Rockwell Medical (RMTI) 10-Q2022 Q1 Quarterly report

United States

SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

Rockwell Medical, Inc. ("Rockwell Medical," "Rockwell", or the "Company") is a commercial-stage, biopharmaceutical company developing and commercializing our next-generation parenteral iron technology platform, ferric pyrophosphate citrate (“FPC”), which we believe has significant potential to lead to transformative treatments for iron deficiency in multiple disease states, that we believe could reduce healthcare costs and improve patients’ lives. We are also one of the two major suppliers of life saving hemodialysis concentrate products to kidney dialysis clinics in the United States.

We have two novel, FDA approved therapies, Triferic and Triferic AVNU, which are the first two products developed from our FPC platform. We market both products to kidney dialysis centers for their patients receiving dialysis. In late 2021, we filed an IND with the United States Food and Drug Administration ("FDA") with the goal to advance our FPC platform strategy by conducting a Phase II trial for the treatment of iron deficiency anemia in patients outside of dialysis, who are receiving intravenous ("IV") medications in the home infusion setting. The trend toward providing medical care, including the delivery of infused medications, at home make the home infusion market a rapidly growing area of healthcare. We believe the home infusion setting is a natural path for expansion of our platform as many of the patients suffer from diseases associated with iron deficiency and anemia. In our R&D pipeline, we are also investigating FPC’s impact in the treatment of hospitalized patients with acute heart failure.

We are the second largest supplier of hemodialysis concentrates in the United States, with a reputation for excellent service, quality, and reliability. We believe this reputation, which is based on over 25 years of service to kidney dialysis centers, combined with about $60 million in annual revenue, approximately 300 dedicated employees, expertise in manufacturing and logistics and the added expertise in pharmaceutical development and commercialization brought to the Company by recent additions to our management team, gives us a solid foundation on which to grow.

Since inception, the Company has incurred significant net losses and has funded its operations primarily through revenue from commercial products, proceeds from the issuance of debt and equity securities and payments from partnerships. At March 31, 2022, Rockwell had an accumulated deficit of approximately $377.2 million and a stockholders' deficit of $4.8 million. As of March 31, 2022, Rockwell had approximately $9.9 million of cash and cash equivalents and working capital of $5.2 million. Net cash used in operating activities for the three months ended March 31, 2022 was approximately $9.8 million.

The Company has experienced significant inflationary pressures in its dialysis concentrates business, particularly within the last six months, which have resulted in an accelerated operating loss associated with this business line. These factors raise substantial doubt about the Company’s ability to continue as a going concern and depend, in part, on the degree of success in the Company's ability to address inflationary pressures affecting the concentrates business, as well as the Company’s ability to contain costs, raise additional working capital and remain in compliance with financial and operating covenants under the Company’s secured loan. Managements plans are described below.

On April 6, 2022, the Company entered into an amendment to one of its supply agreements to restructure the supply relationship, which management expects to result in improved financial performance of the Company's concentrate business. The Company also entered into an equity investment agreement with one of the contracting parties for an investment of up to $15 million in two tranches of $7.5 million each. The first tranche of $7.5 million was funded on April 7, 2022. The second $7.5 million tranche is to be funded subject to the Company raising $15 million in additional capital by June 30, 2022.

On April 8, 2022, 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 up to $12,200,000 of shares of Company’s common stock through the Agent. The offering and sale of such shares has been registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Company’s Registration Statement on Form S-3 (File No. 333-259923) (the “Registration Statement”), which was originally filed with the Securities and Exchange Commission (“SEC”) on September 30, 2021 and declared effective by the SEC on October 8, 2021, the base prospectus contained within the Registration Statement, and a prospectus supplement that was filed with the SEC on April 8, 2022.

The Company has started to implement cost cutting measures as noted in previous filings focusing mainly within sales and marketing. The Company expects it will require additional capital to sustain its operations and make the investments it

needs to execute its strategic plan in developing FPC for iron deficiency anemia in patients undergoing home infusion and for progressing our pipeline development program of new indications for our FPC platform. If the Company is unable to generate sufficient cash flows from operations as described above or obtain additional equity or debt financing, the Company intends to implement further cost cutting measure which may include headcount reduction across multiple areas and reductions in general and administrative expenses. Based on these plans, Management believes the substantial doubt about the Company’s ability to continue as a going concern has been alleviated. 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.

Currently, because the Company's public float is less than $75 million, we are subject to the baby shelf limitations under our current registration statement on Form S-3, which limit the amount we may offer under our Form S-3. This could limit our ability to raise capital under this registration statement.

As previously reported, on June 11, 2021, the Company received written notice (the "Notification Letter") from the Nasdaq Stock Market ("Nasdaq") notifying the Company that it is not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5450(a)(1) for continued listing on the Nasdaq Global Market. Nasdaq Listing Rule 5450(a)(1) requires listed securities maintain a minimum closing bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum closing bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. Based on the closing bid price of the Company's common stock for the 30 consecutive business days prior to the date of the Notification Letter, the Company did not meet the minimum closing bid price requirement. The Notification Letter provided for 180 calendar days, or until December 8, 2021, for the Company to regain compliance with Nasdaq Listing Rule 5450(a)(1). To regain compliance, the closing bid price of the Company’s common stock must be at least $1.00 per share for a minimum of 10 consecutive business days at any time prior to December 8, 2021. The Company was not able to meet the minimum compliance requirements set forth by Nasdaq by December 8, 2021.

