialysis concentrates/dialysates to dialysis providers and distributors in the United States and abroad. We manufacture, sell and distribute hemodialysis concentrates and other ancillary medical products and supplies used in the treatment of patients with End Stage Renal Disease, or “ESRD”. We supply our products to dialysis providers and distributors who treat patients with kidney disease. Our concentrate products are used to remove waste and replace essential nutrients in the blood of dialysis patients during their hemodialysis treatment. The majority of our sales occur in the United States. We are regulated by the Federal Food and Drug Administration (“FDA”) under the Federal Drug and Cosmetics Act, as well as by other federal, state and local agencies. We hold several FDA product approvals including both drugs and medical devices. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2017 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation Our consolidated financial statements include our accounts and the accounts for our wholly owned subsidiaries, Rockwell Transportation, Inc. and Rockwell Medical India Private Limited. All intercompany balances and transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America, or “GAAP,” and with the instructions to Form 10-Q and Securities and Exchange Commission Regulation S-X as they apply to interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The balance sheet at December 31, 2016 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of our management, all adjustments have been included that are necessary to make the financial statements not misleading. All of these adjustments that are material are of a normal and recurring nature. Our operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017. You should read our unaudited interim financial statements together with the financial statements and related footnotes for the year ended December 31, 2016 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 includes a description of our significant accounting policies. Revenue Recognition Our policy is to recognize revenue consistent with authoritative guidance for revenue recognition including the provisions of the Financial Accounting Standards Board Accounting Standards Codification. We recognize revenue when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery (or passage of title) has occurred or services have been rendered, (iii) the seller's price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured. Consistent with these guidelines we recognize revenue at the time we transfer title to our products to our customers which generally occurs when our products are delivered to our customer’s location consistent with our terms of sale. We recognize revenue for international shipments when title has transferred consistent with standard terms of sale. We apply judgment as we analyze each element of our contractual agreements to determine appropriate revenue recognition. The terms of our contractual agreements may include milestone payments if specified research and development objectives are achieved, non-refundable licensing fees, milestone payments on sales or royalties from product sales. When entering into an arrangement, we first determine whether the arrangement includes multiple deliverables and is subject to the accounting guidance in ASC subtopic 605-25, Multiple-Element Arrangements. If we determine that an arrangement includes multiple elements, we determine whether the arrangement should be divided into separate units of accounting and how the arrangement consideration should be measured and allocated among the separate units of accounting. An element qualifies as a separate unit of accounting when the delivered element has standalone value to the customer. Our arrangements do not include a general right of return relative to delivered elements. Any delivered elements that do not qualify as separate units of accounting are combined with other undelivered elements within the arrangement as a single unit of accounting. If the arrangement constitutes a single combined unit of accounting, we determine the revenue recognition method for the combined unit of accounting and recognize the revenue either on a straight-line basis or on a modified proportional performance method over the period from inception through the date the last deliverable within the single unit of accounting is delivered. Non-refundable upfront license fees are recorded as deferred revenue and recognized into revenue over the estimated period of our substantive performance obligations. If we do not have substantive performance obligations, we recognize non-refundable upfront fees into revenue through the date the deliverable is satisfied. Analyzing the arrangement to identify deliverables requires the use of judgment and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation. In arrangements that include license rights and other non-contingent deliverables, such as participation in a steering committee, these deliverables do not have standalone value because the non-contingent deliverables are dependent on the license rights. That is, the non-contingent deliverables would not have value without the license rights, and only we can perform the related services. Upfront license rights and non-contingent deliverables, such as participation in a steering committee, do not have standalone value as they are not sold separately and they cannot be resold. In addition, when non-contingent deliverables are sold with upfront license rights, the license rights do not represent the culmination of a separate earnings process. As such, we account for the license and the non-contingent deliverables as a single combined unit of accounting. In such instances, the license revenue in the form of non-refundable upfront payments is deferred and recognized over the applicable