Quarterly Report (10-q)

Table of Contents

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, 2019

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

For the transition period from to

Commission File Number: 000-23661

ROCKWELL MEDICAL, INC.

(Exact name of registrant as specified in its charter)


Delaware	38-3317208
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

411 Hackensack Avenue, Suite 501, Hackensack , New Jersey	07601
(Address of principal executive offices)	(Zip Code)

(248) 960-9009

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year,

if changed since last report)

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

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

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


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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

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


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock, par value $.0001	RMTI	Nasdaq Global Market

The number of shares of common stock outstanding as of November 12, 2019 was 63,955,893.

Table of Contents

Rockwell Medical, Inc. and Subsidiaries

Index to Form 10-Q


	Page
Part I — Financial Information (unaudited)

Item 1 - Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018	3

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018	4

Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2019 and 2018	5

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018	6

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018	10

Notes to Condensed Consolidated Financial Statements	11

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3 - Quantitative and Qualitative Disclosures about Market Risk	35

Item 4 - Controls and Procedures	35

Part II — Other Information

Item 1 - Legal Proceedings	36

Item 1A - Risk Factors	37

Item 6 - Exhibits	39

Signatures	40

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30,		December 31,
	2019		2018
		(Unaudited)
ASSETS
Cash and Cash Equivalents	$	14,421,394	$	22,713,980
Investments Available-for -Sale		14,575,589		10,818,059
Accounts Receivable, net		5,122,453		6,979,514
Insurance Receivable		—		371,217
Inventory		3,583,452		4,038,778
Prepaid and Other Current Assets		2,861,708		1,903,682
Total Current Assets		40,564,596		46,825,230
Property and Equipment, net		2,506,093		2,638,293
Inventory, Non-Current		528,000		1,637,000
Right of Use Assets, net		3,011,805		—
Goodwill		920,745		920,745
Other Non-current Assets		555,933		536,516
Total Assets	$	48,087,172	$	52,557,784
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts Payable	$	3,194,039	$	4,492,071
Accrued Liabilities		3,916,069		5,129,761
Settlement Payable		270,000		416,668
Lease Liability - Current		1,482,441		—
Deferred License Revenue - Current		2,238,450		2,252,868
Insurance Financing Note Payable		1,145,133		—
Customer Deposits		48,163		63,143
Other Current Liability - Related Party		100,000		850,000
Total Current Liabilities		12,394,295		13,204,511

Lease Liability - Long-Term		1,589,098		—
Deferred License Revenue - Long-Term		10,401,166		12,076,399
Total Liabilities		24,384,559		25,280,910

Commitments and Contingencies (See Note 16)

Shareholders’ Equity:
Preferred Shares, $.0001 par value, no shares issued and outstanding at September 30, 2019 and December 31, 2018		—		—
Common Shares, $.0001 par value; 170,000,000 shares authorized; 63,887,384 and 57,034,154 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		6,389		5,703
Additional paid-in capital		322,837,353		299,596,257
Accumulated Deficit		(299,213,836)		(272,388,234)
Accumulated Other Comprehensive Income		72,707		63,148
Total Shareholders’ Equity		23,702,613		27,276,874
Total Liabilities And Shareholders’ Equity	$	48,087,172	$	52,557,784

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

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ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended September 30, 2019		Three Months Ended September 30, 2018		Nine Months Ended September 30, 2019		Nine Months Ended September 30, 2018

Net Sales	$	15,407,248	$	16,672,416	$	45,812,475	$	46,534,358
Cost of Sales		15,423,612		14,703,606		44,085,298		49,303,048
Gross Profit (Loss)		(16,364)		1,968,810		1,727,177		(2,768,690)
Selling and Marketing		1,827,473		121,874		7,148,848		716,414
General and Administrative		4,623,503		6,037,267		16,340,672		14,465,634
Settlement Expense		—		—		430,000		1,030,000
Research and Product Development		1,474,735		808,192		4,930,287		4,033,494
Operating Loss		(7,942,075)		(4,998,523)		(27,122,630)		(23,014,232)

Other Income
Realized Gain (Loss) on Investments		6,268		(97,027)		24,292		(222,014)
Interest Income, net		80,735		125,918		272,736		486,301
Total Other Income		87,003		28,891		297,028		264,287

Net Loss	$	(7,855,072)	$	(4,969,632)	$	(26,825,602)	$	(22,749,945)


Basic and Diluted Net Loss per Share	$	(0.12)	$	(0.10)	$	(0.45)	$	(0.44)

Basic and Diluted Weighted Average Shares Outstanding		63,796,723		51,288,537		59,728,446		51,288,462

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

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ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)


	Three Months Ended September 30, 2019		Three Months Ended September 30, 2018		Nine Months Ended September 30, 2019		Nine Months Ended September 30, 2018

Net Loss	$	(7,855,072)	$	(4,969,632)	$	(26,825,602)	$	(22,749,945)
Unrealized Gain on Available-for-Sale Debt Instrument Investments		5,926		143,868		10,190		96,327
Foreign Currency Translation Adjustments		(776)		(6,402)		(631)		(13,791)
Comprehensive Loss	$	(7,849,922)	$	(4,832,166)	$	(26,816,043)	$	(22,667,409)

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

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ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the three months ended September 30, 2019

(Unaudited)


								ACCUMULATED
				ADDITIONAL				OTHER		TOTAL
	COMMON SHARES			PAID-IN		ACCUMULATED		COMPREHENSIVE		SHAREHOLDER’S
	SHARES	AMOUNT		CAPITAL		DEFICIT		INCOME		EQUITY
Balance as of July 1, 2019	63,398,704	$	6,340	$	320,876,606	$	(291,358,764)	$	67,557	$	29,591,739
Net Loss	—		—		—		(7,855,072)		—		(7,855,072)
Unrealized Gain on Available-for-Sale Investments	—		—		—		—		5,926		5,926
Foreign Currency Translation Adjustments	—		—		—		—		(776)		(776)
Delivery of common stock underlying restricted stock units, net of tax	62,800		6		(84,866)		—		—		(84,860)
Issuance of common stock, net of offering costs/Public offering	425,880		43		1,169,199		—		—		1,169,242
Stock-based Compensation	—		—		876,414		—		—		876,414
Balance as of September 30, 2019	63,887,384	$	6,389	$	322,837,353	$	(299,213,836)	$	72,707	$	23,702,613

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

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ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the three months ended September 30, 2018

(Unaudited)


								ACCUMULATED
				ADDITIONAL				OTHER		TOTAL
	COMMON SHARES			PAID-IN		ACCUMULATED		COMPREHENSIVE		SHAREHOLDER’S
	SHARES	AMOUNT		CAPITAL		DEFICIT		INCOME / (LOSS)		EQUITY
Balance as of July 1, 2018	51,768,424	$	5,177	$	275,017,065	$	(258,042,689)	$	(90,313)	$	16,889,240
Net Loss	—		—		—		(4,969,632)		—		(4,969,632)
Unrealized Gain on Available-for-Sale Investments	—		—		—		—		143,868		143,868
Foreign Currency Translation Adjustments	—		—		—		—		(6,402)		(6,402)
Exercise of Employee Stock Options, Net of Tax	870		—		(1,978)		—		—		(1,978)
Stock-based Compensation	—		—		614,584		—		—		614,584
Balance as of September 30, 2018	51,769,294	$	5,177	$	275,629,671	$	(263,012,321)	$	47,153	$	12,669,680

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

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ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the nine months ended September 30, 2019

(Unaudited)


								ACCUMULATED
				ADDITIONAL				OTHER		TOTAL
	COMMON SHARES			PAID-IN		ACCUMULATED		COMPREHENSIVE		SHAREHOLDER’S
	SHARES	AMOUNT		CAPITAL		DEFICIT		INCOME		EQUITY
Balance as of January 1, 2019	57,034,154	$	5,703	$	299,596,257	$	(272,388,234)	$	63,148	$	27,276,874
Net Loss	—		—		—		(26,825,602)		—		(26,825,602)
Unrealized Gain on Available-for-Sale Investments	—		—		—		—		10,190		10,190
Foreign Currency Translation Adjustments	—		—		—		—		(631)		(631)
Exercise of Employee Stock Options	30,000		3		147,897		—		—		147,900
Delivery of common stock underlying restricted stock units, net of tax	126,973		13		(180,302)		—		—		(180,289)
Issuance of common stock, net of offering costs/Public offering	6,259,214		626		17,289,296		—		—		17,289,921
Issuance of common stock, net of offering costs/At-the-market offering	437,043		44		2,089,164		—		—		2,089,208
Stock-based Compensation	—		—		3,895,041		—		—		3,895,041
Balance as of September 30, 2019	63,887,384	$	6,389	$	322,837,353	$	(299,213,836)	$	72,707	$	23,702,613

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

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ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the nine months ended September 30, 2018

(Unaudited)


								ACCUMULATED
				ADDITIONAL				OTHER		TOTAL
	COMMON SHARES			PAID-IN		ACCUMULATED		COMPREHENSIVE		SHAREHOLDER’S
	SHARES	AMOUNT		CAPITAL		DEFICIT		(LOSS)		EQUITY
Balance as of January 1, 2018	51,768,424	$	5,177	$	273,205,730	$	(240,262,376)	$	(35,383)	$	32,913,148
Net Loss	—		—		—		(22,749,945)		—		(22,749,945)
Unrealized Gain on Available-for-Sale Investments	—		—		—		—		96,327		96,327
Foreign Currency Translation Adjustments	—		—		—		—		(13,791)		(13,791)
Exercise of Employee Stock Options, Net of Tax	870		—		(1,978)		—		—		(1,978)
Stock-based Compensation	—		—		2,425,919		—		—		2,425,919
Balance as of September 30, 2018	51,769,294	$	5,177	$	275,629,671	$	(263,012,321)	$	47,153	$	12,669,680

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

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ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2019 and 2018

(Unaudited)


