See Accompanying Notes to Unaudited Condensed
Consolidated Financial Statements.
See Accompanying Notes to Unaudited Condensed
Consolidated Financial Statements.
See Accompanying Notes to
Unaudited Condensed Consolidated Financial Statements.
See Accompanying Notes to Unaudited Condensed
Consolidated Financial Statements.
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 infectious
and inflammatory diseases. In 2013, the Company formed a wholly-owned subsidiary, CorMedix Europe GmbH and in May 2020, the Company formed
a wholly-owned subsidiary, CorMedix Spain, S.L.U.
The Company’s primary focus is on the development
of its lead product candidate, DefenCath™, for potential commercialization in the United States (“U.S.”) and other
key markets. The Company has in-licensed the worldwide rights to develop and commercialize DefenCath/ Neutrolin®, which is a novel
anti-infective solution (a formulation of taurolidine 1.35% and heparin 1000 u/ml) intended for the reduction and prevention of catheter-related
infections and thrombosis in patients requiring central venous catheters (“CVCs”) in clinical settings such as hemodialysis,
total parenteral nutrition and oncology. Infection and thrombosis represent key complications among hemodialysis, total parenteral nutrition
and cancer patients with CVCs. These complications can lead to treatment delays and increased costs to the healthcare system when they
occur due to hospitalizations, need for intravenous (“IV”) antibiotic treatment, long-term anticoagulation therapy, removal/replacement
of the CVC, related treatment costs and increased mortality. The name DefenCath is the U.S. proprietary name conditionally approved by
the U.S. Food and Drug Administration (“FDA”), while the name Neutrolin is currently used in the European Union (“EU”)
and other territories where the Company has received CE-Mark approval for the commercial distribution of Neutrolin as a catheter lock
solution (“CLS”) regulated as a medical device.
In January 2015, the FDA designated DefenCath as
a Qualified Infectious Disease Product (“QIDP”) for prevention of catheter-related blood stream infections (“CRBSIs)
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 (“NCE”) upon approval of a New Drug Application (“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 the Company 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, the Company launched its 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 (“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 tissue plasminogen
activating factor, or tPA, or removal of catheter due to dysfunction, and removal of catheter for any reason.
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
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. In 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 the Company’s 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 investigation sites with procedures to include trial quality that has demonstrated a clinically meaningful
and statistically very persuasive effect on prevention of a disease with potentially serious outcome.
In March 2020, the Company 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 the Company’s request for priority review, which provides for a six-month review period
instead of the standard ten-month review period. As the Company announced in March 2021, the FDA informed in its Complete Response Letter
(“CRL”) to the Company that it cannot 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 manufacturer (“CMO”).
Additionally, the FDA is requiring 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, the Company met with the FDA to
discuss proposed resolutions for the deficiencies identified in the CRL to the Company and the Post-Application Action Letter received
by the CMO from the FDA for the NDA for DefenCath. There is now an agreed upon protocol for the manual extraction study identified in
the CRL that the FDA is requiring as confirmation of in-process controls to demonstrate that the labeled volume can be consistently withdrawn
from the vials. The Company has successfully completed this study. Addressing the FDA’s concerns regarding the qualification of
the filling operation may necessitate adjustments in the process and generation of additional data on operating parameters for manufacture
of DefenCath. The Company and the CMO are currently evaluating available data to determine if additional process qualification will be
needed with subsequent validation to address these issues. The FDA stated that the review timeline would be determined when the NDA resubmission
is received and that it expected all corrections to facility deficiencies to be complete at the time of resubmission so that all corrective
actions may be verified during an onsite evaluation in the next review cycle, if the FDA determines it will do an onsite evaluation. The
Company and the CMO continue to work closely to ensure that the identified deficiencies are resolved prior to resubmission of the DefenCath
NDA.
Satisfactory resolution of these issues is required for approval of
the DefenCath NDA by a pre-approval inspection and/or adequate CMO responses addressing these concerns. If an onsite inspection is required,
the Company may encounter delays in obtaining FDA approval because the FDA is currently facing a backlog due to the Covid-19 pandemic.
The FDA recently issued a guidance document on its plan to use voluntary remote interactive evaluations at facilities, including for a
pre-approval inspection to assess a marketing application. The FDA will request the manufacturing facility to participate in a voluntary
remote interactive evaluation, if the FDA believes it is appropriate. A manufacturing facility cannot request the remote interaction.
