Rockwell Medical(RMTI) - 2022 Q1 - Quarterly Report

Part I — Financial Information Item 1. Financial Statements Unaudited Q1 2022 financials show a $7.2 million net loss, $4.8 million stockholders' deficit, and decreased assets Condensed Consolidated Balance Sheets As of March 31, 2022, total assets decreased to $37.4 million, resulting in a $4.8 million stockholders' deficit Condensed Consolidated Balance Sheets (in thousands) | | March 31, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and Cash Equivalents | $9,914 | $13,280 | | Investments Available-for-Sale | $0 | $9,158 | | Total Current Assets | $24,797 | $35,288 | | Total Assets | $37,436 | $48,574 | | Liabilities and Stockholders' (Deficit) Equity | | | | Total Current Liabilities | $19,595 | $20,966 | | Total Liabilities | $42,243 | $46,039 | | Total Stockholders' (Deficit) Equity | $(4,807) | $2,535 | | Total Liabilities and Stockholders' Equity | $37,436 | $48,574 | Condensed Consolidated Statements of Operations Q1 2022 net sales increased to $16.1 million, but higher costs resulted in a $0.8 million gross loss and $7.2 million net loss Q1 2022 vs Q1 2021 Statement of Operations (in thousands, except per share data) | | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net Sales | $16,124 | $15,473 | | Cost of Sales | $16,910 | $15,072 | | Gross (Loss) Profit | $(786) | $401 | | Operating Loss | $(6,626) | $(7,182) | | Net Loss | $(7,162) | $(7,752) | | Basic and Diluted Net Loss per Share | $(0.84) | $(0.91) | Condensed Consolidated Statements of Cash Flows Q1 2022 net cash used in operations was $9.8 million, with $9.1 million from investing, resulting in a $3.4 million net decrease Q1 2022 vs Q1 2021 Cash Flow Summary (in thousands) | | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Cash Used In Operating Activities | $(9,812) | $(12,495) | | Cash Provided By (Used In) Investing Activities | $9,133 | $(512) | | Cash Used In Financing Activities | $(2,687) | $0 | | Decrease in Cash and Cash Equivalents | $(3,366) | $(13,007) | | Cash and Cash Equivalents at End of Period | $9,914 | $35,675 | Notes to Condensed Consolidated Financial Statements Notes highlight liquidity challenges, going concern doubt, and management's plans including a DaVita agreement and reverse stock split - The company is a commercial-stage biopharmaceutical firm with two main business lines: its proprietary FPC iron deficiency platform (Triferic, Triferic AVNU) and being the second-largest supplier of hemodialysis concentrates in the U.S[25][26][27] - Significant net losses, an accumulated deficit of $377.2 million, and inflationary pressures on its concentrates business raise substantial doubt about the company's ability to continue as a going concern[28][29] - To address liquidity issues, the company amended a supply agreement with DaVita for better pricing, secured a $15 million equity investment commitment from DaVita (first $7.5M tranche funded post-quarter), and initiated an 'at-the-market' offering of up to $12.2 million[30][31][129] - A 1-for-11 reverse stock split was effected on May 13, 2022, to regain compliance with Nasdaq's minimum bid price requirement. All share and per-share data have been retroactively adjusted[46][132][133] - The company has a $35.0 million term loan facility with Innovatus, with $18.4 million outstanding as of March 31, 2022. The loan is subject to financial covenants, including minimum liquidity and Triferic sales thresholds, with which the company was in compliance[117][122][125] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses FPC platform expansion and concentrates profitability, addressing Q1 2022 results and ongoing 'going concern' risks Overview and Recent Developments Strategy focuses on FPC platform expansion and concentrates business improvement, supported by a DaVita agreement and reverse stock split - The company's strategy is to expand its FPC technology platform into new therapeutic areas, such as home infusion and acute heart failure, while improving the efficiency and profitability of its legacy concentrates business[147][148][150] - On April 6, 2022, the company entered into a strategic arrangement with DaVita to stabilize its concentrates business through better pricing, cost-sharing, and a commitment from DaVita to invest up to $15 million in preferred stock[157] - A 1-for-11 reverse stock split was effected on May 13, 2022, to address non-compliance with Nasdaq's minimum bid price rule[146] Results of Operations Q1 2022 net sales rose 4.2% to $16.1 million, but inflation led to a $0.8 million gross loss despite reduced operating expenses Q1 2022 vs Q1 2021 Operating Results (in thousands) | | For the Three Months Ended March 31, 2022 | For the Three Months Ended March 31, 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $16,124 | $15,473 | 4.2% | | Gross (Loss) Profit | $(786) | $401 | (296.0)% | | Research and Product Development | $1,567 | $1,809 | (13.4)% | | Selling and Marketing | $455 | $1,851 | (75.4)% | | General and Administrative | $3,818 | $3,923 | (2.7)% | | Operating Loss | $(6,626) | $(7,182) | (7.7)% | - Gross profit decreased by $1.2 million to a gross loss, primarily due to significant inflationary pressures impacting the concentrates business. The company expects margins to improve following the renegotiated contract with DaVita[162] - Selling and marketing expenses decreased by $1.4 million (75.4%) due to reduced marketing spend for Triferic products and a reduction in headcount[164] Liquidity and Capital Resources Substantial doubt exists about the company's going concern ability due to losses, with management's plans including a DaVita agreement and capital raising - The company's history of significant net losses and an accelerated operating loss in its concentrates business due to inflation raise substantial doubt about its ability to continue as a going concern[168][169] - Management's plan to address the going concern issue includes the amended DaVita agreement, a $15M equity investment from DaVita (contingent on raising an additional $15M by June 30, 2022), a $12.2M 'at-the-market' stock offering, and cost-cutting measures[170][171][172] - Net cash used in operating activities was $9.8 million for Q1 2022. Cash was provided by investing activities ($9.1 million) through the liquidation of all available-for-sale investments[180][181] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a Smaller Reporting Company, Rockwell Medical, Inc. is not required to provide disclosure for this item - The Company is designated a Smaller Reporting Company and is not required to provide the disclosure required by this Item[189] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal controls - Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2022[191] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[192] Part II — Other Information Item 1. Legal Proceedings No legal proceedings are expected to materially affect the company's financial condition or operations - The company is not involved in any legal proceedings expected to have a material effect on its financial condition or operations[194] Item 1A. Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K - There have been no material changes to the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2021[195] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None - None[196] Item 6. Exhibits Exhibits filed include the Certificate of Amendment for the reverse stock split and the DaVita Securities Purchase Agreement - Exhibits filed include amendments to the Certificate of Incorporation for the reverse stock split, the Securities Purchase Agreement with DaVita, and CEO/CFO certifications[200][201]