Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
You should read the following
discussion and analysis together with our audited consolidated financial statements and the accompanying notes contained elsewhere in
this report. This discussion contains forward-looking statements, within the meaning of Section 27A of Securities Act, Section 21E of
the Exchange Act, and the Private Securities Litigation Reform Act of 1995, including statements regarding our expected financial
condition, business and financing plans. These statements involve risks and uncertainties. Our actual results could differ materially
from the results described in or implied by these forward-looking statements as a result of various factors, including those discussed
below and elsewhere in this Annual Report on Form 10-K, particularly under the heading “Risk Factors.”
Overview
The Company is a biopharmaceutical
company focused on developing and commercializing therapeutic products for life-threatening diseases and conditions.
Our primary focus has been
commercializing DefenCath® (taurolidine and heparin), in the U.S., which we launched in 2024 in the hemodialysis setting. The name
DefenCath is the U.S. proprietary name approved by the U.S. FDA.
DefenCath is an FDA
approved antimicrobial CLS (a formulation of taurolidine 13.5 mg/mL, and heparin 1000 USP Units/mL) indicated to reduce the
incidence of CRBSI in adult patients with kidney failure receiving chronic hemodialysis through a CVC It is indicated for use in a
limited and specific population of patients. CRBSIs can lead to treatment delays and increased costs to the healthcare system when
they occur due to extended and often repeat hospitalizations, need for IV antibiotic treatment, long-term anticoagulation therapy,
removal/replacement of the CVC, related treatment costs, as well as increased mortality. DefenCath is the first and only
FDA-approved antimicrobial CLS in the U.S. and was shown to reduce the risk of CRBSI by up to 71% in a Phase 3 clinical study.
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DefenCath is subject to Medicare
ESRD PPS, which provides bundled payment for renal dialysis services and affords a TDAPA, which provides temporary, additional payments
for certain new drugs and biologicals. TDAPA reimbursement is calculated based on 100 percent ASP (or 100 percent of wholesale acquisition
price or manufacturers’ list price, respectively, if such data is unavailable). TDAPA and post-TDAPA add-on payment adjustments
for DefenCath apply for five years (with such add-on payments applying to all ESRD PPS payments for years three through five). DefenCath’s
TDAPA began on July 1, 2024.
Looking forward, on July 1,
2026, DefenCath’s TDAPA reimbursement transitions into a three-year, post-TDAPA Add-On Payment phase, the calculation of which is
determined and published by CMS and will be $2.37 for the third and fourth quarters of 2026. As a result of the methodology utilized by
CMS, the level of reimbursement provided to institutions treating dialysis patients will significantly decline, and as a result, we expect
a corresponding reduction to net pricing for DefenCath in the third and fourth quarters of 2026. If CMS utilizes the same methodology
to calculate the 2027 post-TDAPA Add-On Adjustment, which will be effective on January 1, 2027, we estimate the value of the Add-On Adjustment
will be three to five-times higher than that granted for the third and fourth quarters of 2026, which we expect may result in higher DefenCath
sales prices in 2027 relative to the second half 2026. After January 1, 2027, the post-TDAPA Add-On Payment will be reassessed again and
be made effective on January 1, 2028 and January 1, 2029, covering the three-year period through June 30, 2029.
Acquisition of Melinta
On August 29, 2025 (the “Closing Date”),
we completed the acquisition of Melinta. The acquisition of Melinta expanded our team, commercial platform and increased the commercial
portfolio with six marketed, hospital- and clinic-focused infectious disease products, comprised of REZZAYO® (rezafungin for injection),
MINOCIN® (minocycline) for Injection, VABOMERE® (meropenem and vaborbactam), KIMYRSA® (oritavancin), ORBACTIV® (oritavancin),
BAXDELA® (delafloxacin), and an additional well-established cardiovascular product, TOPROL-XL® (metoprolol succinate) (together,
the Melinta Portfolio. REZZAYO is currently approved for the treatment of candidemia and invasive candidiasis in adults, with an ongoing
Phase III study for the prophylaxis of invasive fungal infections in adult patients undergoing allogeneic blood and marrow transplantation.
The completion of the Phase III study for REZZAYO is expected in 2026.
The financial results of Melinta are included in
our consolidated financial statements starting on August 29, 2025. Melinta’s financial results were not reflected in reported figures
in the periods preceding the Closing Date. As a result, the reported results for 2025 and 2024 are not comparable. To assist with the
discussion of 2025 and 2024 results on a comparable basis and provide more meaningful discussion, certain pro forma historical results
are included in Note 3 to the Consolidated Financial Statements included herein. This information does not purport to reflect what our
financial and operational results would have been had the acquisition been consummated at the beginning of the periods presented. In addition,
further information relating to the acquisition of Melinta is included in Note 3 to the Consolidated Financial Statements included herein.
