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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 June 30, 2024
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 suc    h 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 $0.0001RMTI
Nasdaq Capital Market
The number of shares of common stock outstanding as of August 5, 2024 was 31,030,218.



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


PART I – FINANCIAL INFORMATION
Item 1.  Financial Statements
ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
June 30,
2024
December 31,
2023
ASSETS
Cash and Cash Equivalents$11,863 $8,983 
Investments Available-for-Sale 1,952 
Accounts Receivable, net10,840 10,901 
Inventory, net5,883 5,871 
Prepaid and Other Current Assets1,167 1,063 
Total Current Assets29,753 28,770 
Property and Equipment, net6,009 6,402 
Inventory, Non-Current178 178 
Right of Use Assets - Operating, net3,515 2,713 
Right of Use Assets - Financing, net1,621 1,903 
Intangible Assets, net10,483 10,759 
Goodwill921 921 
Other Non-Current Assets548 527 
Total Assets$53,028 $52,173 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts Payable$3,347 $4,516 
Accrued Liabilities6,168 7,149 
Deferred Consideration - Current2,500 2,500 
Lease Liabilities - Operating - Current1,458 1,381 
Lease Liabilities - Financing - Current576 558 
Deferred License Revenue - Current46 46 
Insurance Financing Note Payable670 244 
Customer Deposits126 243 
Total Current Liabilities14,891 16,637 
Lease Liabilities-Operating - Long-Term2,142 1,433 
Lease Liabilities-Financing - Long-Term1,236 1,530 
Term Loan - Long-Term, net of issuance costs8,295 8,293 
Deferred License Revenue - Long-Term452 475 
Deferred Consideration - Long-Term2,500 2,500 
Long Term Liability - Other14 14 
Total Liabilities29,530 30,882 
3











June 30,
2024
December 31,
2023
Stockholders’ Equity:
Preferred Stock, $0.0001 par value, 2,000,000 shares authorized; 15,000 shares issued and outstanding at June 30, 2024 and December 31, 2023
  
Common Stock, $0.0001 par value; 170,000,000 shares authorized; 31,030,218 and 29,130,607 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively
3 3 
Additional Paid-in Capital422,086 418,487 
Accumulated Deficit(398,586)(397,198)
Accumulated Other Comprehensive Loss(5)(1)
Total Stockholders’ Equity23,498 21,291 
Total Liabilities and Stockholders’ Equity$53,028 $52,173 

The accompanying notes are an integral part of the condensed consolidated financial statements.
4


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
Three Months Ended June 30, 2024Three Months Ended June 30, 2023Six Months Ended June 30, 2024Six Months Ended June 30, 2023
Net Sales$25,832 $18,080 $48,508 $37,748 
Cost of Sales21,282 17,047 40,894 34,116 
Gross Profit4,550 1,033 7,614 3,632 
Research and Product Development 167 18 445 
Selling and Marketing586 530 1,180 1,028 
General and Administrative3,449 3,295 7,225 6,545 
Operating Income (Loss)515 (2,959)(809)(4,386)
Other Expense:
Realized gain on Available-for-Sale Investments51  51  
Interest Expense(232)(395)(663)(782)
Interest Income9 49 33 113 
Total Other Expense, net(172)(346)(579)(669)
Net Income (Loss)$343 $(3,305)$(1,388)$(5,055)
Basic Net Income (Loss) per Share$0.01 $(0.18)$(0.05)$(0.27)
Diluted Net Income (Loss) per Share$0.01 $(0.18)$(0.05)$(0.27)
Basic Weighted Average Shares Outstanding30,451,622 18,496,640 29,889,413 18,480,248 
Diluted Weighted Average Shares Outstanding32,033,776 18,496,640 29,889,413 18,480,248 


The accompanying notes are an integral part of the condensed consolidated financial statements.
5


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Three Months Ended June 30, 2024Three Months Ended June 30, 2023Six Months Ended June 30, 2024Six Months Ended June 30, 2023
Net Income (Loss)$343 $(3,305)$(1,388)$(5,055)
Reclassification of Realized Gain on Available-for-Sale Investments Included in Net Income(25) (25) 
Unrealized (Loss) Gain on Available-for-Sale Investments (18)25 (21)
Foreign Currency Translation Adjustments(4)(1)(4)(4)
Comprehensive Income (Loss)$314 $(3,324)$(1,392)$(5,080)

The accompanying notes are an integral part of the condensed consolidated financial statements.
6


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
PREFERRED STOCKCOMMON STOCKADDITIONAL PAID-IN CAPITALACCUMULATED
DEFICIT
ACCUMULATED
OTHER
COMPREHENSIVE
(LOSS) INCOME
TOTAL
STOCKHOLDERS'
 EQUITY
SHARESAMOUNTSHARESAMOUNT
Balance as of January 1, 202415,000 $ 29,130,607 $3 $418,487 $(397,198)$(1)$21,291 
Net Loss— — — — — (1,731)— (1,731)
Unrealized Gain on Available-for-Sale Investments— — — — — — 25 25 
Issuance of Common Stock, net of offering costs/At-The-Market— — 358,210 — 560 — — 560 
Vesting of Restricted Stock Units Issued, net of taxes withheld— — 67,657 — — — — — 
Issuance of Warrant in connection with the Third Amendment (Note 11)
— — — — 247 — — 247 
Stock-based Compensation— — — — 251 — — 251 
Balance as of March 31, 202415,000  29,556,474 3 419,545 (398,929)24 20,643 
Net Income— — — — — 343 — 343 
Reclassification of Realized Gains on Available-for-Sale Debt Instrument Investments Included in Net Income— — — — — — (25)(25)
Foreign Currency Translation Adjustments— — — — — — (4)(4)
Issuance of common stock, net of offering costs/At-the-Market Offering— — 1,350,169 — 2,203 — — 2,203 
Vesting of Restricted Stock Units Issued, net of taxes withheld— — 123,575 — — — — — 
Stock-based Compensation — — — — 338 — — 338 
Balance as of June 30, 202415,000 $ 31,030,218 $3 $422,086 $(398,586)$(5)$23,498 

