| Summary of Significant Accounting Policies | Liquidity,
Going Concern and Uncertainties 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 results of clinical testing and trial activities of the Company’s product candidates; the
ability to obtain regulatory approval to market the Company’s products; the ability to manufacture successfully;
competition from products manufactured and sold or being developed by other companies; the price of, and demand for, Company
products; and the Company’s ability to negotiate favorable licensing or other manufacturing and marketing agreements
for its products. Management has evaluated whether there are
conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue
as a going concern within a year after the date the consolidated financial statements contained in this Report are issued. As
of June 30, 2018, the Company had an accumulated deficit of $170.9 million, and had incurred losses from operations of $8.6 million
and $18.8 million for the three and six months ended June 30, 2018, respectively, and its cash position decreased from $10.6 million
at December 31, 2017 to $4.9 million at June 30, 2018. These factors raise substantial doubt regarding the Company’s ability
to continue as a going concern. Based on the current development plans for Neutrolin and the Company’s other operating requirements,
as well as the current status of its negotiations with its contract research organization (“CRO”), management believes
that the existing cash and cash equivalents at June 30, 2018, plus the funds raised under the at-the-market common stock issuance
program (the “ATM Program”) through August 10, 2018, will be adequate to fund the costs of closing the LOCK-IT-100
study and to hold its planned meeting with the FDA with respect to Neutrolin’s proposed development path. A successful
outcome of the Company’s negotiations with its CRO may enable the Company to continue its operations into 2019; or if no
such agreement is reached, additional financing may be required during the fourth quarter of 2018. On March 9, 2018, the Company entered
into a new At-the-Market Issuance Sales Agreement with B. Riley for the sale of up to $14.7 million of the Company’s common
stock, the registration statement for which was filed on March 9, 2018 and became effective on April 16, 2018, the same date on
which the prior At-the-Market Issuance Sales Agreement with B. Riley entered into in 2016 expired. Under the ATM Program, the
Company sold 3,116,213 shares of common stock and realized net proceeds of approximately $929,000 during the quarter ended June
30, 2018 and 13,434,437 shares and realized $4.1 million of net proceeds for the six months ended June 30, 2018. 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, or out-licensing of its products in order to complete the development and commercialization of Neutrolin
until it achieves profitability, if ever. Management is actively pursuing financing plans but can provide no assurances that such
financing or strategic relationships will be available on acceptable terms, or at all. The financial statements do not include
any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a going concern. 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, its wholly owned subsidiary.
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 under the aforementioned new accounting standard that modifies certain aspects of the recognition,
measurement, presentation and disclosure of financial instruments as shown on the Company’s condensed consolidated statement
of cash flows:
June
30, 2018 June
30, 2017
Cash
and cash equivalents $ 4,701,978 $ 7,937,388
Restricted
cash 171,553 171,553
Total
cash, cash equivalents and restricted cash $ 4,873,531 $ 8,108,941 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 and equity securities classified as available-for-sale 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 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, 2018 or December 31, 2017. 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, 2018, the Company has no marketable
securities and at December 31, 2017, all of the Company’s investments had contractual maturities of less than one year.
The following table summarizes the amortized cost, unrealized gains and losses and the fair value at June 30, 2018 and December
31, 2017:
June
30, 2018: Amortized
Cost Gross
Unrealized Losses Gross
Unrealized Gains Fair
Value
Money
Market Funds included in Cash Equivalents $ - $ - $ - $ -
Total
June 30, 2018 $ - $ - $ - $ -
December
31, 2017:
Money
Market Funds included in Cash Equivalents $ 6,032,034 $ - $ - $ 6,032,034
Corporate
Securities 905,625 (112 ) - 905,516
Commercial
Paper 698,682 - - 698,682
Subtotal 1,604,307 (112 ) - 1,604,198
Total
December 31, 2017 $ 7,636,341 $ (112 ) $ - $ 7,636,232 Fair
Value Measurements The
Company’s 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 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 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, 2018 and December 31, 2017:
June
30, 2018: Carrying
Value Level
1 Level
2 Level
3
Money
Market Funds $ - $ - $ - $ -
Total
June 30, 2018 $ - $ - $ - $ -
December
31, 2017:
Money
Market Funds $ 6,032,034 $ 6,032,034 $ - $ -
Corporate
Securities 905,516 - 905,516 -
Commercial
Paper 698,682 - 698,682 -
Subtotal 1,604,198 - 1,604,198 $ -
Total
December 31, 2017 $ 7,636,232 $ 6,032,034 $ 1,604,198 $ - 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 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 June 30, 2018 and December 31, 2017, the Company has restricted cash 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 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 Neutrolin product. Inventories consist of the following:
June
30, 2018 December
31, 2017
Raw
materials $ 93,716 $ 141,233
Work
in process 294,267 526,067
Finished
goods 387,954 29,894
Inventory
reserve (103,000 ) (103,000 )
Total $ 672,937 $ 594,194 Accounts Payable Accounts payable consist of invoices received
from vendors. At June 30, 2018, the balance increased by approximately $5,500,000 from $1,808,000 balance at December 31, 2017,
due to the suspension of payments to the CRO while negotiations regarding financial considerations for the interim analysis continue. Accrued
Expenses Accrued
expenses consist of the following:
June
30, 2018 December
31, 2017
Professional
and consulting fees $ 324,286 $ 485,089
Accrued
payroll and payroll taxes 775,222 755,221
Clinical
trial and manufacturing development 3,756,595 2,884,924
Product
development 80,001 80,001
Market
research - 116,466
Other 144,198 42,166
Total $ 5,080,302 $ 4,363,867 Revenue
Recognition The
Company adopted Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, as of January
1, 2018 using the modified retrospective method. ASC 606 prescribes a five step model for recognizing revenue which includes (i)
identifying contracts with customers; (ii) identifying performance obligations; (iii) determining the transaction price; (iv)
allocating the transaction price; and (v) recognizing revenue. The
Company recognizes net sales upon shipment of product to the dialysis centers and upon meeting the five step model prescribed
by ASC 606 outlined above. Deferred
Revenue 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”).
Product registration in the Territory is contingent upon the marketing approval of Neutrolin in the U.S. 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 is being 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 June 30,2018 and 2017,
and $4,400 each for the six months ended June 30, 2018 and 2017. Deferred revenue related to the Wonik Agreement at June 30, 2018
and December 31, 2017 amounted to approximately $15,400 and $19,800, 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.
Six Months Ended June 30,
2018 2017
Series C non-voting convertible preferred stock 2,540,000 2,790,000
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
Series F non-voting convertible preferred stock 12,345,679 -
Shares underlying outstanding warrants 22,892,891 33,052,578
Shares underlying restricted stock units 97,529 61,414
Shares underlying outstanding stock options 5,505,795 5,709,545
Total 46,820,893 45,052,536 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” 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. |
