What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-14 compared with 2023-08-14 · 102 added, 89 removed, 119 unchanged (62% of the section changed)

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our ability to continue as a going concern;

our ability to successfully integrate and acquisitions:

our ability to successfully integrate acquisitions;

our ability to develop Ferric Pyrophosphate Citrate (“FPC”) for other indications;

our ability to successfully execute on our business strategy and development of new indications;

our ability to successfully execute on our business strategy;

our ability to raise additional capital;

our ability to renegotiate certain terms of our supply contracts;

our ability to successfully implement certain cost containment and cost-cutting measures;

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Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different.

Factors that might cause such a difference include, without limitation, the risks and uncertainties discussed in this report, “Item 1A — Risk Factors” in our Form 10-K for the year ended December 31, 2022 and from time to time in our other reports filed with the SEC, including in this Form 10-Q.

Other factors not currently anticipated may also materially and adversely affect our results of operations, cash flow and financial position.

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Rockwell Medical 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, 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 center, hospital-based outpatient centers, 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.

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

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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.

In addition, the Company manufactures hemodialysis concentrates in Minnesota under a contract manufacturing agreement with a contract manufacturing organization.

(See Note 4 of the accompanying condensed consolidated interim financial statements for further detail).

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

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

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

The Evoqua Acquisition expands the Company's geographic footprint, customer base, and product offerings.

In addition, the Evoqua Acquisition provides fully automated processing that potentially has a lower cost to manufacture.

As part of this acquisition, the Company 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.

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 with these international partners to develop and commercialize Triferic in their respective regions.

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

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A key element of our dialysis business strategy going forward is to improve the strength of our concentrates business.

We believe we can achieve this by growing our business through the addition of new customers, expanding our territory coverage, increasing the efficiency of our production, and pricing our products appropriately to drive profitability.

Prior to the second quarter of 2022, Rockwell's concentrates business operated at a loss.

This loss was accelerated due to inflation, which has increased our manufacturing and operating costs.

We undertook discussions with our largest customers to renegotiate our existing supply contracts to improve the profitability of this business line.

On April 6, 2022, we amended our agreement with our long-time partner, DaVita, Inc.

("DaVita"), a leading provider of kidney care, to enable us to stabilize our concentrates business.

The amended agreement provides a stronger financial arrangement which encompasses pricing, cost share, cost cutting, and joint efforts to improve supply chain, all of which is intended to drive Rockwell’s concentrates business to operate profitably in the future.

We are currently in discussions with DaVita on an extension to the agreement.

In addition to the amended agreement, DaVita invested $15 million in preferred stock in two equal tranches.

According to an independent research report from L.E.K.

Consulting LLC, which was commissioned by Rockwell in 2022, the hemodialysis concentrates market in the United States alone was valued at $380 million in 2022 and is anticipated to grow to approximately $500 million by 2026.

We believe we can grow our business through the addition of new customers, expanding our territory coverage, increasing the efficiency of our production, and pricing our products appropriately to drive profitability.

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 manufacturing and selling of hemodialysis concentrates products, all of which are manufactured under a contract manufacturing agreement with a third-party organization.

Total consideration was $17.4 million, comprising a cash payment at Closing of $12.4 million (inclusive of transaction costs) and two $2.5 million deferred payments, the first to be paid on the first anniversary and the second to be paid on the second anniversary of the Closing.

See Note 4 for further detail.

On September 18, 2023, Rockwell and our long-time partner, DaVita, Inc.

("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.

In 2022, in connection with an amendment of the original Products Purchase Agreement, DaVita invested $15 million in the Company's preferred stock in two equal tranches.

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

The second tranche of $7.5 million was funded on June 16, 2022.

We continue to review our entire supply chain to identify opportunities for improvement, prioritizing initiatives that will have the largest impact on long-term efficiency, profitability, and growth.

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

These agreements include Sanderling Renal Services, Inc., a full-service provider of in-center, home dialysis and renal telemedicine services focusing on patients in rural and underserved communities across the United States;

Centers for Dialysis Care, the largest non-profit, independent outpatient dialysis provider in Northeast Ohio;

Houston Methodist, a leading health system and academic medical center;

Dialyze Direct, a leading provider of home dialysis services in the skilled nursing facility setting;

and Outset Medical (Nasdaq:OM), a medical technology company pioneering a first-of-its-kind technology to reduce the cost and complexity of dialysis with its Tablo ® Hemodialysis System, which is FDA-cleared for use from the hospital to the home.

