CORMEDIX INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our 2020 Annual Report on Form 10-K, filed with theSecurities and Exchange Commission , or theSEC , onMarch 30, 2021 . Forward Looking Statements This Quarterly Report on Form 10-Q contains "forward-looking statements" that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, referred to herein as the Exchange Act. Forward-looking statements are often identified by the use of words such as, but not limited to, "anticipate," "believe," "can," "continue," "could," "estimate," "expect," "intend," "may," "will," "plan," "project," "seek," "should," "target," "will," "would" and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled "Risk Factors" included in our most recent annual report on Form 10-K, as well as any updates thereto in subsequent filings, as filed with theSEC and which are incorporated herein by reference. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. OverviewCorMedix Inc. and our wholly owned German subsidiaries,CorMedix Europe GmbH and CorMedix Spain, S.L.U., (collectively referred to herein as "we," "us," "our" and the "Company"), is a biopharmaceutical company focused on developing and commercializing therapeutic products for the prevention and treatment of infectious and inflammatory diseases. Our primary focus is on the development of our lead product candidate, DefenCath™, for potential commercialization inthe United States , orU.S. , and other key markets as a catheter lock solution, or CLS. We have in-licensed the worldwide rights to develop and commercialize DefenCath and Neutrolin®. The name DefenCath is theU.S. proprietary name conditionally approved by theU.S. Food and Drug Administration , or FDA, while the name Neutrolin® is currently used in theEuropean Union , or EU, and other territories where we received CE-Mark approval for the commercial distribution of Neutrolin as a CLS regulated as a medical device. DefenCath/Neutrolin is a novel anti-infective solution (a formulation of taurolidine 13.5 mg/ml and heparin 1000 USP Units/ml) intended for the reduction and prevention of catheter-related infections and thrombosis in patients requiring central venous catheters in clinical settings such as hemodialysis, total parenteral nutrition, and oncology. Infection and thrombosis represent key complications among hemodialysis, total parenteral nutrition and cancer patients with central venous catheters. These complications can lead to treatment delays and increased costs to the healthcare system when they occur due to hospitalizations, need for intravenous, or IV antibiotic treatment, long-term anticoagulation therapy, removal/replacement of the central venous catheter, related treatment costs and increased mortality. We believe DefenCath addresses a significant unmet medical need and a potential large market opportunity. InJanuary 2015 , the FDA designated DefenCath as a Qualified Infectious Disease Product, or QIDP, for prevention of catheter-related blood stream infections in patients with end stage renal disease receiving hemodialysis through a central venous catheter. Catheter-related blood stream infections, or CRBSIs, and clotting can be life-threatening. The QIDP designation provides five years of market exclusivity in addition to the five years granted for a New Chemical Entity, or NCE, upon approval of a New Drug Application, or NDA. In addition, inJanuary 2015 , the FDA granted Fast Track designation to DefenCath Catheter Lock Solution, a designation intended to facilitate development and expedite review of drugs that treat serious and life-threatening conditions so that the approved drug can reach the market expeditiously. The Fast Track designation of DefenCath provides us with the opportunity to meet with the FDA on a more frequent basis during the development process, and also ensures eligibility to request priority review of the marketing application. 23 InDecember 2015 , we launched our Phase 3 Prospective, Multicenter, Double-blind, Randomized, Active Control Study to Demonstrate Safety & Effectiveness of DefenCath/Neutrolin in Preventing Catheter-related Bloodstream Infection in Subjects on Hemodialysis for End Stage Renal Disease, or LOCK-IT-100, in patients with hemodialysis catheters in theU.S. The clinical trial was designed to demonstrate the safety and effectiveness of DefenCath compared to the standard of care for CLS, Heparin, in preventing CRBSIs. The primary endpoint for the trial assessed the incidence of CRBSI and time to CRBSI for each study subject. Secondary endpoints were catheter patency, which was defined as required use of tPA, or removal of catheter due to dysfunction, and removal of catheter for any reason. As previously agreed with the FDA, an interim efficacy analysis was performed when the first 28 potential CRBSI cases were identified in our LOCK-IT-100 study that occurred through earlyDecember 2017 . Based on these first 28 cases, there was a highly statistically significant 72% reduction in CRBSI by DefenCath relative to the active control of heparin (p=0.0034). Because the pre-specified level of statistical significance was reached for the primary endpoint and efficacy had been demonstrated with no safety concerns, the LOCK-IT-100 study was terminated early. The study continued enrolling and treating subjects until study termination, and the final analysis was based on a total of 795 subjects. In a total of 41 cases, there was a 71% reduction in CRBSI by DefenCath relative to heparin, which was highly statistically significant (p=0.0006), with a good safety profile.
