CORMEDIX INC.
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||
(Exact
Name of Registrant as Specified in Its Charter)
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Delaware
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20-5894890
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(State
or Other Jurisdiction of Incorporation or
Organization)
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(I.R.S.
Employer Identification No.)
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1430
US Highway 206, Suite 200, Bedminster, NJ
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07921
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(908)
517-9500
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||
(Registrant’s
Telephone Number, Including Area Code)
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Large accelerated filer ☐
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Accelerated filer ☑
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Non-accelerated filer ☐
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Smaller reporting company ☐
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(Do not check if a smaller reporting company)
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PART I FINANCIAL INFORMATION
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2
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Item
1.
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Unaudited
Condensed Consolidated Financial Statements
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2
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Condensed
Consolidated Balance Sheets as of September 30, 2016 and December
31, 2015
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2
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Condensed
Consolidated Statements of Operations and Comprehensive Loss for
the Three and Nine Months Ended September 30, 2016 and
2015
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3
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Condensed
Consolidated Statement of Changes in Stockholders’ Equity for
the Nine Months Ended September 30, 2016
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4
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Condensed
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2016 and 2015
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5
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Notes
to Unaudited Condensed Consolidated Financial
Statements
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6
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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21
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Item
3.
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Quantitative
and Qualitative Disclosure About Market Risk
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32
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Item
4.
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Controls
and Procedures
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32
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PART II OTHER INFORMATION
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33
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Item
1.
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Legal
Procedings
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33
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Item
6.
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Exhibits
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35
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SIGNATURES
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36
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September 30,
2016
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December 31,
2015
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ASSETS
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Current
assets
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Cash
and cash equivalents
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$9,826,947
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$11,817,418
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Restricted
cash
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171,553
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171,553
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Short-term
investments
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16,826,712
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23,568,386
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Trade
receivables
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22,035
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315,771
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Inventories,
net
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118,207
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376,569
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Prepaid
research and development expenses
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1,323,743
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430,162
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Other
prepaid expenses and current assets
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470,391
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379,004
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Total
current assets
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28,759,588
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37,058,863
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Property
and equipment, net
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75,843
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37,866
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Security
deposit
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5,000
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5,000
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TOTAL ASSETS
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$28,840,431
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$37,101,729
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current
liabilities
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Accounts
payable
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$1,758,180
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$1,709,397
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Accrued
expenses
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3,149,726
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1,221,557
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Deferred
revenue
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131,066
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130,409
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Total current
liabilities
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5,038,972
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3,061,363
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Deferred
revenue, long-term
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22,093
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28,878
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TOTAL LIABILITIES
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5,061,065
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3,090,241
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COMMITMENTS AND CONTINGENCIES
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STOCKHOLDERS’ EQUITY
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Preferred
stock - $0.001 par value: 2,000,000 shares authorized; 450,085
shares issued and outstanding at September 30, 2016 and December
31, 2015
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450
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450
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Common
stock - $0.001 par value: 80,000,000 shares authorized; 40,405,739
and 35,963,348 shares issued and outstanding at September 30, 2016
and December 31, 2015, respectively
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40,406
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35,964
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Accumulated
other comprehensive income
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83,298
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62,130
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Additional
paid-in capital
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136,291,018
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128,304,539
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Accumulated
deficit
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(112,635,806)
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(94,391,595)
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TOTAL STOCKHOLDERS’ EQUITY
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23,779,366
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34,011,488
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
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$28,840,431
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$37,101,729
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For the Three
Months Ended
September 30,
2016
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For the Three
Months Ended
September 30,
2015
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For the Nine
Months Ended
September 30,
2016
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For the Nine
Months Ended
September 30,
2015
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Revenue:
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Net
sales
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$44,451
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$35,947
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$102,390
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$187,184
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Cost of
sales
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(43,922)
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(35,396)
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(281,342)
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(154,514)
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Gross profit
(loss)
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529
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551
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(178,952)
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32,670
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Operating
Expenses:
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Research and
development
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(6,840,413)
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(1,764,468)
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(11,702,965)
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(4,796,571)
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Selling, general
and administrative
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(2,318,091)
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(2,948,643)
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(6,449,608)
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(7,996,922)
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Total Operating
Expenses
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(9,158,504)
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(4,713,111)
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(18,152,573)
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(12,793,493)
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Loss
From Operations
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(9,157,975)
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(4,712,560)
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(18,331,525)
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(12,760,823)
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Other
Income (Expense):
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Interest
income
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32,866
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25,019
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93,928
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30,817
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Foreign exchange
transactions gain (loss)
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(1,091)
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674
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(5,622)
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(5,352)
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Value of warrants
issued in connection with backstop financing
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-
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-
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-
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(1,583,252)
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Interest
expense
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-
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(1,609)
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(992)
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(2,635)
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Total Other Income
(Expense)
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31,775
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24,084
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87,314
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(1,560,422)
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Net
Loss
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(9,126,200)
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(4,688,476)
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(18,244,211)
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(14,321,245)
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Other
Comprehensive Income (Loss):
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Unrealized gain
(loss) from investments
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(6,765)
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5,852
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17,233
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348
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Foreign currency
translation gain (loss)
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(82)
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1,230
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3,935
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466
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Total Other
Comprehensive Income (Loss)
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(6,847)
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7,082
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21,168
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814
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Comprehensive
Loss
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(9,133,047)
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(4,681,394)
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(18,223,043)
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(14,320,431)
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Net
loss
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(9,126,200)
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(4,688,476)
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(18,244,211)
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(14,321,245)
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Dividends,
including deemed dividends
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-
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-
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-
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(33,121)
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Net
Loss Attributable To Common Shareholders
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$(9,126,200)
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$(4,688,476)
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$(18,244,211)
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$(14,354,366)
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Net
Loss Per Common Share – Basic and Diluted
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$(0.23)
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$(0.14)
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$(0.49)
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$(0.48)
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Weighted
Average Common Shares Outstanding – Basic and
Diluted
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39,053,956
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34,585,543
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37,156,790
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30,082,478
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Common
Stock
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Non-Voting
Preferred Stock – Series C-2, Series C-3, Series D and Series
E
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Accumulated
Other Comprehensive
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Additional
Paid-in
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Accumulated
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Total
Stockholders’
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||
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Shares
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Amount
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Shares
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Amount
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Income
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Capital
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Deficit
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Equity
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Balance at
January 1, 2016
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35,963,348
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$35,964
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450,085
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$450
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$62,130
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$128,304,539
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$(94,391,595)
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$34,011,488
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Stock issued in
connection with sale of common stock, net
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3,353,437
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3,353
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6,217,203
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6,220,556
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Stock issued in
connection with warrants cashless exercised
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21,454
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21
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(21)
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-
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Stock issued in
connection with stock options exercised
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1,067,500
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1,068
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848,433
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849,501
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Stock-based
compensation
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920,864
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920,864
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Other comprehensive
income
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21,168
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21,168
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Net
loss
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(18,244,211)
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(18,244,211)
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Balance at
September 30, 2016
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40,405,739
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$40,406
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450,085
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$450
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$83,298
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$136,291,018
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$(112,635,806)
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$23,779,366
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For the
Nine Months
Ended September 30,
2016
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For the
Nine Months
Ended September 30,
2015
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Cash
Flows From Operating Activities:
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Net
loss
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$(18,244,211)
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$(14,321,245)
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Adjustments to
reconcile net loss to net cash used in operating
activities:
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Stock-based
compensation
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920,864
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2,908,855
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Value of warrants
issued in connection with backstop agreement
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-
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1,583,252
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Modification of
warrant agreement
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-
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112,982
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Inventory
reserve
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166,000
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-
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Depreciation
|
16,923
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11,087
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Changes in
operating assets and liabilities:
|
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Restricted
cash
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-
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(171,553)
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Trade
receivables
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301,169
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(50,178)
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Inventory
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92,361
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(236,120)
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Prepaid expenses
and other current assets
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(981,963)
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(247,431)
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Accounts
payable
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47,233
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538,533
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Accrued expenses
and accrued interest
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1,921,043
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988,198
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Deferred
revenue
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(6,786)
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(8,221)
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Net cash used in
operating activities
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(15,767,367)
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(8,891,841)
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Cash
Flows From Investing Activities:
|
|
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Sale (purchase) of
short-term investments
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6,758,906
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(23,604,267)
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Purchase of
equipment
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(55,107)
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(13,796)
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Net cash provided
by (used in) investing activities
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6,703,799
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(23,618,063)
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Cash
Flows From Financing Activities:
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|
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Proceeds from sale
of common stock from an at-the-market program, net
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6,220,556
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27,242,752
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Proceeds from
exercise of warrants
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-
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14,658,161
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Proceeds from short
swing profit recovery
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-
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28,594
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Proceeds from
exercise of stock options
|
849,501
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492,960
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Net cash provided
by financing activities
|
7,070,057
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42,422,467
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Foreign exchange
effect on cash
|
3,040
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(5,124)
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Net
Increase (Decrease) In Cash
|
(1,990,471)
|
9,907,439
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Cash
– Beginning of Period
|
11,817,418
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4,339,540
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Cash
– End of Period
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$9,826,947
|
$14,246,979
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Cash
Paid for Interest
|
$992
|
$2,635
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Supplemental
Disclosure of Non-Cash Financing Activities:
|
|
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Conversion of
preferred stock to common stock
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$-
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$500
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Conversion of wages
to common stock
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$-
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$50,000
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Dividends,
including deemed dividends
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$-
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$33,121
|
September 30, 2016:
|
Amortized Cost
|
Gross Unrealized Losses
|
Gross Unrealized Gains
|
Fair Value
|
Money
Market Funds included in Cash Equivalents
|
$3,310,359
|
$-
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$-
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$3,310,359
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U.S.
