What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-09 compared with 2020-08-10 · 323 added, 252 removed, 479 unchanged (55% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

September 30,

2020 December 31,

Cash and Cash Equivalents $ 56,614 $ 11,794

7 unchanged sentences

Right of Use Assets, net 2,099 3,213

Goodwill 921 921

Other Non-Current Assets 629 435

Total Assets $ 85,236 $ 44,317

LIABILITIES AND STOCKHOLDERS’ EQUITY

15 unchanged sentences

Preferred Stock, $ 0.0001 par value, 2,000,000 shares authorized;

no shares issued and outstanding at June 30, 2020 and December 31, 2019

no shares issued and outstanding at September 30, 2020 and December 31, 2019

Common Stock, $ 0.0001 par value;

170,000,000 shares authorized;

70,156,922 and 65,378,890 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

93,573,165 and 65,378,890 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

Additional Paid-in Capital 370,760 326,777

Accumulated Deficit ( 328,743 ) ( 306,516 )

( 321,392,548

( 306,516,265

Accumulated Other Comprehensive Income 49 52

4 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30, 2020

Three Months Ended June 30, 2019

Six Months Ended June 30, 2020

Six Months Ended June 30, 2019

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Amounts)

Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019

Net Sales $ 15,280 $ 15,407 $ 47,033 $ 45,812

Cost of Sales 14,934 15,424 44,693 44,085

Gross Profit 346 ( 17 ) 2,340 1,727

Selling and Marketing 1,669 1,827 5,738 7,149

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Interest Income 2 97 239 289

Total Other Income

Total Other Income (Expense) ( 660 ) 87 ( 1,879 ) 297

Net Loss $ ( 7,350 ) $ ( 7,855 ) $ ( 22,227 ) $ ( 26,826 )

Basic and Diluted Net Loss per Share $ ( 0.10 ) $ ( 0.12 ) $ ( 0.32 ) $ ( 0.45 )

3 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three Months Ended June 30, 2020

Three Months Ended June 30, 2019

Six Months Ended June 30, 2020

Six Months Ended June 30, 2019

Unrealized Loss on Available-for-Sale Debt Instrument Investments

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Dollars in Thousands)

Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019

Net Loss $ ( 7,350 ) $ ( 7,855 ) $ ( 22,227 ) $ ( 26,826 )

Unrealized Gain (Loss) on Available-for-Sale Debt Instrument Investments 2 6 ( 11 ) 10

Foreign Currency Translation Adjustments 1 ( 1 ) 8 ( 1 )

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the three and six months ended June 30, 2020

ADDITIONAL PAID-IN CAPITAL

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Dollars in Thousands)

COMMON STOCK ADDITIONAL PAID-IN CAPITAL ACCUMULATED

DEFICIT ACCUMULATED

COMPREHENSIVE

STOCKHOLDERS'

SHARES AMOUNT

Balance as of January 1, 2020 65,378,890 $ 7 $ 326,777 $ ( 306,516 ) $ 52 $ 20,320

( 306,516,265

Net Loss — — — ( 7,984 ) — ( 7,984 )

Unrealized Loss on Available-for-Sale Investments — — — — ( 7 ) ( 7 )

Foreign Currency Translation Adjustments — — — — 6 6

Issuance of common stock, net of offering costs/Bought Deal

Issuance of common stock, net of offering costs/Public Offering 3,670,212 — 8,003 — — 8,003

Issuance of Warrants related to Debt Financing — — 501 — — 501

1 unchanged sentence

Balance as of March 31, 2020 69,049,102 $ 7 $ 336,216 $ ( 314,500 ) $ 51 $ 21,774

( 314,500,003

Net Loss — — — ( 6,893 ) — ( 6,893 )

Unrealized Loss on Available-for-Sale Investments — — — — ( 6 ) ( 6 )

Foreign Currency Translation Adjustments — — — — 1 1

Issuance of common stock, net of offering costs/Public offering

Issuance of common stock, net of offering costs/At-the-Market Offering 987,716 — 1,978 — — 1,978

Vesting of Restricted Stock Units Issued, net of taxes withheld 120,104 — ( 19 ) — — ( 19 )

2 unchanged sentences

Balance as of June 30, 2020 70,156,922 $ 7 $ 337,551 $ ( 321,393 ) $ 46 $ 16,211

( 321,392,548

Net Loss — — — ( 7,350 ) — ( 7,350 )

Unrealized Gain on Available-for-Sale Investments — — — — 2 2

Foreign Currency Translation Adjustments — — — — 1 1

Issuance of common stock, net of offering costs/Public Offering 23,178,809 2 32,675 — — 32,677

Issuance of common stock, net of offering costs/At-the-Market Offering 140,892 — 284 — — 284

Vesting of Restricted Stock Units Issued, net of taxes withheld 96,542 — — — — —

Stock-based Compensation expense — — 250 — — 250

Balance as of September 30, 2020 93,573,165 $ 9 $ 370,760 $ ( 328,743 ) $ 49 $ 42,075

The accompanying notes are an integral part of the condensed consolidated financial statements.

1 unchanged sentence

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the three and six months ended June 30, 2019

ADDITIONAL PAID-IN CAPITAL

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Dollars in Thousands)

COMMON STOCK ADDITIONAL PAID-IN CAPITAL ACCUMULATED

DEFICIT ACCUMULATED

COMPREHENSIVE

STOCKHOLDERS'

SHARES AMOUNT

Balance as of January 1, 2019 57,034,154 $ 6 $ 299,596 $ ( 272,388 ) $ 63 $ 27,277

( 272,388,234

Net Loss — — — ( 8,679 ) — ( 8,679 )

Unrealized Loss on Available-for-Sale Investments — — — — ( 7 ) ( 7 )

4 unchanged sentences

Balance as of March 31, 2019 57,128,327 $ 6 $ 301,166 $ ( 281,067 ) $ 56 $ 20,161

( 281,066,581

Net Loss — — — ( 10,292 ) — ( 10,292 )

Unrealized Gain on Available-for-Sale Investments — — — — 12 12

4 unchanged sentences

Balance as of June 30, 2019 63,398,704 $ 6 $ 320,877 $ ( 291,359 ) $ 68 $ 29,592

( 291,358,764

Net Loss — — — ( 7,855 ) — ( 7,855 )

Unrealized Gain on Available-for-Sale Investments — — — — 6 6

Foreign Currency Translation Adjustments — — — — ( 1 ) ( 1 )

Delivery of common stock underlying restricted stock units, net of tax 62,800 — ( 85 ) — — ( 85 )

Issuance of common stock, net of offering costs/Public Offering 425,880 — 1,169 — — 1,169

Stock-based Compensation — — 876 — — 876

Balance as of September 30, 2019 63,887,384 $ 6 $ 322,837 $ ( 299,214 ) $ 73 $ 23,702

The accompanying notes are an integral part of the condensed consolidated financial statements.

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended June 30, 2020 and 2019

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

For the nine months ended September 30, 2020 and 2019

Cash Flows From Operating Activities:

Net Loss $ ( 22,227 ) $ ( 26,826 )

Adjustments To Reconcile Net Loss To Net Cash Used In Operating Activities:

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(Increase) Decrease in Inventory ( 953 ) 293

(Increase) Decrease in Prepaid and Other Assets

Decrease in Prepaid and Other Assets 161 931

Increase (Decrease) in Accounts Payable 1,172 ( 1,298 )

Increase (Decrease) in Settlement Payable

Decrease in Settlement Payable ( 104 ) ( 147 )

Decrease in Lease Liability ( 1,056 ) ( 1,369 )

Decrease in Other Liabilities

Increase (Decrease) in Other Liabilities 423 ( 1,229 )

Decrease in Deferred License Revenue ( 1,338 ) ( 1,690 )

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We plan to leverage our experience with Triferic to develop our FPC platform for iron deficiency and iron deficiency anemia in other disease states.