The FDA granted our request for a rolling submission and review of the NDA, which is designed to expedite the approval process for products being developed to address an unmet medical need. Although the FDA usually requires two pivotal clinical trials to provide substantial evidence of safety and effectiveness for approval of an NDA, the FDA will in some cases accept one adequate and well-controlled trial, where it is a large multicenter trial with a broad range of subjects and study sites that has demonstrated a clinically meaningful and statistically very persuasive effect on a disease with potentially serious outcome. InMarch 2020 , we began the modular submission process for the NDA for DefenCath for the prevention of CRBSI in hemodialysis patients, and inAugust 2020 , the FDA accepted for filing the DefenCath NDA. The FDA also granted our request for priority review, which provides for a six-month review period instead of the standard ten-month review period. As we announced inMarch 2021 , the FDA informed in its Complete Response Letter ("CRL") to us that it cannot approve the NDA for DefenCath in its present form. The FDA noted concerns at the third-party manufacturing facility after a review of records requested by the FDA and provided by the contract manufacturer ("CMO"). Additionally, the FDA is requiring a manual extraction study to demonstrate that the labeled volume can be consistently withdrawn from the vials despite an existing in-process control to demonstrate fill volume within specifications. InApril 2021 , we and the CMO met with the FDA to discuss proposed resolutions for the deficiencies identified in the CRL to us and the Post-Application Action Letter received by the CMO from the FDA for the NDA for DefenCath. There was an agreed upon protocol for the manual extraction study identified in the CRL, which now has been successfully completed. Addressing theFDA's concerns regarding the qualification of the filling operation necessitated adjustments in the process and generation of additional data on operating parameters for manufacture of DefenCath. We and the CMO determined that additional process qualification is needed with subsequent validation to address these issues. The FDA stated that the review timeline would be determined when the NDA resubmission is received and that it expected all corrections to facility deficiencies to be complete at the time of resubmission so that all corrective actions may be verified during an onsite evaluation of the manufacturing facility in the next review cycle, if the FDA determines it will do an onsite evaluation. We and the CMO continue to work closely to ensure that the identified deficiencies are resolved prior to resubmission of the DefenCath NDA, but delays have been encountered at the CMO that are unrelated to DefenCath manufacturing activities and the timeline forCorMedix and the CMO to address deficiencies at the facility that are required for resubmission of the DefenCath NDA is uncertain at this time. 24 Satisfactory resolution of these issues is required for approval of the DefenCath NDA. If an onsite inspection is required, we may encounter delays in obtaining FDA approval because the FDA is currently facing a backlog due to the Covid-19 pandemic. The FDA issued a guidance document on its plan to use voluntary remote interactive evaluations at facilities, including for a pre-approval inspection to assess a marketing application. The FDA will request the manufacturing facility to participate in a voluntary remote interactive evaluation, if the FDA believes it is appropriate. A manufacturing facility cannot request the remote interaction. The FDA expects the use of remote interactive evaluations should help the FDA operate within normal timeframes in spite of the Covid-19 pandemic. The FDA did not request additional clinical data and did not identify any deficiencies related to the data submitted on the efficacy or safety of DefenCath from LOCK-IT-100 in the CRL. In draft labeling discussed with the FDA, the FDA added that the initial approval will be for the limited population of patients with kidney failure receiving chronic hemodialysis through a central venous catheter. This is consistent with our request for approval pursuant to the Limited Population Pathway for Antibacterial and Antifungal Drugs, or LPAD. LPAD, passed