United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-23661

ROCKWELL MEDICAL, INC.

(Exact name of registrant as specified in its charter)


Delaware									38-3317208
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)
30142 S. Wixom Road, Wixom, Michigan									48393
(Address of principal executive offices)									(Zip Code)

(248) 960-9009

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year,

if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

Trading Symbol

Name of each exchange on which registered:

Common Stock, par value $0.0001

RMTI

Nasdaq Capital Market

The number of shares of common stock outstanding as of ~~May 12,~~November 10, 2023 was ~~13,743,673.~~28,489,663.

Rockwell Medical, Inc. and Subsidiaries

Index to Form 10-Q


			Page
Part I — Financial Information (unaudited)

Item 1 - Unaudited Financial Statements

Condensed Consolidated Balance Sheets as of ~~March 31,~~September 30, 2023 and December 31, ~~202~~22022			3

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended ~~March 31, 2023~~September 30, 2023 and ~~202~~22022			5

Condensed Consolidated Statements of Comprehensive Loss for the Three and ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2023 and 2022			6

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Three and ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2023 and 2022			7

Condensed Consolidated Statements of Cash Flows for the~~Three~~Nine Months Ended ~~March 31,~~September 30, 2023 and 2022			8

Notes to Condensed Consolidated Financial Statements			89

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations			2419

Item 3 - Quantitative and Qualitative Disclosures about Market Risk			2723

Item 4 - Controls and Procedures			2723

Part II — Other Information

Item 1 - Legal Proceedings			2824

Item 1A - Risk Factors			2824

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds			2924

Item 3 - Defaults Upon Senior Securities			2924

Item 4 - Mine Safety Disclosures			2924

Item 5 - Other Information			2924

Item 6 - Exhibits			3024

Signatures			3125

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars In ~~Thousands)~~Thousands, Except Par Value Amounts)


	September 30, 2023		December 31, 2022

ASSETS
Cash and Cash Equivalents	$	7,759	$	10,102
Investments Available-for-Sale	3,971		11,390
Accounts Receivable, net	9,361		6,259

Inventory, net	5,486		5,814
Prepaid and Other Current Assets	1,596		1,745
Total Current Assets	28,173		35,310
Property and Equipment, net	6,771		2,194
Inventory, Non-Current	178		1,276
Right of Use Assets-Operating, net	3,095		3,943
Right of Use Assets-Financing, net	2,044		2,468
Intangible Asset, net	10,897		—
Goodwill	921		921
Other Non-Current Assets	527		523
Total Assets	$	52,606	$	46,635
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts Payable	$	3,929	$	4,053
Accrued Liabilities	6,708		7,702
Deferred Consideration - Current	2,500		—
Lease Liabilities-Operating - Current	1,529		1,483
Lease Liabilities-Financing - Current	550		522
Deferred License Revenue - Current	46		1,731
Term Loan - Current - Net of Issuance Costs	5,631		1,631
Insurance Financing Note Payable	488		503
Customer Deposits	27		66

Total Current Liabilities	21,408		17,691

Lease Liabilities-Operating - Long-Term	1,676		2,581
Lease Liabilities-Financing - Long-Term	1,672		2,088
Term Loan - Long-Term, net of issuance costs	3,331		7,555
Deferred License Revenue - Long-Term	487		2,600
Deferred Consideration - Long-Term	2,500		—
Long Term Liability - Other	14		14
Total Liabilities	31,088		32,529

March 31,
2023 December 31,
2022
(Unaudited)
ASSETS
Cash and Cash Equivalents $ 10,894 $ 10,102
Investments Available-for-Sale 5,940 11,390
Accounts Receivable, net 6,021 6,259
Inventory 5,595 5,814
Prepaid and Other Current Assets 1,240 1,745
Total Current Assets 29,690 35,310
Property and Equipment, net 2,179 2,194
Inventory, Non-Current 1,276 1,276
Right of Use Assets-Operating, net 3,558 3,943
Right of Use Assets-Financing, net 2,326 2,468
Goodwill 921 921
Other Non-Current Assets 522 523
Total Assets $ 40,472 $ 46,635
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts Payable $ 5,202 $ 4,053
Accrued Liabilities 4,359 7,702
Lease Liability-Operating - Current 1,473 1,483
Lease Liability-Financing - Current 532 522
Deferred License Revenue - Current 259 1,731
Term Loan - Net of Issuance Costs 3,131 1,631
Insurance Financing Note Payable — 503
Customer Deposits 114 66
Total Current Liabilities 15,070 17,691
Lease Liability-Operating - Long-Term 2,214 2,581
Lease Liability-Financing - Long-Term 1,950 2,088
Term Loan, Net of Issuance Costs 6,147 7,555
Deferred License Revenue - Long-Term 2,535 2,600
Long Term Liability - Other 14 14
Total Liabilities 27,930 32,529
Stockholders’ Equity:
Preferred Stock, $0.0001 par value, 2,000,000 shares authorized; 15,000 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively — —
Common Stock, $0.0001 par value; 170,000,000 shares authorized; 12,552,673 and 12,163,673 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively 1 1
Additional Paid-in Capital 402,894 402,701
Accumulated Deficit (390,509) (388,759)
Accumulated Other Comprehensive Income 156 163
Total Stockholders’ Equity 12,542 14,106
Total Liabilities and Stockholders’ Equity $ 40,472 $ 46,635


	September 30, 2023		December 31, 2022
Stockholders’ Equity:
Preferred Stock, $0.0001 par value, 2,000,000 shares authorized; 15,000 shares issued and outstanding at September 30, 2023 and December 31, 2022	—		—
Common Stock, $0.0001 par value; 170,000,000 shares authorized; 28,489,663 and 12,163,673 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively	3		1
Additional Paid-in Capital	417,133		402,701
Accumulated Deficit	(395,686)		(388,759)
Accumulated Other Comprehensive Income	68		163
Total Stockholders’ Equity	21,518		14,106
Total Liabilities and Stockholders’ Equity	$	52,606	$	46,635

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

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except ~~Shares~~Share and Per Share Amounts)


		Three Months Ended March 31, 2023		Three Months Ended March 31, 2022			Three Months Ended September 30, 2023		Three Months Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022

Net Sales	Net Sales	$	19,668	$	16,124	Net Sales	$	23,771	$	18,691	$	61,519	$	53,497
Cost of Sales	Cost of Sales	17,069		16,910		Cost of Sales	21,569		17,914		55,685		51,760
Gross Profit (Loss)		2,599		(786)
Gross Profit						Gross Profit	2,202		777		5,834		1,737
Research and Product Development	Research and Product Development	278		1,567		Research and Product Development	494		469		939		2,963
Selling and Marketing	Selling and Marketing	498		455		Selling and Marketing	556		762		1,584		1,743
General and Administrative	General and Administrative	3,250		3,818		General and Administrative	2,889		3,254		9,434		11,845

Operating Loss	Operating Loss	(1,427)		(6,626)		Operating Loss	(1,737)		(3,708)		(6,123)		(14,814)

Other (Expense) Income	Other (Expense) Income					Other (Expense) Income
Realized Gain on Investments		—		4
Realized Gain on Settlement of Investments						Realized Gain on Settlement of Investments	220		—		220		4

Interest Expense	Interest Expense	(387)		(540)		Interest Expense	(411)		(476)		(1,193)		(1,497)
Interest Income		64		—
Total Other Expense		(323)		(536)
Interest and Other Income (Expense) - net						Interest and Other Income (Expense) - net	56		(6)		169		(10)
Total Other Expense, net						Total Other Expense, net	(135)		(482)		(804)		(1,503)

Net Loss	Net Loss	$	(1,750)	$	(7,162)	Net Loss	$	(1,872)	$	(4,190)	$	(6,927)	$	(16,317)

Basic and Diluted Net Loss per Share	Basic and Diluted Net Loss per Share	$	(0.10)	$	(0.84)	Basic and Diluted Net Loss per Share	$	(0.07)	$	(0.23)	$	(0.32)	$	(1.26)
Basic and Diluted Weighted Average Shares Outstanding		18,359,940		8,544,225
Basic and Diluted Weighted Average Shares Outstanding *						Basic and Diluted Weighted Average Shares Outstanding *	27,521,088		18,463,673		21,526,978		12,902,890

* See Note 3 for more detail related to Basic and Diluted Weighted Average Shares Outstanding

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

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In Thousands)


		Three Months Ended March 31, 2023		Three Months Ended March 31, 2022			Three Months Ended September 30, 2023		Three Months Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022

Net Loss	Net Loss	$	(1,750)	$	(7,162)	Net Loss	$	(1,872)	$	(4,190)	$	(6,927)	$	(16,317)
Unrealized Loss on Available-for-Sale Debt Instrument Investments		(3)		—
Unrealized (Loss) Gain on Available-for-Sale Investments						Unrealized (Loss) Gain on Available-for-Sale Investments	(69)		5		(90)		5
Foreign Currency Translation Adjustments	Foreign Currency Translation Adjustments	(4)		(1)		Foreign Currency Translation Adjustments	—		—		(4)		(3)
Comprehensive Loss	Comprehensive Loss	$	(1,757)	$	(7,163)	Comprehensive Loss	$	(1,941)	$	(4,185)	$	(7,021)	$	(16,315)

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

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Dollars in Thousands)

PREFERRED STOCK COMMON STOCK ADDITIONAL PAID-IN CAPITAL ACCUMULATED
DEFICIT ACCUMULATED
OTHER
COMPREHENSIVE
INCOME TOTAL
STOCKHOLDERS'
EQUITY
SHARES AMOUNT SHARES AMOUNT
Balance as of January 1, 2023 15,000 $ — 12,163,673 $ 1 $ 402,701 $ (388,759) $ 163 $ 14,106
Net Loss — — — — — (1,750) — (1,750)
Unrealized Loss on Available-for-Sale Investments — — — — — — (3) (3)
Foreign Currency Translation Adjustments — — — — — — (4) (4)
Issuance of Common Stock upon exercise of Pre-Funded Warrants — — 389,000 — — — — —
Stock-based Compensation — — — — 193 — — 193
Balance as of March 31, 2023 15,000 $ — 12,552,673 $ 1 $ 402,894 $ (390,509) $ 156 $ 12,542


	PREFERRED STOCK			COMMON STOCK			ADDITIONAL PAID-IN CAPITAL		ACCUMULATED DEFICIT		ACCUMULATED OTHER COMPREHENSIVE INCOME		TOTAL STOCKHOLDERS' EQUITY
	SHARES	AMOUNT		SHARES	AMOUNT
Balance as of January 1, 2023	15,000	$	—	12,163,673	$	1	$	402,701	$	(388,759)	$	163	$	14,106
Net Loss	—	—		—	—		—		(1,750)		—		(1,750)
Unrealized Loss on Available-for-Sale Investments	—	—		—	—		—		—		(3)		(3)
Foreign Currency Translation Adjustments	—	—		—	—		—		—		(4)		(4)


Issuance of Common Stock upon exercise of Pre-Funded Warrants	—	—		389,000	—		—		—		—		—
Stock-based Compensation	—	—		—	—		193		—		—		193
Balance as of March 31, 2023	15,000	—		12,552,673	1		402,894		(390,509)		156		12,542
Net Loss	—	—		—	—		—		(3,305)		—		(3,305)
Unrealized Loss on Available-for-Sale Investments	—	—		—	—		—		—		(18)		(18)
Foreign Currency Translation Adjustments	—	—		—	—		—		—		(1)		(1)
Issuance of Common Stock upon exercise of Pre-Funded Warrants	—	—		4,118,000	1		—		—		—		1



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

Stock-based Compensation	—	—		—	—		309		—		—		309
Balance as of June 30, 2023	15,000	—		16,795,673	2		403,203		(393,814)		137		9,528
Net Loss	—	—		—	—		—		(1,872)		—		(1,872)
Unrealized Loss on Available-for-Sale Investments	—	—		—	—		—		—		(69)		(69)

Issuance of Common Stock in connection with exercise of Prior Warrant and Pre-Funded Warrants, net of offering costs	—	—		11,693,990	1		13,718		—		—		13,719
Stock-based Compensation	—	—		—	—		212		—		—		212
Balance as of September 30, 2023	15,000	$	—	28,489,663	$	3	$	417,133	$	(395,686)	$	68	$	21,518

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

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

(Dollars in Thousands)


		PREFERRED STOCK			COMMON STOCK			ADDITIONAL PAID-IN CAPITAL		ACCUMULATED DEFICIT		ACCUMULATED OTHER COMPREHENSIVE INCOME		TOTAL STOCKHOLDERS' EQUITY (DEFICIT)			PREFERRED STOCK			COMMON STOCK			ADDITIONAL PAID-IN CAPITAL		ACCUMULATED DEFICIT		ACCUMULATED OTHER COMPREHENSIVE INCOME		TOTAL STOCKHOLDERS' EQUITY (DEFICIT)
		SHARES	AMOUNT		SHARES	AMOUNT											SHARES	AMOUNT		SHARES	AMOUNT
Balance as of January 1, 2022	Balance as of January 1, 2022	—	$	—	8,544,225	$	1	$	372,562	$	(370,080)	$	52	$	2,535	Balance as of January 1, 2022	—	$	—	8,544,225	$	1	$	372,562	$	(370,080)	$	52	$	2,535
Net Loss	Net Loss	—	—		—	—		—		(7,162)		—		(7,162)		Net Loss	—	—		—	—		—		(7,162)		—		(7,162)

Foreign Currency Translation Adjustments	Foreign Currency Translation Adjustments	—	—		—	—		—		—		(1)		(1)		Foreign Currency Translation Adjustments	—	—		—	—		—		—		(1)		(1)

Stock-based Compensation	Stock-based Compensation	—	—		—	—		(179)		—		—		(179)		Stock-based Compensation	—	—		—	—		(179)		—		—		(179)
Balance as of March 31, 2022	Balance as of March 31, 2022	—	$	—	8,544,225	$	1	$	372,383	$	(377,242)	$	51	$	(4,807)	Balance as of March 31, 2022	—	—		8,544,225	1		372,383		(377,242)		51		(4,807)
Net Loss																Net Loss	—	—		—	—		—		(4,967)		—		(4,967)

Foreign Currency Translation Adjustments																Foreign Currency Translation Adjustments	—	—		—	—		—		—		(2)		(2)
Issuance of Common Stock, net of offering costs/Public Offering																Issuance of Common Stock, net of offering costs/Public Offering	—	—		844,613	—		14,893		—		—		14,893
Issuance of Common Stock, net of offering costs/At-the-Market Offering																Issuance of Common Stock, net of offering costs/At-the-Market Offering	—	—		7,500	—		15		—		—		15
Issuance of Preferred Stock, net of offering costs																Issuance of Preferred Stock, net of offering costs	15,000	—		—	—		14,916		—		—		14,916
Vesting of Restricted Stock Units Issued, net of taxes withheld																Vesting of Restricted Stock Units Issued, net of taxes withheld	—	—		10,958	—		—		—		—		—

Stock-based Compensation																Stock-based Compensation	—	—		—	—		97		—		—		97
Balance as of June 30, 2022																Balance as of June 30, 2022	15,000	—		9,407,296	1		402,304		(382,209)		49		20,145
Net Loss																Net Loss	—	—		—	—		—		(4,190)		—		(4,190)
Unrealized Gain on Available-for-Sale Investments																Unrealized Gain on Available-for-Sale Investments	—	—		—	—		—		—		5		5

Issuance of Common Stock, net of offering costs/Public Offering																Issuance of Common Stock, net of offering costs/Public Offering	—	—		1,745,377	—		—		—		—		—
Stock-based Compensation																Stock-based Compensation	—	—		—	—		176		—		—		176
Balance as of September 30, 2022																Balance as of September 30, 2022	15,000	$	—	11,152,673	$	1	$	402,480	$	(386,399)	$	54	$	16,136

