| 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 its products 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 September 30, 2018,
the Company had an accumulated deficit of $181.1 million, and had incurred losses from operations of $10.3 million and $29.0 million
for the three and nine months ended September 30, 2018, respectively, and its cash position decreased from $10.6 million at December
31, 2017 to $6.6 million at September 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, management believes that the existing cash and cash
equivalents at September 30, 2018, plus the funds raised under the at-the-market (“ATM”) common stock issuance
program through the filing date of this report, the cash and credits received from the settlement agreement with the CRO, and
the expected proceeds of a $7.5 million convertible debt transaction being negotiated with Elliott Management Corporation
(see Note 7), will be adequate to fund the costs of its operations into the second quarter of 2019. 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 13,807,818 shares and realized $6.9 million of net proceeds for the three months ended September 30, 2018 and sold 27,242,255
shares, realizing $11.0 million of net proceeds for the nine months ended September 30, 2018. As of the filing date of this report,
the current ATM program, which was for an aggregate of $14.7 million, has been fully utilized and is expected to be increased during
the fourth quarter of 2018. The Company’s continued operations will
depend on its ability to close the convertible debt financing with Elliot, and 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 can provide no assurances
that it will close the convertible debt financing with Elliot or that any other 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:
September 30,
2018 2017
Cash and cash equivalents $ 6,443,868 $ 5,212,579
Restricted cash 171,553 171,553
Total cash, cash equivalents and restricted cash $ 6,615,421 $ 5,384,132 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. 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 September 30, 2018, the Company has no marketable securities. 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 at December 31, 2017:
December 31, 2017: Carrying Value Level 1 Level 2 Level 3
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 September 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:
September 30,
December 31,
Raw materials $ 93,716 $ 141,233
Work in process 194,262 526,067
Finished goods 156,199 29,894
Inventory reserve (103,000 ) (103,000 )
Total $ 341,177 $ 594,194 Accounts Payable Accounts payable consist of invoices received
from vendors. At September 30, 2018, the balance increased by approximately $6,074,000 from the $1,808,000 balance at December
31, 2017, due primarily to the suspension of payments to the CRO of approximately $6,630,000 while negotiations regarding financial
considerations for the interim analysis continued (see Note 5 and Note 7). Accrued Expenses Accrued expenses consist
of the following:
September 30,
December 31,
Professional and consulting fees $ 315,561 $ 485,089
Accrued payroll and payroll taxes 861,743 755,221
Clinical trial, CRO 7,834,938 2,528,808
Manufacturing development 467,901 356,116
Product development - 80,001
Market research - 116,466
Other 170,525 42,166
Total $ 9,650,668 $ 4,363,867 Revenue Recognition The Company adopted ASC
606, “ Revenue from Contracts with Customers” 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 in Note 1 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 in revenue related to the Wonik agreement for each of the three months ended September 30, 2018 and 2017, and $6,600 for
each of the nine months ended September 30, 2018 and 2017. Deferred revenue related to the Wonik Agreement
at September 30, 2018 and December 31, 2017 amounted to approximately $13,200 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.
Three and Nine Months Ended
2018 2017
Series C non-voting convertible preferred stock 2,540,000 2,540,000
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 18,587,392 23,189,284
Shares underlying restricted stock units 97,529 61,414
Shares underlying outstanding stock options 5,485,508 4,946,429
Total 42,495,107 34,176,126 Stock-Based Compensation The Company accounts for stock options granted
to employees, officers and directors according to ASC 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. |
