Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 3 — Summary of Significant Accounting Policies:

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 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.

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:

	December 31,
	2019		2018
Cash and cash equivalents	$	16,350,237	$	17,623,770
Restricted cash		174,950		171,553
Total cash, cash equivalents and restricted cash	$	16,525,187	$	17,795,323

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 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). 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 December 31, 2019 or 2018.

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 December 31, 2019 and 2018, all of the Company's 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 December 31, 2019 and 2018:

December 31, 2019:	Amortized Cost		Gross Unrealized Losses			Gross Unrealized Gains		Fair Value
Money Market Funds and Cash Equivalents	$	3,472,043	$	-		$	51	$	3,472,094
U.S. Government Agency Securities		2,691,091		(42	)		869		2,691,918
Corporate Securities		6,058,265		(1,438	)		440		6,057,267
Commercial Paper		3,234,583		(16	)		405		3,234,972
Subtotal		11,983,939		(1,496	)		1,714		11,984,157
Total December 31, 2019	$	15,455,982	$	(1,496	)	$	1,765	$	15,456,251
December 31, 2018:
Money Market Funds	$	1,179,673	$	-		$	-	$	1,179,673
Total December 31, 2018	$	1,179,673	$	-		$	-	$	1,179,673

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's senior secured convertible note (prior to its extinguishment in August 2019) falls into the Level 3 category within the fair value level hierarchy. The fair value was determined using market data for valuation.

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, which is set out below. 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.

● 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 as of December 31, 2019 and 2018:

December 31, 2019:	Carrying Value		Level 1		Level 2		Level 3
Money Market Funds and Cash Equivalents	$	3,472,094	$	3,472,094	$	-	$	-
U.S. Government Agency Securities		2,691,918		2,691,918		-		-
Corporate Securities		6,057,267		-		6,057,267		-
Commercial Paper		3,234,972		-		3,234,972		-
Subtotal		11,984,157		2,691,918		9,292,239		-
Total December 31, 2019	$	15,456,251	$	6,164,012	$	9,292,239	$	-
December 31, 2018:
Money Market Funds	$	1,179,673	$	1,179,673	$	-	$	-
Total December 31, 2018	$	1,179,673	$	1,179,673	$	-	$	-

Foreign Currency Translation and Transactions

The 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, if any, 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 had a foreign currency translation gain of $467 in 2019 and a loss of $1,911 in 2018.

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.

Geographic Information

The following table summarizes the segment and geographic information:

	December 31,
	2019		2018
Reported revenues	$	283,266	$	429,327
Revenues attributable to European and Mideast operations, which are based in Germany		274,443		420,973
Total assets		29,475,910		18,825,914
Total assets located in the United States, with the remainder in the European Union	$	28,919,276	$	18,154,463

Restricted Cash

As of December 31, 2019 and 2018 the Company has restricted cash in connection with the patent and utility model infringement proceedings against TauroPharm (see Note 7). The Company was required by the District Court Mannheim to provide a security deposit of approximately €110,000 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 €36,000 and €10,000 for the first and second instances, respectively, 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, pre-clinical 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:

	December 31,
	2019			2018
Raw materials	$	6,893		$	71,275
Work in process		-			86,957
Finished goods		461,735			373,283
Inventory reserve		(130,163	)		(103,000	)
Total	$	338,465		$	428,515

Property and Equipment

Property and equipment consist primarily of furnishings, fixtures, leasehold improvements, office equipment and computer equipment all of which are recorded at cost. Depreciation is provided for by the straight-line method over the estimated useful lives of the related assets.  Leasehold improvements are amortized using the straight-line method over the remaining lease term or the life of the asset, whichever is shorter.  Property and equipment, as of December 31, 2019 and 2018 were $126,820 and $160,860, respectively, net of accumulated depreciation of $244,328 and $218,948, respectively. Depreciation and amortization of property and equipment is included in selling, general and administrative expenses.