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

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

~~For the three months ended March 31, 2023 and 2022~~


	Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022

Cash Flows From Operating Activities:
Net Loss	$	(6,927)	$	(16,317)
Adjustments To Reconcile Net Loss To Net Cash Used In Operating Activities:
Depreciation and Amortization	894		422
Stock-based Compensation	714		95

Increase in Inventory Reserves	1,098		307
Non-cash Lease Expense from Right of Use Assets	1,529		1,518
Amortization of Debt Financing Costs and Accretion of Debt Discount	276		276
Loss (Gain) on Disposal of Assets	1		(3)
Realized Gain on Sale of Investments	(220)		(4)
Changes in Operating Assets and Liabilities:
Accounts Receivable, net	(3,102)		(1,454)

Inventory	1,561		(921)
Prepaid and Other Assets	875		2,058
Accounts Payable	(124)		(688)
Lease Liabilities	(1,113)		(1,435)
Other Liabilities	(1,033)		756
Deferred License Revenue	(3,798)		(1,427)
Cash Used In Operating Activities	(9,369)		(16,817)
Cash Flows From Investing Activities:
Purchase of Investments Available-for-Sale	(3,752)		(17,389)
Sale of Investments Available-for-Sale	11,301		11,972
Purchase of Equipment	(241)		(197)
Cash Paid in Connection with Evoqua Asset Acquisition	(12,361)		—
Cash Used In Investing Activities	(5,053)		(5,614)
Cash Flows From Financing Activities:


Payments on Debt	(500)		(6,750)
Payments on Insurance Financing Note Payable	(748)		(941)
Payments on Financing Lease Liabilities	(388)		—


Proceeds from Issuance of Common Stock	13,763		15,016
Offering Costs from Issuance of Common Stock	(43)		(106)
Proceeds from Issuance of Preferred Stock	—		15,000
Offering Costs from Issuance of Preferred Stock	—		(85)



Cash Provided by Financing Activities	12,084		22,134

Effect of Exchange Rate Changes on Cash and Cash Equivalents	(5)		(3)

Net Decrease in Cash and Cash Equivalents	(2,343)		(300)
Cash and Cash Equivalents at Beginning of Period	10,102		13,280
Cash and Cash Equivalents at End of Period	$	7,759	$	12,980

Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest	$	929	$	1,261



Supplemental Disclosure of Non-cash Operating, Investing and Financing Activities:
Change in Unrealized (Loss) Gain on Investments Available-for-Sale	$	(90)	$	5
Increase in Prepaid Assets from Insurance Financing Note Payable	$	733	$	—
Deferred Consideration from Evoqua Asset Acquisition	$	5,000	$	—

Three Months Ended
March 31, 2023 Three Months Ended
March 31, 2022
Cash Flows From Operating Activities:
Net Loss $ (1,750) $ (7,162)
Adjustments To Reconcile Net Loss To Net Cash Used In Operating Activities:
Depreciation and Amortization 160 138
Stock-based Compensation 193 (179)
Non-cash lease expense from Right of Use Asset 485 520
Amortization of Debt Financing Costs and Accretion of Debt Discount 92 92
Loss on Disposal of Assets 1 —
Realized Gain on Sale of Investments Available-for-Sale — (4)
Changes in operating Assets and Liabilities:
Accounts Receivable, net 238 (1,208)
Inventory 219 (1,455)
Prepaid and Other Assets 505 630
Accounts Payable 1,149 485
Lease Liability (336) (490)
Other Liabilities (3,295) (640)
Deferred License Revenue (1,537) (538)
Changes in operating Assets and Liabilities (3,057) (3,216)
Cash Used In Operating Activities (3,876) (9,811)
Cash Flows From Investing Activities:
Purchase of Investments Available-for-Sale (2,053) (2,810)
Sale of Investments Available-for-Sale 7,500 11,972
Purchase of Equipment (145) (29)
Cash Provided by Investing Activities 5,302 9,133
Cash Flows From Financing Activities:
Payments on Debt — (2,250)
Payments on Insurance Financing Note Payable (503) (437)
Payment on Financing Lease Liabilities (128) —
Cash Used In Financing Activities (631) (2,687)
Effect of exchange rate changes on cash (3) (1)
Increase (Decrease) in Cash and Cash Equivalents 792 (3,366)
Cash and Cash Equivalents at Beginning of Period 10,102 13,280
Cash and Cash Equivalents at End of Period $ 10,894 $ 9,914
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest $ 295 $ 461
Supplemental Disclosure of Noncash Investing and Financing Activities:
Change in Unrealized Loss on Marketable Securities Available-for-Sale $ (3) $ —

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

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Description of Business

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

Rockwell is a revenue-generating business and the second largest supplier of liquid and powder acid and bicarbonate concentrates for dialysis patients in the United States. Hemodialysis is the most common form of end-stage kidney disease treatment and is ~~usually~~typically performed at freestanding outpatient dialysis centers, at hospital-based outpatient centers, at skilled nursing facilities, or in a patient’s home.

Rockwell provides the hemodialysis community with products controlled by a Quality Management System regulated by the U.S. Food and Drug Administration ("FDA"). Rockwell ~~is ISO 13485 Certified and adheres to current Good Manufacturing Practices ("cGMP") and Association for Advancement of Medical Instrumentation ("AAMI") standards. Rockwell~~ manufactures hemodialysis concentrates at its ~~three~~ facilities in Michigan, ~~Texas,~~South Carolina, and ~~South Carolina~~Texas totaling approximately 175,000 square feet, and manufactures its dry acid concentrate mixers at its facility in Iowa. Rockwell delivers the majority of its hemodialysis concentrates products and mixers to dialysis clinics throughout the United States and internationally utilizing its own delivery trucks and third-party carriers.

On July 10, 2023, the Company executed and consummated the transactions contemplated by an Asset Purchase Agreement (the “Purchase Agreement”) with Evoqua Water Technologies LLC ("Evoqua") (the "Evoqua Acquisition"). Subject to the terms and conditions of the Purchase Agreement, at the closing of the transaction (the “Closing”), the Company purchased customer relationships, equipment and inventory from Evoqua, which were related to its manufacturing and selling of hemodialysis concentrates products, all of which are manufactured under a contract manufacturing agreement with a third-party organization. See Note 4 for further detail.

In addition to its primary focus on hemodialysis concentrates, Rockwell also has a proprietary parenteral iron product, Triferic® (ferric pyrophosphate citrate ("FPC")), which is indicated to maintain hemoglobin in adult patients with hemodialysis-dependent chronic kidney disease. While Rockwell has discontinued commercialization of Triferic in the United States, the Company has established ~~several~~ international partnerships with companies seeking to develop and commercialize Triferic outside the United States and is working closely with these international partners to develop and commercialize Triferic in their respective regions. During the third quarter of 2023, the ongoing Triferic development effort was terminated resulting in an acceleration of the corresponding deferred license revenue (see Note 10) and a reserve on the non-current inventory (see Note 7). Additionally, Rockwell continues to evaluate the viability of its FPC platform and FPC's potential to treat iron deficiency, iron deficiency anemia, and acute heart failure.

Rockwell was incorporated in the state of Michigan in 1996 and re-domiciled to the state of Delaware in 2019. Rockwell's headquarters is located at 30142 Wixom Road, Wixom, Michigan 48393.

~~ROCKWELL MEDICAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

2. Liquidity and Capital Resources

As of ~~March 31,~~September 30, 2023, Rockwell had approximately ~~$16.8~~$11.7 million of cash, cash equivalents and investments available-for-sale, and working capital of ~~$14.6~~$6.8 million. Net cash used in operating activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 was approximately ~~$3.9~~$9.4 million. Based on the currently available working capital, 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.

The Company continues to review its operational plans and execute on the acquisition of new customers, and has implemented cost containment activities. The Company may require additional capital to sustain its operations and make the investments it needs to execute its strategic plan. Additionally, the Company's operational plans include raising capital, if needed, by using its at-the-market ("ATM") facility or other methods or forms of financings, subject to existing limitations.

If the Company attempts to obtain additional debt or equity financing, the Company cannot assume such financing will be available on favorable terms, if at all.

~~Currently, because~~In 2023, the ~~Company's public float~~Company is ~~less than $75 million, it is~~no longer subject to the ~~baby shelf~~"baby shelf" limitations under Form S-3, which limit the amount the Company may offer pursuant to its registration statement on Form S-3.

~~In addition, the~~The Company is subject to certain covenants and cure provisions under its Loan Agreement with Innovatus. As of the date of this report, the Company is in compliance with all covenants (See Note 1415 for further detail).

In addition, the global macroeconomic environment is uncertain, and could be negatively affected by, among other things, increased U.S. trade tariffs and trade disputes with other countries, instability in the global capital and credit markets, recent bank failures in the United States, supply chain weaknesses, and instability in the geopolitical environment, including as a result of the Russian invasion of Ukraine, Israel-Hamas conflict and other political tensions, and lingering effects of the COVID-19 pandemic. Such challenges have caused, and may continue to cause, recession fears, rising interest rates, foreign exchange volatility and inflationary pressures. At this time, the Company is unable to quantify the potential effects of this economic instability on our future operations.

Rockwell has utilized a range of financing methods to fund its operations in the past; however, current conditions in the financial and credit markets may limit the availability of funding, refinancing or increase the cost of funding. Due to the rapidly evolving nature of the global situation, it is not possible to predict the extent to which these conditions could adversely affect the Company's liquidity and capital resources in the future.

~~ROCKWELL MEDICAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

3. Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements

The accompanying condensed consolidated financial statements have been prepared in accordance with ~~the~~ accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the U. S. Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements.

The condensed consolidated balance sheet at ~~March 31,~~September 30, 2023, and the condensed consolidated statements of operations, comprehensive loss, and changes in stockholders' equity for the three and nine months ended September 30, 2023 and cash flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 ~~and 2022~~ are unaudited, but include all adjustments, consisting of normal recurring adjustments the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The results for the three and nine months ended ~~March 31,~~September 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023 or for any future interim period. The condensed consolidated balance sheet at December 31, 2022 has been derived from audited financial statements, however, 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 for the year ended December 31, 2022 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as filed with the SEC on March 30, 2023. The Company’s consolidated subsidiaries consist of its wholly-owned subsidiaries, Rockwell Transportation, Inc. and Rockwell Medical India Private Limited.

The accompanying condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

~~Reverse Stock Split~~

On May 9, 2022, the stockholders of the Company authorized the Board of Directors to effect a reverse stock split of all outstanding shares of common stock. The Board of Directors subsequently approved the implementation of a reverse stock split as a ratio of one-for-eleven shares, which became effective on May 13, 2022. The Company’s outstanding stock options were also adjusted to reflect the one-for-eleven reverse stock split of the Company’s common stock. Outstanding stock options were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased. The reverse stock split resulted in an adjustment to the Series X convertible preferred stock conversion prices to reflect a proportional decrease in the number of shares of common stock to be issued upon conversion. All share and per share data in these condensed consolidated financial statements and related notes hereto have been retroactively adjusted to account for the effect of the reverse stock split.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

~~Leases~~

~~The~~Restatement of Loss Per Share

Loss per share for the three and nine months ended September 30, 2022 have been recalculated and restated and is presented on a comparable basis with the three and nine months ended September 30, 2023. In the first quarter of 2023, the Company ~~accounts for its leases under~~determined it should have included pre-funded warrants issued in the second quarter of 2022 in the earnings per share calculation in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“~~ASC”~~ASC") ~~842,~~ ~~Leases. Under this guidance, arrangements meeting the definition~~260-10-45-13, which treats shares of ~~a lease are classified~~common stock exercisable for little to no consideration 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 implicitincluded in the ~~lease or~~denominator of both the ~~Company’s incremental borrowing rate. Lease liabilities are increased by interest~~basic 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 the right-of-use asset result in straight-line rent expense over the lease term. Variable lease expenses, if any, are recorded when incurred.

~~In calculating the right-of-use asset and lease liability,~~diluted earnings per share calculations. While the Company ~~elects to combine lease~~has determined the impact of including the pre-funded warrants in the earnings per share calculations does not have a material impact on previously issued financial statements, the Company has recalculated and ~~non-lease components. The Company excludes short-term leases having initial terms of 12 months or less as an accounting policy election and recognizes rent expense~~restated amounts presented on a ~~straight-line~~comparative and consistent basis ~~over~~with current period results. The table below summarizes previously reported and restated amounts on a comparative basis. See the ~~lease term.~~table presentation of loss per share calculations as of September 30, 2023 and 2022 in the "Loss Per Share" section below.


	Three Months Ended September 30,			Nine Months Ended September 30,
		2022			2022
As Previously Reported:
Net loss per share attributable to common stockholders - basic and diluted		$	(0.40)		$	(1.75)
Weighted average number of shares of common stock outstanding - basic and diluted		10,528,148			9,299,788

As Restated:
Net loss per share attributable to common stockholders - basic and diluted		$	(0.23)		$	(1.26)
Weighted average number of shares of common stock outstanding - basic and diluted		18,463,673			12,902,890

Loss Per Share

Basic and diluted net loss per share for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022, after giving effect to the restatement discussed above, was calculated as follows:


		As of March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands, Except Shares and Per Share Amounts)		2023		2022
(In Thousands, Except Share and Per Share Amounts)						(In Thousands, Except Share and Per Share Amounts)	2023		2022		2023		2022
Numerator:	Numerator:					Numerator:
Net loss	Net loss	$	(1,750)	$	(7,162)	Net loss	$	(1,872)	$	(4,190)	$	(6,927)	$	(16,317)
Net loss attributable to common stockholders for basic and diluted loss per share	Net loss attributable to common stockholders for basic and diluted loss per share	$	(1,750)	$	(7,162)	Net loss attributable to common stockholders for basic and diluted loss per share	$	(1,872)	$	(4,190)	$	(6,927)	$	(16,317)

Denominator:	Denominator:					Denominator:
Weighted average number of shares of common stock outstanding - basic and diluted	Weighted average number of shares of common stock outstanding - basic and diluted	18,359,940		8,544,225		Weighted average number of shares of common stock outstanding - basic and diluted	27,521,088		18,463,673		21,526,978		12,902,890
Net loss per share attributable to common stockholders - basic and diluted	Net loss per share attributable to common stockholders - basic and diluted	$	(0.10)	$	(0.84)	Net loss per share attributable to common stockholders - basic and diluted	$	(0.07)	$	(0.23)	$	(0.32)	$	(1.26)

Included within the weighted average shares of common stock outstanding for the three and nine months ended ~~March 31, 2023 and~~September 30, 2022 are ~~5,911,000 and nil, respectively, of~~7,311,000 shares of common stock issuable upon the exercise of ~~the~~ pre-funded warrants ~~(see~~(See Note ~~10)~~11), as the warrants are exercisable at any time for nominal consideration and, as such, the shares are considered outstanding for the purpose of calculating basic and diluted net loss per share attributable to common stockholders.

