UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒
For the quarterly period ended September 30, 2017
☐
For the transition period from ________ to ________
Commission file number 001-34673
CORMEDIX INC.
(Exact Name of Registrant as Specified in Its Charter)
| 20-5894890 | ||
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | ||
| 300 Connell Drive, Suite | 07922 | |
| (Address of Principal Executive Offices) | (Zip Code) |
| (908) 517-9500 |
| (Registrant’s Telephone Number, Including Area Code) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common stock, $0.001 par value | CRMD | The Nasdaq Stock Market LLC |
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Non-accelerated filer | Smaller reporting company | |
| Emerging | ||
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 ☒
The number of shares outstanding of the issuer’s common stock, as of November 7, 2017May 10, 2021 was 67,019,794.
CORMEDIX INC. AND SUBSIDIARY
INDEX
i
PART I
| Item 1. | Unaudited Condensed Consolidated Financial Statements. |
CorMedix Inc. AND SUBSIDIARYSUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 76,214,620 | $ | 41,905,469 | ||||
| Restricted cash | 136,034 | 191,314 | ||||||
| Short-term investments | 4,957,357 | 4,444,072 | ||||||
| Trade receivables | 43,606 | 3,357 | ||||||
| Inventories, net | 85,071 | 143,564 | ||||||
| Prepaid research and development expenses | 69,673 | 62,210 | ||||||
| Security deposit | - | 20,000 | ||||||
| Other prepaid expenses and current assets | 1,550,815 | 1,412,183 | ||||||
| Total current assets | 83,057,176 | 48,182,169 | ||||||
| Property and equipment, net | 112,583 | 111,499 | ||||||
| Restricted cash, long-term | 102,295 | - | ||||||
| Operating lease right-of-use assets | 986,757 | 1,014,635 | ||||||
| TOTAL ASSETS | $ | 84,258,811 | $ | 49,308,303 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 1,500,392 | $ | 1,128,104 | ||||
| Accrued expenses | 1,436,710 | 2,924,351 | ||||||
| Operating lease liabilities, short-term | 112,323 | 109,128 | ||||||
| Total current liabilities | 3,049,425 | 4,161,583 | ||||||
| Operating lease liabilities, net of current portion | 894,319 | 923,708 | ||||||
| TOTAL LIABILITIES | 3,943,744 | 5,085,291 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock - $0.001 par value: 2,000,000 shares authorized; 181,622 and 241,623 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively | 182 | 242 | ||||||
| Common stock - $0.001 par value: 160,000,000 shares authorized; 38,046,092 and 33,558,096 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively | 38,046 | 33,558 | ||||||
| Accumulated other comprehensive gain | 98,826 | 102,006 | ||||||
| Additional paid-in capital | 304,843,806 | 261,536,061 | ||||||
| Accumulated deficit | (224,665,793 | ) | (217,448,855 | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | 80,315,067 | 44,223,012 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 84,258,811 | $ | 49,308,303 | ||||
September 30, 2017 | December 31, 2016 | |
| ASSETS | ||
| Current assets | ||
| Cash and cash equivalents | $5,212,579 | $8,064,490 |
| Restricted cash | 171,553 | 171,553 |
| Short-term investments | 6,796,313 | 12,100,920 |
| Trade receivables | 89,449 | 12,014 |
| Inventories, net | 299,485 | 166,733 |
| Prepaid research and development expenses | 890,704 | 943,924 |
| Other prepaid expenses and current assets | 392,585 | 372,057 |
| Total current assets | 13,852,668 | 21,831,691 |
| Property and equipment, net | 71,036 | 69,695 |
| Security deposit | 5,000 | 5,000 |
| TOTAL ASSETS | $13,928,704 | $21,906,386 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||
| Current liabilities | ||
| Accounts payable | $1,408,206 | $1,645,298 |
| Accrued expenses | 2,757,564 | 2,342,352 |
| Deferred revenue | 86,642 | 104,210 |
Total current liabilities | 4,252,412 | 4,091,860 |
| TOTAL LIABILITIES | 4,252,412 | 4,091,860 |
| COMMITMENTS AND CONTINGENCIES | ||
| STOCKHOLDERS’ EQUITY | ||
| Preferred stock - $0.001 par value: 2,000,000 shares authorized; 417,585 and 450,085 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 418 | 450 |
| Common stock - $0.001 par value: 160,000,000 and 80,000,000 shares authorized at September 30, 2017 and December 31, 2016, respectively; 61,978,609 and 40,432,339 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 61,979 | 40,433 |
| Accumulated other comprehensive income | 94,711 | 81,186 |
| Additional paid-in capital | 151,383,530 | 136,857,409 |
| Accumulated deficit | (141,864,346) | (119,164,952) |
| TOTAL STOCKHOLDERS’ EQUITY | 9,676,292 | 17,814,526 |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $13,928,704 | $21,906,386 |
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
CORMEDIX INC. AND SUBSIDIARYSUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(Unaudited)
For the Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenue | ||||||||
| Net sales | $ | 88,261 | $ | 74,054 | ||||
| Cost of sales | (61,339 | ) | (48,517 | ) | ||||
| Gross profit | 26,922 | 25,537 | ||||||
| Operating Expenses | ||||||||
| Research and development | (2,636,332 | ) | (2,472,117 | ) | ||||
| Selling, general and administrative | (4,601,108 | ) | (3,165,168 | ) | ||||
| Total operating expenses | (7,237,440 | ) | (5,637,285 | ) | ||||
| Loss From Operations | (7,210,518 | ) | (5,611,748 | ) | ||||
| Other Income (Expense) | ||||||||
| Interest income | 3,675 | 63,678 | ||||||
| Foreign exchange transaction loss | (4,911 | ) | (3,221 | ) | ||||
| Interest expense | (5,184 | ) | (6,276 | ) | ||||
| Total other income (expense) | (6,420 | ) | 54,181 | |||||
| Net Loss | (7,216,938 | ) | (5,557,567 | ) | ||||
| Other Comprehensive Loss | ||||||||
| Unrealized gain (loss) from investment | 347 | (5,633 | ) | |||||
| Foreign currency translation loss | (3,527 | ) | (888 | ) | ||||
| Total other comprehensive loss | (3,180 | ) | (6,521 | ) | ||||
| Comprehensive Loss | $ | (7,220,118 | ) | $ | (5,564,088 | ) | ||
| Net Loss Per Common Share – Basic and Diluted | $ | (0.20 | ) | $ | (0.21 | ) | ||
| Weighted Average Common Shares Outstanding – Basic and Diluted | 36,328,928 | 26,059,625 | ||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||
2017 | 2016 | 2017 | 2016 | |
| Revenue: | ||||
| Net sales | $61,075 | $44,451 | $236,801 | $102,390 |
| Cost of sales | (66,652) | (43,922) | (178,276) | (281,342) |
| Gross profit (loss) | (5,577) | 529 | 58,525 | (178,952) |
| Operating Expenses: | ||||
| Research and development | (6,014,260) | (6,840,413) | (16,028,151) | (11,702,965) |
| Selling, general and administrative | (1,992,134) | (2,318,091) | (6,683,953) | (6,449,608) |
| Total Operating Expenses | (8,006,394) | (9,158,504) | (22,712,104) | (18,152,573) |
| Loss From Operations | (8,011,971) | (9,157,975) | (22,653,579) | (18,331,525) |
| Other Income (Expense): | ||||
| Interest income | 37,156 | 32,866 | 89,164 | 93,928 |
| Foreign exchange transaction loss | (4,692) | (1,091) | (11,515) | (5,622) |
| Change in fair value of derivative liability | (1,974,019) | - | (120,654) | - |
| Interest expense | (2,810) | - | (2,810) | (992) |
| Total Other Income (Expense) | (1,944,365) | 31,775 | (45,815) | 87,314 |
| Net Loss | (9,956,336) | (9,126,200) | (22,699,394) | (18,244,211) |
| Other Comprehensive Income (Loss): | ||||
| Unrealized gain (loss) from investments | 2,600 | (6,765) | 13,013 | 17,233 |
| Foreign currency translation gain (loss) | (4,573) | (82) | 512 | 3,935 |
| Total Other Comprehensive Income (Loss) | (1,973) | (6,847) | 13,525 | 21,168 |
| Comprehensive Loss | (9,958,309) | (9,133,047) | (22,685,869) | (18,223,043) |
| Net Loss Per Common Share – Basic and Diluted | $(0.17) | $(0.23) | $(0.44) | $(0.49) |
| Weighted Average Common Shares Outstanding – Basic and Diluted | 60,290,988 | 39,053,956 | 51,238,399 | 37,156,790 |
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
CORMEDIX INC. AND SUBSIDIARY
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF CHANGES IN
(Unaudited)
For the Nine Months Ended September 30, 2017three months ended March 31, 2021
| Common Stock | Preferred Stock – Series C-3, Series E and Series G | Accumulated Other Comprehensive | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Income (Loss) | Capital | Deficit | Equity | |||||||||||||||||||||||||
| Balance at December 31, 2020 | 33,558,096 | $ | 33,558 | 241,623 | $ | 242 | $ | 102,006 | $ | 261,536,061 | $ | (217,448,855 | ) | $ | 44,223,012 | |||||||||||||||||
| Stock issued in connection with ATM sale of common stock, net | 3,737,862 | 3,738 | - | - | - | 41,451,892 | - | 41,455,630 | ||||||||||||||||||||||||
| Stock issued in connection with warrants exercised, cash | 23,796 | 24 | - | - | - | 124,905 | - | 124,929 | ||||||||||||||||||||||||
| Stock issued in connection with warrants exercised, cashless | 70,269 | 70 | - | - | - | (70 | ) | - | - | |||||||||||||||||||||||
| Conversion of Series G preferred shares to common stock | 556,069 | 556 | (10,001 | ) | (10 | ) | (546 | ) | - | - | ||||||||||||||||||||||
| Conversion of Series C-3 preferred shares to common stock | 100,000 | 100 | (50,000 | ) | (50 | ) | - | (50 | ) | - | - | |||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | 1,731,614 | - | 1,731,614 | ||||||||||||||||||||||||
| Other comprehensive loss | - | - | - | - | (3,180 | ) | - | - | (3,180 | ) | ||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | (7,216,938 | ) | (7,216,938 | ) | ||||||||||||||||||||||
| Balance at March 31, 2021 | 38,046,092 | $ | 38,046 | 181,622 | $ | 182 | $ | 98,826 | $ | 304,843,806 | $ | (224,665,793 | ) | $ | 80,315,067 | |||||||||||||||||
Common Stock | Non-Voting Preferred Stock – Series C-2, Series C-3, Series D and Series E | |||||||
Shares | Amount | Shares | Amount | Accumulated Other Comprehensive Income | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity | |
| Balance at January 1, 2017 | 40,432,339 | $40,433 | 450,085 | $450 | $81,186 | $136,857,409 | $(119,164,952) | $17,814,526 |
| Stock issued in connection with ATM sale of common stock, net | 198,630 | 199 | 347,163 | 347,362 | ||||
| Conversion of Series C-3 non-voting preferred stock to common stock | 325,000 | 325 | (32,500) | (32) | (293) | - | ||
| Stock issued in connection with stock options exercised | 10,000 | 10 | 6,790 | 6,800 | ||||
| Stock issued in connection with public offering | 18,619,301 | 18,619 | 12,779,706 | 12,798,325 | ||||
| Stock issued in connection with warrants cashless exercise | 970 | 1 | (1) | - | ||||
| Warrants issued in connection with public offering | (3,733,542) | (3,733,542) | ||||||
| Conversion of Series A warrants to common stock | 2,387,500 | 2,387 | (2,387) | - | ||||
| Stock issued for payment of deferred fees | 4,869 | 5 | 10,213 | 10,218 | ||||
| Reclassification of derivative liability to equity | 3,854,195 | 3,854,195 | ||||||
| Stock-based compensation | 1,264,277 | 1,264,277 | ||||||
| Other comprehensive income | 13,525 | 13,525 | ||||||
| Net loss | (22,699,394) | (22,699,394) | ||||||
| Balance at September 30, 2017 | 61,978,609 | $61,979 | 417,585 | $418 | $94,711 | $151,383,530 | $(141,864,346) | $9,676,292 |
For the three months ended March 31, 2020
| Common Stock | Preferred Stock – Series C-3, Series E and Series G | Accumulated Other Comprehensive | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Income (Loss) | Capital | Deficit | Equity | |||||||||||||||||||||||||
| Balance at December 31, 2019 | 25,665,350 | $ | 25,665 | 241,623 | $ | 242 | $ | 97,257 | $ | 218,944,268 | $ | (195,421,172 | ) | $ | 23,646,260 | |||||||||||||||||
| Stock issued in connection with ATM sale of common stock, net | 368,144 | 368 | - | - | - | 2,469,569 | - | 2,469,937 | ||||||||||||||||||||||||
| Stock issued in connection with warrants exercised | 91,500 | 92 | - | - | - | 411,659 | - | 411,751 | ||||||||||||||||||||||||
| Payment of financing fees | (47,024 | ) | - | (47,024 | ) | |||||||||||||||||||||||||||
| Issuance of vested restricted stock | 2,073 | 2 | - | - | - | (2 | ) | - | - | |||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | 676,614 | - | 676,614 | ||||||||||||||||||||||||
| Other comprehensive loss | - | - | - | - | (6,521 | ) | - | - | (6,521 | ) | ||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | (5,557,567 | ) | (5,557,567 | ) | ||||||||||||||||||||||
| Balance at March 31, 2020 | 26,127,067 | $ | 26,127 | 241,623 | $ | 242 | $ | 90,736 | $ | 222,455,084 | $ | (200,978,739 | ) | $ | 21,593,450 | |||||||||||||||||
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
CORMEDIX INC. AND SUBSIDIARY
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (7,216,938 | ) | $ | (5,557,567 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | 1,731,614 | 676,614 | ||||||
| Depreciation | 11,994 | 17,677 | ||||||
| Non-cash lease expense | 1,683 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase in trade receivables | (41,519 | ) | (7,296 | ) | ||||
| Decrease in inventory | 63,393 | 47,158 | ||||||
| Increase in prepaid expenses and other current assets | (131,054 | ) | (3,121,838 | ) | ||||
| Increase in accounts payable | 374,971 | 309,025 | ||||||
| Decrease in accrued expenses | (1,484,956 | ) | (328,493 | ) | ||||
| Decrease in deferred revenue | - | (2,206 | ) | |||||
| Net cash used in operating activities | (6,690,812 | ) | (7,966,926 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of short-term investments | (3,143,285 | ) | (3,799,033 | ) | ||||
| Maturity of short-term investments | 2,630,347 | 4,794,369 | ||||||
| Purchase of equipment | (13,080 | ) | (9,918 | ) | ||||
Net cash (used in) provided by investing activities | (526,018 | ) | 985,418 | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of common stock from at-the-market program, net | 41,455,630 | 2,469,937 | ||||||
| Proceeds from exercise of warrants | 124,929 | 411,751 | ||||||
| Payments of financing fees | - | (47,024 | ) | |||||
| Net cash (used in) provided by financing activities | 41,580,559 | 2,834,664 | ||||||
| Foreign exchange effect on cash | (7,563 | ) | (2,181 | ) | ||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 34,356,166 | (4,149,025 | ) | |||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH – BEGINNING OF PERIOD | 42,096,783 | 16,525,187 | ||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH – END OF PERIOD | $ | 76,452,949 | $ | 12,376,162 | ||||
| Cash paid for interest | $ | 5,184 | $ | 6,276 | ||||
| Supplemental Disclosure of Non-Cash Financing Activities: | ||||||||
| Conversion of Series G preferred stock to common stock | $ | 10 | $ | - | ||||
| Conversion of Series C-3 preferred stock to common stock | $ | 50 | $ | - | ||||
| Unrealized gain (loss) from investments | $ | 347 | $ | (5,633 | ) | |||
| Issuance of common stock for vested restricted stock units | $ | - | $ | 2 | ||||
For the Nine Months Ended September 30, 2017 | For the Nine Months Ended September 30, 2016 | |
| Cash Flows From Operating Activities: | ||
| Net loss | $(22,699,394) | $(18,244,211) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||
| Stock-based compensation | 1,264,277 | 920,864 |
| Change in fair value of derivative liability | 120,654 | - |
| Inventory reserve increase (decrease) | (200,000) | 166,000 |
| Depreciation | 26,694 | 16,923 |
| Changes in operating assets and liabilities: | ||
| (Increase) decrease in trade receivables | (71,611) | 301,169 |
| Decrease in inventory | 67,248 | 92,361 |
| Increase in prepaid expenses and other current assets | (84,004) | (981,963) |
| Increase (decrease) in accounts payable | (241,509) | 47,233 |
| Increase in accrued expenses | 533,342 | 1,921,043 |
| Decrease in deferred revenue | (25,716) | (6,786) |
| Net cash used in operating activities | (21,310,019) | (15,767,367) |
| Cash Flows From Investing Activities: | ||
| Purchase of short-term investments | (13,074,169) | - |
| Sale of short-term investments | 18,391,789 | 6,758,906 |
| Purchase of equipment | (26,632) | (55,107) |
| Net cash provided by investing activities | 5,290,988 | 6,703,799 |
| Cash Flows From Financing Activities: | ||
| Proceeds from sale of common stock from at-the-market program | 347,362 | 6,220,556 |
| Proceeds from the public offering of common stock and warrants | 12,798,325 | - |
| Proceeds from exercise of stock options | 6,800 | 849,501 |
| Net cash provided by financing activities | 13,152,487 | 7,070,057 |
| Foreign exchange effect on cash | 14,633 | 3,040 |
| Net Decrease In Cash | (2,851,911) | (1,990,471) |
| Cash – Beginning of Period | 8,064,490 | 11,817,418 |
| Cash – End of Period | $5,212,579 | $9,826,947 |
| Cash Paid for Interest | $2,810 | $992 |
| Supplemental Disclosure of Non-Cash Financing Activities: | ||
| Conversion of preferred stock to common stock | $32 | $- |
| Unrealized gain from investments | $13,013 | $17,233 |
| Reclassification of warrant liability to equity | $3,854,195 | $- |
| Issuance of common stock for payment of deferred fees | $10,218 | $- |
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
Note 1 — Organization, Business and Basis of Presentation:
Organization and Business
CorMedix Inc. (“CorMedix” or the “Company”), is a biopharmaceutical company focused on developing and commercializing therapeutic products for the prevention and treatment of infectious and inflammatory diseases, was incorporated in the State of Delaware on July 28, 2006.diseases. In 2013, the Company formed a wholly-owned subsidiary, CorMedix Europe GmbH basedand in Fulda, Germany.May 2020, the Company formed a wholly-owned subsidiary, CorMedix Spain, S.L.U.
