Business Context and Reporting Period
Company: CorMedix Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: November 9, 2017
Event: Entry into a Material Definitive Agreement involving the sale of Series F Convertible Preferred Stock and a backstop financing arrangement with Elliott Associates, L.P. and Elliott International, L.P.
Key Financial Metrics and Transaction Details
- Initial Investment: $2,000,000 in Series F Convertible Preferred Stock at $1,000 per share.
- Backstop Capacity: Up to an additional $3,000,000 available for purchase between January 15, 2018, and March 31, 2018.
- Total Potential Proceeds: $5,000,000 (assuming full utilization of the backstop and cashless exercise of warrants).
- Warrant Consideration: Issuance of warrants to purchase up to 947,329 shares of common stock at an exercise price of $0.001 per share.
- Conversion Price: $0.6334 per share (representing a 20% premium to the November 8, 2017 closing price of $0.5278).
- Use of Proceeds: General corporate purposes, working capital, and capital expenditures.
Material Changes and Terms
The filing details the creation of a new class of equity (Series F Stock) with specific rights and restrictions:
- Liquidation Preference: Series F Stock ranks senior to all common stock and existing Series C-2, C-3, D, and E preferred stock. Holders receive $1,000 per share before common stockholders in a liquidation event.
- Anti-Dilution Protection: Includes full ratchet protection if the company fails to subordinate Series C-3 stock or obtains stockholder approval for excessive equity issuance.
- Mandatory Conversion: Scheduled for April 2, 2018, subject to equity conditions. The conversion price will be the lower of $0.6334 or a 10% discount to the notional price of a qualifying equity transaction (or closing price) by March 31, 2018.
- Ownership Caps: Conversion is prohibited if it results in the issuance of more than 20% of outstanding common stock without stockholder approval. Buyers are also restricted from converting if it causes their beneficial ownership to exceed 9.99%.
Outlook, Risks, and Contingencies
- Closing Date: Anticipated on or about November 16, 2017, subject to customary closing conditions.
- Regulatory Status: The securities are sold under Section 4(a)(2) of the Securities Act of 1933 (exempt from registration). They cannot be resold in the U.S. absent registration or an exemption.
- Registration Rights: Buyers have demand registration rights for shares issued upon warrant exercise or Series F conversion.
- Contingency: The number of warrant shares is subject to reduction if the company raises equity capital from other investors that offsets the $3 million backstop amount.
Investor Verification Checklist
- Verify the actual closing date and receipt of the initial $2 million proceeds.
- Monitor whether the company exercises the backstop agreement for the additional $3 million between January and March 2018.
- Confirm if the company successfully obtains consent to subordinate Series C-3 preferred stock to avoid full ratchet anti-dilution triggers.
- Track the mandatory conversion event on April 2, 2018, and the resulting dilution impact on common shareholders.
- Review the filed Certificate of Designation (Exhibit 3.15) for complete legal terms regarding voting rights and dividend provisions.