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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, 2021
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)


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 12, 2021 was 93,966,381.



Rockwell Medical, Inc. and Subsidiaries
Index to Form 10-Q
Page
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2


PART I – FINANCIAL INFORMATION
Item 1.  Financial Statements
ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
September 30,
2021
December 31,
2020
(Unaudited)
ASSETS
Cash and Cash Equivalents$23,390 $48,682 
Investments Available-for-Sale9,813 9,997 
Accounts Receivable, net6,036 4,171 
Inventory, net4,028 3,913 
Prepaid and Other Current Assets2,815 2,706 
Total Current Assets46,082 69,469 
Property and Equipment, net2,507 2,642 
Inventory, Non-Current1,526 1,176 
Right of Use Assets, net6,934 2,911 
Goodwill921 921 
Other Non-Current Assets729 629 
Total Assets$58,699 $77,748 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts Payable$4,834 $4,155 
Accrued Liabilities4,371 5,013 
Lease Liability - Current1,832 1,167 
Deferred License Revenue - Current2,176 2,175 
Term Loan - Net of Issuance Costs7,131  
Insurance Financing Note Payable1,312  
Customer Deposits100 152 
Other Current Liability - Related Party 131 
Total Current Liabilities21,756 12,793 
Lease Liability - Long-Term5,226 1,821 
Term Loan, Net of Issuance Costs14,094 20,949 
Deferred License Revenue - Long-Term6,529 8,015 
Total Liabilities47,605 43,578 
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, 2021 and December 31, 2020
  
Common Stock, $0.0001 par value; 170,000,000 shares authorized; 93,966,381 and 93,573,165 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively
9 9 
Additional Paid-in Capital372,168 371,510 
Accumulated Deficit(361,139)(337,406)
Accumulated Other Comprehensive Income56 57 
Total Stockholders’ Equity11,094 34,170 
Total Liabilities and Stockholders’ Equity$58,699 $77,748 
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, 2021Three Months Ended September 30, 2020Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020
Net Sales$15,988 $15,280 $46,599 $47,033 
Cost of Sales16,317 14,934 46,788 44,693 
Gross (Loss) Profit(329)346 (189)2,340 
Research and Product Development1,221 1,745 5,445 5,183 
Selling and Marketing1,541 1,669 4,860 5,738 
General and Administrative3,881 3,622 11,483 11,767 
Operating Loss(6,972)(6,690)(21,977)(20,348)
Other (Expense) Income
Realized (Loss) Gain on Investments 4 (1)8 
Warrant Modification Expense   (837)
Interest Expense(609)(666)(1,772)(1,289)
Interest Income 2 17 239 
Total Other Expense(609)(660)(1,756)(1,879)
Net Loss$(7,581)$(7,350)$(23,733)$(22,227)
Basic and Diluted Net Loss per Share$(0.08)$(0.10)$(0.26)$(0.32)
Basic and Diluted Weighted Average Shares Outstanding93,882,142 71,811,322 93,726,629 69,594,167 
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, 2021Three Months Ended September 30, 2020Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020
Net Loss$(7,581)$(7,350)$(23,733)$(22,227)
Unrealized Gain (Loss) on Available-for-Sale Debt Instrument Investments4 2 (4)(11)
Foreign Currency Translation Adjustments 1 3 8 
Comprehensive Loss$(7,577)$(7,347)$(23,734)$(22,230)
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, 202193,573,165 $9 $371,510 $(337,406)$57 $34,170 
Net Loss— — — (7,752)— (7,752)
Unrealized Loss on Available-for-Sale Investments— — — — (7)(7)
Foreign Currency Translation Adjustments— — — — 3 3 
Stock-based Compensation26,354 — (236)— — (236)
Balance as of March 31, 202193,599,519 $9 $371,274 $(345,158)$53 $26,178 
Net Loss— — — (8,400)— (8,400)
Unrealized Loss on Available-for-Sale Investments— — — — (1)(1)
Vesting of Restricted Stock Units Issued, net of taxes withheld211,862 — (7)— — (7)
Stock-based Compensation expense— — 433 — — 433 
Balance as of June 30, 202193,811,381 $9 $371,700 $(353,558)$52 $18,203 
Net Loss— — — (7,581)— (7,581)
Unrealized Gain on Available-for-Sale Investments— — — — 4 4 
Issued shares for services155,000 — 107 — — 107 
Stock-based Compensation expense— — 361 — — 361 
Balance as of September 30, 202193,966,381 $9 $372,168 $(361,139)$56 $11,094 

    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, 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/Bought Deal3,670,212 — 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— — (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/At-the-Market Offering140,892 — 284 — — 284 
Vesting of Restricted Stock Units Issued, net of taxes withheld96,542 — — — — — 
Stock-based Compensation— — 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.

