What changed in this filing

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Item 1. Financial Statements

2023-08-14 compared with 2023-05-15 · 237 added, 150 removed, 524 unchanged (42% of the section changed)

36 unchanged sentences

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

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

15,000 shares issued and outstanding at June 30, 2023 and December 31, 2022

Common Stock, $ 0.0001 par value;

170,000,000 shares authorized;

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

16,795,673 and 12,163,673 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Additional Paid-in Capital 403,203 402,701

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(In Thousands, Except Shares and Per Share Amounts)

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

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Net Sales $ 18,080 $ 18,682 $ 37,748 $ 34,806

Cost of Sales 17,047 16,937 34,116 33,846

Gross Profit (Loss) 2,599 ( 786 )

Gross Profit 1,033 1,745 3,632 960

Research and Product Development 167 926 445 2,494

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Basic and Diluted Weighted Average Shares Outstanding * 18,496,640 11,591,768 18,480,248 10,076,415

* See Note 3 for more detail related to Basic and Diluted Weighted Average Shares Outstanding

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

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(In Thousands)

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

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Net Loss $ ( 3,305 ) $ ( 4,967 ) $ ( 5,055 ) $ ( 12,128 )

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

Unrealized Loss on Available-for-Sale Investments ( 18 ) — ( 21 ) —

Foreign Currency Translation Adjustments ( 1 ) ( 2 ) ( 4 ) ( 3 )

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

Net Loss — — — — — ( 3,305 ) — ( 3,305 )

Unrealized Loss on Available-for-Sale Investments — — — — — — ( 18 ) ( 18 )

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

Issuance of Common Stock upon exercise of Pre-Funded Warrants — — 4,118,000 1 — — — 1

Vesting of Restricted Stock Units Issued, net of taxes withheld — — 125,000 — — — — —

Stock-based Compensation expense — — — — 309 — — 309

Balance as of June 30, 2023 15,000 $ — 16,795,673 $ 2 $ 403,203 $ ( 393,814 ) $ 137 $ 9,528

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

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

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 — — — — 97 — — 97

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

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

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(Dollars in Thousands)

For the three months ended March 31, 2023 and 2022

Three Months Ended

March 31, 2023 Three Months Ended

March 31, 2022

For the six months ended June 30, 2023 and 2022

Six Months Ended

June 30, 2023 Six Months Ended

June 30, 2022

Cash Flows From Operating Activities:

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Stock-based Compensation 502 ( 82 )

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

Increase in Inventory Reserves — 10

Non-cash lease expense from Right of Use Assets 1,017 1,027

Amortization of Debt Financing Costs and Accretion of Debt Discount 184 184

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Payment on Financing Lease Liabilities ( 258 ) —

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

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 )

Cash (Used In) Provided by Financing Activities ( 761 ) 24,136

Effect of exchange rate changes on cash ( 4 ) ( 3 )

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

(Decrease) Increase in Cash and Cash Equivalents ( 1,143 ) 17,500

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

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Supplemental Disclosure of Noncash Investing and Financing Activities:

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

Change in Unrealized Loss on Available-for-Sale Investments $ ( 21 ) $ —

Insurance Financing Note Payable $ 733 $ —

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

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(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 freestanding outpatient dialysis centers, at hospital-based outpatient centers, at skilled nursing facilities, or in a patient’s home.

Rockwell is a revenue-generating business and the second largest supplier of liquid and powder 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 typically performed at freestanding outpatient dialysis centers, hospital-based outpatient centers, 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.

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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 manufactures hemodialysis concentrates at its facilities in Michigan, South Carolina, and Texas 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.

On July 10, 2023, Rockwell acquired the hemodialysis concentrates business from Evoqua Water Technologies LLC ("Evoqua").

This acquisition expands the Company's geographic footprint, customer base, and product offerings.

In addition, this acquisition provides fully automated processing that potentially results in a lower cost to manufacture.

As part of this acquisition, the Company now manufactures hemodialysis concentrates in Minnesota under a contract manufacturing agreement with a contract manufacturing organization.

(See Note 16 for further detail).

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.

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Liquidity and Capital Resources

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.

As of June 30, 2023, Rockwell had approximately $ 14.9 million of cash, cash equivalents and investments available-for-sale, and working capital of $ 10.1 million.