On December 9, 2021, the Company received a written notice from Nasdaq indicating that the Company’s application to transfer its listing venue from The Nasdaq Global Market to The Nasdaq Capital Market for its common stock had been approved. The Company’s common stock commenced trading on The Nasdaq Capital Market at the opening of business on December 10, 2021 under the symbol “RMTI.”

Also on December 9, 2021, the Company received written notice that Nasdaq has determined the Company is eligible for an additional 180-day extension, or until June 6, 2022, to regain compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. To regain compliance, the closing bid price of the Company’s common stock must be at least $1.00 per share for a minimum of 10 consecutive business days at any time prior to June 6, 2022. On May 13, 2022, the Company effected a reverse stock split in order to regain compliance with the minimum bid price requirement (see Note 3 for further detail).

In addition, the Company is subject to certain covenants and cure provisions under its Loan Agreement with Innovatus. As of the date of this report, the Company believes it will either be able to satisfy such covenants or, in the event of a breached covenant, exercise cure provisions to avoid an event of default. If Rockwell is unable to avoid an event of default, any required repayments could have an adverse effect on its liquidity (See Note 14 for further detail).

The COVID-19 pandemic and resulting global disruptions, particularly in the supply chain and labor market, among other areas, have adversely affected our business and operations, including, but not limited to, our sales and marketing efforts and our research and development activities, our plant and transportation operations and the operations of third parties upon whom we rely. Further, any vaccine hesitancy among our labor force could disrupt our business if workers become ill or need to quarantine due to illness or exposure to the virus. The Company's international business development activities may also continue to be negatively impacted by COVID-19.

The COVID-19 pandemic, the domestic and international surge in infections and resulting global disruptions have caused significant volatility in financial and credit markets. Rockwell has utilized a range of financing methods to fund its operations in the past; however, current conditions in the financial and credit markets may limit the availability of funding, refinancing or increase the cost of funding. Due to the rapidly evolving nature of the global situation, it is not possible to predict the extent to which these conditions could adversely affect the Company's liquidity and capital resources in the future.

The accompanying condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to

the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the U. S. Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements.

The condensed consolidated balance sheet at March 31, 2022, condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021, condensed consolidated statements of comprehensive loss for the three months ended March 31, 2022 and 2021, condensed consolidated statement of changes in stockholders' equity for the three months ended March 31, 2022 and 2021, and condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 are unaudited, but include all adjustments, consisting of normal recurring adjustments, the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The results for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022 or for any future interim period. The condensed consolidated balance sheet at December 31, 2021 has been derived from audited financial statements, however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2021 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as filed with the SEC on April 8, 2022. The Company’s consolidated subsidiaries consisted of its wholly-owned subsidiaries, Rockwell Transportation, Inc. and Rockwell Medical India Private Limited.

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

On May 9, 2022, the stockholders of the Company authorized our Board of Directors to effect a reverse stock split of all outstanding shares of common stock. The Board of Directors subsequently approved the implementation of a reverse stock split as a ratio of one-for-eleven shares, which became effective on May 13, 2022. The Company’s outstanding stock options were also adjusted to reflect the one-for-eleven reverse stock split of the Company’s common stock. Outstanding stock options were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased. The reverse stock split resulted in an adjustment to the Series X convertible preferred stock conversion prices to reflect a proportional decrease in the number of shares of common stock to be issued upon conversion. All share and per share data in these condensed consolidated financial statements and related notes hereto have been retroactively adjusted to the account for the effect of the reverse stock split for the three month periods ended March 31, 2022 and 2021, respectively, and the balance sheet at March 31, 2022 and December 31, 2021.

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

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.

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:

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

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.

The following is a description of principal activities from which the Company generates its revenue.

products and services based on their stand-alone selling prices. The stand-alone selling prices are determined based on the cost plus margin approach.

Drug and dialysis concentrate products are sold directly to dialysis clinics and to wholesale distributors in both domestic and international markets. Distribution and license agreements for which upfront fees are received are evaluated upon execution or modification of the agreement to determine if the agreement creates a separate performance obligation from the underlying product sales.  For all existing distribution and license agreements, the distribution and license agreement is not a distinct performance obligation from the product sales.  In instances where regulatory approval of the product has not been established and the Company does not have sufficient experience with the foreign regulatory body to conclude that regulatory approval is probable, the revenue for the performance obligation is recognized over the term of the license agreement (over time recognition). Conversely, when regulatory approval already exists or is probable, revenue is recognized at the point in time that control of the product transfers to the customer.

The Company received upfront fees under 5 distribution and license agreements that have been deferred as a contract liability.  The amounts received from Wanbang Biopharmaceuticals Co., Ltd. (“Wanbang”), Sun Pharmaceutical Industries Ltd. ("Sun Pharma"), Jeil Pharmaceutical Co., Ltd. ("Jeil Pharma") and Drogsan Pharmaceuticals ("Drogsan Pharma") are recognized as revenue over the estimated term of the applicable distribution and license agreement as regulatory approval was not received and the Company did not have sufficient experience in China, India, South Korea and Turkey, respectively, to determine that regulatory approval was probable as of the execution of the agreement.  The amounts received from Baxter Healthcare Corporation (“Baxter”) are recognized as revenue at the point in time that the estimated product sales under the agreement occur. 

For the business under the Company’s Distribution Agreement with Baxter (the “Baxter Agreement”) and for the majority of the Company’s international customers, the Company recognizes revenue at the shipping point, which is generally the Company’s plant or warehouse. For other business, the Company recognizes revenue based on when the customer takes control 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.

Revenue is disaggregated by primary geographical market, major product line, and timing of revenue recognition.