Pursuant to the terms of the
Merger Agreement, we acquired Melinta via a merger in which Merger Sub merged with and into Melinta, with Melinta surviving as a wholly-owned
subsidiary of the Company. In consideration for the Merger, we (i) paid to the former Melinta equity holders an aggregate of $260.0 million
in cash, subject to adjustment for estimated Company Cash and estimated Working Capital as compared to the Working Capital Target (each
as defined in the Merger Agreement), and (ii) issued to certain of the former Melinta equity holders an aggregate of 3.3 million common
shares of the Company (the “Merger Shares”). In addition, in connection with the Merger, we paid $23.2 million to acquire
the Toprol XL product rights, which Melinta had licensed from a third party. The total cash consideration was funded by a combination
of the Company’s existing cash on hand and net proceeds from the Company’s $150.0 million aggregate principal amount of convertible
senior notes due 2030 (as described below).
Additionally, former Melinta
equity holders are eligible to receive certain contingent payments pursuant to the terms of the Merger Agreement and the Contingent Payment
Agreement, which provides for milestone and net sales-based payments. Upon the issuance of the FDA marketing approval of REZZAYO (or any
product that contains the active ingredient rezafungin), for the prevention or prophylaxis of invasive fungal infections in adult patients
undergoing allogeneic stem cell blood and marrow transplant or the regulatory equivalent on or prior to June 30, 2029, we shall pay, in
cash or common shares, par value $0.001 per share, of the Company at the Company’s election, to the former Melinta equity holders
the following payments:
(i) if the FDA-approved labeling includes candida, $20 million;
(ii) if the FDA-approved labeling includes aspergillus, $2.5 million; and
(iii) if the FDA-approved labeling includes pneumocystis, $2.5 million.
Further, the Contingent Payment Agreement provides
that we will pay to the former Melinta equity holders tiered royalties on REZZAYO U.S. net sales and low-single-digit royalties on MINOCIN®
U.S. net sales.
Additionally, on the Closing
Date, the Company and the consenting Melinta members entered into a registration rights agreement (the “Registration Rights Agreement”),
pursuant to which, among other things, the Company agreed to register for resale, pursuant to Rule 415 under the Securities Act, the Merger
Shares, pursuant to the Contingent Payment Agreement.
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Convertible Notes Offering
On August 6, 2025, the Company entered into subscription
agreements with certain investors to provide for the issuance of $150.0 million aggregate principal amount of its convertible senior notes
due 2030 (the “Notes”) in a private placement, exempt from registration pursuant to Section 4(a)(2) of the Securities Act.
The Notes were issued on August 12, 2025 and are eligible for resale to persons reasonably believed to be qualified institutional buyers
pursuant to Rule 144A of the Securities Act.
The Notes are governed by an Indenture, by and
between the Company and U.S. Bank Trust Company, National Association, as trustee. The Notes bear interest at a rate of 4.00% per annum,
payable semi-annually in arrears on February 1 and August 1 of each year, commencing on February 1, 2026. The Notes will mature on August
1, 2030 and are senior, unsecured obligations of the Company.
The Company used the net proceeds of the issuance
of the Notes to fund a portion of the purchase price payable in connection with the Merger, including related fees and expenses. See Note
7 to the Consolidated Financial Statements for further information regarding the Notes.
Follow-On Offering
In addition, on June 30, 2025, the Company completed
an underwritten public offering of common stock pursuant to the Company’s universal shelf registration statement on Form S-3, selling
an aggregate of 6,604,507 shares, at the price of $12.87 per share less an underwriting discount of $0.229 per share (the “Follow-On
Offering”). The Company received aggregate net proceeds of approximately $82.4 million after deducting the underwriting discounts
and commissions and offering expenses payable by the Company. See Note 10 to the Consolidated Financial Statements for further information
regarding the Follow-On Offering.
Financial Operations Overview
Revenue from Product Sales
We generate product revenue
from commercial sales of DefenCath to a limited number of direct customers as well as distributors and, from the Closing Date, we generate
revenue from sales of the Melinta Portfolio. We recognize revenue from the sale of our Products when our direct customers obtain control
of the product and is recorded at the transaction price, net of estimates for variable consideration consisting of chargebacks, discounts,
returns, rebates, shelf-stock adjustments and data fees. Actual amounts of consideration ultimately received may differ from our estimates.
If actual results vary materially from our estimates, we will adjust these estimates, which will affect revenue from product sales and
earnings in the period such estimates are adjusted.
We continue to assess our
estimates of variable consideration as we accumulate additional historical data and will adjust these estimates accordingly.
