Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
CRMD > SEC Filings for CRMD > Form 10-K/A on 4-Mar-2014All Recent SEC Filings

Show all filings for CORMEDIX INC.

Form 10-K/A for CORMEDIX INC.


4-Mar-2014

Annual Report


Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

You should read the following discussion and analysis together with our audited financial statements and the accompanying notes. This discussion contains forward-looking statements, within the meaning of Section 27A of Securities Act,
Section 21E of the Exchange Act, and the Private Securities Litigation Reform Act of 1995, including statements regarding our expected financial condition, business and financing plans. These statements involve risks and uncertainties. Our actual results could differ materially from the results described in or implied by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report, particularly under the heading "Risk Factors."

Overview

We are a development stage pharmaceutical and medical device company that seeks to in-license, develop and commercialize therapeutic products for the treatment of cardiac and renal dysfunction, specifically in the dialysis and non-dialysis areas.

We have the worldwide rights to develop and commercialize our product candidates CRMD003 (Neutrolin®) and CRMD004. CRMD003 is a liquid designed to prevent central venous Catheter Related Bloodstream infections, or CRBI, and maintenance of catheter patency in central venous catheters (initially in hemodialysis catheters).

We were organized as a Delaware corporation on July 28, 2006 under the name "Picton Holding Company, Inc." and we changed our corporate name to "CorMedix Inc." on January 18, 2007. Since our inception, we have had no revenue from product sales. Our operations have been primarily limited to organizing and staffing, licensing product candidates, developing clinical trials for our product candidates, establishing manufacturing for our product candidates and maintaining and improving our patent portfolio. We have generated significant losses since our inception and we expect to continue to generate losses as we progress towards the commercialization of our lead product candidate CRMD003 (Neutrolin®). As of December 31, 2012, we had a deficit accumulated during the development stage of $46, 233 ,234. Because we do not generate revenue from any of our product candidates, our losses will continue as we continue development of our product candidates. As a result, our operating losses are likely to be substantial until at least the planned launching of Neutrolin® in Europe and thereafter, if not successful. We are unable to predict the extent of any future losses or when we will become profitable, if at all. These matters raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

On February 19, 2013, we sold 761,429 shares of our newly created Series A non-voting convertible preferred stock and a warrant to purchase up to 400,000 shares of our common stock, for gross proceeds of $533,000. An aggregate of 474,105 shares of this Series A non-voting convertible preferred stock was converted to 474,105 shares of our common stock on February 22, 2013.

During the year ended December 31, 2012, we completed two series of private placements for an aggregate total of 1,324 Units, each Unit consisting of (i) a one-year $1,000 aggregate principal amount 9% Senior Convertible Note, convertible into shares of common stock, at a conversion price of $0.35 per Note, and (ii) a five-year redeemable Warrant, to purchase 3,310,000 shares of common stock, to certain accredited investors pursuant to a Subscription Agreement dated September 20, 2012 and November 13, 2012 at an initial exercise price of $0.40 per share. We received gross proceeds of $1,324,000 or net proceeds of approximately $1,095,600 from these private placements. The Notes issued have maturity dates of September 20, 2013 as to the 850 Units and November 13, 2013 as to the 474 Units. We paid the placement agent for the private placement a total of $109,900 in fees and issued it warrants to purchase an aggregate of 331,000 shares. The placement agent warrants have the same terms as those issued to the investors. (See Notes to the Financial Statements - Note 6.)

In March 2010, we completed our IPO, whereby we sold 1,925,000 units, each unit consisting of two shares of our common stock and a warrant to purchase one share of common stock, at $6.50 per unit resulting in gross proceeds of $12,512,500 and net proceeds to us of $10,457,270 after deducting underwriting discounts and commissions and offering expenses payable by us. All of our convertible notes and accrued interest thereon and all of our outstanding shares of Non-Voting Subordinated Class A Common Stock automatically converted into units or common stock upon the completion of the IPO. We effected a 1 for 7.836 reverse stock split of our common stock on February 24, 2010 in connection with the IPO. All shares and per share amounts, except as noted, have been retroactively adjusted to give effect to the reverse stock split.