    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
(In thousands, except share amounts)
PREFERRED STOCKCOMMON STOCKADDITIONAL PAID-IN CAPITALACCUMULATED
DEFICIT
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME
TOTAL
STOCKHOLDERS'
EQUITY
SHARESAMOUNTSHARESAMOUNT
Balance as of January 1, 202315,000 $ 12,163,673 $1 $402,701 $(388,759)$163 $14,106 
Net Loss— — — — — (1,750)— (1,750)
Unrealized Loss on Available-for-Sale Investments— — — — — — (3)(3)
Foreign Currency Translation Adjustments— — — — — — (4)(4)
Issuance of Common Stock upon exercise of Pre-Funded Warrants— — 389,000 — — — — — 
Issuance of Warrants related to Debt Financing— — — — — — — — 
Stock-based Compensation— — — — 193 — — 193 
Balance as of March 31, 202315,000  12,552,673 1 402,894 (390,509)156 12,542 
Net Loss— — — — — (3,305)— (3,305)
Unrealized Loss on Available-for-Sale Investments— — — — — — (18)(18)
Foreign Currency Translation Adjustments— — — — — — (1)(1)
Issuance of Common Stock, net of offering costs/Public Offering— — 4,118,000 1 — — — 1 
Vesting of Restricted Stock Units Issued, net of taxes withheld— — 125,000 — — — — — 
Stock-based Compensation— — — — 309 — — 309 
Balance as of June 30, 202315,000 $ 16,795,673 $2 $403,203 $(393,814)$137 $9,528 

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

7


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
June 30, 2024
Six Months Ended
June 30, 2023
Cash Flows From Operating Activities:
Net Loss$(1,388)$(5,055)
Adjustments To Reconcile Net Loss To Net Cash Used In Operating Activities:
Depreciation and Amortization1,094 330 
Stock-based Compensation589 502 
Non-cash Lease Expense from Right of Use Assets941 1,017 
Amortization of Debt Financing Costs and Accretion of Debt Discount and Premium249 184 
Realized Gain on Sale of Investments(51) 
Changes in Operating Assets and Liabilities:
Accounts Receivable, net61 848 
Inventory(12) 
Prepaid and Other Assets545 998 
Accounts Payable(1,169)1,874 
Lease Liabilities(676)(744)
Accrued and Other Liabilities(1,098)(3,968)
Deferred License Revenue(23)(1,602)
Net Cash Used In Operating Activities(938)(5,616)
Cash Flows From Investing Activities:
Purchase of Investments Available-for-Sale (3,835)
Sale of Investments Available-for-Sale2,003 9,298 
Purchase of Equipment(425)(225)
Net Cash Provided by Investing Activities1,578 5,238 
Cash Flows From Financing Activities:
Payments on Insurance Financing Note Payable(244)(503)
Payments on Financing Lease Liabilities(276)(258)
Proceeds from Issuance of Common Stock2,763  
Net Cash Provided by (Used In) Financing Activities2,243 (761)
Effect of Exchange Rate Changes on Cash and Cash Equivalents(3)(4)
Net Increase (Decrease) in Cash and Cash Equivalents2,880 (1,143)
Cash and Cash Equivalents at Beginning of Period8,983 10,102 
Cash and Cash Equivalents at End of Period$11,863 $8,959 
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest$432 $295 
Supplemental Disclosure of Non-cash Investing and Financing Activities:
Issuance of Warrant in connection with the Third Amendment as Debt Issuance Costs$247 $ 
Right of Use Assets - Operating obtained in exchange for Lease Liabilities - Operating$1,549 $ 
Change in Unrealized Gain (Loss) on Investments Available-for-Sale $ $(21)
Increase in Prepaid Assets from Insurance Financing Note Payable$670 $733 
The accompanying notes are an integral part of the condensed consolidated financial statements.

8


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1.  Description of Business
Rockwell Medical, Inc. (the "Company", "Rockwell", "we", or "us") is a healthcare company that develops, manufactures, commercializes, and distributes a portfolio of hemodialysis products for dialysis providers worldwide.

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

Rockwell manufactures hemodialysis concentrates at its facilities in Michigan, South Carolina, and Texas totaling approximately 175,000 square feet, and manufactures its dry acid concentrate mixers at its facility in Iowa. Additionally, in July 2023, the Company purchased customer relationships, equipment and inventory from Evoqua Water Technologies related to the manufacturing and sale of hemodialysis concentrates products, all of which are manufactured under a contract manufacturing agreement with a third-party organization in Minnesota.

Rockwell delivers the majority of its hemodialysis concentrates products and mixers to dialysis clinics throughout the United States and internationally utilizing its own delivery trucks and third-party carriers.

The Company operates in a single segment.

Rockwell was incorporated in the state of Michigan in 1996 and re-domiciled to the state of Delaware in 2019. Rockwell's headquarters is located at 30142 Wixom Road, Wixom, Michigan 48393.
2.  Liquidity and Capital Resources
As of June 30, 2024, Rockwell had approximately $11.9 million of cash and cash equivalents, and working capital of $14.9 million. Net cash used in operating activities for the six months ended June 30, 2024 was approximately $0.9 million. Based on the currently available working capital along with the expectation of management of its ability to execute on its operational plans as discussed 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.
The Company continues to review its operational plans and execute on the acquisition of new customers, and has implemented cost containment activities. The Company may require additional capital to sustain its operations and make the investments it needs to execute its strategic plan. Additionally, the Company's operational plans include raising capital, if needed, by using the remaining $8.2 million available under its at-the-market ("ATM") facility or other methods or forms of financings, subject to existing limitations. If the Company attempts to obtain additional debt or equity financing, the Company cannot assume such financing will be available on favorable terms, if at all.

The Company is subject to certain covenants and cure provisions under its Loan Agreement with Innovatus, which, on January 2, 2024, was amended to include, among other things, an interest-only period for 30 months, or up to 36 months if certain conditions are met, and to extend the maturity date to January 1, 2029 (See Note 15 for further detail). As of June 30, 2024, the Company is in compliance with all covenants.

In addition, the global macroeconomic environment is uncertain, and could be negatively affected by, among other things, increased U.S. trade tariffs and trade disputes with other countries, instability in the global capital and credit markets, recent bank failures in the United States, supply chain weaknesses, and instability in the geopolitical environment, including as a result of the Russian invasion of Ukraine, the Israel-Hamas conflict and other political tensions, and the occurrence of natural disasters and public health crises. Such challenges have caused, and may continue to cause, recession fears, rising interest rates, foreign exchange volatility and inflationary pressures. At this time, the Company is unable to quantify the potential effects of this economic instability on our future operations.
Rockwell has utilized a range of financing methods to fund its operations in the past; however, current conditions in the financial and credit markets may limit the availability of funding or refinancing or increase the cost of funding. Due to the rapidly evolving nature of the global situation, it is not possible to predict the extent to which these conditions could adversely affect the Company's liquidity and capital resources in the future.
9


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
3.  Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements

The accompanying condensed consolidated financial statements have been prepared in accordance with 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 June 30, 2024, and the condensed consolidated statements of operations, comprehensive income (loss), and changes in stockholders' equity, and cash flows for the three and six months ended June 30, 2024 and 2023 are unaudited, but include all adjustments, consisting of normal recurring adjustments the Company considers necessary for a fair presentation of the financial position, operating results, and cash flows for the periods presented. The results for the three and six months ended June 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024 or for any future interim period. The condensed consolidated balance sheet at December 31, 2023 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, 2023 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as filed with the SEC on March 21, 2024. The Company’s consolidated subsidiaries consist of its wholly-owned subsidiaries, Rockwell Transportation, Inc. and Rockwell Medical India Private Limited.