Government Agency Securities
|
3,211,974
|
-
|
567
|
3,212,541
|
Corporate
Securities
|
12,131,193
|
(7,688)
|
114
|
12,123,619
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Commercial
Paper
|
1,490,552
|
-
|
-
|
1,490,552
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Subtotal
|
16,833,719
|
(7,688)
|
681
|
16,826,712
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Total
September 30, 2016
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$20,144,078
|
$(7,688)
|
$681
|
$20,137,071
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December
31, 2015:
|
|
|
|
|
Money
Market Funds included in Cash Equivalents
|
$3,353,067
|
$-
|
$-
|
$3,353,067
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U.S.
Government Agency Securities
|
6,531,914
|
(3,014)
|
-
|
6,528,900
|
Corporate
Securities
|
15,065,595
|
(21,637)
|
412
|
15,044,370
|
Commercial
Paper
|
1,995,116
|
-
|
-
|
1,995,116
|
Subtotal
|
23,592,625
|
(24,651)
|
412
|
23,568,386
|
Total
December 31, 2015
|
$26,945,692
|
$(24,651)
|
$412
|
$26,921,453
|
September 30, 2016:
|
Carrying Value
|
Level 1
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Level 2
|
Level 3
|
Money
Market Funds
|
$3,310,359
|
$3,310,359
|
$-
|
$-
|
US
Government Agency Securities
|
3,212,541
|
-
|
3,212,541
|
-
|
Corporate
Securities
|
12,123,619
|
-
|
12,123,619
|
-
|
Commercial
Paper
|
1,490,552
|
-
|
1,490,552
|
-
|
Subtotal
|
16,826,712
|
-
|
16,826,712
|
$-
|
Total
September 30, 2016
|
$20,137,071
|
$3,310,359
|
$16,826,712
|
$-
|
December 31, 2015:
|
|
|
|
|
Money
Market Funds
|
$3,353,067
|
$3,353,067
|
$-
|
$-
|
US
Government Agency Securities
|
6,528,900
|
-
|
6,528,900
|
-
|
Corporate
Securities
|
15,044,370
|
-
|
15,044,370
|
-
|
Commercial
Paper
|
1,995,116
|
-
|
1,995,116
|
-
|
Subtotal
|
23,568,386
|
-
|
23,568,386
|
$-
|
Total
December 31, 2015
|
$26,921,453
|
$3,353,067
|
$23,568,386
|
$-
|
|
September 30,
2016
|
December 31,
2015
|
Raw
materials
|
$221,355
|
$244,459
|
Work in
process
|
355,297
|
424,622
|
Finished
goods
|
7,555
|
7,488
|
Inventory
reserve
|
(466,000)
|
(300,000)
|
Total
|
$118,207
|
$376,569
|
|
September 30,
2016
|
December 31,
2015
|
Professional and
consulting fees
|
$333,982
|
$282,975
|
Accrued payroll and
payroll taxes
|
722,823
|
532,084
|
Clinical trial and
manufacturing development
|
1,763,889
|
226,042
|
Product
development
|
285,915
|
-
|
Monitoring program
fees
|
20,963
|
65,076
|
Statutory
taxes
|
3,307
|
67,236
|
Other
|
18,847
|
48,144
|
Total
|
$3,149,726
|
$1,221,557
|
|
Nine Months
Ended September 30,
|
|
|
2016
|
2015
|
Series C non-voting
convertible preferred stock
|
2,865,000
|
2,865,000
|
Series D non-voting
convertible preferred stock
|
1,479,240
|
1,479,240
|
Series E non-voting
convertible preferred stock
|
1,959,759
|
1,959,759
|
Shares underlying
outstanding warrants
|
4,006,468
|
4,422,188
|
Shares underlying
outstanding stock options
|
4,637,255
|
3,689,545
|
Total
|
14,947,722
|
14,415,732
|
|
Nine
Months Ended
September 30, 2016
|
Expected
Term
|
5
– 10 years
|
Volatility
|
96% -
98%
|
Dividend
yield
|
0.0%
|
Risk-free interest
rate
|
1.14% -
1.94%
|
Weighted-average
fair value of options granted during the period
|
$
1.76
|
Expected
Term
|
5
years
|
Volatility
|
97%
|
Dividend
yield
|
0.0%
|
Risk-free interest
rate
|
1.13%
|
Weighted-average
fair value of options granted during the period
|
$
1.12
|
|
Shares
|
Weighted
AverageExercise Price
|
Outstanding at
beginning of period
|
3,600,045
|
$1.82
|
Exercised
|
(1,067,500)
|
$0.80
|
Forfeited
|
(276,290)
|
$2.27
|
Expired
|
(510,000)
|
$2.73
|
Granted
|
2,891,000
|
$2.38
|
Outstanding at end
of period
|
4,637,255
|
$2.28
|
Options
exercisable
|
2,011,583
|
$2.09
|
Weighted average
remaining contractual life of stock options outstanding
(years)
|
8.5
|
Weighted average
remaining contractual life of stock options exercisable
(years)
|
6.7
|
Weighted average
vesting period over which total compensation expense related to
non-vested options not yet recognized (years)
|
2.4
|
Compensation
expense related to non-vested options not yet
recognized
|
$4,023,733
|
Aggregate intrinsic
value of stock options exercised
|
$1,466,589
|
Aggregate intrinsic
value of stock options outstanding
|
$2,124,291
|
|
Shares
|
WeightedAverageExercisePrice
|
Weighted Average
Remaining Contractual Life
|
Outstanding at
beginning of period
|
4,422,188
|
$1.80
|
3.07
|
Expired
|
(390,720)
|
$3.44
|
-
|
Exercised
|
(25,000)
|
$0.40
|
-
|
Outstanding at end
of period
|
4,006,468
|
$1.65
|
2.61
|
2017
|
$62,405
|
2018
|
30,000
|
Total
|
$92,405
|
|
For the Three
Months Ended September
30,
|
% of
Change
Increase |
For
the Nine Months Ended September
30,
|
% of
Change
Increase |
||
|
2016
|
2015
|
(Decrease)
|
2016
|
2015
|
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$44,451
|
$35,947
|
24%
|
$102,390
|
$187,184
|
(45)%
|
Cost of
sales
|
(43,922)
|
(35,396)
|
24%
|
(281,342)
|
(154,514)
|
82%
|
Gross profit
(loss)
|
529
|
551
|
(4)%
|
(178,952)
|
32,670
|
(648)%
|
Operating
Expenses:
|
|
|
|
|
|
|
Research and
development
|
(6,840,413)
|
(1,764,468)
|
288%
|
(11,702,965)
|
(4,796,571)
|
144%
|
Selling, general
and administrative
|
(2,318,091)
|
(2,948,643)
|
(21)%
|
(6,449,608)
|
(7,996,922)
|
(19)%
|
Total operating
expenses
|
(9,158,504)
|
(4,713,111)
|
94%
|
(18,152,573)
|
(12,793,493)
|
(42)%
|
Loss from
operations
|
(9,157,975)
|
(4,712,560)
|
94%
|
(18,331,525)
|
(12,760,823)
|
(44)%
|
Interest
income
|
32,866
|
25,019
|
31%
|
93,928
|
30,817
|
205%
|
Foreign exchange
transaction gain (loss)
|
(1,091)
|
674
|
(262)%
|
(5,622)
|
(5,352)
|
5%
|
Value of warrants
issued in connection with backstop financing
|
-
|
-
|
-
|
-
|
(1,583,252)
|
(100)%
|
Interest
expense
|
-
|
(1,609)
|
(100)%
|
(992)
|
(2,635)
|
(62)%
|
Total Income
(Expense)
|
31,775
|
24,084
|
32%
|
87,314
|
(1,560,422)
|
(106)%
|
Net
loss
|
(9,126,200)
|
(4,688,476)
|
95%
|
(18,244,211)
|
(14,321,245)
|
27%
|
Other comprehensive
income (loss)
|
(6,847)
|
7,082
|
(197)%
|
21,168
|
814
|
2500%
|
Comprehensive
loss
|
$(9,133,047)
|
$(4,681,394)
|
95%
|
(18,223,043)
|
(14,320,431)
|
27%
|
Exhibit Number
|
Description
|
Certification of
Principal Executive Officer and Principal Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.*
|
|
Certification of
Principal Executive Officer and Principal Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.*
|
|
101
|
The
following materials from CorMedix Inc. Form 10-Q for the
quarter ended September 30, 2016, formatted in Extensible Business
Reporting Language (XBRL): (i) Condensed Consolidated Balance
Sheets at September 30, 2016 and December 31, 2015,
(ii) Condensed Consolidated Statements of Operations and
Comprehensive Income (Loss) for the three and nine months ended
September 30, 2016 and 2015, (iii) Condensed Consolidated
Statements of Changes in Stockholders' Equity for the nine
months ended September 30, 2016, (iv) Condensed Consolidated
Statements of Cash Flows for the nine months ended September 30,
2016 and 2015, and (v) Notes to the Unaudited Condensed
Consolidated Financial Statements.**
|
|
CORMEDIX
INC.
