(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) | ||||||||||
(
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 Triferic, with the latter beginning with the period ending December 31, 2020. The Company 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 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 paid on a straight-line amortization over 9 months with the final payment due on March 3, 2022. As of September 30, 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 September 30, 2021 and 2020 Liquidity and Capital Resources equity securities and payments from partnerships. At September 30, 2021, Rockwell had an accumulated deficit of approximately $361.1 million and stockholders' equity of $11.1 million. As of September 30, September 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.November 12, 2021 was 93,966,381.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)September 30,
2021December 31,
2020(Unaudited) ASSETS Cash and Cash Equivalents $ 23,390 $ 48,682 Investments Available-for-Sale 9,813 9,997 Accounts Receivable, net 6,036 4,171 Inventory, net 4,028 3,913 Prepaid and Other Current Assets 2,815 2,706 Total Current Assets 46,082 69,469 Property and Equipment, net 2,507 2,642 Inventory, Non-Current 1,526 1,176 Right of Use Assets, net 6,934 2,911 Goodwill 921 921 Other Non-Current Assets 729 629 Total Assets $ 58,699 $ 77,748 LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts Payable $ 4,834 $ 4,155 Accrued Liabilities 4,371 5,013 Lease Liability - Current 1,832 1,167 Deferred License Revenue - Current 2,176 2,175 Term Loan - Net of Issuance Costs 7,131 — Insurance Financing Note Payable 1,312 — Customer Deposits 100 152 Other Current Liability - Related Party — 131 Total Current Liabilities 21,756 12,793 Lease Liability - Long-Term 5,226 1,821 Term Loan, Net of Issuance Costs 14,094 20,949 Deferred License Revenue - Long-Term 6,529 8,015 Total Liabilities 47,605 43,578 Commitments and Contingencies (See Note 14) 0 0 Stockholders’ Equity: Preferred Stock, $0.0001 par value, 2,000,000 shares authorized; no shares issued and outstanding at September 30, 2021 and December 31, 2020 — — Common Stock, $0.0001 par value; 170,000,000 shares authorized; 93,966,381 and 93,573,165 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively 9 9 Additional Paid-in Capital 372,168 371,510 Accumulated Deficit (361,139) (337,406) Accumulated Other Comprehensive Income 56 57 Total Stockholders’ Equity 11,094 34,170 Total Liabilities and Stockholders’ Equity $ 58,699 $ 77,748 INCOME STATEMENTSFor the three and nine months ended September 30, 2017 and September 30, 2016 (Unaudited)Three Months Ended September 30, 2021 Three Months Ended September 30, 2020 Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020 Net Sales $ 15,988 $ 15,280 $ 46,599 $ 47,033 Cost of Sales 16,317 14,934 46,788 44,693 Gross (Loss) Profit (329) 346 (189) 2,340 Research and Product Development 1,221 1,745 5,445 5,183 Selling and Marketing 1,541 1,669 4,860 5,738 General and Administrative 3,881 3,622 11,483 11,767 Operating Loss (6,972) (6,690) (21,977) (20,348) Other (Expense) Income Realized (Loss) Gain on Investments — 4 (1) 8 Warrant Modification Expense — — — (837) Interest Expense (609) (666) (1,772) (1,289) Interest Income — 2 17 239 Total Other Expense (609) (660) (1,756) (1,879) Net Loss $ (7,581) $ (7,350) $ (23,733) $ (22,227) Basic and Diluted Net Loss per Share $ (0.08) $ (0.10) $ (0.26) $ (0.32) Basic and Diluted Weighted Average Shares Outstanding 93,882,142 71,811,322 93,726,629 69,594,167 INCOME (LOSS)For the three and nine months ended September 30, 2017 and September 30, 2016(Unaudited)Three Months Ended September 30, 2021 Three Months Ended September 30, 2020 Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020 Net Loss $ (7,581) $ (7,350) $ (23,733) $ (22,227) Unrealized Gain (Loss) on Available-for-Sale Debt Instrument Investments 4 2 (4) (11) Foreign Currency Translation Adjustments — 1 3 8 Comprehensive Loss $ (7,577) $ (7,347) $ (23,734) $ (22,230) 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 Net Loss — — — (7,581) — (7,581) Unrealized Gain on Available-for-Sale Investments — — — — 4 4 Issued shares for services 155,000 — 107 — — 107 Stock-based Compensation expense — — 361 — — 361 Balance as of September 30, 2021 93,966,381 $ 9 $ 372,168 $ (361,139) $ 56 $ 11,094 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 — — — (6,893) — (6,893) Unrealized Loss on Available-for-Sale Investments — — — — (6) (6) Foreign Currency Translation Adjustments — — — — 1 1 Issuance of common stock, net of offering costs/At-the-Market 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 $ (321,393) $ 46 $ 16,211 Net Loss — — — (7,350) — (7,350) Unrealized Gain on Available-for-Sale Investments — — — — 2 2 Foreign Currency Translation Adjustments — — — — 1 1 Issuance of common