relationship period. For milestone payments based on sales and for royalties based on sales, we recognize revenue in the quarter that the information related to the sales becomes available and collectability is reasonably assured. For international license agreements that we have entered into, deferred license revenue is being recognized over the term of the license agreement. The initial payment of $20 million received pursuant to our long-term Exclusive Distribution Agreement (the “Distribution Agreement”) with Baxter Healthcare Corporation (“Baxter”) in October 2014 has been accounted for as deferred license revenue. Deferred license revenue is being recognized based on the proportion of product shipments to Baxter in each period to total expected sales volume for the term of the agreement. See Note 4 to condensed consolidated financial statements for information related to the settlement of arbitration proceedings with Baxter. We recognize other revenues at the time the related fees and or payments are earned. We require certain customers, mostly international customers, to pay for product prior to the transfer of title to the customer. Deposits received from customers and payments in advance for orders are recorded as liabilities under Customer Deposits until such time as orders are filled and title transfers to the customer consistent with our terms of sale. In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) , which will supersede the current revenue recognition requirements in Topic 605, Revenue Recognition . The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new guidance is effective for the year beginning January 1, 2018. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is in the process of evaluating how the new revenue recognition standard could impact the financial statements and disclosures. For the majority of our sales transactions, the new standard is not expected to significantly change the timing of revenue recognition; however, we are still analyzing our licensing arrangements to determine the impact of the new standard. The new standard will also require expanded disclosures surrounding revenue in the notes to the financial statements. Cash and Cash Equivalents We consider cash on hand, money market funds, unrestricted certificates of deposit and short term marketable securities with an original maturity of 90 days or less as cash and cash equivalents. Investments Available for Sale Investments Available for Sale are short-term investments, consisting of investments in short term bond funds and in short term bonds and are stated at fair value based upon observed market prices (Level 1 in the fair value hierarchy). The portfolio generally consists of high credit quality short term debt instruments. These instruments are subject to changes in fair market value due primarily to changes in interest rates. The fair value of these investments was $34,914,331 as of June 30, 2017. Unrealized holding gains or losses on these securities are included in accumulated other comprehensive income (loss). Realized gains and losses, including declines in value judged to be other-than-temporary on available-for-sale securities are included as a component of other income or expense. Gross unrealized losses were $289,753 as of June 30, 2017. There were realized losses of $473,871 and no realized gains in the second quarter. For the six months ended June 30, 2017, there were realized losses of $504,994 and no realized gains. The Company has evaluated the near term interest rate environment and the expected holding period of the investments along with the duration of the fund portfolios in assessing the severity and duration of potential impairments. Based on that evaluation the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2017. Research and Product Development We recognize research and product development expenses as incurred. We incurred product development and research costs related to the commercial development, patent approval and regulatory approval of new products aggregating approximately $2.9 million and $3.4 million for the six months ended June 30, 2017 and 2016, respectively. Share Based Compensation We measure the cost of employee and non-employee services received in exchange for equity awards, including stock options, based on the grant date fair value of the awards in accordance with ASC 718-10, Compensation — Stock Compensation. The cost of equity based compensation is recognized as compensation expense over the vesting period of the awards. We estimate the fair value of compensation involving stock options utilizing the Black-Scholes option pricing model. This model requires the input of several factors such as the expected option term, expected volatility of our stock price over the expected option term, and an expected forfeiture rate, and is subject to various assumptions. We believe the valuation methodology is appropriate for estimating the fair value of stock options we grant to employees and directors which are subject to ASC 718-10 requirements. These amounts are estimates and thus may not be reflective of actual future results or amounts ultimately realized by recipients of these grants. Net Earnings Per Share We computed our basic earnings (loss) per share using weighted average shares outstanding for each respective period. Diluted earnings per share also reflect the weighted average impact from the date of issuance of all potentially dilutive securities, consisting of stock options and common share purchase warrants, unless inclusion would have had an anti-dilutive effect. The calculation of basic weighted average shares outstanding excludes unvested restricted stock. Actual weighted average shares outstanding used in calculating basic and diluted earnings per share were: Three Months Ended June 30, 2017 Three Months Ended June 30, 2016 Six Months Ended June 30, 2017 Six Months Ended June 30, 2016 Basic Weighted Average Shares Outstanding 51,031,899 50,676,787 50,859,927 50,674,954 Effect of Dilutive Securities — — — — Diluted Weighted Average Shares Outstanding 51,031,899 50,676,787 50,859,927 50,674,954 |
