What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-03-31 compared with 2020-03-17 · 440 added, 482 removed, 635 unchanged (59% of the section changed)

6 unchanged sentences

Under the supervision of and with the participation of our management, including the Company’s Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2020.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, because of the material weaknesses in our internal controls over financial reporting described below, our disclosure controls and procedures were not effective for the reasons described below.

Notwithstanding the material weaknesses described below, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, has concluded that the consolidated financial statements included in this Annual Report are fairly stated, in all material respects, in accordance with generally accepting accounting principles in the United States for each of the periods presented herein.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2020.

Additionally, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, has concluded that the consolidated financial statements included in this Annual Report are fairly stated, in all material respects, in accordance with generally accepting accounting principles in the United States for each of the periods presented herein.

Management’s Report on Internal Control over Financial Reporting

3 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Therefore, internal control over financial reporting determined to be effective provides only reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Therefore, internal control over financial reporting determined to be effective provides only reasonable assurance regarding the

reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2020.

1 unchanged sentence

Our evaluation included documenting, evaluating and testing of the design and operating effectiveness of our internal control over financial reporting.

Based on this evaluation, and due to the material weaknesses described below, we concluded that we did not maintain effective control over financial reporting at a reasonable assurance level as of December 31, 2019.

As of December 31, 2019, we had material weaknesses in our internal control over financial reporting, as described below.

A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Specifically, management identified control deficiencies related to Information Technology General Controls (“ITGC”) in connection with change management, user access controls and segregation of duties as it relates to user access controls.

The Company’s ITGC user access security, change management, operations and third-party management controls to the ERP system were not designed effectively to provide an adequate audit trail for system change management and for the periodic review and testing of user access rights and permissions.

The ITGC material weakness in our ERP had a pervasive impact to the various activity level cycles and accounts, including financial reporting, distribution, revenue and accounts receivable, inventory and cost of goods, expenditures and accounts payable, treasury and payroll, and creates a reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis and represents a material weakness in the Company’s internal control over financial reporting.

The Company’s management, including the Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer, has concluded that the consolidated financial statements included in this Annual Report are fairly stated, in all material respects, in accordance with generally accepting accounting principles in the United States for each of the periods presented herein.

Management has taken a number of steps with the intention of remediating the deficiencies described above.

In June 2019, we hired a new Principal Accounting Officer with experience in SEC reporting and internal control over financial reporting.

We updated and implemented change management and user access policies.

We added additional review controls to support change management and user access protocols outside of policy procedures.

The remediation of the material weaknesses described above is among our highest priorities.

Our Audit Committee will continually assess the progress and sufficiency of these initiatives and make adjustments as and when necessary.

As of the date of this report, our management believes that our efforts, when completed, will remediate the material weaknesses in internal control over financial reporting as described above.

Attestation Report of Independent Registered Public Accounting Firm

Marcum LLP, an independent registered public accounting firm, as auditors of our consolidated financial statements, has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2019.

Marcum’s report, which expresses an adverse opinion on the effectiveness of our internal control over financial reporting due to the material weaknesses, is included herein.

The attestation report required under this Item 9A can be found on page F-4 in Consolidated Financial Statements for Rockwell Medical, Inc.

and Subsidiaries found at the end of this Annual Report on Form 10-K under the heading “Report of Independent Registered Public Accounting Firm.”

Based on this evaluation, and the remediation of all the material weaknesses as described in our Annual Report filed on Form 10-K for the year ended December 31, 2019 relating to change management and third-party management controls, user access security and segregation of duties as it relates to user access controls in our Information Technology General Controls ("ITGC"), and the pervasive effect on other ITGC dependent business activity level internal control cycles, we concluded that we maintained effective control over financial reporting at a reasonable assurance level as of December 31, 2020.

Changes in Internal Controls

As described above, our management is taking action intended to remediate such material weaknesses.

As described in our 2018 Form 10-K filed on March 15, 2019, our management identified material weaknesses in our internal control over financial reporting and continues to remediate items identified.

During the quarter ended June 30, 2020, the Company remediated the ITGC control deficiencies in connection with change management and third-party management and enhanced evidentiary review and documentation of key ITGC controls and implemented new programs and policies to provide improved control over change management and third-party management controls to the ERP system.

During the quarter ended September 30, 2020, we continued our improvements by remediating the ITGC control deficiencies in connection with user access security and segregation of duties as it relates to user access controls.

During the quarter ended December 31, 2020, we finalized our remediation efforts by evaluating and testing the design, implementation and operating effectiveness of the pervasive effect from the ITGC material weakness on other ITGC dependent business activity level internal control cycles.

As of December 31, 2020, our management has remediated all material weaknesses described in our Annual Report filed on Form 10-K for the year ended December 31, 2019 and has deemed internal controls over financial reporting, our disclosure controls and procedures were effective as of December 31, 2020.

Other Information.

Directors, Executive Officers and Corporate Governance.

The information required by this Item 10 is incorporated herein by reference to information in our proxy statement for our 2020 Annual Meeting of Stockholders (the “2020 Proxy Statement”), which we expect to be filed with the SEC within 120 days of the end of our fiscal year ended December 31, 2019, including under headings “Election of Directors,” “Executive Officers” and “Corporate Governance.”

The information required by this Item 10 is incorporated herein by reference to information in our proxy statement for our 2021 Annual Meeting of Stockholders (the “2021 Proxy Statement”), which we expect to be filed with the SEC within 120 days of the end of our fiscal year ended December 31, 2020, including under headings “Election of Directors,” “Executive Officers,” “Corporate Governance” and, as applicable, "Delinquent Section 16(a) Reports."

Code of Business Conduct and Ethics

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Our Code of Business Conduct and Ethics is available on our website at www.rockwellmed.com .

Future material amendments or waivers relating to the Code of Business Conduct and Ethics will be disclosed on our web site referenced in this paragraph with four business days following the date of such amendment or waiver.

To the extent required, future material amendments or waivers relating to the Code of Business Conduct and Ethics will be disclosed on our web site referenced in this paragraph with four business days following the date of such amendment or waiver.

Executive Compensation.

4 unchanged sentences

The following table summarizes our compensation plans, including individual compensation arrangements, under which our equity securities are authorized for issuance as of December 31, 2020:

Plan Category

Number of securities

Plan Category Number of securities

to be issued upon

outstanding options and

restricted stock units

Weighted‑average

restricted stock units Weighted‑average

exercise price of

outstanding options

Number of securities

outstanding options Number of securities

remaining available for

4 unchanged sentences

Equity compensation plans not approved by security holders (2) 1,258,750 $ 2.13 —

Consists of 7,571,899 stock options with a weighted average exercise price of $7.06 and 354,036 restricted stock units.

Consists of 1,026,250 stock options with a weighted average exercise price of $4.70 and 1,098,708 restricted stock units.

Total 6,880,250 $ 4.02 1,894,496

(1) Consists of 5,209,206 stock options with a weighted average exercise price of $4.80, 265,494 restricted stock units and 146,800 restricted stock awards.

(2) Consists of 1,258,750 stock options with a weighted average exercise price of $2.13.

Certain Relationships and Related Transactions and Director Independence.

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The following documents are filed as part of this report or were previously filed and incorporated herein by reference to the filing indicated.

Exhibits not required for this report have been omitted.

Our Commission file number is 000‑23661.

3.1 Restated Articles of Incorporation, as amended as of August 28, 2019 (Company’s Form 8-K filed August 30, 2019).

Amended and Restated Bylaws (Company’s Form 8-K filed August 30, 2019).

3.2 Amended and Restated Bylaws (Company’s Form 8-K filed November 5, 2020).

4.1 Form of Common Stock Warrant, dated October 17, 2018 (Company’s Form 8-K filed October 19, 2018).

4.2 Description of Securities.

(Company's Form 10-K filed March 17, 20 20)

4.3 Form of Warrant (Company's Form 8-K filed on September 25, 2020).

4.4 Form of Pre-Funded Warrant (Company's Form 8-K filed on September 25, 2020).

4.5 For of Warrant to Purchase Common Stock for Innovatus (Company's Form 8-K filed March 20, 2020).

10.1 Licensing Agreement, dated January 7, 2002, by and among the Company, Charak LLC and Dr.

42 unchanged sentences

(f/k/a DaVita Healthcare Partners Inc.) (Company’s Form 10-Q filed November 12, 2019).

*10.31 Russell Skibsted Employment Agreement, dated September 15, 2020 (Company’s Form 8-K filed on September 16, 2020).

10.32 Securities Purchase Agreement dated September 23, 2020 (Company’s Form 8-K filed on September 25, 2020).

*10.33 Russell Ellison Employment Agreement, dated April 17, 2020 (Company’s Form 8-K filed on April 20, 2020).

*10.34 Rockwell Medical, Inc.

Amended and Restated 2018 Long Term Incentive plan (Company’s Form 8-K filed on May 21, 2020).

10.35 Loan and Security Agreement, dated March 16, 2020, by and among the Company, Innovatus Life Sciences Lending Fund I, LP and the lenders party thereto (Company’s Form 10-Q filed on May 11, 2020).

21.1 List of Subsidiaries.

4 unchanged sentences

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002.

XBRL Instance Document

XBRL Taxonomy Extension Schema

XBRL Taxonomy Extension Calculation Linkbase

XBRL Taxonomy Extension Definition Database

XBRL Taxonomy Extension Label Linkbase

XBRL Taxonomy Extension Presentation Linkbase

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema

101.CAL XBRL Taxonomy Extension Calculation Linkbase

101.DEF XBRL Taxonomy Extension Definition Database

101.LAB XBRL Taxonomy Extension Label Linkbase

101.PRE XBRL Taxonomy Extension Presentation Linkbase

104 The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, formatted in Inline XBRL (included as Exhibit 101)

* Indicates management contracts or compensatory plans or arrangements.

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ROCKWELL MEDICAL, INC.

/s/ Stuart Paul

/s/ Russell Ellison

Russell Ellison

President and Chief Executive Officer

1 unchanged sentence

POWER OF ATTORNEY

KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Stuart Paul and Angus Smith, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file, any and all documents in connection therewith, with the Securities and Exchange commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their and his or her substitute or substitutes, may lawfully do or cause to be done by virtue thereof.

KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Russell Ellison and Russell Skibsted, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file, any and all documents in connection therewith, with the Securities and Exchange commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their and his or her substitute or substitutes, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of registrant and in the capacities and on the dates indicated.

/s/ Stuart Paul

President, Chief Executive Officer and Director (Principal Executive Officer)

March 16, 2020

/s/ Angus Smith

Chief Financial Officer (Principal Financial Officer)

March 16, 2020

Principal Accounting Officer

March 16, 2020

/s/ Lisa Colleran

March 16, 2020

Lisa Colleran

March 16, 2020

/s/ Russell H.

March 16, 2020

SIGNATURE TITLE DATE

/s/ Russell Ellison President, Chief Executive Officer and Director (Principal Executive Officer) March 31, 2021

Russell Ellison

/s/ Russell Skibsted Chief Financial Officer (Principal Financial Officer) March 31, 2021

Russell Skibsted

McGarry Principal Accounting Officer March 31, 2021

McLaughlin Director March 31, 2021

Cooper Director March 31, 2021

/s/ Robert S.

