Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 14, 2018 | Jun. 30, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | CorMedix Inc. | ||
Entity Central Index Key | 1,410,098 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
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 | Smaller Reporting Company | ||
Entity Public Float | $ 25,300,000 | ||
Entity Common Stock, Shares Outstanding | 81,483,339 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 10,379,729 | $ 8,064,490 |
Restricted cash | 171,553 | 171,553 |
Short-term investments | 1,604,198 | 12,100,920 |
Trade receivables | 64,148 | 12,014 |
Inventories, net | 594,194 | 166,733 |
Prepaid research and development expenses | 86,652 | 943,924 |
Other prepaid expenses and current assets | 367,177 | 372,057 |
Total current assets | 13,267,651 | 21,831,691 |
Property and equipment, net | 186,282 | 69,695 |
Security deposit | 0 | 5,000 |
TOTAL ASSETS | 13,453,933 | 21,906,386 |
Current liabilities | ||
Accounts payable | 1,808,311 | 1,645,298 |
Accrued expenses | 4,363,867 | 2,342,352 |
Deferred revenue | 88,404 | 104,210 |
Total current liabilities | 6,260,582 | 4,091,860 |
TOTAL LIABILITIES | 6,260,582 | 4,091,860 |
COMMITMENTS AND CONTINGENCIES (Note 6) | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock - $0.001 par value: 2,000,000 shares authorized; 419,585 and 450,085 shares issued and outstanding at December 31, 2017 and 2016, respectively | 420 | 450 |
Common stock - $0.001 par value: 160,000,000 and 80,000,000 shares authorized at December 31, 2017 and 2016, respectively; 71,413,790 and 40,432,339 shares issued and outstanding at December 31, 2017 and 2016, respectively | 71,414 | 40,433 |
Accumulated other comprehensive gain | 98,433 | 81,186 |
Additional paid-in capital | 159,197,950 | 136,857,409 |
Accumulated deficit | (152,174,866) | (119,164,952) |
TOTAL STOCKHOLDERS' EQUITY | 7,193,351 | 17,814,526 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 13,453,933 | $ 21,906,386 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
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 | 419,585 | 450,085 |
Preferred stock, shares outstanding | 419,585 | 450,085 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 160,000,000 | 80,000,000 |
Common stock, shares issued | 71,413,790 | 40,432,339 |
Common stock, shares outstanding | 71,413,790 | 40,432,339 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Revenue | ||
Net sales | $ 329,327 | $ 224,105 |
Cost of sales | (114,964) | (366,673) |
Gross profit (loss) | 214,363 | (142,568) |
OPERATING EXPENSES | ||
Research and development | (24,486,122) | (15,735,300) |
Selling, general and administrative | (8,652,351) | (8,883,050) |
Total operating expenses | (33,138,473) | (24,618,350) |
Loss From Operations | (32,924,110) | (24,760,918) |
Other Income (Expense) | ||
Interest income | 110,714 | 126,774 |
Foreign exchange transaction loss | (13,758) | (8,172) |
Change in fair value of derivative liabilities | (177,141) | 0 |
Interest expense | (5,619) | (1,311) |
Total income (expense) | (85,804) | 117,291 |
Net Loss | (33,009,914) | (24,643,627) |
Other Comprehensive Income Gain (Loss) | ||
Unrealized gain from investments | 13,103 | 11,027 |
Foreign currency translation gain | 4,144 | 8,029 |
Total other comprehensive income | 17,247 | 19,056 |
Comprehensive Loss | $ (32,992,667) | $ (24,624,571) |
NET LOSS PER COMMON SHARE - BASIC AND DILUTED | $ (0.60) | $ (0.65) |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED | 55,141,133 | 37,967,373 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Shareholders Equity - USD ($) | Common Stock | Preferred Stock | Accumulated Other Comprehensive Gain (Loss) | Additional Paid-In Capital | Retained Earnings / Accumulated Deficit | Total |
Beginning balance at Dec. 31, 2015 | $ 35,964 | $ 450 | $ 62,130 | $ 128,304,539 | $ (94,391,595) | $ 34,011,488 |
Beginning balance (in shares) at Dec. 31, 2015 | 35,963,348 | 450,085 | ||||
Cumulative effect of change in accounting principle (Note 7) | 129,730 | (129,730) | ||||
Stock issued in connection with warrants cashless exercised, shares | 21,454 | |||||
Stock issued in connection with warrants cashless exercised, amount | $ 21 | (21) | ||||
Stock issued in connection with stock options exercised, Shares | 1,087,500 | |||||
Stock issued in connection with stock options exercised, Amount | $ 1,088 | 862,013 | 863,101 | |||
Stock issued in connection with sale of common stock, shares | 3,360,037 | |||||
Stock issued in connection with sale of common stock, amount | $ 3,360 | 6,225,991 | 6,229,351 | |||
Stock-based compensation | 1,335,157 | 1,335,157 | ||||
Other comprehensive gain | 19,056 | 19,056 | ||||
Net loss | (24,643,627) | (24,643,627) | ||||
Ending balance (in shares) at Dec. 31, 2016 | 40,432,339 | 450,085 | ||||
Ending balance at Dec. 31, 2016 | $ 40,433 | $ 450 | 81,186 | 136,857,409 | (119,164,952) | 17,814,526 |
Stock issued in connection with ATM sale of common stock, net, shares | 8,925,504 | |||||
Stock issued in connection with ATM sale of common stock, net, amount | $ 8,925 | 5,534,131 | 5,543,056 | |||
Stock issued in connection with public offering, net, shares | 18,619,301 | |||||
Stock issued in connection with public offering, net, amount | $ 18,619 | 12,779,706 | 12,798,325 | |||
Stock issued in connection with warrants cashless exercised, shares | 970 | |||||
Stock issued in connection with warrants cashless exercised, amount | $ 1 | (1) | ||||
Conversion of Series C-3 non-voting preferred stock to common stock, shares | 325,000 | (32,500) | ||||
Conversion of Series C-3 non-voting preferred stock to common stock, amount | $ 325 | $ (32) | (293) | |||
Stock issued in connection with stock options exercised, Shares | 10,000 | |||||
Stock issued in connection with stock options exercised, Amount | $ 10 | 6,790 | 6,800 | |||
Stock issued in connection with sale of common stock, shares | 624,246 | |||||
Stock issued in connection with sale of common stock, amount | $ 624 | 299,016 | 299,640 | |||
Issuance of Series F non-voting preferred stock, net, shares | 2,000 | |||||
Issuance of Series F non-voting preferred stock, net, amount | $ 2 | 1,877,174 | 1,877,176 | |||
Stock issued for payment of deferred fees, shares | 4,869 | |||||
Stock issued for payment of deferred fees, amount | $ 5 | 10,213 | 10,218 | |||
Conversion of Series A warrants to common stock, shares | 2,471,561 | |||||
Conversion of Series A warrants to common stock, amount | $ 2,472 | (2,472) | ||||
Reclassification of derivative liability to equity | 3,910,682 | 3,910,682 | ||||
Warrants issued in connection with public offering | (3,733,542) | (3,733,542) | ||||
Stock-based compensation | 1,659,137 | 1,659,137 | ||||
Other comprehensive gain | 17,247 | |||||
Net loss | (33,009,914) | (33,009,914) | ||||
Ending balance (in shares) at Dec. 31, 2017 | 71,413,790 | 419,585 | ||||
Ending balance at Dec. 31, 2017 | $ 71,414 | $ 420 | $ 98,433 | $ 159,197,950 | $ (152,174,866) | $ 7,193,351 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (33,009,914) | $ (24,643,627) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock-based compensation | 1,659,137 | 1,335,157 |
Inventory reserve | (327,000) | 130,000 |
Change in fair value of derivative liabilities | 177,141 | 0 |
Depreciation | 36,886 | 25,596 |
Changes in operating assets and liabilities: | ||
(Increase) decrease in trade receivables | (47,599) | 307,774 |
(Increase) decrease in inventory | (100,461) | 79,836 |
(Increase) decrease in prepaid expenses and other current assets | 869,431 | (505,492) |
Increase (decrease) in accounts payable | 157,525 | (63,586) |
Increase in accrued expenses | 2,022,984 | 1,121,863 |
Decrease in deferred revenue | (25,310) | (52,916) |
Net cash used in operating activities | (28,587,180) | (22,265,395) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of short-term investments | (13,074,169) | 0 |
Sale of short-term investments | 23,583,995 | 11,478,493 |
Purchase of equipment | (151,988) | (58,723) |
Net cash provided by (used in) investing activities | 10,357,838 | 11,419,770 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from sale of common stock from at-the-market program | 5,543,056 | 6,229,351 |
Proceeds from the public offering of common stock and warrants, net | 12,798,325 | 0 |
Proceeds from sale of Series F non-voting preferred stock, net | 1,877,176 | 0 |
Proceeds from sale of common stock | 299,640 | 0 |
Proceeds from exercise of stock options | 6,800 | 863,101 |
Net cash provided by financing activities | 20,524,997 | 7,092,452 |
Foreign exchange effect on cash | 19,584 | 245 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 2,315,239 | (3,752,928) |
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR | 8,064,490 | 11,817,418 |
CASH AND CASH EQUIVALENTS - END OF YEAR | 10,379,729 | 8,064,490 |
Cash paid for interest | 5,619 | 1,197 |
Supplemental Disclosure of Non-Cash Financing Activities: | ||
Unrealized gain (loss) from investments | 13,103 | 11,027 |
Conversion of preferred stock to common stock | 325 | 0 |
Reclassification of derivative liabilities to equity | 3,910,682 | 0 |
Issuance of common stock for payment of deferred fees | $ 10,218 | $ 0 |
1. Organization, Business and B
1. Organization, Business and Basis of Presentation | 12 Months Ended |
Dec. 31, 2017 | |
Organization Business And Basis Of Presentation | |
Organization, Business and Basis of Presentation | Organization and Business: CorMedix Inc. (“CorMedix” or the “Company”) was incorporated in the State of Delaware on July 28, 2006. The Company is a biopharmaceutical company focused on developing and commercializing therapeutic products for the prevention and treatment of infectious and inflammatory diseases. In 2013, the Company formed a wholly-owned subsidiary, CorMedix Europe GmbH. The Company’s primary focus is to develop its lead product candidate, Neutrolin®, for potential commercialization in the United States (“U.S.”) and other key markets. The Company has in-licensed the worldwide rights to develop and commercialize Neutrolin, which is a novel anti-infective solution (a formulation of taurolidine, citrate and heparin 1000 u/ml) under development 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. The Company launched its first Phase 3 clinical trial in hemodialysis patients with 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, 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 (see Note 6 – Commitments and Contingencies). Two pivotal clinical trials to demonstrate safety and effectiveness of Neutrolin are required by the U.S. Food and Drug Administration (“FDA”) to secure marketing approval in the U.S. The design of the second Phase 3 clinical trial required for NDA submission has not been determined and is subject to funding requirements. The Company received CE Mark approval for Neutrolin in 2013 and commercially launched 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. Neutrolin is registered and is being sold in certain European Union and Middle Eastern countries. In September 2014, the TUV-SUD and The Medicines Evaluation Board of the Netherlands granted labeling for expanded indications for Neutrolin in 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 through intravenous (“IV”) administration, 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. The completion of the Company’s ongoing LOCK-IT-100 clinical trial and the execution of the planned second Phase 3 clinical trial are dependent on the Company’s ability to raise sufficient additional funds through various potential sources, such as equity, debt financings, and/or strategic relationships. The Company can provide no assurances that financing or strategic relationships will be available on acceptable terms, or at all, to complete its clinical development program for Neutrolin. |
2. Liquidity, Going Concern and
2. Liquidity, Going Concern and Uncertainties | 12 Months Ended |
Dec. 31, 2017 | |
Liquidity Going Concern And Uncertainties | |
Liquidity, Going Concern and Uncertainties | The financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company as a going concern. To date, the Company’s commercial operations have not generated sufficient revenues to enable profitability. As of December 31, 2017, the Company had an accumulated deficit of $152.2 million, and incurred losses from operations of $33.0 million and $24.6 million for the years ended December 31, 2017 and 2016, respectively. Based on the Company’s 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 its other operating requirements, the Company’s existing cash and cash equivalents at December 31, 2017 are expected to fund its operations into the third quarter of 2018, after taking into consideration the net proceeds received through March 9, 2018 from the August 2016, At-the-Market Issuance Sales Agreement as amended on December 8, 2017, (the “ATM program”) with B. Riley FBR, Inc. (“B. Riley”) (see Note 7 – Stockholders’ Equity and Note 9 – Subsequent Events) and a proposed new $3 million backstop facility, for which a binding term sheet was recently signed by the Company and Elliott Management Corporation. If a definitive agreement can be negotiated and executed, the proposed backstop facility would be available for drawing between April 16, 2018 and July 31, 2018, (see Note 9 – Subsequent Events). These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company’s continued operations will depend on its ability to raise additional capital through various potential sources, such as equity and/or debt financings, strategic relationships, 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. Management is actively pursuing financing plans but 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. At December 31, 2017, approximately $17.9 million remained available for sale under the ATM Program, pursuant to which the Company may be able to issue and sell up to an aggregate of $60 million of shares of its common stock from time to time, subject to B. Riley’s acceptance (See Note 7 – Stockholders’ Equity). This ATM Program will expire on April 16, 2018. On March 9, 2018, the Company entered into a new agreement with B. Riley for the sale of up to $14.1 million of the Company’s common stock, subject to the effectiveness of the registration statement for such offering, which the Company filed on March 9, 2018. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a 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. |
3. Summary of Significant Accou
3. Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements include the accounts of the Company and CorMedix Europe GmbH, a wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. Financial Instruments Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and short-term investments. The Company maintains its cash and cash equivalents in bank deposit and other interest bearing accounts, the balances of which, at times, may exceed federally insured limits. The appropriate classification of marketable securities is determined at the time of purchase and reevaluated as of each balance sheet date. Investments in marketable debt and equity securities classified as available-for-sale are reported at fair value. Fair value is determined using quoted market prices in active markets for identical assets or liabilities or quoted prices for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Changes in fair value that are considered temporary are reported 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). 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 December 31, 2017 or 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 December 31, 2017 and 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 December 31, 2017 and 2016: December 31, 2017: Amortized Cost Gross Unrealized Losses Gross Unrealized Gains Fair Value Money Market Funds included in Cash Equivalents $ 6,032,034 $ - $ - $ 6,032,034 Corporate Securities 905,625 (112 ) 3 905,516 Commercial Paper 698,682 - - 698,682 Subtotal 1,604,307 (112 ) 3 1,604,198 Total December 31, 2017 $ 7,636,341 $ (112 ) $ 3 $ 7,636,232 December 31, 2016: Money Market Funds included in Cash Equivalents $ 95,949 $ - $ - $ 95,949 Corporate Securities 10,619,583 (13,212 ) - 10,606,371 Commercial Paper 1,494,549 - - 1,494,549 Subtotal 12,114,132 (13,212 ) - 12,100,920 Total December 31, 2016 $ 12,210,081 $ (13,212 ) $ - $ 12,196,869 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, which is set out below. 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. ● 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 The following table provides the carrying value and fair value of the Company’s financial assets measured at fair value as of December 31, 2017 and 2016: December 31, 2017: Carrying Value Level 1 Level 2 Level 3 Money Market Funds $ 6,032,034 $ 6,032,034 $ - $ - Available for sale securities: Corporate Securities 905,516 - 905,516 - Commercial Paper 698,682 - 698,682 - Subtotal 1,604,198 - 1,604,198 - Total December 31, 2017 $ 7,636,232 $ 6,032,034 $ 1,604,198 $ - December 31, 2016: Money Market Funds $ 95,949 $ 95,949 $ - $ - Available for sale securities: Corporate Securities 10,606,371 - 10,606,371 - Commercial Paper 1,494,549 - 1,494,549 - Subtotal 12,100,920 - 12,100,920 - Total December 31, 2016 $ 12,196,869 $ 95,949 $ 12,100,920 $ - Foreign Currency Translation and Transactions The 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, if any, 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 year. Translation gains and losses are included in other comprehensive loss. The Company had foreign currency translation gains of $4,144 and $8,029 in 2017 and 2016, respectively. 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. Segment and Geographic Information The Company reported revenues of $329,327 and $224,105 for the years ended December 31, 2017 and 2016, respectively. Of the Company’s 2017 and 2016 revenues, $320,504 and $215,282, respectively, were attributable to its European and Mideast operations, which are based in Germany. Total assets at December 31, 2017 and 2016 were $13,453,933 and $21,906,386, respectively, of which $12,597,231 and $21,595,572 were located in the United States at December 31, 2017 and 2016, respectively, with the remainder in Germany. Restricted Cash As of December 31, 2017 and 2016, the Company’s restricted cash is in connection with the patent and utility model infringement proceedings against TauroPharm (see Note 6). 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, pre-clinical development and insurance policies. These advanced payments are amortized to expense either as services are performed or over the relevant service period using the straight-line method. Inventories, net Inventories are valued at the lower of cost or net realizable value on a first in, first out basis. Inventories consist of raw materials (including labeling and packaging), work-in-process, and finished goods, if any, for the Neutrolin product. Inventories consist of the following: December 31, 2017 2016 Raw materials $ 141,233 $ 79,900 Work in process 526,067 463,897 Finished goods 29,894 52,936 Inventory reserve (103,000 ) (430,000 ) Total $ 594,194 $ 166,733 Property and Equipment Property and equipment consist primarily of furnishings, fixtures, leasehold improvements, office equipment and computer equipment all of which are recorded at cost. Depreciation is provided for by the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized using the straight-line method over the remaining lease term or the life of the asset, whichever is shorter. Property and equipment, as of December 31, 2017 and 2016 were $186,282 and $69,695, respectively, net of accumulated depreciation of $154,836 and $117,949, respectively. Depreciation and amortization of property and equipment is included in selling, general and administrative expenses. Description Estimated Useful Life Office equipment and furniture 5 years Leasehold improvements 5 years Computer equipment 5 years Computer software 3 years Accrued Expenses Accrued expenses consist of the following at December 31: 2017 2016 Professional and consulting fees $ 485,089 $ 335,198 Accrued payroll and payroll taxes 755,221 737,607 Clinical trial and manufacturing development 2,884,924 875,500 Product development 80,001 374,839 Market research 116,466 - Other 42,166 19,208 Total $ 4,363,867 $ 2,342,352 Revenue Recognition 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 revenue once the four revenue recognition criteria are met in accordance with the terms of its various distribution agreements. Deferred Revenue In October 2015, the Company shipped product with less than 75% of its remaining shelf life to a customer 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. Due to limited sales experience with the customer, the Company was 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. During the years ended December 31, 2017 and 2016, the Company recognized deferred revenue of $130,000 and $63,000, respectively, and related cost of sales of $83,000 and $63,000, respectively. Deferred revenue related to these sales at December 31, 2017 and 2016 amounted to approximately $68,000 and $75,000, respectively. 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, 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. Deferred revenue related to this agreement at December 31, 2017 and 2016 amounted to approximately $20,000 and $29,000, respectively. Loss Per Common Share Basic loss per common share excludes dilution and is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted 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. Since the Company has only incurred losses, basic and diluted loss per share are the same as potentially dilutive shares have been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive. The shares outstanding at the end of the respective periods presented below were excluded from the calculation of diluted net loss per shares due to their anti-dilutive effect: December 31, 2017 2016 Series C non-voting preferred stock 2,540,000 2,865,000 Series D non-voting preferred stock 1,479,240 1,479,240 Series E non-voting preferred stock 1,959,759 1,959,759 Series F non-voting preferred stock 3,157,561 - Shares underlying outstanding warrants 23,417,891 4,006,468 Shares underlying outstanding stock options 4,962,795 4,609,755 Total Potentially Dilutive Shares 37,517,246 14,920,222 Stock-Based Compensation The Company accounts for stock options granted to employees, officers and directors according to ASC No. 718, “Compensation — Stock Compensation” Effective October 1, 2016, the Company adopted Accounting Standards Update (“ASU”) 2016-09, Compensation — Stock Compensation Improvements to Employee Share-Based Payment Accounting 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” 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. As actual costs become known, the Company adjusts its accruals in the period when actual costs become known. 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. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized. Derivative Liability The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks; however, the Company has certain financial instruments that qualify as derivatives and are classified as liabilities on the balance sheet. The Company evaluates all its financial instruments to determine if those instruments or any potential embedded components of those instruments qualify as derivatives that need to be separately accounted for in accordance with FASB ASC 815, “Derivatives and Hedging” The Company accounts for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement. Stock warrants are classified as derivative liabilities if they can be cash settled or if there are insufficient authorized and unissued shares available to settle the contract after considering all other commitments that may require the issuance of stock during the maximum period the warrant could remain outstanding. Liability classified warrants are adjusted to their estimated fair values at each reporting period, with any decrease or increase in the estimated fair value being recorded in other income (expense). In May 2017, the Company issued warrants that were liability-classified because there were insufficient shares of common stock available to settle the contracts. The carrying values of those warrants were adjusted to their estimated fair values at June 30, 2017 and again during the third quarter when sufficient additional common shares were authorized to cause the warrants to be reclassified as equity. The fair values on the issuance date and subsequent re-measurement dates were estimated using a probability-weighted option pricing model, requiring assumptions to be developed under different scenarios for the expected term, expected volatility, expected dividend yield and the risk-free interest rate. The Company estimated the expected term of the warrants based on the remaining contractual term. Expected volatility was calculated based on implied volatility of the stock price. The expected dividend yield is assumed to be zero in all scenarios because the Company have never, and have no plans at this time, to pay any dividends. To determine the risk free interest rate, the Company used the U.S. Treasury yield curve in effect at the time of the measurement with a term consistent with the remaining expected term of the warrant. Recently Adopted Authoritative Pronouncements In June 2014, the FASB issued an accounting standard that clarifies the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The standard requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The amendments are effective for interim and annual reporting periods beginning after December 15, 2015. This adoption did not have a material impact on the Company’s consolidated financial statements. In August 2014, the FASB issued new guidance related to disclosures of uncertainties about an entity’s ability to continue as a going concern. The ASU requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued and if management’s plans will alleviate that doubt. Management will be required to make this evaluation for both annual and interim reporting periods. The Company adopted this guidance for the fiscal year ended December 31, 2016. This adoption did not have a material impact on the Company’s consolidated financial statements. In April 2015, the FASB issued new guidance which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This guidance was effective for the Company beginning in the first quarter of 2016. This adoption did not have a material impact on the Company’s consolidated financial statements. In March 2016, the FASB issued new guidance which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company adopted this guidance in the fourth quarter of fiscal year 2016, which was applied retroactively effective January 1, 2016. This adoption did not have a material impact on the Company’s consolidated financial statements. Recent Authoritative Pronouncements In May 2014, the FASB issued new guidance related to how an entity should recognize revenue. The guidance specifies that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In addition, the guidance expands the required disclosures related to revenue and cash flows from contracts with customers. In April 2016 and May 2016, the FASB issued updates in order to provide improvements and clarifications to the revenue recognition guidance. The Company will adopt the new revenue recognition standard as of January 1, 2018 using the modified retrospective method, which requires the cumulative effect of adoption, if any, to be recognized as an adjustment to opening retained earnings in the period of adoption. The majority of the Company’s revenue relates to the sale of finished products to various customers, and the adoption will not have any impact on revenue recognized from these transactions. The Company analyzed the impact on certain less significant transactions where the Company has deferred revenue for certain product sales as a result of the ability of the customer to return the product under certain conditions. As a result of the analysis, the Company will accelerate the remaining deferred revenue under these agreements as a cumulative effect adjustment to opening retained earnings as of January 1, 2018 and at that time will assess the need to adjust the reserve for returns and allowances. In January 2016, the FASB issued a new standard that modifies certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The accounting standard update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted. The Company will adopt this guidance on January 1, 2018 and it is not expected to have an impact on its consolidated financial statements. In February 2016, the FASB issued new guidance related to how an entity should lease assets and lease liabilities. The guidance specifies that an entity who is a lessee under lease agreements should recognize lease assets and lease liabilities for those leases classified as operating leases under previous FASB guidance. Accounting for leases by lessors is largely unchanged under the new guidance. The guidance is effective for us beginning in the first quarter of 2019. Early adoption is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is evaluating the impact of adopting this guidance on its consolidated financial statements. In June 2016, the FASB issued new guidance which replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance is effective for us beginning in the first quarter of fiscal year 2020. Early adoption is permitted beginning in the first quarter of fiscal year 2019. The Company is evaluating the impact of adopting this guidance on its consolidated financial statements. In August 2016, the FASB issued new guidance which clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows in order to reduce diversity in practice. The guidance is effective for us beginning in the first quarter of fiscal year 2018. Early adoption is permitted. The Company will adopt this guidance on January 1, 2018 and it is not expected to have an impact on its consolidated financial statements. In November 2016, the FASB issued new guidance which clarifies how restricted cash is presented and classified in the statement of cash flows. The guidance is effective for us beginning in the first quarter of fiscal year 2018. Early adoption is permitted. The Company will adopt this guidance on January 1, 2018 and it is not expected to have a significant impact on its consolidated financial statements. In January 2017, the FASB issued new guidance which clarifies the definition of a business in a business combination. The guidance is effective for us beginning in the first quarter of fiscal year 2018. Early adoption is permitted. The Company will adopt this guidance on January 1, 2018 and it is not expected to have an impact on its consolidated financial statements. In May 2017, the FASB issued new guidance which clarifies the application of stock based accounting guidance when a change is made to the terms or conditions of a share-based payment award. The guidance is effective for us beginning in the first quarter of fiscal year 2018. Early adoption is permitted. The Company will adopt this guidance on January 1, 2018 and it is not expected to have an impact on its consolidated financial statements. In July 2017, the FASB issued new guidance which changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features and recharacterizes the indefinite deferral of certain provisions within the guidance for distinguishing liabilities from equity. The guidance is effective for us beginning in the first quarter of fiscal year 2019. Early adoption is permitted. The Company is evaluating the impact of adopting this guidance on its consolidated financial statements. |