Inventory
Inventory | 6 Months Ended |
Jun. 30, 2017 | |
Inventory | |
Inventory | 3. Inventory Components of inventory as of June 30, 2017 and December 31, 2016 are as follows: June 30, December 31, 2017 2016 Raw Materials $ 12,943,575 $ 10,903,084 Work in Process 234,326 86,452 Finished Goods 3,322,122 2,978,090 Total $ 16,500,023 $ 13,967,626 |
Baxter Distribution Agreement
Baxter Distribution Agreement | 6 Months Ended |
Jun. 30, 2017 | |
DISTRIBUTION AGREEMENT. | |
DISTRIBUTION AGREEMENT | 4. Baxter Distribution Agreement As of October 2, 2014, we entered into the Distribution Agreement with Baxter, pursuant to which Baxter became the Company’s exclusive agent for sales, marketing and distribution activities for the Company’s hemodialysis concentrate and ancillary products in the United States and various foreign countries for an initial term of 10 years. The Distribution Agreement does not include any of the Company’s drug products. The Company retains sales, marketing and distribution rights for its hemodialysis concentrate products in specified foreign countries in which the Company has an established commercial presence. On September 12, 2016, Baxter initiated an arbitration proceeding against Rockwell in accordance with the International Institute for Conflict Prevention and Resolution, Inc.’s Rules for Non-Administered Arbitration under the Distribution Agreement. Baxter alleged that Rockwell had breached the Distribution Agreement in various respects associated with its dealings with customers, its allocation of expenses and its true-up notices. Baxter sought declaratory relief giving Baxter the right to terminate the Distribution Agreement and recover a portion of the upfront fee, injunctive relief to prevent Rockwell from establishing a West Coast facility and unspecified damages. Rockwell filed a response denying all of Baxter’s claims of breach and wrongdoing, and counterclaimed that Baxter itself is in breach of the Distribution Agreement for failing to pay substantial accounts receivable and for repudiating its obligation to pay the West Coast facility fee of up to $10 million. Rockwell sought damages, declaratory, injunctive and other equitable relief, as well as interest, costs and attorney fees. In addition, in October 2016, Rockwell gave notice to Baxter that it breached the minimum purchase requirement for the contract year ended October 2, 2016 and that Rockwell intended to cause its distribution rights to become non-exclusive unless it cured the shortfall within the applicable cure period. Baxter disputed the existence of a breach. On June 23, 2017, the Company and Baxter settled the arbitration (the “Settlement”) related to all of the foregoing claims. The Settlement included a mutual release with respect to all known claims existing on the date of the Settlement and the arbitration was dismissed with prejudice. No payments were made by either party in connection with the Settlement. In connection with the Settlement, on June 23, 2017, the Company and Baxter entered into a First Amendment to Exclusive Distribution Agreement and a First Amendment to Investment Agreement. The terms of the settlement included, among other things, modified pricing that provides incentive to Baxter to pursue new customers and increase future sales. Our Settlement with Baxter is not expected to have a material impact on our liquidity or results of operations. |
Summary of Significant Accoun12
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation Our consolidated financial statements include our accounts and the accounts for our wholly owned subsidiaries, Rockwell Transportation, Inc. and Rockwell Medical India Private Limited. All intercompany balances and transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America, or “GAAP,” and with the instructions to Form 10-Q and Securities and Exchange Commission Regulation S-X as they apply to interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The balance sheet at December 31, 2016 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of our management, all adjustments have been included that are necessary to make the financial statements not misleading. All of these adjustments that are material are of a normal and recurring nature. Our operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017. You should read our unaudited interim financial statements together with the financial statements and related footnotes for the year ended December 31, 2016 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 includes a description of our significant accounting policies. |
Revenue Recognition | Revenue Recognition Our policy is to recognize revenue consistent with authoritative guidance for revenue recognition including the provisions of the Financial Accounting Standards Board Accounting Standards Codification. We recognize revenue when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery (or passage of title) has occurred or services have been rendered, (iii) the seller's price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured. Consistent with these guidelines we recognize revenue at the time we transfer title to our products to our customers which generally occurs when our products are delivered to our customer’s location consistent with our terms of sale. We recognize revenue for international shipments when title has transferred consistent with standard terms of sale. We apply judgment as we analyze each element of our contractual agreements to determine appropriate revenue recognition. The terms of our contractual agreements may include milestone payments if specified