What changed in this filing

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Item 1. Financial Statements

2021-08-16 compared with 2021-05-17 · 189 added, 136 removed, 500 unchanged (39% of the section changed)

22 unchanged sentences

Deferred License Revenue - Current 2,166 2,175

Term Loan - Net of Issuance Costs 21,133 —

Customer Deposits 140 152

8 unchanged sentences

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

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

no shares issued and outstanding at June 30, 2021 and December 31, 2020

Common Stock, $ 0.0001 par value;

170,000,000 shares authorized;

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

93,811,381 and 93,573,165 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

Additional Paid-in Capital 371,700 371,510

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(Dollars in Thousands, Except Per Share Amounts)

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

Three Months Ended June 30, 2021 Three Months Ended June 30, 2020 Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

Net Sales $ 15,137 $ 15,896 $ 30,611 $ 31,753

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Other (Expense) Income

Realized Gain on Investments — 2

Realized (Loss) Gain on Investments ( 1 ) 2 ( 1 ) 4

Warrant Modification Expense — ( 837 ) — ( 837 )

Interest Expense ( 583 ) ( 521 ) ( 1,164 ) ( 623 )

Interest Income 7 67 18 238

Total Other (Expense) Income ( 570 ) 71

Total Other Expense ( 577 ) ( 1,289 ) ( 1,147 ) ( 1,218 )

Net Loss $ ( 8,400 ) $ ( 6,892 ) $ ( 16,152 ) $ ( 14,876 )

6 unchanged sentences

(Dollars in Thousands)

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

Three Months Ended June 30, 2021 Three Months Ended June 30, 2020 Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

Net Loss $ ( 8,400 ) $ ( 6,892 ) $ ( 16,152 ) $ ( 14,876 )

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

Net Loss — — — ( 8,400 ) — ( 8,400 )

Unrealized Loss on Available-for-Sale Investments — — — — ( 1 ) ( 1 )

Vesting of Restricted Stock Units Issued, net of taxes withheld 211,862 — ( 7 ) — — ( 7 )

Stock-based Compensation expense — — 433 — — 433

Balance as of June 30, 2021 93,811,381 $ 9 $ 371,700 $ ( 353,558 ) $ 52 $ 18,203

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

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

Net Loss — — — ( 6,892 ) — ( 6,892 )

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

Foreign Currency Translation Adjustments — — — — 1 1

Issuance of common stock, net of offering costs/Public Offering 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 — — ( 1,461 ) — — ( 1,461 )

Balance as of June 30, 2020 70,156,922 $ 7 $ 337,551 $ ( 321,392 ) $ 46 $ 16,212

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

3 unchanged sentences

(Dollars in Thousands)

For the three months ended March 31, 2021 and 2020

For the six months ended June 30, 2021 and 2020

Cash Flows From Operating Activities:

3 unchanged sentences

Stock-based Compensation 197 ( 526 )

Warrant Modification Expense — 837

Increase in Inventory Reserves 89 12

2 unchanged sentences

Loss on Disposal of Assets 8 6

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

Realized Loss (Gain) on Sale of Investments Available-for-Sale 1 ( 4 )

Foreign Currency Translation Adjustment 3 6

Changes in Assets and Liabilities:

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

(Increase) Decrease in Accounts Receivable, net ( 1,186 ) 637

Increase in Inventory ( 799 ) ( 1,302 )

Decrease in Prepaid and Other Assets 317 1,093

(Decrease) Increase in Accounts Payable ( 848 ) 105

Increase (Decrease) in Settlement Payable — ( 47 )

Decrease (Increase) in Prepaid and Other Assets 1,293 ( 608 )

Increase in Accounts Payable 777 295

Decrease in Settlement Payable — ( 104 )

Decrease in Lease Liability ( 839 ) ( 703 )

(Decrease) Increase in Other Liabilities ( 958 ) 738

Decrease in Other Liabilities ( 1,163 ) ( 96 )

Decrease in Deferred License Revenue ( 1,088 ) ( 992 )

5 unchanged sentences

Purchase of Equipment ( 281 ) ( 283 )

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

Cash Provided By Investing Activities 1,135 700

Cash Flows From Financing Activities:

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

Cash Provided By Financing Activities — 29,557

Proceeds from the Issuance of Common Stock / At-the-Market Offering — 2,034

Offering Costs from the Issuance of Common Stock / At-the-Market Offering — ( 56 )

Repurchase of Common Stock to Pay Employee Withholding Taxes ( 6 ) ( 19 )

Cash (Used In) Provided By Financing Activities ( 6 ) 30,357

(Decrease) Increase in Cash and Cash Equivalents ( 16,304 ) 14,903

5 unchanged sentences

Change in Unrealized Loss on Marketable Securities Available-for-Sale $ ( 7 ) $ ( 12 )

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

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

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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 2021, we intend to advance our FPC platform strategy outside of dialysis by starting a Phase II trial for the treatment of iron deficiency anemia in patients outside of dialysis, who are receiving long-term and or chronic intravenous medications for various therapeutic needs 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.

We are the second largest supplier of hemodialysis concentrates in the United States generating approximately $ 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.

Our approximately 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

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.

At June 30, 2021, Rockwell had an accumulated deficit of approximately $ 353.6 million and stockholders' equity of $ 18.2 million.

As of June 30, 2021, Rockwell had approximately $ 41.0 million of cash, cash equivalents and investments available-for-sale, and working capital of $ 18.4 million.

Net cash used in operating activities for the six months ended June 30, 2021 was approximately $ 17.4 million.

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.

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 over the next 12 months.

However, based on the foregoing, the Company has classified amounts payable under the Loan Agreement as a current liability.

If and when the Company reaches an agreement with Innovatus to avoid an event of default, the amounts payable under the Loan Agreement will be reclassified.

The financial statements for June 30, 2021, have been prepared with the assumption that the Company will be able to agree to an appropriate remedy during the applicable cure period for any future breaches of operating covenants.

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 (See Note 15 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.

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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 is in compliance with all covenants.

(See Note 15 for further detail).

Based on the currently available working capital and managements assumption that the Company will be able to agree to an appropriate remedy, 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.

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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.

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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.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

refinancing or increase the cost of funding.

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.

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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 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 June 30, 2021, condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020, condensed consolidated statements of comprehensive loss for the three and six months ended June 30, 2021 and 2020, condensed consolidated statement of changes in stockholders' equity for the three and six months ended June 30, 2021 and 2020, and condensed consolidated statements of cash flows for the six months ended June 30, 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 and six months ended June 30, 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.

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All material intercompany balances and transactions have been eliminated in consolidation.

Certain reclassifications have been made to the 2020 financial statements and notes to conform to the 2021 presentation.

Use of Estimates

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Variable lease expenses, if any, are recorded when incurred.

In calculating the right-of-use asset and lease liability, the Company elects to combine lease and non-lease components.

The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term.

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

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

EPS computation.

In calculating the right-of-use asset and lease liability, the Company elects to combine lease and non-lease components.

Loss Per Share

Basic EPS excludes dilution.

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

As of March 31,

As of June 30,

Options to purchase common stock 6,070,801 6,225,562

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

In April 2021, the Financial Accounting Standards Board ("FASB") recently issued Accounting Standards Update ("ASU") 2021-04 to codify the final consensus reached by the Emerging Issues Task Force (EITF) on how an issuer should account for modifications made to equity-classified written call options (hereafter referred to as a warrant to purchase the issuer’s common stock).

The guidance in the ASU requires the issuer to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant.

This guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant.

The Company is evaluating the impact of this guidance on its condensed consolidated financial statements.

Revenue Recognition

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Allocate the transaction price to the performance obligations in the contract

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Recognize revenue when the company satisfies a performance obligation

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

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

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.

3 unchanged sentences

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 four distribution and license agreements that have been deferred as a contract liability.

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

The amounts received from Wanbang Biopharmaceuticals 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.

("Sun Pharma"), Jeil Pharmaceutical Co., Ltd.

("Jeil Pharma") and Drogsan Pharmaceuticals ("Drogsan Pharma") are recognized as revenue over the estimated term of the applicable distribution and license agreement as regulatory approval was not received and the Company did not have sufficient experience in China, India 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.