Our lead indication is developing FPC for the treatment of iron deficiency anemia in patients undergoing home infusion therapy.

We are also a manufacturer of hemodialysis concentrates for dialysis providers and distributors in the United States and abroad.

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Liquidity and Capital Resources

As of June 30, 2020 , the Company had approximately $ 26.7 million of cash and cash equivalents, $ 13.3 million of investments available-for-sale, working capital of $ 40.0 million and an accumulated deficit of $ 321.4 million .

Net cash used in operating activities for the six months ended June 30, 2020 was approximately $ 16.2 million .

As of September 30, 2020, the Company had approximately $ 56.6 million of cash and cash equivalents, $ 10.7 million of investments available-for-sale, working capital of $ 65.2 million and an accumulated deficit of $ 328.7 million.

Net cash used in operating activities for the nine months ended September 30, 2020 was approximately $ 21.1 million.

Management evaluated the Company’s ability to continue as going concern for at least the next 12 months from the filing of this report.

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On March 16, 2020, the Company closed a debt financing transaction with net proceeds at closing of approximately $ 21.2 million, net of fees and expenses (See Note 15 for further detail).

During the six months ended June 30, 2020, the Company sold 987,716 shares of its common stock as part of its sales agreement with Cantor Fitzgerald & Co.

On September 23, 2020, the Company sold 23,178,809 shares of its common stock for proceeds of $ 32.7 million, net of issuance costs (see Note 10 for further detail).

During the nine months ended September 30, 2020, the Company sold 1,128,608 shares of its common stock as part of its sales agreement with Cantor Fitzgerald & Co.

for proceeds of $ 2.3 million, net of issuance costs.

1 unchanged sentence

See Note 10 for further detail.

The Company will require additional capital to sustain its operations and make the investments it needs to execute upon its longer-term business plan, including the continued commercialization of Triferic Dialysate and Triferic AVNU, executing plans for enhancing its medical capabilities, generating additional data for Triferic and developing Triferic for new therapeutic indications.

The Company will require additional capital to sustain its operations and make the investments it needs to execute upon its longer-term business plan, including the commercialization of Triferic Dialysate and Triferic AVNU, executing upon our plans for enhancing Triferic's medical capabilities, generating additional data for Triferic and developing Triferic for new therapeutic indications.

If the Company is unable to generate sufficient revenue from its existing long-term business plan, the Company will need to obtain additional equity or debt financing.

If the Company attempts to obtain additional debt or equity financing, the Company cannot assume that such financing will be available on favorable terms, if at all.

The COVID-19 pandemic and resulting global disruptions have adversely affected our business and operations, including, but not limited to, our sales and marketing efforts and our research and development activities, and the operations of third parties upon whom we rely.

As noted above, we intend to initiate a sample evaluation program for Triferic AVNU during the third quarter of 2020 in order to prepare for a commercial launch.

Quarantines, shelter-in-place, executive and similar government orders may negatively impact our sales and marketing activities, particularly if our sales representatives are unable to interact with current and potential customers to the same extent as before onset of the COVID-19 pandemic.

Depending on the severity of the impact on our sales and marketing efforts, the timing of our commercial launch of Triferic AVNU could be adjusted into the first quarter of 2021.

The COVID-19 pandemic and resulting global disruptions have caused significant volatility in financial and credit markets.

We have utilized a range of financing methods to fund our operations in the past;

however, current conditions in the financial and

In addition, the Company is subject to certain covenants and cure provisions under our Loan Agreement with Innovatus.

As of the date of this report, the Company believes that it will either be able to satisfy such covenants or, in the event of a breached covenant, exercise cure provisions to avoid an event of default.

If we are unable to avoid an event of default, any required repayments could have an adverse effect on our liquidity (See Note 15 for further detail).

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

credit markets may limit the availability of funding or increase the cost of funding.

The COVID-19 pandemic and resulting domestic and global disruptions have adversely affected our business and operations, including, but not limited to, our sales and marketing efforts and our research and development activities, and the operations of third parties upon whom we rely.

Quarantines, shelter-in-place, executive and similar government orders and the recent surge in infections domestically may negatively impact our sales and marketing activities, particularly if our sales representatives are unable to interact with current and potential customers to the same extent as before onset of the COVID-19 pandemic.

Our international business development activities may also be negatively impacted by COVID-19, especially with the recent surge in infections and resulting quarantines or shelter-in-place orders.

Depending on the severity of the impact on our sales and marketing efforts, the timing of our commercial launch of Triferic AVNU could be delayed.

The COVID-19 pandemic, the recent domestic and international surge in infections and resulting global disruptions have caused significant volatility in financial and credit markets.

We have utilized a range of financing methods to fund our operations in the past;

however, current conditions in the financial and credit markets may limit the availability of funding, refinancing or increase the cost of funding.

Due to the rapidly evolving nature of the global situation, it is not possible to predict the extent to which these conditions could adversely affect our liquidity and capital resources in the future.

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

The accompanying condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

The accompanying condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States (“U.S.”) of America (“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.

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, 2020 , condensed consolidated statements of operations for the three and six months ended June 30, 2020 and 2019 , condensed consolidated statements of cash flows for the six months ended June 30, 2020 and 2019 , and condensed consolidated statement of changes in shareholder’s equity for the three and six months ended June 30, 2020 and 2019 are unaudited, but include all adjustments, consisting of normal recurring adjustments, that 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, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020 or for any future interim period.

The condensed consolidated balance sheet at December 31, 2019 has been derived from audited financial statements, however, it does not include all of the information and notes required by GAAP for complete financial statements.

The condensed consolidated balance sheet at September 30, 2020, condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019, condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2020 and 2019, condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019, and condensed consolidated statement of changes in shareholder’s equity for the three and nine months ended September 30, 2020 and 2019 are unaudited, but include all adjustments, consisting of normal recurring adjustments, that 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 nine months ended September 30, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020 or for any future interim period.

The condensed consolidated balance sheet at December 31, 2019 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, 2019 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 as filed with the SEC on Form 10-K on March 17, 2020.

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Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet 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 asset is amortized over the lease term.

Lease liabilities are increased by

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

interest and reduced by payments each period, and the right-of-use asset is 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 rent expense over the lease term.

3 unchanged sentences

Loss Per Share

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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.

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Securities that could potentially dilute net income per share in the future that were not included in the computation of diluted loss per share were as follows:

As of June 30,

As of September 30,

Options to purchase common stock 6,682,192 8,170,382

2 unchanged sentences

Warrants to purchase common stock 26,426,863 2,770,781

33,501,260 12,412,135

Adoption of Recent Accounting Pronouncements

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When it is determined that 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 that there are sufficient controls in place to ascertain that the Company’s consolidated financial statements properly reflect the change.

In July 2017, the FASB issued ASU No.

2017-11, “Earnings Per Share (Topic 260) and Derivatives and Hedging (Topic 815)- Accounting for Certain Financial Instruments with Down Round Features” (“ASU 2017-11”).

Equity-linked instruments, such as warrants and convertible instruments may contain down round features that result in the strike price being reduced on the basis of the pricing of future equity offerings.

Under ASU 2017-11, a down round feature will no longer require a freestanding equity-linked instrument (or embedded conversion option) to be classified as a liability that is remeasured at fair value through the income statement (i.e.

marked-to-market).