The accompanying condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.
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 revenues and expenses during the reporting period. Actual results could differ from those estimates.

Income (Loss) Per Share
Basic and diluted net income (loss) per share for the three and six months ended June 30, 2024 and 2023 was calculated as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands, except share and per share amounts)2024202320242023
Numerator:
Net Income (Loss)$343 $(3,305)$(1,388)$(5,055)
Less: Undistributed Earnings to Participating Securities(58)   
Net Income (Loss) Attributable to Common Stockholders$285 $(3,305)$(1,388)$(5,055)
Denominator:
Weighted Average Number of Shares of Common Stock Outstanding - Basic30,451,622 18,496,640 29,889,413 18,480,248 
Incremental Shares Attributable to the Assumed Exercise of Outstanding Options to Purchase Common Stock35,185    
Incremental Shares Attributable to the Assumed Vesting of Unvested Restricted Stock Units183,333    
Incremental Shares Attributable to the Assumed Conversion of Preferred Stock1,363,636    
Weighted Average Number of Shares of Common Stock Outstanding - Diluted32,033,776 18,496,640 29,889,413 18,480,248 
Net Loss per Share Attributable to Common Stockholders - Basic$0.01 $(0.18)$(0.05)$(0.27)
Net Loss per Share Attributable to Common Stockholders - Diluted$0.01 $(0.18)$(0.05)$(0.27)
Income (loss) per share (“EPS”) is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, using the more dilutive of the two- class method and the if-converted method in the period of earnings. The two class method is an earnings allocation method that determines income (loss) per share (when there are earnings) for common stock and participating securities. The if-converted method assumes all convertible securities are converted into common stock. Diluted EPS excludes all dilutive potential shares of common stock if their effect is anti-dilutive.
Included within the weighted average shares of common stock outstanding for the three and six months ended June 30, 2023 are 1,793,000 shares of common stock issuable upon the exercise of certain pre-funded warrants, as the warrants were exercisable at any time for nominal consideration and, as such, the shares were considered outstanding for the purpose of calculating basic and diluted net loss per share attributable to common stockholders. There were no unexercised pre-funded warrants during each of the three and six months ended June 30, 2024.
The Company’s potentially dilutive securities include stock options, restricted stock awards and units, convertible preferred stock and warrants. The following table includes the potential shares of common stock, presented based on amounts outstanding at each period end, that were excluded from the computation of diluted net income (loss) per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
Three Months Ended
June 30,
Six Months Ended
June 30,
2024202320242023
Warrants to Purchase Common Stock3,984,484 10,196,268 3,984,484 10,196,268 
Options to Purchase Common Stock342,331 1,570,599 1,895,031 1,570,599 
Convertible Preferred Stock 1,363,636 1,363,636 1,363,636 
Unvested Restricted Stock Units 313,065 534,309 313,065 
Unvested Restricted Stock Awards891 891 891 891 
Total4,327,70613,444,459 7,778,35113,444,459 
Adoption of Recent Accounting Pronouncements
The Company continually assesses new accounting pronouncements to determine their applicability. When it is determined a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a review to determine the consequences of the change to its consolidated financial statements and assures there are sufficient controls in place to ascertain the Company’s consolidated financial statements properly reflect the change.
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is in the process of determining the effect this ASU will have on the disclosures contained in the notes to the consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which updates income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This ASU also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is in the process of determining the effect this ASU will have on the disclosures contained in the notes to the consolidated financial statements.
4.  Asset Acquisition
On July 10, 2023, the Company executed and consummated the transactions contemplated by an Asset Purchase Agreement (the “Purchase Agreement”) with Evoqua Water Technologies LLC ("Evoqua") (the "Evoqua Acquisition"). Subject to the terms and conditions of the Purchase Agreement, at the closing of the transaction (the “Closing”), the Company purchased customer relationships, equipment and inventory from Evoqua, which were related to its manufacturing and selling of hemodialysis concentrates products, all of which are manufactured under a contract manufacturing agreement with a third-party organization.
Pursuant to the Purchase Agreement, total consideration was $17.4 million, comprising a cash payment at Closing of $12.4 million (inclusive of transaction costs) and two $2.5 million deferred payments. On July 12, 2024, the Company and Evoqua executed an amendment to the Purchase Agreement (the "First Amendment"), which stipulated that the first deferred payment would be partially offset by $0.3 million to reimburse the Company for certain expenses incurred following the close of the Evoqua Acquisition and split the first deferred payment into four quarterly installments to be paid through April 2025. The First Amendment also split the second deferred payment into four quarterly installments to be paid from July 2025 through April 2026. The first deferred payment is included as Deferred Consideration - Current the Company's condensed consolidated balance sheets.
The transaction was accounted for as an asset acquisition, as the acquired assets did not meet the definition of a business as defined by Accounting Standards Codification ("ASC") 805, Business Combinations.
10


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The purchase price was allocated, on a relative fair value basis, to the assets acquired at the July 10, 2023 acquisition date as follows (table in thousands):
Consideration
Cash Payment$12,233 
Deferred Consideration5,000 
Transaction Costs128 
Total Consideration$17,361 
Assets Acquired
Customer Relationships Intangible Asset$11,035 
Equipment5,093 
Inventory1,233 
Total Assets Acquired$17,361 
The fair value of the customer relationships intangible asset was determined using a multi-period excess earnings method, a form of the income approach, which incorporates the estimated future cash flows to be generated from the customer base. Key assumptions included discounted cash flow, estimated life cycle and customer attrition rates. Customer relationships are being amortized over a period of 20 years. Given that the acquired equipment had been recently purchased and recorded at fair value, the Company determined the fair value of the equipment using a cost approach, which considered assumptions over the equipment's current replacement cost and useful life. Inventory was purchased directly from the contract manufacturer holding the inventory, which approximated fair value.
During the three and six months ended June 30, 2024, the Company recorded amortization of its customer relationship intangible asset of $0.1 million and $0.3 million, respectively, resulting in a net intangible asset of $10.5 million as of June 30, 2024.
Estimated future amortization expense on the Company's customer relationships intangible asset as of June 30, 2024 is as follows (table in thousands):
Year ended December 31:
2024 (remainder of year)$276 
2025552 
2026552 
2027552 
2028552 
Thereafter7,999 
Total$10,483 
5.  Revenue Recognition