|
|
|
|
|
|
|
Date:
November 9,
2016
|
By:
|
/s/
Khoso
Baluch
|
|
|
|
Name:
Khoso
Baluch
|
|
|
|
Title:
Chief
Executive Officer (Principal
Executive Officer and Principal Financial and Accounting
Officer)
|
|
Exhibit Number
|
Description
|
Certification of
Principal Executive Officer and Principal Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.*
|
|
Certification of
Principal Executive Officer and Principal Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.*
|
|
101
|
The
following materials from CorMedix Inc. Form 10-Q for the
quarter ended September 30, 2016, formatted in Extensible Business
Reporting Language (XBRL): (i) Condensed Consolidated Balance
Sheets at September 30, 2016 and December 31, 2015,
(ii) Condensed Consolidated Statements of Operations and
Comprehensive Income (Loss) for the three and nine months ended
September 30, 2016 and 2015, (iii) Condensed Consolidated
Statements of Changes in Stockholders' Equity for the nine
months ended September 30, 2016, (iv) Condensed Consolidated
Statements of Cash Flows for the nine months ended September 30,
2016 and 2015, and (v) Notes to the Unaudited Condensed
Consolidated Financial Statements.**
|
|
|
|
|
Date: November 9, 2016 |
By:
|
/s/
Khoso
Baluch
|
|
|
Name: | Khoso Baluch |
|
|
Title:
|
Chief Executive Officer |
|
|
|
(Principal Executive Officer and Principal Financial and Accounting Officer) |
|
|
|
|
|
Date: November 9, 2016 |
By:
|
/s/
Khoso
Baluch
|
|
|
Name: | Khoso Baluch |
|
|
Title:
|
Chief Executive Officer |
|
|
|
(Principal Executive Officer and Principal Financial and Accounting Officer) |
|
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Nov. 04, 2016 |
|
Document And Entity Information | ||
Entity Registrant Name | CorMedix Inc. | |
Entity Central Index Key | 0001410098 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 40,425,739 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2016 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Preferred stock, shares issued | 450,085 | 450,085 |
Preferred stock, shares outstanding | 450,085 | 450,085 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 80,000,000 | 80,000,000 |
Common stock, shares issued | 40,405,739 | 35,963,348 |
Common stock, shares outstanding | 40,405,739 | 35,963,348 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE GAIN (LOSS) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Revenue | ||||
Net sales | $ 44,451 | $ 35,947 | $ 102,390 | $ 187,184 |
Cost of sales | (43,922) | (35,396) | (281,342) | (154,514) |
Gross profit (loss) | 529 | 551 | (178,952) | 32,670 |
Operating Expenses | ||||
Research and development | (6,840,413) | (1,764,468) | (11,702,965) | (4,796,571) |
Selling, general and administrative | (2,318,091) | (2,948,643) | (6,449,608) | (7,996,922) |
Total Operating Expenses | (9,158,504) | (4,713,111) | (18,152,573) | (12,793,493) |
Loss From Operations | (9,157,975) | (4,712,560) | (18,331,525) | (12,760,823) |
Other Income (Expense) | ||||
Interest income | 32,866 | 25,019 | 93,928 | 30,817 |
Foreign exchange transaction gain (loss) | (1,091) | 674 | (5,622) | (5,352) |
Value of warrants issued in connection with backstop financing | 0 | 0 | 0 | (1,583,252) |
Interest expense | 0 | (1,609) | (992) | (2,635) |
Total Other Income (Expense) | 31,775 | 24,084 | 87,314 | (1,560,422) |
Net Loss | (9,126,200) | (4,688,476) | (18,244,211) | (14,321,245) |
Other Comprehensive Income (Loss): | ||||
Unrealized gain (loss) from investments | (6,765) | 5,852 | 17,233 | 348 |
Foreign currency translation gain (loss) | (82) | 1,230 | 3,935 | 466 |
Total Other Comprehensive Income (Loss) | (6,847) | 7,082 | 21,168 | 814 |
Comprehensive Loss | (9,133,047) | (4,681,394) | (18,223,043) | (14,320,431) |
Net loss | (9,126,200) | (4,688,476) | (18,244,211) | (14,321,245) |
Dividends, including deemed dividends | 0 | 0 | 0 | (33,121) |
Net Loss Attributable To Common Shareholders | $ (9,126,200) | $ (4,688,476) | $ (18,244,211) | $ (14,354,366) |
Net Loss Per Common Share - Basic and Diluted | $ (0.23) | $ (0.14) | $ (0.49) | $ (0.48) |
Weighted Average Common Shares Outstanding - Basic and Diluted | 39,053,956 | 34,585,543 | 37,156,790 | 30,082,478 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - 9 months ended Sep. 30, 2016 - USD ($) |
Common Stock |
Non-Voting Preferred Stock - Series B, Series C-2, Series C-3, Series D and Series E |
Accumulated Other Comprehensive Income |
Additional Paid-In Capital |
Accumulated Deficit |
Total |
---|---|---|---|---|---|---|
Beginning balance (in shares) at Dec. 31, 2015 | 35,963,348 | 450,085 | ||||
Beginning balance at Dec. 31, 2015 | $ 35,964 | $ 450 | $ 62,130 | $ 128,304,539 | $ (94,391,595) | $ 34,011,488 |
Stock issued in connection with sale of common stock, net, Shares | 3,353,437 | |||||
Stock issued in connection with sale of common stock, net, Amount | $ 3,353 | 6,217,203 | 6,220,556 | |||
Stock issued in connection with warrants cashless exercised, Shares | 21,454 | |||||
Stock issued in connection with warrants cashless exercised, Amount | $ 21 | (21) | 0 | |||
Stock issued in connection with stock options exercised, Shares | 1,067,500 | |||||
Stock issued in connection with stock options exercised, Amount | $ 1,068 | 848,433 | 849,501 | |||
Stock-based compensation | 920,864 | 920,864 | ||||
Other comprehensive income | 21,168 | 21,168 | ||||
Net loss | (18,244,211) | (18,244,211) | ||||
Ending balance (in shares) at Sep. 30, 2016 | 40,405,739 | 450,085 | ||||
Ending balance at Sep. 30, 2016 | $ 40,406 | $ 450 | $ 83,298 | $ 136,291,018 | $ (112,635,806) | $ 23,779,366 |
1. Organization, Business and Basis of Presentation |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Organization Business And Basis Of Presentation | |
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. The Company was incorporated in the State of Delaware on July 28, 2006. In 2013, the Company formed a wholly-owned subsidiary, CorMedix Europe GmbH.