	2019		2018

Cash Flows From Operating Activities:
Net Loss	$	(26,825,602)	$	(22,749,945)
Adjustments To Reconcile Net Loss To Net Cash Used In Operating Activities:
Depreciation and Amortization		581,982		466,994
Stock-based Compensation		3,895,041		2,425,919
Increase in Inventory Reserves		1,271,000		3,442,547
Amortization of Right of Use Asset		1,429,727		—
(Gain) Loss on Disposal of Assets		(620)		4,030
Realized (Gain) Loss on Sale of Investments Available-for-Sale		(24,292)		222,014
Foreign Currency Translation Adjustment		(631)		(13,791)
Changes in Assets and Liabilities:
Decrease (Increase) in Accounts Receivable, net		1,857,061		(1,226,133)
Decrease (Increase) in Insurance Receivable		371,217		(500,000)
Decrease in Inventory		293,326		3,669,233
Decrease in Other Assets		930,847		75,570
(Decrease) Increase in Accounts Payable		(1,298,031)		2,709,133
(Decrease) Increase in Settlement Payable		(146,668)		666,667
Decrease in Lease Liability		(1,369,994)		—
Decrease in Other Liabilities		(1,228,671)		(2,109,802)
Decrease in Deferred License Revenue		(1,689,651)		(1,718,127)
Changes in Assets and Liabilities		(2,280,564)		1,566,541
Cash Used In Operating Activities		(21,953,959)		(14,635,691)
Cash Flows From Investing Activities:
Purchase of Investments Available-for-Sale		(34,202,301)		(18,483,694)
Sale of Investments Available-for-Sale		30,479,252		29,596,315
Purchase of Equipment		(448,896)		(589,541)
Purchase of Research and Development Licenses (Related Party)		(750,000)		—
Cash (Used in) Provided By Investing Activities		(4,921,945)		10,523,080
Cash Flows From Financing Activities:
Payments on Short Term Notes Payable		(763,422)		—
Proceeds from the Issuance of Common Stock / Public Offering		18,777,642		—
Offering Costs from the Issuance of Common Stock / Public Offering		(1,487,721)		—
Proceeds from the Issuance of Common Stock / At-the Market Offering		2,296,235		—
Offering Costs from the Issuance of Common Stock / At-the Market Offering		(207,027)		—
Proceeds from the Exercise of Employee Stock Options		147,900		—
Stock Retained in Satisfaction of Tax Liabilities		(180,289)		(1,978)
Cash Provided By (Used In) Financing Activities		18,583,318		(1,978)

Decrease In Cash and Cash Equivalents		(8,292,586)		(4,114,589)
Cash At Beginning Of Period		22,713,980		8,406,917
Cash At End Of Period	$	14,421,394	$	4,292,328

Supplemental Disclosure of Noncash Investing and Financing Activities:
Insurance Financing Note Payable	$	1,145,133	$	—

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

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ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Description of Business

Rockwell Medical, Inc. and subsidiaries (collectively, “we”, “our”, “us”, or the “Company”), is a biopharmaceutical company dedicated to improving outcomes for patients with anemia, with an initial focus on end-stage renal disease (ESRD). We are also a manufacturer of hemodialysis concentrates for dialysis providers and distributors in the United States and abroad. We supply the domestic market with dialysis concentrates and we also supply dialysis concentrates to distributors serving a number of foreign countries, primarily in the Americas and the Pacific Rim. Substantially, all of our sales have been concentrate products and ancillary items, though we initiated commercial sales of our proprietary therapeutic, Triferic, during the second quarter of 2019.

Our mission is to transform anemia management in a wide variety of disease states across the globe while improving patients’ lives. Accordingly, we are building the foundation to become a leading medical and commercial organization in the field of dialysis.

Triferic® is a registered trademark of Rockwell Medical, Inc.

2. Going Concern

As of September 30, 2019, the Company had approximately $14.4 million of cash and cash equivalents, $14.6 million of investments available-for-sale, working capital of $28.2 million and an accumulated deficit of $299.2 million. Net cash used in operating activities for the nine months ended September 30, 2019 was approximately $21.9 million.

The Company will require significant additional capital to sustain its operations and make the investments it needs to execute its longer-term business plan. The Company’s existing liquidity is not sufficient to fund its operations and anticipated capital expenditures within one year of the issuance of the accompanying condensed consolidated financial statements.

On June 20, 2019, the Company closed a public offering of 5,833,334 shares of common stock at a price of $3.00 per share. The aggregate proceeds from this public offering (net of the underwriters’ commissions and offering expenses) were approximately $16.1 million. On July 9, 2019, the underwriters of the public offering partially exercised their over-allotment option and purchased an additional 425,800 shares of common stock at a price of $3.00 per share, which closed on July 11, 2019. The aggregate proceeds from the exercise of the over-allotment option (net of the underwriters’ discount and offering expenses) were approximately $1.2 million.

On March 22, 2019, the Company entered into a 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 up to $40,000,000. As of September 30, 2019, approximately $37.7 million remains available for issuance under this facility. We are not required to sell any shares at any time during the term of the facility. Our ability to sell common stock under the facility may be limited by several factors including, among other things, the trading volume of our common stock and certain black-out periods that we may impose upon the facility, among other things.

The Company will require additional capital to sustain its operations and make the investments it needs to execute upon its longer-term business plan, including the launch of Dialysate Triferic and I.V. Triferic. If the Company is unable to generate sufficient revenue from its existing long-term business plan, the Company will need to obtain additional equity

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ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

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

At the 2019 Annual Meeting, the Company’s shareholders voted and approved to reincorporate the Company from the State of Michigan to the State of Delaware (the “Reincorporation”). The Reincorporation became effective on August 30, 2019 and was accomplished by the filing of (i) a certificate of conversion with the Bureau of Commercial Services of the Michigan Department of Labor & Economic Growth; (ii) a certificate of conversion with the Secretary of State of the State of Delaware; and (iii) a Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Certificate of Incorporation”).

The Company’s new authorized capital stock consists of 170,000,000 shares of common stock, $0.0001 par value per share, and 2,000,000 shares of preferred stock, $0.0001 par value per share.

Certain reclassifications have been made to the 2018 financial statements and notes to conform to the 2019 presentation.

The accompanying unaudited 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 Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of such interim results.

The results for the condensed consolidated statement of operations are not necessarily indicative of results to be expected for the year ending December 31, 2019 or for any future interim period. The condensed consolidated balance sheet at September 30, 2019 has been derived from unaudited financial statements; however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The condensed consolidated balance sheet at December 31, 2018 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 consolidated financial statements for the year ended December 31, 2018 and notes thereto included in the Company’s annual report on Form 10-K filed on March 18, 2019.

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

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with 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.

Significant Accounting Policies

With the exception of the adoption of ASU 2016-02 relating to accounting for leases, there have been no material changes in the Company’s significant accounting policies as previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

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ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Leases

Effective January 1, 2019, 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.

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.

The Company continues to account for leases in the prior period financial statements in accordance with ASC Topic 840.

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,
	2019		2018
Options to purchase common stock		8,170,382		8,048,105
Unvested restricted stock awards		146,800		146,800
Unvested restricted stock units		1,324,172		1,293,750
Warrants to purchase common stock		2,770,781		-
		12,412,135		9,488,655

Adoption of Recent Accounting Pronouncements

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

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which amended the guidance on accounting for leases. The FASB issued this update to increase transparency and comparability among organizations. This update requires the recognition of lease assets and lease liabilities on the balance sheet and the disclosure of key information about leasing arrangements. The Company adopted this ASU effective January 1, 2019 using the additional (optional) approach by recording a right-of-use asset and a lease liability of approximately $3.5 million. Our adoption of

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this ASU had no effect on opening retained earnings, and the Company continues to account for leases in the prior period consolidated financial statements under ASC Topic 840. In adopting the new standard, the Company elected to apply the practical expedients regarding identification of leases, lease classification, indirect costs, and the combination of lease and non-lease components.

In June 2018, the FASB issued ASU 2018-17, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under ASU 2018-17, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than an entity’s adoption of Topic 606. The Company adopted this new standard on January 1, 2019 and the adoption did not have a material impact on its condensed consolidated financial statements and related disclosures.

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

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.

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The Company received upfront fees under two distribution and license agreements that have been deferred as a contract liability. The amounts received from Wanbang Biopharmaceuticals Co., Ltd. (“Wanbang”) are recognized as revenue over the estimated term of the distribution and license agreement as regulatory approval was not received and the Company did not have sufficient experience in China 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 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, including the business under the Company’s distribution agreement with Baxter (the “Baxter Agreement”), 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.


In thousands of US dollars ($)		Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019
Products By Geographic Area	Total		U.S.		Rest of World		Total		U.S.		Rest of World
Drug Revenues
Product Sales – Point-in-time	$	98	$	98	$	-	$	112	$	112	$	-
License Fee – Over time		68		-		68		205		-		205
Total Drug Products		166		98		68		317		112		205
Concentrate Products
Product Sales – Point-in-time		14,746		13,353		1,393		44,010		39,100		4,910
License Fee – Over time		495		495		-		1,485		1,485		-
Total Concentrate Products		15,241		13,848		1,393		45,495		40,585		4,910
Net Revenue	$	15,407	$	13,946	$	1,461	$	45,812	$	40,697	$	5,115

		Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018
Products By Geographic Area		Total		U.S.		Rest of World		Total		U.S.		Rest of World
Drug Revenues
License Fee – Over time	$	68		-	$	68	$	205		-	$	205
Concentrate Products
Product Sales – Point-in-time		16,099		13,208		2,891		44,815		38,536		6,279
License Fee – Over time		505		505		-		1,514		1,514		-
Total Concentrate Products		16,604		13,713		2,891		46,329		40,050		6,279
Net Revenue	$	16,672	$	13,713	$	2,959	$	46,534	$	40,050	$	6,484

Contract balances

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


In thousands of US dollars ($)	September 30, 2019		December 31, 2018
Receivables, which are included in "Trade and other receivables"	$	5,122	$	6,980
Contract liabilities	$	12,640	$	14,329

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There were no impairment losses recognized related to any receivables arising from the Company’s contracts with customers for the three and nine months ended September 30, 2019 and 2018.

For the three and nine months ended September 30, 2019 and September 30, 2018, the Company did not recognize material bad-debt expense and there were no material contract assets recorded on the condensed consolidated balance sheet as of September 30, 2019 and December 31, 2018. The Company does not generally accept returns of its concentrate products and no reserve for returns of concentrate products was established as of September 30, 2019 or December 31, 2018.

