What changed in this filing

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Item 1. Financial Statements

2023-05-15 compared with 2022-11-14 · 232 added, 306 removed, 442 unchanged (55% of the section changed)

4 unchanged sentences

(Dollars In Thousands)

September 30,

2023 December 31,

2 unchanged sentences

Accounts Receivable, net 6,021 6,259

Inventory, net 5,020 4,076

Inventory 5,595 5,814

Prepaid and Other Current Assets 1,240 1,745

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Inventory, Non-Current 1,276 1,276

Right of Use Assets, net 6,928 7,737

Right of Use Assets-Operating, net 3,558 3,943

Right of Use Assets-Financing, net 2,326 2,468

Goodwill 921 921

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Accrued Liabilities 4,359 7,702

Lease Liability - Current 1,992 2,004

Lease Liability-Operating - Current 1,473 1,483

Lease Liability-Financing - Current 532 522

Deferred License Revenue - Current 259 1,731

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Total Current Liabilities 15,070 17,691

Lease Liability - Long-Term 5,171 5,887

Lease Liability-Operating - Long-Term 2,214 2,581

Lease Liability-Financing - Long-Term 1,950 2,088

Term Loan, Net of Issuance Costs 6,147 7,555

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

15,000 and nil shares issued and outstanding at September 30, 2022 and December 31, 2021

15,000 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Common Stock, $ 0.0001 par value;

170,000,000 shares authorized;

11,152,673 and 8,544,225 shares issued and outstanding at September 30, 2022 and December 31, 2021

12,552,673 and 12,163,673 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Additional Paid-in Capital 402,894 402,701

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(In Thousands, Except Shares and Per Share Amounts)

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

Net Sales $ 19,668 $ 16,124

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(In Thousands)

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

Net Loss $ ( 1,750 ) $ ( 7,162 )

Unrealized Gain (Loss) on Available-for-Sale Debt Instrument Investments 5 4 5 ( 4 )

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

Foreign Currency Translation Adjustments ( 4 ) ( 1 )

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Net Loss — — — — — ( 1,750 ) — ( 1,750 )

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

Foreign Currency Translation Adjustments — — — — — — ( 4 ) ( 4 )

Issuance of Common Stock upon exercise of Pre-Funded Warrants — — 389,000 — — — — —

Stock-based Compensation — — — — 193 — — 193

Balance as of March 31, 2023 15,000 $ — 12,552,673 $ 1 $ 402,894 $ ( 390,509 ) $ 156 $ 12,542

Net Loss — — — — — ( 4,967 ) — ( 4,967 )

Foreign Currency Translation Adjustments — — — — — — ( 2 ) ( 2 )

Issuance of common stock, net of offering costs/Public Offering — — 844,613 — 14,893 — — 14,893

Issuance of common stock, net of offering costs/At-the-Market Offering — — 7,500 — 15 — — 15

Issuance of preferred stock, net of offering costs 15,000 — — — 14,916 — — 14,916

Vesting of Restricted Stock Units Issued, net of taxes withheld — — 10,958 — — — — —

Stock-based Compensation and modification expense — — — — 97 — — 97

Balance as of June 30, 2022 15,000 $ — 9,407,296 $ 1 $ 402,304 $ ( 382,209 ) $ 49 $ 20,145

Net Loss — — — — — ( 4,190 ) — ( 4,190 )

Unrealized Gain on Available-for-Sale Investments — — — — — — 5 5

Issuance of common stock, net of offering costs/Public Offering — 1,745,377 — — — — —

Stock-based Compensation expense — — — — 176 — — 176

Balance as of September 30, 2022 15,000 $ — 11,152,673 $ 1 $ 402,480 $ ( 386,399 ) $ 54 $ 16,136

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

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STOCKHOLDERS'

EQUITY (DEFICIT)

SHARES AMOUNT SHARES AMOUNT

1 unchanged sentence

Net Loss — — — — — ( 7,162 ) — ( 7,162 )

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

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

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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 — — 19,260 — ( 7 ) — — ( 7 )

Stock-based Compensation — — — — 433 — — 433

Balance as of June 30, 2021 — $ — 8,528,307 $ 1 $ 371,708 $ ( 353,558 ) $ 52 $ 18,203

Net Loss — — — — — ( 7,581 ) — ( 7,581 )

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

Issued shares for services — — 14,090 — 107 — — 107

Stock-based Compensation — — — — 361 — — 361

Balance as of September 30, 2021 — $ — 8,542,397 $ 1 $ 372,176 $ ( 361,139 ) $ 56 $ 11,094

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, 2022 and 2021

Nine Months Ended

September 30, 2022 Nine Months Ended

September 30, 2021

For the three months ended March 31, 2023 and 2022

Three Months Ended

March 31, 2023 Three Months Ended

March 31, 2022

Cash Flows From Operating Activities:

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Stock-based Compensation 193 ( 179 )

Increase in Inventory Reserves 307 89

Amortization of Right of Use Asset 1,518 1,312

Non-cash lease expense from Right of Use Asset 485 520

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

(Gain) Loss on Disposal of Assets ( 3 ) 7

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

Foreign Currency Translation Adjustment ( 3 ) 3

Changes in Assets and Liabilities:

Increase in Accounts Receivable, net ( 1,454 ) ( 1,865 )

Increase in Inventory ( 921 ) ( 554 )

Decrease in Prepaid and Other Assets 2,058 1,760

(Decrease) Increase in Accounts Payable ( 688 ) 679

Decrease in Lease Liability ( 1,435 ) ( 1,266 )

Increase (Decrease) in Other Liabilities 756 ( 825 )

Decrease in Deferred License Revenue ( 1,427 ) ( 1,485 )

Changes in Assets and Liabilities ( 3,111 ) ( 3,556 )

Loss on Disposal of Assets 1 —

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

Changes in operating Assets and Liabilities:

Accounts Receivable, net 238 ( 1,208 )

Inventory 219 ( 1,455 )

Prepaid and Other Assets 505 630

Accounts Payable 1,149 485

Lease Liability ( 336 ) ( 490 )

Other Liabilities ( 3,295 ) ( 640 )

Deferred License Revenue ( 1,537 ) ( 538 )

Changes in operating Assets and Liabilities ( 3,057 ) ( 3,216 )