The FDA expects the use of remote interactive evaluations should help the FDA operate within normal timeframes in spite of the Covid-19
pandemic.
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
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 the CRL.
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 (“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.
In March 2020, the Company was granted a deferral
by the FDA under the Pediatric Research Equity Act (“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.
The Company has 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.
The Company intends to pursue additional indications
for DefenCath use as a CLS in populations with an unmet medical need that also represent a significant market opportunity. For example,
the Company intends to pursue marketing authorization in the U.S. for use as a CLS to reduce CRBSIs in oncology and total parenteral
nutrition patients using a central venous catheter.
In addition to DefenCath, the Company is 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. The Company may seek one
or more strategic partners or other sources of capital to help develop and commercialize taurolidine for the treatment of neuroblastoma
in children. The Company is 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.
In the European Union (“EU”), Neutrolin
is regulated as a Class 3 medical device. In July 2013, the Company received CE Mark approval for Neutrolin. In December 2013, the Company
commercially launched Neutrolin in Germany for the prevention of CRBSI, and maintenance of catheter patency in hemodialysis patients
using a tunneled, cuffed central venous catheter for vascular access. To date, Neutrolin is registered and may be sold in certain European
Union and Middle Eastern countries for such treatment.
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
In September 2014, the TUV-SUD and The Medicines
Evaluation Board of the Netherlands (“MEB”), granted a label expansion for Neutrolin to include use in oncology patients
receiving chemotherapy, intravenous (“IV”) hydration and IV medications via CVC for the EU. In December 2014, the Company
received approval from the Hessian District President in Germany to expand the label for these same expanded indications. The expansion
also adds patients receiving medication and IV fluids via CVC in intensive or critical care units (cardiac care unit, surgical care unit,
neonatal critical care unit, and urgent care centers). An indication for use in total parenteral nutrition was also approved.
In September 2019, the Company’s registration
with the Saudi Arabia Food and Drug Administration, or the SFDA, expired. As a result, the Company cannot sell Neutrolin in Saudi Arabia.
The Company intends to complete the documentation required to renew its registration with the SFDA, however, the Company cannot predict
how long the renewal process will take. There is no assurance that the registration will be renewed by the SFDA.
The novel coronavirus has been declared a pandemic
and has spread to multiple global regions. The outbreak and government measures taken in response have also had a significant impact,
both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities
and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while
demand for other goods and services, such as travel, has fallen. In response to the COVID-19 outbreak, “shelter in place”
orders and other public health guidance measures have been implemented across much of the United States, Europe and Asia, including in
the locations of the Company’s offices, clinical trial sites, key vendors and partners. The Company’s program timelines may
be negatively affected by COVID-19, which could materially and adversely affect its business, financial conditions and results of operations.
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 (“GAAP”) for interim financial information and with the instructions for 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, 2021 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 (“SEC”) on March 30, 2021. The accompanying consolidated balance sheet as of December
31, 2020 has been derived from the audited financial statements included in such Form 10-K.
Recently Adopted Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12 which removes certain
exceptions to the general principles of the accounting for income taxes and also improves consistent application of and simplification
of other areas when accounting for income taxes. The guidance was effective for the Company beginning in the first quarter of fiscal year
2021. Early adoption was permitted. This adoption on January 1, 2021 did not have a material impact on the Company’s condensed consolidated
financial statements.
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of Significant Accounting Policies:
Liquidity and Uncertainties
The 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. As of March 31, 2021, the Company had an accumulated deficit of $224.7
million, and incurred losses from operations of $7.2 million and $5.6 million for the three months ended March 31, 2021 and 2020, respectively.
The Company currently estimates that as of March 31, 2021 it has sufficient cash, cash equivalents and short-term investments on hand
to fund its operations at least into the second half of 2022, after taking into consideration the costs for the initial preparations
for the commercial launch for DefenCath.
The Company’s continued operations will
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 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. The Company currently has $50.0 million available under its current shelf registration for
the issuance of equity, debt or equity-linked securities and no available balance under the ATM program.
