| Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Rockwell Transportation, Inc. and Rockwell Medical India Private Limited. Rockwell Medical India Private Limited was formed in 2019 for the purpose of conducting certain commercial activities in India. All intercompany balances and transactions have been eliminated in consolidation. Reclassification Certain prior year amounts have been reclassified to conform to the current year presentation, including the reclassification of lease right-of-use assets into Right of Use Assets - Operating, Net and Right of Use Assets - Financing, Net and lease liabilities into Lease Liabilities - Operating, Current, Lease Liabilities - Financing, Current, Lease Liabilities - Operating, Long-Term, and Lease Liabilities - Financing, Long-Term. Additionally, amounts from the Changes in Lease Liabilities were reclassified to Payments on Financing Lease Liabilities on the statement of cash flows. Revenue Recognition The Company recognizes revenue under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, issued by the Financial Accounting Standards Board ("FASB") . The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of 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 following five steps are applied to achieve that core principle: • Step 1: Identify the contract with the customer • Step 2: Identify the performance obligations in the contract • Step 3: Determine the transaction price • Step 4: Allocate the transaction price to the performance obligations in the contract • Step 5: Recognize revenue when the company satisfies a performance obligation Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight related to contracts with customers are accounted for as a fulfillment cost and are included in cost of sales when control of the goods transfers to the customer. Nature of goods and services The following is a description of principal activities from which the Company generates its revenue. For a discussion of significant market segments and customers, see Note 6. Product Sales The Company accounts for individual products and services separately if they are distinct (i.e., if a product or service is separately identifiable from other items and if a customer can benefit from it on its own or with other resources that are readily available to the customer). The consideration, including any discounts, is allocated between separate products and services based on their stand-alone selling prices. The stand-alone selling prices are determined based on the cost plus margin approach. Drug and dialysis concentrate products are sold directly to dialysis clinics and to wholesale distributors in both domestic and international markets. Distribution and license agreements for which upfront fees are received are evaluated upon execution or modification of the agreement to determine if the agreement creates a separate performance obligation from the underlying product sales. For all existing distribution and license agreements, the distribution and license agreement is not a distinct performance obligation from the product sales. In instances where regulatory approval of the product has not been established and the Company does not have sufficient experience with the foreign regulatory body to conclude that regulatory approval is probable, the revenue for the performance obligation is recognized over the term of the license agreement (over time recognition). Conversely, when regulatory approval already exists or is probable, revenue is recognized at the point in time that control of the product transfers to the customer. For the majority of the Company’s international customers, the Company recognizes revenue at the shipping point, which is generally the Company’s plant or warehouse. For other business, the Company recognizes revenue based on when the customer takes control of the product. The amount of revenue recognized is based on the purchase order less returns and adjusted for any rebates, discounts, chargebacks or other amounts paid to customers estimated at the time of sale. Customers typically pay for the product based on customary business practices with payment terms averaging 30 days, while a small subset of customers have payment terms averaging 60 days. Deferred License Revenue The Company received upfront fees under five distribution and license agreements that have been deferred as a contract liability and presented on the accompanying consolidated balance sheets as deferred license revenue. The amounts received from Wanbang Biopharmaceuticals Co., Ltd. (“Wanbang”), Sun Pharmaceutical Industries Ltd. ("Sun Pharma"), Jeil Pharmaceutical Co., Ltd. ("Jeil Pharma") and Drogsan Pharmaceuticals ("Drogsan Pharma") are recognized as revenue over the estimated term of the applicable distribution and license agreement as regulatory approval was not received and the Company did not have sufficient experience in China, India, South Korea and Turkey, respectively, to determine that regulatory approval was probable as of the execution of the agreement. During the year ended December 31, 2023, the amounts received from Wanbang were accelerated out of deferred license revenue and into revenue upon notice that the development effort was terminated. The amounts received from Baxter Healthcare Corporation (“Baxter”) were deferred and