The Company’s primary focus is to developon the development of its lead product candidate, CRMD003 (also known as Neutrolin®)DefenCath™, for potential commercialization in the United States (“U.S.”) and other key markets. The Company has in-licensed the worldwide rights to develop and commercialize Neutrolin,DefenCath/ Neutrolin®, which is a novel anti-infective solution (a formulation of taurolidine citrate1.35% and heparin 1000 u/ml) under developmentintended for the reduction and prevention of catheter-related infections and thrombosis in patients requiring central venous catheters (“CVCs”) in clinical settings such as dialysis, critical/intensive care,hemodialysis, total parenteral nutrition and oncology.
In January 2015, the FDA designated DefenCath as a Qualified Infectious Disease Product (“QIDP”) for prevention of catheter-related blood stream infections (“CRBSIs) in patients with end stage renal disease receiving hemodialysis through a central venous catheter. Catheter-related blood stream infections and clotting can be life-threatening. The QIDP designation provides five years of market exclusivity in addition to securethe five years granted for a New Chemical Entity (“NCE”) upon approval of a New Drug Application (“NDA”). In addition, in January 2015, the FDA granted Fast Track designation to DefenCath Catheter Lock Solution, a designation intended to facilitate development and expedite review of drugs that treat serious and life-threatening conditions so that the approved drug can reach the market expeditiously. The Fast Track designation of DefenCath provides the Company with the opportunity to meet with the FDA on a more frequent basis during the development process, and also ensures eligibility to request priority review of the marketing approvalapplication.
In December 2015, the Company launched its Phase 3 Prospective, Multicenter, Double-blind, Randomized, Active Control Study to Demonstrate Safety & Effectiveness of DefenCath/Neutrolin in Preventing Catheter-related Bloodstream Infection in Subjects on Hemodialysis for End Stage Renal Disease (“LOCK-IT-100”), in patients with hemodialysis catheters in the U.S. The clinical trial was designed to demonstrate the safety and effectiveness of DefenCath compared to the standard of care CLS, Heparin, in preventing CRBSIs. The primary endpoint for the trial assessed the incidence of CRBSI and time to CRBSI for each study subject. Secondary endpoints were catheter patency, which was defined as required use of tissue plasminogen activating factor, or tPA, or removal of catheter due to dysfunction, and removal of catheter for any reason.
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As previously agreed with the FDA, an interim efficacy analysis was performed when the first 28 potential CRBSI cases were identified in our LOCK-IT-100 study that occurred through early December 2017. Based on these first 28 cases, there was a highly statistically significant 72% reduction in CRBSI by DefenCath relative to the active control of heparin (p=0.0034). Because the pre-specified level of statistical significance was reached for the primary endpoint and efficacy had been demonstrated with no safety concerns, the LOCK-IT-100 study was terminated early. The study continued enrolling and treating subjects until study termination, and the final analysis was based on a total of 795 subjects. In a total of 41 cases, there was a 71% reduction in CRBSI by DefenCath relative to heparin, which was highly statistically significant (p=0.0006), with a good safety profile.
The FDA granted the Company’s request for a rolling submission and review of the NDA which is designed to expedite the approval process for products being developed to address an unmet medical need. Although the FDA usually requires two pivotal clinical trials to provide substantial evidence of safety and effectiveness for approval of an NDA, the FDA will in some cases accept one adequate and well-controlled trial, where it is a large multicenter trial with a broad range of subjects and investigation sites with procedures to include trial quality that has demonstrated a clinically meaningful and statistically very persuasive effect on prevention of a disease with potentially serious outcome.
In March 2020, the Company began the modular submission process for the NDA for DefenCath for the prevention of CRBSI in hemodialysis patients, and in August 2020, the FDA accepted for filing the DefenCath NDA. The FDA also granted the Company’s request for priority review, which provides for a six-month review period instead of the standard ten-month review period. As the Company announced in March 2021, the FDA informed in its experienceComplete Response Letter (“CRL”) to the Company that it cannot approve the NDA for DefenCath in its present form. The FDA noted concerns at the third-party manufacturing facility after a review of records requested by the FDA and recent feedbackprovided by the contract manufacturer (“CMO”). Additionally, the FDA is requiring a manual extraction study to demonstrate that the labeled volume can be consistently withdrawn from the vials despite an existing in-process control to demonstrate fill volume within specifications.
In April 2021, the Company met with the FDA to discuss proposed resolutions for the deficiencies identified in the CRL to the Company and the Post-Application Action Letter received by the CMO from the FDA for the NDA for DefenCath. There is now an agreed upon protocol for the manual extraction study identified in the CRL that the FDA is requiring as confirmation of in-process controls to demonstrate that the labeled volume can be consistently withdrawn from the vials. The Company has successfully completed this study. Addressing the FDA’s concerns regarding the qualification of the filling operation may necessitate adjustments in the process and generation of additional data on operating parameters for manufacture of DefenCath. The Company and the CMO are currently evaluating available data to determine if additional process qualification will be needed with subsequent validation to address these issues. The FDA stated that the review timeline would be determined when the NDA resubmission is received and that it expected all corrections to facility deficiencies to be complete at the time of resubmission so that all corrective actions may be verified during an onsite evaluation in the next review cycle, if the FDA determines it will do an onsite evaluation. The Company and the CMO continue to work closely to ensure that the identified deficiencies are resolved prior to resubmission of the DefenCath NDA.
Satisfactory resolution of these issues is required for approval of the DefenCath NDA by a pre-approval inspection and/or adequate CMO responses addressing these concerns. If an onsite inspection is required, the Company may encounter delays in obtaining FDA approval because the FDA is currently facing a backlog due to the Covid-19 pandemic. The FDA recently issued a guidance document on its plan to use voluntary remote interactive evaluations at facilities, including for a pre-approval inspection to assess a marketing application. The FDA will request the manufacturing facility to participate in a voluntary remote interactive evaluation, if the FDA believes it is appropriate. A manufacturing facility cannot request the remote interaction. The FDA expects the use of remote interactive evaluations should help the FDA operate within normal timeframes in spite of the Covid-19 pandemic.
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The FDA did not request additional clinical data and did not identify any deficiencies related to the data submitted on the efficacy or safety of DefenCath from LOCK-IT-100 trial,in the CRL. In draft labeling discussed with the FDA, the FDA added that the initial approval will be for the limited population of patients with kidney failure receiving chronic hemodialysis through a central venous catheter. This is consistent with our request for approval pursuant to the Limited Population Pathway for Antibacterial and Antifungal Drugs (“LPAD”). LPAD, passed as part of the 21st Century Cures Act, is a new program intended to expedite the development and approval of certain antibacterial and antifungal drugs to treat serious or life-threatening infections in limited populations of patients with unmet needs. LPAD provides for a streamlined clinical development program involving smaller, shorter, or fewer clinical trials and is intended to encourage the development of safe and effective products that address unmet medical needs of patients with serious bacterial and fungal infections. We believe that LPAD will provide additional flexibility for the FDA to approve DefenCath to reduce CRBSIs in the limited population of patients with kidney failure receiving hemodialysis through a central venous catheter.
In March 2020, the Company was granted a deferral by the FDA under the Pediatric Research Equity Act (“PREA”), that requires sponsors to conduct pediatric studies for NDAs for a new active ingredient, such as taurolidine in DefenCath, unless a waiver or deferral is obtained from the FDA. A deferral acknowledges that a pediatric assessment is required but permits the applicant to submit the pediatric assessment after the submission of an NDA. The Company has made a commitment to conduct the pediatric study after approval of the NDA for use in adult hemodialysis patients. Pediatric studies for an approved product conducted under PREA may qualify for pediatric exclusivity, which if granted would provide an additional six months of marketing exclusivity. DefenCath would then have the potential to receive a total marketing exclusivity period of 10.5 years, including exclusivity pursuant to NCE and QIDP.
The Company intends to pursue additional indications for DefenCath use as a CLS in populations with an unmet medical need that also represent a significant market opportunity. For example, the Company intends to pursue marketing authorization in the U.S. for use as a CLS to reduce CRBSIs in oncology and total parenteral nutrition patients using a central venous catheter.
In addition to DefenCath, the Company is assessingsponsoring a pre-clinical research collaboration for the structureuse of its planned second Phasetaurolidine as a possible treatment for rare orphan pediatric tumors. In February 2018, the FDA granted orphan drug designation to taurolidine for the treatment of neuroblastoma in children. The Company may seek one or more strategic partners or other sources of capital to help develop and commercialize taurolidine for the treatment of neuroblastoma in children. The Company is also evaluating opportunities for the possible expansion of taurolidine as a platform compound for use in certain medical devices. Patent applications have been filed in several indications, including wound closure, surgical meshes, and wound management.
In the European Union (“EU”), Neutrolin is regulated as a Class 3 clinical trial to seek efficiencies and improvements in design and execution of that trial.
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In September 2014, the TUV-SUD and The completionMedicines Evaluation Board of the Netherlands (“MEB”), granted a label expansion for Neutrolin to include use in oncology patients receiving chemotherapy, intravenous (“IV”) hydration and IV medications via CVC for the EU. In December 2014, the Company received approval from the Hessian District President in Germany to expand the label for these same expanded indications. The expansion also adds patients receiving medication and IV fluids via CVC in intensive or critical care units (cardiac care unit, surgical care unit, neonatal critical care unit, and urgent care centers). An indication for use in total parenteral nutrition was also approved.
In September 2019, the Company’s registration with the Saudi Arabia Food and Drug Administration, or the SFDA, expired. As a result, the Company cannot sell Neutrolin in Saudi Arabia. The Company intends to complete the documentation required to renew its registration with the SFDA, however, the Company cannot predict how long the renewal process will take. There is no assurance that the registration will be renewed by the SFDA.
