What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-16 compared with 2021-11-15 · 258 added, 301 removed, 415 unchanged (57% of the section changed)

4 unchanged sentences

(Dollars In Thousands)

September 30,

2022 December 31,

11 unchanged sentences

Total Assets $ 37,436 $ 48,574

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY

Accounts Payable $ 4,224 $ 3,739

5 unchanged sentences

Customer Deposits 221 144

Other Current Liability - Related Party — 131

Total Current Liabilities 19,595 20,966

2 unchanged sentences

Deferred License Revenue - Long-Term 5,456 5,986

Long Term Liability - Other 14 14

Total Liabilities 42,243 46,039

Commitments and Contingencies (See Note 14)

Stockholders’ Equity:

Stockholders’ (Deficit) Equity:

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

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

no shares issued and outstanding at March 31, 2022 and December 31, 2021

Common Stock, $ 0.0001 par value;

170,000,000 shares authorized;

93,966,381 and 93,573,165 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

8,544,225 shares issued and outstanding at March 31, 2022 and December 31, 2021

Additional Paid-in Capital 372,383 372,562

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Accumulated Other Comprehensive Income 51 52

Total Stockholders’ Equity 11,094 34,170

Total Stockholders’ (Deficit) Equity ( 4,807 ) 2,535

Total Liabilities and Stockholders’ Equity $ 37,436 $ 48,574

3 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Amounts)

Three Months Ended September 30, 2021 Three Months Ended September 30, 2020 Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020

(In Thousands, Except Shares and Per Share Amounts)

Three Months Ended March 31, 2022 Three Months Ended March 31, 2021

Net Sales $ 16,124 $ 15,473

6 unchanged sentences

Other (Expense) Income

Realized (Loss) Gain on Investments — 4 ( 1 ) 8

Warrant Modification Expense — — — ( 837 )

Realized Gain on Investments 4 —

Interest Expense ( 540 ) ( 581 )

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Dollars in Thousands)

Three Months Ended September 30, 2021 Three Months Ended September 30, 2020 Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020

(In Thousands)

Three Months Ended March 31, 2022 Three Months Ended March 31, 2021

Net Loss $ ( 7,162 ) $ ( 7,752 )

14 unchanged sentences

Net Loss — — — ( 7,162 ) — ( 7,162 )

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

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

1 unchanged sentence

Balance as of March 31, 2022 8,544,225 $ 1 $ 372,383 $ ( 377,242 ) $ 51 $ ( 4,807 )

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

Net Loss — — — ( 7,581 ) — ( 7,581 )

Unrealized Gain on Available-for-Sale Investments — — — — 4 4

Issued shares for services 155,000 — 107 — — 107

Stock-based Compensation expense — — 361 — — 361

Balance as of September 30, 2021 93,966,381 $ 9 $ 372,168 $ ( 361,139 ) $ 56 $ 11,094

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

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Foreign Currency Translation Adjustments — — — — 3 3

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 2,396 — ( 236 ) — — ( 236 )

Balance as of March 31, 2021 8,509,047 $ 1 $ 371,282 $ ( 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 — — ( 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/At-the-Market Offering 140,892 — 284 — — 284

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

Stock-based Compensation — — 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.

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(Dollars in Thousands)

For the nine months ended September 30, 2021 and 2020

For the three months ended March 31, 2022 and 2021

Three Months Ended March 31, 2022 Three Months Ended March 31, 2021

Cash Flows From Operating Activities:

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Stock-based Compensation ( 179 ) ( 236 )

Warrant Modification Expense — 837

Increase in Inventory Reserves — 71

2 unchanged sentences

Loss on Disposal of Assets — 6

Realized Loss (Gain) on Sale of Investments Available-for-Sale 1 ( 8 )

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

Foreign Currency Translation Adjustment ( 1 ) 3

Changes in Assets and Liabilities:

(Increase) Decrease in Accounts Receivable, net ( 1,865 ) 74

Increase in Accounts Receivable, net ( 1,208 ) ( 2,426 )

Increase in Inventory ( 1,455 ) ( 424 )

Decrease in Prepaid and Other Assets 630 317

Increase in Accounts Payable 679 1,172

Decrease in Settlement Payable — ( 104 )

Increase (Decrease) in Accounts Payable 485 ( 848 )

Decrease in Lease Liability ( 490 ) ( 410 )

(Decrease) Increase in Other Liabilities ( 825 ) 423

Decrease in Other Liabilities ( 640 ) ( 958 )

Decrease in Deferred License Revenue ( 538 ) ( 544 )

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Purchase of Equipment ( 29 ) ( 38 )

Cash (Used In) Provided By Investing Activities ( 229 ) 2,575

Cash Provided By (Used In) Investing Activities 9,133 ( 512 )

Cash Flows From Financing Activities:

Proceeds from Term Loan — 22,500

Debt Issuance Costs — ( 1,343 )

Payments on Debt ( 2,250 ) —

Payments on Short Term Note Payable ( 437 ) —

Proceeds from the Issuance of Common Stock / Public Offering — 43,148

Offering Costs from the Issuance of Common Stock / Public Offering — ( 2,469 )

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

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

Proceeds from the Issuance of Common Stock for payment related to services provided 107 —

Repurchase of Common Stock to Pay Employee Withholding Taxes ( 6 ) ( 18 )

Cash (Used In) Provided By Financing Activities ( 555 ) 63,317

(Decrease) Increase in Cash and Cash Equivalents ( 25,292 ) 44,820

Cash Used In Financing Activities ( 2,687 ) —

Decrease in Cash and Cash Equivalents ( 3,366 ) ( 13,007 )

Cash and Cash Equivalents at Beginning of Period 13,280 48,682

4 unchanged sentences

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

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

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

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Rockwell Medical, Inc.