Radie Director March 31, 2021

/s/ Allen Nissenson Director March 31, 2021

Allen Nissenson

/s/ Andrea Heslin Smiley Director March 31, 2021

Andrea Heslin Smiley

Ravich Director March 31, 2021

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firms

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, 2020 and 2019

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Notes to the Consolidated Financial Statements

F- 11 – F- 33

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

To the Stockholders and Board of Directors of

Rockwell Medical Inc.

1 unchanged sentence

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Rockwell Medical Inc.

We have audited the accompanying consolidated balance sheet s of Rockwell Medical Inc.

and Subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2019 and 2018, and the results of its consolidated operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2019, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated March 16, 2020 , expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of the existence of material weaknesses.

Adoption of New Accounting Standard - Leases

As discussed in Note 3 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of ASU No.

2016-02, Leases (Topic 842), as amended, effective January 1, 2019, using the modified retrospective approach.

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Marcum LLP

1 unchanged sentence

March 31, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Shareholders and Board of Directors of

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Adverse Opinion on Internal Control over Financial Reporting

We have audited Rockwell Medical Inc.

and Subsidiaries' (the “Company”) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, because of the effect of the material weaknesses described in the following paragraph on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses have been identified and included in “Management's Annual Report on Internal Control Over Financial Reporting:”

The Company has control deficiencies related to Information Technology General Controls (“ITGC”) in connection with change management, user access controls and segregation of duties as it relates to user access controls.

The ITGC material weakness in the Company’s ERP had a pervasive impact to the various activity level cycles and accounts, including financial reporting, distribution, revenue and accounts receivable, inventory and cost of goods, expenditures and accounts payable, treasury and payroll, and creates a reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis and represents a material weakness in the Company’s internal control over financial reporting.

These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the fiscal December 31, 2019 consolidated financial statements, and this report does not affect our report dated March 16, 2020, on those consolidated financial statements.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets as of December 31, 2019 and 2018, and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2019 of the Company and our report dated March 16, 2020 expressed an unqualified opinion on those consolidated financial statements and which report included an emphasis of a matter paragraph due to the Company’s adoption of a new accounting standard effective January 1, 2019, ASU No.

2016-02 as amended (Topic 842), Leases, using the modified retrospective method.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Annual Report on Internal Control over Financial Reporting”.

Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate.

/s/ Marcum LLP

March 16, 2020

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

2020 December 31,

Cash and Cash Equivalents $ 48,682 $ 11,795

Investments Available-for -Sale 9,997 14,250

Accounts Receivable, net of a reserve of $8,932 in 2019 and $2,104 in 2018

Insurance Receivable

Accounts Receivable, net of a reserve of $ 9 for both 2020 and 2019

Inventory 3,913 3,647

Prepaid and Other Current Assets 2,706 2,979

3 unchanged sentences

Right of Use Assets, net 2,911 3,213

Goodwill 921 921

Other Non-current Assets 629 435

Total Assets $ 77,748 $ 44,317

LIABILITIES AND STOCKHOLDERS’ EQUITY

9 unchanged sentences

Lease Liability - Long-Term 1,821 1,781

Term Loan, Net of Issuance Costs 20,949 —

Deferred License Revenue - Long-Term 8,015 9,842

3 unchanged sentences

Preferred Stock, $ 0.0001 par value, 2,000,000 shares authorized, no shares issued and outstanding at December 31, 2020 and 2019

Common Stock, $0.0001 par value, 65,378,890 and 57,034,154 shares issued and outstanding at December 31, 2019 and 2018, respectively

Common Stock, $ 0.0001 par value, 170,000,000 shares authorized, 93,573,165 and 65,378,890 shares issued and outstanding at December 31, 2020 and 2019, respectively

Additional Paid-in Capital 371,510 326,777

Accumulated Deficit ( 337,406 ) ( 306,516 )

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Income 57 52

Total Stockholders’ Equity 34,170 20,320

5 unchanged sentences

For The Years Ended December 31, 2020 and 2019

(Dollars in thousands, except per share amounts)

Net Sales $ 62,197 $ 61,303

Cost of Sales 59,472 58,464

Gross Profit (Loss)

Gross Profit 2,725 2,839

Research and Product Development 7,092 6,886

Selling and Marketing 7,871 9,050

1 unchanged sentence

Settlement Expense, net of Reimbursement — 430

Research and Product Development

Research and Development - Licenses Acquired (Related Party)

Operating Loss ( 28,420 ) ( 34,525 )

1 unchanged sentence

Realized Gain (Loss) on Investments 8 30

Warrant Modification Expense ( 837 ) —

Interest Expense ( 1,879 ) ( 25 )

Interest Income 238 392

Total Other Income

Total Other Income (Expense) ( 2,470 ) 397

Net Loss $ ( 30,890 ) $ ( 34,128 )

Basic and Diluted Net Loss per Share $ ( 0.41 ) $ ( 0.56 )

5 unchanged sentences

For The Years Ended December 31, 2020 and 2019

Unrealized Gain on Available-for-Sale Investments

(Dollars in Thousands)

Net Loss $ ( 30,890 ) $ ( 34,128 )

Unrealized Loss on Available-for-Sale Investments ( 3 ) ( 10 )

Foreign Currency Translation Adjustments 8 ( 1 )

5 unchanged sentences

For The Years Ended December 31, 2020 and 2019

ADDITIONAL PAID-IN CAPITAL

(Dollars in Thousand)

COMMON STOCK ADDITIONAL PAID-IN CAPITAL ACCUMULATED

DEFICIT ACCUMULATED

COMPREHENSIVE

INCOME / (LOSS)

INCOME / (LOSS) TOTAL

STOCKHOLDERS'

Balance as of December 31, 2017

Unrealized Gain on Available-for-Sale Investments

SHARES AMOUNT

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

Net Loss — — — ( 34,128 ) — ( 34,128 )

Unrealized Loss on Available-for-Sale Investments — — — — ( 10 ) ( 10 )

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

Issuance of Common Stock 30,000 — 148 — — 148

Shares Issued in Exchange for Services

Stock Tendered in Satisfaction of Tax Liabilities

Vesting of Restricted Stock Units Issued, net of taxes withheld 215,079 — ( 279 ) — — ( 279 )

Issuance of Common Stock, net of Issuance Costs/Public offering 6,259,214 1 17,287 — — 17,288

Issuance of Common Stock, net of Issuance Costs / At-the-market 1,840,443 — 5,073 — — 5,073

Stock-based Compensation — — 4,952 — — 4,952

Balance as of December 31, 2019 65,378,890 $ 7 $ 326,777 $ ( 306,516 ) $ 52 $ 20,320

Unrealized Gain on Available-for-Sale Investments

Net Loss — — — ( 30,890 ) — ( 30,890 )

Unrealized Loss on Available-for-Sale Investments — — — — ( 3 ) ( 3 )

Foreign Currency Translation Adjustments — — — — 8 8

Exercise of Employee Stock Options, Net of Tax

Delivery of Common Stock underlying Restricted Stock Units, net of tax

Issuance of Common Stock, net of Issuance Costs

Vesting of Restricted Stock Units Issued, net of taxes withheld 216,646 — ( 19 ) — — ( 19 )

Issuance of Common Stock, net of Issuance Costs / Public offering 26,849,021 2 40,677 — — 40,679

Issuance of Common Stock, net of Issuance Costs / At-the-market offerings 1,128,608 — 2,262 — — 2,262

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

Warrant Modification Expense — — 837 — — 837

Stock-based Compensation — — 475 — — 475

5 unchanged sentences

For the years ended December 31, 2020 and 2019

(Dollars in Thousands)

Cash Flows From Operating Activities:

Net Loss $ ( 30,890 ) $ ( 34,128 )

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

1 unchanged sentence

Stock-based Compensation 475 4,952

Research and Development - Licenses Acquired (Related Party)

Warrant Modification Expense 837 —

Increase in Inventory Reserves 305 1,271

Amortization of Right of Use Asset 1,455 1,865

Amortization of Debt Financing Costs and Accretion of Debt Discount 294 —

Loss on Disposal of Assets 7 5

Realized (Gain) Loss on Sale of Investments Available-for-Sale

Realized Loss on Sale of Investments Available-for-Sale ( 8 ) ( 30 )

Foreign Currency Translation Adjustment 8 ( 1 )

Changes in Assets and Liabilities:

Decrease (Increase) in Insurance Receivable

Decrease (Increase) in Accounts Receivable, net

Decrease (Increase) in Inventory

Decrease (Increase) in Other Assets

(Decrease) Increase in Accounts Payable

(Decrease) Increase in Settlement Payable

Decrease in Insurance Receivable — 371

Decrease in Accounts Receivable, net 32 2,777

(Increase) Decrease in Inventory ( 1,306 ) 317

Decrease in Other Assets 76 934

Increase (Decrease) in Accounts Payable 1,136 ( 1,474 )

Decrease in Settlement Payable ( 104 ) ( 313 )

Decrease in Lease Liability ( 1,439 ) ( 1,803 )

(Decrease) Increase in Other Liabilities

Increase (Decrease) in Other Liabilities 534 ( 532 )

Decrease in Deferred License Revenue ( 1,887 ) ( 2,253 )

6 unchanged sentences

Purchase of Research and Development Licenses (Related Party) — ( 750 )

Proceeds on Sale of Assets

Cash (Used in) Provided By Investing Activities

Cash Provided By (Used in) Provided By Investing Activities 3,212 ( 4,750 )

Cash Flows From Financing Activities:

Proceeds from Term Loan 22,500 —

Debt Issuance Costs ( 1,343 ) —

Payments on Short Term Note Payable ( 763 ) ( 1,145 )

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Cash Provided By Financing Activities 63,316 21,085

(Decrease) Increase In Cash and Cash Equivalents

Cash At Beginning Of Period

Cash At End Of Period

Increase (Decrease) In Cash and Cash Equivalents 36,887 ( 10,919 )

Cash and Cash Equivalents At Beginning Of Period 11,795 22,714

Cash and Cash Equivalents At End Of Period $ 48,682 $ 11,795

Supplemental Disclosure of Cash Flow Information:

Cash Paid for Interest $ 1,558 $ —

Supplemental Disclosure of Noncash Investing Activities:

Change in Unrealized Gain on Marketable Securities Available-for-Sale

Research and Development Licenses (Related Party)

Change in Unrealized Loss on Marketable Securities Available-for-Sale $ ( 3 ) $ ( 10 )

Insurance Financing Note Payable $ — $ 763

Fair Value of Warrants issued related to Debt Financing $ 501 $ —

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

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Rockwell Medical, Inc.

and subsidiaries (collectively, “we”, “our”, “us”, or the “Company”), is a biopharmaceutical company dedicated to improving outcomes for patients with anemia, with an initial focus on end-stage renal disease ("ESRD").

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

We supply the domestic market with dialysis concentrates and we also supply dialysis concentrates to distributors serving a number of foreign countries, primarily in the Americas and the Pacific Rim.

