Edgar Filing: CorMedix Inc.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2011

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 or Other 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)

Registrant’s telephone number, including area code: (908) 517-9500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
Common Stock, $0.001 Par Value		NYSE Amex LLC
Units, each consisting of two shares of Common Stock and a Warrant		NYSE Amex LLC
Warrants, exercisable for Common Stock at an exercise price of $3.4375 per share		NYSE Amex LLC

Securities registered pursuant to Section 12(g) of the Act: none

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

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 x No ¨

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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 company x

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

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant, based upon the closing price of the registrant’s common stock on the last business day of the registrant’s most recently completed second fiscal quarter was $16,024,222. Solely for the purpose of this calculation, shares held by directors and executive officers of the registrant have been excluded. Such exclusion should not be deemed a determination or an admission by the registrant that such individuals are, in fact, affiliates of the registrant.

The number of outstanding shares of the registrant’s common stock was 11,408,274 as of March 19, 2012.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Items 10, 11, 12, 13 and 14 of Part III of this report is incorporated by reference from the registrant’s definitive proxy statement on Schedule 14A relating to its 2012 annual meeting of stockholders. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days following the end of the Company’s fiscal year.

CORMEDIX INC.

PART I

Item 1.	Business	3

Item 1A.	Risk Factors	14

Item 1B.	Unresolved Staff Comments	27

Item 2.	Properties	28

Item 3.	Legal Proceedings	28

Item 4.	Mine Safety Disclosures	28

PART II

Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	29

Item 6.	Selected Financial Data	30

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 8.	Financial Statements and Supplementary Data	37

Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	38

Item 9A.	Controls and Procedures	38

Item 9B.	Other Information	38

PART III

Item 10.	Directors and Executive Officers and Corporate Governance	39

Item 11.	Executive Compensation	39

Item 12.	Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder Matters	39

Item 13.	Certain Relationships and Related Transactions, and Director Independence	39

Item 14.	Principal Accountant Fees and Services	40

PART IV

Item 15.	Exhibits and Financial Statement Schedules	41

PART I

Forward-Looking Statements

This Annual Report on Form 10-K 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 Annual Report on Form 10-K that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (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 in the section titled “Risk Factors.” 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.

Item 1. Business.

Overview

CorMedix Inc., incorporated in July 2006 under the laws of the State of Delaware (referred to herein as “we,” “us,” “our” and the “Company”), is a development stage pharmaceutical and medical device company that seeks to in-license, develop and commercialize therapeutic products for the treatment of cardiac and renal dysfunction, specifically in the dialysis and non-dialysis areas.

Our primary product candidate in development is CRMD003 (Neutrolin^®) for the prevention of catheter related infections in the dialysis and non-dialysis markets, which we believe addresses a large unmet medical need and market opportunity. CRMD003 is a liquid formulation designed to prevent central venous catheter infection and maintenance of catheter patency in central venous catheters (initially in hemodialysis catheters). During the third quarter of 2011, we received a notice from the U.S. Food and Drug Administration, or the FDA that our product candidate, CRMD003, Neutrolin^® had been assigned to the Center for Drug Evaluation and Research, or CDER. As a result of this notice and our current capital position, we decided to change our business strategy and focus the majority of our resources on the research and development of CRMD003 and seek regulatory and commercialization approval for Neutrolin^® in Europe through a CE Mark application. During the first half of 2011, we submitted our design dossier to TÜV SÜD the European notified body managing our CE Mark application. In the fourth quarter 2011 we successfully completed our stage 1 audit with TÜV. Upon the successful completion of the upcoming stage 2 audit and the implementation and approval of our quality management system and approval of our design dossier, we anticipate being in a position to obtain a CE mark approval in the first half of 2012. If we obtain CE Mark approval in Europe, we intend to be in a position to launch Neutrolin^®for the prevention of Catheter Related Bloodstream Infections, or CRBI and maintenance of catheter patency in hemodialysis patients in Europe during 2012. We cannot be assured of CE Mark approval of Neutrolin^® on that timeline or at all. We are currently exploring the various methods of launching Neutrolin^® in Europe, whether through a distributorship or partnership arrangement, or otherwise.

During 2011, we completed a phase II study of CRMD001 (deferiprone) an oral formulation of the drug deferiprone which we in-licensed from Shiva Biomedical in 2006. The phase II study was designed for 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. In June 2010, we initiated patient dosing in a phase II biomarker “proof of concept” study for the CIN indication. As of June 2011, we completed the recruitment of our phase II biomarker study of a proprietary formulation of deferiprone for the prevention of CIN also known as Contrast-Induced Acute Kidney Injury or CI-AKI in high risk patients with chronic kidney disease undergoing percutaneous cardiac catheterization with the intent of Percutaneous Coronary Intervention or PCI. The study included patients undergoing cardiac catheterization with the intent of PCI and considered at high risk for CIN who received either deferiprone or placebo twice a day beginning 1-3 hours before the procedure for a total of 8 days. The study was randomized, double-blind and placebo-controlled. Deferiprone was given at a dose of 2700 mg twice per day in the form of 900-mg tablets (1 immediate release and 2 extended release). A total of 61 patients (32 deferiprone, 29 placebo) were enrolled in the study. A variety of biomarkers of kidney injury and function were measured. Clinical events and safety parameters, including Serious Adverse Events or SAEs were followed through day 90. Top-line results were reviewed and interpreted internally, by the principal investigator and by three external academic biomarker experts. In the placebo group, most of the kidney injury biomarkers increased after contrast administration, as expected. Deferiprone tended to reduce acute elevations of the injury biomarkers, particularly in the first 8 hours. Measures of glomerular filtration (serum cystatin C, serum creatinine and Estimated Glomerular Filtration Rate, or EGFR) unexpectedly trended in the opposite direction over the first 8 days, as there was little change in the placebo group and small decreases in renal function in the deferiprone group. Analysis of SAEs indicated no safety signal. Based upon these top-line results, along with the extensive review of our CIN intellectual property position, the review of biomarker expert opinions, and among other factors such as our current cash position, we decided against pursuing further development of CRMD001. On December 1, 2011 we issued a notice of termination to the Shiva Biomedical license agreement.

In March 2010, we completed our Initial Public Offering, or 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 into the fourth 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.

Platforms and Products

Our product candidates’ technology seeks to utilize liquid and gel formulations of Neutrolin^® (CRMD003 and CRMD004, respectively) to prevent the infection and maintenance of catheter patency in central venous catheters and peripherally inserted central catheters. These catheters are frequently used for vascular access in hemodialysis (a form of dialysis where the patient’s blood is circulated through a dialysis filter), for cancer chemotherapy, long term antibiotic therapy, total parenteral nutrition (complete or partial dietary support via intravenous nutrients) and intensive care patients.

Over the past two years we have made progress toward the development of CRMD003, including the following:

in the fourth quarter of 2010, we manufactured a clinical trial batch of CRMD003 and began stability testing;

in December 2010, we commenced the application process for submitting a CE Mark in Europe for CRMD003;

during the first half of 2011, we submitted our design dossier to TÜV SÜD the European notified body managing our CE Mark application; and

during the fourth quarter 2011, we successfully completed stage 1 of 2 audits for the CE Marking approval process.

The following table summarizes our current product candidates.

Product

Intended Indication

Status of Clinical Programs

Commercial
Rights

CRMD003 (Neutrolin^®)

Prevention of catheter-related blood stream infections and maintenance of catheter patency in hemodialysis patients who are asymptomatic for catheter-related blood stream infections using both incident and prevalent catheters with any brand of central venous catheter

In Europe, Neutrolin^® (taurolidine 1.35%, citrate 3.5% and heparin 1,000 u/mL) is considered to be a Class III device requiring submission and approval of a CE Mark for marketing of the product. We commenced the application process for CE Mark approval in Europe during the fourth quarter 2010. In the U.S., Neutrolin^® is considered to be a drug product, requiring submission and approval of an Investigational New Drug (“IND”) application.

Worldwide

CRMD004

In Europe, CRMD004 is considered to be a Class III device requiring submission and approval of a CE Mark for marketing of the product.

Worldwide

CRMD003 (CorMedix Neutrolin^®)

Market Opportunity

Patients undergoing hemodialysis require access to the vascular system in order to perform treatments on a multiple scheduled basis each week. According to the American Journal of Kidney Diseases, February 2008, approximately 81,000 hemodialysis patients in the United States relied on a central venous catheter. One of the major complications in the use of a central venous catheter for hemodialysis treatment is CRBIs and the inflammatory complications associated with them. Assuming an average of 2 episodes of CRBIs per year, there would be 162,000 episodes per year. Further stated in the American Journal of Kidney Diseases, the total annual cost in the United States of treating all CRBI episodes and their complications would amount to approximately $777 million. CRBIs and inflammatory complications are a primary cause of morbidity in the end-stage renal disease hemodialysis patient population, and the second most common cause of mortality.

Prevention of catheter-related blood stream infections and inflammatory complications requires decontamination of the internal surface of the catheter to prevent the systemic dissemination of organisms contained within the biofilm and an anticoagulant to retain patency. Biofilm forms when bacteria adhere to surfaces in aqueous environments and begin to excrete a slimy, glue-like substance that can anchor them to various types of materials, including intravenous catheters. The presence of biofilm has many adverse effects, including the ability to release bacteria into the blood stream. The current standard of catheter care is to instill a heparin lock solution at a concentration of 1,000 – 5,000 u/mL into each catheter lumen immediately post treatment, in order to prevent clotting between dialysis treatments. However, a heparin lock solution provides no protection from the risk of infection. Currently, there are no pharmacologic agents approved for the prevention of CRBIs in central venous catheters.

There is a significant unmet need for prevention of CRBIs in the hemodialysis patient population as well as for other patient populations utilizing central venous catheters, such as oncology/chemotherapy, total parenteral nutrition and intensive care unit patients.

CRMD003, or Neutrolin^®, is a broad-spectrum antimicrobial/antifungal and anticoagulant combination that is active against common microbes including antibiotic-resistant strains and in addition may prevent biofilm formation. We believe that using Neutrolin^® as a catheter lock solution will significantly reduce the incidence of catheter-related blood stream infections, thus reducing the need for local and systemic antibiotics while prolonging catheter life.

Development Strategy

Our strategy is to obtain worldwide approval for Neutrolin^®. Projected key regulatory submissions/communications for both the United States and European Union in the next 12 months include:

· review by the Notified Body and discussions/agreements with them for Class III CE Marking and Quality System Regulation (QSR) certification;

· completion of stage 2 quality management system audit;

· approval of Class III CE Mark; and

· obtaining Investigational New Drug approval from the FDA to begin clinical studies.

Sales and Marketing Strategy

If we obtain CE Mark approval, we intend to be in a position to launch Neutrolin^®for the prevention of CRBI and maintenance of catheter patency in hemodialysis patients in Europe during 2012. However, we cannot be assured of CE Mark approval of Neutrolin^®on that timeline or at all, or, if CE Mark approval is received, we cannot be assured we can effectively launch Neutrolin^®in 2012. We are currently exploring the various methods of launching Neutrolin^® in Europe, whether through a distributorship or partnership arrangement or otherwise.

If we obtain FDA approval, we would intend to launch Neutrolin^® for the prevention of CRBIs and maintenance of catheter patency in hemodialysis patients in the U.S. within six months afterwards. The sales model will primarily be one of achieving formulary listing and inclusion as policy and procedure with the key customers (Fresenius and Davita, as dialysis providers, cover 70% of dialysis patients). Key account managers will be required as well as medical liaison specialists.

It is anticipated that the costs of Neutrolin^® will be added to the dialysis “bundle”, which will transition in from 2011 – 2014. In the interim, for those centers not participating in the bundle, we expect that the product will be billable on the basis of a separate billing “J” code. In any future model of full capitation reimbursement for dialysis services, the value proposition for Neutrolin^® would be even stronger. Clear demonstration of cost-effectiveness will be important for the Centers for Medicare & Medicaid Services, or CMS, private payers and users of Neutrolin^®.

After we launch Neutrolin^®, we will consider developing it for indications for prevention of catheter-related blood stream infections associated with any chronic central venous catheter and peripherally inserted central catheter use, such as cancer chemotherapy, intensive care and total parenteral nutrition.

Competitive Landscape

To the best of our knowledge, the below product candidates have been recognized for the prevention and treatment of catheter-related blood stream infections.

Product	Company	Mechanism	Estimated Launch	Differentiation
TauroLock™	TauroPharm	Antimicrobial and anticoadulant	Approved through CE Mark	500 units less heparin

Zuragen	Ash Access	Antimicrobial and anticoagulant Methylene blue + parabens + citrate 7%	Unknown	First potential approvable treatment for catheter-related blood stream infections in the U.S. Potentially need to undertake a 2^nd pivotal trial which will delay launch

B-Lock	Great Lakes Pharmaceuticals Inc.	Minocycline + EDTA + ethanol combinations	Pre Investigational Device Exemption discussions with the FDA	Contains an antibiotic which may be prone to resistance development

Antibiotic or antimicrobial coated catheters have been launched by some device companies as short term prevention of catheter infection. These are not effective for hemodialysis catheters due to long term use and high blood flow.

Manufacturing

All of our manufacturing processes currently are, and we expect them to continue to be, outsourced to third parties. We rely on third-party manufacturers to produce sufficient quantities of drug product for use in clinical trials. We intend to continue this practice for any future clinical trials and commercialization of our products.

Navinta LLC, a U.S.-based Active Pharmaceutical Ingredient (“API”) developer, provides A PI manufacturing (manufactured in India at an FDA-compliant facility) and a Drug Master File for CRMD003, pursuant to a supply agreement dated December 7, 2009 (the “Navinta Agreement”). The Navinta Agreement provides that Navinta supply taurolidine (the API for CRMD003) to us on an exclusive worldwide basis in the field of the prevention and treatment of human infection and/or dialysis so long as we purchased a minimum of $350,000 of product from Navinta by December 30, 2010, which we achieved, and following our first commercial sale of a product incorporating taurolidine, purchase a minimum of $2,250,000 of product on an annual basis for five years. We are also required to make certain cash payments to Navinta upon the achievement of certain sales-based milestones. The maximum aggregate amount of such payments, assuming achievement of all milestones, is $1,975,000. The Navinta Agreement has a term of five years, but may be terminated by either party upon 30 days written notice.

We are confident that there exist a sufficient number of potential sources for the drug substances required to produce our products, as well as third-party manufacturers, that we will be able to find alternate suppliers and third-party manufacturers in the event that our relationship with any supplier or third-party manufacturer deteriorates.

United States Government Regulation

The research, development, testing, manufacture, labeling, promotion, advertising, distribution, and marketing, among other things, of our products are extensively regulated by governmental authorities in the United States and other countries. Because certain of our product candidates are considered as medical devices and others are considered as drugs for regulatory purposes, we intend to submit applications to regulatory agencies for approval or clearance of both medical devices and pharmaceutical product candidates.

In the United States, the FDA regulates drugs and medical devices under the Federal Food, Drug, and Cosmetic Act and the agency’s implementing regulations. If we fail to comply with the applicable United States requirements at any time during the product development process, clinical testing, and the approval process or after approval, we may become subject to administrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, warning letters, adverse publicity, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties or criminal prosecution. Any agency enforcement action could have a material adverse effect on us.