Cash Used In Operating Activities ( 3,876 ) ( 9,811 )

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Purchase of Equipment ( 145 ) ( 29 )

Cash Used In Investing Activities ( 5,614 ) ( 229 )

Cash Provided by Investing Activities 5,302 9,133

Cash Flows From Financing Activities:

Payments on Debt — ( 2,250 )

Payments on Short Term Note Payable ( 941 ) ( 656 )

Proceeds from the Issuance of Common Stock 15,016 —

Offering Costs from the Issuance of Common Stock ( 106 ) —

Proceeds from the Issuance of Preferred Stock 15,000 —

Offering Costs from the Issuance of Preferred Stock ( 85 ) —

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

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

Cash Provided by (Used In) Financing Activities 22,134 ( 555 )

Decrease in Cash and Cash Equivalents ( 300 ) ( 25,292 )

Payments on Insurance Financing Note Payable ( 503 ) ( 437 )

Payment on Financing Lease Liabilities ( 128 ) —

Cash Used In Financing Activities ( 631 ) ( 2,687 )

Effect of exchange rate changes on cash ( 3 ) ( 1 )

Increase (Decrease) in Cash and Cash Equivalents 792 ( 3,366 )

Cash and Cash Equivalents at Beginning of Period 10,102 13,280

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Rockwell Medical, Inc.

(“Rockwell Medical,” “Rockwell,” or the “Company”) is a commercial healthcare company focused on providing life-sustaining products for patients suffering from blood disorders and diseases associated with the kidney.

(the "Company", "Rockwell", "we", or "us") is a healthcare company that develops, manufactures, commercializes, and distributes a portfolio of hemodialysis products for dialysis providers worldwide.

Rockwell is a revenue-generating business and the second largest supplier of acid and bicarbonate concentrates for dialysis patients in the United States.

Hemodialysis is the most common form of end-stage kidney disease treatment and is usually performed at a freestanding outpatient dialysis center, at a hospital-based outpatient center, or in a patient’s home.

This represents a large market opportunity for which Rockwell's products are well-positioned to meet the needs of patients.

Rockwell manufactures hemodialysis concentrates under cGMP regulations at its three facilities in Michigan, Texas, and South Carolina totaling approximately 175,000 square feet, and manufactures mixers in its Iowa facility.

Hemodialysis is the most common form of end-stage kidney disease treatment and is usually performed at freestanding outpatient dialysis centers, at hospital-based outpatient centers, at skilled nursing facilities, or in a patient’s home.

Rockwell provides the hemodialysis community with products controlled by a Quality Management System regulated by the U.S.

Food and Drug Administration ("FDA").

Rockwell is ISO 13485 Certified and adheres to current Good Manufacturing Practices ("cGMP") and Association for Advancement of Medical Instrumentation ("AAMI") standards.

Rockwell manufactures hemodialysis concentrates at its three facilities in Michigan, Texas, and South Carolina totaling approximately 175,000 square feet, and manufactures its dry acid concentrate mixers at its facility in Iowa.

Rockwell delivers the majority of its hemodialysis concentrates products and mixers to dialysis clinics throughout the United States and internationally utilizing its own delivery trucks and third-party carriers.

Rockwell has developed a core expertise in manufacturing and delivering hemodialysis concentrates, and has built a longstanding reputation for reliability, quality, and excellent customer service.

Rockwell has a proprietary parenteral iron product, TRIFERIC ® (ferric pyrophosphate citrate, "FPC"), which is indicated to maintain hemoglobin in adult patients with hemodialysis-dependent chronic kidney disease.

The Company has established several international partnerships with companies seeking to develop and commercialize TRIFERIC ® outside the United States and is working closely with these international partners to develop and commercialize TRIFERIC ® in their respective regions.

Rockwell continues to evaluate the viability of its FPC platform and FPC's potential to treat iron deficiency and iron deficiency anemia and for acute heart failure.

Rockwell’s strategy is focused on growing the Company's revenue-generating business, which currently includes hemodialysis concentrates and international partnerships for TRIFERIC ® and achieving profitability in 2024 to put the Company in a stronger and more stable financial position.

In addition to its primary focus on hemodialysis concentrates, Rockwell also has a proprietary parenteral iron product, Triferic ® (ferric pyrophosphate citrate ("FPC")), which is indicated to maintain hemoglobin in adult patients with hemodialysis-dependent chronic kidney disease.

While Rockwell has discontinued commercialization of Triferic in the United States, the Company has established several international partnerships with companies seeking to develop and commercialize Triferic outside the United States and is working closely with these international partners to develop and commercialize Triferic in their respective regions.

Additionally, Rockwell continues to evaluate the viability of its FPC platform and FPC's potential to treat iron deficiency, iron deficiency anemia, and acute heart failure.

Rockwell was incorporated in the state of Michigan in 1996 and re-domiciled to the state of Delaware in 2019.

Rockwell's headquarters is located at 30142 Wixom Road, Wixom, Michigan 48393.

ROCKWELL MEDICAL, INC.

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Liquidity and Capital Resources

As of September 30, 2022, Rockwell had approximately $ 27.6 million of cash, cash equivalents and investments available-for-sale, and working capital of $ 23.0 million.

Net cash used in operating activities for the nine months ended September 30, 2022 was approximately $ 16.8 million.

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

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

("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 certain price increases, 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 of $ 10 million, or the Company will be in default under the Products Purchase Agreement.

An event of default could result in termination of that agreement.

On April 6, 2022, the Company and DaVita entered into a Securities Purchase Agreement (the “SPA”), pursuant to which the Company issued $ 15 million of preferred stock to DaVita in two separate tranches.

The Company initially 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.

On June 15, 2022, the Company issued to DaVita an additional 7,500 shares of Series X Preferred Stock in a second closing (the “Second Tranche”) for an additional $ 7.5 million.

The Second Tranche was conditioned upon the Company raising an additional $ 15 million in capital within a certain timeline, which took place on June 2, 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.

During the three months ended September 30, 2022, the Company did not make any sales pursuant to the Sales Agreement.

Approximately $ 12.2 million remains available for sale under the ATM facility.