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

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

Exclusivity and other provisions

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

Under the exclusive distribution agreement, Baxter distributed and commercialized Rockwell’s hemodialysis concentrates products in the United States and certain other countries.

Rockwell manufactured all hemodialysis concentrates products and provided customer service and order delivery to nearly all U.S.

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

Additionally, Rockwell is now able to independently price its products, eliminate costs associated with manufacturing covenants, improve manufacturing efficiencies, realize the full benefits from those improvements, and develop, in-license, or acquire new products to develop a broader kidney care products portfolio.

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

Additionally, Rockwell is able to independently price its products, eliminate costs associated with manufacturing covenants, improve manufacturing efficiencies, realize the full benefits from those improvements, and develop, in-license, or acquire new products to develop a broader kidney care products portfolio.

This is expected to improve Rockwell's overall profitability and set the Company on a positive growth trajectory.

Collectively, we believe this affords Rockwell the opportunity to expand its leadership position within a large market opportunity.

According to an independent research report from L.E.K.

Our first two branded products from our FPC platform, Triferic (dialysate) and Triferic AVNU, are indicated to maintain hemoglobin in patients undergoing hemodialysis.

We began commercializing Triferic and Triferic AVNU in the

United States in the second half of 2019 and in early 2021, respectively.

We began commercializing Triferic and Triferic AVNU in the United States in the second half of 2019 and in early 2021, respectively.

In addition, Rockwell established six international partnerships to develop and commercialize Triferic in China, India, Korea, Turkey, Peru and Chile.

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Triferic and its approved presentations were not discontinued for safety reasons.

Rockwell continues to support its partners outside the United States who have exclusive license agreements to develop and commercialize Triferic in China, India, Korea, Turkey, Peru and Chile.

Rockwell continues to support its partners outside the United States that have exclusive license agreements to develop and commercialize Triferic in India, Korea, Turkey, Peru and Chile.

Partnering in these regions allows us to better leverage the development, regulatory, commercial presence, and expertise of business partners to increase sales of our products throughout the world.

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However, we believe there is still potential opportunity for Triferic internationally and will work diligently to support our partners, which requires minimal financial commitment from Rockwell and provides us with potential for near- and long-term revenue.

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.

Research and Development Pipeline :

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Rockwell conducted a pre-IND meeting with the FDA in 2022 and will determine the path forward for FPC in acute heart failure as the Company works toward profitability.

Results of Operations for the Three Months Ended June 30, 2023 and 2022

Results of Operations for the Three Months Ended September 30, 2023 and 2022

The following table summarizes our operating results for the periods presented below (dollars in thousands):

For the Three Months Ended June 30,

Three Months Ended September 30,

2023 % of Revenue 2022 % of Revenue % Change

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Operating Loss $ (1,737) (7) % $ (3,708) (20) % (53) %

During the three months ended June 30, 2023, our net sales were $18.1 million compared to net sales of $18.7 million during the three months ended June 30, 2022.

The decrease of $0.6 million was primarily due to the reduction of deferred revenue related to Rockwell reacquiring its distribution rights and terminating the Baxter distribution agreement.

Overall, product revenue for the three months ended June 30, 2023 was $18.0 million compared to product revenue of $17.6 million during the three months ended June 30, 2022, an increase of $0.4 million.

Rockwell expects this trend to continue as we work to integrate the Evoqua Acquisition (See Note 16).

Cost of sales during the three months ended June 30, 2023 was $17.0 million, resulting in gross profit of $1.0 million during the three months ended June 30, 2023, compared to cost of sales of $16.9 million and a gross profit of $1.7 million during the three months ended June 30, 2022.

Gross profit decreased by $0.7 million primarily due to the reduction of the recognition of the deferred revenue related to the termination of the Baxter distribution agreement (See Note 9).

During the three months ended September 30, 2023, our net sales were $23.8 million compared to net sales of $18.7 million during the three months ended September 30, 2022.

The increase of $5.1 million was primarily due to the Evoqua Asset Acquisition (see Note 4) which, through the acquisition of customer lists, resulted in new revenue during the third quarter of 2023 of $3.4 million, and the recognition of deferred license revenue of $2.2 million related to the Wanbang Agreement (see Note 10 to the condensed consolidated financial statements included elsewhere in this Form 10-Q).

Overall, product revenue for the three months ended September 30, 2023 was $21.6 million compared to product revenue of $18.1 million for the three months ended September 30, 2022.

Cost of sales for the three months ended September 30, 2023 was $21.6 million, resulting in gross profit of $2.2 million for the three months ended September 30, 2023, compared to cost of sales of $17.9 million and a gross profit of $0.8 million for the three months ended September 30, 2022.

Cost of sales for the three months ended September 30, 2023 included a $1.1 million increase to Triferic inventory reserves due to the decision by Wanbang not to pursue registration in China.

Gross profit increased by $1.4 million primarily due to $1.1 million net impact of Wanbang revenue and inventory reserves, as well as lower distribution costs associated with the concentrates business.

Research and Product Development Expense

Research and product development expenses were $0.2 million and $0.9 million for the three months ended June 30, 2023 and 2022, respectively.

Research and product development expenses decreased by $0.7 million due to greater expense management over project costs, a reduction in headcount and the decision to put all research related to our FPC for home infusion program on hold due to the significant capital expenditure and resources to support additional re-formulation work and conduct a Phase 2 trial.

Research and product development expenses were $0.5 million for each of the three months ended September 30, 2023 and 2022.

Employee compensation expense decreased as a result of lower headcount, but was offset by severance costs.

Selling and Marketing Expense

Selling and marketing expenses were unchanged at $0.5 million for both the three months ended June 30, 2023, and 2022.

Selling and marketing expenses were $0.6 million and $0.8 million for the three months ended September 30, 2023 and 2022, respectively.

We continue to evaluate marketing spend and focus on target opportunities for greater return on investments.

General and Administrative Expense

General and administrative expenses were $3.3 million during the three months ended June 30, 2023, compared with $4.8 million during the three months ended June 30, 2022.

The decrease of $1.5 million is primarily due to improved expense management and the reduced usage of outside consultants and government agencies.

Other Income (Expense)

Other income for the three months ended June 30, 2023 and 2022 was $49,000 and nil, respectively.

Other expense for the three months ended June 30, 2023 and 2022 was $0.4 million and $0.5 million, respectively, primarily due to interest expense related to our debt facility (See Note 14).

Results of Operations for the Six Months Ended June 30, 2023 and 2022

General and administrative expenses were $2.9 million for the three months ended September 30, 2023, compared with $3.3 million for the three months ended September 30, 2022.

The decrease of $0.4 million was primarily due to lower employee compensation as a result of reduced headcount, decreased government fees related to Triferic and lower administrative costs.

Other Expense

Total other expense of $0.1 million and $0.5 million for the three months ended September 30, 2023 and 2022, respectively, was primarily driven by $0.4 million and $0.5 million of other expense for the three months ended September 30, 2023 and 2022, respectively, largely due to interest expense related to our debt facility (See Note 15 to the condensed consolidated financial statements included elsewhere in this Form 10-Q).

Results of Operations for the Nine Months Ended September 30, 2023 and 2022

The following table summarizes our operating results for the periods presented below (dollars in thousands):

For the Six Months Ended June 30,

Nine Months Ended September 30,

2023 % of Revenue 2022 % of Revenue % Change

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Operating Loss $ (6,123) (10) % $ (14,814) (28) % (59) %

During the six months ended June 30, 2023, our net sales were $37.7 million compared to net sales of $34.8 million during the six months ended June 30, 2022.

The increase of $2.9 million was primarily due to the restructuring of our supply contract with DaVita, the reacquired rights to commercialize and distribute our products, onboarding of new customers and increased pricing to other customers.

Overall, product revenue for the six months ended June 30, 2023 was $36.1 million compared to product revenue of $33.1 million during the three months ended June 30, 2022, an increase of $3.0 million.

Cost of sales during the six months ended June 30, 2023 was $34.1 million, resulting in gross profit of $3.6 million during the six months ended June 30, 2023, compared to cost of sales of $33.8 million and a gross profit of $1.0 million during the six months ended June 30, 2022.

Gross profit increased by $2.6 million primarily due to the restructuring of our supply contract with DaVita, recognition of the remaining deferred revenue related to the termination of the Baxter distribution agreement (See Note 9), onboarding of new customers and increased pricing to other customers.

In addition, Rockwell completed the Evoqua Acquisition in July 2023, which is expected to expand our capabilities (See Note 16).

Research and Product Development Expense

Research and product development expenses were $0.4 million and $2.5 million for the six months ended June 30, 2023 and 2022, respectively.

Research and product development expenses decreased by $2.1 million due to greater cash management over project costs, a reduction in headcount and the decision to put all research related to our FPC for Home Infusion program on hold due to the significant capital expenditure and resources to support additional re-formulation work and conduct a Phase 2 trial.

During the nine months ended September 30, 2023, our net sales were $61.5 million compared to net sales of $53.5 million during the nine months ended September 30, 2022.

The increase of $8.0 million was primarily due to the restructuring of our products purchase agreement with DaVita, the reacquired rights to commercialize and distribute our products, the asset acquisition of Evoqua, onboarding of new customers and increased pricing to other customers.

Overall, product revenue for the nine months ended September 30, 2023 was $57.7 million compared to product revenue of $51.9 million for the nine months ended September 30, 2022, an increase of $5.8 million.

Cost of sales during the nine months ended September 30, 2023 was $55.7 million, resulting in gross profit of $5.8 million during the nine months ended September 30, 2023, compared to cost of sales of $51.8 million and a gross profit of $1.7 million during the nine months ended September 30, 2022.

Gross profit increased by $4.1 million primarily due to the restructuring of our supply contract with DaVita in 2022, recognition of the remaining deferred license revenue related to the termination of the Baxter distribution agreement (See Note 10 to the condensed condensed consolidated financial statements included elsewhere in this Form 10-Q), onboarding of new customers, increased pricing to other customers and net impact of Wanbang revenue and inventory reserves.

Research and Development Expense

Research and product development expenses were $0.9 million and $3.0 million for the nine months ended September 30, 2023 and 2022, respectively.

Research and product development expenses decreased by $2.1 million due to a reduction in wages and project costs resulting from the decision to pause all research related to our FPC for Home Infusion program.

Approximately 44% of research and development expenses for the nine months ended September 30, 2023 were comprised of severance costs.

Selling and Marketing Expense

Selling and marketing expenses were unchanged at $1.0 million for both the six months ended June 30, 2023, and 2022.

Selling and marketing expenses were $1.6 million and $1.7 million for the nine months ended September 30, 2023, and 2022, respectively.

We continue to evaluate marketing spend and focus on target opportunities for greater return on investments.

General and Administrative Expense

General and administrative expenses were $6.5 million during the six months ended June 30, 2023, compared with $8.6 million during the six months ended June 30, 2022.

The decrease of $2.1 million is primarily due to the reduced usage of outside consultants and government agencies.

Other Income (Expense)

Other income for the six months ended June 30, 2023 and 2022 was $0.1 million related to cash equivalents and nil, respectively.

Other expense for the six months ended June 30, 2023 and 2022 was $0.8 million and $1.0 million of interest expense related to our debt facility, respectively (See Note 14).

General and administrative expenses were $9.4 million during the nine months ended September 30, 2023, compared with $11.8 million during the nine months ended September 30, 2022.

The decrease of $2.4 million is primarily driven by lower employee compensation as a result of reduced headcount, decreased government fees related to Triferic, reduced professional fees and lower administrative costs.

Other Expense

Total other expense of $0.8 million and $1.5 million for the nine months ended September 30, 2023 and 2022, respectively, was primarily driven by $1.2 million and $1.5 million of other expense for the nine months ended September 30, 2023 and 2022, respectively, largely due to interest expense related to our debt facility (See Note 15 to the condensed consolidated financial statements included elsewhere in this Form 10-Q).

Liquidity and Capital Resources

As of June 30, 2023, we 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, we 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”) exercised its warrant to purchase 9,900,990 shares of common stock with an exercise price of $1.39 per share and the Company received gross proceeds of approximately $13.8 million (See Note 16).

Also on July 10, 2023, Rockwell completed the Evoqua Acquisition 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 $2,500,000 payable on each of the first and second anniversaries of the closing.

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

The Evoqua Acquisition expands the Company's geographic footprint, customer base, and product offerings.

In addition, the Evoqua Acquisition provides fully automated processing that potentially results in a lower cost to manufacture.

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

(See Note 16).

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

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

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 first anniversary and the second to be paid on the second anniversary of the Closing.

See Note 4 for further detail.

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

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

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

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

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.

As of the date of this report, the Company is in compliance with all covenants (See Note 14).

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.

As of the date of this report, the Company is in compliance with all covenants (See Note 15 to the accompanying condensed consolidated interim financial statements).

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, the 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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however, current conditions in the financial and credit markets may limit the availability of funding, refinancing or increase the cost of funding.

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

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.

The actual amount of cash that we will need to execute our business strategy is subject to many factors, including, but not limited to the costs associated with our manufacturing and transportation operations related to our concentrate business.

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Cash Used in Operating Activities

Net cash used in operating activities was $5.6 million for the six months ended June 30, 2023 compared to net cash used in operating activities of $15.7 million for the six months ended June 30, 2022.

The decrease in cash used from operating activities during the current period was primarily due to a decrease in net loss, offset by changes in current balance sheet accounts in the ordinary course of business of approximately $2.6 million, including an increase in accounts payable of $1.9 million, a decrease in other liabilities of $4.0 million, a decrease in deferred revenue of $1.6 million for recognition of the remaining deferred revenue related to the termination of the Baxter distribution agreement and a decrease in prepaid and other assets of $1.0 million.

Cash Provided by Investing Activities

Net cash provided by investing activities was $5.2 million during the six months ended June 30, 2023 compared to net cash provided by investing activities of $9.1 million for the six months ended June 30, 2022.

The net cash provided by investing activities during the six months ended June 30, 2023 was primarily due to sales and purchase of available-for-sale investments during the period.

Cash (Used in) Provided by Financing Activities

Net cash used in financing activities was $0.8 million during the six months ended June 30, 2023 compared to the net cash provided by financing activities of $24.1 million for the six months ended June 30, 2022.

The net cash used in financing activities during the six months ended June 30, 2023 was primarily due to the Company making interest only payments on the Company's debt and short term insurance note payable.

Net cash used in operating activities was $9.4 million for the nine months ended September 30, 2023 compared to net cash used in operating activities of $16.8 million for the nine months ended September 30, 2022.

The decrease in cash used from operating activities during the current period was primarily due to a decrease in net loss, offset by changes in current balance sheet accounts in the ordinary course of business of approximately $6.7 million, including a decrease in deferred license revenue of $3.8 million for recognition of the remaining deferred license revenue related to the termination of the Baxter distribution agreement, a decrease in net accounts receivable of $3.1 million, a decrease in other liabilities of $1.0 million and a decrease in prepaid and other assets of $0.9 million.

Cash Used In Investing Activities

Net cash used in investing activities was $5.1 million during the nine months ended September 30, 2023 compared to net cash used in investing activities of $5.6 million for the nine months ended September 30, 2022.

Net cash used in investing activities during the nine months ended September 30, 2023 was primarily due to the cash paid in connection with the Evoqua Asset Acquisition of $12.4 million, partially offset by the net cash proceeds from sales and purchase of available-for-sale investments during the period of $7.4 million.

Net cash used in investing activities during the nine months ended September 30, 2022 were primarily related to the purchase and sale of investments.

Cash Provided by Financing Activities

Net cash provided by financing activities was $12.1 million during the nine months ended September 30, 2023 compared to net cash provided by financing activities of $22.1 million for the nine months ended September 30, 2022.

Net cash provided financing activities during the nine months ended September 30, 2023 was primarily due to the gross proceeds from the issuance of common stock in connection with the exercise of the Prior Warrant and Pre-Funded Warrants of $13.8 million.

Net cash provided by financing activities for the nine months ended September 30, 2022 was primarily due to the gross proceeds from the issuance of common and preferred stock of $15.0 million each, offset by debt repayment of $6.8 million.

Contractual Obligations and Other Commitments

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Our critical accounting policies and significant estimates are detailed in our Annual Report on Form 10-K for the year ended December 31, 2022.

Our critical accounting policies and significant estimates have not changed from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

In addition, our critical accounting policies and significant estimates related to the Evoqua Asset Acquisition, including changes to our existing accounting policies, are detailed below.

Fair Value Measurements

Nonrecurring Valuations.

The assets acquired through the Evoqua Asset Acquisition were recorded at relative fair value, which required the determination of the fair values of assets acquired as of the acquisition date.

In making these fair value determinations, we were required to make estimates and assumptions that affected the recorded amounts, including, but not limited to, (i) for the customer relationships intangible asset, expected future cash flows, discount rates and remaining useful life and (ii) for the equipment, replacement cost.

To assist us in making these fair value determinations, we engaged third-party valuation specialists.

Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain.

Intangible Assets

Definite-lived intangible assets consist of our customer relationships intangible asset, which has been capitalized and is being amortized over 20 years.

Recently issued and adopted accounting pronouncements :

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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 2. Management’s Discussion and Analysis