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, 2019, revenue recognized from performance obligations related to prior periods was not material.

Revenue expected to be recognized in any future year related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, contracts where revenue is recognized as invoiced and contracts with variable consideration related to undelivered performance obligations, totaled $10.4 million as of September 30, 2019. 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 performance obligations related to the Baxter Agreement are product sales of $9.6 million, which will be amortized through expiration of the agreement on October 2, 2024.

5. Investments - Available-for-Sale

Investments available-for-sale consisted of the following as of September 30, 2019 and December 31, 2018:


	September 30, 2019
	Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value
Available-for-Sale Securities
Bonds	$	14,549,799	$	26,401	$	(611)	$	14,575,589

	December 31, 2018
	Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value
Available-for-Sale Securities
Bonds	$	10,801,836	$	17,415	$	(1,192)	$	10,818,059

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 Level 1, as described in Note 3 on Form 10-K, Fair Value Measurement to our condensed consolidated financial statements.

As of September 30, 2019 and December 31, 2018, available-for-sale securities were due in one year or less.

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6. Inventory

Components of inventory, net of reserves as of September 30, 2019 and December 31, 2018 are as follows:


	September 30,		December 31,
	2019		2018
Raw Materials	$	2,390,179	$	3,621,548
Work in Process		209,940		256,129
Finished Goods		1,511,333		1,798,101
Total	$	4,111,452	$	5,675,778

As of September 30, 2019 and December 31, 2018, we classified $0.5 million and $1.6 million, respectively, of inventory as non-current, all of which was related to Triferic or the active pharmaceutical ingredient (API) for Triferic. As of September 30, 2019 and December 31, 2018, we had total Triferic inventory aggregating $3.5 million and $8.0 million respectively, against which we had reserved $2.8 million and $5.8 million respectively.

The $0.7 million net value of Triferic inventory consisted of $0.1 million of Dialysate Triferic finished goods with expiration dates ranging from March 2020 to May 2021, and $0.6 million of Triferic API with estimated useful lives extending through 2023. The Company increased its inventory reserve for Triferic by $1.1 million as of September 30, 2019 due to, among other factors, the impact of the Centers for Medicare & Medicaid Services (“CMS”) Final Rule, which is discussed in Note 17 below, and its current volume forecasts for Triferic across the globe.

7. Property and Equipment

As of September 30, 2019 and December 31 2018, the Company’s property and equipment consisted of the following:


	September 30,		December 31,
	2019		2018
Leasehold Improvements	$	1,114,503	$	929,849
Machinery and Equipment		4,719,132		4,800,774
Information Technology & Office Equipment		1,810,246		2,459,832
Laboratory Equipment		653,075		668,977
		8,296,956		8,859,432
Accumulated Depreciation		(5,790,863)		(6,221,139)
Net Property and Equipment	$	2,506,093	$	2,638,293

Depreciation expense for the three months ended September 30, 2019 and 2018, totaled $0.2 million and $0.2 million, respectively. Depreciation expense for the nine months ended September 30, 2019 and 2018, totaled $0.58 million and $0.47 million, respectively.

8. Accrued Liabilities

Accrued liabilities as of September 30, 2019 and December 31, 2018 consisted of the following:


	September 30,		December 31,
	2019		2018
Accrued Research & Development Expense	$	84,798	$	86,820
Accrued Compensation and Benefits		1,334,563		1,525,599
Accrued Legal Expenses		392,869		170,334
Accrued Marketing Expenses		206,649		5,000
Other Accrued Liabilities		1,897,190		3,342,008
Total Accrued Liabilities	$	3,916,069	$	5,129,761

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9. Insurance Financing Note Payable

On June 3, 2019, the Company entered into a short-term note payable for $1.9 million, bearing interest at 4.65% per annum to finance various insurance policies. Principal and interest payments related to this note began on July 3, 2019 and are paid on a straight-line amortization over a 10-month period with the final payment due on April 3, 2020. As of September 30, 2019, the Company’s insurance note payable balance was $1.15 million.

10. Deferred Revenue

In October of 2014, the Company entered into a 10 year distribution 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. The Company recognized revenue of approximately $0.5 million and $1.5 million during the three and nine months ended September 30, 2019 and 2018, respectively. Deferred revenue related to the Baxter Agreement totaled $9.6 million as of September 30, 2019 and $11.1 million as of December 31, 2018.

If a “Refund Trigger Event” occurs, we would be obligated to repay a portion of the upfront fee and any paid portion of the facility fee. In the event of a Refund Trigger Event occurring from January 1, 2019 to December 31, 2021, Baxter would be eligible for a 25% refund of the Agreement’s Upfront Payment. In addition, if Baxter terminates the Agreement because Baxter has been enjoined by a court of competent jurisdiction from selling in the United States any product covered by the Baxter Agreement due to a claim of intellectual property infringement or misappropriation relating to such product prior to the end of 2019, Baxter would be eligible for a partial refund of $6.6 million. In no event would more than one refund be required to be paid.

During the year ended December 31, 2016, the Company entered into a distribution and license agreement with Wanbang and received an upfront fee of $4.0 million. The upfront fee was recorded as deferred revenue and is being recognized as revenue based on the agreement term. The Company recognized revenue of approximately $0.1 million and $0.2 million during the three and nine months ended September 30, 2019 and 2018, respectively. Deferred revenue related to the Wanbang agreement totaled $3.0 million as of September 30, 2019 and $3.2 million as of December 31, 2018.

11. Shareholders’ Equity

The Company’s new authorized capital stock consists of 170,000,000 shares of common stock, $0.0001 par value per share, and 2,000,000 shares of preferred stock, $0.0001 par value per share.

Preferred Stock

As of September 30, 2019 and December 31, 2018, there were 2,000,000 shares of preferred stock authorized and no shares of preferred stock issued or outstanding.

Common Stock

As of September 30, 2019, the Company’s authorized shares of common stock was 170 million shares. On June 6, 2019, the Company obtained shareholder approval to increase the number of authorized shares of the Company’s

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common stock by 50 million shares from 120 million shares to 170 million shares. On July 30, 2019, the Company amended its Articles of Incorporation to reflect this increase in authorized shares from 120 million to 170 million shares.

During the nine months ended September 30, 2019, 30,000 vested employee stock options were exercised for cash proceeds of $147,900, at a weighted average exercise price of $4.93.

Controlled Equity 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 $40,000,000 of the shares has been registered under the Securities Act of 1933, as amended, pursuant to the Company’s registration statement on Form S-3 (File No. 333-227363), 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 was filed with the SEC on March 22, 2019.

Sales of the shares, if any, pursuant to the Sales Agreement, may be made in sales deemed to be a “at the market offering” as defined in Rule 415(a) of the Securities Act, including sales made directly through the Nasdaq Global Market or on any other existing trading market for the Company’s common stock. The Company intends to use the proceeds from the offering for working capital and other general corporate purposes. The Company may suspend or terminate the Sales Agreement at any time.

In April 2019, the Company sold 437,043 shares of its common stock pursuant to the Sales Agreement for gross proceeds of $2,296,235, at a weighted average selling price of approximately $5.25. The Company paid $207,027 in commissions and offering fees related to the sale of the common shares. As of September 30, 2019, approximately $37.7 million remains available for issuance under this facility.

We are not required to sell any shares at any time during the term of the facility. Our ability to sell common stock under the facility may be limited by several factors including, among other things, the trading volume of our common stock and certain black-out periods that we may impose upon the facility, among other things.

Public Offering of Common Stock

On June 17, 2019, the Company entered into a purchase agreement with Piper Jaffray & Co., and Cantor Fitzgerald & Co, pursuant to which the Company agreed to issue and sell up to 6,708,334 shares of common stock, which included 875,000 optional shares that may be sold pursuant to an option granted to the underwriters.

On June 20, 2019, the Company closed the sale of 5,833,334 shares of its common stock for gross proceeds of $17,500,002 at the public offering price of $3.00 per share (the “Offering”). The Company paid $1,379,323 in underwriters’ commissions and fees related to the sale of the common shares. The Offering was made pursuant to the Company’s effective registration statement on Form S-3 (File No. 333-227363), which was previously filed with the SEC. On July 9, 2019, the Underwriters exercised their over-allotment option to purchase an additional 425,800 shares of common stock at a price of $3.00 per share, which closed on July 11, 2019. The total proceeds to the Company (net of underwriting commissions and offering fees) from the exercise of the over-allotment option were approximately $1.2 million.

Restricted Common Stock

During the nine months ended September 30, 2019, 195,042 shares of common stock related to fully vested restricted stock units were delivered to an officer of the Company. The Company withheld 68,069 of these common shares at a fair value of $180,289 to cover the officer’s withholding taxes related to the vesting of restricted stock units.

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12. Stock-Based Compensation

The Company recognized total stock-based compensation expense during the three and nine months ended September 30, 2019 and 2018 as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Service based awards:
Restricted stock awards	$	-	$	20,222	$	-	$	1,292,125
Restricted stock units		502,080		166,417		1,273,903		166,417
Stock option awards		596,657		427,944		1,795,819		967,377
		1,098,737		614,583		3,069,722		2,425,919
Performance based awards:
Restricted stock units		(332,389)		-		468,814		-
Stock option awards		110,065		-		356,505		-
		(222,324)		-		825,319		-
Total	$	876,413	$	614,583	$	3,895,041	$	2,425,919

The decrease in stock-based compensation associated with performance based awards for restricted stock units is the result of a change in vesting criteria from probable to improbable based on the CMS Final Rule as described in Note 17 below. This change resulted in a reduction of stock-based compensation expense of $0.7 million for the three and nine months ended September 30, 2019.

Restricted Stock

A summary of the Company’s restricted stock awards during the nine months ended September 30, 2019 is as follows:


			Weighted Average
			Grant-Date
	Number of Shares		Fair Value
Unvested at December 31, 2018	146,800	$	5.70
Unvested at September 30, 2019	146,800	$	5.70

A summary of the Company’s restricted stock awards during the nine months ended September 30, 2018 is as follows:


			Weighted Average
			Grant-Date
	Number of Shares		Fair Value
Unvested at December 31, 2017	480,000	$	7.27
Forfeited	(333,200)		5.70
Unvested at September 30, 2018	146,800	$	5.70

The fair value of 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 September 30, 2019 unvested restricted stock awards of 146,800 were related to performance based awards.

