UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended June 30, 2023
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ________ to ________
Commission
file number 001-34673
CORMEDIX
INC.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware | | 20-5894890 |
(State or Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) |
300 Connell Drive, Suite 4200, Berkeley Heights, NJ | | 07922 |
(Address of Principal Executive Offices) | | (Zip Code) |
(908)
517-9500
(Registrant’s
Telephone Number, Including Area Code)
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common stock, $0.001 par value | | CRMD | | Nasdaq Global Market |
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See
the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Non-accelerated filer ☒ | Smaller reporting company ☒ |
| Emerging Growth Company ☐ | |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares outstanding
of the issuer’s common stock, as of August 4, 2023 was 54,805,376.
CORMEDIX
INC.TM AND SUBSIDIARIES
INDEX
PART
I
FINANCIAL INFORMATION
Item 1. | Unaudited
Condensed Consolidated Financial Statements. |
CorMedix
Inc. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| |
June 30, 2023 | | |
December 31, 2022 | |
ASSETS | |
| | |
| |
Current assets | |
| | |
| |
Cash and cash equivalents | |
$ | 19,699,565 | | |
$ | 43,148,323 | |
Restricted cash | |
| 87,037 | | |
| 124,102 | |
Short-term investments | |
| 32,701,210 | | |
| 15,644,062 | |
Prepaid research and development expenses | |
| 1,255,105 | | |
| 11,016 | |
Other prepaid expenses and current assets | |
| 881,797 | | |
| 623,672 | |
Total current assets | |
| 54,624,714 | | |
| 59,551,175 | |
Property and equipment, net | |
| 1,596,511 | | |
| 1,609,679 | |
Restricted cash, long-term | |
| 102,370 | | |
| 102,320 | |
Operating lease right-of-use assets | |
| 709,185 | | |
| 775,085 | |
TOTAL ASSETS | |
$ | 57,032,780 | | |
$ | 62,038,259 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable | |
$ | 2,900,547 | | |
$ | 2,202,149 | |
Accrued expenses | |
| 4,344,269 | | |
| 3,973,941 | |
Current portion of operating lease liabilities | |
| 142,533 | | |
| 134,801 | |
Total current liabilities | |
| 7,387,349 | | |
| 6,310,891 | |
Operating lease liabilities, net of current portion | |
| 594,322 | | |
| 667,632 | |
TOTAL LIABILITIES | |
| 7,981,671 | | |
| 6,978,523 | |
| |
| | | |
| | |
COMMITMENTS AND CONTINGENCIES (Note 4) | |
| | | |
| | |
| |
| | | |
| | |
STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Preferred stock - $0.001 par value: 2,000,000 shares authorized; 181,622 shares issued and outstanding at June 30, 2023 and December 31, 2022 | |
| 182 | | |
| 182 | |
Common stock - $0.001 par value: 160,000,000 shares authorized; 45,805,283 and 42,815,196 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | |
| 45,806 | | |
| 42,815 | |
Accumulated other comprehensive gain | |
| 90,697 | | |
| 82,743 | |
Additional paid-in capital | |
| 346,116,054 | | |
| 330,294,782 | |
Accumulated deficit | |
| (297,201,630 | ) | |
| (275,360,786 | ) |
TOTAL STOCKHOLDERS’ EQUITY | |
| 49,051,109 | | |
| 55,059,736 | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 57,032,780 | | |
$ | 62,038,259 | |
See
Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
CorMedix
Inc. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
AND
COMPREHENSIVE LOSS
(Unaudited)
| |
For the Three Months Ended
June 30, | | |
For
the Six Months Ended
June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Revenue: | |
| | |
| | |
| | |
| |
Net
sales | |
$ | - | | |
$ | 21,253 | | |
$ | - | | |
$ | 28,889 | |
Cost
of sales | |
| - | | |
| (332 | ) | |
| - | | |
| (1,859 | ) |
Gross
profit | |
| - | | |
| 20,921 | | |
| - | | |
| 27,030 | |
Operating
Expenses: | |
| | | |
| | | |
| | | |
| | |
Research
and development | |
| (4,794,758 | ) | |
| (3,209,471 | ) | |
| (8,202,260 | ) | |
| (5,497,058 | ) |
Selling,
general and administrative | |
| (7,009,824 | ) | |
| (5,051,895 | ) | |
| (14,619,501 | ) | |
| (9,802,778 | ) |
Total
Operating Expenses | |
| (11,804,582 | ) | |
| (8,261,366 | ) | |
| (22,821,761 | ) | |
| (15,299,836 | ) |
Loss
From Operations | |
| (11,804,582 | ) | |
| (8,240,445 | ) | |
| (22,821,761 | ) | |
| (15,272,806 | ) |
Other
Income (Expense): | |
| | | |
| | | |
| | | |
| | |
Interest
income | |
| 550,183 | | |
| 35,342 | | |
| 996,567 | | |
| 49,094 | |
Foreign
exchange transaction (loss) gain | |
| (13,368 | ) | |
| 18,232 | | |
| (1,023 | ) | |
| 8,026 | |
Interest expense | |
| (5,851 | ) | |
| (3,585 | ) | |
| (14,627 | ) | |
| (8,964 | ) |
Total
Other Income | |
| 530,964 | | |
| 49,989 | | |
| 980,917 | | |
| 48,156 | |
Loss
before income taxes | |
| (11,273,618 | ) | |
| (8,190,456 | ) | |
| (21,840,844 | ) | |
| (15,224,650 | ) |
Tax
benefit | |
| - | | |
| 585,617 | | |
| - | | |
| 585,617 | |
Net
Loss | |
| (11,273,618 | ) | |
| (7,604,839 | ) | |
| (21,840,844 | ) | |
| (14,639,033 | ) |
Other
Comprehensive Income (Loss): | |
| | | |
| | | |
| | | |
| | |
Unrealized
(loss) income from investments | |
| (10,732 | ) | |
| (1,316 | ) | |
| 5,661 | | |
| (35,488 | ) |
Foreign
currency translation gain (loss) | |
| 197 | | |
| (9,086 | ) | |
| 2,293 | | |
| (12,123 | ) |
Total
Other Comprehensive Income (Loss) | |
| (10,535 | ) | |
| (10,402 | ) | |
| 7,954 | | |
| (47,611 | ) |
Comprehensive
Loss | |
$ | (11,284,153 | ) | |
$ | (7,615,241 | ) | |
$ | (21,832,890 | ) | |
$ | (14,686,644 | ) |
Net Loss Per Common Share – Basic and Diluted | |
$ | (0.25 | ) | |
$ | (0.19 | ) | |
$ | (0.49 | ) | |
$ | (0.38 | ) |
Weighted Average Common Shares Outstanding – Basic and Diluted | |
| 45,365,635 | | |
| 39,761,754 | | |
| 44,731,838 | | |
| 39,008,590 | |
See
Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
CorMedix
Inc. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’
EQUITY
(Unaudited)
For
the three months ended June 30, 2023
| |
Common
Stock | | |
Preferred
Stock – Series C-3, Series E and Series G | | |
Accumulated
Other Comprehensive | | |
Additional
Paid-in | | |
Accumulated | | |
Total
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Income
(Loss) | | |
Capital | | |
Deficit | | |
Equity | |
Balance
at March 31, 2023 | |
| 44,499,788 | | |
$ | 44,500 | | |
| 181,622 | | |
$ | 182 | | |
$ | 101,232 | | |
$ | 339,709,852 | | |
$ | (285,928,012 | ) | |
$ | 53,927,754 | |
Stock
issued in connection with ATM sale of common stock, net | |
| 1,181,829 | | |
| 1,182 | | |
| - | | |
| - | | |
| - | | |
| 5,313,621 | | |
| - | | |
| 5,314,803 | |
Stock
issued in connection with options exercised | |
| 57,375 | | |
| 57 | | |
| - | | |
| - | | |
| - | | |
| 233,799 | | |
| - | | |
| 233,856 | |
Issuance of vested restricted stock, net of shares withheld for employee
withholding taxes | |
| 66,291 | | |
| 67 | | |
| - | | |
| - | | |
| - | | |
| (198,509 | ) | |
| - | | |
| (198,442 | ) |
Stock-based
compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,057,291 | | |
| - | | |
| 1,057,291 | |
Other
comprehensive loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (10,535 | ) | |
| - | | |
| - | | |
| (10,535 | ) |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (11,273,618 | ) | |
| (11,273,618 | ) |
Balance
at June 30, 2023 | |
| 45,805,283 | | |
$ | 45,806 | | |
| 181,622 | | |
$ | 182 | | |
$ | 90,697 | | |
$ | 346,116,054 | | |
$ | (297,201,630 | ) | |
$ | 49,051,109 | |
For
the six months ended June 30, 2023
| |
Common
Stock | | |
Preferred
Stock
– Series C-3,
Series E and
Series G | | |
Accumulated
Other
Comprehensive | | |
Additional
Paid-in | | |
Accumulated | | |
Total
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Income
(Loss) | | |
Capital | | |
Deficit | | |
Equity | |
Balance
at December 31, 2022 | |
| 42,815,196 | | |
$ | 42,815 | | |
| 181,622 | | |
$ | 182 | | |
$ | 82,743 | | |
$ | 330,294,782 | | |
$ | (275,360,786 | ) | |
$ | 55,059,736 | |
Stock
issued in connection with ATM sale of common stock, net | |
| 2,866,421 | | |
| 2,867 | | |
| - | | |
| - | | |
| - | | |
| 12,512,342 | | |
| - | | |
| 12,515,209 | |
Stock
issued in connection with options exercised | |
| 57,375 | | |
| 57 | | |
| - | | |
| - | | |
| - | | |
| 233,799 | | |
| - | | |
| 233,856 | |
Issuance of vested restricted stock, net of shares withheld for employee
withholding taxes | |
| 66,291 | | |
| 67 | | |
| - | | |
| - | | |
| - | | |
| (198,509 | ) | |
| - | | |
| (198,442 | ) |
Stock-based
compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,273,640 | | |
| - | | |
| 3,273,640 | |
Other
comprehensive gain | |
| - | | |
| - | | |
| - | | |
| - | | |
| 7,954 | | |
| - | | |
| - | | |
| 7,954 | |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (21,840,844 | ) | |
| (21,840,844 | ) |
Balance
at June 30, 2023 | |
| 45,805,283 | | |
$ | 45,806 | | |
| 181,622 | | |
$ | 182 | | |
$ | 90,697 | | |
$ | 346,116,054 | | |
$ | (297,201,630 | ) | |
$ | 49,051,109 | |
CorMedix
Inc. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY
(Unaudited)
For
the three months ended June 30, 2022
| |
Common
Stock | | |
Preferred
Stock
– Series C-3,
Series E and
Series G | | |
Accumulated
Other
Comprehensive | | |
Additional
Paid-in | | |
Accumulated | | |
Total
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Income
(Loss) | | |
Capital | | |
Deficit | | |
Equity | |
Balance
at March 31, 2022 | |
| 38,727,979 | | |
$ | 38,728 | | |
| 181,622 | | |
$ | 182 | | |
$ | 49,921 | | |
$ | 312,473,623 | | |
$ | (252,693,275 | ) | |
$ | 59,869,179 | |
Stock
issued in connection with ATM sale of common stock, net | |
| 2,378,798 | | |
| 2,379 | | |
| - | | |
| - | | |
| - | | |
| 8,408,777 | | |
| - | | |
| 8,411,156 | |
Stock-based
compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,073,646 | | |
| - | | |
| 1,073,646 | |
Other
comprehensive loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (10,402 | ) | |
| - | | |
| - | | |
| (10,402 | ) |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (7,604,839 | ) | |
| (7,604,839 | ) |
Balance
at June 30, 2022 | |
| 41,106,777 | | |
$ | 41,107 | | |
| 181,622 | | |
$ | 182 | | |
$ | 39,519 | | |
$ | 321,956,046 | | |
$ | (260,298,114 | ) | |
$ | 61,738,740 | |
For
the six months ended June 30, 2022
| |
Common
Stock | | |
Preferred
Stock
– Series C-3,
Series E and
Series G | | |
Accumulated
Other
Comprehensive | | |
Additional
Paid-in | | |
Accumulated | | |
Total
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Income
(Loss) | | |
Capital | | |
Deficit | | |
Equity | |
Balance
at December 31, 2021 | |
| 38,086,437 | | |
$ | 38,086 | | |
| 181,622 | | |
$ | 182 | | |
$ | 87,130 | | |
$ | 308,331,750 | | |
$ | (245,659,081 | ) | |
$ | 62,798,067 | |
Stock
issued in connection with ATM sale of common stock, net | |
| 3,020,340 | | |
| 3,021 | | |
| - | | |
| - | | |
| - | | |
| 11,412,351 | | |
| - | | |
| 11,415,372 | |
Stock-based
compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,211,945 | | |
| - | | |
| 2,211,945 | |
Other
comprehensive loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (47,611 | ) | |
| - | | |
| - | | |
| (47,611 | ) |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (14,639,033 | ) | |
| (14,639,033 | ) |
Balance
at June 30, 2022 | |
| 41,106,777 | | |
$ | 41,107 | | |
| 181,622 | | |
$ | 182 | | |
$ | 39,519 | | |
$ | 321,956,046 | | |
$ | (260,298,114 | ) | |
$ | 61,738,740 | |
See
Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
CorMedix
Inc. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| |
For the Six Months Ended
June 30, | |
| |
2023 | | |
2022 | |
CASH
FLOWS FROM OPERATING ACTIVITIES: | |
| | |
| |
Net
loss | |
$ | (21,840,844 | ) | |
$ | (14,639,033 | ) |
Adjustments
to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Stock-based