stock, net of offering costs/Public Offering 23,178,809 2 32,675 — — 32,677 Issuance of common stock, net of offering/At-the-Market Offering 140,892 — 284 — — 284 Vesting of Restricted Stock Units Issued, net of taxes withheld 96,542 — — — — — Stock-based Compensation — — 250 — — 250 Balance as of September 30, 2020 93,573,165 $ 9 $ 370,760 $ (328,743) $ 49 $ 42,075 72021 2020 Cash Flows From Operating Activities: Net Loss $ (23,733) $ (22,227) Adjustments To Reconcile Net Loss To Net Cash Used In Operating Activities: Depreciation and Amortization 535 614 Stock-based Compensation 558 (276) Warrant Modification Expense — 837 Increase in Inventory Reserves 89 305 Amortization of Right of Use Asset 1,312 1,090 Amortization of Debt Financing Costs and Accretion of Debt Discount 276 200 Loss on Disposal of Assets 7 7 Realized Loss (Gain) on Sale of Investments Available-for-Sale 1 (8) Foreign Currency Translation Adjustment 3 7 Changes in Assets and Liabilities: (Increase) Decrease in Accounts Receivable, net (1,865) 74 Increase in Inventory (554) (953) Decrease in Prepaid and Other Assets 1,760 161 Increase in Accounts Payable 679 1,172 Decrease in Settlement Payable — (104) Decrease in Lease Liability (1,266) (1,056) (Decrease) Increase in Other Liabilities (825) 423 Decrease in Deferred License Revenue (1,485) (1,338) Changes in Assets and Liabilities (3,556) (1,621) Cash Used In Operating Activities (24,508) (21,072) Cash Flows From Investing Activities: Purchase of Investments Available-for-Sale (19,107) (23,531) Sale of Investments Available-for-Sale 19,286 27,076 Purchase of Equipment (408) (970) Cash (Used In) Provided By Investing Activities (229) 2,575 Cash Flows From Financing Activities: Proceeds from Term Loan — 22,500 Debt Issuance Costs — (1,343) Payments on Short Term Note Payable (656) (763) Proceeds from the Issuance of Common Stock / Public Offering — 43,148 Offering Costs from the Issuance of Common Stock / Public Offering — (2,469) Proceeds from the Issuance of Common Stock / At-the-Market Offering — 2,325 Offering Costs from the Issuance of Common Stock / At-the-Market Offering — (63) Proceeds from the Issuance of Common Stock for payment related to services provided 107 — Repurchase of Common Stock to Pay Employee Withholding Taxes (6) (18) Cash (Used In) Provided By Financing Activities (555) 63,317 (Decrease) Increase in Cash and Cash Equivalents (25,292) 44,820 Cash and Cash Equivalents at Beginning of Period 48,682 11,794 Cash and Cash Equivalents at End of Period $ 23,390 $ 56,614 Supplemental Disclosure of Cash Flow Information: Cash Paid for Interest $ 1,318 $ 906 Supplemental Disclosure of Noncash Investing and Financing Activities: Change in Unrealized Loss on Marketable Securities Available-for-Sale $ (4) $ (11) Fair Value of Warrants issued related to Debt Financing $ — $ 501 and Subsidiaries (collectively, “we”("Rockwell Medical," "Rockwell", “our”, “us”,the "Company" or the “Company”"We") 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, 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, who are receiving long-term and hemodialysis. We are currently marketing and developing unique, proprietary renal drug therapies. These novel renal drug therapies support disease management initiatives to improveor chronic intravenous medications for various therapeutic needs in 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. We have also obtained licenses for certain dialysis related drugs whichhome infusion setting. In the Company's R&D pipeline, we are developing and planningalso exploring FPC’s impact in the treatment of hospitalized patients with acute heart failure, with the potential to market globally. We are also an established manufacturer and leaderbegin another Phase II trial in delivering high-qualitythese patients in 2022.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. Our concentrate products are used to remove waste and replace essential nutrients in the blood of dialysis patients during their hemodialysis treatment.centers. 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,Company's approximately 300 dedicated employees, as well as a management team with experience in manufacturing, logistics, pharmaceutical development and commercialization provides Rockwell with a solid foundation upon which to grow.federal, stateareas, have adversely affected Rockwell's business and local agencies. We hold several FDA product approvalsoperations, including, both drugsbut not limited to, our sales and medical devices. 2.marketing efforts, research and development activities, our plant and transportation operations and the operations of third parties upon whom the Company relies. Quarantines, shelter-in-place, executive and similar government orders and the recent surge in infections domestically may continue to negatively impact Rockwell's business, including with regard to the Company’s manufacturing and transportation and remaining sales and marketing activities. 