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Service Based Restricted Stock Units

A summary of the Company’s service based restricted stock units during the nine months ended September 30, 2019 is as follows:


			Weighted Average
			Grant-Date
	Number of Shares		Fair Value
Unvested at December 31, 2018	472,959	$	4.32
Granted	222,497		4.26
Forfeited	(4,950)		4.81
Vested	(96,542)		4.70
Unvested at September 30, 2019	593,964	$	4.23

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 1-3 years. Stock-based compensation expense of $0.5 million and $1.3 million was recognized during the three and nine months ended September 30, 2019. Stock-based compensation expense of $0.2 million was recognized for each of three and nine months ended September 30, 2018. As of September 30, 2019, the unrecognized stock-based compensation expense was $1.3 million.

Performance Based Restricted Stock Units

A summary of the Company’s performance based restricted stock units during the nine months ended September 30, 2019 is as follows:


			Weighted Average
			Grant-Date
	Number of Shares		Fair Value
Unvested at December 31, 2018	988,958	$	4.48
Unvested at September 30, 2019	988,958	$	4.48

Stock-based compensation expense recognized for performance based restricted stock units was ($0.3) million and $0.5 million during the three and nine months ended September 30, 2019. The Company did not record stock-based compensation expenses related to the performance-based grants as of September 30, 2018. As of September 30, 2019, the unrecognized stock-based compensation expense related to performance based restricted stock units was $1.0 million. The performance based restricted stock unit compensation was reduced by $0.7 million for the three and nine months ended September 30, 2019 due to a change in vesting criteria from probable to improbable for certain performance based awards. The Company will continue to review this performance award criteria and recognize compensation costs as it relates to the probability of vesting.

Service Based Stock Options

The fair value of the service based stock options granted for the nine months ended September 30, 2019 were based on the following assumptions:


	Nine Months Ended September 30,
	2019	2018
Exercise price	$2.39 - $6.21	$4.52 - $5.75
Expected stock price volatility	67.5% - 70.3%	67.5%
Risk-free interest rate	1.4% - 2.6%	2.7% - 2.9%
Term (years)	5.25 - 6.5	5.0 - 6.5

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A summary of the Company’s service based stock option activity for the nine months ended September 30, 2019 is as follows:


				Weighted
			Weighted	Average
	Shares		Average	Remaining		Aggregate
	Underlying		Exercise	Contractual		Intrinsic
	Options		Price	Term		Value
Outstanding at December 31, 2018	7,856,480	$	7.50	5.2	$	-
Granted	576,477		4.17	9.2		12,074
Exercised	(30,000)		4.93	-		-
Forfeited	(620,700)		6.34	-		-
Outstanding at September 30, 2019	7,782,257	$	7.35	5.1	$	12,074

Exercisable at September 30, 2019	6,340,901	$	8.07	4.2	$	-

A summary of the Company’s service based stock option activity for the nine months ended September 30, 2018 is as follows:


				Weighted
			Weighted	Average
	Shares		Average	Remaining		Aggregate
	Underlying		Exercise	Contractual		Intrinsic
	Options		Price	Term		Value
Outstanding at December 31, 2017	6,906,001	$	7.92	5.0	$	976,335
Granted	1,337,271		4.96	9.4
Exercised	(5,000)		6.59	-
Forfeited	(190,167)		6.59	-
Outstanding at September 30, 2018	8,048,105	$	7.46	5.2	$	365,135

Exercisable at September 30, 2018	6,248,160	$	7.90	4.1	$	365,135

The aggregate intrinsic value in the table above is calculated as the difference between the closing price of our common stock and the exercise price of the stock options that had strike prices below the closing price.

During the nine months ended September 30, 2019, the Company granted to certain employees stock options to purchase up to 576,477 shares of common stock. During the nine months ended September 30, 2019, forfeitures were 620,700. Forfeitures are recorded in the period of occurrence; compensation expense is adjusted accordingly.

Stock-based compensation expense recognized for service based stock options was $0.6 million and $1.8 million for the three and nine months ended September 30, 2019 and $0.4 million and $1.0 million for the three and nine months ended September 30, 2018. As of September 30, 2019, total stock-based compensation expense related to unvested options not yet recognized totaled approximately $2.1 million.

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Performance Based Stock Options

A summary of the performance based stock options for the nine months ended September 30, 2019, is as follows:


			Weighted Average
			Exercise
	Number of Shares		Price
Outstanding at December 31, 2018	388,125	$	4.70
Outstanding at September 30, 2019	388,125	$	4.70

Exercisable at September 30, 2019	-	$	-

Stock-based compensation expense recognized for performance based stock options was $0.1 million and $0.4 million during the three and nine months ended September 30, 2019. Stock-based compensation expense recognized for performance based stock options was $51,000 for each of the three and nine months ended September 30, 2018. As of September 30, 2019, the unrecognized stock-based compensation expense related to performance based stock options was $0.6 million.

13. Related Party Transactions

Product License Agreements

The Company is a party to an in-license agreement for 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, LLC and Dr. Ajay Gupta (collectively “Charak”), who serves as Executive Vice President and Chief Scientific 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 well as the Employment Agreement (defined below). The Charak MSA provides for a payment of $1.0 million to Dr. Gupta, payable in four quarterly installments of $250,000 each on October 15, 2018, January 15, 2019, April 15, 2019 and July 15, 2019, and reimbursement for certain legal fees incurred in connection with the Charak MSA. The Company recorded $1.1 million as Research and Development Expense – License Acquired (Related Party) for the twelve months ended December 31, 2018. As of September 30, 2019, the Company paid all four of the quarterly installments totaling $1.0 million and accrued $0.1 million for the reimbursement of certain legal expenses. As of September 30, 2019 and December 31, 2018, the Company accrued $0.1 million and $850,000, respectively, as a related party payable on the condensed consolidated balance sheet.

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

Also pursuant to the Charak MSA, the Company and Charak entered into a Commercialization and Technology License Agreement I.V. Triferic®, dated as of October 7, 2018 (the “IV Agreement”), under which Charak granted the Company an exclusive, sublicensable, royalty-bearing license to SFP for the purpose of commercializing certain

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 is liable to pay Charak royalties on net sales by the Company of products developed under the license at a specified rate until December 31, 2021. From January 1, 2022 until February 1, 2034, the Company is liable to pay Charak a base royalty at a reduced rate on net sales and an additional royalty on net sales while there exists a valid claim of a licensed patent, on a country-by-country basis. The Company shall also pay to Charak a percentage of any sublicense income received during the term of the IV Agreement, which amount shall not be less than a minimum specified percentage of net sales of the licensed products by the sub-licensee 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 sub-licensee in jurisdictions where there exists no valid claim, on a country-by-country basis.

Also pursuant to the Charak MSA, the Company and Charak entered into a Technology License Agreement TPN Triferic®, dated as of October 7, 2018 (the “TPN Agreement”), pursuant to which Charak granted the Company an exclusive, sublicensable, royalty-bearing license to SFP for the purpose of commercializing worldwide certain parenteral nutritional (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 sub-licensee 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 sub-licensee in jurisdictions where there exists no valid claim, on a country-by-country basis.

The transaction was accounted for as an asset acquisition pursuant to ASU 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business, as the majority of the fair value of the assets acquired was concentrated in a group of similar assets, and the acquired assets did not have outputs or employees. The assets acquired under the MSA include a license of SFP. Because SFP has not yet received regulatory approval, the $1.1 million purchase price paid and accrued for these assets has been expensed in the Company’s statement of operations for the year ended December 31, 2018. In addition, the potential milestone payments are not yet considered probable, and no milestone payments have been accrued at September 30, 2019.

14. Leases

We lease our production facilities and administrative offices as well as certain equipment used in our operations including leases on transportation equipment used in the delivery of our products. The lease terms range from monthly to seven years. We occupy a 51,000 square foot facility and a 17,500 square foot facility in Wixom, Michigan under a lease expiring in August 2021. We also occupy two other manufacturing facilities, a 51,000 square foot facility in Grapevine, Texas under a lease expiring in December 2020, and a 57,000 square foot facility in Greer, South Carolina under a lease expiring February 2020. In addition, we occupy a 1,408 square foot office space in Greer, South Carolina under a lease expiring April 2021 and on December 28, 2018 we executed a lease for 4,100 square feet of office space in Hackensack, New Jersey with a lease term commencing in July 2019 and expiring on July 1, 2024.

At September 30, 2019, the Company had operating lease liabilities of $3.0 million and right-of-use assets of $3.0 million, which are included in the consolidated balance sheet.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following summarizes quantitative information about the Company’s operating leases:


		Three Months Ended		Nine Months Ended
		September 30, 2019		September 30, 2019
Operating leases
Operating lease cost	$	531,709	$	1,591,686
Variable lease cost		90,411		258,492
Operating lease expense		622,120		1,850,178
Short-term lease rent expense		4,157		12,470
Total rent expense	$	626,277	$	1,862,648

Other information
Operating cash flows from operating leases	$	493,872	$	1,531,953
Right of use assets exchanged for operating lease liabilities	$	136,124	$	4,441,553
Weighted-average remaining lease term – operating leases		1.8		1.8
Weighted-average discount rate – operating leases		6.8%		6.8%

Future minimum rental payments under operating lease agreements are as follows:


Three months ended December 31, 2019	$	479,345
Year ending December 31, 2020		1,433,260
Year ending December 31, 2021		811,097
Year ending December 31, 2022		346,649
Year ending December 31, 2023		197,130
Year ending December 31, 2024		97,423
Total	$	3,364,904
Less present value discount		(293,365)
Operating lease liabilities	$	3,071,539

15. Settlement Agreements

On August 7, 2018, the Company entered into a confidential settlement agreement and mutual release (the “Settlement Agreement”) with its former CEO, former CFO and a former and then current director. For more details see Note 10 in Form 10-K filed on March 18, 2019. This resulted in a net settlement expense of approximately $1.0 million for the nine month ended September 30, 2018.

