| Summary of Significant Accounting Policies | Note
2 — Summary of Significant Accounting Policies: Liquidity
and Uncertainties The
financial statements have been prepared in conformity with GAAP which contemplate continuation of the Company as a going concern. To
date, the Company’s commercial operations have not generated sufficient revenues to enable profitability. As of June 30, 2021,
the Company had an accumulated deficit of $229.3 million, and incurred net losses from operations of $4.6 million and $3.8 million for
the three months ended June 30, 2021 and 2020, respectively and $11.8 million and $9.3 million for the six months ended June 30, 2021
and 2020, respectively. The Company currently estimates that as of June 30, 2021 it has sufficient cash, cash equivalents and short-term
investments on hand to fund its 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. In June 2021, the Company received approximately $1.3
million, net of expenses, from the sale of its unused New Jersey net operating losses (“NOL”) eligible for sale under the
State of New Jersey’s Economic Development Authority’s New Jersey Technology Business Tax Certificate Transfer program (“NJEDA
Program”). The NJEDA Program allowed the Company to sell approximately $1.3 million of its total $1.3 million in available NOL tax
benefits for the state fiscal year 2020. The Company’s continued operations will depend
on its ability to raise additional capital through various potential sources, such as equity and/or debt financings, strategic relationships,
potential strategic transactions or out-licensing of its products in order to commercially launch DefenCath upon NDA approval and until
profitability is achieved, if ever. Management can provide no assurances that such financing or strategic relationships will be available
on acceptable terms, or at all. As of June 30, 2021, the Company has $50.0 million available under its current shelf registration for
the issuance of equity, debt or equity-linked securities and no available balance under the ATM program. The
Company’s operations are subject to a number of other factors that can affect its operating results and financial condition. Such
factors include, but are not limited to: the ability to obtain regulatory approval to market the Company’s products; ability to
manufacture successfully; competition from products manufactured and sold or being developed by other companies; the price of, and demand
for the Company products; the Company’s ability to negotiate favorable licensing or other manufacturing and marketing agreements
for its products; the results of clinical testing and trial activities of the Company’s product candidates; and the Company’s
ability to raise capital to support its operations. Use
of Estimates The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported
amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Basis
of Consolidation The
condensed consolidated financial statements include the accounts of the Company, CorMedix Europe GmbH and CorMedix Spain, S.L.U., its
wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Financial
Instruments Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and
short-term investments. The Company maintains its cash and cash equivalents in bank deposit and other interest-bearing accounts, the
balances of which, at times, may exceed federally insured limits. The
following table is the reconciliation of the accounting standard that modifies certain aspects of the recognition, measurement, presentation
and disclosure of financial instruments as shown on the Company’s consolidated statement of cash flows:
June 30, December 31,
Cash and cash equivalents $ 73,093,132 $ 41,905,469
Restricted cash, short-term and long-term 240,083 191,314
Total cash, cash equivalents and restricted cash $ 73,333,215 $ 42,096,783 The
appropriate classification of marketable securities is determined at the time of purchase and reevaluated as of each balance sheet date.