However, other features of the equity-linked instrument (or embedded conversion option) must still be evaluated to determine whether liability or equity classification is appropriate.

Equity classified instruments are not marked-to-market.

For earnings per share ("EPS") reporting, the ASU requires companies to recognize the effect of the down round feature only when it is triggered by treating it as a dividend and as a reduction of income available to common shareholders in basic EPS.

The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

This standard, which the Company as adopted on January 1, 2020, and did not have a material impact on the Company’s financial position, results of operations or cash flows.

Revenue Recognition

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers.

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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

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

services based on their stand-alone selling prices.

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.

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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.

The Company received upfront fees under three distribution and license agreements that have been deferred as a contract liability.

The Company received upfront fees under four distribution and license agreements that have been deferred as a contract liability.

The amounts received from Wanbang Biopharmaceuticals Co., Ltd.

(“Wanbang”) and amounts to be received from Sun Pharmaceutical Industries Ltd.

("Sun 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 and India, respectively, to determine that regulatory approval was probable as of the execution of the agreement.

(“Wanbang”) and Sun Pharmaceutical Industries Ltd.

("Sun Pharma") and amounts to be received Jeil Pharmaceutical Co., Ltd.

("Jeil 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 and South Korea, respectively, to determine that regulatory approval was probable as of the execution of the agreement.

The amounts received from Baxter Healthcare Corporation (“Baxter”), are recognized as revenue at the point in time that the estimated product sales under the agreement occur.

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Revenue is disaggregated by primary geographical market, major product line, and timing of revenue recognition.

In thousands of US dollars ($)

Three Months Ended June 30, 2020

Six Months Ended June 30, 2020

Products By Geographic Area

Rest of World

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Notes to Condensed Consolidated Financial Statements

In thousands of U.S.

dollars ($) Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020

Products By Geographic Area Total U.S.

Rest of World Total U.S.

Rest of World

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Total Concentrate Products 14,996 13,960 1,036 46,257 41,766 4,491

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Notes to Condensed Consolidated Financial Statements

In thousands of US dollars ($)

Three Months Ended June 30, 2019

Six Months Ended June 30, 2019

Products By Geographic Area

Rest of World

Net Revenue $ 15,280 $ 14,188 $ 1,092 $ 47,033 $ 42,375 $ 4,658

In thousands of U.S.

dollars ($) Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019

Products By Geographic Area Total U.S.

Rest of World Total U.S.

Rest of World

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Total Concentrate Products 15,241 13,848 1,393 45,495 40,585 4,910

Net Revenue $ 15,407 $ 13,946 $ 1,461 $ 45,812 $ 40,697 $ 5,115

Contract balances

The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers.

In thousands of US dollars ($)

June 30, 2020

December 31, 2019

In thousands of U.S.

dollars ($) September 30, 2020 December 31, 2019

Receivables, which are included in "Trade and other receivables" $ 4,129 $ 4,203

Contract liabilities $ 10,738 $ 12,076

There were no material losses recognized related to any receivables arising from the Company’s contracts with customers for the three and six months ended June 30, 2020 and 2019 .

For the three and six months ended June 30, 2020 and June 30, 2019 , the Company did not recognize any material bad-debt expense.

There were no material contract assets recorded on the condensed consolidated balance sheet as of June 30, 2020 and December 31, 2019 .

The Company does not generally accept returns of its concentrate products and no material reserve for returns of concentrate products was established as of June 30, 2020 or December 31, 2019 .

There were no material losses recognized related to any receivables arising from the Company’s contracts with customers for the three and nine months ended September 30, 2020 and 2019.

For the three and nine months ended September 30, 2020 and September 30, 2019, the Company did not recognize any material bad-debt expense.

There were no material contract assets recorded on the condensed consolidated balance sheet as of September 30, 2020 and December 31, 2019.

The Company does not generally accept returns of its concentrate products and no material reserve for returns of concentrate products was established as of September 30, 2020 or December 31, 2019.

The contract liabilities primarily relate to upfront payments and consideration received from customers that are received in advance of the customer assuming control of the related products

Transaction price allocated to remaining performance obligations

For the three and six months ended June 30, 2020 , revenue recognized from performance obligations related to prior periods was not material.

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 $ 11.1 million as of June 30, 2020 .

For the three and nine months ended September 30, 2020, revenue recognized from performance obligations related to prior periods was not material.

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Notes to Condensed Consolidated Financial Statements

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.

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The Baxter Agreement includes minimum commitments of product sales over the duration of the agreement.

Unfulfilled performance obligations related to the Baxter Agreement are product sales of $ 8.2 million as of June 30, 2020, which is being amortized ratably through expiration of the Baxter Agreement on October 2, 2024.

Unfulfilled minimum commitments related to the Baxter Agreement are product sales of $ 7.7 million as of September 30, 2020, which is being amortized ratably through expiration of the Baxter Agreement on October 2, 2024.

Investments - Available-for-Sale

Investments available-for-sale consisted of the following as of June 30, 2020 and December 31, 2019 :

June 30, 2020

Amortized Cost

Unrealized Gain

Unrealized Loss

Accrued Interest Income

Investments available-for-sale consisted of the following as of September 30, 2020 and December 31, 2019 (table in thousands):

September 30, 2020

Amortized Cost Unrealized Gain Unrealized Loss Accrued Interest Income Fair Value

Available-for-Sale Securities

Bonds $ 10,679 $ 3 $ ( 1 ) $ 21 $ 10,702

December 31, 2019

Amortized Cost

Unrealized Gain

Unrealized Loss

Accrued Interest

Amortized Cost Unrealized Gain Unrealized Loss Accrued Interest Fair Value

Available-for-Sale Securities

Bonds $ 14,238 $ 13 $ ( 1 ) $ — $ 14,250

The fair value of investments available-for-sale are determined using quoted market prices from daily exchange-traded markets based on the closing price as of the balance sheet date and are classified as a Level 1 measurement under ASC 820 Fair Value Measurements.

As of June 30, 2020 and December 31, 2019 , the amortized cost and estimated fair value of our available-for-sale securities were due within one year.

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Notes to Condensed Consolidated Financial Statements

Components of inventory, net of reserves, as of June 30, 2020 and December 31, 2019 are as follows:

As of September 30, 2020 and December 31, 2019, the amortized cost and estimated fair value of our available-for-sale securities were due within one year.

Components of inventory, net of reserves, as of September 30, 2020 and December 31, 2019 are as follows (table in thousands):

September 30,

2020 December 31,

Raw Materials $ 2,794 $ 2,471

1 unchanged sentence

Finished Goods 1,613 1,432

As of June 30, 2020 , we classified $ 0.8 million of inventory as non-current, all of which was related to Triferic or the active pharmaceutical ingredient and raw materials for Triferic.

As of June 30, 2020 , we had total Triferic inventory aggregating $ 3.7 million , against which we had reserved $ 2.5 million .

Total $ 4,736 $ 4,088

As of September 30, 2020, we classified $ 0.9 million of inventory as non-current, all of which was related to Triferic or the active pharmaceutical ingredient and raw materials for Triferic.

As of September 30, 2020, the total Triferic inventory was $ 3.8 million, against which we had reserved $ 2.7 million.

The $ 1.1 million net value of Triferic inventory consisted of $ 0.1 million of Triferic Dialysate finished goods with expiration dates ranging from December 2020 to May 2021, $ 0.3 million of Triferic API with estimated remaining shelf life extending through 2021, and $ 0.7 million of raw materials for Triferic with estimated remaining shelf life extending beyond 2025.