as part of the 21st Century Cures Act, is a new program intended to expedite the development and approval of certain antibacterial and antifungal drugs to treat serious or life-threatening infections in limited populations of patients with unmet needs. LPAD provides for a streamlined clinical development program involving smaller, shorter, or fewer clinical trials and is intended to encourage the development of safe and effective products that address unmet medical needs of patients with serious bacterial and fungal infections. We believe that LPAD will provide additional flexibility for the FDA to approve DefenCath to prevent CRBSIs in the limited population of patients with kidney failure receiving hemodialysis through a central venous catheter. We intend to pursue additional indications for DefenCath use as a CLS in populations with an unmet medical need that also represent a significant market opportunity. For example, we intend to pursue marketing authorization in theU.S. for use as a CLS to reduce CRBSIs in oncology and total parenteral nutrition patients using a central venous catheter. In addition to DefenCath, we are sponsoring a pre-clinical research collaboration for the use of taurolidine as a possible treatment for rare orphan pediatric tumors. InFebruary 2018 , the FDA granted orphan drug designation to taurolidine for the treatment of neuroblastoma in children. We may seek one or more strategic partners or other sources of capital to help us develop and commercialize taurolidine for the treatment of neuroblastoma in children. We are also evaluating opportunities for the possible expansion of taurolidine as a platform compound for use in certain medical devices. Patent applications have been filed in several indications, including wound closure, surgical meshes, and wound management. Based on initial feasibility work, we are advancing pre-clinical studies for taurolidine-infused surgical meshes, suture materials and hydrogels. We will seek to establish development/commercial partnerships as these programs advance. The FDA regards taurolidine as a new chemical entity and therefore an unapproved new drug. Consequently, there is no appropriate predicate medical device currently marketed in theU.S. on which a 510(k) approval process could be based. As a result, we will be required to submit a premarket approval application, or PMA, for marketing authorization for any medical device indications that we may pursue. In the event that an NDA for DefenCath is approved by the FDA, the regulatory pathway for these medical device product candidates may be revisited with the FDA. Although there may be no appropriate predicate, de novo Class II designation can be proposed, based on a risk assessment and a reasonable assurance of safety and effectiveness. 25 In theEuropean Union , or EU, Neutrolin is regulated as a Class 3 medical device. InJuly 2013 , we received CE Mark approval for Neutrolin. InDecember 2013 , we commercially launched Neutrolin inGermany for the prevention of CRBSI, and maintenance of catheter patency in hemodialysis patients using a tunneled, cuffed central venous catheter for vascular access. To date, Neutrolin is registered and may be sold in certainEuropean Union and Middle Eastern countries for such treatment. InSeptember 2014 , the TUV-SUD and The Medicines Evaluation Board ofthe Netherlands , or MEB, granted a label expansion for Neutrolin to include use in oncology patients receiving chemotherapy, intravenous, or IV, hydration and IV medications via CVC for the EU. InDecember 2014 , we received approval from theHessian District President inGermany to expand the label for these same expanded indications. The expansion also adds patients receiving medication and IV fluids via CVC in intensive or critical care units (cardiac care unit, surgical care unit, neonatal critical care unit, and urgent care centers). An indication for use in total parenteral nutrition was also approved. InSeptember 2019 , our registration with theSaudi Arabia Food and Drug Administration , or the SFDA, expired. As a result, we cannot sell Neutrolin inSaudi Arabia . We intend to complete the documentation required to renew our registration with the SFDA, however, we cannot predict how long the renewal process will take. There is no assurance that the registration will be renewed by the SFDA.
