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Item 7. Management’s Discussion and Analysis

2024-03-21 compared with 2023-03-30 · 110 added, 125 removed, 99 unchanged (70% of the section changed)

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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 and the second largest supplier of acid and bicarbonate concentrates for dialysis patients in the United States.

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

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

Rockwell manufactures hemodialysis concentrates under Current Good Manufacturing Practices ("cGMP") regulations at its three facilities in Michigan, Texas, and South Carolina totaling approximately 175,000 square feet, and manufactures its dry acid concentrate mixers at its facility in Iowa.

Rockwell 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.

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

Food and Drug Administration ("FDA").

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

Rockwell manufactures hemodialysis concentrates at its 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 the former Evoqua product line in Minnesota under a contract manufacturing agreement with a contract manufacturing organization.

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

On February 12, 2024, the Company entered into an amendment to its contract manufacturing agreement to extend the term to December 31, 2024.

The Company plans to transfer the manufacturing of the former Evoqua product line to one of its own manufacturing facilities by the end of 2024, which the Company believes will reduce production costs for these products.

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.

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

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

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

Reverse Stock Split

On May 9, 2022, the Company's stockholders authorized the Company's Board of Directors to effect a reverse stock split of all outstanding shares of common stock, warrants and options.

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

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

common stock.

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

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

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

On July 10, 2023, the Company executed and consummated the transactions contemplated by the Evoqua Acquisition.

Subject to the terms and conditions of the Purchase Agreement, 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.

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 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 and Wanbang will not will not bring the product forward to registration.

As a result, the remaining $2.1 million of deferred license revenue was recorded into revenue, and the related portion of long-term inventory of $1.1 million was reserved for.

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.

Additionally, during the year ended December 31, 2023, Rockwell entered into several long-term product purchase agreements, which include supply and purchasing commitments from certain parties.

These agreements include the largest non-profit dialysis provider in the United States;

Concerto Renal Services, the largest provider of dialysis in skilled nursing facilities in the United States;

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 January 2, 2024, the Company's Loan Agreement was amended to include, among other things, an interest-only period for 30 months, or up to 36 months if certain conditions are met, and extend the maturity date to January 1, 2029.

(See Note 19 for further detail).

Results of Operations

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Cost of Sales 74,908 89.6 % 68,733 94.4 % 9.0 %

Gross (Loss) Profit 4,077 5.6 (2,420) (3.9) (268.5)

Gross Profit 8,704 10.4 % 4,077 5.6 % 113.5%

Research and Product Development 1,107 1.3 % 3,119 4.3 % (64.5) %

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During the year ended December 31, 2023, our net sales were $83.6 million compared to net sales of $72.8 million during the year ended December 31, 2022 .

Net sales of hemodialysis concentrates to dialysis providers and distributors in the United States and abroad were $71.7 million for the year ended December 31, 2022 comp ared to $60.8 million f or the year ended December 31, 2021.

Net sales of hemodialysis concentrates to dialysis providers and distributors in the

United States and abroad were $81.3 million for the year ended December 31, 2023 comp ared to $71.7 million f or the year ended December 31, 2022.

Net sales of Triferic (dialysate) were $2.3 million and $1.2 million for the years ended December 31, 2023 and 2022, respectively.

The increase of $10.9 million is primarily related to the amendment of our supply agreement with DaVita and increased pricing to other customers.

The increase in net sales of Triferic (dialysate) was due to Wanbang's decision to not bring the product forward to registration.

The increase of $10.8 million in net sales is 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.

During 2022, the Company made a strategic decision to discontinue its NDAs for Triferic and Triferic AVNU in the United States.

Cost of Sales and Gross Profit

Cost of sales during the year ended December 31, 2022 was $68.7 million, resulting in gross profit of $4.1 million, compared to cost of sales of $64.4 million and a gross loss of $2.4 million during the year ended December 31, 2021.

Gross profit increased by $6.4 million during the year ended December 31, 2022 compared to the year ended December 31, 2021 due to price increases for all business during the year including the amended products purchase agreement with DaVita, offset by volume reductions and increased distribution costs.

Cost of sales during the year ended December 31, 2023 was $74.9 million, resulting in gross profit of $8.7 million, compared to cost of sales of $68.7 million and a gross profit of $4.1 million during the year ended December 31, 2022.

Gross profit increased by $4.6 million during the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to the restructuring of our supply contract with DaVita in 2022, lower distribution costs, onboarding of new customers, increased pricing to other customers and net impact of recording the remaining deferred license revenue associated with Wanbang and the associated inventory reserve as described above.

Research and Product Development Expense

Research and product development expenses were $1.1 million for the year ended December 31, 2023 compared with $3.1 million during the year ended December 31, 2022.

The decrease of $3.7 million is related to headcount reductions 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 study.

The decrease of $2.0 million is 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 37% of research and development expenses for the year ended December 31, 2023 were comprised of severance costs.

Selling and Marketing Expense

Selling and marketing expenses were $2.1 million during the year ended December 31, 2023 compared with $2.1 million during the year ended December 31, 2022.

The decrease of $3.6 million is du e to a decrease in marketing spend for our Triferic products and a headcount reduction.

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 $12.1 million during the year ended December 31, 2023 compared with $15.6 million during the year ended December 31, 2022.

The $0.3 million increase was driven primarily by increases in executive severance expenses of $1.4 million, legal costs of $0.2 million and travel expense of $0.1 million, offset by decreases in employee incentives of $0.6 million, various cost cutting measures of $0.5 million, and FDA fees of $0.2 million.

Other Income (Expense)

Other income consisted of interest income of $33,000 and $22,000 for the years ended December 31, 2022 and December 31, 2021, respectively.

Other expense consisted of interest expense related to our debt facility (see Note 16 to the financial statements for more information on our debt facility) totaling $1.9 million and $2.4 million for the years ended December 31, 2022 and December 31, 2021, respectively.

The $3.5 million decrease was driven primarily by a reduction in wages and incentive compensation of $0.9 million, legal costs of $0.9 million, insurance costs of $0.9 million, and FDA fees relating to approved products of $0.9 million.

Other Expense

Total other expense for the years ended December 31, 2023 and December 31, 2022 was $1.8 million and $1.9 million, respectively, which was primarily related to interest expense incurred on our debt facility of $2.3 million and $1.9 million for the years ended December 31, 2023 and December 31, 2022, respectively.

See Note 17 to the consolidated financial statements for more information on our debt facility.

Liquidity and Capital Resources

Since inception, we have incurred significant net losses and have funded our operations primarily through revenue from commercial products, proceeds from the issuance of debt and equity securities and payments from partnerships.

At December 31, 2022, we had an accumulated deficit of approximately $388.8 million and shareholders’ equity of $14.1 million.

At December 31, 2023, we had an accumulated deficit of approximately $397.2 million and stockholders’ equity of $21.3 million.

As of December 31, 2023, we had approximately $10.9 million of cash, cash equivalents and investments available-for-sale, and working capital of $12.1 million.

Net cash used in operating activities for the year ended December 31, 2023 was approximately $9.4 million.

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

During the year ended December 31, 2022, the Company continued to experience significant inflationary pressures in its dialysis concentrates business, which has resulted in operating losses associated with this business line.

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 (the "Prior Warrant") and the Company received gross proceeds of approximately $13.8 million (See Note 12 to the consolidated financial statements included elsewhere in this Form 10-K).

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

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 to the consolidated financial statements for further detail.

During the year ended December 31, 2023, the Company continued to experience inflationary pressures in its dialysis concentrates business, which has resulted in operating losses associated with this business line.

As a result of these inflationary pressures, and in light of the fact that the Company's concentrates business operated at a loss in 2022, the Company sought to renegotiate certain terms of its supply contracts with the Company’s two largest customers in an effort to allow the Company to stabilize its concentrates business.

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

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

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

The Amendment contains certain covenants with respect to the Company’s ongoing operations, including a minimum cash covenant of $10 million, or the Company will be in default under the Products Purchase Agreement.

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

On April 6, 2022, the Company and DaVita entered into the SPA, pursuant to which the Company issued $15 million of preferred stock to DaVita in two separate tranches.

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

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

The Second Tranche was conditioned upon the Company raising an additional $15.0 million in capital within a certain timeline, which took place on June 2, 2022.

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

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

During the quarter ended December 31, 2022, no sales were made pursuant to the Sales Agreement.

Subject to restrictions under General Instruction I.B.6 to Form S-3, approximately $12.2 million remains available for sale under the ATM facility.

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

The purchase price of each Pre-Funded Warrant was equal to the

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

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

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

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

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

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

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 (as defined in the Loan Agreement) in one installment on November 14, 2022;

(ii) shall pay interest only payments until September 2023 at which time will resume scheduled debt payments (see Note 16 to the consolidated financial statements included elsewhere in this Form 10-K for more information on our debt facility).

Management evaluated it's going concern by reviewing the Company's operational plans which include executing on the projected financial information including price increases, acquisition of new customers, projected growth of margins and cost containment activities.

Additionally, the Company's operational plans also include raising capital, if needed, by using our ATM facility or other methods or forms of financings, subject to existing limitations.

Based on the currently available working capital, expectation of the ability of management to execute on the Company's operational plans noted above, 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.

Accordingly, management believes that the factors noted above which raised substantial doubt about the Company’s ability to continue as a going concern have been alleviated .

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

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.

In addition, the Company is subject to certain covenants and cure provisions under its Loan Agreement with Innovatus.

As of December 31, 2022, the Company is in compliance with all financial covenants (See Note 16 to the consolidated financial statements included elsewhere in this Form 10-K for more information on our debt facility).

Global Economic Considerations

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

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

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, supply chain weaknesses, and instability in the geopolitical environment, including as a result of the Russian invasion of Ukraine and other political tensions, and lingering effects of the COVID-19 pandemic.

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

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

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

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.

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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and (ii) strategic transactions, including potential alliances and collaborations focused on markets outside the United States, as well as potential combinations (including by merger or acquisition) or other corporate transactions.

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.

We believe our ability to fund our activities in the long term will be highly dependent upon (i) our ability to execute on the growth strategy of our hemodialysis concentrates business, (ii) our ability to achieve profitability, and (iii) our ability to identify, develop, in-license, or acquire new products in developing our renal care product portfolio.

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Even if we are able to raise sufficient capital, such financings may only be available on unattractive terms, or result in significant dilution of stockholders’ interests and, in such event, the market price of our common stock may decline.

Management evaluated it's going concern by reviewing the Company's operational plans, which include executing on the projected financial information, including price increases, acquisition of new customers, projected growth of margins and cost containment activities.

Based on the currently available working capital and expectation of the ability of management to execute on the Company's operational plans noted above, 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.

Additionally, the Company's plans include raising capital, if needed, by using the $11 million remaining on its ATM facility or other methods or forms of financings, subject to existing limitations.

In 2023, the Company was 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 December 31, 2023, the Company is in compliance with all covenants (See Note 17 to the consolidated financial statements included elsewhere in this Form 10-K for more information on our debt facility).

Global Economic Considerations

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, 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 the occurrence of natural disasters and public health crises.

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

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

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

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

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.

Cash Used in Operating Activities

Net cash used in operating activities was $9.4 million for the year ended December 31, 2023.

The net loss for this period was higher than net cash used in operating activities by $1.3 million, which was primarily attributable to non-cash expenses of $3.9 million, consisting primarily of $2.0 million of amortization of the right to use assets, $0.6 million of depreciation and amortization, $0.6 million of inventory reserves, $0.4 million of debt financing cost amortization and accretion of discount, $0.3 million of stock-based compensation, and a $2.6 million net change in assets and liabilities.

The net loss for this period was less than net cash used in operating activities by $1.0 million, which was primarily attributable to increases of non-cash expenses of $6.3 million , consisting primarily of $2.0 million of changes to the right to use assets, $1.4 million of depreciation and amortization, $1.1 million of inventory reserves, $0.9 million of stock-based compensation, $1.1 million of debt financing cost amortization and accretion of discount and premium, and a $7.2 million net change in assets and liabilities.

Net cash used in operating activities was $16.9 million for the year ended December 31, 2022.

The net loss for this period was less than net cash used in operating activities by $0.9 million, which was primarily attributable to non-cash expenses of $4.0 million, consisting primarily of $1.8 million of amortization of the right to use assets, $0.7 million of depreciation and amortization, $0.9 million of stock-based compensation, $0.1 million of inventory reserves, $0.4 million of debt financing cost amortization and accretion of discount, and a $4.8 million net change in assets and liabilities.

Cash Provided by (Used in) Investing Activities

The net loss for this period was higher than net cash used in operating activities by $1.8 million, which was primarily attributable to non-cash expenses of $3.9 million , consisting primarily of $2.0 million of amortization of the right to use assets, $0.6 million of depreciation and amortization, $0.6 million of inventory reserves, $0.4 million of debt financing cost amortization and accretion of discount, $0.3 million of stock-based compensation, and a $2.1 million net change in assets and liabilities.

Cash Used in Investing Activities

Net cash used in investing activities was $3.0 million during the year ended December 31, 2023 .

The net cash provided was primarily due to the purchase of investments available-for-sale of $21.3 million, offset by $19.2 million sale of our available-for-sale investments and $0.3 million for the purchase of equipment.

Net cash provided by investing activities was $0.3 million during the year ended December 31, 2021.

The net cash provided was primarily due to the purchase of investments available-for-sale of $26.1 million, offset by $26.9 million sale of our available-for-sale investments and $0.5 million for the purchase of equipment.

Cash (Used in) Provided by Financing Activities

The net cash used was primarily due to the $12.4 million of cash paid in connection with the Evoqua acquisition, $5.7 million in purchases of our available-for-sale investments and $0.3 million for the purchase of equipment, offset by proceeds from the sale of our available-for-sale investments of $15.3 million .

Net cash used in investing activities was $2.4 million during the year ended December 31, 2022.

The net cash used was primarily due to the purchase of investments available-for-sale of $21.3 million , offset by $19.2 million sale of our available-for-sale investments and $0.3 million for the purchase of equipment.

Cash Provided by Financing Activities

Net cash provided by financing activities was $11.3 million during the year ended December 31, 2023.

The net cash provided by financing activities was primarily due to proceeds from issuance of equity securities of $29.8 million offset by payments on the Company's debt and short term note payable of $13.2 million.

Net cash used in financing activities was $2.2 million during the year ended December 31, 2021.

The net cash used in financing activities was primarily due to payments on the Company's debt and short term note payable.

The net cash provided by financing activities was primarily due to the net proceeds from issuance of equity securities of $14.9 million, primarily comprised of gross proceeds from the issuance of common stock of $13.8 million in connection with Armistice's exercise of the Prior Warrant, offset by payments on the Company's debt, short term note payable, and financing leases which aggregated $3.5 million during the year ended December 31, 2023 .

Net cash provided by financing activities was $16.2 million during the year ended December 31, 2022.

The net cash provided by financing activities was primarily due to net proceeds from issuance of equity securities of $29.8 million offset by payments on the Company's debt and short term note payable of $13.2 million .

Contractual Obligations and Other Commitments

We generally expect to satisfy our material cash requirements, including contractual obligations and commitments, with cash on hand and cash provided by operating activities.

See Notes 14, 15, 16, and 17 to the consolidated financial statements included elsewhere in this Form 10-K for additional disclosures.

Critical Accounting Estimates and Judgments

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Actual results could differ from these estimates.

Changes in estimates are

reflected in our financial statements in the period of change based upon on‑going actual experience, trends, or subsequent realization depending on the nature and predictability of the estimates and contingencies.

Interim changes in estimates are generally applied prospectively within annual periods.

Certain accounting estimates, including those concerning revenue recognition, allowance for doubtful accounts, inventory reserves, share based compensation, impairments of long‑lived assets, and accounting for income taxes, are considered to be critical in evaluating and understanding our financial results because they involve inherently uncertain matters and their application requires the most difficult and complex judgments and estimates.

Changes in estimates are reflected in our financial statements in the period of change based upon on‑going actual experience, trends, or subsequent realization depending on the nature and predictability of the estimates and contingencies.

and their application requires the most difficult and complex judgments and estimates.

These are described below.

For further information on our accounting policies, see Note 3 to our consolidated financial statements.

Fair Value Measurements

Nonrecurring Valuations.

The assets acquired through the Evoqua 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.

Revenue Recognition

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Shipping and handling costs associated with outbound freight related to contracts with customers are accounted for as a fulfillment cost and are included in cost of sales when control of the goods transfers to the customer.

Deferred License Revenue - Upfront fees received under distribution and license agreements have been deferred as a contract liability.

For all existing distribution and license agreements, the distribution and license agreement is not a distinct performance obligation from the underlying product sales.

In instances where regulatory approval of the product has not been established and we do not have sufficient experience with the foreign regulatory body to conclude that regulatory approval is probable, the revenue for the performance obligation is recognized over the term of the license agreement (over time recognition).

Conversely, when regulatory approval already exists or is probable, revenue is recognized at the point in time that the estimated product sales under the agreement occur.

Accounts Receivable

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The carrying amount of trade accounts receivable is reduced by an allowance for doubtful accounts that reflects our best estimate of accounts that may not be collected.

We review outstanding trade accounts receivable balances and based on our assessment of expected collections, we estimate the portion, if any, of the balance that may not be collected as well as a general valuation allowance for other accounts receivable based primarily on historical experience.

All accounts or portions thereof deemed to be uncollectible are written off to the allowance for doubtful accounts.

The Company reviews outstanding trade accounts receivable balances and based on its assessment of expected collections, the Company estimates the portion, if any, of the balance that may not be collected based on future forecasts, historical loss information, and current economic conditions.

All accounts or portions thereof deemed to be uncollectible are written off to the allowance for credit losses and credit loss expense.

Inventory is stated at the lower of cost or net realizable value.

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Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

Impairment losses on long-lived assets, such as real estate and equipment, are recognized when events or changes in circumstances indicate that the undiscounted cash flows estimated to be generated by such assets are less than their carrying value and, accordingly, all or a portion of such carrying value may not be recoverable.

losses are then measured by comparing the fair value of assets to their carrying amounts.

Impairment losses on long-lived assets, such as real estate and equipment and definite-lived intangible assets, are recognized when events or changes in circumstances indicate that the undiscounted cash flows estimated to be generated by such assets are less than their carrying value and, accordingly, all or a portion of such carrying value may not be recoverable.

Impairment losses are then measured by comparing the fair value of assets to their carrying amounts.

For the years ended December 31, 2023 and 2022, there were no impairments of long-lived assets.

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Intangible assets subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable.

Definite-lived intangible assets consist of our license fees related to the technology, intellectual property and marketing rights for Triferic covered under certain issued patents have been capitalized and are being amortized over the life of the related patents which is generally 17 years.

Deferred Revenue

In October 2014, the Company entered into a 10-year Distribution Agreement with Baxter and received an upfront fee of $20 million.

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

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

The Company recognized revenue of approximately $2.5 million and $1.9 million related to the Baxter agreement for each of the years ended December 31, 2022 and 2021, respectively.

In 2016, the Company entered into a distribution and license agreement with Wanbang (the "Wanbang Agreement") and received an upfront fee of $4.0 million.

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

The Company recognized revenue of approximately $0.2 million for both of the years ended December 31, 2022 and 2021.

Deferred revenue related to the Wanbang Agreement totaled $2.3 million and $2.5 million for the years ended December 31, 2022 and 2021, respectively.

On January 14, 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.

Under the terms of the Sun Pharma Agreements, Sun Pharma will be the exclusive development and commercialization partner for Triferic (dialysate) in India, and the Company will supply the product to Sun Pharma.

In consideration for the license, the Company received an upfront fee of $0.1 million, and will be eligible for milestone payments and royalties on net sales.

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

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

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

The Company recognized revenue of approximately $10,000 for both of the years ended December 31, 2022 and 2021.

Deferred revenue related to the Sun Pharma Agreement totaled $0.1 million as of December 31, 2022 and 2021, respectively.

On September 7, 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.

Under the terms of the Jeil Agreements, Jeil Pharmaceutical will be the exclusive development and commercialization partner for Triferic (dialysate) in South Korea, and the Company will supply the product to Jeil Pharmaceutical.

In consideration for the license, the Company received an upfront fee of $0.2 million, and will be eligible for milestone payments and royalties on net sales.

A Joint Alliance Committee, comprised of members from the Company and Jeil Pharmaceutical, will guide the development and execution for Triferic (dialysate) in South Korea.

Jeil Pharmaceutical will be responsible for all clinical and regulatory approval, as well as commercialization activities.

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

The Company recognized revenue of $18,158 and $10,000 during the year ended December 31, 2022 and

2021, respectively.

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

On 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.

Under the terms of the Drogsan Agreements, Drogsan Pharmaceuticals will be the exclusive commercialization partner for Triferic (dialysate) and Triferic AVNU in Turkey.

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

A Joint Alliance Committee, comprised of members from the Company and Drogsan Pharmaceuticals, will guide the execution for Triferic (dialysate) and Triferic AVNU in Turkey.

Drogsan Pharmaceuticals will be responsible for all regulatory approval and commercialization activities, and the Company will supply the product to Drogsan Pharmaceuticals for Turkey.

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

The Company recognized revenue of $15,000 and $7,500 during the year ended December 31, 2022 and 2021, respectively.

Deferred revenue related to the Drogsan Agreements totaled approximately $0.1 million as of December 31, 2022 and 2021 respectively.

Definite-lived intangible assets consist of our customer relationships intangible asset recorded in connection with the Evoqua Acquisition, which is being amortized over 20 years.

Stock-Based Compensation

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New accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that are adopted by us as of the specified effective date.

Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

Unless otherwise discussed, we believe that the impact of

recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

For further discussion on recent accounting pronouncements, please see Note 3, “ New Accounting Pronouncements ,” to our consolidated financial statements included in this Annual Report on Form 10‑K for additional information.

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Per §229.305 of Regulation S-K, the Company, designated a Smaller Reporting Company as defined in §229.10(f)(1) of Regulation S-K, is not required to provide the disclosure required by this Item.

Financial Statements and Supplementary Data.

The consolidated financial statements of the Registrant and other information required by this item are set forth beginning on page F‑1 immediately following the signature page hereof and incorporated herein by reference.

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

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-K

Item 7. Management’s Discussion and Analysis