Rockwell Medical (RMTI) 10-Q 9 Nov 15 2015 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Oct. 31, 2015
Document and Entity Information
Entity Registrant Name	ROCKWELL MEDICAL, INC.
Entity Central Index Key	1,041,024
Document Type	10-Q
Document Period End Date	Sep. 30, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		51,077,877
Document Fiscal Year Focus	2,015
Document Fiscal Period Focus	Q3

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2015	Dec. 31, 2014
ASSETS
Cash and Cash Equivalents	$ 33,172,740	$ 65,800,451
Investments Available for Sale	39,818,118	19,927,310
Accounts Receivable, net of a reserve of $88,000 in 2015 and $52,000 in 2014	5,896,487	4,472,002
Inventory	7,415,281	3,920,185
Other Current Assets	1,601,211	587,201
Total Current Assets	87,903,837	94,707,149
Property and Equipment, net	1,341,795	1,496,912
Intangible Assets	207,415	332,686
Goodwill	920,745	920,745
Other Non-current Assets	542,223	542,224
Total Assets	90,916,015	97,999,716
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable	5,223,394	5,294,515
Accrued Liabilities	2,937,245	4,325,997
Customer Deposits	313,082	183,890
Total Current Liabilities	8,473,721	9,804,402
Deferred License Revenue	18,012,839	19,492,520
Shareholders' Equity:
Common Shares, no par value, 50,277,877 and 50,284,007 shares issued and outstanding	253,777,785	249,018,189
Accumulated Deficit	(188,768,220)	(180,117,726)
Accumulated Other Comprehensive Income (Loss)	(580,110)	(197,669)
Total Shareholders' Equity	64,429,455	68,702,794
Total Liabilities And Shareholders' Equity	$ 90,916,015	$ 97,999,716

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
CONSOLIDATED BALANCE SHEETS
Allowance for reserve, accounts receivable (in dollars)	$ 88,000	$ 52,000
Common Shares, par value (in dollars per share)	$ 0	$ 0
Common Shares, shares issued	50,227,877	50,284,007
Common Shares, shares outstanding	50,227,877	50,284,007

CONSOLIDATED INCOME STATEMENTS

CONSOLIDATED INCOME STATEMENTS - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
CONSOLIDATED INCOME STATEMENTS
Sales	$ 14,378,528	$ 13,743,778	$ 41,218,065	$ 39,740,791
Cost of Sales	11,875,122	11,473,961	34,336,359	33,772,125
Gross Profit	2,503,406	2,269,817	6,881,706	5,968,666
Selling, General and Administrative	3,827,904	4,098,835	12,989,261	12,403,240
Research and Product Development	1,246,727	1,301,824	2,931,577	6,103,716
Operating Income (Loss)	(2,571,225)	(3,130,842)	(9,039,132)	(12,538,290)
Interest and Investment Income, net	156,672	55,263	388,638	199,113
Interest Expense		892,027		2,604,333
Income (Loss) Before Income Taxes	(2,414,553)	(3,967,606)	(8,650,494)	(14,943,510)
Net Income (Loss)	$ (2,414,553)	$ (3,967,606)	$ (8,650,494)	$ (14,943,510)
Basic Earnings (Loss) per Share (in dollars per share)	$ (0.05)	$ (0.10)	$ (0.17)	$ (0.37)
Diluted Earnings (Loss) per Share (in dollars per share)	$ (0.05)	$ (0.10)	$ (0.17)	$ (0.37)

CONSOLIDATED STATEMENTS OF COMP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net Income (Loss)	$ (2,414,553)	$ (3,967,606)	$ (8,650,494)	$ (14,943,510)
Unrealized Gain (Loss) on Available-for-Sale Investments	(270,017)	(58,848)	(382,441)	(40,003)
Comprehensive Income (Loss)	$ (2,684,570)	$ (4,026,454)	$ (9,032,935)	$ (14,983,513)

