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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 September 30, 2020
or
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)
Delaware38-3317208
(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)

411 Hackensack Avenue, Suite 501
Hackensack, NJ 07601
(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 filerAccelerated filer
Non-accelerated filerSmaller 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 
  No
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:Trading SymbolName of each exchange on which registered:
Common Stock, par value $0.0001RMTINasdaq Global Market
The number of shares of common stock outstanding as of November 6, 2020 was 93,573,165.



Rockwell Medical, Inc. and Subsidiaries
Index to Form 10-Q
Page
3
4
5
6
7
8
27
36
36
37
37
44
45
2


PART I – FINANCIAL INFORMATION
Item 1.  Financial Statements
ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
September 30,
2020
December 31,
2019
(Unaudited)
ASSETS
Cash and Cash Equivalents$56,614 $11,794 
Investments Available-for-Sale10,702 14,250 
Accounts Receivable, net4,129 4,203 
Inventory, net3,877 3,647 
Prepaid and Other Current Assets2,621 2,980 
Total Current Assets77,943 36,874 
Property and Equipment, net2,785 2,433 
Inventory, Non-Current859 441 
Right of Use Assets, net2,099 3,213 
Goodwill921 921 
Other Non-Current Assets629 435 
Total Assets$85,236 $44,317 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts Payable$4,190 $3,018 
Accrued Liabilities4,968 4,518 
Settlement Payable 104 
Lease Liability - Current1,155 1,493 
Deferred License Revenue - Current2,180 2,234 
Insurance Financing Note Payable 763 
Customer Deposits73 55 
Other Current Liability - Related Party142 188 
Total Current Liabilities12,708 12,373 
Lease Liability - Long-Term1,039 1,781 
Term Loan, Net of Issuance Costs20,856  
Deferred License Revenue - Long-Term8,558 9,843 
Total Liabilities43,161 23,997 
Commitments and Contingencies (See Note 14)
Stockholders’ Equity:
Preferred Stock, $0.0001 par value, 2,000,000 shares authorized; no shares issued and outstanding at September 30, 2020 and December 31, 2019
  
Common Stock, $0.0001 par value; 170,000,000 shares authorized; 93,573,165 and 65,378,890 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
9 7 
Additional Paid-in Capital370,760 326,777 
Accumulated Deficit(328,743)(306,516)
Accumulated Other Comprehensive Income49 52 
Total Stockholders’ Equity42,075 20,320 
Total Liabilities and Stockholders’ Equity$85,236 $44,317 
The accompanying notes are an integral part of the condensed consolidated financial statements.
3


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
Three Months Ended September 30, 2020Three Months Ended September 30, 2019Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019
Net Sales$15,280 $15,407 $47,033 $45,812 
Cost of Sales14,934 15,424 44,693 44,085 
Gross Profit346 (17)2,340 1,727 
Selling and Marketing1,669 1,827 5,738 7,149 
General and Administrative3,622 4,623 11,767 16,341 
Settlement Expense   430 
Research and Product Development1,745 1,475 5,183 4,930 
Operating Loss(6,690)(7,942)(20,348)(27,123)
Other Income (Expense)
Realized Gain on Investments4 6 8 24 
Warrant Modification Expense  (837) 
Interest Expense(666)(16)(1,289)(16)
Interest Income2 97 239 289 
Total Other Income (Expense)(660)87 (1,879)297 
Net Loss$(7,350)$(7,855)$(22,227)$(26,826)
Basic and Diluted Net Loss per Share$(0.10)$(0.12)$(0.32)$(0.45)
Basic and Diluted Weighted Average Shares Outstanding71,811,322 63,796,723 69,594,167 59,728,446 
The accompanying notes are an integral part of the condensed consolidated financial statements.
4


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Dollars in Thousands)
Three Months Ended September 30, 2020Three Months Ended September 30, 2019Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019
Net Loss$(7,350)$(7,855)$(22,227)$(26,826)
Unrealized Gain (Loss) on Available-for-Sale Debt Instrument Investments2 6 (11)10 
Foreign Currency Translation Adjustments1 (1)8 (1)
Comprehensive Loss$(7,347)$(7,850)$(22,230)$(26,817)
The accompanying notes are an integral part of the condensed consolidated financial statements.
5


