UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





(Mark
One)


ý
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES


EXCHANGE
      ACT OF 1934




For the
quarterly period ended March 31,
2010




 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES


EXCHANGE
      ACT OF 1934




For the
transition period from ________ to ________





Commission
file number 001-34673




CORMEDIX
      INC.(Exact Name of Registrant as
      Specified in Its Charter)Delaware
                                          20-5894890(State orOther Jurisdiction of
      Incorporation or Organization)
                                          (I.R.S. Employer Identification
      No.)745
      Rt. 202-206, Suite 303, Bridgewater, NJ
                                          08807(Address of Principal Executive
      Offices)
                                          (Zip
  Code)(908)
      517-9500(Registrant’s TelephoneNumber, Including Area
      Code)_____________________________________________(Former Name, Former Address and
      Former Fiscal Year, if Changed Since Last
  Report)





Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.    Yes  ̈    No
ý




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).    Yes  ̈    No
 ̈




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.  (Check one):




Large accelerated
      filer ̈
            Accelerated
      filer ̈Non-accelerated
      filer ̈
            Smaller reporting
      companyý(Do not check if a smaller
      reporting company)




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).    Yes  ̈    No
ý




The
number of shares outstanding of the issuer’s common stock, as of May 11, 2010
was 11,408,288.







CORMEDIX
INC.




INDEX




PART
      I FINANCIAL INFORMATION
            1Item
      1.
            Financial
      Statements.
            1Condensed
      Balance Sheets (Unaudited) March 31, 2010 and December 31,
      2009
            1Condensed
      Statements of Operations (Unaudited) for the Three Months Ended
      March 31, 2010 and 2009 and for the Cumulative Period From
      July 28, 2006 (Inception) Through March 31, 2010
            2Condensed
      Statement of Stockholders’ Equity (Deficiency) (Unaudited) for the Three
      Months Ended March 31, 2010
            3Condensed
      Statements of Cash Flows (Unaudited) for the Three Months Ended
      March 31, 2010 and 2009 and for the Cumulative Period From
      July 28, 2006 (Inception) Through March 31, 2010
            4Notes
      to Condensed Financial Statements (Unaudited)
            5Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
            12Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk.
            18Item
      4.
            Controls
      and Procedures.
            18PART
      II OTHER INFORMATION
            19Item
      1.
            Legal
      Proceedings.
            19Item
      1A.
            Risk
      Factors.
            20Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds.
            20Item
      3.
            Defaults
      Upon Senior Securities.
            20Item
      4.
            (Removed
      and Reserved).
            20Item
      5.
            Other
      Information.
            20Item
      6.
            Exhibits.
            20SIGNATURES
            21







i


PART
I


FINANCIAL
INFORMATION




Item
      1.
            Financial
      Statements.




CORMEDIX
INC.


(A
Development Stage Company)




CONDENSED
BALANCE SHEETS




March
      31, 2010
              (Unaudited)
            
            
            December
      31, 2009
              (Note
      1)ASSETSCurrent
    assetsCash and cash
      equivalents
            
            $
            11,724,713
            
            
            $
            1,505,179Prepaid research and development
      expenses
            
            
            175,264
            
            
            
            175,000Other prepaid expenses and current
      assets
            
            
            116,483
            
            
            
            3,114Total current
      assets
            
            
            12,016,460
            
            
            
            1,683,293Property and equipment,
      net
            
            
            28,053
            
            
            
            24,116Deferred financing fees,
      net
            
            
            -
            
            
            
            506,510Security
    deposits
            
            
            25,075
            
            
            
            11,733TOTAL
ASSETS
            
            $
            12,069,588
            
            
            $
            2,225,652LIABILITIES AND
      STOCKHOLDERS’EQUITY(DEFICIENCY)Current
      liabilitiesAccounts payable
            
            $
            1,045,746
            
            
            $
            549,638Accrued
      expenses
            
            
            375,059
            
            
            
            75,000Senior convertible notes,
      net of
      discount
            
            
            -
            
            
            
            12,229,897Interest payable–senior convertible
      notes
            
            
            -
            
            
            
            2,393,132Notes payable–related
      parties
            
            
            -
            
            
            
            535,428Interest payable–related
      parties
            
            
            -
            
            
            
            97,456Notes payable–Galenica,
    Ltd.
            
            
            -
            
            
            
            1,000,000Interest payable–Galenica,
    Ltd.
            
            
            -
            
            
            
            54,000TOTAL
      LIABILITIES
            
            
            1,420,805
            
            
            
            16,934,551COMMITMENTSSTOCKHOLDERS’EQUITY(DEFICIENCY)Common stock - $0.001 par
      value:  40,000,000 shares authorized, 11,408,288 shares issued
      and outstanding at March 31, 2010; 33,000,000 shares authorized, 787,010 shares
      issued and outstanding at December 31, 2009
            
            
            11,408
            
            
            
            787Common stock–Non-Voting Subordinated Class A,
      $0.001 par value: none authorized, issued or outstanding at March 31,
      2010; 5,000,000 shares authorized, 193,936 shares issued and outstanding at December
      31, 2009
            
            
            -
            
            
            
            194Deferred stock
      issuances
            
            
            (27
            )
            
            
            (27
            )Additional paid-in
      capital
            
            
            42,805,684
            
            
            
            10,621,190Deficit accumulated during the
      development stage
            
            
            (32,168,282
            )
            
            
            (25,331,043
            )TOTAL STOCKHOLDERS’EQUITY
      (DEFICIENCY)
            
            
            10,648,783
            
            
            
            (14,708,899
            )TOTAL LIABILITIES AND
      STOCKHOLDERS’EQUITY
      (DEFICIENCY)
            
            $
            12,069,588
            
            
            $
            2,225,652





See Notes
to Unaudited Condensed Financial Statements





1




CORMEDIX
INC.


(A
Development Stage Company)




CONDENSED
STATEMENTS OF OPERATIONS


(Unaudited)




For
      the three months ended March 31, 2010
            
            
            For
      the three months ended March 31, 2009
            
            
            Period
      from July 28, 2006 (inception) Through
              March
      31, 2010OPERATING
      EXPENSESResearch
      and development
            
            $
            3,096,661
            
            
            $
            232,844
            
            
            $
            15,641,110General
      and administrative
            
            
            646,843
            
            
            
            405,329
            
            
            
            5,423,035Total
      Operating Expenses
            
            
            3,743,504
            
            
            
            638,173
            
            
            
            21,064,145LOSS
      FROM OPERATIONS
            
            
            (3,743,504
            )
            
            
            (638,173
            )
            
            
            (21,064,145
            )OTHER
      INCOME (EXPENSE)Interest
      income
            
            
            28
            
            
            
            1,496
            
            
            
            88,891Interest
      expense, including amortization and write-off of
      deferred  financing costs and debt discounts
            
            
            (3,093,763
            )
            
            
            (513,724
            )
            
            
            (11,193,028
            )NET
      LOSS
            
            $
            (6,837,239
            )
            
            $
            (1,150,401
            )
            
            $
            (32,168,282
            )NET
      LOSS PER SHARE – BASIC AND DILUTED
            
            $
            (6.40
            )
            
            $
            (1.37
            )WEIGHTED
      AVERAGE SHARES OUTSTANDING – BASIC AND DILUTED
            
            
            1,067,937
            
            
            
            842,149








See Notes
to Unaudited Condensed Financial Statements





2




CORMEDIX
INC.