Contract balances

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

For the three months ended March 31, 2022 and March 31, 2021, the Company did not recognize any material bad-debt expense. There were no material contract assets recorded on the condensed consolidated balance sheet as of March 31, 2022 and December 31, 2021.  The Company does not generally accept returns of its concentrate products and no material reserve for returns of concentrate products was established as of March 31, 2022 or December 31, 2021. 

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

For the three months ended March 31, 2022, 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 $7.6 million as of March 31, 2022. The amount relates primarily to upfront payments and consideration received from customers that are received in advance of the customer assuming control of the related products. The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. The Baxter Agreement includes minimum commitments of product sales over the duration of the agreement. Unfulfilled minimum commitments related to the Baxter Agreement are product sales of $4.8 million as of March 31, 2022, which is amortized ratably through expiration of the Baxter Agreement on October 2, 2024.

As of March 31, 2022, all investment available-for-sale securities have been liquidated.

Investments available-for-sale consisted of the following as of December 31, 2021 (table in thousands):

As of December 31, 2021, the amortized cost and estimated fair value of our available-for-sale securities were due within one year.

Components of inventory, net of reserves, as of March 31, 2022 and December 31, 2021 are as follows (table in thousands):

The $1.6 million net value of Triferic inventory consisted of $0.3 million of Triferic (dialysate) finished goods with expiration dates ranging from July 2022 to December 2023, $0.4 million of Triferic API with an estimated useful life extending through 2023, and $0.9 million of raw materials for Triferic with an estimated useful life of 25 years.

As of March 31, 2022 and December 31, 2021, the Company’s property and equipment consisted of the following (table in thousands):

In October 2014, the Company entered into the Baxter Agreement, which has a term of 10 years 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 Distribution Agreement. The Company recognized revenue of approximately $0.5 million for each of the three months ended March 31, 2022 and 2021. Deferred revenue related to the Baxter Agreement totaled $4.8 million as of March 31, 2022 and $5.2 million as of December 31, 2021.

In 2016, the Company entered into a distribution agreement with Wanbang (the "Wanbang Agreement") and received an upfront fee of $4.0 million. The upfront fee was recorded as deferred revenue and is being recognized as revenue based on the agreement term. The Company recognized revenue of approximately $0.1 million during each of the three months ended March 31, 2022 and 2021. Deferred revenue related to the Wanbang Agreement totaled $2.5 million as of March 31, 2022 and December 31, 2021.

In January 2020, the Company entered into license and supply agreements with Sun Pharma (the "Sun Pharma Agreements"), for the rights to commercialize Triferic (dialysate) (ferric pyrophosphate citrate) in India. Under the terms of the Sun Pharma Agreements, Sun Pharma will be the exclusive development and commercialization partner for Triferic (dialysate) in India, and the Company will supply the product to Sun Pharma. In consideration for the license, the Company received an upfront fee of $0.1 million, and will be eligible for milestone payments and royalties on net sales. A Joint Alliance Committee, comprised of members from the Company and Sun Pharma, will guide the development and execution for Triferic (dialysate) in India. Sun Pharma will be responsible for all clinical and regulatory approval, as well as commercialization activities. The upfront fee was recorded as deferred revenue and is being recognized as revenue based on the agreement term. The Company recognized revenue of approximately $2,500 for each of the three months ended March 31, 2022 and 2021. Deferred revenue related to the Sun Pharma Agreement totaled $77,500 and $80,000 as of March 31, 2022 and December 31, 2021, respectively.

In September 2020, the Company entered into a license and supply agreements with Jeil Pharma (the "Jeil Pharma Agreements"), for the rights to commercialize Triferic (dialysate) (ferric pyrophosphate citrate) in South Korea. Under the terms of the Jeil Pharma Agreements, Jeil Pharma will be the exclusive development and commercialization partner for Triferic (dialysate) in South Korea, and the Company will supply the product to Jeil Pharma. In consideration for the license, the Company received an upfront fee of $0.2 million, and will be eligible for milestone payments and royalties on net sales. A Joint Alliance Committee, comprised of members from the Company and Jeil Pharma, will guide the development and execution for Triferic (dialysate) in South Korea. Jeil Pharma will be responsible for all clinical and regulatory approval, as well as commercialization activities. The upfront fee was recorded as deferred revenue and is being recognized as revenue based on the agreement term. The Company recognized revenue of $2,500 for each of the three months ended March 31, 2022 and 2021. Deferred revenue related to the Jeil Pharma Agreement totaled approximately $0.2 million as of March 31, 2022 and December 31, 2021.

In June 2021, the Company entered into license and supply agreements with Drogsan Pharma (the "Drogsan Agreements"), for the rights to commercialize Triferic (dialysate) and Triferic AVNU in Turkey. Under the terms of the

On April 6, 2022, the Company and DaVita Inc. ("DaVita") entered into a Securities Purchase Agreement (the "SPA"), pursuant to which the Company will issue up to $15 million of preferred stock to DaVita. On April 6, 2022, the Company issued 7,500 shares of a newly designated series of preferred stock, which is designated “Series X Convertible Preferred Stock” (the "Series X Preferred Stock") for gross proceeds of $7.5 million. The Company will issue an additional 7,500 shares of Series X Preferred Stock to DaVita in a second closing (the "Second Tranche") for an additional $7.5 million if the Company raises $15 million in additional capital by June 30, 2022.

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

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

As of March 31, 2022 and December 31, 2021, there were 2,000,000 shares of preferred stock, $0.0001 par value per share, authorized and no shares of preferred stock issued and outstanding.