Substantially, all of our sales have been concentrate products and ancillary items, though we initiated commercial sales of our proprietary therapeutic, Dialysate Triferic, during the second quarter of 2019.

Our mission is to transform anemia management in a wide variety of disease states across the globe while improving patients’ lives.

Accordingly, we are building the foundation to become a leading medical and commercial organization in the field of dialysis.

Triferic ® is a registered trademark of Rockwell Medical, Inc.

("Rockwell Medical," "Rockwell" or the "Company") is a commercial-stage, biopharmaceutical company developing and commercializing our next-generation parenteral iron technology platform, ferric pyrophosphate citrate (“FPC”), which we believe has significant potential to lead to transformative treatments for iron deficiency in multiple disease states, that we believe could reduce healthcare costs and improve patients’ lives.

We are also one of the two major suppliers of life saving hemodialysis concentrate products to kidney dialysis clinics in the United States.

We have two novel, FDA approved therapies, Triferic and Triferic AVNU, which are the first two products developed from our FPC platform.

We are marketing both products to kidney dialysis centers for their patients receiving dialysis.

In 2021, we intend to advance our FPC platform strategy by starting a Phase II trial for the treatment of iron deficiency anemia in patients outside of dialysis, who are receiving intravenous medications in the home infusion setting.

In our R&D pipeline, we are also exploring FPC’s impact in the treatment of hospitalized patients with acute heart failure, with the potential to begin another Phase II program in these patients in 2022.

We are the second largest supplier of hemodialysis concentrates in the United States, with a reputation for excellent service, quality, and reliability.

We believe that this reputation, which is based on over 25 years of service to the kidney dialysis centers, combined with about $ 60 million in annual revenue, approximately 300 dedicated employees, expertise in manufacturing and logistics and the added expertise in pharmaceutical development and commercialization brought to the Company by recent additions to our management team, gives us a solid foundation on which to grow.

Liquidity and Capital Resources

As of December 31, 2019 , the Company had approximate balances of $11.8 million of cash and cash equivalents, $14.3 million of investments available-for-sale, working capital of $24.5 million and an accumulated deficit of $306.5 million .

Since inception, Rockwell has incurred significant net losses and have funded its operations primarily through revenue from commercial products, proceeds from the issuance of debt and equity securities and payments from partnerships.

At December 31, 2020, Rockwell had an accumulated deficit of approximately $ 337.4 million and stockholders' equity of $ 34.2 million.

As of December 31, 2020, Rockwell had approximately $ 58.7 million of cash, cash equivalents and investments available-for-sale, and working capital of $ 56.7 million.

Net cash used in operating activities for the year ended December 31, 2020 was approximately $ 29.6 million.

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

On February 4, 2020, and February 19, 2020, the Company raised capital in the amount of $8 million , net of estimated issuance costs.

On March 16, 2020, the Company closed a debt financing transaction with net proceeds at closing of approximately $21 million , net of estimated fees and expenses (See Note 18 for further detail).

Based on the currently available working capital, capital raise and debt financing noted above, management believes the Company currently has sufficient funds to meet its operating requirements for at least the next twelve months from the date of the filing of this report.

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 Dialysate Triferic and I.V.

Triferic, if approved, and executing plans for enhancing its medical capabilities and generating additional data for Triferic.

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.

In February 2020, the Company sold 3,670,212 shares of its common stock for proceeds of $ 8.0 million, net of issuance costs.

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).

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 11 for further detail).

During the year ended December 31, 2020, the Company sold 1,128,608 shares of its common stock as part of its At-the-Market ("ATM") sales agreement with Cantor Fitzgerald & Co.

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

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

See Note 11 for further detail.

The Company expects it will require additional capital to sustain its operations and make the investments it needs to execute its strategic plan, including the commercialization of Triferic (dialysate) and Triferic AVNU in dialysis, generating additional data for Triferic in dialysis, developing FPC for iron deficiency anemia in patients undergoing home infusion and for progressing our pipeline development program of new indications for its FPC platform.

If the Company is unable to generate sufficient revenue from sales of its commercial products and from partnerships, 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.

In addition, the Company is subject to certain covenants and cure provisions under its 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 Rockwell is unable to avoid an event of default, any required repayments could have an adverse effect on its liquidity (See Note 15 for further detail).

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

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

The Company's 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.

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

Rockwell has utilized a range of financing methods to fund its 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 the Company's liquidity and capital resources in the future.

Summary of Significant Accounting Policies

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The Company recognizes revenue under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers.

The core principle of the new 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 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:

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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.

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.

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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 two 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”) are recognized as revenue over the estimated term of the distribution and license agreement as regulatory approval was not received and the Company did not have sufficient experience in China to determine that regulatory approval was probable as of the execution of the agreement.

(“Wanbang”), Sun Pharmaceutical Industries Ltd.

("Sun Pharma") and 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 ($)

Year Ended December 31, 2019

Products By Geographic Area

In thousands of US dollars ($) Year Ended December 31, 2020

Products By Geographic Area Total U.S.

Rest of World

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Total Concentrate Products 61,061 55,668 5,393

Year Ended December 31, 2018

Products By Geographic Area

Net Revenue $ 62,197 $ 56,578 $ 5,619

In thousands of US dollars ($) Year Ended December 31, 2019

Products By Geographic Area Total U.S.

Rest of World

Drug Revenues

Product Sales - Point-in-time $ 272 $ 272 $ —

License Fee – Over time 273 — 273

Total Drug Products 545 272 273

Concentrate Products

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Total Concentrate Products 60,758 54,520 6,238

Net Revenue $ 61,303 $ 54,792 $ 6,511

For the years ended December 31, 2020 and 2019, license fee revenue was $ 2.2 million and $ 2.3 million, respectively.

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

In thousands of US dollars ($)

December 31, 2019

December 31, 2018

In thousands of US dollars ($) December 31, 2020 December 31, 2019

Receivables, which are included in "Trade and other receivables" $ 4,171 $ 4,203

Contract liabilities $ 10,190 $ 12,076

There were no impairment losses recognized related to any receivables arising from the Company’s contracts with customers for the years ended December 31, 2019 and 2018 , respectively.

For the years ended December 31, 2019 and 2018 , the Company did not recognize material bad-debt expense and there were no material contract assets recorded on the consolidated balance sheet as of December 31, 2019 and 2018 , respectively.

There were no impairment losses recognized related to any receivables arising from the Company’s contracts with customers for the years ended December 31, 2020 and 2019.

For the years ended December 31, 2020 and 2019, the Company did no t recognize material bad-debt expense and there were no material contract assets recorded on the consolidated balance sheets as of December 31, 2020 and 2019.

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, 2020 or December 31, 2019.

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For the year ended December 31, 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 $12.1 million and $14.3 million for each of the years ended December 31, 2019 and 2018 .

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 $ 10.2 million and $ 12.1 million as of December 31, 2020 and 2019, 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.

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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 totaling $9.1 million , which will be amortized through expiration of the agreement on October 2, 2024.

As of December 31, 2020 unfulfilled performance obligations related to the Baxter Agreement are product sales totaling $ 7.2 million, which will be amortized through expiration of the agreement on October 2, 2024.

Use of Estimates

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Actual results could differ from those estimates.

The most significant accounting estimates inherent in the preparation of our financial statements include estimates associated with revenue recognition, allowance for doubtful accounts, inventory reserves, accrued expenses, deferred license revenue, stock-based compensation, impairments of long‑lived assets, and accounting for income taxes.

The most significant accounting estimates inherent in the preparation of our financial statements include estimates associated with fair value and classification of warrants, revenue recognition, allowance for doubtful accounts, inventory reserves, accrued expenses, deferred license revenue, stock-based compensation, impairments of long-lived assets, and accounting for income taxes.

Cash and Cash Equivalents

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Property and Equipment

Property and equipment are recorded at cost and are depreciated using the straight‑line method over the useful lives of the assets, which range from three to ten years .

Property and equipment is recorded at cost and are depreciated using the straight‑line method over the useful lives of the assets, which range from three to ten years .

Expenditures for routine maintenance and repairs are expensed as incurred.

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Impairment losses on long-lived assets, such as real estate and equipment, 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.

losses are then measured by comparing the fair value of assets to their carrying amounts.

For the years ended December 31, 2020 and 2019, there were no impairments of long-lived assets.

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Intangible assets with indefinite useful lives are measured at their respective fair values as of the acquisition date.

We do not amortize goodwill and intangible assets with indefinite useful lives.

We review goodwill and indefinite-lived intangible assets at least annually for possible impairment.

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.

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Deferred Revenue

In October of 2014, the Company entered into a 10 year distribution agreement with Baxter and received an upfront fee of $20 million .

In October 2014, the Company entered into a 10 year distribution agreement with Baxter and received an upfront fee of $ 20 million.

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 Distribution Agreement.

The Company recognized revenue of approximately $2.1 million during each of years ended December 31, 2019 and 2018 , respectively.

The Company recognized revenue of approximately $ 2.0 million and $ 2.1 million for the years ended December 31, 2020 and 2019, respectively.

Deferred revenue related to the Baxter agreement totaled $ 7.2 million and $ 9.1 million as of December 31, 2020 and 2019, respectively.

If a “Refund Trigger Event” occurs, 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 January 1, 2019 to December 31, 2021, Baxter would be eligible for a 25% refund of the Agreement’s Upfront Payment.

If a “Refund Trigger Event” occurs prior to December 31, 2021, Rockwell would be obligated to repay 25 % of the upfront fee.

During the year ended December 31, 2016, the Company entered into a distribution agreement with Wanbang and received an upfront fee of $ 4.0 million.

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 $0.3 million during each of the years ended December 31, 2019 and 2018 .

The Company recognized revenue of approximately $ 0.2 million and $ 0.3 million during the years ended December 31, 2020 and 2019, respectively.

Deferred revenue related to the Wanbang agreement totaled $ 2.7 million and $ 2.9 million as of December 31, 2020 and 2019, respectively.

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.

Sun 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 approximately $ 10,000 during the year ended December 31, 2020.

Deferred revenue related to the Sun Pharma Agreement totaled $ 90,000 as of December 31, 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 $ 2,500 during the year ended December 31, 2020.

Deferred revenue related to the Jeil Pharma Agreement totaled $ 0.2 million as of December 31, 2020.

We account for income taxes in accordance with the provisions of ASC 740‑10, Income Taxes.

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The Company incurred product development and research costs related to the commercial development, patent approval and regulatory approval of new products aggregating approximately $ 7.1 million and $ 6.9 million for the years ended December 31, 2020 and 2019, respectively.

During the year ended December 31, 2018 , an additional $1.1 million was expensed related to our product license agreement for exclusive worldwide rights to certain patents and information related to our Triferic product.

Stock-Based Compensation

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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

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.

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

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) 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 (loss) refers to revenues, expenses, gains and losses that are included in comprehensive income (loss), but excluded from net income (loss) as these amounts are recorded directly as an adjustment to stockholders’ equity.

Accumulated other comprehensive income (loss) consists of unrealized gains and losses on available‑for‑sale investment securities and foreign currency translation adjustments.

33,307,113 12,968,474

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 securities and foreign currency translation adjustments.

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 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 February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by, and among other provisions, recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous U.S.