(A
Development Stage Company)




CONDENSED
STATEMENT OF CHANGES IN


STOCKHOLDERS’
EQUITY (DEFICIENCY)


(Unaudited)


For
the Three Months Ended March 31, 2010




Common
      Stock
            
            
            Non-Voting
                Common
      Stock –
                Class
      A
            
            
            Deferred
                Stock
                Issuances
            
            
            Additional
                Paid-in
                Capital
            
            
            Deficit
                Accumulated
                During
      the
                Development
                Stage
            
            
            TotalShares
            
            
            Amount
            
            
            Shares
            
            
            AmountBalance
      at January 1, 2010
            
            
            787,010
            
            
            $
            787
            
            
            
            193,936
            
            
            $
            194
            
            
            $
            (27
            )
            
            $
            10,621,190
            
            
            $
            (25,331,043
            )
            
            $
            (14,708,899
            )Common
      stock issued to consultant at $32.05 per share in February
      2010
            
            
            4,059
            
            
            
            4
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            130,087
            
            
            
            
            
            
            
            130,091Common
      stock issued upon conversion of Class A Non Voting Common Stock at a 1 for
      7.836 conversion rate in March 2010
            
            
            24,750
            
            
            
            25
            
            
            
            (193,936
            )
            
            
            (194
            )
            
            
            
            
            
            
            169
            
            
            
            
            
            
            
            -Common
      stock issued from debt conversion to noteholders in March
    2010
            
            
            5,914,445
            
            
            
            5,914
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            18,891,253
            
            
            
            
            
            
            
            18,897,167Common
      stock issued to licensors at $3.125 per share in March
2010
            
            
            828,024
            
            
            
            828
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,586,748
            
            
            
            
            
            
            
            2,587,576Common
      stock issued in initial public offering at $3.125 per share in March 2010,
      net of issuance costs
            
            
            3,850,000
            
            
            
            3,850
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            10,453,420
            
            
            
            
            
            
            
            10,457,270Stock-based
      compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            122,817
            
            
            
            
            
            
            
            122,817Net
      Loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (6,837,239
            )
            
            
            (6,837,239
            )Balance
      at March 31, 2010
            
            
            11,408,288
            
            
            $
            11,408
            
            
            
            -
            
            
            $
            -
            
            
            $
            (27
            )
            
            $
            42,805,684
            
            
            $
            (32,168,282
            )
            
            $
            10,648,783








See Notes
to Unaudited Condensed Financial Statements





3




CORMEDIX
INC.


(A
Development Stage Company)




CONDENSED
STATEMENTS OF CASH FLOWS


(Unaudited)




For
      the Three Months Ended March 31, 2010
            
            
            For
      the Three Months Ended March 31, 2009
            
            
            Period
      from July 28, 2006 (Inception) To March 31,
      2010CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
            
            $
            (6,837,239
            )
            
            $
            (1,150,401
            )
            
            $
            (32,168,282
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Stock-based
      compensation
            
            
            122,817
            
            
            
            20,426
            
            
            
            588,212Stock
      issued in connection with license agreements
            
            
            2,587,576
            
            
            
            -
            
            
            
            6,983,370Stock
      issued in connection with consulting agreement
            
            
            130,091
            
            
            
            -
            
            
            
            158,262Amortization
      of deferred financing costs
            
            
            358,495
            
            
            
            51,879
            
            
            
            2,047,881Amortization
      of debt discount
            
            
            1,135,076
            
            
            
            186,805
            
            
            
            4,979,461Non-cash
      charge for beneficial conversion feature
            
            
            1,137,762
            
            
            
            -
            
            
            
            1,137,762Non-cash
      interest expense
            
            
            462,429
            
            
            
            275,040
            
            
            
            3,007,017Expenses
      paid on behalf of the Company satisfied through the issuance of
      notes
            
            
            -
            
            
            
            -
            
            
            
            51,253Depreciation
            
            
            2,864
            
            
            
            2,487
            
            
            
            28,471Changes
      in operating assets and liabilities:Prepaid
      expenses and other current assets
            
            
            (113,633
            )
            
            
            1,650
            
            
            
            (291,747
            )Security
      deposits
            
            
            (13,342
            )
            
            
            -
            
            
            
            (25,075
            )Accounts
      payable
            
            
            496,108
            
            
            
            70,925
            
            
            
            1,045,746Accrued
      expenses
            
            
            300,059
            
            
            
            -
            
            
            
            375,059Net
      cash used in operating activities
            
            
            (230,937
            )
            
            
            (541,189
            )
            
            
            (12,082,610
            )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of equipment
            
            
            (6,799
            )
            
            
            -
            
            
            
            (56,522
            )Net
      cash used in investing activities
            
            
            (6,799
            )
            
            
            -
            
            
            
            (56,522
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from notes payable to related parties
            
            
            -
            
            
            
            -
            
            
            
            2,465,749Proceeds
      from senior convertible notes
            
            
            -
            
            
            
            -
            
            
            
            13,364,973Proceeds
      from Galenica, Ltd. promissory note
            
            
            -
            
            
            
            -
            
            
            
            1,000,000Deferred
      financing costs
            
            
            -
            
            
            
            -
            
            
            
            (1,447,400
            )Repayment
      of amounts loaned under related party notes
            
            
            -
            
            
            
            -
            
            
            
            (1,981,574
            )Proceeds
      from sale of equity securities, net of issuance costs
            
            
            10,457,270
            
            
            
            -
            
            
            
            10,457,270Proceeds
      from receipt of stock subscriptions and issuances of common
      stock
            
            
            -
            
            
            
            -
            
            
            
            4,827Net
      cash provided by financing activities
            
            
            10,457,270
            
            
            
            -
            
            
            
            23,863,845NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            10,219,534
            
            
            
            (541,189
            )
            
            
            11,724,713CASH
      AND CASH EQUIVALENTS – BEGINNING OF PERIOD
            
            
            1,505,179
            
            
            
            1,380,012
            
            
            
            -CASH
      AND CASH EQUIVALENTS – END OF PERIOD
            
            $
            11,724,713
            
            
            $
            838,823
            
            
            $
            11,724,713Supplemental
      Disclosure of Non-Cash Financing Activities:Conversion
      of notes payable and accrued  interest to common
      stock
            
            $
            18,897,167
            
            
            $
            -
            
            
            $
            18,897,167Reclassification
      of deferred financing fees to additional paid-in capital
            