Common Stock

As of March 31, 2022 and December 31, 2021, there were 170,000,000 shares of common stock, $0.0001 par value per share, authorized and 8,544,225 and 8,544,225 shares issued and outstanding, respectively.

The Company recognized total stock-based compensation expense during the three months ended March 31, 2022 and 2021 as follows (table in thousands):

Restricted Stock

A summary of the Company’s service-based restricted stock units during the three months ended March 31, 2022 is as follows:

A summary of the Company’s service-based restricted stock units during the three months ended March 31, 2021 is as follows:

During the three months ended March 31, 2022, the Company granted stock options to purchase up to 909 shares of common stock to certain employees. During the three months ended March 31, 2022, 14,839 shares were forfeited and 3,545 shares expired. Forfeitures are recorded in the period of occurrence; compensation expense is adjusted accordingly.

Stock-based compensation expense recognized for service-based stock options was $0.2 million and $0.4 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, total stock-based compensation expense related to unvested options not yet recognized totaled approximately $1.0 million, which is expected to be recognized over an estimated weighted average remaining term of 3.1 years.

The Company is a party to a Licensing Agreement between the Company and Charak, LLC ("Charak") dated January 7, 2002 (the "2002 Agreement") that grants the Company exclusive worldwide rights to certain patents and information related to our Triferic® product. On October 7, 2018, the Company entered into a Master Services and IP Agreement (the “Charak MSA”) with Charak and Dr. Ajay Gupta, a former Officer of the Company. Pursuant to the MSA, the parties entered into 3 additional agreements described below related to the license of certain soluble ferric pyrophosphate (“SFP”) intellectual property owned by Charak. As of March 31, 2022, the Company has accrued $86,400 relating to certain IP reimbursement expenses and certain sublicense royalty fees and is included within accrued liabilities 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 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 sublicensee 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 sublicensee in jurisdictions where there exists no valid claim, on a country-by-country basis.

Also pursuant to the Charak MSA, the Company and Charak entered into a Commercialization and Technology License Agreement 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 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 sublicensee in jurisdictions where there exists a valid claim, on a country-by-country basis, and not be less than a lower rate of the net sales of the licensed products by the sublicensee in jurisdictions where there exists no valid claim, on a country-by-country basis.

Also pursuant to the Charak MSA, the Company and Charak entered into a Technology License Agreement TPN Triferic®, dated as of October 7, 2018 (the “TPN Agreement”), pursuant to which Charak granted the Company an exclusive, sublicensable, royalty-bearing license to SFP for the purpose of commercializing worldwide certain TPN products incorporating SFP. The license grant under the TPN Agreement continues for a term that expires on the later of February 1, 2034 or upon the expiration or termination of a valid claim of a licensed patent. During the term of the TPN Agreement, the Company is liable to pay Charak a base royalty on net sales and an additional royalty on net sales while there exists a valid claim of a licensed patent, on a country-by-country basis. The Company shall also pay to Charak a percentage of any sublicense income received during the term of the TPN Agreement, which amount shall not be less than a minimum royalty on net sales of the licensed products by the sublicensee in jurisdictions where there exists a valid claim, on a country-by-country basis, and not be less than a lower rate of the net sales of the licensed products by the sublicensee in jurisdictions where there exists no valid claim, on a country-by-country basis.

The potential milestone payments are not yet considered probable, and no milestone payments have been accrued at March 31, 2022.

Rockwell leases its production facilities and administrative offices as well as certain equipment used in its operations including leases on transportation equipment used in the delivery of its products. The lease terms range from monthly to seven years. Rockwell occupies a 51,000 square foot facility and a 17,500 square foot facility in Wixom, Michigan under a lease expiring in August 2024. Rockwell also occupies two other manufacturing facilities, a 51,000 square foot facility in Grapevine, Texas under a lease expiring in December 2025, and a 57,000 square foot facility in Greer, South Carolina under a lease expiring February 2023. In addition, Rockwell occupies 4,100 square feet of office space in Hackensack, New Jersey under a lease expiring on October 31, 2024. This lease was subleased on December 15, 2021 with an expiration date of October 31, 2024.

At March 31, 2022, the Company had operating and finance lease liabilities of $7.4 million and right-of-use assets of $7.2 million, which are included in the consolidated balance sheet.

At December 31, 2021, the Company had operating lease liabilities of $7.9 million and right-of-use assets of $7.7 million, which are included in the consolidated balance sheet.

On March 16, 2020, the Company and Rockwell Transportation, Inc., as Borrowers, entered into a Loan and Security Agreement (the "Loan Agreement") with Innovatus Life Sciences Lending Fund I, LP ("Innovatus"), as collateral agent and the lenders party thereto, pursuant to which Innovatus, as a lender, agreed to make certain term loans to the Company in the aggregate principal amount of up to $35.0 million (the "Term Loans"). Funding of the first $22.5 million tranche was completed on March 16, 2020. The Company is no longer eligible to draw on a second tranche of $5.0 million, which was tied to the achievement of certain milestones by a specific date. The Company may be eligible to draw on a third tranche of $7.5 million

upon the achievement of certain additional milestones, including the achievement of certain Triferic sales thresholds. Net draw down proceeds were $21.2 million with closing costs of $1.3 million.