4. Related Party Transactions
4. Related Party Transactions | 12 Months Ended |
Dec. 31, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | In September 2014, as part of the removal of anti-dilution, price reset and change of control provisions in various securities that had caused those securities to be classified as derivative liabilities, the Company entered into a Consent and Exchange Agreement with Manchester Securities Corp. (“Manchester”), pursuant to which Manchester had a right of 60% participation in equity financings undertaken by the Company prior to September 15, 2017. Pursuant to this right of participation, Manchester elected partial participation in the equity financing that the Company closed on May 3, 2017 and invested $2,000,000. On March 3, 2015, the Company entered into a backstop agreement with Manchester under which Manchester had agreed to lend the Company, at its request, up to $3,000,000. The Company did not access the loan and the agreement expired on April 30, 2015. The Company issued two warrants exercisable for an aggregate of up to 283,400 common shares with an exercise price of $7.00 per share and a term of five years as a result of entering into the backstop agreement. Additionally, 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. As of December 31, 2017, two board members and one observer had been appointed to the board. The Company’s board of directors subsequently elected the observer to the board. On April 28, 2017, the Company entered into an underwriting agreement with H.C. Wainwright & Co., LLC, relating to an underwritten public offering of 16,190,697 shares of its common stock, together with Series A warrants to purchase up to an aggregate of 12,143,022 shares of its common stock and Series B warrants to purchase up to an aggregate of 12,143,022 shares of its common stock, at a price to the public of $0.75 per share and related warrants. Pursuant to Manchester’s participation rights, Elliott Associates, L.P. and Elliott International, L.P., affiliates of Manchester (together, “Elliott”) collectively purchased an aggregate of 2,666,668 shares of common stock, Series A warrants to purchase up to 2,000,000 shares of common stock, and Series B warrants to purchase up to 2,000,000 shares of common stock. The Company’s director, Gary Gelbfish, purchased 1,333,334 shares of common stock, Series A warrants to purchase up to 1,000,000 shares, and Series B warrants to purchase up to 1,000,000 shares of our common stock. The purchases by Elliott and Dr. Gelbfish were on the same terms as those for all other investors. In November 2017, the Company entered into a securities purchase agreement with Elliott Associates, L.P. and Elliott International, L.P., (the “Buyers”), long-term institutional investors in CorMedix and, together with Manchester Securities Corp., a subsidiary of Elliott Associates, L.P., our largest shareholder, whereby they purchased a newly issued CorMedix Series F convertible preferred stock at $1,000 per share. (See Note 7 – Stockholders’ Equity). Separately, on November 9, 2017, the Company entered into a backstop agreement with the Buyers to purchase up to an additional $3.0 million of Series F convertible preferred stock at $1,000 per share, (the “Backstop Agreement”), at the Company’s sole discretion, beginning January 15, 2018, through March 31, 2018. Gross proceeds of the securities purchase agreement and the Backstop Agreement, if the Backstop Agreement is used in full, total an aggregate of $5.0 million. As consideration for the Backstop Agreement, the Company issued 564,858 warrants, exercisable for three years, to purchase shares of the Company’s common stock at a per share exercise price of $0.001. The number of shares issuable under the warrant was determined by the closing price of the Company’s common stock on November 8, 2017, which was $0.5278, reduced by the amount of equity capital raised from the current ATM program and the sale of common stock to directors, executive officers and other certain employees of the Company totaling $2.4 million. The Buyers may convert the preferred stock into common stock at its option at an effective price of $0.6334 per share, which represents a 20% premium to the closing price of the Company’s common stock on November 8, 2017. The preferred stock will be mandatorily convertible on April 2, 2018, subject to certain equity conditions, at the lower of $0.6334 and a 10% discount to the notional price at which an equity or equity linked transaction in an amount of $3.0 million or more is completed by March 31, 2018, or if no such transaction is completed, a 10% discount to the closing price of the stock on March 31, 2018. No warrants were issued under the securities purchase agreement. The Backstop Agreement is no longer available to the Company. On November 29, 2017, the Company hired Dr. Gary Gelbfish, one of its directors, as a consultant to assist in the Company’s planned interim analysis for its ongoing LOCK-IT 100 clinical trial for Neutrolin. For his services, the Company will pay Dr. Gelbfish $800.00 per hour and will pay him for services rendered since November 10, 2017. In December 2017, the Company issued an aggregate of 624,246 shares of its common stock to its directors and executive officers and to certain of its employees at a per share purchase price of $0.48, which was the closing price of the stock on November 16, 2017, the date before the purchase agreements were executed. This common stock financing reduced the number of shares issuable under the warrants that the Company was required to issue to the Buyers pursuant to the Backstop Agreement. The Company realized gross proceeds of approximately $300,000. The following related parties participated in the common stock financing: Amount Number of Shares Khoso Baluch CEO and Director $ 50,000 104,166 Robert W. Cook CFO $ 25,000 52,083 John Armstrong Executive VP $ 10,000 20,833 Myron Kaplan Chairman of the Board $ 50,000 104,166 Janet Dillione Director $ 25,000 52,083 Gary Gelbfish Director $ 25,000 52,083 Mehmood Khan Director $ 25,000 52,083 Steven W. Lefkowitz Director $ 65,000 135,416 In each instance, the terms of purchase were identical for each purchaser. The Audit Committee of the Board of Directors approved the purchase by these insiders. |
5. Income Taxes
5. Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | The Company’s U.S. and foreign loss before income taxes are set forth below: December 31, 2017 2016 United States $ (31,992,324 ) $ (23,743,682 ) Foreign (1,017,699 ) (899,945 ) Total $ (33,010,023 ) $ (24,643,627 ) There were no current or deferred income tax provision for the years ended December 31, 2017 and 2016 because the Company has incurred operating losses since inception. The Company’s deferred tax assets consist of the following: December 31, 2017 2016 Net operating loss carryforwards – Federal $ 23,833,000 $ 27,798,000 Net operating loss carryforwards – State 7,264,000 4,082,000 Net operating loss carryforwards – Foreign 1,678,000 1,373,000 Capitalized licensing fees 1,068,000 1,734,000 Stock-based compensation 2,232,000 2,511,000 Accrued compensation 206,000 132,000 Other 65,000 181,000 Totals 36,346,000 37,811,000 Less valuation allowance (36,346,000 ) (37,811,000 ) Deferred tax assets $ - $ - The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. The Act reduces the U.S federal corporate tax rate from 35% to 21%. Accordingly, the Company has modified the value of the deferred tax assets and liabilities including the net operating loss carryover at December 31, 2017. Prior to enactment of the new tax reform, the Company had total net deferred tax assets of $51.4M before valuation allowance at December 31, 2017. Taking the new tax reform into consideration, the total net deferred tax assets was $36.3M before valuation allowance at December 31, 2017. The Company had approximately the following potentially utilizable net operating loss tax carryforwards: December 31, 2017 2016 Federal $ 113,492,000 $ 81,759,000 State $ 102,159,000 $ 68,713,000 Foreign $ 5,594,000 $ 4,577,000 The net operating loss tax carryforwards will start to expire in 2026 for Federal purposes and have already begun to expire for state purposes. The foreign net operating loss tax carryforwards do not expire. Our federal and state operating loss carryforwards include windfall tax deductions from stock option exercises. The utilization of the Company’s federal and state net operating losses may be subject to a substantial limitation due to the “change of ownership provisions” under Section 382 of the Internal Revenue Code and similar state provisions. Such limitation may result in the expiration of the net operating loss carryforwards before their utilization. The Company’s foreign earnings are derived from its German subsidiary. The Company does not expect any foreign earnings to be repatriated in the U.S. in the near future. The effective tax rate varied from the statutory rate as follows: December 31, 2017 2016 Statutory Federal tax rate 34.0 % 34.0 % State income tax rate (net of Federal) 6.3 % 5.7 % Effect of foreign operations 0.9 % 1.1 % Non-deductible expenses associated with derivative liabilities 0.0 % 0.0 % Warrant related expenses 0.0 % 0.0 % Federal Deferred Tax Rate Change (45.7 )% 0.0 % Other permanent differences 0.1 % 0.7 % Effect of valuation allowance 4.4 % (41.5 )% Effective tax rate 0.0 % 0.0 % In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income of the appropriate character during the periods in which those temporary differences become deductible and the loss carryforwards are available to reduce taxable income. In making its assessment, the Company considered all sources of taxable income including carryback potential, future reversals of existing deferred tax liabilities, prudent and feasible tax planning strategies, and lastly, objectively verifiable projections of future taxable income exclusive of reversing temporary differences and carryforwards. At December 31, 2017 and 2016, the Company maintained a full valuation allowance against its net deferred tax assets. The Company will continue to assess all available evidence during future periods to evaluate the realization of its deferred tax assets. As per the prior tax footnote, the tax benefit assumed the newly enacted Federal statutory tax rate of 21% and a state tax rate (net of federal) of 7.1% for the tax year ending December 31, 2017 and has been fully offset by the aforementioned valuation allowance. The following table presents the changes in the deferred tax asset valuation allowance for the periods indicated: Year Ended Balance at Beginning of Year Increase (Decrease) Charged (Credited) to Income Taxes (Benefit) Increase (Decrease) Charged (Credited) to OCI Balance at End of Year December 31, 2017 $ 37,811,000 $ (1,433,000 ) $ (32,000 ) $ 36,346,000 December 31, 2016 $ 26,527,000 $ 11,309,800 $ (25,800 ) $ 37,811,000 Accounting for uncertainty in income taxes requires uncertain tax positions to be classified as non-current income tax liabilities unless they are expected to be paid within one year. The Company has concluded that there are no uncertain tax positions requiring recognition in its consolidated financial statements as of December 31, 2017 and 2016. The Company recognizes interest and penalties related to uncertain tax positions if any as a component of income tax expense. The Company files income tax returns in the U.S. federal, state and foreign jurisdictions. Tax years 2013 to 2017 remain open to examination for both the U.S. federal and state jurisdictions. Tax years 2014 to 2016 remain open for Germany. |
6. Commitments and Contingencie
6. Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2017 | |
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 the formulation of taurolidine and citrate with low dose heparin in a catheter lock solution for maintaining patency and preventing infection in hemodialysis catheters. In this action, the Company claims that the Defendants infringe on the Prosl European Patent by manufacturing and distributing catheter locking solutions to the extent they are covered by the claims of the Prosl European Patent. The Company believes that its patent is sound, and is seeking injunctive relief and raising claims for information, rendering of accounts, calling back, destruction and damages. Separately, TauroPharm has filed an opposition with the EPO against the Prosl European Patent alleging that it lacks novelty and inventive step. The Company cannot predict 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 ND Partners’ utility model DE 20 2005 022 124 U1 (the “Utility Model”), which the Company believes is fundamentally identical to the Prosl European Patent in its main aspects and claims. The Court separated the two proceedings and the Prosl European Patent and the Utility Model claims 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 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. 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 by the EPO of the validity and possible infringement of the Prosl European Patent. The Company filed an appeal against the ruling on September 7, 2016. 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 June 2016 decision of the German PTO on the invalidity of the utility model, which we have appealed. On November 22, 2017, the EPO in Munich, Germany held a further oral hearing in this matter. At the hearing, the panel held that the Prosl European Patent would be invalidated because it did not meet the requirements of novelty based on a technical aspect of the European intellectual property law. The Company disagrees with this decision and plans to appeal. The Company’s appeal will be based, in part, on the written opinion to be issued by the Opposition Division, which is expected by the first quarter 2018. The Company continues to believe that the Prosl European Patent is indeed novel and that its validity should be maintained. There can be no assurance that the Company will prevail in this matter with either the German PTO or the EPO. In addition, the ongoing Unfair Competition litigation brought by the Company against TauroPharm is not affected and will continue. 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 in this matter was held on November 15, 2016. In this hearing, the court heard arguments from CorMedix and TauroPharm concerning the allegations of unfair competition. The court made no rulings from the bench, and indicated that it is prepared to further examine the underlying facts of the Company's allegations. On March 7, 2017, the court issued another interim decision in the form of a court order outlining again several issues relating to the argumentation of both sides in the proceedings. In particular the court requested the Company to further specify its requests and to further substantiate in even more detail which know know-how was provided by Biolink to TauroPharm by whom and when. The court also raised the question whether the know-how provided at the time to TauroPharm could still be considered to be secret know-how or may have become public in the meantime. The court granted both sides the opportunity to reply to this court order and provide additional facts and evidence until May 15, 2017. Both parties have submitted further writs in this matter and the court has now scheduled a further hearing on May 8, 2018. After having been rescheduled several times, the hearing will now take place on November 20, 2018. The Company intends to continue to pursue this matter, and to provide additional supplemental documentary and other evidence as may be necessary to support its claims. 