compensation | |
| 3,273,640 | | |
| 2,211,945 | |
Change
in right-of-use assets | |
| 65,901 | | |
| 61,383 | |
Depreciation | |
| 34,292 | | |
| 40,819 | |
Changes
in operating assets and liabilities: | |
| | | |
| | |
Decrease
in trade receivables | |
| - | | |
| 43,738 | |
Decrease
in inventory | |
| - | | |
| 1,288 | |
(Increase)
Decrease in prepaid expenses and other current assets | |
| (1,502,179 | ) | |
| 208,535 | |
Increase
in accounts payable | |
| 698,353 | | |
| 287,011 | |
Increase
(Decrease) in accrued expenses | |
| 370,099 | | |
| (362,604 | ) |
Decrease
in operating lease liabilities | |
| (65,578 | ) | |
| (59,539 | ) |
Net
cash used in operating activities | |
| (18,966,316 | ) | |
| (12,206,457 | ) |
CASH
FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Purchase
of short-term investments | |
| (42,901,487 | ) | |
| (14,279,033 | ) |
Maturity
of short-term investments | |
| 25,850,000 | | |
| 10,700,000 | |
Purchase
of equipment | |
| (21,124 | ) | |
| (14,187 | ) |
Net
cash used in investing activities | |
| (17,072,611 | ) | |
| (3,593,220 | ) |
CASH
FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Proceeds
from sale of common stock from at-the-market program, net | |
| 12,515,209 | | |
| 11,415,372 | |
Payment
of employee withholding taxes on vested restricted stock units | |
| (198,442 | ) | |
| - | |
Proceeds
from exercise of stock options | |
| 233,856 | | |
| - | |
Net
cash provided by financing activities | |
| 12,550,623 | | |
| 11,415,372 | |
Foreign
exchange effect on cash | |
| 2,531 | | |
| (13,555 | ) |
NET
DECREASE IN CASH AND CASH EQUIVALENTS | |
| (23,485,773 | ) | |
| (4,397,860 | ) |
CASH,
CASH EQUIVALENTS AND RESTRICTED CASH – BEGINNING OF PERIOD | |
| 43,374,745 | | |
| 53,551,277 | |
CASH,
CASH EQUIVALENTS AND RESTRICTED CASH – END OF PERIOD | |
$ | 19,888,972 | | |
$ | 49,153,417 | |
Cash
paid for interest | |
$ | 14,627 | | |
$ | 8,964 | |
Supplemental Disclosure of Non-Cash Investing Activities: | |
| | | |
| | |
Unrealized income (loss) from investments | |
$ | 5,661 | | |
$ | (35,488 | ) |
See
Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
CorMedix
Inc. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note
1 — Organization, Business and Basis of Presentation:
Organization
and Business
CorMedix
Inc. (“CorMedix” or the “Company”) is a biopharmaceutical company focused on developing and commercializing therapeutic
products for the prevention and treatment of life-threatening diseases and conditions. The Company was incorporated in the State of Delaware
on July 28, 2006 and its principal executive office is located in Berkeley Heights, New Jersey. In 2013, the Company formed a wholly-owned
subsidiary, CorMedix Europe GmbH and in 2020, the Company formed a wholly-owned Spanish subsidiary, CorMedix Spain, S.L.U.
The
Company’s primary focus is the development of its lead product candidate, DefenCath™, for potential commercialization in
the United States, or U.S., and other key markets. The Company has in-licensed the worldwide rights to develop and commercialize DefenCath
and Neutrolin®. The name DefenCath is the U.S. proprietary name conditionally approved by the U.S. Food and Drug Administration,
or FDA, while the name Neutrolin was used in the European Union, or EU, and other territories where the Company received CE-Mark approval
for the commercial distribution of Neutrolin as a catheter lock solution, or CLS, regulated as a medical device.
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America, or GAAP, for interim financial information and with the instructions for Quarterly Reports
on Form 10-Q and Article 8 of Regulation S-X. Accordingly, the unaudited condensed consolidated financial statements do not include all
information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary
to fairly state the interim results. Interim operating results are not necessarily indicative of results that may be expected for the
full year ending December 31, 2023 or for any subsequent period. These unaudited condensed consolidated financial statements should be
read in conjunction with the audited financial statements and notes thereto of the Company which are included in the Company’s
Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on March 30, 2023. The accompanying consolidated
balance sheet as of December 31, 2022 has been derived from the audited financial statements included in such Annual Report on Form 10-K.
Note
2 — Summary of Significant Accounting Policies:
Liquidity
and Uncertainties
The condensed consolidated financial statements
have been prepared in conformity with GAAP which contemplate continuation of the Company as a going concern. To date, the Company’s
commercial operations have not generated sufficient revenues to enable profitability. Based on the Company’s current development
plans and potential commercial launch plans for DefenCath in the U.S. and its other operating requirements, the Company’s existing
cash and cash equivalents, short-term investments and available resources at June 30, 2023, including the net proceeds received from the
public offering and exercise of underwriters’ option in July 2023, are expected to fund its operations for at least twelve months
from the filing date of this Quarterly Report on Form 10-Q (see Note 7 for additional information regarding the public offering in July
2023).
CorMedix
Inc. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
The Company’s continued operations may depend
on its ability to raise additional capital through various potential sources, such as equity and/or debt financings, strategic relationships,
potential strategic transactions or out-licensing of its products in order to commercially launch DefenCath upon New Drug Application,
or NDA, approval and until profitability is achieved, if ever. Management can provide no assurances that such financing or strategic relationships
will be available on acceptable terms, or at all. As of August 8, 2023, the Company has $18,700,000 available under its At-the-Market
Issuance Sales Agreement (the “ATM program”) and has $104,000,000 available under its current shelf registration for the issuance
of equity, debt or equity-linked securities, after taking into consideration the $43,200,000 total net proceeds from the public offering
and exercise of underwriters’ option in July 2023 (see Note 7).
The
Company’s operations are subject to a number of other factors that can affect its operating results and financial condition. Such
factors include, but are not limited to: the results of clinical testing and trial activities of the Company’s product candidates;
the ability to obtain regulatory approval to market the Company’s products; ability to manufacture successfully; competition from
products manufactured and sold or being developed by other companies; the price of, and demand for, Company products; the Company’s
ability to negotiate favorable licensing or other manufacturing and marketing agreements for its products; and the Company’s ability
to raise capital to support its operations.
Use
of Estimates
The
preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Basis
of Consolidation
The
condensed consolidated financial statements include the accounts of the Company, CorMedix Europe GmbH and CorMedix Spain, S.L.U., its
wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Financial
Instruments
Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and
short-term investments. The Company maintains its cash and cash equivalents in bank deposit and other interest-bearing accounts, the
balances of which exceed federally insured limits.
The
following table is the reconciliation of the accounting standard that modifies certain aspects of the recognition, measurement, presentation
and disclosure of financial instruments as shown on the Company’s condensed consolidated statement of cash flows:
| |
June
30, 2023 | | |
December 31,
2022 | |
Cash
and cash equivalents | |
$ | 19,699,565 | | |
$ | 43,148,323 | |
Restricted
cash | |
| 189,407 | | |
| 226,422 | |
Total
cash, cash equivalents and restricted cash | |
$ | 19,888,972 | | |
$ | 43,374,745 | |
The
appropriate classification of marketable securities is determined at the time of purchase and reevaluated as of each balance sheet date.
Investments in marketable debt classified as available-for-sale and equity securities are reported at fair value. Fair value is determined
using quoted market prices in active markets for identical assets or liabilities or quoted prices for similar assets or liabilities or
other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Changes in fair value that are considered temporary are reported in the condensed consolidated statement of operations. Realized gains
and losses, amortization of premiums and discounts and interest and dividends earned are included in other income (expense). For declines
in the fair value of equity securities that are considered other-than-temporary, impairment losses are charged to other income (expense),
net. The Company considers available evidence in evaluating potential impairments of its investments, including the duration and extent
to which fair value is less than cost. There were no deemed permanent impairments at June 30, 2023 or December 31, 2022.
CorMedix
Inc. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
The
Company’s marketable securities are highly liquid and consist of U.S. government agency securities, high-grade corporate obligations
and commercial paper with original maturities of more than 90 days. As of June 30, 2023 and December 31, 2022, all of the Company’s
investments had contractual maturities of less than one year. As of June 30, 2023, no allowance for credit loss was recorded. The
following table summarizes the amortized cost, unrealized gains and losses and the fair value at June 30, 2023 and December 31, 2022:
| |
Amortized
Cost | | |
Gross
Unrealized
Losses | | |
Gross
Unrealized
Gains | | |
Fair
Value | |
June
30, 2023: | |
| | | |
| | | |
| | | |
| | |
Money
Market Funds included in Cash Equivalents | |
$ | 6,124,632 | | |
$ | - | | |
$ | - | | |
$ | 6,124,632 | |
U.S.
Government Agency Securities | |
| 29,140,824 | | |
| (245 | ) | |
| 7,582 | | |
| 29,148,161 | |
Corporate
Securities | |
| 894,706 | | |
| (164 | ) | |
| - | | |
| 894,542 | |
Commercial
Paper | |
| 2,660,621 | | |
| (2,114 | ) | |
| - | | |
| 2,658,507 | |
Subtotal | |
| 32,696,151 | | |
| (2,523 | ) | |
| 7,582 | | |
| 32,701,210 | |
Total
June 30, 2023 | |
$ | 38,820,783 | | |
$ | (2,523 | ) | |
$ | 7,582 | | |
$ | 38,825,842 | |
December
31, 2022: | |
| | | |
| | | |
| | | |
| | |
Money
Market Funds included in Cash Equivalents | |
$ | 7,311,327 | | |
$ | - | | |
$ | 572 | | |
$ | 7,311,899 | |
U.S.
Government Agency Securities | |
| 12,072,127 | | |
| (3,184 | ) | |
| 2,056 | | |
| 12,070,999 | |
Corporate
Securities | |
| 2,684,235 | | |
| (183 | ) | |
| 909 | | |
| 2,684,961 | |
Commercial
Paper | |
| 888,875 | | |
| (773 | ) | |
| - | | |
| 888,102 | |
Subtotal | |
| 15,645,237 | | |
| (4,140 | ) | |
| 2,965 | | |
| 15,644,062 | |
Total
December 31, 2022 | |
$ | 22,956,564 | | |
$ | (4,140 | ) | |
$ | 3,537 | | |
$ | 22,955,961 | |
Fair
Value Measurements
The
Company’s financial instruments recorded in the condensed consolidated balance sheets include cash and cash equivalents, accounts
receivable, investment securities, accounts payable and accrued expenses. The carrying value of certain financial instruments,
primarily cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their estimated fair values
based upon the short-term nature of their maturity dates.