CONSOLIDATED STATEMENTS OF CHAN

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - 9 months ended Sep. 30, 2015 - USD ($)	COMMON SHARES	ACCUMULATED DEFICIT	ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)	Total
Balance at Dec. 31, 2014	$ 249,018,189	$ (180,117,726)	$ (197,669)	$ 68,702,794
Balance (in shares) at Dec. 31, 2014	50,284,007			50,284,007
Increase (Decrease) in Shareholders' Equity
Net (Loss)		(8,650,494)		$ (8,650,494)
Unrealized (Loss) on Available-for-Sale Securities			(382,441)	(382,441)
Issuance of Common Shares	$ 1,575,333			1,575,333
Issuance of Common Shares (in shares)	233,998
Stock Option Based Expense	$ 3,487,107			3,487,107
Restricted Stock Amortization	2,610,015			2,610,015
Restricted Stock Tendered in Satisfaction of Tax Liabilities	$ (2,912,859)			$ (2,912,859)
Restricted Stock Tendered in Satisfaction of Tax Liabilities (in shares)	(290,128)			(290,128)
Balance at Sep. 30, 2015	$ 253,777,785	$ (188,768,220)	$ (580,110)	$ 64,429,455
Balance (in shares) at Sep. 30, 2015	50,227,877			50,227,877

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Cash Flows From Operating Activities:
Net (Loss)	$ (8,650,494)	$ (14,943,510)
Adjustments To Reconcile Net Loss To Net Cash Used In Operating Activities:
Depreciation and Amortization	608,152	767,386
Share Based Compensation- Employees	6,097,122	6,293,250
Restricted Stock Tendered in Satisfaction of Tax Liabilities	(2,912,859)
Amortization of Debt Issuance Costs		357,140
Non-cash Interest Expense		353,994
Loss on Disposal of Assets	4,292	4,827
Loss on Sale of Investments, net	58,095	1,223
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable	(1,424,485)	388,653
(Increase) in Inventory	(3,495,096)	(181,858)
(Increase) in Other Assets	(1,014,009)	(317,194)
(Decrease) in Accounts Payable	(71,121)	(3,514,762)
(Decrease) in Other Liabilities	(1,259,560)	(2,506,918)
Deferred License Revenue	(1,479,681)
Changes in Assets and Liabilities	(8,743,952)	(6,132,079)
Cash Used In Operating Activities	(13,539,644)	(13,297,769)
Cash Flows From Investing Activities:
Purchase of Investments Available for Sale	(21,800,000)	(2,000,000)
Sale of Investments Available for Sale	1,468,656	4,976,000
Purchase of Equipment	(336,856)	(613,311)
Proceeds on Sale of Assets	4,800
Cash Provided By (Used In) Investing Activities	(20,663,400)	2,362,689
Cash Flows From Financing Activities:
Payments on Notes Payable and Capital Lease Obligations	0	(564,410)
Proceeds from the Issuance of Common Shares and Purchase Warrants	1,575,333	2,634,876
Cash Provided By Financing Activities	1,575,333	2,070,466
Increase (Decrease) In Cash	(32,627,711)	(8,864,614)
Cash At Beginning Of Period	65,800,451	11,881,451
Cash At End Of Period	$ 33,172,740	3,016,837
Supplemental Cash Flow disclosure
Interest Paid		$ 1,906,022

Description of Business

Description of Business	9 Months Ended
	Sep. 30, 2015
Description of Business
Description of Business	1. Description of Business Rockwell Medical, Inc. and Subsidiary (collectively, “we”, “our”, “us”, or the “Company”) is a fully-integrated pharmaceutical company targeting end-stage renal disease and chronic kidney disease with innovative products and services for the treatment of iron deficiency, secondary hyperparathyroidism and hemodialysis. We are also an established manufacturer and leader in delivering high-quality hemodialysis concentrates/dialysates to dialysis providers and distributors in the United States and abroad. We are currently developing unique, proprietary renal drug therapies. These novel renal drug therapies support disease management initiatives to improve the quality of life and care of dialysis patients and are designed to deliver safe and effective therapy, while decreasing drug administration costs and improving patient convenience and outcome. We have obtained global licenses for certain dialysis related drugs which we are developing and planning to market. We manufacture, sell and distribute hemodialysis concentrates and other ancillary medical products and supplies used in the treatment of patients with End Stage Renal Disease, or “ESRD”. We supply our products to medical service providers who treat patients with kidney disease. Our products are used to cleanse patients’ blood and replace nutrients lost during the kidney dialysis process. We primarily sell our products in the United States. We are regulated by the Federal Food and Drug Administration (“FDA”) under the Federal Drug and Cosmetics Act, as well as by other federal, state and local agencies. We obtained FDA approval of Triferic TM , our branded dialysis iron maintenance therapy drug, in January 2015 and sales began in September 2015. We have also received 510(k) approval from the FDA to market hemodialysis solutions and powders, to sell our Dri-Sate Dry Acid Concentrate product line and our Dri-Sate Mixer.