            $
            148,014
            
            
            $
            -
            
            
            $
            148,014








See Notes
to Unaudited Condensed Financial Statements   4


CORMEDIX
INC.
 (A
Development Stage Company)
  NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
  Note
1 — Organization, Business and Basis of Presentation:
  Organization
and Business:
  CorMedix Inc. (“CorMedix” or the “Company”) was
incorporated in the State of Delaware on July 28, 2006.  CorMedix is a
development-stage pharmaceutical company that seeks to fulfill selected,
significant unmet medical needs in the therapeutic areas at the crossroads of
cardiac and kidney (renal) disease.
  Basis
of Presentation:
  The
accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America and the rules of the Securities and Exchange Commission for interim
financial information.  Accordingly, the unaudited condensed financial
statements do not include all information and footnotes required by accounting
principles generally accepted in the United States of America for complete
annual financial statements.  In the opinion of management, the
accompanying unaudited condensed financial statements reflect all adjustments,
consisting of normal recurring adjustments, considered necessary for a fair
presentation of such interim results.  Interim operating results are
not necessarily indicative of results that may be expected for the full year
ending December 31, 2010 or for any subsequent period.  These
unaudited condensed financial statements should be read in conjunction with the
audited financial statements and notes thereto of the Company which are included
in the Company’s registration statement on Form S-1, which was declared
effective by the Securities and Exchange Commission on March 24,
2010.  The accompanying condensed balance sheet as of December 31,
2009 has been derived from the audited financial statements included in such
Form S-1.
  The
Company’s primary activities since incorporation have been organizational
activities, including recruiting personnel, establishing office facilities,
acquiring licenses for its pharmaceutical compound pipeline, performing business
and financial planning, performing research and development and raising funds
through the issuance of debt and common stock.  The Company has not
generated any revenues and, accordingly, the Company is considered to be in the
development stage.
  On
February 24, 2010, the Company effected a 1 for 7.836 reverse stock split of its
common stock.  All share and per-share information in these unaudited
condensed financial statements have been adjusted to give effect to the reverse
stock split.
  The
Company’s financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the settlement of liabilities
and commitments through the normal course of business.  The condensed
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classifications of liabilities.  The Company has sustained
operating losses since its inception and expects that such losses will continue
over the next several years.  Management believes that currently
available capital resources will be sufficient to meet our operating needs
through the end of the first quarter of 2012.  For the three months
ended March 31, 2010 and the period from July 28, 2006 (inception) to March 31,
2010, the Company incurred net losses of $6,837,239 and $32,168,282,
respectively.  The Company’s stockholders’ equity and working capital
as of March 31, 2010 were $10,648,783 and $10,595,655,
respectively.
   5
 CORMEDIX
INC.
 (A
Development Stage Company)
  NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
  Note
2 — 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.
  Loss
per common share:
  Basic
earnings (loss) per common share excludes dilution and is computed by dividing
net income (loss) by the weighted average number of common shares outstanding
during the period.  Diluted earnings per common share reflect 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.  Since the Company has only incurred losses, basic and diluted
loss per share are the same.  The amount of potentially dilutive
securities excluded from the calculation was 6,410,506 and 2,541,818 shares of
common stock being held in escrow, convertible notes, warrants and options at
March 31, 2010 and 2009, respectively.
  Stock
Based Compensation:
  The
Company accounts for stock options granted to employees according to the
Financial Accounting Standards Board Accounting Standards Codification No. 718
(“ASC 718”), “Compensation — Stock Compensation”.  Under ASC
718, share-based compensation cost is measured at grant date, based on the
estimated fair value of the award, and is recognized as expense over the
employee’s requisite service period on a straight-line basis.
  The
Company accounts for stock options granted to non-employees on a fair value
basis using the Black-Scholes option pricing method in accordance with ASC
718.  The initial non-cash charge to operations for non-employee
options with vesting are revalued at the end of each reporting period based upon
the change in the fair value of the options and amortized to consulting expense
over the related vesting period.
  During
the three months ended March 31, 2010 options to purchase 1,581,766 shares of
common stock were issued to employees and directors.  There were no
options granted during the three months ended March 31, 2009.
  Note
3 — Related Party Transactions:
  Consulting
Services:
  Effective
August 1, 2006, the Company began accruing monthly fees for consulting services
at a rate of $25,000 per month payable to Paramount Corporate Development, LLC
(“Paramount”), an affiliate of a significant stockholder of the Company,
pursuant to a services agreement with Paramount.  This agreement was
terminated as of August 31, 2008 and, accordingly, there was no consulting
services expense under this agreement for the three months ended March 31, 2010
and 2009.  For the period from July 28, 2006 (inception) to March 31,
2010, consulting services expense under this agreement was
$625,000.  As of March 31, 2010, the Company had $75,000 payable to
Paramount pursuant to this agreement, which amount is included in accrued
expenses.
   6
 CORMEDIX
INC.
 (A
Development Stage Company)
  NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
  Notes
Payable:
  On July
28, 2006, CorMedix issued a 5% promissory note payable to Paramount BioSciences,
LLC (“PBS”), an affiliate of a significant stockholder of the
Company.  This note and all accrued interest was scheduled to mature
on June 15, 2009, or earlier if certain events occurred.  The maturity
date of this note was extended until July 31, 2010.  The note was
issued to PBS for expenses that PBS has paid on behalf of the Company.On March 30, 2010, in conjunction with the closing
of the Company’s initial public offering (the “IPO”) of units, each consisting
of two shares of the Company’s common stock and a warrant to purchase one share
of the Company’s common stock at an exercise price of $3.4375 (“Units”), the
principal and accrued interest amount outstanding under this note, which was
$198,264 on such date, converted into 30,499 Units which consist of 60,998
shares of common stock and 30,499 warrants with an exercise price of
$3.4375.  See Note 8.
  On August
11, 2006, CorMedix issued a 5% promissory note payable to an entity related to
the sole member of PBS.  This note and all accrued interest was to
mature on August 11, 2009, or earlier if certain events occur.  The
maturity date of this note was extended until July 31, 2010.  On March
30, 2010, the principal and accrued interest amount under this note was
$452,007, which converted into 69,539 Units which consist of 139,078 shares of
common stock and warrants to purchase 69,539 shares of common stock at an
exercise price of $3.4375, in conjunction with the IPO.  See Note
8.
  Note
4 — Stockholders’ Equity (Deficiency):
  Common
Stock:
  During
the three months ended March 31, 2010 and 2009 and the period from July 28, 2006
(inception) to March 31, 2010, the Company recorded compensation expense, in
connection with common stock issued to consultants, employees and technology
finders, each with a three-year vesting period, of $130,091, $0 and $158,262,
respectively.
  Common
Stock Options and Warrants:
  During
the three months ended March 31, 2010, the Company granted options to purchase
1,581,766 shares of common stock under the Amended and Restated 2006 Stock
Incentive Plan (“Plan”) to various employees, officers and directors with an
exercise price of $3.125 per share.  Each option granted to employees
during the three months ended March 31, 2010 has a ten year term and vests
equally over a three-year period.  The options granted to directors
during the three months ended March 31, 2010 have ten year terms and vested
one-third on March 30, 2010, the date of grant, and the remaining two-thirds
will vest equally over a two-year period.  The Company recorded
$122,817, $20,426 and $588,212 of compensation expense during the three months
ended March 31, 2010 and 2009 and the period from July 28, 2006 (inception) to
March 31, 2010, respectively, in accordance with ASC 718.
  There
were no options or warrants issued during the three months ended March 31,
2009.
  The
Company records compensation expense associated with stock options and other
forms of equity compensation using the Black-Scholes option-pricing model and
the following assumptions:
   7
 CORMEDIX
INC.
 (A
Development Stage Company)
  NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
  