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers, issued by the FASB. The core principle of the 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 Rockwell 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
Rockwell operates in one market segment, the hemodialysis market, which involves the manufacture, sale and distribution of hemodialysis products to hemodialysis clinics, including pharmaceutical, dialysis concentrates, dialysis kits and other ancillary products used in the dialysis process.
Rockwell's customer mix is diverse, with most customer sales concentrations under 10% and one customer, DaVita, Inc. ("DaVita"), at approximately 44% and 50% of total net product sales for the six months ended June 30, 2024 and 2023, respectively, and 45% and 51% of total net product sales for the three months ended June 30, 2024 and 2023, respectively. Rockwell's accounts receivable from this customer were approximately 35% of the total net consolidated accounts receivable balance at each of June 30, 2024 and December 31, 2023. See below and Note 10 for additional information regarding the Company's contracts with DaVita.
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.
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 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 estimated at the time of sale. Customers typically pay for the product based on customary business practices with payment terms averaging 30 days, while a small subset of customers have payment terms averaging 60 days.
Deferred License Revenue
The Company received upfront fees under five distribution and license agreements that have been deferred as a contract liability and presented on the accompanying condensed consolidated balance sheets as deferred license revenue.  The amounts received from Wanbang Biopharmaceuticals Co., Ltd. (“Wanbang”), Sun Pharmaceutical Industries Ltd. ("Sun Pharma"), Jeil Pharmaceutical Co., Ltd. ("Jeil Pharma") and Drogsan Pharmaceuticals ("Drogsan Pharma") are recognized as revenue over the estimated term of the applicable distribution and license agreement as regulatory approval was not received and the Company did not have sufficient experience in China, India, South Korea and Turkey, respectively, to determine that regulatory approval was probable as of the execution of the agreement. The amounts received from Baxter Healthcare Corporation (“Baxter”) were deferred and recognized as revenue at the point in time the estimated product sales under the agreement occurred. During the
three months ended June 30, 2023, all remaining deferred revenue relating to the Baxter agreement was recognized as revenue. For additional information related to the Company's deferred license revenue, see Note 10.
Product Purchase Agreements
On September 18, 2023, the Company and its long-time partner, DaVita, Inc. ("DaVita"), a leading provider of kidney care, entered into an Amended and Restated Products Purchase Agreement (the "Amended Agreement"), which amends and restates the Product Purchase Agreement, dated July 1, 2019, as amended, under which the Company supplies DaVita with certain dialysis concentrates. Under the Amended Agreement, the Company and DaVita agreed to an increase in product pricing, effective September 1, 2023 and a one-time payment of $0.4 million to Rockwell on or after December 1, 2023, which was recorded as revenue recognized during the fourth quarter of 2023. The term of the Amended Agreement will expire on December 31, 2024. DaVita will have the right, in its sole discretion upon written notice to the Company given no later than September 30, 2024, to further extend the term through December 31, 2025. In the event of such an extension, product pricing will be increased for the extended term. In addition, DaVita is required to provide the Company with nine-month purchasing forecasts and a commitment to purchase at least the forecasted amounts. In the event that DaVita does not meet its forecasts, it is required to pay the Company for the amount forecasted or purchase additional product; otherwise, the Company may terminate the Amended Agreement. Upon expiration or termination of the Amended Agreement, and upon request by DaVita, the Company has agreed it would provide transition services to DaVita during a transition period.
Disaggregation of revenue
Revenue is disaggregated by primary geographical market, major product line, and timing of revenue recognition.
In thousandsThree Months Ended June 30, 2024Six Months Ended June 30, 2024
Products By Geographic AreaTotalU.S.Rest of WorldTotalU.S.Rest of World
Drug Revenues
License Fee – Over time$12 $ $12 $23 $ $23 
Total Drug Products12  12 23  23 
Concentrate Products
Product Sales – Point-in-time25,820 23,209 2,611 48,485 44,143 4,342 
Total Concentrate Products25,820 23,209 2,611 48,485 44,143 4,342 
Net Revenue$25,832 $23,209 $2,623 $48,508 $44,143 $4,365 

In thousandsThree Months Ended June 30, 2023Six Months Ended June 30, 2023
Products By Geographic AreaTotalU.S.Rest of WorldTotalU.S.Rest of World
Drug Revenues
License Fee – Over time$65 $ $65 $130 $130 
Total Drug Products65  65 130  130 
Concentrate Products
Product Sales – Point-in-time18,015 16,125 1,890 36,146 32,585 3,561 
License Fee – Over time   1,472 1,472  
Total Concentrate Products18,015 16,125 1,890 37,618 34,057 3,561 
Net Revenue$18,080 $16,125 $1,955 $37,748 $34,057 $3,691 
Contract balances
The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers.
In thousandsJune 30, 2024December 31, 2023January 1, 2023
Accounts Receivable, net$10,840 $10,901 $6,259 
Contract Liabilities, which are included in deferred license revenue$498 $521 $4,331 
There were no other material contract assets recorded on the condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023.  The Company does not generally accept returns of its concentrate products and no material reserve for returns of concentrates products was established as of June 30, 2024 or December 31, 2023. 
The contract liabilities primarily relate to upfront fees under distribution and license agreements with Wanbang, Sun Pharma, Jeil Pharma, and Drogsan Pharma.
Transaction price allocated to remaining performance obligations
For the six months ended June 30, 2024 and 2023, the Company recognized an immaterial amount and $1.6 million as revenue from amounts classified as contract liabilities (i.e., deferred license revenue) as of December 31, 2023 and 2022, respectively.
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 $0.5 million as of June 30, 2024. 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 ASC 606, paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.
6.  Investments - Available-for-Sale
Investments available-for-sale consisted of the following as of December 31, 2023 (table in thousands):

December 31, 2023
Amortized CostUnrealized GainUnrealized LossAccrued InterestFair Value
Available-for-Sale Securities
Debt securities$1,948 $4 $ $ $1,952 
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 December 31, 2023, the Company's available-for-sale securities were all due within one year. During the three and six months ended June 30, 2024, the Company sold these investments for a realized gain of $0.1 million, which is included in realized gain on available-for-sale investments on the condensed consolidated statements of operations.
11