Summary of Significant Accounti

Summary of Significant Accounting Policies	9 Months Ended
	Sep. 30, 2015
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies	2. Summary of Significant Accounting Policies Basis of Presentation Our consolidated financial statements include our accounts and the accounts for our wholly owned subsidiary, Rockwell Transportation, Inc. All intercompany balances and transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America, or “GAAP,” and with the instructions to Form 10-Q and Securities and Exchange Commission Regulation S-X as they apply to interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The balance sheet at December 31, 2014 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of our management, all adjustments have been included that are necessary to make the financial statements not misleading. All of these adjustments that are material are of a normal and recurring nature. Our operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015. You should read our unaudited interim financial statements together with the financial statements and related footnotes for the year ended December 31, 2014 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 includes a description of our significant accounting policies. Revenue Recognition We recognize revenue at the time we transfer title to our products to our customers consistent with generally accepted accounting principles. Generally, we recognize revenue when our products are delivered to our customer’s location consistent with our terms of sale. We recognize revenue for international shipments when title has transferred consistent with standard terms of sale. The initial payment of $20 million received pursuant to our long-term Distribution Agreement (the “Distribution Agreement”) with Baxter Healthcare Corporation (“Baxter”) in October 2014 has been accounted for as deferred license revenue. Deferred license revenue is being recognized based on the proportion of product shipments to Baxter in each period to total expected sales volume for the term of the agreement. We require certain customers, mostly international customers, to pay for product prior to the transfer of title to the customer. Deposits received from customers and payments in advance for orders are recorded as liabilities under Customer Deposits until such time as orders are filled and title transfers to the customer consistent with our terms of sale. Cash and Cash Equivalents We consider cash on hand, money market funds, unrestricted certificates of deposit and short term marketable securities with an original maturity of 90 days or less as cash and cash equivalents. Investments Available for Sale Investments Available for Sale are investments in short term duration bond funds, and are stated at fair value based upon observed market prices (Level 1 in the fair value hierarchy). These funds generally hold high credit quality short term debt instruments. These instruments are subject to changes in fair market value due primarily to changes in interest rates. The fair value of these investments was $39,818,118 as of September 30, 2015. Unrealized holding gains or losses on these securities are included in accumulated other comprehensive income (loss). Realized gains and losses, including declines in value judged to be other-than-temporary on available-for-sale securities are included as a component of other income or expense. Realized losses from repositioning our portfolio aggregated $58,095 for the nine months ended September 30, 2015. Gross unrealized gains were $18,493 and gross unrealized losses were $598,603 as of September 30, 2015. The Company has evaluated the near term interest rate environment and the expected holding period of the investments along with the duration of the fund portfolios in assessing the severity and duration of the potential impairment. Based on that evaluation the Company does not consider those investments to be other-than-temporarily impaired at September 30, 2015. Research and Product Development We recognize research and product development expenses as incurred. We incurred product development and research costs related to the commercial development, patent approval and regulatory approval of new products, including our FDA approved iron maintenance therapy drug, Triferic™, aggregating approximately $1.2 million and $1.3 million for the three months ended September 30, 2015 and 2014, respectively. Research and product development costs were $2.9 million and $6.1 million for the nine months ended September 30, 2015 and 2014, respectively. Share Based Compensation We measure the cost of employee services received in exchange for equity awards, including stock options, based on the grant date fair value of the awards in accordance with ASC 718-10, Compensation — Stock Compensation. The cost of equity based compensation is recognized as compensation expense over the vesting period of the awards. We estimate the fair value of compensation involving stock options utilizing the Black-Scholes option pricing model. This model requires the input of several factors such as the expected option term, expected volatility of our stock price over the expected option term, and an expected forfeiture rate, and is subject to various assumptions. We believe the valuation methodology is appropriate for estimating the fair value of stock options we grant to employees and directors which are subject to ASC 718-10 requirements. These amounts are estimates and thus may not be reflective of actual future results or amounts ultimately realized by recipients of these grants. The Company’s Long Term Incentive Plan permits grantees to tender shares to the Company in satisfaction of liabilities related to the exercise of equity awards, including the exercise price of options and tax liabilities related to equity awards. During the first nine months of 2015, 290,128 shares were tendered to the Company in satisfaction of $2,912,859 of such liabilities. Net Earnings Per Share We computed our basic earnings (loss) per share using weighted average shares outstanding for each respective period. Diluted earnings per share also reflect the weighted average impact from the date of issuance of all potentially dilutive securities, consisting of stock options and common share purchase warrants, unless inclusion would have had an anti-dilutive effect. The calculation of basic weighted average shares outstanding excludes unvested restricted stock. Actual weighted average shares outstanding used in calculating basic and diluted earnings per share were: Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 Basic Weighted Average Shares Outstanding Effect of Dilutive Securities — — — — Diluted Weighted Average Shares Outstanding