In connection with each funding of the Term Loans, the Company is required to issue to Innovatus a warrant (the “Warrants”) to purchase a number of shares of the Company’s common stock equal to 3.5% of the principal amount of the relevant Term Loan funded divided by the exercise price, which will be based on the lower of (i) the volume weighted average closing price of the Company’s stock for the 5-trading day period ending on the last trading day immediately preceding the execution of the Loan Agreement or (ii) the closing price on the last trading day immediately preceding the execution of the Loan Agreement (or for the second and third tranches only at the lower of (i) $18.15 per share or (ii) the volume weighted average closing price of the Company’s stock for the 5-trading day period ending on the last trading day immediately preceding the relevant Term Loan funding). The Warrants may be exercised on a cashless basis and are immediately exercisable through the seventh anniversary of the applicable funding date. The number of shares of common stock for which each Warrant is exercisable and the associated exercise price are subject to certain proportional adjustments as set forth in such Warrant. In connection with the first tranche of the Term Loans, the Company issued a Warrant to Innovatus, exercisable for an aggregate of 43,388 shares of the Company’s common stock at an exercise price of $18.15 per share. The Company evaluated the warrant under ASC 470, Debt, and recognized an additional debt discount of approximately $0.5 million based on the relative fair value of the base instruments and warrants. The Company calculated the fair value of the warrant using the Black-Scholes model.

The Company is entitled to make interest-only payments for thirty months, or up to thirty-six months if certain conditions are met. The Term Loans will mature on March 16, 2025, and will bear interest at the greater of (i) Prime Rate (as defined in the Loan Agreement) and (ii) 4.75%, plus 4.00% with an initial interest rate of 8.75% per annum and an effective interest rate of 10.9%. The Company has the option, under certain circumstances, to add 1.00% of such interest rate amount to the then outstanding principal balance in lieu of paying such amount in cash. For the three months ended March 31, 2022 and 2021, interest expense amounted to $0.4 million and $0.6 million, respectively.

The Loan Agreement is secured by all assets of the Company and Rockwell Transportation, Inc. Proceeds are used for working capital purposes. The Loan Agreement contains customary representations and warranties and covenants, subject to customary carve outs, and includes financial covenants related to liquidity and trailing twelve months sales of Triferic, with the latter beginning with the period ending December 31, 2020. The Company cannot assure you that we can maintain compliance with the covenants under our Loan Agreement, which may result in an event of default. The Company's ability to comply with these covenants may be adversely affected by events beyond its control. For example, the Loan Agreement contains certain financial covenants relating to sales and, as a result of the ongoing COVID-19 pandemic and its effect on the Company's sales activities, among other factors, the Company may not be able to satisfy such covenants in the future. If the Company is unable to comply with the covenants under the Loan Agreement, it would pursue all available cure options in order to regain compliance. However, the Company may not be able to mutually agree with Innovatus on appropriate remedies to cure a future breach of a covenant, which could give rise to an event of default. If the Company is unable to avoid an event of default, any required repayments could have an adverse effect on its liquidity.

In September 2021, the Company entered into an amendment to the Loan Agreement in which the Company, in exchange for Innovatus lowering the sales covenants, agreed to (i) prepay an aggregate principal amount of $7,500,000 in 10 installments commencing on December 1, 2021; (ii) pay an additional prepayment premium of 5% on prepaid amounts if the Company elects to prepay all outstanding Term Loans on or before September 24, 2023 and (iii) maintain minimum liquidity of no less than $5,000,000 if the aggregate principal amount of Term Loans is greater than $15,000,000 pursuant to the liquidity covenant in the Loan Agreement.

On March 31, 2022, the Collateral Agent and Lenders consented to the delivery to Collateral Agent and Lenders of its annual audited financial statements for the fiscal year 2021 by April 15, 2022 as opposed to within 90 days of December 31, 2021, as required pursuant to Loan Agreement.

As of March 31, 2022, the Company was in compliance with all covenants under the Loan Agreement.

As of March 31, 2022, the outstanding balance of the Term Loan was $18.4 million, net of unamortized issuance costs and discount of $1.1 million.

The following table reflects the schedule of principal payments on the Term Loan as of March 31, 2022 (in thousands):

On July 3, 2021, the Company entered into a short-term note payable for $2.0 million, bearing interest at 3.93% per annum to finance various insurance policies. Principal and interest payments related to this note began on July 3, 2021 and were paid on a straight-line amortization over 9 months with the final payment due on March 3, 2022. As of March 31, 2022, the Company's insurance note payable was paid in full.

Amended Supply Agreement

The Company has been working to renegotiate certain terms of its supply contracts with the Company’s 2 largest customers in an effort to allow the Company to stabilize its concentrates business. On April 6, 2022, the Company and DaVita entered into an amendment (the "Amendment") to the Products Purchase Agreement, dated July 1, 2019 under which the Company supplies DaVita with certain dialysis concentrates. Under the Amendment, the Company and DaVita agreed to a price increase, effective May 1, 2022, as well as the pass-through of certain inflationary costs, determined on a quarterly basis. Certain costs are subject to a cap. The Amendment also requires the Company to implement certain cost containment and cost-cutting measures.

The Amendment contains certain covenants with respect to the Company’s ongoing operations, including a minimum cash covenant, and the requirement to raise $15 million in additional capital by June 30, 2022. The Amendment also establishes a joint committee that will oversee certain efficiency and cost-savings activities to be undertaken by the Company. Certain cost savings that are realized by the Company will be shared with DaVita in the manner set forth in the Amendment.