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
7.  Inventory
Components of inventory, net of reserves, as of June 30, 2024 and December 31, 2023 are as follows (table in thousands):
June 30,
2024
December 31,
2023
Inventory - Current Portion
Raw Materials$2,209 $2,250 
Work in Process225 351 
Finished Goods3,449 3,270 
Total Current Inventory5,883 5,871 
Inventory - Long Term (1)
178 178 
Total Inventory$6,061 $6,049 
__________
1.Represents inventory related to Triferic raw materials, which is expected to be utilized for the Company's international partnerships, net of a reserve of $1.1 million related to the termination of the development of Triferic in Wanbang in August 2023 as a result of the failure to demonstrate efficacy when compared with a placebo in its phase III clinical studies.
As of June 30, 2024 and December 31, 2023, Rockwell had total current concentrate inventory aggregating $5.9 million and $5.9 million, respectively, against which Rockwell had reserved $25,000 at each of June 30, 2024 and December 31, 2023, respectively.
8.  Property and Equipment
As of June 30, 2024 and December 31, 2023, the Company’s property and equipment consisted of the following (table in thousands):
June 30,
2024
December 31,
2023
Leasehold Improvements$1,542 $1,423 
Machinery and Equipment11,438 11,131 
Information Technology & Office Equipment1,845 1,845 
Laboratory Equipment807 807 
   Total Property and Equipment15,632 15,206 
Accumulated Depreciation and Amortization(9,623)(8,804)
Property and Equipment, net$6,009 $6,402 
Depreciation and amortization expense for the three months ended June 30, 2024 and 2023 was $0.4 million and $0.2 million, respectively. Depreciation and amortization expense for the six months ended June 30, 2024 and 2023 was $0.8 million and $0.3 million.
12


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
9.  Accrued Liabilities
Accrued liabilities as of June 30, 2024 and December 31, 2023 consisted of the following (table in thousands):
June 30,
2024
December 31,
2023
Accrued Compensation and Benefits$1,629 $2,413 
Accrued Unvouchered Receipts1,325 1,663 
Accrued Manufacturing Expense902 1,064 
Accrued Workers Compensation408 254 
Other Accrued Liabilities1,904 1,755 
Total Accrued Liabilities$6,168 $7,149 
10.  Deferred License Revenue
In October 2014, the Company entered into an exclusive distribution agreement with Baxter, which had a term of 10 years, and received an upfront fee of $20 million. Under the exclusive distribution agreement, Baxter distributed and commercialized Rockwell’s hemodialysis concentrates products and provided customer service and order delivery to nearly all U.S. customers. The upfront fee was recorded as deferred license revenue and was being recognized based on the proportion of product shipments to Baxter in each period, compared with total expected sales volume over the term of the distribution agreement. On November 9, 2022, Rockwell paid Baxter a fee, which was reflected as a reduction to revenue on the consolidated statements of operations, and was payable in two equal installments on January 1, 2023 and April 1, 2023, to reacquire its distribution rights to its hemodialysis concentrates products from Baxter and terminated the distribution agreement. Exclusivity and other provisions associated with the distribution agreement terminated November 9, 2022 and the remaining operational elements of the agreement terminated December 31, 2022. To ensure that customer needs continued to be met after January 1, 2023, Rockwell agreed to provide certain services to a group of Baxter's customers until March 31, 2023, and Baxter and Rockwell worked together to transition customers’ purchases of Rockwell’s hemodialysis concentrates through that date. Following the reacquisition of these rights, Rockwell is now unrestricted in its ability to sell its hemodialysis concentrates products to dialysis clinics throughout the United States and around the world. The Company recognized the remaining revenue of $1.5 million during the six months ended June 30, 2023.
The remaining agreements with Sun Pharma, Jeil Pharmaceutical, and Drogsan Pharmaceuticals comprise the current and long-term portions of deferred license revenue on the condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023.
11.  Stockholders’ Equity
Preferred Stock
On April 6, 2022, the Company and DaVita entered into the Securities Purchase Agreement (the "SPA"), which provided for the issuance by the Company of up to $15 million of preferred stock to DaVita. On April 6, 2022, the Company issued 7,500 shares of Series X Preferred Stock for gross proceeds of $7.5 million. On June 16, 2022, the Company issued an additional 7,500 shares of the Series X Preferred Stock to DaVita for gross proceeds of $7.5 million.

The Series X Preferred Stock was issued for a price of $1,000 per share (the "Face Amount"), subject to accretion at a rate of 1% per annum, compounded annually. If the Company’s common stock trades above $22.00 for a period of 30 calendar days, the accretion will thereafter cease. As of June 30, 2024, the Series X Preferred Stock accreted a total $0.2 million.

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

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

As of each of June 30, 2024 and December 31, 2023, there were 2,000,000 shares of preferred stock, $0.0001 par value per share, authorized and 15,000 shares of preferred stock issued and outstanding.
Common Stock
As of June 30, 2024 and December 31, 2023, there were 170,000,000 shares of common stock, $0.0001 par value per share, authorized and 31,030,218 and 29,130,607 shares issued and outstanding, respectively.
As of June 30, 2024 and 2023, the Company reserved for issuance the following shares of common stock related to the potential exercise of employee stock options, unvested restricted stock, convertible preferred stock, pre-funded warrants and all other warrants (collectively, "common stock equivalents"):
As of June 30,
Common Stock and Common Stock Equivalents:20242023
Common Stock31,030,218 16,795,673 
Common Stock Issuable upon Exercise of Pre-funded Warrants 1,793,000 
Common Stock and Pre-funded Stock Warrants31,030,218 18,588,673 
Options to Purchase Common Stock1,895,031 1,570,599 
Unvested Restricted Stock Awards891 891 
Unvested Restricted Stock Units534,309 313,065 
Convertible Preferred Stock1,363,636 1,363,636 
Warrants to Purchase Common Stock3,984,484 10,196,268 
Total38,808,569 32,033,132 
During the three months ended June 30, 2024 and 2023, nil and 4,118,000 Pre-Funded Warrants were exercised, respectively. During the six months ended June 30, 2024 and 2023, nil and 4,507,000 Pre-Funded Warrants were exercised, respectively.
During the three and six months ended June 30, 2024 and 2023, no vested employee stock options were exercised.
Controlled Equity Offering

On April 8, 2022, the Company entered into the Sales Agreement (the "ATM facility") with Cantor Fitzgerald & Co. as Agent, pursuant to which the Company may offer and sell from time to time up to $12.2 million of shares of Company’s common stock through the Agent. The offering and sale of such shares has been registered under the Securities Act of 1933, as amended.