The novel coronavirus has been declared a pandemic and has spread to multiple global regions. The outbreak and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. In response to the COVID-19 outbreak, “shelter in place” orders and other public health guidance measures have been implemented across much of the United States, Europe and Asia, including in the locations of the Company’s ongoing LOCK-IT-100offices, clinical trial sites, key vendors and the executionpartners. The Company’s program timelines may be negatively affected by COVID-19, which could materially and adversely affect its business, financial conditions and results of the planned second Phase 3 clinical trial are dependent on the Company’s ability to raise sufficient additional funds through various potential sources, such as equity, debt financings, and/or strategic relationships. The Company can provide no assurances that financing or strategic relationships will be available on acceptable terms, or at all, to complete its clinical development program for Neutrolin.operations.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 108 of Regulation S-X. Accordingly, the unaudited condensed consolidated financial statements do not include all information and footnotes required by GAAP for complete annual 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 suchto fairly state the interim results. Interim operating results are not necessarily indicative of results that may be expected for the full year ending December 31, 20172021 or for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto of the Company which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 16, 2017.30, 2021. The accompanying condensedconsolidated balance sheet as of December 31, 20162020 has been derived from the audited financial statements included in such Form 10-K.
Recently Adopted Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12 which removes certain exceptions to the general principles of the accounting for income taxes and also improves consistent application of and simplification of other areas when accounting for income taxes. The guidance was effective for the Company beginning in the first quarter of fiscal year 2021. Early adoption was permitted. This adoption on January 1, 2021 did not have a material impact on the Company’s condensed consolidated financial statements.
CORMEDIX INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of Significant Accounting Policies:
Liquidity Going Concern and Uncertainties
The financial statements have been prepared in conformity with GAAP which contemplate continuation of the Company as a going concern. To date, the Company’s commercial operations have not generated sufficient revenues to enable profitability. As of September 30, 2017,March 31, 2021, the Company had an accumulated deficit of $141.9$224.7 million, and had incurred net losses from operations of $10.0$7.2 million and $22.7$5.6 million for the three months ended March 31, 2021 and nine months then ended. Based on the Company's current development plans for Neutrolin in both the U.S. and foreign markets (including the ongoing hemodialysis Phase 3 clinical trial in the U.S.) and its other operating requirements, the Company’s existing2020, respectively. The Company currently estimates that as of March 31, 2021 it has sufficient cash, cash equivalents and short-term investments at September 30, 2017 are expectedon hand to fund its operations throughat least into the first quartersecond half of 2018,2022, after taking into consideration the net proceeds received in October 2017 andcosts for the anticipated net proceeds frominitial preparations for the securities purchase and backstop agreements (See Note 7 - Subsequent Events). These factors raise substantial doubt regarding thecommercial launch for DefenCath.
The Company’s continued operations will depend on its ability to continueraise additional capital through various potential sources, such as a going concern.
The Company’s operations are subject to a number of other factors that can affect its operating results and financial condition. Such factors include, but are not limited to: the Current ATM program. O
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.
Basis of Consolidation
The condensed consolidated financial statements include the accounts of the Company, and CorMedix Europe GmbH and CorMedix Spain, S.L.U., its wholly owned subsidiary.subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Financial Instruments
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and short-term investments. The Company maintains its cash and cash equivalents in bank deposit and other interest bearinginterest-bearing accounts, the balances of which, at times, may exceed federally insured limits.
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table is the reconciliation of the accounting standard that modifies certain aspects of the recognition, measurement, presentation and disclosure of financial instruments as shown on the Company’s consolidated statement of cash flows:
| March 31, 2021 | December 31, 2020 | |||||||
| Cash and cash equivalents | $ | 76,214,620 | $ | 41,905,469 | ||||
| Restricted cash | 238,329 | 191,314 | ||||||
| Total cash, cash equivalents and restricted cash | $ | 76,452,949 | $ | 42,096,783 | ||||
The appropriate classification of marketable securities is determined at the time of purchase and reevaluated as of each balance sheet date. Investments in marketable debt classified as available-for-sale and equity securities classified as available-for-sale are reported at fair value. Fair value is determined using quoted market prices in active markets for identical assets or liabilities or quoted prices for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Changes in fair value that are considered temporary are reported netin the condensed consolidated statement of tax in other comprehensive income (loss).operations. Realized gains and losses, amortization of premiums and discounts and interest and dividends earned are included in other income (expense). For declines in the fair value of equity securities that are considered other-than-temporary, impairment losses are charged to other (income) expense,income (expense), net. The Company considers available evidence in evaluating potential impairments of its investments, including the duration and extent to which fair value is less than cost. There were no deemed permanent impairments at September 30, 2017March 31, 2021 or December 31, 2016.2020.
The Company’s marketable securities are highly liquid and consist of U.S. government agency securities, high-grade corporate obligations and commercial paper with original maturities of more than 90 days. As of September 30, 2017March 31, 2021 and December 31, 2016,2020, all of the Company’s investments had contractual maturities of less than one year. As of March 31, 2021, no allowance for credit loss was recorded. The following table summarizes the amortized cost, unrealized gains and losses and the fair value at September 30, 2017March 31, 2021 and December 31, 2016:2020:
| Amortized Cost | Gross Unrealized Losses | Gross Unrealized Gains | Fair Value | |||||||||||||
| March 31, 2021: | ||||||||||||||||
| Money Market Funds included in Cash Equivalents | $ | 17,661,319 | $ | (259 | ) | $ | - | $ | 17,661,060 | |||||||
| Corporate Securities | 3,658,430 | (595 | ) | 3,657,835 | ||||||||||||
| Commercial Paper | 1,299,323 | - | 199 | 1,299,522 | ||||||||||||
| Subtotal | 4,957,753 | (595 | ) | 199 | 4,957,357 | |||||||||||
| Total March 31, 2021 | $ | 22,619,072 | $ | (854 | ) | $ | 199 | $ | 22,618,417 | |||||||
| December 31, 2020: | ||||||||||||||||
| Money Market Funds included in Cash Equivalents | $ | 3,182,762 | $ | (81 | ) | $ | 8 | $ | 3,182,689 | |||||||
| Corporate Securities | 3,565,501 | (1,005 | ) | 3 | 3,564,499 | |||||||||||
| Commercial Paper | 879,501 | - | 72 | 879,573 | ||||||||||||
| Subtotal | 4,445,002 | (1,005 | ) | 75 | 4,444,072 | |||||||||||
| Total December 31, 2020 | $ | 7,627,764 | $ | (1,086 | ) | $ | 83 | $ | 7,626,761 | |||||||
September 30, 2017: | Amortized Cost | Gross Unrealized Losses | Gross Unrealized Gains | Fair Value |
| Money Market Funds included in Cash Equivalents | $2,605,588 | $- | $- | $2,605,588 |
| U.S. Government Securities | 998,940 | - | 80 | 999,020 |
| Corporate Securities | 4,999,877 | (479) | 200 | 4,999,598 |
| Commercial Paper | 797,695 | - | - | 797,695 |
| Subtotal | 6,796,512 | (479) | 280 | 6,796,313 |
| Total September 30, 2017 | $9,402,100 | $(479) | $280 | $9,401,901 |
December 31, 2016: | ||||
| Money Market Funds included in Cash Equivalents | $95,949 | $- | $- | $95,949 |
| Corporate Securities | 10,619,583 | (13,212) | - | 10,606,371 |
| Commercial Paper | 1,494,549 | - | - | 1,494,549 |
| Subtotal | 12,114,132 | (13,212) | - | 12,100,920 |
| Total December 31, 2016 | $12,210,081 | $(13,212) | $- | $12,196,869 |
CORMEDIX INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Fair Value Measurements
The Company’s financial instruments recorded in the condensed consolidated balance sheets include cash and cash equivalents, accounts receivable, investment securities, accounts payable and accrued expenses and warrant derivatives (see Note 3 – Stockholders’ Equity, Warrants).expenses. The carrying value of certain financial instruments, primarily cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their estimated fair values based upon the short-term nature of their maturity dates.
The Company categorizes its financial instruments into a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument. Financial assets recorded at fair value inon the Company’s condensed consolidated balance sheets are categorized as follows:
| ● | Level 1 inputs—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 inputs— Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs). |
| ● | Level 3 inputs—Unobservable inputs for the asset or liability, which are supported by little or no market activity and are valued based on management’s estimates of assumptions that market participants would use in pricing the asset or liability. |
The following table provides the carrying value and fair value of the Company’s financial assets measured at fair value on a recurring basis as of September 30, 2017March 31, 2021 and December 31, 2016:2020:
| Carrying Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| March 31, 2021: | ||||||||||||||||
| Money Market Funds and Cash Equivalents | $ | 17,661,060 | $ | 17,661,060 | $ | - | $ | - | ||||||||
| Corporate Securities | 3,657,835 | - | 3,657,835 | - | ||||||||||||
| Commercial Paper | 1,299,522 | - | 1,299,522 | - | ||||||||||||
| Subtotal | 4,957,357 | - | 4,957,357 | $ | - | |||||||||||
| Total March 31, 2021 | $ | 22,618,417 | $ | 17,661,060 | $ | 4,957,357 | $ | - | ||||||||
| December 31, 2020: | ||||||||||||||||
| Money Market Funds and Cash Equivalents | $ | 3,182,689 | $ | 3,182,689 | $ | - | $ | - | ||||||||
| Corporate Securities | 3,564,499 | - | 3,564,499 | - | ||||||||||||
| Commercial Paper | 879,573 | - | 879,573 | - | ||||||||||||
| Subtotal | 4,444,072 | - | 4,444,072 | - | ||||||||||||
| Total December 31, 2020 | $ | 7,626,761 | $ | 3,182,689 | $ | 4,444,072 | $ | - | ||||||||
September 30, 2017: | Carrying Value | Level 1 | Level 2 | Level 3 |
| Money Market Funds | $2,605,588 | $2,605,588 | $- | $- |
| U.S. Government Securities | 999,020 | - | 999,020 | - |
| Corporate Securities | 4,999,598 | - | 4,999,598 | - |
| Commercial Paper | 797,695 | - | 797,695 | - |
| Subtotal | 6,796,313 | - | 6,796,313 | - |
| Total September 30, 2017 | $9,401,901 | $2,605,588 | $6,796,313 | - |
December 31, 2016: | ||||
| Money Market Funds | $95,949 | $95,949 | $- | - |
| Corporate Securities | 10,606,371 | - | 10,606,371 | - |
| Commercial Paper | 1,494,549 | - | 1,494,549 | - |
| Subtotal | 12,100,920 | - | 12,100,920 | - |
| Total December 31, 2016 | $12,196,869 | $95,949 | $12,100,920 | $- |
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Foreign Currency Translation and Transactions
The condensed consolidated financial statements are presented in U.S. Dollars (“USD”), the reporting currency of the Company. For the financial statements of the Company’s foreign subsidiary,subsidiaries, whose functional currency is the EURO, foreign currency asset and liability amounts, are translated into USD at end-of-period exchange rates. Foreign currency income and expenses are translated at average exchange rates in effect during the period in which the income and expenses were recognized. Translation gains and losses are included in other comprehensive loss.
The Company has intercompany loans between the parent company based in New Jersey and its German subsidiary. The intercompany loans outstanding are not expected to be repaid in the foreseeable future and unrealized foreign exchange movements related to long-term intercompany loans are recognized in other comprehensive income.income (loss).
Foreign currency exchange transaction gain (loss) is the result of re-measuring transactions denominated in a currency other than the functional currency of the entity recording the transaction.
Restricted Cash
As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company’sCompany has restricted cash is in connection with the patent and utility model infringement proceedings against TauroPharm (see Note 5)4). The Company was required by the District CourtCourts of Mannheim to provide a security deposit of approximately $132,000 to cover legal fees in the event TauroPharm is entitled to reimbursement of these costs. The Company furthermore had to provide a deposit infor the amount of $40,000first and second instances, respectively, in connection with the unfair competition proceedings in Cologne. During the quarter ended March 31, 2021, approximately $48,000 was released by the court for the reimbursement of legal fees and other costs which was removed from restricted cash. As of March 31, 2021 and December 31, 2020, restricted cash in connection with the patent and utility model infringement proceedings were $136,000 and $191,000, respectively.
As of March 31, 2021, the Company had $102,000 in long-term restricted cash for a lease security deposit.
Prepaid Research and Development and Other Prepaid Expenses
Prepaid research and development expenses consist of payments made in advance to vendors relating to service contracts for clinical trial development, manufacturing, preclinical development and other research and development.insurance policies. These advanced payments are amortized to expense either as services are performed or over the relevant service period using the straight-line method.
Inventories, net
Inventories are valued at the lower of cost or net realizable value on a first in, first out basis. Inventories consist of raw materials (including labeling and packaging), work-in-process, and finished goods, if any, for the DefenCath/Neutrolin product. Inventories consist of the following:
| March 31, 2021 | December 31, 2020 | |||||||
| Finished goods | $ | 259,240 | $ | 317,733 | ||||
| Inventory reserve | (174,169 | ) | (174,169 | ) | ||||
| Total | $ | 85,071 | $ | 143,564 | ||||
September 30, 2017 | December 31, 2016 | |
| Raw materials | $290,970 | $79,900 |
| Work in process | 158,997 | 463,897 |
| Finished goods | 79,518 | 52,936 |
| Inventory reserve | (230,000) | (430,000) |
| Total | $299,485 | $166,733 |
CORMEDIX INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Leases
September 30, 2017 | December 31, 2016 | |
| Professional and consulting fees | $235,435 | $335,198 |
| Accrued payroll and payroll taxes | 801,774 | 737,607 |
| Clinical trial and manufacturing development | 1,433,827 | 875,500 |
| Product development | 80,001 | 374,839 |
| Market research | 116,466 | - |
| Other | 90,061 | 19,208 |
| Total | $2,757,564 | $2,342,352 |
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks; however, the Company has certain financial instruments that qualify as derivativesdetermines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities, and are classified asoperating lease liabilities, net of current portion, on the condensed consolidated balance sheet. The Company evaluates all its financial instruments to determine if those instruments or any potential embedded components of those instruments qualify as derivatives that need to be separately accounted for in accordance with FASB ASC 815,
Operating lease ROU assets and Hedging”
The Company has elected, as an accounting policy, not to apply the recognition requirements in ASC 842 to short-term leases. Short-term leases are leases that have a term of 12 months or less and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. The Company recognizes the lease payments for short-term leases on a straight-line basis over the lease term.
The Company has also elected, as a practical expedient, by underlying class of asset, not to separate lease components from non-lease components and, instead, account for them as a single component.