The Company’s potentially dilutive securities include stock options, restricted stock awards and units, convertible preferred stock and warrants. These securities were excluded from the computations of diluted net loss per share for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022, as the effect would be to reduce the net loss per share. The following table includes the potential shares of common stock, presented based on amounts outstanding at each period end, that were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

As of March 31,
2023 2022
Options to purchase common stock 1,194,202 511,117
Unvested restricted stock awards 891 891
Unvested restricted stock units 125,000 28,066
Convertible Preferred Stock 1,363,636 —
Warrants to purchase common stock 10,196,268 2,402,442
Total 12,879,997 2,942,516


	As of September 30,
	2023	2022
Options to Purchase Common Stock	1,367,493	1,311,691
Unvested Restricted Stock Awards	891	891
Unvested Restricted Stock Units	287,400	125,000
Convertible Preferred Stock	1,363,636	1,363,636
Warrants to Purchase Common Stock	4,045,278	17,507,268
Total	7,064,698	20,308,486

Adoption of Recent Accounting Pronouncements

The Company continually assesses new accounting pronouncements to determine their applicability. When it is determined a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a review to determine the consequences of the change to its consolidated financial statements and assures there are sufficient controls in place to ascertain the Company’s consolidated financial statements properly reflect the change.

In June 2016, the ~~Financial Accounting Standards Board ("FASB")~~FASB issued Accounting Standards Update ("ASU") 2016-13, ~~"Financial~~Financial Instruments - Credit Losses (Topic 326)," which introduced an impairment model that is based on expected credit losses, rather than incurred losses, to estimate credit losses on certain types of financial instruments (e.g., loan commitments). The expected credit losses should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. Financial instruments with similar risk characteristics may be grouped together when estimating expected credit losses. In addition, ASC 326 requires expected credit related losses for trade accounts receivable, as well as available-for-sale debt securities, which are to be recorded through an allowance for credit losses, while non-credit related losses will continue to be recognized through other comprehensive income. The Company adopted the new guidance, as of January 1, 2023, and it did not have a material impact on the ~~Condensed Consolidated Financial Statements.~~condensed consolidated financial statements.

4. Asset Acquisition

On July 10, 2023, the Company completed the Evoqua Acquisition. At the Closing, the Company purchased customer relationships, equipment and inventory from Evoqua, which were related to manufacturing and selling of hemodialysis concentrates products, all of which are manufactured under a contract manufacturing agreement with a third-party organization.

Pursuant to the Purchase Agreement, total consideration was $17.4 million, comprising a cash payment at Closing of $12.2 million (inclusive of transaction costs) and two $2.5 million deferred payments, the first to be paid on the one-year anniversary of the Closing, which is included as a current liability on the Company's condensed consolidated balance sheet, and the second to be paid on the second anniversary of the Closing (collectively, the “deferred consideration”).

The transaction was accounted for as an asset acquisition, as the acquired assets did not meet the definition of a business as defined by ASC 805, Business Combinations.

The purchase price was allocated, on a relative fair value basis, to the assets acquired at the July 10, 2023 acquisition date as follows (table in thousands):



Consideration
Cash Payment	$	12,233
Deferred Consideration	5,000
Transaction Costs	128
Total Consideration	$	17,361

Assets Acquired
Customer Relationships Intangible Asset	$	11,035
Equipment	5,093
Inventory	1,233
Total Assets Acquired	$	17,361

The fair value of the customer relationships intangible asset was determined using a multi-period excess earnings method, a form of the income approach, which incorporates the estimated future cash flows to be generated from the customer base. Key assumptions included discounted cash flow, estimated life cycle and customer attrition rates. Customer relationships are being amortized over a period of 20 years. Given the recency of the purchase of the equipment in which the assets were recorded at fair value, the Company determined the fair value of the equipment using a cost approach, which considered

119

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

4.assumptions over the equipment's current replacement cost and useful life. Inventory was purchased directly from the contract manufacturer holding the inventory, which approximated fair value.

During the three and nine months ended September 30, 2023, the Company recorded amortization of its customer relationship intangible asset of $0.1 million, resulting in a net intangible asset of $10.9 million as of September 30, 2023.

Estimated future amortization expense on the Company's customer relationships intangible asset as of September 30, 2023 is as follows (table in thousands):


Year ended December 31:
2023 (remainder of year)	$	138
2024	552
2025	552
2026	552
2027	552
Thereafter	8,551
Total	$	10,897

5. Revenue Recognition

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the ~~new~~ revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

•Step 1: Identify the contract with the customer

•Step 2: Identify the performance obligations in the contract

•Step 3: Determine the transaction price

•Step 4: Allocate the transaction price to the performance obligations in the contract

•Step 5: Recognize revenue when the company satisfies a performance obligation

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue.

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

Nature of goods and services

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

WeThe Company currently ~~operate~~operates in one market segment, the hemodialysis market, which involves the manufacture, sale and distribution of hemodialysis products to hemodialysis clinics, including pharmaceutical, dialysis concentrates, dialysis kits and other ancillary products used in the dialysis process. ~~Our~~Rockwell's customer mix is diverse, with most customer sales concentrations under 10% and one customer, DaVita, Inc. ("DaVita"), at approximately ~~48%. Our~~50% of total net product sales for each of the three and nine months ended September 30, 2023. Rockwell's accounts receivable from this customer were approximately ~~34%~~31% and 30% of the ~~outstanding~~total net consolidated accounts receivable balance at ~~March~~September 30, 2023 and December 31, ~~2023.~~2022, respectively.

Product sales – The Company accounts for individual products and services separately if they are distinct (i.e., if a product or service is separately identifiable from other items and if a customer can benefit from it on its own or with other resources that are readily available to the customer). The consideration, including any discounts, is allocated between separate products and services based on their stand-alone selling prices. The stand-alone selling prices are determined based on the cost plus margin approach.

Drug and dialysis concentrates products are sold directly to dialysis clinics and to wholesale distributors in both domestic and international markets. Distribution and license agreements for which upfront fees are received are evaluated upon execution or modification of the agreement to determine if the agreement creates a separate performance obligation from the underlying product sales. For all existing distribution and license agreements, the distribution and license agreement is not a distinct performance obligation from the product sales. In instances where regulatory approval of the product has not been established and the Company does not have sufficient experience with the foreign regulatory body to conclude regulatory approval is probable, the revenue for the performance obligation is recognized over the term of the license agreement (over time recognition). Conversely, when regulatory approval already exists or is probable, revenue is recognized at the point in time control of the product transfers to the customer.

The Company received upfront fees under five distribution and license agreements that have been deferred as a contract liability. 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, South Korea and Turkey, respectively, to determine regulatory approval was probable as of the execution of the agreement. The amounts received from Baxter Healthcare Corporation (“Baxter”) were deferred and recognized as revenue at the point in time the estimated product sales under the agreement occurred. During the three months ended September 30, 2023, the amounts received from Wanbang were accelerated out of deferred license revenue and into revenue upon notice that the development effort was terminated (see Note 10).

OnIn November 9, 2022, Rockwell reacquired its distribution rights to its hemodialysis concentrates products from Baxter and terminated the ~~Distribution Agreement.~~exclusive distribution agreement. Under the ~~Distribution Agreement, effective December 31, 2022,~~exclusive distribution agreement, Baxter

distributed and commercialized Rockwell’s hemodialysis concentrates products and provided customer service and order delivery to nearly all ~~United States~~U.S. customers. Following the reacquisition of these rights, Rockwell is now unrestricted in its ability to sell its hemodialysis concentrates products to dialysis clinics throughout the ~~United States~~U.S. and around the world. For additional information, see Note 10.

Rockwell agreed to pay Baxter a fee for the reacquisition of its distribution ~~rights.~~rights which was reflected as an expense at that time. This fee was payable in two equal installments on January 1, 2023 and April 1, 2023. As of ~~March 31,~~September 30, 2023, all payments were completed.

On September 18, 2023, the ~~April~~Company and its long-time partner, DaVita, a leading provider of kidney care, entered into an Amended and Restated Products Purchase Agreement (the "Amended Agreement"), which amends and restates the Product Purchase Agreement, dated July 1, 2019, as amended, under which the Company supplies DaVita with certain dialysis concentrates. Under the Amended Agreement, the Company and DaVita agreed to an increase in product pricing, effective September 1, 2023 ~~installment~~and a one-time payment to Rockwell on or after December 1, 2023. The term of the Amended Agreement will expire on December 31, 2024. DaVita will have the right, in its sole discretion upon written notice to the Company given no later than September 30, 2024, to further extend the term through December 31, 2025. In the event of such an extension, product pricing will be increased for the extended term. In addition, DaVita is required to provide the Company with nine-month purchasing forecasts and a commitment to purchase at least the forecasted amounts. In the event that DaVita does not meet its forecasts, it is required to pay the Company for the amount forecasted, purchase additional product, or the Company may terminate the Amended Agreement. Upon expiration or termination of the Amended Agreement, and upon request by DaVita, the Company has ~~been recorded as~~agreed to provide transition services to DaVita during a ~~component~~transition period.

Additionally during the third quarter of ~~accrued liabilities~~2023, the Company entered into several long-term product purchase agreements, which include supply and other current liabilities on the accompanying condensed consolidated balance sheet. To ensure that customer needs continue to be met after January 1, 2023, Baxter and Rockwell worked closely together to transition customers’ purchases of Rockwell’s hemodialysis concentratespurchasing commitments from ~~Baxter to Rockwell.~~certain parties.

For the majority of the Company’s U.S. and international customers, the Company recognizes revenue at the shipping point, which is generally the Company’s plant or warehouse. For other business, the Company recognizes revenue based on when the customer takes control of the product. The amount of revenue recognized is based on the purchase order less returns and adjusted for any rebates, discounts, chargebacks or other amounts paid to ~~customers.~~customers estimated at the time of sale. 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 a small subset of customers have payment terms averaging 60 days.

Disaggregation of revenue

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


In thousands of U.S. dollars ($)		Three Months Ended March 31, 2023
In thousands								In thousands	Three Months Ended September 30, 2023						Nine Months Ended September 30, 2023
Products By Geographic Area	Products By Geographic Area	Total		U.S.		Rest of World		Products By Geographic Area	Total		U.S.		Rest of World		Total		U.S.		Rest of World
Drug Revenues	Drug Revenues							Drug Revenues
Product Sales – Point-in-time	Product Sales – Point-in-time	$	—	$	—	$	—	Product Sales – Point-in-time	$	—	$	—	$	—	$	—	$	—	$	—
License Fee – Over time	License Fee – Over time	65		—		65		License Fee – Over time	2,197		—		2,197		2,327		—		2,327
Total Drug Products	Total Drug Products	65		—		65		Total Drug Products	2,197		—		2,197		2,327		—		2,327
Concentrates Products	Concentrates Products							Concentrates Products
Product Sales – Point-in-time	Product Sales – Point-in-time	18,131		16,459		1,672		Product Sales – Point-in-time	21,574		19,741		1,833		57,720		52,326		5,394
License Fee – Over time	License Fee – Over time	1,472		1,472		—		License Fee – Over time	—		—		—		1,472		1,472		—
Total Concentrate Products	Total Concentrate Products	19,603		17,931		1,672		Total Concentrate Products	21,574		19,741		1,833		59,192		53,798		5,394
Net Revenue	Net Revenue	$	19,668	$	17,931	$	1,737	Net Revenue	$	23,771	$	19,741	$	4,030	$	61,519	$	53,798	$	7,721

In thousands of U.S. dollars ($) Three Months Ended March 31, 2022
Products By Geographic Area Total U.S. Rest of World
Drug Revenues
Product Sales – Point-in-time $ 159 $ 159 $ —
License Fee – Over time 62 — 62
Total Drug Products 221 159 62
Concentrates Products
Product Sales – Point-in-time 15,427 13,810 1,617
License Fee – Over time 476 476 —
Total Concentrate Products 15,903 14,286 1,617
Net Revenue $ 16,124 $ 14,445 $ 1,679


In thousands	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
Products By Geographic Area	Total		U.S.		Rest of World		Total		U.S.		Rest of World
Drug Revenues
Product Sales – Point-in-time	$	193	$	193	$	—	$	834	$	561	$	273
License Fee – Over time	65		—		65		192		—		192
Total Drug Products	258		193		65		1,026		561		465
Concentrates Products
Product Sales – Point-in-time	17,953		16,619		1,334		51,035		46,334		4,701
License Fee – Over time	480		480		—		1,436		1,436		—
Total Concentrate Products	18,433		17,099		1,334		52,471		47,770		4,701
Net Revenue	$	18,691	$	17,292	$	1,399	$	53,497	$	48,331	$	5,166

Contract balances

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

In thousands of U.S. dollars ($) March 31, 2023 December 31, 2022
Accounts Receivable, net $ 6,021 $ 6,259
Contract liabilities, which are included in Deferred revenue $ 2,794 $ 4,331


In thousands	September 30, 2023		December 31, 2022
Accounts Receivable, net	$	9,361	$	6,259
Contract Liabilities, which are included in deferred license revenue	$	533	$	4,331

There were no ~~bad debt expenses recognized related to any receivables arising from the Company’s contracts with customers for the three months ended March 31, 2023 and 2022.~~

~~For the three months ended March 31, 2023 and March 31, 2022, the Company did not recognize any material bad-debt expense. There were no~~other material contract assets recorded on the condensed consolidated balance ~~sheet~~sheets as of ~~March 31,~~September 30, 2023 and December 31, 2022. The Company does not generally accept returns of its concentrates products and no material reserve for returns of concentrates products was established as of ~~March 31,~~September 30, 2023 or December 31, 2022.

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

~~Transaction price allocated to remaining performance obligations~~

~~For the three months ended March 31, 2023, revenue recognized from performance obligations related to prior periods was not material.~~

Revenue expected to be recognized in any future year related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, contracts where revenue is recognized as invoiced, and contracts with variable consideration related to undelivered performance obligations, totaled $2.8 million as of March 31, 2023. The amount relates primarily to upfront payments and consideration received from customers in advance of the customer 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.

1210

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

5.6. Investments - Available-for-Sale

Investments available-for-sale consisted of the following as of ~~March 31,~~September 30, 2023 and December 31, 2022 (table in thousands):


		March 31, 2023											September 30, 2023
		Amortized Cost		Unrealized Gain		Unrealized Loss		Accrued Interest		Fair Value			Amortized Cost		Unrealized Gain		Unrealized Loss		Accrued Interest		Fair Value
Available-for-Sale Securities	Available-for-Sale Securities											Available-for-Sale Securities
Debt securities	Debt securities	$	5,868	$	72	$	—	$	—	$	5,940	Debt securities	$	3,898	$	73	$	—	$	—	$	3,971


	December 31, 2022
	Amortized Cost		Unrealized Gain		Unrealized Loss		Accrued Interest		Fair Value
Available-for-Sale Securities
Debt securities	$	11,315	$	75	$	—	$	—	$	11,390

The fair value of investments available-for-sale are determined using quoted market prices from daily exchange-traded markets based on the closing price as of the balance sheet date and are classified as a Level 1 measurement under ASC 820 Fair Value Measurements.

As of ~~March 31,~~September 30, 2023 and December 31, 2022, ~~the amortized cost and estimated fair value~~all of our available-for-sale securities were all due within one year.

6.7. Inventory

Components of inventory, net of reserves, as of ~~March 31,~~September 30, 2023 and December 31, 2022 are as follows (table in thousands):


		March 31, 2023		December 31, 2022			September 30, 2023		December 31, 2022
Inventory - Current Portion	Inventory - Current Portion					Inventory - Current Portion
Raw Materials	Raw Materials	$	2,806	$	3,351	Raw Materials	$	2,335	$	3,351
Work in Process	Work in Process	504		351		Work in Process	337		351
Finished Goods	Finished Goods	2,285		2,112		Finished Goods	2,814		2,112
Total Current Inventory	Total Current Inventory	5,595		5,814		Total Current Inventory	5,486		5,814
Inventory - Long Term(1)	Inventory - Long Term(1)	1,276		1,276		Inventory - Long Term(1)	178		1,276
Total Inventory	Total Inventory	$	6,871	$	7,090	Total Inventory	$	5,664	$	7,090

__________

~~As of both March 31, 2023 and December 31, 2022, the Company classified $1.3 million of~~1.Represents inventory ~~as non-current, all of which was~~ related to Triferic raw materials. This Triferic inventory will be utilized for the Company's international partnerships. ~~The~~In September 2022, the Company ~~has~~ discontinued its New Drug Applications ("NDAs") for Triferic (dialysate) and Triferic AVNU in the United States. During the three months ended September 30, 2023, the Company reserved $1.1 million of long-term inventory as a result of the termination of the Wanbang development effort.

