(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
2021
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
| 38-3317208 | ||||||||||
(State or other jurisdiction of |
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| (I.R.S. Employer | ||||||||||
30142 S. Wixom Road, Wixom, Michigan | 48393 | ||||||||||
(Address of principal executive offices) | (Zip Code) | ||||||||||
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Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | ||||||||
| Emerging growth company | ☐ | ||||||||||
Page September 30, December 31, 2017 2016 ASSETS Cash and Cash Equivalents $ 3,887,923 $ 17,180,594 Investments Available for Sale 35,028,841 40,759,703 Accounts Receivable, net of a reserve of $6,000 in 2017 and $5,000 in 2016 5,374,390 6,393,228 Inventory 14,864,642 12,141,072 Other Current Assets 2,032,095 2,034,598 Total Current Assets 61,187,891 78,509,195 Property and Equipment, net 1,708,817 1,391,575 Inventory, Non-Current 1,494,175 1,826,554 Intangible Assets 4,117 4,382 Goodwill 920,745 920,745 Other Non-current Assets 490,655 501,187 Total Assets $ 65,806,400 $ 83,153,638 LIABILITIES AND SHAREHOLDERS’ EQUITY Accounts Payable $ 4,188,677 $ 5,858,234 Accrued Liabilities 3,231,789 4,210,151 Customer Deposits 199,407 77,217 Total Current Liabilities 7,619,873 10,145,602 Deferred License Revenue 17,396,167 20,051,737 Shareholders’ Equity: Common Shares, no par value, 51,761,040 and 51,527,711 shares issued and outstanding 272,055,391 268,199,939 Accumulated Deficit (231,223,093) (214,341,092) Accumulated Other Comprehensive Income (41,938) (902,548) Total Shareholders’ Equity 40,790,360 52,956,299 Total Liabilities And Shareholders’ Equity $ 65,806,400 $ 83,153,638 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 Sales $ 14,626,904 $ 12,814,815 $ 42,462,265 $ 39,894,380 Cost of Sales 13,555,853 11,234,934 37,535,454 35,130,045 Gross Profit 1,071,051 1,579,881 4,926,811 4,764,335 Selling, General and Administrative 4,791,636 5,070,127 17,433,530 15,071,238 Research and Product Development 1,304,658 1,261,863 4,195,003 4,639,617 Operating Income (Loss) (5,025,243) (4,752,109) (16,701,722) (14,946,520) Interest and Investment Income (31,751) 188,847 (180,279) 602,429 Income (Loss) Before Income Taxes (5,056,994) (4,563,262) (16,882,001) (14,344,091) Income Tax Expense — — — (404,527) Net Income (Loss) $ (5,056,994) $ (4,563,262) $ (16,882,001) $ (14,748,618) Basic Earnings (Loss) per Share $ (0.10) $ (0.09) $ (0.33) $ (0.29) Diluted Earnings (Loss) per Share $ (0.10) $ (0.09) $ (0.33) $ (0.29) Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 Net Income (Loss) $ (5,056,994) $ (4,563,262) $ (16,882,001) $ (14,748,618) Unrealized Gain on Available-for-Sale Investments 248,628 115,541 860,752 311,273 Foreign Currency Translation Adjustments 132 (18) (142) (18) Comprehensive Income (Loss) $ (4,808,234) $ (4,447,739) $ (16,021,391) $ (14,437,363) ACCUMULATED OTHER TOTAL COMMON SHARES ACCUMULATED COMPREHENSIVE SHAREHOLDER’S SHARES AMOUNT DEFICIT INCOME (LOSS) EQUITY Balance as of December 31, 2016 51,527,711 $ 268,199,939 $ (214,341,092) $ (902,548) $ 52,956,299 Net Loss — — (16,882,001) — (16,882,001) Unrealized Gain on Available-for-Sale Investments — — — 860,752 860,752 Foreign Currency Rate Changes — — — (142) (142) Issuance of Common Shares 21,000 116,105 — — 116,105 Shares Issued in Exchange for Services 50,000 158,667 158,667 Stock Option Based Expense — 3,275,339 — — 3,275,339 Stock Tendered in Satisfaction of Tax Liabilities (317,671) (2,287,231) — — (2,287,231) Restricted Stock Amortization 480,000 2,592,572 — — 2,592,572 Balance as of September 30, 2017 51,761,040 $ 272,055,391 $ (231,223,093) $ (41,938) $ 40,790,360 2017 2016 Cash Flows From Operating Activities: Net (Loss) $ (16,882,001) $ (14,748,618) Adjustments To Reconcile Net Loss To Net Cash Used In Operating Activities: Depreciation and Amortization 384,835 583,501 Share Based Compensation—Non-employee 158,667 — Share Based Compensation—Employees 5,874,769 7,794,690 Loss on Disposal of Assets 4,084 7,340 Loss on Sale of Investments Available for Sale 704,695 26,820 Changes in Assets and Liabilities: (Increase) in Accounts Receivable (149,429) (2,984,463) (Increase) in Inventory (2,391,191) (3,888,489) Decrease (Increase) in Other Assets 224,635 (1,376,042) (Decrease) in Accounts Payable (1,669,651) (598,427) (Decrease) in Other Liabilities (863,034) (179,856) (Decrease) in Deferred License Revenue (1,494,360) (1,445,058) (Decrease) Increase in Deferred Drug License Revenue (204,543) 3,818,184 Changes in Assets and Liabilities (6,547,573) (6,654,151) Cash (Used In) Operating Activities (16,302,524) (12,990,418) Cash Flows From Investing Activities: Purchase of Investments Available for Sale (34,235,347) (23,158,809) Sale of Investments Available for Sale 40,122,266 24,491,678 Purchase of Equipment (706,346) (328,322) Proceeds on Sale of Assets 450 1,000 Cash Provided by Investing Activities 5,181,023 1,005,547 Cash Flows From Financing Activities: Proceeds from Issuance of Common Shares 116,105 80,161 Restricted Stock Retained in Satisfaction of Tax Liabilities (2,287,231) — Cash (Used In) Provided By Financing Activities (2,171,126) 80,161 Effects of exchange rate changes (44) (18) (Decrease) In Cash (13,292,671) (11,904,728) Cash At Beginning Of Period 17,180,594 31,198,182 Cash At End Of Period $ 3,887,923 $ 19,293,454 2017 2016 Income Taxes Paid $ — $ 404,527 or chronic intravenous medications for various therapeutic needs in the home infusion setting. In our R&D pipeline, we are also exploring FPC’s impact in the treatment of hospitalized patients with acute heart failure, with the potential to begin another Phase 2 trial in these patients in 2022. Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 Basic Weighted Average Shares Outstanding 51,260,975 50,677,076 50,995,079 50,675,667 Effect of Dilutive Securities — — — — Diluted Weighted Average Shares Outstanding 51,260,975 50,677,076 50,995,079 50,675,667 Components of inventory, net of reserves, as of September 30, December 31, 2017 2016 Raw Materials $ 10,868,301 $ 10,903,084 Work in Process 231,381 86,452 Finished Goods 5,259,134 2,978,090 Total $ 16,358,816 $ 13,967,626 As of June 30, 2021, the total Triferic inventory net of reserve was $1.7 million. Charak MSA. The Company paid all four of the quarterly installments totaling $1.0 million and accrued $0.1 million for the reimbursement of certain legal expenses during the year ended December 31, 2019. As of December 31, 2020, the Company had fulfilled its reimbursement obligation of certain legal expenses. As of June 30, 2021, the Company accrued $0.2 million relating to certain IP reimbursement expenses and certain sublicense royalty fees within accrued liabilities on the condensed consolidated balance sheet. 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 that future results will meet expectations. and Recent Developments Triferic Results of Operations for the Three Months Ended June 30, 2021 and labor. our debt facility. June 30, 2021. XBRL Instance Document XBRL Taxonomy Extension Schema XBRL Taxonomy Extension Calculation Linkbase XBRL Taxonomy Extension Definition Database XBRL Taxonomy Extension Label Linkbase XBRL Taxonomy Extension Presentation Linkbase ROCKWELL MEDICAL, INC. (Registrant) ◻☐APPLICABLE ONLY TO CORPORATE ISSUERS:IndicateTitle of each class: Trading Symbol Name of each exchange on which registered: Common Stock, par value $0.0001 RMTI Nasdaq Global Market outstanding of each of the issuer’s classes of common stock outstanding as of the latest practicable date.August 13, 2021 was 93,888,881.ClassOutstanding as of October 31, 2017Common Stock, no par value51,761,040 shares3 44 5 6 7 8 1227173617361737183719442045 Triferic® is a registered trademark of Rockwell Medical, Inc.2As of September 30, 2017 and December 31, 2016(Unaudited)June 30,
2021December 31,
2020(Unaudited) ASSETS Cash and Cash Equivalents $ 32,378 $ 48,682 Investments Available-for-Sale 8,574 9,997 Accounts Receivable, net 5,357 4,171 Inventory, net 4,677 3,913 Prepaid and Other Current Assets 1,413 2,706 Total Current Assets 52,399 69,469 Property and Equipment, net 2,529 2,642 Inventory, Non-Current 1,122 1,176 Right of Use Assets, net 6,085 2,911 Goodwill 921 921 Other Non-Current Assets 628 629 Total Assets $ 63,684 $ 77,748 LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts Payable $ 4,932 $ 4,155 Accrued Liabilities 3,993 5,013 Lease Liability - Current 1,674 1,167 Deferred License Revenue - Current 2,166 2,175 Term Loan - Net of Issuance Costs 21,133 0 Customer Deposits 140 152 Other Current Liability - Related Party 0 131 Total Current Liabilities 34,038 12,793 Lease Liability - Long-Term 4,506 1,821 Term Loan, Net of Issuance Costs 0 20,949 Deferred License Revenue - Long-Term 6,937 8,015 Total Liabilities 45,481 43,578 Commitments and Contingencies (See Note 14) 0 0 Stockholders’ Equity: Preferred Stock, $0.0001 par value, 2,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2021 and December 31, 2020 0 0 Common Stock, $0.0001 par value; 170,000,000 shares authorized; 93,811,381 and 93,573,165 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively 9 9 Additional Paid-in Capital 371,700 371,510 Accumulated Deficit (353,558) (337,406) Accumulated Other Comprehensive Income 52 57 Total Stockholders’ Equity 18,203 34,170 Total Liabilities and Stockholders’ Equity $ 63,684 $ 77,748 INCOME STATEMENTSFor the three and nine months ended September 30, 2017 and September 30, 2016 (Unaudited)Three Months Ended June 30, 2021 Three Months Ended June 30, 2020 Six Months Ended June 30, 2021 Six Months Ended June 30, 2020 Net Sales $ 15,137 $ 15,896 $ 30,611 $ 31,753 Cost of Sales 15,399 15,015 30,471 29,759 Gross Profit (262) 881 140 1,994 Research and Product Development 2,416 1,616 4,224 3,438 Selling and Marketing 1,468 1,997 3,319 4,069 General and Administrative 3,677 2,871 7,602 8,145 Operating Loss (7,823) (5,603) (15,005) (13,658) Other (Expense) Income Realized (Loss) Gain on Investments (1) 2 (1) 4 Warrant Modification Expense 0 (837) 0 (837) Interest Expense (583) (521) (1,164) (623) Interest Income 7 67 18 238 Total Other Expense (577) (1,289) (1,147) (1,218) Net Loss $ (8,400) $ (6,892) $ (16,152) $ (14,876) Basic and Diluted Net Loss per Share $ (0.09) $ (0.10) $ (0.17) $ (0.22) Basic and Diluted Weighted Average Shares Outstanding 93,703,492 69,428,574 93,647,583 68,473,407 INCOME (LOSS)For the three and nine months ended September 30, 2017 and September 30, 2016(Unaudited)Three Months Ended June 30, 2021 Three Months Ended June 30, 2020 Six Months Ended June 30, 2021 Six Months Ended June 30, 2020 Net Loss $ (8,400) $ (6,892) $ (16,152) $ (14,876) Unrealized Loss on Available-for-Sale Debt Instrument Investments (1) (6) (8) (13) Foreign Currency Translation Adjustments 0 1 3 7 Comprehensive Loss $ (8,401) $ (6,897) $ (16,157) $ (14,882) SHAREHOLDERS'STOCKHOLDERS' EQUITYFor the nine months ended September 30, 2017(Unaudited)COMMON STOCK ADDITIONAL PAID-IN CAPITAL ACCUMULATED
DEFICITACCUMULATED
OTHER
COMPREHENSIVE
INCOMETOTAL
STOCKHOLDERS'
EQUITYSHARES AMOUNT Balance as of January 1, 2021 93,573,165 $ 9 $ 371,510 $ (337,406) $ 57 $ 34,170 Net Loss — — — (7,752) — (7,752) Unrealized Loss on Available-for-Sale Investments — — — — (7) (7) Foreign Currency Translation Adjustments — — — — 3 3 Stock-based Compensation 26,354 — (236) — — (236) Balance as of March 31, 2021 93,599,519 $ 9 $ 371,274 $ (345,158) $ 53 $ 26,178 Net Loss — — — (8,400) — (8,400) Unrealized Loss on Available-for-Sale Investments — — — — (1) (1) Vesting of Restricted Stock Units Issued, net of taxes withheld 211,862 — (7) — — (7) Stock-based Compensation expense — — 433 — — 433 Balance as of June 30, 2021 93,811,381 $ 9 $ 371,700 $ (353,558) $ 52 $ 18,203 6CASH FLOWSFor the nine months ended September 30, 2017 and September 30, 2016(Unaudited)Supplemental Cash Flow disclosureCOMMON STOCK ADDITIONAL PAID-IN CAPITAL ACCUMULATED