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 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 the Company products; the Company’s ability to negotiate favorable
licensing or other manufacturing and marketing agreements for its products; the results of clinical testing and trial activities of the
Company’s product candidates; and the Company’s ability to raise capital to support its operations.
Use of Estimates
The preparation of 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, at times,
may exceed federally insured limits.
CORMEDIX INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
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 consolidated statement of cash flows:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Cash and cash equivalents
|
|
$
|
76,214,620
|
|
|
$
|
41,905,469
|
|
Restricted cash
|
|
|
238,329
|
|
|
|
191,314
|
|
Total cash, cash equivalents and restricted cash
|
|
$
|
76,452,949
|
|
|
$
|
42,096,783
|
|
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 March 31, 2021 or December 31, 2020.
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 March 31, 2021 and December 31, 2020, all of the Company’s investments had contractual maturities of
less than one year. As of March 31, 2021, no allowance for credit loss was recorded. The following table summarizes the amortized
cost, unrealized gains and losses and the fair value at March 31, 2021 and December 31, 2020:
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Losses
|
|
|
Gross
Unrealized
Gains
|
|
|
Fair Value
|
|
March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money Market Funds included
in Cash Equivalents
|
|
$
|
17,661,319
|
|
|
$
|
(259
|
)
|
|
$
|
-
|
|
|
$
|
17,661,060
|
|
Corporate Securities
|
|
|
3,658,430
|
|
|
|
(595
|
)
|
|
|
|
|
|
|
3,657,835
|
|
Commercial Paper
|
|
|
1,299,323
|
|
|
|
-
|
|
|
|
199
|
|
|
|
1,299,522
|
|
Subtotal
|
|
|
4,957,753
|
|
|
|
(595
|
)
|
|
|
199
|
|
|
|
4,957,357
|
|
Total March 31, 2021
|
|
$
|
22,619,072
|
|
|
$
|
(854
|
)
|
|
$
|
199
|
|
|
$
|
22,618,417
|
|
December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money Market Funds included in Cash
Equivalents
|
|
$
|
3,182,762
|
|
|
$
|
(81
|
)
|
|
$
|
8
|
|
|
$
|
3,182,689
|
|
Corporate Securities
|
|
|
3,565,501
|
|
|
|
(1,005
|
)
|
|
|
3
|
|
|
|
3,564,499
|
|
Commercial Paper
|
|
|
879,501
|
|
|
|
-
|
|
|
|
72
|
|
|
|
879,573
|
|
Subtotal
|
|
|
4,445,002
|
|
|
|
(1,005
|
)
|
|
|
75
|
|
|
|
4,444,072
|
|
Total December 31, 2020
|
|
$
|
7,627,764
|
|
|
$
|
(1,086
|
)
|
|
$
|
83
|
|
|
$
|
7,626,761
|
|
CORMEDIX
INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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.
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 March 31, 2021 and December 31, 2020:
|
|
Carrying Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money Market Funds and Cash Equivalents
|
|
$
|
17,661,060
|
|
|
$
|
17,661,060
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Corporate Securities
|
|
|
3,657,835
|
|
|
|
-
|
|
|
|
3,657,835
|
|
|
|
-
|
|
Commercial Paper
|
|
|
1,299,522
|
|
|
|
-
|
|
|
|
1,299,522
|
|
|
|
-
|
|
Subtotal
|
|
|
4,957,357
|
|
|
|
-
|
|
|
|
4,957,357
|
|
|
$
|
-
|
|
Total March 31, 2021
|
|
$
|
22,618,417
|
|
|
$
|
17,661,060
|
|
|
$
|
4,957,357
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money Market Funds and Cash Equivalents
|
|
$
|
3,182,689
|
|
|
$
|
3,182,689
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Corporate Securities
|
|
|
3,564,499
|
|
|
|
-
|
|
|
|
3,564,499
|
|
|
|
-
|
|
Commercial Paper
|
|
|
879,573
|
|
|
|
-
|
|
|
|
879,573
|
|
|
|
-
|
|
Subtotal
|
|
|
4,444,072
|
|
|
|
-
|
|
|
|
4,444,072
|
|
|
|
-
|
|
Total December 31, 2020
|
|
$
|
7,626,761
|
|
|
$
|
3,182,689
|
|
|
$
|
4,444,072
|
|
|
$
|
-
|
|
CORMEDIX
INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Foreign
Currency Translation and Transactions
The condensed consolidated financial statements are presented in U.S.