Our products may be classified by the FDA as a drug or a medical device depending upon the indications for use or claims.

Drug Approval Process

The research, development, and approval process in the United States and elsewhere is intensive and rigorous and generally takes many years to complete. The typical process required by the FDA before a therapeutic drug may be marketed in the United States includes:

· preclinical laboratory and animal tests performed under the FDA’s Good Laboratory Practices regulations;

· submission to the FDA of an Investigational New Drug Application, which must become effective before human clinical trials may commence;

· preliminary human clinical studies to evaluate the drug’s safety and effectiveness for its intended uses;

· FDA review of whether the facility in which the drug is manufactured, processed, packed, or held meets standards designed to assure the product’s continued quality; and

· submission of a marketing application to the FDA, and approval of the application by the FDA.

During preclinical testing, studies are performed with respect to the chemical and physical properties of candidate formulations. These studies are subject to GLP requirements. Biological testing is typically done in animal models to demonstrate the activity of the compound against the targeted disease or condition and to assess the apparent effects of the new product candidate on various organ systems, as well as its relative therapeutic effectiveness and safety. An Investigational New Drug Application must be submitted to the FDA and become effective before studies in humans may commence.

Clinical trial programs in humans generally follow a three-phase process. Typically, phase I studies are conducted in small numbers of healthy volunteers or, on occasion, in patients afflicted with the target disease. Phase I studies are conducted to determine the metabolic and pharmacological action of the product candidate in humans and the side effects associated with increasing doses, and, if possible, to gain early evidence of effectiveness. In phase II, studies are generally conducted in larger groups of patients having the target disease or condition in order to validate clinical endpoints, and to obtain preliminary data on the effectiveness of the product candidate and optimal dosing. This phase also helps determine further the safety profile of the product candidate. In phase III, large-scale clinical trials are generally conducted in patients having the target disease or condition to provide sufficient data for the statistical proof of effectiveness and safety of the product candidate as required by United States and foreign regulatory agencies.

In the case of products for certain serious or life-threatening diseases, the initial human testing may be done in patients with the disease rather than in healthy volunteers. Because these patients are already afflicted with the target disease or condition, it is possible that such studies will also provide results traditionally obtained in phase II studies. These studies are often referred to as “phase I/II” studies. However, even if patients participate in initial human testing and a phase I/II study carried out, the sponsor is still responsible for obtaining all the data usually obtained in both phase I and phase II studies.

Before proceeding with a study, sponsors may seek a written agreement known as a Special Protocol Assessment, or SPA from the FDA regarding the design, size, and conduct of a clinical trial. Among other things, SPAs can cover clinical studies for pivotal trials whose data will form the primary basis to establish a product’s efficacy. SPAs help establish up-front agreement with the FDA about the adequacy of a clinical trial design to support a regulatory approval, but the agreement is not binding if new circumstances arise. There is no guarantee that a study will ultimately be adequate to support an approval even if the study is subject to an SPA.

United States law requires that studies conducted to support approval for product marketing be “adequate and well controlled.” In general, this means that either a placebo or a product already approved for the treatment of the disease or condition under study must be used as a reference control. Studies must also be conducted in compliance with good clinical practice requirements, and informed consent must be obtained from all study subjects.

The clinical trial process for a new compound can take ten years or more to complete. The FDA may prevent clinical trials from beginning or may place clinical trials on hold at any point in this process if, among other reasons, it concludes that study subjects are being exposed to an unacceptable health risk. Trials may also be prevented from beginning or may be terminated by institutional review boards, who must review and approve all research involving human subjects. Side effects or adverse events that are reported during clinical trials can delay, impede, or prevent marketing authorization. Similarly, adverse events that are reported after marketing authorization can result in additional limitations being placed on a product’s use and, potentially, withdrawal of the product from the market.

Following the completion of clinical trials, the data are analyzed to determine whether the trials successfully demonstrated safety and effectiveness and whether a product approval application may be submitted. In the United States, if the product is regulated as a drug, a New Drug Application must be submitted and approved before commercial marketing may begin. The New Drug Application must include a substantial amount of data and other information concerning the safety and effectiveness of the compound from laboratory, animal, and human clinical testing, as well as data and information on manufacturing, product quality and stability, and proposed product labeling.

Each domestic and foreign manufacturing establishment, including any contract manufacturers CorMedix may decide to use, must be listed in the New Drug Application and must be registered with the FDA. The application generally will not be approved until the FDA conducts a manufacturing inspection, approves the applicable manufacturing process for the drug product, and determines that the facility is in compliance with cGMP requirements.

Under the Prescription Drug User Fee Act, as amended, the FDA receives fees for reviewing an New Drug Application and supplements thereto, as well as annual fees for commercial manufacturing establishments and for approved products. These fees can be significant. For fiscal year 2012, the New Drug Application review fee alone is $1,841,500, although certain limited deferral, waivers, and reductions may be available.

Each New Drug Application submitted for FDA approval is usually reviewed for administrative completeness and reviewability within 45 to 60 days following submission of the application. If deemed complete, the FDA will “file” the New Drug Application, thereby triggering substantive review of the application. The FDA can refuse to file any New Drug Application that it deems incomplete or not properly reviewable. The FDA has established performance goals for the review of New Drug Applications — six months for priority applications and 10 months for standard applications. However, the FDA is not legally required to complete its review within these periods and these performance goals may change over time. Moreover, the outcome of the review, even if generally favorable, typically is not an actual approval but an “action letter” that describes additional work that must be done before the application can be approved. The FDA’s review of an application may involve review and recommendations by an independent FDA advisory committee. Even if the FDA approves a product, it may limit the approved therapeutic uses for the product as described in the product labeling, require that warning statements be included in the product labeling, require that additional studies be conducted following approval as a condition of the approval, impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a risk management plan, or otherwise limit the scope of any approval.

Significant legal and regulatory requirements also apply after FDA approval to market under a New Drug Application. These include, among other things, requirements related to adverse event and other reporting, product advertising and promotion and ongoing adherence to cGMPs, as well as the need to submit appropriate new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling, or manufacturing process. The FDA also enforces the requirements of the Prescription Drug Marketing Act which, among other things, imposes various requirements in connection with the distribution of product samples to physicians.

The regulatory framework applicable to the production, distribution, marketing, and/or sale, of our products may change significantly from the current descriptions provided herein in the time that it may take for any of its products to reach a point at which a New Drug Application is approved.

Overall research, development, and approval times depend on a number of factors, including the period of review at FDA, the number of questions posed by the FDA during review, how long it takes to respond to the FDA’s questions, the severity or life-threatening nature of the disease in question, the availability of alternative treatments, the availability of clinical investigators and eligible patients, the rate of enrollment of patients in clinical trials, and the risks and benefits demonstrated in the clinical trials.

Drugs for Serious or Life-Threatening Illnesses

The Federal Food, Drug, and Cosmetic Act, as amended, and FDA regulations provide certain mechanisms for the accelerated “Fast Track” approval of products intended to treat serious or life-threatening illnesses which have been studied for safety and effectiveness and which demonstrate the potential to address unmet medical needs. The procedures permit early consultation and commitment from the FDA regarding the preclinical and clinical studies necessary to gain marketing approval. Provisions of this regulatory framework also permit, in certain cases, New Drug Applications to be approved on the basis of valid surrogate markets of product effectiveness, thus accelerating the normal approval process. Where the FDA approves a product on the basis of a surrogate market, it requires the sponsor to perform post-approval, or Phase 4, studies as a condition of approval, and may withdraw approval if post-approval studies do not confirm the intended clinical benefit or safety of the product. Special rules would also apply to the submission to the FDA of advertising and promotional materials prior to use.

Controlled Substances

Compounds that have a potential for patient dependence and abuse are classified as controlled substances under the Controlled Substances Act, regulations of the DEA, and similar state and foreign laws. In the United States, for new chemical entities under development for medicinal use, designated staff at the FDA make recommendations about whether a drug should be scheduled as a controlled substance, and the Drug Enforcement Administration, or DEA makes the final determination. States then either follow the federal classification or make their own determination. In the case of a new drug approved by the FDA, the final DEA scheduling determination generally occurs several months or longer after the FDA’s approval.

Drugs that are scheduled as controlled substances are subject to stringent regulatory requirements, including requirements for registering manufacturing and distribution facilities, security controls and employee screening, recordkeeping, reporting, product labeling and packaging, import and export. There are five federal schedules for controlled substances, known as Schedule I, II, III, IV and V. The regulatory requirements that apply to a drug vary depending on the particular controlled substance schedule into which a drug is placed, based on consideration of its potential for dependence and abuse and its medicinal uses. Schedules I and II contain the most stringent restrictions and requirements, and Schedule V the least. No products with recognized medicinal uses are in Schedule I. For substances in Schedule I and II, quotas must be obtained from the DEA in order to manufacture, procure, and distribute inventory. For all controlled substances, there are potential criminal and civil penalties that apply for the failure to meet applicable legal requirements. Healthcare professionals must have special DEA licenses in order to prescribe controlled substances.

Other United States Regulatory Requirements

In the United States, the research, manufacturing, distribution, sale, and promotion of drug and biological products are potentially subject to regulation by various federal, state, and local authorities in addition to the FDA, including the Centers for Medicare and Medicaid Services (formerly the Heath Care Financing Administration), other divisions of the United States Department of Health and Human Services (e.g., the Office of Inspector General), the United States Department of Justice and individual United States Attorney offices within the Department of Justice, and state and local governments. For example, sales, marketing, and scientific/educational grant programs must comply with the anti-fraud and abuse provisions of the Social Security Act, the False Claims Act, the privacy provision of the Health Insurance Portability and Accountability Act, and similar state laws, each as amended. Pricing and rebate programs must comply with the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990 and the Veterans Health Care Act of 1992, each as amended. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. All of these activities are also potentially subject to federal and state consumer protection, unfair competition, and other laws.

Moreover, CorMedix is now, and may become subject to, additional federal, state, and local laws, regulations, and policies relating to safe working conditions, laboratory practices, the experimental use of animals, and/or the use, storage, handling, transportation, and disposal of human tissue, waste, and hazardous substances, including radioactive and toxic materials and infectious disease agents used in conjunction with our research work.

Foreign Regulatory Requirements

CorMedix and its collaborative partners may be subject to widely varying foreign regulations, which may be quite different from those of the FDA, governing clinical trials, manufacture, product registration and approval, and pharmaceutical sales. Whether or not FDA approval has been obtained, CorMedix or its collaboration partners must obtain a separate approval for a product by the comparable regulatory authorities of foreign countries prior to the commencement of product marketing in these countries. In certain countries, regulatory authorities also establish pricing and reimbursement criteria. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. In addition, under current United States law, there are restrictions on the export of products not approved by the FDA, depending on the country involved and the status of the product in that country.

Reimbursement and Pricing Controls

In many of the markets where CorMedix or its collaborative partners would commercialize a product following regulatory approval, the prices of pharmaceutical products are subject to direct price controls (by law) and to drug reimbursement programs with varying price control mechanisms. Public and private health care payors control costs and influence drug pricing through a variety of mechanisms, including through negotiating discounts with the manufacturers and through the use of tiered formularies and other mechanisms that provide preferential access to certain drugs over others within a therapeutic class. Payors also set other criteria to govern the uses of a drug that will be deemed medically appropriate and therefore reimbursed or otherwise covered. In particular, many public and private health care payors limit reimbursement and coverage to the uses of a drug that are either approved by the FDA or that are supported by other appropriate evidence (for example, published medical literature) and appear in a recognized drug compendium. Drug compendia are publications that summarize the available medical evidence for particular drug products and identify which uses of a drug are supported or not supported by the available evidence, whether or not such uses have been approved by the FDA. For example, in the case of Medicare coverage for physician-administered oncology drugs, the Omnibus Budget Reconciliation Act of 1993, with certain exceptions, prohibits Medicare carriers from refusing to cover unapproved uses of an FDA-approved drug if the unapproved use is supposed by one or more citations in the American Hospital Formulary Service Drug Information the American Medical Association Drug Evaluations, or the United States Pharmacopoeia Drug Information. Another commonly cited compendium, for example under Medicaid, is the DRUGDEX Information System.

Foreign Regulatory Requirements

International sales of medical devices manufactured in the U.S. that are not approved by the FDA for use in the U.S., or are banned or deviate from lawful performance standards, are subject to FDA export requirements. Exported devices are subject to the regulatory requirements of each country to which the device is exported. Some countries do not have medical device regulations, but in most foreign countries, medical devices are regulated. Frequently, regulatory approval may first be obtained in a foreign country prior to application in the U.S. to take advantage of differing regulatory requirements. Most countries outside of the U.S. require that product approvals be recertified on a regular basis, generally every five years. The recertification process requires that we evaluate any device changes and any new regulations or standards relevant to the device and conduct appropriate testing to document continued compliance. Where recertification applications are required, they must be approved in order to continue selling our products in those countries.

In the European Union, in order for our product candidates to be marketed and sold, we are required to comply with the Medical Devices Directive and obtain CE Mark certification. The CE Mark certification encompasses an extensive review of our quality management system which is inspected by a notified body’s auditor as part of a stage 1 and 2 International Organization for Standardization, or ISO, 13485:2003 audit, in accordance with worldwide recognized ISO standards and applicable European Medical Devices Directives for quality management systems for medical device manufacturers. Once the quality management system and design dossier has been successfully audited by a notified body and reviewed and approved by a competent authority a CE certificate for the medical device will be issued. We are also required to comply with other foreign regulations such as the requirement that we obtain Ministry of Health, Labor and Welfare approval before we can launch new products in Japan. The time required to obtain these foreign approvals to market our products may vary from U.S. approvals, and requirements for these approvals may differ from those required by the FDA.

Medical device laws and regulations are in effect in many of the countries in which we may do business outside the United States. These laws and regulations range from comprehensive device approval requirements for our medical device product to requests for product data or certifications. The number and scope of these requirements are increasing. We may not be able to obtain regulatory approvals in such countries and we may be required to incur significant costs in obtaining or maintaining our foreign regulatory approvals. In addition, the export of certain of our products which have not yet been cleared for domestic commercial distribution may be subject to FDA export restrictions. Any failure to obtain product approvals in a timely fashion or to comply with state or foreign medical device laws and regulations may have a serious adverse effect on our business, financial condition or results of operations.