InJune 2021 , we received approximately$1.3 million , net of expenses, from the sale of our unusedNew Jersey net operating losses, or NOL, eligible for sale under theState of New Jersey's Economic Development Authority's New Jersey Technology Business Tax Certificate Transfer program, or NJEDA Program. The NJEDA Program allowed us to sell approximately$1.3 million of our total$1.3 million in available NOL tax benefits for the state fiscal year 2020. The novel coronavirus has been declared a pandemic and has spread to multiple global regions. The outbreak and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. In response to the COVID-19 outbreak, "shelter in place" orders and other public health guidance measures have been implemented across much ofthe United States ,Europe andAsia , including in the locations of our offices, clinical trial sites, key vendors and partners. Such "shelter in place" orders were previously lifted, at least partially, in many locations. However, an increase in the spread of COVID-19 and variants, including the Delta variant, which may affect the spread or severity of one or more successive waves of the virus, has led, and may continue to lead, to the re-imposition by many nations andU.S. of quarantine requirements for travelers from other regions and may lead to the re-imposition of "shelter-in-place" or other similar orders. Our program timelines may be negatively affected by COVID-19, which could materially and adversely affect its business, financial conditions and results of operations. Since our inception, our operations have been primarily limited to conducting clinical trials and establishing manufacturing for our product candidates, licensing product candidates, business and financial planning, research and development, seeking regulatory approval for our products, initial commercialization activities for DefenCath in theU.S. and Neutrolin in the EU and other foreign markets, and maintaining and improving our patent portfolio. We have funded our operations primarily through debt and equity financings. We have generated significant losses to date, and we expect to use substantial amounts of cash for our operations as we prepare our pre-launch commercial activities for DefenCath for the U.S. market and commercialize Neutrolin in the EU and other foreign markets, pursue business development activities, and incur additional legal costs to defend our intellectual property. As ofSeptember 30, 2021 , we had an accumulated deficit of approximately$237.9 million . We are unable to predict the extent of any future losses or when we will become profitable, if ever.
Financial Operations Overview
Revenue
We have not generated substantial revenue since our inception. Through
26
Research and Development Expense
Research and development, or R&D, expense consists of: (i) internal costs associated with our development activities; (ii) payments we make to third party contract research organizations, or CRO, contract manufacturers, investigative sites, and consultants; (iii) technology and intellectual property license costs; (iv) manufacturing development costs; (v) personnel related expenses, including salaries, stock-based compensation expense, benefits, travel and related costs for the personnel involved in drug development; (vi) activities relating to regulatory filings and the advancement of our product candidates through preclinical studies and clinical trials; (vii) facilities and other allocated expenses, which include direct and allocated expenses for rent, facility maintenance, as well as laboratory and other supplies; and (viii) costs related to the manufacturing of the product that could potentially be available to support the commercial launch prior to marketing approval. All R&D is expensed as incurred. Conducting a significant amount of development is central to our business model. Product candidates in later-stage clinical development generally have higher development costs than those in earlier stages of development, primarily due to the significantly increased size and duration of the clinical trials. We expect to incur significant R&D expenses for the foreseeable future in order to complete development of Neutrolin in theU.S. , including the close out of our LOCK-IT-100 clinical trial and the ongoing filing of an NDA for Neutrolin. The process of conducting pre-clinical studies and clinical trials necessary to obtain regulatory approval is costly and time consuming. The probability of success for each product candidate and clinical trial may be affected by a variety of factors, including, among others, the quality of the product candidate's early clinical data, clinical trial enrollment, duration, conduct and results, investment in the program, competition, manufacturing capabilities and commercial viability of the product candidate. As a result of the uncertainties associated with clinical trials in specific, and the risks inherent in the development process in general, we