What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-17 compared with 2020-11-09 · 201 added, 367 removed, 435 unchanged (57% of the section changed)

4 unchanged sentences

(Dollars in Thousands)

September 30,

2021 December 31,

14 unchanged sentences

Accrued Liabilities 4,032 5,013

Settlement Payable — 104

Lease Liability - Current 1,417 1,167

Deferred License Revenue - Current 2,170 2,175

Insurance Financing Note Payable — 763

Customer Deposits 135 152

8 unchanged sentences

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

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

no shares issued and outstanding at March 31, 2021 and December 31, 2020

Common Stock, $ 0.0001 par value;

170,000,000 shares authorized;

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

93,599,519 and 93,573,165 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Additional Paid-in Capital 371,274 371,510

8 unchanged sentences

(Dollars in Thousands, Except Per Share Amounts)

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

Three Months Ended March 31, 2021 Three Months Ended March 31, 2020

Net Sales $ 15,473 $ 15,857

1 unchanged sentence

Gross Profit 401 1,113

Research and Product Development 1,809 1,822

Selling and Marketing 1,851 2,073

General and Administrative 3,923 5,273

Settlement Expense — — — 430

Research and Product Development 1,745 1,475 5,183 4,930

Operating Loss ( 7,182 ) ( 8,055 )

Other Income (Expense)

Other (Expense) Income

Realized Gain on Investments — 2

Warrant Modification Expense — — ( 837 ) —

Interest Expense ( 581 ) ( 102 )

Interest Income 11 171

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

Total Other (Expense) Income ( 570 ) 71

Net Loss $ ( 7,752 ) $ ( 7,984 )

6 unchanged sentences

(Dollars in Thousands)

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

Three Months Ended March 31, 2021 Three Months Ended March 31, 2020

Net Loss $ ( 7,752 ) $ ( 7,984 )

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

Unrealized Loss on Available-for-Sale Debt Instrument Investments ( 7 ) ( 7 )

Foreign Currency Translation Adjustments 3 6

14 unchanged sentences

Foreign Currency Translation Adjustments — — — — 3 3

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

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

Stock-based Compensation 26,354 — ( 236 ) — — ( 236 )

Balance as of March 31, 2021 93,599,519 $ 9 $ 371,274 $ ( 345,158 ) $ 53 $ 26,178

Net Loss — — — ( 6,893 ) — ( 6,893 )

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

Foreign Currency Translation Adjustments — — — — 1 1

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

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

Warrant Modification Expense — — 837 — — 837

Stock-based Compensation expense — — ( 1,461 ) — — ( 1,461 )

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

Net Loss — — — ( 7,350 ) — ( 7,350 )

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

Foreign Currency Translation Adjustments — — — — 1 1

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

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

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

Stock-based Compensation expense — — 250 — — 250

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

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

12 unchanged sentences

Foreign Currency Translation Adjustments — — — — 6 6

Exercise of Employee Stock Options, Net of Tax 30,000 — 148 — — 148

Delivery of common stock underlying restricted stock units, net of tax 64,173 — ( 95 ) — — ( 95 )

Issuance of common stock, net of offering costs/Bought Deal 3,670,212 — 8,003 — — 8,003

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

Stock-based Compensation — — 935 — — 935

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

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

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

Foreign Currency Translation Adjustments — — — — — —

Issuance of common stock, net of offering costs/Public Offering 5,833,334 — 16,120 — — 16,120

Issuance of common stock, net of offering costs/At-the-Market Offering 437,043 — 2,089 — — 2,089

Stock-based Compensation — — 1,502 — — 1,502

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

Net Loss — — — ( 7,855 ) — ( 7,855 )

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

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

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

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

Stock-based Compensation — — 876 — — 876

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

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

3 unchanged sentences

(Dollars in Thousands)

For the nine months ended September 30, 2020 and 2019

For the three months ended March 31, 2021 and 2020

Cash Flows From Operating Activities:

3 unchanged sentences

Stock-based Compensation ( 236 ) 935

Warrant Modification Expense 837 —

Increase in Inventory Reserves 71 —

1 unchanged sentence

Amortization of Debt Financing Costs and Accretion of Debt Discount 92 15

Loss (Gain) on Disposal of Assets 7 ( 1 )

Loss on Disposal of Assets 6 —

Realized (Gain) on Sale of Investments Available-for-Sale — ( 2 )