The Company’s primary focus is on the development of its lead product candidate, Neutrolin® (also known as CRMD003), for potential commercialization in the United States and other key markets. The Company has in-licensed the worldwide rights to develop and commercialize Neutrolin®. Neutrolin is a novel anti-infective solution for the reduction and prevention of catheter-related infections and thrombosis in patients requiring central venous catheters in clinical settings such as dialysis, critical/intensive care, and oncology. Infection and thrombosis represent key complications among critical care / intensive care and cancer 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 IV antibiotic treatment, long-term anticoagulation therapy, removal/replacement of the central venous catheter, related treatment costs and increased mortality.
The United States Food and Drug Administration, or FDA, has designated Neutrolin as a Qualified Infectious Disease Product (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 an additional five years of market exclusivity in addition to the five years granted for a New Chemical Entity. In addition, in January 2015, the FDA granted Fast Track designation to Neutrolin Catheter Lock Solution, pursuant to the Food and Drug Administration Safety Innovation Act (FDASIA) highlighting the large unmet need to prevent infections in the U.S. healthcare system. The Fast Track designation of Neutrolin provides the Company with the opportunity to meet with the FDA on a more frequent basis during the development process, and also provides eligibility to request priority review of the marketing application.
In late 2013, the Company met with the FDA to determine the pathway for U.S. marketing approval of Neutrolin. Based on those discussions, the Company plans to conduct two pivotal trials to demonstrate the safety and effectiveness of Neutrolin to secure marketing approval. The Company initiated one Phase 3 clinical trial in hemodialysis patients with a central venous catheter in December 2015 and plans to initiate one Phase 3 clinical trial in oncology patients with catheters.
The Company launched its Phase 3 clinical trial in hemodialysis catheters in the U.S. in December 2015. The clinical trial, named Catheter Lock Solution Investigational Trial, or LOCK-IT-100, is a prospective, multicenter, randomized, double-blind, placebo-controlled, active control trial which aims to demonstrate the efficacy and safety of Neutrolin in preventing catheter-related bloodstream infections, or CRBSI, in subjects receiving hemodialysis therapy as treatment for end stage renal disease. The primary endpoint for the trial is time to CRBSI. The trial will evaluate whether Neutrolin is superior to the active control heparin by documenting the incidence of CRBSI and the time until the occurrence of CRBSI. Key secondary endpoints are catheter patency which is defined as required use of tissue plasminogen activating factor (tPA) or removal of catheter due to dysfunction and catheter removal for any reason.
The Company plans also include conducting a Phase 3 clinical trial in oncology patients with catheters, or LOCK-IT-200. The Company is in discussion with the FDA to develop the design of the trial. Such plans are also subject to funding requirements (see Note 2).
The Company received CE Mark approval for Neutrolin in 2013 and began the commercial launch of Neutrolin in Germany for the prevention of catheter-related bloodstream infections 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.
In September 2014, the TUV-SUD and The Medicines Evaluation Board of the Netherlands granted a label expansion for Neutrolin for expanded indications for the European Union (“EU”). In December 2014, the Company received approval from the Hessian District President in Germany to expand the label to include use in oncology patients receiving chemotherapy, IV hydration and IV medications via central venous catheters. The expansion also adds patients receiving medication and IV fluids via central venous catheters 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, or IV, nutrition was also approved.
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 10 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 for a fair presentation of such interim results. Interim operating results are not necessarily indicative of results that may be expected for the full year ending December 31, 2016 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 15, 2016. The accompanying condensed balance sheet as of December 31, 2015 has been derived from the audited financial statements included in such Form 10-K. |
2. Summary of Significant Accounting Policies |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies |
Liquidity and Going Concern
The Company’s operations are subject to a number of 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. To date, the Company’s commercial operations have not generated enough revenues to enable profitability. As of September 30, 2016, the Company had an accumulated deficit of $112.6 million, and incurred losses from operations of $18.2 million and $9.1 million for the nine and three months then ended, respectively. Based on the current development plans for Neutrolin in both the U.S. and foreign markets (including the ongoing hemodialysis Phase 3 clinical trial in the U.S.) and the Company’s other operating requirements, management believes that the existing cash at September 30, 2016 will not be sufficient to fund operations for at least the next twelve months following the balance sheet date. Additionally, the Company will need additional funding to complete the hemodialysis clinical trial in the U.S. which commenced in December 2015 as well as to initiate the planned Phase 3 clinical trial in oncology patients with catheters. At September 30, 2016, the Company had $4.1 million available under its current at-the-market program. In August 2016, the Company entered into a new sales agreement with the same bank to allow the Company to sell up to $40 million of shares of its common stock. The Company will not and cannot access the ATM program under the new sales agreement unless and until (i) the Company and Elliott Associates, L.P. ("Elliot") agree as to the exercise or waiver of Elliott's participation rights in the new ATM program, which rights were granted in a Consent and Exchange Agreement dated September 15, 2014, and apply to any equity financing we undertake until September 15, 2017, and (ii) the registration statement that includes the prospectus for the new ATM program that the Company filed with the Securities and Exchange Commission is declared effective. At such time, the Company will be able to access the new ATM program and will terminate the current ATM program and the related Sales Agreement. There is no assurance that conditions will allow the Company to raise additional funds available under its at-the-market program. The Company’s continued operations will ultimately depend on its ability to raise additional capital through various potential sources, such as equity and/or debt financings, strategic relationships, or out-licensing of its products in order to complete its ongoing and planned Phase 3 clinical trials and until it achieves profitability, if ever. The Company can provide no assurances that such financing or strategic relationships will be available on acceptable terms, or at all. Without this funding, the Company could be required to delay, scale back or eliminate some or all of its research and development programs which would likely have a material adverse effect on the Company’s business.
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 and CorMedix Europe GmbH, its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains its cash and cash equivalents in bank deposits and other interest bearing accounts, the balances of which exceed federally insured limits.
Short-Term Investments
The Company determines the appropriate classification of marketable securities at the time of purchase and reevaluates such designation as of each balance sheet date. Investments in marketable debt and equity securities classified as available-for-sale are reported at fair value. Fair values of the Company’s investments are 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 net of tax in other comprehensive income (loss). Realized gains and losses, amortization of premiums and discounts and interest and dividends earned are included in income (expense) on the condensed consolidated statements of operations and comprehensive income (loss). The cost of investments for purposes of computing realized and unrealized gains and losses is based on the specific identification method.
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 September 30, 2016.
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 September 30, 2016, all of the Company’s investments had contractual maturities which were less than one year. The following table summarizes the amortized cost, unrealized gains and losses and the fair value at September 30, 2016 and December 31, 2015 of the Company’s financial assets that are measured on a recurring basis:
Fair Value Measurements
The Company’s financial instruments recorded in the 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 September 30, 2016 and December 31, 2015:
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 subsidiary, 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.
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 September 30, 2016 and December 31, 2015, the Company’s restricted cash is in connection with the patent and utility model infringement proceedings against TauroPharm (see Note 5). The Company was required by the District Court Mannheim to provide a security deposit of approximately $132,000 to cover legal fees in the event TauroPharm is entitled to reimbursement of these costs. The Company furthermore had to provide a deposit in the amount of $40,000 in connection with the unfair competition proceedings in Cologne.
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 market on a first in, first out basis. Inventories consist of raw materials (including labeling and packaging), work-in-process, and finished goods for the Neutrolin product. Inventories consist of the following:
Accrued Expenses
Accrued expenses consist of the following:
Revenue Recognition
The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin (“SAB”) Topic 13, Revenue Recognition (“Topic 13”), and Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) 605, Revenue Recognition (“ASC 605”). This guidance requires that revenue is recognized from product sales when the following four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectability is reasonably assured. The Company recognizes net sales upon shipment of product to the dialysis centers.
Deferred Revenue
In October 2015, the Company shipped product with less than 75% of its remaining shelf life to an international distributor and issued a guarantee that the specific product shipped would be replaced by the Company if the customer was not able to sell the product before it expired. As a result of this warranty, the Company may have an additional performance obligation (i.e. accept returned product and deliver new product to the customer) if the customer is unable to sell such product. Due to limited sales experience with the customer, the Company is unable to estimate the amount of the warranty obligation that may be incurred as a result of this shipment. Therefore, the Company has deferred the revenue and related cost of sales associated with the shipment of this product. Since the Company will be unable to resell the expired product if returned by the customer, the deferred revenue and related cost of sales is presented net as Deferred Revenue on the condensed consolidated balance sheet which amounted to approximately $122,000 and $121,000 at September 30, 2016 and December 31, 2015, respectively. During the quarter ended September 30, 2016, the Company recognized $2,400 of revenue net of related cost of sales for this shipment. Additionally, the change in the exchange rate resulted in an increase in the Deferred Revenue balance of $3,000 during the quarter ended September 30, 2106.
