Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2023

Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements

The accompanying condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the U. S. Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements.

The condensed consolidated balance sheet at June 30, 2023, and the condensed consolidated statements of operations, comprehensive loss, and changes in stockholders' equity for the three and six months ended June 30, 2023 and 2022 and cash flows for the six months ended June 30, 2023 and 2022 are unaudited, but include all adjustments, consisting of normal recurring adjustments the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The results for the three and six months ended June 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023 or for any future interim period. The condensed consolidated balance sheet at December 31, 2022 has been derived from audited financial statements, however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2022 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as filed with the SEC on March 30, 2023. The Company’s consolidated subsidiaries consist of its wholly-owned subsidiaries, Rockwell Transportation, Inc. and Rockwell Medical India Private Limited.

The accompanying condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles ("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 financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Restatement of Loss Per Share

Earnings per share for the three and six months ended June 30, 2022 have been recalculated and restated and is presented on a comparable basis with the three and six months ended June 30, 2023. In the first quarter of 2023, the Company determined it should have included pre-funded warrants issued in Q2 2022 in the earnings per share calculation accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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 earnings per share calculations does not have a material impact on previously issued financial statements and is correct to recalculate and restate 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. See the table presentation of loss per share calculations as of June 30, 2023 and 2022 in the "Loss Per Share Including Restated Amounts" section below.


	Three Months Ended June 30,			Six Months Ended June 30,
		2022			2022
As Previously Reported:
Net loss per share attributable to common stockholders - basic and diluted		$	(0.56)		$	(1.40)
Weighted average number of shares of common stock outstanding - basic and diluted		8,805,190			8,675,428

As Restated:
Net loss per share attributable to common stockholders - basic and diluted		$	(0.43)		$	(1.20)
Weighted average number of shares of common stock outstanding - basic and diluted		11,591,768			10,076,415

Loss Per Share

Basic and diluted net loss per share for the three and six months ended June 30, 2023 and 2022, after giving effect to the restatement discussed above, was calculated as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands, Except Shares and Per Share Amounts)	2023		2022		2023		2022
Numerator:
Net loss	$	(3,305)	$	(4,967)	$	(5,055)	$	(12,128)
Net loss attributable to common stockholders for basic and diluted loss per share	$	(3,305)	$	(4,967)	$	(5,055)	$	(12,128)

Denominator:
Weighted average number of shares of common stock outstanding - basic and diluted	18,496,640		11,591,768		18,480,248		10,076,415
Net loss per share attributable to common stockholders - basic and diluted	$	(0.18)	$	(0.43)	$	(0.27)	$	(1.20)

Included within the weighted average shares of common stock outstanding for the three and six months ended June 30, 2023 and 2022, are 1,793,000 and 9,056,377 shares of common stock issuable upon the exercise of the pre-funded warrants (See Note 10), as the warrants are exercisable at any time for nominal consideration, and as such, the shares are considered outstanding for the purpose of calculating basic and diluted net loss per share attributable to common stockholders.

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 three and six months ended June 30, 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 June 30,
	2023	2022
Options to purchase common stock	1,570,599	423,317
Unvested restricted stock awards	891	891
Unvested restricted stock units	313,065	125,000
Convertible Preferred Stock	1,363,636	1,363,636
Warrants to purchase common stock	10,196,268	12,303,432
Total	13,444,459	14,216,276

Adoption of Recent Accounting Pronouncements

The Company continually assesses new accounting pronouncements to determine their applicability. When it is determined a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a review to determine the consequences of the change to its consolidated financial statements and assures there are sufficient controls in place to ascertain the Company’s consolidated financial statements properly reflect the change.

In June 2016, the FASB issued Accounting Standards Update ("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 relates losses for available-for-sale debt securities 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 Condensed Consolidated Financial Statements.