 Three
      Months Ended
                March
      31, 2010Expected
      Term
              5
      yearsVolatility
              112%Dividend
      yield
              0.0%Risk-free
      interest rate
              2.6%Forfeiture
      rate
              0.0%
  The
Company estimated the expected term of the stock options granted based on
anticipated exercises in future periods assuming the success of our business
model as currently forecasted.  Given the Company’s short period of
publicly-traded stock history, management’s estimate of expected volatility is
based on the average expected volatilities of a sampling of five companies with
similar attributes to the Company, including: industry, stage of life cycle,
size and financial leverage.  The Company will continue to analyze the
expected stock price volatility and expected term assumptions as more historical
data for the Company’s common stock becomes available.  The expected
dividend yield reflects the Company’s current and expected future policy for
dividends on the Company’s common stock.  To determine the risk-free
interest rate, the Company utilized the U.S. Treasury yield curve in effect at
the time of grant with a term consistent with the expected term of the Company’s
awards.  Given that the stock options currently outstanding are
primarily held by senior management and directors of the Company, management
does not currently expect to experience any forfeitures with respect to such
options and, as such, compensation expense for stock-based awards does not
include an estimate for forfeitures.
 A summary
of the Company’s option and warrant activity under the Plan and related
information is as follows:
  Three
      Months Ended
                  March 31,
      2010
              
              
              Three
      Months Ended
                  March 31,
      2009Shares
              
              
              Weighted
                  Average
                  Exercise
                  Price
              
              
              Shares
              
              
              Weighted
                  Average
                  Exercise
                  PriceOutstanding
      at beginning of period
              
              
              23,612
              
              
              $
              8.23
              
              
              
              23,612
              
              
              $
              8.23Granted
              
              
              1,581,766
              
              
              $
              3.125
              
              
              
              -
              
              
              $
              -Outstanding
      at end of period and expected to vest
              
              
              1,605,378
              
              
              $
              3.20
              
              
              
              23,612
              
              
              $
              8.23Options
      exercisable
              
              
              56,380
              
              
              $
              4.61
              
              
              
              16,380
              
              
              $
              8.23Weighted-average
      fair value of options granted during the period
              
              
              
              
              
              $
              2.51
              
              
              
              
              