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Notes to Condensed Consolidated Financial Statements

Property and Equipment

As of June 30, 2020 and December 31, 2019 , the Company’s property and equipment consisted of the following:

As of September 30, 2020 and December 31, 2019, the Company’s property and equipment consisted of the following (table in thousands):

September 30,

2020 December 31,

Leasehold Improvements $ 1,176 $ 1,162

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Property and Equipment, net $ 2,785 $ 2,433

Depreciation expense for the three months ended June 30, 2020 and 2019 totaled $ 0.2 million .

Depreciation expense for the six months ended June 30, 2020 and 2019 totaled $ 0.4 million .

Depreciation expense for the three months ended September 30, 2020 and 2019 totaled $ 0.2 million.

Depreciation expense for the nine months ended September 30, 2020 and 2019 totaled $ 0.6 million.

Accrued Liabilities

Accrued liabilities as of June 30, 2020 and December 31, 2019 consisted of the following:

Accrued liabilities as of September 30, 2020 and December 31, 2019 consisted of the following (table in thousands):

September 30,

2020 December 31,

Accrued Research & Development Expense $ 258 $ 283

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The upfront fee was recorded as deferred revenue and is being recognized based on the proportion of product shipments to Baxter in each period, compared with total expected sales volume over the term of the Baxter Agreement, which expires in October 2024.

The Company recognized revenue of approximately $ 0.5 million and $ 1.0 million for the three and six months ended June 30,

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AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

2020 and 2019 , respectively.

Deferred revenue related to the Baxter Agreement totaled $ 8.2 million as of June 30, 2020 and $ 9.1 million as of December 31, 2019 .

The Company recognized revenue of approximately $ 0.5 million and $ 1.5 million for the three and nine months ended September 30, 2020 and 2019, respectively.

Deferred revenue related to the Baxter Agreement totaled $ 7.7 million as of September 30, 2020 and $ 9.1 million as of December 31, 2019.

If a “Refund Trigger Event” occurs under the Baxter Agreement, we would be obligated to repay a portion of the upfront fee and any paid portion of the facility fee.

In the event of a Refund Trigger Event occurring from April 1, 2020 to December 31, 2021, Baxter would be eligible for a 25 % refund of the Baxter Agreement’s upfront fee.

In the event of a Refund Trigger Event occurring from October 1, 2020 to December 31, 2021, Baxter would be eligible for a 25 % refund of the Baxter Agreement’s upfront fee.

In addition, if Baxter terminates the Baxter Agreement because Baxter has been enjoined by a court of competent jurisdiction from selling in the United States any product covered by the Baxter Agreement due to a claim of intellectual property infringement or misappropriation relating to such product prior to the end of 2020, Baxter would be eligible for a partial refund of the upfront fee of $ 5.0 million.

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The upfront fee was recorded as deferred revenue and is being recognized as revenue based on the agreement term.

The Company recognized revenue of approximately $ 53,000 and $ 0.1 million for the three and six months ended June 30, 2020 and 2019 , respectively.

Deferred revenue related to the Wanbang Agreement totaled $ 2.9 million as of June 30, 2020 and $ 3.0 million as of December 31, 2019 .

On January 14, 2020, we entered into license and supply agreements with Sun Pharma (the "Sun Pharma Agreements"), for the rights to commercialize Triferic Dialysate (ferric pyrophosphate citrate) in India.

Under the terms of the Sun Pharma Agreements, Sun Pharma will be the exclusive development and commercialization partner for Triferic Dialysate in India, and we will supply the product to Sun Pharma.

In consideration for the license, we received an upfront fee of $ 0.1 million , and will be eligible for milestone payments and royalties on net sales.

The Company recognized revenue of approximately $ 53,000 and $ 0.2 million for the three and nine months ended September 30, 2020 and 2019, respectively.

Deferred revenue related to the Wanbang Agreement totaled $ 2.8 million as of September 30, 2020 and $ 3.0 million as of December 31, 2019.

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

On January 14, 2020, the Company entered into license and supply agreements with Sun Pharma (the "Sun Pharma Agreements"), for the rights to commercialize Triferic Dialysate (ferric pyrophosphate citrate) in India.

Under the terms of the Sun Pharma Agreements, Sun Pharma will be the exclusive development and commercialization partner for Triferic Dialysate in India, and the Company will supply the product to Sun Pharma.

In consideration for the license, the Company received an upfront fee of $ 0.1 million, and will be eligible for milestone payments and royalties on net sales.

A Joint Alliance Committee, comprised of members from the Company and Sun Pharma, will guide the development and execution for Triferic Dialysate in India.

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The upfront fee was recorded as deferred revenue and is being recognized as revenue based on the agreement term.

The Company recognized revenue of approximately $ 2,500 and $ 5,000 during the three and six months ended June 30, 2020 , respectively.

The Company recognized revenue of approximately $ 2,500 and $ 7,500 during the three and nine months ended September 30, 2020, respectively.

Deferred revenue related to the Sun Pharma Agreement totaled $ 92,500 as of September 30, 2020.

On September 7, 2020, the Company entered into a license and supply agreements with Jeil Pharma (the "Jeil Pharma Agreements"), for the rights to commercialize Triferic Dialysate (ferric pyrophosphate citrate) in South Korea.

Under the terms of the Jeil Pharma Agreements, Jeil Pharma will be the exclusive development and commercialization partner for Triferic Dialysate in South Korea, and the Company will supply the product to Jeil Pharma.

In consideration for the license, the Company received an upfront fee of $ 0.2 million, and will be eligible for milestone payments and royalties on net sales.

A Joint Alliance Committee, comprised of members from the Company and Jeil Pharma, will guide the development and execution for Triferic Dialysate in South Korea.

Jeil Pharma will be responsible for all clinical and regulatory approval, as well as commercialization activities.

The upfront fee was recorded as deferred revenue and is being recognized as revenue based on the agreement term.

The Company recognized revenue of nil during the three and nine months ended September 30, 2020.

Stockholders’ Equity

The Company held its annual meeting of stockholders on May 18, 2020 (the “Annual Meeting”).

At the Annual Meeting, the Company’s stockholders approved the amendment and restatement of the Rockwell Medical, Inc.

2018 Long Term Incentive Plan to increase the number of shares of common stock issuable thereunder by 2,900,000 shares (the “Amended 2018 Plan”).

Preferred Stock

As of June 30, 2020 and December 31, 2019 , there were 2,000,000 shares of preferred stock, $ 0.0001 par value per share, authorized and no shares of preferred stock issued or outstanding.

As of June 30, 2020 and December 31, 2019 , there were 170,000,000 shares of common stock, $ 0.0001 par value per share, authorized and 70,156,922 and 65,378,890 shares issued and outstanding, respectively.

As of September 30, 2020 and December 31, 2019, there were 2,000,000 shares of preferred stock, $ 0.0001 par value per share, authorized and no shares of preferred stock issued or outstanding.

As of September 30, 2020 and December 31, 2019, there were 170,000,000 shares of common stock, $ 0.0001 par value per share, authorized and 93,573,165 and 65,378,890 shares issued and outstanding, respectively.

Controlled Equity Offering (or "At the Market" Offering)

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The Company may suspend or terminate the Sales Agreement at any time.

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

During the year ended December 31, 2019, the Company sold 1,840,443 of shares of its common stock pursuant to the Sales Agreement for gross proceeds of $ 5,383,079 , at a weighted average selling price of approximately $ 2.92 .

The Company paid $ 309,479 in commissions and offering fees related to the sale of the common stock.

For the six months ended June 30, 2020 , the Company sold 987,716 of shares of its common stock pursuant to the Sales Agreement for gross proceeds of $ 2,034,073 , at a weighted average selling price of approximately $ 2.06 .