Dollars (“USD”), the reporting currency of the Company. For the financial statements of the Company’s foreign subsidiaries,
whose functional currency is the EURO, foreign currency asset and liability amounts, are translated into USD at end-of-period exchange
rates. Foreign currency income and expenses are translated at average exchange rates in effect during the period in which the income and
expenses were recognized. Translation gains and losses are included in other comprehensive income (loss).
The
Company has intercompany loans between the parent company based in New Jersey and its German subsidiary. The intercompany loans outstanding
are not expected to be repaid in the foreseeable future and unrealized foreign exchange movements related to long-term intercompany loans
are recognized in other comprehensive income (loss).
Foreign
currency exchange transaction gain (loss) is the result of re-measuring transactions denominated in a currency other than the functional
currency of the entity recording the transaction.
Restricted
Cash
As of March 31, 2021 and December 31, 2020, the Company has restricted
cash in connection with the patent and utility model infringement proceedings against TauroPharm (see Note 4). The Company was required
by the District Courts of Mannheim to provide security deposit to cover legal fees in the event TauroPharm is entitled to reimbursement
of these costs. The Company furthermore had to provide a deposit for the first and second instances, respectively, in connection with
the unfair competition proceedings in Cologne. During the quarter ended March 31, 2021, approximately $48,000 was released by the court
for the reimbursement of legal fees and other costs which was removed from restricted cash. As of March 31, 2021 and December 31, 2020,
restricted cash in connection with the patent and utility model infringement proceedings were $136,000 and $191,000, respectively.
As
of March 31, 2021, the Company had $102,000 in long-term restricted cash for a lease security deposit.
Prepaid
Research and Development and Other Prepaid Expenses
Prepaid
expenses consist of payments made in advance to vendors relating to service contracts for clinical trial development, manufacturing,
preclinical development and insurance policies. These advanced payments are amortized to expense either as services are performed or
over the relevant service period using the straight-line method.
Inventories,
net
Inventories
are valued at the lower of cost or net realizable value on a first in, first out basis. Inventories consist of raw materials (including
labeling and packaging), work-in-process, and finished goods, if any, for the DefenCath/Neutrolin product. Inventories consist of the
following:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Finished goods
|
|
$
|
259,240
|
|
|
$
|
317,733
|
|
Inventory reserve
|
|
|
(174,169
|
)
|
|
|
(174,169
|
)
|
Total
|
|
$
|
85,071
|
|
|
$
|
143,564
|
|
CORMEDIX
INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Leases
The
Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“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.
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.
Accrued
Expenses
Accrued
expenses consist of the following:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Professional and consulting fees
|
|
$
|
175,075
|
|
|
$
|
146,129
|
|
Accrued payroll and payroll taxes
|
|
|
1,048,359
|
|
|
|
2,490,441
|
|
Clinical trial related
|
|
|
1,000
|
|
|
|
2,187
|
|
Manufacturing development related
|
|
|
97,970
|
|
|
|
143,780
|
|
Other
|
|
|
114,306
|
|
|
|
141,814
|
|
Total
|
|
$
|
1,436,710
|
|
|
$
|
2,924,351
|
|
Revenue
Recognition
The
Company recognizes revenue in accordance with ASC 606, “Revenue from Contracts with Customers.” ASC 606 prescribes
a five-step model for recognizing revenue which includes (i) identifying contracts with customers; (ii) identifying performance obligations;
(iii) determining the transaction price; (iv) allocating the transaction price; and (v) recognizing revenue.
The
Company recognizes net sales upon shipment of product and upon meeting the five-step model prescribed by ASC 606 outlined above.