Controlled Equity Offering (or "At the Market" Offering)

On April 8, 2022, 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 up to $12,200,000 of shares of Company’s common stock through the Agent. The offering and sale of such shares has been registered under the Securities Act of 1933, as amended, pursuant to the Company’s Registration Statement on Form S-3 (File No. 333-259923) (the “Registration Statement”), which was originally filed with the SEC on September 30, 2021 and declared effective by the SEC on October 8, 2021, the base prospectus contained within the Registration Statement, and a prospectus supplement that was filed with the SEC on April 8, 2022.

On May 9, 2022, the Company's Board of Directors approved the reverse stock split at the ratio of 1-for-11 shares. The reverse stock split was approved by the Company's stockholders at the annual meeting of stockholders held on May 9, 2022 at a ratio ranging from 1-for-2 up to a ratio of 1-for-15, such ratio to be determined by the Board of Directors and included in a public announcement.

The reverse stock split will became effective at 12:01 a.m. Eastern Time on May 13, 2022. Rockwell Medical's common stock is expected to begin trading on the Nasdaq Capital Market on a split-adjusted basis on May 13, 2022.

The reverse stock split is primarily intended to bring the Company into compliance with the minimum bid price requirements for maintaining its listing on the Nasdaq Capital Market. The new CUSIP number following the reverse stock split will be 774374300.

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes in “Item 1. Condensed Consolidated Financial Statements”. References in this report to "Rockwell," the “Company,” “we,” “our” and “us” are references to Rockwell Medical, Inc. and its subsidiaries.

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 current 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 ability to continue as a going concern; our ability to develop Ferric Pyrophosphate Citrate ("FPC") for other indications; our ability to successfully execute on our business strategy and development of new indications; our ability to raise additional capital; our ability to regain compliance with Nasdaq Listing Rules and maintain our Nasdaq listing; our ability to renegotiate certain terms of our supply contracts; our ability to successfully implement certain cost containment and cost-cutting measures 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, 2021 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.

Rockwell Medical is a commercial-stage, biopharmaceutical company developing and commercializing our next-generation parenteral iron technology platform, Ferric Pyrophosphate Citrate ("FPC"), which we believe has the potential to lead to transformative treatments for iron deficiency in multiple disease states, reduce healthcare costs and improve patients’ lives. We are also one of the two major suppliers of life-saving hemodialysis concentrate products to kidney dialysis clinics in the United States.

We have two novel, FDA approved therapies, Triferic and Triferic AVNU, which are the first two products developed from our FPC platform. We market both products to kidney dialysis centers for their patients receiving dialysis. In late 2021, we filed an IND with the United States Food and Drug Administration ("FDA") with the goal to advance our FPC platform strategy by conducting a Phase II trial in the second half of 2022 for the treatment of iron deficiency anemia in patients outside of dialysis, who are receiving intravenous ("IV") medications in the home infusion setting. The trend toward providing medical care, including the delivery of infused medications at home, make the home infusion market a rapidly growing area of healthcare. We believe the home infusion setting is a natural path for expansion of our platform as many of the patients suffer from diseases associated with iron deficiency and anemia. In our R&D pipeline, we are also investigating FPC’s impact in the treatment of hospitalized patients with acute heart failure.

At Rockwell Medical, we are dedicated to enhancing the currently sub-optimal standard of care for treatment of iron deficiency in acute and chronic disease by leveraging our proprietary FPC platform technology. Our proprietary drug platform, FPC, is a next-generation parenteral iron therapeutic. We believe our FPC platform has several advantages over other parenteral

iron therapies. Importantly, it provides iron that is immediately bioavailable for critical body processes once it is administered. It has been demonstrated to be safe and well-tolerated, with a safety profile similar to placebo in clinical trials.

We are the second largest supplier of hemodialysis concentrates in the United States, with a reputation for excellent service, quality, and reliability. We believe this reputation, which is based on over 25 years of service to the kidney dialysis centers, combined with approximately $60 million in annual revenue, approximately 300 dedicated employees, expertise in manufacturing and logistics and the added expertise in pharmaceutical development and commercialization brought to the Company by recent additions to our management team, provides us with a solid foundation on which to grow.

Reverse Stock Split

On May 9, 2022, the stockholders of the Company authorized our Board of Directors to effect a reverse stock split of all outstanding shares of common stock, warrants and options. The Board of Directors subsequently approved the implementation of a reverse stock split as a ratio of one-for-eleven shares, which became effective on May 13, 2022. The Company’s outstanding stock options were also adjusted to reflect the one-for-eleven reverse stock split of the Company’s common stock. Outstanding stock options were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased. The reverse stock split resulted in an adjustment to the Series X convertible preferred stock conversion prices to reflect a proportional decrease in the number of shares of common stock to be issued upon conversion. All share and per share data in these condensed consolidated financial statements and related notes hereto have been retroactively adjusted to the account for the effect of the reverse stock split for the three month periods ended March 31, 2022 and 2021, respectively, and the balance sheet at March 31, 2022 and December 31, 2021.

Our strategy is to accelerate Rockwell’s growth by creating and developing pharmaceutical products based on our FPC technology for disease states where patients can benefit the most from an effective treatment for iron deficiency or iron deficiency anemia, while concurrently refining our dialysis business to drive incremental growth and efficiencies. We plan to leverage and build on the foundation provided by our current dialysis business serving kidney dialysis centers by developing a pipeline of additional potential drug therapies in multiple disease states outside of nephrology. We have preliminarily identified three disease states where we believe FPC may have the biggest impact.

Based on further feedback received in December 2021 from the FDA, we have made plans to initiate a Phase 2 clinical study in home infusion patients with iron deficient anemia to confirm the dose and duration of FPC treatment. We expect to commence this study in 2022, subject to having sufficient working capital to fund this study, and would expect to have top-line data from the trial approximately 12-18 months following commencement of the study.

