CorMedix Inc. — Form 10-Q Summary
Reporting period: Three months ended March 31, 2013. CorMedix is a development-stage pharmaceutical and medical-device company focused on therapies for cardiac and renal dysfunction. It has not generated product revenue.
Key financial metrics
| Metric | Q1 2013 | Q1 2012 / prior period |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $265,035 | $374,855 |
| General and administrative expense | $551,741 | $536,255 |
| Operating loss | $816,776 | $911,110 |
| Interest expense | $440,403 | $0 |
| Net loss | $1,257,051 | $910,161 |
| Net loss attributable to common shareholders | $1,437,553, including a $180,502 deemed dividend | $910,161 |
| Basic and diluted loss per share | $0.12 | $0.08 |
| Cash used in operating activities | $617,751 | $130,141 |
At March 31, cash was $692,720, down from $835,471 at December 31, 2012. Current assets were $950,182 and current liabilities were $2,232,913, a working-capital deficit of approximately $1.28 million. Total liabilities were $2,243,866; stockholders’ deficit was $1,276,217. The balance sheet reports senior convertible notes, net of discounts, of $598,506 in total, with stated principal of $1.324 million.
Changes and financing
- R&D expense fell 29% year over year, which management attributed to the strategic focus on European CE Mark approval for Neutrolin and lower personnel costs. G&A expense increased about 3%, primarily due to accounting and risk-management fees.
- Interest expense rose from zero, primarily reflecting debt-discount and deferred-financing-cost amortization and accrued interest on 2012 senior convertible notes.
- February’s Series A preferred-stock placement raised $533,000 gross. The company reported $475,000 net cash from financing activities for the quarter, after warrant repurchase and financing costs. It also repurchased 220,000 warrants for $33,000.
- After quarter-end, $409,600 of senior notes were converted into 1,170,286 common shares; 150,000 warrants were exercised for $60,000 gross proceeds. Common shares outstanding were 13,202,665 as of May 7, 2013.
Outlook, risks and unusual items
- Management expected CE Mark approval for Neutrolin in the second quarter of 2013 and, if approved, planned a European hemodialysis-market launch during 2013. Approval and timing were not assured. CRMD004 development was deferred pending progress with Neutrolin.
- Management estimated available capital would fund operations only through the second quarter of 2013. Additional financing would be needed; availability and acceptable terms were uncertain. The filing states that these conditions raise substantial doubt about the company’s ability to continue as a going concern. No significant product-sales revenue was anticipated for 2013.
- In April, CorMedix amended its license agreement to defer a $500,000 payment due upon first CE Mark issuance, allowing payment within 12 months at the company’s choice. It issued ND Partners a five-year warrant for 125,000 shares at $1.50.
- The European Patent Office appeal board upheld the Sodemann patent covering Neutrolin but remanded the matter for consideration of restricting certain claims. The company intends to defend the patent; the outcome remains uncertain.
- NYSE MKT granted an extension to June 30, 2013 to regain compliance with one continued-listing standard. Separately, the company reported noncompliance with a stockholders’-equity/listing standard and submitted a compliance plan; failure to comply or make required progress could lead to delisting.
- Management identified a material weakness in financial reporting controls concerning expertise in complex, non-routine accounting. It did not affect Q1 statements but had led to a restatement of the September 2012 quarterly report. Management concluded disclosure controls were ineffective at March 31 and described remediation steps involving an oversight committee and outside GAAP adviser.
Most important facts for investors to verify
- Whether CorMedix secured financing after the reported cash runway, and the resulting dilution, debt terms, and ability to fund operations.
- Whether Neutrolin received CE Mark approval on the anticipated timeline and whether a European launch followed.
- Progress against both NYSE MKT compliance plans and the risk of delisting.
- Developments in the patent proceeding and any effect on Neutrolin’s claims or commercialization.
- Whether the material weakness remediation is effective and whether further financial-statement corrections are needed.