Contract Revenue
As a result of the Merger,
we recognize revenue associated with Melinta’s license and collaboration agreements for the research and development and/or commercialization
of its therapeutic products in the form of licensing fees, milestone payments, royalties on sales in our partners’ respective licensed
territories, and sale of product inventory.
In addition, Melinta holds
a partnership with BARDA, a government agency, to advance BAXDELA and VABOMERE for use in pediatrics and to partner on the development
of BAXDELA against certain biothreat pathogens. Research and development services under the contract are recognized as contract revenue
over time, as the performance obligation is satisfied, in accordance with the BARDA agreement. Under this contract, BARDA has awarded
a total of $47.5 million with the potential of additional funding of $97.1 million, amounting to total funding up to $144.6 million, if
all options are exercised. If all contract options are exercised, the contract is expected to continue through 2034.
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Cost of Revenues
Cost of revenues include
direct and indirect costs related to the manufacturing and distribution of our Products, including product cost, packaging services,
freight, and an allocation of overhead costs that are primarily fixed such as salaries, benefits and insurance. In addition, cost of
revenues includes the amortization of intangible assets primarily associated with the fair value of the products acquired in the Melinta
Portfolio that were recorded as a result of the Merger (see Note 3 to the Consolidated Financial Statements included herein).
Research and Development Expense
Research and development (“R&D”)
expense consists of: (i) internal costs associated with our development activities; (ii) payments we make to third-party contract research
organizations, 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; and (vi) activities relating to regulatory filings and pre-clinical
studies and clinical trials. All R&D is expensed as incurred.
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 line and clinical trial may be affected by a variety of factors, including, among others, the quality of the product
line’s early clinical data, investment in the program, competition, manufacturing capabilities and commercial viability. As a result
of the uncertainties associated with clinical trial enrollments and the risks inherent in the development process, we are unable to determine
the duration and completion costs of future clinical stages of our product lines or when, or to what extent, we will generate revenues
from the commercialization and sale of any of our future product lines.
Development timelines, probability
of success and development costs vary widely. We are currently focused on the commercialization of our Products in the United States.
Selling and Marketing Expense
Selling and marketing (“S&M”)
expense includes the cost of salaries and related costs for personnel in sales and marketing including our contract sales force, brand
building, advocacy, market research and consulting costs. Selling and marketing expenses are expensed as incurred.
General and Administrative Expense
General and administrative
(“G&A”) expenses consist principally of salaries and related costs for personnel in executive, finance and administrative
functions including payroll taxes and health insurance, stock-based compensation and travel expenses. Other general and administrative
expenses include merger-related costs, facility-related costs, insurance and professional fees for legal, patent review, consulting, and
accounting services. General and administrative expenses are expensed as incurred.
Interest Income
Interest income consists of
interest earned on our cash and cash equivalents and short-term investments.
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 consolidated statement of operations as a separate line item within other income (expense).
Unrealized Gains on Marketable Security
Unrealized gains on marketable
security represents the change in fair market value of our marketable equity securities.
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Change in Contingent Consideration
Change in contingent consideration
represents the change in fair market value of the contingent consideration liabilities in connection with the Merger. Contingent consideration
in connection with the business combination is initially measured at fair value at the acquisition date and classified as a liability
and subsequently remeasured at fair value at each reporting date using a probability-weighted discounted cash flow model, or Monte Carlo
simulation, based on significant inputs. Changes in fair value are recognized as change in contingent
consideration within other expenses in the consolidated statement of operations.
Interest Expense
Interest expense consists
primarily of interest incurred on the Notes.
Tax Expense / Benefit
Income taxes are accounted
for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. 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 operating results in the period that includes the enactment date.
Management assesses the realizability of deferred tax assets and records a valuation allowance if it is more likely than not that all
or a portion of the deferred tax assets will not be realized.
Results of Operations
Comparison of the Years Ended December 31, 2025 and 2024
The following is a tabular
presentation of our audited consolidated operating results for the years ended December 31, 2025 and 2024 (in thousands): Results
for 2025 are inclusive of Melinta’s operations from the acquisition date of August 29, 2025 through December 31, 2025, while the
prior period does not include combined results. The below discussion of changes to our revenue and expenses compared to the prior year
largely focus on material factors independent of the acquisition.
2025 2024 Net of Change Increase (Decrease)
Operating Expenses:
Foreign exchange transaction loss (52 ) (31 ) 68 %
Unrealized gain on marketable security 5,364 - 100 %
Change in contingent consideration (6,501 ) - 100 %
Other comprehensive (loss) income (88 ) (3 ) 2,833 %
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Revenue. Revenue for
the year ended December 31, 2025 was $311.7 million as compared to $43.5 million for the same period in 2024, an increase of $268.2 million,
or 617%.