Intellectual Property

CRMD003 and CRMD004

On January 30, 2008, we entered into a License and Assignment Agreement, or the NDP License Agreement with ND Partners, LLC, or NDP. Pursuant to the NDP License Agreement, NDP granted us exclusive, worldwide licenses for certain antimicrobial catheter lock solutions, processes for treating and inhibiting infections, a biocidal lock system and a taurolidine delivery apparatus, and the corresponding United States and foreign patents and applications (the “NDP Technology”). We acquired such licenses and patents through our assignment and assumption of NDP’s rights under certain separate license agreements by and between NDP and Dr. Hans-Dietrich Polaschegg, Dr. Klaus Sodemann, and Dr. Johannes Reinmueller. NDP also granted us exclusive licenses, with the right to grant sublicenses, to use and display certain trademarks in connection with the NDP Technology. As consideration in part for the rights to the NDP Technology, we paid NDP an initial licensing fee of $325,000 and granted NDP an equity interest in us consisting of 365,534 shares of common stock as of December 31, 2010. In addition, we are required to make payments to NDP upon the achievement of certain regulatory and sales-based milestones. Certain of the milestone payments are to be made in the form of shares of common stock currently held in escrow for NDP, and other milestone payments are to be paid in cash. The maximum aggregate number of shares issuable upon achievement of milestones and the number of shares held in escrow is 145,543 shares of common stock as of December 31, 2011. The maximum aggregate amount of cash payments upon achievement of milestones is $3,000,000. Events that trigger milestone payments include but are not limited to the reaching of various stages of regulatory approval processes and certain worldwide net sales amounts. As of December 31, 2011, no milestone payments have been earned by or paid to NDP.

The NDP License Agreement will expire on a country-by-country basis upon the earlier of (i) the expiration of the last patent claim under the NDP License Agreement in a given country, or (ii) the payment of all milestone payments and release of all shares of our common stock held in escrow under the NDP License Agreement. Upon the expiration of the NDP License Agreement in each country, we will have an irrevocable, perpetual, fully paid-up, royalty-free exclusive license to the NDP Technology in such country. The NDP License Agreement also may be terminated by NDP if we materially breach or default under the NDP License Agreement and that breach is not cured within 60 days following the delivery of written notice to us, or by us on a country-by-country basis upon 60 days prior written notice. If the NDP License Agreement is terminated by either party, our rights to the NDP Technology will revert back to NDP.

On January 30, 2008, we also entered into an Exclusive License and Consulting Agreement with Dr. Polaschegg. Pursuant to the Polaschegg License Agreement, Dr. Polaschegg granted us an exclusive, worldwide license for a gel lock invention and certain taurolidine treatments and the corresponding United States patent applications, the Polaschegg Technology. The Polaschegg Technology serves as a basis for CRMD004. As consideration for the rights to the Polaschegg Technology, in addition to an initial fee of $5,000, we agreed to pay Dr. Polaschegg certain royalty payments ranging from 1% to 3% of the net sales of the Polaschegg Technology. The Polaschegg License Agreement also sets forth certain minimum royalty payments (on an annual basis) to be made to Dr. Polaschegg in connection with the Polaschegg Technology, which payments range from $10,000 to $90,000. Additional minimum royalty payments will become payable to Dr. Polaschegg if he develops new intellectual property that is applied to the Polaschegg Technology. As of December 31, 2011, Dr. Polaschegg has received an aggregate of approximately $471,000 in licensing and minimum royalty payments under the Polaschegg License Agreement.

We may terminate the Polaschegg License Agreement with respect to the gel lock invention or taurolidine treatments (individually or together) upon 60 days notice. Dr. Polaschegg has a right to terminate the Polaschegg License Agreement with respect to the gel lock invention and/or taurolidine treatments if no product based on the particular portion of Polaschegg Technology has been made available to the market by the later of eight years after (i) the date of the Polaschegg License Agreement, and (ii) the priority date of any new patent. If the Polaschegg License Agreement is terminated with respect to any piece of Polaschegg Technology by either party, all rights with respect to such portion of Polaschegg Technology will revert to Dr. Polaschegg.

We believe that the patents and patent applications we have licensed pursuant to the NDP License Agreement and the Polaschegg License Agreement cover effective solutions to the various problems discussed previously when using taurolidine in clinical applications, and specifically in hemodialysis applications. We intend to file additional patent applications to cover any additional related subject matter we develop.

Employees

As of December 31, 2011, we employed 5 full-time employees. Of the full-time employees, 1 was engaged in project management and research and development, 2 were engaged in research and development, 1 was engaged in executive management, financing and other administrative activities and 1 was engaged in administrative activities. As of December 31, 2011, we also employed 1 part-time employee, our Interim Chief Executive Officer. As a result of certain cost cutting measures, as of March 12, 2012 we employed 2 full-time employees. Of the full-time employees, 1 was engaged in project management and research and development and 1 was engaged in executive management, finance and other administrative activities. As of March 12, 2012, we also employed 2 part-time employees, our Interim Chief Executive Officer and Chief Medical Officer, in addition to various consultants primarily serving in manufacturing and regulatory development. None of our employees are represented by a labor union, and we consider our employee relations to be good.

Corporate Information

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. Our principal executive offices are located at 745 Rt. 202-206, Suite 303, Bridgewater, NJ 08807. Our telephone number is (908) 517-9500.

The Company maintains a website at www.cormedix.com; however, the information on, or that can be accessed through, our website is not part of this Annual Report on Form 10-K. This Annual Report on Form 10-K and all of the Company's filings under the Exchange Act, including copies of annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, are available free of charge through our website on the date we file those materials with, or furnish them to, the Securities and Exchange Commission (the "SEC"). Such filings are also available to the public on the internet at the SEC's website at www.sec.gov. The public may also read and copy any document that we file at the SEC's Public Reference Room located at 100 F Street, NE, Washington, DC 20549 on official business days during the hours of 10 a.m. to 3 p.m. For further information on the Public Reference Room, the public is instructed to call the SEC at 1-800-SEC-0300.

Item 1A. Risk Factors.

Risks Related to Our Financial Position and Need for Additional Capital

We have a limited operating history and a history of escalating operating losses, and expect to incur significant additional operating losses.

We were established in July 2006 and have only a limited operating history. Therefore, there is limited historical financial information upon which to base an evaluation of our performance. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. We incurred net losses of approximately $8.1 million, $10.9 million and $6.7 million for the years ended December 31, 2009, 2010 and 2011, respectively. As of December 31, 2011, we had an accumulated deficit of approximately $42.9 million. We expect to incur substantial additional operating expenses over the next several years as our research, development, pre-clinical testing, and clinical trial activities increase. The amount of future losses and when, if ever, we will achieve profitability are uncertain. We have no products that have generated any commercial revenue, do not expect to generate significant revenues from the commercial sale of products in the near future, and might never generate revenues from the sale of products. Our ability to generate revenue and achieve profitability will depend on, among other things, the following: successful completion of the development of our product candidates; obtaining necessary regulatory approvals, including CE Mark approval in Europe and approval from the FDA, establishing manufacturing, sales, and marketing arrangements, either alone or with third parties; and raising sufficient funds to finance our activities. We might not succeed at any of these undertakings. If we are unsuccessful at some or all of these undertakings, our business, prospects, and results of operations may be materially adversely affected.

Our independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern.

In their report accompanying our audited financial statements, our independent registered public accounting firm expressed substantial doubt as to our ability to continue as a going concern. A “going concern” opinion could impair our ability to finance our operations through the sale of debt or equity securities or obtaining bank financing. Our ability to continue as a going concern will depend, in large part, on our ability to obtain additional financing, our ability to generate positive cash flow from operations, neither of which is certain. Additional capital needed by the Company may not be available on reasonable terms, or at all. If adequate financing is not available, the Company may be required to terminate or significantly curtail its operations, or enter into arrangements with collaborative partners or others that may require the Company to relinquish rights to certain of its technologies, or potential markets that the Company would not otherwise relinquish. If we are unable to achieve these goals, our business would be jeopardized and we may not be able to continue operations.

We are not currently profitable and may never become profitable.

We have a history of losses and expect to incur substantial losses and negative operating cash flow for the foreseeable future, and we may never achieve or maintain profitability. Even if we succeed in developing and commercializing one or more product candidates, we expect to incur substantial losses for the foreseeable future and may never become profitable. We also expect to continue to incur significant operating and capital expenditures and anticipate that our expenses will increase substantially in the foreseeable future as we continue to undertake development of our product candidates, undertake clinical trials of our product candidates, seek regulatory approvals for product candidates, implement additional internal systems and infrastructure, and hire additional personnel.

We also expect to experience negative cash flow for the foreseeable future as we fund our operating losses and capital expenditures. As a result, we will need to generate significant revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability would negatively impact the value of our securities.

We may need to finance our future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. Any additional funds that we obtain may not be on terms favorable to us or our stockholders and may require us to relinquish valuable rights.

We have no approved product on the market and have generated no product revenues. Unless and until we receive CE Mark approval in Europe for Neutrolin^® and/or approval from the FDA for our product candidates, we cannot sell our products and will not have product revenues. Therefore, for the foreseeable future, we will have to fund all of our operations and capital expenditures from cash on hand, licensing fees and grants.

We believe that existing cash will be sufficient to enable us to fund our projected operating requirements into the fourth quarter of 2012. However, we will need to raise additional funds more quickly if one or more of our assumptions prove to be incorrect or if we choose to expand our product development efforts more rapidly than we presently anticipate, and we may decide to raise additional funds even before we need them if the conditions for raising capital are favorable.

We may seek to sell additional equity or debt securities, obtain a bank credit facility, or enter into a corporate collaboration or licensing arrangement. The sale of additional equity or debt securities, if convertible, could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also result in covenants that would restrict our operations. Raising additional funds through collaboration or licensing arrangements with third parties may require us to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or to grant licenses on terms that may not be favorable to us or our stockholders.

Risks Related to the Development and Commercialization of Our Product Candidates

Our product candidates are still in development.

We are a development stage pharmaceutical and medical device company focused on the development of product candidates that are in various stages of development. Our products are currently at the following stages of development:

· CRMD003 (Neutrolin^®) - during the second quarter of 2011 we submitted our design dossier as part of the application process for CE Mark approval in Europe, and entered the final stages of manufacturing scale-up; and

· CRMD004 - we may develop, which is currently in the pre-clinical phase.

Our product development methods may not lead to commercially viable products for any of several reasons. For example, our product candidates may fail to be proven safe and effective in clinical trials, or we may have inadequate financial or other resources to pursue development efforts for our product candidates. Our product candidates will require significant additional development, clinical trials, regulatory clearances and investment by us or our collaborators before they can be commercialized.

Successful development of our products is uncertain.

Our development of current and future product candidates is subject to the risks of failure and delay inherent in the development of new pharmaceutical products, including but not limited to the following:

· delays in product development, clinical testing, or manufacturing;

· unplanned expenditures in product development, clinical testing, or manufacturing;

· failure to receive regulatory approvals;

· emergence of superior or equivalent products;

· inability to manufacture our product candidates on a commercial scale on our own, or in collaboration with third parties; and

· failure to achieve market acceptance.

Because of these risks, our development efforts may not result in any commercially viable products. If a significant portion of these development efforts are not successfully completed, required regulatory approvals are not obtained or any approved products are not commercialized successfully, our business, financial condition, and results of operations may be materially harmed.

Clinical trials required for our product candidates are expensive and time-consuming, and their outcome is uncertain.

In order to obtain FDA approval to market a new drug or device product, we must demonstrate proof of safety and effectiveness in humans. To meet these requirements, we must conduct “adequate and well-controlled” clinical trials. Conducting clinical trials is a lengthy, time-consuming, and expensive process. The length of time may vary substantially according to the type, complexity, novelty, and intended use of the product candidate, and often can be several years or more per trial. Delays associated with products for which we are directly conducting clinical trials may cause us to incur additional operating expenses. The commencement and rate of completion of clinical trials may be delayed by many factors, including, for example:

· inability to manufacture sufficient quantities of qualified materials under the FDA’s current Good Manufacturing Practices requirements, referred to herein as cGMP, for use in clinical trials;

· slower than expected rates of patient recruitment;

· failure to recruit a sufficient number of patients;

· modification of clinical trial protocols;

· changes in regulatory requirements for clinical trials;

· lack of effectiveness during clinical trials;

· emergence of unforeseen safety issues;

· delays, suspension, or termination of clinical trials due to the institutional review board responsible for overseeing the study at a particular study site; and

· government or regulatory delays or “clinical holds” requiring suspension or termination of the trials.

The results from early clinical trials are not necessarily predictive of results to be obtained in later clinical trials. Accordingly, even if we obtain positive results from early clinical trials, we may not achieve the same success in later clinical trials.

Our clinical trials may be conducted in patients with serious or life-threatening diseases for whom conventional treatments have been unsuccessful or for whom no conventional treatment exists, and in some cases, our product is expected to be used in combination with approved therapies that themselves have significant adverse event profiles. During the course of treatment, these patients could suffer adverse medical events or die for reasons that may or may not be related to our products. We cannot ensure that safety issues will not arise with respect to our products in clinical development.

Clinical trials may not demonstrate statistically significant safety and effectiveness to obtain the requisite regulatory approvals for product candidates. The failure of clinical trials to demonstrate safety and effectiveness for the desired indications could harm the development of our product candidates. Such a failure could cause us to abandon a product candidate and could delay development of other product candidates. Any delay in, or termination of, our clinical trials would delay the filing of our New Drug Applications or Premarket Approval Applications with the FDA and, ultimately, our ability to commercialize our product candidates and generate product revenues. Any change in, or termination of, our clinical trials could materially harm our business, financial condition, and results of operations.

We do not have, and may never obtain, the regulatory approvals we need to market our product candidates.

We have not received the regulatory approvals required for the commercial sale of any of our products in the United States or abroad. We have applied for a CE Mark approval through the submission of our design dossier in the second quarter of 2011, however have not received the regulatory approval required for commercial sale in Europe. None of our product candidates have been determined to be safe and effective, and we have not submitted a New Drug Application or Premarket Approval Application to the FDA or an equivalent application to any foreign regulatory authority for any of our product candidates.

It is possible that none of our product candidates will be approved for marketing. Failure to obtain regulatory approvals, or delays in obtaining regulatory approvals, may adversely affect the successful commercialization of any drugs or biologics that we or our partners develop, impose additional costs on us or our collaborators, diminish any competitive advantages that we or our partners may attain, and/or adversely affect our receipt of revenues or royalties.

Even if approved, our products will be subject to extensive post-approval regulation.

Once a product is approved, numerous post-approval requirements apply. Depending on the circumstances, failure to meet these post-approval requirements can result in criminal prosecution, fines, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, or refusal to allow us to enter into supply contracts, including government contracts. In addition, even if we comply with FDA, international regulatory agencies and other requirements, new information regarding the safety or effectiveness of a product could lead the FDA or other international regulatory agencies to modify or withdraw product approval.

The successful commercialization of our products will depend on obtaining coverage and reimbursement for use of these products from third-party payors.

Sales of pharmaceutical products largely depend on the reimbursement of patients’ medical expenses by government health care programs and private health insurers. Without the financial support of the government or third-party payors, the market for our products will be limited. These third-party payors are increasingly challenging the price and examining the cost effectiveness of medical products and services. Recent proposals to change the health care system in the United States have included measures that would limit or eliminate payments for medical products and services or subject the pricing of medical treatment products to government control. Significant uncertainty exists as to the reimbursement status of newly approved health care products. Third-party payors may not reimburse sales of our products or enable our collaborators to sell them at profitable prices.

Physicians and patients may not accept and use our products.