1 unchanged sentence

Changes in Assets and Liabilities:

Decrease in Accounts Receivable, net 74 1,857

Decrease in Insurance Receivable — 371

(Increase) Decrease in Inventory ( 953 ) 293

Increase in Accounts Receivable, net ( 2,426 ) ( 384 )

Increase in Inventory ( 424 ) ( 828 )

Decrease in Prepaid and Other Assets 317 1,093

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

Decrease in Settlement Payable ( 104 ) ( 147 )

(Decrease) Increase in Accounts Payable ( 848 ) 105

Increase (Decrease) in Settlement Payable — ( 47 )

Decrease in Lease Liability ( 410 ) ( 339 )

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

(Decrease) Increase in Other Liabilities ( 958 ) 738

Decrease in Deferred License Revenue ( 544 ) ( 446 )

5 unchanged sentences

Purchase of Equipment ( 38 ) ( 203 )

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

Cash Provided By (Used In) Investing Activities 2,575 ( 4,922 )

Cash (Used In) Provided By Investing Activities ( 512 ) 2,586

Cash Flows From Financing Activities:

4 unchanged sentences

Offering Costs from the Issuance of Common Stock / Public Offering — ( 144 )

Proceeds from the Issuance of Common Stock / At-the-Market Offering 2,325 2,296

Offering Costs from the Issuance of Common Stock / At-the-Market Offering ( 63 ) ( 207 )

Proceeds from the Exercise of Employee Stock Options — 148

Repurchase of Common Stock to Pay Employee Withholding Taxes ( 18 ) ( 180 )

Cash Provided By Financing Activities — 29,557

Increase (Decrease) in Cash and Cash Equivalents 44,820 ( 8,293 )

(Decrease) Increase in Cash and Cash Equivalents ( 13,007 ) 25,605

Cash and Cash Equivalents at Beginning of Period 48,682 11,795

4 unchanged sentences

Change in Unrealized Loss on Marketable Securities Available-for-Sale $ ( 7 ) $ ( 7 )

Insurance Financing Note Payable $ — $ 1,145

Issuance Costs related to Debt Financing, not yet paid $ — $ 957

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

5 unchanged sentences

Rockwell Medical, Inc.

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

The Company is focused on developing its proprietary ferric pyrophosphate citrate (“FPC”) therapeutic platform.

The first product developed from this platform is Triferic, the first-FDA approved product for the replacement of iron and maintenance of hemoglobin in adult hemodialysis patients.

We initiated commercial sales of Triferic Dialysate during the second quarter of 2019 and received approval by the U.S.

Food and Drug Administration ("FDA") for the intravenous formulation of Triferic, Triferic AVNU, on March 27, 2020.

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

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

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

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.

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 iron deficiency.

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 the 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 2 trial in these patients in 2022.

We are the second largest supplier of hemodialysis concentrates in the United States generating $ 60 million in annual revenue.

The Company's reputation for excellent service, quality, and reliability is based on over 25 years of service to kidney dialysis centers.

Our 300 dedicated employees, as well as a management team with experience in manufacturing, logistics, pharmaceutical development and commercialization gives us a solid foundation upon which to grow.

Liquidity and Capital Resources

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

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

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

Based on the currently available working capital, capital raise and debt financing described below, 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.

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 10 for further detail).

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

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

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

See Note 10 for further detail.

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

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

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

At March 31, 2021, Rockwell had an accumulated deficit of approximately $ 345.2 million and stockholders' equity of $ 26.2 million.

As of March 31, 2021, Rockwell had approximately $ 46.1 million of cash, cash equivalents and investments available-for-sale, and working capital of $ 48.0 million.

Net cash used in operating activities for the three months ended March 31, 2021 was approximately $ 12.5 million.

Based on the currently available working capital, 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 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 our Loan Agreement with Innovatus.

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

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

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 is in compliance with all covenants.

(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, our sales and marketing efforts, 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 continue to 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 continue to be negatively impacted by COVID-19, especially with the recent surge in infections internationally, ongoing international travel restrictions and 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,

ROCKWELL MEDICAL, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

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

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

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

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

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

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

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

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.

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

The accompanying condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States (“U.S.”) of America (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the U.

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

GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the U.

Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements.