For the nine months ended September 30, 2020, the Company sold 1,128,608 of shares of its common stock pursuant to the Sales Agreement for gross proceeds of $ 2,325,478 , at a weighted average selling price of approximately $ 2.06 .

The Company paid $ 63,000 in commissions and offering fees related to the sale of common stock.

Approximately $ 32.3 million remains available for sale under this facility.

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

We are not required to sell any shares at any time during the term of the facility.

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333-227363), which was previously filed with the SEC.

On September 23, 2020, the Company entered into a Securities Purchase Agreement (the “2020 Purchase Agreement”) with certain purchasers named therein, pursuant to which the Company agreed to issue and sell to several institutional and accredited investors in a registered direct offering, 21,818,544 shares of common stock and warrants to purchase up to 23,178,509 shares of common stock (the “Warrants”) at a combined purchase price equal to $ 1.51 per share.

Each Warrant is exercisable for one share of common stock at an exercise price of $ 1.80 per share.

The Warrants are immediately exercisable and will expire on September 25, 2022.

The Company also offered to certain purchasers pre-funded warrants to purchase up to an aggregate of 1,360,265 shares of common stock (the “Pre-Funded Warrants”), in lieu of shares of common stock.

The purchase price of each Pre-Funded Warrant is equal to the price at which a share of common stock is sold to the public in the offering, minus $ 0.001 , and the exercise price of each Pre-Funded Warrant is $ 0.001 per share.

The Pre-Funded Warrants were exercised in conjunction with the issuance of common stock under the Securities Purchase Agreement.

The Company received gross proceeds of approximately $ 35.0 million in connection with the offering, before deducting placement agent fees and related offering expenses of approximately $ 2.3 million.

A holder (together with its affiliates) may not exercise any portion of the Warrant to the extent that the holder would own more than 9.99 % (or, at the holder’s option upon issuance, 4.99 %) of the Company’s outstanding common stock immediately after exercise, as such percentage ownership is determined in accordance with the terms of the Warrant or Pre-Funded Warrant.

The Company agreed to pay H.C.

Wainwright & Co., LLC (the "Placement Agent") a cash fee of 6.0 % of the aggregate gross proceeds raised in the offering, minus $ 420,000 payable by the Company to a financial advisory firm for services related to the offering.

In addition, the Company agreed to pay the Placement Agent (i) 6.0 % of the aggregate gross proceeds to be received, if any, from the cash exercise of any Warrants through December 25, 2021 and (ii) 4.0 % of the aggregate gross proceeds to be received, if any, from the cash exercise of any Warrants subsequent to December 25, 2021.

The Company also agreed to pay the Placement Agent non-accountable expenses of $ 50,000 as well as $ 12,900 for the clearing fees of the Placement Agent in connection with the offering.

The Company has accounted for the common stock for the 2020 Purchase Agreement as equity on the accompanying consolidated balance sheets as of September 30, 2020.

The amount allocated to common stock was $ 26.1 million.

This allocation is equal to the total proceeds of $ 35.0 million less the amount allocated to Warrants of $ 8.9 million and is also net of the direct and incremental costs associated with the 2020 Purchase Agreement of $ 2.3 million.

The Black-Scholes pricing model was used to calculate the value of Warrants relating to the 2020 Purchase Agreement.

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Stock-Based Compensation

The Company recognized total stock-based compensation expense during the three and six months ended June 30, 2020 and 2019 as follows:

The Company recognized total stock-based compensation expense during the three and nine months ended September 30, 2020 and 2019 as follows (table in thousands):

Three Months Ended

Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Service-based awards:

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Stock option awards 243 597 1,019 1,796

252 1,099 1,262 3,070

Performance-based awards:

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Stock option awards 121 110 ( 390 ) 357

( 2 ) ( 222 ) ( 1,538 ) 825

Total $ 250 $ 877 $ ( 276 ) $ 3,895

Restricted Stock

A summary of the Company’s restricted stock awards during the six months ended June 30, 2020 is as follows:

Number of Shares

Weighted Average

A summary of the Company’s restricted stock awards during the nine months ended September 30, 2020 is as follows:

Number of Shares Weighted Average

Unvested at January 1, 2020 146,800 $ 5.70

Unvested at June 30, 2020

A summary of the Company’s restricted stock awards during the six months ended June 30, 2019 is as follows:

Unvested at September 30, 2020 146,800 $ 5.70

A summary of the Company’s restricted stock awards during the nine months ended September 30, 2019 is as follows:

Number of Shares Weighted Average

Unvested at January 1, 2019 146,800 $ 5.70

Unvested at September 30, 2019 146,800 $ 5.70

The fair value of restricted stock awards are measured based on their fair value on the date of grant and amortized over the vesting period of 20 months.

As of September 30, 2020, unvested restricted stock awards of 146,800 were related to performance-based awards.

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

Number of Shares

Weighted Average

Unvested at January 1, 2019

Unvested at June 30, 2019

The fair value of restricted stock awards are measured based on their fair value on the date of grant and amortized over the vesting period of 20 months .

As of June 30, 2020 , unvested restricted stock awards of 146,800 were related to performance-based awards.

Service-Based Restricted Stock Units

A summary of the Company’s service-based restricted stock units during the six months ended June 30, 2020 is as follows:

Number of Shares

Weighted Average

A summary of the Company’s service-based restricted stock units during the nine months ended September 30, 2020 is as follows:

Number of Shares Weighted Average

Unvested at January 1, 2020 463,786 $ 4.26

Unvested at June 30, 2020

A summary of the Company’s service-based restricted stock units during the six months ended June 30, 2019 is as follows:

Number of Shares

Weighted Average

Granted 188,904 2.09

Vested ( 247,561 ) 4.30

Forfeited ( 159,724 ) 4.26

Unvested at September 30, 2020 245,405 $ 2.72

A summary of the Company’s service-based restricted stock units during the nine months ended September 30, 2019 is as follows:

Number of Shares Weighted Average

Unvested at January 1, 2019 472,959 $ 4.32

Unvested at June 30, 2019

Granted 222,497 4.26

Forfeited ( 4,950 ) 4.81

Vested ( 96,542 ) 4.70

Unvested at September 30, 2019 593,964 $ 4.23

The fair value of service based restricted stock units are measured based on their fair value on the date of grant and amortized over the vesting period.

The vesting periods range from 1 to 3 years.

Stock-based compensation expense of nil and $ 0.2 million was recognized during the three and six months ended June 30, 2020 , respectively.

Stock-based compensation expense of $ 0.4 million and $ 0.8 million was recognized during the three and six months ended June 30, 2019 , respectively.

As of June 30, 2020 , the unrecognized stock-based compensation expense was $ 0.6 million , which is expected to be recognized over an estimated weighted average remaining term of 1 year .

Included in the forfeited service-based restricted stock units are 96,541 units related to the resignation of the Company's former President and Chief Executive Officer on April 17, 2020.

Stock-based compensation expense of nil and $ 0.2 million was recognized during the three and nine months ended September 30, 2020, respectively.

Stock-based compensation expense of $ 0.5 million and $ 1.3 million was recognized during the three and nine months ended September 30, 2019, respectively.

As of September 30, 2020, the unrecognized stock-based compensation expense was $ 0.3 million, which is expected to be recognized over an estimated weighted average remaining term of less than 1 year.

Included in the forfeited service-based restricted stock units are 96,541 and 55,556 units related to the resignation of the Company's former President and Chief Executive Officer on April 17, 2020 and the former Chief Financial Officer on July 3, 2020, respectively.