Even if the FDA and/or international regulatory agencies approves one or more of our product candidates, physicians and patients may not accept and use it. Acceptance and use of our products will depend upon a number of factors including the following:

· perceptions by members of the health care community, including physicians, about the safety and effectiveness of our drug or device product;

· cost-effectiveness of our product relative to competing products;

· availability of reimbursement for our product from government or other healthcare payers; and

· effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any.

Because we expect sales of our current product candidates, if approved, to generate substantially all of our product revenues for the foreseeable future, the failure of these products to find market acceptance would harm our business and could require us to seek additional financing.

Risks Related to Our Business and Industry

Competition and technological change may make our product candidates and technologies less attractive or obsolete.

We compete with established pharmaceutical and biotechnology companies that are pursuing other forms of treatment for the same indications we are pursuing and that have greater financial and other resources. Other companies may succeed in developing products earlier than we do, obtaining FDA approval for products more rapidly, or developing products that are more effective than our product candidates. Research and development by others may render our technology or product candidates obsolete or noncompetitive, or result in treatments or cures superior to any therapy we develop. We face competition from companies that internally develop competing technology or acquire competing technology from universities and other research institutions. As these companies develop their technologies, they may develop competitive positions that may prevent, make futile, or limit our product commercialization efforts, which would result in a decrease in the revenue we would be able to derive from the sale of any products.

There can be no assurance that any of our product candidates will be accepted by the marketplace as readily as these or other competing treatments. Furthermore, if our competitors’ products are approved before ours, it could be more difficult for us to obtain approval from the FDA. Even if our products are successfully developed and approved for use by all governing regulatory bodies, there can be no assurance that physicians and patients will accept our product(s) as a treatment of choice.

Furthermore, the pharmaceutical industry is diverse, complex, and rapidly changing. By its nature, the business risks associated therewith are numerous and significant. The effects of competition, intellectual property disputes, market acceptance, and FDA regulations preclude us from forecasting revenues or income with certainty or even confidence.

We face the risk of product liability claims and the amount of insurance coverage we hold now or in the future may not be adequate to cover all liabilities we might incur.

Our business exposes us to the risk of product liability claims that are inherent in the development of drugs. If the use of one or more of our or our collaborators’ drugs harms people, we may be subject to costly and damaging product liability claims brought against us by clinical trial participants, consumers, health care providers, pharmaceutical companies or others selling our products.

We currently carry product liability insurance that covers our clinical trial. We cannot predict all of the possible harms or side effects that may result and, therefore, the amount of insurance coverage we hold may not be adequate to cover all liabilities we might incur. Our insurance covers bodily injury and property damage arising from our clinical trials, subject to industry-standard terms, conditions and exclusions. This coverage does not include the sale of commercial products. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for our product candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for any products approved for marketing.

If we are unable to obtain insurance at an acceptable cost or otherwise protect against potential product liability claims, we may be exposed to significant liabilities, which may materially and adversely affect our business and financial position. If we are sued for any injury allegedly caused by our or our collaborators’ products and do not have sufficient insurance coverage, our liability could exceed our total assets and our ability to pay the liability. A successful product liability claim or series of claims brought against us would decrease our cash and could cause the value of our capital stock to decrease.

We may be exposed to liability claims associated with the use of hazardous materials and chemicals.

Our research, development and manufacturing activities and/or those of our third party contractors may involve the controlled use of hazardous materials and chemicals. Although we believe that our safety procedures for using, storing, handling and disposing of these materials comply with federal, state and local laws and regulations, we cannot completely eliminate the risk of accidental injury or contamination from these materials. In the event of such an accident, we could be held liable for any resulting damages and any liability could materially adversely affect our business, financial condition and results of operations. In addition, the federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous or radioactive materials and waste products may require us to incur substantial compliance costs that could materially adversely affect our business, financial condition and results of operations.

Recent healthcare policy changes may have an adverse effect on our business, financial condition and results of operations.

The business prospects and financial condition of pharmaceutical and biotechnology companies are affected by the efforts of governmental and third-party payors to contain or reduce the costs of healthcare. In the U.S. and in foreign jurisdictions there have been, and we expect that there will continue to be, a number of legislative and regulatory proposals aimed at changing the healthcare system, such as proposals relating to the pricing of healthcare products and services in the U.S. or internationally, the reimportation of drugs into the U.S. from other countries (where they are then sold at a lower price), and the amount of reimbursement available from governmental agencies or other third party payors. For example, drug manufacturers are required to have a national rebate agreement with the Department of Health and Human Services, or HHS, in order to obtain state Medicaid coverage, which requires manufacturers to pay a rebate on drugs dispensed to Medicaid patients. On January 27, 2012, the Centers for Medicare and Medicaid Services, or CMS, issued a proposed regulation covering the calculation of Average Manufacturer Price, or AMP, which is the key variable in the calculation of these rebates.

Furthermore, in the U.S., healthcare reform legislation titled the Patient Protection and Affordable Care Act was signed into law on March 23, 2010. This comprehensive legislation will affect the terms of public and private health insurance and have a substantial impact on the pharmaceutical industry. For example, the new law will impose an annual fee on manufacturers of branded prescription pharmaceuticals that will impact our products. Regulations to implement this and other provisions related to the research, marketing and sale of prescription pharmaceutical products could result in a decrease in our stock price or limit our ability to raise capital or to obtain strategic partnerships or licenses. Government-financed comparative efficacy research could also result in new practice guidelines, labeling or reimbursement policies that discourages use of our products.

For example, in July 2010, CMS released its final rule to implement a bundled prospective payment system for end-stage renal disease facilities as required by the Medicare Improvements for Patients and Providers Act, or MIPPA. The final rule delayed the inclusion of oral medications without IV equivalents, such as phosphate binders, in the bundle until January 1, 2014. If phosphate binders are included in the bundle beginning in 2014, separate Medicare reimbursement will no longer be available for phosphate binders, as it is today under Medicare Part D. While it is too early to project the impact bundling may have on the phosphate binder industry, the impact could potentially cause dramatic price reductions for phosphate binders.

On September 27, 2007, the Food and Drug Administration Amendments Act of 2007 was enacted, giving the FDA enhanced post-market authority, including the authority to require post-marketing studies and clinical trials, labeling changes based on new safety information, and compliance with risk evaluations and mitigation strategies approved by the FDA. The FDA's exercise of this authority may result in delays or increased costs during the period of product development, clinical trials and regulatory review and approval, which may also increase costs related to complying with new post-approval regulatory requirements, and increase potential FDA restrictions on the sale or distribution of approved products.

If we lose key management or scientific personnel, cannot recruit qualified employees, directors, officers, or other personnel or experience increases in compensation costs, our business may materially suffer.

We are highly dependent on the principal members of our management and scientific staff, specifically, Richard M. Cohen, our Chairman and Interim Chief Executive Officer, Brian Lenz, our Chief Operating Officer and Chief Financial Officer, and Dr. Mark Klausner, our part-time Chief Medical Officer. While we have employment agreements with such persons, employment agreements cannot insure our retention of the employees covered by such agreements. Furthermore, our future success will also depend in part on our ability to identify, hire, and retain additional personnel. We experience intense competition for qualified personnel and may be unable to attract and retain the personnel necessary for the development of our business. Moreover, our work force is located in the New York/New Jersey metropolitan area, where competition for personnel with the scientific and technical skills that we seek is extremely high and is likely to remain high. Because of this competition, our compensation costs may increase significantly. In addition, we have only limited ability to prevent former employees from competing with us.

If we are unable to hire additional qualified personnel, our ability to grow our business may be harmed.

Over time, we will need to hire additional qualified personnel with expertise in clinical testing, clinical research and testing, government regulation, formulation and manufacturing, and sales and marketing. We compete for qualified individuals with numerous pharmaceutical companies, universities and other research institutions. Competition for such individuals is intense, and we cannot be certain that our search for such personnel will be successful. Attracting and retaining such qualified personnel will be critical to our success.

We may not successfully manage our growth.

Our success will depend upon the expansion of our operations and the effective management of our growth, which will place a significant strain on our management and our administrative, operational and financial resources. To manage this growth, we must expand our facilities, augment our operational, financial and management systems and hire and train additional qualified personnel. If we are unable to manage our growth effectively, our business may be materially harmed.

Risks Related to Our Intellectual Property

If we materially breach or default under any of our license agreements, the licensor party to such agreement will have the right to terminate the license agreement, which termination may materially harm our business.

Our commercial success will depend in part on the maintenance of our license agreements. Each of our license agreements provides the licensor with a right to terminate the license agreement for our material breach or default under the agreement. Our license agreement with Dr. Hans-Dietrich Polaschegg (referred to herein as the “Polaschegg License Agreement”) provides for a right of termination for, among other things, our failure to make a product with respect to a particular piece of technology (there are two) available to the market by the later of eight years after (i) the date of the Polaschegg License Agreement, and (ii) the priority date of any new patent. Our intellectual property licensed under the Polaschegg License Agreement serves as a basis for CRMD004. Should the licensor party to any of our license agreements exercise such a termination right, we would lose our right to the intellectual property under the license agreement at issue, which loss may materially harm our business.

If we and our licensors do not obtain protection for and successfully defend our respective intellectual property rights, our competitors may be able to take advantage of our research and development efforts to develop competing products.

Our commercial success will depend in part on obtaining further patent protection for our products and other technologies and successfully defending any patents that we currently have or will obtain against third-party challenges. The patents most material to our business are as follows:

· U.S. Registration No. 7,696,182 (expiring in May 2025) - use of Neutrolin^® for preventing infection and maintenance of catheter patency in hemodialysis catheters (for CRMD003).

· U.S. Registration No. 6,166,007 (expiring May 2019) - a method of inhibiting or preventing infection and blood coagulation at a medical prosthetic device (for CRMD003).

· European Registration No. 1442753 (expiring February 2023) - use of a thixotropic gel as a catheter locking composition, and method of locking a catheter (for CRMD004).

We are currently seeking further patent protection for numerous compounds and methods of treating diseases. However, the patent process is subject to numerous risks and uncertainties, and there can be no assurance that we will be successful in protecting our products by obtaining and defending patents. These risks and uncertainties include those stated below.

· Patents that may be issued or licensed may be challenged, invalidated, or circumvented, or otherwise may not provide any competitive advantage.

· Our competitors, many of which have substantially greater resources than we have and many of which have made significant investments in competing technologies, may seek, or may already have obtained, patents that will limit, interfere with, or eliminate our ability to make, use, and sell our potential products either in the United States or in international markets.

· There may be significant pressure on the United States government and other international governmental bodies to limit the scope of patent protection both inside and outside the United States for treatments that prove successful as a matter of public policy regarding worldwide health concerns.

· Countries other than the United States may have less restrictive patent laws than those upheld by United States courts, allowing foreign competitors the ability to exploit these laws to create, develop, and market competing products.

In addition, the United States Patent and Trademark Office, or PTO and patent offices in other jurisdictions have often required that patent applications concerning pharmaceutical and/or biotechnology-related inventions be limited or narrowed substantially to cover only the specific innovations exemplified in the patent application, thereby limiting the scope of protection against competitive challenges. Thus, even if we or our licensors are able to obtain patents, the patents may be substantially narrower than anticipated.

The patent applications in our patent portfolio are exclusively licensed to us. To support our patent strategy, we have engaged in a review of patentability and freedom to operate issues, including performing certain searches. However, patentability and freedom to operate issues are inherently complex, and we cannot provide assurances that a relevant patent office and/or relevant court will agree with our conclusions regarding patentability issues or with our conclusions regarding freedom to operate issues, which can involve subtle issues of claim interpretation and/or claim liability. Furthermore, we may not be aware of all patents, published applications or published literature that may affect our business either by blocking our ability to commercialize our product candidates, preventing the patentability of our product candidates to us or our licensors, or covering the same or similar technologies that may invalidate our patents, limit the scope of our future patent claims or adversely affect our ability to market our product candidates.

In addition to patents, we also rely on trade secrets and proprietary know-how. Although we take measures to protect this information by entering into confidentiality and inventions agreements with our employees, scientific advisors, consultants, and collaborators, we cannot provide any assurances that these agreements will not be breached, that we will be able to protect ourselves from the harmful effects of disclosure if they are breached, or that our trade secrets will not otherwise become known or be independently discovered by competitors. If any of these events occurs, or we otherwise lose protection for our trade secrets or proprietary know-how, the value of this information may be greatly reduced.

Patent protection and other intellectual property protection is important to the success of our business and prospects, and there is a substantial risk that such protections will prove inadequate.

Intellectual property disputes could require us to spend time and money to address such disputes and could limit our intellectual property rights.

The biotechnology and pharmaceutical industries have been characterized by extensive litigation regarding patents and other intellectual property rights, and companies have employed intellectual property litigation to gain a competitive advantage. We may become subject to infringement claims or litigation arising out of patents and pending applications of our competitors, or additional proceedings initiated by third parties or the PTO to reexamine the patentability of our licensed or owned patents. The defense and prosecution of intellectual property suits, PTO proceedings, and related legal and administrative proceedings are costly and time-consuming to pursue, and their outcome is uncertain. Litigation may be necessary to enforce our issued patents, to protect our trade secrets and know-how, or to determine the enforceability, scope, and validity of the proprietary rights of others. An adverse determination in litigation or PTO proceedings to which we may become a party could subject us to significant liabilities, require us to obtain licenses from third parties, restrict or prevent us from selling our products in certain markets, or invalidate or render unenforceable our licensed or owned patents. Although patent and intellectual property disputes might be settled through licensing or similar arrangements, the costs associated with such arrangements may be substantial and could include our paying large fixed payments and ongoing royalties. Furthermore, the necessary licenses may not be available on satisfactory terms or at all.

In February 2007, Geistlich Söhne AG für Chemische Industrie, Switzerland ("Geistlich") brought an action against the Sodemann patent covering our Neutrolin^® product candidate which is owned by ND Partners, LLC and licensed to us pursuant to the License and Assignment Agreement between ND Partners LLC and CorMedix Inc. on January 30, 2008. The action that was brought against the Sodemann patent in Germany at the Board of the European Patent Office opposition division was for lack of inventiveness in the use of citric acid and a pH value in the range of 4.5 to 6.5 with having the aim to provide an alternative lock solution through having improved anticoagulant characteristics compared to the lock solutions described in the Lehner patent. The Board of the European Patent Office opposition division rejected the opposition by Geistlich. On August 27, 2008, Geistlich appealed the court's ruling, alleging the same arguments as presented during the opposition proceedings. We filed a response to the appeal of Geistlich on March 25, 2009 where we requested a dismissal of the appeal and to maintain the patent as granted. As of the date of this Annual Report, no further petitions have been filed by ND Partners, LLC or Geistlich. Therefore, it can be expected that a summons to attended oral proceedings before the Board of Appeal will be issued during 2012. Though we intend to vigorously defend ourselves and believe that Geistlich's claims are without merit, we can provide no assurances regarding the outcome of this matter.

If we infringe the rights of third parties we could be prevented from selling products and forced to pay damages and defend against litigation.