CorMedix
Inc. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
The
Company categorizes its financial instruments into a three-level fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets
(Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels
of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of
the instrument. Financial assets recorded at fair value on the Company’s condensed consolidated balance sheets are categorized
as follows:
| ● | Level
1 inputs—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level
2 inputs—Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical
or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield
curves, and market-corroborated inputs). |
| ● | Level
3 inputs—Unobservable inputs for the asset or liability, which are supported by little or no market activity and are valued based
on management’s estimates of assumptions that market participants would use in pricing the asset or liability. |
The
following table provides the carrying value and fair value of the Company’s financial assets measured at fair value on a recurring
basis as of June 30, 2023 and December 31, 2022:
| |
Carrying Value | | |
Level
1 | | |
Level
2 | | |
Level
3 | |
June
30, 2023: | |
| | | |
| | | |
| | | |
| | |
Money
Market Funds and Cash Equivalents | |
$ | 6,124,632 | | |
$ | 6,124,632 | | |
$ | - | | |
$ | - | |
U.S.
Government Agency Securities | |
| 29,148,161 | | |
| 29,148,161 | | |
| - | | |
| | |
Corporate
Securities | |
| 894,542 | | |
| - | | |
| 894,542 | | |
| - | |
Commercial
Paper | |
| 2,658,507 | | |
| - | | |
| 2,658,507 | | |
| - | |
Subtotal | |
| 32,701,210 | | |
| 29,148,161 | | |
| 3,553,049 | | |
$ | - | |
Total
June 30, 2023 | |
$ | 38,825,842 | | |
$ | 35,272,793 | | |
$ | 3,553,049 | | |
$ | - | |
December
31, 2022: | |
| | | |
| | | |
| | | |
| | |
Money
Market Funds and Cash Equivalents | |
$ | 7,311,899 | | |
$ | 7,311,899 | | |
$ | - | | |
$ | - | |
U.S.
Government Agency Securities | |
| 12,070,999 | | |
| 12,070,999 | | |
| - | | |
| | |
Corporate
Securities | |
| 2,684,961 | | |
| - | | |
| 2,684,961 | | |
| - | |
Commercial
Paper | |
| 888,102 | | |
| - | | |
| 888,102 | | |
| - | |
Subtotal | |
| 15,644,062 | | |
| 12,070,999 | | |
| 3,573,063 | | |
| - | |
Total
December 31, 2022 | |
$ | 22,955,961 | | |
$ | 19,382,898 | | |
$ | 3,573,063 | | |
$ | - | |
Leases
The
Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use, or ROU,
assets, current portion of operating lease liabilities, and operating lease liabilities, net of current portion, on the condensed consolidated
balance sheet.
Operating
lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over
the lease term at commencement date. As the Company’s leases do not provide an implicit rate, the Company uses its incremental
borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company’s
lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
CorMedix
Inc. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
The
Company has elected, as an accounting policy, not to apply the recognition requirements in ASC 842 to short-term leases. Short-term leases
are leases that have a term of 12 months or less and do not include an option to purchase the underlying asset that the
Company is reasonably certain to exercise. The Company recognizes the lease payments for short-term leases on a straight-line basis
over the lease term.
The
Company has also elected, as a practical expedient, by underlying class of asset, not to separate lease components from non-lease components
and, instead, account for them as a single component.
Loss
Per Common Share
Basic
loss per common share excludes any potential dilution and is computed by dividing net loss by the weighted average number of common shares
outstanding during the period. Diluted net loss per common share reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared
in the earnings of the Company. However, since their effect is anti-dilutive, the Company has excluded potentially dilutive shares. The
following potentially dilutive shares have been excluded from the calculation of diluted net loss per share as their effect would be
anti-dilutive.
| |
Six
Months Ended June 30, | |
| |
2023 | | |
2022 | |
| |
(Number of Shares of
Common Stock Issuable) | |
Series
C non-voting preferred stock | |
| 4,000 | | |
| 4,000 | |
Series
E non-voting preferred stock | |
| 391,953 | | |
| 391,953 | |
Series
G non-voting preferred stock | |
| 5,004,069 | | |
| 5,004,069 | |
Shares
issuable for payment of deferred board compensation | |
| 48,909 | | |
| 48,909 | |
Shares
underlying outstanding warrants | |
| - | | |
| 56,455 | |
Shares
underlying outstanding stock options | |
| 5,929,143 | | |
| 4,433,285 | |
Shares
underlying restricted stock units | |
| 103,735 | | |
| 207,469 | |
Total
potentially dilutive shares | |
| 11,481,809 | | |
| 10,146,140 | |
Stock-Based
Compensation
Stock-based
compensation cost is measured at grant date, based on the estimated fair value of the award using the Black-Scholes option pricing model
for options with service or performance-based conditions. Stock-based compensation is recognized as expense over the requisite service
period on a straight-line basis or when the achievement of the performance condition is probable. For options with market-based vesting,
stock-based compensation cost is measured at grant date using the Monte Carlo option pricing model and the expense is recognized over
the derived service period.
Research
and Development
Research
and development costs are charged to expense as incurred. Research and development include fees associated with operational consultants,
contract clinical research organizations, contract manufacturing organizations, clinical site fees, contract laboratory research organizations,
contract central testing laboratories, licensing activities, and allocated executive, human resources, facilities expenses and costs
related to the manufacturing of the product that could potentially be available to support the commercial launch prior to marketing approval.
The Company accrues for costs incurred as the services are being provided by monitoring the status of the activities and the invoices
received from its external service providers. Costs related to the acquisition of technology rights and patents for which development
work is still in process are charged to operations as incurred and considered a component of research and development expense.
CorMedix
Inc. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
Note
3 — Accrued Expenses:
Accrued
Expenses
Accrued
expenses consist of the following:
| |
June
30,
2023 | | |
December 31,
2022 | |
Professional
and consulting fees | |
$ | 1,171,267 | | |
$ | 514,354 | |
Accrued
payroll and payroll taxes | |
| 2,137,560 | | |
| 2,180,581 | |
Manufacturing
development related | |
| 924,182 | | |
| 1,214,550 | |
Other | |
| 111,260 | | |
| 64,456 | |
Total | |
$ | 4,344,269 | | |
$ | 3,973,941 | |
Note 4 — Commitments
and Contingencies:
Contingency
Matters
In re
CorMedix Inc. Securities Litigation, Case No. 2:21-cv-14020 (D.N.J.)
On October 13, 2021, the United States District
Court for the District of New Jersey consolidated into In re CorMedix Inc. Securities Litigation, Case No. 2:21-cv 14020-JXN-CLW, two
putative class action lawsuits filed on or about July 22, 2021 and September 13, 2021, respectively, and appointed lead counsel and lead
plaintiff, a purported stockholder of the Company. The lead plaintiff filed a consolidated amended class action complaint on December
14, 2021, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, along
with Rule 10b-5 promulgated thereunder, and Sections 11 and 15 of the Securities Act of 1933, as amended, or the Securities Act. On October
10, 2022, the lead plaintiff filed a second amended consolidated complaint that superseded the original complaints in In re CorMedix Securities
Litigation. In the second amended complaint, the lead plaintiff seeks to represent two classes of shareholders: (i) shareholders who purchased
or otherwise acquired CorMedix securities between October 16, 2019 and August 8, 2022, inclusive; and (ii) shareholders who purchased
CorMedix securities pursuant or traceable to the Company’s November 27, 2020 offering pursuant to CorMedix’s Form S-3 Registration
Statement, its Prospectus Supplement, dated November 27, 2020, and its Prospectus Supplement, dated August 12, 2021. The second amended
complaint names as defendants the Company and twelve (12) current and former directors and officers of CorMedix, namely Khoso Baluch,
Robert Cook, Matthew David, Phoebe Mounts, John L. Armstrong, and Joseph Todisco (the “Officer Defendants” and collectively
with CorMedix, the “CorMedix Defendants”) as well as Janet Dillione, Myron Kaplan, Alan W. Dunton, Steven Lefkowitz, Paulo
F. Costa, Greg Duncan (the “Director Defendants”). The second amended complaint alleges that the CorMedix Defendants violated
Section 10(b) of the Exchange Act (and Rule 10b-5), the Officer Defendants violated Section 20(a), the Director Defendants, CorMedix,
Baluch, and David violated Section 11 of the Securities Act, and that the Director Defendants, Baluch, and David violated Section 15.
In general, the purported bases for these claims are allegedly false and misleading statements and omissions related to the NDA submissions
to the FDA for DefenCath, subsequent complete response letters, as well as communications from the FDA related and directed to the Company’s
contract manufacturing organization and heparin supplier. The Company intends to vigorously contest such claims. The Company and the other
Defendants filed their motion to dismiss the second amended complaint on November 23, 2022; the lead plaintiff filed his opposition to
the Defendants’ motions to dismiss on January 7, 2023; and Defendants filed their reply brief on February 6, 2023.
CorMedix
Inc. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
In re
CorMedix Inc. Derivative Litigation, Case No. 2:21-cv-18493-JXN-LDW (D.N.J.)
On
or about October 13, 2021, a purported shareholder, derivatively and on behalf of the Company, filed a shareholder derivative complaint
in the United States District Court for the District of New Jersey, in a case entitled Voter v. Baluch, et al., Case No. 2:21-cv-18493-JXN-LDW
(the “Derivative Litigation”). The complaint names as defendants Khoso Baluch, Janet Dillione, Alan W. Dunton, Myron Kaplan,
Steven Lefkowitz, Paulo F. Costa, Greg Duncan, Matthew David, and Phoebe Mounts along with the Company as Nominal Defendant. The complaint
alleges breaches of fiduciary duties, abuse of control, and waste of corporate assets against the defendants and a claim for contribution
for purported violations of Sections 10(b) and 21D of the Exchange Act against certain defendants. The individual defendants intend to
vigorously contest such claims. On January 21, 2022, pursuant to a stipulation between the parties, the Court entered an order staying
the case while the motion to dismiss the class action lawsuit described in the foregoing paragraph is pending. The stay may be terminated
before the motion to dismiss is resolved according to certain circumstances described in the stipulation available on the Court’s
public docket.
On
or about January 13, 2023, another purported shareholder, derivatively and on behalf of the Company, filed a shareholder derivative complaint
in the United States District Court for the District of New Jersey, in a case entitled DeSalvo v. Costa, et al., Case No. 2:23-cv-00150-JXN-CLW.
Defendants Paulo F. Costa, Janet D. Dillione, Greg Duncan, Alan Dunton, Myron Kaplan, Steven Lefkowitz, Joseph Todisco, Khoso Baluch,
Robert Cook, Matthew David, Phoebe Mounts, and John L. Armstrong along with the Company as Nominal Defendant. The complaint alleges breaches
of fiduciary duty and unjust enrichment against the individual defendants.
On
or about January 25, 2023, another purported shareholder, derivatively and on behalf of the Company, filed a shareholder derivative complaint
in the United States District Court for the District of New Jersey, in a case entitled Scullion v. Baluch, et al., Case No. 2:23-cv-00406-ES-ESK.
Defendants Khoso Baluch, Janet Dillione, Alan W. Dunton, Myron Kaplan, Steven Lefkowitz, Paulo F. Costa, Gregory Duncan, Matthew David,
and Phoebe Mounts, along with the Company as Nominal Defendant. The complaint alleges breaches of fiduciary duties.
On
or about April 18, 2023, the Court entered an order consolidating the above-mentioned shareholder derivative complaints for all purposes,
including pretrial proceedings, trial and appeal. The consolidated derivative action is entitled, In re CorMedix Inc. Derivative Litigation,
C.A. No. 2:21-cv-18493-JXN-LDW. The provisions of the Order to Stay entered in the Voter Action on January 21, 2022, apply to
the consolidated derivative action. The consolidated derivative action was then administratively terminated and removed from the Court’s
docket until the motion to dismiss the class action is resolved. The individual defendants intend to vigorously contest the claims set
forth in the consolidated derivative action when the case moves forward.
Demand
Letter
On
or about June 23, 2022, the Company’s Board received a letter demanding it investigate and pursue causes of action, purportedly
on behalf of Company, against certain current and former directors, officers, and/or other employees of the Company (the “Letter”),
which the Board believes are duplicative of the claims already asserted in the Derivative Litigation. As set forth in the Board’s
response to the Letter, the Board will consider the Letter at an appropriate time, as circumstances warrant, as it continues to monitor
the progress of the Derivative Litigation.
