What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-03-21 compared with 2023-03-30 · 509 added, 451 removed, 606 unchanged (61% of the section changed)

15 unchanged sentences

Under the supervision and with the participation of our Chief Executive Officer, our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2023.

In making their assessment of internal control over financial reporting, our management used the criteria described in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In making their assessment of internal control over financial reporting, our management used the criteria described in the 2013 Internal Control—Integrated

Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2023.

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Other Information.

(a) Appointment of Principal Accounting Officer

Effective March 20, 2024, the Company’s Senior Vice President of Finance, Jesse Neri, 46, has, in addition to his current responsibilities, assumed the role of principal accounting officer.

Neri will not receive any additional compensation related to this appointment.

Prior to joining the Company in October 2023, Mr.

Neri was Executive Director of Finance for Hemavant Sciences from August 2022 to October 2023.

Before joining Hemavant, he was Executive Director of Financial Planning and Analysis for Aruvant Sciences from August 2021 to August 2022.

From July 2020 to August 2021, he provided financial consulting services to a variety of life sciences companies.

Previously, he served in a variety of finance roles at Zyla Life Sciences from June 2015 to July 2020, including most recently as Senior Vice President of Finance from January 2020 to July 2020.

Neri has a B.S.

in Business Administration from Villanova University and an MBA from Drexel University.

Neri has no familial relationships with any executive officer or director of the Company.

There have been no transactions in which the Company has participated and in which Mr.

Neri had a direct or indirect material interest that would be required to be disclosed under Item 404(a) of Regulation S-K.

(b) Trading Arrangements

None of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter ended December 31, 2023, as such terms are defined under Item 408(a) of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

3 unchanged sentences

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that applies to all of our directors, employees and officers, including our principal executive officer, our principal financial officer and persons performing similar functions.

Our Code of Business Conduct and Ethics is available on our website at www.rockwellmed.com .

To the extent required, future material amendments or waivers relating to the Code of Business Conduct and Ethics will be disclosed on our web site referenced in this paragraph with four business days following the date of such amendment or waiver.

To the extent required by applicable rules, future material amendments or waivers relating to the Code of Business Conduct and Ethics will be disclosed on our web site referenced in this paragraph within four business days following the date of such amendment or waiver.

Executive Compensation.

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The information required by this Item 13 is incorporated herein by reference to information in our 2024 Proxy Statement, including under headings “Independence” and “Certain Relationships and Related Party Transactions.”

Principal Accounting Fees and Services.

Principal Accountant Fees and Services.

The information required by this Item 14 is incorporated herein by reference to information in our 2024 Proxy Statement, including under heading “Independent Accountants.”

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The following documents are filed as part of this report or were previously filed and incorporated herein by reference to the filing indicated.

3.1 Certificate of Incorporation, dated as of August 28, 2019 ( Ex hibit 3.3 to the Company’s Form 8-K filed August 30, 2019).

3.1 Certificate of Incorporation, dated as of August 28, 2019 (Exhibit 3.3 to the Company’s Form 8-K filed August 30, 2019).

3.2 Certificate of Amendment to Certificate of Incorporation of Rockwell Medical, Inc.

2 unchanged sentences

3.4 Amended and Restated Bylaws (Exhibit 3.1 to the Company’s Form 10-Q filed November 14, 2022).

4.1 Form of Common Stock Warrant, dated October 17, 2018 ( Exhibit 4.1 to the Company’s Form 8-K filed October 19, 2018).

4.1 Description of Securities (Exhibit 4.2 to the Company's Form 10-K filed on April 8, 2022)

4.2 Form of Warrant (Exhibit 4.1 to the Company's Form 8-K filed on September 25, 2020).

4.4 Form of Pre-Funded Warrant ( Exhib it 4.2 to the Company's Form 8-K filed on September 25, 2020).

4.3 Form of Pre-Funded Warrant (Exhibit 4.2 to the Company's Form 8-K filed on September 25, 2020).

4.4 Form of Warrant to Purchase Common Stock for Innovatus (Exhibit 4.1 to the Company's Form 8-K filed March 20, 2020).

2 unchanged sentences

4.7 Form of PIPE Pre-Funded Warrant (Exhibit 4.3 to the Company’s Form 8-K filed on June 2, 2022).

10.1 Registration Rights Agreement, dated October 17, 2018 (Exhibit 10.83 to the Company’s Form 8-K filed October 19, 2018).

10.2 Loan and Security Agreement, dated March 16, 2020, by and among the Company, Innovatus Life Sciences Lending Fund I, LP and the lenders party thereto (Exhibit 10.1 to the Company’s Form 10-Q filed on May 11, 2020).

10.3 First Amendment to Loan and Security Agreement, dated September 24, 2021, by and among the Company, Innovatus Life Sciences Lending Fund I, LP and the lenders party thereto (Exhibit 10.1 to the Company’s Form 8-K filed on September 30, 2021)

10.4 Second Amendment to Loan and Security Agreement dated November 10, 2022 by and among the Company, Innovatus Life Sciences Lending Fund I, LP and the lenders party thereto (Exhibit 10.3 to the Company’s Form 10-Q filed on November 14, 2022).

4.8 Common Stock Purchase Warrant, dated July 10, 2023, issued to Armistice Capital Master Fund Ltd.

(Exhibit 4 .1 to the Company's Form 10-Q filed on August 14, 2023).

4.9 Form of January 2024 Warrant to Purchase Common Stock issued to Innovatus Life Sciences Lending Fund I, LP (Exhibit 4.1 to the Company's Form 8-K filed on January 8, 2024).

10.1 Third Amendment to and Restatement of Loan and Security Agreement, dated January 1, 2024, by and among the Company, Rockwell Transportation, Inc., Innovatus Life Sciences Lending Fund I, LP and the lenders party thereto (Exhibit 10.1 to the Company's Form 8-K filed on January 8, 2024).

10.2 Sales Agreement, dated April 8, 2022, between Rockwell Medical, Inc.

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10.5 PIPE Securities Purchase Agreement, dated May 30, 2022, by and between the Company and the Purchaser signatory therein (Exhibit 10.2 to the Company’s Form 8-K filed on June 2, 2022).

10.6 Letter Agreement, dated July 10, 2023, by and between Rockwell Medical, Inc.

and Armistice Capital Master Fund Ltd.

(Exhibit 10.2 to the Company's Form 10-Q filed on August 14, 2023).

10.7 Registration Rights Agreement, dated June 2, 2022, by and between the Company and the Holder signatory thereto (Exhibit 10.3 to the Company’s Form 8-K filed on June 2, 2022).

10.10+ Products Purchase Agreement, dated July 1, 2019, by and between the Company and DaVita Inc.

(f/k/a DaVita Healthcare Partners Inc.) (Exhibit 10.1 to the Company’s Form 10-Q filed November 12, 2019).

10.11+ Amendment One to Products Purchase Agreement, dated April 6, 2022, by and between the Company and DaVita, Inc.

(Exhibit 10.2 to the Company’s Form 10-Q filed on May 16, 2022).

10.12 Exclusive Distribution Agreement, dated October 2, 2014, by and between the Company and Baxter Healthcare Corporation (with certain portions redacted pursuant to a confidential treatment order) (Exhibit 10.57 to the Company’s Form 10‑K filed March 3, 2015).

10.13 Investment Agreement, dated October 2, 2014, by and between the Company and Baxter Healthcare Corporation ( Exhibit 10.58 to the Company’s Form 10‑K filed March 3, 2015).

10.14 First Amendment to Exclusive Distribution Agreement, dated June 23, 2017, by and between the Company and Baxter Healthcare Corporation (with certain portions redacted pursuant to a confidential treatment request) ( Exhibit Company’s Form 10-Q filed August 9, 2017).

10.15+# Distribution Termination and Acquisition Agreement dated November 8, 2022 between the Company and Baxter Healthcare Corporation.

10.8+ Licensing Agreement, dated January 7, 2002, by and among the Company, Charak LLC and Dr.

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Ajay Gupta (Exhibit 10.37 to the Company's Form 10-K filed on March 18, 2019).

10.14 Asset Purchase Agreement dated July 10, 2023 by and between Rockwell Medical, Inc.

and Evoqua Water Technologies LLC (Exhibit 10.2 to the Company's Form 10-Q filed on August 14, 2023).

10.15+ Amended and Restated Products Purchase Agreement dated September 18, 2023 by and between Rockwell Medical, Inc.

and DaVita Inc.

(Exhibit 1 0.1 to the Company's Form 10-Q filed on November 14, 2023).

10.16* Rockwell Medical, Inc.

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10.19* Form of Restricted Stock Award Agreement (2007 Long Term Incentive Plan) (Director Version) (Exhibit 10.62 to the Company’s Form 10-K filed February 29, 2016).

10.26* Form of Restricted Stock Award Agreement (2007 Long Term Incentive Plan) (Executive Version) ( Exhibit 10.54 to the Company’s Form 10‑Q filed May 12, 2014).

10.27* Form of Performance Share Award Agreement March 2017 (Executive Version) ( Exhibit 10.64 to the Company’s Form 10-Q filed May 9, 2017).

10.20* Form of Performance Share Award Agreement March 2017 (Director Version) (Exhibit 10.65 to the Company’s Form 10-Q filed May 9, 2017).

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Amended and Restated 2018 Long Term Incentive Plan (Exhibit 10.3 to the Company’s Form 10-Q filed on August 14, 2023).

10.30* Form of Stock Option Agreement (2018 Long Term Incentive Plan) ( Exhibit 10.2 to the Company’s Form 10- Q filed on Nov ember 14, 2022 ).

10.22* Form of Stock Option Agreement (2018 Long Term Incentive Plan) (Exhibit 10.2 to the Company’s Form 10-Q filed on November 14, 2022).

10.23* Form of Contingent Option Agreement for Directors (2018 Long Term Incentive Plan) (Exhibit 10.76 to the Company’s Form 8-K filed March 21, 2018).

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and Mark Strobeck (Exhibit 10.7 to the Company’s Form 10-Q filed on August 15, 2022).

10.38* Russell Ellison Employment Agreement, dated April 17, 2020 ( Exhibit 10.1 to the Company’s Form 8-K filed on April 20, 2020).

10.39* Russell Skibsted Employment Agreement, dated September 15, 2020 ( Exhibit 10.1 to the Company’s Form 8-K filed on September 16, 2020).

10.30*# Employment Agreement dated July 21, 2021 between Rockwell Medical, Inc.

and Megan Timmins.

10.31# Rockwell Medical, Inc.

Amended and Restated Clawback Policy.

10.32# Rockwell Medical, Inc.

Statement of Company Policy Prohibiting Insider Trading.

21.1 List of Subsidiaries (Company's Form 10-K filed on March 31, 2021).

23.1# Consent of EisnerAmper LLP.

23.2# Consent of Marcum LLP.

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Mark Strobeck

/s/ Paul McGarry Senior Vice President, Finance and Chief Accounting Officer March 30, 2023

/s/ Jesse Neri Senior Vice President, Finance and Principal Accounting Officer March 21, 2024

Cooper Director March 21, 2024

/s/ Robert S.

Radie Director March 30, 2023

/s/ Joan Lau Director March 21, 2024

/s/ Allen Nissenson Director March 21, 2024

Allen Nissenson

/s/ Robert S.

Radie Director March 21, 2024

Ravich Director March 21, 2024

/s/ Andrea Heslin Smiley Director March 21, 2024

Andrea Heslin Smiley

Ravich Director March 30, 2023

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm - EisnerAmper LLP (PCAOB Identification Number 274 )

Report of Independent Registered Public Accounting Firm - Marcum LLP

Consolidated Balance Sheets at December 31, 2023 and 2022

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Notes to the Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - EISNERAMPER LLP

To the Board of Directors and Stockholders of

Rockwell Medical, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Rockwell Medical, Inc.

and Subsidiaries (the “Company”) as of December 31, 2023, and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of the intangible asset acquired in the Evoqua asset acquisition

As described in Notes 3 and 4 to the consolidated financial statements, 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”).

At the closing of the transaction, the Company acquired assets, including an intangible asset, from Evoqua for consideration of $17.4 million and the transaction was accounted for as an asset acquisition.

The acquired intangible asset was a customer list valued on a relative fair value basis at $11.0 million on the acquisition date.

Establishing the relative fair value of the customer list intangible asset required management to first perform a fair value assessment, which was completed using a multi-period excess earnings method (“MPEEM”).

The method used to estimate the fair value of the acquired

intangible asset involved significant assumptions.

The significant assumptions applied by the Company in estimating the fair value of the acquired customer list intangible asset included cash flow projections, discount rates, and the estimated useful life of the customer relationships.

We identified the valuation of the acquired customer list intangible asset as a critical audit matter due to the significant judgement by management involved with developing the estimates to determine the fair value of the customer list intangible asset, specifically those relating to the projected cash flows, discount rates, and the estimated useful life of the customer relationships.

As such, there was a high degree of auditor judgement and subjectivity, and significant audit effort was required in performing procedures to evaluate management’s conclusions.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures include, among others, (i) obtaining an understanding of and evaluating the design of controls related to the valuation of the acquired customer list intangible asset;

and (ii) reading the Purchase Agreement and testing management’s process for estimating the fair value of the acquired customer list intangible asset, which included evaluating the appropriateness of the valuation models, testing the completeness, accuracy, and relevance of underlying data used in the models, and testing the reasonableness of significant assumptions, including cash flow projections, discount rates, and the estimated useful life of the customer relationships.

Evaluating the cash flow projections involved considering the current performance of the acquired assets, the consistency with external market and industry data, and whether these assumptions were consistent with other evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of the significant assumptions, including discount rates and the estimated useful life of customer relationships.

/s/ EisnerAmper LLP

We have served as the Company’s auditor since 2023.

EISNERAMPER LLP

West Palm Beach, Florida

March 21, 2024

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - MARCUM LLP

To the Stockholders and Board of Directors of

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Rockwell Medical Inc.

and Subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022 and 2021, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheet of Rockwell Medical Inc.

and Subsidiaries (the “Company”) as of December 31, 2022, the related consolidated statement of operations, comprehensive loss, changes in stockholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of Going Concern

As disclosed in Note 2 to the consolidated financial statements, the Company has experienced significant net losses since inception, has an accumulated deficit and has used significant cash flows for operations during 2022, which caused management to evaluate if those factors raised substantial doubt about the Company’s ability to continue as a going concern which could be mitigated through Management’s plan.

Management’s plan as disclosed in Note 2

includes increasing prices with some of its customers, entering into new distribution and purchase agreements with former Baxter customers, restructuring the Company’s contract with its largest customer in the concentrates business, and implementing certain cost cutting and containment measures, all of which are significant assumptions in the Company’s projections used in its evaluation of going concern.

The Company’s management has exercised significant judgment in their determination of how existing accounting principles generally accepted in the United States of America should be applied to the evaluation of going concern, the associated financial statement presentation and note disclosures relating to substantial doubt about the Company’s ability to continue as a going concern.

We identified the evaluation of the Company’s ability to continue as a going concern as a critical audit matter due to the nature and extent of audit effort required to obtain sufficient appropriate audit evidence to address the risks of material misstatement related to the disclosure of the Company’s liquidity and ability to continue as a going concern for at least the next twelve months in the consolidated financial statements.

The nature and extent of audit effort required to address the matter included significant involvement of more experienced engagement team members.

The primary procedures we performed to address this critical audit matter included the following:

• Understand management’s process and related internal controls in conducting the evaluation of going concern, including preparing projections.

• We examined the executed Amendment to the Products Purchase Agreement and analyzed the terms in the agreement to the projected financial information, such as the projected revenue and gross margins.

• We evaluated and tested management’s assumptions, including, but not limited to, projected price increases to subsequent customer activity to validate the significant assumptions in the projected financial information, such as the projected revenue, gross margins, growth rates and operating expenses.

• We examined the executed Distribution Termination and Acquisition Agreement and analyzed the terms in the agreement to the significant assumptions in the projected financial information, such as the projected revenue and gross margins from customers reacquired under this agreement.

• We examined the executed Second Amendment to the Loan and Security Agreement and tested management’s inputs and calculations of compliance with the projected required financial covenants, such as, concentrate revenue and minimum cash requirements.

• We tested certain assumptions for reasonableness to test the changes to the expected cash flows.

• We concluded on the probability of success of management’s plan.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Marcum LLP

(PCAOB ID 688)

We have served as the Company’s auditor since 2018.

We served as the Company’s auditor from 2018 to 2023.

Chicago, Illinois

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CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

(In thousands, except share and par value amounts)

2023 December 31,

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Accounts Receivable, net of a reserve of $ 81 for 2023 and $ 33 for 2022

Inventory 5,814 4,076

Inventory, net 5,871 5,814

Prepaid and Other Current Assets 1,063 1,745

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Inventory, Non-Current 178 1,276

Right of Use Assets, net 6,411 7,737

Right of Use Assets - Operating, net 2,713 3,943

Right of Use Assets - Financing, net 1,903 2,468

Intangible Assets, net 10,759 —

Goodwill 921 921

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LIABILITIES AND STOCKHOLDERS’ EQUITY

Insurance Financing Note Payable $ 244 $ 503

Accounts Payable 4,516 4,053

Accrued Liabilities 7,149 7,702

Lease Liability - Current 2,005 2,004

Deferred License Revenue 1,731 2,171

Term Loan - Net of Issuance Costs 1,631 7,381

Insurance Financing Note Payable 503 437

Deferred Consideration, Current 2,500 —

Lease Liabilities - Operating, Current 1,381 1,483

Lease Liabilities - Financing, Current 558 522

Deferred License Revenue, Current 46 1,731

Term Loan, Current - Net of Issuance Costs and Premium Accretion — 1,631

Customer Deposits 243 66

Total Current Liabilities 16,637 17,691

Lease Liability - Long-Term 4,669 5,887

Term Loan, Net of Issuance Costs 7,555 13,186

Lease Liabilities - Operating - Long-Term 1,433 2,581

Lease Liabilities - Financing - Long-Term 1,530 2,088

Term Loan - Long-Term, Net of Issuance Costs and Premium Accretion 8,293 7,555

Deferred License Revenue - Long-Term 475 2,600

Deferred Consideration - Long-Term 2,500 —

Long Term Liability - Other 14 14

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Stockholders’ Equity:

Preferred Stock, $ 0.0001 par value, 2,000,000 shares authorized, 15,000 and nil shares issued and outstanding at December 31, 2022 and 2021, respectively

Common Stock, $ 0.0001 par value, 170,000,000 shares authorized, 12,163,673 and 8,544,225 shares issued and outstanding at December 31, 2022 and 2021, respectively

Preferred Stock, $ 0.0001 par value, 2,000,000 shares authorized, 15,000 shares issued and outstanding at December 31, 2023 and 2022

Common Stock, $ 0.0001 par value, 170,000,000 shares authorized, 29,130,607 and 12,163,673 shares issued and outstanding at December 31, 2023 and 2022

Additional Paid-in Capital 418,487 402,701

Accumulated Deficit ( 397,198 ) ( 388,759 )

Accumulated Other Comprehensive Income 163 52

Accumulated Other Comprehensive (Loss) Income ( 1 ) 163

Total Stockholders’ Equity 21,291 14,106

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CONSOLIDATED STATEMENTS OF OPERATIONS

For The Years Ended December 31, 2022 and 2021

(Dollars in thousands, except per share amounts)

(In thousands, except share and per share amounts)

Years Ended December 31,

Net Sales $ 83,612 $ 72,810

Cost of Sales 74,908 68,733

Gross (Loss) Profit 4,077 ( 2,420 )

Gross Profit 8,704 4,077

Research and Product Development 1,107 3,119

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Interest Income 211 33

Total Other Expense ( 1,899 ) ( 2,338 )

Total Other Expense, net ( 1,769 ) ( 1,899 )

Net Loss $ ( 8,439 ) $ ( 18,679 )

Basic and Diluted Net Loss per Share $ ( 1.89 ) $ ( 3.83 )

Basic and Diluted Weighted Average Shares Outstanding 9,866,844 8,526,186

Net Loss Per Share Attributable to Common Stockholders - Basic and Diluted $ ( 0.37 ) $ ( 1.31 )

Weighted Average Number of Shares of Common Stock Outstanding - Basic and Diluted 23,322,915 14,304,512

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

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For The Years Ended December 31, 2022 and 2021

(Dollars in Thousands)

(In thousands)

Years Ended December 31,

Net Loss $ ( 8,439 ) $ ( 18,679 )

Unrealized Gain (Loss) on Available-for-Sale Investments 114 ( 6 )

Unrealized (Loss) Gain on Available-for-Sale Investments ( 159 ) 114

Foreign Currency Translation Adjustments ( 5 ) ( 3 )

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For The Years Ended December 31, 2022 and 2021

(Dollars in Thousand)

(In thousands, except share amounts)

PREFERRED STOCK COMMON STOCK ADDITIONAL PAID-IN CAPITAL ACCUMULATED

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

Warrant Modification Expense — — 14,091 — 107 — — 107

Issuance of Common Stock, net of Issuance Costs / Public offering — — 844,613 — 14,893 — — 14,893

Issuance of Common Stock, net of Issuance Costs / At-the-market offerings — — 7,500 — 15 — — 15

Issuance of Preferred Stock, net of offering costs 15,000 — — — 14,916 — — 14,916

Issuance of Common Stock upon exercise of Pre-Funded Warrants — — 2,756,377 — — — — —

Stock-based Compensation — — — — 315 — — 315

4 unchanged sentences

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

Issuance of Common Stock, net of Issuance Costs / Public offering — — 844,613 — 14,893 — — 14,893

Issuance of Common Stock in connection with exercise of Prior Warrant and Pre-Funded Warrants, net of offering costs — — 16,200,990 2 13,718 — — 13,720

Issuance of Common Stock, net of Issuance Costs / At-the-market offerings — — 640,944 — 1,136 — — 1,136

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

Issuance of common stock upon exercise of prefunded warrants — — 2,756,377 — — — — —

Stock-based Compensation — — — — 932 — — 932

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For The Years Ended December 31, 2022 and 2021

(Dollars in Thousands)

(In thousands)

Years Ended December 31,

Cash Flows From Operating Activities:

4 unchanged sentences

Increase in Inventory Reserves 1,098 610

Amortization of Right of Use Asset 2,013 1,847

Amortization of Debt Financing Costs and Accretion of Debt Discount 369 369

Loss on Disposal of Assets ( 3 ) 8

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

Foreign Currency Translation Adjustment ( 3 ) 2

Changes in Assets and Liabilities:

Increase in Accounts Receivable, net ( 346 ) ( 1,742 )

Increase in Inventory ( 2,101 ) ( 656 )

Decrease in Other Assets 2,720 1,823

(Decrease) Increase in Accounts Payable 314 ( 416 )

Decrease in Lease Liability ( 1,903 ) ( 1,771 )

(Decrease) Increase in Other Liabilities 2,534 ( 48 )

Decrease in Deferred License Revenue ( 3,826 ) ( 2,033 )

Non-cash Lease Expense from Right of Use Assets 2,010 2,013

Amortization of Debt Financing Costs and Accretion of Debt Discount and Premium 1,107 369

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

Realized Gain on Sale of Investments ( 321 ) ( 4 )

Changes in Assets and Liabilities:

Accounts Receivable, net ( 4,642 ) ( 346 )

Inventory 1,176 ( 2,101 )

Prepaid and Other Assets 1,410 2,720

Accounts Payable 463 314

Lease Liabilities ( 1,465 ) ( 1,421 )

Accrued and Other Liabilities ( 376 ) 2,534

Deferred License Revenue ( 3,810 ) ( 3,826 )

Changes in Operating Assets and Liabilities ( 7,244 ) ( 2,126 )

Cash Used In Operating Activities ( 9,412 ) ( 16,929 )

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Purchase of Equipment ( 284 ) ( 281 )

Cash (Used In) Provided By Investing Activities ( 2,396 ) 311

Cash Paid in Connection with Evoqua Asset Acquisition ( 12,361 ) —

Cash Used In Investing Activities ( 3,045 ) ( 2,396 )

Cash Flows From Financing Activities:

Payments on Short Term Note Payable ( 1,443 ) ( 1,530 )

Payments on Debt ( 2,000 ) ( 11,750 )

Proceeds from the Issuance of Common Stock / Public Offering 15,016 —

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

Proceeds from the Issuance of Common Stock / At-the Market Offerings 15,000 —

Offering Costs from the Issuance of Common Stock / At-the Market Offerings ( 85 ) —

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

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

Cash Provided By (Used in) Financing Activities 16,632 ( 2,179 )

Payments on Insurance Financing Note Payable ( 992 ) ( 1,443 )

Payments on Financing Lease Liabilities ( 522 ) ( 482 )

Proceeds from Issuance of Common Stock 14,861 15,016

Offering Costs from Issuance of Common Stock ( 5 ) ( 106 )

Proceeds from Issuance of Preferred Stock — 15,000

Offering Costs from Issuance of Preferred Stock — ( 85 )

Cash Provided By Financing Activities 11,342 16,150

Effect of Exchange Rate Changes on Cash and Cash Equivalents ( 4 ) ( 3 )

Decrease In Cash and Cash Equivalents ( 1,119 ) ( 3,178 )

Cash and Cash Equivalents At Beginning Of Period 13,280 48,682

Cash and Cash Equivalents At End Of Period $ 10,102 $ 13,280

Cash and Cash Equivalents At Beginning Of Year 10,102 13,280

Cash and Cash Equivalents At End Of Year $ 8,983 $ 10,102

Supplemental Disclosure of Cash Flow Information:

Cash Paid for Interest $ 1,209 $ 1,470

Supplemental Disclosure of Noncash Investing Activities:

Change in Unrealized Loss on Marketable Securities Available-for-Sale $ 114 $ ( 6 )

Insurance Financing Note Payable $ 503 $ 437

Supplemental Disclosure of Noncash Investing and Financing Activities:

Change in Unrealized (Loss) Gain on Marketable Securities Available-for-Sale $ ( 159 ) $ 114

Increase in Prepaid Assets from Insurance Financing Note Payable $ 733 $ 503

Fair Value of Warrants issued related to Debt Financing $ — $ 501

Deferred Consideration from Evoqua Asset Acquisition $ 5,000 $ —

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

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Description of Business

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 Medical, Inc.

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

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

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

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

Food and Drug Administration ("FDA").

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.

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, 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 had established international partnerships with companies and sought to develop and commercialize Triferic outside the United States and was working closely with these international partners to develop and commercialize Triferic in their respective regions.

During the year ended December 31, 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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As of December 31, 2023, Rockwell 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, 2022 was approximately $ 17.4 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.

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

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

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

Certain costs are subject to a cap.

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

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

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

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

The Company initially issued 7,500 shares of a newly designated series of preferred stock, which is designated “Series X Convertible Preferred Stock” (the “Series X Preferred Stock”) for gross proceeds of $ 7,500,000 .

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 $ 7,500,000 .

Tranche was conditioned upon the Company raising an additional $ 15,000,000 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 year ended December 31, 2022, the Company sold 7,500 shares of its common stock pursuant to the Sales Agreement for gross proceeds of $ 15,135 , at a weighted average selling price of approximately $ 2.02 The Company paid $ 378 in commissions and offering fees.

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

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

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

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

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

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

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

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 for more information on our debt facility).

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

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.

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

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

As of December 31, 2022, the Company is in compliance with all financial covenants (See Note 16 for further detail).

Global Economic Conditions

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

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

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.

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.

Global Economic Conditions - Risks and Uncertainties

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, 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.

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Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Rockwell Transportation, Inc.

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

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Rockwell Transportation, Inc.

and Rockwell Medical India Private Limited.

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All intercompany balances and transactions have been eliminated in consolidation.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation, including the reclassification of lease right-of-use assets into Right of Use Assets - Operating, Net and Right of Use Assets - Financing, Net and lease liabilities into Lease Liabilities - Operating, Current, Lease Liabilities - Financing, Current, Lease Liabilities - Operating, Long-Term, and Lease Liabilities - Financing, Long-Term.

Additionally, amounts from the Changes in Lease Liabilities were reclassified to Payments on Financing Lease Liabilities on the statement of cash flows.

Revenue Recognition

The Company recognizes revenue under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers.

The Company recognizes revenue under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, issued by the Financial Accounting Standards Board ("FASB") .

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.

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

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).

For a discussion of significant market segments and customers, see Note 6.

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).

The consideration, including any discounts, is allocated between separate products and services based on their stand-alone selling prices.

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Conversely, when regulatory approval already exists or is probable, revenue is recognized at the point in time that control of the product transfers to the customer.

The Company received upfront fees under five distribution and license agreements that have been deferred as a contract liability.

For the majority of the Company’s international customers, the Company recognizes revenue at the shipping point, which is generally the Company’s plant or warehouse.

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 estimated at the time of sale.

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

Deferred License Revenue

The Company received upfront fees under five distribution and license agreements that have been deferred as a contract liability and presented on the accompanying consolidated balance sheets as deferred license revenue.

The amounts received from Wanbang Biopharmaceuticals Co., Ltd.

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("Jeil Pharma") and Drogsan Pharmaceuticals ("Drogsan Pharma") are recognized as revenue over the estimated term of the applicable distribution and license agreement as regulatory approval was not received and the Company did not have sufficient experience in China, India, South Korea and Turkey, respectively, to determine that regulatory approval was probable as of the execution of the agreement.

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

On November 9, 2022, Rockwell reacquired its distribution rights to its hemodialysis concentrates products from Baxter and 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 terminated December 31, 2022.

Rockwell agreed to provide certain services to a group of Baxter customers until March 31, 2023.Remaining upfront fees will continue to be recognized through March 31, 2023 as Rockwell continues to have product sales obligations to a group of specific Baxter customers.

For the majority of the Company’s international customers, the Company recognizes revenue at the shipping point, which is generally the Company’s plant or warehouse.

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.

There were no such adjustments for the periods reported.

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

During the year ended December 31, 2023, the amounts received from Wanbang were accelerated out of deferred license revenue and into revenue upon notice that the development effort was terminated.

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 year ended December 31, 2023, all remaining deferred revenue relating to the Baxter agreement was recognized as revenue.

For additional information related to the Company's deferred license revenue, see Note 10.

Product Purchase Agreements

On September 18, 2023, the Company and its 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 of $ 0.4 million to Rockwell on or after December 1, 2023, which was recorded as revenue recognized during the year ended December 31, 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.

Disaggregation of revenue

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

In thousands of US dollars ($) Year Ended December 31, 2022

In thousands Year Ended December 31, 2023

Products By Geographic Area Total U.S.

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Net Revenue $ 83,612 $ 74,343 $ 9,269

In thousands of US dollars ($) Year Ended December 31, 2021

In thousands Year Ended December 31, 2022

Products By Geographic Area Total U.S.

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Net Revenue $ 72,810 $ 65,765 $ 7,045

For the years ended December 31, 2022 and 2021, license fee revenue was $ 2.7 million and 2.2 million respectively.

For the years ended December 31, 2022 and 2021, product sales revenue was $ 70.1 million and $ 59.7 million, respectively.

Contract balances

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

In thousands of US dollars ($) December 31, 2022 December 31, 2021

Receivables, which are included in "Trade and other receivables" $ 6,259 $ 5,913

Contract liabilities $ 4,331 $ 8,157

There were no impairment losses recognized related to any receivables arising from the Company’s contracts with customers for the years ended December 31, 2022 and 2021.

For the years ended December 31, 2022 and 2021, the Company did no t recognize material bad-debt expense and there were no material contract assets recorded on the consolidated balance sheets as of December 31, 2022 and 2021.

In thousands December 31, 2023 December 31, 2022 January 1, 2022

Accounts Receivable, net $ 10,901 $ 6,259 $ 5,913

Contract Liabilities, which are included in deferred license revenue $ 521 $ 4,331 $ 8,157

There were no other material contract assets recorded on the consolidated balance sheets as of December 31, 2023 and 2022.

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

The contract liabilities primarily relate to upfront payments and consideration received from customers that are received in advance of the customer assuming control of the related products.

The contract liabilities primarily relate to upfront fees under distribution and license agreements with Baxter, Wanbang, Sun Pharma, Jeil Pharma, and Drogan Pharma.

Transaction price allocated to remaining performance obligations

For the year ended December 31, 2022, revenue recognized from performance obligations related to prior periods was not material.

For each of the years ended December 31, 2023 and 2022, the Company recognized $ 3.8 million as revenue from amounts classified as contract liabilities (i.e., deferred license revenue) as of December 31, 2022 and 2021, respectively.

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 $ 0.5 million and $ 2.9 million as of December 31, 2023 and 2022, respectively.

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The Company applies the practical expedient in ASC 606, paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

Reverse Stock Split

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

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

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

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

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

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

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and reported amounts of expenses during the reporting period.

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

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

Actual results could differ from those estimates.

The most significant accounting estimates inherent in the preparation of our financial statements include estimates associated with fair value and classification of warrants, revenue recognition, allowance for doubtful accounts, inventory reserves, accrued expenses, deferred license revenue, stock-based compensation, impairments of long-lived assets, and accounting for income taxes.

The most significant accounting estimates inherent in the preparation of the financial statements include estimates associated with fair value and classification of warrants, revenue recognition, allowance for credit losses, inventory reserves, accrued expenses, deferred license revenue, stock-based compensation, valuations and impairments of long-lived assets, and accounting for income taxes.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents excluding items held in Investments - Available for Sale as noted below.

The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents.

Cash and cash equivalents include cash held in banks, money market mutual funds and unrestricted certificates of deposit.

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Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

Unobservable inputs which are supported by little or no market activity ad values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

Investments – Available for Sale

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Accounts receivable are stated at invoice amounts.

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.

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

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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Leasehold improvements are amortized using the straight‑line method over the shorter of the useful lives or the related lease term.

Impairment of Long-lived Assets

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.

Impairment of Long-lived Assets and Goodwill

Long-lived assets, such as property and equipment and definite-lived intangible 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 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.

Rockwell reviews goodwill and indefinite-lived intangible assets at least annually for possible impairment.

Goodwill and indefinite-lived intangible assets are reviewed for possible impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit or the indefinite-lived intangible assets below their carrying values.

Rockwell completed its annual impairment tests as of December 31, 2023 and 2022, and determined that no adjustment for impairment of goodwill or intangible assets was required during the years ended December 31, 2023 and 2022.

Goodwill and Intangible Assets

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Intangible assets with indefinite useful lives are measured at their respective fair values as of the acquisition date.

Rockwell reviews goodwill and indefinite-lived intangible assets at least annually for possible impairment.

Intangible assets with definite lives are amortized over their estimated useful lives.

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 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 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.

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

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

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

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

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

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

Deferred revenue related to the Distribution Agreement totaled $ 1.5 million and $ 5.2 million as of December 31, 2022 and 2021, respectively.

During the year ended December 31, 2016, the Company entered into a distribution agreement with Wanbang Biopharmaceuticals (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 during each of the years ended December 31, 2022 and 2021.

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

In January 2020, the Company entered into license and supply agreements with Sun Pharma (the "Sun Agreements"), for the rights to commercialize Triferic (dialysate) in India.

Under the terms of the Sun 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 each 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.

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.

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 $ 0.4 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 years 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.

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.

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 years 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.

Goodwill was $ 0.9 million as of December 31, 2023 and December 31, 2022.

Definite-lived intangible assets consist of our customer list associated with the Evoqua asset acquisition and license fees related to the technology, intellectual property and marketing rights for Triferic covered under certain issued patents.

Definite-lived intangible assets have been capitalized and are being amortized over their useful life.

Rockwell accounts for income taxes in accordance with the provisions of ASC 740‑10, Income Taxes.

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The effects of tax positions are generally recognized in the financial statements consistent with amounts reflected in returns filed, or expected to be filed, with taxing authorities.

For tax positions that the Company considers to be uncertain, current and deferred tax liabilities are recognized, or assets derecognized, when it is probable that an income tax liability has been incurred and the amount of the liability is reasonably estimable, or when it is probable that a tax benefit, such as a tax credit or loss carryforward, will be disallowed by a taxing authority.

For tax positions that the Company considers to be uncertain,

current and deferred tax liabilities are recognized, or assets derecognized, when it is probable that an income tax liability has been incurred and the amount of the liability is reasonably estimable, or when it is probable that a tax benefit, such as a tax credit or loss carryforward, will be disallowed by a taxing authority.

The amount of unrecognized tax benefits related to current tax positions is insignificant.

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Service-Based Stock Unit Awards

The Company expenses stock-based compensation to employees over the requisite service period based on the estimated grant-date fair value of the awards.

For stock-based compensation awards to non-employees, the Company re-measures the fair value of the non-employee awards at each reporting period prior to vesting and finally at the vesting date of the award.

Changes in the estimated fair value of these non-employee awards are recognized as compensation expense in the period of change.

The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the grant-date fair value of the awards.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

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The fair value related to the awards with market conditions is recorded as stock-based compensation expense over the period from date of grant to the settlement date regardless of whether the market capitalization is achieved.

The Company accounts for its leases under ASC 842, Leases .

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

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

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

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

In calculating the right-of-use assets and lease liabilities, the Company elected the practical expedient to combine lease and non-lease components.

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

Commitments and Contingencies

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The Company expenses legal costs associated with loss contingencies as they are incurred.

Restatement of Loss Per Share

Loss per share for the year ended December 31, 2022 was recalculated and restated and is presented on a comparable basis with the year ended December 31, 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 loss per share calculation in accordance with 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 loss 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.

Year Ended December 31,

As Previously Reported:

Net Loss Per Share Attributable to Common Stockholders - Basic and Diluted $ ( 1.89 )

Weighted Average Number of Shares of Common Stock Outstanding - Basic and Diluted 9,866,844

Net Loss Per Share Attributable to Common Stockholders - Basic and Diluted $ ( 1.31 )

Weighted Average Number of Shares of Common Stock Outstanding - Basic and Diluted 14,304,512

Loss Per Share

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

Basic net loss per share of common stock excludes dilution and is computed by dividing the net loss by the weighted average number of shares outstanding during the period.

Basic net loss per share of common stock excludes dilution and is computed by dividing the net loss, less accretion of the Series X Preferred Stock, by the weighted average number of shares outstanding during the period.

Diluted net loss per share of common stock reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that are then shared in the earnings of the entity unless inclusion of such shares would be anti-dilutive.

The Company has only incurred losses, therefore, basic and diluted net loss per share is the same.

Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share for the years ended December 31, 2022 and 2021 were as follows:

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 years ended December 31, 2023 and 2022, as the effect would be to reduce the net loss per share.

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

As of December 31,

Warrants to purchase common stock 3,793,388 10,196,268

Convertible Preferred Stock 1,363,636 1,363,636

Options to purchase common stock 1,328,621 1,206,905

Unvested restricted stock awards 891 7,118

Unvested restricted stock units 258,885 125,000

Convertible Preferred Stock 1,363,636 —

Common stock issuable under pre-funded warrants 6,300,000 —

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

Unvested restricted stock awards 891 891

Total 6,745,421 12,892,700

Included within the weighted average shares of common stock outstanding for the year ended December 31, 2022 are 6,300,000 shares of common stock issuable upon the exercise of Pre-Funded Warrants (See Note 12), as the warrants were exercisable at any time for nominal consideration and, as such, the shares were considered outstanding for the purpose of calculating basic and diluted net loss per share attributable to common stockholders.

There were no unexercised Pre-Funded Warrants as of December 31, 2023.

The following table presents the calculation of basic and diluted EPS:

Years Ended December 31,

Net Loss $ ( 8,439 ) $ ( 18,679 )

Accretion of Series X Preferred Stock ( 150 ) —

Net Loss Attributable to Common Stockholders $ ( 8,589 ) $ ( 18,679 )

Weighted Average Number of Shares of Common Stock Outstanding - Basic and Diluted 23,322,915 14,304,512

Net Loss Per Share Attributable to Common Stockholders - Basic and Diluted $ ( 0.37 ) $ ( 1.31 )

Accumulated Other Comprehensive Income

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Accumulated other comprehensive income consists of unrealized gains and losses on available‑for‑sale investment debt securities and foreign currency translation adjustments.

Adoption of Recent Accounting Pronouncements

Adoption of Recent Accounting Pronouncements and New Accounting Pronouncements

The Company continually assesses any new accounting pronouncements to determine their applicability.

When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study

to determine the consequences of the change to its consolidated financial statements and assures that there are proper controls in place to ascertain that the Company’s consolidated financial statements properly reflect the change.

When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequences of the change to its consolidated financial statements and assures that there are proper controls in place to ascertain that the Company’s consolidated financial statements properly reflect the change.

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

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

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

In addition, ASC 326 requires expected credit 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 consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures , which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance.

The amendments in this ASU are effective

for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is in the process of determining the effect this ASU will have on the consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures , which updates income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

This ASU also includes certain other amendments to improve the effectiveness of income tax disclosures.

The amendments in this ASU are effective for annual periods beginning after December 15, 2024.

Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.

The Company is in the process of determining the effect this ASU will have on the consolidated financial statements.

Asset Acquisition

On July 10, 2023, the Company completed the Evoqua Asset 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 $ 12.4 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 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 flows, 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 relative fair value, the Company determined the fair value of the equipment using a cost approach, which considered 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 year ended December 31, 2023, the Company recorded amortization of its customer relationship intangible asset of $ 0.3 million, resulting in a net intangible asset of $ 10.8 million as of December 31, 2023.

Estimated future amortization expense on the Company's customer relationships intangible asset as of December 31, 2023 is as follows (table in thousands):

Year ended December 31:

Thereafter 7,999

Total $ 10,759

Investments - Available-for-Sale

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Bonds $ 11,315 $ 75 $ — $ — $ 11,390

The fair value of investments available-for-sale are determined using quoted market prices from daily exchange-traded markets based on the closing price as of the balance sheet date and are classified as Level 1, as described in Note 3, Fair Value Measurement to our consolidated financial statements.

As of December 31, 2022 and 2021, the amortized cost and estimated fair value of our available-for-sale securities were due in one year or less.

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 December 31, 2023 and 2022, our available-for-sale securities were due in one year or less.

Significant Market Segments and Customers

Rockwell 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.

One customer, DaVita, Inc.

("DaVita"), accounted for 46 % of Rockwell's sales in 2022 and 47 % of its sales in 2021 (see Note 12).

Rockwell's accounts receivable from DaVita were $ 1.9 million and $ 1.0 million as of December 31, 2022 and 2021, respectively.

In October 2014, Rockwell entered into the Baxter Distribution Agreement, which was amended in June 2017 and March 2020, pursuant to which Baxter received exclusive distribution rights for the Company's concentrate products in the United States, a commitment by Rockwell to maintain a specified manufacturing capacity for Baxter, a cap upon the net amount of reimbursable transportation expenses and modified extension terms.

Rockwell's domestic customer contracts for the supply of dialysis concentrate products that permitted assignment to Baxter without consent had been assigned to Baxter.

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.

Rockwell agreed to provide certain services to a group of Baxter customers until March 31, 2023.Under the exclusive distribution agreement, Baxter distributed and commercialized Rockwell’s hemodialysis concentrates products and provided customer service and order delivery to nearly all United States customers.

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

For 2022 and 2021, Rockwell's direct sales to Baxter aggregated approximately 29 % and 26 % of sales, respectively, and the Company had a receivable from Baxter of $ 2.3 million and $ 3.5 million as of December 31, 2022 and 2021, respectively.

DaVita and the accounts previously administered by Baxter are important to Rockwell's business, financial condition and results of operations.

Rockwell's customer mix is diverse, with most customer sales concentrations under 10%, however, two customers, DaVita and Baxter, accounted for approximately 47 % and nil , respectively, of Rockwell's total net product sales in 2023 and 46 % and 29 %, respectively, of its total net product sales in 2022.

Rockwell's accounts receivable from DaVita and Baxter were $ 2.1 million and nil , respectively, as of December 31, 2023 and $ 1.9 million and $ 2.3 million, respectively, as of December 31, 2022.

For additional information regarding the Company's contracts with DaVita and Baxter, see Notes 3 and 10, respectively.

DaVita is important to Rockwell's business, financial condition and results of operations.

The loss of any significant accounts could have a material adverse effect on the Company's business, financial condition and results of operations.

No other domestic customers accounted for more than 10% its sales in any of the last two years.

No other current customer accounted for more than 10% of sales in any of the last two years.

The majority of Rockwell's international sales in each of the last two years were sales to domestic distributors that were resold to end users outside the United States.

Rockwell's sales to foreign customers and distributors accounted for approximately 9 % and 10 % of its total sales in 2022 and 2021, respectively.

One international customer, Nipro Medical Corporation, accounted for 7 % and 8 % of its total sales for 2022 and 2021, respectively.

Distribution Agreement

In October 2014, Rockwell entered into the Distribution Agreement with Baxter, pursuant to which Baxter became Rockwell's exclusive agent for commercializing its hemodialysis concentrate and ancillary products in the United States and various foreign countries for an initial term of 10 years ending October 2, 2024.

Rockwell retained sales, marketing and distribution rights for its hemodialysis concentrate products for its international customers and in those countries in which it had an established commercial presence.

Pursuant to the Distribution Agreement, Rockwell received an upfront fee of $ 20 million in October 2014.

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

Rockwell recognized revenue associated with the upfront fee totaling $ 2.5 million and $ 1.9 million for the years ended December 31, 2022, and 2021, respectively.

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

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

Rockwell agreed to provide certain services to a group of Baxter customers until March 31, 2023.Under the Distribution Agreement, Baxter distributed and commercialized Rockwell’s hemodialysis concentrates products and provided customer service and order delivery to nearly all United States customers.

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

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

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

Rockwell's sales to foreign customers and distributors accounted for approximately 9 % of its total sales in each of 2023 and 2022.

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

2023 December 31,

Inventory - Current Portion

Raw Materials $ 2,250 $ 3,351

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Finished Goods 3,270 2,112

Total $ 7,090 $ 5,599

As of December 31, 2022 and 2021, the Company classified $ 1.3 million and $ 1.5 million, respectively, of inventory as non-current all of which was related to Triferic raw materials.

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

The Company has discontinued its NDAs for Triferic and Triferic AVNU in the United States.

As a result, Rockwell reserved an additional $ 606,000 representing all remaining API and finished goods related to Triferic.

Total Current Inventory 5,871 5,814

Inventory - Long Term (1)

Total Inventory $ 6,049 $ 7,090

Represents inventory related to Triferic raw materials.

This Triferic inventory is expected to 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.

In 2023, the Company reserved $ 1.1 million of long-term inventory as a result of the termination of the Wanbang development effort.

As of December 31, 2023 and 2022, Rockwell had total Concentrate inventory aggregating $ 5.9 million and $ 5.8 million, respectively, against which Rockwell had reserved $ 25,000 and $ 25,000 , respectively.

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

2023 December 31,

Leasehold Improvements $ 1,423 $ 1,256

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Laboratory Equipment 807 807

Accumulated Depreciation ( 7,636 ) ( 7,103 )

Accumulated Depreciation and Amortization ( 8,804 ) ( 7,636 )

Net Property and Equipment $ 6,402 $ 2,194

Depreciation expense during the years ended December 31, 2022 and 2021 is as follows (table in thousands):

Depreciation expense $ 576 $ 668

Goodwill and Intangible Assets

Total goodwill was $ 0.9 million at each of December 31, 2022 and 2021.

Rockwell completed its annual impairment tests as of December 31, 2022 and 2021, and determined that no adjustment for impairment of goodwill was required during the years ended December 31, 2022 and 2021.

Depreciation and amortization expense for the years ended December 31, 2023 and 2022 was $ 1.2 million and $ 0.6 million, respectively.

Accrued Liabilities

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

Accrued Research & Development Expense $ 43 $ 366

2023 December 31,

Accrued Compensation and Benefits $ 2,413 $ 2,568

Accrued Unvouchered Receipts 1,663 585

Accrued Manufacturing Expense 1,064 —

Accrued Workers Compensation 254 306

Accrued Research & Development Expense — 43

Other Accrued Liabilities 1,755 4,200

Total Accrued Liabilities $ 7,149 $ 7,702

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.

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.

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 paid Baxter a fee, which was reflected as a reduction to revenue on the consolidated statements of operations, and was payable in two equal installments on January 1, 2023 and April 1, 2023, to reacquire its distribution rights to its hemodialysis concentrates products from Baxter and terminated the distribution agreement.

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

To ensure that customer needs continued to be met after January 1, 2023, Rockwell agreed to provide certain services to a group of Baxter's customers until March 31, 2023, and Baxter and Rockwell worked together to transition customers’ purchases of Rockwell’s hemodialysis concentrates through that date.

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.

The Company recognized $ 2.5 million of revenue associated with the upfront fee during the year ended December 31, 2022, and recognized the remaining revenue of $ 1.5 million during the year ended December 31, 2023.

The remaining agreements with Sun Pharam, Jeil Pharmaceutical, and Drogan Pharmaceuticals comprise the current and long-term portions of deferred license revenue on the consolidated balance sheet as of December 31, 2023.

Insurance Financing Note Payable

On July 3, 2022, the Company entered into a short-term note payable for $ 2.0 million, bearing interest at 5.40 % per annum to finance various insurance policies.

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

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

As of December 31, 2022, the Company's insurance note payable balance was $ 0.5 million and was paid fully in 2023.

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

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

As of December 31, 2023, the Company's insurance note payable balance was $ 0.2 million.

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

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

Preferred Stock

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

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

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

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

As a result, on June 16, 2022 the

Company issued an additional 7,500 shares of the Series X Preferred Stock to DaVita for gross proceeds of $ 7.5 million (by virtue of this transaction, DaVita rises to the level of related party).

As a result, on June 16, 2022, the Company issued an additional 7,500 shares of the Series X Preferred Stock to DaVita for gross proceeds of $ 7.5 million (by virtue of this transaction, DaVita rises to the level of related party).

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

If the Company’s common stock trades above $ 22.00 for a period of 30 calendar days, the accretion will thereafter cease.

As of December 31, 2023, the Series X Preferred Stock accreted a total of $ 0.2 million.

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

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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.

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

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

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 December 31, 2023 and 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 December 31, 2023 and 2022, there were 170,000,000 shares of common stock, $ 0.0001 par value per share, authorized and 29,130,607 and 12,163,673 shares issued and outstanding, respectively.

As of December 31, 2022 and 2021, 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:

As of December 31, 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 December 31,

Common stock and common stock equivalents:

Common stock 29,130,607 12,163,673

Common stock issuable upon exercise of pre-funded warrants — 6,300,000

Common stock and pre-funded stock warrants 29,130,607 18,463,673

Warrants to Purchase Common Stock 3,793,388 10,196,268

Convertible Preferred Stock 1,363,636 1,363,636

Options to Purchase Common Stock 1,328,621 1,206,905

Unvested restricted stock awards 891 7,118

Unvested Restricted Stock Units 258,885 125,000

Convertible Preferred Stock 1,363,636 —

Common stock issuable under pre-funded warrants 6,300,000 —

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

Unvested Restricted Stock Awards 891 891

Total 35,876,028 31,356,373

During the years ended December 31, 2022 and 2021, 2,756,377 and nil pre-funded warrants were exercised, respectively.

During the years ended December 31, 2022 and 2021, 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 (subject to restrictions under General Instruction I.B.6 to Form S-3) .

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.

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

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

During the quarter ended December 31, 2023, 640,944 shares were sold pursuant to the Sales Agreement for net proceeds of $ 1.1 million.

Approximately $ 11.0 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”).

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 6,300,000 Pre-Funded Warrants remained outstanding as of December 31, 2022.

On May 30, 2022, the Company entered into the Registered Direct Purchase 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 Registered Direct Purchase Agreement contains customary representations and warranties and agreements of the Company and the Purchaser and customary indemnification rights and obligations of the parties.

During the year ended December 31, 2023, all of the remaining 6,300,000 Pre-Funded Warrants to purchase common stock were exercised at an exercise price of $ 0.0001 per share, which resulted in gross proceeds to the Company of $ 630 .

During the year ended December 31, 2022, 1,488,480 Pre-Funded Warrants to purchase common stock were exercised at an exercise price of $ 0.0001 per share, which resulted in gross proceeds to the Company of $ 149 .

Private Placement

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

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 warrants to purchase up to a total of 9,900,990 shares of common stock which expire in November 2027 contain certain valuation provisions on unexercised outstanding warrants if the Company were to experience a fundamental transaction as described in section 3(d) of the warrant agreement.

As of December 31, 2022, 9,900,990 PIPE Warrants and no Pre-Funded PIPE Warrants remained outstanding.

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

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

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

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 was exercisable at an exercise price of $ 1.39 per share.

The purchase price of each Pre-Funded PIPE 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 PIPE Warrant was $ 0.0001 per share.

As of December 31, 2022, all Pre-Funded PIPE Warrants were exercised.

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

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

The Company has accounted for the common stock related to the Offering and Private Placement as equity on the accompanying consolidated balance sheets as of December 31, 2022.

The Company has accounted for the common stock related to the Offering and Private Placement as equity on the accompanying consolidated balance sheet as of December 31, 2022.

The amount allocated to common stock was $ 2.0 million.

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

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 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 .

Stock-Based Compensation

The Board of Directors adopted the Rockwell Medical, Inc., 2007 Long Term Incentive Plan (“2007 LTIP”) on April 11, 2007.

The 2007 LTIP expired on April 11, 2017 and no equity awards were granted under the 2007 LTIP following its

There were 1,045,455 shares of common stock reserved for issuance under the 2007 LTIP.

The Board of Directors adopted the 2018 Long-Term Incentive Plan (“2018 LTIP”) on January 29, 2018 as a replacement for the 2007 LTIP.

Initially there were 300,000 shares of common stock reserved for issuance under the 2018 LTIP.

On May 18, 2020, at the 2020 Annual Meeting, the Company’s stockholders approved the amendment and restatement of the Rockwell Medical, Inc.

2018 Long Term Incentive Plan to increase the number of shares of common stock issuable thereunder by 263,636 and on May 9,2022, at the 2021 Annual Meeting, the Company's stockholders approved the amended and restatement of the Rockwell Medical, Inc.

2018 Long Term Incentive Plan to increase the number of shares of common stock issuable thereunder by 454,546 shares bringing common stock reserve for issuance up to 1,018,182 under the 2018 LTIP.

The Compensation Committee of the Board of Directors (the “Committee”) is responsible for the administration of the 2007 LTIP and 2018 LTIP, including the grant of stock based awards and other financial incentives including performance based incentives to employees, non‑employee directors and consultants.

The Company's standard stock option agreement under the 2007 LTIP and 2018 LTIP allows for the payment of the exercise price of vested stock options either through cash remittance in exchange for newly issued shares, or through non‑cash exchange of previously issued shares held by the recipient for at least six months in exchange for our newly issued shares.

The 2007 LTIP and 2018 LTIP also allow for the retention of shares in payment of the exercise price and income tax withholding.

The Board of Directors adopted the 2018 Long-Term Incentive Plan (“2018 LTIP”) on January 29, 2018 as a replacement for the Company's prior 2007 Long Term Incentive Plan.

As of December 31, 2023, the maximum number of shares of common stock with respect to which awards may be issued under the 2018 LTIP, as amended and restated, was 2,618,182 .

As of December 31, 2023, the 2018 LTIP had 1,403,325 shares of common stock available for grant.

The Compensation Committee of the Board of Directors (the “Committee”) is responsible for the administration of the 2018 LTIP, including the grant of stock based awards and other financial incentives including performance based incentives to employees, non‑employee directors and consultants.

The Company's stock option agreements under the 2018 LTIP allow for the payment of the exercise price of vested stock options either through cash remittance in exchange for newly issued shares, or through non‑cash exchange of previously issued shares held by the recipient for at least six months in exchange for our newly issued shares.

The 2018 LTIP also allows for the retention of shares in payment of the exercise price and income tax withholding.

The latter method results in no cash being received by the Company, but also results in a lower number of total shares being outstanding subsequently as a direct result of this exchange of shares.

Shares returned to the Company in this manner would be retired.

Shares returned to the Company in this manner are retired.

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

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Stock option awards 557 576

$ 705 $ 1,697

Performance based awards:

Restricted stock awards — ( 390 )

Stock option awards — ( 364 )

( 390 ) ( 754 )

Total $ 932 $ 315

Restricted Stock Awards

A summary of the Company’s restricted stock awards during the years ended December 31, 2022 and 2021 is as follows:

Number of Shares Weighted Average

Performance Based Restricted Stock Awards

A summary of the Company’s performance based restricted stock awards during the year ended December 31, 2023 is as follows:

Performance Based Restricted Stock Awards Number of Shares Weighted Average

Unvested at January 1, 2023 891 $ 62.70

Forfeited ( 6,227 ) $ 62.70

Unvested at December 31, 2023 891 $ 62.70

Forfeited ( 6,227 ) —

Unvested at December 31, 2022 891 $ 62.70

The fair value of restricted stock awards are measured based on their fair value on the date of grant and amortized over the vesting period of 20 months.

As of December 31, 2022, all unvested restricted stock awards were related to performance based awards.

The 6,227 forfeited performance-based restricted stock awards were due to the termination of the Company's former Chief Development Officer on March 25, 2022.

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

Stock-based compensation expense of nil was recognized for each of the years ended December 31, 2022 and 2021.

As of December 31, 2022, there is no unrecognized stock-based compensation expense related to restricted stock awards.

Performance-based 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 December 31, 2023, there is no unrecognized stock-based compensation expense related to performance-based restricted stock awards.

Service Based Restricted Stock Units

A summary of the Company’s service based restricted stock units during the year ended December 31, 2022 and 2021 is as follows:

Number of Shares Weighted Average

A summary of the Company’s service based restricted stock units during the year ended December 31, 2023 is as follows:

Service Based Restricted Stock Units Number of Shares Weighted Average

Unvested at January 1, 2023 125,000 $ 1.47

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Unvested at December 31, 2023 258,885 $ 1.83

Granted 125,000 1.47

Forfeited ( 5,774 ) 19.00

Vested ( 23,515 ) 11.33

Unvested at December 31, 2022 125,000 $ 1.47

The fair value of service based restricted stock units are measured based on their fair value on the date of grant and amortized over the vesting period.

The vesting periods range from 1 - 3 years.

Stock-based compensation expense of $ 0.1 million was recognized for each of the years ended December 31, 2022 and 2021.

As of December 31, 2022, the unrecognized stock-based compensation expense was $ 0.1 million over the next 12 months.

Performance Based Restricted Stock Units

As of December 31, 2022, there were no issued or outstanding performance-based restricted stock units.

As a result, there was no unrecognized stock-based compensation expense related to performance-based restricted stock units.

Service Based Stock Options

The fair value of the service based stock options granted for the years ended December 31, 2022 and 2021 were based on the following assumptions:

As of December 31, 2023, the unrecognized stock-based compensation expense was $ 0.2 million which is expected to be recognized over the next 14 months.

Service Based Stock Option Awards

The fair value of the service based stock option awards granted for the years ended December 31, 2023 and 2022 were based on the following assumptions:

Exercise price $ 1.37 - $ 2.83

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Term (years) 4.0 - 6.0

A summary of the Company’s service based stock option activity for the years ended December 31, 2022 and 2021 is as follows:

A summary of the Company’s service based stock option activity for the year ended December 31, 2023 is as follows:

Service Based Stock Option Awards Shares

Options Weighted

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Outstanding at December 31, 2023 1,328,621 $ 5.22 8.5 $ 450

Granted 898,659 1.49 — —

Expired ( 96,199 ) ( 78.06 ) —

Forfeited ( 124,146 ) ( 5.70 ) —

Outstanding at December 31, 2022 1,206,905 $ 28.31 8.9 $ —

Exercisable at December 31, 2023 361,531 $ 14.19 7.3 $ 76

The aggregate intrinsic value in the table above is calculated as the difference between the closing price of our common stock and the exercise price of the stock options that had strike prices below the closing price.

During the year ended December 31, 2022 and 2021, the service based stock options granted consisted of 898,659 and 177,014 options granted to employees, respectively.

As of December 31, 2022, 243,088 vested options were exercisable at a weighted average price of $ 28.31 per share.

During the year ended December 31, 2022 and 2021, stock-based compensation expense of $ 0.6 million and $ 1.4 million was recognized, respectively.

As of December 31, 2022, total stock-based compensation expense related to 963,817 unvested options not yet recognized totaled approximately $ 0.9 million over the next 3.7 years.

Performance Based Stock Options

As of December 31, 2022, there were no performance based stock options outstanding.

The aggregate intrinsic value in the table above is calculated as the difference between the closing price of the Company's common stock and the exercise price of the stock options that had strike prices below the closing price.

The weighted average grant date fair value for service based stock option awards during the years ended December 31, 2023 and 2022 was $ 1.09 and $ 0.99 , respectively.

As of December 31, 2023, total stock-based compensation expense related to 967,090 unvested options not yet recognized totaled approximately $ 0.7 million which is expected to be recognized over the next 3.0 years.

License Agreements

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Ajay Gupta, a former Officer of the Company.

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 well as the Employment Agreement (defined below).

As of December 31, 2022 and 2021, the Company has accrued $ 87,900 and $ 86,400 , respectively, relating to certain IP reimbursement expenses and certain sublicense royalty fees as an accrued liability on the condensed consolidated balance sheet.

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 well as the Employment Agreement (defined below).

As of December 31, 2023 and 2022, the Company has accrued $ 85,400 and $ 87,900 , respectively, relating to certain IP reimbursement expenses and certain sublicense royalty fees as an accrued liability on the consolidated balance sheets.

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.

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

The Company is liable to pay Charak royalties on net sales by the Company of products developed under the license at a specified rate until December 31, 2021.

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

The Company was liable to pay Charak royalties on net sales by the Company of products developed under the license at a specified rate until December 31, 2021.

From January 1, 2022 until February 1, 2034, the Company is liable to pay Charak a base royalty at a reduced rate on net sales and an additional royalty on net sales while there exists a valid claim of a licensed patent, on a country-by-country basis.

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

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

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

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

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Commitments and Contingencies

The Company evaluates various kinds of risk that it is exposed to in its business.

In its evaluation of risk, the Company evaluates options and alternatives to mitigating such risks.

For certain insurable risks, Rockwell may acquire insurance policies to protect against potential losses or to partially insure against certain risks.

For the Company's subsidiary, Rockwell Transportation, Inc., Rockwell maintains a partially self-insured workers' compensation policy.

Under the policy, its self‑insurance retention is $ 350,000 per occurrence and $ 618,000 in aggregate coverage for the policy year ending June 1, 2024.

The total amount at December 31, 2023 by which retention limits exceed the claims paid and accrued is approximately $ 535,000 for the policy year ending July 1, 2023.

Estimated loss and additional future claims of approximately $ 254,000 have been reserved and accrued for the year ended December 31, 2023.

As of December 31, 2023, approximately $ 0.4 million was held in cash collateral and escrow by the insurance carrier for workers’ compensation insurance.

At December 31, 2023, amounts held in cash collateral and escrow are included in prepaid expenses and other non-current assets in the consolidated financial statements.

The Company may be involved in certain routine legal proceedings from time to time before various courts and governmental agencies.

The Company cannot predict the final disposition of such proceedings.

The Company regularly reviews legal matters and record provisions for claims considered probable of loss.

The resolution of these pending proceedings is not expected to have a material effect on its operations or consolidated financial statements in the period in which they are resolved.

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.

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

For the year ended December 31, For the year ended December 31,

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

For the year ended December 31,

Operating leases

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Financing cash flows from finance leases $ 522 $ 482

Right of use assets exchanged for operating lease liabilities $ 768 $ 4,217

Right of use assets exchanged for finance lease liabilities $ — $ 2,431

Right of use assets obtained in exchange for operating lease liabilities $ — $ 768

Weighted-average remaining lease term - operating leases 2.3 3.0

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

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

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

Operating Finance

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Year ending December 31, 2025 1,021 676

Year ending December 31, 2025 937 676

Year Ended December 31, 2026 362 666

Year Ended December 31, 2027 129 311

Remaining future payments — —

Year Ended December 31, 2028 2 —

Total 3,025 2,325

2 unchanged sentences

$ 2,814 $ 2,088

The Company evaluates various kinds of risk that it is exposed to in its business.

In its evaluation of risk, the Company evaluates options and alternatives to mitigating such risks.

For certain insurable risks, Rockwell may acquire insurance policies to protect against potential losses or to partially insure against certain risks.

For the Company's subsidiary, Rockwell Transportation, Inc., Rockwell maintains a partially self-insured workers' compensation policy.

Under the policy, its self‑insurance retention is $ 350,000 per occurrence and $ 621,000 in aggregate coverage for the policy year ending July 1, 2023.

The total amount at December 31, 2022 by which retention limits exceed the claims paid and accrued is approximately $ 534,000 for the policy year ending July 1, 2023.

Estimated loss and additional future claims of approximately $ 306,000 have been reserved and accrued for the year ended December 31, 2022.

As of December 31, 2022, approximately $ 0.4 million was held in cash collateral and escrow by the insurance carrier for workers’ compensation insurance.

At December 31, 2022, amounts held in cash collateral and escrow are included in prepaid expenses and other non-current assets in the consolidated financial statements.

Purchase Obligations

Rockwell has contracts for anticipated future obligations through December 31, 2022 of approximately $ 31.0 million, which include $ 29.4 million for concentrate manufacturing and $ 1.6 million in ancillary supplies.

SEC Investigation

As a follow up to certain prior inquiries, the Company received a subpoena from the SEC during the Company’s quarter ended September 30, 2018 requesting, among other things, certain information and documents relating to the status of the Company’s request to the Centers for Medicare & Medicaid Services for separate reimbursement status for Triferic (dialysate), the Company’s reserving methodology for expiring Triferic inventory, and the basis for the Board’s termination of the former Chief Executive Officer, Robert Chioini, and former Chief Financial Officer, Thomas Klema, in 2018.

On January 31, 2022, the Company received a letter from the United States Securities and Exchange Commission (the "Commission") concluding it’s investigation and stating that it does not intend to recommend an enforcement action by the Commission against the Company.

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, which was tied to the achievement of certain milestones by a specific date.

The Company may be eligible to draw on a third tranche of $ 7.5 million upon the achievement of certain additional milestones, including the achievement of certain Triferic sales thresholds.

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.

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 10.90 %.

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.

The Company also owes an additional fee equal to 4.375 % of the funded amount of the Term Loans, or $ 1.0 million (such additional fee, the “Final Fee”) at maturity.

The Company is accreting up to this Final Fee premium with a charge against interest expense on the accompanying consolidated statements of operations.

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.

In connection with the first tranche of the Term Loans, the Company issued a Warrant to Innovatus, exercisable for, after considering the impact of the reverse stock split as further described in Note 12, 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 Term Loan was scheduled to 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 12.50 % as of December 31, 2023.

The Company had 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 year ended December 31, 2023, interest expense amounted to $ 1.2 million.

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

Proceeds will be used for working capital purposes.

The Loan Agreement contains customary representations and warranties and covenants, subject to customary carve outs, and includes financial covenants related to liquidity and trailing twelve months sales of Triferic, with the latter beginning with the period ending December 31, 2022.

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

Our ability to comply with these covenants may be adversely affected by events beyond our control.

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

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.

There can be no assurances that the Company can maintain compliance with the covenants under the Loan Agreement, which may result in an event of default.

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

For example, the Loan Agreement contains certain financial covenants relating to sales and, as a result of geopolitical and other factors, the Company may not be able to satisfy such covenants in the future.

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

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The financial statements for December 31, 2023 have been prepared with the assumption that the Company will be able to agree to an appropriate remedy during the applicable cure period for any future breaches of operating covenants.

In connection with each funding of the Term Loans, the Company is required to issue to Innovatus a warrant (the “Warrants”) to purchase a number of shares of the Company’s common stock equal to 3.5 % of the principal amount of the relevant Term Loan funded divided by the exercise price, which will be based on the lower of (i) the volume weighted average

closing price of the Company’s stock for the 5 -trading day period ending on the last trading day immediately preceding the execution of the Loan Agreement or (ii) the closing price on the last trading day immediately preceding the execution of the Loan Agreement (or for the second and third tranches only at the lower of (i) $ 1.65 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 477,273 shares of the Company’s common stock at an exercise price of $ 1.65 per share.

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.

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;

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 $ 15.0 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.

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;

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

As of December 31, 2022, the Company was in compliance with its financial and reporting covenants.

As of December 31, 2022, the outstanding balance of the Term Loan was $ 9.2 million, net of unamortized issuance costs and discount of $ 0.8 million.

The following table reflects the schedule of principal payments on the Term Loan as of December 31, 2022 (in thousands):

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;

and (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's ability to comply with the covenants under the Loan Agreement may be adversely affected by events beyond its control.

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, as of December 31, 2023, the Company was in compliance with its covenants under the Loan Agreement.

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).

As of December 31, 2023, the outstanding balance of the Term Loan was $ 8.3 million, net of unamortized issuance costs, discount of $ 0.4 million, and including $ 0.7 million of premium accretion.

The following table reflects the schedule of principal payments on the Term Loan as of December 31, 2023 after giving effect to the January 2, 2024 amendment (in thousands):

Year Principal Payments

A reconciliation of income tax expense at the statutory rate to income tax expense at our effective tax rate is as follows (dollars in thousands):

Tax Expense (Benefit) Computed at 22.68 % and 22.62 % of Pretax Income (Loss)

2026 $ $ 1,333

Total $ 8,000

A reconciliation of income tax expense at the statutory rate to income tax expense at our effective tax rate is as follows (dollars in thousands):

Year Ended December 31,

Tax Benefit Computed of Pretax Loss $ ( 1,772 ) $ ( 4,361 )

Changes in Tax Laws — —

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Stock Based Compensation 7,856 7,792

Deferred Revenue 983 1,846

General Business Credit 6,872 6,872

Accrued Expenses 605 174

Inventories 234 88

Book over Tax Depreciation — 6

Research & Experimental Expenses 459 371

Inventories 398 234

Accrued Expenses 144 605

Deferred License Revenue 118 983

Other Deferred Tax Assets 1,989 1,274

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Deferred Tax Liabilities:

Book over Tax Depreciation 8 —

Goodwill & Intangible Assets 259 224

Prepaid Expenses 181 316

Book over Tax Depreciation 35 8

Total Deferred Tax Liabilities 475 548

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Net Deferred Tax Asset $ — $ —

The Tax Cuts and Jobs Act of 2017 ("TCJA") impacted how net operating losses are utilized.

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") temporarily suspends the TCJA limitation, allowing a net operating loss carryforward to fully offset taxable income in tax years beginning before January 1, 2021.

The CARES Act also temporarily reinstated a carryback period for all net operating losses generated in years beginning after December 31, 2017 and before January 1, 2021.

The carryback period for those years is five years under the CARES Act.

Deferred tax assets result primarily from net operating loss carryforwards.

For federal tax purposes, we have net operating loss carryforwards of approximately $ 311.6 million of which approximately $ 165.3 million expire between 2023 and 2038.

For federal tax purposes, we have net operating loss carryforwards of approximately $ 321.4 million of which approximately $ 164.7 million began expiring in 2023 and will continue to expire through 2038.

In assessing the potential for realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized upon the generation of future taxable income during the periods in which those temporary differences become deductible.

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Considered together with the Company's limited history of operating income and its net losses in 2023 and 2022, management has placed a full valuation allowance against the net deferred tax assets as of December 31, 2023 and 2022.

The portion of the valuation allowance resulting from excess tax benefits on share based compensation that would be credited directly to contributed capital if recognized in subsequent periods is $ 3.9 million.

Rockwell accounts for its uncertain tax positions in accordance with ASC 740‑10, Income Taxes and the amount of unrecognized tax benefits related to tax positions is not significant at December 31, 2023 and 2022.

The Company has not been under tax examination in any jurisdiction for the years ended December 31, 2023 and 2022.

Tax examination years of 2018 to 2021 remain open.

A recent IRC Section 382 study has not been performed, which could limit the value of the Company's net operating losses.

Subsequent Events

On January 25, 2023, 389,000 of Pre-Funded Warrants were exercised.

The exercise price of each Pre-Funded Warrant is $ 0.0001 per share.

(See Note 12 for more detail on the Pre-Funded Warrants).

Third Amendment to Loan Agreement

On January 2, 2024, the Company and Rockwell Transportation, Inc.

entered into the Third Amendment to and Restatement of the Loan and Security Agreement (the "A&R Loan Agreement") with Innovatus, dated January 1, 2024 (the "A&R Effective Date").

The A&R Loan Agreement provides for the continuation of term loans initially borrowed under the Loan Agreement amounting to $ 8.0 million as of the A&R Effective Date.

The Company will make interest-only payments on the Term Loans for 30 months, or up to 36 months if certain conditions are met.

The Term Loans will mature on the fifth anniversary of the A&R Effective Date, unless earlier repaid.

The Term Loans will bear interest at the greater of (i) Prime Rate (as defined in the A&R Loan Agreement) and (ii) 7.50 %, plus 3.50 %.

At the Company's option, 2.00 % of the interest due on any applicable interest payment date during the interest-only period may be paid in-kind by adding such amount to the then outstanding principal balance of the Term Loans.

The Term Loans may be voluntarily prepaid in full (but not partially) at any time, upon at least seven business days’ prior notice.

In connection with any voluntary prepayment or satisfaction of the Term Loans prior to the maturity date

(including any acceleration), the Company will pay all accrued and unpaid interest and all other amounts due in connection with the Term Loans, together with (x) a prepayment fee (the “Prepayment Fee”) equal to:

(i) 6.0 % of the principal amount of the Term Loans prepaid if the payment is made before the first anniversary of the A&R Effective Date;

(ii) 2.0 % of the principal amount of the Term Loans prepaid if the payment is made after the first anniversary of the A&R Effective Date but on or before the second anniversary of the A&R Effective Date;

(iii) 1.0 % of the principal amount of the Term Loans prepaid if the payment is made after the second anniversary of the A&R Effective Date but on or before the third anniversary of the A&R Effective Date;

or (iv) 0 % of the principal amount of the Term Loans prepaid if the payment is made after the third anniversary of the A&R Effective Date through maturity, and (y) an additional fee equal to 4.375 % of the funded amount of the Term Loans Final Fee.

The Term Loans will be mandatorily prepaid upon a change in control of the Company, or upon any early termination/acceleration of the Term Loans.

In the event of a mandatory prepayment of the Term Loans, the Company shall be required to pay the Prepayment Fee (if applicable), as well as the Final Fee.

The Final Fee shall be due and payable at maturity if it has not previously been paid in full in connection with a prepayment of the Term Loans.

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

Proceeds were used for working capital purposes.

The A&R Loan Agreement contains customary representations and warranties and affirmative and negative covenants, subject to exceptions as described in the A&R Loan Agreement.

The A&R Loan Agreement includes a financial covenant that requires actual consolidated revenue from the sale and supply of hemodialysis products for the trailing six-month period (ended on the date when tested), to be not less than 85.0 % of the projections for the same period and, beginning with the quarter ending September 30, 2024, actual consolidated revenue from the sale and supply of hemodialysis products for the trailing six-month period (ended on the date when tested), to be not less than 80.0 % of the projections for the same period.

The A&R Loan Agreement also includes a financial covenant that requires that the Company to maintain minimum liquidity of the greater of (x) the Company’s three-month cash burn or (y) the sum of $ 1.5 million and the aggregate amount of finance lease payments required to be made during the succeeding 12 months (or during a continuing event of default, the aggregate amount of finance lease payments required to be made during the entire term of such capital leases).

In connection with the execution of the A&R Loan Agreement, on January 2, 2024, the Company issued to Innovatus a warrant to purchase 191,096 shares of the Company’s common stock with an exercise price of $ 1.83 per share.

The warrant may be exercised on a cashless basis, and is immediately exercisable through the January 2, 2029.

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

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 9A. Controls and Procedures