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.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 fromSeptember 30, 2021, condensed consolidated statements of operations for the audited financialthree and nine months ended September 30, 2021 and 2020, condensed consolidated statements at that dateof comprehensive loss for the three and nine months ended September 30, 2021 and 2020, condensed consolidated statement of changes in stockholders' equity for the three and nine months ended September 30, 2021 and 2020, and condensed consolidated statements of cash flows for the nine months ended September 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 nine months ended September 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 September 30, 2021 2020 Options to purchase common stock 5,871,620 6,682,192 Unvested restricted stock awards 78,300 146,800 Unvested restricted stock units 342,271 245,405 Warrants to purchase common stock 26,426,863 26,426,863 Total 32,719,054 33,501,260 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 September 30, 2021 Nine Months Ended September 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 $ 217 $ 217 $ — $ 656 $ 656 $ — License Fee – Over time 62 — 62 179 — 179 Total Drug Products 279 217 62 835 656 179 Concentrate Products Product Sales – Point-in-time 15,224 13,541 1,683 44,308 39,768 4,540 License Fee – Over time 485 485 — 1,456 1,456 — Total Concentrate Products 15,709 14,026 1,683 45,764 41,224 4,540 Net Revenue $ 15,988 $ 14,243 $ 1,745 $ 46,599 $ 41,880 $ 4,719 In thousands of U.S. dollars ($) Three Months Ended September 30, 2020 Nine Months Ended September 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 $ 228 $ 228 $ — $ 609 $ 609 $ — License Fee – Over time 56 — 56 167 — 167 Total Drug Products 284 228 56 776 609 167 Concentrate Products Product Sales – Point-in-time 14,506 13,470 1,036 44,786 40,295 4,491 License Fee – Over time 490 490 — 1,471 1,471 — Total Concentrate Products 14,996 13,960 1,036 46,257 41,766 4,491 Net Revenue $ 15,280 $ 14,188 $ 1,092 $ 47,033 $ 42,375 $ 4,658 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 ($) September 30, 2021 December 31, 2020 Receivables, which are included in "Trade and other receivables" $ 6,036 $ 4,171 Contract liabilities $ 8,705 $ 10,190 up-frontany receivables arising from the Company’s contracts with customers for the three and milestonenine months ended September 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 $5.7 million as of September 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):September 30, 2021 Amortized Cost Unrealized Gain Unrealized Loss Accrued Interest Income Fair Value Available-for-Sale Securities Bonds $ 9,805 $ 1 $ — $ 7 $ 9,813 December 31, 2020 Amortized Cost Unrealized Gain Unrealized Loss Accrued Interest Fair Value Available-for-Sale Securities Bonds $ 9,987 $ 3 $ — $ 7 $ 9,997 these investments was $35,028,841available-for-sale are determined using quoted market prices from daily exchange-traded markets based on the closing price as of the balance sheet date and are classified as a Level 1 measurement under ASC 820 Fair Value Measurements.2017. Unrealized holding gains2021 and December 31, 2020 are as follows (table in thousands):September 30,
2021December 31,
2020Raw Materials $ 3,507 $ 3,112 Work in Process 266 172 Finished Goods 1,781 1,805 Total $ 5,554 $ 5,089 losses on these securities are includedthe active pharmaceutical ingredient and raw materials for Triferic. As of September 30, 2021, the total Triferic inventory net of reserve was $1.6 million.accumulated other comprehensive income (loss). Realized gainsthousands):September 30,
2021December 31,
2020Leasehold Improvements $ 1,196 $ 1,196 Machinery and Equipment 5,794 5,475 Information Technology & Office Equipment 1,846 1,831 Laboratory Equipment 676 676 9,512 9,178 Accumulated Depreciation (7,005) (6,536) Property and Equipment, net $ 2,507 $ 2,642 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 $76,3992020 was $0.1 million and gross unrealized gains were $35,274$0.2 million, respectively. Depreciation expense for the nine months end September 30, 2021 and 2020 was $0.5 million and $0.6 million, respectively.2017. There2021 and December 31, 2020 consisted of the following (table in thousands):September 30,
2021December 31,
2020Accrued Research & Development Expense $ 181 $ 232 Accrued Compensation and Benefits 2,193 2,500 Accrued Unvouchered Receipts 622 755 Accrued Workers Compensation 434 395 Other Accrued Liabilities 941 1,131 Total Accrued Liabilities $ 4,371 $ 5,013 realized gains2,000,000 shares of $57preferred stock, $0.0001 par value per share, authorized and realized lossesno shares of $199,758preferred stock issued or outstanding.Three Months Ended