159,000 square feet, located in Michigan, Texas and South Carolina, from which we deliver these products to dialysis clinics throughout most of the United States. We utilize our own delivery fleet as well as third parties. We employ approximately 300 people in the concentrates unit of our dialysis business.

We believe that the Company has earned a reputation for dependability, quality and service within our customer base. This reputation was further strengthened during the recent challenges presented, not only by the COVID-19 pandemic, but also by supply chain disruptions due to recent natural disasters, in which our team has been challenged by hurricanes, flooding and freezing, while still meeting production demands. During the recent shortage in dialysis concentrates, the Company was able to fill the supply gaps for many clinics because they had not received deliveries of certain products from other suppliers.

Despite our market position, we believe our growth opportunities for our concentrates business and Triferic in the U.S. dialysis market are challenged by the consolidated ownership of dialysis clinics, a capitated reimbursement model and the demographics of the dialysis patient population. The two largest dialysis organizations treat approximately 72% of the patients in the United States. One manufactures its own concentrates and IV iron, and we have an existing agreement to supply concentrates to the other. Through our partnership with Baxter Healthcare Corporation, a subsidiary of Baxter International, Inc. ("Baxter"), we currently supply concentrates to a significant percentage of the small and medium sized independent dialysis organizations. In a sector like kidney dialysis, with capitated reimbursement for the dialysis procedure and all included inputs, new product success depends on compelling data demonstrating improved patient outcomes and/or pharmacoeconomics versus the current standard of care in practice in the clinics. Once Medicare determined Triferic and Triferic AVNU would be reimbursed under the fixed bundled rate for dialysis treatment, market adoption became more dependent on the generation of these data, which were not required for the drug's approval by the FDA.

Notwithstanding the growth limitations mentioned above, we continue to believe Triferic has the potential to be an important option for the maintenance of hemoglobin in dialysis patients. To this end, we have continued our efforts in generating real world data in clinics with current protocols, which we believe will help with the adoption of Triferic and Triferic AVNU as these results are developed and disseminated over time. In addition, we are seeking a partner to help us further commercialize Triferic.

A key element of our dialysis business strategy is to also improve the strength of our concentrates business by creating efficiencies and enhancing our manufacturing and transportation operations and to fully recoup manufacturing and shipping expenses so this business has the potential to be profitable. To date, our concentrates business has operated at a loss, with the loss accelerating recently as inflationary pressures have increased our manufacturing and operating costs, while we have limited ability to pass these costs along to certain customers. We undertook discussions with our largest customers to renegotiate our existing supply contracts in an effort to improve the profitability of this business line. On April 6, 2022, we entered into a strategic arrangement with our long-time partner, DaVita, Inc. ("DaVita"), a leading provider of kidney care, to enable the Company to stabilize its concentrates business. The strategic intent of this agreement is to make sure Rockwell Medical is on stable financial footing because it is one of the two major suppliers of dialysis concentrates in the U.S. The amended agreement provides a stronger financial arrangement, encompassing pricing, cost sharing and joint efforts in supply chain improvement and cost cutting, with the goal of having the Company’s concentrates business operate profitably in the future. In addition to the amended agreement, DaVita entered into an agreement pursuant to which it will invest up to $15 million in preferred stock in two equal tranches. The first tranche of $7.5 million was funded on April 7, 2022. The second $7.5 million tranche is to be funded subject to the Company raising $15 million additional capital by June 30, 2022. We are also in discussions with our other major customer to renegotiate certain terms of that agreement. In addition, we are reviewing our entire supply chain to

identify opportunities for improvement, prioritizing initiatives that will have the largest impact on long-term efficiency, profitability and growth.

During the three months ended March 31, 2022, our net sales were $16.1 million compared to net sales of $15.5 million during the three months ended March 31, 2021. The increase of $0.7 million was primarily due to an increase in sales of dialysis concentrates products from Baxter and our international customers. We expect our concentrate sales to continue to grow due to the restructuring of the supply contract with DaVita.

Cost of sales during the three months ended March 31, 2022 was $16.9 million, resulting in gross loss of $0.8 million during the three months ended March 31, 2022, compared to cost of sales of $15.1 million and a gross profit of $0.4 million during the three months ended March 31, 2021. Gross profit decreased by $1.2 million due to significant inflationary pressures related to the concentrates segment. As noted in Note 17 to the condensed consolidated financial statements included elsewhere in this Form 10-Q, the Company has renegotiated certain terms of its supply contract with DaVita Inc. ("DaVita"), one of the Company's largest customers, to be able to pass through a significant portion of inflationary costs and increases in pricing. As a result of these changes, the Company expects an improvement in margins for the remainder of 2022.

Research and product development expenses were $1.6 million and $1.8 million for the three months ended March 31, 2022 and 2021, respectively. Research and product development expenses decreased by $0.2 million due to labor cost reductions. The Company expects research and development costs will increase due to the Company's pipeline initiatives.

Selling and marketing expenses were $0.5 million during the three months ended March 31, 2022, compared with $1.9 million during the three months ended March 31, 2021. The decrease of $1.4 million is due to a decrease in marketing spent for our Triferic products and a headcount reduction.

elsewhere in this Form 10-Q for more information on our debt facility). Other expense for the three months ended March 31, 2021 was $0.6 million of interest expense related to our debt facility.