CorMedix
Inc. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
Patent
Infringement
On
September 9, 2014, the Company filed in the District Court of Mannheim, Germany, (the “Court”) a patent infringement action
against TauroPharm GmbH and Tauro-Implant GmbH as well as their respective CEOs (the “Defendants”) claiming infringement
of the Company’s European Patent EP 1 814 562 B1, which was granted by the European Patent Office (the “EPO”) on January
8, 2014 (the “Prosl European Patent”). The Company is seeking injunctive relief and raising claims for information,
rendering of accounts, calling back, destruction and damages. Separately, TauroPharm has filed an opposition with the EPO against the
Prosl European Patent alleging that it lacks novelty and inventive step.
In the same complaint against the same Defendants,
the Company also alleged an infringement (requesting the same remedies) of ND Partners LLP’s utility model DE 20 2005 022 124 U1
(the “Utility Model”), which the Company believes is fundamentally identical to the Prosl European Patent in its main aspects
and claims. The Court separated the two proceedings and the Prosl European Patent and the Utility Model claims were tried separately.
TauroPharm has filed a cancellation action against the Utility Model before the German Patent and Trademark Office (the “German
PTO”) based on the similar arguments as those in the opposition against the Prosl European Patent.
The Court issued its decisions on May 8, 2015,
staying both proceedings as it determined that it will defer any consideration of the request by the Company for injunctive and other
relief until such time as the EPO or the German PTO made a final decision on the underlying validity of the Prosl European Patent and
the Utility Model.
The
German PTO declared that the Utility Model was invalid. The Company filed an appeal against the ruling on September 7, 2016. The German
Federal Patent Court affirmed the first instance decision that the Utility Model was invalid. The decision has only a declaratory effect,
as the Utility Model had expired in November 2015. On April 28, 2020, the Company filed a withdrawal of the complaint on the German utility
model, thereby waiving its claims on these proceedings. The proceedings were closed and during the year ended December 31, 2020, final
reimbursement of approximately $30,000 for the costs in connection with the utility model infringement were paid to TauroPharm.
On November 22, 2017, the EPO in Munich, Germany
held that the Prosl European Patent would be invalidated. The Company disagrees with this decision and has appealed the decision. In a
hearing on October 27, 2022 before the EPO Board of Appeals, the Board expressed the view that the patent claims of the Prosl European
Patent on file were not inventive over prior art presented by TauroPharm. The Company thus withdrew its appeal against the first instance
decision. This means that the invalidation of the patent has become final and that, as a consequence, the infringement proceedings, which
are formally still ongoing, will also be closed because there is no underlying patent anymore. In order to avoid a dismissal, on January 12,
2023, the Company withdrew the infringement action with prejudice. Due to the withdrawal, there will be no decision on the merits, however,
on March 9, 2023, the Court issued a decision that the Company has to bear the cost of the proceedings. Given that the court fees have
already been paid by the Company, the cost of the proceedings are the costs that will have to be reimbursed to the Defendants, i.e., mainly
statutory attorney’s fees and expenses.
On January 16, 2015, the Company filed a complaint
against TauroPharm GmbH and its managing directors in the District Court of Cologne, Germany. In the complaint, the Company alleged
violation of the German Unfair Competition Act by TauroPharm and that TauroPharm is improperly and unfairly using its proprietary information
relating to the composition and manufacture of Neutrolin, in the manufacture and sale of TauroPharm’s products TauroLockTM,
TauroLock-HEP100 and TauroLock-HEP500. The Company sought a cease and desist order against TauroPharm from continuing to manufacture and
sell any product containing taurolidine (the active pharmaceutical ingredient (“API”) of Neutrolin) and citric acid in addition
to possible other components, damages for any sales in the past and the removal of all such products from the market. A decision
was rendered by the court on December 11, 2018, dismissing the complaint in its entirety. The Company therefore appealed in January 2019.
At the end of an oral hearing held on June 18, 2021, the court indicated that it would dismiss the complaint of the Company, if the Company
did not withdraw the appeal. As there were no advantages to further pursuing the matter in view of the Court’s statements, the Company
withdrew the appeal and the proceedings are therefore now closed. The Company reimbursed costs in the amount of approximately $41,000
plus interest to TauroPharm.
CorMedix
Inc. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
In connection with the aforementioned patent and
utility model infringement and unfair competition proceedings against TauroPharm, the Company was required by the District Courts of Mannheim
and Cologne to provide security deposits to cover legal fees in the event TauroPharm is entitled to reimbursement of these costs.
The aggregate amount of security deposits made by the Company for such proceedings was 116,000 EUR (approximately $126,000). On February
8, 2023, the Regional Court of Cologne informed the Company that the security deposit in two proceedings, 81 HL 448/15
and 81 HL 903/19, in the amount of 36,000 EUR and 10,000 EUR, (approximately in aggregate of $50,000), respectively, are in
the process of being refunded to the Company, of which approximately 36,000 EUR has been received, and about 10,000 EUR is still in the
process of being refunded to Company, according to the Regional Court of Cologne. As of June 30, 2023, the aggregate remaining security
deposit, including the 10,000 EUR that is in the process of being refunded to the Company, was approximately 80,000 EUR (approximately
$87,000), which the Company recorded as restricted cash on the consolidated balance sheets.
To summarize, one of the infringement
proceedings initiated on September 9, 2014 before the District Court of Mannheim, has been terminated after the Company’s
withdrawal of the action; the parallel validity proceedings before the German Federal Patent Court are also terminated. The other
infringement proceeding initiated on September 9, 2014 before the District Court of Mannheim is in its final stages; the parallel
validity proceeding before the European Patent Office is also terminated. After the Company withdrew the infringement action and
TauroPharm consented to the withdrawal, there is no decision on the merits, but the court issued a decision that the Company has to
bear the costs of the proceedings. The Defendants requested the court to determine the amount of the cost to be paid by Company at
46,600 EUR, of which 26,000 EUR (approximately $28,000) has been accrued. The Company’s outside counsel is in the process of
reviewing whether the amount is justified. A complaint filed on January 16, 2015 against TauroPharm in the District Court of Cologne
has been withdrawn by the Company and the proceedings were closed. In connection with the aforementioned proceedings, the Company
was required to provide security deposits to the District Courts of Mannheim and Cologne in the aggregate amount of 116,000 EUR
(approximately $126,000) of which 36,000 EUR (approximately $39,000) was received in April 2023 and 10,000 EUR (approximately
$11,000) are in the process of being refunded to the Company.
Commitments
In-Licensing
In 2008, the Company entered into a License and Assignment
Agreement (the “NDP License Agreement”) with ND Partners LLP (“NDP”). Pursuant to the NDP License Agreement, NDP
granted the Company exclusive, worldwide licenses for certain antimicrobial catheter lock solutions, processes for treating and inhibiting
infections, a biocidal lock system and a taurolidine delivery apparatus, and the corresponding United States and foreign patents and applications
(the “NDP Technology”). The Company acquired such licenses and patents through its assignment and assumption of NDP’s
rights under certain separate license agreements by and between NDP and Dr. Hans-Dietrich Polaschegg, Dr. Klaus Sodemann and Dr. Johannes
Reinmueller. As consideration in part for the rights to the NDP Technology, the Company paid NDP an initial licensing fee of $325,000
and granted NDP a 5% equity interest in the Company, consisting of 7,996 shares of the Company’s common stock.
CorMedix
Inc. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
The
Company is required to make payments to NDP upon the achievement of certain regulatory and sales-based milestones. Certain of the milestone
payments are to be made in the form of shares of common stock currently held in escrow for NDP, and other milestone payments are to be
paid in cash. The maximum aggregate number of shares issuable upon achievement of milestones is 29,109 shares. In 2014, a certain milestone
was achieved resulting in the release of 7,277 shares held in escrow. The number of shares held in escrow as of June 30, 2023 is 21,832
shares of common stock. The maximum aggregate amount of cash payments due upon achievement of milestones is $3,000,000 with the balance
being $2,500,000 as of June 30, 2023 and 2022. Events that trigger milestone payments include but are not limited to the reaching of
various stages of regulatory approval and upon achieving certain worldwide net sales amounts. There were no milestones achieved during
the quarters ended June 30, 2023 and 2022.
The
NDP License Agreement may be terminated by the Company on a country-by-country basis upon 60 days prior written notice. If the NDP License
Agreement is terminated by either party, the Company’s rights to the NDP Technology will revert back to NDP.
Note
5 — Stockholders’ Equity:
Common
Stock
In
November 2020, the Company filed a shelf registration statement (the “2020 Shelf Registration”), under which the Company
could issue and sell up to an aggregate of $100,000,000 of shares of its common stock, $0.001 par value per share. In November 2020,
the Company allocated to its at-the-market program (“ATM program”), an aggregate of $50,000,000 out of the $100,000,000 total
under the 2020 Shelf Registration, which has been fully sold.
In August 2021, the Company entered into an At-The-Market
Issuance Sales Agreement with Truist Securities, Inc. and JMP Securities LLC, as sales agents, pursuant to which the Company may sell,
from time to time, an aggregate of up to $50,000,000, which was the remaining balance under the 2020 Shelf Registration, of its common
stock through the sales agents under its ATM program, subject to limitations imposed by the Company and subject to the sales agents’
acceptance, such as the number or dollar amount of shares registered under the 2020 Shelf Registration to which the offering relates.
The sales agents are entitled to a commission of up to 3% of the gross proceeds from the sale of common stock sold under the ATM program.
As of August 8, 2023, the Company has $18,736,000 available under its ATM program relating to its 2020 Shelf Registration.
Also, in August 2021, the Company filed a new shelf
registration statement (the “2021 Shelf Registration”) for the issuance of up to $150,000,000 of shares of its common stock
of which $104,000,000 is currently available for the issuance of equity, debt or equity-linked securities, after taking into consideration
the $46,000,000 public offering and the exercise of underwriters’ option in July 2023 (see Note 7).
On June 28, 2023, the Company entered into an underwriting
agreement (the “Underwriting Agreement”) with RBC Capital Markets, LLC and Truist Securities, Inc., as representatives of
the several underwriters named therein, relating to the issuance and sale of an aggregate of 7,500,000 shares of the Company’s common
stock, and, in lieu of common stock to certain investors, pre-funded warrants to purchase 2,500,625 shares of common stock to the underwriters.
Pursuant to the Underwriting Agreement, the Company also granted the underwriters a 30-day option to purchase up to 1,500,093 additional
shares of common stock. The offering, pursuant to the 2021 Shelf Registration, closed on July 3, 2023. The underwriters fully exercised
the option, and the closing of the option exercise occurred on July 28, 2023 (see Note 7).
During the three and six months ended June 30,
2023, the Company sold an aggregate of 1,181,829 and 2,866,421 shares of its common stock under the ATM program, respectively, and realized
net proceeds of $5,315,000 and $12,515,000, respectively. For the three and six months ended June 30, 2022, the Company sold an aggregate
of 2,378,798 and 3,020,340 shares of its common stock, respectively, and realized net proceeds of $8,411,000 and $11,415,000, respectively.
Restricted
Stock Units
In May 2023, 103,734 restricted stock units (“RSUs”)
vested pursuant to a grant made to the Company’s chief executive officer, of which 66,291 shares of common stock were issued by
the Company and 37,443 shares were withheld in lieu of withholding taxes. As of June 30, 2023, the Company has 103,735 outstanding RSUs.
The Company recorded $68,000 and $154,000 compensation expense for the three and six months ended June 30, 2023, respectively, and $50,000
for the three and six months ended June 30, 2022. Unrecognized compensation expense for these RSUs amounted to $321,000 and the expected
weighted average period for the expense to be recognized is 1.30 years at June 30, 2023.
CorMedix
Inc. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
Preferred
Stock
The
Company is authorized to issue up to 2,000,000 shares of preferred stock in one or more series without stockholder approval. The Company’s
board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend
rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock. Of the 2,000,000 shares
of preferred stock authorized and designated by the Company’s board of directors, all with par value of $0.001 per share, the following
are outstanding:
| |
As
of June 30, 2023 and December 31, 2022 | |
| |
Preferred
Shares
Outstanding | | |
Liquidation
Preference
(Per Share) | | |
Total
Liquidation
Preference | |
Series
C-3 | |
| 2,000 | | |
$ | 10.00 | | |
$ | 20,000 | |
Series
E | |
| 89,623 | | |
$ | 49.20 | | |
$ | 4,409,452 | |
Series
G | |
| 89,999 | | |
$ | 187.36 | | |
$ | 16,862,213 | |
Total | |
| 181,622 | | |
| | | |
$ | 21,291,665 | |
Stock
Options
During the six months ended June 30, 2023 and 2022,
the Company granted ten-year qualified and non-qualified stock options covering an aggregate of 1,901,200 and 1,377,850 shares of the
Company’s common stock under the Amended and Restated 2019 Omnibus Stock Incentive Plan, respectively. The weighted average exercise
price of these options is $4.43 and $3.73 per share, respectively.