CORMEDIX
INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 entity. 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.
|
|
Three
Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(Number
of Shares of Common Stock Issuable)
|
|
Series C non-voting preferred stock
|
|
|
4,000
|
|
|
|
104,000
|
|
Series E non-voting preferred stock
|
|
|
391,953
|
|
|
|
391,953
|
|
Series G non-voting preferred stock
|
|
|
5,004,069
|
|
|
|
5,560,137
|
|
Restricted stock units
|
|
|
-
|
|
|
|
417
|
|
Shares issuable for payment of deferred board
compensation
|
|
|
48,909
|
|
|
|
35,303
|
|
Shares underlying outstanding warrants
|
|
|
64,066
|
|
|
|
183,148
|
|
Shares underlying outstanding stock options
|
|
|
3,542,011
|
|
|
|
1,720,937
|
|
Total potentially dilutive shares
|
|
|
9,055,008
|
|
|
|
7,995,895
|
|
Stock-Based
Compensation
Share-based
compensation cost for stock options granted to employees is measured at grant date using the Black-Scholes stock option pricing model
in accordance with ASC No. 718, “Compensation-Stock Compensation”, based on the estimated fair value of the award
for options with service or performance-based conditions and is recognized as expense over the requisite service period on a straight-line
basis. For stock options with performance-based vesting provisions, share-based compensation cost is recorded when the achievement of
the performance condition is probable.
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
Note
3 — Stockholders’ Equity:
Common
Stock
In November 2020, the Company filed a new registration statement, under
which the Company could issue and sell up to an aggregate of $100.0 million of shares of its common stock, $0.001 par value per share.
On November 27, 2020, the Company entered into an Amended and Restated At Market Issuance Sales Agreement (“Amended Sales Agreement”)
with B. Riley and Needham & Company, LLC (“Needham”), together with B. Riley, acting as sales agents (“Sales Agent”).
The Amended Sales Agreement relates to the sale of shares of up to $25.0 million of the Company’s common stock under its ATM program,
of which the Company may issue and sell common stock from time to time through the Sales Agent, subject to limitations imposed by the
Company and subject to Sales Agent’s acceptance, such as the number or dollar amount of shares registered under the registration
statement to which the offering relates. Sales Agent is entitled to a commission of up to 3% of the gross proceeds from the sale of common
stock sold under the ATM program. At December 31, 2020, the Company had approximately $17.8 million available under the Amended Sales
Agreement and $75.0 million available under its current shelf registration for the issuance of equity, debt or equity-linked securities
unrelated to the Amended Sales Agreement. On February 5, 2021, the Company allocated to its ATM program an additional $25.0 million of
the remaining $75.0 million available under its shelf registration statement. Giving effect to the additional $25.0 million, plus the
$17.8 million available at December 31, 2020, the Company had a total of $42.8 million available under the ATM program. During the quarters
ended March 31, 2021 and 2020, the Company sold an aggregate of 3,737,862 and 368,144 shares of its common stock under the ATM program,
respectively, and realized net proceeds of $41,456,000 and $2,470,000, respectively. As of March 31, 2021, the Company has no available
balance under its ATM program and it has $50.0 million available under its current shelf registration for the issuance of equity, debt
or equity-linked securities.
During
the first quarter of 2021, the Company issued an aggregate of 656,069 shares of its common stock upon conversion of 50,000 Series C-3
preferred shares by an unrelated party and 10,001 Series G preferred shares by a related party.
During
the quarter ended March 31, 2021 and 2020, the Company issued an aggregate of 23,796 and 91,500 shares of its common stock, respectively,
upon cash exercise of warrants, resulting in net proceeds to the Company of $125,000 and $412,000, respectively.
During
the quarter ended March 31, 2021, the Company issued an aggregate of 70,269 shares of its common stock upon cashless exercise of 95,286
warrants.
During the quarter ended March 31, 2020, the Company
issued an aggregate of 2,073 shares of its common stock upon the vesting of restricted stock units issued to the Company’s board
of directors. There were no issuances for restricted stock during the quarter ended March 31, 2021.