For public companies, ASU 2016-2 is effective for fiscal years

beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted.

In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the adoption date, unless the lease is modified, and permits entities to not reassess (a) the existence of a lease, (b) lease classification or (c) determination of initial direct costs, as of the adoption date, which effectively allows entities to carryforward accounting conclusions under previous U.S.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) :

Targeted Improvements , which provides entities an optional transition method to apply the guidance under Topic 842 as of the adoption date, rather than as of the earliest period presented.

The Company adopted Topic 842 on January 1, 2019, using the optional transition method to apply the new guidance as of January 1, 2019, rather than as of the earliest period presented, and elected the package of practical expedients described above.

The Company adopted this new standard on January 1, 2019 and recognized, on the Company's consolidated balance sheet, additional operating liabilities of $3.5 million , with corresponding ROU assets of approximately the same amount as of January 1, 2019 based on the present value of the remaining lease payments.

In June 2018, the FASB issued ASU 2018-17, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services.

Under ASU 2018-17, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees.

The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

Early adoption is permitted, but no earlier than an entity’s adoption of Topic 606.

The Company adopted this new standard on January 1, 2019 and the adoption did not have a material impact on its consolidated financial statements and related disclosures.

In August 2018, the Securities and Exchange Commission ("SEC"), adopted the final rule under SEC Release No.

33-10532, “Disclosure Update and Simplification,” amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded.

In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity presented in the balance sheet must be provide in a note or separate statement.

The analysis should represent a reconciliation of the beginning balance to the ending balance for each period for which a statement of comprehensive income is required to be filed.

This final rule is effective on November 5, 2018.

The Company implemented this change on the Company's Form 10Q filed May 10, 2019 and the adoption did not have a material impact on its consolidated financial statements and related disclosures.

Investments - Available-for-Sale

Investments available-for-sale consisted of the following as of December 31, 2019 and 2018 :

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

December 31, 2020

Amortized Cost

Unrealized Gain

Unrealized Loss

Amortized Cost Unrealized Gain Unrealized Loss Accrued Interest Income Fair Value

Available-for-Sale Securities

Bonds $ 9,987 $ 3 $ — $ 7 $ 9,997

December 31, 2019

Amortized Cost

Unrealized Gain

Unrealized Loss

Amortized Cost Unrealized Gain Unrealized Loss Accrued Interest Income 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 Level 1, as described in Note 3, Fair Value Measurement to our consolidated financial statements.

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("DaVita"), accounted for 50 % of our sales in 2020 and 49 % of our sales in 2019.

Our accounts receivable from this customer were $1,166,603 and $2,538,503 as of December 31, 2019 and 2018 , respectively.

In October 2014, we entered into the Distribution Agreement with Baxter, which was amended in June 2017, pursuant to which Baxter received exclusive distribution rights for our concentrate products in the United States.

Our accounts receivable from this customer were $ 1.1 million and $ 1.2 million as of December 31, 2020 and 2019, respectively.

In October 2014, we entered into the Distribution Agreement with Baxter, which was amended in June 2017 and March 2020, pursuant to which Baxter received exclusive distribution rights for our concentrate products in the United States, a commitment by Rockwell to maintain a specified manufacturing capacity for Baxter, a cap upon the net amount of reimbursable transportation expenses and modified extension terms.

Our domestic customer contracts for the supply of dialysis concentrate products that permitted assignment to Baxter without consent have been assigned to Baxter.

As a result, for 2019 and 2018 , our direct sales to Baxter aggregated approximately 27% and 26% of sales, respectively, and we had a receivable from Baxter of $2,015,438 and $2,824,051 as of December 31, 2019 and 2018 , respectively.

As a result, for 2020 and 2019, our direct sales to Baxter aggregated approximately 25 % and 27 % of sales, respectively, and we had a receivable from Baxter of $ 1.6 million and $ 2.0 million as of December 31, 2020 and 2019, respectively.

DaVita and Baxter and the accounts administered by Baxter are important to our business, financial condition and results of operations.

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Distribution Agreement

As of October 2, 2014, we entered into the Distribution Agreement with Baxter, pursuant to which Baxter became our exclusive agent for sales, marketing and distribution activities for our hemodialysis concentrate and ancillary products in the United States and various foreign countries for an initial term of 10 years ending on October 2, 2024.

The Distribution Agreement does not include any of our drug products.

We will retain sales, marketing and distribution rights for our hemodialysis concentrate products in specified foreign countries in which we have an established commercial presence.

In October 2014, we entered into the Distribution Agreement with Baxter, pursuant to which Baxter became our exclusive agent for commercializing our hemodialysis concentrate and ancillary products in the United States and various foreign countries for an initial term of 10 years ending October 2, 2024.

We retain sales, marketing and distribution rights for our hemodialysis concentrate products for our international customers and in those countries in which we have an established commercial presence.

During the term of the Distribution Agreement, Baxter has agreed not to manufacture or sell any competitive concentrate products in the United States hemodialysis market, other than specified products.

Pursuant to the Distribution Agreement, Baxter paid us $20 million in cash in October 2014 (the “Upfront Fee”).

The Upfront Fee has been deferred and is being recognized as revenue based on the proportion of product shipments to Baxter in each period to total expected sales volume over the term of the Distribution Agreement.

We recognized revenue associated with the Upfront Fee totaling $2.1 million for each of the years ended December 31, 2019 , and 2018 , respectively.

Under the Distribution Agreement, Baxter purchases products from us at established gross margin-based prices per unit, adjusted each year during the term.

We continue to manage customer service, transportation and certain other functions for our current customers on Baxter’s behalf, in exchange for which Baxter will pay us an amount equal to our related costs to provide such functions plus a slight mark-up.

The Distribution Agreement also requires Baxter to meet minimum annual gallon-equivalent purchase levels, subject to a cure period and certain other relief, in order to maintain its exclusive distribution rights.

The Distribution Agreement does not include any of the Company’s drug products.

In June 2017, we entered into the First Amendment to Exclusive Distribution Agreement with Baxter (the “Amendment”).

The Amendment provides for, among other things, reduced pricing on certain accounts and incentives to Baxter to pursue new customers and increase future sales.

In March 2020, we entered into the Second Amendment to the Exclusive Distribution Agreement with Baxter (the “Second Amendment”).

Second Amendment provides for, among other things, a commitment by Rockwell to maintain a specified manufacturing capacity for Baxter, a cap upon the net amount of reimbursable transportation expenses and modified extension terms.

Under the Distribution Agreement, Baxter purchases concentrate-related products from us at pre-determined gross margin-based prices per unit adjusted each year during the term and subject to an annual true up.

The Distribution Agreement also requires Baxter to meet minimum annual purchase levels, subject to a cure period and certain other relief, in order to maintain its exclusive distribution rights.

The minimum purchase levels increase each year over the term of the Distribution Agreement.

Orders in any contract year that exceed the minimum will be carried forward and applied to future years’ minimum requirements.

The Distribution Agreement also contains provisions governing the operating relationship between the parties, our obligations to maintain specified manufacturing capacity and quality levels, remedies, as well as representations, warranties and indemnification obligations of the parties.

Purchases in any calendar year that exceed the minimum may be carried forward and applied to future years’ minimum requirements.

The Distribution Agreement, as amended by the Second Amendment, also contains provisions regarding our obligations to maintain specified manufacturing capacity and quality levels.

We continue to manage customer service, transportation and certain other functions for our current customers.

For customer service, Baxter pays us an amount equal to our related costs plus a slight mark-up for these services.

For transportation costs, Baxter pays us an amount equal to our related costs, subject to the defined caps contained within the Second Amendment, which are based upon defined percentages of liquid concentrate product being shipped.

The Distribution Agreement also provides that, upon the mutual determination of us and Baxter, Baxter will pay us up to $ 10 million to build a new manufacturing facility in the Pacific time-zone that would serve customers in the western United States.

The fee payable in connection with construction of the facility will be reduced to the extent that the facility is not operational within 12 months after the start of construction.

Except for any leased components, we will own and operate the facility when completed.

Either party may terminate the Distribution Agreement upon the insolvency or material breach of the other party or in the event of a force majeure.

In addition, Baxter may also terminate the Distribution Agreement at any time upon 270 days ’ prior written notice to us or if (1) prices increase beyond certain thresholds and notice is provided within 45 days after the true up payment is due for the year in which the price threshold is exceeded, (2) a change of control of the Company occurs and 270 days ’ notice is provided, or (3) upon written notice that Baxter has been enjoined by a court of competent jurisdiction from selling in the United States any product covered by the Distribution Agreement due to a claim of intellectual property infringement or misappropriation relating to such product.

In addition, Baxter may also terminate the Distribution Agreement at any time upon 270 days’ prior written notice to us or if (i) prices increase beyond certain thresholds and notice is provided within 45 days after the true up payment is due for the year in which the price threshold is exceeded, (ii) a change of control of the Company occurs and 270 days’ notice is provided, or (iii) upon written notice that Baxter has been enjoined by a court of competent jurisdiction from selling in the United States any product covered by the Distribution Agreement due to a claim of intellectual property infringement or misappropriation relating to such product.

If Baxter terminates the Distribution Agreement under the discretionary termination or the price increase provisions, it would be subject to a limited non-compete obligation in the United States with respect to certain products for a period of two years .

If a “Refund Trigger Event” occurs, we would be obligated to repay 25% of the Upfront Fee and Facility Fee (described below) if the event occurs in 2019, 2020 or 2021.

Pursuant to the Distribution Agreement, we received an upfront fee of $ 20 million in October 2014.

If a “Refund Trigger Event” occurs prior to December 31, 2021, we would be obligated to repay 25 % of the upfront fee and any paid portion of the facility fee.

A “Refund Trigger Event” means any of the following:

(1) a change of control of the Company involving any of certain specified companies;

(2) a termination by Baxter due to the Company’s bankruptcy or breach, or due to price increases that exceed the stated thresholds;

(3) a termination by either party due to a force majeure;

(4) settlement or adjudication of any claim, action or litigation relating to a covered product that materially and adversely affects Baxter’s commercialization of the product;

and (5) any regulatory action or ruling relating to a covered product that materially and adversely affects Baxter’s commercialization of the product.

The Distribution Agreement also required us to prepay our outstanding secured long-term indebtedness within 180 days and prohibits us from entering into a subsequent contract encumbering the assets used in our concentrate business without the prior written consent of Baxter.

The Distribution Agreement may be extended an additional five years by Baxter if Baxter achieves a specified sales target and pays an extension fee of $7.5 million .

(i) a change of control of the Company involving any of certain specified companies;

(ii) a termination by Baxter due to the Company’s bankruptcy or breach, or due to price increases that exceed the stated thresholds;

(iii) a termination by either party due to a force majeure;

(iv) settlement or adjudication of any claim, action or litigation relating to a covered product that materially and adversely affects Baxter’s commercialization of the product;

and (v) any regulatory action or ruling relating to a covered product that materially and adversely affects Baxter’s commercialization of the product.

We recognized revenue associated with the Upfront Fee totaling $ 2.0 million and $ 2.1 million for the years ended December 31, 2020, and 2019, respectively.

