| Summary of Significant Accounting Policies | Liquidity, Risks and Uncertainties The Companys operations are subject to
a number of factors that can affect its operating results and financial condition. Such factors include, but are not limited to:
the results of clinical testing and trial activities of the Companys product candidates; the ability to obtain regulatory
approval to market the Companys products; competition from products manufactured and sold or being developed by other companies,
the price of, and demand for, Company products; the Companys ability to negotiate favorable licensing or other manufacturing
and marketing agreements for its products; and the Companys ability to raise capital. To date, the Company has not generated significant commercial revenues. Based
on the current development plans for Neutrolin in both the United States (U.S.) and foreign markets (including the
planned Phase 3 clinical trials in the U.S.) and on the current revenue assumptions for Neutrolin in approved markets, management
believes that the existing cash will be sufficient to fund its operations for at least the next 12 months following the balance
sheet date. The Companys continued operations, including
the completion of its planned Phase 3 clinical trials for Neutrolin in hemodialysis and oncology/total parenteral nutrition patients
in the U.S., will depend on its ability to raise additional capital through potential sources such as equity and/or debt financings,
strategic relationships, out-licensing or distribution arrangements of its products and its ability to generate substantial revenue
from sales of Neutrolin. However, the Company can provide no assurances that such financing or strategic relationships
will be available on acceptable terms, or at all, or that the Company will achieve substantial levels of revenue from sales of
Neutrolin. If the Company is unable to raise sufficient capital or find strategic partners, there would be a material
adverse effect on its business. Further, the Company expects to incur increases in its cash used in operations as it continues
to commercialize Neutrolin, increases its business development activities, incurs additional legal costs to defend its intellectual
property and seeks FDA approval of Neutrolin in the U.S. Use of Estimates The preparation of financial statements in conformity
with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those estimates. Basis of Consolidation The condensed consolidated financial statements
include the accounts of the Company and CorMedix Europe GmbH, a wholly owned subsidiary. All significant intercompany
accounts and transactions have been eliminated in consolidation. Cash and Cash Equivalents The Company considers all highly liquid instruments with an original
maturity of 90 days or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist of deposits
and other interest bearing accounts, the balances of which, at times, may exceed federally insured limits. Short-Term Investments The Company determines the appropriate classification of marketable
securities at the time of purchase and reevaluates such designation as of each balance sheet date. Investments in marketable
debt and equity securities classified as available-for-sale are reported at fair value. Fair values of the Companys
investments are determined using quoted market prices in active markets for identical assets or liabilities or quoted prices for
similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data for substantially
the full term of the assets or liabilities. Changes in fair value that are considered temporary are reported net of tax in other
comprehensive income (loss). Realized gains and losses, amortization of premiums and discounts and interest
and dividends earned are included in income (expense) on the condensed consolidated statements of operations and comprehensive
income (loss). The cost of investments for purposes of computing realized and unrealized gains and losses is based on the specific
identification method. For declines in the fair value of equity securities that are considered other-than-temporary,
impairment losses are charged to other (income) expense, net. The Company considers available evidence in evaluating potential
impairments of its investments, including the duration and extent to which fair value is less than cost and, for equity securities,
the Companys ability and intent to hold the investments. The Companys 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, 2015, all of the Companys investments had contractual maturities which were less than
one year. The following table summarizes the amortized cost, unrealized gains and losses and the fair value at June
30, 2015 of the Companys financial assets that are measured on a recurring basis:
Amortized Cost Gross Unrealized Losses Gross Unrealized Gains Fair Value
Money Market Funds included in Cash Equivalents $ 8,582,883 $ - $ - $ 8,582,883
US Government Agency Securities 1,507,470 (360 ) - 1,507,110
Corporate Securities 10,876,000 (6,683 ) 1,539 10,870,856
Commercial Paper 999,111 - - 999,111
Subtotal 13,382,581 (7,043 ) 1,539 13,377,077
$ 21,965,464 $ (7,043 ) $ 1,539 $ 21,959,960 Fair Value Measurements The Companys financial instruments recorded in the consolidated
balance sheets include cash and cash equivalents, accounts receivable, investment securities, accounts payable and accrued expenses.