For the years ended December
31, 2025 and 2024, product sales were $304.3 million and $43.5 million, respectively, representing an increase of $260.8 million, or 600%.
Product sales during fiscal year 2024 and 2025 consist primarily of sales of DefenCath, which was approved by the FDA in November 2023
and launched in the U.S in April 2024 (inpatient setting) and July 2024 (outpatient setting) and reflects the shipment of DefenCath to
direct customers and specialty distributors, net of estimates for applicable variable consideration. Revenue from the Melinta Portfolio
represents $45.5 million of product sales, net of applicable variable consideration, for the post-acquisition period, starting August
29, 2025.
In 2024, we entered into multi-year
commercial supply agreements with a large and several mid-sized dialysis organizations. Each dialysis provider customized its implementation
plan to provide access to patients based on a variety of clinical and other factors. We believe the currently contracted customer base
represents roughly 60% of the outpatient dialysis centers in the U.S. in terms of the total addressable patient market. During the
second quarter of 2025, the Company’s largest volume customer commenced ordering, patient utilization commenced in the third quarter
of 2025, driving significant sales growth in the second half of 2025 relative to the first half.
Contract revenue for 2025
is related solely to the acquired operations of Melinta after the Closing Date of August 29, 2025 and reflects $4.2 million earned under
the BARDA agreement and $3.2 million related to milestone, royalty, and inventory revenue under Melinta’s licensing agreements.
The following is a summary
of our Total Revenue between the DefenCath sales and the contribution from the Melinta Portfolio from the Closing Date of August 29, 2025
through the end of 2025. The table below represents consolidated revenue for the year ended December 31, 2025 and 2024 (in thousands):
Product Sales:
Melinta Portfolio 45,531 -
Contract Revenue 7,365 -
Cost of Revenue. Cost
of revenue for the year ended December 31, 2025 was $22.1 million as compared to $3.0 million for the same period in 2024, an increase
of $19.1 million, or 628%. Cost of revenues include direct and indirect costs related to the manufacturing and distribution of DefenCath
and the Melinta Portfolio, including product cost, packaging services, freight, and an allocation of overhead costs that are primarily
fixed such as salaries, benefits and insurance. The increase from 2024 to 2025 is primarily driven by higher product sales and to a lesser
extent, costs associated with the sales of the Melinta Portfolio.
Intangible Asset Amortization.
Amortization of intangible assets was $13.9 million and $0.2 million for the year ended December 31, 2025 and 2024, respectively. The
increase was primarily due to the intangible assets acquired in connection with the Merger.
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Research and Development
Expense. R&D expense for the year ended December 31, 2025 was $19.3 million, an increase of $15.4 million, or 390%, from $3.9
million for the same period in 2024. The increase was due primarily to the increases in personnel and clinical trial services in support
of the ongoing clinical studies initiated in the fourth quarter of 2024 as well as severance costs and the incremental cost of Melinta’s
operations starting on August 29, 2025.
Selling and Marketing Expense.
S&M expense was $38.1 million for the year ended December 31, 2025, an increase of $9.4 million, or 32%, from $28.7 million for the
same period in 2024. These increases were primarily due to severance costs and the incremental cost of Melinta’s operations starting
on August 29, 2025 and the termination cost associated with the Syneos contract, offset by additional marketing costs related to the pre-launch
and launch of DefenCath in 2024.
General and Administrative
Expense. G&A expense for year ended December 31, 2025 was $68.2 million, an increase of $38.2 million, or 128%, from $30.0 million
for the same period in 2024. These increases were primarily driven by the Merger-related transaction costs, severance costs, the incremental
cost of Melinta’s operations starting on August 29, 2025 including higher headcount with the combined company, non-cash charges
for stock-based compensation and an increase in costs related to business development.
Interest Income. Interest
income was $3.8 million for the year ended December 31, 2025 compared to $2.6 million for the same period last year, an increase of $1.2
million, or 49%, driven by higher average cash balances.
Unrealized Gains on Marketable
Security. Unrealized gain on marketable security represents the change in fair value for our marketable equity securities in Talphera,
a publicly-traded biotechnology company, from the date that the stock was acquired to December 31, 2025. Fair value is determined based
on the closing stock price of Talphera on the balance sheet date. For the year ended December 31, 2025, we recognized an unrealized gain
on marketable security of $5.4 million related to the increase in fair value of our Talphera stock.
Change in Contingent Consideration.
For the year ended December 31, 2025, we recognized a $6.5 million change in contingent consideration, primarily driven by the changes
in the present value of expected payments resulting from discount accretion and updates to the risk-free rate used in the initial Closing
Date valuation. As the Merger closed in 2025, there was no comparative amount in 2024.
Interest
Expense. Interest expense was $2.8 million for the year ended December 31, 2025 compared to $0.0 million for the same period last
year, an increase of $2.8 million. This was primarily driven by the interest expense and accretion related to the Notes.
Tax Benefit. The tax benefit for year ended December 31, 2025 was $13.0 million,
an increase of $11.6 million, or 835% from $1.4 million for the same period in 2024. As of December 31, 2025, the Company partially released
a valuation allowance primarily related to US Federal net operating losses (“NOLs”). The release of valuation allowance was
mainly attributed to the expected utilization of historical CorMedix federal NOLs. The Company will continue to evaluate the realizability
of its remaining deferred tax assets each reporting period and adjust the valuation allowance as appropriate based on changes in cumulative
results, forecasts of future taxable income, or other objective evidence as required by ASC 740-10-35. The tax benefit from the release
of the valuation allowance was partially offset by state taxes.
Other
Comprehensive (Loss) Income. Unrealized foreign exchange movements related to long-term intercompany loans, the translation
of the foreign affiliate financial statements to U.S. dollars and unrealized movements related to short-term investment are recorded
in other comprehensive (loss) income. The foreign entity was dissolved in 2025.
Liquidity and Capital Resources
Sources of Liquidity
We achieved profitability
for the year ended December 31, 2025, driven primarily by product sales of DefenCath. In addition, we received net proceeds of $7.8 million
from the issuance of 715,051 shares of common stock under our at-the-market-issuance sales agreement (“ATM program”), we raised
net proceeds of $144.3 million from the Notes offering in August 2025 and $82.4 million from the Follow-On Offering in June 2025. We may
continue to utilize external sources of cash to further fund operations. See Notes 7 and 10, respectively, to the Consolidated Financial
Statements for further details on the Notes, Follow-On Offering, and ATM program.
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Net Cash Provided by (Used in) Operating
Activities
Net cash provided by operating
activities for the year ended December 31, 2025 was $175.0 million as compared to net cash used in operating activities of $50.6 million
for the same period in 2024. Net cash provided by operating activities was primarily attributable to the net income of $163.1 million
for the year ended December 31, 2025 compared to a net loss of $17.9 million in the comparison period in 2024.
Net Cash (Used in) Provided by Investing
Activities
Net cash used in investing
activities for year ended December 31, 2025 was $308.4 million as compared to $21.2 million of net cash provided by investing activities
for the same period in 2024. The net cash used during the year ended December 31, 2025, was mainly driven by the acquisition of Melinta.
Net Cash Provided by Financing Activities
Net cash provided by financing
activities for the year ended December 31, 2025 of $238.5 million was attributable to the Notes Offering in August 2025, the Follow-On
Offering in June 2025, and from our ATM program. Net cash provided by financing activities for the year ended December 31, 2024 was $26.3
million attributable to the net proceeds received from the sale of our common stock in our ATM program and stock option exercises.
Funding Requirements and Liquidity
Our total cash, cash equivalents
and short-term investments as of December 31, 2025, was $148.5 million, excluding restricted cash of $1.0 million, compared with $51.7
million as of December 31, 2024, excluding restricted cash of $0.1 million. As of December 31, 2025, $22.1 million of the Company’s
common stock remains available for potential sale under the ATM program. Additionally, we have $15.0 million of remaining capacity available
under our 2024 Shelf Registration Statement for the issuance of Company securities.
We expect to continue to fund
operations from cash collections of accounts receivable, our cash on hand, cash equivalents and short-term investments, and through potential
capital raising sources, which may be dilutive to existing stockholders. We may seek to sell additional equity or debt securities through
one or more discrete transactions, but can provide no assurances that any such financing 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.
Our actual cash requirements
may vary materially from those now planned due to a number of factors, including any material change in commercial operations pertaining
to our Products or the focus and direction of our research and development programs, any acquisition or pursuit of development of new
product candidates, competitive and technical advances, the costs of commercializing any of our product candidates, and costs of filing,
prosecuting, defending and enforcing any patent claims and any other intellectual property rights.
We currently estimate that
as of December 31, 2025, we have sufficient cash, cash equivalents and short-term investments to fund operations for at least twelve months
from the issuance of these financial statements.
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Contractual Obligations
We entered into a seven-year
operating lease agreement in March 2020 for an office space at 300 Connell Drive, Berkeley Heights, New Jersey 07922. The lease agreement,
with a monthly average cost of approximately $17,000, commenced on September 16, 2020 and has a term through October 2027.