September 30,Nine Months Ended
September 30,2021 2020 2021 2020 Service-based awards: Restricted stock units $ 81 $ 9 $ 263 $ 243 Stock option awards 315 243 1,050 1,019 396 252 1,313 1,262 Performance-based awards: Restricted stock awards — — (391) — Restricted stock units — (123) — (1,148) Stock option awards (35) 121 (364) (390) (35) (2) (755) (1,538) Total $ 361 $ 250 $ 558 $ (276) Number of Shares Weighted Average
Grant-Date
Fair ValueUnvested at January 1, 2021 146,800 $ 5.70 Forfeited (68,500) $ 5.70 Unvested at September 30, 2021 78,300 $ 5.70 Number of Shares Weighted Average
Grant-Date
Fair ValueUnvested at January 1, 2020 146,800 $ 5.70 Unvested at September 30, 2020 146,800 $ 5.70 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 (11,799) 4.81 Unvested at September 30, 2021 342,271 $ 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 (247,561) 4.30 Forfeited (159,724) 4.26 Unvested at September 30, 2020 245,405 $ 2.72 Number of Shares Weighted Average
Grant-Date
Fair ValueUnvested at January 1, 2020 988,958 $ 4.48 Forfeited (988,958) 4.48 Unvested at Unvested at September 30, 2020 — $ — September 30,
2021Exercise price $0.61 - $1.73 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 $ — Granted 1,872,162 0.89 6.0 — Forfeited (385,278) 2.30 — — Expired (1,333,220) 7.16 — — Outstanding at September 30, 2021 5,871,620 $ 2.95 7.7 $ — Exercisable at September 30, 2021 2,539,438 $ 4.96 5.8 $ — 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 2,252,344 1.95 5.9 — Forfeited (440,026) 3.96 — — Expired (4,090,150) 8.24 — — Outstanding at September 30, 2020 5,932,192 $ 4.54 6.7 $ — Exercisable at September 30, 2020 2,889,218 $ 6.95 3.8 $ — Number of Shares Weighted Average
Exercise
PriceOutstanding at January 1, 2021 750,000 $ 2.20 Expired (750,000) 2.20 Outstanding at September 30, 2021 — $ — Exercisable at September 30, 2021 — $ — Number of Shares Weighted Average
Exercise
PriceOutstanding at January 1, 2020 388,125 $ 4.70 Granted 750,000 $ 2.20 Forfeited (388,125) $ 4.70 Outstanding at September 30, 2020 750,000 $ 2.20 Exercisable at September 30, 2020 — $ — Three Months Ended September 30, 2021 Three Months Ended September 30, 2020 Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020 Operating leases Operating lease cost $ 457 $ 382 $ 1,309 $ 1,228 Variable lease cost 94 90 286 403 Operating lease expense 551 472 1,595 1,631 Finance leases Amortization of right-of-use assets 73 — 184 — Interest on lease obligations 22 — 55 — Finance lease expense 95 — 239 — Short-term lease rent expense 4 4 12 12 Total rent expense $ 650 $ 476 $ 1,846 $ 1,643 Other information Operating cash flows from operating leases $ 444 $ 393 $ 1,298 $ 1,248 Operating cash flows from finance leases $ 22 $ — $ 56 $ — Financing cash flows from finance leases $ 59 $ — $ 152 $ — Right of use assets exchanged for operating lease liabilities $ 718 $ — $ 4,089 $ — Right of use assets exchanged for finance lease liabilities $ 588 $ — $ 1,365 $ — Weighted-average remaining lease term – operating leases 3.7 2.3 3.7 2.3 Weighted-average remaining lease term – finance leases 5.5 0.0 5.5 0.0 Weighted-average discount rate – operating leases 6.3 % 6.8 % 6.3 % 6.8 % Weighted-average discount rate – finance leases 5.9 % — % 5.9 % — % Operating Finance Year ending December 31, 2021 (remaining) $ 470 $ 103 Year ending December 31, 2022 1,746 418 Year ending December 31, 2023 1,429 424 Year ending December 31, 2024 1,076 424 Year ending December 31, 2025 616 426 Remaining future payments 345 526 Total $ 5,682 $ 2,321 Less present value discount (607) (338) Operating and finance lease liabilities $ 5,075 $ 1,983 quarter.tranche of $7.5 million upon the achievement of certain additional milestones, including the achievement of certain Triferic sales thresholds. Net draw down proceeds were $21.2 million with closing costs of $1.3 million.2017, there were realized gains2021 and 2020, interest expense amounted to $1.8 million and $1.3 million, respectively.$57the Company and realized lossesRockwell Transportation, Inc. Proceeds are being used for working capital purposes. The Loan Agreement contains customary representations and warranties and covenants, subject to customary carve outs, and includes financial covenants related to liquidity and trailing twelve months sales of $704,752. has evaluatedcannot assure you that we can maintain compliance with the near term interest rate environmentcovenants under our Loan Agreement, which may result in an event of default. The Company's ability to comply with these covenants may be adversely affected by events beyond its control. For example, the Loan Agreement contains certain financial covenants relating to sales and, the expected holding periodas a result of the investments alongongoing COVID-19 pandemic and its effect on the Company's sales activities, among other factors, the