During
the three and six months ended June 30, 2023, total compensation expense for stock options issued to employees, directors, officers and
consultants was $989,000 and $3,119,000, respectively, and $1,024,000 and $2,162,000 for the three and six months ended June 30, 2022,
respectively.
As
of June 30, 2023, there was approximately $7,370,000 in total unrecognized compensation expense related to stock options granted, which
expense will be recognized over an expected remaining weighted average period of 1.6 years.
The
fair value of each stock option award estimated on the grant date is determined using the Black-Scholes option pricing model. The following
assumptions were used for the Black-Scholes option pricing model for the stock options granted during the six months ended June 30, 2023:
Expected
term | |
| 5 years | |
Volatility
weighted average | |
| 105.26 | % |
Dividend yield weighted
average | |
| 0.0 | % |
Risk-free interest
rate weighted average | |
| 3.65 | % |
Weighted
average grant date fair value of options granted during the period | |
$ | 3.46 | |
The Company estimated the expected term of the stock options granted
based on anticipated exercises in future periods. The expected term of the stock options granted to consultants, if any, is based upon
the full term of the respective option agreements. The expected stock price volatility for the Company’s stock options is calculated
based on the historical volatility of the Company’s common stock. The expected dividend yield of 0.0% reflects the Company’s
current and expected future policy for dividends on the Company’s common stock. To determine the risk-free interest rate, the Company
utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of the Company’s
awards which is 5 years for employees and 10 years for non-employees.
CorMedix
Inc. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
Note 6 — Leases:
The
Company entered into a seven-year operating lease agreement in March 2020 for an office space at 300 Connell Drive, Berkeley Heights,
New Jersey 07922. The lease agreement, with a monthly average cost of approximately $17,000 commenced in September 2020.
The
Company entered into an operating lease for office space in Germany that began in July 2017. The rental agreement has a three-month term
which automatically renews and includes a monthly cost of 400 Euros. The Company elected to apply the short-term practical expedient
to the office lease.
Operating
lease expense in the Company’s condensed consolidated statements of operations and comprehensive loss for the three and six months
ended June 30, 2023 was approximately $52,000 and $104,000, respectively, and $52,000 and $104,000 for the three and six months ended
June 30, 2022, respectively, which includes costs associated with leases for which ROU assets have been recognized as well as short-term
leases.
At
June 30, 2023, the Company has a total operating lease liability of $737,000, of which $143,000 was classified as operating lease liabilities,
short-term and $594,000 was classified as operating lease liabilities, net of current portion, on the condensed consolidated balance
sheet. At December 31, 2022, the Company’s total operating lease liability was $803,000 of which $135,000 was classified as operating
lease liabilities, short-term and $668,000 was classified as operating lease liabilities, net of current portion, on the condensed consolidated
balance sheet. Operating ROU assets as of June 30, 2023 and December 31, 2022 are $709,000 and $775,000, respectively.
For
each of the three and six months ended June 30, 2023 and 2022, cash paid for amounts included in the measurement of lease liabilities
in operating cash flows from operating leases was $50,000 and $100,000, respectively.
The weighted average remaining lease term as of
June 30, 2023 and 2022 was 4.3 and 5.3 years, respectively, and the weighted average discount rate for operating leases was 9% at June
30, 2023 and 2022.
As
of June 30, 2023, maturities of lease liabilities were as follows:
2023
(excluding the three months ended June 30, 2023) | |
$ | 101,000 | |
2024 | |
| 205,000 | |
2025 | |
| 208,000 | |
2026 | |
| 211,000 | |
2027 | |
| 169,000 | |
Total
future minimum lease payments | |
| 894,000 | |
Less
imputed interest | |
| (157,000 | ) |
Total | |
$ | 737,000 | |
Note 7
— Subsequent Events:
The Company performed an evaluation of subsequent
events for potential recognition and disclosure through the date of the financial statements issuance.
On July 3, 2023, the Company issued and sold an
aggregate of 7,500,000 shares of its common stock at a public offering price of $4.00 per share and, in lieu of common stock to certain
investors, pre-funded warrants to purchase up to an aggregate of 2,500,625 shares of its commons stock at a price of $3.999 per pre-funded
warrant, which represents the per share public offering price for the common stock less the $0.001 per share exercise price for each such
pre-funded warrant pursuant to the Underwriting Agreement (see Note 5). The Company realized net proceeds of approximately $37,600,000
from the sale of the shares and pre-funded warrants. On July 26, 2023, the underwriters’ representatives exercised the option to
purchase additional shares of common stock, and on July 28, 2023, the Company issued and sold an aggregate of 1,500,093 shares of its
common stock at the public offering price of $4.00 per share, less underwriting discounts and commissions, and the Company realized net
proceeds of approximately $5,600,000.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with our 2022 Annual
Report on Form 10-K, filed with the Securities and Exchange Commission, or the SEC, on March 30, 2023.
Forward
Looking Statements
This Quarterly Report on Form 10-Q contains
“forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize
or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The
statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, referred to herein as the Exchange Act. Forward-looking statements are often identified by the use of words such as, but not
limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,”
“expect,” “intend,” “may,” “will,” “plan,” “project,” “seek,”
“should,” “target,” “will,” “would” and similar expressions or variations intended to
identify forward-looking statements. All statements are based on the beliefs and assumptions of our management based on information currently
available to management, including, but not limited to, statements regarding the timing or ultimate outcome of the FDA’s review
of our New Drug Application, or NDA, the Prescription Drug User Fee Act target action date, our commercial launch efforts, the results
of FDA pre-approval inspections as part of its NDA review process, the timing and qualification of our contract manufacturing organization
alternative manufacturing site, and our future financial position, financing plans, future revenues, projected costs and sufficiency of
our cash and short term investments to fund our operations should be considered forward-looking. Such forward-looking statements are subject
to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially
from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included
in our most recent Annual Report on Form 10-K, as well as any amendments thereto, as filed with the SEC and which are incorporated herein
by reference. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake
no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Set forth
below is a summary of the principal risks we face:
Risks
Related to our Financial Position and Need for Additional Capital
| ● | We have a history of operating losses, expect to incur additional
operating losses in the future and may not achieve profitability when expected or we may never be profitable. |
| ● | Our expectation regarding the sufficiency of our existing cash, cash
equivalents, short-term investments and available resources to fund the anticipated launch of DefenCath through anticipated profitability. |
| ● | Our ability to generate revenue from anticipated future product sales,
and our ability to achieve and maintain profitability. |
| ● | Our
cost of operations could increase significantly more than what we expect depending on the
costs to complete our development and commercialization programs for DefenCath. |
| ● | We
may need to finance additional future cash needs through public or private equity offerings,
debt financings or corporate collaboration and licensing arrangements. Any additional funds
that we obtain may not be on terms favorable to us or our stockholders and may require us
to relinquish valuable rights. |
Risks
Related to the Development and Commercialization of Our Product Candidates
| ● | DefenCath,
our lead product candidate, has received Fast Track designation and Qualified Infectious
Disease Product designation from the FDA, but we cannot provide assurances that these designations
will not be rescinded. |
| ● |
We may seek a sales partner in the U.S. if DefenCath receives FDA approval
or we may undertake marketing and sales of DefenCath in the U.S. on our own. If we are unable to sell DefenCath or any other product after
approval or are unable to establish sufficient marketing and sales capabilities, we may not be able to generate significant or any product
revenues.
|
| ● | If the FDA requires a second clinical trial for DefenCath or imposes
additional manufacturing requirements to approve the NDA, the development of DefenCath will take longer and cost more to complete, and
we will likely need significant additional funds to undertake a second trial, if required. |
| ● | Final
approval by regulatory authorities of our product candidates for commercial use may be delayed,
limited or prevented, any of which would adversely affect our ability to generate operating
revenues. |
| ● | Successful
development and commercialization of our other products is uncertain. |
| ● | If
we fail to comply with environmental, health and safety laws and regulations, we could become
subject to fines or penalties or incur costs that could harm our business. |
| ● | The
successful commercialization of DefenCath will depend on obtaining coverage and reimbursement
from third-party payors. |
| ● | Health
systems, physicians and other key stakeholders may not accept and use our products. |
| ● | Changes
in funding for the FDA and other government agencies or future government shutdowns or disruptions
could cause delays in the submission and regulatory review of marketing applications, which
could negatively impact our business or prospects. |
| ● | Clinical
trials required for our product candidates may be expensive and time-consuming, and their
outcome is uncertain. |
| ● | If
we fail to comply with international regulatory requirements, we could be subject to regulatory
delays, fines or other penalties. |
| ● | Even
if approved, our products will be subject to extensive post-approval regulation. |
Risks
Related to our Business Industry
| ● | Competition
and technological change may make our product candidates and technologies less attractive
or obsolete. |
| ● | Healthcare
policy changes, including reimbursement policies for drugs and medical devices, may have
an adverse effect on our business, financial condition and results of operations. |
| ● | If
we lose key management or scientific personnel, cannot recruit qualified employees, directors,
officers, or other personnel or experience increases in compensation costs, our business
may materially suffer. |
| ● | If
we are unable to hire additional qualified personnel, our ability to grow our business may
be harmed. |
| ● | We
may not successfully manage our growth. |
| ● | We
face the risk of product liability claims and the amount of insurance coverage we hold now
or in the future may not be adequate to cover all liabilities we might incur. |
| ● | We
may be exposed to liability claims associated with the use of hazardous materials and chemicals. |
| ● | Negative
U.S. and global economic conditions may pose challenges to our business strategy, which relies
on funding from the financial markets or collaborators. |
Risks
Related to Our Intellectual Property
| ● | If
we materially breach or default under any of our license agreements, the licensor party to
such agreement will have the right to terminate the license agreement, which termination
may materially harm our business. |
| ● | If
we and our licensors do not obtain protection for and successfully defend our respective
intellectual property rights, competitors may be able to take advantage of our research and
development efforts to develop competing products. |
| ● | Ongoing
and future intellectual property disputes could require us to spend time and money to address
such disputes and could limit our intellectual property rights. |
| ● | The
decisions by the European and German patent offices may affect patent rights in other jurisdictions. |
| ● | If
we infringe the rights of third parties we could be prevented from selling products and forced
to pay damages and defend against litigation. |
Risks
Related to Dependence on Third Parties
| ● | If
we or our collaborators are unable to manufacture our products in sufficient quantities or
are unable to obtain regulatory approvals for a manufacturing facility, we may be unable
to meet demand for our products and we may lose potential revenues. |
| ● | Corporate
and academic collaborators may take actions that delay, prevent, or undermine the success
of our products. |
| ● | Data
provided by collaborators and others upon which we rely that has not been independently verified
could turn out to be false, misleading or incomplete. |
| ● | We
rely on third parties to conduct our clinical trials and pre-clinical studies. If those parties
do not successfully carry out their contractual duties or meet expected deadlines, our product
candidates may not advance in a timely manner or at all. |
| ● | We
will depend on third party suppliers and contract manufacturers for the manufacturing of
our product candidates and have no direct control over the cost of manufacturing our product
candidates. Increases in the cost of manufacturing our product candidates would increase
our costs of conducting clinical trials and could adversely affect our future profitability. |
Risks
Related to our Common Stock
| ● | We
may need additional financing to fund our activities in the future, which may dilute our
stockholders. |
| ● | Our
executive officers and directors may sell shares of their stock, and these sales could adversely
affect our stock price. |
| ● | Our
common stock price has fluctuated considerably and is likely to remain volatile, in part
due to the limited market for our common stock and you could lose all or a part of your investment. |
| ● | A
significant number of additional shares of our common stock may be issued at a later date,
and their sale could depress the market price of our common stock. |
| ● | Provisions
in our corporate charter documents and under Delaware law could make an acquisition of us,
which may be beneficial to our stockholders, more difficult. |
| ● | If
we fail to comply with the continued listing standards of the Nasdaq Global Market, it may
result in a delisting of our common stock from the exchange. |
| ● | Laws,
rules and regulations relating to public companies may be costly and impact our ability to
attract and retain directors and executive officers. |
| ● | Our
internal control over financial reporting and our disclosure controls and procedures may
not prevent all possible errors that could occur. |
| ● | Security
breaches and other disruptions could compromise our information and expose us to liability,
which would cause our business and reputation to suffer. |
| ● | We
do not intend to pay dividends on our common stock so any returns on our common stock will
be limited to the value of our common stock. |
Overview
CorMedix
Inc. and our wholly owned subsidiaries, CorMedix Europe GmbH and CorMedix Spain, S.L.U., (collectively referred to herein as “we,”
“us,” “our” and the “Company”), is a biopharmaceutical company focused on developing and commercializing
therapeutic products for the prevention and treatment of life-threatening diseases and conditions.