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. These amounts are shown as restricted cash on the condensed consolidated balance sheets. Commitments Manufacturing 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 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 services related to this agreement were completed in the first quarter of 2017 and the total cost was $1.8 million. During the years ended December 31, 2017 and 2016, the Company recognized research and development expense of $279,000 and $1,278,000, respectively. The API produced under this agreement has been manufactured for future commercial sales in the EU and Middle East and used for the U.S. Phase 3 clinical trial. 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 $8.9 million at December 31, 2017. During the years ended December 31, 2017 and 2016, the Company recognized research and development expense of approximately $2,513,000 and $2,359,000, 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, the Company entered into a Master Service Agreement and Work Orders (the “Master Service Agreement”) with PPD Development, LP (“PPD”) to help the Company conduct its Phase 3 multicenter, double-blind, randomized active control study 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. In May 2017, the Company signed a contract modification with PPD for an additional cost of $7.2 million to cover the extension of the estimated study timeline, incorporate several protocol amendments and take on several new tasks related to the enrollment sites. Given several recent changes to the study agreed with the FDA, the Company signed a second contract modification with PPD for another $6.3 million, to cover the continuation of trial enrollment which is anticipated to continue into the second quarter of 2018, the increased length of time in which patients are enrolled and additional activities related to the collection of retrospective data outside the treatment centers. At December 31, 2017, the total cost of the contract increased to $32.7 million from its original amount of $19.2 million. During the years ended December 31, 2017 and 2016, the Company recognized $14,380,000 and $5,283,000 in research and development expense related to this agreement, respectively. The current contract may be subject to further modifications as the clinical trial progresses. The remaining commitment under the current contract at December 31, 2017 is approximately $14.7 million, which may be further modified. 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. 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. During the year ended December 31, 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 December 31, 2017 and 2016 is 109,157 shares of common stock. The maximum aggregate amount of cash payments upon achievement of milestones is $3,000,000 with the balance of $2,500,000 for the years ended December 31, 2017 and 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 in 2017 and 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. Employment Agreements On September 27, 2016, the Company entered into an employment agreement, effective October 3, 2016, with Khoso Baluch, its Chief Executive Officer. Unless renewed pursuant to the terms thereof, the agreement will expire on October 3, 2019. After the initial three-year term of Mr. Baluch’s employment agreement, the agreement will automatically renew for additional successive one-year 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. 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 his base salary and benefits for a period of 12 months following the effective date of the termination of his employment and all restricted shares and unvested stock options 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. In January 2017, the Company entered into a three-year employment agreement with Robert Cook to serve as its Chief Financial Officer and with Judith Abrams to serve as its Chief Medical Officer, and in March 2017, the Company entered into an employment agreement with John Armstrong to serve as its Executive Vice President for Technical Operations. After the initial three-year term of each employment agreement, the agreement will automatically renew for additional successive one-year 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. Under the agreements, in the event the Company terminates the employment of Mr. Cook, Dr. Abrams or Mr. Armstrong other than for Cause (as defined in the agreements), death or disability, other than by notice of nonrenewal, or if any of them resigns for Good Reason (as defined in the agreements), he or she will receive his or her base salary and benefits for a period of nine months following the effective date of the termination of employment, and, in the case of Mr. Cook and Dr. Abrams, all unvested time-based stock options 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 24, 2017, Dr. Abrams resigned for personal reasons. The Company did not owe Dr. Abrams any severance obligations under her employment agreement. In connection with her resignation, on August 25, 2017, the Company entered into a consulting agreement with Dr. Abrams for a term of up to nine months. Pursuant to the consulting agreement, Dr. Abrams will receive a monthly payment of approximately $29,000, an upfront payment of approximately $17,000, vesting in full of an option to purchase 46,250 shares of Company common stock granted under her employment agreement, and, at her option, COBRA premiums for the period during which she receives monthly payments under the consulting agreement. The fair value of the options that fully vested was recorded as an expense by the Company in the amount of $60,250 for the year ended December 31, 2017. Other In September 2017, the Company entered into a sublease agreement for approximately 6,960 square feet of office space in Berkeley Heights, New Jersey, which sublease runs from September 15, 2017 to June 29, 2020. This sublease is rent-free to the Company. Effective October 1, 2017, the Company terminated its sublease for the 4,700 square feet of office space in Bedminster, New Jersey with no further lease obligation for the remainder of the sublease. Rent was $5,000 per month plus occupancy costs such as utilities, maintenance and taxes. Rent expense for the years ended December 31, 2017 and 2016, was $45,237 and $68,096, respectively. As of December 31, 2017, the Company has no remaining lease obligation. |
7. Stockholders' Equity
7. Stockholders' Equity | 12 Months Ended |
Dec. 31, 2017 | |
STOCKHOLDERS' EQUITY | |
Stockholders' Equity | Common Stock: On May 3, 2017, the Company closed an underwritten public offering of 18,619,301 shares of its common stock, par value $0.001 per share, together with Series A warrants (“Series A Warrants”) to purchase up to an aggregate of 13,964,476 shares of its common stock and Series B warrants (“Series B Warrants”) to purchase up to an aggregate of 13,964,476 shares of its common stock. Series A Warrants have an exercise price of $0.75 per share of common stock and will expire thirteen months following the Exercisable Date (defined below). Series B Warrants have an exercise price of $1.05 per share of common stock and will expire five years following the Exercisable Date. The net proceeds from this public offering was approximately $12.8 million. The Company issued to the underwriter warrants to purchase up to an aggregate of 1,117,158 shares of common stock, with an exercise price of $0.9375, which represents 125% of the public offering price per combined share and related warrants. The underwriter warrant will expire five years following the Exercisable Date. Other than the exercise price, the terms of the underwriter warrants are the same as the Series B Warrants. In May 2017, the Company did not have a sufficient number of authorized shares of common stock to cover the shares issuable upon exercise of the warrants issued in the May 2017 public offering and therefore classified the fair value of the warrants as a derivative liability at June 30, 2017. On August 8, 2017, the Company’s shareholders approved the amendment of the Company’s amended and restated Certificate of Incorporation (the “Charter Amendment”) increasing the shares of authorized capital stock from 82,000,000 shares to 162,000,000 shares and increasing the number of authorized shares of common stock from 80,000,000 to 160,000,000 shares. The fair value of these warrants was re-measured on August 10, 2017, the date the warrants became exercisable (the “Exercisable Date”), with the increase in value recorded as a loss in the statement of operations. The fair value of the warrants at August 10, 2017 was reclassified then from liability to equity. In December 2017, the Company sold an aggregate of 624,246 shares of its common stock to its directors and executive officers and to certain of its employees at a per share purchase price of $0.48. The Company realized gross proceeds of approximately $300,000. (See Note 4 – Related Party Transactions). During the year ended December 31, 2017, the Company entered into warrant exchange agreements whereby the Company agreed to exchange with various investors (the “Investors”) Series A warrants issued in its May 2017 public offering of common stock and warrants. The exchanged warrants provided for the purchase of up to an aggregate of 9,886,250 shares of the Company’s common stock at an exercise price of $0.75, with an expiration date of September 10, 2018. The Company issued an aggregate of 2,471,561 shares of common stock to the Investors in exchange for these warrants at an exchange rate of 25%. During the year ended December 31, 2017, the Company issued 10,000 shares of its common stock upon exercise of stock options resulting in gross proceeds of $6,800 to the Company. During the year ended December 31, 2017, the Company issued an aggregate of 325,000 shares of its common stock upon conversion of an aggregate of 32,500 Series C-3 non-voting preferred stock. During the year ended December 31, 2017, the Company issued 970 shares of its common stock upon cashless exercise of 62,500 warrants. The Company has a sales agreement, as amended on December 8, 2017, with B. Riley (the “Sales Agreement”) under which the Company may issue and sell up to an aggregate of $60.0 million of shares of its common stock from time to time through B. Riley acting as agent, subject to limitations imposed by the Company and subject to B. Riley’s acceptance, 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 B. Riley 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. B. Riley 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. During the years ended December 31, 2017 and 2016, the shares of common stock under the Sales Agreement issued by the Company were 5,239,815 and 3,360,037, respectively, and realized net proceeds of $3,484,000 in 2017 and $6,229,000 in 2016. As of December 31, 2017, the Company had approximately $17.9 million available under the Sales Agreement which will expire on April 16, 2018. During the year ended December 31, 2016, the Company also issued 21,454 shares of common stock upon cashless exercise of 25,000 warrants and 1,087,500 shares of common stock upon exercise of stock options at a weighted average exercise price of $0.79 per share, resulting in gross proceeds of $863,000 to the Company. Restricted Stock Units During the year ended December 31, 2017, the Company granted an aggregate of 112,931 restricted stock units (“RSUs”) to its officers and directors under its 2013 Stock Incentive Plan with a weighted average grant date fair value of $2.15 per share. These RSUs vest over various dates through December 31, 2018. During the year ended December 31, 2017, compensation expense recorded for these RSUs was $88,000. Unrecognized compensation expense as of December 31, 2017 was $50,000. The expected weighted average period for the expense to be recognized is 0.48 years. During the year ended December 31, 2017, 46,517 RSUs were forfeited. Preferred Stock The Company is authorized to issue up to 2,000,000 shares of preferred stock in one or more series without stockholder approval. The Company’s board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock. Of the 2,000,000 shares of preferred stock authorized, the Company’s board of directors has designated (all with par value of $0.001 per share) the following: As of December 31, 2017 As of December 31, 2016 Preferred Shares Outstanding Liquidation Preference (Per Share) Total Liquidation Preference Preferred Shares Outstanding Liquidation Preference (Per Share) Total Liquidation Preference Series C-2 150,000 10.0 1,500,000 150,000 10.0 1,500,000 Series C-3 104,000 10.0 1,040,000 136,500 10.0 1,365,000 Series D 73,962 21.0 1,553,202 73,962 21.0 1,553,202 Series E 89,623 49.2 4,409,452 89,623 49.2 4,409,452 Series F 2,000 1,000 2,000,000 - - - Total 419,585 10,502,654 450,085 8,827,654 On November 9, 2017, the Company entered into a securities purchase agreement with existing institutional investors (the “Buyers”), pursuant to which, on November 16, 2017, the Company sold $2.0 million of its newly designated Series F convertible preferred stock (“Series F Stock”) at $1,000 per share. Each share of Series F Stock is convertible into shares of the Company’s common stock, at the option of the Buyers, at an effective price of $0.6334 per share, which represents a 20% premium to the closing price of the Company’s common stock on November 8, 2017. The conversion price of the Series F Stock is subject to anti-dilution adjustment for customary recapitalization events such as stock splits, as well as full ratchet anti-dilution protection in the event that the Company does not obtain the subordination of the Series C-3 preferred stock to that of the Series F Stock (as described below) or obtain stockholder approval of the issuance of common stock that exceeds NYSE American rules (as described below). The Series F Stock will be mandatorily convertible on April 2, 2018, subject to certain equity conditions, at (A) the lower of (i) $0.6334 and (ii) a 10% discount to the notional price at which an equity or equity linked transaction in an amount of $3 million or more is completed by March 31, 2018, or (B) if such a transaction is completed and results in gross proceeds of less than $3 million, the average closing price of the common stock for the immediately preceding five trading days, or (C) otherwise the lower of (i) $0.6334 and (ii) a 10% discount to the closing price of the stock on April 2, 2018. The Series F Stock is non-voting and has no dividend right outside of receiving dividends in the same form as we pay to holders of shares of our common stock. It contains a prohibition on its conversion if, as a result of such conversion, the Company would have issued shares of our common stock in an aggregate amount equal to 13,336,939 shares, which is 20% of its outstanding shares of common stock on November 9, 2017, unless the Company has received the approval of its stockholders for such overage, or the Series F Stock does not rank