              
              $
              8.23
 
 The
weighted average remaining contractual life of stock options outstanding at
March 31, 2010 is 9.89 years.  The aggregate intrinsic value is
calculated as the difference between the exercise prices of the underlying
options and the quoted closing price of the common stock of the Company as of
March 31, 2010 for those options that have an exercise price below the quoted
closing price.  As of March 31, 2010, there were options to purchase
an aggregate of 1,605,378 shares with an exercise above quoted closing price of
the common stock of the Company, resulting in $0 intrinsic value.
  As of
March 31, 2010, the total compensation expense related to non-vested options not
yet recognized totaled $3,915,685.  The weighted-average vesting
period over which the total compensation expense related to non-vested options
not yet recognized at March 31, 2010 was approximately 3 years.
  Note
5 — Convertible Notes:
  In
connection with the closing of the IPO, which occurred on March 30, 2010, all of
the Company’s outstanding convertible notes converted into Units or shares of
common stock, as described below, in accordance with the terms of such
notes.  See Note 8.
   8
 CORMEDIX
INC.
 (A
Development Stage Company)
  NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
  In July
and September 2007, the Company issued 8% senior convertible notes in connection
with a private placement in the aggregate principal amount of $8,645,000 (the
“First Bridge Notes”) with an original maturity date of July 31, 2008, which was
subsequently extended to July 31, 2009. The First Bridge Notes were amended on
June 5, 2009 to extend the maturity date to July 31, 2010 and to provide for an
interest rate per annum of 10% per annum from June 5, 2009 until July 31, 2009,
and 12% per annum from and after August 1, 2009.  On March 30, 2010,
the aggregate amount of principal and accrued interest outstanding under the
First Bridge Notes was $11,036,837 and the First Bridge Notes converted into an
aggregate of 1,697,971 Units, which consist of an aggregate of 3,395,942 shares
of common stock and warrants to purchase 1,697,971 shares of common stock at an
exercise price of $3.4375, in conjunction with the IPO.
  In August
2008, the Company issued 8% senior convertible notes in connection with a
private placement in the aggregate principal amount of $2,100,000 (the “Second
Bridge Notes”), to mature on July 31, 2009. The Second Bridge Notes were amended
on June 5, 2009 to extend the maturity date to July 31, 2010 and to provide for
an interest rate of 10% per annum from June 5, 2009 until July 31, 2009, and 12%
per annum from and after August 1, 2009. On March 30, 2010, the aggregate amount
of principal and accrued interest outstanding under the Second Bridge Notes was
$2,440,368 and the Second Bridge Notes converted into an aggregate of 375,437
Units, which consist of an aggregate of 750,874 shares of common stock and
warrants to purchase 375,437 shares of common stock at an exercise price of
$3.4375, in conjunction with the IPO.
  On
December 10, 2008, the Company issued a promissory note with no stated interest
rate to Galenica, Ltd., a pharmaceutical company (“Galenica”), in the principal
amount of $1,000,000, in connection with a proposed purchase agreement between
the Company and Galenica. As a result of the termination of the proposed
purchase agreement, on April 30, 2009, this promissory note was cancelled, and
the Company issued to Galenica a new promissory note in the principal amount of
$1,000,000, with an interest rate of 8% and a maturity date of July 31, 2010
(the “Galenica Note”). Except for the interest rate, the terms of the Galenica
Note were consistent with the terms of the Second Bridge Notes. On March 30,
2010, the amount of principal and accrued interest outstanding under the
Galenica Note was $1,073,333 and the Galenica Note converted into 165,128 Units,
which consist of 330,256 shares of common stock and warrants to purchase 165,128
shares of common stock at an exercise price of $3.4375, in conjunction with the
IPO.
  In
October and November 2009, the Company issued 8% senior convertible notes in
connection with a private placement in the aggregate principal amount of
$2,619,973 (the “Third Bridge Notes”) and a maturity date of October 29,
2011.  Under the terms of the Third Bridge Notes, the Third Bridge
Notes, plus all accrued interest, automatically converted into shares of the
Company’s common stock upon completion of the IPO at a price equal to 70% of the
portion of the offering price of the Units sold in the IPO that was allocated to
the common stock, which was $3.125.   Accordingly, on March 30,
2010, the aggregate amount of principal and accrued interest outstanding under
the Third Bridge Notes, which was $2,706,594, converted into 1,237,293 shares of
common stock in conjunction with the IPO.  The beneficial conversion
feature of the Third Bridge Notes as a result of the 30% discount at which the
Third Bridge Notes converted into shares of common stock upon the IPO was valued
at $1,137,762 which was recorded to interest expense on March 30,
2010.
  In
addition, in connection with the private placement of the Third Bridge Notes,
each noteholder received warrants to purchase a number of the Company’s common
stock equal to 60% of the principal amount of the Third Bridge Notes purchased
divided by $3.125, the portion of the offering price of the Units sold in the
IPO that was allocated to the common stock.  These warrants have an
exercise price of $3.4375, the same exercise price as the warrants underlying
the Units sold in the IPO, and are exercisable for a period of five
years.
   9
 CORMEDIX
INC.
 (A
Development Stage Company)
  NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
  Note
6 — Shares Issued to Licensors:
  In
accordance with the terms of agreements with the Company’s licensors, Shiva
Biomedical, LLC (“Shiva”) and ND Partners, LLC (“ND Partners”), the Company was
obligated to issue additional shares of common stock to each licensor sufficient
to maintain an ownership percentage of 7% of the outstanding common stock of the
Company on a fully diluted basis.   As a result of the automatic
conversion of all of the Company’s outstanding convertible notes into Units and
shares common stock in connection with the closing of the IPO, on March 30,
2010, the Company issued in the aggregate 828,024 shares of common stock to
Shiva and ND Partners at a price of $3.125 per share resulting in a charge of
$2,587,576, in accordance with this obligation. This obligation terminated upon
the closing of the IPO.
  Note
7 — Commitments:
  On
February 16, 2010, the Company entered into an employment agreement with Brian
Lenz, effective February 16, 2010, to act as the Company’s Chief Financial
Officer (the “Lenz Employment Agreement”).  The Lenz Employment
Agreement has an initial term of two years, and thereafter is automatically
extended for additional one-year periods unless either party provides the other
with appropriate notice of its decision not to extend the
term.  Pursuant to the Lenz Employment Agreement, Mr. Lenz receives an
annual base salary of $175,000, and guaranteed bonuses of $15,000 upon the last
business day of the first calendar year during the term and $25,000 upon the
last business day of the second and each following calendar year during the
term, provided that Mr. Lenz remains the Company’s
employee.  Additionally, Mr. Lenz is eligible for annual milestone
bonus payments of up to 30% of the aggregate of his base salary and guaranteed
bonus, as established annually by the Company’s Chief Executive Officer, in
conjunction with the Company’s Board of Directors or a committee
thereof.  The Lenz Employment Agreement also provided for a $10,000
bonus which is accrued for as of March 31, 2010, and will be paid during the May
2010 payroll, and the issuance of an option to purchase 324,837 shares of common
stock representing 2.0% of the common stock outstanding upon the consummation of
the IPO on a fully diluted basis.  Such option will have an exercise
price equal to $3.125, the price of the Units sold in this offering that is
allocated to the common stock and will vest in equal installments on each of the
first three anniversaries of the grant date.  The stock option grant
had an approximate fair value of $814,600 at the date of grant based on the
Black-Scholes option-pricing model.  The Lenz Employment Agreement
also entitles Mr. Lenz to certain severance benefits.
  On March
18, 2010, the Company entered into a lease agreement with UA Bridgewater
Holdings, LLC for office space located in Bridgewater, New Jersey, for an
initial term of sixty (60) months, with a commencement date of April 1, 2010, an
expiration date of March 31, 2015, with lease payments beginning on July 1,
2010.  In accordance with the lease agreement, the Company has
deposited $13,342 with the landlord or the equivalent of two months’
rent.  The Company has a one-time right to terminate the lease after
two years from the commencement date of April 1, 2010, provided the Company
gives the landlord notice of its election to exercise this option on or before
eighteen months after April 1, 2010.  If the Company elects to
exercise the early termination option, the Company will pay an early
cancellation fee to the landlord in an amount equal to the sum of the
following:  the remaining balance of the unamortized leasing costs
incurred by the landlord, the brokerage commissions, the landlord’s legal fees
associated with this lease, and $18,474, representing three (3) months base
rent.  The Company also has been granted the option to extend the
lease term for one (1) additional period of three (3) years, commencing the day
following the then current expiration date of the term or March 31, 2015,
provided the Company delivers notice to the landlord no later than nine (9)
months prior to March 31, 2015.  The total sixty (60) month lease
obligation is approximately $389,000.
   10
 CORMEDIX
INC.
 (A
Development Stage Company)
  NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
  Note
8 — Initial Public Offering:
  In March
2010, the Company completed its IPO, whereby the Company sold 1,925,000 Units,
each Unit consisting of two shares of its common stock and a warrant to purchase
one share of common stock, at $6.50 per Unit resulting in gross proceeds of
$12,512,500.  In connection with the IPO, the Company paid
underwriting discounts and commissions of $1,063,563, corporate finance fees of
$225,250 and reimbursable legal expenses of counsel for the underwriters of
