| 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 support its operations. To
date, the Companys commercial operations have not generated enough revenues to make the Company profitable. As
of March 31, 2016, the Company had an accumulated deficit of $98.6 million, and incurred losses from operations of $4.3 million
for the quarter then ended. Based on the current development plans for Neutrolin in both the U.S. and foreign markets
(including the ongoing hemodialysis Phase 3 clinical trial in the U.S.) and our other operating requirements, management believes
that the existing cash at March 31, 2016 will be sufficient to fund operations for at least the next twelve months following the
balance sheet date. The Company will need additional funding thereafter to complete the hemodialysis clinical trial in the U.S.
which commenced in December 2015. The Company also plans to initiate an oncology/total parenteral nutrition trial in
the U.S. in the first quarter of 2017 and will need to raise additional funds to complete this trial. If the Company
is unable to raise additional funds when needed, they will not be able to complete the ongoing hemodialysis Phase 3 clinical trial
or the planned Phase 3 oncology/total parenteral nutrition clinical trial. The
Companys continued operations will depend on its ability to raise additional capital through various potential sources,
such as equity and/or debt financings, strategic relationships, or out-licensing of its products, until it achieves profitability,
if ever. However, the Company can provide no assurances that such financing or strategic relationships will be available
on acceptable terms, or at all. Without this funding, the Company could be required to delay, scale back or eliminate
some or all of its research and development programs which would likely have a material adverse effect on the Companys
business. 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 and CorMedix Europe GmbH, a wholly owned subsidiary. All
significant intercompany accounts and transactions have been eliminated in consolidation. Cash
and Cash Equivalents Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents.
The Company maintains its cash and cash equivalents in bank deposits and other interest bearing accounts, the balances of which
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. There were no deemed permanent impairments at March 31, 2016. 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 March 31, 2016, 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 March 31, 2016 and December 31, 2015 of the Companys financial
assets that are measured on a recurring basis:
March
31, 2016: Amortized
Cost Gross
Unrealized Losses Gross
Unrealized Gains Fair
Value
Money
Market Funds included in Cash Equivalents $ 3,047,206 $ - $ - $ 3,047,206
U.S.
Government Agency Securities 2,014,153 (53 ) - 2,014,100
Corporate
Securities 13,035,370 (2,215 ) 1,475 13,034,630
Commercial
Paper 1,995,260 - - 1,995,260
Subtotal 17,044,783 (2,268 ) 1,475 17,043,990
Total
March 31, 2016 $ 20,091,989 $ (2,268 ) $ 1,475 $ 20,091,196
December
31, 2015:
Money
Market Funds included in Cash Equivalents $ 3,353,067 $ - $ - $ 3,353,067
U.S.
Government Agency Securities 6,531,914 (3,014 ) - 6,528,900
Corporate
Securities 15,065,595 (21,637 ) 412 15,044,370
Commercial
Paper 1,995,116 - - 1,995,116
Subtotal 23,592,625 (24,651 ) 412 23,568,386
Total
December 31, 2015 $ 26,945,692 $ (24,651 ) $ 412 $ 26,921,453 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 March 31, 2016 and December 31, 2015:
March
31, 2016: Carrying
Value Level
1 Level
2 Level
3
Money
Market Funds $ 3,047,206 $ 3,047,206 $ - $ -
US
Government Agency Securities 2,014,100 - 2,014,100 -
Corporate
Securities 13,034,630 - 13,034,630 -
Commercial
Paper 1,995,260 - 1,995,260 -
Subtotal 17,043,990 - 17,043,990 -
Total
March 31, 2016 $ 20,091,196 $ 3,047,206 $ 17,043,990 $ -
December
31, 2015:
Money
Market Funds $ 3,353,067 $ 3,353,067 $ - $ -
US
Government Agency Securities 6,528,900 - 6,528,900 -
Corporate
Securities 15,044,370 - 15,044,370 -
Commercial
Paper 1,995,116 - 1,995,116 -
Subtotal 23,568,386 - 23,568,386 -
Total
December 31, 2015 $ 26,921,453 $ 3,353,067 $ 23,568,386 $ - 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 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 period in which the income and expenses were recognized. Translation
gains and losses are included in other comprehensive 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. 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 March 31, 2016 and December 31, 2015, the Companys restricted cash is in connection with the patent and utility model
infringement proceedings against TauroPharm (see Note 5). The Company was required by the District Court Mannheim to
provide a security deposit of approximately $132,000 to cover legal fees in the event TauroPharm is entitled to reimbursement