On August 7, 2019, the Company entered into a settlement agreement relating to the class action lawsuits described below. This resulted in a settlement expense of approximately $0.4 million for the nine months ended September 30, 2019. See Note 16 below for further details. The settlement is subject to court review and approval, which is scheduled for February, 2020.

16. Commitments and Contingencies

Litigation

SEC Investigation

As a follow up to certain prior inquiries, the Company received a subpoena from the SEC during the Company’s quarter ended September 30, 2018 requesting, among other things, certain information and documents relating to the status of the Company’s request to the CMS for separate reimbursement status for Dialysate Triferic, the Company’s reserving methodology for expiring Triferic inventory, and the basis for the Board’s termination of the former CEO and CFO. The Company is cooperating with the SEC and is responding to the SEC’s requests for documents and information.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

Shareholder Class Action Lawsuits

On July 27, 2018, Plaintiff Ah Kit Too filed a putative class action lawsuit in the United States District Court in the Eastern District of New York against the Company and former officers, Robert Chioini and Thomas Klema. The complaint is a federal securities class action purportedly brought on behalf of a class consisting of all persons and entities, other than Defendants, who purchased or otherwise acquired the publicly traded securities of the Company between March 16, 2018 and June 26, 2018. The Complaint alleges that the Company and Messrs. Chioini and Klema violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”). Specifically, the Complaint alleges that defendants filed reports with the Securities and Exchange Commission that contained purported inaccurate and misleading statements regarding the potential for the Company’s drug, Triferic, to quality for separate reimbursement status by the Centers for Medicare and Medicaid Services.

On September 4, 2018, Plaintiff Robert Spock filed a similar putative class action lawsuit in the United States District Court in the Eastern District of New York against the Company and Messrs. Chioini and Klema. The Spock complaint is a federal securities class action purportedly brought on behalf of a class consisting of persons who purchased the Company’s securities between November 8, 2017 and June 26, 2018. This complaint alleges that the Company and Messrs. Chioini and Klema violated the Exchange Act in that the Company was aware the Centers for Medicare and Medicaid Services would not pursue the Company’s proposal for separate reimbursement for Triferic; misstated reserves in the Company’s quarterly report for the first quarter of 2018; had a material weakness its internal controls over financial reporting, which rendered those controls ineffective; Mr. Chioini withheld material information regarding Triferic from the Company’s auditor, corporate counsel, and independent directors of the Board; and, as a result of these alleged issues, statements about the Company’s business were materially false and misleading.

On September 25, 2018, four Company stockholders filed motions to appoint lead plaintiffs, lead counsel, and to consolidate the Ah Kit Too v. Rockwell securities class action with the Spock v. Rockwell securities class action. On October 10, 2018, the court issued an order consolidating the two actions, appointing co-lead plaintiffs and co-lead counsel. On December 10, 2018, lead Plaintiffs filed a consolidated amended complaint, which included the same allegations as the initial complaints and asserted claims on behalf of a putative class consisting of person who purchased the Company’s securities between November 8, 2017 and June 26, 2018, accordingly.

On August 7, 2019, all parties to the class action entered into a settlement of the consolidated class action. Pursuant to the terms and conditions of the settlement agreement, the Company will pay the Plaintiffs $3.7 million (the “Settlement Amount’) in exchange for a full release of all liability as to all defendants. Of the Settlement Amount, the Company will be contributing approximately $0.4 million, which represents the remaining retention amount under the Company’s director and officer liability insurance policy. The remainder of the settlement amount will be funded by the Company’s director and officer insurance policy. The settlement is subject to court review and approval, which is scheduled for February, 2020.

Shareholder Derivative Actions

Two verified stockholder derivative complaints (the “Derivative Complaints”) entitled LeClair v Rockwell Medical, Inc., and Post v Rockwell Medical, Inc. were filed in the United States District Court in the Eastern District of New York, purportedly on behalf of the Company (as nominal defendant) and against certain of the Company’s current and former directors (the “Individual Defendants”). The Derivative Complaints assert causes of actions against the Individual Defendants for breach of fiduciary duty, waste of corporate assets, and unjust enrichment. The Derivative Complaints allege the Individual Defendants breached duties by, among other things, permitting alleged misstatements to be made in public filings regarding the status of separate reimbursement for Triferic from CMS, the adequacy of Rockwell’s reserves, and the adequacy of Rockwell’s internal controls. Recently, the Plaintiffs have amended their derivative complaints. These cases are at an early stage, and the Company anticipates filing a motion to dismiss the action.

The Company has tendered the above shareholder derivative actions to its D&O insurance carrier(s) for defense and indemnity under its applicable insurance policies. The Company maintains a $1.0 million self-insured retention under

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ROCKWELL MEDICAL, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

the applicable insurance policies, which will be exhausted upon payment of the Company’s share of the Settlement Amount from the settlement of the class action described above.

17. Subsequent Events

On October 31, 2019, CMS issued a final rule to update payment policies and rates under the ESRD Prospective Payment System for renal dialysis services furnished to beneficiaries on or after January 1, 2020 (the “2020 Final Rule”). The Final Rule contains certain revisions to the eligibility requirements for the CMS Transitional Drug Add-on Payment Adjustment (“TDAPA”) program, which has the potential to provide two years of add-on reimbursement for certain qualifying new drugs. Under the revisions to the TDAPA rules, ESRD drugs approved by the FDA under the following types of New Drug Applications (an “NDA”) are ineligible for TDAPA, effective as of January 1, 2020: (a) NDA Types 3, 5, 7 and 8, (b) NDA Type 3 in combination with NDA Type 2 or NDA Type 4, (c) NDA Type 5 in combination with NDA Type 2, or (d) NDA Type 9, when the “parent NDA” is NDA Type 3, 5, 7 or 8.

As previously disclosed, we have filed an NDA for the intravenous formulation of Triferic. The FDA has informed the Company that the NDA for I.V. Triferic will be classified as Type 3. As a result, the Company believes that I.V. Triferic will not be eligible for TDAPA.

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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 the “Company,” “we,” “our” and “us” are references to Rockwell Medical, Inc. and its subsidiaries.

Forward-Looking Statements

We make forward-looking statements in this report and may make such statements in future filings with the Securities and Exchange Commission, or SEC. We may also make forward-looking statements in our press releases or other public or shareholder communications. Our forward-looking statements are subject to risks and uncertainties and include information about our expectations and possible or assumed future results of our operations. When we use words such as “may,” “might,” “will,” “should,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “could,” “plan,” “potential,” “predict,” “forecast,” “project,” “intend,” or similar expressions, or make statements regarding our intent, belief, or current expectations, we are making forward-looking statements. Our forward looking statements also include, without limitation, statements about our liquidity and capital resources; our plans relating to the commercialization of our products; our timing and ability to obtain add-on reimbursement for our products; our ability to obtain FDA and EMA approval for I.V. Triferic; whether we can successfully execute on our business strategy; and statements regarding our anticipated future financial condition, operating results, cash flows and business plans.

While we believe that our forward-looking statements are reasonable, you should not place undue reliance on any such forward-looking statements, which are based on information available to us on the date of this report or, if made elsewhere, as of the date made. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different. Factors that might cause such a difference include, without limitation, the risks and uncertainties discussed in this report, “Item 1A — Risk Factors” in our Form 10-K for the year ended December 31, 2018 and from time to time in our other reports filed with the SEC, including in this Form 10-Q.

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

Overview and Recent Developments

We are a specialty pharmaceutical company targeting end-stage renal disease with products for the treatment of iron deficiency and hemodialysis. We are also a manufacturer of hemodialysis concentrates/dialysates to dialysis providers and distributors in the United States and abroad. We supply approximately 25% of the United States domestic market with dialysis concentrates and we also supply dialysis concentrates to distributors serving a number of foreign countries, primarily in the Americas and the Pacific Rim. To date, substantially all of our sales have been concentrate products and related ancillary items, though we initiated commercial sales of our proprietary therapeutic, Triferic, during the second quarter of 2019.

Our business strategy is developing unique, proprietary renal drug therapies that we can commercialize or out-license, while also expanding our dialysis products business. These renal drug therapies support disease management initiatives to improve the quality of life and care of dialysis patients and are designed to deliver safe and effective therapy, while decreasing drug administration costs and improving patient convenience and outcome.

Triferic

Triferic is the Company’s proprietary iron therapy that replaces iron and maintains hemoglobin in dialysis patients without increasing iron stores. The Company has developed Dialysate Triferic (Ferric Pyrophosphate Citrate) as the only FDA approved product indicated to replace iron and maintain hemoglobin concentration in adult HDD-CKD hemodialysis patients, and is in the process of developing and seeking FDA approval for I.V. Triferic, a novel intravenous formulation of Triferic that would be used for the same indication, if approved. A description of Dialysate Triferic and I.V. Triferic is set forth below.

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Our objective for Triferic is to transform anemia management in a wide variety of disease states across the globe while improving patients’ lives. Accordingly, we are building the foundation to become a leading medical and commercial organization in the field of dialysis, which we believe will enable Triferic to become the standard of care for ESRD patients. Specifically, we are investing in our medical capabilities to, among other things, generate real-world data, provide medical education to the dialysis community regarding the potentinal benefits of Triferic, and engage with key opinion leaders and centers of excellence to guide the delveopment and commercialization of Triferic.

Dialysate Triferic

Our dialysate formulation of Triferic (“Dialysate Triferic”) received FDA approval in 2015 and remains the only FDA-approved therapy indicated to replace iron and maintain hemoglobin in adult hemodialysis patients. Dialysate Triferic received a CMS reimbursement J-code on January 1, 2016, providing that Dialysate Triferic would be reimbursed for administration to dialysis patients within the existing fixed-price “bundle” of payments that CMS provides to dialysis providers. Because Dialysate Triferic reimbursement would be included in this bundled payment, we commenced efforts in early 2016 to seek so-called “add-on” or “separate” reimbursement for Dialysate Triferic, which is sometimes available for certain new, innovative therapies.

Following receipt of the reimbursement J-code in early 2016 until June 2018, the Company’s commercialization strategy for Dialysate Triferic was primarily focused on obtaining add-on reimbursement status from CMS for Dialysate Triferic, at which point the Company planned to commence commercializing the drug.