$90,000, and the Company incurred other offering costs and expenses, including
legal, accounting, printing and filing fees totaling $676,417.
  All of
the Company’s convertible notes and all of the Company’s outstanding shares of
Non-Voting Subordinated Class A Common Stock automatically converted into Units
or common stock upon the completion of the IPO.  Management believes
that the net proceeds from the IPO and existing cash will be sufficient to fund
the Company’s projected operating requirements through the end of the first
quarter of 2012.
  Note
9 — Fair Value
Measurements:
  The fair value of the Company’s cash
and cash equivalents, accounts payable and other accrued liabilities at March
31, 2010 are estimated to approximate their carrying values due to the relative
liquidity of these instruments.
  11
  Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
  The following discussion and analysis of our
financial condition and results of operations should be read in conjunction with
our condensed consolidated financial statements and related notes appearing
elsewhere in this Quarterly Report on Form 10-Q and our Prospectus filed
pursuant to Rule 424(b) under the Securities Act of 1933, as amended
(the “Securities Act”), with the Securities and Exchange Commission (the “SEC”)
on March 26,
2010.
  Forward
Looking Statements
  This
quarterly report on Form 10-Q contains “forward-looking statements” that
involve risks and uncertainties, as well as assumptions that, if they never
materialize or prove incorrect, could cause our results to differ materially
from those expressed or implied by such forward-looking
statements.  The statements contained in this Quarterly Report on
Form 10-Q that are not purely historical are forward-looking statements
within the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”).  Forward-looking statements are often identified by
the use of words such as, but not limited to, “anticipate,” “believe,” “can,”
“continue,” “could,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,”
“project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions
or variations intended to identify forward-looking statements.  These
statements are based on the beliefs and assumptions of our management based on
information currently available to management.  Such forward-looking
statements are subject to risks, uncertainties and other important factors that
could cause actual results and the timing of certain events to differ materially
from future results expressed or implied by such forward-looking
statements.  Factors that could cause or contribute to such
differences include, but are not limited to, those identified below, and those
discussed in the section titled “Risk Factors” included in our Prospectus filed
pursuant to Rule 424(b) under the Securities Act with the SEC on March
26, 2010.  Furthermore, such forward-looking statements speak only as
of the date of this report.  Except as required by law, we undertake
no obligation to update any forward-looking statements to reflect events or
circumstances after the date of such statements.
  Overview
  We are a
pharmaceutical company that seeks to in-license, develop and commercialize
therapeutic products for the treatment of cardiac and renal dysfunction, also
known as Cardiorenal disease.  Specifically, our goal is to treat
kidney disease by reducing the commonly associated cardiovascular and metabolic
complications — in effect, “Treating the kidney to treat the
heart.”  To date, we have licensed all of the products in our
Cardiorenal pipeline.
  We have
several proprietary product candidates in clinical development that address
large market opportunities, including our most advanced product candidates,
CRMD003 (Neutrolin®) and
CRMD001, and we have the worldwide rights to develop and commercialize these
products.
  CRMD003
is a liquid designed to prevent central venous catheter related bloodstream
infection (“CRBI”) and clotting in central venous catheters (initially in
hemodialysis catheters).  We intend to submit an Investigational
Device Exemption for CRMD003 by mid-2010, which if approved will enable us to
start a pivotal clinical trial.
  CRMD001
is our formulation of the drug deferiprone, which we intend to develop for use
in the prevention of contrast-induced nephropathy, or CIN, which is a common and
potentially serious complication arising from the use of iodinated contrast
media used in X-ray procedures to identify the status of blood vessels in the
heart.  Following our assessment of the data generated in connection
with our development of CRMD001 for the CIN indication, we will consider whether
or not to also develop CRMD001 for use in the treatment of chronic kidney
disease, or CKD, based on the support such data provides for this additional
indication as well as other factors, including our access to capital, clinical
and regulatory considerations regarding development of CRMD001 for the CKD
indication, and our assessment of the then-current state of our intellectual
property estate in CRMD001 with respect to both the CIN and the CKD
indications.  We intend to start a phase II biomarker “proof of
concept” study for the CIN indication by mid-2010.  We expect this
study to generate supportive data on the ability of CRMD001 to reduce biomarker
evidence of acute kidney injury.  Additionally, we believe this study
will also provide other information that will increase the likelihood of success
of a later phase III trial for the CIN indication.
   12
  We are a
development stage company.  We were organized as a Delaware
corporation on July 28, 2006 under the name “Picton Holding Company, Inc.” and
we changed our corporate name to “CorMedix Inc.” on January 18,
2007.  Since our inception, we have had no revenue from product
sales.  Our operations to date have been primarily limited to
organizing and staffing, licensing product candidates, developing clinical
trials for our product candidates, establishing manufacturing for our product
candidates and maintaining and improving our patent portfolio.  We
have generated significant losses to date, and we expect to continue to generate
losses as we progress towards the commercialization of our product candidates,
including CRMD003 and CRMD001.  As of March 31, 2010, we had an
accumulated deficit of approximately $32,168,282.  Because we do not
generate revenue from any of our product candidates, our losses will continue as
we advance our product candidates towards regulatory approval and eventual
commercialization.  As a result, our operating losses are likely to be
substantial over the next several years.  We are unable to predict the
extent of any future losses or when we will become profitable, if at
all.
  In March
2010, we completed our initial public offering (the “IPO”), whereby we sold
1,925,000 units, each unit consisting of two shares of our common stock and a
warrant to purchase one share of common stock, at $6.50 per unit resulting in
gross proceeds of $12,512,500 and net proceeds to us of $10,457,270 after
deducting underwriting discounts and commissions and offering expenses payable
by us.  All of our convertible notes and accrued interest thereon and
all of our outstanding shares of Non-Voting Subordinated Class A Common Stock
automatically converted into units or common stock upon the completion of the
IPO.  We believe that the net proceeds from the IPO and existing cash
will be sufficient to fund our projected operating requirements through the end
of the first quarter of 2012.
  We also
effected a 1 for 7.836 reverse stock split of our common stock on February 24,
2010 in connection with the IPO.  All shares and per share amounts,
except as noted, have been retroactively adjusted to give effect to the reverse
stock split.
  Financial
Operations Overview
  Revenue
  We have
not generated any revenue since our inception.  To date, we have
funded our operations primarily through debt financings and the
IPO.
  If our
product development efforts result in clinical success, regulatory approval and
successful commercialization of any of our products, we could generate revenue
from sales or licenses of any such products.
   13
  Research
and Development Expense
  Research
and development expense consists of: (i) internal costs associated with our
development activities; (ii) payments we make to third party contract research
organizations, contract manufacturers, investigative sites, and consultants;
(iii) technology and intellectual property license costs; (iv) manufacturing
development costs; (v) personnel related expenses, including salaries, benefits,
travel and related costs for the personnel involved in drug development; (vi)
activities relating to regulatory filings and the advancement of our product
candidates through preclinical studies and clinical trials; and (vii) facilities
and other allocated expenses, which include direct and allocated expenses for
rent, facility maintenance, as well as laboratory and other supplies. All
research and development is expensed as incurred.
  Conducting
a significant amount of development is central to our business
model.  Through March 31, 2010, we incurred approximately $15,641,110
in research and development expenses since our inception in July
2006.  Product candidates in later-stage clinical development
generally have higher development costs than those in earlier stages of
development, primarily due to the significantly increased size and duration of
the clinical trials.  We plan to increase our research and development
expenses for the foreseeable future in order to complete development of our two
most advanced product candidates, CRMD003 and CRMD001, and our earlier-stage
research and development projects.
  The
following table summarizes the percentages of our research and development
payments related to our two most advanced product candidates and other
projects.  The percentages summarized in the following table reflect
payments directly attributable to each development candidate, which are tracked
on a project basis.  A portion of our internal costs, including
indirect costs relating to our product candidates, are not tracked on a project
basis and are allocated based on management’s estimate.
  Three
      Months Ended
                  March 31,
              Period
      from July 28,
                  2006
      (Inception)
                  through
      March 31, 20102010
              2009CRMD003
              51%
              65%
              28%CRMD001
              47%
              34%
              62%CRMD002
              1%
              -%
              7%CRMD004
              1%
              1%
              3%
 