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

In thousands of U.S.

dollars ($) Three Months Ended March 31, 2021

dollars ($) Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

Products By Geographic Area Total U.S.

Rest of World Total U.S.

Rest of World

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Net Revenue $ 15,137 $ 13,726 $ 1,411 $ 30,611 $ 27,637 $ 2,974

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

In thousands of U.S.

dollars ($) Three Months Ended March 31, 2020

dollars ($) Three Months Ended June 30, 2020 Six Months Ended June 30, 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 ($) March 31, 2021 December 31, 2020

dollars ($) June 30, 2021 December 31, 2020

Receivables, which are included in "Trade and other receivables" $ 5,357 $ 4,171

Contract liabilities $ 9,103 $ 10,190

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.

There were no material losses recognized related to any receivables arising from the Company’s contracts with customers for the three and six months ended June 30, 2021 and 2020.

For the three and six months ended June 30, 2021 and June 30, 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 June 30, 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 June 30, 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 months ended March 31, 2021, 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 $ 9.6 million as of March 31, 2021.

The amount relates primarily to upfront payments and consideration received from customers that are received in advance of the customer assuming control of the related products.

The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

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 $ 6.7 million as of March 31, 2021, which is amortized ratably through expiration of the Baxter Agreement on October 2, 2024.

For the three and six months ended June 30, 2021, revenue recognized from performance obligations related to prior periods was not material.

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

The amount relates primarily to upfront payments and consideration received from customers that are received in advance of the customer assuming control of the related products.

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 $ 6.2 million as of June 30, 2021, which is amortized ratably through expiration of the Baxter Agreement on October 2, 2024.

Investments - Available-for-Sale

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

March 31, 2021

Investments available-for-sale consisted of the following as of June 30, 2021 and December 31, 2020 (table in thousands):

June 30, 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 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):

As of June 30, 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 June 30, 2021 and December 31, 2020 are as follows (table in thousands):

2021 December 31,

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Total $ 5,799 $ 5,089

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.

As of June 30, 2021, the Company classified $ 1.1 million of inventory as non-current, all of which was related to Triferic or the active pharmaceutical ingredient and raw materials for Triferic.

As of June 30, 2021, the total Triferic inventory net of reserve was $ 1.7 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.

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Property and Equipment

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

As of June 30, 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 $ 2,529 $ 2,642

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

Depreciation expense for each of the three and six months ended June 30, 2021 and 2020 totaled $ 0.2 million and $ 0.4 million.

Accrued Liabilities

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

Accrued liabilities as of June 30, 2021 and December 31, 2020 consisted of the following (table in thousands):

2021 December 31,

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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 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.

The Company recognized revenue of approximately $ 0.5 million and $ 1.0 million for each of the three and six months ended June 30, 2021 and 2020.

Deferred revenue related to the Baxter Agreement totaled $ 6.2 million as of June 30, 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.

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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 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.

The Company recognized approximately $ 53,000 and $ 0.1 million revenue for each of the three and six months ended June 30, 2021 and 2020.

Deferred revenue related to the Wanbang Agreement totaled $ 2.6 million as of June 30, 2021 and $ 2.7 million as of 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.

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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.

A Joint Alliance Committee, comprised of members from the Company and Sun Pharma, will guide the development and execution for Triferic (dialysate) in

ROCKWELL MEDICAL, INC.

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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.

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 $ 5,000 for each of the three and six months ended June 30, 2021 and 2020.

Deferred revenue related to the Sun Pharma Agreement totaled $ 85,000 and $ 90,000 as of June 30, 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.

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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 $ 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.

The Company recognized revenue of $ 2,500 and nil for the three months ended June 30, 2021 and 2020, respectively, and $ 5,000 and nil for the six months ended June 30, 2021 and 2020, respectively.

Deferred revenue related to the Jeil Pharma Agreement totaled approximately $ 0.2 million as of June 30, 2021 and December 31, 2020.

In June 2021, the Company entered into license and supply agreements with Drogsan Pharma (the "Drogsan Agreements"), for the rights to commercialize Triferic (dialysate) and Triferic AVNU in Turkey.