We believe that as a result of our decision in late 2011 to focus the majority of our resources, including our research and development efforts primarily on CE Mark approval and the commercialization of Neutrolin® (CRMD003) in Europe, the net proceeds from the IPO, the net proceeds from our 2012 convertible note private placement financing and the gross proceeds from the private placement of our Series A non-voting convertible preferred stock in February 2013, our existing cash will be sufficient to fund our projected operating requirements into the second quarter of 2013. We intend to raise additional funds through various potential sources, such as equity and/or debt financings, strategic relationships, or out-licensing of our products, however, we can provide no assurances that such financing will be available on acceptable terms, or at all.


Financial Operations Overview

Revenue

We have not generated any revenue since our inception. As of December 31, 2012, we have funded our operations primarily through debt financings and the IPO, and our receipt of a total of approximately $490,000 from Federal grants under the Qualifying Therapeutic Discovery Project program, a total of approximately $775,000 from the sale of our unused net operating losses through the State of New Jersey's Economic Development Authority Technology Business Tax Certificate Transfer Program and approximately $35,000 from the State of New York's Research and Development Tax Credit Program.

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, 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, 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. All R&D is expensed as incurred.

Conducting a significant amount of development is central to our business model. Through December 31, 2012, we incurred $23, 203 ,305 in R&D expenses since our inception in July 2006. 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 plan to increase our R&D expenses for the foreseeable future in order to complete development of CRMD003 and our earlier-stage R&D projects.

The following table summarizes the percentages of our R&D payments related to our two most advanced product candidates and other projects. The percentages summarized in the following table reflect payments directly attributable to each development candidate, which are tracked on a project basis. A portion of our internal costs, including indirect costs relating to our product candidates, are not tracked on a project basis and are allocated based on management's estimate.

              Year Ended
             December 31,
                                    Period from July 28,
                                      2006 (Inception)
           2012        2011       through December 31, 2012
CRMD001        6 %        32 %                            49 %
CRMD002        0 %         0 %                             0 %
CRMD003       88 %        66 %                            48 %
CRMD004        6 %         2 %                             3 %

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, investment in the program, competition, manufacturing capabilities and commercial viability. As a result of the uncertainties discussed above, the uncertainty associated with clinical trial enrollments and the risks inherent in the development process, 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.

Development timelines, probability of success and development costs vary widely. During the third quarter of 2011, we received a notice from the U.S. Food and Drug Administration, or FDA, that our product candidate, Neutrolin®, had been assigned to the Center for Drug Evaluation and Research, or CDER. As a result of this, and given our limited resources, we decided to change our business strategy and focus the majority of our resources on the research and development of Neutrolin® rather than CRMD004 and to seek regulatory and commercialization approval for Neutrolin® in Europe through a CE Mark application rather than pursue FDA approval at this time.

During the first half of 2011, we submitted our design dossier to TÜV SÜD the European notified body managing our CE Mark application. In the fourth quarter of 2011, we successfully completed our stage 1 audit with TÜV SÜD. We also have successfully completed our stage 2 audit with TÜV SÜD which resulted in our receipt of the ISO 13485:2003 certification from TÜV SÜD on October 10, 2012. This certification, which is a stand-alone standard developed by the International Organization for Standardization, is the globally recognized standard that outlines consistent international processes for the design and manufacturing of medical devices, including many supply chain functions such as assembly, packaging, warehousing and distribution. Compliance with ISO 13485 is often seen as a step towards achieving compliance with European regulatory requirements. The conformity of medical devices and in-vitro diagnostic medical devices according to applicable EU standards must be assessed before sale is permitted. The preferred method to prove conformity is the certification by a notified body of the quality management system according to ISO 9001 and/or ISO 13485 and ISO 14971. The result of a positive assessment is the issuance of a certificate of conformity allowing the CE Mark and the permission to sell the medical device in the European Union.


