What changed in this filing

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Item 1. Financial Statements

2023-11-14 compared with 2023-08-14 · 260 added, 256 removed, 505 unchanged (51% of the section changed)

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars In Thousands)

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars In Thousands, Except Par Value Amounts)

September 30,

2023 December 31,

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Accounts Receivable, net 9,361 6,259

Inventory 5,814 5,814

Inventory, net 5,486 5,814

Prepaid and Other Current Assets 1,596 1,745

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Right of Use Assets-Financing, net 2,044 2,468

Intangible Asset, net 10,897 —

Goodwill 921 921

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Accrued Liabilities 6,708 7,702

Lease Liability-Operating - Current 1,560 1,483

Lease Liability-Financing - Current 541 522

Deferred Consideration - Current 2,500 —

Lease Liabilities-Operating - Current 1,529 1,483

Lease Liabilities-Financing - Current 550 522

Deferred License Revenue - Current 46 1,731

Term Loan - Net of Issuance Costs 4,631 1,631

Term Loan - Current - Net of Issuance Costs 5,631 1,631

Insurance Financing Note Payable 488 503

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Total Current Liabilities 21,408 17,691

Lease Liability-Operating - Long-Term 2,022 2,581

Lease Liability-Financing - Long-Term 1,811 2,088

Term Loan, Net of Issuance Costs 4,740 7,555

Lease Liabilities-Operating - Long-Term 1,676 2,581

Lease Liabilities-Financing - Long-Term 1,672 2,088

Term Loan - Long-Term, net of issuance costs 3,331 7,555

Deferred License Revenue - Long-Term 487 2,600

Deferred Consideration - Long-Term 2,500 —

Long Term Liability - Other 14 14

Total Liabilities 31,088 32,529

September 30,

2023 December 31,

Stockholders’ Equity:

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

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

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

Common Stock, $ 0.0001 par value;

170,000,000 shares authorized;

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

28,489,663 and 12,163,673 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Additional Paid-in Capital 417,133 402,701

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Shares and Per Share Amounts)

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

(In Thousands, Except Share and Per Share Amounts)

Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

Net Sales $ 23,771 $ 18,691 $ 61,519 $ 53,497

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Other (Expense) Income

Realized Gain on Investments — — — 4

Realized Gain on Settlement of Investments 220 — 220 4

Interest Expense ( 411 ) ( 476 ) ( 1,193 ) ( 1,497 )

Interest Income 49 — 113 —

Total Other Expense ( 346 ) ( 485 ) ( 669 ) ( 1,021 )

Interest and Other Income (Expense) - net 56 ( 6 ) 169 ( 10 )

Total Other Expense, net ( 135 ) ( 482 ) ( 804 ) ( 1,503 )

Net Loss $ ( 1,872 ) $ ( 4,190 ) $ ( 6,927 ) $ ( 16,317 )

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(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

Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

Net Loss $ ( 1,872 ) $ ( 4,190 ) $ ( 6,927 ) $ ( 16,317 )

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

Unrealized (Loss) Gain on Available-for-Sale Investments ( 69 ) 5 ( 90 ) 5

Foreign Currency Translation Adjustments — — ( 4 ) ( 3 )

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

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

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

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

Net Loss — — — — — ( 1,872 ) — ( 1,872 )

Unrealized Loss on Available-for-Sale Investments — — — — — — ( 69 ) ( 69 )

Issuance of Common Stock in connection with exercise of Prior Warrant and Pre-Funded Warrants, net of offering costs — — 11,693,990 1 13,718 — — 13,719

Stock-based Compensation — — — — 212 — — 212

Balance as of September 30, 2023 15,000 $ — 28,489,663 $ 3 $ 417,133 $ ( 395,686 ) $ 68 $ 21,518

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

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AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

(Dollars in Thousands)

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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 — — — — 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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(Dollars in Thousands)

For the six months ended June 30, 2023 and 2022

Six Months Ended

June 30, 2023 Six Months Ended

June 30, 2022

Nine Months Ended

September 30, 2023 Nine Months Ended

September 30, 2022

Cash Flows From Operating Activities:

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Amortization of Debt Financing Costs and Accretion of Debt Discount 276 276

Loss on Disposal of Assets — ( 2 )

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

Loss (Gain) on Disposal of Assets 1 ( 3 )

Realized Gain on Sale of Investments ( 220 ) ( 4 )

Changes in Operating Assets and Liabilities:

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Accounts Payable ( 124 ) ( 688 )

Lease Liability ( 744 ) ( 969 )

Lease Liabilities ( 1,113 ) ( 1,435 )

Other Liabilities ( 1,033 ) 756

Deferred License Revenue ( 3,798 ) ( 1,427 )

Changes in operating Assets and Liabilities ( 2,594 ) ( 4,999 )

Cash Used In Operating Activities ( 9,369 ) ( 16,817 )

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Purchase of Equipment ( 241 ) ( 197 )

Cash Provided by Investing Activities 5,238 9,082

Cash Paid in Connection with Evoqua Asset Acquisition

Cash Used In Investing Activities ( 5,053 ) ( 5,614 )

Cash Flows From Financing Activities:

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Payments on Insurance Financing Note Payable ( 748 ) ( 941 )

Payment on Financing Lease Liabilities ( 258 ) —

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 )

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

Payments on Financing Lease Liabilities ( 388 ) —

Proceeds from Issuance of Common Stock 13,763 15,016

Offering Costs from Issuance of Common Stock ( 43 ) ( 106 )

Proceeds from Issuance of Preferred Stock — 15,000

Offering Costs from Issuance of Preferred Stock — ( 85 )

Cash Provided by Financing Activities 12,084 22,134

Effect of Exchange Rate Changes on Cash and Cash Equivalents ( 5 ) ( 3 )

Net Decrease in Cash and Cash Equivalents ( 2,343 ) ( 300 )

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

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Cash Paid for Interest $ 929 $ 1,261

Supplemental Disclosure of Noncash Investing and Financing Activities:

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

Insurance Financing Note Payable $ 733 $ —

Supplemental Disclosure of Non-cash Operating, Investing and Financing Activities:

Change in Unrealized (Loss) Gain on Investments Available-for-Sale $ ( 90 ) $ 5

Increase in Prepaid Assets from Insurance Financing Note Payable $ 733 $ —

Deferred Consideration from Evoqua Asset Acquisition

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

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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 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.

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

Subject to the terms and conditions of the Purchase Agreement, at the closing of the transaction (the “Closing”), the Company purchased customer relationships, equipment and inventory from Evoqua, which were related to its manufacturing and selling of hemodialysis concentrates products, all of which are manufactured under a contract manufacturing agreement with a third-party organization.

See Note 4 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.

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.

While Rockwell has discontinued commercialization of Triferic in the United States, the Company has established 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.

During the third quarter of 2023, the ongoing Triferic development effort was terminated resulting in an acceleration of the corresponding deferred license revenue (see Note 10) and a reserve on the non-current inventory (see Note 7).

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.

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

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Liquidity and Capital Resources

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.

As of September 30, 2023, Rockwell had approximately $ 11.7 million of cash, cash equivalents and investments available-for-sale, and working capital of $ 6.8 million.

Net cash used in operating activities for the nine months ended September 30, 2023 was approximately $ 9.4 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.

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.

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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.

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.

In 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.

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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.

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, Israel-Hamas conflict 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.

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

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

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

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

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

The condensed consolidated balance sheet at 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 September 30, 2023, and the condensed consolidated statements of operations, comprehensive loss, and changes in stockholders' equity for the three and nine months ended September 30, 2023 and cash flows for the nine months ended September 30, 2023 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, 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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The preparation of the condensed consolidated financial statements in conformity with U.S.

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.

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.

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.

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

In the first quarter of 2023, the Company determined it should have included pre-funded warrants issued in the second quarter of 2022 in the earnings per share calculation in 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, the Company has recalculated and restated 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,

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

Three Months Ended September 30, Nine Months Ended September 30,

As Previously Reported:

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Loss Per Share

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

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

Net loss $ ( 1,872 ) $ ( 4,190 ) $ ( 6,927 ) $ ( 16,317 )

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Net loss per share attributable to common stockholders - basic and diluted $ ( 0.07 ) $ ( 0.23 ) $ ( 0.32 ) $ ( 1.26 )

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.

Included within the weighted average shares of common stock outstanding for the three and nine months ended September 30, 2022 are 7,311,000 shares of common stock issuable upon the exercise of pre-funded warrants (See Note 11), 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 and six months ended June 30, 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 nine months ended September 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 June 30,

As of September 30,

Options to Purchase Common Stock 1,367,493 1,311,691

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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.

In addition, ASC 326 requires expected credit related losses for trade accounts receivable, as well as available-for-sale debt securities, which are 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.

Asset Acquisition

On July 10, 2023, the Company completed the Evoqua Acquisition.

At the Closing, the Company purchased customer relationships, equipment and inventory from Evoqua, which were related to manufacturing and selling of hemodialysis concentrates products, all of which are manufactured under a contract manufacturing agreement with a third-party organization.

Pursuant to the Purchase Agreement, total consideration was $ 17.4 million, comprising a cash payment at Closing of $ 12.2 million (inclusive of transaction costs) and two $ 2.5 million deferred payments, the first to be paid on the one-year anniversary of the Closing, which is included as a current liability on the Company's condensed consolidated balance sheet, and the second to be paid on the second anniversary of the Closing (collectively, the “deferred consideration”).

The transaction was accounted for as an asset acquisition, as the acquired assets did not meet the definition of a business as defined by ASC 805, Business Combinations .

The purchase price was allocated, on a relative fair value basis, to the assets acquired at the July 10, 2023 acquisition date as follows (table in thousands):

Consideration

Cash Payment $ 12,233

Deferred Consideration 5,000

Transaction Costs 128

Total Consideration $ 17,361

Assets Acquired

Customer Relationships Intangible Asset $ 11,035

Equipment 5,093

Inventory 1,233

Total Assets Acquired $ 17,361

The fair value of the customer relationships intangible asset was determined using a multi-period excess earnings method, a form of the income approach, which incorporates the estimated future cash flows to be generated from the customer base.

Key assumptions included discounted cash flow, estimated life cycle and customer attrition rates.

Customer relationships are being amortized over a period of 20 years.

Given the recency of the purchase of the equipment in which the assets were recorded at fair value, the Company determined the fair value of the equipment using a cost approach, which considered

ROCKWELL MEDICAL, INC.

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Notes to Condensed Consolidated Financial Statements

assumptions over the equipment's current replacement cost and useful life.

Inventory was purchased directly from the contract manufacturer holding the inventory, which approximated fair value.

During the three and nine months ended September 30, 2023, the Company recorded amortization of its customer relationship intangible asset of $ 0.1 million, resulting in a net intangible asset of $ 10.9 million as of September 30, 2023.

Estimated future amortization expense on the Company's customer relationships intangible asset as of September 30, 2023 is as follows (table in thousands):

Year ended December 31:

2023 (remainder of year) $ 138

Thereafter 8,551

Total $ 10,897

Revenue Recognition

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

The core principle of the new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

The following five steps are applied to achieve that core principle:

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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 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.

The Company currently operates 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.

Rockwell's customer mix is diverse, with most customer sales concentrations under 10% and one customer, DaVita, Inc.

("DaVita"), at approximately 50 % of total net product sales for each of the three and nine months ended September 30, 2023.

Rockwell's accounts receivable from this customer were approximately 31 % and 30 % of the total net consolidated accounts receivable balance at September 30, 2023 and December 31, 2022, respectively.

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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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.

During the three months ended September 30, 2023, the amounts received from Wanbang were accelerated out of deferred license revenue and into revenue upon notice that the development effort was terminated (see Note 10).

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.

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

Following the reacquisition of these rights, Rockwell is now unrestricted in its ability to sell its hemodialysis concentrates products to dialysis clinics throughout the U.S.

and around the world.

For additional information, see Note 10.

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 June 30, 2023, all payments were completed.

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

On September 18, 2023, the Company and its long-time partner, DaVita, a leading provider of kidney care, entered into an Amended and Restated Products Purchase Agreement (the "Amended Agreement"), which amends and restates the Product Purchase Agreement, dated July 1, 2019, as amended, under which the Company supplies DaVita with certain dialysis concentrates.

Under the Amended Agreement, the Company and DaVita agreed to an increase in product pricing, effective September 1, 2023 and a one-time payment to Rockwell on or after December 1, 2023.

The term of the Amended Agreement will expire on December 31, 2024.

DaVita will have the right, in its sole discretion upon written notice to the Company given no later than September 30, 2024, to further extend the term through December 31, 2025.

In the event of such an extension, product pricing will be increased for the extended term.

In addition, DaVita is required to provide the Company with nine-month purchasing forecasts and a commitment to purchase at least the forecasted amounts.

In the event that DaVita does not meet its forecasts, it is required to pay the Company for the amount forecasted, purchase additional product, or the Company may terminate the Amended Agreement.

Upon expiration or termination of the Amended Agreement, and upon request by DaVita, the Company has agreed to provide transition services to DaVita during a transition period.

Additionally during the third quarter of 2023, the Company entered into several long-term product purchase agreements, which include supply and purchasing commitments from certain parties.

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

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

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

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

There were no such adjustments for the periods reported.

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

In thousands of U.S.

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

In thousands Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023

Products By Geographic Area Total U.S.

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Net Revenue $ 23,771 $ 19,741 $ 4,030 $ 61,519 $ 53,798 $ 7,721

In thousands of U.S.

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

In thousands Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

Products By Geographic Area Total U.S.

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The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers.

In thousands of U.S.

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

In thousands September 30, 2023 December 31, 2022

Accounts Receivable, net $ 9,361 $ 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 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.

Contract Liabilities, which are included in deferred license revenue $ 533 $ 4,331

There were no other material contract assets recorded on the condensed consolidated balance sheets as of September 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 September 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

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 $ 2.7 million as of June 30, 2023.

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 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 June 30, 2023 and December 31, 2022 (table in thousands):

June 30, 2023

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

September 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 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):

As of September 30, 2023 and December 31, 2022, all of our available-for-sale securities were all due within one year.

Components of inventory, net of reserves, as of September 30, 2023 and December 31, 2022 are as follows (table in thousands):

September 30,

2023 December 31,

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Total Inventory $ 5,664 $ 7,090

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.

Represents inventory related to Triferic raw materials.

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

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

During the three months ended September 30, 2023, the Company reserved $ 1.1 million of long-term inventory as a result of the termination of the Wanbang development effort.

As of September 30, 2023 and December 31, 2022, Rockwell had total current concentrate inventory aggregating $ 5.5 million and $ 5.8 million, respectively, against which Rockwell had reserved $ 25,000 at both September 30, 2023 and December 31, 2022.

ROCKWELL MEDICAL, INC.

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Property and Equipment, net

As of June 30, 2023 and December 31, 2022, the Company’s property and equipment consisted of the following (table in thousands):

As of September 30, 2023 and December 31, 2022, the Company’s property and equipment consisted of the following (table in thousands):

September 30,

2023 December 31,

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Total Property and Equipment 15,160 9,830

Accumulated Depreciation ( 7,963 ) ( 7,636 )

Accumulated Depreciation and Amortization ( 8,389 ) ( 7,636 )

Property and Equipment, net $ 6,771 $ 2,194

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.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Depreciation and amortization expense for the three months ended September 30, 2023 and 2022 was $ 0.4 million and $ 0.1 million, respectively.

Depreciation and amortization expense for the nine months ended September 30, 2023 and 2022 was $ 0.8 million and $ 0.4 million, respectively.

Accrued Liabilities

Accrued liabilities as of June 30, 2023 and December 31, 2022 consisted of the following (table in thousands):

Accrued liabilities as of September 30, 2023 and December 31, 2022 consisted of the following (table in thousands):

September 30,

2023 December 31,

Accrued Research & Development Expense $ — $ 43

Accrued Compensation and Benefits $ 2,240 $ 2,568

Accrued Unvouchered Receipts 1,947 585

Accrued Manufacturing Expense 732 —

Accrued Workers Compensation 202 306

Accrued Research & Development Expense — 43

Other Accrued Liabilities 1,587 4,200

Total Accrued Liabilities $ 6,708 $ 7,702

Deferred Revenue

Deferred License Revenue

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.

The upfront fee was recorded as deferred license 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.

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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 $ 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.

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

On August 7, 2023, Rockwell was informed by Wanbang that the main efficacy results of Wanbang’s clinical trial for Triferic (dialysate) compared with placebo were not obtained and Wanbang will not bring the product forward to registration.

As a result, the Company recognized all remaining revenue under the Wangbang Agreement of approximately $ 2.2 million during the third quarter of 2023.

Additionally, in connection with these events, the Company

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

established a reserve for related Triferic long-term inventory of $ 1.1 million, resulting in a net increase in gross profit of $ 1.1 million.

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 $ 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.

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

The Company recognized revenue of approximately $ 2,500 and $ 7,500 for the three and nine months ended September 30, 2023 and 2022, respectively.

Deferred license revenue related to the Sun Pharma Agreement totaled $ 62,500 and $ 70,000 as of September 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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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 $ 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

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

The Company recognized revenue of $ 5,200 and $ 15,600 for the three and nine months ended September 30, 2023 and 2022, respectively.

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

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 $ 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.

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

The Company recognized revenue of $ 3,750 and $ 11,250 for the three and nine months ended September 30, 2023 and 2022, respectively.

Deferred license revenue related to the Drogsan Agreements totaled approximately $ 0.1 million as of each of September 30, 2023 and December 31, 2022.

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.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Stockholders’ Equity

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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.

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

As of September 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).

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Additionally, the Series X Preferred Stock has a deemed liquidation event and redemption clause which could be triggered if the sale of all or substantially all of the Company's assets relating to the Company's dialysis concentrates business line.

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.

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 and the sale of the assets that would allow for redemption is within the control of the Company, 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 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,

As of both September 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 September 30, 2023 and December 31, 2022, there were 170,000,000 shares of common stock, $ 0.0001 par value per share, authorized and 28,489,663 and 12,163,673 shares issued and outstanding, respectively.

As of September 30, 2023 and 2022, the Company 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 September 30,

Common stock and common stock equivalents:

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Total 35,554,361 38,772,159

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.

During the three months ended September 30, 2023 and 2022, 1,793,000 and 477,480 pre-funded warrants were exercised, respectively.

During the nine months ended September 30, 2023 and 2022, 6,300,000 and 477,480 pre-funded warrants were exercised, respectively.

During the three and nine months ended September 30, 2023 and 2022, no vested employee stock options were exercised.

Controlled Equity Offering

On April 8, 2022, the Company entered into the Sales Agreement with Cantor Fitzgerald & Co.

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

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

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

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

On April 8, 2022, the Company entered into the Sales Agreement (the "ATM facility") with Cantor Fitzgerald & Co.

as Agent, pursuant to which the Company may offer and sell from time to time up to $ 12.2 million 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.

During the quarter ended September 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

On May 30, 2022, the Company entered into the RD Purchase Agreement with the Purchaser named therein, 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 pre-funded 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”).

On May 30, 2022, the Company entered into the Registered Direct Purchase Agreement (the "Agreement") with the Purchaser, pursuant to which the Company issued and sold, in a registered direct offering (the “Offering”), 844,613 shares of its common stock at price of $ 1.39 per share, and pre-funded 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 is 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.

A holder (together with its affiliates) may not exercise any portion of the Pre-Funded Warrants to the extent 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 the Pre-Funded Warrant.

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 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.

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

On July 5, 2023, all of the remaining Pre-Funded Warrants to purchase 1,793,000 shares of common stock 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 .

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 (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”).

Also on May 30, 2022, concurrent with the Offering, the Company entered into the private investment in public equity "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.

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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).

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.

ROCKWELL MEDICAL, INC.

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Stock-Based Compensation

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):

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Performance Based Restricted Stock

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

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

Number of Shares Weighted Average

Unvested at January 1, 2023 891 $ 62.70

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:

Unvested at September 30, 2023 891 $ 62.70

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

Number of Shares Weighted Average

1 unchanged sentence

Forfeited (1) ( 6,227 ) $ 62.70

Unvested at June 30, 2022 891 $ 62.70

Unvested at September 30, 2022 891 $ 62.70

These forfeited awards were due to the resignation of the Company's Chief Development Officer on March 25, 2022 and reduced stock-based compensation expense by $ 0.4 million in 2022.

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.

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 six months ended June 30, 2023 is as follows:

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

Number of Shares Weighted Average

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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:

Forfeited ( 25,665 ) 1.37

Unvested at September 30, 2023 287,400 $ 1.85

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

Number of Shares Weighted Average

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Forfeited ( 5,774 ) 19.00

Unvested at June 30, 2022 125,000 $ 1.47

Unvested at September 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 $ 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.

Stock-based compensation expense of $ 0.1 million and $ 46,000 was recognized for the three months ended September 30, 2023 and 2022, respectively.

Stock-based compensation expense of $ 0.3 million and $ 0.1 million was recognized for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, the unrecognized stock-based compensation expense was $ 0.4 million, which is expected to be recognized over an estimated weighted average remaining term of less than 1.4 years.

Service-Based Stock Options

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

The fair value of the service-based stock options granted for the nine months ended September 30, 2023 were based on the following assumptions:

Nine Months Ended September 30, 2023

Exercise price $ 1.37 - $ 2.83

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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:

A summary of the Company’s service-based stock option activity for the nine months ended September 30, 2023 is as follows:

Options Weighted

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Price Weighted

Term Aggregate

Intrinsic Value

in years in thousands

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

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Expired ( 78,727 ) 26.74

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:

Outstanding at September 30, 2023 1,367,493 $ 5.93 8.4 $ 680

Exercisable at September 30, 2023 444,836 $ 14.64 7 $ 114

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

Options Weighted

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Expired ( 85,466 ) 82.09 —

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

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

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

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

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 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.

The intrinsic value of the outstanding options as of September 30, 2022 was not significant.

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

Stock-based compensation expense recognized for service-based stock options was $ 0.4 million and $ 0.4 million for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 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 3.2 years.

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 $ 0.2 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.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Licensing Agreements

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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 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.

As of September 30, 2023 and December 31, 2022, the Company has accrued $ 85,400 relating to

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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.

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

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

Additionally, the Company is required to pay Charak a percentage of any sublicense income during the term of the agreement, which amount cannot 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 be no less than a lower rate of the net sales of the licensed products by the sublicensee in jurisdictions where there exists no valid claim, on a country-by-country basis.

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

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

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

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

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

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 September 30, 2023, the Company had operating and finance lease liabilities of $ 5.4 million and right-of-use assets of $ 5.1 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 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

Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

Operating leases

Operating lease cost $ 422 $ 410 $ 1,281 $ 1,289

Interest on lease obligations 64 65 124 135

Variable lease cost 112 101 336 287

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Operating and finance lease liabilities $ 3,205 $ 2,222

ROCKWELL MEDICAL, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Loan and Security Agreement

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

The Company is no longer eligible to draw on a second tranche of $ 5.0 million or a third tranche of $ 7.5 million, which were tied to the achievement of certain milestones by a specific date.

The Company is no longer eligible to draw on additional tranches, which were tied to the achievement of certain milestones.

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 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.

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

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

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

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

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

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

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

The Term Loans will mature on March 16, 2025, and will bear interest at the greater of (i) Prime Rate (as defined in the Loan Agreement) and (ii) 4.75 %, plus 4.00 % with an initial interest rate of 8.75 % per annum and an effective interest rate of 10.9 %.

The Term Loans mature on March 16, 2025, and bear interest at the greater of (i) Prime Rate (as defined in the Loan Agreement) and (ii) 4.75 %, plus 4.00 %, with an initial interest rate of 8.75 % per annum and an effective interest rate of 12.5 % as of September 30, 2023.

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 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.

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

For the nine months ended September 30, 2023 and 2022, interest expense amounted to $ 0.9 million and $ 1.2 million, respectively.

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 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;

and contains customary representations and warranties and covenants, subject to customary carve outs, and initially included financial covenants related to liquidity and sales of Triferic.

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.

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

(ii) paid interest only payments until September 2023, at which time it resumed scheduled debt payments.

The financial covenant related to the sales of Triferic was replaced with the trailing 6 months revenue of our concentrates products.

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

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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 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):

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

As of September 30, 2023, the outstanding balance of the Term Loan was $ 9.0 million, net of unamortized issuance costs and discount of $ 0.5 million.

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

Principal Payments

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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 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.

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

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

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

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

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.

As of September 30, 2023, the outstanding balance was $ 0.5 million.

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