senior to all previously issued preferred stock. The Buyers will be prohibited from converting Series F Stock into shares of its common stock to the extent that, as a result of such conversion, the Buyers, together with their affiliates, would own more than 9.99% of the total number of shares of our common stock then issued and outstanding. In the event of the Company’s liquidation, dissolution, or winding up, holders of the Series F Stock will receive a payment equal to $1,000 per share of Series F Stock, subject to adjustment, before any proceeds are distributed to the holders of common stock. Shares of the Series F Stock will rank: ● senior to all common stock and the Series C-2, Series C-3 Convertible Preferred Stock (subject to the Company obtaining any consent, waiver or other authorization from the holders of the Series C-3 Convertible Preferred Stock necessary for the subordination of the Series C-3 Convertible Preferred Stock to the Series F Preferred Stock), Series D Non-Voting Convertible Preferred Stock, Series E Non-Voting Convertible Stock; and ● senior to any class or series of capital stock hereafter created. in each case, as to distributions of assets upon our liquidation, dissolution or winding up whether voluntarily or involuntarily. As a part of the financing, the Company also entered into a registration rights agreement with the Buyers whereby the Buyers can demand that the Company register the shares issuable upon exercise of the warrants, and shares issuable upon conversion of the Series F Stock, if issued. The backstop agreement (see Warrant section of this Note) provides that until the later of (x) the date that no Series F preferred shares are outstanding and (y) the date the no warrants issued under the backstop agreement are outstanding, the Company may not effect a issue any securities in a “variable rate transaction” other than at-the-market offerings through a registered broker-dealer or offerings of the Series F preferred stock. A “variable rate transaction” is a transaction on terms more favorable than those of the backstop agreement and the Series F preferred stock, in which the Company issues any convertible securities either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of the Company’s common Stock at any time after the initial issuance of such convertible securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such convertible securities or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for its common stock, other than pursuant to a customary “weighted average” anti-dilution provision or (ii) enters into any agreement (other than an at-the-market offering through a registered broker-dealer) whereby the Company may sell securities at a future determined price (other than standard and customary “preemptive” or “participation” rights). The following terms and conditions apply to the Series C, Series D and Series E non-voting convertible preferred stock outstanding at December 31, 2017 and 2016: Dividends Fundamental Transactions- Redemption Listing- Series C-2 and Series C-3 Non-Voting Convertible Preferred Stock and Warrants In October 2013, the Company issued 150,000 shares of Series C-2 non-voting convertible preferred stock, together with warrants to purchase up to an aggregate of 1,500,000 shares of common stock. In January 2014, the Company sold to various investors 200,000 shares of Series C-3 non-voting convertible preferred stock, together with warrants to purchase up to an aggregate of 1,000,000 shares of common stock, for aggregate gross proceeds of $2,000,000. The Series C-2 non-voting preferred stock and Series C-3 non-voting preferred stock have identical rights, privileges and terms and are referred to collectively as the “Series C Stock.” Each share of Series C Stock is convertible into 10 shares of common stock at any time at the holder’s option at a conversion price of $1.00 per share. In the event of the Company’s liquidation, dissolution, or winding up, holders of the Series C Stock will receive a payment equal to $10.00 per share of Series C Stock, subject to adjustment, before any proceeds are distributed to the holders of common stock. Shares of the Series C Stock will not be entitled to receive any dividends, unless and until specifically declared by the Company’s board of directors. The Series C Preferred Stock ranks senior to the Company’s common stock; senior Series D Non-Voting Convertible Preferred Stock Each share of Series D non-voting convertible preferred stock is convertible into 20 shares of common stock (subject to adjustment) at a per share price of $0.35 at any time at the option of the holder, except that a holder will be prohibited from converting shares of Series D non-voting convertible preferred stock into shares of common stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than 9.99% of the total number of shares of the Company’s common stock then issued and outstanding. In the event of the Company’s liquidation, dissolution or winding up, holders of Series D non-voting convertible preferred stock will receive a payment equal to $21.00 per share of Series D non-voting convertible preferred stock on parity with the payment of the liquidation preference due the Series E non-voting convertible preferred stock, but before any proceeds are distributed to the holders of common stock, the Series C-2 non-voting convertible preferred stock. The Series D non-voting convertible preferred stock ranks senior to the Company’s common stock; senior to any class or series of capital stock created after the issuance of the Series D non-voting convertible preferred stock; senior to the Series C-2 non-voting convertible preferred stock and the Series C-3 non-voting convertible preferred stock; on parity with the Series E non-voting convertible preferred stock; and junior to the Series F non-voting convertible preferred stock. As long as any of the Series D non-voting convertible preferred stock is outstanding, the Company cannot incur any indebtedness other than indebtedness existing prior to September 15, 2014, trade payables incurred in the ordinary course of business consistent with past practice, and letters of credit incurred in an aggregate amount of $3.0 million at any point in time. In addition to the debt restrictions above, as long as any shares of the Series D non-voting convertible preferred stock are outstanding, the Company cannot, among others things: create, incur, assume or suffer to exist any encumbrances on any of its assets or property; or redeem, purchase or otherwise acquire or pay or declare any dividend or other distribution on any junior securities. Series E Non-Voting Convertible Preferred Stock Each share of Series E non-voting convertible preferred stock was originally convertible into 21.8667 shares of the Company’s common stock (subject to adjustment) at a per share price of $0.75 at any time at the option of the holder, except that a holder will be prohibited from converting shares of Series E non-voting convertible preferred stock into shares of common stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than 9.99% of the total number of shares of the Company’s common stock then issued and outstanding. In the event of the Company’s liquidation, dissolution or winding up, holders of Series E preferred stock will receive a payment equal to $49.20 per share of Series E non-voting convertible preferred stock on parity with the payment of the liquidation preference due the Series D non-voting convertible preferred stock, but before any proceeds are distributed to the holders of common stock, the Series C-2 non-voting convertible preferred stock. The Series E non-voting convertible preferred stock ranks senior to the Company’s common stock; senior to any class or series of capital stock created after the issuance of the Series E non-voting preferred stock; senior to the Series C-2 and the Series C-3 non-voting convertible preferred stock; on parity with the Series D non-voting convertible preferred stock; and junior to the Series F non-voting convertible preferred stock. As long as any of the Series E non-voting convertible preferred stock is outstanding, the Company cannot incur any indebtedness other than indebtedness existing prior to September 15, 2014, trade payables incurred in the ordinary course of business consistent with past practice, and letters of credit incurred in an aggregate amount of $3.0 million at any point in time. In addition to the debt restrictions above, as long as any the Series E non-voting convertible preferred stock is outstanding , the Company cannot, among others things: create, incur, assume or suffer to exist any encumbrances on any of our assets or property; redeem, repurchase or pay any cash dividend or distribution on any of our capital stock (other than as permitted); redeem, repurchase or prepay any indebtedness; or engage in any material line of business substantially different from our current lines of business. In the event the Company issues any options, convertible securities or rights to purchase stock or other securities pro rata to the holders of common stock, then holders of Series E non-voting convertible preferred stock will be entitled to acquire, upon the same terms a pro rata amount of such stock or securities as if the Series E non-voting convertible preferred stock had been converted to common stock. Stock Options: The Company’s 2013 Stock Incentive Plan (the “2013 Plan”) was approved by the shareholders in July 2013. The 2013 Plan provides for the issuance of equity grants in the form of options, restricted stock, stock awards and other forms of equity compensation. Awards may be made to directors, officers, employees and consultants under the 2013 Plan. Initially, an aggregate of 5,000,000 shares of the Company’s common stock was reserved for issuance under the 2013 Plan. On January 19, 2016, the shareholders approved the increase of the shares issuable under the 2013 Plan from 5,000,000 to 8,000,000 and on June 13, 2016 from 8,000,000 to 11,000,000. During the year ended December 31, 2017, the Company granted ten-year qualified and non-qualified stock options to its officers, directors, employees and consultants covering an aggregate of 1,387,500 shares of the Company’s common stock under the 2013 Stock Incentive Plan. The weighted average exercise price of these options is $1.54 per share. During the year ended December 31, 2016, the Company granted ten-year non-qualified stock options under 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 is being amortized to expense over the related vesting periods. During the years ended December 31, 2017 and 2016, total compensation expense for stock options issued to employees, directors, officers and consultants was $1,571,137 and $1,335,157, respectively. As of December 31, 2017, there was $2,834,000 total unrecognized compensation expense related to stock options granted which expense will be recognized over an expected remaining weighted average period of 1.67 years. Effective October 1, 2016, the Company adopted Accounting Standards Update (“ASU”) 2016-09, Compensation — Stock Compensation Improvements to Employee Share-Based Payment Accounting The fair value at grants dates of the grants issued subject to service and performance based vesting conditions were determined using the Black-Scholes option pricing model with the following assumptions: Year Ended December 31, 2017 2016 Risk-free interest rate 1.77% - 2.40% 1.14% - 1.94% Expected volatility 95% - 106% 96% - 98% Expected term (years) 5 - 10 years 5 - 10 years Expected dividend yield 0.0% 0.0% Weighted-average grant date fair value of options granted during the period $ 1.18 $ 1.76 The Company estimated the expected term of the stock options granted based on anticipated exercises in future periods. The expected term of the stock options granted to consultants is based upon the full term of the respective option agreements. Beginning January 1, 2017, 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. In 2016, the expected stock price volatility was calculated based on the historical volatility since the initial public offering, weighted between the period 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 which is 5 years for employees and 10 years for non-employees. 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: Expected Term 5 years Volatility 97 % Dividend yield 0.0 % Risk-free interest rate 1.13 % Weighted-average grant date fair value of options granted during the period $ 1.12 The following table summarizes the Company’s stock options activity and related information for the year ended December 31, 2017: Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding at beginning of year 4,609,755 $ 2.29 8.2 $ 581,823 Granted 1,387,500 $ 1.54 247,500 Exercised (10,000 ) $ 0.68 13,200 Expired/Cancelled (588,344 ) $ 2.97 Forfeited (436,116 ) $ 1.85 Outstanding at end of year 4,962,795 $ 2.04 7.5 $ 247,500 Vested at end of year 2,479,971 $ 1.91 6.1 $ 76,249 Expected to vest in the future 2,482,824 $ 2.17 8.9 $ 171,251 The total intrinsic value of stock options exercised during the years ended December 31, 2017 and 2016 was $13,200 and $1,497,506, respectively. 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: On November 9, 2017, in addition to the securities purchase agreement issued to the Buyers (See Preferred Stock, Note 7), the Company entered into a backstop agreement with the Buyers to purchase additional Series F convertible preferred Stock at $1,000 per share, at the Company’s sole discretion, beginning January 15, 2018 through March 31, 2018. As consideration for the backstop agreement, the Company issued 564,858 warrants, exercisable for three years, to purchase shares of the Company’s common stock at a per share exercise price of $0.001. The number of shares issuable under the warrant was determined by the closing price of the Company’s common stock on November 8, 2017, which was $0.5278, reduced by the amount of equity capital raised from the ATM program and the sale of common stock to directors, executive officers and other certain employees of the Company totaling $2.4 million. Each Buyer may convert the preferred stock into common stock at its option at an effective price of $0.6334 per share, which represents a 20% premium to the closing price of the Company’s common stock on November 8, 2017. On November 16, 2017, the Company recorded a derivative liability of $270,592 and a corresponding reduction to additional paid in capital based on the initial Black Scholes valuation. The warrants were initially classified as a liability as the Company had a conditional obligation to settle the warrants by issuing a variable number of shares with variations of the obligation based on inputs other than the fair value of the Company’s shares (i.e. the amount subject to the backstop agreement). The fair value of the warrants was determined using a Black-Scholes option pricing model using the following assumptions at the grant date of the warrants: November 16, 2017 Expected Term 3.00 years Volatility 98 % Dividend yield 0.0 % Exercise Price $ 0.00 Risk-free interest rate 1.83 % Fair value of warrants granted $ 270,592 Number of shares underlying warrants granted 564,858 On December 24, 2017, the derivative liability of $327,079 was reclassified to equity as the number of issued warrants was determined on that date. Prior to the reclassification to equity, an expense of $56,487 for the change in fair value of derivative liability was recorded on the Company’s consolidated statement of operations and comprehensive income (loss) for the year ended December 31, 