 The
process of conducting pre-clinical studies and clinical trials necessary to
obtain U.S. Food and Drug Administration approval is costly and time
consuming.  The probability of success for each product candidate and
clinical trial may be affected by a variety of factors, including, among others,
the quality of the product candidate’s early clinical data, investment in the
program, competition, manufacturing capabilities and commercial
viability.  As a result of the uncertainties discussed above, the
uncertainty associated with clinical trial enrollments and the risks inherent in
the development process, we are unable to determine the duration and completion
costs of current or future clinical stages of our product candidates or when, or
to what extent, we will generate revenues from the commercialization and sale of
any of our product candidates.
  Development
timelines, probability of success and development costs vary
widely.  We are currently focused on developing our two most advanced
product candidates, CRMD003 for the prevention of CRBI and CRMD001 for the CIN
indication.  We expect to raise additional funds at a later date in
order to fully complete the development of CRMD003 for CRBI and CRMD001 for the
CIN indication, to further develop CRMD002 or CRMD004 through and beyond the
pre-clinical stage, to develop CRMD001 for the CKD indication (should we decide
to pursue such development) or to develop any new product
candidates.
   14
  General
and Administrative Expense
  General
and administrative expense consists primarily of salaries and other related
costs, including stock-based compensation expense, for persons serving in our
executive, finance and accounting functions.  Other general and
administrative expense includes facility-related costs not otherwise included in
research and development expense, promotional expenses, costs associated with
industry and trade shows, and professional fees for legal services and
accounting services.  We expect that our general and administrative
expenses will increase if we add personnel and as a result of the reporting
obligations applicable to public companies.  From our inception on
July 28, 2006 through March 31, 2010, we spent $5,423,035 on general and
administrative expense.
  Interest
Income and Interest Expense
  Interest
income consists of interest earned on our cash.  Interest expense
consists of interest incurred on our convertible notes up to their automatic
conversion into units or common stock upon the completion of the IPO on March
30, 2010, as well as the amortization and write-off of deferred financing costs
and debt discounts and a charge for the beneficial conversion relating to our
convertible notes.
  Results
of Operations
  Three
months ended March 31, 2010 compared to three months ended March 31,
2009
  Research and Development
Expense.  Research and development expense was $3,096,661 for
the three months ended March 31, 2010, an increase of $2,863,817, from $232,844
for the three months ended March 31, 2009.  The increase was primarily
attributable to our issuance on March 30, 2010 of 828,024 shares of our common
stock to our licensors valued at $3.125 per share, or $2,587,576 as a result of
anti-dilution adjustments in connection with the conversion of our outstanding
convertible debt to common stock upon the closing of the IPO.
  General and Administrative
Expense.  General and administrative expense was $646,843 for
the three months ended March 31, 2010, an increase of $241,514 from $405,329 for
the three months ended March 31, 2009.  The increase was primarily
attributable to our issuance of 4,059 shares of our common stock to a consultant
valued at $32.05 per share or $130,091, a charge of additional stock-based
compensation expense of $102,391 relating to stock option grants in connection
with the IPO and increased compensation expense as a result of our hiring a
Chief Financial Officer in February 2010.
  Interest Income and Interest
Expense.  Interest income was $28 for the three months ended
March 31, 2010, a decrease of $1,468, from $1,496 for the three months ended
March 31, 2009.  The decrease was primarily attributable to lower
interest-bearing cash balances during the first quarter 2010 compared to the
first quarter of 2009.
  Interest
expense was $3,093,763 for the three months ended March 31, 2010, an increase of
$2,580,039 from $513,724 for the three months ended March 31,
2009.  The increase was primarily attributable to charges related to
the conversion of all our convertible notes, of which the aggregate amount of
principal and accrued interest as of March 30, 2010 was $18,897,167, in
connection with the IPO.  These charges consisted primarily of a
beneficial conversion feature charge of $1,137,762 related to the 30% discount
at which the Third Bridge Notes converted into common stock, a write-off of debt
discount of $1,135,076, and a write-off of deferred financing fees of
$358,495.
   15
  Liquidity
and Capital Resources
  Sources
of Liquidity
  As a
result of our significant research and development expenditures and the lack of
any approved products to generate product sales revenue, we have not been
profitable and have generated operating losses since we were incorporated in
July 2006.  Prior to the IPO, we had funded our operations principally
with $14,364,973 in convertible notes sold in private placements and $625,464 in
related party notes, which were also convertible.  We received net
proceeds of $10,457,270 from the IPO, after deducting underwriting discounts,
commissions and offering expenses payable by us upon the closing of the IPO on
March 30, 2010.  All of our convertible notes were automatically
converted into 2,338,569 units which are comprised of 5,914,445 shares of common
stock and 2,841,603 warrants at an exercise price of $3.4375.
  Net
Cash Used in Operating Activities
  Net cash
used in operations was $230,937 for the three months ended March 31,
2010.  The net loss for the three months ended March 31, 2010 was
higher than cash used in operating activities by $6,606,302.  The
primary reasons for the difference are the stock issued in connection with our
license agreements’ anti-dilution provision  of stock issuances of
$2,587,576, the charge for the  beneficial conversion feature related
to the Third Bridge Notes of $1,137,762, non-cash interest expense of $462,429
on our outstanding debt during the first quarter of 2010, the write-offs of debt
discount and deferred financing costs of $1,135,076 and $358,495, respectively,
as a result of the conversion of our notes, stock-based compensation charges of
$122,817, an increase in accounts payable and accrued expenses of $796,167
relating to legal and accounting fees associated with the IPO, which were
partially offset by an increase in prepaid expenses and other current assets of
$113,633 which was primarily attributable to directors’ and officers’ insurance
premiums and by security deposits of $13,342 related to our newly leased office
space.
  Net
Cash Used in Investing Activities
  Net cash
used in investing activities was $6,799 for the three months ended March 31,
2010.  Net cash used in investing activities consisted of leasehold
improvements and the purchase of accounting software, which are being amortized
over the term of the lease and the expected life of the software.  Net
cash used in investing activities was $0 for the three months ended March 31,
2009.
  Net
Cash Provided by Financing Activities
  Net cash
provided by financing activities was $10,457,270 for the three months ended
March 31, 2010.  Net cash provided by financing activities consisted
of the sale of equity securities issued in our IPO, through which we received
gross proceeds of $12,512,500.
  The gross
proceeds of $12,512,500 were offset by underwriting discounts and commissions of
$1,063,563, corporate finance fees of $225,250, reimbursable legal fees for
counsel to the underwriters of $90,000 in addition to other offering costs and
expenses of $676,417, consisting primarily of legal, accounting, printing and
filing fees.
  Funding
Requirements
  Our total
cash on hand as of March 31, 2010 was $11,724,713, compared to $1,505,179 at
December 31, 2009.  Because our business does not generate
positive operating cash flow, we will need to either raise additional capital
before we exhaust our current cash resources in order to continue to fund our
research and development, including our long-term plans for clinical trials and
new product development, as well as to fund operations generally.  Our
continued operations will depend on whether we are able to raise additional
funds through various potential sources, such as equity, debt financing,
strategic relationships, or out-licensing of our products.  Through
March 31, 2010, all of our financing has been through our recent IPO and
previous debt financings.
   16
  We will
continue to fund operations from cash on hand and through the similar sources of
capital previously described, or through other sources that may be dilutive to
existing stockholders.  Moreover, the incurrence of indebtedness in
connection a debt financing would result in increased fixed obligations and
could also result in covenants that would restrict our operations. We can give
no assurances that we will be able to secure such additional financing, or if
available, it will be sufficient to meet our needs.
  Our
actual cash requirements may vary materially from those now planned, however,
because of a number of factors including the changes in the focus and direction
of our research and development programs, including the acquisition and pursuit
of development of new product candidates; competitive and technical advances;
costs of commercializing any of the product candidates; and costs of filing,
prosecuting, defending and enforcing any patent claims and any other
intellectual property rights.
  We do not
anticipate that we will generate product revenue for at least the next several
years. In the absence of additional funding, we expect our continuing operating
losses to result in increases in our cash used in operations over the next
several quarters and years.
  Based on
our cash resources at March 31, 2010, and our current plan of expenditure on
continuing development of our current products, we believe that we have
sufficient capital to fund our operations until the end of the first quarter of
2012, and will need additional financing until we can achieve profitability, if
ever.  If we are unable to raise additional funds when needed, we may
not be able to market our products as planned or continue development and
regulatory approval of our products, or we could be required to delay, scale
back or eliminate some or all of our research and development
programs.  Each of these alternatives would likely have a material
adverse effect on the prospects of our business.