Our
primary focus is the development of our lead product candidate, DefenCath™, for potential commercialization in the United States,
or U.S., and other key markets as a catheter lock solution, or CLS. We have in-licensed the worldwide rights to develop and commercialize
DefenCath and Neutrolin®. The name DefenCath is the U.S. proprietary name conditionally approved by the U.S. Food and
Drug Administration, or FDA, while the name Neutrolin was used in the European Union, or EU, and other territories where we received
CE-Mark approval for the commercial distribution of Neutrolin as a CLS regulated as a medical device. DefenCath/Neutrolin is a novel
antimicrobial solution (a formulation of taurolidine 13.5 mg/mL and heparin 1000 USP Units/mL) intended for the reduction and prevention
of catheter-related infections and thrombosis in patients requiring central venous catheters in clinical settings such as hemodialysis,
total parenteral nutrition, and oncology. Infection and thrombosis represent key complications among hemodialysis, total parenteral nutrition
and oncology patients with central venous catheters. These complications can lead to treatment delays and increased costs to the healthcare
system when they occur due to hospitalizations, need for intravenous, or IV antibiotic treatment, long-term anticoagulation therapy,
removal/replacement of the central venous catheter, related treatment costs and increased mortality. We believe DefenCath addresses a
significant unmet medical need and a potential large market opportunity.
In
January 2015, the FDA designated DefenCath as a Qualified Infectious Disease Product, or QIDP, for prevention of catheter-related blood
stream infections in patients with end stage renal disease receiving hemodialysis through a central venous catheter. Catheter-related
blood stream infections and clotting can be life-threatening. The QIDP designation provides five years of market exclusivity in addition
to the five years granted for a new chemical entity upon approval of a New Drug Application, or NDA. In addition, in January 2015, the
FDA granted Fast Track designation to DefenCath Catheter Lock Solution, a designation intended to facilitate development and expedite
review of drugs that treat serious and life-threatening conditions so that the approved drug can reach the market expeditiously. The
Fast Track designation of DefenCath provides us with the opportunity to meet with the FDA on a more frequent basis during the development
process, and also ensures eligibility to request priority review of the marketing application.
In
December 2015, we launched our Phase 3 Prospective, Multicenter, Double-blind, Randomized, Active Control Study to Demonstrate Safety & Effectiveness of DefenCath/Neutrolin in Preventing Catheter-related Bloodstream Infection in Subjects on Hemodialysis for End Stage
Renal Disease, or LOCK-IT-100, in patients with hemodialysis catheters in the U.S. The clinical trial was designed to demonstrate the
safety and effectiveness of DefenCath compared to the standard of care CLS, Heparin, in preventing CRBSIs. The primary endpoint for the
trial assessed the incidence of CRBSI and time to CRBSI for each study subject. Secondary endpoints were catheter patency, which was
defined as required use of tPA, or removal of catheter due to dysfunction, and removal of catheter for any reason.
As
previously agreed with the FDA, an interim efficacy analysis was performed when the first 28 potential CRBSI cases were identified in
our LOCK-IT-100 study that occurred through early December 2017. Based on these first 28 cases, there was a highly statistically significant
72% reduction in CRBSI by DefenCath relative to the active control of heparin (p=0.0034). Because the pre-specified level of statistical
significance was reached for the primary endpoint and efficacy had been demonstrated with no safety concerns, the LOCK-IT-100 study was
terminated early. The study continued enrolling and treating subjects until study termination, and the final analysis was based on a
total of 795 subjects with a total of 41 cases. There was a 71% reduction in CRBSI by DefenCath relative to heparin, which was highly
statistically significant (p=0.0006), with a good safety profile.
The
FDA granted our request for a rolling submission and review of the NDA, which is designed to expedite the approval process for products
being developed to address an unmet medical need. Although the FDA usually requires two pivotal clinical trials to provide substantial
evidence of safety and effectiveness for approval of an NDA, the FDA will in some cases accept one adequate and well-controlled trial,
where it is a large multicenter trial with a broad range of subjects and study sites that has demonstrated a clinically meaningful and
statistically very persuasive effect on a disease with potentially serious outcome.
In
March 2020, we began the modular submission process for the NDA for DefenCath for the prevention of CRBSI in hemodialysis patients, and
in August 2020, the FDA accepted for filing the DefenCath NDA. The FDA also granted our request for priority review, which provides for
a six-month review period instead of the standard ten-month review period. As we announced in March 2021, the FDA informed us in its
Complete Response Letter, or CRL, that it could not approve the NDA for DefenCath in its present form. The FDA noted concerns at the
third-party manufacturing facility after a review of records requested by the FDA and provided by the contract manufacturing organization,
or CMO. Additionally, the FDA required a manual extraction study to demonstrate that the labeled volume can be consistently withdrawn
from the vials despite an existing in-process control to demonstrate fill volume within specifications.
In
April 2021, we and the CMO met with the FDA to discuss proposed resolutions for the deficiencies identified in the CRL to us and the
Post-Application Action Letter, or PAAL, received by the CMO from the FDA for the NDA for DefenCath. There was an agreed upon protocol
for the manual extraction study identified in the CRL, which has been successfully completed. Addressing the FDA’s concerns regarding
the qualification of the filling operation necessitated adjustments in the process and generation of additional data on operating parameters
for manufacture of DefenCath. We and the CMO determined that additional process qualification was needed with subsequent validation to
address these issues. The FDA did not request additional clinical data and did not identify any deficiencies related to the data submitted
on the efficacy or safety of DefenCath from LOCK-IT-100. In draft labeling discussed with the FDA, the FDA added that the initial approval
will be for the limited population of patients with kidney failure receiving chronic hemodialysis through a central venous catheter.
This is consistent with our request for approval pursuant to the Limited Population Pathway for Antibacterial and Antifungal Drugs, or
LPAD. LPAD, passed as part of the 21st Century Cures Act, is a new program intended to expedite the development and approval of certain
antibacterial and antifungal drugs to treat serious or life-threatening infections in limited populations of patients with unmet needs.
LPAD provides for a streamlined clinical development program involving smaller, shorter, or fewer clinical trials and is intended to
encourage the development of safe and effective products that address unmet medical needs of patients with serious bacterial and fungal
infections. We believe that LPAD will provide additional flexibility for the FDA to approve DefenCath to reduce CRBSIs in the limited
population of patients with kidney failure receiving hemodialysis through a central venous catheter.
On
February 28, 2022, we resubmitted the NDA for DefenCath to address the CRL issued by the FDA. In parallel, our third-party manufacturer
submitted responses to the deficiencies identified at the manufacturing facility in the PAAL issued by the FDA concurrently with the
CRL. On March 28, 2022, we announced that the resubmission of the NDA for DefenCath had been accepted for filing by the FDA. The FDA
considered the resubmission as a complete, Class 2 response with a six-month review cycle. The CMO notified us that an onsite inspection
by the FDA was conducted that resulted in FORM FDA 483 observations that are being addressed. The CMO submitted responses to the inspectional
observations along with a corrective action plan and requested a meeting with the FDA to discuss. We were also notified by our supplier
of heparin, an active pharmaceutical ingredient, or API, for DefenCath, that an inspection by the FDA for an unrelated API resulted in
a Warning Letter due to deviations from good manufacturing practices for the unrelated API.
On
August 8, 2022, we announced receipt of a second CRL from the FDA regarding our DefenCath NDA. The FDA stated that the DefenCath NDA
cannot be approved until deficiencies conveyed to the CMO and the heparin API supplier are resolved to the satisfaction of the FDA. There
were no other requirements identified by the FDA for us prior to resubmission of the NDA. The FDA has acknowledged the progress reports
submitted by the CMO on implementation of the ongoing corrective actions. Validation of manufacturing with heparin from an alternative
supplier is underway to prepare for resubmission of the NDA in the event that the Warning Letter at our current API supplier remains
unresolved. Corrective actions have been implemented to address the inspectional observations at the CMO and are under review by the
FDA.
On May 15, 2023, we resubmitted the NDA for DefenCath
after meeting with the FDA to discuss timing and content of the resubmission. At the meeting, the FDA informed us that it is in receipt
of the close out report for inspectional observations received from our existing CMO, and the NDA resubmission with the CMO can be done
at our discretion. The NDA was resubmitted, accepted for filing by the FDA and received a target review date of November 15, 2023. As
the resubmission contained new manufacturing information, it was classified as a Class 2 resubmission with a six-month review period.
The FDA will conduct a pre-approval inspection at the CMO’s facility as part of the NDA review process.
As
part of the NDA review process, the FDA is reviewing the proposed tradename DefenCath, which was conditionally approved, to ensure that
there is no potential confusion with another approved or pending product name that is also under review.
We
previously announced agreements with additional CMOs, including Alcami Corporation and Siegfried Hameln, with proven capabilities for
manufacturing commercial sterile parenteral drug products. They may function as alternate manufacturing sites for DefenCath for the U.S.
market. As part of the technology transfer and validation of the manufacturing process, we also qualified an alternate source of heparin
API sourced from a major U.S. supplier.
We announced on April 26, 2023 that following the submission
of a duplicate New Technology Add-On Payment (“NTAP”) application in the fourth quarter of 2022 to the Centers for Medicare
& Medicaid Services (“CMS”), CMS has subsequently issued the Inpatient Prospective Payment System (“IPPS”)
2024 proposed rule that includes a NTAP of up to $17,111 per hospital stay for DefenCath. This NTAP represents reimbursement to inpatient
facilities of 75% of the anticipated wholesaler acquisition cost price of $1,170 per 3 mL vial, and an average utilization of 19.5 vials
per hospital stay. The final IPPS rule was published in early August 2023 and confirmed this payment amount in that final rule. This NTAP
is conditioned upon the DefenCath NDA obtaining final FDA approval prior to July 1, 2024.
We
announced on May 1, 2023 that the United States Patent and Trademark Office (“USPTO”) allowed our patent claims directed
to a locking solution composition for treating and reducing infection and flow reduction in central venous catheters. Our newly allowed
U.S. Patent Application (No. 17/721,699) reflects the unique and proprietary formulation of our product, DefenCath, for which we expect
to resubmit our NDA by mid-May. The newly allowed application provides patent coverage that supplements our existing licensed U.S. Patent
No. 7,696,182, and has the potential to provide an additional layer of patent protection for DefenCath through 2042.
We
intend to pursue additional indications for DefenCath use as a CLS in populations with unmet medical needs that may also represent potentially
significant market opportunities. While we are continuing to assess these areas, potential future indications may include use as a CLS
to reduce CRBSIs in total parenteral nutrition patients using a central venous catheter and in oncology patients using a central venous
catheter.
In
addition to DefenCath, we are sponsoring a pre-clinical research collaboration for the use of taurolidine as a possible treatment for
rare orphan pediatric tumors. In February 2018, the FDA granted orphan drug designation to taurolidine for the treatment of neuroblastoma
in children. We may seek one or more strategic partners or other sources of capital to help us develop and commercialize taurolidine
for the treatment of neuroblastoma in children. We are also evaluating opportunities for the possible expansion of taurolidine as a platform
compound for use in certain medical devices. Patent applications have been filed in several indications, including wound closure, surgical
meshes, and wound management. We would seek to establish development/commercial partnerships to advance these programs.
We
were granted a deferral by the FDA under the Pediatric Research Equity Act, or PREA, that requires sponsors to conduct pediatric studies
for NDAs for a new active ingredient, such as taurolidine in DefenCath, unless a waiver or deferral is obtained from the FDA. A deferral
acknowledges that a pediatric assessment is required but permits the applicant to submit the pediatric assessment after the submission
of an NDA. We have made a commitment to conduct the pediatric study after approval of the NDA for use in adult hemodialysis patients.