6


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
For the nine months ended September 30, 2021 and 2020
20212020
Cash Flows From Operating Activities:
Net Loss$(23,733)$(22,227)
Adjustments To Reconcile Net Loss To Net Cash Used In Operating Activities:
Depreciation and Amortization535 614 
Stock-based Compensation558 (276)
Warrant Modification Expense 837 
Increase in Inventory Reserves89 305 
Amortization of Right of Use Asset1,312 1,090 
Amortization of Debt Financing Costs and Accretion of Debt Discount276 200 
Loss on Disposal of Assets7 7 
Realized Loss (Gain) on Sale of Investments Available-for-Sale1 (8)
Foreign Currency Translation Adjustment3 7 
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable, net(1,865)74 
Increase in Inventory(554)(953)
Decrease in Prepaid and Other Assets1,760 161 
Increase in Accounts Payable679 1,172 
Decrease in Settlement Payable (104)
Decrease in Lease Liability(1,266)(1,056)
(Decrease) Increase in Other Liabilities(825)423 
Decrease in Deferred License Revenue(1,485)(1,338)
Changes in Assets and Liabilities(3,556)(1,621)
Cash Used In Operating Activities(24,508)(21,072)
Cash Flows From Investing Activities:
Purchase of Investments Available-for-Sale(19,107)(23,531)
Sale of Investments Available-for-Sale19,286 27,076 
Purchase of Equipment(408)(970)
Cash (Used In) Provided By Investing Activities(229)2,575 
Cash Flows From Financing Activities:
Proceeds from Term Loan 22,500 
Debt Issuance Costs (1,343)
Payments on Short Term Note Payable(656)(763)
Proceeds from the Issuance of Common Stock / Public Offering 43,148 
Offering Costs from the Issuance of Common Stock / Public Offering (2,469)
Proceeds from the Issuance of Common Stock / At-the-Market Offering 2,325 
Offering Costs from the Issuance of Common Stock / At-the-Market Offering (63)
Proceeds from the Issuance of Common Stock for payment related to services provided107  
Repurchase of Common Stock to Pay Employee Withholding Taxes(6)(18)
Cash (Used In) Provided By Financing Activities(555)63,317 
(Decrease) Increase in Cash and Cash Equivalents(25,292)44,820 
Cash and Cash Equivalents at Beginning of Period48,682 11,794 
Cash and Cash Equivalents at End of Period$23,390 $56,614 
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest$1,318 $906 
Supplemental Disclosure of Noncash Investing and Financing Activities:
Change in Unrealized Loss on Marketable Securities Available-for-Sale$(4)$(11)
Fair Value of Warrants issued related to Debt Financing$ $501 
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. ("Rockwell Medical," "Rockwell", the "Company" or "We") is a commercial-stage, biopharmaceutical company developing and commercializing our next-generation parenteral iron technology platform, ferric pyrophosphate citrate (“FPC”), which we believe has the potential to lead to transformative treatments for iron deficiency in multiple disease states, reduce healthcare costs and improve patients’ lives. We are also one of the two major suppliers of life saving hemodialysis concentrate products to kidney dialysis clinics in the United States.

The Company has two novel, FDA approved therapies, Triferic and Triferic AVNU, which are the first two products developed from our FPC platform. The Company is target marketing both products to kidney dialysis centers for their patients receiving dialysis and working to find a commercial partner to expand our commercial efforts within the United States. In 2021, Rockwell has been working to advance our FPC platform strategy outside of dialysis by starting a Phase II trial for the treatment of iron deficiency anemia in patients, who are receiving long-term and or chronic intravenous medications for various therapeutic needs in the home infusion setting. In the Company's R&D pipeline, we are also exploring FPC’s impact in the treatment of hospitalized patients with acute heart failure, with the potential to begin another Phase II trial in these patients in 2022.

Rockwell Medical is the second largest supplier of hemodialysis concentrates in the United States generating approximately $60 million in annual revenue. The Company's reputation for excellent service, quality, and reliability is based on over 25 years of service to kidney dialysis centers. The Company's approximately 300 dedicated employees, as well as a management team with experience in manufacturing, logistics, pharmaceutical development and commercialization provides Rockwell with a solid foundation upon which to grow.
2.  Liquidity and Capital Resources
Since inception, Rockwell has incurred significant net losses and has funded its operations primarily through revenue from commercial products, proceeds from the issuance of debt and equity securities and payments from partnerships. At September 30, 2021, Rockwell had an accumulated deficit of approximately $361.1 million and stockholders' equity of $11.1 million. As of September 30, 2021, Rockwell had approximately $33.2 million of cash, cash equivalents and investments available-for-sale, and working capital of $24.3 million. Net cash used in operating activities for the nine months ended September 30, 2021 was approximately $24.5 million. Based on the currently available working capital, the adjustments made to sales and marketing efforts for Triferic and Triferic AVNU and the implementation of key efficiency initiatives within our concentrates business, management believes the Company currently has sufficient funds to meet its operating requirements for at least the next twelve months from the date of the filing of this report.

The Company expects it will require additional capital to sustain its operations and make the investments it needs to execute its strategic plan developing FPC for iron deficiency anemia in patients undergoing home infusion and for progressing our pipeline development program of new indications for its FPC platform. If the Company is unable to generate sufficient revenue from sales of its commercial products and from partnerships, the Company will need to obtain additional equity or debt financing. Currently, because the Company's public float is less than $75 million, we are subject to the baby shelf limitations under our current registration statement on Form S-3, which limit the amount we may offer under our Form S-3. This could limit our ability to raise capital under this registration statement. Additionally, the Company has received a delisting notification letter from the Nasdaq Stock Market ("Nasdaq") regarding compliance with minimum bid requirements. The notification letter states that the Company has 180 calendar days, or until December 8, 2021, to regain compliance with Nasdaq Listing Rule 5450(a)(1). To regain compliance, the closing bid price of the Company’s common stock must be at least $1.00 per share for a minimum of 10 consecutive business days at any time prior to December 8, 2021. In the event that the Company does not regain compliance by December 8, 2021, the Company may be eligible for additional time to reach compliance with the minimum bid price requirement. The Company is working on a plan to meet the minimum compliance requirements set forth by Nasdaq. Based on the above, 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 its Loan Agreement with Innovatus. As of the date of this report, the Company is in compliance with all covenants. (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 in the supply chain and labor market, among other areas, have adversely affected Rockwell's business and operations, including, but not limited to, our sales and marketing efforts, research and development activities, our plant and transportation operations and the operations of third parties upon whom the Company relies. Quarantines, shelter-in-place, executive and similar government orders and the recent surge in infections domestically may continue to negatively impact Rockwell's business, including with regard to the Company’s manufacturing and transportation and remaining sales and marketing activities. The Company's international business development activities may also continue to be negatively impacted by COVID-19, especially with the recent surge in infections internationally, ongoing international travel restrictions and quarantines or shelter-in-place orders.

The COVID-19 pandemic, the domestic and international surge in infections and resulting global disruptions have caused significant volatility in financial and credit markets. Rockwell has utilized a range of financing methods to fund its operations in the past; however, current conditions in the financial and credit markets may limit the availability of funding, refinancing or increase the cost of funding. Due to the continued 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.
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 September 30, 2021, condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020, condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2021 and 2020, condensed consolidated statement of changes in stockholders' equity for the three and nine months ended September 30, 2021 and 2020, and condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020 are unaudited, but 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, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021 or for any future interim period. The condensed consolidated balance sheet at December 31, 2020 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, 2020 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with the SEC on March 31, 2021. 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.
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 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.
9


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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,
20212020
Options to purchase common stock5,871,620 6,682,192 
Unvested restricted stock awards78,300 146,800 
Unvested restricted stock units342,271 245,405 
Warrants to purchase common stock26,426,863 26,426,863 
Total32,719,054 33,501,260 
Adoption of Recent Accounting Pronouncements
The Company continually assesses 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 April 2021, the Financial Accounting Standards Board ("FASB") recently issued Accounting Standards Update ("ASU") 2021-04 to codify the final consensus reached by the Emerging Issues Task Force (EITF) on how an issuer should account for modifications made to equity-classified written call options (hereafter referred to as a warrant to purchase the issuer’s common stock). The guidance in the ASU requires the issuer to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant. The Company is evaluating the impact of this guidance on its condensed consolidated financial statements.
4.  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
10


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 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 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, 2021Nine Months Ended September 30, 2021
Products By Geographic AreaTotalU.S.Rest of WorldTotalU.S.Rest of World
Drug Revenues
Product Sales – Point-in-time$217 $217 $ $656 $656 $ 
License Fee – Over time62  62 179  179 
Total Drug Products279 217 62 835 656 179 
Concentrate Products
Product Sales – Point-in-time15,224 13,541 1,683 44,308 39,768 4,540 
License Fee – Over time485 485  1,456 1,456  
Total Concentrate Products15,709 14,026 1,683 45,764 41,224 4,540 
Net Revenue$15,988 $14,243 $1,745 $46,599 $41,880 $4,719 
In thousands of U.S. dollars ($)Three Months Ended September 30, 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 $4,658 
Contract balances
The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers.
In thousands of U.S. dollars ($)September 30, 2021December 31, 2020
Receivables, which are included in "Trade and other receivables"$6,036 $4,171 
Contract liabilities$8,705 $10,190 
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, 2021 and 2020.
For the three and nine months ended September 30, 2021 and September 30, 2020, 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, 2021 and December 31, 2020.  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, 2021 or December 31, 2020. 
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, 2021, revenue recognized from performance obligations related to prior periods was not material.
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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 $8.7 million as of September 30, 2021. 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 $5.7 million as of September 30, 2021, which is 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, 2021 and December 31, 2020 (table in thousands):
September 30, 2021
Amortized CostUnrealized GainUnrealized LossAccrued Interest IncomeFair Value
Available-for-Sale Securities
Bonds$9,805 $1 $ $7 $9,813 
December 31, 2020
Amortized CostUnrealized GainUnrealized LossAccrued InterestFair Value
Available-for-Sale Securities
Bonds$9,987 $3 $ $7 $9,997 
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, 2021 and December 31, 2020, 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, 2021 and December 31, 2020 are as follows (table in thousands):
September 30,
2021
December 31,
2020
Raw Materials$3,507 $3,112 
Work in Process266 172 
Finished Goods1,781 1,805 
Total$5,554 $5,089 
As of September 30, 2021, the Company classified $1.5 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, 2021, the total Triferic inventory net of reserve was $1.6 million.
The $1.6 million net value of Triferic inventory consisted of $0.4 million of Triferic (dialysate) finished goods with expiration dates ranging from September 2021 to December 2023, $0.4 million of Triferic API with estimated remaining shelf life extending beyond 2022, and $0.9 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, 2021 and December 31, 2020, the Company’s property and equipment consisted of the following (table in thousands):
September 30,
2021
December 31,
2020
Leasehold Improvements$1,196 $1,196 
Machinery and Equipment5,794 5,475 
Information Technology & Office Equipment1,846 1,831 
Laboratory Equipment676 676 
9,512 9,178 
Accumulated Depreciation(7,005)(6,536)
Property and Equipment, net$2,507 $2,642 
Depreciation expense for three months ended September 30, 2021 and 2020 was $0.1 million and $0.2 million, respectively. Depreciation expense for the nine months end September 30, 2021 and 2020 was $0.5 million and $0.6 million, respectively.
8.  Accrued Liabilities
Accrued liabilities as of September 30, 2021 and December 31, 2020 consisted of the following (table in thousands):
September 30,
2021
December 31,
2020
Accrued Research & Development Expense$181 $232 
Accrued Compensation and Benefits2,193 2,500 
Accrued Unvouchered Receipts622 755 
Accrued Workers Compensation434 395 
Other Accrued Liabilities941 1,131 
Total Accrued Liabilities$4,371 $5,013 
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 and is subject to extension. The Company recognized revenue of approximately $0.5 million and $1.5 million for each of the three and nine months ended September 30, 2021 and 2020. Deferred revenue related to the Baxter Agreement totaled $5.7 million as of September 30, 2021 and $7.2 million as of December 31, 2020.
If a “Refund Trigger Event” occurs under the Baxter Agreement prior to December 31, 2021, Rockwell would be obligated to repay 25% of the upfront fee.
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 approximately $53,000 and $0.2 million revenue for each of the three and nine months ended September 30, 2021 and 2020. Deferred revenue related to the Wanbang Agreement totaled $2.6 million as of September 30, 2021 and $2.7 million as of December 31, 2020.

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) (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,
14


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 for each of the three and nine months ended September 30, 2021 and 2020. Deferred revenue related to the Sun Pharma Agreement totaled $82,500 and $90,000 as of September 30, 2021 and December 31, 2020, respectively.

In September 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 $2,500 and nil for the three months ended September 30, 2021 and 2020, respectively, and $7,500 and nil for the nine months ended September 30, 2021 and 2020, respectively. Deferred revenue related to the Jeil Pharma Agreement totaled approximately $0.2 million as of September 30, 2021 and December 31, 2020.

In June 2021, the Company entered into license and supply agreements with Drogsan Pharma (the "Drogsan Agreements"), for the rights to commercialize Triferic (dialysate) and Triferic AVNU in Turkey. Under the terms of the Drogsan Agreements, Drogsan Pharma will be the exclusive commercialization partner for Triferic (dialysate) and Triferic AVNU in Turkey. In consideration for the license, the Company received an upfront fee of $0.15 million, and will be eligible for milestone payment and royalties on net sales. A Joint Alliance Committee, comprised of members from the Company and Drogsan Pharma, will guide the execution for Triferic (dialysate) and Triferic AVNU in Turkey. Drogsan Pharma will be responsible for all regulatory approval and commercialization activities, and the Company will supply the product to Drogsan Pharma for Turkey. The upfront fee will be recorded as deferred revenue and will be recognized as revenue based on the agreement term. The Company recognized revenue of $3,750 for the three months ended September 30, 2021. Deferred revenue related to the Drogsan Agreements totaled approximately $0.15 million as of September 30, 2021.
10.  Stockholders’ Equity

Preferred Stock
As of September 30, 2021 and December 31, 2020, there were 2,000,000 shares of preferred stock, $0.0001 par value per share, authorized and no shares of preferred stock issued or outstanding.
Common Stock
As of September 30, 2021 and December 31, 2020, there were 170,000,000 shares of common stock, $0.0001 par value per share, authorized and 93,966,381 and 93,573,165 shares issued and outstanding, respectively.
Controlled Equity Offering (or "At the Market" Offering)
On March 22, 2019, the Company entered into a sales agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (the “Agent”), pursuant to which the Company may offer and sell from time to time shares of the Company’s common stock through the Agent. The offering and sale of up to $40.0 million of the shares has been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to the Company’s registration statement on Form S-3 (File No. 333-227363), which was originally filed with the SEC on September 14, 2018 and declared effective by the SEC on October 1, 2018, the base prospectus contained within the registration statement, and a prospectus supplement that was filed with the SEC on March 22, 2019. The registration statement on Form S-3 expired on October 1, 2021 and no further sales may be made under the Sales Agreement.

During the three and nine months ended September 30, 2021, the Company has not sold shares of its common stock pursuant to the Sales Agreement. Approximately $32.3 million remained available for sale under this facility as of September 30, 2021.
15


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
11.  Stock-Based Compensation
The Company recognized total stock-based compensation expense during the three and nine months ended September 30, 2021 and 2020 as follows (table in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
Service-based awards:
Restricted stock units$81 $9 $263 $243 
Stock option awards315 243 1,050 1,019 
396 252 1,313 1,262 
Performance-based awards:
Restricted stock awards  (391) 
Restricted stock units (123) (1,148)
Stock option awards(35)