Description	Estimated Useful Life
Office equipment and furniture	5 years
Leasehold improvements	5 years
Computer equipment	5 years
Computer software	3 years

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 (included in accrued expenses), and operating lease liabilities, net of current portion, on the 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:

	December 31,
	2019		2018
Professional and consulting fees	$	214,777	$	258,352
Accrued payroll and payroll taxes		1,287,047		1,102,143
Clinical trial related		2,435,953		3,408,032
Manufacturing development related		806,032		210,577
Product development		-		49,200
Other		56,677		137,920
Total	$	4,800,486	$	5,166,224

In December 2015, the Company entered into a Master Service Agreement and Work Orders (the "Master Service Agreement") with a clinical research organization ("CRO") to help the Company conduct its LOCK-IT-100 Phase 3 multicenter, double-blind, randomized active control study to demonstrate the safety and effectiveness of Neutrolin in preventing catheter-related bloodstream infections and blood clotting in subjects receiving hemodialysis therapy as treatment for end stage renal disease.

During 2018, the Company contested a substantial amount of the unpaid clinical trial expense accrued during 2018 due to the unexpected delay and additional costs the Company incurred in preparing for the interim analysis of the LOCK-IT-100 study. Negotiations with the CRO concluded in November 2018 with the signing of a confidential settlement agreement. In parallel with the settlement agreement, a new work order under the Master Service Agreement was executed specifying certain services the CRO will continue to provide to the Company related to the closeout of the study. The budgeted amount of the new work order was approximately $1.4 million, of which $1.4 million was incurred through December 31, 2019.

Through December 31, 2019, approximately $30.0 million of clinical trial expense has been recorded in connection with the Master Service Agreement and new work orders, of which approximately $27.4 million has been paid. During the years ended December 31, 2019 and 2018, the Company recognized $1.5 and $7.7 million, respectively, in research and development expense related to this agreement. At December 31, 2019, the Company had accrued approximately $2.4 million in accounts payable and accrued expenses related to the settlement agreement and the new work order.

Revenue Recognition

The Company uses Accounting Standards Codification ("ASC") 606, "Revenue from Contracts with Customers," issued by the Financial Accounting Standards Board ("FASB"), that 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 South Korea. Upon execution, 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 South 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. Deferred revenue related to this agreement at December 31, 2019 and 2018 amounted to approximately $2,000 and $11,000, respectively.

Loss Per Common Share

Basic loss per common share excludes dilution and is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted 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.

The Company's outstanding shares of Series E preferred stock entitle the holders to receive dividends on a basis equivalent to the dividends paid to holders of common stock. As a result, the Series E preferred stock meet the definition of participating securities requiring the application of the two-class method. Under the two-class method, earnings available to common shareholders, including both distributed and undistributed earnings, are allocated to each class of common stock and participating securities according to dividends declared and participating rights in undistributed earnings, which may cause diluted earnings per share to be more dilutive than the calculation using the treasury stock method. No loss has been allocated to these participating securities since they do not have contractual obligations that require participation in the Company's losses.

Since the Company has only incurred losses, basic and diluted loss per share are the same as potentially dilutive shares have been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive. The shares outstanding at the end of the respective periods presented below were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:

	Number of Shares of Common Stock Issuable At
	December 31,
	2019		2018
Series C non-voting preferred stock		104,000		508,000
Series D non-voting preferred stock		-		295,848
Series E voting preferred stock		391,953		391,953
Series F non-voting preferred stock		-		2,469,136
Series G voting preferred stock		5,560,137		-
Shares issuable upon conversion of convertible debt		-		1,000,000
Restricted stock units		2,490		5,817
Shares issuable for payment of deferred board compensation		33,597		28,578
Shares underlying outstanding warrants		341,328		3,319,003
Shares underlying outstanding stock options		1,376,394		1,011,265
Total potentially dilutive shares		7,809,899		9,029,600

Stock-Based Compensation

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 for options with service or performance-based conditions. Stock-based compensation is recognized as expense over the requisite service period on a straight-line basis or when the achievement of the performance condition is probable.

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.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized.