If our products, methods, processes and other technologies infringe the proprietary rights of other parties, we could incur substantial costs and we may have to do one or more of the following:

· obtain licenses, which may not be available on commercially reasonable terms, if at all;

· abandon an infringing product candidate;

· redesign our products or processes to avoid infringement;

· stop using the subject matter claimed in the patents held by others;

· pay damages; or

· defend litigation or administrative proceedings, which may be costly whether we win or lose, and which could result in a substantial diversion of our financial and management resources.

Risks Related to Our Dependence on Third Parties

If we are not able to develop collaborative marketing relationships with licensees or partners, or create an effective sales, marketing, and distribution capability, we may be unable to market our products successfully.

Our business strategy may rely on out-licensing product candidates to or collaborating with larger firms with experience in marketing and selling pharmaceutical products. There can be no assurance that we will be able to successfully establish marketing, sales, or distribution relationships, that such relationships, if established, will be successful, or that we will be successful in gaining market acceptance for our products. To the extent that we enter into any marketing, sales, or distribution arrangements with third parties, our product revenues will be lower than if we marketed and sold our products directly, and any revenues we receive will depend upon the efforts of such third-parties. If we are unable to establish such third-party sales and marketing relationships, or choose not to do so, we will have to establish our own in-house capabilities. We currently have no sales, marketing, or distribution infrastructure. To market any of our products directly, we would need to develop a marketing, sales, and distribution force that has both technical expertise and the ability to support a distribution capability. The establishment of a marketing, sales, and distribution capability would significantly increase our costs, possibly requiring substantial additional capital. In addition, there is intense competition for proficient sales and marketing personnel, and we may not be able to attract individuals who have the qualifications necessary to market, sell, and distribute our products. There can be no assurance that we will be able to establish internal marketing, sales, or distribution capabilities. If we are unable to, or choose not to establish these capabilities, or if the capabilities we establish are not sufficient to meet our needs, we will be required to establish collaborative marketing, sales, or distribution relationships with third parties.

If we or our collaborators are unable to manufacture our products in sufficient quantities or are unable to obtain regulatory approvals for a manufacturing facility, we may be unable to meet demand for our products and we may lose potential revenues.

Completion of our clinical trials and commercialization of our product candidates require access to, or development of, facilities to manufacture a sufficient supply of our product candidates. All of our manufacturing processes currently are, and we expect them to continue to be, outsourced to third parties. If, for any reason, we become unable to rely on our current sources for the manufacture of our product candidates, either for clinical trials or, at some future date, for commercial quantities, then we would need to identify and contract with additional or replacement third-party manufacturers to manufacture compounds for pre-clinical, clinical, and commercial purposes. We may not be successful in identifying such additional or replacement third-party manufacturers, or in negotiating acceptable terms with any that we do identify. Such third-party manufacturers must receive FDA approval before they can produce clinical material or commercial product, and any that are identified may not receive such approval. We may be in competition with other companies for access to these manufacturers’ facilities and may be subject to delays in manufacturing if the manufacturers give other clients higher priority than they give to us. If we are unable to secure and maintain third-party manufacturing capacity, the development and sales of our products and our financial performance may be materially affected.

Before we can begin to commercially manufacture our product candidates, we must obtain regulatory approval of the manufacturing facility and process. Manufacturing of drugs for clinical and commercial purposes must comply with current Good Manufacturing Practices, referred to herein as cGMP, and applicable non-U.S. regulatory requirements. The cGMP requirements govern quality control and documentation policies and procedures. Complying with cGMP and non-U.S. regulatory requirements will require that we expend time, money, and effort in production, recordkeeping, and quality control to assure that the product meets applicable specifications and other requirements. We, or our contracted manufacturing facility, must also pass a pre-approval inspection prior to FDA approval. Failure to pass a pre-approval inspection may significantly delay FDA approval of our products. If we fail to comply with these requirements, we would be subject to possible regulatory action and may be limited in the jurisdictions in which we are permitted to sell our products. As a result, our business, financial condition, and results of operations may be materially adversely affected.

Corporate and academic collaborators may take actions that delay, prevent, or undermine the success of our products.

Our operating and financial strategy for the development, clinical testing, manufacture, and commercialization of product candidates is heavily dependent on our entering into collaborations with corporations, academic institutions, licensors, licensees, and other parties. Our current strategy assumes that we will successfully establish these collaborations or similar relationships. However, there can be no assurance that we will be successful establishing such collaborations. Some of our existing collaborations are, and future collaborations may be, terminable at the sole discretion of the collaborator. Replacement collaborators might not be available on attractive terms, or at all. The activities of any collaborator will not be within our control and may not be within our power to influence. There can be no assurance that any collaborator will perform its obligations to our satisfaction or at all, that we will derive any revenue or profits from such collaborations, or that any collaborator will not compete with us. If any collaboration is not pursued, we may require substantially greater capital to undertake development and marketing of our proposed products and may not be able to develop and market such products effectively, if at all. In addition, a lack of development and marketing collaborations may lead to significant delays in introducing proposed products into certain markets and/or reduced sales of proposed products in such markets.

Data provided by collaborators and others upon which we rely that has not been independently verified could turn out to be false, misleading, or incomplete.

We rely on third-party vendors, scientists, and collaborators to provide us with significant data and other information related to our projects, clinical trials, and business. If such third parties provide inaccurate, misleading, or incomplete data, our business, prospects, and results of operations could be materially adversely affected.

Risks Related to Our Common Stock

Our stock price has fluctuated considerably and is likely to remain volatile, in part due to the limited market for our common stock.

During the period from the completion of the IPO on March 30, 2010 through March 12, 2012, the high and low sales prices for our common stock were $4.00 and $0.21, respectively. There is a limited public market for our common stock and we cannot provide assurances that an active trading market will develop. As a result of low trading volume in our common stock, the purchase or sale of a relatively small number of shares could result in significant share price fluctuations.

Additionally, the market price of our common stock may continue to fluctuate significantly in response to a number of factors, some of which are beyond our control, including the following:

· general economic conditions;

· economic conditions in our industry and in the industries that typically comprise our customers and suppliers;

· changes in financial estimates or investment recommendations by securities analysts relating to our common stock;

· announcements by our competitors of significant developments, strategic partnerships, joint ventures or capital commitments; and

· changes in key personnel.

If the prices of our securities are volatile, purchasers of our securities could incur substantial losses.

The prices of our securities are likely to be volatile. The stock market in general and the market for biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their securities at or above the price they paid for such securities. The market prices of our securities may be influenced by many factors, including but not limited to the following:

· results of clinical trials of our product candidates or those of our competitors;

· our entry into or the loss of a significant collaboration;

· regulatory or legal developments in the United States and other countries, including changes in the healthcare payment systems;

· variations in our financial results or those of companies that are perceived to be similar to us;

· market conditions in the pharmaceutical and biotechnology sectors and issuance of new or changed securities analysts’ reports or recommendations;

· general economic, industry and market conditions;

· developments or disputes concerning patents or other proprietary rights;

· future sales or anticipated sales of our securities by us or our stockholders; and

· any other factors described in this “Risk Factors” section.

For these reasons and others, you should consider an investment in our securities as risky and invest only if you can withstand a significant loss and wide fluctuations in the value of your investment.

A significant number of additional shares of our common stock may become eligible for sale at a later date, and their sale could depress the market price of our common stock.

The Units we issued in the IPO and upon conversion of certain of our convertible notes in connection therewith consisted of two shares of common stock and a warrant to purchase one share of common stock. The warrants that were issued as part of the Units have an exercise price of $3.4375 per share and expire on March 24, 2015. As of December 31, 2011, there were 4,263,569 of these warrants outstanding, which if executed, would result in the issuance of an additional 4,263,569 shares of common stock. In connection with the IPO, we also issued a warrant to purchase 2,406 Units to the underwriters of the IPO that, if executed, would result in the issuance of an additional 4,812 shares of common stock and warrants to purchase an additional 2,406 shares of common stock.

In addition, in connection with our private placement of convertible notes in October and November 2009, we issued warrants to the investors in such private placement, which warrants have an exercise price of $3.4375 per share and expire on October 29, 2014. As of December 31, 2011, the number of shares of common stock issuable upon exercise of these warrants was 503,034 shares.

As of December 31, 2011 we also had outstanding other warrants that, if exercised, would result in the issuance of an additional 17,869 shares of common stock at an exercise price of $10.66 per share and 18,250 shares of common stock at an exercise price of $7.84 per share.

As of December 31, 2011, options to purchase 1,236,342 shares of our common stock, which were issued to our officers, directors and employees, were outstanding under our Amended and Restated 2006 Stock Incentive Plan with a weighted average exercise price of $2.47 per share. Options to purchase 850,178 of such shares are currently exercisable or will be exercisable within 60 days of the date of this report.

The sale or even the possibility of sale of the shares of common stock described above could substantially reduce the market price for our common stock or our ability to obtain future financing.

Future sales and issuances of our equity securities or rights to purchase our equity securities, including pursuant to equity incentive plans, would result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be further diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to existing stockholders.

Pursuant to our Amended and Restated 2006 Stock Incentive Plan, our Board of Directors is authorized to award up to a total of 2,300,000 shares of common stock or options to purchase shares of common stock to our officers, directors and employees. As of December 31, 2011, options to purchase 1,236,342 shares of common stock issued under the Amended and Restated 2006 Stock Incentive Plan at a weighted average exercise price of $2.47 per share, were outstanding. Stockholders will experience dilution in the event that additional shares of common stock are issued under the Amended and Restated 2006 Stock Incentive Plan, or options previously issued or to be issued under the Amended and Restated 2006 Stock Incentive Plan are exercised.

If our existing securityholders exercise their registration rights, they may substantially reduce the market price of our common stock. The existence of these rights may make it more difficult for us to effect future offerings.

Holders of 6,429,746 shares of common stock and warrants to purchase an additional 505,440 shares of common stock are entitled to certain “demand” and “piggyback” registration rights. If these holders exercise their registration rights, the presence of these additional shares of common stock eligible for trading in the public market may substantially reduce the market price of our common stock. In addition, the existence of these holders’ piggyback registration rights may make it more difficult for us to effect future public offerings and may reduce the amount of capital that we are able to raise for our own account in these offerings.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult.

Provisions in our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws, as well as provisions of the General Corporation Law of the State of Delaware (“DGCL”), may discourage, delay or prevent a merger, acquisition or other change in control of our company, even if such a change in control would be beneficial to our stockholders. These provisions include the following:

· prohibiting our stockholders from fixing the number of our directors; and

· establishing advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our Board of Directors.

Additionally, Section 203 of the DGCL, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. We have not opted out of the restrictions under Section 203.

We may receive notice from the NYSE AMEX that we fail to comply with certain of its continued listing standards, which may result in a delisting of our common stock from the exchange.

Our common stock is currently listed for trading on the NYSE AMEX, or AMEX, and the continued listing of our common stock on the AMEX is subject to our compliance with a number of listing standards. These listing standards include the requirement for avoiding sustained losses. We incurred a net loss of approximately $6.7 million for the year ended December 31, 2011 and, as of December 31, 2011, we had a deficit accumulated during the development stage of approximately $42.9 million. Unless we can raise capital through various potential sources, such as equity, debt financing, strategic relationships, out-licensing or distribution arrangements of our products, we may receive notice from the AMEX informing us that we are not in compliance with the AMEX listing standards, and we may be required to submit a plan to the AMEX advising the actions we have taken, or will take, that would bring us into compliance with all of the continued listing standards. If we are not in compliance with the continued listing standards at the end of the plan period, or if we do not make progress consistent with the plan during the plan period, the AMEX staff may initiate delisting proceedings. There can be no assurance that we will be able to make progress consistent with such plan.

If our common stock were no longer listed on the AMEX, investors might only be able to trade on the OTC Bulletin Board^® or in the Pink Sheets^® (a quotation medium operated by Pink Sheets LLC). This would impair the liquidity of our securities not only in the number of shares that could be bought and sold at a given price, which might be depressed by the relative illiquidity, but also through delays in the timing of transactions and reduction in media coverage.

Because the average daily trading volume of our common stock is low, the ability to sell our shares in the secondary trading market may be limited.

Because the average daily trading volume of our common stock on the AMEX is low, the liquidity of our common stock may be impaired. As a result, prices for shares of our common stock may be lower than might otherwise prevail if the average daily trading volume of our common stock was higher. The average daily trading volume of our common stock may be low relative to the stocks of exchange-listed companies, which could limit investors’ ability to sell shares in the secondary trading market.

Penny stock regulation may impose certain restriction on marketability of our securities.

The SEC has adopted regulations which generally define a “penny stock” to be any equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. As a result, our common stock is subject to rules that impose additional sales practice requirements on broker dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by such rules, the broker dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the SEC relating to the penny stock market. The broker dealer must also disclose the commission payable to both the broker dealer and the registered representative, current quotations for the securities and, if the broker dealer is the sole market maker, the broker dealer must disclose this fact and the broker dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Broker-dealers must wait two business days after providing buyers with disclosure materials regarding a security before effecting a transaction in such security. Consequently, the “penny stock” rules restrict the ability of broker dealers to sell our securities and affect the ability of investors to sell our securities in the secondary market and the price at which such purchasers can sell any such securities, thereby affecting the liquidity of the market for our common stock.

Stockholders should be aware that, according to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:

•

control of the market for the security by one or more broker-dealers that are often related to the promoter or issuer;

•

manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

•

“boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;

•

excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

•

the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

Our management is aware of the abuses that have occurred historically in the penny stock market.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our principal executive offices are located in approximately 3,500 square feet of office space in Bridgewater, New Jersey. We lease this office space pursuant to a lease agreement dated March 18, 2010 with UA Bridgewater Holdings, LLC (the “Lease Agreement”). The Lease Agreement has an initial term of 60 months, commencing on April 1, 2010 and expiring on March 31, 2015, and lease payments began on July 1, 2010. We had a one-time right to terminate the lease after two years from the commencement date, provided we were to give the landlord notice of our election to exercise this option on or before 18 months after April 1, 2010. We also have been granted the option to extend the lease term for one additional period of three years, commencing the day following the then-current expiration date of the term, March 31, 2015, provided we deliver notice to the landlord no later than nine months prior to March 31, 2015. The total 60 month lease obligation is approximately $389,000. The Company’s total remaining lease obligation was approximately $267,000 as of December 31, 2011.

Item 3. Legal Proceedings.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5.

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market for Common Equity

From March 30, 2010 to May 13, 2010, the units issued in connection with the IPO were traded on NYSE Amex under the symbol “CRMD.U”, each unit consisting of two shares of our common stock and a warrant to purchase one share of our common stock at an exercise price of $3.4375. These units separated and ceased to be traded independently on May 13, 2010, on which date the common stock and the warrants comprising the units commenced trading on NYSE Amex under the symbols “CRMD” and “CRMD.WS”, respectively. Based upon information furnished by our transfer agent, at March 12, 2012, we had approximately 100 holders of record of our common stock. The following table sets forth the high and low sales prices for our common stock for the periods indicated as reported by NYSE Amex:

Fiscal Year 2011	High		Low
First Quarter	$	2.50	$	1.44
Second Quarter	$	2.04	$	1.33
Third Quarter	$	1.50	$	0.82
Fourth Quarter	$	0.90	$	0.21

Fiscal Year 2010		High		Low
Second Quarter ⁽¹⁾	$	4.00	$	1.87
Third Quarter		2.01		1.08
Fourth Quarter		2.08		1.10

(1) From May 13, 2010 through June 30, 2010.