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in Thousands)
COMMON STOCKADDITIONAL PAID-IN CAPITALACCUMULATED
DEFICIT
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME
TOTAL
STOCKHOLDERS'
EQUITY
SHARESAMOUNT
Balance as of January 1, 202065,378,890 $7 $326,777 $(306,516)$52 $20,320 
Net Loss— — — (7,984)— (7,984)
Unrealized Loss on Available-for-Sale Investments— — — — (7)(7)
Foreign Currency Translation Adjustments— — — — 6 6 
Issuance of common stock, net of offering costs/Public Offering3,670,212  8,003 — — 8,003 
Issuance of Warrants related to Debt Financing— — 501 — — 501 
Stock-based Compensation— — 935 — — 935 
Balance as of March 31, 202069,049,102 $7 $336,216 $(314,500)$51 $21,774 
Net Loss— — — (6,893)— (6,893)
Unrealized Loss on Available-for-Sale Investments— — — — (6)(6)
Foreign Currency Translation Adjustments— — — — 1 1 
Issuance of common stock, net of offering costs/At-the-Market Offering987,716  1,978 — — 1,978 
Vesting of Restricted Stock Units Issued, net of taxes withheld120,104  (19)— — (19)
Warrant Modification Expense— — 837 — — 837 
Stock-based Compensation expense— — (1,461)— — (1,461)
Balance as of June 30, 202070,156,922 $7 $337,551 $(321,393)$46 $16,211 
Net Loss— — — (7,350)— (7,350)
Unrealized Gain on Available-for-Sale Investments— — — — 2 2 
Foreign Currency Translation Adjustments— — — — 1 1 
Issuance of common stock, net of offering costs/Public Offering23,178,809 2 32,675 — — 32,677 
Issuance of common stock, net of offering costs/At-the-Market Offering140,892  284 — — 284 
Vesting of Restricted Stock Units Issued, net of taxes withheld96,542  — — —  
Stock-based Compensation expense— — 250 — — 250 
Balance as of September 30, 202093,573,165 $9 $370,760 $(328,743)$49 $42,075 

    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)
COMMON STOCKADDITIONAL PAID-IN CAPITALACCUMULATED
DEFICIT
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME
TOTAL
STOCKHOLDERS'
EQUITY
SHARESAMOUNT
Balance as of January 1, 201957,034,154 $6 $299,596 $(272,388)$63 $27,277 
Net Loss— — — (8,679)— (8,679)
Unrealized Loss on Available-for-Sale Investments— — — — (7)(7)
Foreign Currency Translation Adjustments— — — —   
Exercise of Employee Stock Options, Net of Tax30,000  148 — — 148 
Delivery of common stock underlying restricted stock units, net of tax64,173  (95)— — (95)
Stock-based Compensation— — 1,517 — — 1,517 
Balance as of March 31, 201957,128,327 $6 $301,166 $(281,067)$56 $20,161 
Net Loss— — — (10,292)— (10,292)
Unrealized Gain on Available-for-Sale Investments— — — — 12 12 
Foreign Currency Translation Adjustments— — — —   
Issuance of common stock, net of offering costs/Public Offering5,833,334  16,120 — — 16,120 
Issuance of common stock, net of offering costs/At-the-Market Offering437,043  2,089 — — 2,089 
Stock-based Compensation— — 1,502 — — 1,502 
Balance as of June 30, 201963,398,704 $6 $320,877 $(291,359)$68 $29,592 
Net Loss— — — (7,855)— (7,855)
Unrealized Gain on Available-for-Sale Investments— — — — 6 6 
Foreign Currency Translation Adjustments— — — — (1)(1)
Delivery of common stock underlying restricted stock units, net of tax62,800  (85)— — (85)
Issuance of common stock, net of offering costs/Public Offering425,880  1,169 — — 1,169 
Stock-based Compensation— — 876 — — 876 
Balance as of September 30, 201963,887,384 $6 $322,837 $(299,214)$73 $23,702 
The accompanying notes are an integral part of the condensed consolidated financial statements.