Under the terms of the Drogsan Agreements, Drogsan Pharma will be the exclusive commercialization partner for Triferic (dialysate) and Triferic AVNU in Turkey.

In consideration for the license, the Company is due to receive an upfront fee of $ 0.2 million, and will be eligible for milestone payment and royalties on net sales.

A Joint Alliance Committee, comprised of members from the Company and Drogsan Pharma, will guide the execution for Triferic (dialysate) and Triferic AVNU in Turkey.

Drogsan Pharma will be responsible for all regulatory approval and commercialization activities, and the Company will supply the product to Drogsan Pharma for Turkey.

The upfront fee will be recorded as deferred revenue and will be recognized as revenue based on the agreement term.

Stockholders’ Equity

Preferred Stock

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.

As of June 30, 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 June 30, 2021 and December 31, 2020, there were 170,000,000 shares of common stock, $ 0.0001 par value per share, authorized and 93,811,381 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 three months ended March 31, 2021, the Company has not sold shares of its common stock pursuant to the Sales Agreement.

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

During the three and six months ended June 30, 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.

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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.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

The Company recognized total stock-based compensation expense during the three and six months ended June 30, 2021 and 2020 as follows (table in thousands):

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Service-based awards:

Restricted stock awards $ — $ —

Restricted stock units $ 78 $ ( 4 ) $ 182 $ 234

Stock option awards 344 336 735 776

422 332 917 1,010

Performance-based awards:

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Stock option awards 11 ( 596 ) ( 330 ) ( 511 )

11 ( 1,793 ) ( 720 ) ( 1,536 )

Total $ 433 $ ( 1,461 ) $ 197 $ ( 526 )

Restricted Stock

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

A summary of the Company’s restricted stock awards during the six months ended June 30, 2021 is as follows:

Number of Shares Weighted Average

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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:

Unvested at June 30, 2021 78,300 $ 5.70

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

Number of Shares Weighted Average

Unvested at January 1, 2020 146,800 $ 5.70

Unvested at March 31, 2020 146,800 $ 5.70

Unvested at June 30, 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 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.

As of June 30, 2021, unvested restricted stock awards of 78,300 were related to performance-based awards.

The forfeited performance-based restricted stock awards of 68,500 was 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.

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Service-Based Restricted Stock Units

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

A summary of the Company’s service-based restricted stock units during the six months ended June 30, 2021 is as follows:

Number of Shares Weighted Average

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Forfeited ( 11,466 ) 4.81

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:

Unvested at June 30, 2021 342,604 $ 1.17

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

Number of Shares Weighted Average

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Granted 188,904 2.09

Vested ( 104,168 ) 4.66

Forfeited ( 128,460 ) 4.30

Unvested at March 31, 2020 472,630 $ 4.21

Unvested at June 30, 2020 420,062 $ 3.27

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 $ 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.

Stock-based compensation expense of $ 0.1 million and $ 0.2 million was recognized for the three and six months ended June 30, 2021, respectively.

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

As of June 30, 2021, 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.

Performance-Based Restricted Stock Units

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

As of June 30, 2021, there were no outstanding performance-based restricted stock units.

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

Number of Shares Weighted Average

Unvested at January 1, 2020 988,958 $ 4.48

Unvested at March 31, 2020 988,958 $ 4.48

Forfeited ( 905,625 ) 4.61

Unvested at June 30, 2020 83,333 $ 3.09

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

The fair value of the service-based stock options granted for the six months ended June 30, 2021 were based on the following assumptions:

Exercise price $ 0.90 - $ 0.94

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Term (years) 5.5 - 6

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

A summary of the Company’s service-based stock option activity for the six months ended June 30, 2021 is as follows:

Options Weighted

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Expired ( 1,266,553 ) 7.35 — —

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:

Outstanding at June 30, 2021 5,695,801 $ 3.07 7.8 $ 5,000

Exercisable at June 30, 2021 2,387,440 $ 5.25 5.8 $ —

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

Options Weighted

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Forfeited ( 211,471 ) 4.41 — —

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 $ —

Expired ( 3,983,335 ) 8.30 — —

Outstanding at June 30, 2020 5,625,562 $ 4.90 6.7 $ 1,000

Exercisable at June 30, 2020 2,809,954 $ 7.09 4.3 $ —

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.