Dividend Policy

We have never declared dividends on our equity securities, and currently do not plan to declare dividends on shares of our common stock in the foreseeable future. We expect to retain our future earnings, if any, for use in the operation and expansion of our business. Subject to the foregoing, the payment of cash dividends in the future, if any, will be at the discretion of our Board of Directors and will depend upon such factors as earnings levels, capital requirements, our overall financial condition and any other factors deemed relevant by our Board of Directors.

Equity Compensation Plan Information

The following table provides information as of December 31, 2011 about our common stock that may be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans (including individual arrangements):

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders ⁽¹⁾	1,236,342		$2.47		1,063,658
Equity compensation plans not approved by security holders		—		—		—
Total		1,236,342		$2.47		1,063,658

(1)

Our Amended and Restated 2006 Stock Incentive Plan was approved by our stockholders on February 19, 2010.

Use of Proceeds from the Sale of Registered Securities

Our IPO was effected through a Registration Statement on Form S-1, as amended (Registration No. 333-163380), that was declared effective by the U.S. Securities and Exchange Commission or the SEC on March 24, 2010. The net offering proceeds to us, after deducting underwriting discounts, commissions and offering expenses payable by us, were approximately $10.5 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. Of the net proceeds of $10.5 million and our cash balance of $1.5 million at December 31, 2009, we have used approximately $6.5 million for research and development, or R&D, expenditures and approximately $4.5 million for general working capital expenditures through the end of the fourth quarter of 2011. We have invested the unused proceeds from the IPO in an interest bearing savings account.

Item 6.

Selected Financial Data.

Not applicable.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis together with our audited financial statements and the accompanying notes. This discussion contains forward-looking statements, within the meaning of Section 27A of Securities Act, Section 21E of the Exchange Act, and the Private Securities Litigation Reform Act of 1995, including statements regarding our expected financial position, business and financing plans. These statements involve risks and uncertainties. Our actual results could differ materially from the results described in or implied by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report, particularly under the headings “Forward-Looking Statements” and “Risk Factors.”

Overview

We are a development stage pharmaceutical and medical device company that seeks to in-license, develop and commercialize therapeutic products for the treatment of cardiac and renal dysfunction, specifically in the dialysis and non-dialysis areas.

We have the worldwide rights to develop and commercialize proprietary product candidates that address large market opportunities, which includes CRMD003 (Neutrolin^®) and CRMD004.

CRMD003 is a liquid designed to prevent central venous Catheter Related Bloodstream infections or CRBI and maintenance of catheter patency in central venous catheters (initially in hemodialysis catheters). During the second quarter 2011, we submitted our design dossier for a CE Marking approval in Europe.

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 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 since our inception and we expect to continue to generate losses as we progress towards the commercialization of our product candidates, including CRMD003 and previously CRMD001. As of December 31, 2011, we had a deficit accumulated during the development stage of $42,947,552. 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. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In March 2010, we completed our 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 into the fourth quarter of 2012.

Financial Operations Overview

Revenue

We have not generated any revenue since our inception. As of December 31, 2011, we have funded our operations primarily through debt financings and the IPO, and our receipt of a total of approximately $490,000 from federal grants under the Qualifying Therapeutic Discovery Project program, a total of approximately $775,000 from the sale of our unused net operating losses through the State of New Jersey’s Economic Development Authority Technology Business Tax Certificate Transfer Program and approximately $35,000 from the State of New York’s Research and Development Tax Credit Program.

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.

Research and Development Expense

Research and Development, or R&D 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, stock-based compensation, 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 R&D is expensed as incurred.

Conducting a significant amount of development is central to our business model. Through December 31, 2011, we incurred $22,155,674 in R&D 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 R&D expenses for the foreseeable future in order to complete development of CRMD003 and our earlier-stage R&D projects.

The following table summarizes the percentages of our R&D 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.

	Year Ended December 31,						Period from July 28, 2006 (Inception) through December 31, 2011
	2011			2010
CRMD001		32	%		44	%	53	%
CRMD002		0	%		1	%	0	%
CRMD003		66	%		53	%	44	%
CRMD004		2	%		2	%	3	%

The process of conducting pre-clinical studies and clinical trials necessary to obtain FDA 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 have decided to focus the majority of our resources and research and development efforts on seeking CE marking approval and commercialization of Neutrolin^® in Europe through a CE Mark application. During the first half of 2011 we submitted our design dossier with TÜV SÜD the European notified body managing our CE Mark application. In the fourth quarter 2011 we successfully completed our stage 1 audit with TÜV. Upon the successful completion of the stage 2 audit and the implementation and approval of our quality management system and approval our design dossier, we would anticipate being in a position to obtain a CE Mark approval in the first half of 2012. If we obtain CE Mark approval in Europe, we intend to be in a position to launch Neutrolin^®for the prevention of Catheter Related Bloodstream Infections, or CRBI and maintenance of catheter patency in hemodialysis patients in Europe during 2012. We cannot be assured of CE Mark approval of Neutrolin^® on that timeline or at all. We are currently exploring the various methods of launching Neutrolin^® in Europe, whether through a distributorship or partnership arrangement or otherwise.

General and Administrative Expense

General and Administrative, or G&A 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 G&A expense includes facility-related costs not otherwise included in R&D expense, promotional expenses, costs associated with industry and trade shows, and professional fees for legal services and accounting services. We expect that our G&A 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 December 31, 2011, we incurred $10,918,954 of G&A expense.

Other Income

Other income consists mainly of federal research grants awarded and research and development tax refunds, net of application fees. From our inception on July 28, 2006 through December 31, 2011, we received $420,987 of other income, net of application fees and related filing costs.

Interest Income and Interest Expense

Interest income consists of interest earned on our cash and cash equivalents. 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 certain of our convertible notes. From our inception on July 28, 2006 through December 31, 2011, we received $124,342 of interest income through interest bearing savings accounts and incurred $11,193,028 of interest expense, which consists of interest incurred in debt issued to noteholders, amortization and write-off of deferred financing costs and debt discounts and a beneficial conversion feature charge related to the conversion of certain of our convertible notes.

Results of Operations

Comparison of the Years Ended December 31, 2011 and December 31, 2010

R&D Expense. R&D expense was $4,098,225 for the year ended December 31, 2011, a decrease of $1,396,072, from $5,494,297 for the year ended December 31, 2010. The decrease was primarily attributed to the March 30, 2010 issuance of 828,024 shares of our common stock, of which 118,288 shares are held in escrow, to our licensors valued at $3.125 per share, or $2,217,924 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, which anti-dilution provisions have expired. The decrease in R&D expense was partially offset by increased clinical development costs related to our phase II clinical trial of CRMD001 that began in June 2010, higher manufacturing and regulatory costs related the development of CRMD003 and costs related to the hiring of two employees in the areas of clinical operations and product development during the third quarter of 2010.

G&A Expense. G&A expense was $3,148,759 for the year ended December 31, 2011, an increase of $136,053 from $3,012,706 for the year ended December 31, 2010. The increase in G&A expense reflects increased officer and director compensation costs in addition to costs associated with operating as a publicly-traded company following the IPO in March 2010, which include filing fees related to the listing of our common stock.

Other Income. Other income was $29,819 for the year ended December 31, 2011, a decrease of $361,349 from $391,168 for the year ended December 31, 2010. Other income during 2011 represented a research and development funding reimbursement from the State of New York research and development tax refund program and in 2010 represented federal grants, net of filing and application fees we received under the Qualifying Therapeutic Discovery Project program.

Interest Income and Interest Expense. Interest income was $12,037 for the year ended December 31, 2011, a decrease of $11,405, from $23,442 for the year ended December 31, 2010. The decrease was attributable to having lower interest-bearing cash balances during the year ended December 31, 2011 compared to the year ended December 31, 2010.

Interest expense was $0 for the year ended December 31, 2011 compared to $3,093,763 for the year ended December 31, 2010. Interest expense 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. The interest expense charges consisted primarily of a beneficial conversion feature charge of $1,137,762 related to the 30% discount at which the 8% senior convertible notes we issued in October and November 2009 in the aggregate principal amount of $2,619,973 (the “Third Bridge Notes”), converted into common stock, a write-off of debt discount of $1,135,076 in 2010 and a write-off of the remaining amortization of deferred financing fees of $358,495 in 2010.

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 1,237,293 shares of common stock and 2,338,569 units comprised of 4,677,138 shares of common stock and 2,338,569 warrants at an exercise price of $3.4375. We also received a total of approximately $490,000 from federal grants under the Qualifying Therapeutic Discovery Project program, a total of approximately $775,000 from the sale of our unused net operating losses through the State of New Jersey’s Economic Development Authority Technology Business Tax Certificate Transfer Program and approximately $30,000 from the State of New York’s Research and Development Tax Credit Program.

Net Cash Used in Operating Activities

Net cash used in operating activities was $6,296,725 for the year ended December 31, 2011. The net loss of $6,711,273 for the year ended December 31, 2011 was higher than cash used in operating activities by $414,548. The primary reasons for the difference are non-cash stock-based compensation charges of $692,403, offset by decreases in accounts payable and accrued expenses of $130,783 and $139,855, respectively, relating primarily to clinical research organization costs, clinical site costs, manufacturing costs, patent fees and accrued legal fees. Net cash used in operating activities was $3,668,404 for the year ended December 31, 2010. The net loss of $10,905,236 for the year ended December 31, 2010 was higher than cash used in operating activities by $7,236,832. The primary reasons for the difference are the stock issued in connection with our license agreements’ anti-dilution provisions of stock issuances of $2,217,924, which provisions expired upon the completion of our IPO in March 2010, the charge for the beneficial conversion feature related to the Third Bridge Notes of $1,137,762, non-cash interest expense of $462,431 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 $1,167,081, an increase in accounts payable and accrued expenses of $589,638 and $361,367, respectively, relating primarily to clinical research organization costs, manufacturing costs, patent fees, accrued legal fees, accounting fees, bonuses and filing fees.

Net Cash Used in Investing Activities

Net cash used in investing activities was $1,625 for the year ended December 31, 2011. Net cash used in investing activities consisted of a purchase of computer equipment during 2011. Net cash used in investing activities was $10,361 for the year ended December 31, 2010. Net cash used in investing activities consisted of leasehold improvements made to our corporate headquarters located in Bridgewater, New Jersey, in addition to purchases of computer equipment and accounting software, which are being amortized over the term of the lease and depreciated over the expected life of the equipment and software.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $0 for the year ended December 31, 2011 compared to $10,457,270 for the year ended December 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, and 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 December 31, 2011 was $1,985,334, compared to $8,283,684 at December 31, 2010. Because our business does not generate positive operating cash flow, we will need to 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, out-licensing or distribution arrangements of our products. Through December 31, 2011, all of our financing has been through our 2010 IPO, previous debt financings and our receipt of a total of approximately $490,000 from Federal grants under the Qualifying Therapeutic Discovery Project program, a total of approximately $775,000 from the sale of our unused net operating losses through the State of New Jersey’s Economic Development Authority Technology Business Tax Certificate Transfer Program and approximately $30,000 from the State of New York’s Research and Development Tax Credit Program, net of application fees. We expect to continue to fund operations from cash on hand and through either capital raising sources as previously described, which may be dilutive to existing stockholders, or through generating revenues from the licensing of our products or strategic alliances. We plan to seek additional debt and/or equity financing, but can provide no assurances that such financing will be available on acceptable terms, or at all. Moreover, the incurrence of indebtedness in connection with a debt financing would result in increased fixed obligations and could also result in covenants that would restrict our operations. 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, the acquisition and pursuit of development of new product candidates, competitive and technical advances, costs of commercializing any of our 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 significant product sales revenue for 2012. 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.

Based on our cash resources at December 31, 2011, and our current plan of expenditure on continuing development of our current products, we believe that we have sufficient capital to fund our operations into the fourth 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. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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 Note 2 to our financial statements included with this report, 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.

Stock-Based Compensation

We account for stock options according to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 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 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.

We granted options to purchase 886,000 shares of common stock to our employees, non-employees and directors and officers during the year ended December 31, 2011. For the purpose of valuing options and warrants granted to the Company’s employees, directors and officers during the year ended December 31, 2011, the Company used the Black-Scholes option pricing model. For the purpose of valuing performance based options granted to a non-employee during the year ended December 31, 2011, the Company used the standard Monte Carlo stock price simulation method. As of December 31, 2011, there were no non-employee stock options that have vested, as the vesting of such stock options was contingent upon various performance metrics that were not achieved as of December 31, 2011. To estimate the number of stock options expected to vest, the Company used the Monte Carlo stock price simulation method. The Monte Carlo analysis uses several random simulations along with performance vesting metrics, an initial stock price of $1.72, expected volatility of 100% for the one-year period of the vesting contingency and a one-year risk-free rate of 0.25%. The Company then used the results of the Monte Carlo analysis together with the Black-Scholes option pricing model to estimate the fair value of the options issued. 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 our awards. The Company estimated the expected term of the options granted based on anticipated exercises in future periods assuming the success of the Company’s business model as currently forecasted. The expected dividend yield reflects the Company’s current and expected future policy for dividends on the Company’s common stock. The expected stock price volatility for the stock options was calculated by examining historical volatilities for publicly traded industry peers, since the Company does not have a significant trading history for our common stock. The Company will continue to analyze the expected stock price volatility and expected term assumptions as more historical data for its common stock becomes available. The Company has experienced forfeitures of stock options issued to its former President and Chief Executive Officer, Chief Medical Officer, Chairman and Board member. Since the stock options currently outstanding are primarily held by the Company’s senior management and directors, the Company will continue to evaluate the effects of such future potential forfeitures, as they may arise, to ascertain an estimated forfeiture rate.

Accounting Standards Updates

In December 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-11, “Disclosures about Offsetting Assets and Liabilities”, which requires entities to disclose information about offsetting and related arrangements of financial instruments and derivative instruments. The update requires new disclosures about balance sheet offsetting and related arrangements. For derivatives and financial assets and liabilities, the amendments require disclosure of gross asset and liability amounts, amounts offset on the balance sheet, and amounts subject to the offsetting requirements but not offset on the balance sheet. The guidance is effective beginning on or after January 1, 2013, and interim periods within those annual periods and is to be applied retrospectively. This guidance does not amend the existing guidance on when it is appropriate to offset; as a result, we do not expect this guidance to affect our financial condition, results of operation or cash flows.

In December 2010, the FASB issued ASU 2010-27 to address questions concerning how pharmaceutical manufacturers should recognize and classify in their income statements fees mandated by the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act. The legislation imposes an annual fee on the pharmaceutical manufacturing industry for each calendar year beginning on or after January 1, 2011. An entity’s portion of the annual fee is payable no later than September 30 of the applicable calendar year and is not tax deductible. Pharmaceutical manufacturers and importers with less than $5 million in annual sales are exempt from the annual fee. The adoption of this standard did not have a significant impact on our results of operations, cash flows or financial position.