("Rockwell Medical," "Rockwell", the "Company" or "We") 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, reduce healthcare costs and improve patients’ lives.

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

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

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

The Company is target marketing both products to kidney dialysis centers for their patients receiving dialysis and working to find a commercial partner to expand our commercial efforts within the United States.

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

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

Rockwell Medical is 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.

The Company's approximately 300 dedicated employees, as well as a management team with experience in manufacturing, logistics, pharmaceutical development and commercialization provides Rockwell with 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 September 30, 2021, Rockwell had an accumulated deficit of approximately $ 361.1 million and stockholders' equity of $ 11.1 million.

As of September 30, 2021, Rockwell had approximately $ 33.2 million of cash, cash equivalents and investments available-for-sale, and working capital of $ 24.3 million.

Net cash used in operating activities for the nine months ended September 30, 2021 was approximately $ 24.5 million.

Based on the currently available working capital, the adjustments made to sales and marketing efforts for Triferic and Triferic AVNU and the implementation of key efficiency initiatives within our concentrates business, 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 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.

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

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

In late 2021, we filed an IND with the United States Food and Drug Administration ("FDA") with the goal to advance our FPC platform strategy by conducting a Phase II trial for the treatment of iron deficiency anemia in patients outside of dialysis, who are receiving intravenous ("IV") medications in the home infusion setting.

The trend toward providing medical care, including the delivery of infused medications, at home make the home infusion market a rapidly growing area of healthcare.

We believe the home infusion setting is a natural path for expansion of our platform as many of the patients suffer from diseases associated with iron deficiency and anemia.

In our R&D pipeline, we are also investigating FPC’s impact in the treatment of hospitalized patients with acute heart failure.

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

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

Liquidity and Going Concern Considerations

Since inception, the Company 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, 2022, Rockwell had an accumulated deficit of approximately $ 377.2 million and a stockholders' deficit of $ 4.8 million.

As of March 31, 2022, Rockwell had approximately $ 9.9 million of cash and cash equivalents and working capital of $ 5.2 million.

Net cash used in operating activities for the three months ended March 31, 2022 was approximately $ 9.8 million.

The Company has experienced significant inflationary pressures in its dialysis concentrates business, particularly within the last six months, which have resulted in an accelerated operating loss associated with this business line.

These factors raise substantial doubt about the Company’s ability to continue as a going concern and depend, in part, on the degree of success in the Company's ability to address inflationary pressures affecting the concentrates business, as well as the Company’s ability to contain costs, raise additional working capital and remain in compliance with financial and operating covenants under the Company’s secured loan.

Managements plans are described below.

On April 6, 2022, the Company entered into an amendment to one of its supply agreements to restructure the supply relationship, which management expects to result in improved financial performance of the Company's concentrate business.

The Company also entered into an equity investment agreement with one of the contracting parties for an investment of up to $ 15 million in two tranches of $ 7.5 million each.

The first tranche of $ 7.5 million was funded on April 7, 2022.

The second $ 7.5 million tranche is to be funded subject to the Company raising $ 15 million in additional capital by June 30, 2022.

On April 8, 2022, the Company entered into a sales agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.

(the “Agent”), pursuant to which the Company may offer and sell from time to time up to $ 12,200,000 of shares of Company’s common stock through the Agent.

The offering and sale of such shares has been registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Company’s Registration Statement on Form S-3 (File No.

333-259923) (the “Registration Statement”), which was originally filed with the Securities and Exchange Commission (“SEC”) on September 30, 2021 and declared effective by the SEC on October 8, 2021, the base prospectus contained within the Registration Statement, and a prospectus supplement that was filed with the SEC on April 8, 2022.

The Company has started to implement cost cutting measures as noted in previous filings focusing mainly within sales and marketing.

The Company expects it will require additional capital to sustain its operations and make the investments it

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

needs to execute its strategic plan in developing FPC for iron deficiency anemia in patients undergoing home infusion and for progressing our pipeline development program of new indications for our FPC platform.

If the Company is unable to generate sufficient cash flows from operations as described above or obtain additional equity or debt financing, the Company intends to implement further cost cutting measure which may include headcount reduction across multiple areas and reductions in general and administrative expenses.

Based on these plans, Management believes the substantial doubt about the Company’s ability to continue as a going concern has been alleviated.

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.

Currently, because the Company's public float is less than $75 million, we are subject to the baby shelf limitations under our current registration statement on Form S-3, which limit the amount we may offer under our Form S-3.

This could limit our ability to raise capital under this registration statement.