As of ~~both March 31, 2023 and December 31, 2022, the total Triferic inventory net of reserve was $1.3 million. As of March 31,~~September 30, 2023 and December 31, 2022, Rockwell had total ~~Concentrate~~current concentrate inventory aggregating ~~$5.6~~$5.5 million and $5.8 million, respectively, against which Rockwell had reserved $25,000 ~~for~~at both ~~periods.~~

~~ROCKWELL MEDICAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~7. Property and Equipment, net~~

~~As of March 31,~~September 30, 2023 and December 31, ~~2022, the Company’s property and equipment consisted of the following (table in thousands):~~

March 31,
2023 December 31,
2022
Leasehold Improvements $ 1,322 $ 1,256
Machinery and Equipment 6,001 5,922
Information Technology & Office Equipment 1,845 1,845
Laboratory Equipment 807 807
Total Property and Equipment 9,975 9,830
Accumulated Depreciation (7,796) (7,636)
Property and Equipment, net $ 2,179 $ 2,194

~~Depreciation expense for the three months ended March 31, 2023 and 2022 was $0.2 million and $0.1 million respectively.~~2022.

1411

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

8. Property and Equipment, net

As of September 30, 2023 and December 31, 2022, the Company’s property and equipment consisted of the following (table in thousands):


	September 30, 2023		December 31, 2022
Leasehold Improvements	$	1,423	$	1,256
Machinery and Equipment	11,085		5,922
Information Technology & Office Equipment	1,845		1,845
Laboratory Equipment	807		807
Total Property and Equipment	15,160		9,830
Accumulated Depreciation and Amortization	(8,389)		(7,636)
Property and Equipment, net	$	6,771	$	2,194

Depreciation and amortization expense for the three months ended September 30, 2023 and 2022 was $0.4 million and $0.1 million, respectively. Depreciation and amortization expense for the nine months ended September 30, 2023 and 2022 was $0.8 million and $0.4 million, respectively.

9. Accrued Liabilities

Accrued liabilities as of ~~March 31,~~September 30, 2023 and December 31, 2022 consisted of the following (table in thousands):


		March 31, 2023		December 31, 2022			September 30, 2023		December 31, 2022
Accrued Research & Development Expense		$	—	$	43
Accrued Compensation and Benefits	Accrued Compensation and Benefits	1,804		2,568		Accrued Compensation and Benefits	$	2,240	$	2,568
Accrued Unvouchered Receipts	Accrued Unvouchered Receipts	358		585		Accrued Unvouchered Receipts	1,947		585
Accrued Manufacturing Expense						Accrued Manufacturing Expense	732		—
Accrued Workers Compensation	Accrued Workers Compensation	303		306		Accrued Workers Compensation	202		306
Accrued Research & Development Expense						Accrued Research & Development Expense	—		43
Other Accrued Liabilities	Other Accrued Liabilities	1,894		4,200		Other Accrued Liabilities	1,587		4,200
Total Accrued Liabilities	Total Accrued Liabilities	$	4,359	$	7,702	Total Accrued Liabilities	$	6,708	$	7,702

9.10. Deferred License Revenue

In October 2014, the Company entered into ~~the~~an exclusive distribution agreement with Baxter, ~~Agreement,~~ which had a term of 10 years and received an upfront fee of $20 million. The upfront fee was recorded as deferred license revenue and was being recognized based on the proportion of product shipments to Baxter in each period, compared with total expected sales volume over the term of the ~~Distribution Agreement.~~distribution agreement. On November 9, 2022, Rockwell reacquired its distribution rights to its hemodialysis concentrates products from Baxter and terminated the ~~Distribution Agreement.~~distribution agreement. Exclusivity and other provisions associated with the distribution agreement terminated November 9, 2022 and the remaining operational elements of the agreement terminated December 31, 2022. Rockwell agreed to provide certain services to a group of Baxter's customers until March 31, 2023. Under the ~~Distribution Agreement,~~distribution agreement, Baxter distributed and commercialized Rockwell’s hemodialysis concentrates products and provided customer service and order delivery to nearly all United States customers. Following the reacquisition of these rights, Rockwell is now unrestricted in its ability to sell its hemodialysis concentrates products to dialysis clinics throughout the United States and around the world. The Company recognized the remaining revenue of $1.5 million during the three months ended March 31, 2023.

In 2016, the Company entered into a distribution agreement with Wanbang (the "Wanbang Agreement") and received an upfront fee of $4.0 million. The upfront fee was recorded as deferred license revenue and is being recognized as revenue based on the agreement term. ~~The~~On August 7, 2023, Rockwell was informed by Wanbang that the main efficacy results of Wanbang’s clinical trial for Triferic (dialysate) compared with placebo were not obtained and Wanbang will not bring the product forward to registration. As a result, the Company recognized all remaining revenue under the Wangbang Agreement of approximately ~~$0.1~~$2.2 million during the third quarter of 2023. Additionally, in connection with these events, the Company

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

established a reserve for ~~both the three months ended March 31, 2023 and 2022. Deferred revenue~~ related ~~to the Wanbang Agreement totaled $2.3~~Triferic long-term inventory of $1.1 million, asresulting in a net increase in gross profit of ~~March 31, 2023 and $2.5 million as of December 31, 2022.~~$1.1 million.

In January 2020, the Company entered into license and supply agreements with Sun Pharma (the "Sun Pharma Agreements"), for the rights to commercialize Triferic (dialysate) in India. In consideration for the license, the Company received an upfront fee of $0.1 million. The upfront fee was recorded as deferred license revenue and is being recognized as revenue based on the agreement term. The Company recognized revenue of approximately $2,500 and $7,500 for ~~both~~ the three and nine months ended ~~March 31,~~September 30, 2023 and ~~2022.~~2022, respectively. Deferred license revenue related to the Sun Pharma Agreement totaled ~~$67,500~~$62,500 and $70,000 as of ~~March 31,~~September 30, 2023 and December 31, 2022, respectively.

In September 2020, the Company entered into a license and supply agreements with Jeil Pharmaceutical (the "Jeil Agreements"), for the rights to commercialize Triferic (dialysate) in South Korea. In consideration for the license, the Company received an upfront fee of $0.2 million. In May 2022, Jeil Pharmaceutical obtained regulatory approval in South Korea and paid the Company $0.2 million in consideration of reaching the milestone. The upfront fee and milestone payments were recorded as deferred license revenue and are being recognized as revenue based on the agreement term. The Company recognized revenue of $5,200 and ~~$2,500~~$15,600 for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022, respectively. Deferred license revenue related to the Jeil Agreement totaled approximately $0.4 million ~~and $0.2 million~~ as of ~~March 31,~~both September 30, 2023 and December 31, ~~2022 respectively.~~2022.

In June 2021, the Company entered into license and supply agreements with Drogsan Pharmaceuticals (the "Drogsan Agreements"), for the rights to commercialize Triferic (dialysate) and Triferic AVNU in Turkey. In consideration for the license, the Company received an upfront fee of $0.15 million. The upfront fee was recorded as deferred license revenue and will be recognized as revenue based on the agreement term. The Company recognized revenue of $3,750 and $11,250 for ~~both~~ the three and nine months ended ~~March 31,~~September 30, 2023 and ~~2022.~~2022, respectively. Deferred license revenue related to the Drogsan Agreements totaled approximately ~~$123,750 and $127,500~~$0.1 million as of ~~March 31,~~each of September 30, 2023 and December 31, ~~2022,~~2022. In April 2023, Drogsan submitted a Marketing Authorization application and GMP application for Triferic AVNU to the Turkish Medicines and Medical Devices Agency, for which Drogsan received priority status and high priority status, respectively.

Drogsan is responsible for all regulatory approval and commercialization activities.

~~ROCKWELL MEDICAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~10.~~11. Stockholders’ Equity

The Company held its annual meeting of stockholders on May 23, 2023 (the “Annual Meeting”). At the Annual Meeting, the Company’s stockholders approved the amendment and restatement of the Rockwell Medical, Inc. 2018 Long Term Incentive Plan to increase the number of shares of common stock issuable thereunder by 1,600,000 shares (the “Amended 2018 Plan”).

Preferred Stock

On April 6, 2022, the Company and DaVita entered into the Securities Purchase Agreement (the "SPA"), which provided for the issuance by the Company of up to $15 million of preferred stock to DaVita. On April 6, 2022, the Company issued 7,500 shares of Series X Preferred Stock for gross proceeds of $7.5 million. On June 16, 2022 the Company issued an additional 7,500 shares of the Series X Preferred Stock to DaVita for gross proceeds of $7.5 million.

The Series X Preferred Stock was issued for a price of $1,000 per share (the "Face Amount"), subject to accretion at a rate of 1% per annum, compounded annually. If the Company’s common stock trades above $22.00 for a period of 30 calendar days, the accretion will thereafter cease. As of September 30, 2023, the Series X Preferred Stock accreted a total $150,000.

The Series X Convertible Preferred Stock is convertible to common stock at a rate equal to the Face Amount, divided by a conversion price of $11.00 per share (subject to adjustment for future stock splits, reverse stock splits and similar recapitalization events). As a result, each share of Series X Preferred Stock will initially convert into approximately 91 shares of common stock. DaVita’s right to convert to common stock is subject to a beneficial ownership limitation, which is initially set at 9.9% of the outstanding common stock, which limitation may be reset (not to exceed 19.9%) at DaVita’s option and upon providing prior written notice to the Company. In addition, any debt financing is limited by the terms of our Securities Purchase Agreement with DaVita. Specifically, until DaVita owns less than 50% of its investment, the Company may only incur additional debt in the form of a purchase money loan, a working capital line of up to $5 million or to refinance existing debt, unless DaVita consents.

Additionally, the Series X Preferred Stock has a deemed liquidation event and redemption clause which could be triggered if the sale of all or substantially all of the Company's assets relating to the Company's dialysis concentrates business line. Since the Series X Preferred Stock may be redeemed if certain assets are sold at the option of the holder, but is not mandatorily redeemable and the sale of the assets that would allow for redemption is within the control of the Company, the preferred stock has been classified as permanent equity and initially recognized at fair value of $15 million (the proceeds on the date of issuance) less issuance costs of $0.1 million, resulting in an initial value of $14.9 million. The Company will assess at each reporting period whether conditions have changed to now meet the ~~mandatorily redemptive~~mandatory redemption definition which could trigger liability classification.

As of both ~~March 31,~~September 30, 2023 and December 31, 2022, there were 2,000,000 shares of preferred stock, $0.0001 par value per share, authorized and 15,000 shares of preferred stock issued and outstanding.

Common Stock

As of ~~March 31,~~September 30, 2023 and December 31, 2022, there were 170,000,000 shares of common stock, $0.0001 par value per share, authorized and ~~12,552,673~~28,489,663 and 12,163,673 shares issued and outstanding, respectively.

As of ~~March 31,~~September 30, 2023 and 2022, the Company ~~has~~ reserved for issuance the following shares of common stock related to the potential exercise of employee stock options, unvested restricted stock, convertible preferred stock, pre-funded warrants and all other warrants (collectively, "common stock equivalents"):


		As of March 31,			As of September 30,
Common stock and common stock equivalents:	Common stock and common stock equivalents:	2023	2022	Common stock and common stock equivalents:	2023	2022
Common stock	Common stock	12,552,673	8,544,225	Common stock	28,489,663	11,152,673
Common stock issuable upon exercise of pre-funded warrants	Common stock issuable upon exercise of pre-funded warrants	5,911,000	—	Common stock issuable upon exercise of pre-funded warrants	—	7,311,000
Common stock and pre-funded stock warrants	Common stock and pre-funded stock warrants	18,463,673	8,544,225	Common stock and pre-funded stock warrants	28,489,663	18,463,673
Options to purchase common stock		1,194,202	511,117
Unvested restricted stock awards		891	891
Unvested restricted stock units		125,000	28,066
Options to Purchase Common Stock				Options to Purchase Common Stock	1,367,493	1,311,691
Unvested Restricted Stock Awards				Unvested Restricted Stock Awards	891	891
Unvested Restricted Stock Units				Unvested Restricted Stock Units	287,400	125,000
Convertible Preferred Stock	Convertible Preferred Stock	1,363,636	—	Convertible Preferred Stock	1,363,636	1,363,636

Warrants to purchase common stock		10,196,268	2,402,442
Warrants to Purchase Common Stock				Warrants to Purchase Common Stock	4,045,278	17,507,268
Total	Total	31,343,670	11,486,741	Total	35,554,361	38,772,159

During the three months ended ~~March 31,~~September 30, 2023 and 2022, ~~389,000~~1,793,000 and ~~nil~~477,480 pre-funded warrants were exercised, respectively. During the nine months ended September 30, 2023 and 2022, 6,300,000 and 477,480 pre-funded warrants were exercised, respectively.

During the three and nine months ended ~~March 31,~~September 30, 2023 and 2022, no vested employee stock options ~~were exercised.~~

~~On April 20, 2023, 1,191,000 Pre-Funded Warrants to purchase common stock~~ were exercised.

Controlled Equity Offering

On April 8, 2022, the Company entered into the Sales Agreement (the "ATM facility") with Cantor Fitzgerald & Co. as Agent, pursuant to which the Company may offer and sell from time to time up to ~~$12,200,000~~$12.2 million of shares of Company’s common stock through the Agent. The offering and sale of such shares has been registered under the Securities Act of 1933, as amended, pursuant to the Company’s Registration Statement on Form S-3 (File No. 333-259923) (the “Registration Statement”), which was originally filed with the SEC on September 30, 2021 and declared effective by the SEC on October 8, 2021, the base prospectus contained within the Registration Statement, and a prospectus supplement that was filed with the SEC on April 8, 2022.amended.

During the quarter ended ~~March 31,~~September 30, 2023, no sales were made pursuant to the Sales Agreement. Approximately $12.2 million remains available for sale under the ATM ~~facility (subject to restrictions under General Instruction I.B.6 to Form S-3).~~facility.

Registered Direct Offering

On May 30, 2022, the Company entered into the RDRegistered Direct Purchase Agreement (the "Agreement") with the Purchaser, ~~named therein,~~ pursuant to which the Company ~~agreed to issue~~issued and ~~sell,~~sold, in a registered direct offering (the “Offering”), 844,613 shares of its common stock at price of $1.39 per share, and pre-funded warrants to purchase up to an aggregate of 7,788,480 shares of common stock (the “Pre-Funded Warrants” and the shares of common stock underlying the Pre-Funded Warrants, the “Warrant Shares”). The purchase price of each Pre-Funded Warrant is equal to the price at which a share of common stock was sold to the public in the Offering, minus $0.0001, and the exercise price of each Pre-Funded Warrant is $0.0001 per share.

A holder (together with its affiliates) may not exercise any portion of the Pre-Funded Warrants to the extent the holder would own more than 9.99% of the Company’s outstanding common stock immediately after exercise, as such percentage ownership is determined in accordance with the terms of the Pre-Funded Warrant. The ~~RD Purchase~~ Agreement contains customary representations and warranties and agreements of the Company and the Purchaser and customary indemnification rights and obligations of the parties.