The condensed consolidated balance sheet at September 30, 2020, condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019, condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2020 and 2019, condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019, and condensed consolidated statement of changes in shareholder’s equity for the three and nine months ended September 30, 2020 and 2019 are unaudited, but include all adjustments, consisting of normal recurring adjustments, that the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The results for the three and nine months ended September 30, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020 or for any future interim period.

The condensed consolidated balance sheet at March 31, 2021, condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020, condensed consolidated statements of comprehensive loss for the three months ended March 31, 2021 and 2020, condensed consolidated statement of changes in stockholders' equity for the three months ended March 31, 2021 and 2020, and condensed consolidated statements of cash flows for the three months ended March 31, 2021 and 2020 are unaudited, but include all adjustments, consisting of normal recurring adjustments, that the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The results for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021 or for any future interim period.

The condensed consolidated balance sheet at December 31, 2020 has been derived from audited financial statements, however, it does not include all of the information and notes required by U.S.

GAAP for complete financial statements.

The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2019 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 as filed with the SEC on Form 10-K on March 17, 2020.

The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2020 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with the SEC on March 31, 2021.

The Company’s consolidated subsidiaries consisted of its wholly-owned subsidiaries, Rockwell Transportation, Inc.

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Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate.

Lease liabilities are increased by

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term.

For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term.

3 unchanged sentences

Loss Per Share

ASC 260, Earnings Per Share , requires dual presentation of basic and diluted earnings per share (“EPS”), with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation.

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

EPS computation.

Basic EPS excludes dilution.

4 unchanged sentences

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

As of September 30,

As of March 31,

Options to purchase common stock 6,142,586 8,191,963

2 unchanged sentences

Warrants to purchase common stock 26,426,863 3,248,054

33,501,260 12,412,135

Total 32,885,473 13,048,405

Adoption of Recent Accounting Pronouncements

The Company continually assesses any new accounting pronouncements to determine their applicability.

The Company continually assesses new accounting pronouncements to determine their applicability.

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

In July 2017, the FASB issued ASU No.

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

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

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

marked-to-market).

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

Equity classified instruments are not marked-to-market.

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

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

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

Revenue Recognition

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Notes to Condensed Consolidated Financial Statements

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

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The stand-alone selling prices are determined based on the cost plus margin approach.

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Notes to Condensed Consolidated Financial Statements

Drug and dialysis concentrate products are sold directly to dialysis clinics and to wholesale distributors in both domestic and international markets.

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The amounts received from Wanbang Biopharmaceuticals Co., Ltd.

(“Wanbang”) and Sun Pharmaceutical Industries Ltd.

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

(“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.

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

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Notes to Condensed Consolidated Financial Statements

In thousands of U.S.

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

dollars ($) Three Months Ended March 31, 2021

Products By Geographic Area Total U.S.

Rest of World Total U.S.

Rest of World

8 unchanged sentences

Net Revenue $ 15,473 $ 13,911 $ 1,562

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

In thousands of U.S.

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

dollars ($) Three Months Ended March 31, 2020

Products By Geographic Area Total U.S.

Rest of World Total U.S.

Rest of World

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In thousands of U.S.

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

dollars ($) March 31, 2021 December 31, 2020

Receivables, which are included in "Trade and other receivables" $ 6,597 $ 4,171

Contract liabilities $ 9,646 $ 10,190

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

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

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

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

There were no material losses recognized related to any receivables arising from the Company’s contracts with customers for the three months ended March 31, 2021 and 2020.

For the three months ended March 31, 2021 and March 31, 2020, the Company did not recognize any material bad-debt expense.

There were no material contract assets recorded on the condensed consolidated balance sheet as of March 31, 2021 and December 31, 2020.

The Company does not generally accept returns of its concentrate products and no material reserve for returns of concentrate products was established as of March 31, 2021 or December 31, 2020.

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

Transaction price allocated to remaining performance obligations

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

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AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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 $ 10.7 million as of September 30, 2020.

For the three months ended March 31, 2021, revenue recognized from performance obligations related to prior periods was not material.

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

Unfulfilled minimum commitments related to the Baxter Agreement are product sales of $ 6.7 million as of March 31, 2021, which is amortized ratably through expiration of the Baxter Agreement on October 2, 2024.