The carrying value of certain financial instruments, primarily cash and cash equivalents, accounts receivable, accounts payable,
and accrued expenses approximate their estimated fair values based upon the short-term nature of their maturity dates. The Company categorizes its financial instruments into a three-level
fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value
hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority
to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy,
the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument. Financial
assets recorded at fair value on the Companys condensed consolidated balance sheets are categorized as follows:
● Level 1 inputsObservable 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 inputsUnobservable inputs for the asset or liability, which are supported by little or no market activity and are The following table provides the carrying value and fair value of
the Companys financial assets measured at fair value on a recurring basis as of June 30, 2015:
Fair Value Measurement at June 30, 2015
Carrying Value Level 1 Level 2 Level 3
Money Market Funds $ 8,582,883 $ 8,582,883 $ - $ -
US Government Agency Securities 1,507,110 - 1,507,110 -
Corporate Securities 10,870,856 - 10,870,856 -
Commercial Paper 999,111 - 999,111 -
Subtotal $ 13,377,077 $ - $ 13,377,077 $ -
$ 21,959,960 $ 8,582,883 $ 13,377,077 $ - Foreign Currency Translation and Transactions These condensed consolidated financial statements
are presented in U.S. Dollars (USD), the reporting currency of the Company. For the financial statements
of the Companys foreign subsidiary, whose functional currency is the EURO, foreign currency asset and liability amounts,
are translated into USD at end-of-period exchange rates. Foreign currency income and expenses are translated at average
exchange rates in effect during the year. 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. Effective October 1, 2014, the Company assessed and determined
that the intercompany loans outstanding 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, beginning October 1, 2014, 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. Segment and Geographic Information The Company operates in one business segment. The
Company reported revenues of $119,973 and $151,237 for the three and six months ended June 30, 2015, respectively. Of the Companys
revenues for the three and six months ended June 30, 2015, $117,767 and $146,825, respectively, were attributable to its European
and Middle East operations, which are based in Germany. All of the Companys revenues of $39,729 and $51,932 for
the three and six month ended June 30, 2014, respectively, were attributable to its European operations. Total assets at
June 30, 2015 were $38,796,026, of which $37,816,669 were located in the United States, with the remainder in Germany. Net
property and equipment at June 30, 2015 was $44,652, of which $13,065 was located in the United States, with the remainder located
in Germany. Prepaid Expenses Prepaid expenses consist of payments made in
advance to vendors relating to service contracts for clinical trial development, manufacturing, preclinical development and insurance
policies. These advanced payments are amortized to expense either as services are performed or over the relevant service period
using the straight-line method. Inventories, net Inventories are valued at the lower of cost or
market on a first in, first out basis. Inventories consist of raw materials (including labeling and packaging), work-in-process,
and finished goods, if any, for the Neutrolin product. Inventories consist of the following:
June 30, 2015
December 31, 2014
Raw materials $ 247,625 $ 293,976
Work in process 460,945 166,807
Finished goods 6,479 2,246
Total $ 715,049 $ 463,029 The Company maintained an inventory reserve of
$175,000 at June 30, 2015 and December 31, 2014. Accrued Expenses Accrued expenses consist of the following:
June 30, 2015
December 31, 2014
Professional and consulting fees $ 216,125 $ 225,726
Accrued payroll and payroll taxes 195,078 13,393
Market research 162,345 137,345
Monitoring program fees 80,013 82,861
Statutory taxes 65,773 34,548
Other 41,787 27,652
Total $ 761,121 $ 521,525 Revenue Recognition The Company recognizes revenue in accordance
with SEC Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements Revenue Recognition Revenue Recognition. Deferred Revenue In August 2014, the Company entered into an exclusive
distribution agreement (the Agreement) with Wonik Corporation, a South Korean company, to market, sell and distribute
Neutrolin for hemodialysis and oncolytic patients upon receipt of regulatory approval in South Korea (the Territory). Upon
execution of the Agreement, Wonik paid the Company a non-refundable $50,000 payment and will pay an additional $50,000 upon receipt
of the product registration necessary to sell Neutrolin in the Territory. The term of the agreement commenced on August
8, 2014 and will continue for three years after the first commercial sale of Neutrolin in the Territory. The non-refundable
up-front payment has been recorded as deferred revenue and will be recognized as revenue on a straight-line basis over the contractual
term of the Agreement. Income (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. For the three and six months ended June 30, 2015
and 2014, basic income (loss) per common share is calculated by dividing net income (loss) available to common shareholders by
the number of weighted average common shares issued and outstanding. Diluted earnings (loss) per common share is calculated
by dividing net income (loss) available to common shareholders by the weighted average number of common shares issued and outstanding
for the period, plus amounts representing the dilutive effect from the exercise of stock options and warrants and the
conversion of convertible preferred stock, as applicable. The Company calculates dilutive potential common shares using the treasury
stock method, which assumes the Company will use the proceeds from the exercise of stock options and warrants to repurchase shares
of common stock to hold in its treasury stock reserves. 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.