Following the Merger, the
Company now has operating leases for two additional offices; a lease agreement for our corporate headquarters at 389 Interpace Parkway,
Parsippany, New Jersey, which expires in March 2030, and a sublease agreement for an office facility in Lake Forest, Illinois, which expires
in September 2031. The total monthly expense associated with these leases is approximately $60,000.
In addition, following the
Merger, we have finance leases for numerous vehicles that are used by certain field-based employees The lease term for each vehicle is
between 48 to 60 months with an aggregate approximate monthly expense of $70,000.
In connection with the Merger,
we are required to make certain contingent payments to the former Melinta equity holders. Upon the issuance of the FDA marketing approval
of REZZAYO (or any product that contains the active ingredient rezafungin), for the prevention or prophylaxis of invasive fungal infections
in adult patients undergoing allogeneic stem cell blood and marrow transplant or the regulatory equivalent (the “REZZAYO Second
Indication”) on or prior to June 30, 2029, the Company shall pay, in cash or common shares, par value $0.001 per share, of the Company
at the Company’s election, to the former Melinta equity holders the following payments (the “REZZAYO Milestone”):
(i) if the FDA-approved labeling includes candida, $20 million;
(ii) if the FDA-approved labeling includes aspergillus, $2.5 million; and
(iii) if the FDA-approved labeling includes pneumocystis, $2.5 million.
Further, we are obligated
to pay to the former Melinta equity holders tiered royalties on REZZAYO U.S. net sales and low-single-digit royalties on MINOCIN U.S.
net sales.
In addition, in connection
with the Merger, we assumed certain commitments under the REZZAYO License Agreement that Melinta held with its licensor Mundipharma, including
a regulatory milestone of between $30 million and $40 million upon receipt of FDA approval for the REZZAYO Second Indication, a number
of commercial milestones upon exceeding certain net sales targets, and tiered net sales-based royalties. The REZZAYO License Agreement
additionally stipulates that upon the earlier of thirty-days following the receipt of the marketing approval for the prophylaxis indication
or on June 30, 2028, we will assume all rights, title and interest in and to all product filings for the current product in the U.S.
In connection with the purchase
of the active pharmaceutical ingredient (API) for VABOMERE, we have committed to API deliveries from the CMO in 2026 with a total cost
of €5.9 million, subject to inflation adjustments.
In December 2024, the Company
entered into a three-year agreement with Syneos Health Commercial Services, LLC (“Syneos”) under which Syneos agreed to provide
a dedicated inpatient field sales force to exclusively promote DefenCath to hospitals and health systems. The Company paid an up-front
implementation fee and was obligated to pay a fixed monthly fee. The Company signed a termination agreement, effective October 1,
2025 whereas the related services to CorMedix were completed on December 31, 2025. As of December 31, 2025, the Company has a total
net obligation of $2.3 million, consisting of $1.3 million of accrued termination fees and $1.6 million of unpaid expenses incurred through
December 31, 2025, which will be partially offset by a security deposit of $0.6 million. We expect complete settlement to occur during
the first quarter of 2026.
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Critical Accounting Estimates
We prepare our consolidated
financial statements in accordance with U.S. generally accepted accounting principles, which require our management to make estimates
that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates,
as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences
between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates
on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations
for the future based on available information. We evaluate these estimates on an ongoing basis. We consider an accounting estimate to
be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting
estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates
that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of
Directors. In addition, there are other items within our financial statements that require estimation, but are not deemed critical as
defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.
Variable consideration pertaining to
accrued Medicaid rebates requires estimation as our customers may have differing utilizations rates of Medicaid coverage, different utilization
within States which may be in either the primary or secondary positions, together with as well as general fluctuations in patient populations
over time. Based on the relatively short time since product launch of DefenCath and the inherent lag time in states’ Medicaid processing,
the utilization of information the Company has received is limited and, as such, there is a lack of significant historical trends for
Medicaid utilization. The Company’s accrual does take into consideration its customers’ recent actual Medicaid utilization
rates as well as anticipated Medicaid utilization rates. At December 31, 2025, the Company had $12.4 million in accrued Medicaid rebates,
including the balance recorded for the Melinta Portfolio.
During the year ended December 31,
2025, a change in estimate was recorded for variable consideration pertaining to Medicaid rebates, specific to DefenCath. During the three
months ended June 30, 2025, new information was obtained by the Company surrounding Medicaid utilization rates for certain states that
reimburse service providers using DefenCath. The resulting change in accounting estimate negatively impacted net sales, income from continuing
operations and net income for the year ended December 31, 2025. The resulting change in estimate negatively impacts full year 2025 revenue,
continuing operations and net income in the amount of $1.7 million. This impacted basic and diluted earnings per share by $0.02 and $0.02
per share, which would have caused earnings per share and diluted earnings per share to be $2.27 and $2.06 respectively. , with a corresponding net income of $164.7 million.