Accrued Expenses
Accrued expenses consist of the measurement with a term consistent with the remaining expected term of the warrant.following:
| March 31, 2021 | December 31, 2020 | |||||||
| Professional and consulting fees | $ | 175,075 | $ | 146,129 | ||||
| Accrued payroll and payroll taxes | 1,048,359 | 2,490,441 | ||||||
| Clinical trial related | 1,000 | 2,187 | ||||||
| Manufacturing development related | 97,970 | 143,780 | ||||||
| Other | 114,306 | 141,814 | ||||||
| Total | $ | 1,436,710 | $ | 2,924,351 | ||||
Revenue Recognition
The Company recognizes revenue once the four revenue recognition criteria are met in accordance with ASC 606, “Revenue from Contracts with Customers.” ASC 606 prescribes a five-step model for recognizing revenue which includes (i) identifying contracts with customers; (ii) identifying performance obligations; (iii) determining the termstransaction price; (iv) allocating the transaction price; and (v) recognizing revenue.
The Company recognizes net sales upon shipment of its various distribution agreements.
CORMEDIX INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Loss Per Common Share
Basic loss per common share excludes any potential dilution and is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share 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. However, since their effect is anti-dilutive, the Company has excluded potentially dilutive shares. The following potentially dilutive shares have been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive.
| Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| (Number of Shares of Common Stock Issuable) | ||||||||
| Series C non-voting preferred stock | 4,000 | 104,000 | ||||||
| Series E non-voting preferred stock | 391,953 | 391,953 | ||||||
| Series G non-voting preferred stock | 5,004,069 | 5,560,137 | ||||||
| Restricted stock units | - | 417 | ||||||
| Shares issuable for payment of deferred board compensation | 48,909 | 35,303 | ||||||
| Shares underlying outstanding warrants | 64,066 | 183,148 | ||||||
| Shares underlying outstanding stock options | 3,542,011 | 1,720,937 | ||||||
| Total potentially dilutive shares | 9,055,008 | 7,995,895 | ||||||
Nine Months Ended September 30, | ||
2017 | 2016 | |
| Series C non-voting convertible preferred stock | 2,540,000 | 2,865,000 |
| Series D non-voting convertible preferred stock | 1,479,240 | 1,479,240 |
| Series E non-voting convertible preferred stock | 1,959,759 | 1,959,759 |
| Shares underlying outstanding warrants | 23,189,284 | 4,006,468 |
| Shares underlying restricted stock units | 61,414 | - |
| Shares underlying outstanding stock options | 4,946,429 | 4,637,255 |
| Total | 34,176,126 | 14,947,722 |
Stock-Based Compensation
Share-based compensation cost for stock options granted to employees is measured at grant date using the Black-Scholes stock option pricing model in accordance with ASC No. 718, “Compensation-Stock Compensation”, based on the estimated fair value of the award using the Black-Scholes option pricing model for options with service or performance-based conditions and a Monte Carlo option pricing model for options with market conditions. Stock-based compensation is recognized as expense over the employee’s requisite service period on a straight-line basis.
Research and Development
Research and development costs are charged to expense as incurred. Research and development includesinclude fees associated with operational consultants, contract clinical research organizations, contract manufacturing organizations, clinical site fees, contract laboratory research organizations, contract central testing laboratories, licensing activities, and allocated executive, human resources, facilities expenses and facilities expenses.costs related to the manufacturing of the product that could potentially be available to support the commercial launch prior to marketing approval. The Company accrues for costs incurred as the services are being provided by monitoring the status of the trialactivities and the invoices received from its external service providers. As actual costs become known, the Company adjusts its accruals in the period when actual costs become known. Costs related to the acquisition of technology rights and patents for which development work is still in process are charged to operations as incurred and considered a component of research and development expense.
CORMEDIX INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 — Stockholders’ Equity:
Common Stock
In November 2020, the Company closedfiled a new registration statement, under which the Company could issue and sell up to an underwritten public offeringaggregate of 18,619,301$100.0 million of shares of its common stock, $0.001 par value $0.001 per share,share. On November 27, 2020, the Company entered into an Amended and Restated At Market Issuance Sales Agreement (“Amended Sales Agreement”) with B. Riley and Needham & Company, LLC (“Needham”), together with Series A warrantsB. Riley, acting as sales agents (“Series A Warrants”Sales Agent”). The Amended Sales Agreement relates to purchasethe sale of shares of up to an aggregate of 13,964,476 shares of its common stock and Series B warrants (“Series B Warrants”) to purchase up to an aggregate of 13,964,476 shares of its common stock. Series A Warrants have an exercise price of $0.75 per share of common stock and will expire thirteen months following the Exercisable Date (defined below). Series B Warrants have an exercise price of $1.05 per share of common stock and will expire five years following the Exercisable Date. The net proceeds from this public offering was approximately $12.8 million.
During the nine months ended September 30, 2017,
During the quarter ended March 31, 2021 and 2020, the Company issued an aggregate of 32,500 Series C-3 non-voting preferred stock.
During the nine monthsquarter ended September 30, 2017,March 31, 2021, the Company issued 970an aggregate of 70,269 shares of its common stock upon cashless exercise of 62,50095,286 warrants.
During the ninequarter ended March 31, 2020, the Company issued an aggregate of 2,073 shares of its common stock upon the vesting of restricted stock units issued to the Company’s board of directors. There were no issuances for restricted stock during the quarter ended March 31, 2021.
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Preferred Stock
The Company is authorized to issue up to 2,000,000 shares of preferred stock in one or more series without stockholder approval. The Company’s board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock. Of the 2,000,000 shares of preferred stock authorized, the Company’s board of directors has designated (all with par value of $0.001 per share) the following:
| As of March 31, 2021 | As of December 31, 2020 | |||||||||||||||||||||||
| Preferred Shares Outstanding | Liquidation Preference (Per Share) | Total Liquidation Preference | Preferred Shares Outstanding | Liquidation Preference (Per Share) | Total Liquidation Preference | |||||||||||||||||||
| Series C-3 | 2,000 | $ | 10.00 | $ | 20,000 | 52,000 | $ | 10.00 | $ | 520,000 | ||||||||||||||
| Series E | 89,623 | $ | 49.20 | $ | 4,409,452 | 89,623 | $ | 49.20 | $ | 4,409,452 | ||||||||||||||
| Series G | 89,999 | $ | 187.36 | $ | 16,862,213 | 100,000 | $ | 187.36 | $ | 18,736,452 | ||||||||||||||
| Total | 181,622 | $ | 21,291,665 | 241,623 | $ | 23,665,904 | ||||||||||||||||||
During the quarter ended March 31, 2021, 50,000 Series C-3 preferred shares were converted into 100,000 shares of the Company’s common stock by an unrelated party and 10,001 Series G preferred shares were converted into 556,069 shares of the Company’s common stock by a related party.
Stock Options
During the three months ended September 30, 2017,March 31, 2021, the Company granted ten-year qualified and non-qualified stock options covering an aggregate of 1,342,5001,122,200 shares of the Company’s common stock under the 20132019 Stock Incentive Plan.
During the ninethree months ended September 30, 2017,March 31, 2021 and 2016,2020, total compensation expense for stock options issued to employees, directors, officers and consultants was $1,202,260$1,732,000 and $920,864, respectively, and $388,616 and $192,685 for the three months ended September 30, 2017 and 2016,$670,000, respectively.
As of September 30, 2017,March 31, 2021, there was approximately $3,184,000$8,080,000 in total unrecognized compensation expense related to stock options granted, which expense will be recognized over an expected remaining weighted average period of 1.51.6 years.
The fair value of each stock option award estimated on the grants aregrant date is determined using the Black-Scholes option pricing model, withexcept for an aggregate of 410,000 stock option awards, of which vesting was upon achievement of certain milestones. The fair value of these options was determined using the Monte Carlo option pricing model. The following assumptions:assumptions were used for the Black-Scholes option pricing model for the stock options granted during the three months ended March 31, 2021:
| Expected term | 5 years |
| Volatility | 103.08% - 103.18% |
| Dividend yield | 0.0% |
| Risk-free interest rate | 0.50% - 0.57% |
| Weighted average grant date fair value of options granted during the period | $5.85 |
| Nine Months Ended September 30, | |||
| 2017 | 2016 | ||
| Expected Term | 5 years | 5 – 10 years | |
| Volatility | 99.85% - 105.07% | 96% - 98% | |
| Dividend yield | 0.0% | 0.0% | |
| Risk-free interest rate | 1.77% - 1.99% | 1.14% - 1.94% | |
| Weighted average fair value of options granted during the period | $1.21 | $ 1.76 | |
A summary of the assumptions used in the Monte Carlo option pricing model are as follows:
| Expected term | 2 years |
| Volatility | 107.10% |
| Dividend yield | 0.0% |
| Risk-free interest rate | 1.15% |
The Company estimated the expected term of the stock options granted based on anticipated exercises in future periods. The expected term of the stock options granted to consultants is based upon the full term of the respective option agreements. Beginning January 1, 2017, theThe expected stock price volatility for the Company’s stock options is calculated based on the historical volatility since the initial public offering of the Company’s common stock in March 2010. In 2016 the expected stock price volatility was calculated based on the historical volatility since the initial public offering weighted pre and post CE Mark approval in the European Union. The expected dividend yield of 0.0% reflects the Company’s current and expected future policy for dividends on the Company’s common stock. To determine the risk-free interest rate, the Company utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of the Company’s awards.awards which is 5 years for employees and 10 years for non-employees.
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the Company’s stock options activity and related information for the ninethree months ended September 30, 2017:March 31, 2021:
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) |
Aggregate | |||||||||||||
| Outstanding at beginning of period | 2,447,687 | $ | 7.22 | 7.1 | $ | 3,872,092 | ||||||||||
| Granted | 1,122,200 | $ | 8.70 | $ | 1,757,174 | |||||||||||
| Forfeited | (21,876 | ) | $ | 4.71 | $ | - | ||||||||||
| Expired | (6,000 | ) | $ | 10.50 | $ | - | ||||||||||
| Outstanding at end of period | 3,542,011 | $ | 7.70 | 7.8 | $ | 10,048,396 | ||||||||||
| Exercisable at end of period | 1,671,558 | $ | 8.34 | 6.0 | $ | 4,378,889 | ||||||||||
Shares | Weighted AverageExercise Price | Weighted AverageRemaining Contractual Term (Years) | Aggregate Intrinsic Value | |
| Outstanding at beginning of period | 4,609,755 | $2.29 | 8.2 | $581,823 |
| Exercised | (10,000) | $0.68 | 13,200 | |
| Forfeited | (433,116) | $1.85 | ||
| Expired/Canceled | (562,710) | $2.99 | ||
| Granted | 1,342,500 | $1.57 | ||
| Outstanding at end of period | 4,946,429 | $2.05 | 7.7 | $0 |
| Vested at end of period | 2,152,520 | $1.82 | 6.0 | $0 |
The aggregate intrinsic value is calculated as the difference between the exercise prices of the underlying options and the quoted closing price of the common stock of the Company at the end of the reporting period for those options that have an exercise price below the quoted closing price.
Restricted Stock Units
During the nine monthsquarter ended September 30, 2017,March 31, 2021, the Company granted an aggregate of 107,931did not grant any restricted stock units (“RSUs”) to its officers, no compensation expense was recognized and directors under its 2013 Stock Incentive Plan with a weighted average grant date fair value of $2.22 per share. Thesethere are no outstanding RSUs vest over various dates through Decemberat March 31, 2018. 2021.
During the three and nine monthsquarter ended September 30, 2017, compensationMarch 31, 2020, the Company issued an aggregate of 2,073 shares of its common stock upon the vesting of RSUs issued to the Company’s board of directors. Compensation expense recorded for these RSUsby the Company was $26,019 and $62,017, respectively. Unrecognized compensation expense as of September 30, 2017 was $73,387. The expected weighted average period$7,000 for the expense to be recognized is 0.83 years. quarter ended March 31, 2020.
Warrants
During the nine monthsquarter ended September 30, 2017, 46,517 RSUs were forfeited. No RSUs wereMarch 31, 2021 and 2020, the Company issued duringan aggregate of 23,796 and 91,500 shares of its common stock, respectively, upon cash exercise of warrants, resulting in net proceeds to the nine monthsCompany of $125,000 and $412,000, respectively.
During the quarter ended September 30, 2016.March 31, 2021, the Company issued an aggregate of 70,269 shares of its common stock upon cashless exercise of 95,286 warrants.
As of September 30, 2017,March 31, 2021, there were 23,189,28464,066 outstanding warrants with a weighted average exercise price of $1.10$5.25 per share and a weighted average remaining contractual life of 3.61.36 years. In the May 2017 public offering, the Company issued 29,046,110 warrants, of which 9,549,999 warrants were subsequently exchanged for 2,387,500 shares of the Company's common stock in September 2017.
| Series A | Series B | Underwriter’s | |||
| Expected Term | 1.18 – 1.33 years | 5.10 – 5.25 years | 5.10 – 5.25 years | ||
| Volatility | 55% | 55% | 55% | ||
| Dividend yield | 0.0% | 0.0% | 0.0% | ||
| Exercise Price | $0.75 | $1.05 | $0.94 | ||
| Risk-free interest rate | 1.13% - 1.16% | 1.86% - 1.88% | 1.86% - 1.88% | ||
| Weighted average fair value of warrants granted | $0.08 | $0.17 | $0.18 | ||
| Number of shares underlying warrants granted | 13,964,476 | 13,964,476 | 1,117,158 |
Series A | Series B | Underwriter’s | |
| Expected Term | 1.09 | 5.00 | 5.00 |
| Volatility | 96.95% | 96.95% | 96.95% |
| Dividend yield | 0.0% | 0.0% | 0.0% |
| Exercise Price | $0.75 | $1.05 | $0.94 |
| Risk-free interest rate | 1.22% | 1.76% | 1.76% |
| Weighted average fair value of warrants | $0.06 | $0.20 | $0.20 |
Note 4 — Related Party Transactions:
Contingency Matters
On September 9, 2014, the Company filed in the District Court of Mannheim, Germany, a patent infringement action against TauroPharm GmbH and Tauro-Implant GmbH as well as their respective CEOs (the “Defendants”) claiming infringement of the Company’s European Patent EP 1 814 562 B1, which was granted by the European Patent Office (the “EPO”) on January 8, 2014 (the “Prosl European Patent”). The Prosl European Patent covers athe formulation of taurolidine and citrate with low dose heparin in a catheter lock solution for maintaining patency and preventing infection in a hemodialysis catheter.catheters. In this action, the Company claims that the Defendants infringe on the Prosl European Patent by manufacturing and distributing catheter locking solutions to the extent they are covered by the claims of the Prosl European Patent. The Company believes that its patent is sound and is seeking injunctive relief and raising claims for information, rendering of accounts, calling back, destruction and damages. Separately, TauroPharm has filed an opposition with the EPO against the Prosl European Patent alleging that it lacks novelty and inventive step. The Company cannot predict what other defenses the Defendants may raise, or the ultimate outcome of either of these related matters.