In June 2018, the Company determined, based on feedback from CMS’s Innovation Center (“CMMI”), that Dialysate Triferic was unlikely to obtain add-on reimbursement in the near term. As a result, the Company changed its commercialization strategy to plan for the commercial launch of Dialysate Triferic with initial reimbursement within the bundle of payments to dialysis providers, while continuing to pursue add-on reimbursement, if possible, and while continuing to develop I.V. Triferic (discussed below). As part of our strategy to launch Dialysate Triferic within the bundle, we requested that CMS provide us with a separate J-code for our powder packet formulation of Dialysate Triferic to distinguish it from our liquid formulation of Dialysate Triferic. On April 26, 2019, pursuant to a request we submitted earlier in 2019, we were notified of a preliminary recommendation by CMS to grant our powder packet formulation of Dialysate Triferic a separate J-Code, effective July 1, 2019. On May 6, 2019, we announced the commencement of commercial sales of Dialysate Triferic.

While the Company was pursuing the earlier strategy of delaying commercialization until receipt of add-on reimbursement approval, we built up significant inventory of active pharmaceutical ingredient (“API”) and Dialysate Triferic finished goods. However, due to the delays in launching Triferic and taking into account feedback received from CMMI in March 2018 regarding the prospects for near-term approval of add-on reimbursement for Triferic, we increased our inventory reserves for Triferic by a total of $8.1 million during 2018 from $3.5 million as of December 31, 2017 to $11.6 million as of December 31, 2018. For the nine months ended September 30, 2019, Triferic inventory reserves increased by approximately $0.9 million. After deducting inventory destroyed or used for samples, as of September 30, 2019 we had $0.5 million of Dialysate Triferic Finished Goods inventory with $0.4 million reserved leaving a net value of $0.1 million. As of September 30, 2019, we also had approximately $3.0 million of Triferic API against which we have reserved $2.0 million leaving a net value of $1.0 million. Depending on the timing and success of our commercial launch of Dialysate Triferic in 2019 and the degree of uptake of the drug commercially, additional amounts or all of our current investment in Dialysate Triferic finished goods inventory and some or all of our API inventory may need to be written off in future periods. Additional write-offs of existing Triferic inventory will not have a material negative impact on our cash flow, but could potentially have a material adverse impact on our reported results of operations and financial position.

I.V. Triferic

We are also developing an intravenous injection of Triferic (“I.V. Triferic”) for use by hemodialysis patients in the United States as well as international markets. A clinical equivalence study of I.V. Triferic infusion presentation has been completed and, on the basis of the clinical and non-clinical data prepared by the Company, we submitted a New Drug Application (“NDA”) seeking FDA approval to market I.V. Triferic in the United States for the clinical indication of replacing iron and maintaining hemoglobin in adult hemodialysis patients on May 28, 2019. The NDA for I.V. Triferic was accepted for filing by the FDA on August 2, 2019 with a Prescription Drug User Fee Act (“PDUFA”) date of March 28, 2020.

In November 2018 CMS provided interpretative guidance (“CMS Guidance”) regarding the TDAPA program and its potential application to I.V. Triferic. Based on the CMS Guidance, the Company believed that, if approved by the

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FDA on or after January 1, 2020, I.V. Triferic would possibly be eligible for separate add-on reimbursement under CMS’s TDAPA program for a period of two years On October 31, 2019, CMS issued its final rule to update payment policies and rates under the ESRD Prospective Payment System (PPS) for 2020 (the “2020 Final Rule”). The 2020 Final Rule included updates to TDAPA program eligibility, specifically excluding from eligibility for TDAPA, effective as of January 1, 2020: (a) NDA Types 3, 5, 7 and 8, (b) NDA Type 3 in combination with NDA Type 2 or NDA Type 4, (c) NDA Type 5 in combination with NDA Type 2, or (d) NDA Type 9, when the “parent NDA” is NDA Type 3, 5, 7 or 8.

As previously disclosed, the Company has submitted an NDA for the intravenous formulation of Triferic. The FDA has informed the Company that the classification for the I.V. Triferic NDA is Type 3. Accordingly, the Company believes that I.V. Triferic is adversely impacted by the 2020 Final Rule, because it is not eligible for TDAPA reimbursement under the 2020 Final Rule.

While we intend to market and sell Dialysate Triferic and I.V. Triferic directly in the United States, our international strategy is to partner with and license these products to established companies in other regions of the world to assist in the further development (primarily clinical trials and regulatory activities), if necessary, and commercialize in those regions. We continue to pursue international licensing opportunities in a number of countries and specific regions.

Dialysis Concentrates

We manufacture, sell, deliver and distribute hemodialysis concentrates, along with a line of ancillary dialysis products abroad. We use Baxter as our exclusive marketer and distributor in the United States and in select foreign markets. Dialysate concentrates accounted for approximately 97% of our revenues for the three months ended September 30, 2019, with ancillary products and Triferic accounting for most of the remainder. We receive a pre-defined gross profit margin on our concentrate products sold pursuant to the Baxter Agreement, subject to an annual true-up of costs. On August 1, 2019, we entered into a Products Purchase Agreement with DaVita (the “DaVita Agreement”). The Davita Agreement supersedes and replaces that certain First Amended and Restated Products Purchase Agreement, effective as of May 8, 2013 (as subsequently amended) by and between the Company and DaVita, which agreement expired effective as of July 31, 2019 (the “Prior Agreement”). The DaVita Agreement is effective from July 1, 2019 through December 31, 2023. Generally, the DaVita Agreement is similar to the Prior Agreement, except that it provides for an increase in the product sale prices relative to the prices charged for these products under the Prior Agreement.

Calcitriol (Active Vitamin D) Injection

Calcitriol, an active Vitamin D injection for the management of hypocalcemia in patients undergoing chronic hemodialysis, is FDA approved under an Abbreviated New Drug Application. To date, we have not commercially launched Calcitriol. Following a strategic review of this product, including pricing, commercial distribution and marketing, manufacturing efficiencies and capacity (including potential capital investment), we have determined commercialization of Calcitriol in the U.S. would not be viable at this time. The decision was based, in part, on the fact that prevailing market prices for similar Vitamin D products are lower than our cost to produce Calcitriol on a dose-equivalent basis, and as a result it would be difficult for us to market Calcitriol profitably. As a result of this decision, we recorded an inventory reserve reflecting the remainder of our Calcitriol inventory. As of December 31, 2018 and September 30, 2019, this reserve totaled $0.7 million.

Clinical Development

Although Dialysate Triferic is approved for commercial sale in the United States, Triferic is not approved for sale in other major markets globally. We have received regulatory guidance from the European Medicines Agency (“EMA”) regarding the clinical studies that are needed to file for approval of I.V. Triferic in Europe. At the present time, we do not intend to commence these clinical studies, absent finding a development partner in Europe or raising additional capital. In conjunction with our licensee in the People’s Republic of China, Wanbang Biopharmaceutical (“Wanbang”), two clinical pharmacology studies were completed earlier in 2019 and Wanbang has requested a meeting with the National Medical Products Administration (NMPA) (formerly, China Food and Drug Administration or CFDA) to review the results of these studies and discuss whether these studies are sufficient to support a submission for regulatory approval for Dialysate Triferic. Pursuant to our license agreement with Wanbang, we are entitled to up to $35 million of regulatory and sales-based milestones, including an $8 million milestone payment upon regulatory approval of Triferic in China. We will supply the finished dosage form of Triferic to Wanbang at a transfer price comprising cost of goods sold, a mark-up and a percentage of net sales in the low-to-mid 20% range.

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As a post-approval requirement under the Pediatric Research Equity Act, we are required to conduct a further clinical study of the effectiveness of Triferic in a pediatric patient population. We have reached agreement with the FDA on the design of this study, which we intend to commence in 2019, assuming we have the liquidity and capital resources to do so. In April 2019, we entered into a contract with a CRO for the conduct of the pediatric study and prepaid approximately $0.8 million for future work under the contract. We expect to begin enrollment of patients in the pediatric study in the first half of 2020. We expect that the data from this study could be used as part of the overall clinical data package to support approval by the EMA, if and when we are able to complete the other clinical trials needed to support making such a filing.

Additionally, we believe that Dialysate Triferic and I.V. Triferic have potential to be developed for use in other iron deficiency anemia indications, as well as other product presentations and other clinical applications, including peritoneal dialysis and total parenteral nutrition.

Results of Operations for the three months ended September 30, 2019 and 2018

Net Sales

During the three months ended September 30, 2019, our net sales were $15.4 million compared to sales of $16.7 million during the three months ended September 30, 2018. Net sales of hemodialysis concentrates to dialysis providers and distributors in the U.S. and abroad were $15.2 million for the three months ended September 30, 2019 compared to $16.6 million for the three months ended September 30, 2018. The decrease of $1.4 million was primarily due to lower sales to international customers offset by an increase in sales pursuant to the Company’s contract with DaVita Inc. Net sales of Triferic were $166,000 for the three months ended September 30, 2019 compared to $68,000 for the three months ended September 30, 2018. For each of the three months ended September 30, 2019 and September 30, 2018, Triferic net sales included approximately $68,000 of deferred revenue recognized under the Company’s license in the People’s Republic of China with Wanbang Biopharmaceutical. Triferic net sales for the three months ended September 30, 2019 also included approximately $98,000 of Triferic product sales to U.S. customers..

Gross Profit (Loss)

Cost of sales during the three months ended September 30, 2019 was $15.4 million, resulting in gross loss of $16,000 during the three months ended September 30, 2019, compared to cost of sales of $14.7 million and a gross profit of $2.0 million during the three months ended September 30, 2018. Cost of sales for the three months ended September 30, 2019 included $14.3 million of manufacturing and distribution costs associated with the Company’s concentrates products and $1.1 million of inventory reserve expenses and product costs for Triferic, compared to $14.6 million and $0.1 million, respectively, for the three months ended September 30, 2018. Gross profit decreased by $2.0 million in the third quarter of 2019 compared to the third quarter of 2018, due primarily to a decrease in sales of $1.3 million; an increase in inventory reserve expense of $1.1 million; increase in labor, maintenance and recruiting of $0.4 million; offset by a decrease in distribution and materials and overhead of $0.7 million.