are unable to determine the duration and completion costs of current or future clinical stages of our product candidates or when, or to what extent, we will generate revenues from the commercialization and sale of any of our product candidates that may be approved. Development timelines, probability of success and development costs vary widely. We are currently focused on securing the marketing approval for DefenCath in theU.S. as well as on continuing sales in foreign markets where Neutrolin is approved. InDecember 2015 , we signed an agreement with a clinical research organization, or CRO, to help us conduct our LOCK-IT-100 Phase 3 clinical trial in hemodialysis patients with central venous catheters to demonstrate the efficacy and safety of DefenCath in preventing catheter-related bloodstream infections and blood clotting in subjects receiving hemodialysis therapy as treatment for end stage renal disease. Our LOCK-IT-100 study was completed and all costs related to the agreement with the CRO have been paid. We were granted a deferral by the FDA under the Pediatric Research Equity Act ("PREA"), that requires sponsors to conduct pediatric studies for NDAs for a new active ingredient, such as taurolidine in DefenCath, unless a waiver or deferral is obtained from the FDA. A deferral acknowledges that a pediatric assessment is required but permits the applicant to submit the pediatric assessment after the submission of an NDA. We have made a commitment to conduct the pediatric study after approval of the NDA for use in adult hemodialysis patients. Pediatric studies for an approved product conducted under PREA may qualify for pediatric exclusivity, which if granted would provide an additional six months of marketing exclusivity. DefenCath would then have the potential to receive a total marketing exclusivity period of 10.5 years, including exclusivity pursuant to NCE and QIDP. We are pursuing additional opportunities to generate value from taurolidine, an active component of DefenCath. Based on initial feasibility work, we have completed an initial round of pre-clinical studies for taurolidine-infused surgical meshes, suture materials, and hydrogels, which require a PMA regulatory pathway for approval. We are also involved in a pre-clinical research collaboration for the use of taurolidine as a possible treatment for rare orphan pediatric tumors. InFebruary 2018 , the FDA granted orphan drug designation to taurolidine for the treatment of neuroblastoma in children. We may seek one or more strategic partners or other sources of capital to help us develop and commercialize taurolidine for the treatment of neuroblastoma in children. 27
Selling, General and Administrative Expense
Selling, general and administrative, or SG&A, expense includes costs related to commercial personnel, medical education professionals, marketing and advertising, salaries and other related costs, including stock-based compensation expense, for persons serving in our executive, sales, finance and accounting functions. Other SG&A expense includes facility-related costs not included in R&D expense, promotional expenses, costs associated with industry and trade shows, and professional fees for legal services and accounting services.
Foreign Currency Exchange Transaction Gain (Loss)
Foreign currency exchange transaction gain (loss) is the result of re-measuring transactions denominated in a currency other than our functional currency and is reported in the condensed consolidated statement of operations as a separate line item within other income (expense). The intercompany loans outstanding between our company based inNew Jersey and our subsidiary based inGermany are not expected to be repaid in the foreseeable future and the nature of the funding advanced is of a long-term investment nature. As such, unrealized foreign exchange movements related to long-term intercompany loans are recorded in other comprehensive income (loss). Interest Income
Interest income consists of interest earned on our cash and cash equivalents and short-term investments.
Interest Expense
Interest expense consists of interest incurred on our convertible debt, amortization of debt discount and on financing of expenditures.
Results of Operations
Three and nine months ended
The following is a tabular presentation of our consolidated operating results
(in thousands):
For the Three Months Ended % For the Nine Months Ended %
September 30, Increase September 30, Increase
2021 2020 (Decrease) 2021 2020 (Decrease)
Revenue $ 38,088 $ 93,020 (59 )% $ 134,539 $ 183,517 (27 )%
Cost of sales (25,166 ) (79,913 ) (69 )% (100,931 ) (147,614 ) (32 )%
Gross profit 12,922 13,107 (1 )% 33,608 35,903 (6 )%
Operating Expenses:
Research and development (4,741,228 ) (2,925,355 ) 62 % (9,897,763 ) (11,082,764 ) (11 )%
Selling, general and administrative (3,836,613 ) (3,691,507 ) 4 % (11,793,509 ) (10,089,252 ) 17 %
Total operating expenses (8,577,841 ) (6,616,862 ) 30 % (21,691,272 ) (21,172,016 ) 2 %