recognized as revenue at the point in time the estimated product sales under the agreement occurred. During the year ended December 31, 2023, all remaining deferred revenue relating to the Baxter agreement was recognized as revenue. For additional information related to the Company's deferred license revenue, see Note 10. Product Purchase Agreements On September 18, 2023, the Company and its long-time partner, DaVita, Inc. ("DaVita"), a leading provider of kidney care, entered into an Amended and Restated Products Purchase Agreement (the "Amended Agreement"), which amends and restates the Product Purchase Agreement, dated July 1, 2019, as amended, under which the Company supplies DaVita with certain dialysis concentrates. Under the Amended Agreement, the Company and DaVita agreed to an increase in product pricing, effective September 1, 2023 and a one-time payment of $0.4 million to Rockwell on or after December 1, 2023, which was recorded as revenue recognized during the year ended December 31, 2023. The term of the Amended Agreement will expire on December 31, 2024. DaVita will have the right, in its sole discretion upon written notice to the Company given no later than September 30, 2024, to further extend the term through December 31, 2025. In the event of such an extension, product pricing will be increased for the extended term. In addition, DaVita is required to provide the Company with nine-month purchasing forecasts and a commitment to purchase at least the forecasted amounts. In the event that DaVita does not meet its forecasts, it is required to pay the Company for the amount forecasted, purchase additional product, or the Company may terminate the Amended Agreement. Upon expiration or termination of the Amended Agreement, and upon request by DaVita, the Company has agreed to provide transition services to DaVita during a transition period. Disaggregation of revenue Revenue is disaggregated by primary geographical market, major product line, and timing of revenue recognition. In thousands Year Ended December 31, 2023 Products By Geographic Area Total U.S. Rest of World Drug Revenues Product Sales - Point-in-time $ — $ — $ — License Fee – Over time 2,338 — 2,338 Total Drug Products 2,338 — 2,338 Concentrate Products Product Sales – Point-in-time 79,802 72,871 6,931 License Fee – Over time 1,472 1,472 — Total Concentrate Products 81,274 74,343 6,931 Net Revenue $ 83,612 $ 74,343 $ 9,269 In thousands Year Ended December 31, 2022 Products By Geographic Area Total U.S. Rest of World Drug Revenues Product Sales - Point-in-time $ 903 $ 561 $ 342 License Fee – Over time 256 — 256 Total Drug Products 1,159 $ 561 598 Concentrate Products Product Sales – Point-in-time 69,162 62,715 6,447 License Fee – Over time 2,489 2,489 — Total Concentrate Products 71,651 65,204 6,447 Net Revenue $ 72,810 $ 65,765 $ 7,045 Contract balances The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers. In thousands December 31, 2023 December 31, 2022 January 1, 2022 Accounts Receivable, net $ 10,901 $ 6,259 $ 5,913 Contract Liabilities, which are included in deferred license revenue $ 521 $ 4,331 $ 8,157 There were no other material contract assets recorded on the consolidated balance sheets as of December 31, 2023 and 2022. The Company does not generally accept returns of its concentrate products and no reserve for returns of concentrate products was established as of December 31, 2023 or 2022. The contract liabilities primarily relate to upfront fees under distribution and license agreements with Baxter, Wanbang, Sun Pharma, Jeil Pharma, and Drogan Pharma. Transaction price allocated to remaining performance obligations For each of the years ended December 31, 2023 and 2022, the Company recognized $3.8 million as revenue from amounts classified as contract liabilities (i.e., deferred license revenue) as of December 31, 2022 and 2021, respectively. Revenue expected to be recognized in any future year related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, contracts where revenue is recognized as invoiced and contracts with variable consideration related to undelivered performance obligations, totaled $0.5 million and $2.9 million as of December 31, 2023 and 2022, respectively. The amount relates primarily to upfront payments and consideration received from customers that are received in advance of the customer assuming control of the related products. The Company applies the practical expedient in ASC 606, paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates. The most significant accounting estimates inherent in the preparation of the financial statements include estimates associated with fair value and classification of warrants, revenue recognition, allowance for credit losses, inventory reserves, accrued expenses, deferred license revenue, stock-based compensation, valuations and impairments of long-lived assets, and accounting for income taxes. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. Cash and cash equivalents include cash held in banks, money market mutual funds and unrestricted certificates of deposit. The Company’s cash and cash equivalents exceeds the Federal Deposit Insurance Corporation insured limits. The Company has not experienced any credit losses for amounts in excess of insured limits. Currently, the Company does not reasonably believe a significant risk of credit loss exists. Fair Value Measurement The Company applies the guidance issued with ASC 820, Fair Value Measurements , which provides guidance on the development and disclosure of fair value measurements. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace. Level 3: Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. Investments – Available for Sale The Company determines the appropriate classification of its investments in equity and debt securities at the time of purchase and reevaluates such determination at each balance sheet date. Marketable equity securities that are bought and held principally for the purpose of selling them in the near term are reported at fair value, with unrealized gains and losses recognized in earnings. Marketable debt securities classified as available for sale securities are carried at fair market value, with the unrealized gains and losses, net of tax, included in the determination of comprehensive income (loss) and reported in stockholders’ equity. All of the Company's investments available-for-sale are subject to periodic impairment review. The Company recognizes an impairment charge when a decline in the fair value of its investments below the cost basis is judged to be other than temporary. Accounts Receivable Accounts receivable are stated at invoice amounts. The carrying amount of trade accounts receivable is reduced by an allowance for credit losses that reflects our best estimate of accounts that may not be collected. The Company reviews outstanding trade accounts receivable balances and based on its assessment of expected collections, the Company estimates the portion, if any, of the balance that may not be collected based on future forecasts, historical loss information, and current economic conditions. All accounts or portions thereof deemed to be uncollectible are written off to the allowance for credit losses and credit loss expense. Inventory Inventory is stated at the lower of cost or net realizable value. Cost is determined on the first‑in first‑out (FIFO) method. Inventory that is not expected to be converted to cash over the next year is classified as non-current. The Company's policy is to reserve for its drug product inventory that it determines is unlikely to be sold to, or if sold, unlikely to be utilized by its customers on or before its expiration date. Property and Equipment Property and equipment is recorded at cost and is depreciated using the straight‑line method over the useful lives of the assets, which range from three Impairment of Long-lived Assets and Goodwill Long-lived assets, such as property and equipment and definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Impairment losses on long-lived assets are recognized when events or changes in circumstances indicate that the undiscounted cash flows estimated to be generated by such assets are less than their carrying value and, accordingly, all or a portion of such carrying value may not be recoverable. Impairment losses are then measured by comparing the fair value of assets to their carrying amounts. For the years ended December 31, 2023 and 2022, there were no impairments of long-lived assets. Rockwell reviews goodwill and indefinite-lived intangible assets at least annually for possible impairment. Goodwill and indefinite-lived intangible assets are reviewed for possible impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit or the indefinite-lived intangible assets below their carrying values. Rockwell completed its annual impairment tests as of December 31, 2023 and 2022, and determined that no adjustment for impairment of goodwill or intangible assets was required during the years ended December 31, 2023 and 2022. Goodwill and Intangible Assets Goodwill is the excess of purchase price over the fair value of identified net assets of businesses acquired. Intangible assets with indefinite useful lives are measured at their respective fair values as of the acquisition date. Goodwill was $0.9 million as of December 31, 2023 and December 31, 2022. Definite-lived intangible assets consist of our customer list associated with the Evoqua asset acquisition and license fees related to the technology, intellectual property and marketing rights for Triferic covered under certain issued patents. Definite-lived intangible assets have been capitalized and are being amortized over their useful life. Income Taxes Rockwell accounts for income taxes in accordance with the provisions of ASC 740‑10, Income Taxes. A current tax liability or asset is recognized for the estimated taxes payable or refundable on tax returns for the year. Deferred tax liabilities or assets are recognized for the estimated future tax effects of temporary differences between book and tax accounting and operating loss and tax credit carryforwards. A valuation allowance is established for deferred tax assets if the Company determine it to be more likely than not that the deferred tax asset will not be realized. The effects of tax positions are generally recognized in the financial statements consistent with amounts reflected in returns filed, or expected to be filed, with taxing authorities. For tax positions that the Company considers to be uncertain, current and deferred tax liabilities are recognized, or assets derecognized, when it is