In August 2014, the Company entered into an exclusive distribution agreement (the “Wonik Agreement”) with Wonik Corporation, a South Korean company, to market, sell and distribute Neutrolin for hemodialysis and oncolytic patients upon receipt of regulatory approval in Korea. Upon execution of the Wonik Agreement, Wonik paid the Company a non-refundable $50,000 payment and will pay an additional $50,000 upon receipt of the product registration necessary to sell Neutrolin in the Republic of Korea (the “Territory”). The term of the Wonik Agreement commenced on August 8, 2014 and will continue for three years after the first commercial sale of Neutrolin in the Territory. The non-refundable up-front payment has been recorded as deferred revenue and will be recognized as revenue on a straight-line basis over the contractual term of the Agreement. The Company recognized $2,200 revenue related to the Wonik agreement for each of the three months ended September 30, 2016 and 2015. Deferred revenue short-term balance at September 30, 2016 and December 31, 2015 amounted to approximately $9,000 for each period and deferred revenue long-term balances at September 30, 2016 and December 31, 2015 amounted to approximately $22,000 and $29,000, respectively.
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.
Stock-Based Compensation
The Company accounts for stock options granted to employees, officers and directors according to ASC No. 718, “Compensation — Stock Compensation” (“ASC 718”). Share-based compensation cost is measured at grant date, based on the estimated fair value of the award using a Black-Scholes option pricing model for options with service or performance based conditions and a Monte Carlo option pricing model for options with market vesting conditions. Stock-based compensation cost is recognized as expense net of expected forfeitures, over the employee’s requisite service period on a straight-line basis.
The Company accounts for stock options granted to non-employees on a fair value basis using the Black-Scholes option pricing model in accordance with ASC 718 and ASC No. 505-50, “Equity-Based Payments to Non-Employees” (“ASC 505”). The non-cash charge to operations for non-employee options with time based vesting provisions is based on the fair value of the options remeasured each reporting period and amortized to expense over the related vesting period. The non-cash charge to operations for non-employee options with performance based vesting provisions is recorded when the achievement of the performance condition is probable and remeasured each reporting period until the performance condition is achieved.
Stock compensation expense is recognized by applying the expected forfeiture rate during the vesting period to the fair value of the award. The estimation of the number of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from the Company’s current estimates, compensation expense may need to be revised. The Company considers many factors when estimating expected forfeitures for stock awards granted to employees, officers and directors, including types of awards, employee class, and an analysis of historical forfeitures.
Research and Development
Research and development costs are charged to expense as incurred. Research and development includes 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 and facilities expenses. The Company accrues for costs incurred as the services are being provided by monitoring the status of the trial 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. |
3. Stockholders' Equity |
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Stockholders' Equity |
Common Stock
The Company has entered into an At-the-Market Issuance Sales Agreement (the “Sales Agreement”) with MLV & Co. LLC, now a subsidiary of FBR & Co. (“MLV”), under which the Company may issue and sell up to $40.0 million of shares of its common stock from time to time through MLV acting as agent, subject to limitations imposed by the Company, such as the number or dollar amount of shares registered under the registration statement to which the offering relates. When the Company wishes to issue and sell common stock under the Sales Agreement, it notifies MLV of the number of shares to be issued, the dates on which such sales are anticipated to be made, any minimum price below which sales may not be made and other sales parameters as the Company deems appropriate. MLV is entitled to a commission of up to 3% of the gross proceeds from the sale of common stock sold under the Sales Agreement. The shares of common stock to be sold under the Sales Agreement are registered under an effective registration statement filed with the SEC. At September 30, 2016, approximately $4.1 million is available for sale under this Sales Agreement. During the nine months ended September 30, 2016, the Company issued 3,353,437 shares of common stock under the Sales Agreement and realized net proceeds of approximately $6.2 million.
In August 2016, the Company entered into a new At Market Issuance Sales Agreement with FBR Capital Markets & Co. (“FBR”), the successor in interest to MLV, which is identical in terms to the Sales Agreement for the Company’s current ATM program and allows the Company to sell up to $40 million of shares of its common stock. The Company will not and cannot access the ATM program under the new sales agreement unless and until (i) the Company and Elliott Associates, L.P. ("Elliot") agree as to the exercise or waiver of Elliott's participation rights in the new ATM program, which rights were granted in a Consent and Exchange Agreement dated September 15, 2014, and apply to any equity financing we undertake until September 15, 2017, and (ii) the registration statement that includes the prospectus for the new ATM program that the Company filed with the Securities and Exchange Commission is declared effective. At that time, the Company will be able to access the new ATM program and will terminate the current ATM program and the related Sales Agreement.
During the nine months ended September 30, 2016, the Company issued a total of 1,067,500 shares of common stock upon exercise of stock options resulting in gross proceeds of $849,501 to the Company.
During the nine months ended September 30, 2016, the Company issued 21,454 shares of its common stock upon a cashless exercise of 25,000 warrants.
Stock Options
During the nine months ended September 30, 2016, the Company granted ten-year non-qualified stock options under the 2013 Stock Incentive Plan (the “2013 Plan”) covering an aggregate of 2,891,000 shares of the Company’s common stock to its officers, directors, employees and consultants. Of these options, 1,850,000 were granted on September 30, 2016 to the Company’s new CEO in connection with his employment. 1,250,000 of the options will vest in four equal annual installments on the first four anniversaries of the grant date. Of the remaining options, 300,000, split into three equal tranches, become exercisable upon the achievement of specified performance milestones, provided that these options will be forfeited if the milestones are not achieved within four years of grant date and provided further that these options will not vest before December 18, 2018. The remaining 300,000 options become exercisable upon the achievement of a specified average closing stock price, provided that these options will not vest before December 31, 2018 and if the closing price per share of the Company’s common stock is below the specified average closing stock price on December 31, 2018, the options will be forfeited. In each case, the new CEO must be an employee of the Company or consultant to the Company on the applicable vesting date. The total fair value of the 1,850,000 stock options issued to the Company’s CEO on the date of grant was $3,186,450 which will be amortized to expense over the related vesting periods beginning in the fourth quarter of 2016.
During the three and nine months ended September 30, 2016, total compensation expense for stock options issued to employees, directors, officers and consultants was $192,685 and $920,864, respectively, and $921,153 and $2,908,855 for the three and nine months ended September 30, 2015, respectively.
The fair value of the grants issued subject to service and performance based vesting conditions was determined using the Black-Scholes option pricing model with the following assumptions:
The Company estimated the expected term of the stock options granted to employees 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, weighted pre and post CE Mark approval in the European Union. 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.
The fair value of the grant issued, subject to a market based vesting condition, was determined using the Monte Carlo option pricing model which values financial instruments whose value is dependent on share price by sampling random paths for share price. The key inputs for the simulation included the closing stock price of the Company on the date of grant, the expected term of the stock options granted was based on anticipated exercises in future periods, the expected stock price volatility for the Company’s stock options was calculated based on the historical volatility since the initial public offering of the Company’s common stock in March 2010, weighted pre and post CE Mark, the expected dividend yield of 0.0% reflects the Company’s current and expected future policy for dividends on the Company’s common stock and the risk-free interest rate which was determined by utilizing 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. The table below summarizes the key inputs used in the Monte Carlo simulation:
A summary of the Company’s stock option activity and related information for the nine months ended September 30, 2016 is as follows:
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.
Warrants
The following table is the summary of warrant activity for the nine months ended September 30, 2016:
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4. Related Party Transactions |
9 Months Ended |
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Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | On March 3, 2015, the Company entered into a backstop agreement with an existing institutional investor, Manchester Securities Corp., a wholly owned subsidiary of Elliott Associates, L.P., and a beneficial holder of more than 5% of the Company’s outstanding common stock. Pursuant to the backstop agreement, Manchester had agreed to lend the Company, at its request, up to $4,500,000 less the dollar amount of gross proceeds received by the Company upon the exercise of warrants to purchase common stock issued in connection with its initial public offering, or IPO, on or before April 30, 2015, provided that the loan could not exceed $3,000,000. As a result of the backstop agreement, in March 2015, the Company issued five-year warrants exercisable for an aggregate of up to 283,400 common shares with an exercise price of $7.00 per share and recorded an expense of $1,583,000 for the value of these warrants. The backstop agreement was not accessed. Pursuant to the backstop agreement, the Company granted Manchester the right for as long as it or its affiliates hold any of the Company’s common stock or securities convertible into its common stock to appoint up to two members to the Company’s board of directors and/or to have up to two observers attend board meetings in a non-voting capacity. Manchester appointed one director in August 2015 and appointed another director in April 2016. |
5. Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||
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 a low dose heparin catheter lock solution for maintaining patency and preventing infection in a hemodialysis catheter. 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 what other defenses the Defendants may raise, or the ultimate outcome of either of these related matters.