On May 30, 2022, the Company entered into a Securities Purchase Agreement (the “RD Purchase Agreement”) with the purchaser named therein (the “Purchaser”), pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “Offering”), 844,613 shares of its common stock at price of $ 1.39 per share, and prefunded warrants to purchase up to an aggregate of 7,788,480 shares of common stock (the “Pre-Funded Warrants” and the shares of common stock underlying the Pre-Funded Warrants, the “Warrant Shares”).

The purchase price of each Pre-Funded Warrant was equal to the price at which a share of common stock was sold to the public in the Offering, minus $ 0.0001 , and the exercise price of each Pre-Funded Warrant is $ 0.0001 per share.

Also on May 30, 2022, concurrently with the Offering, the Company entered into a Securities Purchase Agreement with the Purchaser (the “PIPE Purchase Agreement”) relating to the offering and sale (the “Private Placement”) of warrants to purchase up to a total of 9,900,990 shares of common stock and pre-funded warrants to purchase up to a total of 1,267,897 shares of common stock (the “PIPE Warrants”).

Each warrant was sold at a price of $ 0.125 per underlying warrant share and is exercisable at an exercise price of $ 1.39 per share.

The Offering and the Private Placement closed on June 2, 2022.

The net proceeds to the Company from the Offering and the Private Placement were approximately $ 14.9 million, after deducting fees and expenses.

As of March 31, 2023, Rockwell had approximately $ 16.8 million of cash, cash equivalents and investments available-for-sale, and working capital of $ 14.6 million.

Net cash used in operating activities for the three months ended March 31, 2023 was approximately $ 3.9 million.

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

The Company continues to review its operational plans, execute on the acquisition of new customers and cost containment activities.

The Company may require additional capital to sustain its operations and make the investments it needs to execute its strategic plan.

Additionally, the Company's operational plans include raising capital, if needed, by using its at-the-market ("ATM") facility or other methods or forms of financings, subject to existing limitations.

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

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

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

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

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 14 for further detail).

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

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

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

In addition, the global macroeconomic environment is uncertain, and could be negatively affected by, among other things, increased U.S.

trade tariffs and trade disputes with other countries, instability in the global capital and credit markets, recent bank failures in the United States, supply chain weaknesses, and instability in the geopolitical environment, including as a result of the Russian invasion of Ukraine and other political tensions, and lingering effects of the COVID-19 pandemic.

Such challenges have caused, and may continue to cause, recession fears, rising interest rates, foreign exchange volatility and inflationary pressures.

At this time, the Company is unable to quantify the potential effects of this economic instability on our future operations.

Rockwell has utilized a range of financing methods to fund its operations in the past;

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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 September 30, 2022, condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021, condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2022 and 2021, condensed consolidated statement of changes in stockholders' equity for the three and nine months ended September 30, 2022 and 2021, and condensed consolidated statements of cash flows for the nine months ended September 30, 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 and nine months ended September 30, 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 March 31, 2023, and the condensed consolidated statements of operations, comprehensive loss, changes in stockholders' equity, and cash flows for the three months ended March 31, 2023 and 2022 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, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023 or for any future interim period.

The condensed consolidated balance sheet at December 31, 2022 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, 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.

The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2022 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as filed with the SEC on March 30, 2023.

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

and Rockwell Medical India Private Limited.

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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 account for the effect of the reverse stock split for the three and nine month periods ended September 30, 2022 and 2021, respectively, and the balance sheet at September 30, 2022 and December 31, 2021.

All share and per share data in these condensed consolidated financial statements and related notes hereto have been retroactively adjusted to account for the effect of the reverse stock split.

Use of Estimates

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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.

The Company excludes short-term leases having initial terms of 12 months or less 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 EPS computation.

Basic EPS excludes dilution.

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that are then sharing in the earnings of the entity.

Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents.

Diluted net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding plus the effect of dilutive potential common shares outstanding during the period determined using the treasury-stock and if-converted methods.

For purposes of the diluted net loss per share calculation, common stock warrants, unvested restricted stock units and stock options are considered to be potentially dilutive securities but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive, and therefore, basic and diluted net loss per share were the same for all periods presented.

The following table sets forth the outstanding potentially dilutive securities that have been excluded from the calculation of diluted net loss per share for the nine months ended September 30, 2022 and 2021, respectively, because to do so would be anti-dilutive (in common equivalent shares):

As of September 30,

Basic and diluted net loss per share for the three months ended March 31, 2023 and 2022 was calculated as follows:

As of March 31,

(In Thousands, Except Shares and Per Share Amounts) 2023 2022

Net loss $ ( 1,750 ) $ ( 7,162 )

Net loss attributable to common stockholders for basic and diluted loss per share $ ( 1,750 ) $ ( 7,162 )

Weighted average number of shares of common stock outstanding - basic and diluted 18,359,940 8,544,225

Net loss per share attributable to common stockholders - basic and diluted $ ( 0.10 ) $ ( 0.84 )

Included within the weighted average shares of common stock outstanding for the three months ended March 31, 2023 and 2022, are 5,911,000 and nil , respectively, of shares of common stock issuable upon the exercise of the pre-funded warrants (see Note 10), as the warrants are exercisable at any time for nominal consideration, and as such, the shares are considered outstanding for the purpose of calculating basic and diluted net loss per share attributable to common stockholders.

The Company’s potentially dilutive securities include stock options, restricted stock awards and units, convertible preferred stock and warrants.

These securities were excluded from the computations of diluted net loss per share for the three months ended March 31, 2023 and 2022, as the effect would be to reduce the net loss per share.

The following table includes the potential shares of common stock, presented based on amounts outstanding at each period end, that were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

As of March 31,

Options to purchase common stock 1,194,202 511,117

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Unvested restricted stock units 125,000 28,066

Preferred stock conversion to common stock 1,363,636 —

Convertible Preferred Stock 1,363,636 —

Warrants to purchase common stock 10,196,268 2,402,442

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

In August 2020, the FASB issued ASU No.

2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, which simplifies the accounting for convertible instruments by eliminating the requirement to separate embedded conversion features from the host contract when the conversion features are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or do not result in substantial premiums accounted for as paid-in capital.

By removing the separation model, a convertible debt instrument will be reported as a single liability instrument with no separate accounting for embedded conversion features.