The Distribution Agreement may be extended for an additional five years by Baxter if Baxter achieves a specified sales target and pays an extension fee of $ 7.5 million.

If the first extension occurs, the Distribution Agreement term may later be extended an additional five years at Baxter’s option at no additional cost.

Components of inventory, net of reserves as of December 31, 2019 and 2018 are as follows:

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

2020 December 31,

Raw Materials $ 3,112 $ 2,471

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Finished Goods 1,805 1,432

Total $ 5,089 $ 4,088

As of December 31, 2020 and 2019, we classified $ 1.2 million and $ 0.4 million, respectively, of inventory as non-current all of which was related to Triferic or the active pharmaceutical ingredient for Triferic.

As of December 31, 2020 and 2019, we had total Triferic inventory aggregating $ 3.9 million and $ 3.5 million respectively, against which we had reserved $ 2.6 million and $ 2.8 million, respectively.

For the year ended December 31, 2019 , the Company’s inventory reserves and write-offs increased by $1.3 million , which related to Triferic.

For the year ended December 31, 2018 , inventory reserves and write-offs increased by $8.8 million , consisting of $8.1 million related to Triferic and $0.7 million related to Calcitriol.

The $0.7 million net value of Triferic inventory consisted of $0.2 million of Dialysate Triferic finished goods with expiration dates ranging from March 2020 to May 2021 , and $0.5 million of Triferic API with estimated useful lives extending through 2023 .

The Company increased its inventory reserve for Triferic by $1.3 million for the year ended December 31, 2019 due to, among other factors, the impact of the Centers for Medicare & Medicaid Services (“CMS”) Final Rule on October 31, 2019 and its current volume forecasts for Triferic across the globe.

For the year ended December 31, 2020, the Company’s inventory reserves and write-offs decreased overall by $ 0.1 million, which consisted primarily of an increase in inventory reserve of $ 0.3 million offset by a reduction to inventory reserve of $ 0.4 million related to destruction of Triferic inventory.

For the year ended December 31, 2019, inventory reserves and write-offs increased by $ 1.3 million.

The $ 1.3 million net value of Triferic inventory consisted of $ 0.1 million of Triferic (dialysate) finished goods with expiration dates ranging from May 2021 to September 2021, $ 0.3 million of Triferic API with estimated useful lives extending through 2023, and $ 890,000 of Triferic raw material with an estimated useful live of 25 years.

Property and Equipment

As of December 31, 2019 and 2018 , the Company’s property and equipment consisted of the following:

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

Leasehold Improvements $ 1,196 $ 1,162

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Laboratory Equipment 676 653

Transportation Equipment

Accumulated Depreciation ( 6,536 ) ( 5,865 )

Net Property and Equipment $ 2,642 $ 2,433

Depreciation expense during the years ended December 31, 2019 and 2018 is as follows:

Depreciation expense during the years ended December 31, 2020 and 2019 is as follows (table in thousands):

Depreciation expense $ 834 $ 788

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We completed our annual impairment tests as of December 31, 2020 and 2019, and determined that no adjustment for impairment of goodwill was required during the years ended December 31, 2020 and 2019.

We entered into global licensing agreements for certain patents covering our Triferic products.

We received FDA approval for Dialysate Triferic in January 2015.

We have capitalized the licensing fees paid for the rights to use this patented technology as an intangible asset.

Capitalized Licensing Fees

Accumulated Amortization

Capitalized Licensing Fees, Net of Amortization

Amortization Expense

Our policy is to amortize licensing fees over the life of the patents pertaining to certain licensing agreements and to amortize patent costs over the life of the patent.

Amortization expense was $353 for capitalized patent costs for each of the years ended December 31, 2019 and 2018 , respectively.

Accrued Liabilities

Accrued liabilities as of December 31, 2019 and 2018 consisted of the following:

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

Accrued Research & Development Expense $ 232 $ 283

Accrued Compensation and Benefits 2,500 1,108

Accrued Legal Expenses

Accrued Marketing Expenses

Accrued Unvouchered Receipts 755 1,901

Accrued Workers Compensation 395 195

Other Accrued Liabilities 1,131 1,031

Total Accrued Liabilities $ 5,013 $ 4,518

Insurance Financing Note Payable

On June 3, 2019, the Company entered into a short-term note payable for $1.9 million , bearing interest at 4.65% per annum to finance various insurance policies.

Principal and interest payments related to this note began on July 3, 2019 and are paid on a straight-line amortization over a 10 -month period with the final payment due on April 3, 2020.

As of December 31, 2019 , the Company’s insurance note payable balance was $0.8 million .

Interest expense was $24,547 for the year ended December 31, 2019 .

Interest expense is included under other income (expense) within the Interest Income item on the consolidated statement of operations herein.

Stockholders’ Equity

The Company’s new authorized capital stock consists of 170 million shares of common stock, $0.0001 par value per share, and 2,000,000 shares of preferred stock, $0.0001 par value per share.

At the 2019 Annual Meeting of Shareholders, the Company’s shareholders voted and approved to reincorporate the Company from the State of Michigan to the State of Delaware (the “Reincorporation”).

The Reincorporation became effective on August 30, 2019 and was accomplished by the filing of (i) a certificate of conversion with the Bureau of Commercial Services of the Michigan Department of Labor & Economic Growth;

(ii) a certificate of conversion with the Secretary of State of the State of Delaware;

and (iii) a Certificate of Incorporation with the Secretary of State of the State of Delaware.

Also at the 2019 Annual Meeting, the Company obtained shareholder approval to increase the number of authorized shares of the Company’s common stock by 50,000,000 shares from 120,000,000 shares to 170,000,000 shares.

On July 30, 2019,

the Company amended its Articles of Incorporation to reflect this increase in authorized shares from 120,000,000 to 170,000,000 shares.

Preferred Stock

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During the year ended December 31, 2019, 30,000 vested employee stock options were exercised for net cash proceeds of $ 147,900 at a weighted average exercise price of $ 4.93 per share.

The Company withheld 210,132 of these shares of common stock at a cost of $759,028 , or a weighted average cost of $3.61 per share, to cover the employee withholding taxes and other expenses related to these exercises.

During the year ended December 31, 2019 , 30,000 vested employee stock options were exercised for net cash proceeds of $147,900 at a weighted average exercise price of $4.93 per share.

During the year ended December 31, 2020, no vested employee stock options were exercised.

Controlled Equity Offering

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

As of December 31, 2019 , the Company sold 1,840,443 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 .

During the year ended December 31, 2019, the Company sold 1,840,443 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.

As of December 31, 2019 , approximately $34.6 million remains available for issuance under this facility.

For the year ended December 31, 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.

As of December 31, 2020, approximately $ 32.3 million remains available for sale under this facility.

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

Our ability to sell common stock under the facility may be limited by several factors including, among other things, the trading volume of our common stock and certain black-out periods that we may impose upon the facility, among other things.

Public Offering of Common Stock

On October 15, 2018, the Company raised $21.9 million , net of issuance costs, in capital from the offering and sale of 5,541,562 shares of common stock at a price of $3.97 per share, along with warrants to purchase up to an additional 2,770,781 shares of common stock at a price of $4.96 per share.

On June 17, 2019, the Company entered into an underwriting agreement with Piper Jaffray & Co., and Cantor Fitzgerald & Co., pursuant to which the Company agreed to issue and sell up to 6,708,334 shares of common stock, which included 875,000 optional shares that may be sold pursuant to an option granted to the underwriters.

On June 20, 2019, the Company closed the sale of 5,833,334 shares of its common stock for gross proceeds of $17,500,002 at the public offering price of $3.00 per share (the “Offering”).

The Company paid $1,379,323 in underwriters’ commissions and fees related to the sale of the common stock.

Public Offerings of Common Stock

On February 4, 2020, the Company entered into an underwriting agreement with Cantor Fitzgerald & Co., as underwriter, pursuant to which the Company agreed to issue and sell an aggregate of up to 3,670,212 shares of its common stock, which included 478,723 optional shares that may be sold pursuant to an over-allotment option granted to the underwriters.

On February 6, 2020, the Company closed the sale of 3,191,489 shares of its common stock at the public offering price of $ 2.22 per share (the "Offering").

On February 19, 2020, the underwriter exercised its over-allotment option to purchase an additional 478,723 shares at a price of $ 2.22 per share, which closed on February 21, 2020.

The Company raised a total of $ 8.0 million, net of issuance costs of $ 0.1 million, relating to the sale of the common stock in the Offering.

The Offering was made pursuant to the Company’s effective Registration Statement on Form S-3 (File No.

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

On July 9, 2019, the Underwriters exercised their over-allotment option to purchase an additional 425,800 shares of common stock at a price of $3.00 per share, which closed on July 11, 2019.

The total proceeds to the Company

(net of underwriting commissions and offering fees) from the exercise of the over-allotment option were approximately $1.2 million .

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 23,178,809 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 % of the aggregate gross proceeds raised in the offering, minus $ 0.4 million 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 % 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 December 31, 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.

Restricted Common Stock

On August 7, 2018, 333,200 shares of restricted stock were forfeited.

Forfeitures of restricted stock were related to a settlement agreement between the Company and its former CEO, CFO, and two former Directors.

(see Note 15).

During the year ended December 31, 2019 , 322,820 shares of common stock related to fully vested restricted stock units were delivered to officers of the Company.

The Company withheld 107,741 of these shares of common stock at a fair value of $279,346 to cover the officer’s withholding taxes related to the vesting of restricted stock units.

During the year ended December 31, 2020, 988,958 shares of performance-based restricted stock and 152,097 shares of time-based restricted stock were forfeited.

Forfeitures of the performance-based and time-based restricted stock were related to the resignation of Stuart Paul, former CEO, and Angus Smith, former CFO.

During the year ended December 31, 2020, 224,994 shares of common stock related to fully vested restricted stock units were delivered to officers and employees of the Company.

The Company withheld 8,348 of these shares of common stock at a fair value of $ 18,950 to cover the employees and officer’s withholding taxes related to the vesting of restricted stock units.

Stock-Based Compensation

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The Board of Directors adopted the 2018 Long-Term Incentive Plan (“2018 LTIP”) on January 29, 2018 as a replacement for the 2007 LTIP.

There are 3,300,000 shares of common stock reserved for issuance under the 2018 LTIP.

Initially there were 3,300,000 shares of common stock reserved for issuance under the 2018 LTIP.

On May 18, 2020, 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 bringing common stock reserve for issuance up to 6,200,000 under the 2018 LTIP.

The Compensation Committee of the Board of Directors (the “Committee”) is responsible for the administration of the 2007 LTIP and 2018 LTIP, including the grant of stock based awards and other financial incentives including performance based incentives to employees, non‑employee directors and consultants.

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The 2007 LTIP and 2018 LTIP also allow for the retention of shares in payment of the exercise price and income tax withholding.

The latter method results in no cash being received by us, but also results in a lower number of total shares being outstanding subsequently as a direct result of this exchange of shares.

method results in no cash being received by us, but also results in a lower number of total shares being outstanding subsequently as a direct result of this exchange of shares.

Shares returned to us in this manner would be retired.