These forfeited awards reduced stock-based compensation expense by $ 0.4 million.

Performance-Based Restricted Stock Units

A summary of the Company’s performance-based restricted stock units during the six months ended June 30, 2020 is as follows:

A summary of the Company’s performance-based restricted stock units during the nine months ended September 30, 2020 is as follows:

Number of Shares Weighted Average

Unvested at January 1, 2020 988,958 $ 4.48

Forfeited ( 988,958 ) 4.48

Unvested at September 30, 2020 — $ —

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

Number of Shares

Weighted Average

Unvested at January 1, 2020

Unvested at June 30, 2020

A summary of the Company’s performance-based restricted stock units during the six months ended June 30, 2019 is as follows:

Number of Shares

Weighted Average

A summary of the Company’s performance-based restricted stock units during the nine months ended September 30, 2019 is as follows:

Number of Shares Weighted Average

Unvested at January 1, 2019 988,958 $ 4.48

Unvested at June 30, 2019

Stock-based compensation expense recognized for performance-based restricted stock units was ($ 1.2 ) million and ($ 1.0 ) million during the three and six months ended June 30, 2020 and $ 0.4 million and $ 0.8 million for the three and six months ended June 30, 2019 , respectively.

As of June 30, 2020 , the unrecognized stock-based compensation expense related to performance-based restricted stock units was $ 0.1 million , which is expected to be recognized over an estimated weighted average remaining term of 2 years .

The forfeited performance-based restricted stock awards of 905,625 is due to the resignation of the Company's former President and Chief Executive Officer on April 17, 2020.

These forfeited awards reduced stock-based compensation expense by $ 1.3 million .

Unvested at September 30, 2019 988,958 $ 4.48

Stock-based compensation expense recognized for performance-based restricted stock units was ($ 0.1 ) million and ($ 1.1 ) million during the three and nine months ended September 30, 2020 and ($ 0.3 ) million and $ 0.5 million for the three and nine months ended September 30, 2019, respectively.

As of September 30, 2020, there was no unrecognized stock-based compensation expense related to performance-based restricted stock units.

The forfeited performance-based restricted stock awards of 988,958 is due to the resignation of the Company's former President and Chief Executive Officer on April 17, 2020 and the resignation of the Company's former Chief Financial Officer effective July 3, 2020.

These forfeited awards reduced stock-based compensation expense for the three and nine months ended September 30, 2020 by $ 0.1 million and $ 1.4 million, respectively.

Service-Based Stock Options

The fair value of the service-based stock options granted for the six months ended June 30, 2020 were based on the following assumptions:

The fair value of the service-based stock options granted for the nine months ended September 30, 2020 were based on the following assumptions:

September 30,

Exercise price $ 1.17 - $ 2.90

$1.77 - $2.45

Expected stock price volatility 68.2 % - 75.0 %

68.2% - 74.4%

Risk-free interest rate 0.31 % - 1.65 %

0.35% - 1.65%

Term (years) 5.5 - 6.0

A summary of the Company’s service-based stock option activity for the nine months ended September 30, 2020 is as follows:

Options Weighted

Average Exercise

Price Weighted

Term Aggregate

Outstanding at January 1, 2020 8,210,024 $ 7.06 5.1 $ 107,150

Granted 2,252,344 1.95 5.9 —

Forfeited ( 440,026 ) 3.96 — —

Expired ( 4,090,150 ) 8.24 — —

Outstanding at September 30, 2020 5,932,192 $ 4.54 6.7 $ —

Exercisable at September 30, 2020 2,889,218 $ 6.95 3.8 $ —

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

A summary of the Company’s service-based stock option activity for the six months ended June 30, 2020 is as follows:

Average Exercise

Outstanding at January 1, 2020

Outstanding at June 30, 2020

Exercisable at June 30, 2020

A summary of the Company’s service-based stock option activity for the six months ended June 30, 2019 is as follows:

A summary of the Company’s service-based stock option activity for the nine months ended September 30, 2019 is as follows:

Options Weighted

Average Exercise

Price Weighted

Term Aggregate

Outstanding at January 1, 2019 7,856,480 $ 7.50 5.2 $ —

Outstanding at June 30

Exercisable at June 30, 2019

Granted 576,477 4.17 9.7 12,074

Exercised ( 30,000 ) 4.93 — —

Forfeited ( 620,700 ) 6.34 — —

Outstanding at September 30, 2019 7,782,257 $ 7.35 5.1 $ 12,074

Exercisable at September 30, 2019 6,340,901 $ 8.07 4.2 $ —

The aggregate intrinsic value in the table above is calculated as the difference between the closing price of our common stock and the exercise price of the stock options that had strike prices below the closing price.

During the six months ended June 30, 2020 , the Company granted stock options to purchase up to 1,610,344 shares of common stock to certain employees.

During the six months ended June 30, 2020 , 211,471 shares were forfeited.

During the nine months ended September 30, 2020, the Company granted stock options to purchase up to 2,252,344 shares of common stock to certain employees.

During the nine months ended September 30, 2020, 440,026 shares were forfeited.

Forfeitures are recorded in the period of occurrence;

compensation expense is adjusted accordingly.

Stock-based compensation expense recognized for service-based stock options was $ 0.3 million and $ 0.8 million for the three and six months ended June 30, 2020 , respectively.

Stock-based compensation expense recognized for service-based stock options was $ 0.5 million and $ 1.2 million for the three and six months ended June 30, 2019 , respectively.

As of June 30, 2020 , total stock-based compensation expense related to unvested options not yet recognized totaled approximately $ 3.1 million , which is expected to be recognized over an estimated weighted average remaining term of 1.4 years .

Included in the forfeited service-based stock options are 129,375 unvested options related to the resignation of the Company's former President and Chief Executive Officer on April 17, 2020.

Stock-based compensation expense recognized for service-based stock options was $ 0.2 million and $ 1.0 million for the three and nine months ended September 30, 2020, respectively.

Stock-based compensation expense recognized for service-based stock options was $ 0.6 million and $ 1.8 million for the three and nine months ended September 30, 2019, respectively.

As of September 30, 2020, total stock-based compensation expense related to unvested options not yet recognized totaled approximately $ 2.8 million, which is expected to be recognized over an estimated weighted average remaining term of 2.4 years.

Included in the forfeited service-based stock options are 129,375 unvested options related to the resignation of the Company's former President and Chief Executive Officer on April 17, 2020 and 222,222 unvested options related to the resignation of the Company's former Chief Financial Officer effective July 3, 2020.

These forfeited awards reduced stock-based compensation expense by $ 0.5 million.

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Performance-Based Stock Options

A summary of the performance-based stock options for the six months ended June 30, 2020 is as follows:

A summary of the performance-based stock options for the nine months ended September 30, 2020 is as follows:

Number of Shares Weighted Average

Outstanding at January 1, 2020 388,125 $ 4.70

Granted 750,000 2.20

Forfeited ( 388,125 ) 4.70

Outstanding at September 30, 2020 750,000 $ 2.20

Exercisable at September 30, 2020 — $ —

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

Number of Shares

Weighted Average

Outstanding at January 1, 2020

Outstanding at June 30, 2020

Exercisable at June 30, 2020

A summary of the performance-based stock options for the six months ended June 30, 2019 is as follows:

Number of Shares

Weighted Average

A summary of the performance-based stock options for the nine months ended September 30, 2019 is as follows:

Number of Shares Weighted Average

Outstanding at January 1, 2019 388,125 $ 4.70

Outstanding at June 30, 2019

Exercisable at June 30, 2019

Stock-based compensation expense recognized for performance-based stock options was ($ 0.6 ) million and ($ 0.5 ) million for the three and six months ended June 30, 2020 .