~~A total~~On July 5, 2023, all of ~~5,911,000 Pre-Funded Warrants remained outstanding as of March 31, 2023.~~ ~~On April 20, 2023, 1,191,000~~the remaining Pre-Funded Warrants to purchase 1,793,000 shares of common stock were exercised. The exercise price of each Pre-Funded Warrant was $0.0001 per share and resulted in gross proceeds to the Company of $179.

Private Placement

Also on May 30, 2022, ~~concurrently~~concurrent with the Offering, the Company entered into the ~~PIPE~~private investment in public equity "PIPE" Purchase Agreement relating to the offering and sale (the “Private Placement”) of warrants to purchase up to a total of 9,900,990 shares of common

stock (the "PIPE Warrants") and pre-funded warrants to purchase up to a total of 1,267,897 shares of common stock (the ~~“PIPE~~“Pre-Funded PIPE Warrants”). Each warrant was sold at a price of $0.125 per underlying warrant share and is exercisable at an exercise price of $1.39 per share. The purchase price of each Pre-Funded Warrant was equal to the price at which a share of common stock was sold to the public in the Offering, minus $0.0001, and the exercise price of each ~~prefunded warrant~~Pre-Funded Warrant is $0.0001 per share. As of December 2022, all Pre-Funded PIPE Warrants have been exercised.

AsOn July 10, 2023, the Company entered into a letter agreement (the “Letter Agreement”) with Armistice Capital Master Fund Ltd. (“Armistice”), which held a warrant (the “Prior Warrant”) to purchase 9,900,990 shares of ~~March 31, 2023, 9,900,990~~ common stock ~~warrants~~of the Company (the “Common Stock”) with an exercise price of $1.39 per share, offering Armistice the opportunity to exercise the Prior Warrant for cash, provided the Prior Warrant was exercised for cash on or prior to 5:00 P.M. Eastern Time on July 10, 2028 (the “End Date”). In addition, Armistice would receive a “reload” warrant (the “Reload Warrant”) to purchase 3,750,000 shares of Common Stock with an exercise price of $5.13 per share, the closing price as reported by the Nasdaq Capital Market on July 7, 2023. The terms of the Reload Warrant and ~~no PIPE Warrants remained outstanding.~~Letter Agreement provide for customary resale registration rights. The Letter Agreement also provides that for a period of 45 days after the issuance of the Reload Warrant, the Company’s may not sell shares of Common Stock pursuant to its sales agreement with Cantor Fitzgerald & Co., dated as of April 8, 2022, at price per share less than $6.25. The Reload Warrant may be exercised at all times prior to the 54 months month anniversary of its issuance date. The Prior Warrant and the Reload Warrant both provide that a holder (together with its affiliates) may not exercise any portion of the Prior Warrant or the Reload Warrant to the extent that the holder would own more than 9.99% of the Company’s outstanding Common Stock immediately after exercise, as such percentage ownership is determined in accordance with the terms of such warrant. To the extent the exercise of the Prior Warrant would result in Armistice holding more than 9.99% of the Company’s outstanding Common Stock, such shares of Common Stock in excess of 9.99% will be held in abeyance. The Letter Agreement amended the Prior Warrant to extend the expiration date thereof to one year following the original expiration date set forth therein.

Armistice exercised the Prior Warrant on July 10, 2023, and the Company received gross proceeds of approximately $13.8 million from the exercise of the Prior Warrant as a result of such exercise pursuant to the terms of the Letter Agreement.

1613

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~11.~~12. Stock-Based Compensation

The Company recognized total stock-based compensation expense during the three and nine months ended ~~March 31,~~September 30, 2023 and 2022 as follows (table in thousands):


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022				2023		2022		2023		2022
Service-based awards:	Service-based awards:						Service-based awards:

Restricted stock units		$	45	$	12
Stock option awards		148		200
Restricted Stock Units							Restricted Stock Units	$	112	$	46	$	276	$	84
Stock Option Awards							Stock Option Awards	100		130		438		401
Total Service Based Awards	Total Service Based Awards	193		212			Total Service Based Awards	212		176		714		485
Performance-based awards:	Performance-based awards:						Performance-based awards:
Restricted stock awards		—		(391)
Restricted Stock Awards							Restricted Stock Awards	—		—		—		(391)

Total Performance Based Awards		—		(391)

Total	Total	$	193	$	(179)		Total	$	212	$	176	$	714	$	94

Performance Based Restricted Stock

A summary of the Company’s restricted stock awards during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 is as follows:

Number of Shares Weighted Average
Grant-Date
Fair Value
Unvested at January 1, 2023 891 $ 62.70
Unvested at March 31, 2023 891 $ 62.70


	Number of Shares	Weighted Average Grant-Date Fair Value
Unvested at January 1, 2023	891	$	62.70

Unvested at September 30, 2023	891	$	62.70

A summary of the Company’s restricted stock awards during the ~~three~~nine months ended ~~March 31,~~September 30, 2022 is as follows:


		Number of Shares	Weighted Average Grant-Date Fair Value			Number of Shares	Weighted Average Grant-Date Fair Value
Unvested at January 1, 2022	Unvested at January 1, 2022	7,118	$	62.70	Unvested at January 1, 2022	7,118	$	62.70
Forfeited(1)	Forfeited(1)	(6,227)	$	62.70	Forfeited(1)	(6,227)	$	62.70
Unvested at March 31, 2022		891	$	62.70
Unvested at September 30, 2022					Unvested at September 30, 2022	891	$	62.70

~~The fair value~~__________

1.These forfeited awards were due to the resignation of ~~restricted~~the Company's Chief Development Officer on March 25, 2022 and reduced stock-based compensation expense by $0.4 million in 2022.

Restricted stock awards are measured based on their fair value on the date of grant and amortized over the vesting period of 20 months. As of both March 31, 2023 and 2022, unvested restricted stock awards of 891 were related to performance-based awards. The forfeited performance-based restricted stock awards of 6,227 was due to the resignation of the Company's Chief Development Officer on March 25, 2022. These forfeited awards reduced stock-based compensation expense by $0.4 million in 2022.

1714

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Service-Based Restricted Stock Units

A summary of the Company’s service-based restricted stock units during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 is as follows:

Number of Shares Weighted Average
Grant-Date
Fair Value
Unvested at January 1, 2023 125,000 $ 1.47
Unvested at March 31, 2023 125,000 $ 1.47


	Number of Shares	Weighted Average Grant-Date Fair Value
Unvested at January 1, 2023	125,000	$	1.47
Granted	313,065	1.87
Vested	(125,000)	1.47
Forfeited	(25,665)	1.37
Unvested at September 30, 2023	287,400	$	1.85

A summary of the Company’s service-based restricted stock units during the ~~three~~nine months ended ~~March 31,~~September 30, 2022 is as follows:


		Number of Shares	Weighted Average Grant-Date Fair Value			Number of Shares	Weighted Average Grant-Date Fair Value
Unvested at January 1, 2022	Unvested at January 1, 2022	29,289	$	12.87	Unvested at January 1, 2022	29,289	$	12.87

Granted					Granted	125,000	1.47
Vested					Vested	(23,515)	11.33
Forfeited	Forfeited	(1,223)	52.91		Forfeited	(5,774)	19.00

Unvested at March 31, 2022		28,066	$	11.11
Unvested at September 30, 2022					Unvested at September 30, 2022	125,000	$	1.47

~~The fair value of service~~Service based restricted stock units are measured based on their fair value on the date of grant and amortized over the vesting period. The vesting periods range from 1 to 3 years. Stock-based compensation expense of ~~$45,184~~$0.1 million and ~~$12,000~~$46,000 was recognized for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively. Stock-based compensation expense of $0.3 million and $0.1 million was recognized for the nine months ended September 30, 2023 and 2022, respectively. As of ~~March 31,~~September 30, 2023, the unrecognized stock-based compensation expense was ~~$34,139,~~$0.4 million, which is expected to be recognized over an estimated weighted average remaining term of less than ~~1 year.~~1.4 years.

Service-Based Stock Options

~~During~~The fair value of the ~~three~~service-based stock options granted for the nine months ended ~~March 31,~~September 30, 2023 ~~there~~ were ~~no service~~ based ~~stock options issued.~~on the following assumptions:

~~A summary of the Company’s service-based stock option activity for the three months ended March 31, 2023 is as follows:~~

Shares
Underlying
Options Weighted
Average Exercise
Price Weighted
Average
Remaining
Contractual
Term
Outstanding at January 1, 2023 1,206,905 $ 8.32 8.9
Forfeited (8,083) 3.54 —
Expired (4,620) 18.44 —
Outstanding at March 31, 2023 1,194,202 $ 8.32 8.6
Exercisable at March 31, 2023 239,075 $ 28.45 6.7


			Nine Months Ended September 30, 2023
Exercise price			$1.37 - $2.83
Expected stock price volatility			81.6% - 81.8%
Risk-free interest rate			3.41% - 3.46%
Term (years)			5.6 - 6

1815

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

A summary of the Company’s service-based stock option activity for the nine months ended September 30, 2023 is as follows:


	Shares Underlying Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
				in years	in thousands
Outstanding at January 1, 2023	1,206,905	$	8.32
Granted	382,745	1.48

Forfeited	(143,430)	2.82
Expired	(78,727)	26.74
Outstanding at September 30, 2023	1,367,493	$	5.93	8.4	$	680

Exercisable at September 30, 2023	444,836	$	14.64	7	$	114

A summary of the Company’s service-based stock option activity for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 is as follows:


							Shares Underlying Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
		Shares Underlying Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term					in years
Outstanding at January 1, 2022	Outstanding at January 1, 2022	528,591	$	32.01	7.5	Outstanding at January 1, 2022	528,591	$	32.01	7.5
Granted	Granted	909	4.07		9.9	Granted	898,659	1.49		5.5
Forfeited	Forfeited	(14,839)	17.49		—	Forfeited	(30,093)	15.11		—
Expired	Expired	(3,545)	85.36		—	Expired	(85,466)	82.09		—
Outstanding at March 31, 2022		511,116	$	32.01	7.0
Outstanding at September 30, 2022						Outstanding at September 30, 2022	1,311,691	$	8.23	9.1

Exercisable at March 31, 2022		230,858	$	54.56	5.0
Exercisable at September 30, 2022						Exercisable at September 30, 2022	243,973	$	29.31	6.9

The aggregate intrinsic value is calculated as the difference between the closing price of the Company's common stock and the exercise price of the stock options that had strike prices below the closing price. The intrinsic value of the outstanding options ~~were~~as of September 30, 2022 was not ~~significant for all periods presented.~~

During the three months ended March 31, 2023, the Company granted no stock options to purchase shares of common stock. During the three months ended March 31, 2023, 8,083 shares were forfeited and 4,620 shares expired. Forfeitures are recorded in the period of occurrence and compensation expense is adjusted accordingly.significant.

Stock-based compensation expense recognized for service-based stock options was $0.1 million and ~~$0.2~~$0.1 million for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively. Stock-based compensation expense recognized for service-based stock options was $0.4 million and $0.4 million for the nine months ended September 30, 2023 and 2022, respectively. As of ~~March 31,~~September 30, 2023, total stock-based compensation expense related to unvested options not yet recognized totaled approximately $0.7 million, which is expected to be recognized over an estimated weighted average remaining term of ~~8.64~~3.2 years.

Forfeitures are recorded in the period of occurrence and compensation expense is adjusted accordingly.

~~ROCKWELL MEDICAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~12.~~13. Licensing Agreements

Product License Agreements

The Company is a party to a Licensing Agreement between the Company and Charak, LLC ("Charak") dated January 7, 2002 (the "2002 Agreement") that grants the Company exclusive worldwide rights to certain patents and information related to our Triferic product. On October 7, 2018, the Company entered into a Master Services and IP Agreement (the “Charak MSA”) with Charak and Dr. Ajay Gupta, a former Officer of the Company. Pursuant to the MSA, the parties entered into three additional agreements described below related to the license of certain soluble ferric pyrophosphate (“SFP”) intellectual property owned by Charak. As of ~~March~~September 30, 2023 and December 31, ~~2023,~~2022, the Company has accrued $85,400 relating to

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

certain IP reimbursement expenses and certain sublicense royalty fees, which is included within accrued liabilities on the condensed consolidated balance sheet.

Pursuant to the Charak MSA, the aforementioned parties entered into an Amendment, dated as of October 7, 2018 (the “Charak Amendment”), to the 2002 Agreement, under which Charak granted the Company an exclusive, worldwide, non-transferable license to commercialize SFP for the treatment of patients with renal failure. The Charak Amendment amends the royalty payments due to Charak under the 2002 Agreement such that the Company is liable to pay Charak royalties on net sales by the Company of products developed under the license, which includes the Company’s Triferic product, at a specified rate until December 31, 2021 and thereafter at a reduced rate from January 1, 2022 until February 1, 2034. Additionally, the Company ~~shall~~is required to pay Charak a percentage of any sublicense income during the term of the agreement, which amount ~~shall not~~cannot be less than a minimum specified percentage of net sales of the licensed products by the sublicensee in jurisdictions where there exists a valid claim, on a country-by-country basis, and be no less than a lower rate of the net sales of the licensed products by the sublicensee in jurisdictions where there exists no valid claim, on a country-by-country basis.

Also pursuant to the Charak MSA, the Company and Charak entered into a Commercialization and Technology License Agreement I.V. Triferic dated as of October 7, 2018 (the “IV Agreement”), under which Charak granted the Company an exclusive, ~~sublicensable,~~sub-licensable, royalty-bearing license to SFP for the purpose of commercializing certain intravenous-delivered products incorporating SFP for the treatment of iron disorders worldwide for a term that expires on the later of February 1, 2034 or upon the expiration or termination of a valid claim of a licensed patent. The Company was liable to pay Charak royalties on net sales by the Company of products developed under the license at a specified rate until December 31, 2021. From January 1, 2022 until February 1, 2034, the Company is liable to pay Charak a base royalty at a reduced rate on net sales and an additional royalty on net sales while there exists a valid claim of a licensed patent, on a country-by-country basis. The Company shall also pay to Charak a percentage of any sublicense income received during the term of the IV Agreement, which amount shall not be less than a minimum specified percentage of net sales of the licensed products by the sublicensee in jurisdictions where there exists a valid claim, on a country-by-country basis, and not be less than a lower rate of the net sales of the licensed products by the sublicensee in jurisdictions where there exists no valid claim, on a country-by-country basis.

Also pursuant to the Charak MSA, the Company and Charak entered into a Technology License Agreement TPN Triferic dated as of October 7, 2018 (the “TPN Agreement”), pursuant to which Charak granted the Company an exclusive, ~~sublicensable,~~sub-licensable, royalty-bearing license to SFP for the purpose of commercializing worldwide certain TPN products incorporating SFP. The license grant under the TPN Agreement continues for a term that expires on the later of February 1, 2034 or upon the expiration or termination of a valid claim of a licensed patent. During the term of the TPN Agreement, the Company is liable to pay Charak a base royalty on net sales and an additional royalty on net sales while there exists a valid claim of a licensed patent, on a country-by-country basis. The Company shall also pay to Charak a percentage of any sublicense income received during the term of the TPN Agreement, which amount shall not be less than a minimum royalty on net sales of the licensed products by the sublicensee in jurisdictions where there exists a valid claim, on a country-by-country basis, and not be less than a lower rate of the net sales of the licensed products by the sublicensee in jurisdictions where there exists no valid claim, on a country-by-country basis.

The potential sub-license milestone payments are not yet considered probable, and no milestone payments have been accrued ~~at March~~as of September 30, 2023 and December 31, ~~2023.~~

2022.

