CRMD

Business Context and Reporting Period

Company: CorMedix Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: January 7, 2014
Event Date: January 7, 2014 (Agreement); January 8, 2014 (Closing)
Business Context: The company entered into a securities purchase agreement to raise capital for general corporate purposes, specifically the development and commercialization of Neutrolin, working capital, and capital expenditures.

Key Financial Metrics and Transaction Details

Capital Raised: $2,000,000 in gross proceeds.
Securities Issued:

• 200,000 shares of Series C-3 Non-Voting Convertible Preferred Stock.
• Warrants to purchase up to 1,000,000 shares of common stock.

Pricing Terms:

• Preferred Stock: Sold at $10.00 per share (including warrants).
• Warrants: Exercise price of $1.25 per share; exercisable one year after issuance; five-year term.
• Conversion: Each share of Series C-3 Preferred Stock converts into 10 shares of common stock at $1.00 per share.

Liquidity and Debt: The filing does not provide specific data on existing debt, cash flow, or liquidity positions outside of the new proceeds. No placement agent or underwriter fees were incurred.

Material Changes and Corporate Actions

Equity Structure Changes:

• Series C-3 Designation: Filed a Certificate of Designation for Series C-3 Preferred Stock on January 8, 2014. Terms are identical to Series C-1 and C-2.
• Parity Adjustments: Series C-3 ranks on parity with Series B, C-1, and C-2; senior to common stock; junior to Series D and E.
• Dividend Amendments: Amended Series D and Series E Preferred Stock certificates. For the seven-year period ending October 2, 2020, dividends will be added to the Stated Value (accumulated) rather than paid in cash. Cash payments resume thereafter.

Ownership Restrictions:

• Warrant exercise is blocked if the holder (plus affiliates) would own more than 4.99% or 9.99% of outstanding common stock.
• Preferred stock conversion is blocked if the holder (plus affiliates) would own more than 9.99% of outstanding common stock.

Guidance, Outlook, and Risks

Use of Proceeds: Funds are designated for the development and commercialization of Neutrolin, working capital, and capital expenditures.
Risks and Contingencies:

• Registration Exemption: The transaction was exempt from registration under Section 4(a)(2) of the Securities Act of 1933. The securities cannot be resold in the U.S. without registration or an exemption.
• Liquidation Preference: In a liquidation event, Series C-3 holders receive $10.00 per share before common stockholders.
• Dividend Deferral: The amendment to Series D and E preferred stock defers cash dividend payments for seven years, potentially impacting future cash flow obligations.

Management Commentary: The filing contains no forward-looking financial guidance or earnings projections beyond the stated use of proceeds.

Investor Verification Checklist

• Verify the exact number of shares outstanding to calculate the dilution impact of the 200,000 new preferred shares and potential 1,000,000 warrant exercises.
• Confirm the current cash balance and burn rate to assess the runway provided by the $2,000,000 raise.
• Review the specific terms of the Series D and E dividend accumulation to understand future cash obligations post-2020.
• Check the status of Neutrolin development milestones to validate the stated use of proceeds.
• Examine the "Beneficial Ownership" section of the filing to identify if any single investor is near the 4.99% or 9.99% exercise/conversion limits.