6


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
For the nine months ended September 30, 2020 and 2019
20202019
Cash Flows From Operating Activities:
Net Loss$(22,227)$(26,826)
Adjustments To Reconcile Net Loss To Net Cash Used In Operating Activities:
Depreciation and Amortization614 582 
Stock-based Compensation(276)3,895 
Warrant Modification Expense837  
Increase in Inventory Reserves305 1,271 
Amortization of Right of Use Asset1,090 1,430 
Amortization of Debt Financing Costs and Accretion of Debt Discount200  
Loss (Gain) on Disposal of Assets7 (1)
Realized (Gain) on Sale of Investments Available-for-Sale(8)(24)
Foreign Currency Translation Adjustment7  
Changes in Assets and Liabilities:
Decrease in Accounts Receivable, net74 1,857 
Decrease in Insurance Receivable 371 
(Increase) Decrease in Inventory(953)293 
Decrease in Prepaid and Other Assets161 931 
Increase (Decrease) in Accounts Payable1,172 (1,298)
Decrease in Settlement Payable(104)(147)
Decrease in Lease Liability(1,056)(1,369)
Increase (Decrease) in Other Liabilities423 (1,229)
Decrease in Deferred License Revenue(1,338)(1,690)
Changes in Assets and Liabilities(1,621)(2,281)
Cash Used In Operating Activities(21,072)(21,954)
Cash Flows From Investing Activities:
Purchase of Investments Available-for-Sale(23,531)(34,202)
Sale of Investments Available-for-Sale27,076 30,479 
Purchase of Equipment(970)(449)
Purchase of Research and Development Licenses (Related Party) (750)
Cash Provided By (Used In) Investing Activities2,575 (4,922)
Cash Flows From Financing Activities:
Proceeds from Term Loan22,500  
Debt Issuance Costs(1,343) 
Payments on Short Term Note Payable(763)(763)
Proceeds from the Issuance of Common Stock / Public Offering43,148 18,777 
Offering Costs from the Issuance of Common Stock / Public Offering(2,469)(1,488)
Proceeds from the Issuance of Common Stock / At-the-Market Offering2,325 2,296 
Offering Costs from the Issuance of Common Stock / At-the-Market Offering(63)(207)
Proceeds from the Exercise of Employee Stock Options 148 
Repurchase of Common Stock to Pay Employee Withholding Taxes(18)(180)
Cash Provided By Financing Activities63,317 18,583 
Increase (Decrease) in Cash and Cash Equivalents44,820 (8,293)
Cash and Cash Equivalents at Beginning of Period11,794 22,714 
Cash and Cash Equivalents at End of Period$56,614 $14,421 
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest$906 $ 
Supplemental Disclosure of Noncash Investing and Financing Activities:
Change in Unrealized Loss on Marketable Securities Available-for-Sale$(11)$ 
Insurance Financing Note Payable$ $1,145 
Fair Value of Warrants issued related to Debt Financing$501 $ 
The accompanying notes are an integral part of the condensed consolidated financial statements.
7


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1.  Description of Business
    
Rockwell Medical, Inc. and subsidiaries (collectively, “we”, “our”, “us”, or the “Company”), is a biopharmaceutical company dedicated to improving outcomes for patients with iron deficiency and iron-deficiency anemia, with an initial focus on patients with end-stage kidney disease (ESKD) and on dialysis. The Company is focused on developing its proprietary ferric pyrophosphate citrate (“FPC”) therapeutic platform. The first product developed from this platform is Triferic, the first-FDA approved product for the replacement of iron and maintenance of hemoglobin in adult hemodialysis patients. We initiated commercial sales of Triferic Dialysate during the second quarter of 2019 and received approval by the U.S. Food and Drug Administration ("FDA") for the intravenous formulation of Triferic, Triferic AVNU, on March 27, 2020. We plan to leverage our experience with Triferic to develop our FPC platform for iron deficiency and iron deficiency anemia in other disease states. Our lead indication is developing FPC for the treatment of iron deficiency anemia in patients undergoing home infusion therapy. We are also a manufacturer of hemodialysis concentrates for dialysis providers and distributors in the United States and abroad. We supply the domestic market with dialysis concentrates and we also supply dialysis concentrates to distributors serving a number of foreign countries, primarily in the Americas and the Pacific Rim.
 