research and development objectives are achieved, non-refundable licensing fees, milestone payments on sales or royalties from product sales. When entering into an arrangement, we first determine whether the arrangement includes multiple deliverables and is subject to the accounting guidance in ASC subtopic 605-25, Multiple-Element Arrangements. If we determine that an arrangement includes multiple elements, we determine whether the arrangement should be divided into separate units of accounting and how the arrangement consideration should be measured and allocated among the separate units of accounting. An element qualifies as a separate unit of accounting when the delivered element has standalone value to the customer. Our arrangements do not include a general right of return relative to delivered elements. Any delivered elements that do not qualify as separate units of accounting are combined with other undelivered elements within the arrangement as a single unit of accounting. If the arrangement constitutes a single combined unit of accounting, we determine the revenue recognition method for the combined unit of accounting and recognize the revenue either on a straight-line basis or on a modified proportional performance method over the period from inception through the date the last deliverable within the single unit of accounting is delivered. Non-refundable upfront license fees are recorded as deferred revenue and recognized into revenue over the estimated period of our substantive performance obligations. If we do not have substantive performance obligations, we recognize non-refundable upfront fees into revenue through the date the deliverable is satisfied. Analyzing the arrangement to identify deliverables requires the use of judgment and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation. In arrangements that include license rights and other non-contingent deliverables, such as participation in a steering committee, these deliverables do not have standalone value because the non-contingent deliverables are dependent on the license rights. That is, the non-contingent deliverables would not have value without the license rights, and only we can perform the related services. Upfront license rights and non-contingent deliverables, such as participation in a steering committee, do not have standalone value as they are not sold separately and they cannot be resold. In addition, when non-contingent deliverables are sold with upfront license rights, the license rights do not represent the culmination of a separate earnings process. As such, we account for the license and the non-contingent deliverables as a single combined unit of accounting. In such instances, the license revenue in the form of non-refundable upfront payments is deferred and recognized over the applicable relationship period. For milestone payments based on sales and for royalties based on sales, we recognize revenue in the quarter that the information related to the sales becomes available and collectability is reasonably assured. For international license agreements that we have entered into, deferred license revenue is being recognized over the term of the license agreement. The initial payment of $20 million received pursuant to our long-term Exclusive Distribution Agreement (the “Distribution Agreement”) with Baxter Healthcare Corporation (“Baxter”) in October 2014 has been accounted for as deferred license revenue. Deferred license revenue is being recognized based on the proportion of product shipments to Baxter in each period to total expected sales volume for the term of the agreement. See Note 4 to condensed consolidated financial statements for information related to the settlement of arbitration proceedings with Baxter. We recognize other revenues at the time the related fees and or payments are earned. We require certain customers, mostly international customers, to pay for product prior to the transfer of title to the customer. Deposits received from customers and payments in advance for orders are recorded as liabilities under Customer Deposits until such time as orders are filled and title transfers to the customer consistent with our terms of sale. In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) , which will supersede the current revenue recognition requirements in Topic 605, Revenue Recognition . The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new guidance is effective for the year beginning January 1, 2018. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is in the process of evaluating how the new revenue recognition standard could impact the financial statements and disclosures. For the majority of our sales transactions, the new standard is not expected to significantly change the timing of revenue recognition; however, we are still analyzing our licensing arrangements to determine the impact of the new standard. The new standard will also require expanded disclosures surrounding revenue in the notes to the financial statements. |
Cash and Cash Equivalents | Cash and Cash Equivalents We consider cash on hand, money market funds, unrestricted certificates of deposit and short term marketable securities with an original maturity of 90 days or less as cash and cash equivalents. |