Pediatric studies for an approved product conducted under PREA may qualify for pediatric exclusivity, which, if granted, would provide
an additional six months of marketing exclusivity. DefenCath would then have the potential to receive a total marketing exclusivity period
of 10.5 years, including exclusivity pursuant to NCE and QIDP.
Since
our inception, our operations have been primarily limited to conducting clinical trials and establishing manufacturing for our product
candidates, licensing product candidates, business and financial planning, research and development, seeking regulatory approval for
our products, initial commercialization activities for DefenCath in the U.S. and Neutrolin in the EU and other foreign markets, and maintaining
and improving our patent portfolio. We have funded our operations primarily through debt and equity financings. We
have generated significant losses to date, and we expect to use substantial amounts of cash for our operations as we prepare our pre-launch
commercial activities for DefenCath for the U.S. market, pursue business development activities, and incur additional legal costs to
defend our intellectual property. As of June 30, 2023, we had an accumulated deficit of approximately $297,202,000. We
are unable to predict the extent of any future losses or when we will become profitable, if ever.
Financial
Operations Overview
Revenue
We
have not generated substantial revenue since our inception. Through June 30, 2023, we have funded our operations primarily through debt
and equity financings.
Research
and Development Expense
Research
and development, or R&D, expense consists of: (i) internal costs associated with our development activities; (ii) payments we make
to third party contract research organizations, or CRO, contract manufacturers, investigative sites, and consultants; (iii) technology
and intellectual property license costs; (iv) manufacturing development costs; (v) personnel related expenses, including salaries, stock–based
compensation expense, benefits, travel and related costs for the personnel involved in drug development; (vi) activities relating to
regulatory filings and the advancement of our product candidates through preclinical studies and clinical trials; (vii) facilities and
other allocated expenses, which include direct and allocated expenses for rent, facility maintenance, as well as laboratory and other
supplies; and (viii) costs related to the manufacturing of the product that could potentially be available to support the commercial
launch prior to marketing approval. All R&D is expensed as incurred.
Conducting
a significant amount of development is central to our business model. Product candidates in later-stage clinical development generally
have higher development costs than those in earlier stages of development, primarily due to the significantly increased size and duration
of the clinical trials.
The
process of conducting pre-clinical studies and clinical trials necessary to obtain regulatory approval is costly and time consuming.
The probability of success for each product candidate and clinical trial may be affected by a variety of factors, including, among others,
the quality of the product candidate’s early clinical data, investment in the program, competition, manufacturing capabilities
and commercial viability. As a result of the uncertainties associated with clinical trial enrollments and the risks inherent in the development
process, we are unable to determine the duration and completion costs of current or future clinical stages of our product candidates
or when, or to what extent, we will generate revenues from the commercialization and sale of any of our product candidates.
Development
timelines, probability of success and development costs vary widely. We are currently focused on securing the marketing approval for
DefenCath in the U.S. as well as on continuing sales in foreign markets where Neutrolin is approved. In December 2015, we signed an agreement
with a clinical research organization, or CRO, to help us conduct our LOCK-IT-100 Phase 3 clinical trial in hemodialysis patients with
central venous catheters to demonstrate the efficacy and safety of DefenCath in preventing catheter-related bloodstream infections and
blood clotting in subjects receiving hemodialysis therapy as treatment for end stage renal disease. Our LOCK-IT-100 study was completed
and all costs related to the agreement with the CRO has been paid.
We
are pursuing additional opportunities to generate value from taurolidine, an active component of DefenCath. Based on initial feasibility
work, we have completed an initial round of pre-clinical studies for taurolidine-infused surgical meshes, suture materials, and hydrogels,
which may require a PMA regulatory pathway for approval. We are also involved in a pre-clinical research collaboration for the use of
taurolidine as a possible treatment for rare orphan pediatric tumors. In February 2018, the FDA granted orphan drug designation to taurolidine
for the treatment of neuroblastoma in children. We may seek one or more strategic partners or other sources of capital to help us develop
and commercialize taurolidine for the treatment of neuroblastoma in children.
Selling,
General and Administrative Expense
Selling,
general and administrative, or SG&A, expense includes costs related to commercial personnel, medical education professionals, marketing
and advertising, salaries and other related costs, including stock-based compensation expense, for persons serving in our executive,
sales, finance and accounting functions. Other SG&A expense includes facility-related costs not included in R&D expense, promotional
expenses, costs associated with industry and trade shows, and professional fees for legal services and accounting services.
Foreign
Currency Exchange Transaction Gain (Loss)
Foreign
currency exchange transaction gain (loss) is the result of re-measuring transactions denominated in a currency other than our functional
currency and is reported in the condensed consolidated statement of operations as a separate line item within other income (expense).
The intercompany loans outstanding between our company based in New Jersey and our subsidiary based in Germany are not expected to be
repaid in the foreseeable future and the nature of the funding advanced is of a long-term investment nature. As such, unrealized foreign
exchange movements related to long-term intercompany loans are recorded in other comprehensive income (loss).
Interest
Income
Interest
income consists of interest earned on our cash and cash equivalents and short-term investments.
Interest
Expense
Interest
expense consists of interest incurred on our convertible debt, amortization of debt discount and on financing of expenditures.
Results
of Operations
Three
and six months ended June 30, 2023 compared to three and six months ended June 30, 2022.
The
following is a tabular presentation of our condensed consolidated operating results:
| |
For the Three Months Ended
June 30, | | |
%
Increase | | |
For
the Six Months Ended
June 30, | | |
%
Increase | |
| |
2023 | | |
2022 | | |
(Decrease) | | |
2023 | | |
2022 | | |
(Decrease) | |
Revenue | |
$ | - | | |
$ | 21,253 | | |
| (100 | )% | |
$ | - | | |
$ | 28,889 | | |
| (100 | )% |
Cost
of sales | |
| - | | |
| (332 | ) | |
| (100 | )% | |
| - | | |
| (1,859 | ) | |
| (100 | )% |
Gross
profit | |
| - | | |
| 20,921 | | |
| (100 | )% | |
| - | | |
| 27,030 | | |
| (100 | )% |
Operating
Expenses: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Research
and development | |
| (4,794,758 | ) | |
| (3,209,471 | ) | |
| 49 | % | |
| (8,202,260 | ) | |
| (5,497,058 | ) | |
| 49 | % |
Selling,
general and administrative | |
| (7,009,824 | ) | |
| (5,051,895 | ) | |
| 39 | % | |
| (14,619,501 | ) | |
| (9,802,778 | ) | |
| 49 | % |
Total
operating expenses | |
| (11,804,582 | ) | |
| (8,261,366 | ) | |
| 43 | % | |
| (22,821,761 | ) | |
| (15,299,836 | ) | |
| 49 | % |
Loss
from operations | |
| (11,804,582 | ) | |
| (8,240,445 | ) | |
| 43 | % | |
| (22,821,761 | ) | |
| (15,272,806 | ) | |
| 49 | % |
Interest
income | |
| 550,183 | | |
| 35,342 | | |
| 1,457 | % | |
| 996,567 | | |
| 49,094 | | |
| 1,930 | % |
Foreign
exchange transaction (loss) gain | |
| (13,368 | ) | |
| 18,232 | | |
| (173 | )% | |
| (1,023 | ) | |
| 8,026 | | |
| (113 | )% |
Interest
expense | |
| (5,851 | ) | |
| (3,585 | ) | |
| 63 | % | |
| (14,627 | ) | |
| (8,964 | ) | |
| 63 | % |
Total
other income | |
| 530,964 | | |
| 49,989 | | |
| 962 | % | |
| 980,917 | | |
| 48,156 | | |
| 1,937 | % |
Loss
before income taxes | |
| (11,273,618 | ) | |
| (8,190,456 | ) | |
| 38 | % | |
| (21,840,844 | ) | |
| (15,224,650 | ) | |
| 43 | % |
Tax
benefit | |
| - | | |
| 585,617 | | |
| (100 | )% | |
| - | | |
| 585,617 | | |
| (100 | )% |
Net
loss | |
| (11,273,618 | ) | |
| (7,604,839 | ) | |
| 48 | % | |
| (21,840,844 | ) | |
| (14,639,033 | ) | |
| 49 | % |
Other
comprehensive (loss) income | |
| (10,535 | ) | |
| (10,402 | ) | |
| 1 | % | |
| 7,954 | | |
| (47,611 | ) | |
| (117 | )% |
Comprehensive
loss | |
$ | (11,284,153 | ) | |
$ | (7,615,241 | ) | |
| 48 | % | |
$ | (21,832,890 | ) | |
$ | (14,686,644 | ) | |
| 49 | % |
Revenue.
Revenue for the three months ended June 30, 2023 was $0 as compared to $21,000 in the same period last year, a decrease of $21,000.
The decrease was the result of winding down of our operations in the EU and the discontinuance of Neutrolin sales in both the EU and
the Middle East.
Revenue
for the six months ended June 30, 2023 was $0 as compared to $29,000 in the same period last year, a decrease of $29,000. The decrease
was the result of winding down of our operations in the EU and the discontinuance of Neutrolin sales in both the EU and the Middle East.
Cost
of Sales. Cost of sales was $0 for the three months ended June 30, 2023 compared to $300 in the same period last year, a decrease
of $300. The decrease was the result of winding down of our operations in the EU and the discontinuance of Neutrolin sales in both the
EU and the Middle East.
Cost
of sales was $0 for the six months ended June 30, 2023 compared to $2,000 in the same period last year, a decrease of $2,000. The decrease
was the result of winding down of our operations in the EU and the discontinuance of Neutrolin sales in both the EU and the Middle East.
Research
and Development Expense. R&D expense was $4,795,000 for the three months ended June 30, 2023, an increase of $1,586,000, or 49%,
from $3,209,000 for the same period in 2022. The increase was driven by an increase in costs related to the manufacturing of DefenCath
prior to its potential marketing approval of $780,000, an increase in personnel expenses of $471,000, due to additional hires in 2023
as compared to 2022, and an increase in costs related to medical affairs activities of $248,000.
R&D
expense was $8,202,000 for the six months ended June 30, 2023, an increase of $2,705,000, or 49%, from $5,497,000 for the same period
in 2022. The increase was driven by an increase in personnel expenses of $1,059,000, due to additional hires in 2023 as compared to 2022,
an increase in costs related to the manufacturing of DefenCath prior to its potential marketing approval of $915,000, and an increase
in costs related to medical affairs activities of $542,000.
Selling, General and Administrative Expense.
SG&A expense was $7,010,000 for the three months ended June 30, 2023, an increase of $1,958,000, or 39%, from $5,052,000 for the same
period in 2022. The increase was primarily attributable to an increase in costs related to market research studies and pre-launch activities
in preparation for the potential marketing approval of DefenCath of $1,799,000, an increase in personnel expenses of $426,000 as a result
of additional SG&A hires in 2023 as compared to 2022. These increases were partially offset, among others of lesser significance,
by a decrease in legal fees of $359,000.
SG&A
expense was $14,620,000 for the six months ended June 30, 2023, an increase of $4,817,000, or 49%, from $9,803,000 for the same period
in 2022. The increase was primarily attributable to an increase in costs related to market research studies and pre-launch activities
in preparation for the potential marketing approval of DefenCath of $3,650,000, an increase in personnel expenses of $937,000 and an
increase in non-cash charges for stock-based compensation of $867,000. These increases were partially offset, among others of lesser
significance, by a decrease in legal fees of $731,000.
Interest
Income. Interest income was $550,000 for the three months ended June 30, 2023 compared to $35,000 for the same period last year,
an increase of $515,000. The increase was attributable to higher interest rates and higher average balance in short-term investments
during this period as compared to the same period last year.
Interest
income was $997,000 for the six months ended June 30, 2023 compared to $49,000 for the same period last year, an increase of $948,000.
The increase was attributable to higher interest rates and higher average balance in short-term investments during this period as compared
to the same period last year.
Foreign
Exchange Transaction Gain (Loss). Foreign exchange transaction gains (losses) are due to the re-measuring of transactions denominated
in a currency other than our functional currency. For the quarter ended June 30, 2023, there was a loss of $13,000 compared to a gain
of $18,000 for the same period in 2022.