CORMEDIX
INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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, the Company’s board of directors has designated (all with par value of $0.001 per share) the following:
|
|
As of March 31, 2021
|
|
|
As of December 31, 2020
|
|
|
|
Preferred
Shares
Outstanding
|
|
|
Liquidation
Preference
(Per Share)
|
|
|
Total
Liquidation
Preference
|
|
|
Preferred
Shares
Outstanding
|
|
|
Liquidation
Preference
(Per Share)
|
|
|
Total
Liquidation
Preference
|
|
Series C-3
|
|
|
2,000
|
|
|
$
|
10.00
|
|
|
$
|
20,000
|
|
|
|
52,000
|
|
|
$
|
10.00
|
|
|
$
|
520,000
|
|
Series E
|
|
|
89,623
|
|
|
$
|
49.20
|
|
|
$
|
4,409,452
|
|
|
|
89,623
|
|
|
$
|
49.20
|
|
|
$
|
4,409,452
|
|
Series G
|
|
|
89,999
|
|
|
$
|
187.36
|
|
|
$
|
16,862,213
|
|
|
|
100,000
|
|
|
$
|
187.36
|
|
|
$
|
18,736,452
|
|
Total
|
|
|
181,622
|
|
|
|
|
|
|
$
|
21,291,665
|
|
|
|
241,623
|
|
|
|
|
|
|
$
|
23,665,904
|
|
During the quarter ended March 31, 2021, 50,000
Series C-3 preferred shares were converted into 100,000 shares of the Company’s common stock by an unrelated party and 10,001 Series
G preferred shares were converted into 556,069 shares of the Company’s common stock by a related party.
Stock
Options
During
the three months ended March 31, 2021, the Company granted ten-year qualified and non-qualified stock options covering an aggregate of
1,122,200 shares of the Company’s common stock under the 2019 Stock Incentive Plan. The weighted average exercise price of these
options is $8.70 per share.
During
the three months ended March 31, 2021 and 2020, total compensation expense for stock options issued to employees, directors, officers
and consultants was $1,732,000 and $670,000, respectively.
As of March 31, 2021, there was approximately $8,080,000
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, except for an aggregate of 410,000 stock
option awards, of which vesting was upon achievement of certain milestones. The fair value of these options was determined using
the Monte Carlo option pricing model. The following assumptions were used for the Black-Scholes option pricing model for the stock
options granted during the three months ended March 31, 2021:
Expected term
|
5 years
|
Volatility
|
103.08% - 103.18%
|
Dividend yield
|
0.0%
|
Risk-free interest rate
|
0.50% - 0.57%
|
Weighted average grant date fair value of options granted during the period
|
$5.85
|
A summary of the assumptions used
in the Monte Carlo option pricing model are as follows:
Expected term
|
2 years
|
Volatility
|
107.10%
|
Dividend yield
|
0.0%
|
Risk-free interest rate
|
1.15%
|
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 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 since the initial public offering of
the Company’s common stock in March 2010. 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
The
following table summarizes the Company’s stock options activity and related information for the three months ended March 31, 2021:
|
|
Shares
|
|
|
Weighted Average
Exercise
Price
|
|
|
Weighted Average
Remaining
Contractual
Term
(Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding at beginning of period
|
|
|
2,447,687
|
|
|
$
|
7.22
|
|
|
|
7.1
|
|
|
$
|
3,872,092
|
|
Granted
|
|
|
1,122,200
|
|
|
$
|
8.70
|
|
|
|
|
|
|
$
|
1,757,174
|
|
Forfeited
|
|
|
(21,876
|
)
|
|
$
|
4.71
|
|
|
|
|
|
|
$
|
-
|
|
Expired
|
|
|
(6,000
|
)
|
|
$
|
10.50
|
|
|
|
|
|
|
$
|
-
|
|
Outstanding at end of period
|
|
|
3,542,011
|
|
|
$
|
7.70
|
|
|
|
7.8
|
|
|
$
|
10,048,396
|
|
Exercisable at end of period
|
|
|
1,671,558
|
|
|
$
|
8.34
|
|
|
|
6.0
|
|
|
$
|
4,378,889
|
|
The aggregate intrinsic value is calculated as the difference between
the exercise prices of the underlying options and the quoted closing price of the common stock of the Company at the end of the reporting
period for those options that have an exercise price below the quoted closing price. There were no stock options exercised during the
three months ended March 31, 2021.
Restricted
Stock Units
During
the quarter ended March 31, 2021, the Company did not grant any restricted stock units (“RSUs”), no compensation expense
was recognized and there are no outstanding RSUs at March 31, 2021.
During
the quarter ended March 31, 2020, the Company issued an aggregate of 2,073 shares of its common stock upon the vesting of RSUs issued
to the Company’s board of directors. Compensation expense recorded by the Company was $7,000 for the quarter ended March 31, 2020.