The Company recognized total stock-based compensation expense during the years ended December 31, 2019 and 2018 as follows:

The Company recognized total stock-based compensation expense during the years ended December 31, 2020 and 2019 as follows (table in thousands):

Service based awards:

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Stock option awards 1,491 2,300

$ 1,863 $ 3,867

Performance based awards:

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Stock option awards ( 240 ) 443

( 1,388 ) 1,085

Total $ 475 $ 4,952

Restricted Stock Awards

A summary of the Company’s restricted stock awards during the years ended December 31, 2020 and 2019 is as follows:

Number of Shares

Weighted Average

Number of Shares Weighted Average

Unvested at January 1, 2019 146,800 $ 5.70

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Unvested at December 31, 2020 146,800 $ 5.70

During the year ended December 31, 2018 , forfeitures of performance based restricted stock awards totaled 333,200 related to the settlement agreement with the Company’s former CEO, CFO, and two former Directors.

(see Note 15.)

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 December 31, 2020, unvested restricted stock awards of 146,800 were related to performance based awards.

Stock-based compensation expense of nil and $1.3 million was recognized during the year ended December 31, 2019 and 2018 , respectively.

Stock-based compensation expense of nil was recognized for both the year ended December 31, 2020 and 2019, respectively.

As of December 31, 2020, there is no unrecognized stock-based compensation expense related to restricted stock awards.

Service Based Restricted Stock Units

A summary of the Company’s service based restricted stock units during the year ended December 31, 2019 is as follows:

Number of Shares

Weighted Average

A summary of the Company’s service based restricted stock units during the year ended December 31, 2020 and 2019 is as follows:

Number of Shares Weighted Average

Unvested at January 1, 2019 472,959 $ 4.32

Granted 244,063 4.09

Forfeited ( 28,916 ) 4.32

Vested ( 224,320 ) 4.19

Unvested at December 31, 2019 463,786 4.26

Granted 208,993 2.00

Forfeited ( 159,724 ) 4.26

Vested ( 247,561 ) 4.30

Unvested at December 31, 2020 265,494 $ 2.60

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Stock-based compensation expense of 0.4 million and $ 1.6 million was recognized during the year ended December 31, 2020 and 2019, respectively.

As of December 31, 2019 , the unrecognized stock-based compensation expense was $0.9 million .

As of December 31, 2020, the unrecognized stock-based compensation expense was $ 0.2 million over the next 12 months.

Performance Based Restricted Stock Units

A summary of the Company’s performance based restricted stock units during the year ended December 31, 2019 is as follows:

Number of Shares

Weighted Average

A summary of the Company’s performance based restricted stock units during the year ended December 31, 2020 and 2019 is as follows:

Number of Shares Weighted Average

Unvested at January 1, 2020 988,958 $ 4.48

Forfeited ( 988,958 ) $ 4.48

Unvested at December 31, 2020 — $ —

Number of Shares Weighted Average

Unvested at January 1, 2019 988,958 $ 4.48

Unvested at December 31, 2019 988,958 $ 4.48

Stock-based compensation expense recognized for performance based restricted stock units was $( 1.1 ) million and $ 0.6 million for the year ended December 31, 2020 and 2019, respectively.

As of December 31, 2019, the unrecognized stock-based compensation expense related to performance based restricted stock units was $0.9 million .

The performance based restricted stock unit compensation was reduced by $0.7 million for the year ended December 31, 2019 due to a change in vesting criteria from probable to improbable for certain performance based awards.

The Company will continue to review this performance award criteria and recognize compensation costs as it relates to the probability of vesting.

A performance unit may be comprised of either a performance based award or a market-based award.

Performance based awards vest from the grant date through the remaining service period, and the fair value is the market price of one common share on the grant date.

Evaluation of the expected vesting period is reviewed quarterly.

Market-based awards vest upon the achievement of the market-based performance goal, provided the continued employment of the Company’s employee.

The fair value of each market-based restricted stock unit was determined through the use of the Monte Carlo simulation method.

Over the performance period, the number of shares expected to be issued is adjusted upward or downward based upon probability of achievement of performance targets.

The ultimate number of shares issued and the related compensation cost recognized is based on a comparison of the final performance metrics to the specified targets.

In accordance with ASC 718, Share-Based Payments, the market-based restricted stock units were assigned a fair value of $4.07 per share on the date of grant using the Monte Carlo simulation model.

The following assumptions were used in the model in fiscal year 2018 :

Expected stock price volatility

Risk-free interest rate

Dividend yield rate

As of December 31, 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, Stuart Paul, on April 17, 2020 and the resignation of the Company's former Chief Financial Officer, Angus Smith, effective July 3, 2020.

These forfeited awards reduced stock-based compensation expense for the year ended December 31, 2020 by $ 1.4 million.

Service Based Stock Options

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$ 1.91 - $ 6.55

$3.17 - $5.75

Expected stock price volatility 68.2 % - 75.8 %

67.5 % - 70.3 %

67.5% - 69.9%

Risk-free interest rate 0.31 % - 1.70 %

1.40 % - 2.60 %

Term (years) 5.5 - 6.0

A summary of the Company’s service based stock option activity for the years ended December 31, 2020 and 2019 is as follows:

Options Weighted

Price Weighted

Term Aggregate

(in $1,000's)

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

Granted 1,103,938 $ 3.37 9.0 107

Exercised ( 30,000 ) $ 4.93 —

Forfeited ( 720,394 ) $ ( 6.24 ) —

Outstanding at December 31, 2019 8,210,024 $ 7.06 5.1 $ 107

Granted 2,288,386 $ 1.94 9.0 —

Exercised — $ — —

Expired ( 4,249,596 ) $ ( 8.07 ) —

Forfeited ( 530,858 ) $ ( 3.88 ) —

Outstanding at December 31, 2020 5,717,956 $ 4.55 6.6 $ —

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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 year ended December 31, 2018, the Company accelerated the vesting of 258,334 and 71,667 unvested stock options of the former Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) in accordance with the terms of

the Settlement Agreement (defined in Note 15).

As a result of this acceleration of stock options, the Company recorded additional stock-based compensation of approximately $162,000 .

During the year ended December 31, 2020 and 2019, the service based stock options granted consisted of 2,288,386 and 1,103,938 options granted to employees, respectively.

As of December 31, 2019 , 6,481,095 vested options were exercisable at a weighted average price of 7.97 per share and 1,728,929 unvested options were exercisable at a weighted average price of 3.66 per share.

As of December 31, 2020, 2,898,104 vested options were exercisable at a weighted average price of 6.85 per share.

During the year ended December 31, 2020 and 2019, stock-based compensation expense of $ 1.5 million and $ 2.3 million was recognized, respectively.

As of December 31, 2019 , total stock-based compensation expense related to unvested options not yet recognized totaled approximately $2.2 million .

As of December 31, 2020, total stock-based compensation expense related to 2,819,582 unvested options not yet recognized totaled approximately $ 2.2 million over the next 2.2 years.

Performance Based Stock Options

A summary of the performance based stock options granted for the year ended December 31, 2020, is as follows:

Number of Shares

Weighted Average

Number of Shares Weighted Average

Outstanding at January 1, 2019 388,125 $ 4.70

Outstanding at December 31, 2019 388,125 $ 4.70

Granted 750,000 $ 2.20

Forfeited ( 388,125 ) $ ( 4.70 )

Outstanding at December 31, 2020 750,000 $ 2.20

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Stock-based compensation expense recognized for performance-based stock options was $( 0.2 ) million and $ 0.4 million for the year ended December 31, 2020 and 2019.

As of December 31, 2019, the unrecognized stock-based compensation expense related to performance based stock options was $0.5 million .

As of December 31, 2020, the unrecognized stock-based compensation expense related to unvested performance-based stock options was $ 0.2 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, Stuart Paul, on April 17, 2020.

These forfeited options reduced stock-based compensation expense by $ 0.7 million.

A performance option may be comprised of either a performance based award or a market-based award.

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Evaluation of the expected vesting period is reviewed quarterly.

Market-based awards vest upon the achievement of the market-based performance goal, provided the continued employment of the Company’s employee.

Market-based awards vest upon the achievement of the market-based performance goal, provided the continued employment of the

Company’s employee.

The fair value of each market-based stock option was determined through the use of the Monte Carlo simulation method.

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The ultimate number of shares issued and the related compensation cost recognized is based on a comparison of the final performance metrics to the specified targets.

In accordance with ASC 718, Share-Based Payments, the market-based stock options were assigned an average fair value of $2.71 per share on the date of grant using the Monte Carlo simulation model.

The following assumptions were used in the model in fiscal year 2018:

The fair value of the performance-based stock options granted for the year ended December 31, 2020 were based on the following assumptions:

Expected stock price volatility 74.4 %

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Dividend yield rate —

Term (years) 5.7

Related Party Transactions

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On October 7, 2018, the Company entered into a Master Services and IP Agreement (the “Charak MSA”) with Charak and Dr.

Ajay Gupta, who serves as Executive Vice President and Chief Scientific Officer of the Company.

Ajay Gupta, a former Officer of the Company (see Note 18).

Pursuant to the MSA, the parties entered into three additional agreements described below related to the license of certain soluble ferric pyrophosphate (“SFP”) intellectual property owned by Charak, as well as the Employment Agreement (defined below).

The Charak MSA provides for a payment of $ 1.0 million to Dr.

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 .

As of December 31, 2019 , 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.

As of December 31, 2019 and 2018, the Company accrued $0.1 million and $0.9 million , respectively, as a related party payable on the condensed consolidated balance sheet.

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 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 December 31, 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.

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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 sublicensee 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 sublicensee 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 Technology License Agreement TPN Triferic®, dated as of October 7, 2018 (the “TPN Agreement”), pursuant to which Charak granted the Company an exclusive, sublicensable, royalty-bearing license to SFP for the purpose of commercializing worldwide certain TPN products incorporating SFP.

incorporating SFP.

The license grant under the TPN Agreement continues for a term that expires on the later of February 1, 2034 or upon the expiration or termination of a valid claim of a licensed patent.

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

The transaction was accounted for as an asset acquisition pursuant to ASU 2017-1, Business Combinations (Topic 805), Clarifying the Definition of a Business, as the majority of the fair value of the assets acquired was concentrated in a group of similar assets, and the acquired assets did not have outputs or employees.

The assets acquired under the MSA include a license of SFP.

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

In addition, the potential milestone payments are not yet considered probable, and no milestone payments have been accrued at December 31, 2019 .

The potential milestone payments are not yet considered probable, and no milestone payments have been accrued at December 31, 2020.

Director Compensation

In 2018 , the Company compensated non-employee directors with a cash retainer and a stock option grant, which was approved at the 2018 Annual Meeting of Shareholders in conjunction with the approval of the Company’s 2018 Long Term Incentive Plan.

Following the removal of the Company’s then Chief Executive Officer and Chief Financial Officer in May 2018, independent directors Lisa Colleran, John Cooper and Benjamin Wolin were appointed to a special committee of the Board, which committee was delegated the responsibility to provide Board-level oversight of management on a more frequent basis until the appointment of a new Chief Executive Officer and Chief Financial Officer in the third and fourth quarters of 2018 , as well as to provide Board-level oversight over the Company’s legal matters during this time.

