Cormedix Inc. — Q1 2012 Form 10-Q
Reporting period: Three months ended March 31, 2012. CorMedix is a development-stage pharmaceutical and medical-device company focused on products for cardiac and renal dysfunction. It had no product revenue and reported no revenue since inception.
Financial results and liquidity
- Revenue: $0. The company does not expect significant product revenue in 2012.
- Operating expenses: $911,110, down 55% from $2,010,023 in Q1 2011. Research and development was $374,855, down 68% from $1,175,542; general and administrative expense was $536,255, down 36% from $834,481.
- Net loss: $910,161, compared with $1,975,038 in Q1 2011. Basic and diluted loss per share was $0.08 versus $0.17. Profit and operating margins are not meaningful because the company had no revenue.
- Cash flow: Operating cash used was $130,141, compared with $1,719,472 in Q1 2011. There was no investing or financing cash flow in either quarter. Cash declined by $130,141 during Q1.
- Cash and liquidity: Cash and cash equivalents were $1,855,193 at March 31, versus $1,985,334 at December 31, 2011. Current liabilities were $1,598,431, including accounts payable of $1,424,598; current assets were $2,012,084.
- Debt and equity: The balance sheet reports no outstanding debt. Total liabilities were $1,612,331 and stockholders’ equity was $423,029. Shares outstanding were 11,408,274 at March 31 and May 14, 2012.
- Accumulated losses: Deficit since inception was $43,857,713. The filing states that recurring losses and limited capital raise substantial doubt about the company’s ability to continue as a going concern.
Changes and management outlook
- Lower R&D reflected the strategy adopted in 2011 to concentrate resources on obtaining European CE Mark approval and commercializing Neutrolin (CRMD003). The company also discontinued CRMD001 and returned it to its licensor in December 2011. Q1 R&D payments were allocated 89% to CRMD003, 6% to CRMD004, and 5% to CRMD001.
- Lower G&A primarily reflected reduced compensation and stock-based compensation following the former CEO’s departure. The company expected G&A expense to remain unchanged for the rest of 2012.
- Management expected available capital to fund operations into the fourth quarter of 2012, based on the current spending plan. Additional funding would be needed; potential sources included equity or debt financing, strategic relationships, and product out-licensing. Availability and terms were uncertain, and financing could dilute shareholders or require the company to relinquish rights.
- The company had submitted its Neutrolin design dossier for European CE marking, completed a first-stage audit, and anticipated possible approval in the first half of 2012 and a European launch during 2012. These were expectations, not assured outcomes. U.S. development was limited and further development would require additional funding.
Risks, contingencies, and unusual items
- Going concern and funding: If financing is unavailable, CorMedix said it might need to curtail or cease operations, delay development, or relinquish technology or market rights.
- NYSE Amex listing: On April 20, 2012, the exchange notified the company that it did not meet a continued-listing standard related to losses and financial condition. CorMedix intended to submit a remediation plan by May 21; the exchange could initiate delisting proceedings if the plan was not accepted or compliance was not restored by August 22, 2012.
- Vendor litigation: On April 19, 2012, the company was served with a New Jersey lawsuit concerning $80,986.93 owed to vendor Xerimis. The company said it was discussing settlement.
- Management changes: The former COO/CFO resigned effective April 30, 2012, with limited transition services through May 31. Richard Cohen was interim CEO and CFO; the filing also cites Randy Milby as COO. The company disclosed risks related to management continuity and financial-reporting capacity.
- Product and regulatory risks: Neutrolin approval, manufacturing, commercialization, reimbursement, market acceptance, and future U.S. development were uncertain. The filing also describes competition, intellectual-property challenges, reliance on third parties, and potential product-liability exposure.
- Controls: Management concluded disclosure controls were effective at March 31, 2012 and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Current cash runway, cash burn, accounts-payable position, and status and terms of any financing.
- Progress and outcome of the NYSE Amex remediation plan and continued-listing review.
- Current status of CE Mark approval, European launch plans, and any distributor or partner arrangement.
- Resolution of the Xerimis claim and any other material vendor obligations.
- Management and finance-team staffing, and whether reporting capacity changed after the CFO’s departure.
- Potential dilution from outstanding options and warrants; the filing reports 6,354,656 potentially dilutive option and warrant shares excluded from Q1 loss-per-share calculations.