Stock-based compensation expense recognized for performance-based stock options was $ 0.1 million and $ 0.2 million during the three and six months ended June 30, 2019 .

As of June 30, 2020 , the unrecognized stock-based compensation expense related to unvested performance-based stock options was $ 0.1 million .

Outstanding at September 30, 2019 388,125 $ 4.70

Exercisable at September 30, 2019 — $ —

Stock-based compensation expense recognized for performance-based stock options was $ 0.1 million and ($ 0.4 ) million for the three and nine months ended September 30, 2020.

Stock-based compensation expense recognized for performance-based stock options was $ 0.1 million and $ 0.4 million during the three and nine months ended September 30, 2019.

As of September 30, 2020, the unrecognized stock-based compensation expense related to unvested performance-based stock options was $ 0.4 million.

The forfeited unvested performance-based stock options of 388,125 is due to the resignation of the Company's former President and Chief Executive Officer on April 17, 2020.

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Gupta, payable in four quarterly installments of $ 250,000 each on October 15, 2018, January 15, 2019, April 15, 2019 and July 15, 2019, and reimbursement for certain legal fees incurred in connection with the Charak MSA.

The Company recorded $ 1.1 million as Research and Development Expense - License Acquired (Related Party) for the twelve months ended December 31, 2018 .

The Company paid all four of the quarterly installments totaling $ 1.0 million and accrued $ 0.1 million for the reimbursement of certain legal expenses during the year ended December 31, 2019.

As of June 30, 2020 , and December 31, 2019 , the Company accrued $ 27,500 and $ 0.1 million , respectively, as a related party payable on the condensed consolidated balance sheet.

In addition, the Company accrued $ 0.2 million relating to certain IP reimbursement expenses as a related party payable on the condensed consolidated balance sheet.

As of September 30, 2020, the Company has fulfilled its reimbursement obligation of certain legal expenses and accrued $ 0.1 million relating to certain IP reimbursement expenses and certain sublicense royalty fees as a related party payable on the condensed consolidated balance sheet.

Pursuant to the Charak MSA, the aforementioned parties entered into an Amendment, dated as of October 7, 2018 (the “Charak Amendment”), to the 2002 Agreement, under which Charak granted the Company an exclusive, worldwide, non-transferable license to commercialize SFP for the treatment of patients with renal failure.

The Charak Amendment amends the royalty payments due to Charak under the 2002 Agreement such that the Company is liable to pay Charak royalties on net sales by the Company of products developed under the license, which includes the Company’s Triferic® product, at a specified rate until December 31, 2021 and thereafter at a reduced rate from January 1, 2022 until February 1, 2034.

Additionally, the Company

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

shall pay Charak a percentage of any sublicense income during the term of the agreement, which amount shall not be less than a minimum specified percentage of net sales of the licensed products by the sub-licensee in jurisdictions where there exists a valid claim, on a country-by-country basis, and be no less than a lower rate of the net sales of the licensed products by the sub-licensee in jurisdictions where there exists no valid claim, on a country-by-country basis.

Additionally, the Company shall pay Charak a percentage of any sublicense income during the term of the agreement, which amount shall not be less than a minimum specified percentage of net sales of the licensed products by the sub-licensee in jurisdictions where there exists a valid claim, on a country-by-country basis, and be no less than a lower rate of the net sales of the licensed products by the sub-licensee in jurisdictions where there exists no valid claim, on a country-by-country basis.

Also pursuant to the Charak MSA, the Company and Charak entered into a Commercialization and Technology License Agreement I.V.

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The Company is liable to pay Charak royalties on net sales by the Company of products developed under the license at a specified rate until December 31, 2021.

From January 1, 2022 until February 1, 2034, the Company is liable to pay Charak a base royalty at a reduced rate on net sales and an additional royalty on net sales while there exists a valid claim of a licensed patent, on a country-by-country basis.

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

country-by-country basis.

The Company shall also pay to Charak a percentage of any sublicense income received during the term of the IV Agreement, which amount shall not be less than a minimum specified percentage of net sales of the licensed products by the sub-licensee in jurisdictions where there exists a valid claim, on a country-by-country basis, and not be less than a lower rate of the net sales of the licensed products by the sub-licensee in jurisdictions where there exists no valid claim, on a country-by-country basis.

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Because SFP has not yet received regulatory approval, the $ 1.1 million purchase price paid and accrued for these assets has been expensed in the Company’s statement of operations for the year ended December 31, 2018.

In addition, because the potential milestone payments are not yet considered probable, no milestone payments have been accrued at June 30, 2020 .

In addition, because the potential milestone payments are not yet considered probable, no milestone payments have been accrued at September 30, 2020.

We lease our production facilities and administrative offices as well as certain equipment used in our operations including leases on transportation equipment used in the delivery of our products.

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In addition, we occupy a 1,408 square foot office space in Greer, South Carolina under a lease expiring April 2021.

In addition, we executed a lease for 4,100 square feet of office space in Hackensack, New Jersey with a lease term beginning on April 1, 2019 and expiring on July 1, 2024.

At June 30, 2020 , the Company had operating lease liabilities of $ 2.5 million and right-of-use assets of $ 2.4 million , which are included in the consolidated balance sheet.

The following summarizes quantitative information about the Company’s operating leases:

Finally, we executed a lease for 4,100 square feet of office space in Hackensack, New Jersey with a lease term beginning on April 1, 2019 and expiring on July 1, 2024.

At September 30, 2020, the Company had operating lease liabilities of $ 2.2 million and right-of-use assets of $ 2.1 million, which are included in the consolidated balance sheet.

The following summarizes quantitative information about the Company’s operating leases (table in thousands):

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

Three Months Ended June 30, 2020

Three Months Ended June 30, 2019

Six Months Ended June 30, 2020

Six Months Ended June 30, 2019

Three Months Ended September 30, 2020 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019

Operating leases

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Weighted-average discount rate – operating leases 6.8 % 6.8 % 6.8 % 6.8 %

Future minimum rental payments under operating lease agreements are as follows:

Future minimum rental payments under operating lease agreements are as follows (in thousands):

Year ending December 31, 2020 (remaining) $ 387

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Year ending December 31, 2024 98

Total $ 2,366

Less present value discount ( 172 )

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The supplier alleged the Company did not meet certain annual minimums under the supply agreement, and has requested $ 3.0 million in penalties, plus payment of the cost for certain raw materials.

No lawsuit was filed.

While the Company believed it had several defenses to the supplier's claim, the Company and the supplier negotiated an amicable resolution of the dispute.

On July 31, 2020, the Company and the supplier entered into a settlement agreement, which released the Company from any penalties relating to annual minimums under the 2015 agreement, established new minimums under an amended supply agreement and required the Company to pay for certain raw materials with 50 % of the cost to be paid upon execution of the settlement agreement and the remaining 50 % to be paid no later than December 31, 2020.

As of September 30, 2020, the Company has purchased 50 % of the required raw materials under the settlement agreement.

SEC Investigation

As a follow up to certain prior inquiries, the Company received a subpoena from the SEC during the Company’s quarter ended September 30, 2019 requesting, among other things, certain information and documents relating to the status of the Company’s request to the Centers for Medicare & Medicaid Services (the "CMS") for separate reimbursement status for Triferic Dialysate, the Company’s reserving methodology for expiring Triferic inventory, and the basis for the Board’s termination of the former Chief

As a follow up to certain prior inquiries, the Company received a subpoena from the SEC during the Company’s quarter ended September 30, 2018 requesting, among other things, certain information and documents relating to

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

Executive Officer, Robert Chioini, and former Chief Financial Officer, Thomas Klema, in 2018.

the status of the Company’s request to the Centers for Medicare & Medicaid Services (the "CMS") for separate reimbursement status for Triferic Dialysate, the Company’s reserving methodology for expiring Triferic inventory, and the basis for the Board’s termination of the former Chief Executive Officer, Robert Chioini, and former Chief Financial Officer, Thomas Klema, in 2018.