2017, which represented the increase in the fair value of the derivative liability from November 16, 2017, the original valuation date of the warrants, and December 24, 2017, the date the warrants became classified as equity. As these warrants were liability-classified prior to the reclassification to equity, the fair value of the warrants were revalued at December 24, 2017 using the following assumptions: December 24, 2017 Expected Term 2.90 years Volatility 98 % Dividend yield 0.0 % Exercise Price $ 0.00 Risk-free interest rate 2.01 % Weighted average fair value of warrants granted $ 327,079 Number of shares underlying warrants granted 564,858 In the May 2017 public offering, the Company issued 29,046,110 warrants, of which 9,886,250 warrants were subsequently exchanged for 2,471,561 shares of the Company's common stock during the year ended December 31, 2017. In the May 2017 public offering, the Company did not have sufficient number of authorized shares of common stock available to reserve the shares issuable upon the exercise of 29,046,110 outstanding warrants issued in the May 2017 public offering. Therefore, these warrants were classified as liabilities at June 30, 2017 and were re-measured on August 10, 2017, which was the Exercisable Date, with any increase or decrease in value recorded as a loss or gain in the income statement. The Company recorded a loss of $1,974,019 during the year ended December 31, 2017. As of August 9, 2017, the Company had enough authorized shares to cover the issuance of these warrants, and therefore the derivative liability was reclassified to equity on that date in the amount of $3,854,195. The fair value of the warrants was determined using a probability-weighted Black-Scholes option pricing under different scenarios regarding the expected probability and timing of sufficient additional shares being authorized to allow the warrants to become exercisable. The following assumptions were used to value the warrants at the grant date. Series A Series B Underwriter’s Expected Term 1.18 – 1.33 years 5.10 – 5.25 years 5.10 – 5.25 years Volatility 55% 55% 55% Dividend yield 0.0% 0.0% 0.0% Exercise Price $0.75 $1.05 $0.94 Risk-free interest rate 1.13% - 1.16% 1.86% - 1.88% 1.86% - 1.88% Weighted average fair value of warrants granted $0.08 $0.17 $0.18 Number of shares underlying warrants granted 13,964,476 13,964,476 1,117,158 As these warrants are liability-classified, they were revalued at August 10, 2017 using the following assumptions: Series A Series B Underwriter’s Expected Term 1.09 5.00 5.00 Volatility 96.95% 96.95% 96.95% Dividend yield 0.0% 0.0% 0.0% Exercise Price $ 0.75 $ 1.05 $ 0.94 Risk-free interest rate 1.22% 1.76% 1.76% Weighted average fair value of warrants $ 0.06 $ 0.20 $ 0.20 The following table is the summary of warrant activities: Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life Outstanding at December 31, 2016 4,006,468 $ 1.65 2.36 Issued 29,610,968 0.95 3.77 Converted to common shares (9,886,250 ) Exercised (62,500 ) 0.40 - Expired (250,795 ) 0.40 - Outstanding at December 31, 2017 23,417,891 $ 1.08 3.42 Various warrants that the Company has issued contain a prohibition on the Company entering into a merger, sale of all or substantially all of its assets or similar transaction unless the acquiring entity assumes all of the obligations of the Company under the warrants and also is a publicly traded corporation whose common stock is quoted on or listed for trading on a securities exchange, provided that this prohibition will not apply to an all cash acquisition. Stock-based Deferred Compensation Plan for Non-Employee Directors During the third quarter of 2014, the Company established an unfunded stock-based deferred compensation plan, providing non-employee directors the opportunity to defer up to one hundred percent of fees and compensation, including restricted stock units. The amount of fees and compensation deferred by a non-employee director is converted into stock units, the number of which is determined based on the closing price of the Company’s common stock on the date such compensation would have otherwise been payable. At all times, the plan participants are one hundred percent vested in their respective |
8. Concentrations
8. Concentrations | 12 Months Ended |
Dec. 31, 2017 | |
Risks and Uncertainties [Abstract] | |
Concentrations | At December 31, 2017, approximately 81% of net accounts receivable was due from two customers (57% and 24%). During the year ended December 31, 2017 and 2016, the Company had revenue from two customers that each exceeded 10% of its total sales (25% and 19%) and (24% and 12%), respectively. |
9. Subsequent Events
9. Subsequent Events | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Through March 9, 2018, the Company issued an aggregate of 9,709,621 shares under its current ATM Program with a weighted average sale price of $0.33 per share, resulting in net proceeds of approximately $3.2 million. On March 9, 2018, the Company entered into a new agreement with B. Riley FBR, Inc. for the sale of up to $14.1 million of the Company’s common stock, subject to the effectiveness of the registration statement for such offering, which the Company filed on March 9, 2018. The new ATM program is expected to become effective upon the expiration of the current ATM Program; in no event will the two ATM programs run concurrently. On March 19, 2018, the Company entered into a binding term sheet with Elliott Management Corporation for a proposed $3.0 million backstop facility. If a definitive agreement can be negotiated and executed, the proposed backstop facility would be available for drawing between April 16, 2018 and July 31, 2018. In the event of the execution of a definitive backstop agreement, for which the Company can give no assurance, the Company will report such execution and publicly disclose the terms of the backstop agreement. |
3. Summary of Significant Acc16
3. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Use of Estimates | The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements include the accounts of the Company and CorMedix Europe GmbH, a wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. |
Financial Instruments | Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and short-term investments. The Company maintains its cash and cash equivalents in bank deposit and other interest bearing accounts, the balances of which, at times, may exceed federally insured limits. The appropriate classification of marketable securities is determined at the time of purchase and reevaluated as of each balance sheet date. Investments in marketable debt and equity securities classified as available-for-sale are reported at fair value. Fair value is determined using quoted market prices in active markets for identical assets or liabilities or quoted prices for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Changes in fair value that are considered temporary are reported 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). 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 December 31, 2017 or 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 December 31, 2017 and 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 December 31, 2017 and 2016: December 31, 2017: Amortized Cost Gross Unrealized Losses Gross Unrealized Gains Fair Value Money Market Funds included in Cash Equivalents $ 6,032,034 $ - $ - $ 6,032,034 Corporate Securities 905,625 (112 ) 3 905,516 Commercial Paper 698,682 - - 698,682 Subtotal 1,604,307 (112 ) 3 1,604,198 Total December 31, 2017 $ 7,636,341 $ (112 ) $ 3 $ 7,636,232 December 31, 2016: Money Market Funds included in Cash Equivalents $ 95,949 $ - $ - $ 95,949 Corporate Securities 10,619,583 (13,212 ) - 10,606,371 Commercial Paper 1,494,549 - - 1,494,549 Subtotal 12,114,132 (13,212 ) - 12,100,920 Total December 31, 2016 $ 12,210,081 $ (13,212 ) $ - $ 12,196,869 |
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, which is set out below. 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. ● 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 The following table provides the carrying value and fair value of the Company’s financial assets measured at fair value as of December 31, 2017 and 2016: December 31, 2017: Carrying Value Level 1 Level 2 Level 3 Money Market Funds $ 6,032,034 $ 6,032,034 $ - $ - Available for sale securities: Corporate Securities 905,516 - 905,516 - Commercial Paper 698,682 - 698,682 - Subtotal 1,604,198 - 1,604,198 - Total December 31, 2017 $ 7,636,232 $ 6,032,034 $ 1,604,198 $ - December 31, 2016: Money Market Funds $ 95,949 $ 95,949 $ - $ - Available for sale securities: Corporate Securities 10,606,371 - 10,606,371 - Commercial Paper 1,494,549 - 1,494,549 - Subtotal 12,100,920 - 12,100,920 - Total December 31, 2016 $ 12,196,869 $ 95,949 $ 12,100,920 $ - |
Foreign Currency Translation and Transactions | The 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, if any, 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 year. Translation gains and losses are included in other comprehensive loss. The Company had foreign currency translation gains of $4,144 and $8,029 in 2017 and 2016, respectively. 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. |
Segment and Geographic Information | The Company reported revenues of $329,327 and $224,105 for the years ended December 31, 2017 and 2016, respectively. Of the Company’s 2017 and 2016 revenues, $320,504 and $215,282, respectively, were attributable to its European and Mideast operations, which are based in Germany. Total assets at December 31, 2017 and 2016 were $13,453,933 and $21,906,386, respectively, of which $12,597,231 and $21,595,572 were located in the United States at December 31, 2017 and 2016, respectively, with the remainder in Germany. |
Restricted Cash | As of December 31, 2017 and 2016, the Company’s restricted cash is in connection with the patent and utility model infringement proceedings against TauroPharm (see Note 6). 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, pre-clinical development and insurance policies. These advanced payments are amortized to expense either as services are performed or over the relevant service period using the straight-line method. |
Inventories, net | Inventories are valued at the lower of cost or net realizable value on a first in, first out basis. Inventories consist of raw materials (including labeling and packaging), work-in-process, and finished goods, if any, for the Neutrolin product. Inventories consist of the following: December 31, 2017 2016 Raw materials $ 141,233 $ 79,900 Work in process 526,067 463,897 Finished goods 29,894 52,936 Inventory reserve (103,000 ) (430,000 ) Total $ 594,194 $ 166,733 |
Property and Equipment | Property and equipment consist primarily of furnishings, fixtures, leasehold improvements, office equipment and computer equipment all of which are recorded at cost. Depreciation is provided for by the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized using the straight-line method over the remaining lease term or the life of the asset, whichever is shorter. Property and equipment, as of December 31, 2017 and 2016 were $186,282 and $69,695, respectively, net of accumulated depreciation of $154,836 and $117,949, respectively. Depreciation and amortization of property and equipment is included in selling, general and administrative expenses. Description Estimated Useful Life Office equipment and furniture 5 years Leasehold improvements 5 years Computer equipment 5 years Computer software 3 years |
Accrued Expenses | Accrued expenses consist of the following at December 31: 2017 2016 Professional and consulting fees $ 485,089 $ 335,198 Accrued payroll and payroll taxes 755,221 737,607 Clinical trial and manufacturing development 2,884,924 875,500 Product development 80,001 374,839 Market research 116,466 - Other 42,166 19,208 Total $ 4,363,867 $ 2,342,352 |
Revenue Recognition | 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 revenue once the four revenue recognition criteria are met in accordance with the terms of its various distribution agreements. |
Deferred Revenue | In October 2015, the Company shipped product with less than 75% of its remaining shelf life to a customer 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. Due to limited sales experience with the customer, the Company was 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. During the years ended December 31, 2017 and 2016, the Company recognized deferred revenue of $130,000 and $63,000, respectively, and related cost of sales of $83,000 and $63,000, respectively. Deferred revenue related to these sales at December 31, 2017 and 2016 amounted to approximately $68,000 and $75,000, respectively. 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, 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. Deferred revenue related to this agreement at December 31, 2017 and 2016 amounted to approximately $20,000 and $29,000, respectively. |
Loss per common share | Basic loss per common share excludes dilution and is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted 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. Since the Company has only incurred losses, basic and diluted loss per share are the same as potentially dilutive shares have been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive. The shares outstanding at the end of the respective periods presented below were excluded from the calculation of diluted net loss per shares due to their anti-dilutive effect: December 31, 2017 2016 Series C non-voting preferred stock 2,540,000 2,865,000 Series D non-voting preferred stock 1,479,240 1,479,240 Series E non-voting preferred stock 1,959,759 1,959,759 Series F non-voting preferred stock 3,157,561 - Shares underlying outstanding warrants 23,417,891 4,006,468 Shares underlying outstanding stock options 4,962,795 4,609,755 Total Potentially Dilutive Shares 37,517,246 14,920,222 |
Stock-Based Compensation | The Company accounts for stock options granted to employees, officers and directors according to ASC No. 718, “Compensation — Stock Compensation” Effective October 1, 2016, the Company adopted Accounting Standards Update (“ASU”) 2016-09, Compensation — Stock Compensation Improvements to Employee Share-Based Payment Accounting 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” |
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. As actual costs become known, the Company adjusts its accruals in the period when actual costs become known. 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. |
Income Taxes | Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized. |