Investments in marketable debt classified as available-for-sale and equity securities are reported at fair value. Fair value is determined
using quoted market prices in active markets for identical assets or liabilities or quoted prices for similar assets or liabilities or
other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Changes in fair value that are considered temporary are reported in the condensed consolidated statement of operations. Realized gains
and losses, amortization of premiums and discounts and interest and dividends earned are included in other income (expense). For declines
in the fair value of equity securities that are considered other-than-temporary, impairment losses are charged to other income (expense),
net. The Company considers available evidence in evaluating potential impairments of its investments, including the duration and extent
to which fair value is less than cost. There were no deemed permanent impairments at June 30, 2021 or December 31, 2020. The
Company’s marketable securities are highly liquid and consist of U.S. government agency securities, high-grade corporate obligations
and commercial paper with original maturities of more than 90 days. As of June 30, 2021 and December 31, 2020, all of the Company’s
investments had contractual maturities of less than one year. As of June 30, 2021, no allowance for credit loss was recorded. The
following table summarizes the amortized cost, unrealized gains and losses and the fair value at June 30, 2021 and December 31, 2020:
June 30, 2021: Amortized Gross Gross Fair Value
Money Market Funds included in Cash Equivalents $ 17,478,369 $ - $ - $ 17,478,369
Corporate Securities 3,561,926 (1,584 ) 3,560,342
Commercial Paper 1,598,744 - 267 1,599,011
Subtotal 5,160,670 (1,584 ) 267 5,159,353
Total June 30, 2021 $ 22,639,039 $ (1,584 ) $ 267 $ 22,637,722
December 31, 2020:
Money Market Funds included in Cash Equivalents $ 3,182,762 $ (81 ) $ 8 $ 3,182,689
Corporate Securities 3,565,501 (1,005 ) 3 3,564,499
Commercial Paper 879,501 - 72 879,573
Subtotal 4,445,002 (1,005 ) 75 4,444,072
Total December 31, 2020 $ 7,627,764 $ (1,086 ) $ 83 $ 7,626,761 Fair
Value Measurements The
Company’s financial instruments recorded in the condensed consolidated balance sheets include cash and cash equivalents, accounts
receivable, investment securities, accounts payable and accrued expenses. The carrying value of certain financial instruments,
primarily cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their estimated fair values
based upon the short-term nature of their maturity dates. The
Company categorizes its financial instruments into a three-level fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets
(Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels
of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of
the instrument. Financial assets recorded at fair value on the Company’s condensed consolidated balance sheets are categorized
as follows:
● Level
1 inputs—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level
2 inputs— Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical
or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield
curves, and market-corroborated inputs).
● Level
3 inputs—Unobservable inputs for the asset or liability, which are supported by little or no market activity and are valued based
on management’s estimates of assumptions that market participants would use in pricing the asset or liability. The
following table provides the carrying value and fair value of the Company’s financial assets measured at fair value on a recurring
basis as of June 30, 2021 and December 31, 2020:
June 30, 2021: Carrying Value Level 1 Level 2 Level 3
Money Market Funds and Cash Equivalents $ 17,478,369 $ 17,478,369 $ - $ -
Corporate Securities 3,560,342 - 3,560,342 -
Commercial Paper 1,599,011 - 1,599,011 -
Subtotal 5,159,353 - 5,159,353 $ -
Total June 30, 2021 $ 22,637,722 $ 17,478,369 $ 5,159,353 $ -
December 31, 2020:
Money Market Funds and Cash Equivalents $ 3,182,689 $ 3,182,689 $ - $ -
Corporate Securities 3,564,499 - 3,564,499 -
Commercial Paper 879,573 - 879,573 -
Subtotal 4,444,072 - 4,444,072 -
Total December 31, 2020 $ 7,626,761 $ 3,182,689 $ 4,444,072 $ - Foreign
Currency Translation and Transactions The
condensed consolidated financial statements are presented in U.S. Dollars (“USD”), the reporting currency of the Company.