Our mission is to transform anemia management in a wide variety of disease states across the globe, while improving patients’ lives. Accordingly, we are building the foundation to become a leading medical and commercial organization in the field of iron deficiency.
 
Triferic® is a registered trademark of Rockwell Medical, Inc.
2.  Liquidity and Capital Resources
As of September 30, 2020, the Company had approximately $56.6 million of cash and cash equivalents, $10.7 million of investments available-for-sale, working capital of $65.2 million and an accumulated deficit of $328.7 million. Net cash used in operating activities for the nine months ended September 30, 2020 was approximately $21.1 million. Management evaluated the Company’s ability to continue as going concern for at least the next 12 months from the filing of this report. Based on the currently available working capital, capital raise and debt financing described below, management believes the Company currently has sufficient funds to meet its operating requirements for at least the next twelve months from the date of the filing of this report.
In February 2020, the Company sold 3,670,212 shares of its common stock for proceeds of $8.0 million, net of issuance costs. On March 16, 2020, the Company closed a debt financing transaction with net proceeds at closing of approximately $21.2 million, net of fees and expenses (See Note 15 for further detail). On September 23, 2020, the Company sold 23,178,809 shares of its common stock for proceeds of $32.7 million, net of issuance costs (see Note 10 for further detail).
During the nine months ended September 30, 2020, the Company sold 1,128,608 shares of its common stock as part of its sales agreement with Cantor Fitzgerald & Co. for proceeds of $2.3 million, net of issuance costs. Approximately $32.3 million remains available for sale under this facility. See Note 10 for further detail.

The Company will require additional capital to sustain its operations and make the investments it needs to execute upon its longer-term business plan, including the commercialization of Triferic Dialysate and Triferic AVNU, executing upon our plans for enhancing Triferic's medical capabilities, generating additional data for Triferic and developing Triferic for new therapeutic indications. If the Company is unable to generate sufficient revenue from its existing long-term business plan, the Company will need to obtain additional equity or debt financing. If the Company attempts to obtain additional debt or equity financing, the Company cannot assume that such financing will be available on favorable terms, if at all.

In addition, the Company is subject to certain covenants and cure provisions under our Loan Agreement with Innovatus. As of the date of this report, the Company believes that it will either be able to satisfy such covenants or, in the event of a breached covenant, exercise cure provisions to avoid an event of default. If we are unable to avoid an event of default, any required repayments could have an adverse effect on our liquidity (See Note 15 for further detail).

8


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The COVID-19 pandemic and resulting domestic and global disruptions have adversely affected our business and operations, including, but not limited to, our sales and marketing efforts and our research and development activities, and the operations of third parties upon whom we rely. Quarantines, shelter-in-place, executive and similar government orders and the recent surge in infections domestically may negatively impact our sales and marketing activities, particularly if our sales representatives are unable to interact with current and potential customers to the same extent as before onset of the COVID-19 pandemic. Our international business development activities may also be negatively impacted by COVID-19, especially with the recent surge in infections and resulting quarantines or shelter-in-place orders. Depending on the severity of the impact on our sales and marketing efforts, the timing of our commercial launch of Triferic AVNU could be delayed.

The COVID-19 pandemic, the recent domestic and international surge in infections and resulting global disruptions have caused significant volatility in financial and credit markets. We have utilized a range of financing methods to fund our 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 our liquidity and capital resources in the future.
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 (“U.S.”) of America (“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 September 30, 2020, condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019, condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2020 and 2019, condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019, and condensed consolidated statement of changes in shareholder’s equity for the three and nine months ended September 30, 2020 and 2019 are unaudited, but include all adjustments, consisting of normal recurring adjustments, that 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 September 30, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020 or for any future interim period. The condensed consolidated balance sheet at December 31, 2019 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, 2019 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 as filed with the SEC on Form 10-K on March 17, 2020. The Company’s consolidated subsidiaries consisted 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.