Derivative Liability | The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks; however, the Company has certain financial instruments that qualify as derivatives and are classified as liabilities on the balance sheet. The Company evaluates all its financial instruments to determine if those instruments or any potential embedded components of those instruments qualify as derivatives that need to be separately accounted for in accordance with FASB ASC 815, “Derivatives and Hedging” The Company accounts for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement. Stock warrants are classified as derivative liabilities if they can be cash settled or if there are insufficient authorized and unissued shares available to settle the contract after considering all other commitments that may require the issuance of stock during the maximum period the warrant could remain outstanding. Liability classified warrants are adjusted to their estimated fair values at each reporting period, with any decrease or increase in the estimated fair value being recorded in other income (expense). In May 2017, the Company issued warrants that were liability-classified because there were insufficient shares of common stock available to settle the contracts. The carrying values of those warrants were adjusted to their estimated fair values at June 30, 2017 and again during the third quarter when sufficient additional common shares were authorized to cause the warrants to be reclassified as equity. The fair values on the issuance date and subsequent re-measurement dates were estimated using a probability-weighted option pricing model, requiring assumptions to be developed under different scenarios for the expected term, expected volatility, expected dividend yield and the risk-free interest rate. The Company estimated the expected term of the warrants based on the remaining contractual term. Expected volatility was calculated based on implied volatility of the stock price. The expected dividend yield is assumed to be zero in all scenarios because the Company have never, and have no plans at this time, to pay any dividends. To determine the risk free interest rate, the Company used the U.S. Treasury yield curve in effect at the time of the measurement with a term consistent with the remaining expected term of the warrant. |
Recently Adopted Authoritative Pronouncements | In June 2014, the FASB issued an accounting standard that clarifies the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The standard requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The amendments are effective for interim and annual reporting periods beginning after December 15, 2015. This adoption did not have a material impact on the Company’s consolidated financial statements. In August 2014, the FASB issued new guidance related to disclosures of uncertainties about an entity’s ability to continue as a going concern. The ASU requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued and if management’s plans will alleviate that doubt. Management will be required to make this evaluation for both annual and interim reporting periods. The Company adopted this guidance for the fiscal year ended December 31, 2016. This adoption did not have a material impact on the Company’s consolidated financial statements. In April 2015, the FASB issued new guidance which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This guidance was effective for the Company beginning in the first quarter of 2016. This adoption did not have a material impact on the Company’s consolidated financial statements. In March 2016, the FASB issued new guidance which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company adopted this guidance in the fourth quarter of fiscal year 2016, which was applied retroactively effective January 1, 2016. This adoption did not have a material impact on the Company’s consolidated financial statements. |
Recent Authoritative Pronouncements | In May 2014, the FASB issued new guidance related to how an entity should recognize revenue. The guidance specifies that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In addition, the guidance expands the required disclosures related to revenue and cash flows from contracts with customers. In April 2016 and May 2016, the FASB issued updates in order to provide improvements and clarifications to the revenue recognition guidance. The Company will adopt the new revenue recognition standard as of January 1, 2018 using the modified retrospective method, which requires the cumulative effect of adoption, if any, to be recognized as an adjustment to opening retained earnings in the period of adoption. The majority of the Company’s revenue relates to the sale of finished products to various customers, and the adoption will not have any impact on revenue recognized from these transactions. The Company analyzed the impact on certain less significant transactions where the Company has deferred revenue for certain product sales as a result of the ability of the customer to return the product under certain conditions. As a result of the analysis, the Company will accelerate the remaining deferred revenue under these agreements as a cumulative effect adjustment to opening retained earnings as of January 1, 2018 and at that time will assess the need to adjust the reserve for returns and allowances. In January 2016, the FASB issued a new standard that modifies certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The accounting standard update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted. The Company will adopt this guidance on January 1, 2018 and it is not expected to have an impact on its consolidated financial statements. In February 2016, the FASB issued new guidance related to how an entity should lease assets and lease liabilities. The guidance specifies that an entity who is a lessee under lease agreements should recognize lease assets and lease liabilities for those leases classified as operating leases under previous FASB guidance. Accounting for leases by lessors is largely unchanged under the new guidance. The guidance is effective for us beginning in the first quarter of 2019. Early adoption is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is evaluating the impact of adopting this guidance on its consolidated financial statements. In June 2016, the FASB issued new guidance which replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance is effective for us beginning in the first quarter of fiscal year 2020. Early adoption is permitted beginning in the first quarter of fiscal year 2019. The Company is evaluating the impact of adopting this guidance on its consolidated financial statements. In August 2016, the FASB issued new guidance which clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows in order to reduce diversity in practice. The guidance is effective for us beginning in the first quarter of fiscal year 2018. Early adoption is permitted. The Company will adopt this guidance on January 1, 2018 and it is not expected to have an impact on its consolidated financial statements. In November 2016, the FASB issued new guidance which clarifies how restricted cash is presented and classified in the statement of cash flows. The guidance is effective for us beginning in the first quarter of fiscal year 2018. Early adoption is permitted. The Company will adopt this guidance on January 1, 2018 and it is not expected to have a significant impact on its consolidated financial statements. In January 2017, the FASB issued new guidance which clarifies the definition of a business in a business combination. The guidance is effective for us beginning in the first quarter of fiscal year 2018. Early adoption is permitted. The Company will adopt this guidance on January 1, 2018 and it is not expected to have an impact on its consolidated financial statements. In May 2017, the FASB issued new guidance which clarifies the application of stock based accounting guidance when a change is made to the terms or conditions of a share-based payment award. The guidance is effective for us beginning in the first quarter of fiscal year 2018. Early adoption is permitted. The Company will adopt this guidance on January 1, 2018 and it is not expected to have an impact on its consolidated financial statements. In July 2017, the FASB issued new guidance which changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features and recharacterizes the indefinite deferral of certain provisions within the guidance for distinguishing liabilities from equity. The guidance is effective for us beginning in the first quarter of fiscal year 2019. Early adoption is permitted. The Company is evaluating the impact of adopting this guidance on its consolidated financial statements. |
3. Summary of Significant Acc17
3. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Schedule of Investments | December 31, 2017: Amortized Cost Gross Unrealized Losses Gross Unrealized Gains Fair Value Money Market Funds included in Cash Equivalents $ 6,032,034 $ - $ - $ 6,032,034 Corporate Securities 905,625 (112 ) 3 905,516 Commercial Paper 698,682 - - 698,682 Subtotal 1,604,307 (112 ) 3 1,604,198 Total December 31, 2017 $ 7,636,341 $ (112 ) $ 3 $ 7,636,232 December 31, 2016: Money Market Funds included in Cash Equivalents $ 95,949 $ - $ - $ 95,949 Corporate Securities 10,619,583 (13,212 ) - 10,606,371 Commercial Paper 1,494,549 - - 1,494,549 Subtotal 12,114,132 (13,212 ) - 12,100,920 Total December 31, 2016 $ 12,210,081 $ (13,212 ) $ - $ 12,196,869 |
Carrying value and fair value of the Company's financial assets measured at fair value on a recurring ba | December 31, 2017: Carrying Value Level 1 Level 2 Level 3 Money Market Funds $ 6,032,034 $ 6,032,034 $ - $ - Available for sale securities: Corporate Securities 905,516 - 905,516 - Commercial Paper 698,682 - 698,682 - Subtotal 1,604,198 - 1,604,198 - Total December 31, 2017 $ 7,636,232 $ 6,032,034 $ 1,604,198 $ - December 31, 2016: Money Market Funds $ 95,949 $ 95,949 $ - $ - Available for sale securities: Corporate Securities 10,606,371 - 10,606,371 - Commercial Paper 1,494,549 - 1,494,549 - Subtotal 12,100,920 - 12,100,920 - Total December 31, 2016 $ 12,196,869 $ 95,949 $ 12,100,920 $ - |
Inventories | December 31, 2017 2016 Raw materials $ 141,233 $ 79,900 Work in process 526,067 463,897 Finished goods 29,894 52,936 Inventory reserve (103,000 ) (430,000 ) Total $ 594,194 $ 166,733 |
Property and Equipment | Description Estimated Useful Life Office equipment and furniture 5 years Leasehold improvements 5 years Computer equipment 5 years Computer software 3 years |
Accrued Expenses | 2017 2016 Professional and consulting fees $ 485,089 $ 335,198 Accrued payroll and payroll taxes 755,221 737,607 Clinical trial and manufacturing development 2,884,924 875,500 Product development 80,001 374,839 Market research 116,466 - Other 42,166 19,208 Total $ 4,363,867 $ 2,342,352 |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | December 31, 2017 2016 Series C non-voting preferred stock 2,540,000 2,865,000 Series D non-voting preferred stock 1,479,240 1,479,240 Series E non-voting preferred stock 1,959,759 1,959,759 Series F non-voting preferred stock 3,157,561 - Shares underlying outstanding warrants 23,417,891 4,006,468 Shares underlying outstanding stock options 4,962,795 4,609,755 Total Potentially Dilutive Shares 37,517,246 14,920,222 |
4. Related Party Transactions (
4. Related Party Transactions (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Related Party Transactions Tables | |
Related Party Transactions | Amount Number of Shares Khoso Baluch CEO and Director $ 50,000 104,166 Robert W. Cook CFO $ 25,000 52,083 John Armstrong Executive VP $ 10,000 20,833 Myron Kaplan Chairman of the Board $ 50,000 104,166 Janet Dillione Director $ 25,000 52,083 Gary Gelbfish Director $ 25,000 52,083 Mehmood Khan Director $ 25,000 52,083 Steven W. Lefkowitz Director $ 65,000 135,416 |
5. Income Taxes (Tables)
5. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
US and Foreign loss | December 31, 2017 2016 United States $ (31,992,324 ) $ (23,743,682 ) Foreign (1,017,699 ) (899,945 ) Total $ (33,010,023 ) $ (24,643,627 ) |
Deferred Tax Assets | December 31, 2017 2016 Net operating loss carryforwards – Federal $ 23,833,000 $ 27,798,000 Net operating loss carryforwards – State 7,264,000 4,082,000 Net operating loss carryforwards – Foreign 1,678,000 1,373,000 Capitalized licensing fees 1,068,000 1,734,000 Stock-based compensation 2,232,000 2,511,000 Accrued compensation 206,000 132,000 Other 65,000 181,000 Totals 36,346,000 37,811,000 Less valuation allowance (36,346,000 ) (37,811,000 ) Deferred tax assets $ - $ - |
Net Operating Loss Tax Carryforwards | December 31, 2017 2016 Federal $ 113,492,000 $ 81,759,000 State $ 102,159,000 $ 68,713,000 Foreign $ 5,594,000 $ 4,577,000 |
Effective Income Tax Rate Reconciliation | December 31, 2017 2016 Statutory Federal tax rate 34.0 % 34.0 % State income tax rate (net of Federal) 6.3 % 5.7 % Effect of foreign operations 0.9 % 1.1 % Non-deductible expenses associated with derivative liabilities 0.0 % 0.0 % Warrant related expenses 0.0 % 0.0 % Federal Deferred Tax Rate Change (45.7 )% 0.0 % Other permanent differences 0.1 % 0.7 % Effect of valuation allowance 4.4 % (41.5 )% Effective tax rate 0.0 % 0.0 % |
Changes in deferred tax asset valuation allowance | Year Ended Balance at Beginning of Year Increase (Decrease) Charged (Credited) to Income Taxes (Benefit) Increase (Decrease) Charged (Credited) to OCI Balance at End of Year December 31, 2017 $ 37,811,000 $ (1,433,000 ) $ (32,000 ) $ 36,346,000 December 31, 2016 $ 26,527,000 $ 11,309,800 $ (25,800 ) $ 37,811,000 |
7. Stockholders' Equity (Tables
7. Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
STOCKHOLDERS' EQUITY | |
Summary of preferred stock | As of December 31, 2017 As of December 31, 2016 Preferred Shares Outstanding Liquidation Preference (Per Share) Total Liquidation Preference Preferred Shares Outstanding Liquidation Preference (Per Share) Total Liquidation Preference Series C-2 150,000 10.0 1,500,000 150,000 10.0 1,500,000 Series C-3 104,000 10.0 1,040,000 136,500 10.0 1,365,000 Series D 73,962 21.0 1,553,202 73,962 21.0 1,553,202 Series E 89,623 49.2 4,409,452 89,623 49.2 4,409,452 Series F 2,000 1,000 2,000,000 - - - Total 419,585 10,502,654 450,085 8,827,654 |
Fair value assumptions for Black Sholes, Stock Options | Year Ended December 31, 2017 2016 Risk-free interest rate 1.77% - 2.40% 1.14% - 1.94% Expected volatility 95% - 106% 96% - 98% Expected term (years) 5 - 10 years 5 - 10 years Expected dividend yield 0.0% 0.0% Weighted-average grant date fair value of options granted during the period $ 1.18 $ 1.76 |
Key inputs used in Monte Carlo simulation | Expected Term 5 years Volatility 97 % Dividend yield 0.0 % Risk-free interest rate 1.13 % Weighted-average grant date fair value of options granted during the period $ 1.12 |
Summary of Stock Option Activity | Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding at beginning of year 4,609,755 $ 2.29 8.2 $ 581,823 Granted 1,387,500 $ 1.54 247,500 Exercised (10,000 ) $ 0.68 13,200 Expired/Cancelled (588,344 ) $ 2.97 Forfeited (436,116 ) $ 1.85 Outstanding at end of year 4,962,795 $ 2.04 7.5 $ 247,500 Vested at end of year 2,479,971 $ 1.91 6.1 $ 76,249 Expected to vest in the future 2,482,824 $ 2.17 8.9 $ 171,251 |
Fair value assumptions for Black Sholes, Warrants | November 16, 2017 Expected Term 3.00 years Volatility 98 % Dividend yield 0.0 % Exercise Price $ 0.00 Risk-free interest rate 1.83 % Fair value of warrants granted $ 270,592 Number of shares underlying warrants granted 564,858 December 24, 2017 Expected Term 2.90 years Volatility 98 % Dividend yield 0.0 % Exercise Price $ 0.00 Risk-free interest rate 2.01 % Weighted average fair value of warrants granted $ 327,079 Number of shares underlying warrants granted 564,858 |
Fair value assumptions for Black Sholes, Grant date and Non-grant date | Series A Series B Underwriter’s Expected Term 1.18 – 1.33 years 5.10 – 5.25 years 5.10 – 5.25 years Volatility 55% 55% 55% Dividend yield 0.0% 0.0% 0.0% Exercise Price $0.75 $1.05 $0.94 Risk-free interest rate 1.13% - 1.16% 1.86% - 1.88% 1.86% - 1.88% Weighted average fair value of warrants granted $0.08 $0.17 $0.18 Number of shares underlying warrants granted 13,964,476 13,964,476 1,117,158 Series A Series B Underwriter’s Expected Term 1.09 5.00 5.00 Volatility 96.95% 96.95% 96.95% Dividend yield 0.0% 0.0% 0.0% Exercise Price $ 0.75 $ 1.05 $ 0.94 Risk-free interest rate 1.22% 1.76% 1.76% Weighted average fair value of warrants $ 0.06 $ 0.20 $ 0.20 |