Selling and Marketing Expense

Selling and marketing expenses were $1.8 million during the three months ended September 30, 2019 compared with $0.1 million during the three months ended September 30, 2018. The increase of $1.7 million was due to the investments the Company made in developing a commercial platform to support the commercial launch of Triferic.

General and Administrative Expense

General and administrative expenses were $4.6 million during the three months ended September 30, 2019 compared with $6.0 million during the three months ended September 30, 2018. The decrease of $1.4 million is primarily due to a decrease in legal and related costs associated with various matters, including litigation activities, related to the departure of certain executives and directors during 2018, partially offset by increases in insurance premiums.

Settlement Expense

Settlement expense was nil for each of the three months ended September 30, 2019 and 2018, respectively.

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Research and Product Development Expense

Research and product development expenses were $1.5 million for the three months ended September 30, 2019 compared with $0.8 million during the three months ended September 30, 2018. The increase of $0.7 million was due to the Company’s commitment to investing in and building its medical capabilities mentioned above, including generating data from studies and real-world use of Triferic to support medical education and development efforts for Triferic, as well as the expansion of the Company’s internal medical affairs staff. The Company expects its research and product development expenses to increase in the future due to additional clinical development of Dialysate and I.V. Triferic, including the pediatric clinical trial for Triferic, and investments we are making in our medical platform to support medical education efforts and the collection and analysis of real-world data for Triferic

Other Income, Net

Other income for the three months ended September 30, 2019 was $0.1 million, consisting primarily of interest income. Other income for the three months ended September 30, 2018 was $29,000, consisting of $0.13 million of interest income, offset by $0.1 million of realized gains on investments.

Results of Operations for the nine months ended September 30, 2019 and 2018

Net Sales

During the nine months ended September 30, 2019, our net sales were $45.8 million compared to sales of $46.5 million during the nine months ended September 30, 2018. Net sales of hemodialysis concentrates to dialysis providers and distributors in the U.S. and abroad were $45.5 million for the nine months ended September 30, 2019 compared to $46.3 million for the nine months ended September 30, 2019. The decrease of $0.7 million was primarily due to lower sales to international customers offset by an increase in sales pursuant to the Company’s contract with DaVita Inc. Net sales of Triferic were $0.3 million for the nine months ended September 30, 2019 compared to $0.2 million for the nine months ended September 30, 2018. For each of the nine months ended September 30, 2019 and September 30, 2018, Triferic net sales included approximately $0.2 million of deferred revenue recognized under the Company’s license in the People’s Republic of China with Wanbang Biopharmaceutical. Triferic net sales for the nine months ended September 30, 2019 also included approximately $112,000 of Triferic product sales to U.S. customers.

Gross Profit (Loss)

Cost of sales during the nine months ended September 30, 2019 was $44.1 million, resulting in gross profit of $1.7 million during the nine months ended September 30, 2019, compared to cost of sales of $49.3 million and a gross loss of $2.8 million during the nine months ended September 30, 2018. Gross profit increased by $4.5 million during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, due primarily to a non-cash charge taken for an inventory reserve for Triferic of $8.3 million for the nine months ended September 30, 2018, partially offset by a gross profit decrease of $1.2 million in our dialysis concentrates products. The decrease in gross profit for our dialysis concentrates products was primarily attributable to increased labor, materials and overhead costs.

Selling and Marketing Expense

Selling and Marketing Expenses were $7.2 million during the nine months ended September 30, 2019 compared with $0.7 million during the nine months ended September 30, 2018. The increase of $6.5 million was due to the investments the Company made in developing a commercial platform to support the commercial launch of Triferic, which included $3.4 million in marketing costs and $2.8 million in hiring, training and educating new employees.

General and Administrative Expense

General and administrative expenses were $16.3 million during the nine months ended September 30, 2019 compared with $14.5 million during the nine months ended September 30, 2018. The $1.8 million increase was driven primarily by increases to stock compensation, insurance premium expense, annual reporting and consulting fees; offset by a decrease legal and related costs associated with various matters, including litigation activities, related to the departure of certain executives and directors during 2018.

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Research and Product Development Expense

Research and product development expenses were $4.9 million for the nine months ended September 30, 2019 compared with $4.0 million during the nine months ended September 30, 2018. The increase of $0.9 million was due to the Company’s commitment to investing in and building its medical capabilities mentioned above, including generating data from studies and real-world use of Triferic to support medical education and development efforts for Triferic, as well as the expansion of the Company’s internal medical affairs staff. The Company expects its research and product development expenses to increase in the future due to additional clinical development of Dialysate and I.V. Triferic, including the pediatric clinical trial for Triferic, and investments we are making in our medical platform to support medical education efforts and the collection and analysis of real-world data for Triferic.

Settlement Expense

Settlement Expense was $0.4 million for the nine months ended September 30, 2019, compared to $1.0 million in for the nine months ended September 30, 2018. Settlement Expense for the nine months ended September 30, 2018 reflected the terms of the confidential settlement agreement and mutual release entered into with the Company’s former CEO, former CFO and a former and then current director. Settlement Expense for the third quarter of 2019 reflected the Company’s contribution of the Settlement Amount relating to the consolidated class action. See Note 16 on the condensed consolidated financial statements herein for more detail.

Other Income, Net

Other income for each of the nine months ended September 30, 2019 and 2018 was $0.3 million, respectively. The amounts consist primarily of interest income.

Liquidity and Capital Resources

As of September 30, 2019, we had approximately $29.0 million of cash, cash equivalents and investments available-for-sale, and working capital of $28.2 million. Net cash used in operating activities for the nine months ended September 30, 2019 was approximately $21.9 million. On June 20, 2019, the Company closed a public offering of 5,833,334 shares of common stock at a price of $3.00 per share. On July 9, 2019, the underwriters of the public offering partially exercised their over-allotment option to purchase an additional 425,800 shares of common stock at a price of $3.00 per share, which closed on July 11, 2019.

On March 22, 2019, the Company entered into a 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 up to $40,000,000. In April 2019, the Company sold 437,043 shares of its common stock pursuant to the Sales Agreement for gross proceeds of $2,296,235, at a weighted average selling price of approximately $5.25. The Company did not issue an shares of common stock pursuant to the Sales Agreement during the third quarter of 2019. As of September 30, 2019, approximately $37.7 million was available for issuance under the Sales Agreement. We are not required to sell any shares at any time during the term of the facility. Our ability to sell common stock under the facility may be limited by several factors, including, among other things, the trading volume of our common stock and certain black-out periods that we may impose upon the facility, among other things.

The Company will require additional capital to sustain its operations and make the investments it needs to execute upon its longer-term business plan, including the commercialization of Dialysate Triferic and I.V. Triferic, if approved, and executing plans for enhancing its medical capabilities and generating additional data for Triferic. If the Company is unable to generate sufficient revenue from its existing long-term business plan, the Company will need to obtain additional

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

General

The actual amount of cash that we will need to execute our business strategy is subject to many factors, including, but not limited to, the expenses and revenue associated with the commercialization and investments we are making in our medical capabilities to support Dialysate Triferic and I.V. Triferic, if approved, in the United States; the timing and magnitude of cash received from drug product sales; and the timing and expenditures associated with the development of Triferic for international markets; and the costs associated with ongoing litigation and investigatory matters.

We may elect to raise capital in the future through one or more of the following: (i) equity and debt raises through the equity and capital markets, though there can be no assurance that we will be able to secure additional capital or funding on acceptable terms, of if at all; and (ii) strategic transactions, including potential alliances and collaborations focused on markets outside the U.S., as well as potential combinations (including by merger or acquisition) or other corporate transactions. In particular, our Baxter Agreement prohibits us from entering into a contract that would encumber the assets used in our concentrate business without the prior written consent of Baxter. Due to the fact that the assets used in our concentrate business currently constitute a substantial portion of the tangible assets we own other than our drug inventory, we may not be able to, or we may find it difficult, to obtain secured debt financing without the consent of Baxter.

We believe that our ability to fund our activities in the long term will be highly dependent upon our ability to successfully commercialize Dialysate Triferic and to obtain regulatory approval for, and successfully launch, I.V. Triferic. Our commercialization of Dialysate Triferic and I.V. Triferic (if approved) is subject to significant risks and uncertainties, including risks we will be successful in the commercialization of Triferic in accordance with our plans. If our commercialization of Dialysate Triferic and/or I.V. Triferic should be delayed for any reason or not proceed in accordance with our plans, we may be forced to implement cost-saving measures that may potentially have a negative impact on our activities and potentially the results of our research and development programs. If our launch of Dialysate Triferic is unsuccessful or our commercial launch does not proceed as planned, we may be unable to secure the additional capital that we will require to continue our research and development activities and operations, which could have a material adverse effect on our business. If we are unable to raise the required capital, we may be forced to curtail all of our activities and, ultimately, cease operations. Even if we are able to raise sufficient capital, such financings may only be available on unattractive terms, or result in significant dilution of shareholders’ interests and, in such event, the market price of our common stock may decline.

Cash Used in Operating Activities

Net cash used in operating activities was $21.9 million for the nine months ended September 30, 2019. The net loss for this period was higher than net cash used in operating activities by $4.9 million, which was primarily attributable to non-cash expenses of $7.2 million, consisting primarily of $3.9 million of stock-based compensation, $1.4 million of amortization of the right to use assets, $1.3 million of inventory reserves, $0.6 million of depreciation and amortization, and a $2.3 million net change in assets and liabilities.

Net cash used in operating activities was $14.6 million for the nine months ended September 30, 2018. The net loss for this period was higher than net cash used in operating activities by $8.1 million, which was primarily attributable to non-cash expenses of $6.6 million, consisting of $3.4 million of inventory reserves, $2.4 million of stock-based compensation, $0.5 million of depreciation and amortization, and $0.2 million of realized losses on sale of investments available-for-sale, offset by a decrease of $3.7 million in inventory related to the destruction of Triferic finished goods inventory, a decrease of $2.1 million in other liabilities related to the reduction in bonus and other payroll accruals, a decrease of $1.7 million in deferred revenue relating to the recognition of revenue from our licensing agreements, an increase of $1.2 million in accounts receivable related to increases in revenue related to our international sales, an increase in accounts payable of $2.7 million, as well as increased legal fee accrued, an increase of $0.7 million related to settlement payable, comprised of the $1.5 million accrued in the third quarter of 2018 for the settlement fee related to the Settlement Agreement between the Company and its former directors and officers, offset by settlement payments of $0.8 million, and a $0.5 million increase due to an insurance settlement receivable related to the Settlement Agreement.