Company may not be able to satisfy such covenants in the future. If the Company is unable to comply with the durationcovenants under the Loan Agreement, it would pursue all available cure options in order to regain compliance. The Company previously failed to satisfy a revenue covenant for the period ended December 31, 2020 and then subsequently agreed to an appropriate remedy during the applicable cure period. However, the Company may not be able to mutually agree with Innovatus on appropriate remedies to cure a future breach of a covenant, which could give rise to an event of default. If the Company is unable to avoid an event of default, any required repayments could have an adverse effect on its liquidity. As of September 30, 2021, the Company is in compliance with all the reporting and financial covenants. The financial statements for September 30, 2021 have been prepared with the assumption that the Company will be able to agree to an appropriate remedy during the applicable cure period for any future breaches of operating covenants. Based on the foregoing, the Company has classified amounts payable under the Loan Agreement as a current liability.fund portfolios in assessing the severity and duration of potential impairments. Based on that evaluationTerm Loans, the Company does not consider those investmentsis required 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 relatedissue to Innovatus a warrant (the “Warrants”) to purchase a number of shares of the commercial development, patent approval and regulatory approvalCompany’s common stock equal to 3.5% 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 measureprincipal amount of the cost of employee and non-employee services received in exchange for equity awards, including stock options,relevant Term Loan funded divided by the exercise price, which will be based on the grant datelower of (i) the volume weighted average closing price of the Company’s stock for the 5-trading day period ending on the last trading day immediately preceding the execution of the Loan Agreement or (ii) the closing price on the last trading day immediately preceding the execution of the Loan Agreement (or for the second and third tranches only at the lower of (i) $1.65 per share or (ii) the volume weighted average closing price of the Company’s stock for the 5-trading day period ending on the last trading day immediately preceding the relevant Term Loan funding). The Warrants may be exercised on a cashless basis and are immediately exercisable through the seventh anniversary of the applicable funding date. The number of shares of common stock for which each Warrant is exercisable and the associated exercise price are subject to certain proportional adjustments as set forth in such Warrant. In connection with the first tranche of the Term Loans, the Company issued a Warrant to Innovatus, exercisable for an aggregate of 477,273 shares of the Company’s common stock at an exercise price of $1.65 per share. The Company evaluated the warrant under ASC 470, Debt, and recognized an additional debt discount of approximately $0.5 million based on the relative fair value of the awards in accordance with ASC 718-10, Compensation — Stock Compensation.base instruments and warrants. The cost of equity based compensation is recognized as compensation expense over the vesting period of the awards.We estimateCompany calculated the fair value of compensation involving stock options utilizingthe warrant using the Black-Scholes option pricing model. This model requiresinputCompany, entered into the First Amendment to Loan and Security Agreement (the “Amendment”) with Innovatus Life Sciences Lending Fund I, LP, which amended the Loan Agreement.. Pursuant to the Amendment, the Company (i) shall prepay an aggregate principal amount of several factors such as$7.5 million in Term Loans (as defined in the expected option term, expected volatilityLoan Agreement) in 10 consecutive equal monthly installments commencing on December 1, 2021; (ii) shall pay an additional prepayment premium of our stock price over5% on prepaid amounts if the expected option term,Company elects to prepay all outstanding Term Loans on or before September 24, 2023 and an expected forfeiture rate,(iii) shall maintain minimum liquidity of no less than $5.0 million if the aggregate principal amount of Term Loans is greater than $15.0 million pursuant to the liquidity covenant in the Loan Agreement.is subject to various assumptions. We believeunaccreted discount of $1.3 million.valuation methodology is appropriate for estimatingschedule of principal payments on 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. 10Net 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. InventoryComponents of inventoryTerm Loan as of September 30, 20172021 (in thousands):Principal Payments 2021 $ 1,500 2022 7,500 2023 6,000 2024 6,000 2025 1,500 $ 22,500 December 31, 2016interest payments related to this note will begin on July 3, 2021 and are as follows:2017, we classified $1,494,175 of inventory as non-current all of which related to2021, the active pharmaceutical ingredient for Triferic.4. Baxter Distribution AgreementAs of October 2, 2014, we entered into the Distribution Agreement with Baxter, pursuant to which Baxter became the Company’s exclusive agent for sales, marketing and distribution activities for the Company’s hemodialysis concentrate and ancillary products in the United States and various foreign countries for an initial term of 10 years. The Distribution Agreement does not include any of the Company’s drug products. The Company retains sales, marketing and distribution rights for its hemodialysis concentrate products in specified foreign countries in which 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 breaches of the Distribution Agreement, and Rockwell counterclaimed alleging various breaches by Baxter. On June 23, 2017, the Company and Baxter settled the arbitration (the “Settlement”). The Settlement included a mutual release with respect to all known claims existing on the date of the Settlement and the arbitrationCompany's insurance note payable balance was dismissed with prejudice. No payments were made by either party in connection with the Settlement.In connection with the Settlement, on June 23, 2017, the Company and Baxter entered into a First Amendment to Exclusive Distribution Agreement and a First Amendment to Investment Agreement. The terms of 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 impact on our liquidity or results of operations.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, 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.servicesworking to find a commercial partner to expand our commercial efforts within the United States. This decision was based on the dynamics of the hemodialysis ("HD") market, including provider consolidation, the effects of the CMS bundled payment system and competitive product bundling tactics. In 2021, Rockwell has been working to advance our FPC platform strategy outside of dialysis and plans to start a Phase II 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 by the end of the year. In the Company's 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 II trial in these patients in 2022. 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. Subsequent to our Type C and Pre-IND meeting with FDA, and incorporating their advice and feedback, we filed an IND for the treatment of iron deficiency anemia in the home-infusion setting in November 2021. Our expectations regarding the commencement of a Phase II trial by the end of 2021 are based on the FDA's statutory obligations to respond to an IND submission within 30 calendar days. In ouralsobuilding on our reputation and industry presence by commercializing them 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. While we had identified a partner to commercialize the product in Canada, we recently terminated the distribution agreement with that partner and are seeking a new partner in Canada.This may delay commercial availability of Triferic AVNU in Canada. 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 futureestablished 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 and the limitations of our existing distribution and purchase agreements. 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 capitatedAmericasclinics. 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,To 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,and have adjusted our sales and marketing efforts while seeking a commercial partner within the United States with a bigger footprint to expand commercialization of whom have been supportiveboth products. In addition, we believe the hemodialysis industry may experience a great deal of our efforts.change over the next several years. We have had meetings withplan to take the leadershipsteps necessary to generate the data necessary to potentially allow Triferic and Triferic AVNU to benefit from these new innovations, such as the potential approval of the Departmenta class 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 development of 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 have iron deficiency anemia. 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 the first half of 2022 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.14For the Three Months Ended September 30, 2021 % of Revenue 2020 % of Revenue % Change Net Sales $ 15,988 $ 15,280 4.6 % Cost of Sales 16,317 102.1 % 14,934 97.7 % 9.3 Gross (Loss) Profit (329) (2.1) 346 2.3 (195.1) Research and Product Development 1,221 7.6 1,745 11.4 (30.0) Selling and Marketing 1,541 9.6 1,669 10.9 (7.7) General and Administrative 3,881 24.3 3,622 23.7 7.2 Operating Loss $ (6,972) (43.6) % $ (6,690) (43.8) % 4.2 % 20172021 and 2020For the Nine Months Ended September 30, 2021 % of Revenue 2020 % of Revenue % Change Net Sales $ 46,599 $ 47,033 (0.9) % Cost of Sales 46,788 100.4 % 44,693 95.0 % 4.7 Gross Profit (189) (0.4) 2,340 5.0 (108.1) Research and Product Development 5,445 11.7 5,183 11.0 5.1 Selling and Marketing 4,860 10.4 5,738 12.2 (15.3) General and Administrative 11,483 24.6 11,767 25.0 (2.4) Operating Loss $ (21,977) (47.2) % $ (20,348) (43.3) % 8.0 % 2016SalesOur2021, our net sales inwere $46.6 million compared to net sales of $47.0 million during the third quarternine months ended September 30, 2020. The decrease of 2017 were $14.6$0.4 million $1.8 million or 14.1% higher than the third quarter of 2016. The increase waswahigher domestica decrease in sales of dialysis concentrates products in the United States the resulted from the COVID-19 pandemic.$1.6the ongoing COVID-19 pandemic, as well as increases in shipping, fuel and labor costs. We expect our gross profit to continue to decrease due to increasing labor and fuel costs for transportation, which we have a limited our ability to recover such costs due to the terms of our agreements with our larger customers.which wasfor the nine months ended September 30, 2021, compared with $5.2 million during the nine months ended September 30, 2020. This increase of $0.2 million is primarily due to volume growthcontinued investments we are making in our 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$5.7 million during the nine months ended September 30, 2020. The decrease of $0.8 million is primarily due to volume growth and increased expenses compared to the third quarter of 2016. Our international sales were $0.2 million higher than the third quarter of 2016. Revenue recognized from licensing fees was the same as the third quarter of 2016.Our salesa headcount reduction in the firstquarter.2017 were $42.5$0.3 million is due primarily to a decrease of $0.5 million from the completion of severance pay related to our former President and Chief Executive Officer (CEO), a decrease in legal costs of $0.4 million, relating to previous litigation that has since been resolved; a decrease in recruiting fees of $0.3 million; partially offset by 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 2016 primarily due to increased sales volumes and additional pass through billings for delivery services to Baxter. Our international sales were $0.2 million higher than the first nine months 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$0.3 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 modifications to our contractual terms with Baxter. Our net drug business costs were approximately $0.3 million higher than the third quarter of 2016. Our drug business costs in the third quarter included inventory reserves of $0.7 million for inventory that was expected to be surplus to our requirements. Gross profit in the first nine months of 2017 was $4.9 million,insurance premiums; and an increase of $0.1$0.9 million or 3.4% overfor stock compensation. first nine months ended September 30, 2021 was $17,000, consisting primarily of 2016. Gross profit margins were 11.6 % compared to 11.9% ininterest income. Other income for the first nine months ended September 30, 2020 was $0.2 million, consisting primarily of 2016. The gross profit increaseinterest income. Other expense for the nine months ended September 30, 2021 was primarily due$1.8 million of interest expense related to lower costsour debt facility (see Note 15 for more information on our debt facility). Other expense for the nine months ended September 30, 2020 was $2.1 million, consisting of $0.5warrant modification expense of $0.8 million and interest expense of $1.3 million related to our drug business operations for regulatory fees and value add taxes paid in connection with our 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 $4.8 million compared to $5.1 million in the third quarter of 2016. The $0.3 million expense decrease was primarily due to lower equity compensation expenses of $0.9 million which was partially offset by higher legal costs, expenses related to shareholder activist activities and the contested 2017 annual meeting of $0.5 million.Selling, general 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.Research and Product Development ExpenseWe 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. Research and product development costs incurred in the first nine months of 2017 and 2016 were $4.2 million and $4.6 million, respectively, and were largely related to Triferic testing and development costs for use in other clinical indications and delivery presentations.15Interest and Investment Income, NetOur net interest and investment income in the third quarter of 2017 was $0.2 million less than the third quarter of 2016 due to the repositioning of