Subsequent to the appointment of this committee, the Compensation Committee of the Board recommended, and the Board approved, additional aggregate cash compensation of

$330,000 payable to the directors who served on this committee in light of the substantial investment of additional time required in this role during the Company’s transition in 2018 .

In 2019, the Company compensated non-employee directors with a cash retainer, which was approved by the Board of Directors, to serve on a special Advisory Committee of the Board, which committee was delegated to provide Board-level oversight of senior management and not have any management authority within the Company.

Independent directors Lisa Colleran and John Cooper were appointed to the Advisory Committee.

The aggregate compensation paid to the members of the advisory Committee for the year ended December 31, 2019 was $202,500 .

The aggregate compensation paid to the members of the advisory Committee for the year ended December 31, 2020 and 2019 was $ 225,000 and $ 202,500 , respectively.

The Advisory Committee disbanded in May 2020.

Commitments and Contingencies

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We also occupy two other manufacturing facilities, a 51,000 square foot facility in Grapevine, Texas under a lease expiring in December 2025, and a 57,000 square foot facility in Greer, South Carolina under a lease expiring February 2023.

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.

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

For the year ended December 31,

In addition, we occupy 4,100 square feet of office space in Hackensack, New Jersey under a lease expiring on July 1, 2024.

This lease is currently being offered for sublease.

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

For the year ended December 31, For the year ended December 31,

Operating leases

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Operating lease expense 2,097 2,394

Finance leases

Amortization of right-of-use assets 18 —

Interest on lease obligations 5 —

Finance lease expense 23 —

Short-term lease rent expense 17 17

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Operating cash flows from operating leases $ 1,648 $ 2,015

Operating cash flows from finance leases $ 5 $ —

Financing cash flows from finance leases $ 17 $ —

Right of use assets exchanged for operating lease liabilities $ 268 $ 5,077

Right of use assets exchanged for finance lease liabilities $ 930 $ —

Weighted-average remaining lease term - operating leases 2.3 1.9

Weighted-average remaining lease term – finance leases 5.8 0

Weighted-average discount rate - operating leases 6.4 % 6.8 %

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

Year ending December 31, 2020

Weighted-average discount rate – finance leases 5.1 % — %

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

Operating Finance

Year ending December 31, 2021 $ 1,131 $ 176

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Year ending December 31, 2024 118 178

Year Ended December 31, 2025 6 176

Year Ended December 31, 2026 — 163

Total 2,237 1,053

Less present value discount $ ( 162 ) $ ( 140 )

Operating lease liabilities.

Operating and Finance lease liabilities.

$ 2,075 $ 913

We evaluate various kinds of risk that we are exposed to in our business.

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For certain insurable risks, we may acquire insurance policies to protect against potential losses or to partially insure against certain risks.

For our subsidiary, Rockwell Transportation, Inc., we maintain a partially self-

insured workers' compensation policy.

For our subsidiary, Rockwell Transportation, Inc., we maintain a partially self-insured workers' compensation policy.

Under the policy, our self‑insurance retention is $ 350,000 per occurrence and $ 602,354 in aggregate coverage for the policy year ending July 1, 2021.

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Demand Notice

In February 2020, the Company received a letter from a supplier relating to a supply agreement entered into in 2015 between the Company and the supplier.

In February 2020, the Company received a letter from a supplier relating to a supply agreement entered into with the Company in 2015.

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.

Based upon current information, the Company believes it has several defenses to the supplier’s claims.

No lawsuit has been filed.

The Company intends cooperate with the supplier in an effort to amicably resolve its claim.

If a resolution cannot be concluded;

however, the Company intends to vigorously defend itself from the supplier’s allegations.

Richmond/Ravich Litigation

On March 8, 2017, we filed suit in the United States District Court for the Eastern District of Michigan against Richmond Brothers, Inc.

and certain related entities, David S.

Richmond, Mark H.

Ravich and certain related trusts, and Matthew J.

Curfman (“Richmond/Ravich Defendants”).

Our complaint alleged various violations of the Securities and Exchange Act of 1933 (the “Exchange Act”) by the Richmond/Ravich Defendants.

Richmond/Ravich Settlement

On November 22, 2017, we entered into a Settlement and Standstill Agreement with the Richmond/Ravich Defendants (the “Standstill Agreement”) whereby the Richmond/Ravich Defendants agreed to support our recommendations and nominations in connection with any meeting of shareholders, including the 2018 Annual Meeting of shareholders (the “2018 Meeting”) through December 31, 2018 , and we agreed to add a seventh, independent director to our Board of Directors by February 15, 2018 and to reimburse the Richmond/Ravich Defendants for certain of their third-party expenses.

Pursuant to the Standstill Agreement, we and Richmond/Ravich Defendants each released all claims against one another and jointly submitted a stipulation to the Court seeking to voluntarily dismiss the lawsuits.

On November 30, 2017, the Court entered a Stipulated Order of Dismissal dismissing the entire case with prejudice.

Our Board of Directors was unable to appoint a seventh director by February 15, 2018.

Accordingly, on February 27, 2018, Richmond Brothers, Inc.

(“RBI”) and David S.

Richmond (“Richmond”) delivered a letter to us nominating Lisa Colleran, Benjamin Wolin and Richmond for election to the Board of Directors at the 2018 Meeting.

Thereafter, on March 7, 2018, we entered into a letter agreement with RBI and Richmond to memorialize the parties’ mutual agreement on certain corporate governance matters (the “Letter Agreement”).

The Letter Agreement provided, among other things, that:(a) by March 7, 2018, the Company’s Board would increase the size of the Board from six directors to eight directors and would appoint:

(i) Benjamin Wolin as (A) a Class I director to serve for a term expiring at the Company’s 2019 Annual Meeting of Shareholders and (B) the lead independent director of the Board;

and (ii) Lisa Colleran as a Class II director to serve for a term expiring at the Company’s 2020 Annual Meeting of Shareholders;

and (b) if the Company complied with the provisions of the Letter Agreement by March 7, 2018, then RBI would withdraw its proposal to separately nominate any directors for election at the 2018 Meeting.

As a result, on March 9, 2018, RBI and Richmond withdrew their proposal to separately nominate directors for election at the 2018 Meeting.

Termination of our CEO and CFO

The Company terminated its CEO and CFO in May 2018, which resulted in the following litigation involving the Company.

Circuit Court for Oakland County, Michigan

Following the Board’s termination of the Company’s former CEO on May 22, 2018, and in response to his continued assertion that he remained the duly appointed Chief Executive Officer of the Company, on May 23, 2018, the Company filed a complaint in the Oakland County Circuit Court in Michigan (“State Court”) seeking declaratory relief and a temporary restraining order.

On May 24, 2018, the Board terminated its then-serving CFO.

On July 11, 2018, the State Court entered a stipulated order permitting the Company to withdraw its complaint and allowing the parties to litigate in the Federal Court action described below.

On July 17, 2018, the lawsuit in the State Court action was dismissed and closed.

United States District Court for the Eastern District of Michigan

On June 13, 2018, the Company’s former CEO and CFO filed a complaint in the United States District Court for the Eastern District of Michigan (“Federal Court”) against the Company and certain directors (collectively, the “Defendants”).

The complaint requested that the Federal Court reinstate the former CEO to his former position of Chief Executive Officer, reinstate the former CFO to his former position of Chief Financial Officer and order the Defendants to pay all costs associated with the matter.

The complaint alleged that the Defendants possibly violated their duties of loyalty and care to the Company;

rules under Regulation Fair Disclosure;

and various federal securities laws, including Section 10(b) of the Exchange Act and SEC Rule 10b-5.

On July 2, 2018, the Company filed an answer and counterclaim against the Company’s former CEO, former CFO, a former director and a then-serving director.

On August 7, 2018, the parties entered into the Settlement Agreement by which the parties agreed to dismiss the Federal Court action with prejudice.

Settlement Agreement and Dismissal of State and Federal Court Actions

On August 7, 2018, the parties entered into a Settlement Agreement by which the parties agreed to dismiss the federal court action with prejudice.

The court dismissed and closed the action on August 15, 2018.

On August 7, 2018, the Company, the Company’s former CEO, former CFO, a former director and a then-serving director and the Defendants, entered into the Settlement Agreement, pursuant to which the parties agreed to dismiss the Federal Court action with prejudice and to enter into a broad mutual release of claims.

The Company agreed to:

(i) pay the Company’s former CEO, former CFO, a former director and a then-serving director a total of $1,500,000 one-half of which was paid at execution and the remainder of which will be paid in nine equal monthly installments of $83,333 (ii) pay $30,000 to the then-serving director (who then agreed to resign as a director);

(iii) accelerate the vesting of options held by the Company’s former CEO and former CFO as of the date of their terminations;

and (iv) grant an extended option exercise period for vested options.

The Company’s former CEO, former CFO, a former director and the resigning director agreed to certain standstill covenants for a period of approximately five years and agreed to forfeit a total of 313,600 unvested shares of restricted common stock.

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 December 31, 2020, the Company has performed all required obligations under the settlement agreement.

SEC Investigation

As a follow up to its prior inquiry letters, the Company received a subpoena from the SEC during the Company’s third quarter requesting, among other things, certain information and documents relating to the status of the Company’s request to CMS for separate reimbursement status for Dialysate Triferic, the Company’s reserving methodology for expiring Triferic inventory, and the basis for the Board’s termination of the former CEO and CFO.

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 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.

Shareholder Class Action Lawsuits

On July 27, 2018, Plaintiff Ah Kit Too filed a putative class action lawsuit in the United States District Court in the Eastern District of New York against the Company and former officers, Robert Chioini and Thomas Klema.

The complaint is a federal securities class action purportedly brought on behalf of a class consisting of all persons and entities, other than Defendants, who purchased or otherwise acquired the publicly traded securities of the Company between March 16, 2018 and June 26, 2018.

The complaint alleges that the Company and Messrs.

The Too Complaint is a federal securities class action purportedly brought on behalf of a class consisting of all persons and entities, other than Defendants, who purchased or otherwise acquired the publicly traded securities of the Company between March 16, 2018 and June 26, 2018.

The Too Complaint alleges that the Company and Messrs.

Chioini and Klema violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).

Specifically, the complaint alleges that defendants filed reports with the Securities and Exchange Commission that contained purported inaccurate and misleading statements regarding the potential for the Company’s drug, Triferic, to quality for separate reimbursement status by the Centers for Medicare and Medicaid Services.

Specifically, the Too Complaint alleges that defendants filed reports with the SEC that contained purported inaccurate and misleading statements regarding the potential for the Company’s drug, Triferic, to quality for separate reimbursement status by the CMS.

On September 4, 2018, Plaintiff Robert Spock filed a similar putative class action lawsuit in the United States District Court in the Eastern District of New York against the Company and Messrs.

Chioini and Klema.

Chioini and Klema (the "Spock Complaint").

The Spock Complaint is a federal securities class action purportedly brought on behalf of a class consisting of persons who purchased the Company’s securities between November 8, 2017 and June 26, 2018.

This complaint alleges that the Company and Messrs.