Since inception, the Company has incurred significant net losses and have funded our operations primarily through revenue from commercial products, proceeds from the issuance of debt and equity securities and payments from partnerships. At March 31, 2022, we had an accumulated deficit of approximately $377.2 million and stockholders' deficit of $4.8 million. As of March 31, 2022, we had approximately $9.9 million of cash and cash equivalents, and working capital of $5.2 million. Net cash used in operating activities for the three months ended March 31, 2022 was approximately $9.8 million.

The Company has experienced significant inflationary pressures in its dialysis concentrates business, particularly within the last six months, which have resulted in an accelerated operating loss associated with this business line. These factors raise substantial doubt about the Company’s ability to continue as a going concern and depend, in part, on the degree of success in the Company's ability to address inflationary pressures affecting the concentrates business, as well as the Company’s ability to contain costs, raise additional working capital and remain in compliance with financial and operating covenants under the Company’s secured loan. Management's plans are described below.

On April 6, 2022, the Company and DaVita entered into an amendment (the "Amendment") to the Products Purchase Agreement, dated July 1, 2019, under which the Company supplies DaVita with certain dialysis concentrates. Under the Amendment, the Company and DaVita agreed to a price increase, effective May 1, 2022, as well as the pass-through of certain inflationary costs, determined on a quarterly basis. Certain costs are subject to a cap. The Amendment also requires the Company to implement certain cost containment and cost-cutting measures. The Amendment contains certain covenants with respect to the Company’s ongoing operations, including a minimum cash covenant of $10 million, or we will be in default under the Products Purchase Agreement. An event of default could result in termination of that agreement. The Company also entered into an equity investment agreement with one of the contracting parties for up to $15 million of investment in two tranches of $7.5 million each. The first tranche of $7.5 million was funded on April 7, 2022. The second $7.5 million tranche is to be funded subject to the Company raising $15 million in additional capital by June 30, 2022. In addition, any debt financing is limited by the terms of our Securities Purchase Agreement with DaVita. Specifically, until DaVita owns less than 50% of its investment, the Company may only incur additional debt in the form of a purchase money loan, a working capital line of up to $5 million or to refinance existing debt, unless DaVita consents.

On April 8, 2022, 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 up to $12,200,000 of Company’s common stock through the Agent. The offering and sale of 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. 333-259923) (the “Registration Statement”), which was originally filed with the SEC on September 30, 2021 and declared effective by the SEC on October 8, 2021, the base prospectus contained within the Registration Statement, and a prospectus supplement that was filed with the SEC on April 8, 2022.

The Company has started to implement cost cutting measures as noted in previous filings focusing mainly within sales and marketing. The Company expects it will require additional capital to sustain its operations and make the investments it needs to execute its strategic plan in developing FPC for iron deficiency anemia in patients undergoing home infusion therapy and for progressing our pipeline development program of new indications for our FPC platform. If the Company is unable to generate sufficient cash flows from operations as described above or obtain additional equity or debt financing, the Company intends to implement further cost cutting measures which may include headcount reductions across multiple areas and reductions in general and administrative expenses. Based on these plans, Management believes the substantial doubt about the Company’s ability to continue as a going concern has been alleviated. If the Company attempts to obtain additional debt or equity financing, the Company cannot assume that such financing will be available on favorable terms, if at all.

In addition, the Company is subject to certain covenants and cure provisions under our Loan Agreement with Innovatus. As of the date of this report, the Company believes it will either be able to satisfy such covenants or, in the event of a breached covenant, exercise cure provisions to avoid an event of default. If we are unable to avoid an event of default, any required repayments could have an adverse effect on our liquidity (See Note 14 to the condensed consolidated financial statements included elsewhere in this Form 10-Q for more information on our debt facility).

The COVID-19 pandemic and resulting domestic and global disruptions have adversely affected our business and operations, including, but not limited to, our sales and marketing efforts and our research and development activities, and the

operations of third parties upon whom we rely. Our international business development activities have also been negatively impacted by COVID-19.

The COVID-19 pandemic and the resulting inflation, surges in infections and resulting global disruptions have caused significant volatility in financial and credit markets. We have utilized a range of financing methods to fund our operations in the past; however, current conditions in the financial and credit markets may limit the availability of funding, refinancing or increase the cost of funding. Due to the rapidly evolving nature of the global situation, it is not possible to predict the extent to which these conditions could adversely affect our liquidity and capital resources in the future.

Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities was $9.1 million during the three months ended March 31, 2022 compared to net cash used in investing activities of $0.5 million for the three months ended March 31, 2021. The net cash provided by investing activities during the three months ended March 31, 2022 was primarily due to sales and purchase of available-for-sale investments during the quarter. All investments available-for-sale have been liquidated as of March 31, 2022.

Net cash used in financing activities was $2.7 million during the three months ended March 31, 2022 compared to the net cash provided by financing activities of nil for the three months ended March 31, 2021. The net cash used during the three months ended March 31, 2022 was primarily due to the payments on the Company's debt and short term note payable.

COVID-19 Impact

The COVID-19 pandemic and resulting global disruptions have caused and may continue to cause significant volatility in financial and credit markets. We have utilized a range of financing methods to fund our operations in the past; however, current conditions in the financial and credit markets may limit the availability of funding or increase the cost of funding. Due to the evolving nature of the global situation, it is not possible to predict the extent to which these conditions could adversely affect our liquidity and capital resources in the future.

Our critical accounting policies and significant estimates are detailed in our Annual Report on Form 10-K for the year ended December 31, 2021. Our critical accounting policies and significant estimates have not changed from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

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 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 March 31, 2022. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2022.

There were no changes in our internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.