CORMEDIX INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In the same complaint against the same Defendants, the Company also alleged an infringement (requesting the same remedies) of ND Partners’ utility model DE 20 2005 022 124 U1 (the “Utility Model”), which the Company believes is fundamentally identical to the Prosl European Patent in its main aspects and claims. The Court separated the two proceedings and the Prosl European Patent and the Utility Model claims are now beingwere tried separately. TauroPharm has filed a cancellation action against the Utility Model before the German Patent and Trademark Office (the “German PTO”) based on the similar arguments as those in the opposition against the Prosl European Patent.
The Court issued its decisions on May 8, 2015, staying both proceedings. In its decisions, the Court found that the commercialization by TauroPharm in Germany of its TauroLock catheter lock solutions Hep100 and Hep500 infringes both the Prosl European Patent and the Utility Model and further that there is no prior use right that would allow TauroPharm to continue to make, use or sell its product in Germany. However, the Court declined to issue an injunction in favor of the Company that would preclude the continued commercialization by TauroPharm based upon its finding that there is a sufficient likelihood that the EPO, in the case of the Prosl European Patent, or the German PTO, in the case of the Utility Model, may find that such patent or utility model is invalid. Specifically, the Court noted the possible publication of certain instructions for product use that may be deemed to constitute prior art. As such, the District Court determined that it will defer any consideration of the request by the Company for injunctive and other relief until such time as the EPO or the German PTO made a final decision on the underlying validity of the Prosl European Patent and the Utility Model.
The opposition proceeding against the Prosl European Patent before the EPO is ongoing. The EPO held a hearing in the opposition proceeding on November 25, 2015. In its preliminary consideration of the matter, the EPO (and the German PTO) had regarded the patent as not inventive or novel due to publication of prior art. However, the EPO did not issue a decision at the end of the hearing but adjourned the matter due to the fact that the panel was of the view that Claus Herdeis, one of the managing directors of TauroPharm, hashad to be heard as a witness in a further hearing in order to close some gaps in the documentation presented by TauroPharm as regards the publication of the prior art. In October 2016, TauroPharm submitted a further writ to the EPO requesting a date for the hearing and bringing forward further arguments, in particular in view of the recent decision of the German PTO on the invalidity of the utility model. The EPO has scheduled a further oral hearing for November 22-23, 2017. While the Company continues to believe that the referenced publication and instructions for use do not, in fact, constitute prior art and that the Prosl European Patent will be found to be valid by the EPO, there can be no assurance that the Company will prevail in this matter.
The German PTO held a hearing in the validity proceedings relating to the Utility Model on June 29, 2016, at which the panel affirmed its preliminary finding that the Utility Model was invalid based upon prior publication of a reference to the benefits that may be associated with adding heparin to a taurolidine based solution. The Company filed an appeal against the ruling on September 7, 2016. An oral hearing was held on September 17, 2019 in which the German Federal Patent Court affirmed the first instance decision that the Utility Model was invalid. The decision has only a declaratory effect, as the Utility Model had expired in November 2015. Furthermore, it has no bearingOn April 28, 2020, the Company filed a withdrawal of the complaint on the ongoing consideration byGerman utility model, thereby waiving its claims on these proceedings. During the year ended December 31, 2020, costs in connection with the utility model infringement proceedings of approximately $30,000 was reimbursed to TauroPharm.
On November 22, 2017, the EPO ofin Munich, Germany held a further oral hearing in this matter. At the validity and possible infringement ofhearing, the panel held that the Prosl European Patent.Patent would be invalidated because it did not meet the requirements of novelty based on a technical aspect of the European intellectual property law. The Company filed an appealdisagrees with this decision and has appealed the decision. The Company continues to believe that the Prosl European Patent is indeed novel and that its validity should be maintained. There can be no assurance that the Company will prevail in this matter. In addition, the ongoing Unfair Competition litigation brought by the Company against the ruling on September 7, 2016.
CORMEDIX INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On January 16, 2015, the Company filed a complaint against TauroPharm GmbH and its managing directors in the District Court of Cologne, Germany. In the complaint, the Company alleges violation of the German Unfair Competition Act by TauroPharm for the unauthorized use of its proprietary information obtained in confidence by TauroPharm. The Company alleges that TauroPharm is improperly and unfairly using its proprietary information relating to the composition and manufacture of Neutrolin, in the manufacture and sale of TauroPharm’s products TauroLockTM, TauroLock-HEP100 and TauroLock-HEP500. The Company seeks a cease and desist order against TauroPharm from continuing to manufacture and sell any product containing taurolidine (the active pharmaceutical ingredient (“API”) of Neutrolin) and citric acid in addition to possible other components, damages for any sales in the past and the removal of all such products from the market. An initial hearing in the District Court of Cologne, Germany was held on November 19, 2015 to consider the Company’s claims. In this hearing, the presiding judge explained that the court needed more information with regard to several aspects of the case. As a consequence, the courtCourt issued an interim decision in the form of a court order outlining several issues of concern that relate primarily to the court'scourt’s interest in clarifying the facts and reviewing any and all available documentation, in particular with regard to the question which specific know-how was provided to TauroPharm by whom and when. The Company's legal team has prepared the requested reply and produced the respective documentation. TauroPharm has also filed another writ within the same deadline and both parties have filed further writs at the end of April setting out their respective argumentation in more detail. A further oral hearing in this matter was held on November 15, 2016. In this hearing, the court heard arguments from CorMedix and TauroPharm concerning the allegations of unfair competition. The court made no rulings from the bench, and indicated that it is prepared to further examine the underlying facts of the Company's allegations. On March 7, 2017, the courtCourt issued another interim decision in the form of a court order outlining again several issues relating to the argumentation of both sides in the proceedings. In particular the court requested the Company to further specify its requests and to further substantiate in even more detail which know know-how was provided by Biolink to TauroPharm by whom and when. The court also raised the question whether the know-how provided at the time to TauroPharm could still be considered to be secret know-how or may have become public in the meantime. The court granted both sides the opportunity to reply to this court order and provide additional facts and evidence until May 15, 2017. Both parties have submitted further writs in this matter and the court has nowCourt scheduled a further hearing on May 8, 2018. TheAfter having been rescheduled several times, the hearing took place on November 20, 2018. A decision was rendered by the court on December 11, 2018, dismissing the complaint in its entirety. However, the Company intends to continue to pursue this matter, and still believes firmly that its claims are well-founded. The Company therefore appealed in January 2019 and filed its grounds of appeal in March 2019. An oral hearing was held on September 6, 2019 in which the legal counsel of the Company brought forward further arguments for the fact that the manufacturing process of the respective catheter locking solution is indeed protectable as a trade secret. In view of these new arguments, the Court issued an evidentiary order on September 27, 2019 ordering an expert opinion. The expert opinion was not in the Company’s favor but the Company has filed a response to provide additional supplemental documentarythe expert opinion in reaction to which the Court asked the expert to supplement his opinion to address the issues brought forward in the Company’s submission. In the supplementary expert opinion, the expert confirmed his view. The Company has filed a response and other evidence as may be necessaryan oral hearing has been scheduled for February 5, 2021 but was postponed to support its claims.
In connection with the aforementioned patent and utility model infringement and unfair competition proceedings against TauroPharm, the Company was required by the District CourtCourts of Mannheim and Cologne to provide a security deposit of approximately $132,000deposits to cover legal fees in the event TauroPharm is entitled to reimbursement of these costs. TheAs of March 31, 2021, the aggregate deposit was approximately $136,000, which the Company recorded the deposit as restricted cash for the year ended December 31, 2015. The Company furthermore had to provide a deposit in the amount of $40,000 in connection with the unfair competition proceedings in Cologne. These amounts are shown as restricted cash on the condensed consolidated balance sheets.
CORMEDIX INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Commitments
In-Licensing
In 2008, the Company entered into a License and Assignment Agreement (the “NDP License Agreement”) with ND Partners, LLP (“NDP”). Pursuant to the NDP License Agreement, NDP granted the Company exclusive, worldwide licenses for certain antimicrobial catheter lock solutions, processes for treating and inhibiting infections, a biocidal lock system and a taurolidine delivery apparatus, and the corresponding United States and foreign patents and applications (the “NDP Technology”). The Company acquired such licenses and patents through its assignment and assumption of NDP’s rights under certain separate license agreements by and between NDP and Dr. Hans-Dietrich Polaschegg, Dr. Klaus Sodemann and Dr. Johannes Reinmueller. As consideration in part for the rights to the NDP Technology, the Company paid NDP an initial licensing fee of $325,000 and granted NDP a 5% equity interest in the Company, consisting at the time of 39,9807,996 shares of the Company’s common stock.
The Company is required to make payments to NDP upon the achievement of certain regulatory and sales-based milestones. Certain of the milestone payments are to be made in the form of shares of common stock currently held in escrow for NDP, and other milestone payments are to be paid in cash. The maximum aggregate number of shares issuable upon achievement of milestones is 145,54329,109 shares. During the year ended December 31,In 2014, a certain milestone was achieved resulting in the release of 36,3867,277 shares held in escrow. A totalThe number of 109,157 shares of common stock are held in escrow as of September 30, 2017 and DecemberMarch 31, 2016.2021 is 21,832 shares of common stock. The maximum aggregate amount of cash payments due upon achievement of milestones is $3,000,000 with the balance being $2,500,000 remaining unearned at September 30, 2017.as of March 31, 2021 and 2020. Events that trigger milestone payments include but are not limited to the reaching of various stages of regulatory approval and upon achieving certain worldwide net sales amounts. There were no milestones achieved during the threequarters ended March 31, 2021 and nine months ended September 30, 2017 and 2016.
The NDP License Agreement may be terminated by the Company on a country-by-country basis upon 60 days prior written notice. If the NDP License Agreement is terminated by either party, the Company’s rights to the NDP Technology will revert back to NDP.
Note 5 — Leases:
The Company entered into a seven-year operating lease agreement in March 2020 for an office space at 300 Connell Drive, Berkeley Heights, New Jersey 07922. The lease agreement, with a monthly average cost of approximately $17,000 commenced in September 2020. The Company’s sublease on its previous premises at 400 Connell Drive, Berkeley Heights, New Jersey 07922 terminated in November 2020.
The Company entered into an operating lease for office space in Germany that began in July 2017. The rental agreement has a three-month term which automatically renews and includes a monthly cost of 400 Euros. The Company elected to apply the short-term practical expedient to the office lease. The Company also has an operating lease for office equipment.
Operating lease expense in the Company’s condensed consolidated statements of operations and comprehensive loss for each of the three months ended March 31, 2021 and 2020 was approximately $52,000 and $2,000, respectively, which includes costs associated with leases for which ROU assets have been recognized as well as short-term leases.
At March 31, 2021 and December 31, 2020, the Company has a total operating lease liability of $1,007,000 and $1,033,000, respectively. At March 31, 2021, approximately $113,000 and $894,000 were classified as operating lease liabilities, short-term and operating lease liabilities, net of current portion, respectively, on the consolidated balance sheet. At December 31, 2020, approximately $109,000 and $924,000 were classified as operating lease liabilities, short-term and operating lease liabilities, net of current portion, respectively, on the consolidated balance sheet. Operating ROU assets as of March 31, 2021 and December 31, 2020 are $987,000 and $1,015,000, respectively.
CORMEDIX INC. AND SUBSIDIARYSUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Company entered into a three-year employment agreement with Robert Cook to serve as its Chief Financial Officerthree months ended March 31, 2021 and with Judith Abrams to serve as its Chief Medical Officer, and in March 2017, the Company entered into an employment agreement with John Armstrong to serve as its Executive Vice
The weighted average remaining lease term as of the termination date.
As of September 30, 2017, the Company has no remainingMarch 31, 2021, maturities of lease obligation.liabilities were as follows:
| 2021 (excluding the three months ended March 31, 2021) | $ | 149,000 | ||
| 2022 | 200,000 | |||
| 2023 | 202,000 | |||
| 2024 | 205,000 | |||
| 2025 | 208,000 | |||
| 2026 and thereafter | 380,000 | |||
| Total future minimum lease payments | 1,344,000 | |||
| Less imputed interest | (337,000 | ) | ||
| Total | $ | 1,007,000 |
Note 6 — Concentrations:
At September 30, 2017, approximately 97% ofMarch 31, 2021, net accounts receivable was due from two customers.customers that exceeded 10% of the Company’s accounts receivable (65% and 34%) and at December 31, 2020, one customer exceeded 10% of the Company’s accounts receivable (95%). During the three months ended September 30, 2017,March 31, 2021 and 2020, the Company had revenue from two customers that each exceeded 10% (57% and 33%) of its total sales, and for the nine months ended September 30, 2017 three customers that each exceeded 10% of total sales (44%, 34% and 14%). For the three and nine months ended September 30, 2016, two customers exceeded 10% of its total sales, (37%47%, 28% and 21%)15% in 2021, and (30%62%, 19% and 20%)10%, respectively.
Item 2.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our 20162020 Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or the SEC, on March 16, 2017.30, 2021.
Forward Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, orreferred to herein as the Exchange Act. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,”“would” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included in our most recent annual report on Form 10-K, as well as any amendments thereto, including in our quarterly report on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017, as filed with the SEC and which are incorporated herein by reference. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Overview
CorMedix Inc. and its Subsidiary (referredour wholly owned German subsidiaries, CorMedix Europe GmbH and CorMedix Spain, S.L.U., (collectively referred to herein collectively as “we,” “us,” “our” and the “Company”), is a biopharmaceutical company focused on developing and commercializing therapeutic products for the prevention and treatment of infectious and inflammatory diseases.
Our primary focus is to developon the development of our lead product candidate, Neutrolin® (also known as CRMD003)DefenCath™, for potential commercialization in the United States, or U.S., and other key markets.markets as a catheter lock solution, or CLS. We have in-licensed the worldwide rights to develop and commercialize DefenCath and Neutrolin®. The name DefenCath is the U.S. proprietary name conditionally approved by the U.S. Food and Drug Administration, or FDA, while the name Neutrolin® is currently used in the European Union, or EU, and other territories where we received CE-Mark approval for the commercial distribution of Neutrolin whichas a CLS regulated as a medical device. DefenCath/Neutrolin is a novel anti-infective solution (a formulation of taurolidine citrate1.35% and heparin 1000 u/ml) under development in the U.S.intended for the reduction and prevention of catheter-related infections and thrombosis in patients requiring central venous catheters in clinical settings such as dialysis, critical/intensive care,hemodialysis, total parenteral nutrition, and oncology. Infection and thrombosis represent key complications among critical care/ intensive carehemodialysis, total parenteral nutrition and cancer patients with central venous catheters. These complications can lead to treatment delays and increased costs to the healthcare system when they occur due to hospitalizations, the need for intravenous, or IV antibiotic treatment, long-term anticoagulation therapy, removal/replacement of the central venous catheter, related treatment costs and increased mortality. We believe Neutrolin has the potential to addressDefenCath addresses a significant unmet medical need and represents a significantpotential large market opportunity.