Investments Available for Sale | Investments Available for Sale Investments Available for Sale are short-term investments, consisting of investments in short term bond funds and in short term bonds and are stated at fair value based upon observed market prices (Level 1 in the fair value hierarchy). The portfolio generally consists of high credit quality short term debt instruments. These instruments are subject to changes in fair market value due primarily to changes in interest rates. The fair value of these investments was $34,914,331 as of June 30, 2017. Unrealized holding gains or losses on these securities are included in accumulated other comprehensive income (loss). Realized gains and losses, including declines in value judged to be other-than-temporary on available-for-sale securities are included as a component of other income or expense. Gross unrealized losses were $289,753 as of June 30, 2017. There were realized losses of $473,871 and no realized gains in the second quarter. For the six months ended June 30, 2017, there were realized losses of $504,994 and no realized gains. The Company has evaluated the near term interest rate environment and the expected holding period of the investments along with the duration of the fund portfolios in assessing the severity and duration of potential impairments. Based on that evaluation the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2017. |
Research and Product Development | Research and Product Development We recognize research and product development expenses as incurred. We incurred product development and research costs related to the commercial development, patent approval and regulatory approval of new products aggregating approximately $2.9 million and $3.4 million for the six months ended June 30, 2017 and 2016, respectively. |
Share Based Compensation | Share Based Compensation We measure the cost of employee and non-employee services received in exchange for equity awards, including stock options, based on the grant date fair value of the awards in accordance with ASC 718-10, Compensation — Stock Compensation. The cost of equity based compensation is recognized as compensation expense over the vesting period of the awards. We estimate the fair value of compensation involving stock options utilizing the Black-Scholes option pricing model. This model requires the input of several factors such as the expected option term, expected volatility of our stock price over the expected option term, and an expected forfeiture rate, and is subject to various assumptions. We believe the valuation methodology is appropriate for estimating the fair value of stock options we grant to employees and directors which are subject to ASC 718-10 requirements. These amounts are estimates and thus may not be reflective of actual future results or amounts ultimately realized by recipients of these grants. |
Net Earnings Per Share | Net Earnings Per Share We computed our basic earnings (loss) per share using weighted average shares outstanding for each respective period. Diluted earnings per share also reflect the weighted average impact from the date of issuance of all potentially dilutive securities, consisting of stock options and common share purchase warrants, unless inclusion would have had an anti-dilutive effect. The calculation of basic weighted average shares outstanding excludes unvested restricted stock. Actual weighted average shares outstanding used in calculating basic and diluted earnings per share were: Three Months Ended June 30, 2017 Three Months Ended June 30, 2016 Six Months Ended June 30, 2017 Six Months Ended June 30, 2016 Basic Weighted Average Shares Outstanding 51,031,899 50,676,787 50,859,927 50,674,954 Effect of Dilutive Securities — — — — Diluted Weighted Average Shares Outstanding 51,031,899 50,676,787 50,859,927 50,674,954 |
Summary of Significant Accoun13
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Summary of Significant Accounting Policies | |
Schedule of weighted average shares outstanding used in calculating basic and diluted earnings per share | Three Months Ended June 30, 2017 Three Months Ended June 30, 2016 Six Months Ended June 30, 2017 Six Months Ended June 30, 2016 Basic Weighted Average Shares Outstanding 51,031,899 50,676,787 50,859,927 50,674,954 Effect of Dilutive Securities — — — — Diluted Weighted Average Shares Outstanding 51,031,899 50,676,787 50,859,927 50,674,954 |
Inventory (Tables)
Inventory (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Inventory | |
Schedule components of inventory | June 30, December 31, 2017 2016 Raw Materials $ 12,943,575 $ 10,903,084 Work in Process 234,326 86,452 Finished Goods 3,322,122 2,978,090 Total $ 16,500,023 $ 13,967,626 |
SUMMARY OF SIGNIFICANT ACCOUN15
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition, PPE, Licensing and Research (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||
Oct. 31, 2014 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Research and Product Development | ||||||
Product development and research costs | $ 1,675,494 | $ 2,063,324 | $ 2,890,345 | $ 3,377,754 | ||
Investments Available for Sale | ||||||
Fair value of investments | 34,914,331 | 34,914,331 | $ 40,759,703 | |||
Gross unrealized losses | 28,975 | 28,975 | ||||
Realized losses | 473,871 | 504,994 | ||||
Research and Development | ||||||
Research and Development Expense | $ 1,675,494 | $ 2,063,324 | $ 2,890,345 | $ 3,377,754 | ||
Baxter Healthcare Organization | ||||||
Revenue Recognition | ||||||
Initial Payment Received | $ 20,000,000 |
SUMMARY OF SIGNIFICANT ACCOUN16
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Stock Options, Warrants, and Restricted Common Stock (Details) - shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Weighted average shares outstanding used in calculating basic and diluted earnings per share | ||||
Basic Weighted Average Shares Outstanding | 51,031,899 | 50,676,787 | 50,859,927 | 50,674,954 |
Diluted Weighted Average Shares Outstanding | 51,031,899 | 50,676,787 | 50,859,927 | 50,674,954 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Inventory | ||
Raw Materials | $ 12,943,575 | $ 10,903,084 |
Work in Process | 234,326 | 86,452 |
Finished Goods | 3,322,122 | 2,978,090 |
Total | $ 16,500,023 | $ 13,967,626 |
Baxter Distribution Agreement (
Baxter Distribution Agreement (Details) - Baxter Healthcare Organization - USD ($) | Jun. 23, 2017 | Sep. 12, 2016 |
Facility Fee | $ 10,000,000 | |
Payment (made) received | $ 0 |