Additionally, the Company has received a delisting notification letter from the Nasdaq Stock Market ("Nasdaq") regarding compliance with minimum bid requirements.

The notification letter states that the Company has 180 calendar days, or until December 8, 2021, to regain compliance with Nasdaq Listing Rule 5450(a)(1).

As previously reported, on June 11, 2021, the Company received written notice (the "Notification Letter") from the Nasdaq Stock Market ("Nasdaq") notifying the Company that it is not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5450(a)(1) for continued listing on the Nasdaq Global Market.

Nasdaq Listing Rule 5450(a)(1) requires listed securities maintain a minimum closing bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum closing bid price requirement exists if the deficiency continues for a period of 30 consecutive business days.

Based on the closing bid price of the Company's common stock for the 30 consecutive business days prior to the date of the Notification Letter, the Company did not meet the minimum closing bid price requirement.

The Notification Letter provided for 180 calendar days, or until December 8, 2021, for the Company to regain compliance with Nasdaq Listing Rule 5450(a)(1).

To regain compliance, the closing bid price of the Company’s common stock must be at least $ 1.00 per share for a minimum of 10 consecutive business days at any time prior to December 8, 2021.

In the event that the Company does not regain compliance by December 8, 2021, the Company may be eligible for additional time to reach compliance with the minimum bid price requirement.

The Company is working on a plan to meet the minimum compliance requirements set forth by Nasdaq.

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

The Company was not able to meet the minimum compliance requirements set forth by Nasdaq by December 8, 2021.

On December 9, 2021, the Company received a written notice from Nasdaq indicating that the Company’s application to transfer its listing venue from The Nasdaq Global Market to The Nasdaq Capital Market for its common stock had been approved.

The Company’s common stock commenced trading on The Nasdaq Capital Market at the opening of business on December 10, 2021 under the symbol “RMTI.”

Also on December 9, 2021, the Company received written notice that Nasdaq has determined the Company is eligible for an additional 180-day extension, or until June 6, 2022, to regain compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market.

To regain compliance, the closing bid price of the Company’s common stock must be at least $1.00 per share for a minimum of 10 consecutive business days at any time prior to June 6, 2022.

On May 13, 2022, the Company effected a reverse stock split in order to regain compliance with the minimum bid price requirement (see Note 3 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).

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

The COVID-19 pandemic and resulting domestic and global disruptions in the supply chain and labor market, among other areas, have adversely affected Rockwell's business and operations, including, but not limited to, our sales and marketing efforts, research and development activities, our plant and transportation operations 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 business, including with regard to the Company’s manufacturing and transportation and remaining sales and marketing activities.

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.

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

If Rockwell is unable to avoid an event of default, any required repayments could have an adverse effect on its liquidity (See Note 14 for further detail).

The COVID-19 pandemic and resulting global disruptions, particularly in the supply chain and labor market, among other areas, have adversely affected our business and operations, including, but not limited to, our sales and marketing efforts and our research and development activities, our plant and transportation operations and the operations of third parties upon whom we rely.

Further, any vaccine hesitancy among our labor force could disrupt our business if workers become ill or need to quarantine due to illness or exposure to the virus.

The Company's international business development activities may also continue to be negatively impacted by COVID-19.

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

1 unchanged sentence

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 continued 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.

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 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.

GAAP”) for interim financial information and pursuant to

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AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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, 2021, condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020, condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2021 and 2020, condensed consolidated statement of changes in stockholders' equity for the three and nine months ended September 30, 2021 and 2020, and condensed consolidated statements of cash flows for the nine months ended September 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 nine months ended September 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 March 31, 2022, condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021, condensed consolidated statements of comprehensive loss for the three months ended March 31, 2022 and 2021, condensed consolidated statement of changes in stockholders' equity for the three months ended March 31, 2022 and 2021, and condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 are unaudited, but include all adjustments, consisting of normal recurring adjustments, the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The results for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022 or for any future interim period.

The condensed consolidated balance sheet at December 31, 2021 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, 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 accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2021 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as filed with the SEC on April 8, 2022.

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

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

Reverse Stock Split

On May 9, 2022, the stockholders of the Company authorized our Board of Directors to effect a reverse stock split of all outstanding shares of common stock.

The Board of Directors subsequently approved the implementation of a reverse stock split as a ratio of one-for-eleven shares, which became effective on May 13, 2022.

The Company’s outstanding stock options were also adjusted to reflect the one-for-eleven reverse stock split of the Company’s common stock.

Outstanding stock options were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased.

The reverse stock split resulted in an adjustment to the Series X convertible preferred stock conversion prices to reflect a proportional decrease in the number of shares of common stock to be issued upon conversion.

All share and per share data in these condensed consolidated financial statements and related notes hereto have been retroactively adjusted to the account for the effect of the reverse stock split for the three month periods ended March 31, 2022 and 2021, respectively, and the balance sheet at March 31, 2022 and December 31, 2021.

Use of Estimates

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

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

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

1 unchanged sentence

Loss Per Share

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

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

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

As of September 30,

As of March 31,

Options to purchase common stock 511,117 558,417

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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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Product sales – The Company accounts for individual products and services separately if they are distinct (i.e., if a product or service is separately identifiable from other items and if a customer can benefit from it on its own or with other resources that are readily available to the customer).