Certain reclassifications have been made to the 2019 financial statements and notes to conform to the 2020 presentation.
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 Company accounts for its leases under Accounting Standards Codification (“ASC”) 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by
9


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of 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, the Company elects to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term.
Loss Per Share
ASC 260, Earnings Per Share, requires dual presentation of basic and diluted earnings per share (“EPS”), with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that are then sharing in the earnings of the entity.
Basic net loss per share of common stock excludes dilution and is computed by dividing the net loss by the weighted average number of shares outstanding during the period. Diluted net loss per share of common stock reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity unless inclusion of such shares would be anti-dilutive. The Company has only incurred losses, therefore, basic and diluted net loss per share is the same. Securities that could potentially dilute net income per share in the future that were not included in the computation of diluted loss per share were as follows:
As of September 30,
20202019
Options to purchase common stock6,682,192 8,170,382 
Unvested restricted stock awards146,800 146,800 
Unvested restricted stock units245,405 1,324,172 
Warrants to purchase common stock26,426,863 2,770,781 
33,501,260 12,412,135 
Adoption of Recent Accounting Pronouncements
The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that 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 that there are sufficient controls in place to ascertain that the Company’s consolidated financial statements properly reflect the change.
In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260) and Derivatives and Hedging (Topic 815)- Accounting for Certain Financial Instruments with Down Round Features” (“ASU 2017-11”). Equity-linked instruments, such as warrants and convertible instruments may contain down round features that result in the strike price being reduced on the basis of the pricing of future equity offerings. Under ASU 2017-11, a down round feature will no longer require a freestanding equity-linked instrument (or embedded conversion option) to be classified as a liability that is remeasured at fair value through the income statement (i.e. marked-to-market). However, other features of the equity-linked instrument (or embedded conversion option) must still be evaluated to determine whether liability or equity classification is appropriate. Equity classified instruments are not marked-to-market. For earnings per share ("EPS") reporting, the ASU requires companies to recognize the effect of the down round feature only when it is triggered by treating it as a dividend and as a reduction of income available to common shareholders in basic EPS. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. This standard, which the Company as adopted on January 1, 2020, and did not have a material impact on the Company’s financial position, results of operations or cash flows.
4.  Revenue Recognition

10


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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.
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 concentrate 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 that 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 that control of the product transfers to the customer.
The Company received upfront fees under four distribution and license agreements that have been deferred as a contract liability.  The amounts received from Wanbang Biopharmaceuticals Co., Ltd. (“Wanbang”) and Sun Pharmaceutical Industries Ltd. ("Sun Pharma") and amounts to be received Jeil Pharmaceutical Co., Ltd. ("Jeil Pharma") are recognized as revenue over the estimated term of the applicable distribution and license agreement as regulatory approval was not received and the Company did not have sufficient experience in China, India and South Korea, respectively, to determine that regulatory approval was probable as of the execution of the agreement.  The amounts received from Baxter Healthcare Corporation (“Baxter”), are recognized as revenue at the point in time that the estimated product sales under the agreement occur. 
For the business under the Company’s distribution agreement with Baxter (the “Baxter Agreement”), and for the majority of the Company’s 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 or receipt of the product. The amount of revenue recognized is based on the purchase order less returns and adjusted for any rebates, discounts, chargebacks or other amounts paid to customers. There were no such adjustments for the periods reported. Customers typically pay for the product based on customary business practices with payment terms averaging 30 days, while distributor payment terms average 45 days.
Disaggregation of revenue
Revenue is disaggregated by primary geographical market, major product line, and timing of revenue recognition.
11