42
As a result of this conclusion,
the Company partially released its valuation allowance previously recorded against its deferred tax assets, recognizing an income
tax benefit of $61.5 million for the year ended, December 31, 2025. The release of valuation allowance was mainly attributed to the
expected utilization of historical CorMedix federal NOLs. The Company will continue to evaluate the realizability of its remaining
deferred tax assets each reporting period and adjust the valuation allowance as appropriate based on changes in cumulative results,
forecasts of future taxable income, or other objective evidence as required by ASC 740-10-35.
We engaged a third-party professional
service provider to assist us in determining the fair values of the purchase consideration, assets acquired, and liabilities assumed.
Such valuations require management to make significant estimates and assumptions, especially with respect to contingent liabilities associated
with the purchase price and intangible assets, such as developed product rights and in-process research and development programs. Critical
estimates that we have used in valuing these elements include, but are not limited to, future expected cash flows using valuation techniques
(i.e., Monte Carlo simulation models) and discount rates. Management’s estimates of fair value are based upon assumptions believed
to be reasonable, but which are inherently uncertain and unpredictable.
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk
N/A.
Item 8. Financial Statements and Supplementary Data
The information required by
this Item 8 is included in Part IV, Item 15, and is incorporated by reference.
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Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
Item 9A. Controls and Procedures
Management’s Annual Report on Internal Controls Over Financial
Reporting
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal
control over financial reporting. As defined by the Securities and Exchange Commission, internal control over financial reporting is a
process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of
Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of the consolidated financial statements in accordance with U.S. generally accepted accounting principles.
Our internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect our transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of the consolidated financial statements in accordance with generally accepted accounting
principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets
that could have a material effect on the consolidated financial statements.
Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial
Reporting
There
were no changes in our internal control over financial reporting during our year ended December 31, 2025, or in other factors that could
significantly affect these controls, that materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
Internal Controls Assessment
In
connection with the preparation of our annual consolidated financial statements for the year ended December 31, 2025, management identified
a deficiency in its internal control over financial reporting related to the operational effectiveness of an internal control to ensure
adequate and timely review of significant, non-routine transactions.
During the third quarter of
2025, the Company had recently completed a large acquisition and a convertible debt offering, and as a result, encountered numerous and
competing financial reporting demands with a limited number of finance resources and with heavy reliance on a third-party accounting
firm. The capacity constraints of our team at this time contributed to the control deficiency, which resulted in an immaterial error
in the measurement of equity-based consideration and goodwill that were recorded on the Company’s consolidated balance sheet as
of September 30, 2025 in connection with the acquisition of Melinta. The Company made appropriate corrections of this error during the
preparation of the Company’s consolidated financial statements for the year ended December 31, 2025.
44
While
the error did not result in a material misstatement or a restatement of the Company’s consolidated financial statements, management
concluded that there is a reasonable possibility that a material misstatement could have occurred without being prevented or detected
on a timely basis, and therefore, the control deficiency was deemed to be a material weakness.
Managements’
Internal Controls Conclusions
In connection with the
preparation of our annual consolidated financial statements, management, including, our Principal Executive and Financial Officer,
has undertaken an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2025,
based on the criterial established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). Management’s assessment included an evaluation of the design of
our internal control over financial reporting and testing of the operational effectiveness of those controls. Based on this
evaluation, management has concluded that our internal control over financial reporting was not effective as of December 31,
2025 due to the material weakness described above.
In addition, as of the end
of the period covered by this Annual Report on Form 10-K, we carried out an evaluation, under the supervision and with the participation
of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation
of our disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) (the “Exchange Act”).
Based on the material weakness described above, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure
controls and procedures were not effective to ensure that information required to be disclosed by us in the reports we file or submit
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the
SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, to allow timely decisions regarding required disclosures.
The Company excluded Melinta
from our assessment of internal control over financial reporting as of December 31, 2025, because it was acquired by the Company in a
business combination during 2025. Total assets and total revenues of Melinta, a wholly-owned subsidiary, represent 62 percent and 17 percent,
respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2025.
Remediation Efforts
Management has initiated remediation
measures designed to address the material weakness identified above. These measures include the implementation of an enhanced review control
over the accounting for significant non-routine transactions, including the preparation of contemporaneous technical accounting memoranda
and enhanced management review and approval procedures.
In connection with remediation
efforts, management will evaluate its workforce capacity relative to resourcing needs to determine if additional resources, including
both internal and external to the Company, are necessary to facilitate timely analysis and review of significant non-routine transactions.