The consideration, including any discounts, is allocated between separate products and services based on their stand-alone selling prices.

The consideration, including any discounts, is allocated between separate

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

products and services based on their stand-alone selling prices.

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

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("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.

("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, South Korea and Turkey, 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.

For the business under the Company’s Distribution Agreement with Baxter (the “Baxter Agreement”) and for the majority of the Company’s international customers, the Company recognizes revenue at the shipping point, which is generally the Company’s plant or warehouse.

For other business, the Company recognizes revenue based on when the customer takes control or receipt of the product.

For other business, the Company recognizes revenue based on when the customer takes control of the product.

The amount of revenue recognized is based on the purchase order less returns and adjusted for any rebates, discounts, chargebacks or other amounts paid to customers.

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

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

In thousands of U.S.

dollars ($) Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

dollars ($) Three Months Ended March 31, 2022

Products By Geographic Area Total U.S.

Rest of World Total U.S.

Rest of World

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Net Revenue $ 16,124 $ 14,445 $ 1,679

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

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

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In thousands of U.S.

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

dollars ($) March 31, 2022 December 31, 2021

Receivables, which are included in "Trade and other receivables" $ 7,121 $ 5,913

Contract liabilities $ 7,619 $ 8,157

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, 2021 and 2020.

For the three and nine months ended September 30, 2021 and September 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 September 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 September 30, 2021 or December 31, 2020.

There were no impairment losses recognized related to any receivables arising from the Company’s contracts with customers for the three months ended March 31, 2022 and 2021.

For the three months ended March 31, 2022 and March 31, 2021, 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, 2022 and December 31, 2021.

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, 2022 or December 31, 2021.

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, 2021, revenue recognized from performance obligations related to prior periods was not material.

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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 $ 8.7 million as of September 30, 2021.

For the three months ended March 31, 2022, 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 $ 5.7 million as of September 30, 2021, which is amortized ratably through expiration of the Baxter Agreement on October 2, 2024.

Unfulfilled minimum commitments related to the Baxter Agreement are product sales of $ 4.8 million as of March 31, 2022, which is amortized ratably through expiration of the Baxter Agreement on October 2, 2024.

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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, 2021 and December 31, 2020 (table in thousands):

September 30, 2021

Amortized Cost Unrealized Gain Unrealized Loss Accrued Interest Income Fair Value

Available-for-Sale Securities

Bonds $ 9,805 $ 1 $ — $ 7 $ 9,813

As of March 31, 2022, all investment available-for-sale securities have been liquidated.

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

December 31, 2021

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

September 30,

As of December 31, 2021, 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, 2022 and December 31, 2021 are as follows (table in thousands):

2022 December 31,

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Total $ 7,054 $ 5,599

As of September 30, 2021, the Company classified $ 1.5 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, 2021, the total Triferic inventory net of reserve was $ 1.6 million.

The $ 1.6 million net value of Triferic inventory consisted of $ 0.4 million of Triferic (dialysate) finished goods with expiration dates ranging from September 2021 to December 2023, $ 0.4 million of Triferic API with estimated remaining shelf life extending beyond 2022, and $ 0.9 million of raw materials for Triferic with estimated remaining shelf life extending beyond 2025.

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Notes to Condensed Consolidated Financial Statements

As of March 31, 2022, the Company classified $ 1.5 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, 2022, the total Triferic inventory net of reserve was $ 1.6 million.

The $ 1.6 million net value of Triferic inventory consisted of $ 0.3 million of Triferic (dialysate) finished goods with expiration dates ranging from July 2022 to December 2023, $ 0.4 million of Triferic API with an estimated useful life extending through 2023, and $ 0.9 million of raw materials for Triferic with an estimated useful life of 25 years.

Property and Equipment

As of September 30, 2021 and December 31, 2020, the Company’s property and equipment consisted of the following (table in thousands):

September 30,

As of March 31, 2022 and December 31, 2021, the Company’s property and equipment consisted of the following (table in thousands):

2022 December 31,

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Property and Equipment, net $ 2,377 $ 2,486

Depreciation expense for three months ended September 30, 2021 and 2020 was $ 0.1 million and $ 0.2 million, respectively.

Depreciation expense for the nine months end September 30, 2021 and 2020 was $ 0.5 million and $ 0.6 million, respectively.

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Notes to Condensed Consolidated Financial Statements

Depreciation expense for three months ended March 31, 2022 and 2021 was $ 0.1 million and $ 0.2 million, respectively.

Accrued Liabilities

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

September 30,

Accrued liabilities as of March 31, 2022 and December 31, 2021 consisted of the following (table in thousands):

2022 December 31,

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Deferred Revenue

In October 2014, the Company entered into the Baxter Agreement with Baxter and received an upfront fee of $ 20 million.

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

The Company recognized revenue of approximately $ 0.5 million and $ 1.5 million for each of the three and nine months ended September 30, 2021 and 2020.

Deferred revenue related to the Baxter Agreement totaled $ 5.7 million as of September 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.