In January 2015, the FDA designated DefenCath as a Phase 3 clinical trialQualified Infectious Disease Product, or QIDP, for prevention of catheter-related blood stream infections in hemodialysis patients with end stage renal disease receiving hemodialysis through a central venous catheter (“LOCK-IT-100”)catheter. Catheter-related blood stream infections, or CRBSIs, and clotting can be life-threatening. The QIDP designation provides five years of market exclusivity in addition to the five years granted for a New Chemical Entity, or NCE, upon approval of a New Drug Application, or NDA. In addition, in January 2015, the FDA granted Fast Track designation to DefenCath Catheter Lock Solution, a designation intended to facilitate development and expedite review of drugs that treat serious and life-threatening conditions so that the approved drug can reach the market expeditiously. The Fast Track designation of DefenCath provides us with the opportunity to meet with the FDA on a more frequent basis during the development process, and also ensures eligibility to request priority review of the marketing application.
In December 2015. Based2015, we launched our Phase 3 Prospective, Multicenter, Double-blind, Randomized, Active Control Study to Demonstrate Safety & Effectiveness of DefenCath/Neutrolin in Preventing Catheter-related Bloodstream Infection in Subjects on our experienceHemodialysis for End Stage Renal Disease, or LOCK-IT-100, in patients with hemodialysis catheters in the LOCK-IT-100 trial, we are assessing the structure of our planned second Phase 3U.S. The clinical trial to seek efficiencies and improvements in the design and execution. Two pivotal trialswas designed to demonstrate the safety and effectiveness of Neutrolin areDefenCath compared to the standard of care CLS, Heparin, in preventing CRBSIs. The primary endpoint for the trial assessed the incidence of CRBSI and time to CRBSI for each study subject. Secondary endpoints were catheter patency, which was defined as required use of tPA, or removal of catheter due to dysfunction, and removal of catheter for any reason.
As previously agreed with the FDA, an interim efficacy analysis was performed when the first 28 potential CRBSI cases were identified in our LOCK-IT-100 study that occurred through early December 2017. Based on these first 28 cases, there was a highly statistically significant 72% reduction in CRBSI by DefenCath relative to the active control of heparin (p=0.0034). Because the pre-specified level of statistical significance was reached for the primary endpoint and efficacy had been demonstrated with no safety concerns, the LOCK-IT-100 study was terminated early. The study continued enrolling and treating subjects until study termination, and the final analysis was based on a total of 795 subjects. In a total of 41 cases, there was a 71% reduction in CRBSI by DefenCath relative to heparin, which was highly statistically significant (p=0.0006), with a good safety profile.
The FDA granted our request for a rolling submission and review of the NDA, which is designed to expedite the approval process for products being developed to address an unmet medical need. Although the FDA usually requires two pivotal clinical trials to provide substantial evidence of safety and effectiveness for approval of an NDA, the FDA will in some cases accept one adequate and well-controlled trial, where it is a large multicenter trial with a broad range of subjects and study sites that has demonstrated a clinically meaningful and statistically very persuasive effect on a disease with potentially serious outcome.
In March 2020, we began the modular submission process for the NDA for DefenCath for the prevention of CRBSI in hemodialysis patients, and in August 2020, the FDA accepted for filing the DefenCath NDA. The FDA also granted our request for priority review, which provides for a six-month review period instead of the standard ten-month review period. As we announced in March 2021, the FDA informed in its Complete Response Letter (“CRL”) to us that it cannot approve the NDA for DefenCath in its present form. The FDA noted concerns at the third-party manufacturing facility after a review of records requested by the U.S. FoodFDA and Drug Administrationprovided by the contract manufacturer (“FDA”CMO”). Additionally, the FDA is requiring a manual extraction study to secure marketing approvaldemonstrate that the labeled volume can be consistently withdrawn from the vials despite an existing in-process control to demonstrate fill volume within specifications.
In April 2021, we met with the FDA to discuss proposed resolutions for the deficiencies identified in the United States.
Satisfactory resolution of these issues is required for approval of the DefenCath NDA by a pre-approval inspection and/or adequate CMO responses addressing these concerns. If an onsite inspection is required, we may encounter delays in obtaining FDA approval because the FDA is currently facing a backlog due to the Covid-19 pandemic. The FDA recently issued a guidance document on its plan to use voluntary remote interactive evaluations at facilities, including for a pre-approval inspection to assess a marketing application. The FDA will request the manufacturing facility to participate in a voluntary remote interactive evaluation, if the FDA believes it is appropriate. A manufacturing facility cannot request the remote interaction. The FDA expects the use of remote interactive evaluations should help the FDA operate within normal timeframes in spite of the Covid-19 pandemic.
The FDA did not request additional clinical data and did not identify any deficiencies related to the data submitted on the efficacy or safety of DefenCath from LOCK-IT-100 in the CRL. In draft labeling discussed with the FDA, the FDA added that the initial approval will be for the limited population of patients with kidney failure receiving chronic hemodialysis through a central venous catheter. This is consistent with our request for approval pursuant to the Limited Population Pathway for Antibacterial and Antifungal Drugs, or LPAD. LPAD, passed as part of the 21st Century Cures Act, is a new program intended to expedite the development and approval of certain antibacterial and antifungal drugs to treat serious or life-threatening infections in limited populations of patients with unmet needs. LPAD provides for a streamlined clinical trial.development program involving smaller, shorter, or fewer clinical trials and is intended to encourage the development of safe and effective products that address unmet medical needs of patients with serious bacterial and fungal infections. We believe that LPAD will provide additional flexibility for the changes endorsedFDA to approve DefenCath to prevent CRBSIs in the limited population of patients with kidney failure receiving hemodialysis through a central venous catheter.
We intend to pursue additional indications for DefenCath use as a CLS in populations with an unmet medical need that also represent a significant market opportunity. For example, we intend to pursue marketing authorization in the U.S. for use as a CLS to reduce CRBSIs in oncology and total parenteral nutrition patients using a central venous catheter.
In addition to DefenCath, we are sponsoring a pre-clinical research collaboration for the use of taurolidine as a possible treatment for rare orphan pediatric tumors. In February 2018, the FDA granted orphan drug designation to taurolidine for the treatment of neuroblastoma in children. We may seek one or more strategic partners or other sources of capital to help us develop and commercialize taurolidine for the treatment of neuroblastoma in children. We are also evaluating opportunities for the possible expansion of taurolidine as a platform compound for use in certain medical devices. Patent applications have been filed in several indications, including wound closure, surgical meshes, and wound management. Based on initial feasibility work, we are advancing pre-clinical studies for taurolidine-infused surgical meshes, suture materials and hydrogels. We will seek to establish development/commercial partnerships as these programs advance.
The FDA regards taurolidine as a new chemical entity and therefore an unapproved new drug. Consequently, there is no appropriate predicate medical device currently marketed in the U.S. on which a 510(k) approval process could be based. As a result, we will be required to submit a premarket approval application, or PMA, for marketing authorization for any medical device indications that we may pursue. In the event that an NDA for DefenCath is approved by the FDA, will facilitate our ability to complete the ongoing Phase 3 clinical trial in hemodialysis patientsregulatory pathway for these medical device product candidates may be revisited with central venous catheters, as previously announced, by year-end 2018. We sought guidance from the FDA to address, in part, the apparent overall lower rate of catheter-related blood stream infection (CRBSI) events as announced in April 2017. Changes made to the protocol were 1) the utilization of a Clinical Adjudication Committee (CAC) to assess suspected CRBSIs; 2) the use of the CAC to critically and independently assess suspected CRBSIs in a blinded fashionFDA. Although there may be no appropriate predicate, de novo Class II designation can be proposed, based on a single positive blood culturerisk assessment and supporting documentation, rather than two positive blood culturesa reasonable assurance of safety and effectiveness.
In the European Union, or EU, Neutrolin is regulated as required per protocol; 3) the ability to capture cases occurring outside of dialysis centers to facilitate more complete capture of CRBSI events in the study, particularly when patients present with CRBSI events outside of the dialysis center setting e.g. emergency rooms or urgent care centers; and 4) a revision of the design of the study to detect a treatment effect of 55% or greater when comparing the Neutrolin and heparin control arms. The FDA agreed that cases adjudicated by the CAC to be CRBSI events and the per protocol definition of CRBSI events will be included in the primary analysis of the primary efficacy endpoint of the LOCK-IT-100 study. The amended study assumptions including a reduction in statistical power have resulted in a reduction in the total number of CRBSI events required from 161 events to 56 events to complete the study.
In April 2017, we entered intoSeptember 2014, the TUV-SUD and The Medicines Evaluation Board of the Netherlands, or MEB, granted a commercial collaboration with Hemotech SAS covering Francelabel expansion for Neutrolin to include use in oncology patients receiving chemotherapy, intravenous, or IV, hydration and French overseas territories.
In September 2019, our registration with the Saudi Arabia Food and Drug Administration, or the SFDA, expired. As a result, we cannot sell Neutrolin in Saudi Arabia. We intend to complete the documentation required to renew our registration with the SFDA, however, we cannot predict how long the renewal process will take. There is no assurance that the registration will be renewed by the SFDA.
The novel coronavirus has been declared a pandemic and has spread to multiple global regions. The outbreak and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been fileddisrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. In response to the COVID-19 outbreak, “shelter in wound closure, surgical meshes, wound management,place” orders and osteoarthritis,other public health guidance measures have been implemented across much of the United States, Europe and Asia, including visco-supplementation.
Since our inception, we have not generated sufficient revenue from product sales to be profitable. Ourour operations to date have been primarily limited to conducting clinical trials and establishing manufacturing for our product candidates, licensing product candidates, business and financial planning, research and development, seeking regulatory approval for our products, initial commercialization activities for DefenCath in the U.S. and Neutrolin in the European UnionEU and other foreign markets, and maintaining and improving our patent portfolio. We have funded our operations primarily through debt and equity financings. We have generated significant losses to date, and we expect to use substantial amounts of cash for our operations as we continue to conductprepare our ongoing Phase 3 clinical trial in hemodialysis patients with catheters, plan a second Phase 3 clinical trialpre-launch commercial activities for Neutrolin,DefenCath for the U.S. market and commercialize Neutrolin in the European UnionEU and other foreign markets, pursue business development activities, and incur additional legal costs to defend our intellectual property, and seek FDA approval of Neutrolin in the U.S.property. As of September 30, 2017,March 31, 2021, we had an accumulated deficit of approximately $141.8$224.7 million. We are unable to predict the extent of any future losses or when we will become profitable, if ever.
Financial Operations Overview
Revenue
We have not generated substantial revenue since our inception. Through March 31, 2021, we have funded our operations primarily through debt and equity financings.
Research and Development Expense
Research and development, or R&D, expense consists of: (i) internal costs associated with our development activities; (ii) payments we make to third party contract research organizations, or CRO, contract manufacturers, investigative sites, and consultants; (iii) technology and intellectual property license costs; (iv) manufacturing development costs; (v) personnel related expenses, including salaries, stock–based compensation expense, benefits, travel and related costs for the personnel involved in drug development; (vi) activities relating to regulatory filings and the advancement of our product candidates through preclinical studies and clinical trials; and (vii) facilities and other allocated expenses, which include direct and allocated expenses for rent, facility maintenance, as well as laboratory and other supplies.supplies; and (viii) costs related to the manufacturing of the product that could potentially be available to support the commercial launch prior to marketing approval. All R&D is expensed as incurred.
Conducting a significant amount of development is central to our business model. Product candidates in later-stage clinical development generally have higher development costs than those in earlier stages of development, primarily due to the significantly increased size and duration of the clinical trials. We expect to incur highersignificant R&D expenses for the foreseeable future in order to complete development of Neutrolin in the U.S., especiallyincluding the ongoingclose out of our LOCK-IT-100 clinical trial and a second Phase 3 trial.the ongoing filing of an NDA for Neutrolin.
The process of conducting pre-clinical studies and clinical trials necessary to obtain regulatory approval is costly and time consuming. The probability of success for each product candidate and clinical trial may be affected by a variety of factors, including, among others, the quality of the product candidate’s early clinical data, clinical trial enrollment, duration, conduct and results, investment in the program, competition, manufacturing capabilities and commercial viability.viability of the product candidate. As a result of the uncertainties associated with clinical trial enrollmentstrials in specific, and the risks inherent in the development process in general, we are unable to determine the duration and completion costs of current or future clinical stages of our product candidates or when, or to what extent, we will generate revenues from the commercialization and sale of any of our product candidates.candidates that may be approved.
Development timelines, probability of success and development costs vary widely. We are currently focused on clinical developmentsecuring the marketing approval for DefenCath in the U.S. and optimization ofas well as on continuing sales in foreign markets where Neutrolin is approved. In December 2015, we contractedsigned an agreement with PPD Development, L.P.a clinical research organization, or CRO, to help us conduct our multicenter, double-blind, randomized, active controlLOCK-IT-100 Phase 3 clinical trial in hemodialysis patients with central venous catheters to demonstrate the efficacy and safety of NeutrolinDefenCath in preventing catheter-related bloodstream infections and blood clotting in subjects receiving hemodialysis therapy as treatment for end stage renal disease. In May 2017, we modified the contract to cover theOur LOCK-IT-100 study was completed and all costs associated with an extension of the estimated study timeline, incorporate several protocol amendments and take on several new tasks related to the enrollment sites. The total costagreement with the CRO has been paid.