During the six months ended June 30, 2024, 1,708,379 shares were sold pursuant to the Sales Agreement for net proceeds of $2.8 million. Approximately $8.2 million remains available for sale under the ATM facility.
Private Placement
On July 10, 2023, the Company entered into a letter agreement (the “Letter Agreement”) with Armistice Capital Master Fund Ltd. (“Armistice”), which held a warrant (the “Prior Warrant”) to purchase 9,900,990 shares of common stock of the Company (the “Common Stock”) with an exercise price of $1.39 per share, offering Armistice the opportunity to exercise the Prior Warrant for cash, provided the Prior Warrant was exercised for cash on or prior to 5:00 P.M. Eastern Time on July 10, 2028 (the “End Date”). In addition, Armistice would receive a “reload” warrant (the “Reload Warrant”) to purchase 3,750,000 shares of Common Stock with an exercise price of $5.13 per share, the closing price as reported by the Nasdaq Capital Market on July 7, 2023. The terms of the Reload Warrant and Letter Agreement provide for customary resale registration rights. The Letter Agreement also provides that for a period of 45 days after the issuance of the Reload Warrant, the Company may not sell shares of Common Stock pursuant to its sales agreement with Cantor Fitzgerald & Co., dated as of April 8, 2022, at a price per share less than $6.25. The Reload Warrant may be exercised at all times prior to the 54 months anniversary of its issuance date. The Prior Warrant and the Reload Warrant both provide that a holder (together with its affiliates) may not exercise any portion of the Prior Warrant or the Reload Warrant to the extent that the holder would own more than 9.99% of the Company’s outstanding Common Stock immediately after exercise, as such percentage ownership is determined in accordance with the terms of such warrant. To the extent the exercise of the Prior Warrant would result in Armistice holding more than 9.99% of the Company’s outstanding Common Stock, such shares of Common Stock in excess of 9.99% will be held in abeyance. The Letter Agreement amended the Prior Warrant to extend the expiration date thereof to one year following the original expiration date set forth therein.
Armistice exercised the Prior Warrant on July 10, 2023, and the Company received gross proceeds of approximately $13.8 million.

Third Amendment

In connection with the execution of the Third Amendment, as defined and described in Note 15, on January 2, 2024, the Company issued to Innovatus a warrant to purchase 191,096 shares of the Company’s common stock with an exercise price of $1.83 per share. The warrant may be exercised on a cashless basis, and is immediately exercisable through January 2, 2029. The number of shares of common stock for which the warrant is exercisable and the exercise price are subject to certain proportional adjustments as set forth in the Third Amendment. The warrant is equity-classified with a fair value of approximately $0.2 million at issuance, which was treated as a debt issuance cost and will be amortized through interest expense over the remaining contractual term of the Term Loan.

The fair value of the warrant at the issuance date was calculated using the Black-Scholes pricing model and include the following assumptions:

Stock Price per Share$1.86
Expected Stock Price Volatility85.00%
Risk-free Interest Rate3.93%
Term (years)5.0
Dividend Yield0%
12.  Stock-Based Compensation
The Company recognized total stock-based compensation expense during the three and six months ended June 30, 2024 and 2023 as follows (table in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2024202320242023
Service-based awards:
Restricted Stock Units$159 $119 $277 $164 
Stock Option Awards179 190 312 338 
Total$338 $309 $589 $502 
13


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Performance Based Restricted Stock Awards
A summary of the Company’s performance based restricted stock awards during the six months ended June 30, 2024 is as follows:
Performance Based Restricted Stock AwardsNumber of SharesWeighted Average
Grant-Date
Fair Value
Unvested at January 1, 2024891 $62.70 
Unvested at June 30, 2024891 $62.70 
Performance-based restricted stock awards are measured based on their fair value on the date of grant and amortized over the vesting period of 20 months. As of June 30, 2024, there is no unrecognized stock-based compensation expense related to performance based restricted stock awards.
Service Based Restricted Stock Units
A summary of the Company’s service-based restricted stock units during the six months ended June 30, 2024 is as follows:
Service Based Restricted Stock UnitsNumber of SharesWeighted Average
Grant-Date
Fair Value
Unvested at January 1, 2024258,885 $1.97 
Granted466,656 1.58 
Vested(191,232)2.18 
Unvested at June 30, 2024534,309 $1.48 
The fair value of service based restricted stock units are measured based on their fair value on the date of grant and amortized over the vesting period. The vesting periods range from 1 to 3 years. As of June 30, 2024, the unrecognized stock-based compensation expense was $0.7 million, which is expected to be recognized over the next 1.7 years.
Service Based Stock Option Awards
The fair value of the service-based stock option awards granted for the six months ended June 30, 2024 and 2023 were based on the following assumptions:
Six Months Ended June 30, 2024Six Months Ended June 30, 2023
Exercise Price
$1.39 - $1.80
$1.37 - $2.83
Expected Stock Price Volatility
81.8%
81.6% - 81.9%
Risk-free Interest Rate
4.31% - 4.45%
3.41% - 3.55%
Term (years)
5.61 - 5.62
4 - 6
14


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
A summary of the Company’s service-based stock option activity for the six months ended June 30, 2024 is as follows:
Service Based Stock Option AwardsShares
Underlying
Options
Weighted
Average Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic Value
(in $1,000's)
Outstanding at January 1, 20241,328,621 $5.22 
Granted569,160 1.40 
Forfeited(2,500)2.29 
Expired(250)2.83 
Outstanding at June 30, 20241,895,031 $4.08 8.5$529,694 
Exercisable at June 30, 2024455,511 $11.57 7.2$88,240 
The aggregate intrinsic value is calculated as the difference between the closing price of the Company's common stock at the date indicated and the exercise price of the stock options that had strike prices below the closing price.
The weighted average grant date fair value for service based stock option awards granted during the six months ended June 30, 2024 and 2023 was $0.99 and $1.03, respectively.
As of June 30, 2024, total stock-based compensation expense related to unvested options not yet recognized totaled approximately $0.9 million, which is expected to be recognized over the next 3.2 years.
13.  License Agreements
Product License Agreements
The Company is a party to a Licensing Agreement between the Company and Charak, LLC ("Charak") dated January 7, 2002 (the "2002 Agreement") that grants the Company exclusive worldwide rights to certain patents and information related to our Triferic product. On October 7, 2018, the Company entered into a Master Services and IP Agreement (the “Charak MSA”) with Charak and Dr. Ajay Gupta, a former Officer of the Company. Pursuant to the MSA, the parties entered into three additional agreements described below related to the license of certain soluble ferric pyrophosphate (“SFP”) intellectual property owned by Charak. As of June 30, 2024 and December 31, 2023, the Company has accrued $87,900 relating to certain IP reimbursement expenses and certain sublicense royalty fees, which is included within accrued liabilities on the condensed consolidated balance sheets.
Pursuant to the Charak MSA, the aforementioned parties entered into an Amendment, dated as of October 7, 2018 (the “Charak Amendment”), to the 2002 Agreement, under which Charak granted the Company an exclusive, worldwide, non-transferable license to commercialize SFP for the treatment of patients with renal failure. The Charak Amendment amends the royalty payments due to Charak under the 2002 Agreement such that the Company is liable to pay Charak royalties on net sales by the Company of products developed under the license, which includes the Company’s Triferic product, at a specified rate until December 31, 2021 and thereafter at a reduced rate from January 1, 2022 until February 1, 2034. Additionally, the Company is required to pay Charak a percentage of any sublicense income during the term of the agreement, which cannot be less than a minimum specified percentage of net sales of the licensed products by the sublicensee in jurisdictions where there exists a valid claim, on a country-by-country basis, and can be no less than a lower rate of the net sales of the licensed products by the sublicensee in jurisdictions where there exists no valid claim, on a country-by-country basis.
Also pursuant to the Charak MSA, the Company and Charak entered into a Commercialization and Technology License Agreement IV Triferic dated as of October 7, 2018 (the “IV Agreement”), under which Charak granted the Company an exclusive, sub-licensable, royalty-bearing license to SFP for the purpose of commercializing certain intravenous-delivered products incorporating SFP for the treatment of iron disorders worldwide for a term that expires on the later of February 1, 2034 or upon the expiration or termination of a valid claim of a licensed patent. The Company was liable to pay Charak royalties on net sales by the Company of products developed under the license at a specified rate until December 31, 2021. From January 1, 2022 until February 1, 2034, the Company is liable to pay Charak a base royalty at a reduced rate on net sales and an additional royalty on net sales while there exists a valid claim of a licensed patent, on a country-by-country basis. The Company shall also
15