In the same complaint against the same Defendants, the Company also alleged an infringement (requesting the same remedies) of NDP’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 are now being 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.
On March 27, 2015, the District Court held a hearing to evaluate whether the Utility Model has been infringed by TauroPharm in connection with the manufacture, sale and distribution of its TauroLock-HEP100TM and TauroLock-HEP500TM products. A hearing before the same court was held on January 30, 2015 on the separate, but related, question of infringement of the Prosl European Patent by TauroPharm.
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 has 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. In its preliminary consideration of the matter, the EPO (and the German PTO) had regarded the patent as not inventive or novel due to publication of prior art. 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, has 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. No date has yet been scheduled for such further hearing as of the filing of this Form 10-Q. In October 2016, TauroPharm submitted a further writ to the EPO requesting a date for the hearing and bringing forward further arguments, in particular in view of the recent decision of the German PTO on the invalidity of the utility model. The Company will submit a further writ pushing for a date for the oral hearing and bringing forward the Company’s counter-arguments. While the Company continues to believe that the referenced publication and instructions for use do not, in fact, constitute prior art and that the Prosl European Patent will be found to be valid by the EPO, there can be no assurance that the Company will prevail in this matter. 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 decision has only a declaratory effect, as the Utility Model had expired in November 2015. Furthermore, it has no bearing on the ongoing consideration of the validity and possible infringement of the Prosl European Patent by the EPO. The Company filed an appeal against the ruling on September 7, 2016.
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. The Company's legal team has prepared the requested reply and produced the respective documentation. TauroPharm has also filed another writ within the same deadline and both parties have filed further writs at the end of April setting out their respective argumentation in more detail. A further oral hearing has been scheduled for November 15, 2016.
In connection with the aforementioned patent and utility model infringement proceedings against TauroPharm, the Company was required by the District Court Mannheim to provide a security deposit of approximately $132,000 to cover legal fees in the event TauroPharm is entitled to reimbursement of these costs. The Company recorded the deposit as restricted cash for the year ended December 31, 2015. The Company furthermore had to provide a deposit in the amount of $40,000 in connection with the unfair competition proceedings in Cologne.
On July 7, 2015, a putative class action lawsuit was commenced against the Company and certain of its current and former officers in the United States District Court for the District of New Jersey, captioned Li v. Cormedix Inc., et al., Case 3:15-cv-05264 (the “Securities Class Action”). On September 4, 2015, two individuals, Shahm Martini and Paul Chretien (the “Martini Group”), filed a Motion to Appoint Lead Plaintiff. On that same date, another individual, Elaine Wood, filed a competing Motion to Appoint Lead Plaintiff. On September 18, 2015, the Martini Group withdrew its motion. Thereafter, on September 22, 2015, the Court appointed Elaine Wood as Lead Plaintiff and, on October 2, 2015, appointed the Rosen Law Firm as Lead Counsel.
On December 1, 2015, Lead Plaintiff filed an Amended Complaint asserting claims that the Company and Steven Lefkowitz, Randy Milby and Harry O’Grady (the “Cormedix Defendants”) violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act. The Amended Complaint also names as defendants several unrelated entities that allegedly were paid stock promoters. Lead Plaintiff alleges generally that the Cormedix Defendants made materially false or misleading statements and omissions concerning, among other things, the competitive landscape for the Company’s Neutrolin product and the alleged use of stock promoters. The Amended Complaint seeks unspecified damages, interest, attorneys’ fees, and other costs.
On February 1, 2016, the Cormedix Defendants filed a motion to dismiss all claims asserted against them in the Amended Complaint on the grounds, among others, that the Amended Complaint fails to adequately allege: (1) material misstatements or omissions; (2) scienter by any of the Cormedix Defendants; or (3) loss causation. The Court heard oral argument on this motion on July 18, 2016 in an order dated October 27, 2016, the Court granted the Cormedix Defendants’ Motion to Dismiss and dismissed with prejudice the Amended Complaint.
On May 13, 2016, a putative shareholder derivative action was filed in the Superior Court of New Jersey against the Company and certain present and former directors and officers captioned Raval v. Milby, et. al., Docket No. C-12034-6 (the “Derivative Action”). The factual allegations of the Derivative Action substantially overlap the factual allegations contained in the Amended Complaint in the Securities Class Action. The plaintiff purports to assert claims against the individual defendants on behalf of the Company for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement and waste of corporate assets. The complaint in the Derivative Action seeks unspecified damages, interest, attorneys’ fees and other costs, and certain amendments to the Company’s “corporate governance and internal procedures”. On June 30, 2016, the Court entered a stipulated order, among other things, staying the Derivative Action until 30 days after either: (a) the entry of any order denying any motion to dismiss the Derivative Action in the Securities Class Action, or (b) the entry of a final order dismissing the Securities Class Action with prejudice.
The Company believes that it has substantial legal and factual defenses to the claims in the Securities Class Action and the Derivative Action and intends to continue vigorously defending those cases.
Commitments
Manufacturing
Navinta LLC, a U.S.-based API developer, has provided API manufacturing (manufactured in India at an FDA-compliant facility) and a Drug Master File for CRMD003, pursuant to an original supply agreement dated December 7, 2009 (the “Navinta Agreement”). The Company was required to make certain cash payments to Navinta upon the achievement of certain sales-based milestones which was based on a tiered approach and was not to commence until the Company achieves a designated net sales threshold. The maximum aggregate amount of such payments, assuming achievement of all milestones, would have been $1,975,000 over five years. There were no milestones achieved during the nine months ended September 30, 2016.
On March 24, 2015, the Company and Navinta LLC entered into an amendment to the Navinta Agreement to extend the term of the Navinta Agreement to March 31, 2016 and to lower the price per kilogram of API that the Company purchases from Navinta LLC under the Navinta Agreement. The Company also agreed to purchase a minimum amount of product from Navinta LLC during 2015, which replaced the prior minimum purchase requirement. The Navinta Agreement expired on March 31, 2016 without delivery of the minimum purchase requirement. The Agreement will not be renewed and no further obligations for purchase nor milestone payments for sales exist.
The Company has developed a program aimed at reducing the cost of goods of Neutrolin through a more efficient, custom synthesis of the active ingredient taurolidine. As part of that program, on April 8, 2015, the Company entered into a Preliminary Services Agreement with [RC]2 Pharma Connect LLC (“RC2”), pursuant to which RC2 will coordinate certain manufacturing services related to taurolidine. Specifically, RC2 will undertake a critical parameters evaluation for the Company’s manufacturing needs and coordinate the cGMP processes set forth in the agreement that the Company believes are necessary for the submission of its planned new drug application for Neutrolin to the FDA, as well as any foreign regulatory applications. The total cost for RC2’s services under the preliminary services agreement is expected to be approximately $1.7 million which is expected to be incurred through the fourth quarter of 2016. During the three and nine months ended September 30, 2016, the Company recognized research and development expense of $1,198,000 and $1,269,000, respectively, for its services related to the agreement and $250,000 for the nine months ended September 30, 2015.
The Company also has several service agreements with RC2 for the manufacture of clinical supplies to support its ongoing and planned Phase 3 clinical trials for an aggregate amount of $3.4 million. During the three and nine months ended September 30, 2016, the Company recognized research and development expense of approximately $777,000 and $1,510,000, respectively, related to these agreements. The Company may terminate these agreements upon 30 days written notice and is only obligated for project costs and reasonable project shut down costs provided through the date of termination.
Clinical and Regulatory
In December 2015, CorMedix signed a Master Service Agreement and Work Order (the “Master Service Agreement”) with PPD Development, LP (“PPD”) for a $19.2 million Phase 3 multicenter, double-blind, randomized active control study (the “Phase 3 Clinical Trial”) to demonstrate the safety and effectiveness of Neutrolin in preventing catheter-related bloodstream infections and blood clotting in subjects receiving hemodialysis therapy as treatment for end stage renal disease. The Phase 3 Clinical Trial is expected to accrue up to 632 patients in approximately 70 sites in the U.S. During the three and nine months ended September 30, 2016, the Company recognized $1.8 million and $3.8 million research and development expense related to this agreement.