This new standard also removes certain settlement conditions required for contracts to qualify for equity classification and simplifies the diluted earnings per share calculations by requiring an entity use the if-converted method and the effect of potential share settlement be included in diluted earnings per share calculations.

This new standard will be effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted.

The Company is currently assessing the impact of adopting this standard on the consolidated financial statements.

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, "Financial Instruments - Credit Losses (Topic 326)," which introduced an impairment model that is based on expected credit losses, rather than incurred losses, to estimate credit losses on certain types of financial instruments (e.g., loan commitments).

The expected credit losses should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term.

Financial instruments with similar risk characteristics may be grouped together when estimating expected credit losses.

The Company adopted the new guidance, as of January 1, 2023, and it did not have a material impact on the Condensed Consolidated Financial Statements.

ROCKWELL MEDICAL, INC.

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The following is a description of principal activities from which the Company generates its revenue.

We currently operate in one market segment, the hemodialysis market, which involves the manufacture, sale and distribution of hemodialysis products to hemodialysis clinics, including pharmaceutical, dialysis concentrates, dialysis kits and other ancillary products used in the dialysis process.

Our customer mix is diverse with most customer sales concentrations under 10% and one customer, DaVita, Inc., at approximately 48 %.

Our accounts receivable from this customer were approximately 34 % of the outstanding balance at March 31, 2023.

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).

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("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 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 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.

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

On November 9, 2022, Rockwell reacquired its distribution rights to its hemodialysis concentrates products from Baxter and terminated the Distribution Agreement.

Under the Distribution Agreement, effective December 31, 2022, Baxter

distributed and commercialized Rockwell’s hemodialysis concentrates products and provided customer service and order delivery to nearly all United States customers.

Following the reacquisition of these rights, Rockwell is now unrestricted in its ability to sell its hemodialysis concentrates products to dialysis clinics throughout the United States and around the world.

Rockwell agreed to pay Baxter a fee for the reacquisition of its distribution rights.

This fee was payable in two equal installments on January 1, 2023 and April 1, 2023.

As of March 31, 2023, the April 1, 2023 installment has been recorded as a component of accrued liabilities and other current liabilities on the accompanying condensed consolidated balance sheet.

To ensure that customer needs continue to be met after January 1, 2023, Baxter and Rockwell worked closely together to transition customers’ purchases of Rockwell’s hemodialysis concentrates from Baxter to Rockwell.

For the majority of the Company’s U.S.

and 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 of the product.

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There were no such adjustments for the periods reported.

Customers typically pay for the product based on customary business practices with payment terms averaging 30 days, while distributor payment terms average 45 days.

Customers typically pay for the product based on customary business practices with payment terms averaging 30 days, while a small subset of customers have payment terms averaging 60 days.

Disaggregation of revenue

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In thousands of U.S.

dollars ($) Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

dollars ($) Three Months Ended March 31, 2023

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 ($) 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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In thousands of U.S.

dollars ($) September 30, 2022 December 31, 2021

Receivables, which are included in "Trade and other receivables" $ 7,367 $ 5,913

Contract liabilities $ 6,729 $ 8,157

There were no impairment losses recognized related to any receivables arising from the Company’s contracts with customers for the three and nine months ended September 30, 2022 and 2021.

For the three and nine months ended September 30, 2022 and September 30, 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 September 30, 2022 and December 31, 2021.

The Company does not generally accept returns of its concentrates products and no material reserve for returns of concentrates products was established as of September 30, 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

dollars ($) March 31, 2023 December 31, 2022

Accounts Receivable, net $ 6,021 $ 6,259

Contract liabilities, which are included in Deferred revenue $ 2,794 $ 4,331

There were no bad debt expenses recognized related to any receivables arising from the Company’s contracts with customers for the three months ended March 31, 2023 and 2022.

For the three months ended March 31, 2023 and March 31, 2022, 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, 2023 and December 31, 2022.

The Company does not generally accept returns of its concentrates products and no material reserve for returns of concentrates products was established as of March 31, 2023 or December 31, 2022.

The contract liabilities primarily relate to upfront payments and consideration received from customers 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, 2022, 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 $ 6.7 million as of September 30, 2022.

For the three months ended March 31, 2023, revenue recognized from performance obligations related to prior periods was not material.

The amount relates primarily to upfront payments and consideration received from customers 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 having 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 $ 3.8 million as of September 30, 2022, which is amortized ratably through expiration of the Baxter Agreement on October 2, 2024.

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.

ROCKWELL MEDICAL, INC.

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Investments - Available-for-Sale

Investments available-for-sale consisted of the following as of September 30, 2022 and December 31, 2021 (table in thousands):

September 30, 2022

Investments available-for-sale consisted of the following as of March 31, 2023 and December 31, 2022 (table in thousands):

March 31, 2023

Amortized Cost Unrealized Gain Unrealized Loss Accrued Interest Fair Value

Available-for-Sale Securities

Bonds $ 14,578 $ 6 $ ( 1 ) $ 1 $ 14,584

Debt securities $ 5,868 $ 72 $ — $ — $ 5,940

December 31, 2022

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Available-for-Sale Securities

Bonds $ 9,143 $ 1 $ — $ 14 $ 9,158

Debt securities $ 11,315 $ 75 $ — $ — $ 11,390

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, 2022 and 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 September 30, 2022 and December 31, 2021 are as follows (table in thousands):

September 30,

As of March 31, 2023 and December 31, 2022, the amortized cost and estimated fair value of our available-for-sale securities were all due within one year.

Components of inventory, net of reserves, as of March 31, 2023 and December 31, 2022 are as follows (table in thousands):

2023 December 31,

Inventory - Current Portion

Raw Materials $ 2,806 $ 3,351

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Finished Goods 2,285 2,112

Total $ 6,213 $ 5,599

As of September 30, 2022, the Company classified $ 1.2 million of inventory as non-current, all of which was related to the active pharmaceutical ingredient and raw materials for TRIFERIC ® .

As of September 30, 2022, the total TRIFERIC ® inventory net of reserve was $ 1.2 million.

The $ 1.2 million net value of TRIFERIC ® inventory consisted of $ 0.3 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.

Total Current Inventory 5,595 5,814

Inventory - Long Term 1,276 1,276

Total Inventory $ 6,871 $ 7,090

As of both March 31, 2023 and December 31, 2022, the Company classified $ 1.3 million of inventory as non-current, all of which was related to Triferic raw materials.