Debt Issuance Costs

The Company accounts for debt issuance costs as a direct deduction from the carrying amount of the respective debt liability, consistent with debt discounts. The Company amortizes the debt discount, including debt issuance costs over the term of the associated debt using the effective interest method.

Recently Adopted Authoritative Pronouncements

In June 2018, the Financial Accounting Standards Board ("FASB") issued new guidance which expands the scope of the FASB's Accounting Standards Codification ("ASC") 718, to include share-based payment transactions for acquiring goods and services from nonemployees. Early adoption is permitted and the Company elected to adopt the guidance effective in the first quarter of fiscal year 2019. This adoption on January 1, 2019 did not have a material impact on the Company's consolidated financial statements.

In July 2017, the FASB issued new guidance which changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features and recharacterizes the indefinite deferral of certain provisions within the guidance for distinguishing liabilities from equity. Early adoption is permitted and the Company elected to adopt the guidance effective in the first quarter of fiscal year 2019. This adoption on January 1, 2019 did not have a material impact on the Company's consolidated financial statements.

In February 2016, the FASB issued new guidance related to how an entity should recognize lease assets and lease liabilities. The guidance specifies that an entity who is a lessee under lease agreements should recognize lease assets and lease liabilities for those leases classified as operating leases under previous FASB guidance. The Company adopted the standard on January 1, 2019 using the transition method provided by the FASB. Under this transition method, the Company applied the new requirements to only those leases that exist as of January 1, 2019, rather than at the earliest comparative period presented in the financial statements. Prior periods will be presented under existing lease guidance. Upon transition, the Company applied the package of practical expedients permitted under ASC 842 transition guidance. As a result, the Company did not reassess (1) whether expired or existing contracts contain leases under the new definition of a lease, including whether an existing or expired contract contains an embedded lease, (2) lease classification for expired or existing leases and (3) any initial direct costs of existing leases. As a result of the adoption, the Company recorded right-of-use assets and lease liabilities of approximately $6,000 each. Adoption of the standard did not have a material impact on the Company's consolidated statements of operations and comprehensive loss or cash from or used in operating, investing or financing activities on its consolidated statements of cash flows.

Recent Authoritative Pronouncements

In June 2016, the FASB issued new guidance which replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company has assessed the impact of adopting this guidance and the adoption on January 1, 2020 will not have a significant impact on its consolidated financial statements.

In August 2018, the FASB issued a new guidance which modifies the disclosure requirements on fair value measurements. The guidance is effective for the Company beginning in the first quarter of fiscal year 2020. Early adoption is permitted. The Company assessed the impact of adopting this guidance and the adoption on January 1, 2020 will not have a significant impact on its consolidated financial statements

In November 2018, the FASB issued new guidance to clarify the interaction between the authoritative guidance for collaborative arrangements and revenue from contracts with customers. The new guidance clarifies that, when the collaborative arrangement participant is a customer in the context of a unit-of-account, revenue from contracts with customers guidance should be applied, adds unit-of-account guidance to collaborative arrangements guidance, and requires, that in a transaction with a collaborative arrangement participant who is not a customer, presenting the transaction together with revenue recognized under contracts with customers is precluded. The guidance is effective for the Company beginning in the first quarter of fiscal year 2020. Early adoption is permitted. The Company has assessed the impact of adopting this guidance and the adoption on January 1, 2020 will not have a significant impact on its consolidated financial statements.

In November 2019, the FASB issued new guidance which requires that an entity measure and classify share-based payment awards granted to a customer by applying the guidance in ASC 718. The guidance is effective for the Company beginning in the first quarter of fiscal year 2020. Early adoption is permitted. The Company has assessed the impact of adopting this guidance and the adoption on January 1, 2020 will not have a significant impact on its consolidated financial statements.

In December 2019, the FASB issued new guidance which removes certain exceptions to the general principles of the accounting for income taxes and also improves consistent application of and simplification of other areas when accounting for income taxes. The guidance is effective for the Company beginning in the first quarter of fiscal year 2021. Early adoption is permitted. The Company is assessing the impact of adopting this guidance on its consolidated financial statements.