In-Licensing
In 2008, the Company entered into a License and Assignment Agreement (the “NDP License Agreement”) with 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 39,980 shares of the Company’s common stock.
In addition, 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 145,543 shares. In 2014, a certain milestone was achieved resulting in the release of 36,386 shares held in escrow. The number of shares held in escrow as of September 30, 2016 is 109,157 shares of common stock. The maximum aggregate amount of cash payments upon achievement of milestones is $3,000,000 with $2,500,000 remaining at September 30, 2016. 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 three and nine months ended September 30, 2016.
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.
Other
On September 27, 2016, the Company entered into an employment agreement, effective October 3, 2016, with Khoso Baluch, who joined the Company on October 3, 2016 as its Chief Executive Officer. Unless renewed pursuant to the terms thereof, the agreement will expire on October 3, 2019. After the initial threeyear term of Mr. Baluch’s employment agreement, the agreement will automatically renew for additional successive oneyear periods, unless either party notifies the other in writing at least 90 days before the expiration of the then current term that the agreement will not be renewed. Mr. Baluch also was appointed to the Company’s Board of Directors (the “Board”) on October 3, 2016.
Mr. Baluch will receive an annual base salary of $375,000, which cannot be decreased unless all officers and/or members of the Company’s executive management team experience an equal or greater percentage reduction in total compensation and no reduction may be greater than 25%. Mr. Baluch will be eligible for an annual bonus, which may equal up to 80% of his base salary then in effect, as determined by the Board or compensation committee.
If the Company terminates Mr. Baluch’s employment other than for Cause (as defined in the agreement), death or disability, other than by notice of nonrenewal, or if Mr. Baluch resigns for Good Reason (as defined in the agreement), Mr. Baluch will receive the following: (i) payment of any accrued compensation and any unpaid bonus for the prior year; (ii) his base salary and benefits for a period of 12 months following the effective date of the termination of his employment; (iii) payment on a prorated basis of any partial bonus earned based on the actual achievement of the specified bonus objectives; (iv) if elected continued health insurance coverage under COBRA, the Company will pay the premium to continue such coverage in an amount equal to the portion paid for by the Company during employment until the conclusion of the time when he is receiving continuation of base salary payments; and (v) all restricted shares and unvested stock options held by Mr. Baluch that are scheduled to vest on or before the next succeeding anniversary of the date of termination shall be accelerated and deemed to have vested as of the termination date.
On August 3, 2015, the Company entered into a Release of Claims and Severance Modification with Randy Milby, its former Chief Executive Officer, that Mr. Milby may not compete against the Company by engaging in any business involving the development or commercialization of (i) a preventive anti-infective product that would be a direct competitor of Neutrolin or (ii) a product containing taurolidine. The non-compete term did not change and remains at twelve months following termination of his employment. The employment agreement was also amended to allow Mr. Milby a period in which to exercise all vested options and warrants until the later of 60 months following the termination date of his employment, provided in no event shall he be able to exercise after the respective expiration date of any stock option or warrant. During the quarter ended September 30, 2015, the Company recorded non-cash expense of $507,341 as a result of this modification.
Mr. Milby resigned as the Company’s Interim Chief Executive Officer on October 2, 2016. Pursuant to the terms of his employment agreement, Mr. Milby will be entitled to receive his base salary and benefits for a period of twelve months following the effective date of the termination of his employment, or, in the case of benefits, until such time as he receives equivalent coverage and benefits under plans and programs of a subsequent employer if such receipt is prior to the expiration of the twelve month period. To the extent any of the aforementioned benefits cannot be provided to former employees, the Company will pay Mr. Milby a lump-sum payment in the amount necessary to allow Mr. Milby to purchase the equivalent benefits. The Company accrued $325,000 of severance pay during the year ended December 31, 2015 which remained unpaid at September 30, 2016.
The Company entered into sublease for 4,700 square feet of office space in Bedminster, New Jersey, which sublease runs from April 1, 2015 until March 31, 2018. Rent is $5,000 per month plus occupancy costs such as utilities, maintenance and taxes. In accordance with the lease agreement, the Company has deposited $5,000 with the landlord, the equivalent of one month rent.
The Company’s subsidiary entered into a lease agreement for its offices in Fulda, Germany. The lease has a term of 36 months which commenced on September 1, 2013 for a base monthly payment of €498. The total 36 month lease obligation is approximately €17,900 ($20,000). The 36 month lease has terminated and is renewable every three months commencing on November 1, 2016 for a base monthly payment of €461. Rent expense for the three and nine months ended September 30, 2016 was $17,000 and $51,000, respectively and $16,000 and $55,000 for the three and nine months ended September 30, 2015, respectively.
Under the Company’s current lease agreements, the total remaining lease obligation as of September 30, 2016 is set forth below:
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2. Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liquidity and Going Concern |
The Company’s operations are subject to a number of 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. To date, the Company’s commercial operations have not generated enough revenues to enable profitability. As of September 30, 2016, the Company had an accumulated deficit of $112.6 million, and incurred losses from operations of $18.2 million and $9.1 million for the nine and three months then ended, respectively. Based on the current development plans for Neutrolin in both the U.S. and foreign markets (including the ongoing hemodialysis Phase 3 clinical trial in the U.S.) and the Company’s other operating requirements, management believes that the existing cash at September 30, 2016 will not be sufficient to fund operations for at least the next twelve months following the balance sheet date. Additionally, the Company will need additional funding to complete the hemodialysis clinical trial in the U.S. which commenced in December 2015 as well as to initiate the planned Phase 3 clinical trial in oncology patients with catheters. At September 30, 2016, the Company had $4.1 million available under its current at-the-market program. In August 2016, the Company entered into a new sales agreement with the same bank to allow the Company to sell up to $40 million of shares of its common stock. The Company will not and cannot access the ATM program under the new sales agreement unless and until (i) the Company and Elliott Associates, L.P. ("Elliot") agree as to the exercise or waiver of Elliott's participation rights in the new ATM program, which rights were granted in a Consent and Exchange Agreement dated September 15, 2014, and apply to any equity financing we undertake until September 15, 2017, and (ii) the registration statement that includes the prospectus for the new ATM program that the Company filed with the Securities and Exchange Commission is declared effective. At such time, the Company will be able to access the new ATM program and will terminate the current ATM program and the related Sales Agreement. There is no assurance that conditions will allow the Company to raise additional funds available under its at-the-market program. The Company’s continued operations will ultimately depend on its ability to raise additional capital through various potential sources, such as equity and/or debt financings, strategic relationships, or out-licensing of its products in order to complete its ongoing and planned Phase 3 clinical trials and until it achieves profitability, if ever. The Company can provide no assurances that such financing or strategic relationships will be available on acceptable terms, or at all. Without this funding, the Company could be required to delay, scale back or eliminate some or all of its research and development programs which would likely have a material adverse effect on the Company’s business. |
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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. |
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Basis of Consolidation | The condensed consolidated financial statements include the accounts of the Company and CorMedix Europe GmbH, its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. |
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Cash and Cash Equivalents | Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains its cash and cash equivalents in bank deposits and other interest bearing accounts, the balances of which exceed federally insured limits. |
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Short term investments |
Short-Term Investments
The Company determines the appropriate classification of marketable securities at the time of purchase and reevaluates such designation as of each balance sheet date. Investments in marketable debt and equity securities classified as available-for-sale are reported at fair value. Fair values of the Company’s investments are 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 net of tax in other comprehensive income (loss). Realized gains and losses, amortization of premiums and discounts and interest and dividends earned are included in income (expense) on the condensed consolidated statements of operations and comprehensive income (loss). The cost of investments for purposes of computing realized and unrealized gains and losses is based on the specific identification method.
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 September 30, 2016.
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 September 30, 2016, all of the Company’s investments had contractual maturities which were less than one year. The following table summarizes the amortized cost, unrealized gains and losses and the fair value at September 30, 2016 and December 31, 2015 of the Company’s financial assets that are measured on a recurring basis:
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Fair value measurements | The Company’s financial instruments recorded in the 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 September 30, 2016 and December 31, 2015:
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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 subsidiary, 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.