DEFICITACCUMULATED
OTHER
COMPREHENSIVE
INCOMETOTAL
STOCKHOLDERS'
EQUITYSHARES AMOUNT Balance as of January 1, 2020 65,378,890 $ 7 $ 326,777 $ (306,516) $ 52 $ 20,320 Net Loss — — — (7,984) — (7,984) Unrealized Loss on Available-for-Sale Investments — — — — (7) (7) Foreign Currency Translation Adjustments — — — — 6 6 Issuance of common stock, net of offering costs/Bought Deal 3,670,212 — 8,003 — — 8,003 Issuance of Warrants related to Debt Financing — — 501 — — 501 Stock-based Compensation — — 935 — — 935 Balance as of March 31, 2020 69,049,102 $ 7 $ 336,216 $ (314,500) $ 51 $ 21,774 Net Loss — — — (6,892) — (6,892) Unrealized Loss on Available-for-Sale Investments — — — — (6) (6) Foreign Currency Translation Adjustments — — — — 1 1 Issuance of common stock, net of offering costs/Public Offering 987,716 — 1,978 — — 1,978 Vesting of Restricted Stock Units Issued, net of taxes withheld 120,104 — (19) — — (19) Warrant Modification Expense — — 837 — — 837 Stock-based Compensation — — (1,461) — — (1,461) Balance as of June 30, 2020 70,156,922 $ 7 $ 337,551 $ (321,392) $ 46 $ 16,212 72021 2020 Cash Flows From Operating Activities: Net Loss $ (16,152) $ (14,876) Adjustments To Reconcile Net Loss To Net Cash Used In Operating Activities: Depreciation and Amortization 385 408 Stock-based Compensation 197 (526) Warrant Modification Expense 0 837 Increase in Inventory Reserves 89 12 Amortization of Right of Use Asset 857 748 Amortization of Debt Financing Costs and Accretion of Debt Discount 184 108 Loss on Disposal of Assets 8 6 Realized Loss (Gain) on Sale of Investments Available-for-Sale 1 (4) Foreign Currency Translation Adjustment 3 6 Changes in Assets and Liabilities: (Increase) Decrease in Accounts Receivable, net (1,186) 637 Increase in Inventory (799) (1,302) Decrease (Increase) in Prepaid and Other Assets 1,293 (608) Increase in Accounts Payable 777 295 Decrease in Settlement Payable 0 (104) Decrease in Lease Liability (839) (703) Decrease in Other Liabilities (1,163) (96) Decrease in Deferred License Revenue (1,088) (992) Changes in Assets and Liabilities (3,005) (2,873) Cash Used In Operating Activities (17,433) (16,154) Cash Flows From Investing Activities: Purchase of Investments Available-for-Sale (13,765) (16,514) Sale of Investments Available-for-Sale 15,181 17,497 Purchase of Equipment (281) (283) Cash Provided By Investing Activities 1,135 700 Cash Flows From Financing Activities: Proceeds from Term Loan 0 22,500 Debt Issuance Costs 0 (1,343) Payments on Short Term Note Payable 0 (763) Proceeds from the Issuance of Common Stock / Public Offering 0 8,148 Offering Costs from the Issuance of Common Stock / Public Offering 0 (144) Proceeds from the Issuance of Common Stock / At-the-Market Offering 0 2,034 Offering Costs from the Issuance of Common Stock / At-the-Market Offering 0 (56) Repurchase of Common Stock to Pay Employee Withholding Taxes (6) (19) Cash (Used In) Provided By Financing Activities (6) 30,357 (Decrease) Increase in Cash and Cash Equivalents (16,304) 14,903 Cash and Cash Equivalents at Beginning of Period 48,682 11,794 Cash and Cash Equivalents at End of Period $ 32,378 $ 26,697 Supplemental Disclosure of Cash Flow Information: Cash Paid for Interest $ 982 $ 410 Supplemental Disclosure of Noncash Investing and Financing Activities: Change in Unrealized Loss on Marketable Securities Available-for-Sale $ (7) $ (12) Fair Value of Warrants issued related to Debt Financing $ 0 $ 501 and Subsidiaries (collectively, “we”, “our”, “us”,("Rockwell Medical," "Rockwell" or the “Company”"Company") is a fully-integrated pharmaceuticalcommercial-stage, biopharmaceutical company targeting end-stage renaldeveloping and commercializing our next-generation parenteral iron technology platform, ferric pyrophosphate citrate (“FPC”), which we believe has the potential to lead to transformative treatments for iron deficiency in multiple disease states, that we believe could reduce healthcare costs and chronicimprove patients’ lives. We are also one of the two major suppliers of life saving hemodialysis concentrate products to kidney disease with innovativedialysis clinics in the United States.secondary hyperparathyroidismanemia in patients outside of dialysis, who are receiving long-term and hemodialysis. currently marketing and developing unique, proprietary renal drug therapies. These novel renal drug therapies support disease management initiatives to improve the qualitysecond largest supplier of life and care of dialysis patients and are designed to deliver safe and effective therapy, while decreasing drug administration costs and improving patient convenience and outcome. We have also obtained licenses for certain dialysis related drugs which we are developing and planning to market globally. We are also an established manufacturer and leader in delivering high-quality hemodialysis concentrates/dialysates to dialysis providers and distributorsconcentrates in the United States generating approximately $60 million in annual revenue. The Company's reputation for excellent service, quality, and abroad. We manufacture, sell and distribute hemodialysis concentrates and other ancillary medical products and supplies used in the treatmentreliability is based on over 25 years of patients with End Stage Renal Disease, or “ESRD”. We supply our productsservice to kidney dialysis providers and distributors who treat patients with kidney disease.centers. Our concentrate products are used to remove waste and replace essential nutrients in the blood of dialysis patients during their hemodialysis treatment. The majority of our sales occur in the United States.We are regulated by the Federal Food and Drug Administration (“FDA”) under the Federal Drug and Cosmetics Act,approximately 300 dedicated employees, as well as a management team with experience in manufacturing, logistics, pharmaceutical development and commercialization gives us a solid foundation upon which to grow.other federal, stateCOVID-19, especially with the recent surge in infections internationally, ongoing international travel restrictions and local agencies. We hold several FDA product approvals including both drugsquarantines or shelter-in-place orders.medical devices. 2.international surge in infections and resulting global disruptions have caused significant volatility in financial and credit markets. Rockwell has utilized a range of financing methods to fund its operations in the past; however, current conditions in the financial and credit markets may limit the availability of funding, refinancing or increase the cost of funding. Due to the rapidly evolving nature of the global situation, it is not possible to predict the extent to which these conditions could adversely affect the Company's liquidity and capital resources in the future.Basis of PresentationOur consolidated financial statements include our accounts and the accounts for our wholly owned subsidiaries, Rockwell Transportation, Inc. and Rockwell Medical India Private Limited. All intercompany balances and transactions have been eliminated in consolidation. Recent Accounting Pronouncementsusingin accordance with the accounting principles generally accepted in the United States of America or “GAAP,”(“U.S. GAAP”) for interim financial information and withpursuant to the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the U. S. Securities and Exchange Commission Regulation S-X(“SEC”) and on the same basis as they apply to interimthe Company prepares its annual audited consolidated financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.December 31, 2016 has been derived fromJune 30, 2021, condensed consolidated statements of operations for the audited financialthree and six months ended June 30, 2021 and 2020, condensed consolidated statements at that dateof comprehensive loss for the three and six months ended June 30, 2021 and 2020, condensed consolidated statement of changes in stockholders' equity for the three and six months ended June 30, 2021 and 2020, and condensed consolidated statements of cash flows for the six months ended June 30, 2021 and 2020 are unaudited, but does not include all adjustments, consisting of normal recurring adjustments, that the Company considers necessary for a fair presentation of the informationfinancial position, operating results and footnotes required by GAAPcash flows for complete financial statements.In the opinion of our management, all adjustments have been included that are necessary to make the financial statements not misleading. All of these adjustments that are material are of a normal and recurring nature. Our operatingperiods presented. The results for the three and ninesix months ended SeptemberJune 30, 20172021 are not necessarily indicative of the results to be expected for the year ending December 31, 2017. You should read our unaudited2021 or for any future interim period. The condensed consolidated balance sheet at December 31, 2020 has been derived from audited financial statements, togetherhowever, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements and related footnotes for the year ended December 31, 20162020 and notes thereto included in ourthe Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Our Annual Report2020 as filed with the SEC on Form 10-KMarch 31, 2021. The Company’s consolidated subsidiaries consisted of its wholly-owned subsidiaries, Rockwell Transportation, Inc. and Rockwell Medical India Private Limited.fiscal year ended December 31, 2016 includesdefinition of a descriptionlease are classified as operating or financing leases and are recorded on the consolidated balance sheet 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 asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of our significantthe right-of-use asset result in straight-line rent expense over the lease term. Variable lease expenses, if any, are recorded when incurred.policies.Revenue RecognitionOur policy election and recognizes rent expense on a straight-line basis over the lease term.recognize revenue consistent with authoritative guidance for revenue recognition includingissue common stock were exercised or converted into common stock or resulted in the provisionsissuance of common stock that 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 net income per share in the future that were not included in the computation of diluted loss per share were as follows:As of June 30, 2021 2020 Options to purchase common stock 6,070,801 6,225,562 Unvested restricted stock awards 78,300 146,800 Unvested restricted stock units 342,604 503,395 Warrants to purchase common stock 26,426,863 3,248,054 Total 32,918,568 10,123,811 Accounting Standards Codification. We recognize revenue when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery (or passage of title) has occurred or services have been rendered, (iii) the seller's price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured.8Consistent with these guidelines we recognize revenue at the time we transfer title to our products to our customers which generally occurs when our products are delivered to our customer’s location consistent with our terms of sale. We recognize revenue for international shipments when title has transferred consistent with standard terms of sale.We apply judgment as we analyze each element of our contractual agreements to determine appropriate revenue recognition. The terms of our contractual agreements may include milestone payments if specified research and development objectives are achieved, non-refundable licensing fees, milestone payments on sales or royalties from product sales.When entering into an arrangement, we first determine whether the arrangement includes multiple deliverables and is subject to the accounting guidance in ASC subtopic 605-25, Multiple-Element Arrangements. If we determine that an arrangement includes multiple elements, we determine whether the arrangement should