Cormedix Inc. — Q3 2012 Form 10-Q
Reporting period: Three and nine months ended September 30, 2012. CorMedix was a development-stage pharmaceutical and medical-device company focused on products for cardiac and renal dysfunction. It had generated no product revenue since inception.
Financial performance and position
| Metric | Q3 2012 | Q3 2011 | Nine months 2012 | Nine months 2011 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $255,738 | $1,724,797 | $878,785 | $4,482,687 |
| General and administrative | $421,653 | $877,020 | $1,334,522 | $2,609,526 |
| Net loss | $703,172 | $2,599,618 | $2,237,548 | $7,051,769 |
| Net loss per share | $0.06 | $0.23 | $0.20 | $0.62 |
- Q3 operating expenses totaled $677,391; nine-month operating expenses were $2,213,307. No operating margin is meaningful because the company had no revenue.
- Net cash used in operating activities was $1,747,993 for the first nine months of 2012, compared with $5,392,136 in 2011. Investing cash flow was zero. Financing provided $755,000 net, reflecting $850,000 gross note proceeds less $95,000 of financing costs.
- Cash and cash equivalents were $992,341 at September 30, 2012, down from $1,985,334 at December 31, 2011. Current assets were $1,237,676 versus current liabilities of $1,361,507. Total liabilities were $1,374,263, and stockholders’ equity was negative $116,822.
- The September financing consisted of one-year 9% senior convertible notes with $850,000 aggregate face value, convertible at $0.35, and five-year warrants exercisable at $0.40. The notes mature September 20, 2013; certain prepayments require payment of 120% of principal plus accrued interest. The financing included directors, the COO, and certain significant shareholders.
Changes, outlook, and significant matters
- Year-over-year losses narrowed substantially, primarily because CorMedix shifted resources toward European CE Mark approval for Neutrolin (CRMD003), discontinued CRMD001 in late 2011, reduced related development spending, and cut personnel costs. G&A also fell due mainly to management departures and lower investor-relations costs.
- Management expected existing cash, including approximately $689,000 net proceeds from the initial note closing, to fund operations into the first quarter of 2013. The company said it would need additional financing and could not assure funding would be available on acceptable terms or at all. Failure to obtain funds could force it to curtail or cease operations or relinquish product rights. The filing states these conditions raise substantial doubt about the company’s ability to continue as a going concern.
- Management focused on obtaining European CE Mark approval and aimed to launch Neutrolin in Europe in the first or second quarter of 2013, subject to approval; it cautioned that timing and approval were not assured. The company reported receiving ISO 13485:2003 certification on October 10, 2012. It did not expect product revenue in 2012.
- Neutrolin’s European patent faced an appeal by Geistlich. The European Patent Office scheduled oral proceedings for November 28, 2012; CorMedix intended to defend the patent but could not assure the outcome.
- The NYSE-MKT granted an extension through January 31, 2013 for CorMedix to regain compliance with continued listing standards, subject to periodic review. Delisting remained a risk.
- Subsequent disclosed items included an October 31 amendment increasing the COO’s consulting retainer to $12,000 monthly, and a November 9 consulting agreement with Oliver Buck providing a $5,400 monthly retainer and options for 200,000 shares, with some vesting tied to milestones including CE Mark approval.
- Management reported effective disclosure controls as of September 30, 2012 and no material change in internal control over financial reporting during the quarter. A vendor lawsuit over unpaid services was settled in May 2012 for $80,986.93.
Key investor verification points
- Confirm current cash runway, subsequent cash use, and the availability and terms of additional financing; verify the status of any further closings under the note offering, which could continue through November 14, 2012.
- Track CE Mark review milestones, approval timing, commercialization plans, and any resulting changes to development spending.
- Assess the patent appeal outcome and implications for Neutrolin’s European commercialization.
- Review potential dilution: the filing described convertible notes potentially converting into 2,428,571 shares and associated warrants covering 2,125,000 shares, in addition to other outstanding options and warrants.
- Monitor NYSE-MKT compliance through the January 31, 2013 extension and the possibility of delisting.