INVENTORY

INVENTORY	9 Months Ended
	Sep. 30, 2015
Inventory
Inventory	3. Inventory Components of inventory as of September 30, 2015 and December 31, 2014 are as follows: September 30, December 31, 2015 2014 Raw Materials $ $ Work in Process Finished Goods Total $ $

Summary of Significant Accoun11

Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2015
Summary of Significant Accounting Policies
Basis of Presentation	Basis of Presentation Our consolidated financial statements include our accounts and the accounts for our wholly owned subsidiary, Rockwell Transportation, Inc. All intercompany balances and transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America, or “GAAP,” and with the instructions to Form 10-Q and Securities and Exchange Commission Regulation S-X as they apply to interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The balance sheet at December 31, 2014 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of our management, all adjustments have been included that are necessary to make the financial statements not misleading. All of these adjustments that are material are of a normal and recurring nature. Our operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015. You should read our unaudited interim financial statements together with the financial statements and related footnotes for the year ended December 31, 2014 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 includes a description of our significant accounting policies.
Revenue Recognition	Revenue Recognition We recognize revenue at the time we transfer title to our products to our customers consistent with generally accepted accounting principles. Generally, we recognize revenue when our products are delivered to our customer’s location consistent with our terms of sale. We recognize revenue for international shipments when title has transferred consistent with standard terms of sale. The initial payment of $20 million received pursuant to our long-term Distribution Agreement (the “Distribution Agreement”) with Baxter Healthcare Corporation (“Baxter”) in October 2014 has been accounted for as deferred license revenue. Deferred license revenue is being recognized based on the proportion of product shipments to Baxter in each period to total expected sales volume for the term of the agreement. We require certain customers, mostly international customers, to pay for product prior to the transfer of title to the customer. Deposits received from customers and payments in advance for orders are recorded as liabilities under Customer Deposits until such time as orders are filled and title transfers to the customer consistent with our terms of sale.
Cash and Cash Equivalents	Cash and Cash Equivalents We consider cash on hand, money market funds, unrestricted certificates of deposit and short term marketable securities with an original maturity of 90 days or less as cash and cash equivalents.
Investments Available for Sale	Investments Available for Sale Investments Available for Sale are investments in short term duration bond funds, and are stated at fair value based upon observed market prices (Level 1 in the fair value hierarchy). These funds generally hold high credit quality short term debt instruments. These instruments are subject to changes in fair market value due primarily to changes in interest rates. The fair value of these investments was $39,818,118 as of September 30, 2015. Unrealized holding gains or losses on these securities are included in accumulated other comprehensive income (loss). Realized gains and losses, including declines in value judged to be other-than-temporary on available-for-sale securities are included as a component of other income or expense. Realized losses from repositioning our portfolio aggregated $58,095 for the nine months ended September 30, 2015. Gross unrealized gains were $18,493 and gross unrealized losses were $598,603 as of September 30, 2015. The Company has evaluated the near term interest rate environment and the expected holding period of the investments along with the duration of the fund portfolios in assessing the severity and duration of the potential impairment. Based on that evaluation the Company does not consider those investments to be other-than-temporarily impaired at September 30, 2015.
Research and Product Development	Research and Product Development We recognize research and product development expenses as incurred. We incurred product development and research costs related to the commercial development, patent approval and regulatory approval of new products, including our FDA approved iron maintenance therapy drug, Triferic™, aggregating approximately $1.2 million and $1.3 million for the three months ended September 30, 2015 and 2014, respectively. Research and product development costs were $2.9 million and $6.1 million for the nine months ended September 30, 2015 and 2014, respectively.
Share Based Compensation	Share Based Compensation We measure the cost of employee services received in exchange for equity awards, including stock options, based on the grant date fair value of the awards in accordance with ASC 718-10, Compensation — Stock Compensation. The cost of equity based compensation is recognized as compensation expense over the vesting period of the awards. We estimate the fair value of compensation involving stock options utilizing the Black-Scholes option pricing model. This model requires the input of several factors such as the expected option term, expected volatility of our stock price over the expected option term, and an expected forfeiture rate, and is subject to various assumptions. We believe the valuation methodology is appropriate for estimating the fair value of stock options we grant to employees and directors which are subject to ASC 718-10 requirements. These amounts are estimates and thus may not be reflective of actual future results or amounts ultimately realized by recipients of these grants. The Company’s Long Term Incentive Plan permits grantees to tender shares to the Company in satisfaction of liabilities related to the exercise of equity awards, including the exercise price of options and tax liabilities related to equity awards. During the first nine months of 2015, 290,128 shares were tendered to the Company in satisfaction of $2,912,859 of such liabilities.
Net Earnings Per Share	Net Earnings Per Share We computed our basic earnings (loss) per share using weighted average shares outstanding for each respective period. Diluted earnings per share also reflect the weighted average impact from the date of issuance of all potentially dilutive securities, consisting of stock options and common share purchase warrants, unless inclusion would have had an anti-dilutive effect. The calculation of basic weighted average shares outstanding excludes unvested restricted stock. Actual weighted average shares outstanding used in calculating basic and diluted earnings per share were: Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 Basic Weighted Average Shares Outstanding Effect of Dilutive Securities — — — — Diluted Weighted Average Shares Outstanding