This Triferic inventory will be utilized for the Company's international partnerships.

The Company has discontinued its New Drug Applications ("NDAs") for Triferic (dialysate) and Triferic AVNU in the United States.

As of both March 31, 2023 and December 31, 2022, the total Triferic inventory net of reserve was $ 1.3 million.

As of March 31, 2023 and December 31, 2022, Rockwell had total Concentrate inventory aggregating $ 5.6 million and $ 5.8 million, respectively, against which Rockwell had reserved $ 25,000 for both periods.

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

Property and Equipment

As of September 30, 2022 and December 31, 2021, the Company’s property and equipment consisted of the following (table in thousands):

September 30,

Property and Equipment, net

As of March 31, 2023 and December 31, 2022, the Company’s property and equipment consisted of the following (table in thousands):

2023 December 31,

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Laboratory Equipment 807 807

Total Property and Equipment 9,975 9,830

Accumulated Depreciation ( 7,796 ) ( 7,636 )

Property and Equipment, net $ 2,179 $ 2,194

Depreciation expense for both the three months ended September 30, 2022 and 2021 was $ 0.1 million.

Depreciation expense for nine months end September 30, 2022 and 2021 was $ 0.4 million and $ 0.5 million, respectively.

Depreciation expense for the three months ended March 31, 2023 and 2022 was $ 0.2 million and $ 0.1 million respectively.

ROCKWELL MEDICAL, INC.

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Accrued Liabilities

Accrued liabilities as of September 30, 2022 and December 31, 2021 consisted of the following (table in thousands):

September 30,

Accrued liabilities as of March 31, 2023 and December 31, 2022 consisted of the following (table in thousands):

2023 December 31,

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Deferred Revenue

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

The Company recognized revenue of approximately $ 0.5 million and $ 1.4 million for the three and nine months ended September 30, 2022, respectively.

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

Deferred revenue related to the Baxter Agreement totaled $ 3.8 million as of September 30, 2022 and $ 5.2 million as of December 31, 2021.

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

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

On November 9, 2022, Rockwell reacquired its distribution rights to its hemodialysis concentrates products from Baxter and terminated the Distribution Agreement.

Exclusivity and other provisions associated with the distribution agreement terminated November 9, 2022 and the remaining operational elements of the agreement terminated December 31, 2022.

Rockwell agreed to provide certain services to a group of Baxter's customers until March 31, 2023.

Under the Distribution Agreement, Baxter distributed and commercialized Rockwell’s hemodialysis concentrates products and provided customer service and order delivery to nearly all United States customers.

The Company recognized the remaining revenue of $ 1.5 million during the three months ended March 31, 2023.

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 revenue of approximately $ 0.1 million and $ 0.2 million during each of the three and nine months ended September 30, 2022 and 2021, respectively.

Deferred revenue related to the Wanbang Agreement totaled $ 2.3 million as of September 30, 2022 and $ 2.5 million as of 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.

The Company recognized revenue of approximately $ 0.1 million for both the three months ended March 31, 2023 and 2022.

Deferred revenue related to the Wanbang Agreement totaled $ 2.3 million as of March 31, 2023 and $ 2.5 million as of December 31, 2022.

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) in India.

In consideration for the license, the Company received an upfront fee of $ 0.1 million.

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

The Company recognized revenue of approximately $ 2,500 and $ 7,500 for each of the three and nine months ended September 30, 2022 and 2021, respectively.

Deferred revenue related to the Sun Pharma Agreement totaled $ 72,500 and $ 80,000 as of September 30, 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.

The Company recognized revenue of approximately $ 2,500 for both the three months ended March 31, 2023 and 2022.

Deferred revenue related to the Sun Pharma Agreement totaled $ 67,500 and $ 70,000 as of March 31, 2023 and December 31, 2022, respectively.

In September 2020, the Company entered into a license and supply agreements with Jeil Pharmaceutical (the "Jeil Agreements"), for the rights to commercialize Triferic (dialysate) in South Korea.

In consideration for the license, the Company received an upfront fee of $ 0.2 million.

In May 2022, Jeil Pharma obtained regulatory approval in South Korea and paid the Company $ 0.2 million in consideration of reaching the milestone.

In May 2022, Jeil Pharmaceutical obtained regulatory approval in South Korea and paid the Company $ 0.2 million in consideration of reaching the milestone.

The upfront fee and milestone payments were recorded as deferred revenue and are being recognized as revenue based on the agreement term.

The Company recognized revenue of $ 5,200 and $ 13,000 for the three and nine months ended September 30, 2022, respectively, and $ 2,500 and $ 7,500 for the three and nine months ended September 30, 2021, respectively.

Deferred revenue related to the Jeil Pharma Agreement totaled approximately $ 0.4 million and $ 0.2 million as of September 30, 2022 and December 31, 2021 respectively.

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.

The Company recognized revenue of $ 5,200 and $ 2,500 for the three months ended March 31, 2023 and 2022, respectively.

Deferred revenue related to the Jeil Agreement totaled approximately $ 0.4 million and $ 0.2 million as of March 31, 2023 and December 31, 2022 respectively.

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

In consideration for the license, the Company received an upfront fee of $ 0.15 million.

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

The Company recognized revenue of $ 3,750 and $ 11,250 for each of the three and nine months ended September 30, 2022 and 2021, respectively.

Deferred revenue related to the Drogsan Agreements totaled approximately $ 0.13 million and $ 0.15 million as of September 30, 2022 and December 31, 2021, respectively.

The Company recognized revenue of $ 3,750 for both the three months ended March 31, 2023 and 2022.

Deferred revenue related to the Drogsan Agreements totaled approximately $ 123,750 and $ 127,500 as of March 31, 2023 and December 31, 2022, respectively.

ROCKWELL MEDICAL, INC.

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Stockholders’ Equity

Reverse Stock Split

On May 9, 2022, the stockholders of the Company authorized the 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.

Preferred Stock

On April 6, 2022, the Company and DaVita entered into the SPA, which provided for the issuance by the Company of up to $ 15 million of preferred stock to DaVita.

On April 6, 2022, the Company and DaVita entered into the Securities Purchase Agreement (the "SPA"), which provided for the issuance by the Company of up to $ 15 million of preferred stock to DaVita.