Chioini and Klema violated the Exchange Act in that the Company was aware the Centers for Medicare and Medicaid Services would not pursue the Company’s proposal for separate reimbursement for Triferic;

Chioini and Klema violated the Exchange Act in that the Company was aware the CMS would not pursue the Company’s proposal for separate reimbursement for Triferic;

misstated reserves in the Company’s quarterly report for the first quarter of 2018;

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On October 10, 2018, the court issued an order consolidating the two actions, appointing co-lead plaintiffs and co-lead counsel.

On December 10, 2018, lead Plaintiffs filed a consolidated amended complaint, which included the same allegations as the initial complaints and asserted claims on behalf of a putative class consisting of person who purchased the Company’s securities between November 8, 2017 and June 26, 2018.

between November 8, 2017 and June 26, 2018.

On February 18, 2019, the Company answered the consolidated amended complaint.

The lawsuits seek damages allegedly sustained by the class and an award of plaintiffs’ costs and attorney fees.

The case is at an early stage with no significant pre-trial proceedings (such, as substantive motions, discovery, etc.) having occurred.

The Company believes it has defenses to the claims of liability and damages and is responding accordingly.

On August 7, 2019, all parties to the class action entered into a settlement of the consolidated class action.

Pursuant to the terms and conditions of the settlement agreement, the Company will pay the Plaintiffs $ 3.7 million (the “Settlement Amount") in exchange for a full release of all liability as to all defendants.

Of the Settlement Amount, the Company will be contributing approximately $0.4 million , which represents the remaining retention amount under the Company’s director and officer liability insurance policy.

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

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 December 31, 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 has tendered the above shareholder derivative actions to its D&O insurance carrier(s) for defense and indemnity under its applicable insurance policies.

The Company maintains a $1.0 million self-insured retention under the applicable insurance policies, which will be exhausted upon payment of the Company’s share of the Settlement Amount from the settlement of the class action described above.

The Company also has received requests from stockholders to investigate issues relating in part to allegations raised in the securities and derivative lawsuits.

The Audit Committee of the Board of Directors engaged independent counsel to investigate these issues.

The investigation concluded, among other things that there was no merit to the claims raised in the stockholder requests and the investigation has been concluded.

Settlement Agreements

On August 7, 2018, the Company entered into a confidential settlement agreement and mutual release (the “Settlement Agreement”) with its former CEO, former CFO and a former and then current director.

For more details see Note 14 in Form 10-K filed on March 18, 2019.

The Company accrued approximately $1.5 million related to this Settlement Agreement and as of December 31, 2018 , the Company has paid $1.1 million .

The Company is also entitled to a partial reimbursement for this accrual from the Company’s insurance company of approximately $0.5 million which was collected in October 2018.

This resulted in a net settlement expense of approximately $1.0 million for the year ended December 31, 2018 .

On August 7, 2019, the Company entered into a settlement agreement relating to the class action lawsuits.

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

See Note 15 above for further details.

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

A reconciliation of income tax expense at the statutory rate to income tax expense at our effective tax rate is as follows:

The cases were consolidated.

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' settlement of the Derivative Complaints.

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

On March 16, 2020, Rockwell Medical, Inc.

and Rockwell Transportation, Inc., as Borrowers, entered into a Loan and Security Agreement (the "Loan Agreement") with Innovatus Life Sciences Lending Fund I, LP ("Innovatus"), as collateral agent and the lenders party thereto, pursuant to which Innovatus, as a lender, agreed to make certain term loans to the Company in the aggregate principal amount of up to $ 35.0 million (the "Term Loans").

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

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.

The Company is entitled to make interest-only payments for thirty months , or up to thirty-six months if certain conditions are met.

The Term Loans will mature on March 16, 2025, and will bear interest at the greater of (i) Prime Rate (as defined in the Loan Agreement) and (ii) 4.75 %, plus 4.00 % with an initial interest rate of 8.75 % per annum and an effective interest rate of 10.90 %.

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 year ended December 31, 2020, interest expense amounted to $ 1.6 million.

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.

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 Triferic sales for the year ended December 31, 2020, we did not satisfy this covenant as of December 31, 2020.

The Company utilized the cure provision to regain compliance,

which Innovatus accepted.

As of December 31, 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).

The Warrants may be exercised on a cashless basis and are immediately exercisable through the seventh anniversary of the applicable funding date.

The number of shares of common stock for which each Warrant is exercisable and the associated exercise price are subject to certain proportional adjustments as set forth in such Warrant.

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.

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 December 31, 2020, the outstanding balance of the Term Loan was $ 20.9 million, net of unamortized issuance costs and unaccreted discount of $ 1.6 million.

The following table reflects the schedule of principal payments on the Term Loan as of December 31, 2020 (in thousands):

Year Principal Payments

A reconciliation of income tax expense at the statutory rate to income tax expense at our effective tax rate is as follows (dollars in thousands):

Tax Expense (Benefit) Computed at 22.67 % and 22.79 % of Pretax Income (Loss)

$ ( 6,373 ) $ ( 7,780 )

Changes in Tax Laws — —

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Total Income Tax Expense $ — $ —

The details of the net deferred tax asset are as follows:

The details of the net deferred tax asset are as follows (dollars in thousands):

Deferred tax assets:

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Accrued Expenses 185 280

Inventories 666 866

Book over Tax Depreciation 25 18

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Total Deferred Tax Liabilities 449 468

Subtotal 77,164 70,791

Valuation Allowance ( 77,164 ) ( 70,791 )

Net Deferred Tax Asset $ — $ —

TCJA tax reform legislation enacted on December 22, 2017 makes major changes to the U.S.

corporate income tax system, including lowering the U.S.

federal corporate income tax rate to 21 percent from 35 percent, limiting or eliminating certain existing tax deductions, credits and incentives, allowing immediate expensing of capital expenditures through 2022, and eliminating the expiration of net operating loss carryforwards for losses generated in 2018 or after.

ASC 740 requires companies to recognize the effects of tax law changes in the period of enactment, which for us was the fourth quarter of 2017, even though the effective date of most provisions of the TCJA is January 1, 2018.

TCJA resulted in significant changes to our fourth quarter of 2017 income tax provision most notably a reduction in our deferred tax asset, before valuation allowance, as a result of the lower corporate income tax rate.

The Tax Cuts and Jobs Act of 2017 ("TCJA") impacted how net operating losses are utilized.

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") temporarily suspends the TCJA limitation, allowing a net operating loss carryforward to fully offset taxable income in tax years beginning before January 1, 2021.

The CARES Act also temporarily reinstated a carryback period for all net operating losses generated in years beginning after December 31, 2017 and before January 1, 2021.

The carryback period for those years is five years under the CARES Act.

Deferred tax assets result primarily from net operating loss carryforwards.

For tax purposes, we have net operating loss carryforwards of approximately $232,300,000 , of which $169,000,000 that expire between 2020 and 2037.

In assessing the potential for realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized upon the generation of future taxable income during the periods

in which those temporary differences become deductible.

For federal tax purposes, we have net operating loss carryforwards of approximately $ 262.9 million that expire between 2021 and 2037.

We recognized no income tax expense or benefit for the years ended December 31, 2020, and 2019.

We expect to incur operating losses until our drug products are marketed and generating sufficient profits to offset our operating expenses.

Due to our history of recurring net losses, management has placed a full valuation allowance against the net deferred tax assets as of December 31, 2019 and 2018 .

While we anticipate generating income within the next year or two, we expect to incur operating losses until our drug products are marketed and generating sufficient profits to offset our operating expenses.

Considered together with our limited history of operating income and our net losses in 2020 and 2019, management has placed a full valuation allowance against the net deferred tax assets as of December 31, 2020 and 2019.

The portion of the valuation allowance resulting from excess tax benefits on share based compensation that would be credited directly to contributed capital if recognized in subsequent periods is $ 4.2 million.

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We have not been under tax examination in any jurisdiction for the years ended December 31, 2020 and 2019.

Tax examination years of 2016 to 2019 remain open.

Subsequent Events

License and Supply Agreement

On January 14, 2020, the Company entered into license and supply agreements with a wholly-owned subsidiary of Sun Pharmaceutical Industries Ltd.

(together, “Sun Pharma”), for the rights to commercialize Dialysate Triferic (ferric pyrophosphate citrate) in India.

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

In consideration for the license, the Company will receive an upfront fee, 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 Dialysate Triferic in India.

Sun Pharma will be responsible for all clinical, regulatory and commercialization activities.

Public Offering

On February 4, 2020 , the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Cantor Fitzgerald & Co., as underwriter (the “Underwriter”), pursuant to which the Company (i) agreed to issue and sell an aggregate of 3,191,489 shares of its common stock (the “Shares”) to the Underwriter and (ii) granted the Underwriter an over-allotment option for 30 days to purchase up to an additional 478,723 shares that may be sold upon the exercise of such option by the Underwriter (the “Offering”).

The Shares were purchased by the Underwriter from the Company at a price of $2.22 per share.

The Offering was made pursuant to the Company’s effective Registration Statement on Form S-3 (File No.

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

The Offering closed on February 6, 2020 .

On February 19, 2020 , the Underwriter exercised its over-allotment option in full and an additional 478,723 shares were sold to the underwriter on February 21, 2020 .

The Company raised a total of $8.0 million , net of an estimated issuance costs of $0.2 million , relating to the sale of the common stock.

Loan and Security Agreement

On March 16, 2020 , Rockwell Medical, Inc.

and Rockwell Transportation, Inc., as Borrowers, entered into a Loan and Security Agreement (the "Loan Agreement") with Innovatus Life Sciences Lending Fund I, LP, as collateral agent and the lenders party thereto to obtain term loans in an amount up to $35 million .

$22.5 million , under the Loan Agreement was drawn on the date of closing, and the remaining $12.5 million will be available for subsequent draws based on our achievement of certain milestones.

Net draw down proceeds was $21 million with estimated closing costs of $1.5 million .

Interest on the loans will accrue either in cash or a combination of cash and in kind interest, at our election.

Cash interest will accrue at a rate equal to the greater of (i) Prime Rate and (ii) 4.75% , plus 4.00% , for an initial interest rate of 8.75% per annum.

We have 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.

The Company is entitled to make interest-only payments for thirty months , or up to thirty-six months if certain conditions are met.

The Loan Agreement contains representations and warranties, affirmative and negative covenants, and events of default that are customary for credit facilities of this type.

The term loans will mature on March 16, 2025.

Distribution Agreement

On March 16, 2020, we entered into the Second Amendment to the Exclusive Distribution Agreement with Baxter (the “Second Amendment”).

Pursuant to the Second Amendment, the parties agreed to remove Baxter’s consent right over transactions granting a security interest on the assets used to manufacture or commercialize our concentrates products, and amended certain other terms of the agreement related to manufacturing and failure to supply, reimbursement for certain transportation costs, and conditions for extension of the contract in 2024.

Effective January 19, 2021, as authorized by the Board of Directors of Rockwell Medical, Inc., the Company terminated the employment of Ajay Gupta, M.D.

as the Company’s Chief Scientific Officer.

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-K

Item 9A. Controls and Procedures