be divided into separate units of accounting and how the arrangement consideration should be measured and allocated among the separate units of accounting. An element qualifies as a separate unit of accounting when the delivered element has standalone value to the customer. Our arrangements do not include a general right of return relative to delivered elements. Any delivered elements that do not qualify as separate units of accounting are combined with other undelivered elements within the arrangement as a single unit of accounting. If the arrangement constitutes a single combined unit of accounting, we determine the revenue recognition method for the combined unit of accounting and recognize the revenue either on a straight-line basis or on a modified proportional performance method over the period from inception through the date the last deliverable within the single unit of accounting is delivered.Non-refundable upfront license fees are recorded as deferred revenue and recognized into revenue over the estimated period of our substantive performance obligations. If we do not have substantive performance obligations, we recognize non-refundable upfront fees into revenue through the date the deliverable is satisfied. Analyzing the arrangement to identify deliverables requires the use of judgment and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation. In arrangements that include license rights and other non-contingent deliverables, such as participation in a steering committee, these deliverables do not have standalone value because the non-contingent deliverables are dependent on the license rights. That is, the non-contingent deliverables would not have value without the license rights, and only we can perform the related services. Upfront license rights and non-contingent deliverables, such as participation in a steering committee, do not have standalone value as they are not sold separately and they cannot be resold. In addition, when non-contingent deliverables are sold with upfront license rights, the license rights do not represent the culmination of a separate earnings process. As such, we account for the license and the non-contingent deliverables as a single combined unit of accounting. In such instances, the license revenue in the form of non-refundable upfront payments is deferred and recognized over the applicable relationship period.For milestone payments based on sales and for royalties based on sales, we recognize revenue in the quarter that the information related to the sales becomes available and collectability is reasonably assured.For international license agreements that we have entered into, deferred license revenue is being recognized over the term of the license agreement.The initial payment of $20 million received pursuant to our long-term Exclusive Distribution Agreement (the “Distribution Agreement”("FASB") with Baxter Healthcare Corporation (“Baxter”) in October 2014 has been accounted for as deferred license revenue. Deferred license revenue is being recognized based on the proportion of product shipments to Baxter in each period to total expected sales volume for the term of the agreement. See Note 4 to condensed consolidated financial statements for information related to the settlement of arbitration proceedings with Baxter. We recognize other revenues at the time the related fees and or payments are earned.We require certain customers, mostly international customers, to pay for product prior to the transfer of title to the customer. Deposits received from customers and payments in advance for orders are recorded as liabilities under Customer Deposits until such time as orders are filled and title transfers to the customer consistent with our terms of sale.In May 2014, the Financial Accounting Standards Boardrecently issued Accounting Standards Update (“ASU”("ASU") No. 2014-09, 2021-04 to codify the final consensus reached by the Emerging Issues Task Force (EITF) on how an issuer should account for modifications made to equity-classified written call options (hereafter referred to as a warrant to purchase the issuer’s common stock). The guidance in the ASU requires the issuer to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant. The Company is evaluating the impact of this guidance on its condensed consolidated financial statements.Customers (Topic 606), which will supersedeCustomers. The core principle of the currentnew revenue recognition requirements9in Topic 605, Revenue Recognition. The standard’s core principlestandard is that a company willshould recognize revenue when it transfersto depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new guidancefollowing five steps are applied to achieve that core principle:effectivea description of principal activities from which the Company generates its revenue.year beginning January 1, 2018. The standard permitsperformance obligation is recognized over the useterm of either the retrospectivelicense agreement (over time recognition). Conversely, when regulatory approval already exists or cumulative effect transition method. is probable, revenue is recognized at the point in time that control of the product transfers to the customer.isreceived upfront fees under 5 distribution and license agreements that have been deferred as a contract liability. The amounts received from Wanbang Biopharmaceuticals Co., Ltd. (“Wanbang”), Sun Pharmaceutical Industries Ltd. ("Sun Pharma"), Jeil Pharmaceutical Co., Ltd. ("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 and South Korea, respectively, to determine that regulatory approval was probable as of the processexecution of evaluating how the newagreement. The amounts received from Baxter Healthcare Corporation (“Baxter”) are recognized as revenue recognition standard could impactat the financial statementspoint in time that the estimated product sales under the agreement occur. disclosures. Forfor the majority of our sales transactions, the new standardCompany’s international customers, the Company recognizes revenue at the shipping point, which is not expectedgenerally the Company’s plant or warehouse. For other business, the Company recognizes revenue based on when the customer takes control or receipt 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 significantly changecustomers. 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.In thousands of U.S. dollars ($) Three Months Ended June 30, 2021 Six Months Ended June 30, 2021 Products By Geographic Area Total U.S. Rest of World Total U.S. Rest of World Drug Revenues Product Sales – Point-in-time $ 215 $ 215 $ 0 $ 439 $ 439 $ 0 License Fee – Over time 58 0 58 117 0 117 Total Drug Products 273 215 58 556 439 117 Concentrate Products Product Sales – Point-in-time 14,379 13,026 1,353 29,084 26,227 2,857 License Fee – Over time 485 485 0 971 971 0 Total Concentrate Products 14,864 13,511 1,353 30,055 27,198 2,857 Net Revenue $ 15,137 $ 13,726 $ 1,411 $ 30,611 $ 27,637 $ 2,974 In thousands of U.S. dollars ($) Three Months Ended June 30, 2020 Six Months Ended June 30, 2020 Products By Geographic Area Total U.S. Rest of World Total U.S. Rest of World Drug Revenues Product Sales – Point-in-time $ 182 $ 182 $ 0 $ 381 $ 381 $ 0 License Fee – Over time 56 0 56 112 0 112 Total Drug Products 238 182 56 493 381 112 Concentrate Products Product Sales – Point-in-time 15,168 13,319 1,849 30,280 26,826 3,454 License Fee – Over time 490 490 0 980 980 0 Total Concentrate Products 15,658 13,809 1,849 31,260 27,806 3,454 Net Revenue $ 15,896 $ 13,991 $ 1,905 $ 31,753 $ 28,187 $ 3,566 new standard could impact the timing of revenue recognitionfollowing table provides information about receivables, contract assets, and contract liabilities from contracts with customers.In thousands of U.S. dollars ($) June 30, 2021 December 31, 2020 Receivables, which are included in "Trade and other receivables" $ 5,357 $ 4,171 Contract liabilities $ 9,103 $ 10,190 up-frontany receivables arising from the Company’s contracts with customers for the three and milestonesix months ended June 30, 2021 and 2020.for licensing agreements.and consideration received from customers that are received in advance of the customer assuming control of the related productsnew standard will also require expanded disclosures surrounding revenueamount relates primarily to upfront payments and consideration received from customers that are received in advance of the notescustomer assuming control of the related products. The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. The Baxter Agreement includes minimum commitments of product sales over the duration of the agreement. Unfulfilled minimum commitments related to the financial statements. CashBaxter Agreement are product sales of $6.2 million as of June 30, 2021, which is amortized ratably through expiration of the Baxter Agreement on October 2, 2024.Cash EquivalentsWe consider cash on hand, money market funds, unrestricted certificates of deposit and short term marketable securities with an original maturity of 90 days or less as cash and cash equivalents.Investments Available for SaleInvestments Available for Sale are short-term investments, consisting of investmentsDecember 31, 2020 (table in short term bond funds and in short term bonds and are stated at fair value based upon observed market prices (Level 1 in the fair value hierarchy). The portfolio generally consists of high credit quality short term debt instruments. These instruments are subject to changes in fair market value due primarily to changes in interest rates. thousands):June 30, 2021 Amortized Cost Unrealized Gain Unrealized Loss Accrued Interest Income Fair Value Available-for-Sale Securities Bonds $ 8,558 $ 1 $ 0 $ 15 $ 8,574 December 31, 2020 Amortized Cost Unrealized Gain Unrealized Loss Accrued Interest Fair Value Available-for-Sale Securities Bonds $ 9,987 $ 3 $ 0 $ 7 $ 9,997 these investments was $35,028,841 as of September 30, 2017. Unrealized holding gains or losses on these securitiesavailable-for-sale are included in accumulated other comprehensive income (loss). Realized gains and losses, including declines in value judged to be other-than-temporary on available-for-sale securities are included as a component of other income or expense. Gross unrealized losses were $76,399 and gross unrealized gains were $35,274 as of September 30, 2017. There were realized gains of $57 and realized losses of $199,758 in the third quarter. For the nine months ended September 30, 2017, there were realized gains of $57 and realized losses of $704,752. The Company has evaluated the near term interest rate environment and the expected holding period of the investments along with the duration of the fund portfolios in assessing the severity and duration of potential impairments. Based on that evaluation the Company does not consider those investments to be other-than-temporarily impaired at September 30, 2017.Research and Product DevelopmentWe recognize research and product development expenses as incurred. We incurred product development and research costs related to the commercial development, patent approval and regulatory approval of new products aggregating approximately $4.2 million and $4.6 million for the nine months ended September 30, 2017 and 2016, respectively.Share Based CompensationWe measure the cost of employee and non-employee services received in exchange for equity awards, including stock options,determined using quoted market prices from daily exchange-traded markets based on the grantclosing price as of the balance sheet date and are classified as a Level 1 measurement under ASC 820 the awards in accordance with ASC 718-10, Compensation — Stock Compensation. The cost of equity based compensation is recognized as compensation expense over the vesting period of the awards.We estimate the fair value of compensation involving stock options utilizing the Black-Scholes option pricing model. This model requires the input of several factors such as the expected option term, expected volatility of our stock price over the expected option term, and an expected forfeiture rate, and is subject to various assumptions. We believe the valuation methodology is appropriate for estimating the fair value of stock options we grant to employees and directors which are subject to ASC 718-10 requirements. These amounts are estimates and thus may not be reflective of actual future results or amounts ultimately realized by recipients of these grants. 10