Other ASUs not effective until after December 31, 2011 are not expected to have a significant effect on our financial position or results of operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 8.

Financial Statements and Supplementary Data.

See the financial statements included at the end of this report beginning on page F-1.

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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 (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on their evaluation of our disclosure controls and procedures, our management, including our principal executive officer and principal financial officer, have concluded that our disclosure controls and procedures were effective as of December 31, 2011 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 management, including our principal executive officer and principal financial officer, as appropriate to allow for timely decisions regarding required disclosure.

Management’s Annual Report on Internal Controls Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. All internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Company management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011. In making this assessment, The Company used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Our management concluded that based on its assessment, our internal control over financial reporting was effective as of December 31, 2011.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this annual report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during our quarter ended December 31, 2011, 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.

Item 9B.

Other Information.

Not applicable.

PART III

Item 10. Directors, Executive Officers, and Corporate Governance

Information required to be disclosed by this Item about our executive officers and our board of directors is incorporated in this Annual Report on Form 10-K by reference from the sections entitled "Directors and Executive Officers" contained in our definitive proxy statement for our 2012 annual meeting of stockholders scheduled to be held on June 1, 2012, which we intend to file within 120 days of the end of our fiscal year.

Information required to be disclosed by this Item about the Section 16(a) compliance of our directors and executive officers is incorporated in this annual report on Form 10-K by reference from the section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” contained in our definitive proxy statement for our 2012 annual meeting of stockholders scheduled to be held on June1, 2012, which we intend to file within 120 days of the end of our fiscal year.

Information required to be disclosed by this Item about our board of directors, the audit committee of our board of directors, our audit committee financial expert, our Code of Business Conduct and Ethics, and other corporate governance matters is incorporated in this Annual Report on Form 10-K by reference from the section entitled “Corporate Governance” contained in our definitive proxy statement related to our 2012 annual meeting of stockholders sche2012 annual meeting of stockholders scheduled to be held on June 1, 2012, which we intend to file within 120 days of the end of our fiscal year scheduled to be held on June 1, 2012, which we intend to file within 120 days of the end of our fiscal year.

The text of our Code of Business Conduct and Ethics, which applies to our directors and employees (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions) is posted in the “Corporate Governance” section of our website, www.cormedix.com. A copy of the Code of Business Conduct and Ethics can be obtained free of charge on our website. We intend to disclose on our website any amendments to, or waivers from, our Code of Business Conduct and Ethics that are required to be disclosed pursuant to the rules of the Securities and Exchange Commission and The NYSE AMEX.

Item 11. Executive Compensation

Information required to be disclosed by this Item is incorporated in this Annual Report on Form 10-K by reference from the sections entitled “Executive Compensation” and “Directors Compensation” contained in our definitive proxy statement for our 2012 annual meeting of stockholders scheduled to be held on June 1, 2012, which we intend to file within 120 days of the end of our fiscal year.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information required to be disclosed by this Item is incorporated in this Annual Report on Form 10-K by reference from the sections entitled “Security Ownership of Certain Beneficial Owners and Management” contained in our definitive proxy statement for our 2012 annual meeting of stockholders scheduled to be held on June 1, 2012, which we intend to file within 120 days of the end of our fiscal year.

Item 13. Certain Relationships and Related Transactions and Director Independence

The information required to be disclosed by this Item is incorporated in this Annual Report on Form 10-K by reference from the section(s) entitled “Transactions with Related Persons, Promoters and Certain Control Persons” and “Executive Compensation” and “Director Compensation” contained in our definitive proxy statement for our 2012 annual meeting of stockholders scheduled to be held on June 1, 2012, which we intend to file within 120 days of the end of our fiscal year.

Item 14. Principal Accountant Fees and Services

This information required to be disclosed by this Item is incorporated in this Annual Report on Form 10-K by reference from the section entitled “Fees Billed by our Independent Registered Public Accounting Firm During Fiscal 2011 and 2010” contained in our definitive proxy statement for our 2012 annual meeting of stockholders scheduled to be held on June 1, 2012, which we intend to file within 120 days of the end of our fiscal year.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) List of documents filed as part of this report:

Financial Statements:

The financial statements of the Company and the related report of the Company’s independent registered public accounting firm thereon have been filed under Item 8 hereof.

Financial Statement Schedules:

None.

Exhibit Index

The following is a list of exhibits filed as part of this Form 10-K:

Exhibit No.		Description

3.1		Form of Amended and Restated Certificate of Incorporation(incorporated by reference to Exhibit 3.3 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 1, 2010).

3.2		Form of Amended and Restated By-laws(incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 1, 2010).

4.1		Specimen common stock certificate (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 19, 2010).

4.2		Specimen Unit certificate (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 19, 2010).

4.3		Specimen warrant certificate (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 19, 2010).

4.4		Form of warrant agreement (incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 19, 2010).

4.5		Common Stock Exchange and Stockholder Agreement, dated as of October 6, 2009, by and between CorMedix Inc. and Shiva Biomedical, LLC (incorporated by reference to Exhibit 4.6 to the Registration Statement on Form S-1 (File No. 333-163380), filed with the SEC on November 25, 2009).

4.6		Stockholder Agreement, dated as of January 30, 2008, between the Company and ND Partners LLC (incorporated by reference to Exhibit 4.7 to the Registration Statement on Form S-1 (File No. 333-163380), filed with the SEC on November 25, 2009).

4.11		Form of Third Bridge Warrant (incorporated by reference to Exhibit 4.18 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on January 20, 2010).

10.1		Contribution Agreement, dated as of July 28, 2006, by and between Shiva Biomedical, LLC, Picton Pharmaceuticals, Inc., Picton Holding Company, Inc., and the stockholders of Picton Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on December 31, 2009).‡

10.2		Amendment to Contribution Agreement, dated as of October 6, 2009, by and between Shiva Biomedical, LLC and CorMedix, Inc. (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on December 31, 2009).‡

10.3		Amendment No. 2 to Contribution Agreement, dated as of February 22, 2010, by and between the Company and Shiva Biomedical, LLC (incorporated by reference to Exhibit 10.15 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 1, 2010).

10.4		License and Assignment Agreement, dated as of January 30, 2008, between the Company and ND Partners LLC. (incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on December 31, 2009).‡

10.5		Escrow Agreement, dated as of January 30, 2008, among the Company, ND Partners LLC and the Secretary of the Company, as Escrow Agent (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1 (File No. 333-163380), filed with the SEC on November 25, 2009).

10.6		Exclusive License and Consulting Agreement, dated as of January 30, 2008, between the Company and Hans-Dietrich Polaschegg (incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 1, 2010).‡

10.7		Amended and Restated Consulting Agreement, dated as of January 10, 2008, between the Company and Sudhir V. Shah, M.D. (incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-1 (File No. 333-163380), filed with the SEC on November 25, 2009).

10.8		Consulting Agreement, dated as of January 30, 2008, between the Company and Frank Prosl (incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-1 (File No. 333-163380), filed with the SEC on November 25, 2009).

10.9		Supply Agreement, dated as of December 7, 2009, between the Company and Navinta, LLC (incorporated by reference to Exhibit 10.13 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 1, 2010).‡

10.10		Manufacture and Development Agreement, dated as of March 5, 2007, by and between the Company and Emcure Pharmaceuticals USA, Inc. (incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on December 31, 2009).‡

10.13		Employment Agreement, dated as of February 4, 2010, between the Company and Brian Lenz (incorporated by reference to Exhibit 10.16 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 1, 2010.

10.14		Amendment to Employment Agreement, dated as of January 14, 2011, by and between CorMedix Inc. and Brian Lenz (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed with the SEC on January 19, 2011.

10.15		Employment Agreement, dated as of February 25, 2011, between the Company and Mark A. Klausner M.D. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the SEC on March 3, 2011.

10.16		Amended and Restated 2006 Stock Incentive Plan (incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 1, 2010).

10.17		Form of Indemnification Agreement between the Company and each of its directors and executive officers (incorporated by reference to Exhibit 10.17 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 1, 2010).

10.18		Separation and General Release Agreement, effective as of September 30, 2011, by and between the Company and John C. Houghton (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q, filed with the SEC on November 10, 2011).

10.19		Amendment No. 3 to Contribution Agreement, effective as of August 31, 2011, by and between the Company and Shiva Biomedical, LLC (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q, filed with the SEC on November 10, 2011). ‡

23.1		Consent of Independent Registered Public Accounting Firm.*

31.1		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 Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101		The following materials from CorMedix Inc. Form 10-K for the year ended December 31, 2011, formatted in Extensible Business Reporting Language (XBRL): (i) Balance Sheets at December 31, 2011 and December 31, 2010, (ii) Statements of Operations for the years ended December 31, 2011 and 2010 and for the Cumulative Period from July 28, 2006 (inception) through December 31, 2011, (iii) Statements of Changes in Stockholders’ Equity for the year ended December 31, 2011, (iv) Statements of Cash Flows for the years ended December 31, 2011 and 2010 and for the Cumulative Period from July 28, 2006 (inception) through December 31, 2011 and (v) Notes to the Financial Statements.**

Filed herewith.

‡

Confidential treatment has been granted for portions of this document. The omitted portions of this document have been filed separately with the SEC.

Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended and otherwise are not subject to liability under those sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CORMEDIX INC.

March 19, 2012	By:	/s/ Richard M. Cohen
		Richard M. Cohen
		Chairman and Interim Chief Executive Officer (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date

/s/ Richard M. Cohen	Chairman and Interim Chief Executive Officer	March 19, 2012
Richard M. Cohen	(Principal Executive Officer)

/s/ Brian Lenz	Chief Operating Officer and Chief Financial Officer, Secretary and Treasurer	March 19, 2012
Brian Lenz	(Principal Financial and Accounting Officer)

/s/ Matthew Duffy	Director	March 19, 2012
Matthew Duffy

/s/ Gary A. Gelbfish	Director	March 19, 2012
Gary A. Gelbfish

/s/ Steven W. Lefkowitz	Director	March 19, 2012
Steven W. Lefkowitz

/s/ Antony E. Pfaffle	Director	March 19, 2012
Antony E. Pfaffle

/s/ Timothy Hofer	Director	March 19, 2012
Timothy Hofer

CORMEDIX INC.
(A Development Stage Company)

FINANCIAL STATEMENTS

Financial Statements Index

Report of Independent Registered Public Accounting Firm		F-2

Balance Sheets December 31, 2011 and 2010		F-3

Statements of Operations Years ended December 31, 2011 and 2010 and the period from July 28, 2006 (Inception) to December 31, 2011		F-4

Statement of Changes in Stockholders’ Equity (Deficiency) Period from July 28, 2006 (Inception) to December 31, 2011		F-5 - F-7

Statements of Cash Flows Years Ended December 31, 2011 and 2010 and the period from July 28, 2006 (Inception) to December 31, 2011		F-8

Notes to Financial Statements		F-9

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

CorMedix Inc.

We have audited the accompanying balance sheets of CorMedix Inc. (A Development Stage Company) as of December 31, 2011 and 2010, and the related statements of operations, changes in stockholders’ equity (deficiency) and cash flows for the years then ended, and the period from July 28, 2006 (Inception) to December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CorMedix Inc. (A Development Stage Company) as of December 31, 2011 and 2010, and its results of operations and cash flows for the years then ended, and the period from July 28, 2006 (Inception) to December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company incurred a net loss of $6,711,273 for the year ended December 31, 2011 and, as of that date, had a deficit accumulated during the development stage of $42,947,552. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ J.H. Cohn LLP

Roseland, New Jersey

March 19, 2012

F-2

CorMedix Inc.
(A Development Stage Company)

BALANCE SHEETS

	December 31, 2011			December 31, 2010
ASSETS
Current assets
Cash and cash equivalents	$	1,985,334		$	8,283,684
Prepaid research and development expenses		19,888			205,404
Other receivable		493,855			280,920
Other prepaid expenses and current assets		31,897			42,140
Total current assets		2,530,974			8,812,148
Property and equipment, net		11,689			22,310
Security deposit		13,342			13,342
TOTAL ASSETS	$	2,556,005		$	8,847,800

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	1,008,493		$	1,139,276
Accrued expenses		296,512			436,367
Total current liabilities		1,305,005			1,575,643
Deferred rent		14,472			16,759
TOTAL LIABILITIES		1,319,477			1,592,402

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY
Common stock - $0.001 par value: 40,000,000 shares authorized, 11,408,274 shares issued and outstanding at December 31, 2011 and 2010		11,408			11,408
Deferred stock issuances		(146	)		(146	)
Additional paid-in capital		44,172,818			43,480,415
Deficit accumulated during the development stage		(42,947,552	)		(36,236,279	)
TOTAL STOCKHOLDERS’ EQUITY		1,236,528			7,255,398
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,556,005		$	8,847,800

See Notes to Financial Statements

F-3

CorMedix Inc.
(A Development Stage Company)

STATEMENTS OF OPERATIONS

	Year Ended December 31, 2011			Year Ended December 31, 2010			Cumulative Period from July 28, 2006 (Inception) Through December 31, 2011

OPERATING EXPENSES
Research and development	$	4,098,225		$	5,494,297		$	22,155,674
General and administrative		3,148,759			3,012,706			10,918,954
Total Operating Expenses		7,246,984			8,507,003			33,074,628

LOSS FROM OPERATIONS		(7,246,984	)		(8,507,003	)		(33,074,628	)

OTHER INCOME (EXPENSE)
Other income		29,819			391,168			420,987
Interest income		12,037			23,442			124,342
Interest expense, including amortization and write-off of deferred financing costs and debt discounts		-			(3,093,763	)		(11,193,028	)
LOSS BEFORE INCOME TAXES		(7,205,128	)		(11,186,156	)		(43,722,327	)
State income tax benefit		493,855			280,920			774,775
NET LOSS	$	(6,711,273	)	$	(10,905,236	)	$	(42,947,552	)

NET LOSS PER SHARE – BASIC AND DILUTED	$	(0.59	)	$	(1.15	)

WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC AND DILUTED		11,408,274			9,473,259

See Notes to Financial Statements

F-4

CORMEDIX INC.
(A Development Stage Company)

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)
Period from July 28, 2006 (Inception) to December 31, 2011

	Common Stock				Non-Voting Common Stock – Class A				Common Stock – Series B - F				Deferred Stock Issuances			Additional Paid-in Capital		Deficit Accumulated During the Development Stage			Total Stockholders’ Equity (Deficiency)
	Shares		Amount		Shares		Amount		Shares		Amount

Common stock issued to founders at $0.008 per share in July 2006		510,503	$	510												$	3,490				$	4,000

Common stock issued and held in escrow to licensor at $0.008 per share in August 2006										1,000,000	$	1,000	$	(1,000	)							-

Common stock issued to employee at $0.008 per share in November 2006		53,743		54													367					421

Stock-based compensation																	4,726					4,726

Net loss																		$	(975,317	)		(975,317	)

Balance at December 31, 2006		564,246		564						1,000,000		1,000		(1,000	)		8,583		(975,317	)		(966,170	)

Common stock issued to employees at $0.008 per share in January and March 2007		27,056		27													185					212