Loss from operations (8,564,919 ) (6,603,755 ) 30 % (21,657,664 ) (21,136,113 ) 2 %
Interest income 3,022 10,843 (72 )% 10,036 113,125 (91 )%
Foreign exchange transaction loss (2,088 ) (35 ) 5,866 % (11,232 ) (59,241 ) (81 )%
Interest expense, including amortization of
debt discount (5,381 ) (7,800 ) (31 )% (10,565 ) (27,904 ) (62 )%
Total other income (expense) (4,447 ) 3,008 (248 )% (11,761 ) 25,980 (145 )%
Loss before income taxes (8,569,366 ) (6,600,747 ) 30 % (21,669,425 ) (21,110,133 ) (3 )%
Tax benefit - - - 1,250,186 5,169,395 (76 )%
Net loss (8,569,366 ) (6,600,747 ) 30 % (20,419,239 ) (15,940,738 ) 28 %
Other comprehensive income (loss) (3,679 ) (5,931 ) (38 )% (6,504 ) 2,402 (371 )%
Comprehensive loss $ (8,573,045 ) $ (6,606,678 ) 30 % $ (20,425,743 ) $ (15,938,336 ) 28 %
28
Revenue. Revenue for the three months endedSeptember 30, 2021 was$38,000 as compared to$93,000 in the same period last year, a decrease of$55,000 . The decrease was attributable to lower sales in theMiddle East and EU countries in 2021 as compared to the same period in 2020. Revenue for the nine months endedSeptember 30, 2021 was$135,000 as compared to$184,000 in the same period last year, a decrease of$49,000 . The decrease was attributable to lower sales inGermany and other EU countries in 2021 as compared to the same period in 2020. Cost of Sales. Cost of sales was$25,000 for the three months endedSeptember 30, 2021 compared to$80,000 in the same period last year, a decrease of$55,000 . The decrease was primarily attributable to the net decrease in cost of materials as a result of lower sales. Cost of sales was$101,000 for the nine months endedSeptember 30, 2021 compared to$148,000 in the same period last year, a decrease of$47,000 . The decrease was primarily attributable to the net decrease in cost of materials as a result of lower sales in 2021 as compared to the same period in 2020. Research and Development Expense. R&D expense was$4,741,000 for the three months endedSeptember 30, 2021 , an increase of$1,816,000 , or 62%, from$2,925,000 for the same period in 2020. The increase was driven by net increase in costs related to the manufacturing of DefenCath prior to its potential marketing approval of$1,408,000 . Additionally, there were also an increase in personnel expenses of$171,000 , as a result of additional hires during the fourth quarter of 2020 through the first half of 2021, and an increase in non-cash charges for stock-based compensation of$145,000 . R&D expense was$9,898,000 for the nine months endedSeptember 30, 2021 , a decrease of$1,185,000 , or 11%, from$11,083,000 for the same period in 2020. The decrease was driven by net decrease in costs related to the manufacturing of DefenCath prior to its potential marketing approval of$2,469,000 . The decrease was partially offset, among others of lesser significance, by an increase in personnel expenses of$813,000 , as a result of additional hires during the fourth quarter of 2020 through the first half of 2021, and an increase in non-cash charges for stock-based compensation of$555,000 . Selling, General and Administrative Expense. SG&A expense was$3,837,000 for the three months endedSeptember 30, 2021 , an increase of$145,000 , or 4%, from$3,692,000 for the same period in 2020. The increase was primarily attributable to an increase in non-cash charges for stock-based compensation of$290,000 , and an increase in personnel expenses of$240,000 , as a result of additional hires during the fourth quarter of 2020 through the first half of 2021. These increases were partially offset, among others of lesser significance, by a decrease in costs related to marketing research studies in preparation for the potential marketing approval of DefenCath of$249,000 and a decrease in consulting fees of$185,000 29
SG&A expense was$11,794,000 for the nine months endedSeptember 30, 2021 , an increase of$1,705,000 , or 17%, from$10,089,000 for the same period in 2020. The increase was primarily attributable to an increase in non-cash charges for stock-based compensation of$1,251,000 , an increase in personnel expenses of$936,000 , as a result of additional hires during the fourth quarter of 2020 through the first half of 2021. These increases were partially offset, among others of lesser significance, by a decrease in consulting fees of$533,000 . Foreign Exchange Transaction Gain (Loss). A foreign exchange transaction loss of$2,000 was recorded for the three months endedSeptember 30, 2021 compared to no foreign exchange transaction loss or gain recorded for the three months endedSeptember 30, 2020 . These losses occur due to the re-measuring of transactions denominated in a currency other than our functional currency. Foreign exchange transaction losses were recorded for the nine months endedSeptember 30, 2021 and 2020 of$11,000 and$59,000 , respectively. These losses occurred due to the re-measuring of transactions denominated in a currency
other than our functional currency.