6. InventoryNet Earnings Per ShareWe computed our basic earnings (loss) per share using weighted average shares outstanding for each respective period. Diluted earnings per share also reflect the weighted average impact from the date of issuance of all potentially dilutive securities, consisting of stock options and common share purchase warrants, unless inclusion would have had an anti-dilutive effect. The calculation of basic weighted average shares outstanding excludes unvested restricted stock. Actual weighted average shares outstanding used in calculating basic and diluted earnings per share were:3. InventorySeptemberJune 30, 20172021 and December 31, 20162020 are as follows:June 30,
2021December 31,
2020Raw Materials $ 3,598 $ 3,112 Work in Process 265 172 Finished Goods 1,936 1,805 Total $ 5,799 $ 5,089 SeptemberJune 30, 2017, we2021, the Company classified $1,494,175$1.1 million of inventory as non-current, all of which was related to Triferic or the active pharmaceutical ingredient and raw materials for Triferic.4. Baxter Distribution AgreementJune 30,
2021December 31,
2020Leasehold Improvements $ 1,196 $ 1,196 Machinery and Equipment 5,684 5,475 Information Technology & Office Equipment 1,847 1,831 Laboratory Equipment 676 676 9,403 9,178 Accumulated Depreciation (6,874) (6,536) Property and Equipment, net $ 2,529 $ 2,642 June 30,
2021December 31,
2020Accrued Research & Development Expense $ 315 $ 232 Accrued Compensation and Benefits 1,420 2,500 Accrued Unvouchered Receipts 647 755 Accrued Workers Compensation 531 395 Other Accrued Liabilities 1,080 1,131 Total Accrued Liabilities $ 3,993 $ 5,013 2, 2014, wethe Company entered into the DistributionBaxter Agreement with Baxter and received an upfront fee of $20 million. The upfront fee was recorded as deferred revenue and is being recognized based on the proportion of product shipments to Baxter in each period, compared with total expected sales volume over the term of the Baxter Agreement, which expires in October 2024. The Company recognized revenue of approximately $0.5 million and $1.0 million for each of the three and six months ended June 30, 2021 and 2020. Deferred revenue related to the Baxter Agreement totaled $6.2 million as of June 30, 2021 and $7.2 million as of December 31, 2020.Baxter becamethe Company may offer and sell from time to time shares of the Company’s exclusive agent forcommon stock through the Agent. The offering and sale of up to $40.0 million of the shares has been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to the Company’s registration statement on Form S-3 (File No. 333-227363), which was originally filed with the SEC on September 14, 2018 and declared effective by the SEC on October 1, 2018, the base prospectus contained within the registration statement, and a prospectus supplement that was filed with the SEC on March 22, 2019.marketing and distribution activitiesdeemed to be an “at the market" offering as defined in Rule 415(a) of the Securities Act, including sales made directly through the Nasdaq Global Market or on any other existing trading market for the Company’s hemodialysis concentratecommon stock. The Company intends to use the proceeds from the offering for working capital and ancillary products inother general corporate purposes. The Company may suspend or terminate the United StatesSales Agreement at any time.various foreign countriessix months ended June 30, 2021, the Company has not sold shares of its common stock pursuant to the Sales Agreement. Approximately $32.3 million remains available for an initialsale under this facility.10 years.the facility. The Distribution Agreement does not include anyCompany's ability to sell common stock under the facility may be limited by several factors including, among other things, the trading volume of its common stock and certain black-out periods that the Company may impose upon the facility, among other things.Three Months Ended
June 30,Six Months Ended
June 30,2021 2020 2021 2020 Service-based awards: Restricted stock units $ 78 $ (4) $ 182 $ 234 Stock option awards 344 336 735 776 422 332 917 1,010 Performance-based awards: Restricted stock awards 0 0 (390) 0 Restricted stock units 0 (1,197) 0 (1,025) Stock option awards 11 (596) (330) (511) 11 (1,793) (720) (1,536) Total $ 433 $ (1,461) $ 197 $ (526) drug products. The Company retains sales, marketing and distribution rights for its hemodialysis concentrate products in specified foreign countries in whichrestricted stock awards during the Company has an established commercial presence. On September 12, 2016, Baxter initiated an arbitration proceeding against Rockwell in accordance with the International Institute for Conflict Prevention and Resolution, Inc.’s Rules for Non-Administered Arbitration under the Distribution Agreement alleging various breachessix months ended June 30, 2021 is as follows:Number of Shares Weighted Average
Grant-Date
Fair ValueUnvested at January 1, 2021 146,800 $ 5.70 Forfeited (68,500) $ 5.70 Unvested at June 30, 2021 78,300 $ 5.70 Distribution Agreement, and Rockwell counterclaimed alleging various breaches by Baxter. OnCompany’s restricted stock awards during the six months ended June 23, 2017, the Company and Baxter settled the arbitration (the “Settlement”). 30, 2020 is as follows:Number of Shares Weighted Average
Grant-Date
Fair ValueUnvested at January 1, 2020 146,800 $ 5.70 Unvested at June 30, 2020 146,800 $ 5.70 Settlement included a mutual release with respect to all known claims existingfair value of restricted stock awards are measured based on their fair value on the date of grant and amortized over the Settlementvesting period of 20 months. As of June 30, 2021, unvested restricted stock awards of 78,300 were related to performance-based awards. The forfeited performance-based restricted stock awards of 68,500 was due to the termination of the Company's former Chief Science Officer on January 19, 2021. These forfeited awards reduced stock-based compensation expense by $0.4 million.Number of Shares Weighted Average
Grant-Date
Fair ValueUnvested at January 1, 2021 265,494 $ 2.60 Granted 310,050 0.90 Vested (221,474) 2.38 Forfeited (11,466) 4.81 Unvested at June 30, 2021 342,604 $ 1.17 Number of Shares Weighted Average
Grant-Date
Fair ValueUnvested at January 1, 2020 463,786 $ 4.26 Granted 188,904 2.09 Vested (104,168) 4.66 Forfeited (128,460) 4.30 Unvested at June 30, 2020 420,062 $ 3.27 Number of Shares Weighted Average
Grant-Date
Fair ValueUnvested at January 1, 2020 988,958 $ 4.48 Forfeited (905,625) 4.61 Unvested at June 30, 2020 83,333 $ 3.09 June 30,
2021Exercise price $0.90 - $0.94 Expected stock price volatility 75.8% - 77.7% Risk-free interest rate 0.47% - 1.06% Term (years) 5.5 - 6 Shares
Underlying
OptionsWeighted
Average Exercise
PriceWeighted
Average
Remaining
Contractual
TermAggregate
Intrinsic
ValueOutstanding at January 1, 2021 5,717,956 $ 4.55 6.6 $ 0 Granted 1,522,162 0.96 6.0 — Forfeited (277,764) 2.52 — — Expired (1,266,553) 7.35 — — Outstanding at June 30, 2021 5,695,801 $ 3.07 7.8 $ 5,000 Exercisable at June 30, 2021 2,387,440 $ 5.25 5.8 $ 0 Shares
Underlying
OptionsWeighted
Average Exercise
PriceWeighted
Average
Remaining
Contractual
TermAggregate
Intrinsic
ValueOutstanding at January 1, 2020 8,210,024 $ 7.06 5.1 $ 107,000 Granted 1,610,344 2.24 5.9 — Forfeited (211,471) 4.41 — — Expired (3,983,335) 8.30 — — Outstanding at June 30, 2020 5,625,562 $ 4.90 6.7 $ 1,000 Exercisable at June 30, 2020 2,809,954 $ 7.09 4.3 $ 0 arbitrationexercise price of the stock options that had strike prices below the closing price.dismissed$0.3 million and $0.7 million for the three and six months ended June 30, 2021, respectively. Stock-based compensation expense recognized for service-based stock options was $0.3 million and $0.8 million for the three and six months ended June 30, 2020, respectively. As of June 30, 2021, total stock-based compensation expense related to unvested options not yet recognized totaled approximately $2.0 million, which is expected to be recognized over an estimated weighted average remaining term of 3.0 years.Number of Shares Weighted Average
Exercise
PriceOutstanding at January 1, 2021 750,000 $ 2.20 Expired (375,000) 2.20 Outstanding at June 30, 2021 375,000 $ 2.20 Exercisable at June 30, 2021 0 $ 0 Number of Shares Weighted Average
Exercise
PriceOutstanding at January 1, 2020 388,125 $ 4.70 Granted 600,000 $ 2.45 Forfeited (388,125) $ 4.70 Outstanding at June 30, 2020 600,000 $ 2.45 Exercisable at June 30, 2020 0 $ 0 prejudice. No payments were madeCharak, LLC ("Charak") dated January 7, 2002 (the "2002 Agreement") that grants the Company exclusive worldwide rights to certain patents and information related to our Triferic® product. On October 7, 2018, the Company entered into a Master Services and IP Agreement (the “Charak MSA”) with Charak and Dr. Ajay Gupta, a former Officer of the Company. Pursuant to the MSA, the parties entered into 3 additional agreements described below related to the license of certain soluble ferric pyrophosphate (“SFP”) intellectual property owned by either partyCharak. The Charak MSA provided for a payment of $1.0 million to Dr. Gupta, payable in 4 quarterly installments of $250,000 each on October 15, 2018, January 15, 2019, April 15, 2019 and July 15, 2019, and reimbursement for certain legal fees incurred in connection with the Settlement.Three Months Ended June 30, 2021 Three Months Ended June 30, 2020 Six Months Ended June 30, 2021 Six Months Ended June 30, 2020 Operating leases Operating lease cost $ 432 $ 403 $ 851 $ 846 Variable lease cost 90 123 192 312 Operating lease expense 522 526 1,043 1,158 Finance leases Amortization of right-of-use assets 67 0 112 0 Interest on lease obligations 20 0 33 0 Finance lease expense 87 0 145 0 Short-term lease rent expense 4 4 8 8 Total rent expense $ 613 $ 530 $ 1,196 $ 1,166 Other information Operating cash flows from operating leases $ 428 $ 410 $ 853 $ 855 Operating cash flows from finance leases $ 21 $ 0 $ 34 $ 0 Financing cash flows from finance leases $ 56 $ 0 $ 93 $ 0 Right of use assets exchanged for operating lease liabilities $ 1,476 $ 0 $ 3,371 $ 0 Right of use assets exchanged for finance lease liabilities $ 316 $ 0 $ 777 $ 0 Weighted-average remaining lease term – operating leases 3.5 2.4 3.5 2.4 Weighted-average remaining lease term – finance leases 5.5 0.0 5.5 0 Weighted-average discount rate – operating leases 6.2 % 6.8 % 6.2 % 6.8 % Weighted-average discount rate – finance leases 5.5 % 0 % 5.5 % 0 % Operating Finance Year ending December 31, 2021 (remaining) $ 865 $ 148 Year ending December 31, 2022 1,603 300 Year ending December 31, 2023 1,285 305 Year ending December 31, 2024 930 305 Year ending December 31, 2025 468 305 Remaining future payments 97 319 Total $ 5,248 $ 1,682 Less present value discount (522) (228) Operating and finance lease liabilities $ 4,726 $ 1,454 Settlement, on June 23, 2017,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 Baxterrecognized 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.Principal Payments 2021 $ 0 2022 2,250 2023 9,000 2024 9,000 2025 2,250 $ 22,500 First Amendmentshort-term note payable for $2.0 million, bearing interest at 3.925% per annum to Exclusive Distribution Agreementfinance various insurance policies. Principal and interest payments related to this note will begin on July 3, 2021 and are paid on a First Amendment to Investment Agreement. The terms ofstraight-line amortization over a 9-month period with the Settlement included, among other things, modified pricing that provides incentive to Baxter to pursue new customers and increase future sales. Our Settlement with Baxter is not expected to have a material impactfinal payment due on our liquidity or results of operations.March 3, 2022.11theour condensed consolidated financial statements and related notes in “Item 1. Condensed Consolidated Financial Statements and the Notes thereto included elsewhere in this report.Statements”. References in this report to "Rockwell," the “Company,” “we,” “our” and “us” are references to Rockwell Medical, Inc. and its subsidiaries.“projected,“project,” “intend,” 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 competitors, statements regardingliquidity and capital resources; our plans and ability to successfully commercialize our products; our ability to successfully launch FDA-approved Triferic AVNU; our ability to develop FPC for other indications; our ability to successfully execute on our business strategy and Calcitriol, statements relating to our Settlement with Baxterdevelopment of new indications; and statements regarding our anticipated future financial condition, operating results, cash flows and business plans.We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all of our forward-looking statements. our quarterlythis report, for the period ended June 30, 2017 under “Part II - Item“Item 1A — Risk Factors” as modified in “Part II - Item 1A — Risk Factors” ofour Form 10-K for the year ended December 31, 2020 and from time to time in our other reports filed with the SEC, including in this report, as well as the risks listed below:Risks Related To Our Drug Business