~~ROCKWELL MEDICAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~13.~~14. Leases

Rockwell leases its production facilities and administrative offices as well as certain equipment used in its operations including leases on transportation equipment used in the delivery of its products. The lease terms range from monthly to six years. Rockwell occupies a 51,000 square foot facility and a 17,500 square foot facility in Wixom, Michigan under a lease expiring in August 2024. Rockwell also occupies two other manufacturing facilities, a 51,000 square foot facility in Grapevine, Texas under a lease expiring in December 2025, and a 57,000 square foot facility in Greer, South Carolina under a lease expiring February 2026. In addition, Rockwell occupied 4,100 square feet of office space in Hackensack, New Jersey under a lease expiring on October 31, 2024. This lease was subleased on December 15, 2021 with an expiration date of October 31, 2024.

At ~~March 31,~~September 30, 2023, the Company had operating and finance lease liabilities of ~~$6.2~~$5.4 million and right-of-use assets of ~~$5.9~~$5.1 million, which are included in the condensed consolidated balance sheet.

At December 31, 2022, the Company had operating and finance lease liabilities of $6.7 million and right-of-use assets of $6.4 million, which are included in the condensed consolidated balance sheet.

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


		Three Months Ended March 31, 2023			Three Months Ended March 31, 2022				Three Months Ended September 30, 2023			Three Months Ended September 30, 2022			Nine Months Ended September 30, 2023			Nine Months Ended September 30, 2022
Operating leases	Operating leases							Operating leases
Operating lease cost	Operating lease cost	$	344		$	449		Operating lease cost	$	422		$	410		$	1,281		$	1,289
Interest on lease obligations		60			—
Variable lease cost	Variable lease cost	115			95			Variable lease cost	112			101			336			287
Operating lease expense	Operating lease expense	519			544			Operating lease expense	534			511			1,617			1,576
Finance leases	Finance leases							Finance leases
Non-cash lease expense from right-of-use assets	Non-cash lease expense from right-of-use assets	141			141			Non-cash lease expense from right-of-use assets	142			141			424			424
Interest on lease obligations	Interest on lease obligations	39			47			Interest on lease obligations	36			44			113			136
Finance lease expense	Finance lease expense	180			188			Finance lease expense	178			185			537			560
Short-term lease rent expense	Short-term lease rent expense	4			4			Short-term lease rent expense	4			5			12			14
Total lease expense	Total lease expense	$	703		$	736		Total lease expense	$	716		$	701		$	2,166		$	2,150

Other information	Other information							Other information
Operating cash flows from operating leases		$	424		$	464
Operating cash flows from finance leases		$	39		$	47
Financing cash flows from finance leases		$	128		$	118
Payments for principal from operating leases								Payments for principal from operating leases	$	461		$	427		$	1,363		$	1,338
Payments for interest from finance leases								Payments for interest from finance leases	$	37		$	44		$	114		$	136
Payments for principal from finance leases								Payments for principal from finance leases	$	130		$	121		$	388		$	359

Weighted-average remaining lease term – operating leases	Weighted-average remaining lease term – operating leases	2.8			3.4			Weighted-average remaining lease term – operating leases	2.5			3.2			2.5			3.2
Weighted-average remaining lease term – finance leases	Weighted-average remaining lease term – finance leases	4.2			5.2			Weighted-average remaining lease term – finance leases	3.7			4.7			3.7			4.7
Weighted-average discount rate – operating leases	Weighted-average discount rate – operating leases	6.4		%	6.3		%	Weighted-average discount rate – operating leases	6.5		%	6.4		%	6.5		%	6.4		%
Weighted-average discount rate – finance leases	Weighted-average discount rate – finance leases	6.4		%	6.4		%	Weighted-average discount rate – finance leases	6.4		%	6.4		%	6.4		%	6.4		%

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

Operating Finance
Year ending December 31, 2023 (remaining) $ 1,249 $ 502
Year ending December 31, 2024 1,405 672
Year ending December 31, 2025 937 676
Year ending December 31, 2026 310 666
Year ending December 31, 2027 121 311
Total $ 4,022 $ 2,827
Less present value discount (335) (345)
Operating and finance lease liabilities $ 3,687 $ 2,482


	Operating		Finance
Year ending December 31, 2023 (remaining)	$	439	$	168
Year ending December 31, 2024	1,511		672
Year ending December 31, 2025	1,021		676
Year ending December 31, 2026	362		666
Year ending December 31, 2027	131		311

Total	3,464		2,493
Less present value discount	(259)		(271)
Operating and finance lease liabilities	$	3,205	$	2,222

~~ROCKWELL MEDICAL, INC. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~14.~~15. Loan and Security Agreement

On March 16, 2020, the Company and Rockwell Transportation, Inc., as Borrowers, entered into a Loan and Security Agreement (the "Loan Agreement") with Innovatus Life Sciences Lending Fund I, LP ("Innovatus"), as collateral agent and the lenders party thereto, pursuant to which Innovatus, as a lender, agreed to make certain term loans to the Company in the aggregate principal amount of up to $35.0 million (the "Term Loans"). Funding of the first $22.5 million tranche was completed on March 16, 2020. The Company is no longer eligible to draw on ~~a second tranche of $5.0 million or a third tranche of $7.5 million,~~additional tranches, which were tied to the achievement of certain ~~milestones by a specific date.~~milestones. Net draw down proceeds were $21.2 million with closing costs of $1.3 million.

In connection with each funding of the Term Loans, the Company iswas required to issue to Innovatus a warrant (the “Warrants”) to purchase a number of shares of the Company’s common stock equal to 3.5% of the principal amount of the relevant Term Loan funded divided by the exercise price, which will be based on the lower of (i) the volume weighted average closing price of the Company’s stock for the 5-trading day period ending on the last trading day immediately preceding the execution of the Loan Agreement or (ii) the closing price on the last trading day immediately preceding the execution of the Loan Agreement (or for the second and third tranches only at the lower of (i) $18.15 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.price. In connection with the first tranche of the Term Loans, the Company issued a Warrant to Innovatus, exercisable for an aggregate of 43,388 shares of the Company’s common stock at an exercise price of $18.15 per share. The Warrant may be exercised on a cashless basis and is immediately exercisable through the seventh anniversary of the applicable funding date. The number of shares of common stock for which the Warrant is exercisable and the associated exercise price are subject to certain proportional adjustments as set forth in such Warrant. The Company evaluated the warrant under ASC 470, Debt, and recognized an additional debt discount of approximately $0.5 million based on the relative fair value of the base instruments and warrants. The Company calculated the fair value of the warrant using the Black-Scholes model.

The ~~Company is entitled to make interest-only payments for thirty months, or up to thirty-six months if certain conditions are met. The~~ Term Loans ~~will~~ mature on March 16, 2025, and ~~will~~ bear interest at the greater of (i) Prime Rate (as defined in the Loan Agreement) and (ii) 4.75%, plus 4.00%, with an initial interest rate of 8.75% per annum and an effective interest rate of ~~10.9%.~~12.5% as of September 30, 2023. The Company has the option, under certain circumstances, to add 1.00% of such interest rate amount to the then outstanding principal balance in lieu of paying such amount in cash. For ~~both~~ the three months ended ~~March 31,~~September 30, 2023 and 2022, interest expense amounted to $0.3 million and $0.4 ~~million.~~million, respectively. For the nine months ended September 30, 2023 and 2022, interest expense amounted to $0.9 million and $1.2 million, respectively.

The Loan Agreement is secured by all assets of the Company and Rockwell Transportation, Inc. ~~Proceeds are used for working capital purposes. The Loan Agreement contained~~and contains customary representations and warranties and covenants, subject to customary carve outs, and initially included financial covenants related to liquidity and ~~trailing twelve months~~ sales of ~~Triferic, with the latter beginning with the period ending December 31, 2020.~~Triferic.

In September 2021, the Company entered into an amendment to the Loan Agreement in which the Company, in exchange for Innovatus lowering the sales covenants, agreed toto: (i) prepay an aggregate principal amount of $7.5 million in ten installments commencing on December 1, 2021; (ii) pay an additional prepayment premium of 5% on prepaid amounts if the Company elects to prepay all outstanding Term Loans on or before September 24, 2023 and (iii) maintain minimum liquidity of no less than $5.0 million if the aggregate principal amount of Term Loans is greater than $15 million pursuant to the liquidity covenant in the Loan Agreement.

On November 10, 2022, the Company entered into a Second Amendment to the Loan and Security Agreement (the “Second Amendment”) dated as of November 14, 2022 with Innovatus, which amended the Loan Agreement. Pursuant to the Second Amendment, the Company (i) prepaid an additional aggregate principal amount of $5.0 million in Term Loans in one installment on November 14, 2022; (ii) ~~shall pay~~paid interest only payments until September 2023, at which time ~~will resume~~it resumed scheduled debt payments. ~~Additionally, the~~The financial ~~covenants~~covenant related to the ~~trailing twelve months~~ sales of Triferic was replaced with athe trailing 6 months revenue of our concentrates ~~products beginning with the period ending September 30, 2022.~~products. The Company cannot assure that it can maintain compliance with the covenants 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. If the Company is unable to comply with the covenants under the Loan Agreement, it would pursue all available cure options in order to regain compliance. However, the Company may not be able to mutually agree with Innovatus on appropriate remedies to cure a future breach of a covenant, which could give rise to an event of default. If the Company is unable to avoid an event of default, any required repayments could have an adverse effect on its liquidity.

As of ~~March 31,~~September 30, 2023, the Company was in compliance with all covenants under the Loan Agreement.

As of ~~March 31,~~September 30, 2023, the outstanding balance of the Term Loan was ~~$9.3~~$9.0 million, net of unamortized issuance costs and discount of ~~$0.7~~$0.5 million.

The following table reflects the schedule of principal payments on the Term Loan as of ~~March 31,~~September 30, 2023 (in thousands):


		Principal Payments			Principal Payments
2023 (remaining)	2023 (remaining)	2,000		2023 (remaining)	$	1,500
2024	2024	6,000		2024	6,000
2025	2025	2,000		2025	2,000

		$	10,000		$	9,500

2217

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~15.~~16. Insurance Financing Note Payable

On June ~~2, 2022,~~3, 2023, the Company entered into a short-term note payable for ~~$1.5~~$0.7 million, bearing interest at ~~5.40%~~9.59% per annum to finance various insurance policies. Principal and interest payments related to this note began on July 3, ~~2022~~2023 and ~~were~~will be paid on a straight-line amortization over 9nine months with the final payment due on March 3, ~~2023.~~2024. As of ~~March 31,~~September 30, 2023, the ~~Company's insurance note payable~~outstanding balance was ~~paid in full.~~

~~16. Subsequent Events~~

On April 20, 2023, Pre-Funded Warrants to purchase 1,191,000 shares of common stock issued on May 30, 2022 were exercised. The exercise price of each Pre-Funded Warrant is $0.0001 per share and resulted in gross proceeds to the Company of $119.10 (See Note 10 for more detail on the Pre-Funded Warrants).

$0.5 million.

2318

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes in “Item 1. Condensed Consolidated Financial Statements”. References in this report to “Rockwell,” the “Company,” “we,” “our” and “us” are references to Rockwell Medical, Inc. and its subsidiaries.

Forward-Looking Statements

We make forward-looking statements in this report and may make such statements in future filings with the Securities and Exchange Commission, or SEC. We may also make forward-looking statements in our press releases or other public or shareholder communications. Our forward-looking statements are subject to risks and uncertainties and include information about our current expectations and possible or assumed future results of our operations. When we use words such as “may,” “might,” “will,” “should,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “could,” “plan,” “potential,” “predict,” “forecast,” “project,” “intend,” “is focused on” or similar expressions, or make statements regarding our intent, belief, or current expectations, we are making forward-looking statements. Our forward looking statements also include, without limitation, statements about our liquidity and capital resources; our ability to continue as a going concern; our ability to successfully integrate acquisitions; our ability to develop Ferric Pyrophosphate Citrate (“FPC”) for other indications; our ability to successfully execute on our business ~~strategy and development of new indications;~~strategy; our ability to raise additional capital; ~~our ability to renegotiate certain terms of our supply contracts;~~ our ability to successfully implement certain cost containment and cost-cutting measures; our ability to achieve profitability and statements regarding our anticipated future financial condition, operating results, cash flows and business plans.

While we believe our forward-looking statements are reasonable, you should not place undue reliance on any such forward-looking statements, which are based on information available to us on the date of this report or, if made elsewhere, as of the date made. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different. Factors that might cause such a difference include, without limitation, the risks and uncertainties discussed in this report, “Item 1A — Risk Factors” in our Form 10-K for the year ended December 31, 2022 and from time to time in our other reports filed with the ~~SEC, including in this Form 10-Q.~~SEC.

Other factors not currently anticipated may also materially and adversely affect our results of operations, cash flow and financial position. There can be no assurance future results will meet expectations. Forward-looking statements speak only as of the date of this report and we expressly disclaim any intent to update or alter any statements whether as a result of new information, future events or otherwise, except as may be required by applicable law.

Overview

Rockwell Medical is a healthcare company that develops, manufactures, commercializes, and distributes a portfolio of hemodialysis products for dialysis providers worldwide.

Rockwell is a revenue-generating business and the second largest supplier of liquid and powder acid and bicarbonate concentrates for dialysis patients in the United States. Hemodialysis is the most common form of end-stage kidney disease treatment and is ~~usually~~typically performed at a freestanding outpatient dialysis ~~center, at~~centers, hospital-based outpatient ~~center, at~~centers, skilled nursing facilities, or in a patient’s home. This represents a large market opportunity for which we believe Rockwell's products are well-positioned to meet the needs of patients.

Rockwell ~~manufactures~~provides the hemodialysis ~~concentrates under Current~~community with products controlled by a Quality Management System regulated by the U.S. Food and Drug Administration ("FDA"). Rockwell is ISO 13485 Certified and adheres to current Good Manufacturing Practices ("cGMP") ~~regulations~~and Association for Advancement of Medical Instrumentation ("AAMI") standards. Rockwell manufactures hemodialysis concentrates at its ~~three~~ facilities in Michigan, ~~Texas,~~South Carolina, and ~~South Carolina~~Texas totaling approximately 175,000 square feet, and manufactures its dry acid concentrate mixers at its facility in Iowa. In addition, the Company manufactures hemodialysis concentrates in Minnesota under a contract manufacturing agreement with a contract manufacturing organization. (See Note 4 of the accompanying condensed consolidated interim financial statements for further detail). Rockwell delivers the majority of its hemodialysis concentrates products and mixers to dialysis clinics throughout the United States and internationally utilizing its own delivery trucks and third-party carriers. Rockwell has developed a core expertise in manufacturing and delivering hemodialysis concentrates, and has built a longstanding reputation for reliability, quality, and excellent customer service.

In addition to its primary focus on hemodialysis concentrates, Rockwell also has a proprietary parenteral iron product, Triferic (ferric pyrophosphate citrate, ("FPC")), which is indicated to maintain hemoglobin in adult patients with hemodialysis-dependent chronic kidney disease. While Rockwell has discontinued commercialization of Triferic in the United States, the Company has established ~~several~~ international partnerships with companies seeking to develop and commercialize Triferic

outside the United States and is working ~~closely~~ with these international partners to develop and commercialize Triferic in their respective regions. Additionally, Rockwell continues to evaluate the viability of its FPC platform and FPC's potential to treat iron deficiency, iron deficiency anemia, and acute heart failure.

Rockwell’s strategy is focused on growing the Company's revenue-generating business, which currently includes hemodialysis concentrates and international partnerships for Triferic and achieving profitability ~~in 2024~~ to put the Company in a stronger and more stable financial position.