Warrants
During
the quarter ended March 31, 2021 and 2020, the Company issued an aggregate of 23,796 and 91,500 shares of its common stock, respectively,
upon cash exercise of warrants, resulting in net proceeds to the Company of $125,000 and $412,000, respectively.
During
the quarter ended March 31, 2021, the Company issued an aggregate of 70,269 shares of its common stock upon cashless exercise of 95,286
warrants.
As
of March 31, 2021, there were 64,066 outstanding warrants with a weighted average exercise price of $5.25 per share and a weighted average
remaining contractual life of 1.36 years.
Note
4 — Commitments and Contingencies:
Contingency
Matters
On
September 9, 2014, the Company filed in the District Court of Mannheim, Germany, 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 Prosl European Patent covers the formulation of taurolidine and citrate with low dose heparin in a
catheter lock solution for maintaining patency and preventing infection in hemodialysis catheters. In this action, the Company claims
that the Defendants infringe on the Prosl European Patent by manufacturing and distributing catheter locking solutions to the extent
they are covered by the claims of the Prosl European Patent. The Company believes that its patent is sound and 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. The
Company cannot predict the ultimate outcome of either of these related matters. At present, the EPO has revoked the Prosl European Patent
as invalid, and the Company has filed an appeal, which is currently pending.
CORMEDIX
INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In
the same complaint against the same Defendants, the Company also alleged an infringement (requesting the same remedies) of ND Partners’
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. In its decisions, the Court found that the commercialization by
TauroPharm in Germany of its TauroLock catheter lock solutions Hep100 and Hep500 infringes both the Prosl European Patent and the
Utility Model and further that there is no prior use right that would allow TauroPharm to continue to make, use or sell its product in
Germany. However, the Court declined to issue an injunction in favor of the Company that would preclude the continued commercialization
by TauroPharm based upon its finding that there is a sufficient likelihood that the EPO, in the case of the Prosl European Patent, or
the German PTO, in the case of the Utility Model, may find that such patent or utility model is invalid. Specifically, the Court noted
the possible publication of certain instructions for product use that may be deemed to constitute prior art. As such, the District Court
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
opposition proceeding against the Prosl European Patent before the EPO is ongoing. The EPO held a hearing in the opposition proceeding
on November 25, 2015. However, the EPO did not issue a decision at the end of the hearing but adjourned the matter due to the fact that
the panel was of the view that Claus Herdeis, one of the managing directors of TauroPharm, had to be heard as a witness in a further
hearing in order to close some gaps in the documentation presented by TauroPharm as regards the publication of the prior art.
The
German PTO held a hearing in the validity proceedings relating to the Utility Model on June 29, 2016, at which the panel affirmed its
preliminary finding that the Utility Model was invalid based upon prior publication of a reference to the benefits that may be associated
with adding heparin to a taurolidine based solution. The Company filed an appeal against the ruling on September 7, 2016. An oral hearing
was held on September 17, 2019 in which 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. During the year ended
December 31, 2020, costs in connection with the utility model infringement proceedings of approximately $30,000 was reimbursed to TauroPharm.
On
November 22, 2017, the EPO in Munich, Germany held a further oral hearing in this matter. At the hearing, the panel held that the Prosl
European Patent would be invalidated because it did not meet the requirements of novelty based on a technical aspect of the European
intellectual property law. The Company disagrees with this decision and has appealed the decision. The Company continues to believe that
the Prosl European Patent is indeed novel and that its validity should be maintained. There can be no assurance that the Company will
prevail in this matter. In addition, the ongoing Unfair Competition litigation brought by the Company against TauroPharm is not affected
and will continue.
