Business Context and Reporting Period
Company: CorMedix Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: October 22, 2013
Principal Executive Offices: Bridgewater, NJ
This filing reports the closing of a private placement financing and the subsequent resolution of listing compliance deficiencies with the NYSE MKT. The company is focused on the development and commercialization of its product, Neutrolin.
Key Financial Metrics and Capital Structure
Financing Proceeds: The company closed a sale of preferred stock and warrants for aggregate gross proceeds of $3,000,000.
Pro Forma Liquidity and Equity (as of October 17, 2013):
- Cash and Cash Equivalents: Approximately $3.7 million.
- Stockholders' Equity: Approximately $2.1 million.
Debt Conversion: As a condition of the closing, the company exchanged convertible notes totaling $1,150,000 ($400,000 and $750,000) for Series D and Series E Preferred Stock.
Use of Proceeds: General corporate purposes, development and commercialization of Neutrolin, working capital, and capital expenditures.
Material Changes and Listing Compliance
Resolution of Listing Deficiencies: The company previously received notices of non-compliance with NYSE MKT standards due to financial impairment and stockholders' equity below $2 million. Following the financing, the company received confirmation from the NYSE MKT that it has regained compliance with Sections 1003(a)(i) and 1003(a)(iv) of the Company Guide.
Securities Issued:
- Series C-1 Preferred Stock: 150,000 shares sold.
- Series C-2 Preferred Stock: 150,000 shares sold.
- Warrants: Warrants to purchase up to 1,500,000 shares of common stock.
- Series D Preferred Stock: 57,400 shares issued via note exchange.
- Series E Preferred Stock: 55,204 shares issued (53,537 via note exchange; 1,667 to another investor).
Capital Structure Details and Risks
Preferred Stock Terms:
- Series C Stock (C-1 & C-2): Convertible at $1.00 per share (10:1 ratio). Liquidation preference of $10.00 per share. Ranks senior to common stock and Series B, but junior to Series D and E. No dividends unless declared.
- Series D Preferred Stock: Convertible at $0.35 per share (20:1 ratio). Liquidation preference of $7.00 per share. 9% annual dividend. Ranks senior to Series B and C.
- Series E Preferred Stock: Convertible at $0.82 per share (20:1 ratio). Liquidation preference of $16.40 per share. 8% annual dividend. Ranks senior to Series B and C; on parity with Series D.
Conversion Limitations: Holders of Series C, D, and E stock are prohibited from converting if the resulting ownership would exceed 9.99% of outstanding common stock. Additionally, aggregate conversion of Series C, D, and E is capped at 3,190,221 shares (20% of outstanding common stock as of Oct 17, 2013) without stockholder approval.
Risks: The filing notes that the Series C-2 Preferred Stock and warrants were sold in a transaction exempt from registration and may not be offered or sold in the United States absent registration or exemption.
Investor Verification Checklist
- Verify the pro forma stockholders' equity of $2.1 million and cash position of $3.7 million against the most recent audited financial statements.
- Confirm the specific terms of the warrants issued (exercise price, expiration date) which are not detailed in the text of this 8-K.
- Review the impact of the 9.99% beneficial ownership limitation and the 20% aggregate conversion cap on future liquidity and dilution.
- Assess the dividend obligations on Series D (9%) and Series E (8%) preferred stock and their impact on future cash flow.
- Confirm the status of the convertible notes exchanged ($1.15 million total) to ensure they are fully retired.