  Critical
Accounting Policies
  Our
management’s discussion and analysis of our financial condition and results of
operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States,
or GAAP.  The preparation of these financial statements requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities and expenses.  On an ongoing basis, we evaluate these
estimates and judgments, including those described below.  We base our
estimates on our historical experience and on various other assumptions that we
believe to be reasonable under the circumstances.  These estimates and
assumptions form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources.  Actual results and experiences may differ materially from
these estimates.
  While our
significant accounting policies are more fully described in our Prospectus filed
pursuant to Rule 424(b) under the Securities Act with the SEC on March 26, 2010,
we believe that the following accounting policies are the most critical to aid
you in fully understanding and evaluating our reported financial results and
affect the more significant judgments and estimates that we use in the
preparation of our financial statements.
   17
  Stock-Based
Compensation
  We
account for stock options according to the Financial Accounting Standards Board
Accounting Standards Codification 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,
and is recognized as expense over the employee’s requisite service period on a
straight-line basis.
  We
account for stock options granted to non-employees on a fair value basis using
the Black-Scholes option pricing method in accordance with ASC
718.  The initial non-cash charge to operations for non-employee
options with vesting are revalued at the end of each reporting period based upon
the change in the fair value of the options and amortized to consulting expense
over the related vesting period.
  For the
purpose of valuing options and warrants granted to our employees, non-employees
and directors and officers during the three months ended March 31, 2010, we used
the Black-Scholes option pricing model.  We granted options to
purchase 1,581,766 shares of common stock to our employees, non-employees and
directors and officers during the three months ended March 31,
2010.  No options were issued during the year ended March 31,
2009.  To determine the risk-free interest rate, we utilized the U.S.
Treasury yield curve in effect at the time of grant with a term consistent with
the expected term of our awards.  We estimated the expected term
of the options granted based on anticipated exercises in future periods assuming
the success of our business model as currently forecasted.  The
expected dividend yield reflects our current and expected future policy for
dividends on our common stock.  The expected stock price volatility
for our stock options was calculated by examining historical volatilities for
publicly traded industry peers, although we do not have any trading history for
our common stock.  We will continue to analyze the expected stock
price volatility and expected term assumptions as more historical data for our
common stock becomes available.  Given that the stock options
currently outstanding are primarily held by our senior management and directors,
we do not currently expect to experience any forfeitures with respect to such
options and, as such, compensation expense for stock-based awards does not
include an estimate for forfeitures.
  Off-Balance
Sheet Arrangements
  We do not
have any off-balance sheet arrangements.
  Item
      3.
              Quantitative
      and Qualitative Disclosures About Market
Risk.
  Not
applicable.
  Item
      4.
              Controls
      and Procedures.
  Evaluation
of Disclosure Controls and Procedures
  Disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) are controls and other procedures that are designed to ensure that
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is (a) recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms and (b)
accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate to allow for
timely decisions regarding required disclosure.
  As of the
end of the period covered by this report, our management, including our
principal executive officer and principal financial officer, evaluated the
effectiveness of our disclosure controls and procedures.  Based on
their evaluation of our disclosure controls and procedures and as a result of
the material weaknesses discussed below, management, including our principal
executive officer and principal financial officer, have concluded that our
disclosure controls and procedures were not effective as of March 31,
2010.
   18
  Specifically,
our principal executive officer and principal financial officer identified
material weaknesses in our financial reporting process with respect to the
following matters:
  ·
              lack
      of segregation of duties in certain accounting processes, including the
      approval and execution of disbursements, as a result of the absence of
      internal review procedures with respect to such processes;
    and
  ·
              lack
      of independent internal review over financial
  reporting.
  Notwithstanding
the foregoing, we believe that the accompanying financial statements presented
in this Form 10-Q fairly present our financial condition and results of
operations for the periods indicated in all material respects.
  Management’s
Efforts to Remediate Remaining Material Weaknesses
  We
recently completed the IPO on March 30, 2010, and have undertaken a general
effort to implement personnel and process changes in order to improve our
disclosure controls and procedures.  Additionally, we plan to
remediate the abovementioned material weaknesses as follows:
  ·
              Segregation
      of duties - We are in the process of establishing procedures whereby both
      our Chief Executive Officer and Chief Financial Officer are required to
      sign for cash disbursements above a certain amount, and both our Chief
      Executive Officer and Chief Financial Officer review our cash
      disbursements, payroll registers and banking
  transactions.
  ·
              Independent
      internal review over financial reporting - We intend to hire an outside
      consultant to independently review our quarterly and annual financial
      statements as well as our accounting for non-routine complex
      transactions.
  Changes
in Internal Control Over Financial Reporting
  We hired
Brian Lenz to serve as our Chief Financial Officer on February 16,
2010.  Prior to such date, we used third party personnel to meet all
of our internal accounting needs.  We viewed the hiring of a Chief
Financial Officer as crucial to ensure the coordination and appropriate
supervision of all financial and fiscal management aspects of our
operations.
  Except
for the events disclosed above, during the three months ended March 31, 2010,
there were no changes in our internal controls over financial reporting, or in
other factors that could significantly affect these controls, that materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
  PART
II
 OTHER
INFORMATION
  Item
      1.
              Legal
      Proceedings.
  None.
   19
  Item
      1A.
              Risk
      Factors.
  There are
no material changes from the risk factors previously disclosed in our Prospectus
filed pursuant to Rule 424(b) under the Securities Act with the SEC on
March 26, 2010.
  Item
      2.
              Unregistered
      Sales of Equity Securities and Use of
Proceeds.
  Use
of Proceeds
  Our IPO
was effected through a Registration Statement on Form S-1, as amended
(Registration No. 333-163380), that was declared effective by the SEC on March
24, 2010, which registered 1,925,000 units, each unit consisting of two shares
of our common stock and a warrant to purchase one share of common
stock.  On March 30, 2010, we completed the IPO of 1,925,000 units at
an initial public offering price of $6.50 per unit and received gross proceeds
of approximately $12.5 million.  The IPO was underwritten and managed
by Maxim Group LLC.  We paid to the underwriters underwriting
discounts and corporate fees totaling approximately $1.3 million in connection
with the IPO.  In addition, we incurred expenses of approximately $0.8
million in connection with the IPO, which when added to the underwriting
discounts paid by us, amount to total expenses of approximately $2.1
million.  Thus, the net offering proceeds to us, after deducting
underwriting discounts, commissions and offering expenses payable by us, were
approximately $10.4 million.  No offering expenses were paid directly
or indirectly to any of our directors or officers (or their associates) or
persons owning ten percent or more of any class of our equity securities or to
any other affiliates. We have invested the unused proceeds from the IPO in an
interest bearing money market savings account.
  Item
      3.
              Defaults
      Upon Senior Securities.
  None.
  Item
      4.
              (Removed
      and Reserved).
  None.
  Item
      5.
              Other
      Information.
  None.
  Item
      6.
              Exhibits.
  The
following is a list of exhibits filed as part of this Form 10-Q:
  Exhibit
      Number
              Description31.1
              Certification
      of Principal Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.*31.2
              Certification
      of Principal Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.*32.1
              Certification
      of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.*32.2
              Certification
      of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.*
  _____________
 *
              Filed
      herewith.
   20
  SIGNATURES
  Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
  
 CORMEDIX
      INC.Date:  May
      11, 2010
              By:
              /s/
      John C. HoughtonName:
              John
      C. HoughtonTitle:
              President
      and Chief Executive Officer(Principal
      Executive Officer)Date:  May
      11, 2010
              By:
              /s/
      Brian LenzName:
              Brian
      LenzTitle:
              Chief
      Financial Officer(Principal
      Financial and Accounting Officer)
 
  21
  EXHIBIT
INDEX
  Exhibit
      Number
              Description31.1
              Certification
      of Principal Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.*31.2
              Certification
      of Principal Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.*32.1
              Certification
      of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.*32.2
              Certification
      of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.*
  _____________
 *
              Filed
      herewith.
  
  22