Interest Income. Interest income was
Interest income was$10,000 for the nine months endedSeptember 30, 2021 compared to$113,000 for the same period last year, a decrease of$103,000 . The decrease was attributable to lower interest rates this year as compared to
last year.
Interest Expense. Interest expense was
Interest expense was
Other Comprehensive Income (Loss). Unrealized foreign exchange movements related
to long-term intercompany loans, the translation of the foreign affiliate
financial statements to
Unrealized foreign exchange movements related to long-term loans and the translation of the foreign affiliate financial statements toU.S. dollars and unrealized movements related to short term investment are recorded in other comprehensive income (loss) totaling a loss of$7,000 and a gain of$2,000 for the nine months endedSeptember 30, 2021 and 2020, respectively. Tax Benefit. Tax benefits for the nine months endedSeptember 30, 2021 and 2020 of$1,250,000 and$5,169,000 , respectively, was an income tax benefit due to the sale of our unused NOL for the state fiscal years 2020 and 2019, respectively, through the NJEDA Program.
Liquidity and Capital Resources
Sources of Liquidity
As a result of our cost of sales, R&D and SG&A expenditures and the lack of substantial product sales revenue, our ongoing operations have not been profitable since our inception. During the nine months endedSeptember 30, 2021 , we received net proceeds of$41,456,000 from the issuance of 3,737,862 shares of common stock under our at-the-market-issuance sales agreement as compared to$3,046,000 of net proceeds for the same period in 2020 from the issuance of 477,721 shares of common stock. Additionally, we also received$165,000 and$412,000 from the exercise of warrants during the nine months endedSeptember 30, 2021 and 2020, respectively. We will continue to be reliant on external sources of cash for the foreseeable future until we are able to generate revenue. 30 InJune 2021 , we received approximately$1,250,000 , net of expenses, from the sale of our unused New Jersey NOL eligible for sale under the NJEDA Program. The NJEDA Program allowed us to sell approximately$1,250,000 of our total$1,337,000 in available NOL tax benefits for the state fiscal year 2020.
Net cash used in operating activities for the nine months endedSeptember 30, 2021 was$15,286,000 as compared to$16,034,000 for the same period in 2020, a decrease in net cash used in operations of$748,000 . The decrease was driven by an increase in accrued expenses of$1,065,000 as compared to a decrease of$2,286,000 for the same period in 2020, partially offset by an increase in net loss of$4,479,000 mainly attributable to lower cash received from the NOL sale of$1,250,000 as compared to$5,169,000 for the same period in 2020.
Net Cash Provided by (Used in) Investing Activities
Cash used in investing activities for the nine months endedSeptember 30, 2021 was$2,006,000 as compared to$9,274,000 provided by investing activities in the same period in 2020. The net cash used during the nine months endedSeptember 30, 2021 was mainly driven by the higher amount invested in short-term investments in addition to an increase in purchases of equipment offset by the lower amount of matured investments as compared to the same period in 2020.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the nine months endedSeptember 30, 2021 was$41,758,000 as compared to$24,778,000 for the same period in 2020, an increase of$16,980,000 . During the nine months endedSeptember 30, 2021 , we generated net proceeds of$41,456,000 from the sale of our common stock in our at-the-market, or ATM program,$165,000 from the exercise of warrants and$137,000 from the exercise of stock options. In the same period in 2020, we generated net proceeds of$21,320,000 from the underwritten public offering of our common stock,$3,046,000 from the sale of our common stock in our ATM program, and$412,000 from the exercise of warrants.