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

Investments - Available-for-Sale

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

September 30, 2020

Investments available-for-sale consisted of the following as of March 31, 2021 and December 31, 2020 (table in thousands):

March 31, 2021

Amortized Cost Unrealized Gain Unrealized Loss Accrued Interest Income Fair Value

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

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

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

September 30,

As of March 31, 2021 and December 31, 2020, the amortized cost and estimated fair value of our available-for-sale securities were due within one year.

Components of inventory, net of reserves, as of March 31, 2021 and December 31, 2020 are as follows (table in thousands):

2021 December 31,

3 unchanged sentences

Total $ 5,442 $ 5,089

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

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

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

As of March 31, 2021, the Company classified $ 1.3 million of inventory as non-current, all of which was related to Triferic or the active pharmaceutical ingredient and raw materials for Triferic.

As of March 31, 2021, the total Triferic inventory was $ 2.5 million, against which the Company had reserved $ 0.8 million.

The $ 1.7 million net value of Triferic inventory consisted of $ 0.3 million of Triferic (dialysate) finished goods with expiration dates ranging from September 2021 to December 2023, $ 0.5 million of Triferic API with estimated remaining shelf life extending beyond 2021, and $ 0.9 million of raw materials for Triferic with estimated remaining shelf life extending beyond 2025.

ROCKWELL MEDICAL, INC.

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Property and Equipment

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

September 30,

As of March 31, 2021 and December 31, 2020, the Company’s property and equipment consisted of the following (table in thousands):

2021 December 31,

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Property and Equipment, net $ 2,472 $ 2,642

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

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

Depreciation expense for the three months ended March 31, 2021 and 2020 totaled $ 0.2 million.

Accrued Liabilities

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

September 30,

Accrued liabilities as of March 31, 2021 and December 31, 2020 consisted of the following (table in thousands):

2021 December 31,

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Accrued Compensation and Benefits 1,334 2,500

Accrued Legal Expenses 172 182

Accrued Marketing Expenses 100 61

Accrued Unvouchered Receipts 661 755

Accrued Workers Compensation 436 395

Other Accrued Liabilities 1,270 1,131

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

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

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

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

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

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

In no event does the Baxter Agreement require more than one refund be paid.

The Company recognized revenue of approximately $ 0.5 million for each of the three months ended March 31, 2021 and 2020.

Deferred revenue related to the Baxter Agreement totaled $ 6.7 million as of March 31, 2021 and $ 7.2 million as of December 31, 2020.

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

In 2016, the Company entered into a distribution and license agreement with Wanbang (the "Wanbang Agreement") 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 $ 53,000 and $ 0.2 million for the three and nine months ended September 30, 2020 and 2019, respectively.

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

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

The Company recognized approximately $ 0.1 million revenue for both the three months ended March 31, 2021 and 2020, respectively.

Deferred revenue related to the Wanbang Agreement totaled $ 2.7 million as of March 31, 2021 and December 31, 2020.

In January 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.

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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 $ 2,500 and $ 7,500 during the three and nine months ended September 30, 2020, respectively.

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

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

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

The Company recognized revenue of approximately $ 2,500 for each of the three months ended March 31, 2021 and 2020.

Deferred revenue related to the Sun Pharma Agreement totaled $ 87,500 and $ 90,000 as of March 31, 2021 and December 31, 2020, respectively.

In September 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.

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

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

The Company recognized revenue of $ 2,500 and nil during the three months ended March 31, 2021 and 2020, respectively.

Deferred revenue related to the Jeil Pharma Agreement totaled $ 0.2 million as of March 31, 2021 and December 31, 2020.

Stockholders’ Equity

Preferred Stock

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

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

As of March 31, 2021 and December 31, 2020, there were 2,000,000 shares of preferred stock, $ 0.0001 par value per share, authorized and no shares of preferred stock issued or outstanding.

As of March 31, 2021 and December 31, 2020, there were 170,000,000 shares of common stock, $ 0.0001 par value per share, authorized and 93,599,519 and 93,573,165 shares issued and outstanding, respectively.

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

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

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

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

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

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

During the three months ended March 31, 2021, the Company has not sold shares of its common stock pursuant to the Sales Agreement.

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

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

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

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

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

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

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

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

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

The Company agreed to pay H.C.

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

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

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

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

The amount allocated to common stock was $ 26.1 million.

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

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

The Company is not required to sell any shares at any time during the term of the facility.