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
In thousands of U.S. dollars ($) Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
Products By Geographic AreaTotalU.S.Rest of WorldTotalU.S.Rest of World
Drug Revenues
Product Sales – Point-in-time$228 $228 $ $609 $609 $ 
License Fee – Over time56  56 167  167 
Total Drug Products284 228 56 776 609 167 
Concentrate Products
Product Sales – Point-in-time14,506 13,470 1,036 44,786 40,295 4,491 
License Fee – Over time490 490  1,471 1,471  
Total Concentrate Products14,996 13,960 1,036 46,257 41,766 4,491 
Net Revenue$15,280 $14,188 $1,092 $47,033 $42,375 $4,658 
In thousands of U.S. dollars ($)Three Months Ended September 30, 2019Nine Months Ended September 30, 2019
Products By Geographic AreaTotalU.S.Rest of WorldTotalU.S.Rest of World
Drug Revenues
Product Sales – Point-in-time$98 $98 $ $112 $112 $ 
License Fee – Over time$68 $ 68 205  205 
Total Drug Products166 98 68 317 112 205 
Concentrate Products
Product Sales – Point-in-time14,746 13,353 1,393 44,010 39,100 4,910 
License Fee – Over time495 495  1,485 1,485  
Total Concentrate Products15,241 13,848 1,393 45,495 40,585 4,910 
Net Revenue$15,407 $13,946 $1,461 $45,812 $40,697 $5,115 
Contract balances
The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers.
In thousands of U.S. dollars ($)September 30, 2020December 31, 2019
Receivables, which are included in "Trade and other receivables"$4,129 $4,203 
Contract liabilities$10,738 $12,076 
There were no material losses recognized related to any receivables arising from the Company’s contracts with customers for the three and nine months ended September 30, 2020 and 2019.
For the three and nine months ended September 30, 2020 and September 30, 2019, the Company did not recognize any material bad-debt expense. There were no material contract assets recorded on the condensed consolidated balance sheet as of September 30, 2020 and December 31, 2019.  The Company does not generally accept returns of its concentrate products and no material reserve for returns of concentrate products was established as of September 30, 2020 or December 31, 2019. 
The contract liabilities primarily relate to upfront payments and consideration received from customers that are received in advance of the customer assuming control of the related products
Transaction price allocated to remaining performance obligations
For the three and nine months ended September 30, 2020, revenue recognized from performance obligations related to prior periods was not material.
12


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 $10.7 million as of September 30, 2020. The amount relates primarily to upfront payments and consideration received from customers that are received 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. The Baxter Agreement includes minimum commitments of product sales over the duration of the agreement. Unfulfilled minimum commitments related to the Baxter Agreement are product sales of $7.7 million as of September 30, 2020, which is being amortized ratably through expiration of the Baxter Agreement on October 2, 2024.
5.  Investments - Available-for-Sale
Investments available-for-sale consisted of the following as of September 30, 2020 and December 31, 2019 (table in thousands):
September 30, 2020
Amortized CostUnrealized GainUnrealized LossAccrued Interest IncomeFair Value
Available-for-Sale Securities
Bonds$10,679 $3 $(1)$21 $10,702 
December 31, 2019
Amortized CostUnrealized GainUnrealized LossAccrued InterestFair Value
Available-for-Sale Securities
Bonds$14,238 $13 $(1)$ $14,250 
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 September 30, 2020 and December 31, 2019, the amortized cost and estimated fair value of our available-for-sale securities were due within one year.
6.  Inventory
Components of inventory, net of reserves, as of September 30, 2020 and December 31, 2019 are as follows (table in thousands):
September 30,
2020
December 31,
2019
Raw Materials$2,794 $2,471 
Work in Process329 185 
Finished Goods1,613 1,432 
Total$4,736 $4,088 
As of September 30, 2020, we classified $0.9 million of inventory as non-current, all of which was related to Triferic or the active pharmaceutical ingredient and raw materials for Triferic. As of September 30, 2020, the total Triferic inventory was $3.8 million, against which we had reserved $2.7 million.
The $1.1 million net value of Triferic inventory consisted of $0.1 million of Triferic Dialysate finished goods with expiration dates ranging from December 2020 to May 2021, $0.3 million of Triferic API with estimated remaining shelf life extending through 2021, and $0.7 million of raw materials for Triferic with estimated remaining shelf life extending beyond 2025.
13