Hemodialysis Concentrates Business:Rockwell is the second largest supplier of life-sustaining hemodialysis concentrates products to dialysis clinics in the United States. Our hemodialysis concentrates products are used to sustain a patient's life by removing toxins and balancing electrolytes in a dialysis patient’s bloodstream. A key element of our dialysis business strategy going forward is to improve the strength of our concentrates business. According to an independent research report from L.E.K. Consulting LLC, which was commissioned by Rockwell in 2022, the hemodialysis concentrates market in the United States alone was valued at $380 million in 2022 and is anticipated to grow to approximately $500 million by 2026. We believe we can ~~achieve this by growing~~grow our business through the addition of new customers, expanding our territory coverage, increasing the efficiency ~~by which Rockwell produces its products,~~of our production, and pricing our products appropriately to drive profitability.

~~Prior~~On July 10, 2023, the Company executed and consummated the transactions contemplated by an Asset Purchase Agreement (the “Purchase Agreement”) with Evoqua Water Technologies LLC ("Evoqua") (the "Evoqua Acquisition"). Subject to the ~~second quarter~~terms and conditions of ~~2022, Rockwell's concentrates business operated~~the Purchase Agreement, at ~~a loss. This loss was accelerated due~~the closing of the transaction (the “Closing”), the Company purchased customer relationships, equipment and inventory from Evoqua, which were related to ~~inflation, which has increased our~~ manufacturing and ~~operating costs. We undertook discussions~~selling of hemodialysis concentrates products, all of which are manufactured under a contract manufacturing agreement with ~~our largest customers~~a third-party organization. Total consideration was $17.4 million, comprising a cash payment at Closing of $12.4 million (inclusive of transaction costs) and two $2.5 million deferred payments, the first to ~~renegotiate our existing supply contracts~~be paid on the first anniversary and the second to ~~improve~~be paid on the ~~profitability~~second anniversary of ~~this business line.~~ the Closing. See Note 4 for further detail.

On ~~April 6, 2022, we amended our agreement with~~September 18, 2023, Rockwell and our long-time partner, DaVita, Inc. ("DaVita"), a leading provider of kidney care, entered into an Amended and Restated Products Purchase Agreement (the "Amended Agreement"), which amends and restates the Product Purchase Agreement, dated July 1, 2019, as amended, under which the Company supplies DaVita with certain dialysis concentrates. Under the Amended Agreement, the Company and DaVita agreed to ~~enable us~~an increase in product pricing, effective September 1, 2023 and a one-time payment to ~~stabilize our concentrates business.~~Rockwell on or after December 1, 2023. The ~~amended agreement provides a stronger financial arrangement which encompasses~~term of the Amended Agreement will expire on December 31, 2024. DaVita will have the right, in its sole discretion upon written notice to the Company given no later than September 30, 2024, to further extend the term through December 31, 2025. In the event of such an extension, product pricing ~~cost share, cost cutting, and joint efforts to improve supply chain, all of which is intended to drive Rockwell’s concentrates business to operate profitably in~~will be increased for the ~~future.~~extended term. In addition, DaVita is required to provide the ~~amended agreement,~~Company with nine-month purchasing forecasts and a commitment to purchase at least the forecasted amounts. In the event that DaVita does not meet its forecasts, it is required to pay the Company for the amount forecasted, purchase additional product, or the Company may terminate the Amended Agreement. Upon expiration or termination of the Amended Agreement, and upon request by DaVita, the Company has agreed to provide transition services to DaVita during a transition period.

In 2022, in connection with an amendment of the original Products Purchase Agreement, DaVita invested $15 million in the Company's preferred stock in two equal tranches. The first tranche of $7.5 million was funded on April 7, 2022. The second tranche of $7.5 million was funded on June 16, 2022. ~~We continue to review our entire~~

Additionally, during the third quarter of 2023, Rockwell entered into several long-term product purchase agreements, which include supply ~~chain to identify opportunities~~and purchasing commitments from certain parties. These agreements include Sanderling Renal Services, Inc., a full-service provider of in-center, home dialysis and renal telemedicine services focusing on patients in rural and underserved communities across the United States; Centers for ~~improvement, prioritizing initiatives that will have~~Dialysis Care, the largest ~~impact on long-term efficiency, profitability,~~non-profit, independent outpatient dialysis provider in Northeast Ohio; Houston Methodist, a leading health system and ~~growth.~~academic medical center; Dialyze Direct, a leading provider of home dialysis services in the skilled nursing facility setting; and Outset Medical (Nasdaq:OM), a medical technology company pioneering a first-of-its-kind technology to reduce the cost and complexity of dialysis with its Tablo® Hemodialysis System, which is FDA-cleared for use from the hospital to the home.

On November 9, 2022, Rockwell reacquired its distribution rights to its hemodialysis concentrates products from Baxter and has agreed to terminate the exclusive distribution agreement dated October 2, 2014.Exclusivity and other provisions

associated with the distribution agreement terminated November 9, 2022 and the remaining operational elements of the agreement terminate December 31, 2022. Under the exclusive distribution agreement, Baxter distributed and commercialized Rockwell’s hemodialysis concentrates products in the United States and certain other countries. Rockwell manufactured all hemodialysis concentrates products and provided customer service and order delivery to nearly all U.S. customers.Following the reacquisition of these rights, Rockwell ~~will now be~~is able to sell its hemodialysis concentrates products directly to dialysis clinics throughout the United States and around the world.Additionally, Rockwell ~~will now be~~is able to independently price its products, eliminate costs associated with manufacturing covenants, improve manufacturing efficiencies, realize the full benefits from those improvements, and develop, in-license, or acquire new products to develop a broader kidney care products portfolio.This is expected to improve Rockwell's overall profitability and set the Company on a positive growth trajectory.Collectively, we believe this affords Rockwell the opportunity to expand its leadership position within a large market opportunity. According to an independent research report from L.E.K. Consulting LLC, which was commissioned by Rockwell in 2022, the hemodialysis concentrates market in the United States alone was valued at $380 million in 2022 and is anticipated to grow to approximately $500 million by 2026.

Rockwell agreed to pay Baxter a fee for the reacquisition of its distribution rights. This fee is payable in two equal installments on January 1, 2023 and April 1, 2023. To ensure that customer needs continue to be met after January 1, 2023, Baxter and Rockwell worked closely together to transition customers’ purchases of Rockwell’s hemodialysis concentrates from Baxter to Rockwell.

~~Triferic:~~Triferic: Our first two branded products from our FPC platform, Triferic (dialysate) and Triferic AVNU, are indicated to maintain hemoglobin in patients undergoing hemodialysis. We began commercializing Triferic and Triferic AVNU in the United States in the second half of 2019 and in early 2021, respectively. In addition, Rockwell established six international partnerships to develop and commercialize Triferic in China, India, Korea, Turkey, Peru and Chile.

In 2022, Rockwell undertook a strategic review of Triferic's viability in the United States. Triferic was launched into a very competitive marketplace with well-entrenched products and a lack of consensus regarding unmet medical needs for dialysis patients with anemia. Due to its limited market adoption, unfavorable reimbursement, and absence of interest from

other companies to license or acquire Triferic despite Rockwell's significant effort to partner the program, the Company discontinued its NDAs for Triferic and Triferic AVNU in the United States in the fourth quarter of 2022. Sustaining Triferic commercially in the United States resulted in annual losses to Rockwell. The decision to discontinue the NDAs was not made lightly as the Company realizes the direct impact this action had on patients using the products. Triferic and its approved presentations were not discontinued for safety reasons.

Rockwell continues to support its partners outside the United States ~~who~~that have exclusive license agreements to develop and commercialize Triferic in ~~China,~~ India, Korea, Turkey, Peru and Chile. Partnering in these regions allows us to better leverage the development, regulatory, commercial presence, and expertise of business partners to increase sales of our products throughout the world. Currently, India, Peru and Chile development work has been put on hold. However, we believe there is still potential opportunity for Triferic internationally and will work diligently to support our partners, which requires minimal financial commitment from Rockwell and provides us with potential for near- and long-term revenue.

On August 7, 2023, Rockwell was informed by Wanbang, the Company’s commercialization partner in China for Triferic, that the main efficacy results of Wanbang’s clinical trial for Triferic (dialysate) compared with placebo were not obtained and Wanbang will not will not bring the product forward to registration.

Research and Development Pipeline:

FPC for Home Infusion is Rockwell's follow-up to Triferic and utilizes the FPC platform in the home infusion setting.

In late 2021, Rockwell filed an Investigational New Drug (“IND”) application with the United States Food and Drug Administration (“FDA”) for the treatment of iron deficiency anemia in patients, who are receiving medications in the home infusion setting. During the second quarter 2022, Rockwell provided the FDA with supplemental data to be used in Rockwell’s clinical studies and to clinically support the Company’s IND application for home infusion. The FDA placed this program on Clinical Hold and requested that additional data related to the microbiology and short-term stability of this formulation be provided to support the application. During the third quarter of 2022, Rockwell conducted a microbiological and short-term stability study of FPC for Home Infusion, in accordance with FDA guidance, to support the Company’s IND application. Preliminary results from the microbiology and short-term stability study indicated that the program would likely not meet the FDA’s requirements to support the IND application and would require significant capital expenditure and resources to support additional re-formulation work and conduct a Phase 2 trial. As a result, Rockwell has put development work associated with FPC for Home Infusion on hold.

Rockwell is also exploring FPC’s impact on the treatment of hospitalized acute heart failure patients, which affects more than one million people in the United States annually. Rockwell conducted a pre-IND meeting with the FDA in 2022 and will determine the path forward for FPC in acute heart failure as the Company works toward profitability.

~~Reverse Stock Split~~

On May 9, 2022, the Company's stockholders authorized the Company's Board of Directors to effect a reverse stock split of all outstanding shares of common stock, warrants and options. The Board of Directors subsequently approved the implementation of a reverse stock split at a ratio of one-for-eleven shares, which became effective on May 13, 2022. The Company’s outstanding stock options were also adjusted to reflect the one-for-eleven reverse stock split of the Company’s common stock. Outstanding stock options were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased. The reverse stock split resulted in an adjustment to the Series X convertible preferred stock conversion prices to reflect a proportional decrease in the number of shares of common stock to be issued upon conversion. All share and per share data in this Form 10-Q hereto have been retroactively adjusted to the account for the effect of the reverse stock split.

Results of Operations for the Three Months Ended ~~March 31,~~September 30, 2023 and 2022

The following table summarizes our operating results for the periods presented below (dollars in thousands):


		For the Three Months Ended March 31,											Three Months Ended September 30,
		2023		% of Revenue		2022		% of Revenue		% Change			2023		% of Revenue		2022		% of Revenue		% Change

Net Sales	Net Sales	$	19,668			$	16,124			22.0	%	Net Sales	$	23,771			$	18,691			27	%
Cost of Sales	Cost of Sales	17,069		86.8	%	16,910		104.9	%	0.9		Cost of Sales	21,569		91	%	17,914		96	%	20	%
Gross Profit (Loss)		2,599		13.2		(786)		(4.9)		(430.7)
Gross Profit												Gross Profit	2,202		9	%	777		4	%	183	%

Research and Product Development	Research and Product Development	278		1.4		1,567		9.7		(82.3)		Research and Product Development	494		2	%	469		3	%	5	%
Selling and Marketing	Selling and Marketing	498		2.5		455		2.8		9.5		Selling and Marketing	556		2	%	762		4	%	(27)	%
General and Administrative	General and Administrative	3,250		16.5		3,818		23.7		(14.9)		General and Administrative	2,889		12	%	3,254		17	%	(11)	%

Operating Loss	Operating Loss	$	(1,427)	(7.3)	%	$	(6,626)	(41.1)	%	(78.5)	%	Operating Loss	$	(1,737)	(7)	%	$	(3,708)	(20)	%	(53)	%

Net Sales

During the three months ended ~~March 31,~~September 30, 2023, our net sales were ~~$19.7~~$23.8 million compared to net sales of ~~$16.1~~$18.7 million during the three months ended ~~March 31,~~September 30, 2022. The increase of ~~$3.5~~$5.1 million was primarily due to the ~~restructuring~~Evoqua Asset Acquisition (see Note 4) which, through the acquisition of ~~our supply contract with DaVita, onboarding~~customer lists, resulted in new revenue during the third quarter of ~~new customers~~2023 of $3.4 million, and ~~increased pricing~~the recognition of deferred license revenue of $2.2 million related to ~~other customers.~~the Wanbang Agreement (see Note 10 to the condensed consolidated financial statements included elsewhere in this Form 10-Q). Overall, product revenue for the three months ended September 30, 2023 was $21.6 million compared to product revenue of $18.1 million for the three months ended September 30, 2022.

Gross Profit ~~(Loss)~~

Cost of sales ~~during~~for the three months ended ~~March 31,~~September 30, 2023 was ~~$17.1~~$21.6 million, resulting in gross profit of ~~$2.6~~$2.2 million ~~during~~for the three months ended ~~March 31,~~September 30, 2023, compared to cost of sales of ~~$16.9~~$17.9 million and a gross ~~loss~~profit of $0.8 million ~~during~~for the three months ended ~~March 31,~~September 30, 2022. Cost of sales for the three months ended September 30, 2023 included a $1.1 million increase to Triferic inventory reserves due to the decision by Wanbang not to pursue registration in China. Gross profit increased by ~~$3.4~~$1.4 million primarily due to $1.1 million net impact of Wanbang revenue and inventory reserves, as well as lower distribution costs associated with the restructuring of our supply contract with DaVita, recognition of the remaining deferred revenue related to the termination of the Baxter distribution agreement (see Note 9), onboarding of new customers and increased pricing to other customers. As a result, the Company expects an improvement in margins for the remainder of 2023.concentrates business.

Research and Product Development Expense

Research and product development expenses were ~~$0.3~~$0.5 million ~~and $1.6 million~~ for each of the three months ended ~~March 31,~~September 30, 2023 and ~~2022, respectively. Research and product development expenses~~2022. Employee compensation expense decreased as a result of lower headcount, but was offset by $1.3 million due to greater cash management over project costs, a reduction in headcount and the decision to put all research related to our FPC for Home Infusion program on hold due to the significant capital expenditure and resources to support additional re-formulation work and conduct a Phase 2 trial.severance costs.

Selling and Marketing Expense

Selling and marketing expenses were ~~unchanged at $0.5~~$0.6 million and $0.8 million for ~~both~~ the three months ended ~~March 31,~~September 30, 2023 and ~~2022.~~2022, respectively. We continue to evaluate marketing spend and focus on target opportunities for greater return on investments.

General and Administrative Expense

General and administrative expenses were ~~$3.3~~$2.9 million during the three months ended March 31, 2023, compared with $3.8 million during the three months ended March 31, 2022. The decrease of $0.5 million is primarily due to improved expense management and the reduced usage of outside agencies.

~~Other Income (Expense)~~

~~Other income~~ for the three months ended ~~March 31,~~September 30, 2023, compared with $3.3 million for the three months ended September 30, 2022. The decrease of $0.4 million was primarily due to lower employee compensation as a result of reduced headcount, decreased government fees related to Triferic and lower administrative costs.

Other Expense

Total other expense of $0.1 million and $0.5 million for the three months ended September 30, 2023 and 2022, respectively, was ~~negligible. Other~~primarily driven by $0.4 million and $0.5 million of other expense for the three months ended ~~March 31,~~September 30, 2023 ~~was $0.4 million of~~and 2022, respectively, largely due to interest expense related to our debt facility ~~(see~~(See Note 1415 to the condensed consolidated financial statements included elsewhere in this Form ~~10-Q~~10-Q).