We were granted a deferral by the FDA under the Pediatric Research Equity Act (“PREA”), that requires sponsors to conduct pediatric studies for NDAs for a new active ingredient, such as taurolidine in DefenCath, unless a waiver or deferral is obtained from the FDA. A deferral acknowledges that a pediatric assessment is required but permits the applicant to submit the pediatric assessment after the submission of an NDA. We have made a commitment to conduct the pediatric study after approval of the contract increased to $26.4 million from its original amount of $19.2 million, ofNDA for use in adult hemodialysis patients. Pediatric studies for an approved product conducted under PREA may qualify for pediatric exclusivity, which approximately $14.4 million has been recognized through September 30, 2017. Given several recent changes to the study agreed with the FDA,if granted would provide an additional modificationsix months of marketing exclusivity. DefenCath would then have the contract with PPD is being negotiated. The expected costpotential to receive a total marketing exclusivity period of this modification is approximately $8.0 million. We currently anticipate that enrollment for this trial will continue into the second quarter of 2018. We are still reassessing the structure of our planned second Phase 3 clinical trial10.5 years, including exclusivity pursuant to NCE and do not have a cost estimate at this time.
We are pursuing additional opportunities to generate value based onfrom taurolidine, an active component of Neutrolin.DefenCath. Based on initial feasibility work, we are advancing preclinicalhave completed an initial round of pre-clinical studies for taurolidine-infused surgical meshes, suture materials, and hydrogels.hydrogels, which require a PMA regulatory pathway for approval. We anticipate pursuingare also involved in a pre-clinical research collaboration for the use of taurolidine as a possible treatment for rare orphan pediatric tumors. In February 2018, the FDA clearancegranted orphan drug designation to taurolidine for these potential products through the 510(k) pathwaytreatment of neuroblastoma in children. We may seek one or more strategic partners or other sources of capital to help us develop and will seek to establish development/commercial partnerships as these programs advance.commercialize taurolidine for the treatment of neuroblastoma in children.
Selling, General and Administrative Expense
Selling, general and administrative, or SG&A, expense includes costs related to commercial personnel, medical education professionals, marketing and advertising, salaries and other related costs, including stock-based compensation expense, for persons serving in our executive, sales, finance and accounting functions. Other SG&A expense includes facility-related costs not included in R&D expense, promotional expenses, costs associated with industry and trade shows, and professional fees for legal services and accounting services.
Foreign Currency Exchange Transaction Gain (Loss)
Foreign currency exchange transaction gain (loss) is the result of re-measuring transactions denominated in a currency other than our functional currency and is reported in the condensed consolidated statement of operations as a separate line item within other income (expense). The intercompany loans outstanding between our company based in New Jersey and our subsidiary based in Germany are not expected to be repaid in the foreseeable future and the nature of the funding advanced is of a long-term investment nature. As such, unrealized foreign exchange movements related to long-term intercompany loans are recorded in other comprehensive income (loss).
Interest Income
Interest income consists of interest earned on our cash and cash equivalents and short-term investments.
Interest Expense
Interest expense consists of interest incurred on our convertible debt, amortization of debt discount and on financing of expenditures.
Results of Operations
Three months and nine months ended September 30, 2017March 31, 2021 compared to three and nine months ended September 30, 2016.March 31, 2020
The following is a tabular presentation of our consolidated operating results:results (in thousands):
| For the Three Months Ended March 31, | % of Change Increase | |||||||||||
| 2021 | 2020 | (Decrease) | ||||||||||
| Revenue | $ | 88 | $ | 74 | 19 | % | ||||||
| Cost of sales | (61 | ) | (49 | ) | 24 | % | ||||||
| Gross profit | 27 | 25 | 8 | % | ||||||||
| Operating Expenses: | ||||||||||||
| Research and development | (2,636 | ) | (2,472 | ) | 7 | % | ||||||
| Selling, general and administrative | (4,601 | ) | (3,165 | ) | 45 | % | ||||||
| Total operating expenses | (7,237 | ) | (5,637 | ) | 28 | % | ||||||
| Loss from operations | (7,210 | ) | (5,612 | ) | 28 | % | ||||||
| Interest income | 3 | 64 | (95 | )% | ||||||||
| Foreign exchange transaction loss | (5 | ) | (3 | ) | 67 | % | ||||||
| Interest expense | (5 | ) | (6 | ) | (17 | )% | ||||||
| Net loss | (7,217 | ) | (5,557 | ) | 30 | % | ||||||
| Other comprehensive loss | (3 | ) | (7 | ) | (57 | )% | ||||||
| Comprehensive loss | $ | (7,220 | ) | $ | (5,564 | ) | 30 | % | ||||
For the Three Months Ended September 30, | % Increase (Decrease) | For the Nine Months Ended September 30, | % Increase (Decrease) | |||
| Revenue | $61,075 | $44,451 | 37% | $$236,801 | $$102,390 | 131% |
| Cost of sales | (66,652) | (43,922) | (52)% | (178,276) | (281,342) | (37)% |
| Gross profit (loss) | (5,577) | 529 | NM | 58,525 | (178,952) | NM |
| Operating expenses: | ||||||
| Research and development | (6,014,260) | (6,840,413) | (12)% | (16,028,151) | (11,702,965) | 37% |
| Selling, general and administrative | (1,992,134) | (2,318,091) | (14)% | (6,683,953) | (6,449,608) | 4% |
| Total operating expenses | (8,006,394) | (9,158,504) | (13)% | (22,712,104) | (18,152,573) | 25% |
| Loss from operations | (8,011,971) | (9,157,975) | (13)% | (22,653,579) | (18,331,525) | 24% |
| Interest income | 37,156 | 32,866 | 13% | 89,164 | 93,928 | (5)% |
| Foreign exchange transaction (loss) | (4,692) | (1,091) | 330% | (11,515) | (5,622) | 105% |
| Value of warrants issued in connection with public offering | (1,974,019) | - | - | (120,654) | - | - |
| Interest expense | (2,810) | - | - | (2,810) | (992) | 183% |
| Total other income (expense) | (1,944,365) | 31,775 | NM | (45,815) | 87,314 | NM |
| Net loss | (9,956,336) | (9,126,200) | 9% | (22,699,394) | (18,244,211) | 24% |
| Other comprehensive income (loss) | (1,973) | (6,847) | (71)% | 13,525 | 21,168 | (36)% |
| Comprehensive loss | $(9,958,309) | $(9,133,047) | 9% | (22,685,869) | (18,223,043) | 24% |
Revenue.Revenue for the three months ended September 30, 2017March 31, 2021 was $61,000$88,000 as compared to $44,000$74,000 in the same period last year, an increase of $17,000.$14,000. The increase occurred duewas attributable to the recognition of previously deferred revenue for products sold under a warranty and return provision of $29,000, partially offset by a decrease inincreased sales of Neutrolin in the European Union of $12,000.
Cost of Sales.
Cost of sales was $61,000 for the three months endedResearch and Development Expense. R&D expense was $2,636,000 for the three months ended SeptemberMarch 30, 2017 that had previously been deferred, partially2021, an increase of $164,000, or 7%, from $2,472,000 for the same period in 2020. The increase was primarily attributable to an increases in personnel expenses and non-cash charges for stock-based compensation of $401,000 and $354,000, respectively, offset by a $13,000 reductiondecrease in inventory reserve duringin costs related to the manufacturing of DefenCath of $337,000 and clinical trial expenses of $254,000, mainly due to the closing of our LOCK-IT-100 clinical trial.
Selling, General and Administrative Expense. SG&A expense was $4,601,000 for the three months ended September 30, 2017.
Foreign Exchange Transaction Gain (Loss). A foreign exchange transaction loss of $5,000 was recorded for the three months ended March 31, 2021 compared to a loss of $3,000 for the same period last year, partially offset byyear. These losses occur due to the re-measuring of transactions denominated in a $198,000 increased cost of materials related to higher sales during the nine months ended September 30, 2017 (including the recognition of $60,000 associated with revenue recognized during the nine months ended September 30, 2017 that had previously been deferred) and an increase in ongoing stability studies cost of $65,000.currency other than our functional currency.
Interest Income. R&D expenseInterest income was $3,000 for the three months ended September 30, 2017 was $6,014,000March 31, 2021 compared to $6,840,000$64,000 for the same period last year, a decrease of $826,000. The decrease was primarily attributable to reduced activity related to antimicrobial sutures, nanofiber webs, wound management and osteoarthritis and visco-supplementation of $1,756,000; and a reduction in costs related to manufacturing process development activities of $1,562,000. These decreases were substantially offset by a $2,085,000 increase in clinical trial expenses related to the ongoing LOCK-IT-100 trial in the U.S. and an increase in personnel expenses of $398,000, mainly due to the hiring of our chief medical officer and new staff supporting the LOCK-IT-100 trial, including several consultants who were converted to employee status.
Interest Expense. Interest expense was $5,000 for the three months ended September 30, 2017 of $1,974,000 is the difference between the fair value of the warrants issued with insufficient authorized shares in our May 2017 public offering which was classifiedMarch 31, 2021 as liability at June 30, 2017 for $1,880,000 and the estimated fair value of these warrants at August 10, 2017 of $3,854,000, when these warrants were reclassifiedcompared to equity.
Other Comprehensive Income (Loss)
. Unrealized foreign exchange movements related to long-term intercompany loans, the translation of the foreign affiliate financial statements to U.S. dollars and unrealized movements related to short-term investmentLiquidity and Capital Resources
Sources of Liquidity
As a result of our cost of sales, R&D and SG&A expenditures and the lack of substantial product sales revenue, weour ongoing operations have not been profitable and have generated operating losses since we began operations.our inception. During the ninethree months ended September 30, 2017,March 31, 2021, we received net proceeds of $12,798,000 from the May 2017 public offering resulting$41,456,000 from the issuance of an aggregate of 18,619,301 and 29,046,110 shares of common stock and warrants, respectively; $347,000 from the issuance of 198,6303,737,862 shares of common stock under our at-the-market-issuance sales agreement;agreement as compared to $2,470,000 net proceeds for the same period in 2020 from the issuance of 368,144 shares of common stock. Additionally, we also received $125,000 and $6,800$412,000 from the exercise of 10,000 stock options.warrants during the quarter ended March 31, 2021 and 2020, respectively. We will continue to be reliant on external sources of cash for the foreseeable future until we are able to generate revenue.
Net Cash Used in Operating Activities
Net cash used in operating activities for the ninethree months ended September 30, 2017March 31, 2021 was $21,310,000$6,691,000 as compared to $15,767,000$7,967,000 for the same period in 2016, an increase2020, a decrease in net cash useduse of $5,543,000.$1,276,000. The increasedecrease was primarilymainly attributable to higher non-cash stock-based compensation of $1,732,000 compared to $677,000 for the same period last year, offset by an increase in net loss of $4,455,000$1,659,000, primarily driven by increased researchan increase in selling, general and development expenses. The net loss of $22,699,000 for the nine months ended September 30, 2017 wasadministrative expenses, higher than cash used in operating activities by $1,389,000. The difference is primarily attributable to non-cash stock-based compensation of $1,264,000, change in fair value of derivative liability of $121,000, an increasedecrease in accrued expenses of $533,000$1,485,000 compared to $328,000 for the same period last year, and a decrease in inventory of $67,000, partially offset by increaseslower increase in prepaid expenses and trade receivablesother current assets of $84,000 and $72,000, respectively, and decreases of $242,000 in accounts payable and $200,000 in inventory reserve.
Net cashCash Provided by (Used in) Investing Activities
Cash used in investing activities for the three months ended March 31, 2021 was $526,000 as compared to $985,000 provided by investing activitiesin the same period in 2020. The net cash used during the ninethree months ended September 30, 2017 is attributable to the proceeds from the sale ofMarch 31, 2021 was mainly driven by lower amount invested in short-term investments of $18,392,000, partially offset by the purchase of short-term investments of $13,074,000. In comparisonas compared to the same period in 2016, net cash provided by activities was attributable to the proceeds from the sale of short-term investments used to fund operations.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the ninethree months ended September 30, 2017March 31, 2021 was $13,152,000$41,581,000 as compared to $7,070,000$2,835,000 for the same period in 2016.2020, an increase of $38,746,000. During the ninethree months ended September 30, 2017,March 31, 2021, we generated net proceeds of $12,798,000 from the May 2017 public offering of our common stock and warrants, $347,000$41,456,000 from the sale of our common stock in our current at-the-market, or ATM program, and $7,000$125,000 from the exercise of stock options.warrants. In comparison to the same period in 2016,2020, we generated $6,221,000net proceeds of $2,470,000 from the sale of our common stock in the current at-the-marketour ATM program and $850,000$412,000 from the exercise of stock options.warrants.
Funding Requirements and Liquidity
Our total cash on hand and short-term investments as of September 30, 2017March 31, 2021 was $12.0$81.2 million, excluding restricted cash of $0.2 million, compared with $20.2$46.3 million at December 31, 2016. In October 2017,2020. As of March 31, 2021, we raised approximately $3.1 million through the use of our current at-the-market program and have approximately $0.5 million remaining. At September 30, 2017, we also had approximately $46.0$50.0 million available under our current shelf registration for the issuance of equity, debt or equity-linked securities unrelated to the currentand no available balance under our ATM program.
Because our business has not currently generated positive operating cash flow, weadditional capital will need to raise additional capitallikely be required in order to continue to fund ourpre-commercial launch activities for DefenCath, as well as other taurolidine-based research and development activities as well as to fundand our operations generally, even after accounting for the sale of our common stock under our current ATM program.generally. Our continued operations and specifically the completion of our ongoing LOCK-IT-100 clinical trial for Neutrolin in the U.S., which was initiated in December 2015, will depend on our ability to raise sufficient additional funds through various potential sources, such as equity, debt financings, and/or strategic relationships. A second Phase 3 clinical trial is required for approval, for which funds in addition to the ongoing hemodialysis Phase 3 clinical trial will be required. We can provide no assurances that financing or strategic relationships will be available on acceptable terms, or at all, that may enable us to complete our Phase 3 clinical trial program.all.
We expect to continue to fund operations from cash on hand and through capital raising sources as previously described, which may be dilutive to existing stockholders, through revenues from the licensing of our products, or through strategic alliances.
WeSales of Neutrolin outside the U.S. are not expected to generate significant product revenues for the foreseeable future, and we expect to grow product sales we do not anticipate that we will generate significant product revenuesfor DefenCath in the foreseeable future.U.S., should we receive FDA approval. In the absence of suchsignificant revenue, we are likely to continue generating operating cash flow deficits. We expectwill continue to incur increases in ouruse cash used in operations as we continue our ongoing and planned Phase 3 clinical trials,increase other activities leading to the commercialization of DefenCath upon approval, pursue business development activities, and incur additional legal costs to defend our intellectual propertyproperty.
We currently estimate that as of March 31, 2021, we have sufficient cash on hand to fund operations at least into the second half of 2022, after taking into consideration the costs for the initial preparations for the commercial launch for DefenCath. Additional financing may be required to build out our commercial infrastructure and seek FDA approval of Neutrolinto continue our operations should we decide to market and sell Defencath in the U.S.