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. |
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Restricted Cash | As of September 30, 2016 and December 31, 2015, the Company’s restricted cash is in connection with the patent and utility model infringement proceedings against TauroPharm (see Note 5). The Company was required by the District Court Mannheim to provide a security deposit of approximately $132,000 to cover legal fees in the event TauroPharm is entitled to reimbursement of these costs. The Company furthermore had to provide a deposit in the amount of $40,000 in connection with the unfair competition proceedings in Cologne. |
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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. |
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Inventories, net | Inventories are valued at the lower of cost or market on a first in, first out basis. Inventories consist of raw materials (including labeling and packaging), work-in-process, and finished goods for the Neutrolin product. Inventories consist of the following:
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Accrued Expenses |
Accrued expenses consist of the following:
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Revenue Recognition | The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin (“SAB”) Topic 13, Revenue Recognition (“Topic 13”), and Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) 605, Revenue Recognition (“ASC 605”). This guidance requires that revenue is recognized from product sales when the following four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectability is reasonably assured. The Company recognizes net sales upon shipment of product to the dialysis centers. |
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Deferred Revenue | In October 2015, the Company shipped product with less than 75% of its remaining shelf life to an international distributor and issued a guarantee that the specific product shipped would be replaced by the Company if the customer was not able to sell the product before it expired. As a result of this warranty, the Company may have an additional performance obligation (i.e. accept returned product and deliver new product to the customer) if the customer is unable to sell such product. Due to limited sales experience with the customer, the Company is unable to estimate the amount of the warranty obligation that may be incurred as a result of this shipment. Therefore, the Company has deferred the revenue and related cost of sales associated with the shipment of this product. Since the Company will be unable to resell the expired product if returned by the customer, the deferred revenue and related cost of sales is presented net as Deferred Revenue on the condensed consolidated balance sheet which amounted to approximately $122,000 and $121,000 at September 30, 2016 and December 31, 2015, respectively. During the quarter ended September 30, 2016, the Company recognized $2,400 of revenue net of related cost of sales for this shipment. Additionally, the change in the exchange rate resulted in an increase in the Deferred Revenue balance of $3,000 during the quarter ended September 30, 2106.
In August 2014, the Company entered into an exclusive distribution agreement (the “Wonik Agreement”) with Wonik Corporation, a South Korean company, to market, sell and distribute Neutrolin for hemodialysis and oncolytic patients upon receipt of regulatory approval in Korea. Upon execution of the Wonik Agreement, Wonik paid the Company a non-refundable $50,000 payment and will pay an additional $50,000 upon receipt of the product registration necessary to sell Neutrolin in the Republic of Korea (the “Territory”). The term of the Wonik Agreement commenced on August 8, 2014 and will continue for three years after the first commercial sale of Neutrolin in the Territory. The non-refundable up-front payment has been recorded as deferred revenue and will be recognized as revenue on a straight-line basis over the contractual term of the Agreement. The Company recognized $2,200 revenue related to the Wonik agreement for each of the three months ended September 30, 2016 and 2015. Deferred revenue short-term balance at September 30, 2016 and December 31, 2015 amounted to approximately $9,000 for each period and deferred revenue long-term balances at September 30, 2016 and December 31, 2015 amounted to approximately $22,000 and $29,000, respectively. |
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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.
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Stock-Based Compensation | The Company accounts for stock options granted to employees, officers and directors according to ASC No. 718, “Compensation — Stock Compensation” (“ASC 718”). Share-based compensation cost is measured at grant date, based on the estimated fair value of the award using a Black-Scholes option pricing model for options with service or performance based conditions and a Monte Carlo option pricing model for options with market vesting conditions. Stock-based compensation cost is recognized as expense net of expected forfeitures, over the employee’s requisite service period on a straight-line basis.
The Company accounts for stock options granted to non-employees on a fair value basis using the Black-Scholes option pricing model in accordance with ASC 718 and ASC No. 505-50, “Equity-Based Payments to Non-Employees” (“ASC 505”). The non-cash charge to operations for non-employee options with time based vesting provisions is based on the fair value of the options remeasured each reporting period and amortized to expense over the related vesting period. The non-cash charge to operations for non-employee options with performance based vesting provisions is recorded when the achievement of the performance condition is probable and remeasured each reporting period until the performance condition is achieved.
Stock compensation expense is recognized by applying the expected forfeiture rate during the vesting period to the fair value of the award. The estimation of the number of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from the Company’s current estimates, compensation expense may need to be revised. The Company considers many factors when estimating expected forfeitures for stock awards granted to employees, officers and directors, including types of awards, employee class, and an analysis of historical forfeitures. |
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Research and Development | Research and development costs are charged to expense as incurred. Research and development includes 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 and facilities expenses. The Company accrues for costs incurred as the services are being provided by monitoring the status of the trial 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. |
2. Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of short-term investments |
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Carrying and fair value of financial assets |
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Schedule of inventories |
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Schedule of accrued expenses |
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Schedule of anti-dilutive securities excluded from calculation of diluted net loss per share |
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3. Stockholders' Equity (Tables) |
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Fair value assumptions for Black Sholes |
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Key inputs used in Monte Carlo simluation |
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Summary of Option Activity under Plan and Related Information |
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Warrants | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Warrant Activity |
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5. Commitments and Contingencies (Tables) |
9 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||
Schedule of Future Minimum Rental Payments for Operating Leases |
|
2. Summary of Significant Accounting Policies (Details 2) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Summary Of Significant Accounting Policies Details 2 | ||
Raw materials | $ 221,355 | $ 244,459 |
Work in process | 355,297 | 424,622 |
Finished goods | 7,555 | 7,488 |
Inventory reserve | (466,000) | (300,000) |
Total | $ 118,207 | $ 376,569 |
2. Summary of Significant Accounting Policies (Details 3) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Accounting Policies [Abstract] | ||
Professional and consulting fees | $ 333,982 | $ 282,975 |
Accrued payroll and payroll taxes | 722,823 | 532,084 |
Clinical trial and manufacturing development | 1,763,889 | 226,042 |
Product development | 285,915 | 0 |
Monitoring program fees | 20,963 | 65,076 |
Statutory taxes | 3,307 | 67,236 |
Other | 18,847 | 48,144 |
Total | $ 3,149,726 | $ 1,221,557 |
2. Summary of Significant Accounting Policies (Details 4) - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Antidilutive Shares | 14,947,722 | 14,415,732 |
Series C non-voting convertible preferred stock | ||
Antidilutive Shares | 2,865,000 | 2,865,000 |
Series D non-voting convertible preferred stock | ||
Antidilutive Shares | 1,479,240 | 1,479,240 |
Series E non-voting convertible preferred stock | ||
Antidilutive Shares | 1,959,759 | 1,959,759 |
Warrants | ||
Antidilutive Shares | 4,006,468 | 4,422,188 |
Shares underlying outstanding stock options | ||
Antidilutive Shares | 4,637,255 | 3,689,545 |
3. Stockholders' Equity (Details) |
9 Months Ended |
---|---|
Sep. 30, 2016
$ / shares
| |
Stock options | |
Expected Term, minimum | 5 years |
Expected Term, maximum | 10 years |
Volatility, minimum | 96.00% |
Volatility, maximum | 98.00% |
Dividend yield | 0.00% |
Risk-free interest rate, minimum | 1.14% |
Risk-free interest rate, maximum | 1.94% |
Weighted-average fair value of options granted during the period | $ 1.76 |
Monte Carlo | |
Expected Term | 5 years |
Volatility | 97.00% |
Dividend yield | 0.00% |
Risk-free interest rate | 1.13% |
Weighted-average fair value of options granted during the period | $ 1.12 |
3. Stockholders' Equity (Details 2) - Warrants |
9 Months Ended |
---|---|
Sep. 30, 2016
$ / shares
shares
| |
Outstanding at beginning of period | shares | 4,422,188 |
Number of Warrants Expired | shares | (390,720) |
Number of Warrants Exercised | shares | (25,000) |
Outstanding at end of period | shares | 4,006,468 |
Weighted Average Exercise Price Outstanding, Beginning | $ / shares | $ 1.80 |
Weighted Average Exercise Price Expired | $ / shares | 3.44 |
Weighted Average Exercise Price Exercised | $ / shares | 0.40 |
Weighted Average Exercise Price Outstanding, Ending | $ / shares | $ 1.65 |
Weighted Average Remaining Contractual Life (in years) Outstanding, Beginning | 3 years 25 days |
Weighted Average Remaining Contractual Life (in years) Outstanding, Ending | 2 years 7 months 10 days |
5. Commitments and Contingencies (Details) |
Sep. 30, 2016
USD ($)
|
---|---|
Commitments And Contingencies Details | |
2017 | $ 62,405 |
2018 | 30,000 |
Total | $ 92,405 |
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