Form 10-Q.·Although Triferic has been approved by the FDA, we may not be able to commercialize it successfully.·If we are unable to use our Triferic inventory before its shelf life expires, we may have to take a reserve which could have a material adverse effect on our results of operations and financial condition.·Our ability to market Triferic and other FDA-approved drugs is limited by the FDA to those specific indications and conditions for which clinical safety and efficacy have been demonstrated, which may limit our ability to market Triferic and our other drug products.·We depend on contract manufacturing organizations to manufacture our drug products. If these organizations are unable or unwilling to manufacture our drug products, or if these organizations fail to comply with FDA or other applicable regulations or otherwise fail to meet our requirements, our drug business will be harmed.·We rely on third party suppliers for raw materials and packaging components of our drug products. We may not be able to obtain the raw materials and proper components we need, or the cost of the materials or components may be higher than expected, any of which could impair our production or commercialization of drug products and have a material adverse effect on our results of operations, financial position and cash flows.·We may not be successful in obtaining foreign regulatory approvals or in arranging out-licensing partners capable of obtaining the approvals needed to effectively commercialize our drug products outside of the United States. Even if we are successful in out-licensing our drug products and obtaining the required regulatory approvals, the licensees or partners may not be effective at marketing our products in certain markets or at all.·We may not be successful in expanding our drug product portfolio or in our business development efforts related to in-licensing, acquisitions or other business collaborations. Even if we are able to enter into business development arrangements, they could have a negative impact on our business and our profitability.·Expansion of our drug business in the United States may require FDA approval of new drug candidates or indications for use. The process of obtaining FDA approval is a long and expensive process with no guarantee of success.·Our drug business depends on government funding of health care, and changes could impact our ability to be paid in full for our products, increase prices or cause consolidation in the dialysis provider market.·It may be difficult for us to capture market share for Calcitriol in the highly competitive generic drug market.12Risks Related To Our Concentrate Business·We may be required to repay a portion of the fees received from Baxter, which could materially and adversely affect our financial position and cash reserves.·A few customers account for a substantial portion of the end user sales of our concentrate products. The loss of any of these customers could have a material adverse effect on our results of operations and cash flow from our concentrate business.·The concentrate market is competitive and has a large competitor with substantial resources.·We may be affected materially and adversely by increases in raw material costs.Risks Related To Our Business As A Whole·Our drug and concentrate businesses are highly regulated, resulting in additional expense and risk of noncompliance that can materially and adversely affect our business, financial condition and results of operations.·Health care reform could adversely affect our business.·We depend on key personnel, the loss of which could harm our ability to operate.·Defending our intellectual property rights could be expensive, we may not always be successful in protecting our exclusive rights and we could be prevented from selling products, forced to pay damages and compelled to defend against litigation if we infringe the rights of a third party.·Our products may have undesirable side effects and our product liability insurance may not be sufficient to protect us from material liability or harm to our business.·Our business and operations would suffer in the event of a security breach, system failure, invasion, corruption, destruction or interruption of our or our business partners’ critical information technology systems or infrastructure.·We may be unable to obtain secured debt financing in the future as a result of our Distribution Agreement with Baxter.Risks Related To Our Common Stock·Shares eligible for future sale may affect the market price of our common shares.·The market price for our common stock is volatile.·Our ability to use our net operating loss carryforwards to offset potential taxable income and related income taxes that would otherwise be due may be limited.·We could have a material weakness in our internal control over financial reporting, which, until remedied, could result in errors in our financial statements requiring restatement of our financial statements. As a result, investors may lose confidence in our reported financial information, which could lead to a decline in our stock price.·Structural and anti-takeover provisions reduce the likelihood that you will receive a takeover premium.·We do not anticipate paying dividends in the foreseeable future.We do not undertakeForward-looking statements speak only as of the date of this report and we expressly disclaim any obligationintent 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.fully-integrated pharmaceuticalcommercial-stage, biopharmaceutical company targeting end-stage renaldeveloping and commercializing our next-generation parenteral iron technology platform, Ferric Pyrophosphate Citrate ("FPC"), which we believe has the potential to lead to transformative treatments for iron deficiency in multiple disease states, that we believe could reduce healthcare costs and chronicimprove patients’ lives. We are also one of the two major suppliers of life-saving hemodialysis concentrate products to kidney disease with innovativedialysis clinics in the United States.and servicesdeveloped from our FPC platform. We are marketing both products to kidney dialysis centers for their patients receiving dialysis. In 2021, we intend to advance our FPC platform strategy outside of dialysis by starting a Phase 2 trial for the treatment of iron deficiency secondary hyperparathyroidismanemia in patients who are receiving long-term and or chronic intravenous(“IV”) medications for various therapeutic needs in the home infusion setting.. The trend toward providing medical care, including the delivery of medicines, at home make the home infusion market a rapidly growing area of healthcare. We believe that the home infusion setting is a natural path for expansion of our platform as many of the patients suffer from chronic diseases that are associated with iron deficiency and anemia. We are currently seeking additional FDA feedback and clarification regarding the clinical development plan for FPC in the home-infusion setting. Our expectations regarding the commencement of a Phase 2 trial in 2021 is based on the assumption that the FDA agrees with the development plan as we have proposed. In our R&D pipeline, we are also investigating FPC’s impact on iron deficiency in the treatment of hospitalized patients with acute heart failure, with the potential to begin another Phase 2 trial in these patients in 2022.alsobuilding on our reputation and industry presence by commercializing then to medium and small dialysis organizations. We began commercializing Triferic and Triferic AVNU in the United States in the second half of 2019 and in early 2021, respectively. In April 2021, we received marketing approval for Triferic AVNU from Health Canada for the replacement of iron to maintain hemoglobin in adult patients with hemodialysis-dependent chronic kidney disease, which is the first international regulatory approval for our intravenous therapy. We expect Triferic AVNU to become commercially available in Canada during 2022. Our strategy for increasing Triferic adoption is to continue to generate data in clinics showing the benefits of Triferic in real world protocols. In addition, we expect to study Triferic use with the innovations that we believe have the potential to change future medical practices (e.g. introduction and adoption of HIF-PHIs), subject to FDA approval. We believe that positive data from these studies would better position Triferic for long-term growth. We are developing strategic alliance partners for development, regulatory approval and commercialization of Triferic outside of the United States.established manufacturereffective treatment for iron deficiency. In parallel with continually seeking to drive incremental growth and leaderefficiencies in our dialysis business unit, our strategy is to accelerate the growth of our business in large, higher-margin markets by creating and developing pharmaceutical products based on our proprietary FPC technology that address iron deficiency in patients who are currently under-treated.high-quality hemodialysis concentrates/dialysatesconcentrates. Because these concentrates are used to maintain human life by removing toxins and balancing electrolytes in the dialysis patient’s bloodstream, we manufacture them under cGMP regulations as described below. Our concentrates are manufactured in three facilities, totaling 159,000 square feet, located in Michigan, Texas and South Carolina, from which we deliver these products to dialysis providersclinics throughout most of the United States. We utilize our own delivery fleet as well as third parties. We employ approximately 300 people in the concentrates unit of our dialysis business.distributorsservice within our customer base. This reputation was further strengthened during the recent challenges presented, not only by the COVID-19 pandemic, but also by the multitude of recent natural disasters where our team has been challenged by hurricanes, flooding and freezing, while still meeting production demands.abroad. We supply approximately 25%are partnering with established local pharmaceutical companies for the regulatory approval and commercialization outside of the United States domestic