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.

In October 2014, the Company entered into the Baxter Agreement, which has a term of 10 years and received an upfront fee of $ 20 million.

The Company recognized revenue of approximately $ 0.5 million for each of the three months ended March 31, 2022 and 2021.

Deferred revenue related to the Baxter Agreement totaled $ 4.8 million as of March 31, 2022 and $ 5.2 million as of December 31, 2021.

In 2016, the Company entered into a distribution 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 approximately $ 53,000 and $ 0.2 million revenue for each of the three and nine months ended September 30, 2021 and 2020.

Deferred revenue related to the Wanbang Agreement totaled $ 2.6 million as of September 30, 2021 and $ 2.7 million as of December 31, 2020.

The Company recognized revenue of approximately $ 0.1 million during each of the three months ended March 31, 2022 and 2021.

Deferred revenue related to the Wanbang Agreement totaled $ 2.5 million as of March 31, 2022 and December 31, 2021.

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,

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Notes to Condensed Consolidated Financial Statements

comprised of members from the Company and Sun Pharma, will guide the development and execution for Triferic (dialysate) in India.

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

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

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

The Company recognized revenue of approximately $ 2,500 and $ 7,500 for each of the three and nine months ended September 30, 2021 and 2020.

Deferred revenue related to the Sun Pharma Agreement totaled $ 82,500 and $ 90,000 as of September 30, 2021 and December 31, 2020, respectively.

The Company recognized revenue of approximately $ 2,500 for each of the three months ended March 31, 2022 and 2021.

Deferred revenue related to the Sun Pharma Agreement totaled $ 77,500 and $ 80,000 as of March 31, 2022 and December 31, 2021, 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 for the three months ended September 30, 2021 and 2020, respectively, and $ 7,500 and nil for the nine months ended September 30, 2021 and 2020, respectively.

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

The Company recognized revenue of $ 2,500 for each of the three months ended March 31, 2022 and 2021.

Deferred revenue related to the Jeil Pharma Agreement totaled approximately $ 0.2 million as of March 31, 2022 and December 31, 2021.

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.

Under the terms of the

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Notes to Condensed Consolidated Financial Statements

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 received an upfront fee of $ 0.15 million, and will be eligible for milestone payment and royalties on net sales.

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

The Company recognized revenue of $ 3,750 for the three months ended September 30, 2021.

Deferred revenue related to the Drogsan Agreements totaled approximately $ 0.15 million as of September 30, 2021.

The Company recognized revenue of $ 3,750 and nil for the three months ended March 31, 2022 and 2021, respectively.

Deferred revenue related to the Drogsan Agreements totaled approximately $ 0.14 million as of March 31, 2022 and December 31, 2021.

Stockholders’ Equity

Preferred Stock

As of September 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 September 30, 2021 and December 31, 2020, there were 170,000,000 shares of common stock, $ 0.0001 par value per share, authorized and 93,966,381 and 93,573,165 shares issued and outstanding, respectively.

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

On March 22, 2019, the Company entered into a sales agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.

(the “Agent”), pursuant to which the Company may offer and sell from time to time shares of the Company’s common stock through the Agent.

The offering and sale of up to $ 40.0 million of the shares has been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to the Company’s registration statement on Form S-3 (File No.

333-227363), which was originally filed with the SEC on September 14, 2018 and declared effective by the SEC on October 1, 2018, the base prospectus contained within the registration statement, and a prospectus supplement that was filed with the SEC on March 22, 2019.

The registration statement on Form S-3 expired on October 1, 2021 and no further sales may be made under the Sales Agreement.

During the three and nine months ended September 30, 2021, the Company has not sold shares of its common stock pursuant to the Sales Agreement.

Approximately $ 32.3 million remained available for sale under this facility as of September 30, 2021.

On April 6, 2022, the Company and DaVita Inc.

("DaVita") entered into a Securities Purchase Agreement (the "SPA"), pursuant to which the Company will issue up to $ 15 million of preferred stock to DaVita.

On April 6, 2022, the Company issued 7,500 shares of a newly designated series of preferred stock, which is designated “Series X Convertible Preferred Stock” (the "Series X Preferred Stock") for gross proceeds of $ 7.5 million.

The Company will issue an additional 7,500 shares of Series X Preferred Stock to DaVita in a second closing (the "Second Tranche") for an additional $ 7.5 million if the Company raises $ 15 million in additional capital by June 30, 2022.

The Series X Preferred Stock will be issued for a price $ 1,000 per share (the "Face Amount"), subject to accretion at a rate of 1 % per annum, compounded annually.

If the Company’s common stock trades above $ 22.00 for a period of 30 calendar days, the accretion will thereafter cease.

The Series X Convertible Preferred Stock is convertible to common stock at rate equal to the Face Amount, divided by a conversion price of $ 11.00 per share (subject to adjustment for stock splits, reverse stock splits and similar recapitalization events).

As a result, each share of Series X Preferred Stock will initially convert into approximately 91 shares of common stock.

DaVita’s right to convert to common stock is subject to a beneficial ownership limitation, which is initially set at 9.9 % of the outstanding common stock, which limitation may be reset (not to exceed 19.9 %) at DaVita’s option and upon providing prior written notice to the Company.

The shares issued in the Second Tranche will have a lower conversion price if the Company raises capital through the issuance of convertible preferred stock prior to the closing of the Second Tranche and the conversion price of the securities sold in such preferred stock offerings is below $ 11.00 per share.

In addition, any debt financing is limited by the terms of our Securities Purchase Agreement with DaVita.

Specifically, until DaVita owns less than 50 % of its investment, the Company may only incur additional debt in the form of a purchase money loan, a working capital line of up to $ 5 million or to refinance existing debt, unless DaVita consents.

As of March 31, 2022 and December 31, 2021, there were 2,000,000 shares of preferred stock, $ 0.0001 par value per share, authorized and no shares of preferred stock issued and outstanding.

As of March 31, 2022 and December 31, 2021, there were 170,000,000 shares of common stock, $ 0.0001 par value per share, authorized and 8,544,225 and 8,544,225 shares issued and outstanding, respectively.

Stock-Based Compensation

The Company recognized total stock-based compensation expense during the three months ended March 31, 2022 and 2021 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, 2021 and 2020 as follows (table in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Service-based awards:

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Stock option awards 200 391

396 252 1,313 1,262

Performance-based awards:

Restricted stock awards ( 391 ) ( 391 )

Restricted stock units — ( 123 ) — ( 1,148 )

Stock option awards — ( 340 )

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Restricted Stock

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

A summary of the Company’s restricted stock awards during the three months ended March 31, 2022 is as follows:

Number of Shares Weighted Average

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Forfeited ( 6,227 ) $ 62.70

Unvested at September 30, 2021 78,300 $ 5.70

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

Unvested at March 31, 2022 891 $ 62.70

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 13,345 $ 62.70

Unvested at September 30, 2020 146,800 $ 5.70

Forfeited ( 6,227 ) $ 62.70

Unvested at March 31, 2021 7,118 $ 62.70

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, 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.

As of March 31, 2022, unvested restricted stock awards of 891 were related to performance-based awards.

The forfeited performance-based restricted stock awards of 6,227 was due to the resignation of the Company's Chief Development Officer on March 25, 2022.

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

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Notes to Condensed Consolidated Financial Statements

Service-Based Restricted Stock Units

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

A summary of the Company’s service-based restricted stock units during the three months ended March 31, 2022 is as follows:

Number of Shares Weighted Average

Unvested at January 1, 2022 29,289 $ 12.87

Granted 310,050 0.90

Vested ( 221,474 ) 2.38

Forfeited ( 1,223 ) 52.91

Unvested at September 30, 2021 342,271 $ 1.17

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

Unvested at March 31, 2022 28,066 $ 11.11

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Notes to Condensed Consolidated Financial Statements

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 ( 2,396 ) 27.50

Unvested at September 30, 2020 245,405 $ 2.72

Unvested at March 31, 2021 21,612 $ 27.39

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 $ 0.3 million was recognized for the three and nine months ended September 30, 2021, respectively.

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

As of September 30, 2021, the unrecognized stock-based compensation expense was $ 0.2 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 September 30, 2021, there were no outstanding 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:

Number of Shares Weighted Average

Unvested at January 1, 2020 988,958 $ 4.48

Forfeited ( 988,958 ) 4.48

Unvested at Unvested at September 30, 2020 — $ —

Stock-based compensation expense of $ 12,000 and $ 104,000 was recognized for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, 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.

Service-Based Stock Options

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Notes to Condensed Consolidated Financial Statements

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

September 30,

The fair value of the service-based stock options granted for the three months ended March 31, 2022 were based on the following assumptions:

Exercise price $ 4.12

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Term (years) 6.5

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

A summary of the Company’s service-based stock option activity for the three months ended March 31, 2022 is as follows:

Options Weighted

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Expired ( 3,545 ) 85.36 — —

Outstanding at September 30, 2021 5,871,620 $ 2.95 7.7 $ —

Exercisable at September 30, 2021 2,539,438 $ 4.96 5.8 $ —

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

Outstanding at March 31, 2022 511,116 $ 32.01 7.0 $ 1

Exercisable at March 31, 2022 236,720 $ 52.14 5.0 $ —

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Notes to Condensed Consolidated Financial Statements

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 ( 20,530 ) 84.26 — —

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

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

Outstanding at March 31, 2021 490,235 $ 48.95 6.1 $ —

Exercisable at March 31, 2021 251,180 $ 73.48 3.2 $ —

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 nine months ended September 30, 2021, the Company granted stock options to purchase up to 1,872,162 shares of common stock to certain employees.

During the nine months ended September 30, 2021, 385,278 shares were forfeited and 1,333,220 shares expired.

During the three months ended March 31, 2022, the Company granted stock options to purchase up to 909 shares of common stock to certain employees.

During the three months ended March 31, 2022, 14,839 shares were forfeited and 3,545 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 $ 0.3 million and $ 1.0 million for the three and nine months ended September 30, 2021, respectively.

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.

As of September 30, 2021, total stock-based compensation expense related to unvested options not yet recognized totaled

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Notes to Condensed Consolidated Financial Statements

approximately $ 1.7 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 nine months ended September 30, 2021 is as follows:

Number of Shares Weighted Average

Outstanding at January 1, 2021 750,000 $ 2.20

Expired ( 750,000 ) 2.20

Outstanding at September 30, 2021 — $ —

Exercisable at September 30, 2021 — $ —

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 — $ —

Stock-based compensation expense recognized for performance-based stock options was nil and $( 0.4 ) million for the three and nine months ended September 30, 2021, respectively.

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, respectively.

The increase in expired performance-based stock options and 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 September 30, 2021.

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

Stock-based compensation expense recognized for service-based stock options was $ 0.2 million and $ 0.4 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, total stock-based compensation expense related to unvested options not yet recognized totaled approximately $ 1.0 million, which is expected to be recognized over an estimated weighted average remaining term of 3.1 years.

Licensing Agreements

Product License Agreements

The Company is a party to a Licensing Agreement with Charak, LLC ("Charak") dated January 7, 2002 (the "2002 Agreement") that grants the Company exclusive worldwide rights to certain patents and information related to our Triferic® product.

The Company is a party to a Licensing Agreement between the Company and Charak, LLC ("Charak") dated January 7, 2002 (the "2002 Agreement") that grants the Company exclusive worldwide rights to certain patents and information related to our Triferic® product.

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

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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.

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

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

The Company 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 had fulfilled its reimbursement obligation of certain legal expenses.

As of September 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.

As of March 31, 2022, the Company has accrued $ 86,400 relating to certain IP reimbursement expenses and certain sublicense royalty fees and is included 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.

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Notes to Condensed Consolidated Financial Statements

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.

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 sublicensee in jurisdictions where there exists no valid claim, on a country-by-country basis.

Also pursuant to the Charak MSA, the Company and Charak entered into a 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.

Triferic®, dated as of October 7, 2018 (the “IV Agreement”), under which Charak granted the Company an exclusive, sublicensable, 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 country-by-country basis.

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

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

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

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

During the term of the TPN Agreement, the Company is liable to pay Charak a base royalty on net sales and an additional royalty on net sales while there exists a valid claim of a licensed patent, on a country-by-country basis.

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 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 .

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 2024.

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 September 30, 2021, the Company had operating and finance lease liabilities of $ 7.1 million and right-of-use assets of $ 6.9 million, which are included in the consolidated balance sheet.

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

The potential milestone payments are not yet considered probable, and no milestone payments have been accrued at March 31, 2022.

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

The lease terms range from monthly to seven years .

Rockwell occupies a 51,000 square foot facility and a 17,500 square foot facility in Wixom, Michigan under a lease expiring in August 2024.

Rockwell 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, Rockwell occupies 4,100 square feet of office space in Hackensack, New Jersey under a lease expiring on October 31, 2024.

This lease was subleased on December 15, 2021 with an expiration date of October 31, 2024.

At March 31, 2022, the Company had operating and finance lease liabilities of $ 7.4 million and right-of-use assets of $ 7.2 million, which are included in the consolidated balance sheet.

At December 31, 2021, the Company had operating lease liabilities of $ 7.9 million and right-of-use assets of $ 7.7 million, which are included in the consolidated balance sheet.

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Notes to Condensed Consolidated Financial Statements

Three Months Ended September 30, 2021 Three Months Ended September 30, 2020 Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020

Three Months Ended March 31, 2022 Three Months Ended March 31, 2021

Operating leases

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Operating and finance lease liabilities $ 4,410 $ 2,973

Commitments and Contingencies

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.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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.

Loan and Security Agreement

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").

On March 16, 2020, the Company and Rockwell Transportation, Inc., as Borrowers, entered into a Loan and Security Agreement (the "Loan Agreement") with Innovatus Life Sciences Lending Fund I, LP ("Innovatus"), as collateral agent and the lenders party thereto, pursuant to which Innovatus, as a lender, agreed to make certain term loans to the Company in the aggregate principal amount of up to $ 35.0 million (the "Term Loans").

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

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

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

The Company may be eligible to draw on a third tranche of $ 7.5 million

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

upon the achievement of certain additional milestones, including the achievement of certain Triferic sales thresholds.

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

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) $ 18.15 per share or (ii) the volume weighted average closing price of the Company’s stock for the 5 -trading day period ending on the last trading day immediately preceding the relevant Term Loan funding).

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

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

In connection with the first tranche of the Term Loans, the Company issued a Warrant to Innovatus, exercisable for an aggregate of 43,388 shares of the Company’s common stock at an exercise price of $ 18.15 per share.

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

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

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

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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 each of the three months ended September 30, 2021 and 2020, interest expense amounted to $ 0.6 million and $ 0.7 million, respectively.

For the nine months ended September 30, 2021 and 2020, interest expense amounted to $ 1.8 million and $ 1.3 million, respectively.

For the three months ended March 31, 2022 and 2021, interest expense amounted to $ 0.4 million and $ 0.6 million, respectively.

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

Proceeds are being used for working capital purposes.

Proceeds are 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.

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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.

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 September 30, 2021, the Company is in compliance with all the reporting and financial covenants.

The financial statements for September 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).

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

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

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

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

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

In September 2021, the Company entered into an amendment to the Loan Agreement in which the Company, in exchange for Innovatus lowering the sales covenants, agreed to (i) prepay an aggregate principal amount of $ 7,500,000 in ten installments commencing on December 1, 2021;

(ii) pay an additional prepayment premium of 5 % on prepaid amounts if the Company elects to prepay all outstanding Term Loans on or before September 24, 2023 and (iii) maintain minimum liquidity of no less than $ 5,000,000 if the aggregate principal amount of Term Loans is greater than $ 15,000,000 pursuant to the liquidity covenant in the Loan Agreement.

On March 31, 2022, the Collateral Agent and Lenders consented to the delivery to Collateral Agent and Lenders of its annual audited financial statements for the fiscal year 2021 by April 15, 2022 as opposed to within 90 days of December 31, 2021, as required pursuant to Loan Agreement.

As of March 31, 2022, the Company was in compliance with all covenants under the Loan Agreement.

As of March 31, 2022, the outstanding balance of the Term Loan was $ 18.4 million, net of unamortized issuance costs and discount of $ 1.1 million.

The following table reflects the schedule of principal payments on the Term Loan as of March 31, 2022 (in thousands):

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

On September 24, 2021, the Company, entered into the First Amendment to Loan and Security Agreement (the “Amendment”) with Innovatus Life Sciences Lending Fund I, LP, which amended the Loan Agreement..

Pursuant to the Amendment, the Company (i) shall prepay an aggregate principal amount of $ 7.5 million in Term Loans (as defined in the Loan Agreement) in ten consecutive equal monthly installments commencing on December 1, 2021;

(ii) shall pay an additional prepayment premium of 5 % on prepaid amounts if the Company elects to prepay all outstanding Term Loans on or before September 24, 2023 and (iii) shall maintain minimum liquidity of no less than $ 5.0 million if the aggregate principal amount of Term Loans is greater than $ 15.0 million pursuant to the liquidity covenant in the Loan Agreement.

As of September 30, 2021, the outstanding balance of the Term Loan was $ 21.2 million, net of unamortized issuance costs and unaccreted discount of $ 1.3 million.

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

Principal Payments

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On July 3, 2021, the Company entered into a short-term note payable for $ 2.0 million, bearing interest at 3.93 % 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 9 months with the final payment due on March 3, 2022.

As of September 30, 2021, the Company's insurance note payable balance was $ 1.3 million.

Principal and interest payments related to this note began on July 3, 2021 and were paid on a straight-line amortization over 9 months with the final payment due on March 3, 2022.

As of March 31, 2022, the Company's insurance note payable was paid in full.

Subsequent Events

Amended Supply Agreement

The Company has been working to renegotiate certain terms of its supply contracts with the Company’s two largest customers in an effort to allow the Company to stabilize its concentrates business.

On April 6, 2022, the Company and DaVita entered into an amendment (the "Amendment") to the Products Purchase Agreement, dated July 1, 2019 under which the Company supplies DaVita with certain dialysis concentrates.

Under the Amendment, the Company and DaVita agreed to a price increase, effective May 1, 2022, as well as the pass-through of certain inflationary costs, determined on a quarterly basis.

Certain costs are subject to a cap.

The Amendment also requires the Company to implement certain cost containment and cost-cutting measures.

The Amendment contains certain covenants with respect to the Company’s ongoing operations, including a minimum cash covenant, and the requirement to raise $ 15 million in additional capital by June 30, 2022.

The Amendment also establishes a joint committee that will oversee certain efficiency and cost-savings activities to be undertaken by the Company.

Certain cost savings that are realized by the Company will be shared with DaVita in the manner set forth in the Amendment.

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

On April 8, 2022, the Company entered into a sales agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.

(the “Agent”), pursuant to which the Company may offer and sell from time to time up to $ 12,200,000 of shares of Company’s common stock through the Agent.

The offering and sale of such shares has been registered under the Securities Act of 1933, as amended, pursuant to the Company’s Registration Statement on Form S-3 (File No.

333-259923) (the “Registration Statement”), which was originally filed with the SEC on September 30, 2021 and declared effective by the SEC on October 8, 2021, the base prospectus contained within the Registration Statement, and a prospectus supplement that was filed with the SEC on April 8, 2022.

Reverse Stock Split

On May 9, 2022, the Company's Board of Directors approved the reverse stock split at the ratio of 1-for-11 shares.

The reverse stock split was approved by the Company's stockholders at the annual meeting of stockholders held on May 9, 2022 at a ratio ranging from 1-for-2 up to a ratio of 1-for-15, such ratio to be determined by the Board of Directors and included in a public announcement.

The reverse stock split will became effective at 12:01 a.m.

Eastern Time on May 13, 2022.

Rockwell Medical's common stock is expected to begin trading on the Nasdaq Capital Market on a split-adjusted basis on May 13, 2022.

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

The reverse stock split is primarily intended to bring the Company into compliance with the minimum bid price requirements for maintaining its listing on the Nasdaq Capital Market.

The new CUSIP number following the reverse stock split will be 774374300.

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