probable that an income tax liability has been incurred and the amount of the liability is reasonably estimable, or when it is probable that a tax benefit, such as a tax credit or loss carryforward, will be disallowed by a taxing authority. The amount of unrecognized tax benefits related to current tax positions is insignificant. The Company recognizes interest and penalties accrued related to unrecognized tax benefits as income tax expense. Research and Product Development The Company recognizes research and product development expenses as incurred. The Company incurred product development and research costs related to the commercial development, patent approval and regulatory approval of new products aggregating approximately $1.1 million and $3.1 million for the years ended December 31, 2023 and 2022, respectively. Stock-Based Compensation Service-Based Stock Unit Awards The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the grant-date fair value of the awards. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and 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. For the years ended December 31, 2023 and 2022, the Company recorded stock-based compensation expense on its options granted under the Company’s equity compensation plans to its directors and officers, and its employees (See Note 13). Market and Performance-Based Stock Unit Awards In addition to awards with service-based vesting conditions, the Company has granted performance share units with market and performance conditions, to certain of its executives. The fair value of awards with performance conditions are based on the fair value of the Company’s common stock on the date of grant. The fair value of awards with market conditions are based on a Monte Carlo simulation model. Assumptions and estimates utilized in the calculation of the fair value of the market awards include the risk-free interest rate, dividend yield, average closing price, expected volatility based on the historical volatility of the Company, and the remaining period of the award. The awards with performance conditions vest and result in issuance, at settlement, of common stock for each recipient based upon the recipient’s continued employment with the Company through the settlement date of the award and the Company’s achievement of specified milestones. The requisite service period of the awards with performance conditions is generally 1-2 years. In the case of awards with performance conditions, the Company recognizes stock-based compensation expense based on the grant date fair value of the award when achievement of the underlying performance-based targets become probable. The awards with market conditions vest and result in the issuance of common stock based upon the recipient’s continuing employment with the Company through the settlement date of the award related to the market capitalization criteria. The fair value related to the awards with market conditions is recorded as stock-based compensation expense over the period from date of grant to the settlement date regardless of whether the market capitalization is achieved. Leases The Company accounts for its leases under ASC 842, Leases . Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheets as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company's incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use assets are amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line expense over the lease term. Variable lease expenses, if any, are recorded when incurred. In calculating the right-of-use assets and lease liabilities, the Company elected the practical expedient to combine lease and non-lease components. Additionally, the Company excludes short-term leases having initial terms of 12 months or less as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term. Commitments and Contingencies In the normal course of business, the Company may become subject to loss contingencies, such as legal proceedings and claims arising out of its business, including government investigations. An accrual for a loss contingency is recognized when it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated. The Company expenses legal costs associated with loss contingencies as they are incurred. Restatement of Loss Per Share Loss per share for the year ended December 31, 2022 was recalculated and restated and is presented on a comparable basis with the year ended December 31, 2023. In the first quarter of 2023, the Company determined it should have included pre-funded warrants issued in the second quarter of 2022 in the loss per share calculation in accordance with ASC 260-10-45-13, which treats shares of common stock exercisable for little to no consideration as included in the denominator of both the basic and diluted earnings per share calculations. While the Company has determined the impact of including the pre-funded warrants in the loss per share calculations does not have a material impact on previously issued financial statements, the Company has recalculated and restated amounts presented on a comparative and consistent basis with current period results. The table below summarizes previously reported and restated amounts on a comparative basis. Year Ended December 31, 2022 As Previously Reported: Net Loss Per Share Attributable to Common Stockholders - Basic and Diluted $ (1.89) Weighted Average Number of Shares of Common Stock Outstanding - Basic and Diluted 9,866,844 As Restated: Net Loss Per Share Attributable to Common Stockholders - Basic and Diluted $ (1.31) Weighted Average Number of Shares of Common Stock Outstanding - Basic and Diluted 14,304,512 Loss Per Share ASC 260, Earnings Per Share , requires dual presentation of basic and diluted earnings per share (“EPS”), with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issued common stock were exercised or converted into common stock or resulted in the issuance of common stock that are then shared in the earnings of the entity. Basic net loss per share of common stock excludes dilution and is computed by dividing the net loss, less accretion of the Series X Preferred Stock, by the weighted average number of shares outstanding during the period. Diluted net loss per share of common stock reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that are then shared in the earnings of the entity unless inclusion of such shares would be anti-dilutive. The Company has only incurred losses, therefore, basic and diluted net loss per share is the same. The Company’s potentially dilutive securities include stock options, restricted stock awards and units, convertible preferred stock and warrants. These securities were excluded from the computations of diluted net loss per share for the years ended December 31, 2023 and 2022, as the effect would be to reduce the net loss per share. The following table includes the potential shares of common stock, presented based on amounts outstanding at each period end, that were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect: As of December 31, 2023 2022 Warrants to purchase common stock 3,793,388 10,196,268 Convertible Preferred Stock 1,363,636 1,363,636 Options to purchase common stock 1,328,621 1,206,905 Unvested restricted stock units 258,885 125,000 Unvested restricted stock awards 891 891 Total 6,745,421 12,892,700 Included within the weighted average shares of common stock outstanding for the year ended December 31, 2022 are 6,300,000 shares of common stock issuable upon the exercise of Pre-Funded Warrants (See Note 12), as the warrants were exercisable at any time for nominal consideration and, as such, the shares were considered outstanding for the purpose of calculating basic and diluted net loss per share attributable to common stockholders. There were no unexercised Pre-Funded Warrants as of December 31, 2023. The following table presents the calculation of basic and diluted EPS: Years Ended December 31, 2023 2022 Numerator: Net Loss $ (8,439) $ (18,679) Accretion of Series X Preferred Stock (150) — Net Loss Attributable to Common Stockholders $ (8,589) $ (18,679) Denominator Weighted Average Number of Shares of Common Stock Outstanding - Basic and Diluted 23,322,915 14,304,512 Net Loss Per Share Attributable to Common Stockholders - Basic and Diluted $ (0.37) $ (1.31) Accumulated Other Comprehensive Income Accumulated other comprehensive income includes all changes in equity during a period except those that resulted from investments by or distributions to the Company’s stockholders. Accumulated other comprehensive income refers to revenues, expenses, gains and losses that are included in comprehensive income, but excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity. Accumulated other comprehensive income consists of unrealized gains and losses on available‑for‑sale investment debt securities and foreign currency translation adjustments. Adoption of Recent Accounting Pronouncements and New Accounting Pronouncements The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequences of the change to its consolidated financial statements and assures that there are proper controls in place to ascertain that the Company’s consolidated financial statements properly reflect the change. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) , which introduced an impairment model that is based on expected credit losses, rather than incurred losses, to estimate credit losses on certain types of financial instruments (e.g., loan commitments). The expected credit losses should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. Financial instruments with similar risk characteristics may be grouped together when estimating expected credit losses. In addition, ASC 326 requires expected credit related losses for trade accounts receivable, as well as available-for-sale debt securities, which are to be recorded through an allowance for credit losses, while non-credit related losses will continue to be recognized through other comprehensive income. The Company adopted the new guidance, as of January 1, 2023, and it did not have a material impact on the consolidated financial statements. In November 2023, the FASB issued ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures , which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is in the process of determining the effect this ASU will have on the consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures , which updates income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This ASU also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is in the process of determining the effect this ASU will have on the consolidated financial statements. |