During the six months ended June 30, 2021, the Company granted stock options to purchase up to 1,522,162 shares of common stock to certain employees.

During the six months ended June 30, 2021, 277,764 shares were forfeited and 1,266,553 shares expired.

Forfeitures are recorded in the period of occurrence;

compensation expense is adjusted accordingly.

Stock-based compensation expense recognized for service-based stock options was $ 0.4 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.

Stock-based compensation expense recognized for service-based stock options was $ 0.3 million and $ 0.7 million for the three and six months ended June 30, 2021, respectively.

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

As of June 30, 2021, total stock-based compensation expense related to unvested options not yet recognized totaled approximately $ 2.0 million, which is expected to be recognized over an estimated weighted average remaining term of 3.0 years.

Performance-Based Stock Options

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 six months ended June 30, 2021 is as follows:

Number of Shares Weighted Average

Outstanding at January 1, 2021 750,000 $ 2.20

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:

Expired ( 375,000 ) 2.20

Outstanding at June 30, 2021 375,000 $ 2.20

Exercisable at June 30, 2021 — $ —

A summary of the performance-based stock options for the six months ended June 30, 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.

Granted 600,000 $ 2.45

Forfeited ( 388,125 ) $ 4.70

Outstanding at June 30, 2020 600,000 $ 2.45

Exercisable at June 30, 2020 — $ —

Stock-based compensation expense recognized for performance-based stock options was nil and $( 0.3 ) million for the three and six months ended June 30, 2021, respectively.

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

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

As of June 30, 2021, there was no unrecognized stock-based compensation expense related to unvested performance-based stock options.

Licensing Agreements

Product License Agreements

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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 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.

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

As of June 30, 2021, the Company accrued $ 0.2 million relating to certain IP reimbursement expenses and certain sublicense royalty fees within accrued liabilities on the condensed consolidated balance sheet.

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

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

Additionally, the Company 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.

The Charak Amendment amends the royalty payments due to Charak under the 2002 Agreement such that the Company is liable to pay Charak royalties on net sales

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

by the Company of products developed under the license, which includes the Company’s Triferic® product, at a specified rate until December 31, 2021 and thereafter at a reduced rate from January 1, 2022 until February 1, 2034.

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

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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 June 30, 2021, the Company had operating and finance lease liabilities of $ 6.2 million and right-of-use assets of $ 6.1 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.

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Notes to Condensed Consolidated Financial Statements

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

Three Months Ended June 30, 2021 Three Months Ended June 30, 2020 Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

Operating leases

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

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

For each of the three months ended June 30, 2021 interest expense amounted to $ 0.6 million.

For the six months ended June 30, 2021 and 2020, interest expense amounted to $ 1.2 million and $ 0.6 million, respectively.

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

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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.

The Company previously failed to satisfy a revenue covenant for the period ended December 31, 2020 and then subsequently agreed to an appropriate remedy during the applicable cure period.

However, the Company may not be able to mutually agree with Innovatus on appropriate remedies to cure a future 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.

As of June 30, 2021, the Company is in compliance with all the reporting and financial covenants.

The financial statements for June 30, 2021 have been prepared with the assumption that the Company will be able to agree to an appropriate remedy during the applicable cure period for any future breaches of operating covenants.

Based on the foregoing, the Company has classified amounts payable under the Loan Agreement as a current liability.

If and when the Company reaches an agreement with Innovatus to avoid an event of default, the amounts payable under the Loan Agreement will be reevaluated for its classification and presentation.

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 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

As of June 30, 2021, the outstanding balance of the Term Loan was $ 21.1 million, net of unamortized issuance costs and unaccreted discount of $ 1.4 million.

The following table reflects the schedule of principal payments on the Term Loan as of June 30, 2021 (in thousands):

Principal Payments

Subsequent Events

On July 3, 2021, the Company entered into a short-term note payable for $ 2.0 million, bearing interest at 3.925 % per annum to finance various insurance policies.

Principal and interest payments related to this note will begin on July 3, 2021 and are paid on a straight-line amortization over a 9-month period with the final payment due on March 3, 2022.

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