Contractual Obligations
We entered into a seven-year operating lease agreement in March 2020 for an office space at 300 Connell Drive, Berkeley Heights, New Jersey 07922. The lease agreement, with a monthly average cost of approximately $17,000, commenced on September 16, 2020. Our sublease on our previous premises at 400 Connell Drive, Berkeley Heights, New Jersey 07922 terminated on November 30, 2020.
Critical Accounting Policies
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments, including those described below. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates.
For the three-month period ended March 31, 2021, there were no significant changes to our significantcritical accounting policies are more fully describedas identified in Note 2 to our financial statements included with this report, we believe thatAnnual Report on Form 10-K for the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our financial statements.year ended December 31, 2020.
Recently Adopted Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements” (“SAB 101”), as amended by SAB No. 104, “Revenue Recognition” (“SAB 104”) and FASB ASC 605, “Revenue Recognition”.Pronouncements
In accordance with SAB 101 and SAB 104, we recognize revenue from product sales when the following four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectability is reasonably assured. We recognize revenue once the four revenue recognition criteria are met in accordance with the terms of our various distribution agreements. For an upfront payment related to an exclusive distribution agreement, we record it as deferred revenue and recognize revenue on a straight-line basis over the contractual term of the agreement.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Item 3.
None.
Item 4.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed only to provide reasonable assurance that information to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of September 30, 2017.March 31, 2021. Based on the foregoing evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarterthree months ended September 30, 2017,March 31, 2021, or in other factors that could significantly affect these controls, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II
Item 1.
On September 9, 2014, we filed in the District Court of Mannheim, Germany a patent infringement action against TauroPharm GmbH and Tauro-Implant GmbH as well as their respective CEOs, (the “Defendants”)referred to as the Defendants claiming infringement of our European Patent EP 1 814 562 B1, which was granted by the EPO on January 8, 2014, (the “Proslor the Prosl European Patent”).Patent. The Prosl European Patent covers a low dose heparin catheter lock solution for maintaining patency and preventing infection in a hemodialysis catheter. In this action, we claim that the Defendants infringe on the Prosl European Patent by manufacturing and distributing catheter locking solutions to the extent they are covered by the claims of the Prosl European Patent. We believe that our patent is sound and are seeking injunctive relief and raising claims for information, rendering of accounts, calling back, destruction and damages. Separately, TauroPharm has filed an opposition with the EPO against the Prosl European Patent alleging that it lacks novelty and inventive step. We cannot predict what other defenses the Defendants may raise, or the ultimate outcome of either of these related matters. At present, the EPO has revoked the Prosl European Patent as invalid, and we have filed an appeal, which is currently pending.
In the same complaint against the same Defendants, we also alleged an infringement (requesting the same remedies) of NDP’s utility model DE 20 2005 022 124 U1, (the “Utility Model”),referred to as the Utility Model, which we believe is fundamentally identical to the Prosl European Patent in its main aspects and claims. The Court separated the two proceedings and the Prosl European Patent and the Utility Model claims are now beingwere tried separately. TauroPharm has filed a cancellation action against the Utility Model before the German Patent and Trademark Office, (the “German PTO”)or German PTO based on the similar arguments as those in the opposition against the Prosl European Patent.
The Court issued its decisions on May 8, 2015, staying both proceedings. In its decisions, the Court found that the commercialization by TauroPharm in Germany of its TauroLock catheter lock solutions Hep100 and Hep500 infringes both the Prosl European Patent and the Utility Model and further that there is no prior use right that would allow TauroPharm to continue to make, use or sell its product in Germany. However, the Court declined to issue an injunction in favor of us that would preclude the continued commercialization by TauroPharm based upon its finding that there is a sufficient likelihood that the EPO, in the case of the Prosl European Patent, or the German PTO, in the case of the Utility Model, may find that such patent or utility model is invalid. Specifically, the Court noted the possible publication of certain instructions for product use that may be deemed to constitute prior art. As such, the District Court determined that it will defer any consideration of the request by us for injunctive and other relief until such time as the EPO or the German PTO made a final decision on the underlying validity of the Prosl European Patent and the Utility Model.
The opposition proceeding against the Prosl European Patent before the EPO is ongoing. In its preliminary consideration of the matter, the EPO (and the German PTO) regarded the patent as not inventive or novel due to publication of prior art. Oral proceedings before the Opposition Division at the EPO were held on November 25, 2015, at which the three judgethree-judge patent examiner panel considered arguments related to the validity of the Prosl European Patent. The hearing was adjourned due to the fact that the panel was of the view that Claus Herdeis, one of the managing directors of TauroPharm, hashad to be heard as a witness in a further hearing in order to close some gaps in the documentation presented by TauroPharm as regards the publication of prior art. In October 2016, TauroPharm submitted a further writ to the EPO requesting a date for the hearing and bringing forward further arguments, in particular in view of the recent decision of the German PTO on the invalidity of the utility model. The EPO has scheduled a further oral hearing for November 22-23, 2017. While we continue to believe that the referenced publication and instructions for use do not, in fact, constitute prior art and that the Prosl European Patent will be found to be valid by the EPO, there can be no assurance that we will prevail in this matter.
The German PTO held a hearing in the validity proceedings relating to the Utility Model on June 29, 2016, at which the panel affirmed its preliminary finding that the Utility Model was invalid based upon prior publication of a reference to the benefits that may be associated with adding heparin to a taurolidine based solution. We filed an appeal against the ruling on September 7, 2016. An oral hearing was held on September 17, 2019 in which the German Federal Patent Court affirmed the first instance decision that the Utility Model was invalid. The decision has only a declaratory effect, as the Utility Model had expired in November 2015. Furthermore, it has no bearingOn April 28, 2020, we filed a withdrawal of the complaint on the ongoing consideration byGerman utility model, thereby waiving our claims on these proceedings.
On November 22, 2017, the EPO ofin Munich, Germany held a further oral hearing in this matter. At the validity and possible infringement ofhearing, the panel held that the Prosl European Patent.Patent would be invalidated because it did not meet the requirements of novelty based on a technical aspect of the European intellectual property law. We filed an appealdisagree with this decision and have appealed the decision. We continue to believe that the Prosl European Patent is indeed novel and that its validity should be maintained. There can be no assurance that we will prevail in this matter. In addition, the ongoing Unfair Competition litigation against the ruling on September 7, 2016.TauroPharm is not affected and will continue.
On January 16, 2015, we filed a complaint against TauroPharm GmbH and its managing directors in the District Court of Cologne, Germany. In the complaint, we allege violation of the German Unfair Competition Act by TauroPharm for the unauthorized use of itsour proprietary information obtained in confidence by TauroPharm. We allege that TauroPharm is improperly and unfairly using itsour proprietary information relating to the composition and manufacture of Neutrolin, in the manufacture and sale of TauroPharm’s products TauroLockTM, TauroLock-HEP100 and TauroLock-HEP500. We seek a cease and desist order against TauroPharm from continuing to manufacture and sell any product containing taurolidine (the active pharmaceutical ingredient (“API”)API of Neutrolin) and citric acid in addition to possible other components, damages for any sales in the past and the removal of all such products from the market. An initial hearing in the District Court of Cologne, Germany was held on November 19, 2015 to consider our claims. The judge made no decision on the merits of our complaint. On January 14, 2016, the courtCourt issued an interim decision in the form of a court order outlining several issues of concern that relate primarily to court'sthe court’s interest in clarifying the facts and reviewing any and all available documentation, in particular with regard to the question which specific know-how was provided to TauroPharm by whom and when. We have prepared the requested reply and produced the respective documentation. TauroPharm has also filed another writ within the same deadline and both parties have filed further writs at the end of April setting out their respective argumentation in more detail. A further oral hearing in this matter was held on November 15, 2016. In this hearing, the courtCourt heard arguments from CorMedix and TauroPharm concerning the allegations of unfair competition. The court made no rulings from the bench, and indicated that it is prepared to further examine the underlying facts of our allegations. On March 7, 2017, the courtCourt issued another interim decision in the form of a court order outlining again several issues relating to the argumentation of both sides in the proceedings. In particular the court requested us to further specify our requests and to further substantiate in even more detail which know know-how was provided by Biolink to TauroPharm by whom and when. The court also raised the question whether the know-how provided at the time to TauroPharm could still be considered to be secret know-how or may have become public in the meantime. The court granted both sides the opportunity to reply to this court order and provide additional facts and evidence until May 15, 2017. Both parties have submitted further writs in this matter and the court has nowCourt had scheduled a further hearing for May 8, May 2018. The Company intendsAfter having been rescheduled several times, the hearing took place on November 20, 2018. A decision was rendered by the Court on December 11, 2018, dismissing the complaint in its entirety. However, we intend to continue to pursue this matter, and still believe firmly that our claims are well-founded. We have therefore appealed in January 2019 and filed our grounds of appeal in March 2019. An oral hearing was held on September 6, 2019 in which our legal counsel brought forward further arguments for the fact that the manufacturing process of the respective catheter locking solution is indeed protectable as a trade secret. In view of these new arguments, the Court issued an evidentiary order on September 27, 2019 ordering an expert opinion. The expert opinion was not in our favor, but we have filed a response to provide additional supplemental documentarythe expert opinion in reaction to which the Court asked the expert to supplement his opinion to address the issues brought forward in our submission. In the supplementary expert opinion, the expert confirmed his view. We have filed another response and an oral hearing has been scheduled for February 5, 2021 but was postponed to June 18, 2021 due to the COVID19 situation in Germany.
Item 1A. Risk Factors.
The outbreak of the novel coronavirus disease, COVID-19, or other pandemic, epidemic or outbreak of an infectious disease may materially and adversely impact our business, including our preclinical studies and clinical trials.
In December 2019, the novel coronavirus disease, COVID-19, was identified in Wuhan, China. This virus has been declared a pandemic and has spread to multiple global regions. The outbreak and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. In response to the COVID-19 outbreak, “shelter in place” orders and other evidence aspublic health guidance measures have been implemented across much of the United States, Europe and Asia, including in the locations of our offices, clinical trial sites, key vendors and partners. Such “shelter in place” orders were previously lifted, at least partially, in many locations. However, an increase in the spread of COVID-19 and variants, which may reflect the spread of one or more successive waves of the virus, has led to the re-imposition by many states of quarantine requirements for out-of-state travelers and may lead to the re-imposition of “shelter-in-place” or other similar orders. Although several vaccines for prevention or mitigation of the severity of the virus have been granted Emergency Use Authorization by the FDA and foreign regulatory authorities, the timely distribution and public acceptance thereof in reducing the pandemic remain uncertain. Our clinical development program timelines may be negatively affected by COVID-19, which could materially and adversely affect our business, financial condition and results of operations. Further, due to “shelter in place” orders and other public health guidance measures, we have implemented a work-from-home policy for all staff members excluding those necessary to support its claims.maintain minimum basic operations. Our increased reliance on personnel working from home may negatively impact productivity, or disrupt, delay or otherwise adversely impact our business.
As a result of the COVID-19 outbreak, or similar pandemics, and related travel restrictions and “shelter in place” orders and other public health guidance measures, we have and may in the future experience disruptions that could materially and adversely impact our clinical trials, business, financial condition and results of operations. Potential disruptions include but are not limited to:
| ● | delays or difficulties at our third-party vendors on whom we are dependent for manufacturing activities; |
| ● | delays or difficulties in enrolling patients in our clinical trials; |
| ● | delays or difficulties in initiating or expanding clinical trials, including delays or difficulties with clinical site initiation and recruiting clinical site investigators and clinical site staff; |
| ● | increased rates of patients withdrawing from our clinical trials following enrollment as a result of contracting COVID-19 or other health conditions or being forced to quarantine; |
| ● | diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials; |
| ● | interruption of key clinical trial activities, such as clinical trial site data monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures, which may impact the integrity of subject data and clinical study endpoints; |
| ● | interruption or delays in the operations of the FDA or other regulatory authorities, which may impact review and approval timelines for our NDA; |
| ● | delays or disruptions in preclinical experiments and investigational new drug application-enabling studies due to restrictions of on-site staff and unforeseen circumstances at contract research organizations and vendors; |
| ● | interruption of, or delays in receiving supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems; |
| ● | limitations on our ability to recruit and hire key personnel due to our inability to meet with candidates because of travel restrictions and “shelter in place” orders; |
| ● | limitations on employee resources that would otherwise be focused on the conduct of our preclinical studies and clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; and |
| ● | interruption or delays to our sourced discovery and clinical activities. |
The COVID-19 pandemic continues to rapidly evolve. The extent to which the outbreak impacts our business, preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of Equity Securitiesthe disease, the duration of the pandemic, travel restrictions and Usesocial distancing in the United States and other countries, business closures or business disruptions and the effectiveness of Proceeds.actions taken in the United States and other countries to contain and treat the disease. If we or any of the third parties with whom we engage were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted.
In October 2017, we entered into a warrant exchange agreement whereby we agreed to exchange with an investor Series A warrants issued toaddition, the investor intrading prices for our May 2017 public offering of common stock and warrants. The warrants provided forother biopharmaceutical companies have been highly volatile as a result of the purchase of up to an aggregate of 22,500 sharesCOVID-19 pandemic. As a result, we may face difficulties raising capital through sales of our common stock at an exercise price of $0.75, with an expiration date of September 10, 2018. We issued 5,625 shares of common stock to the investor in exchange for the warrants.or such sales may be on unfavorable terms.
Item 6. Exhibits.
The followingexhibit index set forth below is a list of exhibits filed as part ofincorporated by reference in response to this Form 10-Q:Item 6.
Exhibit Number | Description | |
| 10.1 | Executive Employment Agreement, dated and effective March 10, 2021, between CorMedix Inc. and Elizabeth Masson-Hurlburt (incorporated by reference to Exhibit 10.1 to CorMedix Inc.’s Current Report on Form 8-K filed on March 12, 2021). | |
| 31.1 | Certification of Principal Executive Officer | |
| 31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* | |
| 32.1 | Certification of Principal Executive Officer | |
| Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | ||
| 101 | The following materials from CorMedix Inc. Form 10-Q for the quarter ended |
| * | Filed herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CORMEDIX INC. | |||
| Date: May 13, 2021 | By: | /s/ Khoso Baluch | |
| Name: | Khoso Baluch | ||
| Title: | Chief Executive Officer | ||
(Principal Executive Officer) | |||
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