of these costs. The Company furthermore had to provide a deposit in the amount of $40,000 in connection with the unfair
competition proceedings in Cologne. Prepaid
Research and Development and Other Prepaid Expenses Prepaid
expenses consist of payments made in advance to vendors relating to service contracts for clinical trial development, manufacturing,
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:
March
31, 2016 December
31, 2015
Raw
materials $ 244,386 $ 244,459
Work
in process 400,361 424,622
Finished
goods 11,554 7,488
Inventory
reserve (322,428 ) (300,000 )
Total $ 333,873 $ 376,569 Accrued
Expenses Accrued
expenses consist of the following:
March
31, 2016 December
31, 2015
Professional
and consulting fees $ 392,774 $ 282,975
Accrued
payroll and payroll taxes 567,900 532,084
Clinical
Trial and manufacturing development 255,951 226,042
Market
research - 3,225
Monitoring
program fees 46,908 65,076
Statutory
taxes 70,805 67,236
Other 12,587 44,919
Total $ 1,346,925 $ 1,221,557 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
October 2015, the Company shipped product with less than 75% of its remaining shelf life to a customer and issued a guarantee
that the specific product shipped would be replaced by the Company if the customer was not able to sell the product before it
expired. As a result of this warranty, the Company may have an additional performance obligation (i.e. accept returned
product and deliver new product to the customer) if the customer is unable to sell the short-dated product. Due to
limited sales experience with the customer, the Company is unable to estimate the amount of the warranty obligation that may be
incurred as a result of this shipment. Therefore, the Company has deferred the revenue and related cost of sales associated
with the shipment of this product. Since the Company will be unable to resell the expired product if returned by the
customer, the deferred revenue and related cost of sales is presented net as Deferred Revenue on the condensed consolidated balance
sheet which amounted to $126,000 and $121,000 at March 31, 2016 and December 31, 2015, respectively. In
August 2014, the Company entered into an exclusive distribution agreement (the Wonik Agreement) with Wonik Corporation,
a South Korean company, to market, sell and distribute Neutrolin for hemodialysis and oncolytic patients upon receipt of regulatory
approval in Korea. Upon execution of the Wonik 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 Republic of Korea (the
Territory). The term of the Wonik Agreement commenced on August 8, 2014 and will continue for three years
after the first commercial sale of Neutrolin in the Territory. The non-refundable up-front payment has been recorded
as deferred revenue and will be recognized as revenue on a straight-line basis over the contractual term of the Agreement. The
Company recognized $2,200 revenue related to the Wonik agreement for each of the three months ended March 31, 2016 and 2015. Deferred
revenue balance at March 31, 2016 and December 31, 2015 amounted to $9,000 for each period and deferred revenue long-term balances
at March 31, 2016 and December 31, 2015 amounted to $27,000 and $29,000, respectively. 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.
Three
Months Ended
March
31, 2016 March
31, 2015
Series
C non-voting convertible preferred stock 2,865,000 2,865,000
Series
D non-voting convertible preferred stock 1,479,240 1,479,240
Series
E non-voting convertible preferred stock 1,959,759 1,959,759
Shares
underlying outstanding warrants 4,031,468 6,890,327
Shares
underlying outstanding stock options 4,483,545 4,014,500
Total 14,819,012 17,208,826 Stock-Based
Compensation The
Company accounts for stock options granted to employees, officers and directors according to ASC No. 718, Compensation
Stock Compensation 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 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. Research
and Development Research
and development costs are charged to expense as incurred. Research and development includes fees associated with operational consultants,
contract clinical research organizations, contract manufacturing organizations, clinical site fees, contract laboratory research
organizations, contract central testing laboratories, licensing activities, and allocated executive, human resources and facilities
expenses. The Company accrues for costs incurred as the services are being provided by monitoring the status of the trial and
the invoices received from its external service providers. As actual costs become known, the Company adjusts its accruals in the
period when actual costs become known. Costs related to the acquisition of technology rights and patents for which development
work is still in process are charged to operations as incurred and considered a component of research and development expense. |