For the financial statements of the Company’s foreign subsidiaries, whose functional currency is the EURO, foreign currency asset
and liability amounts, are translated into USD at end-of-period exchange rates. Foreign currency income and expenses are translated at
average exchange rates in effect during the period in which the income and expenses were recognized. Translation gains and losses are
included in other comprehensive income (loss). The
Company has intercompany loans between the parent company based in New Jersey and its German subsidiary. The intercompany loans outstanding
are not expected to be repaid in the foreseeable future and unrealized foreign exchange movements related to long-term intercompany loans
are recognized in other comprehensive income (loss). Foreign
currency exchange transaction gain (loss) is the result of re-measuring transactions denominated in a currency other than the functional
currency of the entity recording the transaction. Restricted
Cash As
of June 30, 2021 and December 31, 2020, the Company has restricted cash in connection with the patent and utility model infringement
proceedings against TauroPharm (see Note 4). The Company was required by the District Courts of Mannheim to provide security deposit
to cover legal fees in the event TauroPharm is entitled to reimbursement of these costs. The Company furthermore had to provide a deposit
for the first and second instances, respectively, in connection with the unfair competition proceedings in Cologne. During the six months
ended June 30, 2021, approximately $48,000 was released by the court for the reimbursement of legal fees and other costs which was removed
from restricted cash. As of June 30, 2021 and December 31, 2020, restricted cash in connection with the patent and utility model infringement
proceedings were $138,000 and $191,000, respectively. As
of June 30, 2021, the Company had $102,000 in long-term restricted cash for a lease security deposit. Prepaid
Research and Development and Other Prepaid Expenses Prepaid
expenses consist of payments made in advance to vendors relating to service contracts for clinical trial development, manufacturing,
preclinical development and insurance policies. These advanced payments are amortized to expense either as services are performed or
over the relevant service period using the straight-line method. Inventories,
net Inventories
are valued at the lower of cost or net realizable value on a first in, first out basis. Inventories consist of raw materials (including
labeling and packaging), work-in-process, and finished goods, if any, for the DefenCath/Neutrolin product. Inventories consist of the
following:
June 30, December 31,
Finished goods $ 245,668 $ 317,733
Inventory reserve (172,941 ) (174,169 )
Total $ 72,727 $ 143,564 Leases The
Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”)
assets, current portion of operating lease liabilities, and operating lease liabilities, net of current portion, on the condensed consolidated
balance sheet. Operating
lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over
the lease term at commencement date. As the Company’s leases do not provide an implicit rate, the Company uses its incremental
borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company’s
lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The
Company has elected, as an accounting policy, not to apply the recognition requirements in ASC 842 to short-term leases. Short-term leases
are leases that have a term of 12 months or less and do not include an option to purchase the underlying asset that the
Company is reasonably certain to exercise. The Company recognizes the lease payments for short-term leases on a straight-line basis
over the lease term. The
Company has also elected, as a practical expedient, by underlying class of asset, not to separate lease components from non-lease components
and, instead, account for them as a single component. Accrued
Expenses Accrued
expenses consist of the following:
June 30, December 31,
Professional and consulting fees $ 234,041 $ 146,129
Accrued payroll and payroll taxes 1,432,414 2,490,441
Clinical trial related 1,000 2,187
Manufacturing development related 278,305 143,780
Other 118,609 141,814
Total $ 2,064,369 $ 2,924,351 Revenue
Recognition The
Company recognizes revenue in accordance with ASC 606, “ Revenue from Contracts with Customers.” The
Company recognizes net sales upon shipment of product and upon meeting the five-step model prescribed by ASC 606 outlined above. Loss
Per Common Share Basic
loss per common share excludes any potential dilution and is computed by dividing net loss by the weighted average number of common shares
outstanding during the period. Diluted net loss per common share reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. However, since their effect is anti-dilutive, the Company has excluded potentially dilutive shares. The
following potentially dilutive shares have been excluded from the calculation of diluted net loss per share as their effect would be
anti-dilutive.
Six Months Ended
2021 2020
(Number of Shares of
Series C non-voting preferred stock 4,000 104,000
Series E non-voting preferred stock 391,953 391,953
Series G non-voting preferred stock 5,004,069 5,560,137
Restricted stock units - 105
Shares issuable for payment of deferred board compensation 48,909 40,556
Shares underlying outstanding warrants 56,455 183,148
Shares underlying outstanding stock options 3,765,746 2,300,937
Total potentially dilutive shares 9,271,132 8,580,836 Stock-Based
Compensation Share-based
compensation cost for stock options granted to employees is measured at grant date using the Black-Scholes stock option pricing model
in accordance with ASC No. 718, “Compensation-Stock Compensation” Research
and Development Research
and development costs are charged to expense as incurred. Research and development include fees associated with operational consultants,
contract clinical research organizations, contract manufacturing organizations, clinical site fees, contract laboratory research organizations,
contract central testing laboratories, licensing activities, and allocated executive, human resources, facilities expenses and costs
related to the manufacturing of the product that could potentially be available to support the commercial launch prior to marketing approval.
The Company accrues for costs incurred as the services are being provided by monitoring the status of the activities and the invoices
received from its external service providers. Costs related to the acquisition of technology rights and patents for which development
work is still in process are charged to operations as incurred and considered a component of research and development expense. |