Funding Requirements and Liquidity
Our total cash on hand and short-term investments as ofSeptember 30, 2021 was$72.0 million , excluding restricted cash of$0.2 million , compared with$46.3 million atDecember 31, 2020 . As ofSeptember 30, 2021 , we have$150.0 million available under our new shelf registration statement filed onAugust 12, 2021 for the issuance of equity, debt or equity-linked securities and$50.0 million under our ATM program relating to our shelf registration statement filed inNovember 2020 . Because our business has not generated positive operating cash flow, additional capital will likely be required in order to fund pre-commercial launch activities for DefenCath, as well as other taurolidine-based research and development activities and our operations generally. Our continued operations will depend on our ability to raise sufficient funds through various potential sources, such as equity, debt financings, and/or strategic relationships. We can provide no assurances that financing or strategic relationships will be available on acceptable terms, or at all. 31 We expect to continue to fund operations from cash on hand and through capital raising sources as previously described, which may be dilutive to existing stockholders, through revenues from the licensing of our products, or through strategic alliances. We may seek to sell additional equity or debt securities through one or more discrete transactions, or enter into a strategic alliance arrangement, but can provide no assurances that any such financing or strategic alliance arrangement will be available on acceptable terms, or at all. Moreover, the incurrence of indebtedness would result in increased fixed obligations and could contain covenants that would restrict our operations. Raising additional funds through strategic alliance arrangements with third parties may require significant time to complete and could force us to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or to grant licenses on terms that may not be favorable to us or our stockholders. Our actual cash requirements may vary materially from those now planned due to a number of factors, any change in the focus and direction of our research and development programs, any acquisition or pursuit of development of new product candidates, competitive and technical advances, the costs of commercializing any of our product candidates, and costs of filing, prosecuting, defending and enforcing any patent claims and any other intellectual property rights. Sales of Neutrolin outside theU.S. are not expected to generate significant product revenues for the foreseeable future, and we expect to grow product sales for DefenCath in theU.S. , should we receive FDA approval. In the absence of significant revenue, we are likely to continue generating operating cash flow deficits. We will continue to use cash as we increase other activities leading to the commercialization of DefenCath upon approval, pursue business development activities, and incur additional legal costs to defend our intellectual property. We currently estimate that as ofSeptember 30, 2021 , we have sufficient cash on hand to fund operations at least through 2022, after taking into consideration the costs for re-submission of the NDA and initial preparations for the commercial launch for DefenCath. Additional financing may be required to build out our commercial infrastructure following FDA approval and to continue our operations should we decide to market and sell DefenCath in theU.S. on our own. If we are unable to raise additional funds when needed, we may be forced to slow or discontinue our preparations for the commercial launch of DefenCath. We may also be required to delay, scale back or eliminate some or all of our research and development programs. Each of these alternatives would likely have a material adverse effect on our business. Contractual Obligations
We entered into a seven-year operating lease agreement inMarch 2020 for an office space at300 Connell Drive ,Berkeley Heights, New Jersey 07922. The lease agreement, with a monthly average cost of approximately$17,000 , commenced onSeptember 16, 2020 . Our sublease on our previous premises at400 Connell Drive ,Berkeley Heights, New Jersey 07922 terminated onNovember 30, 2020 . Critical Accounting Policies Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States , or GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments, including those described below. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates. For the nine-month period endedSeptember 30, 2021 , there were no significant changes to our critical accounting policies as identified in our Annual Report on Form 10-K for the year endedDecember 31, 2020 .
Recently Adopted Accounting Pronouncements
InDecember 2019 , the FASB issued new guidance which removes certain exceptions to the general principles of the accounting for income taxes and also improves consistent application of and simplification of other areas when accounting for income taxes. The guidance was effective for us beginning in the first quarter of fiscal year 2021. Early adoption was permitted. This adoption onJanuary 1, 2021 did not have a material impact on our condensed consolidated financial
statements.
32
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
© Edgar Online, source