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
7.  Property and Equipment
As of September 30, 2020 and December 31, 2019, the Company’s property and equipment consisted of the following (table in thousands):
September 30,
2020
December 31,
2019
Leasehold Improvements$1,176 $1,162 
Machinery and Equipment5,454 4,673 
Information Technology & Office Equipment1,822 1,810 
Laboratory Equipment653 653 
9,105 8,298 
Accumulated Depreciation(6,320)(5,865)
Property and Equipment, net$2,785 $2,433 
Depreciation expense for the three months ended September 30, 2020 and 2019 totaled $0.2 million. Depreciation expense for the nine months ended September 30, 2020 and 2019 totaled $0.6 million.
8.  Accrued Liabilities
Accrued liabilities as of September 30, 2020 and December 31, 2019 consisted of the following (table in thousands):
September 30,
2020
December 31,
2019
Accrued Research & Development Expense$258 $283 
Accrued Compensation and Benefits2,584 1,018 
Accrued Legal Expenses172 182 
Accrued Marketing Expenses100 61 
Other Accrued Liabilities1,854 2,974 
Total Accrued Liabilities$4,968 $4,518 
9.  Deferred Revenue
In October 2014, the Company entered into the Baxter Agreement with Baxter and received an upfront fee of $20 million. The upfront fee was recorded as deferred revenue and is being recognized based on the proportion of product shipments to Baxter in each period, compared with total expected sales volume over the term of the Baxter Agreement, which expires in October 2024. The Company recognized revenue of approximately $0.5 million and $1.5 million for the three and nine months ended September 30, 2020 and 2019, respectively. Deferred revenue related to the Baxter Agreement totaled $7.7 million as of September 30, 2020 and $9.1 million as of December 31, 2019.
If a “Refund Trigger Event” occurs under the Baxter Agreement, we would be obligated to repay a portion of the upfront fee and any paid portion of the facility fee. In the event of a Refund Trigger Event occurring from October 1, 2020 to December 31, 2021, Baxter would be eligible for a 25% refund of the Baxter Agreement’s upfront fee. In addition, if Baxter terminates the Baxter Agreement because Baxter has been enjoined by a court of competent jurisdiction from selling in the United States any product covered by the Baxter Agreement due to a claim of intellectual property infringement or misappropriation relating to such product prior to the end of 2020, Baxter would be eligible for a partial refund of the upfront fee of $5.0 million. In no event does the Baxter Agreement require more than one refund be paid.
In 2016, the Company entered into a distribution and license agreement with Wanbang (the "Wanbang Agreement") and received an upfront fee of $4.0 million. The upfront fee was recorded as deferred revenue and is being recognized as revenue based on the agreement term. The Company recognized revenue of approximately $53,000 and $0.2 million for the three and nine months ended September 30, 2020 and 2019, respectively. Deferred revenue related to the Wanbang Agreement totaled $2.8 million as of September 30, 2020 and $3.0 million as of December 31, 2019.

14


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
On January 14, 2020, the Company entered into license and supply agreements with Sun Pharma (the "Sun Pharma Agreements"), for the rights to commercialize Triferic Dialysate (ferric pyrophosphate citrate) in India. Under the terms of the Sun Pharma Agreements, Sun Pharma will be the exclusive development and commercialization partner for Triferic Dialysate in India, and the Company will supply the product to Sun Pharma. In consideration for the license, the Company received an upfront fee of $0.1 million, and will be eligible for milestone payments and royalties on net sales. A Joint Alliance Committee, comprised of members from the Company and Sun Pharma, will guide the development and execution for Triferic Dialysate in India. Sun Pharma will be responsible for all clinical and regulatory approval, as well as commercialization activities. The upfront fee was recorded as deferred revenue and is being recognized as revenue based on the agreement term. The Company recognized revenue of approximately $2,500 and $7,500 during the three and nine months ended September 30, 2020, respectively. Deferred revenue related to the Sun Pharma Agreement totaled $92,500 as of September 30, 2020.

On September 7, 2020, the Company entered into a license and supply agreements with Jeil Pharma (the "Jeil Pharma Agreements"), for the rights to commercialize Triferic Dialysate (ferric pyrophosphate citrate) in South Korea. Under the terms of the Jeil Pharma Agreements, Jeil Pharma will be the exclusive development and commercialization partner for Triferic Dialysate in South Korea, and the Company will supply the product to Jeil Pharma. In consideration for the license, the Company received an upfront fee of $0.2 million, and will be eligible for milestone payments and royalties on net sales. A Joint Alliance Committee, comprised of members from the Company and Jeil Pharma, will guide the development and execution for Triferic Dialysate in South Korea. Jeil Pharma will be responsible for all clinical and regulatory approval, as well as commercialization activities. The upfront fee was recorded as deferred revenue and is being recognized as revenue based on the agreement term. The Company recognized revenue of nil during the three and nine months ended September 30, 2020.
10.  Stockholders’ Equity

Preferred Stock
As of September 30, 2020 and December 31, 2019, there were 2,000,000 shares of preferred stock