The Company is cooperating with the SEC and is responding to the SEC’s requests for documents and information.

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This resulted in a settlement expense of approximately $ 0.4 million for the year ended December 31, 2019.

Of the Settlement Amount, the Company contributed approximately $ 0.1 million , which represented the remaining retention amount under the Company’s director and officer liability insurance policy as of June 30, 2020 .

The remainder of the settlement amount has been funded by the Company’s director and officer insurance policy.

Of the Settlement Amount, the Company contributed approximately $ 0.1 million, which represented the remaining retention amount under the Company’s director and officer liability insurance policy as of September 30, 2020.

The remainder of the settlement amount was funded by the Company’s director and officer insurance carrier.

The settlement was approved by the court on February 26, 2020.

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The Derivative Complaints demand a jury trial, seeking monetary damages, corporate governance and internal procedure reform, injunctive relief on the Individual Directors’ trading activities, restitution, and attorneys’ fees.

The cases have been consolidated and the parties are in advanced settlement discussions.

If a settlement is not reached, the Defendants anticipate filing motions to dismiss.

The Company tendered the above shareholder derivative actions to its director and officer insurance carrier(s) for defense and indemnity under its applicable insurance policies.

On May 18, 2020, the Company, the Individual Defendants and the Plaintiffs (the "Settling Parties") entered into a formal Stipulation of Settlement, which memorializes the terms of the Settling Parties'

The cases were consolidated.

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

settlement of the Derivative Complaints.

On June 2, 2020, the court issued an order preliminarily approving the settlement.

A hearing is set for August 10, 2020 to determine if the court should issue a final order approving the final settlement.

The Company has exhausted self-insured retention under the above insurance policies.

The Company’s director and officer insurance company has funded the settlement amount on behalf of the Company.

Termination of our former CEO and CFO

On August 7, 2018, the Company entered into a confidential settlement agreement and mutual release with Robert Chioini, its former Chief Executive Officer, Thomas Klema, its former Chief Financial Officer and a former and then current director.

For more details see Note 15 in the Company’s Annual Report on Form 10-K filed on March 17, 2020.

The Company tendered the above shareholder derivative actions to its director and officer insurance carrier(s) for defense and indemnity under its applicable insurance policies.

A hearing occurred before the court on August 10, 2020 and the court issued a final order approving the settlement.

The Company's director and officer insurance carrier has funded the settlement on behalf of the Company.

Loan and Security Agreement

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Funding of the first $ 22.5 million tranche was completed on March 16, 2020.

The Company will be eligible to draw on a second tranche of $ 5.0 million upon achievement of certain milestones, including the FDA approval of the Company’s New Drug Application for Triferic AVNU.

The Company will be eligible to draw on a third tranche of $ 7.5 million upon the achievement of certain additional milestones, including the achievement of certain Triferic sales thresholds.

The Company is no longer eligible to draw on a second tranche of $ 5.0 million, which was tied to the achievement of certain milestones by a specific date.

The Company may be eligible to draw on a third tranche of $ 7.5 million upon the achievement of certain additional milestones, including the achievement of certain Triferic sales thresholds.

Net draw down proceeds were $ 21.2 million with closing costs of $ 1.3 million.

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The Company has the option, under certain circumstances, to add 1.00 % of such interest rate amount to the then outstanding principal balance in lieu of paying such amount in cash.

For the three months ended June 30, 2020 and 2019 , interest expense amounted to $ 0.5 million and nil , respectively.

For the six months ended June 30, 2020 and 2019 , interest expense amounted to $ 0.6 million and nil , respectively.

For the three and nine months ended September 30, 2020, interest expense amounted to $ 0.7 million and $ 1.3 million, respectively.

The Loan Agreement is secured by all assets of the Company and Rockwell Transportation, Inc.

Proceeds will be used for working capital purposes.

The Loan Agreement contains customary representations and warranties and covenants, subject to customary carve outs, and includes financial covenants related to liquidity and trailing twelve months sales of Triferic, with the latter beginning with the period ending December 31, 2020, or September 30, 2020 if the Company draws the second tranche of $ 5.0 million .

As of June 30, 2020 , the Company was in compliance with all the reporting and financial covenants.

We cannot assure you that we can maintain compliance with the covenants under our Loan Agreement, which may result in an event of default.

Our ability to comply with these covenants may be adversely affected by events beyond our control.

For example, the Loan Agreement contains certain financial covenants relating to sales and, as a result of the ongoing COVID-19 pandemic and its effect on our sales activities, among other factors, we may not be able to satisfy such covenants in the future.

Based on our annualized Triferic sales through September 30, 2020, we may not satisfy this covenant as of December 31, 2020.

If we are unable to comply with the covenants under our Loan Agreement, we intend to pursue all available cure options in order to regain compliance.

However, we may not be able to mutually agree with Innovatus on appropriate remedies to cure a breach of a covenant, which could give rise to an event of default.

If we are unable to avoid an event of default, any required repayments could have an adverse effect on our liquidity.

As of September 30, 2020, the Company is in compliance with all the reporting and financial covenants.

In connection with each funding of the Term Loans, the Company is required to issue to Innovatus a warrant (the “Warrants”) to purchase a number of shares of the Company’s common stock equal to 3.5 % of the principal amount of the relevant Term Loan funded divided by the exercise price, which will be based on the lower of (i) the volume weighted average closing price of the Company’s stock for the 5 -trading day period ending on the last trading day immediately preceding the execution of the Loan Agreement or (ii) the closing price on the last trading day immediately preceding the execution of the Loan Agreement (or for the second and third tranches only at the lower of (i) $ 1.65 per share or (ii) the volume weighted average closing price of the Company’s stock for the 5 -trading day period ending on the last trading day immediately preceding the relevant Term Loan funding).

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In connection with the first tranche of the Term Loans, the Company issued a Warrant to Innovatus, exercisable for an aggregate of 477,273 shares of the Company’s common stock at an exercise price of $ 1.65 per share.

As of June 30, 2020 , the outstanding balance of the Term Loan was $ 20.8 million , net of unamortized issuance costs and unaccreted discount of $ 1.7 million .

The following table reflects the schedule of principal payments on the Term Loan as of June 30, 2020 :

The Company evaluated the warrant under ASC 470, Debt, and recognized an additional debt discount of approximately $ 0.5 million based on the relative fair value of the base instruments and warrants.

The Company calculated the fair value of the warrant using the Black-Scholes model.

As of September 30, 2020, the outstanding balance of the Term Loan was $ 20.9 million, net of unamortized issuance costs and unaccreted discount of $ 1.6 million.

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

The following table reflects the schedule of principal payments on the Term Loan as of September 30, 2020 (in thousands):

Principal Payments

Subsequent Events

Resignation of Chief Financial Officer

On June 5, 2020, Angus Smith, the Company's Chief Financial Officer, notified the Company of his intent to resign from the Company effective July 3, 2020.

As a result of Mr.

Smith's resignation, certain of his time-based, all of his performance-based and market-based stock awards previously granted to Mr.

Smith will be forfeited.

Such forfeitures will be reflected in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.

The estimated expense the forfeited stock awards is approximately $ 0.7 million .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements