ROCKWELL MEDICAL, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes in “Item 1. Condensed Consolidated Financial Statements”. References in this report to “Rockwell,” the “Company,” “we,” “our” and “us” are references to Rockwell Medical, Inc. and its subsidiaries. Forward-Looking Statements We make forward-looking statements in this report and may make such statements in future filings with the U.S. Securities and Exchange Commission ("SEC"). We may also make forward-looking statements in our press releases or other public or shareholder communications. Our forward-looking statements are subject to risks and uncertainties and include information about our current expectations and possible or assumed future results of our operations. When we use words such as “may,” “might,” “will,” “should,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “could,” “plan,” “potential,” “predict,” “forecast,” “project,” “intend,” “is focused on” or similar expressions, or make statements regarding our intent, belief, or current expectations, we are making forward-looking statements. Our forward looking statements also include, without limitation, statements about our liquidity and capital resources; our ability to continue as a going concern; our ability to successfully negotiate a contract extension with and/or future volume commitments by DaVita; our ability to successfully integrate acquisitions; the size of the hemodialysis concentrates market opportunity; our ability to successfully execute on our business strategy; our ability to raise additional capital; our ability to successfully implement certain cost containment and cost-cutting measures; our ability to achieve profitability and statements regarding our anticipated future financial condition, operating results, cash flows and business plans. While we believe our forward-looking statements are reasonable, you should not place undue reliance on any such forward-looking statements, which are based on information available to us on the date of this report or, if made elsewhere, as of the date made. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different. Factors that might cause such a difference include, without limitation, the risks and uncertainties discussed in this report, “Item 1A — Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024 and from time to time in our other reports filed with the SEC. Other factors not currently anticipated may also materially and adversely affect our results of operations, cash flow and financial position. There can be no assurance future results will meet expectations. Forward-looking statements speak only as of the date of this report and we expressly disclaim any intent to update or alter any statements whether as a result of new information, future events or otherwise, except as may be required by applicable law. Overview Rockwell is a healthcare company that develops, manufactures, commercializes, and distributes a portfolio of hemodialysis products for dialysis providers worldwide. Rockwell's mission is to provide dialysis clinics and the patients they serve with the highest quality products supported by the best customer service in the industry. The Company is a leading supplier of liquid bicarbonate concentrates, and the second largest supplier of acid and dry 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 in freestanding outpatient dialysis centers, hospital-based outpatient centers, skilled nursing facilities, or a patient’s home. This represents a large market opportunity for which we believe Rockwell's products are well positioned to meet the needs of patients. Rockwell's products are vital to vulnerable patients with end-stage kidney disease. We are an established leader in manufacturing and delivering high-quality hemodialysis concentrates and dialysates, along with certain ancillary products, to dialysis providers and distributors in the United States and abroad. Rockwell provides the hemodialysis community with products controlled by a Quality Management System regulated by the U.S. Food and Drug Administration ("FDA"). Rockwell is ISO 13485 Certified and adheres to current Good Manufacturing Practices ("cGMP") and Association for Advancement of Medical Instrumentation ("AAMI") standards. Rockwell manufactures hemodialysis concentrates at its facilities in Michigan and Texas, and manufactures its dry acid concentrate mixers at its facility in Iowa. The Company previously operated a manufacturing facility in South Carolina, but the Company concluded manufacturing at that facility in the third quarter of 2025 as part of its ongoing efforts to streamline operations and improve efficiency. 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. Rockwell's commercial organization supports the Company's vision to focus its efforts on enhancing its revenue-generating business and driving the Company towards sustainable profitability. The Company concentrates its efforts on increasing its market share, broadening its product portfolio, right-sizing its product pricing, improving gross margins, and growing the Company's business through organic and inorganic growth and other business development opportunities. We currently operate in one market segment, the hemodialysis market, which involves the manufacturing, sale and distribution of hemodialysis products to hemodialysis clinics, including dialysis concentrates, dialysis kits and other ancillary products used in the dialysis process. On September 18, 2023, Rockwell and DaVita, Inc. ("DaVita") entered into the Amended Agreement, which amended and restated 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. The term of the Amended Agreement was scheduled to expire on December 31, 2024. Prior to the expiration, the Company received written notice from DaVita that DaVita intended to extend the term of the Amended Agreement through December 31, 2025 (the "Extension Term"). However, DaVita subsequently indicated that it will completely transition to another supplier, subject to further discussions betw een Rockwell and DaVita. DaVita has agreed to quarterly, non-refundable payments totaling $ 1.7 million to ensure supply continuity for products purchased during the nine months ended September 30, 2025. These quarterly, non-refundable payments of $ 1.7 million were recorded as revenue during the nine months ended September 30, 2025. Discussions between Rockwell and DaVita are ongoing and include a potential contract extension and/or future volume commitments by DaVita to Rockwell. There can be no assurance that these discussions will yield a successful outcome for Rockwell. We continue to supply DaVita as of the filing date of this report, but at significantly reduced levels from 2024. In the second quarter of 2025, Rockwell entered into a product purchase agreement with Innovative Renal Care ("IRC"), one of the largest dialysis service providers in the United States. Under the terms of the agreement, Rockwell will supply IRC with liquid and dry, acid and bicarbonate hemodialysis concentrates, as well as the Company's DAMX45 dry acid concentrate mix system, which is 510(k) approved to be used exclusively with Rockwell's CitraPure and Dri-Sate dry acid concentrate powders. This multimillion-dollar agreement contains utilization commitments will remain in effect for three years, with the option to extend for an additional one-year period. Results of Operations for the Three Months Ended September 30, 2025 and 2024 The following table summarizes our operating results for the periods presented below (dollars in thousands): Three Months Ended September 30, 2025 % of Revenue 2024 % of Revenue % Change Net Sales $ 15,927 $ 28,316 (44) % Cost of Sales 13,655 86 % 22,077 78 % (38) % Gross Profit 2,272 14 % 6,239 22 % (64) % Selling and Marketing 531 3 % 726 3 % (27) % General and Administrative 3,325 21 % 3,577 13 % (7) % Operating (Loss) Income $ (1,584) (10) % $ 1,936 6 % (182) % 16 Net Sales During the three months ended September 30, 2025, net sales were $15.9 million compared to net sales of $28.3 million during the three months ended September 30, 2024. The decrease of $12.4 million was primarily due to a $13.0 million reduction in sales to DaVita, partially offset by an increases of $0.6 million from price increases to other existing customers and sales to new customers. The three months ended September 30, 2024 included $4.5 million from a special large order of premium-priced product to DaVita. DaVita represented 12% and 52% of net sales for the three months ended September 30, 2025 and 2024, respectively. Non-Product revenue was not material for either period. Gross Profit Cost of sales for the three months ended September 30, 2025 was $13.7 million, resulting in gross profit of $2.3 million for the three months ended September 30, 2025, compared to cost of sales of $22.1 million and a gross profit of $6.2 million for the three months ended September 30, 2024. The gross profit decrease of $3.9 million was primarily due to (i) $3.2 million a decrease in product sales, which includes $1.5 million from a special large order of premium-priced product to DaVita during the three months ended September 30, 2024 that did not repeat during the 2025 period, (ii) and increase of $0.2 million in severance expense and $0.3 million of other costs related to the closure of the Greer manufacturing facility and (iii) an increase of $0.6 million in additional manufacturing costs, partially offset by a price adjustment of $0.4 million for DaVita purchases for the three months ended September 30, 2025. Selling and Marketing Expense Selling and marketing expenses for the three months ended September 30, 2025 were $0.5 million compared to $0.7 million during the three months ended September 30, 2024. The decrease was primarily due to lower compensation expense. General and Administrative Expense General and administrative expenses were $3.3 million for the three months ended September 30, 2025, compared to $3.6 million for the three months ended September 30, 2024. The decrease of $0.3 million was primarily driven by a $0.2 million decrease in administrative costs and a $0.1 million decrease in professional fees. Other Expense Total other expense of $0.2 million and $0.3 million for the three months ended September 30, 2025 and 2024, respectively, was driven primarily by interest expense of $0.2 million in each period related to our debt facility (See Note 15 to the condensed consolidated financial statements included elsewhere in this Form 10-Q). The interest expense for the three months ended September 30, 2025 was partially offset by $0.1 million of interest income and realized gains on available-for-sale investments of $0.1 million. Results of Operations for the Nine Months Ended September 30, 2025 and 2024 The following table summarizes our operating results for the periods presented below (dollars in thousands): Nine Months Ended September 30, 2025 % of Revenue 2024 % of Revenue % Change Net Sales $ 50,912 $ 76,824 (34) % Cost of Sales 43,095 85 % 62,971 82 % (32) % Gross Profit 7,817 15 % 13,853 18 % Research and Product Development — — % 18 — % (100) % Selling and Marketing 1,814 4 % 1,906 2 % (5) % General and Administrative 10,296 20 % 10,802 14 % (5) % Operating (Loss) Income $ (4,293) (9) % $ 1,127 2 % 17 Net Sales During the nine months ended September 30, 2025, net sales were $50.9 million compared to net sales of $76.8 million during the nine months ended September 30, 2024. Product revenue for the nine months ended September 30, 2025 was $50.6 million compared to product revenue of $76.8 million for the nine months ended September 30, 2024. The decrease of $25.9 million was primarily due to a $27.9 million reduction in DaVita sales as a result of DaVita transitioning to a new supplier, partially offset by an increase of $2.0 million from price increases to other existing customers and sales to new customers. The three months ended September 30, 2024 included $5.4 million from a special large order of premium-priced product to DaVita. DaVita represented 17% and 47% of net sales during the nine months ended September 30, 2025 and 2024, respectively. Net sales of non-product revenue were $0.3 million for the nine months ended September 30, 2025 from the recognition of the remaining deferred license revenue associated with Sun Pharmaceutical Industries Ltd. ("Sun Pharma"), Jeil Pharmaceutical Co., Ltd. ("Jeil Pharma") and Drogsan Pharmaceuticals ("Drogsan Pharma"). Non-Product revenue was not material for either period. Gross Profit Cost of sales for the nine months ended September 30, 2025 was $43.1 million, resulting in gross profit of $7.8 million for the nine months ended September 30, 2025, compared to cost of sales of $63.0 million and a gross profit of $13.9 million for the nine months ended September 30, 2024. The gross profit decrease of $6.1 million was primarily due to (i) a $5.5 million decrease in product sales, which includes $1.6 million from a special large order of premium-priced product to DaVita during the nine months ended September 30, 2024 that did not repeat during the 2025 period, (ii) an increase of $0.4 million in severance expense and $0.4 million of other costs related to the closure of the Greer manufacturing facility and (iii) an increase of $1.6 million in manufacturing costs, partially offset by a price adjustment of $1.7 million for DaVita purchases for the nine months ended September 30, 2025. Gross profit from non-product sales consists of $0.1 million associated with recognition of the remaining deferred license revenue associated with Sun Pharma, Jeil Pharma and Drogsan Pharma during the nine months ended September 30, 2025. Research and Product Development Expense Research and product development expenses were immaterial for the each of nine months ended September 30, 2025 and 2024 due to the decision to pause all research and development related to Triferic in 2023. Selling and Marketing Expense Selling and marketing expenses were $1.8 million and $1.9 million for the nine months ended September 30, 2025 and 2024, respectively. The decrease of $0.1 million is primarily due to lower employee compensation expenses. General and Administrative Expense General and administrative expenses were $10.3 million for the nine months ended September 30, 2025, compared to $10.8 million for the nine months ended September 30, 2024. The decrease of $0.5 million was primarily driven by decreases of (i) $0.5 million in administrative costs and (ii) $0.4 million in professional fees, partially offset by an increase of $0.4 million of stock-based compensation expense. Other Expense Total other expense of $0.5 million and $0.9 million for the nine months ended September 30, 2025 and 2024, respectively, was driven primarily by interest expense of $0.7 million in each period related to our debt facility (See Note 15 to the condensed consolidated financial statements included elsewhere in this Form 10-Q). The nine months ended September 30, 2025 was partially offset by $0.2 million of interest income, as well as realized gains on available-for-sale investments of $0.2 million. Liquidity and Capital Resources As of September 30, 2025, we had approximately $23.7 million of cash, cash equivalents and investments available-for-sale, and net working capital of $27.9 million. Based on the currently available net working capital along with the expectation of management of its ability to execute on its operational plans as discussed below, 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 operational plans include raising capital, if needed, by using the $13.1 million remaining availability under its at-the-market ("ATM") facility or other methods or forms of financings, subject to existing limitations. Under the ATM, we have the ability to control the timing and floor price at which capital is raised. The actual amount of cash that we will need to execute our business strategy is subject to many factors, including, but not limited to, the costs associated with our manufacturing and transportation operations related to our concentrate business. We may elect to raise capital in the future through one or more of the following: (i) equity and debt raises through the equity and capital markets, though there can be no assurance we will be able to secure additional capital or funding on acceptable terms, or if at all; and (ii) strategic transactions, including potential alliances and collaborations focused on markets outside the United States, as well as potential combinations (including by merger or acquisition) or other corporate transactions. We believe our ability to fund our activities in the long term will be highly dependent upon (i) our ability to execute on the growth strategy of our hemodialysis concentrates business and maintain sales with existing customers, (ii) our ability to achieve sustained profitability, and (iii) our ability to identify, develop, in-license, or acquire new products in developing our renal care product portfolio. All of these strategies are subject to significant risks and uncertainties such that there can be no assurance we will be successful in achieving them. If we are unsuccessful in executing our business plan and we are unable to raise the required capital, we may be forced to curtail all of our activities and, ultimately, cease operations. Even if we are able to raise sufficient capital, such financings may only be available on unattractive terms, or result in significant dilution of stockholders’ interests and, in such event, the market price of our common stock may decline. If the Company attempts to obtain additional debt or equity financing, the Company cannot assume such financing will be available on favorable terms, if at all. In addition, any debt financing is limited by the terms of our Securities Purchase Agreement with DaVita. Specifically, until DaVita owns less than 50% of its investment, the Company may only incur additional debt in the form of a purchase money loan, a working capital line of up to $5.0 million or to refinance existing debt, unless DaVita consents. The Company is subject to certain covenants and cure provisions under its Loan and Security Agreement (the "Loan Agreement") with Innovatus Life Sciences Lending Fund I, LP. As of September 30, 2025, the Company was in compliance with all covenants. On January 2, 2024, the 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 15 to the accompanying condensed consolidated financial statements). The global macroeconomic environment is uncertain, and could be negatively affected by, among other things, changes in U.S. trade policies, including tariffs and other trade restrictions or the threat of such actions, instability in the global capital and credit markets, recent bank failures in the United States, supply chain weaknesses, and instability in the geopolitical environment, including as a result of the Russian invasion of Ukraine, the Middle East conflict and other political tensions, and the occurrence of natural disasters and public health crises. Such challenges have caused, and may continue to cause, recession fears, rising interest rates, foreign exchange volatility and inflationary pressures. At this time, the Company is unable to quantify the potential effects of this economic instability on our future operations. Due to the rapidly evolving nature of the global situation, it is not possible to predict the extent to which these conditions could adversely affect the Company's liquidity and capital resources in the future. On July 4, 2025, the U.S. enacted P.L. 119-21, a U.S. federal statute passed by the 119th United States Congress that includes tax and spending policies (the “Act”), which contains a broad range of tax reform provisions affecting businesses, including extending or reinstating certain provisions of the 2017 Tax Cuts and Jobs Act, tax relief measures, modifications of certain energy tax credits granted under the Inflation Reduction Act and limits on various tax deductions, among other key provisions. The Company evaluated the Act and concluded it will not have a material impact on its condensed consolidated financial statements. Cash (Used In) Provided By Operating Activities Net cash used in operating activities was $3.0 million for the nine months ended September 30, 2025 compared to net cash provided by operating activities of $3.3 million for the nine months ended September 30, 2024. The change in cash used in operating activities during the current period as compared to cash provided by operating activities in the prior period was primarily due to increases in (i) net loss of approximately $5.0 million and (ii) cash used in changes in current balance sheet accounts in the ordinary course of business of approximately $1.5 million, partially offset by (iii) non-cash adjustments of $0.3 million. Cash Used In Investing Activities Net cash used in investing activities was $4.4 million during the nine months ended September 30, 2025 compared to net cash used in investing activities of $4.5 million for the nine months ended September 30, 2024. Net cash used in investing activities during the nine months ended September 30, 2025 and 2024 was primarily driven by net cash payments from purchases and sales of our available-for-sale investments during each period of $4.0 million and $3.9 million, respectively. Cash Provided By Financing Activities Net cash provided by financing activities was $5.3 million during the nine months ended September 30, 2025 compared to net cash provided by financing activities of $4.6 million for the nine months ended September 30, 2024. Net cash provided by financing activities during the nine months ended September 30, 2025 was primarily due to the gross proceeds from the issuance of common stock in connection with the ATM facility of $7.8 million, as defined and described in Note 11 to the condensed consolidated financial statements, partially offset by the cash paid in connection with the Evoqua Asset Acquisition of $1.6 million, as defined and described in Note 5 to the condensed consolidated financial statements. Net cash provided by financing activities for the nine months ended September 30, 2024 was primarily due to the gross proceeds from the issuance of common stock in connection with the ATM facility of $6.4 million, partially offset by the cash paid in connection with the Evoqua Asset Acquisition of $1.0 million. Contractual Obligations and Other Commitments Due to the contract-intensive nature of the Company's business, the Company has been and may in the future become involved in disputes or legal actions with its contract counterparties, which could have a negative impact on the Company's business, results of operations or financial condition. See Note 13 to the condensed consolidated financial statements included elsewhere in this Form 10-Q for additional disclosures. There have been no other material changes from the contractual obligations and other commitments disclosed in Notes 14 and 15 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024. Critical Accounting Policies and Significant Judgments and Estimates Our critical accounting policies and significant estimates are detailed in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2024. Recently issued and adopted accounting pronouncements : We have evaluated all recently issued accounting pronouncements and believe such pronouncements do not have a material effect our financial statements. See Note 3 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Item 3 . Quantitative and Qualitative Disclosures about Market Risk Per §229.305 of Regulation S-K, the Company, designated a Smaller Reporting Company as defined in §229.10(f)(1) of Regulation S-K, is not required to provide the disclosure required by this Item. 18