In addition, Management believes that the integration of the financial systems and streamlining the combined-company close process this
year will create additional capacity within the finance function to support the remediation efforts.
The
material weakness will be considered remediated once the applicable controls have been fully implemented, have operated for a sufficient
period of time, and have been tested for operating effectiveness.
Item 9B. Other Information
Rule 10b5-1 Plans
During the quarter ended December
31, 2025, no director or officer of the Company (as defined in Rule 16a-1(f) under the Exchange Act) informed us of the adoption or termination of
a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item
408 of SEC Regulation S-K.
Item 9C. Disclosure
Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
45
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
The information required
by this Item will be included in our Proxy Statement, which will be filed within 120 days after the close of the 2025 fiscal year, or
an amendment to this Annual Report, and is hereby incorporated by reference.
Code of Ethics
We
have adopted a written Code of Conduct and Ethics that applies to our directors, executive officers and all employees. We intend to disclose
any amendments to, or waivers from, our code of ethics and business conduct that are required to be publicly disclosed pursuant to rules
of the SEC by filing such amendment or waiver with the SEC. This code of ethics and business conduct can be found in the “Investors
- Corporate Governance” section of our website, www.cormedix.com.
Insider Trading Policy
We
have adopted insider trading and 10b5-1 trading plan policies and procedures applicable to our directors, officers, employees,
and other covered persons, and have implemented processes for the company, that we believe are reasonably designed to promote compliance
with insider trading laws, rules and regulations, and the Nasdaq Stock Market LLC listing standards. Our insider trading policy and our
10b5-1 trading plan policy are filed as Exhibit 19.1 to this Annual Report on Form 10-K.
Item 11. Executive Compensation
The
information required by this Item will be included in our Proxy Statement, which will be filed within 120 days after the close of the
2025 fiscal year, or an amendment to this Annual Report, and is hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholders Matters
The
information required by this Item will be included in our Proxy Statement, which will be filed within 120 days after the close of the
2025 fiscal year, or an amendment to this Annual Report, and is hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions and Director
Independence
The
information required by this Item will be included in our Proxy Statement, which will be filed within 120 days after the close of the
2025 fiscal year, or an amendment to this Annual Report, and is hereby incorporated by reference.
Item 14. Principal Accountant Fees and Services
The
information required by this Item will be included in our Proxy Statement, which will be filed within 120 days after the close of the
2025 fiscal year, or an amendment to this Annual Report, and is hereby incorporated by reference.
46
PART IV
Item 15. Exhibits, Financial Statement Schedules
1. Financial Statements. The following
consolidated financial statements of CorMedix Inc. are filed as part of this Annual Report on Form 10-K:
Report of Independent Registered Public Accounting Firm (PCAOB ID # 199) F-2
Report of Independent Registered Public Accounting Firm (PCAOB ID # 688) F-4
Consolidated Balance Sheets as of December 31, 2025 and 2024 F-5
Consolidated Statements of Cash Flows Years Ended December 31, 2025 and 2024 F-8
Notes to Consolidated Financial Statements F-9
2. Financial Statement Schedules. The Financial
Statement Schedules have been omitted because of the absence of conditions under which they are required or because the required information,
where material, is shown in the financial statements or notes thereto.
3. Exhibit Index. The following is a list of exhibits filed
as part of this Annual Report on Form 10-K:
47
4.2 Description of Capital Stock of CorMedix Inc. X
48
19.1 Insider Trading Policies and Procedures X
21.1 List of Subsidiaries X
23.1 Consent of Independent Registered Public Accounting Firm (CBIZ CPAs P.C) X
23.2 Consent of Independent Registered Public Accounting Firm (Marcum LLP) X
101.INS Inline XBRL Instance Document X
101.SCH Inline XBRL Taxonomy Extension Schema Document. X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. X
*** These certifications are furnished.
+ Indicates management contract or compensation plan.
Item 16. Form 10-K Summary
Not applicable.
49
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
CORMEDIX INC.
March 5, 2026 By: /s/ Joseph Todisco
Joseph Todisco
Chief Executive Officer
(Principal Executive Officer)
March 5, 2026 By: /s/ Susan Blum
Susan Blum
Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated:
Signature Title Date
Joseph Todisco (Principal Executive Officer)
Susan Blum (Principal Financial and Accounting Officer)
/s/ Myron Kaplan Lead Independent Director March 5, 2026
Myron Kaplan
/s/ Janet Dillione Director March 5, 2026
Janet Dillione
/s/ Gregory Duncan Director March 5, 2026
Gregory Duncan
/s/ Alan Dunton Director March 5, 2026