We anticipate receiving a CE Mark approval by the end of the second quarter of 2013. If we obtain CE Mark approval in Europe, we intend to launch Neutrolin® for the prevention of Catheter Related Bloodstream Infections, or CRBI and maintenance of catheter patency in hemodialysis patients in Europe during 2013. However, we cannot be assured of CE Mark approval of Neutrolin® or the planned commercialization timeline. We are currently exploring the various methods of launching Neutrolin® in Europe, whether through a distributorship or partnership arrangement, or otherwise, and plan to initially launch in Germany. Assuming the receipt of a CE Mark and the launch of Neutrolin®, we intend to meet with the FDA to determine the pathway for U.S. approval of Neutrolin®, which we expect to entail a Phase 3 trial.

General and Administrative Expense

General and Administrative, or G&A, expense consists primarily of salaries and other related costs, including stock-based compensation expense, for persons serving in our executive, finance and accounting functions. Other G&A expense includes facility-related costs not otherwise included in R&D expense, promotional expenses, costs associated with industry and trade shows, and professional fees for legal services and accounting services. We expect that our G&A expenses will increase if we add personnel and as a result of the reporting obligations applicable to public companies. From our inception on July 28, 2006 through December 31, 2012, we incurred $12,776,034 of G&A expense.

Other Income

Other income consists mainly of federal research grants awarded and research and development tax refunds, net of application fees. From our inception on July 28, 2006 through December 31, 2012, we received $420,987 of other income, net of application fees and related filing costs.

Interest Income and Interest Expense

Interest income consists of interest earned on our cash and cash equivalents. Interest expense consists of interest incurred on our pre-IPO convertible notes (up to their automatic conversion into units or common stock upon the completion of the IPO on March 30, 2010), and on our convertible notes issued in September and November 2012, as well as the amortization and write-off of deferred financing costs and debt discounts and a charge for the beneficial conversion relating to certain of our convertible notes. From our inception on July 28, 2006 through December 31, 2012, we received $126,307 of interest income through interest bearing savings accounts and incurred $11,575,964 of interest expense, which consists of interest incurred in debt issued to note holders, amortization and write-off of deferred financing costs and debt discounts and a beneficial conversion feature charge related to the conversion of certain of our convertible notes.

Results of Operations

Comparison of the Years Ended December 31, 2012 and December 31, 2011

R&D Expense. R&D expense was $1, 142 ,631 for the year ended December 31, 2012, a decrease of $2, 915 ,594, from $4, 058 ,225 for the year ended December 31, 2011. The decrease was attributable to our strategic change of direction during September 2011, which is to focus primarily on CE Mark approval for Neutrolin® in Europe. During the fourth quarter of 2011, we also discontinued the development of CRMD001, deferiprone and returned the product candidate to the licensor in December 2011. Our strategic change of direction also resulted in lower clinical research organization, manufacturing and regulatory expenses related to the development of CRMD003 during the second quarter of 2012 and lower personnel costs as a result of our Chief Medical Officer ("CMO") transitioning to a part-time status and a 50% reduction of salary effective March 2012.

G&A Expense. G&A expense was $1,857,080 for the year ended December 31, 2012, a decrease of $1,291,679 from $3,148,759 for the year ended December 31, 2011. The decrease was primarily attributable to lower compensation and stock-based compensation expense as a result of the separation of our former President and Chief Executive Officer in September 2011 and the resignation of our Chief Financial Officer/Chief Operating Officer in April 2012 and lower expenses related to investor relations.


Other Income. Other income during 2011 in the amount of $29,819 represented a research and development funding reimbursement from the State of New York research and development tax refund program. No other income was recognized for the year ended December 31, 2012.

Interest Income. Interest income was $1,965 for the year ended December 31, 2012, a decrease of $10,072, from $12,037 for the year ended December 31, 2011. The decrease was attributable to having lower interest-bearing cash balances during the year ended December 31, 2012 compared to the year ended December 31, 2011.

Interest Expense. Interest expense was $382,936 for the year ended December 31, 2012. No interest expense was recognized for the year ended December 31, 2011. The interest expense charges consisted primarily of a beneficial conversion feature charge of $279,052 related to the senior convertible notes and warrants we issued in September and November 2012 in the aggregate principal amount of $1,324,000, amortization of deferred financing fees of $76,632 and accrued interest of $26,938 related to the one-year 9% senior convertible notes.

Liquidity and Capital Resources

Sources of Liquidity

As a result of our significant R&D expenditures and the lack of any approved products to generate product sales revenue, we have not been profitable and have generated operating losses since we were incorporated in July 2006. Prior to the IPO, we had funded our operations principally with $14,364,973 in convertible notes sold in private placements and $625,464 in related party notes, which were also convertible. All of our convertible notes were automatically converted into 1,237,293 shares of common stock and 2,338,576 Units (comprised of 4,677,152 shares of common stock and 2,841,603 warrants at an exercise price of $3.4375). We received net proceeds of $10,457,270 from the IPO, after deducting underwriting discounts, commissions and offering expenses payable by us upon the closing of the IPO on March 30, 2010. Additionally, we received a total of approximately $490,000 from Federal grants under the Qualifying Therapeutic Discovery Project program and a total of approximately $775,000 from the sale of our unused net operating losses through the State of New Jersey's Economic Development Authority Technology Business Tax Certificate Transfer Program and a total of approximately $35,000 from qualified R&D expenditures refunded to us through the New York State Department of Taxation and Finance under the Qualifying Emerging Technology Incentive Program.

During the year ended December 31, 2012, we completed two series of private placements for an aggregate total of 1,324 Units, each Unit consisting of (i) a one-year $1,000 aggregate principal amount 9% Senior Convertible Note, convertible into shares of common stock, at a conversion price of $0.35 per Note, and (ii) a five-year redeemable Warrant, to purchase 3,310,000 shares of common stock, to certain accredited investors pursuant to a Subscription Agreement dated September 20, 2012 and November 13, 2012 at an initial exercise price of $0.40 per share. We received gross proceeds of $1,324,000 or net proceeds of approximately $1,095,600 from these private placements. The Notes issued have maturity dates of September 20, 2013 as to the 850 Units and November 13, 2013 as to the 474 Units.

On February 19, 2013, we sold 761,429 shares of our newly created Series A Non-Voting Convertible preferred stock and a warrant to purchase up to 400,000 shares of our common stock, for gross proceeds of $533,000.

Net Cash Used in Operating Activities

Net cash used in operating activities was $2,276,260 for the year ended December 31, 2012. The net loss of $3, 380 ,682 for the year ended December 31, 2012 was higher than cash used in operating activities by $1, 104 ,422. The primary reasons for the difference are amortization of debt discount of $279,052, noncash stock-based compensation charges of $274,358 and amortization of deferred financing costs of $76,633, primarily due to the beneficial conversion feature of the convertible notes and warrants we issued, and an increase in accrued expenses of $26,646, offset by decreases in prepaid expenses and other current assets of $503,742, relating primarily to the collection of other receivables related to the sale of our unused net operating losses through the State of New Jersey's Economic Development Authority Technology Business Tax Certificate Transfer Program and accounts payable of $15,743. Net cash used in operating activities was $6,296,725 for the year ended December 31, 2011. The net loss of $6, 671 ,273 for the year ended December 31, 2011 was higher than cash used in operating activities by $ 374 ,548. The primary reasons for the difference are non-cash stock-based compensation charges of $692,403, offset by decreases in accounts payable and accrued expenses of $ 170 ,783 and $139,855, respectively, relating primarily to clinical research organization costs, clinical site costs, manufacturing costs, patent fees and accrued legal fees.

Net Cash Used in Investing Activities

Net cash used in investing activities was $0 for the year ended December 31, 2012 a decrease of $1,625 for the same period last year due to a purchase of office equipment during the year ended December 31, 2011.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $1,126,397 for the year ended December 31, 2012 as compared to $0 for the same period last year. The increase was attributable to the gross proceeds from senior convertible notes of $1,324,000 offset by deferred financing costs of $197,603.


Funding Requirements

Our total cash on hand as of December 31, 2012 was $835,471, compared to $1,985,334 at December 31, 2011. Because our business does not generate positive operating cash flow, we will need to raise additional capital before we exhaust our current cash resources in order to continue to fund our research and development, as well as to fund operations generally. Our continued operations will depend on whether we are able to raise additional funds through various potential sources, such as equity, debt financing, strategic relationships, out-licensing or distribution arrangements of our products. Through December 31, 2012, all of our financing has been through the issuance of convertible notes in September and November 2012, our 2010 IPO, previous debt financings and our receipt of a total of approximately $490,000 from Federal grants under the Qualifying Therapeutic Discovery Project program, a total of approximately $775,000 from the sale of our unused net operating losses through the State of New Jersey's Economic Development Authority Technology Business Tax Certificate Transfer Program and approximately $35,000 from the State of New York's Research and Development Tax Credit Program, net of application fees. We expect to continue to fund operations from cash on hand and through either capital raising sources as previously described, which may be dilutive to existing stockholders, or through generating revenues from the licensing of our products or strategic alliances. We plan to seek additional debt and/or equity financing, but can provide no assurances that such financing will be available on acceptable terms, or at all. Moreover, the incurrence of indebtedness in connection with a debt financing would result in increased fixed obligations and could also result in covenants that would restrict our operations. Our actual cash requirements may vary materially from those now planned, however, because of a number of factors including the changes in the focus and direction of our research and development programs, the acquisition and pursuit of development of new product candidates, competitive and technical advances, costs of commercializing any of our product candidates, and costs of filing, prosecuting, defending and enforcing any patent claims and any other intellectual property rights.

We do not anticipate that we will generate significant product sales revenue for 2013, if any. In the absence of additional funding, we expect our continuing operating losses to result in increases in our cash used in operations over the next several quarters.

Based on our cash resources at December 31, 2012, the private placement of our Series A non-voting convertible preferred stock in February 2013, and our current plan of expenditure on continuing development of Neutrolin®, we believe that we have sufficient capital to fund our operations into the second quarter of 2013, and will need additional financing until we can achieve profitability, if ever. If we are unable to raise additional funds when needed, we may not be able to market our products as planned or continue development and regulatory approval of our products, or we could be required to delay, scale back or eliminate some or all of our research and development programs. Each of these alternatives would likely have a material adverse effect on our business. These matters raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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 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.

While our significant accounting policies are more fully described in Note 2 to our financial statements included with this report, we believe that 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.

Stock-Based Compensation

We account for stock options according to the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") No. 718, "Compensation
- Stock Compensation" ("ASC 718"). Under ASC 718, share-based compensation cost is measured at grant date, based on the estimated fair value of the award, and is recognized as expense over the employee's requisite service period on a straight-line basis.

We account for stock options granted to non-employees on a fair value basis using the Black-Scholes option pricing method in accordance with ASC 718. The non-cash charge to operations for non-employee options with vesting are revalued at the end of each reporting period based upon the change in the fair value of the options and amortized to consulting expense over the related vesting period.


We granted options to purchase 1,380,000 shares of common stock to our employees, non-employees and directors and officers during the year ended December 31, 2012. For the purpose of valuing options and warrants granted to our employees, directors and officers during the year ended December 31, 2012, we used the Black-Scholes option pricing model. For the purpose of valuing . . .

  Add CRMD to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for CRMD - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.