Net cash used in operating activities for the six months ended June 30, 2023 was approximately $ 5.6 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.

On July 10, 2023, Armistice Capital Master Fund Ltd.

(“Armistice”), which held a warrant to purchase 9,900,990 shares of common stock of the Company with an exercise price of $ 1.39 per share, exercised the warrant and the Company received gross proceeds of approximately $ 13.8 million (See Note 16 for further detail).

Also on July 10, 2023, Rockwell acquired the hemodialysis concentrates business from Evoqua Water Technologies LLC ("Evoqua") for an aggregate purchase price, subject to certain adjustments pursuant to the terms of the Purchase Agreement, of $ 11.0 million in cash paid at closing and equal annual installments of $ 2.5 million payable on each of the first and second anniversaries of the closing.

In addition, the Company purchased approximately $ 1.2 million of inventory.

This acquisition expands the Company's geographic footprint, customer base, and product offerings.

In addition, this acquisition provides fully automated processing that potentially results in a lower cost to manufacture.

As part of this acquisition, the Company manufactures hemodialysis concentrates under a contract manufacturing agreement with a contract manufacturing organization.

(See Note 16 for further detail).

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

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

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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 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 June 30, 2023, the Company is no longer 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.

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).

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

The condensed consolidated balance sheet at March 31, 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 June 30, 2023, and the condensed consolidated statements of operations, comprehensive loss, and changes in stockholders' equity for the three and six months ended June 30, 2023 and 2022 and cash flows for the six months ended June 30, 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 and six months ended June 30, 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.

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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 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.

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.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period.

generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period.

Actual results could differ from those estimates.

The Company accounts for its leases under Accounting Standards Codification (“ASC”) 842, Leases .

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

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

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

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

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

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

Restatement of Loss Per Share

Earnings per share for the three and six months ended June 30, 2022 have been recalculated and restated and is presented on a comparable basis with the three and six months ended June 30, 2023.

In the first quarter of 2023, the Company determined it should have included pre-funded warrants issued in Q2 2022 in the earnings per share calculation accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC’) 260-10-45-13, which treats shares of common stock exercisable for little to no consideration as included in the denominator of both the basic and diluted earnings per share calculations.

While the Company has determined the impact of including the pre-funded warrants in the earnings per share calculations does not have a material impact on previously issued financial statements and is correct to recalculate and restate amounts presented on a comparative and consistent basis with current period results.

The table below summarizes previously reported and restated amounts on a comparative basis.

See the table presentation of loss per share calculations as of June 30, 2023 and 2022 in the "Loss Per Share Including Restated Amounts" section below.

Three Months Ended June 30, Six Months Ended June 30,

As Previously Reported:

Net loss per share attributable to common stockholders - basic and diluted $ ( 0.56 ) $ ( 1.40 )

Weighted average number of shares of common stock outstanding - basic and diluted 8,805,190 8,675,428

Net loss per share attributable to common stockholders - basic and diluted $ ( 0.43 ) $ ( 1.20 )

Weighted average number of shares of common stock outstanding - basic and diluted 11,591,768 10,076,415

Loss Per Share

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,

Basic and diluted net loss per share for the three and six months ended June 30, 2023 and 2022, after giving effect to the restatement discussed above, was calculated as follows:

Three Months Ended June 30, Six Months Ended June 30,

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

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Net loss per share attributable to common stockholders - basic and diluted $ ( 0.18 ) $ ( 0.43 ) $ ( 0.27 ) $ ( 1.20 )

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.

Included within the weighted average shares of common stock outstanding for the three and six months ended June 30, 2023 and 2022, are 1,793,000 and 9,056,377 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.

These securities were excluded from the computations of diluted net loss per share for the three and six months ended June 30, 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,

As of June 30,

Options to purchase common stock 1,570,599 423,317

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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 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).

In June 2016, the 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.

In addition, ASC 326 requires expected credit relates losses for available-for-sale debt securities to be recorded through an allowance for credit losses, while non-credit related losses will continue to be recognized through other comprehensive income.

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.

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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.

Our customer mix is diverse with most customer sales concentrations under 10% and one customer, DaVita, Inc., at approximately 50 % for the six months ended June 30, 2023.

Our accounts receivable from this customer were approximately 33 % of the total consolidated accounts receivable balance at June 30, 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”) 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.

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

In November 2022, Rockwell reacquired its distribution rights to its hemodialysis concentrates products from Baxter and terminated the exclusive distribution agreement.

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 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.

Rockwell agreed to pay Baxter a fee for the reacquisition of its distribution rights which was reflected as an expense at that time.

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.

As of June 30, 2023, all payments were completed.

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

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In thousands of U.S.

dollars ($) Three Months Ended March 31, 2023

dollars ($) Three Months Ended June 30, 2023 Six Months Ended June 30, 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 March 31, 2022

dollars ($) Three Months Ended June 30, 2022 Six Months Ended June 30, 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 ($) March 31, 2023 December 31, 2022

dollars ($) June 30, 2023 December 31, 2022

Accounts Receivable, net $ 5,411 $ 6,259

Contract liabilities, which are included in deferred revenue $ 2,729 $ 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.

There were no bad debt expenses recognized related to any receivables arising from the Company’s contracts with customers for the three and six months ended June 30, 2023 and 2022.

There were no other material contract assets recorded on the condensed consolidated balance sheet as of June 30, 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 June 30, 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 months ended March 31, 2023, 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 $ 2.8 million as of March 31, 2023.

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

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Investments - Available-for-Sale

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

March 31, 2023

Investments available-for-sale consisted of the following as of June 30, 2023 and December 31, 2022 (table in thousands):

June 30, 2023

Amortized Cost Unrealized Gain Unrealized Loss Accrued Interest Fair Value

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

As of March 31, 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):

As of June 30, 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 June 30, 2023 and December 31, 2022 are as follows (table in thousands):

2023 December 31,

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Total Inventory $ 7,090 $ 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.

As of both June 30, 2023 and December 31, 2022, Rockwell had total concentrate inventory aggregating $ 5.8 million against which Rockwell had reserved $ 25,000 for both periods.

As of both June 30, 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.

In September 2022, the Company discontinued its New Drug Applications ("NDAs") for Triferic (dialysate) and Triferic AVNU in the United States.

ROCKWELL MEDICAL, INC.

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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):

As of June 30, 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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Property and Equipment, net $ 2,093 $ 2,194

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

Depreciation expense for the three months ended June 30, 2023 and 2022 was $ 0.2 million and $ 0.1 million, respectively.

Depreciation expense for both the six months ended June 30, 2023 and 2022 was $ 0.3 million.

ROCKWELL MEDICAL, INC.

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Accrued Liabilities

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

Accrued liabilities as of June 30, 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 had a term of 10 years and received an upfront fee of $ 20 million.

In October 2014, the Company entered into an exclusive distribution agreement with Baxter, 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.

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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 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.

The Company recognized revenue of approximately $ 53,000 and $ 0.1 million for each of the three and six months ended June 30, 2023 and 2022, respectively.

Deferred revenue related to the Wanbang Agreement totaled $ 2.2 million as of June 30, 2023 and $ 2.3 million as of December 31, 2022.

On August 7, 2023, Rockwell was informed by Wanbang, the Company’s commercialization partner in China for Triferic, that the main efficacy results of Wanbang’s clinical trial for Triferic (dialysate) compared with placebo were not obtained.

The Company is working with Wanbang to determine next steps.

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.

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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 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.

The Company recognized revenue of approximately $ 2,500 and $ 5,000 for the three and six months ended June 30, 2023 and 2022, respectively.

Deferred revenue related to the Sun Pharma Agreement totaled $ 65,000 and $ 70,000 as of June 30, 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.

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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 $ 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.

The Company recognized revenue of $ 5,200 and $ 10,400 for the three and six months ended June 30, 2023 and 2022, respectively.

Deferred revenue related to the Jeil Agreement totaled approximately $ 0.4 million as of both June 30, 2023 and December 31, 2022.

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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.

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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 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.

The Company recognized revenue of $ 3,750 and $ 7,500 for the three and six months ended June 30, 2023 and 2022, respectively.

Deferred revenue related to the Drogsan Agreements totaled approximately $ 120,000 and $ 127,500 as of June 30, 2023 and December 31, 2022, respectively.

In April 2023, Drogsan submitted a Marketing Authorization application and GMP application for Triferic AVNU to the Turkish Medicines and Medical Devices Agency, for which Drogsan received priority status and high priority status, respectively.

Taking into consideration that Drogsan was granted an accelerated review for Triferic AVNU with the Turkish regulatory authority, Rockwell anticipates approval for Triferic AVNU in Turkey in 2024.

Drogsan is responsible for all regulatory approval and commercialization activities.

ROCKWELL MEDICAL, INC.

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Stockholders’ Equity

The Company held its annual meeting of stockholders on May 23, 2023 (the “Annual Meeting”).

At the Annual Meeting, the Company’s stockholders approved the amendment and restatement of the Rockwell Medical, Inc.

2018 Long Term Incentive Plan to increase the number of shares of common stock issuable thereunder by 1,600,000 shares (the “Amended 2018 Plan”).

Preferred Stock

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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 future stock splits, reverse stock splits and similar recapitalization events).

As of June 30, 2023, the Series X Preferred Stock accreted a total $ 150,000 .

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

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Since the Series X Preferred Stock may be redeemed if certain assets are sold at the option of the holder, but is not mandatorily redeemable, the preferred stock has been classified as permanent equity and initially recognized at fair value of $ 15 million (the proceeds on the date of issuance) less issuance costs of $ 0.1 million, resulting in an initial value of $ 14.9 million.

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 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,

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

As of both June 30, 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 June 30, 2023 and December 31, 2022, there were 170,000,000 shares of common stock, $ 0.0001 par value per share, authorized and 16,795,673 and 12,163,673 shares issued and outstanding, respectively.

As of June 30, 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 June 30,

Common stock and common stock equivalents:

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Total 32,033,132 30,572,785

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.

During the three months ended June 30, 2023 and 2022, 4,118,000 and nil pre-funded warrants were exercised, respectively.

During the six months ended June 30, 2023 and 2022, 4,507,000 and nil pre-funded warrants were exercised, respectively.

During the three and six months ended June 30, 2023 and 2022, no vested employee stock options 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.

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).

During the quarter ended June 30, 2023, no sales were made pursuant to the Sales Agreement.

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

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 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.

A total of 1,793,000 Pre-Funded Warrants remained outstanding as of June 30, 2023.

On July 5, 2023, the remaining 1,793,000 Pre-Funded Warrants to purchase common stock were exercised.

Private Placement

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

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

Funded 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 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 prefunded warrant is $ 0.0001 per share.

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

As of December 2022, all Pre-Funded PIPE Warrants have been exercised.

As of June 30, 2023, 9,900,990 PIPE Warrants remained outstanding.

On July 10, 2023, 9,900,990 PIPE Warrants were exercised for 9,900,990 shares of common stock (See Note 16 for further details).

ROCKWELL MEDICAL, INC.

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Stock-Based Compensation

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

The Company recognized total stock-based compensation expense during the three and six months ended June 30, 2023 and 2022 as follows (table in thousands):

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Service-based awards:

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Restricted stock awards — — — ( 391 )

Total Performance Based Awards — ( 391 )

Total $ 309 $ 98 $ 502 $ ( 82 )

Performance Based Restricted Stock

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

A summary of the Company’s restricted stock awards during the six months ended June 30, 2023 is as follows:

Number of Shares Weighted Average

Unvested at January 1, 2023 891 $ 62.70

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:

Unvested at June 30, 2023 891 $ 62.70

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

Number of Shares Weighted Average

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Forfeited ( 6,227 ) $ 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 both March 31, 2023 and 2022, unvested restricted stock awards of 891 were related to performance-based awards.

Unvested at June 30, 2022 891 $ 62.70

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 both June 30, 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.

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Service-Based Restricted Stock Units

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

A summary of the Company’s service-based restricted stock units during the six months ended June 30, 2023 is as follows:

Number of Shares Weighted Average

Unvested at January 1, 2023 125,000 $ 1.47

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:

Granted 313,065 1.87

Vested ( 125,000 ) 1.47

Unvested at June 30, 2023 313,065 $ 1.87

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

Number of Shares Weighted Average

Unvested at January 1, 2022 29,289 $ 12.87

Granted 125,000 1.47

Vested ( 23,515 ) 11.33

Forfeited ( 5,774 ) 19.00

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.

Unvested at June 30, 2022 125,000 $ 1.47

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 $ 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.

Stock-based compensation expense of $ 0.1 million and $ 25,554 was recognized for the three months ended June 30, 2023 and 2022, respectively.

Stock-based compensation expense of $ 0.2 million and $ 37 thousand was recognized for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, the unrecognized stock-based compensation expense was $ 0.5 million, which is expected to be recognized over an estimated weighted average remaining term of less than 1.7 years.

Service-Based Stock Options

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:

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

Six Months Ended June 30, 2023

Exercise price $ 1.37 - $ 2.83

Expected stock price volatility 81.64 % - 81.9 %

Risk-free interest rate 3.41 % - 3.55 %

Term (years) 4 - 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 six months ended June 30, 2023 is as follows:

Options Weighted

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

Granted 382,745 1.48 5.5

Forfeited ( 13,447 ) 4.02 —

Expired ( 5,604 ) 19.01 —

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:

Outstanding at June 30, 2023 1,570,599 $ 6.65 8.7

Exercisable at June 30, 2023 301,986 $ 26.15 6.5

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

Options Weighted

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Expired ( 81,695 ) 83.32 —

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

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

Outstanding at June 30, 2022 423,317 $ 23.03 7.8

Exercisable at June 30, 2022 227,412 $ 31.19 5.8

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.

During the six months ended June 30, 2023, the Company granted 382,745 stock options to purchase shares of common stock.

During the six months ended June 30, 2023, 13,447 shares were forfeited and 5,604 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.

Stock-based compensation expense recognized for service-based stock options was $ 0.2 million and $ 0.1 million for the three months ended June 30, 2023, and 2022 respectively.

Stock-based compensation expense recognized for service-based stock options was $ 0.3 million and $ 0.3 million for the six months ended June 30, 2023, and 2022, respectively.

As of June 30, 2023, total stock-based compensation expense related to unvested options not yet recognized totaled approximately $ 0.9 million, which is expected to be recognized over an estimated weighted average remaining term of 8.7 years.

ROCKWELL MEDICAL, INC.

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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.

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.

As of June 30, 2023 and December 31, 2022, 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.

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

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.

Triferic dated as of October 7, 2018 (the “IV Agreement”), under which Charak granted the Company an exclusive, sub-licensable, royalty-bearing license to SFP for the purpose of commercializing certain intravenous-delivered products incorporating SFP for the treatment of iron disorders worldwide for a term that expires on the later of February 1, 2034 or upon the expiration or termination of a valid claim of a licensed patent.

The Company 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.

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

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

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, sub-licensable, royalty-bearing license to SFP for the purpose of commercializing worldwide certain TPN products incorporating SFP.

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

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

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

The potential sub-license milestone payments are not yet considered probable, and no milestone payments have been accrued as of June 30, 2023 and December 31, 2022.

ROCKWELL MEDICAL, INC.

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

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 June 30, 2023, the Company had operating and finance lease liabilities of $ 5.9 million and right-of-use assets of $ 5.7 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 March 31, 2023 Three Months Ended March 31, 2022

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

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Operating leases

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Other information

Operating cash flows from operating leases $ 424 $ 464

Operating cash flows from finance leases $ 39 $ 47

Financing cash flows from finance leases $ 128 $ 118

Payments for principal from operating leases $ 478 $ 447 $ 902 $ 911

Payments for interest from finance leases $ 38 $ 45 $ 77 $ 92

Payments for principal from finance leases $ 129 $ 119 $ 258 $ 237

Weighted-average remaining lease term – operating leases 2.7 3.2 2.7 3.2

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Weighted-average discount rate – finance leases 6.4 % 6.4 % 6.4 % 6.4 %

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

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

Operating Finance

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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).

In connection with each funding of the Term Loans, the Company was 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 was 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.

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

For the three months ended June 30, 2023 and 2022, interest expense amounted to $ 0.3 million and $ 0.4 million, respectively.

For the six months ended June 30, 2023 and 2022, interest expense amounted to $ 0.6 million and $ 0.8 million, respectively.

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

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

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

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

cure a future breach of a covenant, which could give rise to an event of default.

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

As of March 31, 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):

As of June 30, 2023, the Company was in compliance with all covenants under the Loan Agreement.

As of June 30, 2023, the outstanding balance of the Term Loan was $ 9.4 million, net of unamortized issuance costs and discount of $ 0.6 million.

The following table reflects the schedule of principal payments on the Term Loan as of June 30, 2023 (in thousands):

Principal Payments

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On June 3, 2023, the Company entered into a short-term note payable for $ 0.7 million, bearing interest at 9.59 % per annum to finance various insurance policies.

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

Principal and interest payments related to this note began on July 3, 2023 and will be paid on a straight-line amortization over nine months with the final payment due on March 3, 2024.

As of June 30, 2023, the outstanding balance was $ 0.7 million.

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Subsequent Events

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).

On July 5, 2023, all of the remaining Pre-Funded Warrants to purchase 1,793,000 shares of common stock issued on May 30, 2022 were exercised.

The exercise price of each Pre-Funded Warrant was $ 0.0001 per share and resulted in gross proceeds to the Company of $ 179 (See Note 10 for more detail on the Pre-Funded Warrants).

Asset Purchase Agreement

On July 10, 2023, the Company executed and consummated the transactions contemplated by an Asset Purchase Agreement (the “Purchase Agreement”) with Evoqua.

Subject to the terms and conditions of the Purchase Agreement, at the closing of the transaction (the “Closing”), the Company purchased from Evoqua substantially all of the assets of Evoqua that are related to its business of manufacturing, marketing, distributing, and selling hemodialysis concentrates products in powder and liquid form (the “Concentrates Business”) for an aggregate purchase price, subject to certain adjustments pursuant to the terms of the Purchase Agreement, of $ 11.0 million in cash paid at Closing and equal annual installments of $ 2.5 million payable on each of the first and second anniversaries of the Closing.

The foregoing summary of the Purchase Agreement is subject to, and qualified in its entirety by reference to, the Purchase Agreement, which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q.

Warrant Exercise and Reload Warrants

On July 10, 2023, the Company entered into a letter agreement (the “Letter Agreement”) with Armistice Capital Master Fund Ltd.

(“Armistice”), which held a warrant (the “Prior Warrant”) to purchase 9,900,990 shares of common stock of the Company (the “Common Stock”) with an exercise price of $ 1.39 per share, offering Armistice the opportunity to exercise the Prior Warrant for cash, provided the Prior Warrant was exercised for cash on or prior to 5:00 P.M.

Eastern Time on July 10, 2028 (the “End Date”).

In addition, Armistice would receive a “reload” warrant (the “Reload Warrant”) to purchase 3,750,000 shares of Common Stock with an exercise price of $ 5.13 per share, the closing price as reported by the Nasdaq Capital Market on July 7, 2023.

The terms of the Reload Warrant and Letter Agreement provide for customary resale registration rights.

The Letter Agreement also provides that for a period of 45 days after the issuance of the Reload Warrant, the Company’s may not sell shares of Common Stock pursuant to its sales agreement with Cantor Fitzgerald & Co., dated as of April 8, 2022, at price per share less than $ 6.25 .

The Reload Warrant may be exercised at all times prior to the 54 months month anniversary of its issuance date.

The Prior Warrant and the Reload Warrant both provide that a holder (together with its affiliates) may not exercise any portion of the Prior Warrant or the Reload Warrant to the extent that the holder would own more than 9.99 % of the Company’s outstanding Common Stock immediately after exercise, as such percentage ownership is determined in accordance with the terms of such warrant.

To the extent the exercise of the Prior Warrant would result in Armistice holding more than 9.99 % of the Company’s outstanding Common Stock, such shares of Common Stock in excess of 9.99 % will be held in abeyance.

The Letter Agreement amended the Prior Warrant to extend the expiration date thereof to one year following the original expiration date set forth therein.

Armistice exercised the Prior Warrant on July 10, 2023, and the Company received gross proceeds of approximately $ 13.8 million from the exercise of the Prior Warrant as a result of such exercise pursuant to the terms of the Letter Agreement.

As of July 10, 2023, following the exercise of the Prior Warrant, the Company had 28,489,663 shares of common stock outstanding.

The Letter Agreement and Reload Warrant were entered into pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D as promulgated thereunder.

The foregoing summaries of the Reload Warrant and the Letter Agreement are subject to, and qualified in their entirety by reference to, the Reload Warrant and the Letter Agreement, which are filed as Exhibits 4.1 and 10.1 to this Quarterly Report on Form 10-Q, respectively.

International Distribution Agreement

The Company is working with Wanbang to determine next steps.

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