CORMEDIX
INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 alleges violation of the German Unfair Competition Act by TauroPharm for the unauthorized
use of its proprietary information obtained in confidence by TauroPharm. The Company alleges 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 seeks 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. An initial hearing in the District Court of Cologne, Germany was held on November 19,
2015 to consider the Company’s claims. In this hearing, the presiding judge explained that the court needed more information with
regard to several aspects of the case. As a consequence, the Court issued an interim decision in the form of a court order outlining
several issues of concern that relate primarily to the court’s interest in clarifying the facts and reviewing any and all available
documentation, in particular with regard to the question which specific know-how was provided to TauroPharm by whom and when. A further
oral hearing in this matter was held on November 15, 2016. In this hearing, the court heard arguments from CorMedix and TauroPharm concerning
the allegations of unfair competition. On March 7, 2017, the Court issued another interim decision in the form of a court order outlining
again several issues relating to the argumentation of both sides in the proceedings. Both parties have submitted further writs in this
matter and the Court scheduled a further hearing on May 8, 2018. After having been rescheduled several times, the hearing took place
on November 20, 2018. A decision was rendered by the court on December 11, 2018, dismissing the complaint in its entirety. However, the
Company intends to continue to pursue this matter, and still believes firmly that its claims are well-founded. The Company therefore
appealed in January 2019 and filed its grounds of appeal in March 2019. An oral hearing was held on September 6, 2019 in which the legal
counsel of the Company brought forward further arguments for the fact that the manufacturing process of the respective catheter locking
solution is indeed protectable as a trade secret. In view of these new arguments, the Court issued an evidentiary order on September
27, 2019 ordering an expert opinion. The expert opinion was not in the Company’s favor but the Company has filed a response to
the expert opinion in reaction to which the Court asked the expert to supplement his opinion to address the issues brought forward in
the Company’s submission. In the supplementary expert opinion, the expert confirmed his view. The Company has filed a response
and an oral hearing has been scheduled for February 5, 2021 but was postponed to June 18, 2021 due to the COVID19 situation in Germany.
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. As of March 31, 2021, the aggregate deposit was approximately $136,000, which the Company
recorded as restricted cash on the condensed consolidated balance sheets, after deducting approximately $48,000 released by the court
to the Company during the quarter ended March 31, 2021.
CORMEDIX
INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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.
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 March 31, 2021 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 March 31, 2021 and 2020. 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 March 31, 2021 and 2020.
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 — 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’s
sublease on its previous premises at 400 Connell Drive, Berkeley Heights, New Jersey 07922 terminated in November 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. The Company also has an operating lease for office equipment.
Operating
lease expense in the Company’s condensed consolidated statements of operations and comprehensive loss for each of the three months
ended March 31, 2021 and 2020 was approximately $52,000 and $2,000, respectively, which includes costs associated with leases for which
ROU assets have been recognized as well as short-term leases.
At March 31, 2021 and December 31, 2020, the Company
has a total operating lease liability of $1,007,000 and $1,033,000, respectively. At March 31, 2021, approximately $113,000 and $894,000
were classified as operating lease liabilities, short-term and operating lease liabilities, net of current portion, respectively, on the
consolidated balance sheet. At December 31, 2020, approximately $109,000 and $924,000 were classified as operating lease liabilities,
short-term and operating lease liabilities, net of current portion, respectively, on the consolidated balance sheet. Operating ROU assets
as of March 31, 2021 and December 31, 2020 are $987,000 and $1,015,000, respectively.
CORMEDIX
INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the three months ended March 31, 2021 and 2020, cash paid for amounts included in the measurement of lease liabilities in operating cash
flows from operating leases was $52,000 and $2,000, respectively.
The
weighted average remaining lease term as of March 31, 2021 and 2020 were 6.5 and 2.3 years, respectively, and the weighted average discount
rate for operating leases was 9% and 10.0% at March 31, 2021 and 2020, respectively.
As
of March 31, 2021, maturities of lease liabilities were as follows:
2021 (excluding the three months ended March 31, 2021)
|
|
$
|
149,000
|
|
2022
|
|
|
200,000
|
|
2023
|
|
|
202,000
|
|
2024
|
|
|
205,000
|
|
2025
|
|
|
208,000
|
|
2026 and thereafter
|
|
|
380,000
|
|
Total future minimum lease payments
|
|
|
1,344,000
|
|
Less imputed interest
|
|
|
(337,000
|
)
|
Total
|
|
$
|
1,007,000
|
|
Note
6 — Concentrations:
At
March 31, 2021, net accounts receivable was due from two customers that exceeded 10% of the Company’s accounts receivable (65%
and 34%) and at December 31, 2020, one customer exceeded 10% of the Company’s accounts receivable (95%). During the three months
ended March 31, 2021 and 2020, the Company had revenue from three customers that exceeded 10% of its total sales, 47%, 28% and 15% in
2021, and 62%, 19% and 10%, for the same period in 2020.