marketStates. dialysis concentrates and Triferic, our growth opportunities for both in the United States dialysis market are challenged by the consolidated ownership of dialysis clinics, a capitated reimbursement model and the demographics of the patient population. The two largest dialysis organizations treat approximately 73% of the patients in the United States. One manufactures its own concentrates and IV iron and we alsoalready supply dialysis concentrates to distributors servingthe other. Through our partnership with Baxter International, we currently supply concentrates to a numbersignificant percentage of foreign countries, primarilythe small and medium sized dialysis organizations. In a sector, such as kidney dialysis, with capitated reimbursement for the dialysis procedure and all included inputs, new product success depends on compelling data demonstrating improved patient outcomes and/or pharmacoeconomics versus the current standard of care in practice in the Americasclinics. Once Medicare determined that Triferic and Triferic AVNU would be reimbursed under the Pacific Rim. Substantially allfixed bundled rate, market adoption became more dependent on the generation of our salesthese data, which were concentrate productsnot required for the drug's approval from the FDA.related ancillary items.13Our business strategy is developing unique, proprietary renal drug therapiescontinue to be confident that we can commercialize or out-license, while also expanding our dialysis products business. These novel renal drug therapies support disease management initiatives to improve the quality of life and care of dialysis patients and are designed to deliver safe and effective therapy, while decreasing drug administration costs and improving patient convenience and outcome. is our lead branded drug. We believe it has the potential to capture significant market share due to its improved clinical and cost-saving benefits. Triferic received FDA approval in 2015, and isbe the only FDA-approved therapy indicated to replace iron and maintaintreatment of choice for the maintenance of hemoglobin in adult hemodialysisdialysis patients. Triferic received a reimbursement J-code, effective January 1, 2016. At about that time,Toward this end, we received clarification from CMS that Triferic would be includedhave increased our efforts in the ESRD bundled paymentgenerating real world data in clinics with current protocols, which initiated our pursuit of separate reimbursement, which is available for new, innovative therapies. Although we cannot be certain, we believe that Triferic will receive separate reimbursement, which offers greater incentive for dialysis providers to adopt new, innovative therapies. We believe that Triferic will receive separate reimbursement as a result of our extensive efforts in workinghelp with policy makers. We have had in-depth discussions with high level officials within the current administration, key members of Congress, patient advocacy groups and other stakeholders regarding the meritsadoption of Triferic and why this innovative therapy should receive separate reimbursement, allTriferic AVNU as these results are developed and disseminated over time. In addition, we believe the hemodialysis industry may experience a great deal of whom have been supportivechange over the next several years. We plan to take the steps necessary toour efforts. We have had meetings with the leadershipa class of the Department of Health and Human Services, the Centers for Medicare and Medicaid Services (CMS) and the Center for Medicare and Medicaid Innovation (CMMI). Upon their guidance, we have submitted a proposal to the Innovation Center at CMS. Among other advantages, the proposal highlights the improved clinical benefits that Triferic provides to patients,drugs, known as hypoxia-inducible factor prolyl hydroxylase inhibitors ("HIF-PHIs"), as well as the significant cost savings Triferic deliversnew, solid-state dialysis equipment in development. We are planning to both Medicare and dialysis providers. Additionally, our key supporters in Congress and other influential agencies are encouraging CMS to immediately approve separate reimbursement for Triferic. We cannot predict the outcome or timing of the CMS review.Until the separate reimbursement issue is resolved for Triferic, we do not anticipate realizing significant revenues from Triferic sales. In the meantime, we continue to make progress in marketing to and educating our customers about Triferic and the valuable benefit it delivers by improving patient outcomes and lowering costs. We also continue to provide Triferic to dialysis providers via a drug sample program, receiving favorable response to the positive clinical and cost saving benefits. Our marketing and selling efforts to nephrologists and nurses, as well as to patients, are effective and being received favorably. We have built significant inventory ofstudy Triferic in anticipation of receiving separate reimbursement. If we are unable to successfully commercialize Triferic and achieve sufficient sales volumes over the next one to two years, we may have to write off a significant portioncombination with these potential new innovations as they become available.inventory investment in Triferic, which would have an adverse effect on our results of operations. As of September 30, 2017, we had $4.0 million of Triferic finished goods inventory that could expire within the next twelve months. We reserved $0.6 million in the third quarter for specific Triferic API batches that were determined to be in excess of our expected requirements over the next year and for which there was no plan to convert the API into finished goods. Our globaldialysis business strategy is to license Trifericalso improve the strength of our concentrates business by creating efficiencies and enhancing our manufacturing and transportation operations. We have launched projects to key partnersidentify ways to commercialize internationally.improve the overall profitability of these core operations. Specifically, we are reviewing our entire supply chain to identify opportunities for improvement, prioritizing initiatives that will have the largest impact on long-term efficiency, profitability and growth.actively pursuing international licensing opportunitiesplanning to develop an FPC-based therapeutic for iron deficiency to be given in athe home infusion setting. According to the National Home Infusion Association, the number of countriespatients served by home infusion therapy has grown from approximately 800,000 in 2010 to over 3,000,000 in 2019. The home infusion setting is expected to continue to expand, which has been further accelerated by the COVID-19 pandemic and regions. Additionally,the desire to reduce or eliminate hospital and or clinic exposure. Many patient groups requiring home infusion therapies suffer from diseases that are associated with an incidence of iron deficiency and anemia. For example, it is estimated that 40% to 55% of all home parenteral nutrition patients are iron deficient. We believe, based on our data with hemodialysis patients, FPC as a home infusion therapy for iron deficiency anemia may have distinct advantages over currently available iron replacement therapy options.continuing development work on other clinical indications related toalso exploring FPC’s impact in the treatment of iron deficiency that address unmet patient needs and we are evaluating opportunities to in-license other products that will complement our product portfolio. We are also working to begin marketing Calcitriol, generic injectable vitamin-D, which is manufactured through contract manufacturing organizations (“CMOs”). We received written notice from the FDA in October 2017 that the FDA needed additional time to review the data submitted by us supporting Calcitriol. The notice contained no indication by FDA of any deficiency with the data submitted. We expect to begin marketing Calcitriol in the first quarter of 2018 assuming FDA approval of the submission.Rockwell sells its dialysis concentrateshospitalized heart failure patients. More than one million people in the United States and certain foreign markets underare hospitalized each year for acute heart failure. Clinical improvement in heart failure has already been demonstrated with older first-generation forms of IV iron in clinical trials in the Distribution Agreement with Baxter. Rockwell receives a pre-defined gross profit margin on its concentrate products sold pursuantoutpatient setting. We believe that FPC may deliver rapidly bioavailable iron to the Distribution Agreement, subjectheart and improve cardiac energetics during hospitalization. This effect could help patients recover faster resulting in improved function, shorter hospital stays and fewer 30-day re-admissions. If so, these outcomes would translate into a meaningful reduction in healthcare costs and human suffering. We expect to communicate with the FDA in 2021 regarding a development pathway for this indication.annual true-up of costs. As discussed in more detail in Note 4 toeffective treatment for iron deficiency, and where the condensed consolidated financial statements, Baxterdevelopment path, cost estimates and Rockwell settled their contractual dispute and, as part of their settlement, modified pricing that provides incentive to Baxter to pursue new customers and increase future sales. The Settlement with Baxter is not expected to have a material impact on our liquidity or results of operations.reimbursement are the most favorable.14Nine Months Ended September2020For the Three Months Ended June 30, 2021 % of Revenue 2020 % of Revenue % Change Net Sales $ 15,137 $ 15,896 (4.8) % Cost of Sales 15,399 101.7 % 15,015 94.5 % 2.6 Gross (Loss) Profit (262) (1.7) 881 5.5 (129.7) Research and Product Development 2,416 16.0 1,616 10.2 49.5 Selling and Marketing 1,468 9.7 1,997 12.6 (26.5) General and Administrative 3,677 24.3 2,871 18.1 28.1 Operating Loss $ (7,823) (51.7) % $ (5,603) (35.2) % 39.6 % 2017 and September2021, our net sales were $15.1 million compared to net sales of $15.9 million during the three months ended June 30, 2016SalesOur sales in the third quarter2020. The decrease of 2017 were $14.6$0.8 million $1.8 million or 14.1% higher than the third quarter of 2016. The increase was primarily due to higher domestica decrease in sales of dialysis concentrates products.whichduring the three months ended June 30, 2020. The increase of $0.8 million was primarily due to volume growththe Company continuing to invest in its medical and scientific programs to support the continued advancement of our FPC technology platform.our domestic customers. Invoicing for pass through delivery costs to Baxter increased approximately $0.6$2.0 million due to volume growth and increased expenses compared toduring the third quarterthree months ended June 30, 2020. The decrease of 2016. Our international sales were $0.2$0.5 million higher than the third quarter of 2016. Revenue recognized from licensing fees was the same as the third quarter of 2016.Our sales in the first nine months of 2017 were $42.5 million, an increase of $2.6 million or 6.4% over the first nine months of 2016. Our domestic concentrate sales increased $2.4 million or 6.9% over the first nine months of 2016is primarily due to increased sales volumesa decrease in marketing costs related to Triferic (dialysate) partially offset by a slight increase in costs associated with the launch of Triferic AVNU.additional pass through billingsAdministrative Expensedelivery services to Baxter. Our international sales were $0.2 million higher than the first nine monthsreduction of 2016. Our drug business revenue was not significant in the first nine months of 2017 or 2016. Gross ProfitGross profit in the third quarter of 2017 was $1.1million compared to $1.6 million in the third quarter of 2016.Gross profit margins were 7.3 % in the third quarter of 2017 compared to 12.3% in the third quarter of 2016. Our concentrate gross profit decreased $0.2 million due to lower pricing resulting from modificationsseverance costs related to our contractual terms with Baxter. Our net drug business costs were approximately $0.3former President and Chief Executive Officer.higher thanconsisting primarily of interest income. Other expense for the third quarterthree months ended June 30, 2021 was $0.6 million of 2016. Our drug business costs in the third quarter included inventory reserves of $0.7 million for inventory that was expected to be surplusinterest expense related to our requirements. Gross profit indebt facility (see Note 15 for morefirst ninethree months ended June 30, 2020 was $1.4 million, consisting of 2017 was $4.9 million, an increase of $0.1 million or 3.4% over the first nine months of 2016. Gross profit margins were 11.6 % compared to 11.9% in the first nine months of 2016. The gross profit increase was primarily due to lower costsinterest expense of $0.5 million related to our drug business operationsdebt facility and warrant modification expense of $0.8 million.regulatory feesthe Six Months Ended June 30, 2021 and value add taxes paid2020connection withthousands):For the Six Months Ended June 30, 2021 % of Revenue 2020 % of Revenue % Change Net Sales $ 30,611 $ 31,753 (3.6) % Cost of Sales 30,471 99.5 % 29,759 93.7 % 2.4 Gross Profit 140 0.5 1,994 6.3 (93.0) Research and Product Development 4,224 13.8 3,438 10.8 22.9 Selling and Marketing 3,319 10.8 4,069 12.8 (18.4) General and Administrative 7,602 24.8 8,145 25.7 (6.7) Operating Loss $ (15,005) (49.0) % $ (13,658) (43.0) % 9.9 % execution of the Wanbang license agreement and partially offset by inventory reserves for surplus product. The increase in gross profit was partially offset by lower gross profit on the concentrate business of $0.4 million.Selling, General and Administrative ExpenseSelling, general and administrative expense during the third quarter of 2017 was $4.8net sales were $30.6 million compared to $5.1net sales of $31.8 million induring the third quartersix months ended June 30, 2020. The decrease of 2016. The $0.3$1.2 million expense decrease was primarily due to lower equity compensation expensesa decrease in sales of $0.9dialysis concentrates products.which was partially offsetresulting in gross profit of $0.1 million during the six months ended June 30, 2021, compared to cost of sales of a $29.8 million and a gross profit of $2.0 million during the six months ended June 30, 2020. Gross profit decreased by higher legal$1.9 million mainly due to a decrease in concentrate sales and an increase in costs expenses related to shareholder activist activitiesprotocols implemented because of the ongoing COVID-19 pandemic, shipping and the contested 2017 annual meeting of $0.5 million.Selling, generalfuel costs and administrative expense during the first nine months of 2017 was $17.4 million compared to $15.1 million in the first nine months of 2016. The $2.3 million increase was primarily due to higher legal and professional costs relating to pending litigation, the Settlement with Baxter and the contested 2017 annual meeting. Equity compensation costs decreased by $1.8 million compared to the first nine months of 2016, partially offset by higher compensation and benefit costs of $0.5 million. Marketing costs for Triferic increased $0.4 million compared to the first nine months of 2016.We incurred product development and research costs related to the commercial development, patent approval and regulatory approval of new products, primarily Triferic, aggregating approximately $1.3 million and $1.3 million in the third quarter of 2017 and 2016, respectively. costs incurred in the first nine months of 2017 and 2016expenses were $4.2 million for the six months ended June 30, 2021, compared with $3.4 million during the six months ended June 30, 2020. This increase of $0.8 million is primarily due to continued investments the Company is making in its medical and $4.6scientific programs to support the continued advancement of our FPC technology platform.respectively, and were largelyduring the six months ended June 30, 2021, compared with $4.1 million during the six months ended June 30, 2020. The decrease of $0.8 million is primarily due to a decrease in marketing costs related to Triferic testing(dialysate) partially offset by a slight increase in costs associated with the launch of Triferic AVNU.developmentAdministrative Expenseusestock compensation, relating to a decrease in other clinical indicationsQ2 2020 incentive compensation from forfeited equity awards related to our former President and delivery presentations.CEO.15
Other Income (Expense)Interest and Investment Income, NetOur net interest and investmentincome. Other income infor the third quarter of 2017six months ended June 30, 2020 was $0.2 million, less thanconsisting primarily of interest income. Other expense for the third quartersix months ended June 30, 2021 was $1.2 million of 2016 dueinterest expense related to our debt facility (see Note 15 for more information on our debt facility). Other expense for the repositioningsix months ended June 30, 2020 was $1.5 million, consisting of holdings in our short term bond portfolio in response to market changes. For the first nine monthswarrant modification expense of 2017, we incurred a loss of $0.2$0.8 million compared toand interest incomeexpense of $0.6 million in the first nine months of 2016. Income Tax ExpenseWe recognized no income tax expense in the third quarter of 2017 or 2016. We recognized no income tax expense in the first nine months of 2017 compared to approximately $0.4 million in income tax expense in the first nine months of 2016, which pertained to foreign income taxes paid related to license payments received under the Wanbang license agreement.We believehave adequate capital resources and liquiditywill need to pursueexecute our business strategy.strategy is subject to many factors, including, but not limited to, the expenses and revenue associated with the commercial operations in the United States and internationally (with partners); the timing and magnitude of cash received from drug product sales; the timing and expenditures associated with the development programs including our FPC technology for home infusion and potentially acute heart failure; the costs associated with our manufacturing and transportation operations related to our concentrate business; any potential accelerated amortization under the Loan Agreement in the event of a failure to satisfy operating covenants..addition to operatingparticular, our Baxter Agreement prohibits us from entering into a contract that would encumber the assets used in our concentrate business without the prior written consent of Baxter. Due to the fact that the assets used in our strategyconcentrate business currently constitute a substantial portion of the tangible assets we own other than our drug inventory, we may not be able to, or we may find it difficult, to obtain secured debt financing without the consent of Baxter.centeredsubject to significant risks and uncertainties such that there can be no assurance that we will be successful is achieving approval of FPC in a new therapeutic area or that we will be able to have sustained commercial success with Triferic (dialysate) and Triferic AVNU. If our planned clinical program is delayed or fails or if our commercialization of Triferic (dialysate) and/or Triferic AVNU should fail to increase sales, we may be forced to implement cost-saving measures that may potentially have a negative impact on developing, marketingour activities and licensing high potential drug products including Triferic.Aspotentially the results of September 30, 2017, we had current assets of $61.2 million and net working capital of $53.6 million. We have approximately $38.9 million in cash and investments as of September 30, 2017. Our uses of cash have primarily been forour research and product development investmentsprograms. Even though we began commercialization of Triferic (dialysate) and Triferic AVNU as planned, if the results are unsuccessful, we may be unable to secure the additional capital that we will require to continue ourinventory to supportsignificant dilution of stockholders’ interests and, in such event, the market price of our drug product launches and for operating expenses. common stock may decline.$16.3$17.4 million for the six months ended June 30, 2021 compared to net cash used in operating activities of $16.2 million for the six months ended June 30, 2020. The increase in cash used from operating activities during the current period was primarily due to changes in current balance sheet accounts in the first nineordinary course of business of approximately $3.0 million, including an increase in net accounts receivable of $1.2 million and a reduction in accounts payable and accrued expense of approximately $0.4 million. Overall, our cash burn for the six months ended June 30, 2021 was in line with our expectations, and we continue to expect, in aggregate, 2021 cash burn to be lower than 2020 cash burn.2017, which included$0.7 million for the six months ended June 30, 2020. The net cash provided by investing activities during the six months ended June 30, 2021 was primarily due to sales and purchase of available-for-sale investments during the quarter.expensesactivities, and the operations of $4.2 millionthird parties upon whom we rely. Quarantines, shelter-in-place, executive and ansimilar government orders may negatively impact our sales and marketing activities, particularly if our sales representatives are unable to interact with current and potential customers to the same extent as before onset of the COVID-19 pandemic. The Company's international business development activities may also continue to be negatively impacted by COVID-19, especially with the recent surge in infections internationally, ongoing international travel restrictions and quarantines or shelter-in-place orders.$2.4 millionfunding. 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 our liquidity and capital resources in inventory levels. the future.increased our Trifericinventory over the last year in preparation for commercializing Triferichave evaluated all recently issued accounting pronouncements and believe wesuch pronouncements do not have adequate inventory to meet anticipated requirements. We have classified $1.5 million of Triferic’s active pharmaceutical ingredient as non-current inventory as of September 30, 2017 based on expected Triferic demand and production plans during 2018. The amount of non-current API inventory declined from the second quarter of 2017 primarily as a resultmaterial effect our financial statements. See Note 3 of the conversion of API into finished goods during the third quarter. We anticipate that we will increase our accounts receivable as we increase our drug product sales and we may also increase inventoriescondensed consolidated financial statements at June 30, 2021.a more modest degree as we commercialize Triferic and Calcitriol. We also expect to continue investing in research and product development, such as clinical testing in connection with peritoneal dialysis, an orphan drug indication, pediatric indications and certain other indications, as we work to expand potential uses for Triferic. Future spending on such indications is expected to be minor in relation to the Company’s cash resources. We believe that we have adequate capital resources to make these investments in accounts receivable, inventory and research and product development. We expect to generate positive cash flow from operations when our drug products generate substantial sales. We have no long term debt as of September 30, 2017 and do not expect to incur interest expense in 2017. Capital expenditures on our current facilities are not expected to materially exceed depreciation expense. Our capital expenditures were $0.7 million in the first nine months of 2017 compared to $0.3 million in the first nine months of 2016. We paid $2.3 million in withholding taxes in connection with restricted stock that vested in 2017 and for which we received common shares to be retired from the holders in accordance with the terms of the grants. The Company is in discussions with multiple potential business development partners to out‑license rights to Rockwell’s drug products outside the United States. Such licensing arrangements often include upfront fees, developmental milestone payments and royalties. If such licensing arrangements are negotiated for certain markets, we may receive such consideration in the future in addition to that which we are already entitled to receive under existing agreements. We are also considering other business development arrangements including joint ventures, partnerships and other transactions related to our products or other future products that we may develop or license.163. 3. Quantitative and Qualitative Disclosures Aboutabout Market RiskInterest Rate RiskWe have invested $35.0 millionavailable for sale securities that are invested in short term bonds and short term bond funds which typically yield higher returns than§229.10(f)(1) of Regulation S-K, is not required to provide the interest realized in money market funds. While these bonds and bond funds hold bonds of short duration, their market value is affecteddisclosure required by changes in interest rates. Increases in interest rates will reduce the market value of bonds held and we may incur unrealized losses from the reduction in market value of the bonds. If we sell some or all of our positions, those unrealized losses may result in realized losses which may or may not exceed the interest and dividends earned from those funds. However, due to the short duration of our portfolio of holdings, we do not believe that a hypothetical 100 basis point increase or decrease in interest rates will have a material impact on the value of our investments.Foreign Currency Exchange Rate RiskOur international business is conducted in U.S. dollars. It has not been our practice to hedge the risk of appreciation of the U.S. dollar against the predominant currencies of our trading partners. We have no significant foreign currency exposure to foreign supplied materials, and an immediate 10% strengthening or weakening of the U.S. dollar would not have a material impact on our shareholders’ equity or net income.Management is responsible for establishing and maintaining effectiveas defined under Rule 13a-15 of the Securities Exchange Act of 1934, as amended, that are designed to ensure that material information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’sSEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required financial disclosure. In designing and evaluating the disclosure controls and procedures, we recognized that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Management necessarily was required to apply its judgment in evaluating the cost-benefitcost‑benefit relationship of possible controls and procedures.As of the end of the period covered by this report, we carried out an evaluation underourthe Company’s Chief Executive Officer and Chief Financial Officer, ofwe evaluated the effectiveness of the design and operation of our disclosure controls and procedures.procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2021. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level, as of the end of the period covered by this report.have beenwere no changes in our internal control over financial reporting (as defined in connection with the evaluation required by Rule 13a-15 under13a-15(d) of the Exchange Act)Act that occurred during the most recently completed fiscal quarterperiod covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.the United States District Court for the Eastern District of Michigan against Richmond Brothers, Inc.Note 14 (Commitments and certain related entities, David S. Richmond, Mark H. Ravich and certain related trusts, and Matthew J. Curfman (“Richmond/Ravich Defendants”Contingencies –Litigation), and three individual Rockwell shareholders: Jay F. Joliat, Chris to our unaudited condensed consolidated financial statements is incorporated herein by reference.17Paxos, and David Hagelstein (together with the “Richmond/Ravich Defendants,” the “Rockwell Shareholders”). Since then, Rockwell voluntarily dismissed its claims against two of the individual shareholders, Chris Paxos and David Hagelstein. Rockwell’s complaint alleges that the Rockwell Shareholders failed to timely file a Schedule 13D and that a Schedule 13G and Schedules 13D filed by the Richmond/Ravich Defendants contained various material misstatements and omissions, in violation of Section 13(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, and the rules promulgated thereunder by the Securities and Exchange Commission. The complaint seeks declaratory and injunctive relief relating to these alleged violations, including requiring the Rockwell Shareholders to file new or amended Schedules 13D disclosing the proper date of their shareholder group’s formation and providing accurate information about the group’s membership and activities, and issuing a declaratory judgment finding that the Rockwell Shareholders violated Section 13(d) of the Exchange Act. On June 28, 2017, the Court denied the Richmond/Ravich Defendants’ motion to dismiss this case, in which Defendant Jay F. Joliat had joined. On August 24, 2017, the Richmond/Ravich Defendants answered the Complaint, and Defendant Mark H. Ravich asserted counterclaims against Rockwell alleging that he was denied access to corporate books, not properly notified of a Board of Directors meeting, and that certain settlement agreements with Baxter Healthcare Corporation (“Baxter”) and former Defendant David Hagelstein violate Michigan law. Defendant Ravich also asserted claims against Baxter and Mr. Hagelstein as third party “relief” defendants. On September 19, 2017, Rockwell moved for leave to amend the Complaint to add allegations regarding misstatements in the Richmond/Ravich Defendants’ Schedule 13(d) concerning the voting power of Richmond Brothers, Inc. and Mr. Richmond. The Richmond/Ravich Defendants have opposed this Motion. On September 28, 2017, Rockwell moved to dismiss Counts II-IV of Defendant Ravich’s Counterclaims. The hearing on Rockwell’s Motion to Dismiss is scheduled for December 13, 2017. The parties are currently engaged in discovery, with the trial in this case set for July 2018.Other ProceedingsWe areAdditionally, we may be involved in certain otherroutine legal proceedings from time to time before various courts and governmental agencies. We cannot predict the final disposition of such proceedings. We regularly review legal matters and record provisions for claims that are considered probable of loss. The resolution of these pending proceedings is not expected to have a material effect on our operations or consolidated financial statements in the period in which they are resolved.The Company has determined that its Triferic patent expiring in 2029 provides sufficient protection of the Company’s interest in Triferic and that it is in the Company’s best interest to no longer pursue an extension under the Hatch-Waxman Act of the earlier Triferic patents as to which it has a license. As a result, the Company has withdrawn its election under the Hatch-Waxman Act and those patents have now expired. In light of these actions, the risk factor entitled “If we do not obtain protection under the Hatch-Waxman Act to extend patent protection for Triferic, our drug business may not reach its full potential.” is no longer a material risk. In addition, as set forth below, the Company has expanded the risk factor entitled “Defending our intellectual property rights could be expensive, we may not always be successful in protecting our exclusive rights and we could be prevented from selling products, forced to pay damages and compelled to defend against litigation if we infringe the rights of a third party.” Defending our proprietary rights could be expensive, we may not always be successful in protecting our intellectual property, licenses and other proprietary rights and we could be prevented from selling products, forced to pay royalties and damages and compelled to defend against litigation if we infringe the rights of a third party.Our success, competitive position and future revenues, particularly with respect to our drug products, will depend in part on our ability to obtain and maintain proprietary protection for our products, methods, processes and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights and to operate without infringing the proprietary rights of third parties. There can be no assurance that these protections will prove commercially valuable.We could incur substantial costs in seeking enforcement of our proprietary rights, and we cannot guarantee that we will prevail in any legal action seeking enforcement or that such rights will successfully preclude others from using technology that we rely upon. It is possible that we may infringe on proprietary rights of others, even if we are not aware18of the infringement or believe our rights are otherwise valid. If a third party believes that one of our products infringes on the third party’s rights, it may sue us even if we have received our own patent protection for the technology or otherwise believe we have valid proprietary rights. If we are found by a court to have infringed the rights of a third party, we could be prevented from manufacturing and selling products, forced to pay royalties and damages, compelled to license technology from the party claiming infringement and lose the opportunity to license our technology to others and collect royalty payments, any of which could have a material adverse effect on our business. In addition, if Baxter is prevented from selling any of our concentrate or ancillary products due to a patent infringement or if its ability to sell any of our concentrate or ancillary products due to a patent infringement is materially and adversely affected, Baxter may be entitled to terminate our Distribution Agreement and obtain a refund of a portion of the upfront fee and facility fee.Other than the foregoing, thereThere have been no material changes to the risk factors set forth in our quarterly report for the period ended June 30, 2017 under “Part II - Item 1A — Risk Factors”, which amended and restated the risk factors in “Item 1A Risk Factors” of ourAnnual Report on Form 10-K for the year ended December 31, 2016.following documents areexhibits filed or furnished as part of this report or were previously filed andQuarterly Report on Form 10-Q are set forth on the Exhibit Index, which Exhibit Index is incorporated herein by reference to the filing indicated. Exhibits not required for this report have been omitted. Our Commission file number is 000-23661.reference.Exhibit No.DescriptionExhibit No. Description 10.70Form of Director and Officer Indemnification Agreement September 201710.71Stock Appreciation Right Agreement, dated September 5, 2017, between the Company and John G. Cooper.31.131.1* 31.232.1101.INS101.SCH101.CAL101.DEF101.LAB101.PRE104* The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in Inline XBRL (included as Exhibit 101) * Filed herewith ** Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act 19Date: August 16, 2021 /s/ Russell Ellison Date: November 8, 2017/s/ ROBERT L. CHIOINIRobert L. ChioiniPresident and Russell Ellison
Chief Executive Officer(principal executive officer) (duly authorized officer)Date: August 16, 2021 /s/ Russell Skibsted Date: November 8, 2017/s/ THOMAS E. KLEMAThomas E. KlemaVice President and Russell Skibsted
Chief Financial Officer(principal financial officer and principal accounting officer)20