Summary of Warrant Activity | Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life Outstanding at December 31, 2016 4,006,468 $ 1.65 2.36 Issued 29,610,968 0.95 3.77 Converted to common shares (9,886,250 ) Exercised (62,500 ) 0.40 - Expired (250,795 ) 0.40 - Outstanding at December 31, 2017 23,417,891 $ 1.08 3.42 |
3. Summary of Significant Acc21
3. Summary of Significant Accounting Policies (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Amortized cost | $ 7,636,341 | $ 12,210,081 |
Gross unrealized losses | (112) | (13,212) |
Gross unrealized gains | 3 | 0 |
Fair value | 7,636,232 | 12,196,869 |
Money Market Funds included in Cash Equivalents | ||
Amortized cost | 6,032,034 | 95,949 |
Gross unrealized losses | 0 | 0 |
Gross unrealized gains | 0 | 0 |
Fair value | 6,032,034 | 95,949 |
Corporate Securities | ||
Amortized cost | 905,625 | 10,619,583 |
Gross unrealized losses | (112) | (13,212) |
Gross unrealized gains | 3 | 0 |
Fair value | 905,516 | 10,606,371 |
Commercial Paper | ||
Amortized cost | 698,682 | 1,494,549 |
Gross unrealized losses | 0 | 0 |
Gross unrealized gains | 0 | 0 |
Fair value | 698,682 | 1,494,549 |
Subtotal | ||
Amortized cost | 1,604,307 | 12,114,132 |
Gross unrealized losses | (112) | (13,212) |
Gross unrealized gains | 3 | 0 |
Fair value | $ 1,604,198 | $ 12,100,920 |
3. Summary of Significant Acc22
3. Summary of Significant Accounting Policies (Details 1) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Carrying Value | $ 7,636,232 | $ 12,196,869 |
Level 1 | ||
Carrying Value | 6,032,034 | 95,949 |
Level 2 | ||
Carrying Value | 1,604,198 | 12,100,920 |
Level 3 | ||
Carrying Value | 0 | 0 |
Money Market Funds included in Cash Equivalents | ||
Carrying Value | 6,032,034 | 95,949 |
Money Market Funds included in Cash Equivalents | Level 1 | ||
Carrying Value | 6,032,034 | 95,949 |
Money Market Funds included in Cash Equivalents | Level 2 | ||
Carrying Value | 0 | 0 |
Money Market Funds included in Cash Equivalents | Level 3 | ||
Carrying Value | 0 | 0 |
Corporate Securities | ||
Carrying Value | 905,516 | 10,606,371 |
Corporate Securities | Level 1 | ||
Carrying Value | 0 | 0 |
Corporate Securities | Level 2 | ||
Carrying Value | 905,516 | 10,606,371 |
Corporate Securities | Level 3 | ||
Carrying Value | 0 | 0 |
Commercial Paper | ||
Carrying Value | 698,682 | 1,494,549 |
Commercial Paper | Level 1 | ||
Carrying Value | 0 | 0 |
Commercial Paper | Level 2 | ||
Carrying Value | 698,682 | 1,494,549 |
Commercial Paper | Level 3 | ||
Carrying Value | 0 | 0 |
Subtotal | ||
Carrying Value | 1,604,198 | 12,100,920 |
Subtotal | Level 1 | ||
Carrying Value | 0 | 0 |
Subtotal | Level 2 | ||
Carrying Value | 1,604,198 | 12,100,920 |
Subtotal | Level 3 | ||
Carrying Value | $ 0 | $ 0 |
3. Summary of Significant Acc23
3. Summary of Significant Accounting Policies (Details 2) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Summary Of Significant Accounting Policies Details 2 | ||
Raw materials | $ 141,233 | $ 79,900 |
Work in process | 526,067 | 463,897 |
Finished goods | 29,894 | 52,936 |
Inventory reserve | (103,000) | (430,000) |
Total | $ 594,194 | $ 166,733 |
3. Summary of Significant Acc24
3. Summary of Significant Accounting Policies (Details 3) | 12 Months Ended |
Dec. 31, 2017 | |
Office equipment and furniture | |
Estimated Useful Life | 5 years |
Leasehold improvements | |
Estimated Useful Life | 5 years |
Computer equipment | |
Estimated Useful Life | 5 years |
Computer software | |
Estimated Useful Life | 3 years |
3. Summary of Significant Acc25
3. Summary of Significant Accounting Policies (Details 4) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Accounting Policies [Abstract] | ||
Professional and consulting fees | $ 485,089 | $ 335,198 |
Accrued payroll and payroll taxes | 755,221 | 737,607 |
Clinical trial and manufacturing development | 2,884,924 | 875,500 |
Product development | 80,001 | 374,839 |
Market research | 116,466 | 0 |
Other | 42,166 | 19,208 |
Total | $ 4,363,867 | $ 2,342,352 |
3. Summary of Significant Acc26
3. Summary of Significant Accounting Policies (Details 5) - shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Antidilutive Shares | 37,517,246 | 14,920,222 |
Series C non-voting preferred stock | ||
Antidilutive Shares | 2,540,000 | 2,865,000 |
Series D | ||
Antidilutive Shares | 1,479,240 | 1,479,240 |
Series E | ||
Antidilutive Shares | 1,959,759 | 1,959,759 |
Series F | ||
Antidilutive Shares | 3,157,561 | 0 |
Shares underlying outstanding warrants | ||
Antidilutive Shares | 23,417,891 | 4,006,468 |
Shares underlying outstanding stock options | ||
Antidilutive Shares | 4,962,795 | 4,609,755 |
4. Related Party Transactions27
4. Related Party Transactions (Details) | 12 Months Ended |
Dec. 31, 2017USD ($)shares | |
Khoso Baluch | |
Description | CEO and Director |
Amount | $ | $ 50,000 |
Number of Shares | shares | 104,166 |
Robert W. Cook | |
Description | CFO |
Amount | $ | $ 25,000 |
Number of Shares | shares | 52,083 |
John Armstrong | |
Description | Executive VP |
Amount | $ | $ 10,000 |
Number of Shares | shares | 20,833 |
Myron Kaplan | |
Description | Chairman of the Board |
Amount | $ | $ 50,000 |
Number of Shares | shares | 104,166 |
Janet Dillione | |
Description | Director |
Amount | $ | $ 25,000 |
Number of Shares | shares | 52,083 |
Gary Gelbfish | |
Description | Director |
Amount | $ | $ 25,000 |
Number of Shares | shares | 52,083 |
Mehmood Khan | |
Description | Director |
Amount | $ | $ 25,000 |
Number of Shares | shares | 52,083 |
Steven W Lefkowitz | |
Description | Director |
Amount | $ | $ 65,000 |
Number of Shares | shares | 135,416 |
5. Income Taxes (Details)
5. Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Loss Before Income Taxes | $ (33,010,023) | $ (24,643,627) |
United States | ||
Income Loss Before Income Taxes | (31,992,324) | (23,743,682) |
Foreign | ||
Income Loss Before Income Taxes | $ (1,017,699) | $ (899,945) |
5. Income Taxes (Details 1)
5. Income Taxes (Details 1) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Income Taxes Details 1 | |||
Net operating loss carryforwards – Federal | $ 23,833,000 | $ 27,798,000 | |
Net operating loss carryforwards – State | 7,264,000 | 4,082,000 | |
Net operating loss carryforwards - Foreign | 1,678,000 | 1,373,000 | |
Capitalized licensing fees | 1,068,000 | 1,734,000 | |
Stock-based compensation | 2,232,000 | 2,511,000 | |
Accrued compensation | 206,000 | 132,000 | |
Other | 65,000 | 181,000 | |
Totals | 36,346,000 | 37,811,000 | |
Less valuation allowance | (36,346,000) | (37,811,000) | $ (26,527,000) |
Deferred tax assets | $ 0 | $ 0 |
5. Income Taxes (Details 2)
5. Income Taxes (Details 2) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Federal | ||
Potentially utilizable net operating loss carryforwards | $ 113,492,000 | $ 81,759,000 |
State | ||
Potentially utilizable net operating loss carryforwards | 102,159,000 | 68,713,000 |
Foreign | ||
Potentially utilizable net operating loss carryforwards | $ 5,594,000 | $ 4,577,000 |
5. Income Taxes (Details 3)
5. Income Taxes (Details 3) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes Details 3 | ||
Statutory Federal tax rate | 34.00% | 34.00% |
State income tax rate (net of Federal) | 6.30% | 5.70% |
Effect of foreign operations | 0.90% | 1.10% |
Non-deductible expenses associated with derivative liabilities | 0.00% | 0.00% |
Warrant related expenses | 0.00% | 0.00% |
Federal Deferred Tax Rate Change | (45.70%) | 0.00% |
Other permanent differences | 0.10% | 0.70% |
Effect of valuation allowance | 4.40% | (41.50%) |
Effective tax rate | 0.00% | 0.00% |
5. Income Taxes (Details 4)
5. Income Taxes (Details 4) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes Details 4 | ||
Deferred tax asset valuation allowance, beginning | $ 37,811,000 | $ 26,527,000 |
Increase (decrease) charged (credited) to income taxes (benefit) | (1,433,000) | 11,309,800 |
Increase (decrease) charged (credited) to OCI | (32,000) | (25,800) |
Deferred tax asset valuation allowance, end | $ 36,346,000 | $ 37,811,000 |
6. Commitments and Contingenc33
6. Commitments and Contingencies (Details Narrative) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Bedminster office space | ||
Operating lease obligation, per month | $ 0 | $ 5,000 |
7. Stockholders' Equity (Detail
7. Stockholders' Equity (Details) - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
Preferred Shares Outstanding | 419,585 | 450,085 |
Total liquidation preference | 10,502,654 | 8,827,654 |
Series C-2 | ||
Preferred Shares Outstanding | 150,000 | 150,000 |
Liquidation Preference (Per Share) | $ 10 | $ 10 |
Total liquidation preference | 1,500,000 | 1,500,000 |
Series C-3 | ||
Preferred Shares Outstanding | 104,000 | 136,500 |
Liquidation Preference (Per Share) | $ 10 | $ 10 |
Total liquidation preference | 1,040,000 | 1,365,000 |
Series D | ||
Preferred Shares Outstanding | 73,962 | 73,962 |
Liquidation Preference (Per Share) | $ 21 | $ 21 |
Total liquidation preference | 1,553,202 | 1,553,202 |
Series E | ||
Preferred Shares Outstanding | 89,623 | 89,623 |
Liquidation Preference (Per Share) | $ 49.2 | $ 49.2 |
Total liquidation preference | 4,409,452 | 4,409,452 |
Series F | ||
Preferred Shares Outstanding | 2,000 | 0 |
Liquidation Preference (Per Share) | $ 1,000 | $ 0 |
Total liquidation preference | 2,000,000 | 0 |
7. Stockholders' Equity (Deta35
7. Stockholders' Equity (Details 1) - Stock Options - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Risk-free interest rate, minimum | 1.77% | 1.14% |
Risk-free interest rate, maximum | 2.40% | 1.94% |
Expected Volatility, minimum | 95.00% | 96.00% |
Expected Volatility, maximum | 106.00% | 98.00% |
Dividend yield | 0.00% | 0.00% |
Weighted-average fair value of options granted during the period | $ 1.18 | $ 1.76 |
Minimum | ||
Expected Term | 5 years | 5 years |
Maximum | ||
Expected Term | 10 years | 10 years |
7. Stockholders' Equity (Deta36
7. Stockholders' Equity (Details 2) - Monte Carlo | 12 Months Ended |
Dec. 31, 2016$ / shares | |
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 |
7. Stockholders' Equity (Deta37
7. Stockholders' Equity (Details 3) | 12 Months Ended |
Dec. 31, 2017USD ($)$ / sharesshares | |
Number of Options | |
Number of Options Outstanding, beginning of year | shares | 4,609,755 |
Number of Options Granted | shares | 1,387,500 |
Number of Options Exercised | shares | (10,000) |
Number of Options Canceled | shares | (588,344) |
Number of Options Forfeited | shares | (436,116) |
Number of Options Outstanding, at end of year | shares | 4,962,795 |
Outstanding at end of year expected to vest | shares | 2,482,824 |
Options Exercisable | shares | 2,479,971 |
Weighted Average Exercise Price | |
Weighted Average Exercise Price Outstanding, Beginning | $ / shares | $ 2.29 |
Weighted Average Exercise Price Granted | $ / shares | 1.54 |
Weighted Average Exercise Price Exercised | $ / shares | 0.68 |
Weighted Average Exercise Price Canceled | $ / shares | 2.97 |
Weighted Average Exercise Price Forfeited | $ / shares | 1.85 |
Weighted Average Exercise Price Outstanding, Ending | $ / shares | 2.04 |
Weighted Average Exercise Price expected to vest | $ / shares | 2.17 |
Weighted Average Exercise Price Exercisable | $ / shares | $ 1.91 |
Weighted Average Remaining Contractual Life (in years) | |
Weighted Average Remaining Contractual Life (in years) Outstanding | 8 years 2 months 12 days |
Weighted Average Remaining Contractual Life (in years) Outstanding, Ending | 7 years 6 months |
Weighted Average Remaining Contractual Life (in years) Exercisable | 6 years 1 month 6 days |
Weighted average vesting period over which total compensation expense related to non-vested options not yet recognized (years) | 8 years 10 months 24 days |
Aggregate Intrinsic Value | |
Aggregate Intrinsic Value vested and expected to vest | $ | $ 171,251 |
Aggregate intrinsic value of stock options exercised | $ | 13,200 |
Aggregate intrinsic value of stock options outstanding | $ | 247,500 |
Aggregate intrinsic value of stock options outstanding at beginning of year | $ | $ 581,823 |
7. Stockholders' Equity (Deta38
7. Stockholders' Equity (Details 4) | 12 Months Ended |
Dec. 31, 2017USD ($)$ / sharesshares | |
New Warrants Issued | |
Expected Term | 3 years |
Volatility | 98.00% |
Dividend yield | 0.00% |
Exercise Price | $ / shares | $ 0 |
Risk-free interest rate | 1.83% |
Fair value of warrants granted | $ | $ 270,592 |
Number of shares underlying warrants granted | shares | 564,858 |
Revaluation of Warrants | |
Expected Term | 2 years 10 months 24 days |
Volatility | 98.00% |
Dividend yield | 0.00% |
Exercise Price | $ / shares | $ 0 |
Risk-free interest rate | 2.01% |
Fair value of warrants granted | $ | $ 327,079 |
Number of shares underlying warrants granted | shares | 564,858 |
7. Stockholders' Equity (Deta39
7. Stockholders' Equity (Details 5) | 12 Months Ended |
Dec. 31, 2017$ / sharesshares | |
Series A | Revaluation of Warrants | |
Expected Term | 1 year 1 month 2 days |
Volatility | 96.95% |
Dividend yield | 0.00% |
Exercise Price | $ 0.75 |
Risk-free interest rate | 1.22% |
Weighted-average fair value of warrants granted during the period | $ 0.06 |
Series A | Grant Date | |
Expected Term, minimum | 1 year 2 months 5 days |
Expected Term, maximum | 1 year 3 months 29 days |
Volatility | 55.00% |
Dividend yield | 0.00% |
Exercise Price | $ 0.75 |
Risk-free interest rate, minimum | 1.13% |
Risk-free interest rate, maximum | 1.16% |
Weighted-average fair value of warrants granted during the period | $ 0.08 |
Number of shares underlying warrants granted | shares | 13,964,476 |
Series B | Revaluation of Warrants | |
Expected Term | 5 years |
Volatility | 96.95% |
Dividend yield | 0.00% |
Exercise Price | $ 1.05 |
Risk-free interest rate | 1.76% |
Weighted-average fair value of warrants granted during the period | $ 0.20 |
Series B | Grant Date | |
Expected Term, minimum | 5 years 1 month 6 days |
Expected Term, maximum | 5 years 3 months |
Volatility | 55.00% |
Dividend yield | 0.00% |
Exercise Price | $ 1.05 |
Risk-free interest rate, minimum | 1.86% |
Risk-free interest rate, maximum | 1.88% |
Weighted-average fair value of warrants granted during the period | $ 0.17 |
Number of shares underlying warrants granted | shares | 13,964,476 |
Underwriter's | Revaluation of Warrants | |
Expected Term | 5 years |
Volatility | 96.95% |
Dividend yield | 0.00% |
Exercise Price | $ 0.94 |
Risk-free interest rate | 1.76% |
Weighted-average fair value of warrants granted during the period | $ 0.20 |
Underwriter's | Grant Date | |
Expected Term, minimum | 5 years 1 month 6 days |
Expected Term, maximum | 5 years 3 months |
Volatility | 55.00% |
Dividend yield | 0.00% |
Exercise Price | $ 0.94 |
Risk-free interest rate, minimum | 1.86% |
Risk-free interest rate, maximum | 1.88% |
Weighted-average fair value of warrants granted during the period | $ 0.18 |
Number of shares underlying warrants granted | shares | 1,117,158 |
7. Stockholders' Equity (Deta40
7. Stockholders' Equity (Details 6) | 12 Months Ended |
Dec. 31, 2017$ / sharesshares | |
Number of Warrants | |
Outstanding at beginning of period | 4,006,468 |
Issued | 29,610,968 |
Converted to common shares | (9,886,250) |
Exercised | (62,500) |
Expired | (250,795) |
Outstanding at end of period | 23,417,891 |
Weighted Average Exercise Price | |
Outstanding at beginning of period | $ / shares | $ 1.65 |
Granted | 0.95 |
Expired | 0.4 |
Exercised | 0.4 |
Outstanding at end of period | $ / shares | $ 1.08 |
Weighted Average Remaining Contractual Life | |
Outstanding at beginning of period | 2 years 4 months 10 days |
Issued | 3 years 9 months 7 days |
Outstanding at end of period | 3 years 5 months 1 day |