On April 6, 2022, the Company issued 7,500 shares of Series X Preferred Stock for gross proceeds of $ 7.5 million.

On June 2, 2022, the Company met the conditions for the Second Tranche through a Registered Direct and Private Placement Offering by raising $ 15 million in additional capital.

As a result, on June 16, 2022 the Company issued an additional 7,500 shares of the Series X Preferred Stock to DaVita for gross proceeds of $ 7.5 million.

On June 16, 2022 the Company issued an additional 7,500 shares of the Series X Preferred Stock to DaVita for gross proceeds of $ 7.5 million.

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

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The Company will assess at each reporting period whether conditions have changed to now meet the mandatorily redemptive definition which could trigger liability classification.

As of September 30, 2022 and December 31, 2021, there were 2,000,000 shares of preferred stock, $ 0.0001 par value per share, authorized and 15,000 and nil shares of preferred stock issued and outstanding, respectively.

As of September 30, 2022 and December 31, 2021, there were 170,000,000 shares of common stock, $ 0.0001 par value per share, authorized and 11,152,673 and 8,544,225 shares issued and outstanding, respectively.

As of both March 31, 2023 and December 31, 2022, there were 2,000,000 shares of preferred stock, $ 0.0001 par value per share, authorized and 15,000 shares of preferred stock issued and outstanding.

As of March 31, 2023 and December 31, 2022, there were 170,000,000 shares of common stock, $ 0.0001 par value per share, authorized and 12,552,673 and 12,163,673 shares issued and outstanding, respectively.

As of March 31, 2023 and 2022, the Company has reserved for issuance the following shares of common stock related to the potential exercise of employee stock options, unvested restricted stock, convertible preferred stock, pre-funded warrants and all other warrants (collectively, "common stock equivalents"):

As of March 31,

Common stock and common stock equivalents:

Common stock 12,552,673 8,544,225

Common stock issuable upon exercise of pre-funded warrants 5,911,000 —

Common stock and pre-funded stock warrants 18,463,673 8,544,225

Options to purchase common stock 1,194,202 511,117

Unvested restricted stock awards 891 891

Unvested restricted stock units 125,000 28,066

Convertible Preferred Stock 1,363,636 —

Warrants to purchase common stock 10,196,268 2,402,442

Total 31,343,670 11,486,741

During the three months ended March 31, 2023 and 2022, 389,000 and nil pre-funded warrants were exercised, respectively.

During the three months ended March 31, 2023 and 2022, no vested employee stock options were exercised.

On April 20, 2023, 1,191,000 Pre-Funded Warrants to purchase common stock were exercised.

Controlled Equity Offering

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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.

In May 2022, the Company sold 7,500 shares of its common stock pursuant to the Sales Agreement for gross proceeds of $ 15,135 , at a weighted average selling price of approximately $ 2.02 .

The Company paid $ 378 in commissions and offering fees related to the sale of shares of common stock.

Under the RD Purchase Agreement and the PIPE Purchase Agreement discussed below, the Company has agreed not to make any sales under any at-the-market offering facility, including pursuant to the Sales Agreement, until at least January 1, 2023 (or until such later time when the Company is permitted to make additional sales under Instruction I.B.6 to Form S-3).

During the quarter ended March 31, 2023, no sales were made pursuant to the Sales Agreement.

Approximately $ 12.2 million remains available for sale under the ATM facility (subject to restrictions under General Instruction I.B.6 to Form S-3).

Registered Direct Offering

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The RD Purchase Agreement contains customary representations and warranties and agreements of the Company and the Purchaser and customary indemnification rights and obligations of the parties.

A total of 7,311,000 Pre-Funded Warrants remained outstanding as of September 30, 2022.

A total of 5,911,000 Pre-Funded Warrants remained outstanding as of March 31, 2023.

On April 20, 2023, 1,191,000 Pre-Funded Warrants to purchase common stock were exercised.

Private Placement

Also on May 30, 2022, concurrently with the Offering, the Company entered into the PIPE Purchase Agreement relating to the offering and sale (the “Private Placement”) of warrants to purchase up to a total of 9,900,990 shares of common stock and pre-funded warrants to purchase up to a total of 1,267,897 shares of common stock (the “PIPE Warrants”).

stock and pre-funded warrants to purchase up to a total of 1,267,897 shares of common stock (the “PIPE Warrants”).

Each warrant was sold at a price of $ 0.125 per underlying warrant share and is exercisable at an exercise price of $ 1.39 per share.

As of September 30, 2022 9,900,990 PIPE Warrants and no Pre-Funded PIPE Warrants remained outstanding.

In connection with the Private Placement, the Company entered into a Registration Rights Agreement with the Purchaser, dated as of June 2, 2022 (the “RRA”).

Pursuant to the RRA, the Company was required to prepare and file a registration statement with the SEC no later than July 1, 2022, and to use its reasonable best efforts to have the registration statement declared effective as promptly as possible, subject to certain specified penalties if timely effectiveness is not achieved.

The Company filed a registration statement on June 22, 2022 which became effective on July 5, 2022.

The Offering and the Private Placement closed on June 2, 2022.

The net proceeds to the Company from the Offering and the Private Placement were approximately $ 14.9 million, after deducting fees and expenses.

Subject to certain ownership limitations, the PIPE Warrants are exercisable upon issuance.

The Company has accounted for the common stock related to the Offering and Private Placement as equity on the accompanying consolidated balance sheets as of September 30, 2022.

The amount allocated to common stock was $ 2.0 million.

This allocation is equal to the total proceeds of $ 15.0 million less the amount allocated to Warrants of $ 12.9 million and is also net of the direct and incremental costs associated with the Offering and Private Placement of $ 0.1 million.

The Black-Scholes pricing model was used to calculate the value of Warrants relating to the Offering and Private Placement.

As of March 31, 2023, 9,900,990 common stock warrants and no PIPE Warrants remained outstanding.

ROCKWELL MEDICAL, INC.

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Stock-Based Compensation

The Company recognized total stock-based compensation expense during the three and nine months ended September 30, 2022 and 2021 as follows (table in thousands):

The Company recognized total stock-based compensation expense during the three months ended March 31, 2023 and 2022 as follows (table in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Service-based awards:

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Stock option awards 148 200

176 396 485 1,313

Total Service Based Awards 193 212

Performance-based awards:

Restricted stock awards — ( 391 )

Stock option awards — ( 35 ) — ( 364 )

— ( 35 ) ( 391 ) ( 755 )

Total Performance Based Awards — ( 391 )

Total $ 193 $ ( 179 )

Performance Based Restricted Stock

A summary of the Company’s restricted stock awards during the nine months ended September 30, 2022 is as follows:

A summary of the Company’s restricted stock awards during the three months ended March 31, 2023 is as follows:

Number of Shares Weighted Average

Unvested at January 1, 2023 891 $ 62.70

Forfeited ( 6,227 ) $ 62.70

Unvested at September 30, 2022 891 $ 62.70

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

Unvested at March 31, 2023 891 $ 62.70

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 7,118 $ 62.70

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

As of both March 31, 2023 and 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.

As of September 30, 2021, unvested restricted stock awards of 7,118 were related to performance-based awards.

The forfeited performance-based restricted stock awards of 6,227 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.

These forfeited awards reduced stock-based compensation expense by $ 0.4 million in 2022.

ROCKWELL MEDICAL, INC.

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Service-Based Restricted Stock Units

A summary of the Company’s service-based restricted stock units during the nine months ended September 30, 2022 is as follows:

A summary of the Company’s service-based restricted stock units during the three months ended March 31, 2023 is as follows:

Number of Shares Weighted Average

Unvested at January 1, 2023 125,000 $ 1.47

Granted 125,000 1.47

Vested ( 23,515 ) 11.33

Forfeited ( 5,774 ) 19.00

Unvested at September 30, 2022 125,000 $ 1.47

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

Unvested at March 31, 2023 125,000 $ 1.47

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 28,186 9.90

Vested ( 20,134 ) 26.18

Forfeited ( 1,223 ) 52.91

Unvested at September 30, 2021 31,115 $ 12.87

Unvested at March 31, 2022 28,066 $ 11.11

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 $ 46,193 and $ 83,607 was recognized for the three and nine months ended September 30, 2022, respectively.

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.

As of September 30, 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.

Stock-based compensation expense of $ 45,184 and $ 12,000 was recognized for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, the unrecognized stock-based compensation expense was $ 34,139 , which is expected to be recognized over an estimated weighted average remaining term of less than 1 year.

Service-Based Stock Options

The fair value of the service-based stock options granted for the nine months ended September 30, 2022 were based on the following assumptions:

September 30,

Exercise price $ 1.28 - $ 1.66

Expected stock price volatility 76.2 % - 78.5 %

Risk-free interest rate 1.97 % - 3.44 %

Term (years) 5.5 - 6

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

A summary of the Company’s service-based stock option activity for the nine months ended September 30, 2022 is as follows:

During the three months ended March 31, 2023 there were no service based stock options issued.

A summary of the Company’s service-based stock option activity for the three months ended March 31, 2023 is as follows:

Options Weighted

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Price Weighted

Term Aggregate

Outstanding at January 1, 2023 1,206,905 $ 8.32 8.9

Granted 898,659 1.49 5.5 —

Forfeited ( 8,083 ) 3.54 —

Expired ( 4,620 ) 18.44 —

Outstanding at September 30, 2022 1,311,691 $ 8.23 9.1 $ —

Exercisable at September 30, 2022 243,973 $ 29.31 6.9 $ —

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

Outstanding at March 31, 2023 1,194,202 $ 8.32 8.6

Exercisable at March 31, 2023 239,075 $ 28.45 6.7

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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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Price Weighted

Term Aggregate

Outstanding at January 1, 2022 528,591 $ 32.01 7.5

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Expired ( 3,545 ) 85.36 —

Outstanding at September 30, 2021 533,784 $ 32.45 7.7 $ —

Exercisable at September 30, 2021 230,858 $ 54.56 5.8 $ —

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, 2022, the Company granted stock options to purchase up to 898,659 shares of common stock to certain employees.

During the nine months ended September 30, 2022, 30,093 shares were forfeited and 85,466 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 $ 0.1 million and $ 0.4 million for the three and nine months ended September 30, 2022, respectively.

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.

As of September 30, 2022, total stock-based compensation expense related to unvested options not yet recognized totaled approximately $ 1.4 million, which is expected to be recognized over an estimated weighted average remaining term of 3.6 years.

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

Exercisable at March 31, 2022 230,858 $ 54.56 5.0

The aggregate intrinsic value 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.

The intrinsic value of the outstanding options were not significant for all periods presented.

During the three months ended March 31, 2023, the Company granted no stock options to purchase shares of common stock.

During the three months ended March 31, 2023, 8,083 shares were forfeited and 4,620 shares expired.

Forfeitures are recorded in the period of occurrence and compensation expense is adjusted accordingly.

Stock-based compensation expense recognized for service-based stock options was $ 0.1 million and $ 0.2 million for the three months ended March 31, 2023, and 2022 respectively.

As of March 31, 2023, total stock-based compensation expense related to unvested options not yet recognized totaled approximately $ 0.7 million, which is expected to be recognized over an estimated weighted average remaining term of 8.64 years.

ROCKWELL MEDICAL, INC.

7 unchanged sentences

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

As of September 30, 2022, the Company has accrued $ 85,400 relating to certain IP reimbursement expenses and certain sublicense royalty fees and is included within accrued liabilities on the condensed consolidated balance sheet.

As of March 31, 2023, the Company has accrued $ 85,400 relating to certain IP reimbursement expenses and certain sublicense royalty fees, which 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.

3 unchanged sentences

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.

The Company was 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.

4 unchanged sentences

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 September 30, 2022.

The potential sub-license milestone payments are not yet considered probable, and no milestone payments have been accrued at March 31, 2023.

ROCKWELL MEDICAL, INC.

7 unchanged sentences

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

At September 30, 2022, the Company had operating and finance lease liabilities of $ 7.2 million and right-of-use assets of $ 6.9 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.

At March 31, 2023, the Company had operating and finance lease liabilities of $ 6.2 million and right-of-use assets of $ 5.9 million, which are included in the condensed consolidated balance sheet.

At December 31, 2022, the Company had operating and finance lease liabilities of $ 6.7 million and right-of-use assets of $ 6.4 million, which are included in the condensed consolidated balance sheet.

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

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

Operating leases

Operating lease cost $ 344 $ 449

Interest on lease obligations 60 —

Variable lease cost 115 95

1 unchanged sentence

Finance leases

Amortization of right-of-use assets 141 73 424 184

Non-cash lease expense from right-of-use assets 141 141

Interest on lease obligations 39 47

1 unchanged sentence

Short-term lease rent expense 4 4

Total rent expense $ 701 $ 650 $ 2,150 $ 1,846

Total lease expense $ 703 $ 736

Other information

2 unchanged sentences

Financing cash flows from finance leases $ 128 $ 118

Right of use assets exchanged for operating lease liabilities $ 768 $ 718 $ 768 $ 4,089

Right of use assets exchanged for finance lease liabilities $ — $ 588 $ — $ 1,365

Weighted-average remaining lease term – operating leases 2.8 3.4

9 unchanged sentences

Year ending December 31, 2027 121 311

Remaining future payments 120 311

Total $ 4,022 $ 2,827

18 unchanged sentences

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 September 30, 2022 and 2021, interest expense amounted to $ 0.4 million and $ 0.6 million, respectively.

For the nine months ended September 30, 2022 and 2021, interest expense amounted to $ 1.2 million and $ 1.8 million, respectively.

For both the three months ended March 31, 2023 and 2022, interest expense amounted to $ 0.4 million.

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

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.

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

The Loan Agreement contained customary representations and warranties and covenants, subject to customary carve outs, and included financial covenants related to liquidity and trailing twelve months sales of Triferic, with the latter beginning with the period ending December 31, 2020.

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 $ 7.5 million 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 $ 5.0 million if the aggregate principal amount of Term Loans is greater than $ 15 million pursuant to the liquidity covenant in the Loan Agreement.

On November 10, 2022, the Company entered into a Second Amendment to the Loan and Security Agreement (the “Second Amendment”) dated as of November 14, 2022 with Innovatus, which amended the Loan Agreement.

Pursuant to the Second Amendment, the Company (i) prepaid an aggregate principal amount of $ 5.0 million in Term Loans in one installment on November 14, 2022;

(ii) shall pay interest only payments until September 2023 at which time will resume scheduled debt payments.

Additionally, the financial covenants related to the trailing twelve months sales of Triferic was replaced with a trailing 6 months revenue of our concentrates products beginning with the period ending September 30, 2022.

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

The Company's ability to comply with these covenants may be adversely affected by events beyond its control.

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

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

1 unchanged sentence

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

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 September 30, 2022, the Company was in compliance with all covenants under the Loan Agreement.

As of September 30, 2022, the outstanding balance of the Term Loan was $ 14.1 million, net of unamortized issuance costs and discount of $ 0.9 million.

The following table reflects the schedule of principal payments on the Term Loan as of September 30, 2022 (in thousands):

As of March 31, 2023, the Company was in compliance with all covenants under the Loan Agreement.

As of March 31, 2023, the outstanding balance of the Term Loan was $ 9.3 million, net of unamortized issuance costs and discount of $ 0.7 million.

The following table reflects the schedule of principal payments on the Term Loan as of March 31, 2023 (in thousands):

Principal Payments

2023 (remaining) 2,000

ROCKWELL MEDICAL, INC.

4 unchanged sentences

Principal and interest payments related to this note began on July 3, 2022 and were paid on a straight-line amortization over 9 months with the final payment due on March 3, 2023.

As of September 30, 2022, the Company's insurance note payable balance was $ 1.0 million.

As of March 31, 2023, the Company's insurance note payable was paid in full.

Subsequent Events

On October 28, 2022, 480,000 Pre-Funded Warrants to purchase common stock pursuant the SPA entered into on May 30, 2022 were exercised.

The exercise price of each Pre-Funded Warrant is $ 0.0001 per share and resulted in gross proceeds of $ 48.00 (See Note 10 for more detail on the SPA).

On November 9, 2022, Rockwell reacquired its distribution rights to its hemodialysis concentrates products from Baxter and has agreed to terminate the exclusive distribution agreement dated October 2, 2014.

Exclusivity and other provisions associated with the distribution agreement terminated November 9, 2022 and the remaining operational elements of the agreement terminate December 31, 2022.

Under the exclusive distribution agreement, Baxter distributed and commercialized Rockwell’s hemodialysis concentrates products and provided customer service and order delivery to nearly all United States customers.

Following the reacquisition of these rights, Rockwell will now be able to sell its hemodialysis concentrates products to dialysis clinics throughout the United States and around the world.

Rockwell will pay Baxter a fee for the reacquisition of its distribution rights.

This fee will be payable in two equal installments on January 1, 2023 and April 1, 2023.

To ensure that customer needs continue to be met after January 1, 2023, Baxter and Rockwell are working closely together to transition customers’ purchases of Rockwell’s hemodialysis concentrates from Baxter to Rockwell.

Pursuant to the Second Amendment, the Company (i) shall prepay an aggregate principal amount of $ 5.0 million in Term Loans (as defined in the Loan Agreement) in one installment on November 14, 2022;

(ii) shall pay interest only payments until September 2023 at which time will resume scheduled debt payments.

Separation of Chief Financial Officer

On November 10, 2022, the Board of Directors of Rockwell terminated the employment of Russell Skibsted as Chief Financial Officer of the Company, effective immediately.

The termination of employment of Mr.

Skibsted by the Company without cause entitles Mr.

Skibsted to severance in accordance with the Employment Agreement, dated September 15, 2020, by and between the Company and Mr.

Skibsted (the “Employment Agreement”).

The severance benefits under the Employment Agreement are subject to the execution and non-revocation of a release of claims in favor of the Company.

In connection with Mr.

Skibsted’s termination, the Board of Directors appointed Mark Strobeck, the Company’s Chief Executive Officer, as interim principal financial officer.

On April 20, 2023, Pre-Funded Warrants to purchase 1,191,000 shares of common stock issued on May 30, 2022 were exercised.

The exercise price of each Pre-Funded Warrant is $ 0.0001 per share and resulted in gross proceeds to the Company of $ 119.10 (See Note 10 for more detail on the Pre-Funded Warrants).

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