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

Stock-Based Compensation

The Company recognized total stock-based compensation expense during the three months ended March 31, 2021 and 2020 as follows (table in thousands):

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

Stock-Based Compensation

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Service-based awards:

Restricted stock awards $ — $ —

Restricted stock units $ 104 $ 238

Stock option awards 391 440

252 1,099 1,262 3,070

Performance-based awards:

Restricted stock awards ( 391 ) —

Restricted stock units — 171

Stock option awards ( 340 ) 86

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

Total $ ( 236 ) $ 935

Restricted Stock

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

A summary of the Company’s restricted stock awards during the three months ended March 31, 2021 is as follows:

Number of Shares Weighted Average

Unvested at January 1, 2021 146,800 $ 5.70

Unvested at September 30, 2020 146,800 $ 5.70

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

Forfeited ( 68,500 ) $ 5.70

Unvested at March 31, 2021 78,300 $ 5.70

A summary of the Company’s restricted stock awards during the three months ended March 31, 2020 is as follows:

Number of Shares Weighted Average

Unvested at January 1, 2020 146,800 $ 5.70

Unvested at September 30, 2019 146,800 $ 5.70

Unvested at March 31, 2020 146,800 $ 5.70

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

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

As of March 31, 2021, unvested restricted stock awards of 78,300 were related to performance-based awards.

The forfeited performance-based restricted stock awards of 68,500 is due to the termination of the Company's former Chief Science Officer on January 19, 2021.

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

ROCKWELL MEDICAL, INC.

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Service-Based Restricted Stock Units

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

A summary of the Company’s service-based restricted stock units during the three months ended March 31, 2021 is as follows:

Number of Shares Weighted Average

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Forfeited ( 11,466 ) 4.81

Unvested at September 30, 2020 245,405 $ 2.72

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

Unvested at March 31, 2021 237,724 $ 2.49

A summary of the Company’s service-based restricted stock units during the three months ended March 31, 2020 is as follows:

Number of Shares Weighted Average

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Forfeited ( 7,460 ) 4.15

Vested ( 96,542 ) 4.70

Unvested at September 30, 2019 593,964 $ 4.23

Unvested at March 31, 2020 472,630 $ 4.21

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

The vesting periods range from 1 to 3 years.

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

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

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

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

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

Stock-based compensation expense of $ 0.1 million and $ 0.2 million was recognized during the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, the unrecognized stock-based compensation expense was $ 0.1 million, which is expected to be recognized over an estimated weighted average remaining term of less than 1 year.

Performance-Based Restricted Stock Units

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

As of March 31, 2021, there were no outstanding performance-based restricted stock units.

Number of Shares Weighted Average

Unvested at January 1, 2020 988,958 $ 4.48

Forfeited ( 988,958 ) 4.48

Unvested at September 30, 2020 — $ —

Unvested at March 31, 2020 988,958 $ 4.48

Service-Based Stock Options

The fair value of the service-based stock options granted for the three months ended March 31, 2021 were based on the following assumptions:

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

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

Number of Shares Weighted Average

Unvested at January 1, 2019 988,958 $ 4.48

Unvested at September 30, 2019 988,958 $ 4.48

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

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

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

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

Service-Based Stock Options

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

September 30,

Exercise price $ 1.03 - $ 1.75

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Term (years) 6

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

A summary of the Company’s service-based stock option activity for the three months ended March 31, 2021 is as follows:

Options Weighted

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Expired ( 225,834 ) 7.66 — —

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

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

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Outstanding at March 31, 2021 5,392,586 $ 4.45 6.1 $ —

Exercisable at March 31, 2021 2,762,976 $ 6.68 3.2 $ —

A summary of the Company’s service-based stock option activity for the three months ended March 31, 2020 is as follows:

Options Weighted

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Granted 51,148 2.30 9.9 —

Exercised ( 30,000 ) 4.93 — —

Forfeited ( 457,334 ) ( 7.02 ) — —

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

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

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

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

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

Outstanding at March 31, 2020 7,803,838 $ 7.03 5.1 $ 2,000

Exercisable at March 31, 2020 6,146,337 $ 7.97 4.1 $ —

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

During the three months ended March 31, 2021, the Company granted stock options to purchase up to 84,395 shares of common stock to certain employees.

During the three months ended March 31, 2021, 183,931 shares were forfeited.