ROCKWELL MEDICAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
pay to Charak a percentage of any sublicense income received during the term of the IV Agreement, which amount shall not be less than a minimum specified percentage of net sales of the licensed products by the sublicensee in jurisdictions where there exists a valid claim, on a country-by-country basis, and not be less than a lower rate of the net sales of the licensed products by the sublicensee in jurisdictions where there exists no valid claim, on a country-by-country basis.
Also pursuant to the Charak MSA, the Company and Charak entered into a Technology License Agreement TPN Triferic dated as of October 7, 2018 (the “TPN Agreement”), pursuant to which Charak granted the Company an exclusive, sub-licensable, royalty-bearing license to SFP for the purpose of commercializing worldwide certain TPN products incorporating SFP. The license grant under the TPN Agreement continues for a term that expires on the later of February 1, 2034 or upon the expiration or termination of a valid claim of a licensed patent. During the term of the TPN Agreement, the Company is liable to pay Charak a base royalty on net sales and an additional royalty on net sales while there exists a valid claim of a licensed patent, on a country-by-country basis. The Company shall also pay to Charak a percentage of any sublicense income received during the term of the TPN Agreement, which amount shall not be less than a minimum royalty on net sales of the licensed products by the sublicensee in jurisdictions where there exists a valid claim, on a country-by-country basis, and not be less than a lower rate of the net sales of the licensed products by the sublicensee in jurisdictions where there exists no valid claim, on a country-by-country basis.
The potential milestone payments are not yet considered probable, and no milestone payments have been accrued as of June 30, 2024 and December 31, 2023.
14.  Leases
Rockwell leases its production facilities and administrative offices as well as certain equipment used in its operations including leases on transportation equipment used in the delivery of its products. The lease terms range from monthly to six years. Rockwell occupies a 51,000 square foot facility and a 17,500-square foot facility in Wixom, Michigan under a lease expiring in August 2027. During the six months ended June 30, 2024, the lease for the Wixom facilities was extended by three years to August 2027, which was accounted for as a modification. As a result of the modification, the operating lease right of use asset and lease liabilities increased by $1.5 million. Rockwell also occupies two other manufacturing facilities, a 51,000-square foot facility in Grapevine, Texas under a lease expiring in December 2025, and a 57,000-square foot facility in Greer, South Carolina under a lease expiring February 2026. In addition, Rockwell occupied 4,100 square feet of office space in Hackensack, New Jersey under a lease expiring on October 31, 2024. This lease was subleased on December 15, 2021 with an expiration date of October 31, 2024.
The following summarizes quantitative information about the Company’s operating and finance leases (table in thousands):
Three Months Ended June 30, 2024Three Months Ended June 30, 2023Six Months Ended June 30, 2024Six Months Ended June 30, 2023
Operating Leases
Operating Lease Cost$341 $455 $761 $859 
Variable Lease Cost128 109 250 224 
Operating Lease Expense469 564 1,011 1,083 
Finance Leases
Amortization of Right-of-use Assets141 141 282 282 
Interest on Lease Obligations29 38 61 77 
Finance Lease Expense170 179 343 359 
Short-term Lease Rent Expense6 4 11 8 
Total Rent Expense$645 $747 $1,365 $1,450 
Other Information
Operating Cash Flows from Operating Leases$426 $478 $863 $902 
Operating Cash Flows from Finance Leases$29 $38 $61 $77 
Financing Cash Flows from Finance Leases$138 $129 $276 $258 
Weighted-average Remaining Lease Term – Operating Leases2.62.72.62.7
Weighted-average Remaining Lease Term – Finance Leases3.03.93.03.9
Weighted-average Discount Rate – Operating Leases6.3 %6.5 %6.3 %6.5 %
Weighted-average Discount Rate – Finance Leases6.4 %6.4 %6.4 %6.4 %
Future minimum rental payments under operating and finance lease agreements are as follows (in thousands):
OperatingFinance
Year ending December 31, 2024 (remaining)$835 $334 
Year ending December 31, 20251,587 676 
Year ending December 31, 2026946 666 
Year ending December 31, 2027525 311 
Year ending December 31, 20282  
Total3,895 1,987 
Less Present Value Discount(295)(175)
Operating and Finance Lease Liabilities$3,600 $1,812 
15. Loan and Security Agreement

On March 16, 2020, the Company and Rockwell Transportation, Inc., as Borrowers, entered into a Loan and Security Agreement (the "Loan Agreement") with Innovatus Life Sciences Lending Fund I, LP ("Innovatus"), as collateral agent and the lenders party thereto, pursuant to which Innovatus, as a lender, agreed to make certain term loans to the Company in the aggregate principal amount of up to $35.0 million (the "Term Loans"). Funding of the first $22.5 million tranche was completed on March 16, 2020. The Company is no longer eligible to draw on additional tranches, which were tied to the achievement of certain milestones. Net draw down proceeds were $21.2 million with closing costs of $1.3 million. The Company also owes an additional fee equal to 4.375% of the funded amount of the Term Loans, or $1.0 million (such additional fee, the "Final Fee") at maturity. The Company is accreting up to this Final Fee premium with a charge against interest expense on the accompanying condensed consolidated statements of operations.
In connection with each funding of the Term Loans, the Company was required to issue to Innovatus a warrant (the “Warrants”) to purchase a number of shares of the Company’s common stock equal to 3.5% of the principal amount of the relevant Term Loan funded divided by the exercise price. In connection with the first tranche of the Term Loans, the Company issued a Warrant to Innovatus, exercisable for an aggregate of 43,388 shares of the Company’s common stock at an exercise price of $18.15 per share. The Warrant may be exercised on a cashless basis and is immediately exercisable through the seventh anniversary of the applicable funding date. The number of shares of common stock for which the Warrant is exercisable and the associated exercise price are subject to certain proportional adjustments as set forth in such Warrant. The Company evaluated the warrant under ASC 470, Debt, and recognized an additional debt discount of approximately $0.5 million based on the relative fair value of the base instruments and warrants. The Company calculated the fair value of the warrant using the Black-Scholes model.

The Term Loan was scheduled to mature on March 16, 2025, and bore interest at the greater of (i) Prime Rate (as defined in the Loan Agreement) and (ii) 4.75%, plus 4.00%, with an initial interest rate of 8.75% per annum. The Company had the option, under certain circumstances, to add 1.00% of such interest rate amount to the then outstanding principal balance in lieu of paying such amount in cash.

The Loan Agreement is secured by all assets of the Company and Rockwell Transportation, Inc. and contains customary representations and warranties and covenants, subject to customary carve outs, and initially included financial covenants related to liquidity and sales of Triferic.

In September 2021, the Company entered into an amendment to the Loan Agreement in which the Company, in exchange for Innovatus lowering the sales covenants, agreed to: (i) prepay an aggregate principal amount of $7.5 million in ten installments commencing on December 1, 2021; (ii) pay an additional prepayment premium of 5% on prepaid amounts if the Company elects to prepay all outstanding Term Loans on or before September 24, 2023; and (iii) maintain minimum liquidity of no less than $5.0 million if the aggregate principal amount of Term Loans is greater than $15 million pursuant to the liquidity covenant in the Loan Agreement.
On November 10, 2022, the Company entered into a Second Amendment to the Loan and Security Agreement (the “Second Amendment”) dated as of November 14, 2022 with Innovatus. Pursuant to the Second Amendment, the Company (i) prepaid an additional aggregate principal amount of $5.0 million in Term Loans in one installment on November 14, 2022; and (ii) paid interest only payments until September 2023, at which time it resumed scheduled debt payments. The financial covenant related to the sales of Triferic was replaced with the trailing 6 months revenue of the Company's concentrates products.
On January 2, 2024, the Company entered into the Third Amendment to and Restatement of the Loan and Security Agreement (the "Third Amendment") with Innovatus, dated January 1, 2024. The Third Amendment provides for the continuation of term loans initially borrowed under the Loan Agreement amounting to $8.0 million as of January 1, 2024. The Company will make interest-only payments on the Term Loans for 30 months, or up to 36 months if certain conditions are met. The Term Loans will mature on January 1, 2029, unless earlier repaid. Effective on January 1, 2024, the Term Loans will bear interest equal to the sum of (i) the greater of (a) Prime Rate (as defined in the Third Amendment) and (b) 7.50% plus (ii) 3.50%. At the Company's option, 2.00% of the interest due on any applicable interest payment date during the interest-only period may be paid in-kind by adding such amount to the then outstanding principal balance of the Term Loans. The Term Loans may be voluntarily prepaid in full (but not partially) at any time, upon at least seven business days’ prior notice. In connection with any voluntary prepayment or satisfaction of the Term Loans prior to the maturity date (including any acceleration), the Company will pay all accrued and unpaid interest and all other amounts due in connection with the Term Loans, together with (x) a prepayment fee (the “Prepayment Fee”) equal to: (i) 6.0% of the principal amount of the Term Loans prepaid if the payment is made before January 1, 2025; (ii) 2.0% of the principal amount of the Term Loans prepaid if the payment is made after January 1, 2025 but on or before January 1, 2026; (iii) 1.0% of the principal amount of the Term Loans prepaid if the payment is made after January 1, 2026 but on or before January 1, 2027; or (iv) 0% of the principal amount of the Term Loans prepaid if the payment is made after January 1, 2027 through maturity, and (y) the Final Fee. The Term Loans will be mandatorily prepaid upon a change in control of the Company, or upon any early termination/acceleration of the Term Loans. In the event of a mandatory prepayment of the Term Loans, the Company shall be required to pay the Prepayment Fee (if applicable), as well as the Final Fee. The Third Amendment Final Fee shall be due and payable at maturity if it has not previously been paid in full in connection with a prepayment of the Term Loans. The Third Amendment was treated as a modification for accounting purposes.
The Third Amendment contains various financial covenants and customary representations and warranties and affirmative and negative covenants, subject to exceptions as described in the Third Amendment. The Company's ability to
comply with the covenants under the Third Amendment may be adversely affected by events beyond its control. If the Company is unable to comply with the covenants under the Third Amendment, it would pursue all available cure options in order to regain compliance. However, the Company may not be able to mutually agree with Innovatus on appropriate remedies to cure a future breach of a covenant, which could give rise to an event of default. However, as of June 30, 2024, the Company was in compliance with all covenants under the Third Amendment.
In connection with the execution of the Third Amendment, on January 2, 2024, the Company issued a warrant to purchase shares of the Company’s common stock. The warrant is equity-classified with a fair value of $0.2 million at issuance, which was treated as a debt issuance cost and will be amortized through interest expense over the remaining contractual term of the Term Loan. For additional information, see Note 11.

The effective interest rate is 12.0% as of June 30, 2024. For the three months ended June 30, 2024 and 2023, interest expense amounted to $0.2 million and $0.3 million, respectively. For the six months ended June 30, 2024 and 2023, interest expense amounted to $0.5 million and $0.6 million, respectively. As of June 30, 2024, the outstanding balance of the Term Loan was $8.3 million, net of unamortized issuance costs and discount of $0.6 million, and including $0.8 million of premium accretion, $0.1 million related to a fee resulting from the Third Amendment, and paid-in-kind interest of $0.1 million.

The following table reflects the schedule of principal payments on the Term Loan as of June 30, 2024 (in thousands):
June 30, 2024
2024 (remaining)$ 
2025 
20261,359 
20273,262 
20283,262 
2029 (inclusive of Final Fee)1,256 
Total Debt Maturities9,139 
Unamortized Issuance Costs, Discount and Premium, net(844)
Term Loan - Long-Term, net of issuance costs$8,295 

16. Insurance Financing Note Payable
On June 3, 2023, the Company entered into a short-term note payable for $0.7 million, bearing interest at a rate of 9.59% per annum to finance various insurance policies. Principal and interest payments related to this note began on July 3, 2023 and were paid on a straight-line amortization over nine months with the final payment due on March 3, 2024. During the six months ended June 30, 2024, the Company's insurance financing note payable balance was paid in full.
On June 24, 2024, the Company entered into a short-term note payable with a principal amount of $0.7 million, bearing interest at a rate of 7.89% per annum to finance various insurance policies, which required an upfront payment of $0.2 million. Principal and interest payments related to this note began on July 3, 2024 and will be paid in 10 equal monthly payments of $0.1 million, with the final payment due on April 3, 2025. As of June 30, 2024, the balance of the insurance financing note payable was $0.7 million.
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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes in “Item 1. Condensed Consolidated Financial Statements”. References in this report to “Rockwell,” the “Company,” “we,” “our” and “us” are references to Rockwell Medical, Inc. and its subsidiaries.