A
foreign exchange transaction loss of $1,000 was recorded for the six months ended June 30, 2023 compared to a gain of $8,000 for the
same period last year.
Interest
Expense. Interest expense was $6,000 for the three months ended June 30, 2023 as compared to $4,000 for the same period in 2022,
an increase of $2,000, primarily due to higher interest rates on expenses that were financed this year as compared to the same period
last year.
Interest
expense was $15,000 for the six months ended June 30, 2023 as compared to $9,000 for the six months ended June 30, 2022, an increase
of $6,000 due to higher interest rates on expenses that were financed this year as compared to the same period last year.
Tax Benefit. Tax benefits for the three
and six months ended June 30, 2022 of $586,000 was an income tax benefit due to the sale of our unused net operating losses for the state
fiscal years 2021 through the New Jersey Economic Development Authority Program. There was no tax benefit from the unused net operating
losses that were utilized for 2023.
Other Comprehensive Income (Loss). Unrealized
foreign exchange movements related to long-term intercompany loans, the translation of the foreign affiliate financial statements to U.S.
dollars and unrealized movements related to short-term investment are recorded in other comprehensive income (loss) which resulted in
net losses of $11,000 and $10,000 for the three months ended June 30, 2023 and 2022, respectively.
Unrealized
foreign exchange movements related to long-term intercompany loans, the translation of the foreign affiliate financial statements to
U.S. dollars and unrealized movements related to short-term investment resulted in a gain of $8,000 and a loss of $48,000 for the six
months ended June 30, 2023 and 2022, respectively.
Liquidity
and Capital Resources
Sources
of Liquidity
As
a result of our cost of sales, R&D and SG&A expenditures and the lack of substantial product sales revenue, our ongoing operations
have not been profitable since our inception. During the six months ended June 30, 2023, we received net proceeds of $12,515,000 from
the issuance of 2,866,421 shares of common stock under our at-the-market-issuance sales agreement, or ATM program, as compared to $11,415,000
net proceeds for the same period in 2022 from the issuance of 3,020,340 shares of common stock. We may need to raise additional capital
through various potential sources, such as equity and/or debt financings, strategic relationships, potential strategic transactions or
out-licensing of our products until profitability is achieved, if ever.
Net
Cash Used in Operating Activities
Net cash used in operating activities for the six
months ended June 30, 2023 was $18,966,000 as compared to $12,206,000 for the same period in 2022, an increase of $6,760,000. The increase
is primarily driven by an increase in net loss of $7,202,000, attributable to a net increase in operating expenses of $7,522,000.
Net
Cash Used in Investing Activities
Cash
used in investing activities for the six months ended June 30, 2023 was $17,073,000 as compared to $3,593,000 provided by in the same
period in 2022. The net cash used in investing activities during the six months ended June 30, 2023 was mainly driven by increased amounts
invested in short-term investments as compared to the same period in 2022.
Net
Cash Provided by Financing Activities
Net
cash provided by financing activities for the six months ended June 30, 2023 was $12,551,000 as compared to $11,415,000 for the same
period in 2022, an increase of $1,136,000, attributable to higher net proceeds generated from the sale of our common stock in our at-the-market
program, or ATM program, during the six months ended June 30, 2023 as compared to the same period in 2022.
Funding
Requirements and Liquidity
Our total cash on hand and short-term investments
as of June 30, 2023 was $52,401,000, excluding restricted cash of $189,000, compared with $58,792,000 at December 31, 2022, excluding
$226,000 restricted cash. During the six months ended June 30, 2023, we received net proceeds of $12,515,000 from the issuance of 2,866,421
shares of common stock under our ATM program. As of August 8, 2023, we have approximately $18,736,000 available under our ATM program
and $104,000,000 under the shelf registration statement filed in August 2021 for the issuance of equity, debt or equity-linked securities,
after taking into consideration the $40,000,000 public offering and the $6,000,000 exercise of the underwriters’ option that closed
on July 3, 2023 and July 28, 2023, respectively.
Because
our business has not generated positive operating cash flow and if we do not raise significant revenue, we may need to raise additional
capital in order to continue to fund our research and development activities, as well as to fund operations generally. Our continued
operations are focused primarily on activities leading to the pre-launch and commercialization of DefenCath and we can provide no assurances
that financing or strategic relationships will be available on acceptable terms, or at all, if additional funds are needed.
We
expect to continue to fund operations from cash on hand and through capital raising sources as previously described, which may be dilutive
to existing stockholders, through revenues from the licensing of our products, or through strategic alliances. We expect to continue
to utilize our ATM program, if conditions allow, to support our ongoing funding requirements. Additionally, we may seek to sell additional
equity or debt securities through one or more discrete transactions, or enter into a strategic alliance arrangement, but can provide
no assurances that any such financing or strategic alliance arrangement will be available on acceptable terms, or at all. Moreover, the
incurrence of indebtedness would result in increased fixed obligations and could contain covenants that would restrict our operations.
Raising additional funds through strategic alliance arrangements with third parties may require significant time to complete and could
force us to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or to grant
licenses on terms that may not be favorable to us or our stockholders. Our actual cash requirements may vary materially from those now
planned due to a number of factors, any change in the focus and direction of our research and development programs, any acquisition or
pursuit of development of new product candidates, competitive and technical advances, the costs of commercializing any of our product
candidates, and costs of filing, prosecuting, defending and enforcing any patent claims and any other intellectual property rights.
We
expect to grow product sales for DefenCath in the U.S., should we receive FDA approval. In the absence of significant revenue, we are
likely to continue generating operating cash flow deficits. We will continue to use cash as we increase other activities leading to the
commercialization of DefenCath upon approval, pursue business development activities, and incur additional legal costs to defend our
intellectual property.
We currently estimate that our cash and cash equivalents,
short-term investments and available resources as of June 30, 2023, plus the net proceeds received from the public offering and the exercise
of the underwriters’ option in July 2023, will be sufficient to fund our operations for at least twelve months from the filing date
of this Quarterly Report on Form 10-Q, and will enable us to fund the launch of DefenCath through to anticipated profitability. These
estimates are based upon the assumption of an approval of the DefenCath NDA in November 2023, commercial launch in the first quarter of
2024, and other base case assumptions for market penetration, average selling price, R&D expense and commercial infrastructure cost.
Additional financing may be needed to build out our commercial infrastructure should we receive FDA approval and to continue our operations.
If we are unable to raise additional funds when needed, we may be forced to slow or discontinue our preparations for the commercial launch
of DefenCath. We may also be required to delay, scale back or eliminate some or all of our research and development programs. Each of
these alternatives would likely have a material adverse effect on our business.
Contractual
Obligations
We
entered into a seven-year operating lease agreement in March 2020 for an office space at 300 Connell Drive, Berkeley Heights, New Jersey
07922. The lease agreement, with a monthly average cost of approximately $17,000, commenced on September 16, 2020.
Critical
Accounting Policies and Estimates
Our
management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated
financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP.
The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments, including those described
below. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the
circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates.
For
the six-month period ended June 30, 2023, there were no significant changes to our critical accounting policies and estimates as identified
in our Annual Report on Form 10-K for the year ended December 31, 2022.
Item
3. Quantitative and Qualitative Disclosure about Market Risk.
Interest
Rate Risk
We
are exposed to market risks in the ordinary course of our business. Market risk is the risk of change in fair value of a financial instrument
due to changes in interest rates, equity prices, financing, exchange rates or other factors. These market risks are principally limited
to interest rate fluctuations.
We
had cash, cash equivalents and short-term investments (excluding restricted cash) of $52,401,000 and $58,792,000 at June 30, 2023 and
December 31, 2022, respectively, consisting primarily of funds in cash, money market accounts, U.S. government agency securities, high-grade
corporate obligations and commercial paper with original maturities of more than 90 days. The primary objective of our investment activities
is to preserve principal and liquidity while maximizing income without significantly increasing risk. We do not enter into investments
for trading or speculative purposes. Due to the short-term nature of our investment portfolio, we do not believe an immediate 10.0% increase
in interest rates would have a material effect on the fair market value of our portfolio, and accordingly we do not expect our operating
results or cash flows to be materially affected by a sudden change in market interest rates.
Our
results of operations and cash flows are subject to fluctuations due to changes in interest rates. We do not believe that we are materially
exposed to changes in interest rates. We do not currently use interest rate derivative instruments to manage exposure to interest rate
changes. We estimate that a 1% unfavorable change in interest rates would not have a material effect on interest expense for the six
months ended June 30, 2023.
Inflation
Risk
Inflation
generally affects us by increasing our cost of labor and pricing of contracts and agreements. We do not believe that inflation had a
material effect on our business, financial condition, or results of operations during the six months ended June 30, 2023.
Item
4. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
Disclosure
controls and procedures are designed only to provide reasonable assurance that information to be disclosed in our Exchange Act reports
is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Under the supervision
and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an
evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) as of June 30, 2023. Based on the foregoing evaluation, our Chief Executive Officer
and our Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required
to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management,
including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosures.
Changes
in Internal Control Over Financial Reporting
There
were no changes in our internal control over financial reporting during the quarter ended June 30, 2023, or in other factors that could
significantly affect these controls, that materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
PART
II
OTHER INFORMATION
Item
1. Legal Proceedings.
For
information regarding our legal proceedings, see Note 4, Commitments and Contingencies, included in Part I, Item 1, Financial Statements,
in this Quarterly Report on Form 10-Q, which is incorporated into this item by reference.
Item
1A. Risk Factors.
See
the risk factors previously disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended
December 31, 2022. The information set forth in this Quarterly Report on Form 10-Q, including the risk factors presented below, updates
and should be read in conjunction with the risk factors and information disclosed in such Annual Report.
Our internal control over financial reporting
and our disclosure controls and procedures may not prevent all possible errors that could occur.
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial
reporting and the preparation of financial statements for external purposes in accordance with GAAP. Failure on our part to have effective
internal financial and accounting controls would cause our financial reporting to be unreliable, could have a material adverse effect
on our business, operating results, and financial condition, and could cause the trading price of our common stock to fall dramatically.
In June 2023, our registered public accounting firm agreed to a settlement with the SEC with respect to certain matters relating to systemic
quality control failures and violations of audit standards in connection with audit work for hundreds of special purpose acquisition company
(SPAC) clients beginning at the latest in 2020 and continuing through 2022. We are actively monitoring the situation but do not currently
believe this settlement will affect CorMedix or our financial statements. In future periods, if the process required by Section 404 of
the Sarbanes-Oxley Act reveals any material weaknesses or significant deficiencies, the correction of any such material weaknesses or
significant deficiencies could require remedial measures which could be costly and time-consuming. In addition, in such a case, we may
be unable to produce accurate financial statements on a timely basis. Any associated accounting restatement could create a significant
strain on our internal resources and cause delays in our release of quarterly or annual financial results and the filing of related reports,
increase our costs and cause management distraction. Any of the foregoing could cause investors to lose confidence in the reliability
of our financial statements, which could cause the market price of our common stock to decline and make it more difficult for us to finance
our operations and growth.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item
3. Default Upon Senior Securities.
None.
Item
4. Mine Safety Disclosures.
Not
applicable.
Item
5. Other Information.
During the three months ended June 30, 2023, no director or officer
of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,”
as each term is defined in Item 408(a) of Regulation S-K.
Item
6. Exhibits.
The
exhibit index set forth below is incorporated by reference in response to this Item 6.
** |
Furnished, not filed, herewith. |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
|
CORMEDIX
INC. |
|
|
Date:
August 8, 2023 |
By: |
/s/
Joseph Todisco |
|
|
Name: |
Joseph
Todisco |
|
|
Title: |
Chief
Executive Officer |
|
|
|
(Principal
Executive Officer) |
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In connection with the Quarterly Report of CorMedix Inc., a Delaware
corporation (the “Company”), on Form 10-Q for the quarter ended June 30, 2023, as filed with the Securities and Exchange Commission
on the date hereof (the “Report”), I, Joseph Todisco, Chief Executive Officer of the Company, hereby certify, pursuant to
18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
In connection with the Quarterly Report of CorMedix Inc., a Delaware
corporation (the “Company”), on Form 10-Q for the quarter ended June 30, 2023, as filed with the Securities and Exchange Commission
on the date hereof (the “Report”), I, Matthew David, Chief Financial Officer of the Company, hereby certify, pursuant to 18
U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: