CRMD

Cormedix Inc. 10-Q Summary: Quarter Ended March 31, 2010

Business Context and Reporting Period

Cormedix Inc. is a development-stage pharmaceutical company focused on treating cardiorenal disease. The reporting period covers the three months ended March 31, 2010. The company has generated no revenue since its inception in July 2006. During this quarter, Cormedix completed its Initial Public Offering (IPO) on March 30, 2010, and effected a 1-for-7.836 reverse stock split on February 24, 2010.

Key Financial Metrics

Debt Status: As of March 31, 2010, all outstanding senior convertible notes, related party notes, and the Galenica note were converted into common stock or units in connection with the IPO. Consequently, the company reported zero debt on its balance sheet at period end.

Material Changes vs. Prior Period

• Liquidity Transformation: Cash and cash equivalents increased from $1,505,179 at December 31, 2009, to $11,724,713 at March 31, 2010, driven by net IPO proceeds of $10,457,270.
• Debt Elimination: Total liabilities dropped from $16,934,551 (Dec 31, 2009) to $1,420,805 (Mar 31, 2010) due to the full conversion of approximately $18.9 million in principal and accrued interest into equity.
• Expense Surge: Net loss increased significantly to $6.8 million compared to $1.15 million in the prior year quarter. This was primarily due to non-cash charges related to the IPO, including a $1.14 million beneficial conversion feature charge, $1.14 million in debt discount write-offs, and $2.59 million in stock issued to licensors.
• Capital Structure: The company transitioned from a debt-heavy capital structure to an equity-funded structure, with 11,408,288 shares of common stock outstanding as of March 31, 2010.

Guidance, Outlook, and Risks

Outlook: Management believes current capital resources ($11.7 million) are sufficient to fund operations through the end of the first quarter of 2012. The company expects to continue incurring substantial operating losses as it advances its two most advanced product candidates, CRMD003 (Neutrolin) and CRMD001, through clinical trials.

Management Commentary: The company intends to submit an Investigational Device Exemption for CRMD003 by mid-2010 and start a Phase II biomarker study for CRMD001 by mid-2010. No product revenue is anticipated for at least the next several years.

Risks and Contingencies:

• Going Concern: While currently funded, the company will require additional financing to continue operations beyond Q1 2012. Failure to secure funding could force delays or elimination of R&D programs.
• Internal Controls: Management concluded that disclosure controls and procedures were not effective as of March 31, 2010, citing material weaknesses including a lack of segregation of duties and lack of independent internal review. Remediation efforts are underway.
• Development Risk: As a development-stage company, there is no assurance that product candidates will receive regulatory approval or achieve commercial success.

Investor Verification Checklist

• Cash Runway: Verify the accuracy of the $11.7 million cash balance and the projected burn rate to confirm the Q1 2012 liquidity timeline.
• Internal Controls Remediation: Monitor progress on fixing the identified material weaknesses in financial reporting and segregation of duties.
• Product Milestones: Track the submission of the Investigational Device Exemption for CRMD003 and the initiation of the CRMD001 Phase II study.
• Dilution: Review the impact of the 1-for-7.836 reverse stock split and the conversion of debt into equity on future share count and ownership percentages.
• Future Financing Needs: Assess the likelihood and terms of future capital raises required after Q1 2012.