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Cash (Used in) Provided by Investing Activities

Net cash used in investing activities was $4.9 million during the nine months ended September 30, 2019. The net cash used was primarily due to the purchase of investments available-for-sale of $34.2 million, offset by $30.5 million sale of our available-for-sale investments, $0.4 million for the purchase of equipment and $0.8 million for the purchase of research and development licenses acquired from a related party.

Net cash provided by investing activities was $10.5 million during the nine months ended September 30, 2018. The net cash provided was primarily due to the sale of our available-for-sale investments of $29.6 million, offset by $18.5 million used for the purchase of investments available-for-sale and $0.6 million for the purchase of equipment.

Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities was $18.5 million during the nine months ended September 30, 2019. The net cash provided was primarily due to net proceeds of $17.3 million and $2.1 million from the sale of our common stock, related to our public offering and our at-the market offering, respectively. Net cash used in financing activities was $1,978 during the nine months ended September 30, 2018, for the repurchase of common stock to pay the employee withholding taxes on a stock option exercise in September 2018.

Critical Accounting Policies and Significant Judgements and Estimates

Our critical accounting policies and significant estimates are detailed in our Annual Report on Form 10-K for the year ended December 31, 2018. Our critical accounting policies and significant estimates have not changed from those previously disclosed in our 2018 Annual Report, except for those subjects mentioned in the section of the notes to the condensed consolidated financial statements titled Adoption of Recent Accounting Pronouncements.

Recently issued and adopted accounting pronouncements:

We have evaluated all recently issued accounting pronouncements and believe such pronouncements do not have a material effect our financial statements. See Note 3 of the condensed consolidated financial statements at September 30, 2019.

Item 3.

Not applicable.

Item 4. Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure material information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure. In designing and evaluating the disclosure controls and procedures, we recognized that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Management necessarily was required to apply its judgment in evaluating the cost‑benefit relationship of possible controls and procedures.

Under the supervision of and with the participation of our management, including the Company’s Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2019. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, because of the material weaknesses in our internal controls over financial reporting described in our December 31, 2018 Annual Report, our disclosure controls and procedures were not effective. Notwithstanding the material weaknesses, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, have concluded that the condensed consolidated financial statements as of September 30, 2019, are fairly stated, in all material respects, in accordance with generally accepted accounting principles in the United States for each of the periods presented herein.

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In connection with the material weaknesses, management has taken a number of steps with the intention of remediating the control deficiencies. We continue to implement enhanced procedures and controls to remediate our material weaknesses in internal control over financial reporting.

Changes in Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. We maintain internal control over financial reporting designed to provide reasonable, but not absolute, assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

We continue to make further improvements to our internal controls over financial reporting, in addition to the improvements developed in 2018. During nine months ended September 30, 2019 and through the date of this report, we implemented the following:

Hired staff required to address and improve financial and information technology capabilities, including (i) a Vice President, Corporate Controller and Principal Accounting Officer; (ii) an internal audit consultant; and (iii) a Manager of Information Technology.

Developed our preliminary 2019 audit program, which includes an in-house audit of entity level and IT general controls.

Implemented new programs and policies to provide improved control over the accounting for discretionary bonuses and stock-based compensation.

Updated our process of obtaining information for calculation of our inventory reserves, including a comprehensive sales and operations planning process.

Migrated the hosting of our ERP system and performed testing of the system before and after the completion of the migration.

Preparation of our SEC reporting on Form 10-Q for the quarter ended September 30, 2019, was completed by our Principal Accounting Officer, supported by internal and external resources.

The remediation of the material weaknesses is among our highest priorities. Our Audit Committee continually assesses the progress and sufficiency of these initiatives and make adjustments as and when necessary. As of the date of this report, our management believes that our efforts, when completed, will remediate the material weaknesses in internal control over financial reporting. However, there can be no assurance that our efforts will result in remediation of the material weaknesses in internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The disclosure set forth above in Note 16 (Commitments and Contingencies – Litigation) to our unaudited condensed consolidated financial statements is incorporated herein by reference.

Additionally, we are involved in certain other legal proceedings from time to time before various courts and governmental agencies. We cannot predict the final disposition of such proceedings. We regularly review legal matters and record provisions for claims that are considered probable of loss. The resolution of these pending proceedings is not expected to have a material effect on our operations or consolidated financial statements in the period in which they are resolved.

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Item 1A. Risk Factors

Other than those set forth below, there have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2018 under “Item 1A — Risk Factors”.

We have limited capital resources and will likely need additional funding before we are able to achieve profitability. If we are unable to raise additional capital on attractive terms, or at all, we may be unable to sustain our operations.

We have limited capital resources, a cumulative deficit of approximately $299.2 million since inception and expect to incur further losses for the foreseeable future. As of September 30, 2019, we had approximately $29.0 million of cash, cash equivalents and investments available-for-sale, and working capital of $28.2 million. Net cash used in operating activities for the nine months ended September 30, 2019 was approximately $21.9 million. On June 20, 2019, the company closed a public offering of 5,833,334 shares of common stock at a price of $3.00 per share. On July 9, 2019, the underwriters of the public offering partially exercised their over-allotment option to purchase an additional 425,800 shares of common stock at a price of $3.00 per share, which closed on July 11, 2019.

On March 22, 2019, the Company entered into a 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 up to $40,000,000. We are not required to sell any shares at any time during the term of the facility. Our ability to sell common stock under the facility may be limited by several factors, including, among other things, the trading volume of our common stock and certain black-out periods that we may impose upon the facility, among other things.

The Company’s recurring operating losses, net operating cash flow deficits, and an accumulated deficit, raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the accompanying consolidated financial statements. The consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has not made any adjustments to the accompanying consolidated financial statements related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company will require additional capital to sustain its operations and make the investments it needs to execute upon its longer-term business plan, including the launch of dialysate Triferic and I.V. Triferic. If the Company is unable to generate sufficient revenue from its existing long-term business plan, the Company will need to obtain additional equity or debt financing. If the Company attempts to obtain additional debt or equity financing, the Company cannot assume that such financing will be available on favorable terms, if at all.

Because we may be unable to complete our development, manufacturing and commercialization of our products, we could face significant harm to our business plans, prospects, results of operations, financial condition and liquidity.

Commercializing Dialysate Triferic depends on a number of factors, including but not limited to:

further product and manufacturing process development;

completion, refinement and management of our supply chain and distribution channels;

regulatory requirements for clinical information;

differentiation of our products from competitive therapies, including those in development by other companies;

demonstration of efficiencies that will make our products attractively priced; and

development of an adequate sales force and sales channels necessary to distribute our products and achieve our desired revenue goals.

We cannot commercialize I.V. Triferic unless and until we receive FDA approval of our planned NDA submission for this drug. Even if the FDA approves I.V. Triferic for commercialization, the degree of success in

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commercializing this drug will depend upon our ability to receive add-on reimbursement status, such as through the TDAPA program. Under the 2020 Final Rule published by CMS in October 2019, it appears that I.V. Triferic is not be eligible for add-on reimbursement, meaning I.V. Triferic would be required to be sold within the bundled payment for dialysis treatment, if approved. This could significantly limit the overall commercial opportunity in the United States for I.V. Triferic.

We cannot assure investors that the strategies we intend to employ will enable us to support the manufacture, distribution and selling of Dialysate Triferic or I.V. Triferic (if approved). If we are unable to implement the necessary steps of our business plan, our prospects, results of operations and financial condition will suffer.

Our business and operations would suffer in the event of a security breach, system failure, invasion, corruption, destruction or interruption of our or our business partners’ critical information technology systems or infrastructure.

In the ordinary course of business, we and our business partners store sensitive data, including intellectual property and proprietary information related to our business, our customers and our business partners, on our information technology systems. Despite the implementation of security measures, these systems are vulnerable to damage from computer viruses, unauthorized access, cyber-attacks, natural disasters, terrorism, war and telecommunication, electrical and other system failures due to employee error, malfeasance or other disruptions. We could experience a business interruption, intentional theft of confidential information or reputational damage, including damage to key customer and partner relationships, from system failures, espionage attacks, malware, ransomware or other cyber-attacks. Such cyber-security breaches may compromise our system infrastructure or lead to data leakage, either internally or at our contractors or consultants. In particular, system failures or cyber-security breaches could result in the loss of nonclinical or clinical trial data from completed, ongoing or planned trials, which could cause delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

The risk of a security breach or disruption, particularly through cyber-attacks, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. We have experienced cyber-security attacks in the past, including attacks targeting our e-mail systems, which to date have not had a material impact on our operations or development programs; however; there is no assurance that such impacts will not be material in the future.

To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees, we could be subject to legal claims or proceedings, liability under laws and regulations governing the protection of health and other personally identifiable information and related regulatory penalties. In any such event, our business, results of operations, financial position and cash flows could be materially adversely affected.

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Item 6. Exhibits

The following documents are filed as part of this report or were previously filed and incorporated herein by reference to the filing indicated. Exhibits not required for this report have been omitted. Our Commission file number is 000-23661.

EXHIBIT INDEX


Exhibit No.		Description

3.1		Restated Articles of Incorporation, as amended as of August 28, 2019 (Company’s Form 8-K filed August 30, 2019)

3.2		Amended and Restated Bylaws (Company’s Form 8-K filed August 30, 2019)

10.1§		Davita Agreement

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

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

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

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Database

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

§Certain confidential portions of this exhibit were omitted by means of marking such portions with asterisks because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed.

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SIGNATURES

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


	ROCKWELL MEDICAL, INC.
	(Registrant)


Date: November 12, 2019		/s/ Stuart Paul
		Stuart Paul
		Chief Executive Officer (Principal Executive Officer)



Date: November 12, 2019		/s/ Angus Smith
		Angus Smith
		Chief Financial Officer (Principal Financial Officer)