holdings in our short term bond portfolio in response to market changes. For the first nine months of 2017, we incurred a loss of $0.2 million compared to interest income 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 believe we have adequate capital resourcesliquidity to pursue our business strategy. In addition to operating our concentrate business, our strategy is centered on developing, marketinghas funded its operations primarily through revenue from commercial products, proceeds from the issuance of debt and licensing high potential drug products including Triferic.2017, we2021, Rockwell had current assetsapproximately $33.2 million of $61.2 millioncash, cash equivalents and netinvestments available-for-sale, and working capital of $53.6$24.3 million. We have approximately $38.9 millionNet cash used in cash and investments as ofoperating activities for the nine months ended September 30, 2017. Our uses2021 was approximately $24.5 million. Based on the currently available working capital, the adjustments made to sales and marketing efforts for Triferic and Triferic AVNU and the implementation of key efficiency initiatives within our concentrates business, management believes the Company currently has sufficient funds to meet its operating requirements for at least the next twelve months from the date of the filing of this report.primarily been forsustained commercial success with Triferic (dialysate) and Triferic AVNU or be able to improve our profitability due to the current economic environment and the limitations of certain agreements. If our planned clinical program is delayed or fails or if Triferic (dialysate) and/or Triferic AVNU sales fail to increase or we cannot increase the profitability of our concentrate business, we may be forced to implement cost-saving measures that may potentially have a negative impact on our activities and potentially the results of our 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 our research and development activities and operations, which could have a material adverse effect on our business. If we are unable to raise the required capital, we may be forced to curtail all of our activities and, ultimately,inventory 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$24.5 million for the nine months ended September 30, 2021 compared to net cash used in operating activities of $21.1 million for the nine months ended September 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 nine monthsordinary course of 2017, which included research and development expensesbusiness of $4.2approximately $3.6 million, including an increase in net accounts receivable of $1.9 million and an increase in accounts payable and accrued expense of $2.4approximately $0.2 million.inventory levels.investing activities during the nine months ended September 30, 2021 was primarily due to sales and purchase of available-for-sale investments during the quarter.increasedhave utilized a range of financing methods to fund our Trifericinventory overoperations in the lastpast; however, current conditions in the financial and credit markets may limit the availability of funding or increase the cost of funding. Due to the 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 the future.preparationour Annual Report on Form 10-K for commercializing Trifericthe year ended December 31, 2020.wesuch pronouncements do not have adequate inventory to meet anticipated requirements. We have classified $1.5 milliona material effect our financial statements. See Note 3 of Triferic’s active pharmaceutical ingredient as non-current inventory as ofthe condensed consolidated financial statements at 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 result 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 inventories to 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 September 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. 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 effectimpact on our business. In addition, if Baxterbusiness, financial condition, results of operations and cash flows. The discussion of these risk factors is prevented from selling anyincluded in Part I, Item 1A 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 ofAnnual Report on Form 10-K for the upfront fee and facility fee.Other than the foregoing, therefiscal year ended December 31, 2020. There 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 201710.1 10.7110.2 + 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 September 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 + Certain confidential portions of this exhibit were omitted by means of marking such portions with asterisks because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed. 19Date: November 15, 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: November 15, 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