Results of Operations for ~~more information~~the Nine Months Ended September 30, 2023 and 2022

The following table summarizes our operating results for the periods presented below (dollars in thousands):


	Nine Months Ended September 30,
	2023		% of Revenue		2022		% of Revenue		% Change

Net Sales	$	61,519			$	53,497			15	%
Cost of Sales	55,685		91	%	51,760		97	%	8	%
Gross Profit	5,834		9	%	1,737		3	%	236	%

Research and Product Development	939		2	%	2,963		6	%	(68)	%
Selling and Marketing	1,584		3	%	1,743		3	%	(9)	%
General and Administrative	9,434		15	%	11,845		22	%	(20)	%



Operating Loss	$	(6,123)	(10)	%	$	(14,814)	(28)	%	(59)	%

Net Sales

During the nine months ended September 30, 2023, our net sales were $61.5 million compared to net sales of $53.5 million during the nine months ended September 30, 2022. The increase of $8.0 million was primarily due to the restructuring of our products purchase agreement with DaVita, the reacquired rights to commercialize and distribute our products, the asset acquisition of Evoqua, onboarding of new customers and increased pricing to other customers. Overall, product revenue for the nine months ended September 30, 2023 was $57.7 million compared to product revenue of $51.9 million for the nine months ended September 30, 2022, an increase of $5.8 million.

Gross Profit

Cost of sales during the nine months ended September 30, 2023 was $55.7 million, resulting in gross profit of $5.8 million during the nine months ended September 30, 2023, compared to cost of sales of $51.8 million and a gross profit of $1.7 million during the nine months ended September 30, 2022. Gross profit increased by $4.1 million primarily due to the restructuring of our supply contract with DaVita in 2022, recognition of the remaining deferred license revenue related to the termination of the Baxter distribution agreement (See Note 10 to the condensed condensed consolidated financial statements included elsewhere in this Form 10-Q), onboarding of new customers, increased pricing to other customers and net impact of Wanbang revenue and inventory reserves.

Research and Development Expense

Research and product development expenses were $0.9 million and $3.0 million for the nine months ended September 30, 2023 and 2022, respectively. Research and product development expenses decreased by $2.1 million due to a reduction in wages and project costs resulting from the decision to pause all research related to our FPC for Home Infusion program. Approximately 44% of research and development expenses for the nine months ended September 30, 2023 were comprised of severance costs.

Selling and Marketing Expense

Selling and marketing expenses were $1.6 million and $1.7 million for the nine months ended September 30, 2023, and 2022, respectively. We continue to evaluate marketing spend and focus on ~~our debt facility).~~ target opportunities for greater return on investments.

General and Administrative Expense

General and administrative expenses were $9.4 million during the nine months ended September 30, 2023, compared with $11.8 million during the nine months ended September 30, 2022. The decrease of $2.4 million is primarily driven by lower employee compensation as a result of reduced headcount, decreased government fees related to Triferic, reduced professional fees and lower administrative costs.

Other Expense

Total other expense of $0.8 million and $1.5 million for the nine months ended September 30, 2023 and 2022, respectively, was primarily driven by $1.2 million and $1.5 million of other expense for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, ~~was $0.5 million of~~respectively, largely due to interest expense related to our debt ~~facility.~~facility (See Note 15 to the condensed consolidated financial statements included elsewhere in this Form 10-Q).

Liquidity and Capital Resources

As of ~~March 31,~~September 30, 2023, we had approximately ~~$16.8~~$11.7 million of cash, cash equivalents and investments available-for-sale, and working capital of ~~$14.6~~$6.8 million. Net cash used in operating activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 was approximately ~~$3.9~~$9.4 million. Based on the currently available working capital, 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.

On July 10, 2023, Armistice Capital Master Fund Ltd. (“Armistice”) exercised its warrant to purchase 9,900,990 shares of common stock with an exercise price of $1.39 per share and the Company received gross proceeds of approximately $13.8 million (See Note 11 to the condensed consolidated financial statements included elsewhere in this Form 10-Q).

On July 10, 2023, the Company completed the Evoqua Acquisition. Total consideration was $17.4 million, comprising a cash payment at Closing of $12.2 million (inclusive of transaction costs) and two $2.5 million deferred payments, the first to be paid on the first anniversary and the second to be paid on the second anniversary of the Closing. See Note 4 for further detail.

The Company continues to review its operational plans and ~~executing~~execute on the acquisition of new customers and cost containment activities. The Company may require additional capital to sustain its operations and make the investments it needs to execute its strategic plan. Additionally, the Company's operational plans include raising capital, if needed, by using our ATM facility or other methods or forms of financings, subject to existing limitations.

If the Company attempts to obtain additional debt or equity financing, the Company cannot assume such financing will be available on favorable terms, if at all.

~~Currently, because~~ In addition, any debt financing is limited by the ~~Company's public float is~~terms of our Securities Purchase Agreement with DaVita. Specifically, until DaVita owns less than ~~$75~~50% of its investment, the Company may only incur additional debt in the form of a purchase money loan, a working capital line of up to $5 million itor to refinance existing debt, unless DaVita consents.

In 2023, the Company is no longer subject to the ~~baby shelf~~"baby shelf" limitations under Form S-3, which limit the amount the Company may offer pursuant to its registration statement on Form S-3.

~~In addition, the~~The global macroeconomic environment is uncertain, and could be negatively affected by, among other things, increased U.S. trade tariffs and trade disputes with other countries, instability in the global capital and credit markets, recent bank failures in the United States, supply chain weaknesses, and instability in the geopolitical environment, including as a result of the Russian invasion of Ukraine, the Israel-Hamas conflict and other political tensions, and lingering effects of the COVID-19 pandemic. Such challenges have caused, and may continue to cause, recession fears, rising interest rates, foreign exchange volatility and inflationary pressures. At this time, the Company is unable to quantify the potential effects of this economic instability on our future operations.

rapidly evolving nature of the global situation, it is not possible to predict the extent to which these conditions could adversely affect the Company's liquidity and capital resources in the future.

General

The actual amount of cash that we will need to execute our business strategy is subject to many factors, including, but not limited to the costs associated with our manufacturing and transportation operations related to our concentrate business.

We may elect to raise capital in the future through one or more of the following: (i) equity and debt raises through the equity and capital markets, though there can be no assurance we will be able to secure additional capital or funding on acceptable terms, or if at all; and (ii) strategic transactions, including potential alliances and collaborations focused on markets outside the United States, as well as potential combinations (including by merger or acquisition) or other corporate transactions.

We believe our ability to fund our activities in the long term will be highly dependent upon i) our ability to execute on the growth strategy of our hemodialysis concentrates business, iiii) our ability to achieve profitability, and iii) our ability to identify, develop, in-license, or acquire new products in developing our renal care product portfolio. All of these strategies are subject to significant risks and uncertainties such that there can be no assurance we will be successful in achieving them. If we are unsuccessful in executing our business plan and we are unable to raise the required capital, we may be forced to curtail all of our activities and, ultimately, cease operations. Even if we are able to raise sufficient capital, such financings may only be available on unattractive terms, or result in significant dilution of stockholders’ interests and, in such event, the market price of our common stock may decline.

Cash Used in Operating Activities

Net cash used in operating activities was ~~$3.9~~$9.4 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 compared to net cash used in operating activities of ~~$9.8~~$16.8 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. The decrease in cash used from

operating activities during the current period was primarily due to a decrease in net loss, offset by changes in current balance sheet accounts in the ordinary course of business of approximately ~~$3.1~~$6.7 million, including ~~an increase in accounts payable of $1.1 million, a decrease in other liabilities of $3.3 million,~~ a decrease in deferred license revenue of ~~$1.5~~$3.8 million for recognition of the remaining deferred license revenue related to the termination of the Baxter distribution agreement, a decrease in net accounts receivable of $3.1 million, a decrease in other liabilities of $1.0 million and a decrease in prepaid and other assets of ~~$0.5~~$0.9 million.

Cash ~~Provided by~~Used In Investing Activities

Net cash ~~provided by~~used in investing activities was ~~$5.3~~$5.1 million during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 compared to net cash used in investing activities of ~~$9.1~~$5.6 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. ~~The net~~Net cash ~~provided by~~used in investing activities during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 was primarily due to the cash paid in connection with the Evoqua Asset Acquisition of $12.4 million, partially offset by the net cash proceeds from sales and purchase of available-for-sale investments during the ~~period.~~period of $7.4 million. Net cash used in investing activities during the nine months ended September 30, 2022 were primarily related to the purchase and sale of investments.

Cash ~~Used in~~Provided by Financing Activities

Net cash ~~used in~~provided by financing activities was ~~$0.6~~$12.1 million during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 compared to ~~the~~ net cash ~~used in~~provided by financing activities of ~~$2.7~~$22.1 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. ~~The net~~Net cash ~~used in~~provided financing activities during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 was primarily due to the ~~Company making interest only payments on~~gross proceeds from the ~~Company's~~issuance of common stock in connection with the exercise of the Prior Warrant and Pre-Funded Warrants of $13.8 million. Net cash provided by financing activities for the nine months ended September 30, 2022 was primarily due to the gross proceeds from the issuance of common and preferred stock of $15.0 million each, offset by debt ~~and short term insurance note payable.~~repayment of $6.8 million.

Contractual Obligations and Other Commitments

See Note 1213 to the condensed consolidated financial statements included elsewhere in this Form 10-Q for additional disclosures. There have been no other material changes from the ~~Contractual Obligations~~contractual obligations and ~~Other Commitments~~other commitments disclosed in Note 14 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022.

2622

Critical Accounting Policies and Significant Judgments and Estimates

Our critical accounting policies and significant estimates are detailed in our Annual Report on Form 10-K for the year ended December 31, 2022. ~~Our~~In addition, our critical accounting policies and significant estimates ~~have~~related to the Evoqua Asset Acquisition, including changes to our existing accounting policies, are detailed below.

Fair Value Measurements

Nonrecurring Valuations. The assets acquired through the Evoqua Asset Acquisition were recorded at relative fair value, which required the determination of the fair values of assets acquired as of the acquisition date. In making these fair value determinations, we were required to make estimates and assumptions that affected the recorded amounts, including, but not ~~changed from those previously disclosed in our Annual Report on Form 10-K~~limited to, (i) for the ~~year ended December 31, 2022.~~customer relationships intangible asset, expected future cash flows, discount rates and remaining useful life and (ii) for the equipment, replacement cost. To assist us in making these fair value determinations, we engaged third-party valuation specialists. Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain.

Intangible Assets

Definite-lived intangible assets consist of our customer relationships intangible asset, which has been capitalized and is being amortized over 20 years.

Recently issued and adopted accounting pronouncements:

We have evaluated all recently issued accounting pronouncements and believe such pronouncements do not have a material effect our financial statements. See Note 3 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure material information required to be disclosed in our reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and such information is accumulated and communicated to our management, including our Chief Executive Officer as appropriate, to allow timely decisions regarding required financial disclosure. In designing and evaluating the disclosure controls and procedures, we recognized a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance 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 was required to apply its judgment in evaluating the cost‑benefit relationship of possible controls and procedures.

Under the supervision of and with the participation of our management, including the Company’s Chief Executive Officer, we evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~March 31,~~September 30, 2023. Based upon that evaluation, our Chief Executive Officer concluded our disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the period 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.

2723

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We may be involved in certain routine 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 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.

Item 1A. Risk Factors

Our business is subject to various risks, including those described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2022 under "Item 1A - Risk Factors". and subsequent quarterly report on Form 10-Q for the quarter ended June 30, 2023, except as noted below.

Our agreement with our largest customer in our concentrates business is set to expire on December 31, 2024 and our inability to negotiate a new agreement would have a material and adverse effect on our financial condition and results of operations.

Our Amended and Restated Products Purchase Agreement (the “Products Purchase Agreement”) with DaVita is set to expire on December 31, 2024. The Products Purchase Agreement is a fixed price agreement. In September 2023, we amended the original Products Purchase Agreement with DaVita to raise our prices in light of inflationary pressures and to remove certain provisions.The Products Purchase Agreement may be extended by DaVita for one year in its sole discretion. When the Products Purchase Agreement is again up for renewal, we may be unable to reach an agreement with DaVita on new terms that make economic sense for us.In that case, we would not expect to enter into a new agreement. This would result in the loss of approximately one-half of our current volume of concentrates products and would have a material and adverse effect on our financial condition and results of operations and would likely lead to the implementation of cost saving measures that would negatively impact our activities.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits

The exhibits filed or furnished as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index, which Exhibit Index is incorporated herein by reference.

EXHIBIT INDEX

Exhibit No.

Description

4.1

Common Stock Purchase Warrant, dated July 10, 2023, issued to Armistice Capital Master Fund Ltd. (Exhibit 4.1 to the Company’s Form 10-Q filed August 14, 2023).

10.1 *+

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

10.2

Letter Agreement, dated July 10, 2023, by and between Rockwell Medical, Inc. and Armistice Capital Master Fund Ltd. (Exhibit 10.1 to the Company’s Form 10-Q filed August 14, 2023).

10.3

Asset Purchase Agreement dated July 10, 2023 by and between Rockwell Medical, Inc. and Evoqua Water Technologies LLC. (Exhibit 10.2 to the Company’s Form 10-Q filed August 14, 2023).

31.1*

Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934

32.1**

Certification pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(b) of the Securities Exchange Act of 1934

101.INS*

XBRL Instance Document

101.SCH*

XBRL Taxonomy Extension Schema

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase

101.DEF*

XBRL Taxonomy Extension Definition Database

101.LAB*

XBRL Taxonomy Extension Label Linkbase

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase

104*

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31, 2022,~~September 30, 2023, 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.

3024

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ROCKWELL MEDICAL, INC.
	(Registrant)

Date: ~~May 15,~~November 14, 2023		/s/ Mark Strobeck
		Mark Strobeck, Ph.D. Chief Executive Officer (Principal Executive Officer and Interim Financial Officer)

3125


	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022

Cash Flows From Operating Activities:
Net Loss	$	(1,750)	$	(7,162)
Adjustments To Reconcile Net Loss To Net Cash Used In Operating Activities:
Depreciation and Amortization	160		138
Stock-based Compensation	193		(179)


Non-cash lease expense from Right of Use Asset	485		520
Amortization of Debt Financing Costs and Accretion of Debt Discount	92		92
Loss on Disposal of Assets	1		—
Realized Gain on Sale of Investments Available-for-Sale	—		(4)
Changes in operating Assets and Liabilities:
Accounts Receivable, net	238		(1,208)

Inventory	219		(1,455)
Prepaid and Other Assets	505		630
Accounts Payable	1,149		485

Lease Liability	(336)		(490)
Other Liabilities	(3,295)		(640)
Deferred License Revenue	(1,537)		(538)
Changes in operating Assets and Liabilities	(3,057)		(3,216)
Cash Used In Operating Activities	(3,876)		(9,811)
Cash Flows From Investing Activities:
Purchase of Investments Available-for-Sale	(2,053)		(2,810)
Sale of Investments Available-for-Sale	7,500		11,972
Purchase of Equipment	(145)		(29)

Cash Provided by Investing Activities	5,302		9,133
Cash Flows From Financing Activities:


Payments on Debt	—		(2,250)
Payments on Insurance Financing Note Payable	(503)		(437)
Payment on Financing Lease Liabilities	(128)		—









Cash Used In Financing Activities	(631)		(2,687)

Effect of exchange rate changes on cash	(3)		(1)

Increase (Decrease) in Cash and Cash Equivalents	792		(3,366)
Cash and Cash Equivalents at Beginning of Period	10,102		13,280
Cash and Cash Equivalents at End of Period	$	10,894	$	9,914

Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest	$	295	$	461
Supplemental Disclosure of Noncash Investing and Financing Activities:
Change in Unrealized Loss on Marketable Securities Available-for-Sale	$	(3)	$	—