June 30,
2015 2014
Series B non-voting convertible preferred stock - 454,546
Series C non-voting convertible preferred stock 2,865,000 3,500,000
Series D non-voting convertible preferred stock 1,479,240 1,148,000
Series E non-voting convertible preferred stock 1,959,759 1,104,280
Shares underlying outstanding warrants 4,422,188 11,571,233
Shares underlying outstanding stock options 3,594,545 4,048,000
Total 14,320,732 21,826,059 Each outstanding series of convertible preferred
stock is considered to be a participating security under ASC 260, Earnings Per Share The following table is the calculation of the
basic and diluted net income (loss) per share of common stock:
Three Months Ended June 30, Six Months Ended June 30,
2015 2014 2015 2014
Income (Loss) Per Common Share - Basic:
Net income (loss) $ (4,135,100 ) $ 3,509,290 $ (9,632,769 ) $ (13,204,001 )
Less: Dividends on participating securities - (27,453 ) (33,121 ) (54,602 )
Less: Net income allocated to participating securities - (766,348 ) - -
Net income (loss) available to common shareholders - basic $ (4,135,100 ) $ 2,715,489 $ (9,665,890 ) $ (13,258,603 )
Weighted average common shares outstanding basic 31,623,100 21,993,384 27,793,627 20,036,671
Net income (loss) per common share basic $ (0.13 ) $ 0.12 $ (0.35 ) $ (0.64 )
Three Months Ended June 30, Six Months Ended June 30,
2015 2014 2015 2014
Income (Loss) Per Common Share - Diluted:
Net income (loss) available to common shareholders - basic $ (4,135,100 ) $ 2,715,490 $ (9,665,890 ) $ (13,258,603 )
Plus: Dividends declared on participating securities - 27,452 - -
Plus: Net income allocated to participating securities - 766,348 - -
Less: Change in fair value of derivative securities - (4,657,481 ) - -
Numerator for income per share - diluted $ (4,135,100 ) $ (1,148,191 ) $ (9,665,890 ) $ (13,258,603 )
Weighted average common shares outstanding basic 31,623,100 21,993,384 27,793,627 20,036,671
Weighted average effect of dilutive securities:
Exercise of warrants - 1,194,135 - -
Conversion of preferred stock to common stock - 2,252,280 - -
Weighted average common shares outstanding diluted 31,623,100 25,439,799 27,793,627 20,036,671
Net loss per common share diluted $ (0.13 ) $ (0.05 ) $ (0.35 ) $ (0.64 ) Warrants and options if exercised, and convertible
preferred stock if converted, that would result in the issuance of 16,073,779 and 21,826,059 shares of common stock for the three
and six months ended June 30, 2014, respectively, and 14,320,732 for the three and six months ended June 30, 2015 were excluded
from the computation of diluted earnings (loss) per share because they were anti-dilutive. Stock-Based Compensation The Company accounts for stock options granted
to employees, officers and directors according to ASC No. 718, Compensation Stock Compensation (ASC
718). Under ASC 718, share-based compensation cost is measured at grant date, based on the estimated fair value of
the award using the Black-Scholes option pricing model, and is recognized as expense net of expected forfeitures, over the employees
requisite service period on a straight-line basis. Stock compensation expense is recognized by applying the expected
forfeiture rate during the vesting period to the fair value of the award. The estimation of the number of stock awards that
will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from the Companys current
estimates, compensation expense may need to be revised. The Company considers many factors when estimating expected
forfeitures for stock awards granted to employees, officers and directors, including types of awards, employee class, and an analysis
of historical forfeitures. The Company accounts for stock options granted
to non-employees on a fair value basis using the Black-Scholes option pricing model in accordance with ASC 718 and ASC No. 505-50,
Equity-Based Payments to Non-Employees (ASC 505). The non-cash charge to operations for non-employee
options with time based vesting provisions is based on the fair value of the options at the balance sheet date and amortized to
expense over the related vesting period. Research and Development Research and development costs are charged to
expense as incurred. Research and development costs include fees associated for operational consultants, contract clinical research
organizations, contract manufacturing organizations, contract laboratory research organizations and contract central testing laboratories,
licensing activities, clinical site fees, and allocated executive, human resources and facilities expenses, among others. The Company
accrues for costs incurred as the services are being provided. |