Forfeitures are recorded in the period of occurrence;

compensation expense is adjusted accordingly.

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

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

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

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

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

Included in the expired service-based stock options are 3,783,335 options related to the settlement with the former Chief Executive Officer, Robert Chioini, former Chief Financial Officer, Thomas Klema, and a former and then current director.

See Note 14 for further details.

Stock-based compensation expense recognized for service-based stock options was $ 0.4 million for each of the three months ended March 31, 2021 and 2020.

As of March 31, 2021, total stock-based compensation expense related to unvested options not yet recognized totaled approximately $ 1.6 million, which is expected to be recognized over an estimated weighted average remaining term of 2.0 years.

Performance-Based Stock Options

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

Number of Shares Weighted Average

Outstanding at January 1, 2020 388,125 $ 4.70

Granted 750,000 2.20

Forfeited ( 388,125 ) 4.70

Outstanding at September 30, 2020 750,000 $ 2.20

Exercisable at September 30, 2020 — $ —

A summary of the performance-based stock options for the three months ended March 31, 2021 is as follows:

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

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

Number of Shares Weighted Average

Outstanding at January 1, 2021 750,000 $ 2.20

Outstanding at September 30, 2019 388,125 $ 4.70

Exercisable at September 30, 2019 — $ —

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

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

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

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

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

Outstanding at March 31, 2021 750,000 $ 2.20

Exercisable at March 31, 2021 — $ —

A summary of the performance-based stock options for the three months ended March 31, 2020 is as follows:

Number of Shares Weighted Average

Outstanding at January 1, 2020 388,125 $ 4.70

Outstanding at March 31, 2020 388,125 $ 4.70

Exercisable at March 31, 2020 — $ —

Stock-based compensation expense recognized for performance-based stock options was ($ 0.3 ) million and $ 0.1 million for the three months ended March 31, 2021 and 2020, respectively.

The reduction in stock-based compensation expense was due to the performance criteria of certain performance-based options granted to officers of the Company becoming non-probable as of March 31, 2021.

The Company will continue to assess the probability of the performance criteria until such time the criteria becomes probably and the performance-based stock option vests or continues to be non-probable and the performance-based stock option expires.

As of March 31, 2021, there was no unrecognized stock-based compensation expense related to unvested performance-based stock options.

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.

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).

Ajay Gupta, a former Officer of the Company.

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

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

As of December 31, 2020, the Company has fulfilled its reimbursement obligation of certain legal expenses.

As of March 31, 2021, the Company accrued $ 0.2 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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Additionally, the Company shall pay Charak a percentage of any sublicense income during the term of the agreement, which amount shall not be less than a minimum specified percentage of net sales of the licensed products by the sub-licensee in jurisdictions where there exists a valid claim, on a country-by-country basis, and be no less than a lower rate of the net sales of the licensed products by the sub-licensee in jurisdictions where there exists no valid claim, on a country-by-country basis.

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

Triferic® (now Triferic AVNU), dated as of October 7, 2018 (the “IV Agreement”), under which Charak granted the Company an exclusive, sub-licensable, royalty-bearing license to SFP for the purpose of commercializing certain intravenous-delivered products incorporating SFP for the treatment of iron disorders worldwide 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.

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

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

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

country-by-country basis.

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

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

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

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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 sub-licensee in jurisdictions where there exists a valid claim, on a country-by-country basis, and not be less than a lower rate of the net sales of the licensed products by the sub-licensee in jurisdictions where there exists no valid claim, on a country-by-country basis.

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 Charak MSA include a license of SFP.

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

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

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

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

The lease terms range from monthly to five years .

We occupy a 51,000 square foot facility and a 17,500 square foot facility in Wixom, Michigan under a lease expiring in August 2021.

We also occupy two other manufacturing facilities, a 51,000 square foot facility in Grapevine, Texas under a lease expiring in December 2020, and a 57,000 square foot facility in Greer, South Carolina under a lease expiring February 2023.

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

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

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

The Company occupies a 51,000 square foot facility and a 17,500 square foot facility in Wixom, Michigan under a lease expiring in August 2021.

The Company also occupies 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, the Company occupies 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.

At March 31, 2021, the Company had operating and finance lease liabilities of $ 4.9 million and right-of-use assets of $ 4.9 million, which are included in the consolidated balance sheet.

At December 31, 2020, the Company had operating lease liabilities of $ 3.0 million and right-of-use assets of $ 2.9 million, which are included in the consolidated balance sheet.

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

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Notes to Condensed Consolidated Financial Statements

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

Three Months Ended March 31, 2021 Three Months Ended March 31, 2020

Operating leases

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Operating lease expense 521 632

Finance leases

Amortization of right-of-use assets 45 —

Interest on lease obligations 13 —

Finance lease expense 58 —

Short-term lease rent expense 4 4

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Operating cash flows from operating leases $ 425 $ 445

Operating cash flows from finance leases $ 13 $ —

Financing cash flows from finance leases $ 37 $ —

Right of use assets exchanged for operating lease liabilities $ 1,896 $ —

Right of use assets exchanged for finance lease liabilities $ 460 $ —

Weighted-average remaining lease term – operating leases 3.6 2.6

Weighted-average remaining lease term – finance leases 5.7 0.0

Weighted-average discount rate – operating leases 6.3 % 6.8 %

Weighted-average discount rate – finance leases 5.4 % — %

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

Operating Finance

Year ending December 31, 2021 (remaining) $ 1,107 $ 199

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Year ending December 31, 2025 455 269

Remaining future payments 79 272

Total $ 4,019 $ 1,551

Less present value discount ( 417 ) ( 214 )

Operating lease liabilities $ 2,194

Operating and finance lease liabilities $ 3,602 $ 1,337

Commitments and Contingencies

Demand Notice

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.

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

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

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

SEC Investigation

As a follow up to certain prior inquiries, the Company received a subpoena from the SEC during the Company’s quarter ended September 30, 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

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

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.

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 "Too Complaint").

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 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 (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 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;

had a material weakness its internal controls over financial reporting, which rendered those controls ineffective;

Chioini withheld material information regarding Triferic from the Company’s auditor, corporate counsel, and independent directors of the Board;

and, as a result of these alleged issues, statements about the Company’s business were materially false and misleading.

On September 25, 2018, four Company stockholders filed motions to appoint lead plaintiffs, lead counsel, and to consolidate the Ah Kit Too v.

Rockwell securities class action with the Spock v.

Rockwell securities class action.

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.

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

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.

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 September 30, 2020.

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

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

Shareholder Derivative Actions

Plaintiff Bill Le Clair filed a Verified Stockholder Derivative Complaint on April 23, 2019 in Case No.

1:19-cv-02373, and Plaintiff John Post filed a Verified Stockholder Derivative Complaint on May 10, 2019 in Case No.

1:19-cv-02774 (the “Derivative Complaints”) in the United States District Court in the Eastern District of New York, purportedly on behalf of the Company (as nominal defendant) and against certain of the Company’s current and former directors (the “Individual Defendants”).

The Derivative Complaints assert causes of actions against the Individual Defendants for breach of fiduciary duty, waste of corporate assets, and unjust enrichment.

The Derivative Complaints allege the Individual Defendants breached duties by, among other things, permitting alleged misstatements to be made in public filings regarding the status of separate reimbursement for Triferic from CMS, the adequacy of the Company's reserves and internal controls.

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 were consolidated.

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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.

In March 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").

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

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

For the three months ended March 31, 2021 and 2020, interest expense amounted to $ 0.5 million and $ 0.1 million, respectively.

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

Proceeds will be used for working capital purposes.

Proceeds are being 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 annualized Triferic sales through September 30, 2020, we may not satisfy this covenant as of December 31, 2020.

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

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

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

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

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

The Company's ability to comply with these covenants may be adversely affected by events beyond its 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 the Company's sales activities, among other factors, the Company may not be able to satisfy such covenants in the future.

If the Company is unable to comply with the covenants under the Loan Agreement, it would pursue all available cure options in order to regain compliance.

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

If the Company is unable to avoid an event of default, any required repayments could have an adverse effect on its liquidity.

As of March 31, 2021, the Company is in compliance with all the reporting and financial covenants.

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

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

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

As of March 31, 2021, the outstanding balance of the Term Loan was $ 21.0 million, net of unamortized issuance costs and unaccreted discount of $ 1.5 million.

The following table reflects the schedule of principal payments on the Term Loan as of March 31, 2021 (in thousands):

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

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

Principal Payments

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

What changed 10-Q

Item 1. Financial Statements