Summary of Significant Accoun12

Summary of Significant Accounting Policies (Tables)	9 Months Ended
	Sep. 30, 2015
Summary of Significant Accounting Policies
Schedule of weighted average shares outstanding used in calculating basic and diluted earnings per share	Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014 Basic Weighted Average Shares Outstanding Effect of Dilutive Securities — — — — Diluted Weighted Average Shares Outstanding

Inventory (Tables)

Inventory (Tables)	9 Months Ended
	Sep. 30, 2015
Inventory
Schedule components of inventory	September 30, December 31, 2015 2014 Raw Materials $ $ Work in Process Finished Goods Total $ $

Summary of Significant Accoun14

Summary of Significant Accounting Policies (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014	Oct. 31, 2014
Revenue Recognition
Deferred License Revenue	$ 18,012,839		$ 18,012,839		$ 19,492,520
Investments Available for Sale
Fair value of investments	39,818,118		39,818,118		$ 19,927,310
Gross unrealized gains	18,493		18,493
Gross unrealized losses	598,603		598,603
Realized gains or losses			58,095
Research and Product Development
Product development and research costs	$ 1,246,727	$ 1,301,824	$ 2,931,577	$ 6,103,716
Baxter Healthcare Organization
Revenue Recognition
Deferred License Revenue						$ 20,000,000

Summary of Significant Accoun15

Summary of Significant Accounting Policies (Details 2) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Share-based Compensation.
Restricted Stock Tendered in Satisfaction of Tax Liabilities			$ (2,912,859)
Restricted Stock Tendered in Satisfaction of Tax Liabilities (in shares)			290,128
Weighted average shares outstanding used in calculating basic and diluted earnings per share
Basic Weighted Average Shares Outstanding	50,222,787	40,405,693	49,988,684	40,063,399
Diluted Weighted Average Shares Outstanding	50,222,787	40,405,693	49,988,684	40,063,399

Inventory (Details)

Inventory (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Inventory
Raw Materials	$ 5,117,485	$ 2,197,143
Work in Process	187,392	197,106
Finished Goods	2,110,404	1,525,936
Total	$ 7,415,281	$ 3,920,185

Uncategorized Items - rmti-2015

Label	Element	Value
Repayments of Debt and Capital Lease Obligations	us-gaap_RepaymentsOfDebtAndCapitalLeaseObligations	$ 0