Common stock issued to technology finders at $0.008 per share in March 2007						193,936	$	194														194

Warrants issued in connection with senior convertible notes																	748,495					748,495

Debt discount on senior convertible notes																	2,993,981					2,993,981

Stock-based compensation																	64,875					64,875

Net loss																			(7,237,526	)		(7,237,526	)

Balance at December 31, 2007		591,302		591		193,936		194		1,000,000		1,000		(1,000	)		3,816,119		(8,212,843	)		(4,395,939	)

See Notes to Financial Statements

F-5

CORMEDIX INC.
(A Development Stage Company)

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)
Period from July 28, 2006 (Inception) to December 31, 2011

	Common Stock				Non-Voting Common Stock – Class A				Common Stock – Series B - F						Deferred Stock Issuances			Additional Paid-in Capital		Deficit Accumulated During the Development Stage			Total Stockholders’ Equity (Deficiency)
	Shares		Amount		Shares		Amount		Shares			Amount
Balance at December 31, 2007 (carried forward)		591,302	$	591		193,936	$	194		1,000,000		$	1,000		$	(1,000	)	$	3,816,119	$	(8,212,843	)	$	(4,395,939	)

Common stock issued to licensor at $8.23 per share in January 2008		39,980		40															328,908					328,948

Common stock issued to licensor and held in escrow in January 2008		15,992		16												(125	)		109					-

Common stock issued to consultant at $8.23 per share in May 2008		939		1															7,720					7,721

Debt discount on senior convertible notes																			747,215					747,215

Stock-based compensation																			281,652					281,652

Net loss																					(8,996,745	)		(8,996,745	)

Balance at December 31, 2008		648,213		648		193,936		194		1,000,000			1,000			(1,125	)		5,181,723		(17,209,588	)		(12,027,148	)

Common stock issued to consultant at $32.05 per share in July 2009		639		1															20,449					20,450

Common stock issued to licensor at $32.05 per share in exchange for Series B-F common stock in October 2009		98,739		99						(1,000,000	)		(1,000	)		1,186			3,164,217					3,164,502

Common stock issued to licensor at $32.05 per share in October 2009		28,156		28															902,316					902,344

Common stock issued to licensor and held in escrow in October 2009		11,263		11												(88	)		77					-

Debt discount on senior convertible notes																			1,238,265					1,238,265

Stock-based compensation																			114,143					114,143

Net loss																					(8,121,455	)		(8,121,455	)

Balance at December 31, 2009		787,010		787		193,936		194		-			-			(27	)		10,621,190		(25,331,043	)		(14,708,899	)

See Notes to Financial Statements

F-6

CORMEDIX INC.
(A Development Stage Company)

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)
Period from July 28, 2006 (Inception) to December 31, 2011

	Common Stock				Non-Voting Common Stock – Class A						Common Stock – Series B - F				Deferred Stock Issuances			Additional Paid-in Capital		Deficit Accumulated During the Development Stage			Total Stockholders’ Equity (Deficiency)
	Shares		Amount		Shares			Amount			Shares		Amount
Balance at December 31, 2009 (carried forward)		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					130,091

Common stock issued upon conversion of Class A Non-Voting Common Stock at a 1 for 7.836 conversion rate in February 2010		24,750		25		(193,936	)		(194	)									169					-

Common stock issued from debt conversion to noteholders in March 2010		5,914,431		5,914															18,891,253					18,897,167

Common stock issued to licensors at $3.125 per share in March 2010		828,024		828												(119	)		2,217,215					2,217,924

Common 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					10,457,270

Stock-based compensation																			1,167,081					1,167,081

Net loss																					(10,905,236	)		(10,905,236	)

Balance at December 31, 2010		11,408,274		11,408		-			-			-		-		(146	)		43,480,415		(36,236,279	)		7,255,398

Stock-based compensation																			692,403					692,403

Net loss																					(6,711,273	)		(6,711,273	)

Balance at December 31, 2011		11,408,274	$	11,408		-		$	-			-	$	-	$	(146	)	$	44,172,818	$	(42,947,552	)	$	1,236,528

See Notes to Financial Statements

F-7

CorMedix Inc.
(A Development Stage Company)

STATEMENTS OF CASH FLOWS

	Year Ended December 31, 2011			Year Ended December 31, 2010			Period from July 28, 2006 (Inception) To December 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(6,711,273	)	$	(10,905,236	)	$	(42,947,552	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		692,403			1,167,081			2,324,880
Stock issued in connection with license agreements		-			2,217,924			6,613,718
Stock issued in connection with consulting agreement		-			130,091			158,262
Amortization of deferred financing costs		-			358,495			2,047,881
Amortization of debt discount		-			1,135,076			4,979,461
Non-cash charge for beneficial conversion feature		-			1,137,762			1,137,762
Non-cash interest expense		-			462,431			3,007,018
Expenses paid on behalf of the Company satisfied through the issuance of notes		-			-			51,253
Depreciation		12,246			12,167			50,020
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(17,176	)		(350,350	)		(545,640	)
Security deposits		-			(1,609	)		(13,342	)
Accounts payable		(130,783	)		589,638			1,008,493
Accrued expenses		(139,855	)		361,367			296,512
Deferred rent		(2,287	)		16,759			14,472
Net cash used in operating activities		(6,296,725	)		(3,668,404	)		(21,816,802	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment		(1,625	)		(10,361	)		(61,709	)
Net cash used in investing activities		(1,625	)		(10,361	)		(61,709	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable to related parties		-			-			2,465,749
Proceeds from senior convertible notes		-			-			13,364,973
Proceeds from Galenica, Ltd. promissory note		-			-			1,000,000
Deferred 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			10,457,270
Proceeds from receipt of stock subscriptions and issuances of common stock		-			-			4,827
Net cash provided by financing activities		-			10,457,270			23,863,845
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(6,298,350	)		6,778,505			1,985,334
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD		8,283,684			1,505,179			-
CASH AND CASH EQUIVALENTS – END OF PERIOD	$	1,985,334		$	8,283,684		$	1,985,334

Cash paid for interest	$	-		$	-		$	18,425

Supplemental Disclosure of Non Cash Financing Activities:
Conversion of notes payable and accrued interest to common stock	$	-		$	18,897,167		$	18,897,167
Reclassification of deferred financing fees to additional paid-in capital	$	-		$	148,015		$	148,015
Stock issued to technology finders and licensors	$	-		$	-		$	155
Warrants issued to placement agent	$	-		$	-		$	748,495
Debt discount on senior convertible notes	$	-		$	-		$	4,979,461

See Notes to Financial Statements

F-8

CORMEDIX INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

Note 1 — Organization, Business and Basis of Presentation:

Organization and Business:

CorMedix Inc. (f/k/a Picton Holding Company, Inc.) (“CorMedix” or the “Company”) was incorporated in the State of Delaware on July 28, 2006. CorMedix is a development stage pharmaceutical and medical device company that seeks to fulfill selected, significant unmet medical needs in the preventive areas of catheter related infections in dialysis and non-dialysis catheters. On January 18, 2007, the Company changed its name from Picton Holding Company, Inc. to CorMedix Inc.

Basis of Presentation:

The Company’s primary activities since incorporation have been organizational activities, including recruiting personnel, establishing office facilities, acquiring licenses for its pharmaceutical product candidates, 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.

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. For the year ended December 31, 2011 and the period from July 28, 2006 (inception) to December 31, 2011, the Company incurred net losses of $6,711,273 and $42,947,552, respectively. The Company has stockholders’ equity as of December 31, 2011 of $1,236,528. Management believes that the Company will continue to incur losses for the foreseeable future and will need additional equity or debt financing or will need to generate revenue from the licensing or distribution of its products or by entering into strategic alliances to be able to sustain its operations until it can achieve profitability and positive cash flows, if ever. Management plans to seek additional debt, equity and/or bank financing for the Company, but cannot assure that such financing will be available on acceptable terms, or at all. If adequate financing is not available, the Company may be required to terminate or significantly curtail its operations, or enter into arrangements with collaborative partners or others that may require the Company to relinquish rights to certain of its technologies, or potential markets that the Company would not otherwise relinquish. If we are unable to achieve these goals, our business would be jeopardized and we may not be able to continue operations. Management believes that the currently available capital resources will be sufficient to meet the Company’s operating needs into the fourth quarter of 2012. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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 financial statements have been adjusted to give effect to the reverse stock split.

Note 2 — Summary of Significant Accounting Policies:

Cash and Cash Equivalents:

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains its cash and cash equivalents in bank deposit and other interest bearing accounts, the balances of which, at times, may exceed federally insured limits.

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.

F-9

CORMEDIX INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

Prepaid Expenses

Prepaid expenses consist of payments made in advance to vendors relating to service contracts for clinical trial development, manufacturing, preclinical development and insurance policies. These advanced payments are amortized to expense either as services are performed or over the relevant service period using the straight-line method.

Property and Equipment

Property and equipment consist primarily of furnishings, fixtures, leasehold improvements, office equipment and computer equipment which are recorded at cost. Repairs and maintenance costs are expensed in the period incurred. Depreciation of property and equipment 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, net as of December 31, 2011 and 2010 were $11,689 and $22,310, respectively, net of accumulated depreciation of $50,020 and $37,774, respectively.

Description		Estimated Useful Life
Office equipment and furniture		5 years

Leasehold improvements		5 years

Computer equipment		5 years

Computer software		3 years

Stock-Based Compensation:

The Company accounts for stock options granted to employees according to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 718 (“ASC 718”), “Compensation — Stock Compensation”. Under ASC 718, share-based compensation cost is measured at the 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.

For the purpose of valuing options and warrants granted to the Company’s employees, directors and officers during the year ended December 31, 2011, the Company used the Black-Scholes option pricing model. For the purpose of valuing performance based options granted to a non-employee during the year ended December 31, 2011, the Company used the standard Monte Carlo stock price simulation method. As of December 31, 2011, there were no non-employee stock options that have vested, as the vesting of such stock options was contingent upon various performance metrics that were not achieved as of December 31, 2011. To estimate the number of stock options expected to vest, the Company used the Monte Carlo stock price simulation method. The Monte Carlo analysis uses several random simulations along with performance vesting metrics, an initial stock price of $1.72, expected volatility of 100% for the one-year period of the vesting contingency and a one-year risk-free rate of 0.25%. The Company then used the results of the Monte Carlo analysis together with the Black-Scholes option pricing model to estimate the fair value of the options issued. 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 our awards. The Company estimated the expected term of the options granted based on anticipated exercises in future periods assuming the success of the Company’s business model as currently forecasted. The expected dividend yield reflects the Company’s current and expected future policy for dividends on the Company’s common stock. The expected stock price volatility for the stock options was calculated by examining historical volatilities for publicly traded industry peers, since the Company does not have a significant trading history for its common stock. The Company will continue to analyze the expected stock price volatility and expected term assumptions as more historical data for its common stock becomes available. The Company has experienced forfeitures of stock options issued to its former President and Chief Executive Officer, Chief Medical Officer, Chairman and Board member. Since the stock options currently outstanding are primarily held by the Company’s senior management and directors the Company will continue to evaluate the effects of such future potential forfeitures, as they may arise, to ascertain an estimated forfeiture rate.

F-10

CORMEDIX INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

	2011		2010
Risk-free interest rate		0.9% – 2.1%		1.5%-2.6%
Expected volatility		109% – 115%		112%-114%
Expected life of options in years		5		5
Expected dividend yield		0.0%		0.0%

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:

Under ASC 740, “Income Taxes” (“ASC 740”), 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. Under ASC 740, 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.

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 6,043,876 and 6,472,767 shares of common stock underlying warrants and options at December 31, 2011 and 2010, respectively. Additionally, there were 145,543 shares of common stock being held in escrow at December 31, 2011 and 2010, pending the achievement of certain regulatory and sales-based milestones as part of the license agreement with ND Partners LLC.

F-11

CORMEDIX INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

Accounting Standards Updates

In December 2011 the FASB issued Accounting Standards Update (“ASU”) 2011-11, “Disclosures about Offsetting Assets and Liabilities”, which requires entities to disclose information about offsetting and related arrangements of financial instruments and derivative instruments. The update requires new disclosures about balance sheet offsetting and related arrangements. For derivatives and financial assets and liabilities, the amendments require disclosure of gross asset and liability amounts, amounts offset on the balance sheet, and amounts subject to the offsetting requirements but not offset on the balance sheet. The guidance is effective beginning on or after January 1, 2013, and interim periods within those annual periods and is to be applied retrospectively. This guidance does not amend the existing guidance on when it is appropriate to offset; as a result, we do not expect this guidance to affect our financial condition, results of operations or cash flows.

In December 2010, the FASB issued ASU 2010-27 to address questions concerning how pharmaceutical manufacturers should recognize and classify in their income statements fees mandated by the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act. The legislation imposes an annual fee on the pharmaceutical manufacturing industry for each calendar year beginning on or after January 1, 2011. An entity’s portion of the annual fee is payable no later than September 30 of the applicable calendar year and is not tax deductible. Pharmaceutical manufacturers and importers with less than $5 million in annual sales are exempt from the annual fee. The adoption of this standard did not have a significant impact on the Company’s results of operations, cash flows or financial position.

Other ASUs not effective until after December 31, 2011 are not expected to have a significant effect on the Company’s financial position or results of operations.

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 years ended December 31, 2011 and 2010. For the period from July 28, 2006 (inception) to December 31, 2010, consulting services expense under this agreement was $625,000. No amounts were due Paramount pursuant to this agreement as of December 31, 2011 and 2010.

Notes Payable:

On July 28, 2006, the Company 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 originally scheduled to mature on July 28, 2008, or earlier if certain events occurred. This note was subsequently amended to, among other things, extend the maturity date until July 31, 2010 and increase the annual interest rate to 8% per year. The note was issued to PBS for expenses that PBS 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, consisting of 60,998 shares of common stock and warrants to purchase 30,499 shares of common stock at an exercise price of $3.4375. See Note 8.

On August 11, 2006, the Company issued a 5% promissory note payable to an entity related to the sole member of PBS. This note and all accrued interest was originally scheduled to mature on August 11, 2009, or earlier if certain events occurred. This note was subsequently amended to, among other things, extend the maturity date until July 31, 2010 and increase the annual interest rate to 8% per year. On March 30, 2010, in conjunction with the closing of the IPO, the principal and accrued interest amount under this note which was $452,007 on such date, converted into 69,539 Units, consisting of 139,078 shares of common stock and warrants to purchase 69,539 shares of common stock at an exercise price of $3.4375. See Note 8.

F-12

CORMEDIX INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

Note 4 — Income Taxes:

The Company recorded a state income tax benefit of $493,855 and $280,920 for the years ended December 31, 2011 and 2010, respectively, related to the sale of its state net operating losses. There was no current or deferred income tax provision for the years ended December 31, 2011 and 2010.

The Company’s deferred tax assets as of December 31, 2011 and 2010 consist of the following:

	2011			2010
Net operating loss carryforwards – Federal	$	8,612,000		$	5,962,000
Net operating loss carryforwards – state		931,000			821,000
Common stock issued to licensors		2,541,000			1,436,000
Other		80,000			54,000
Totals		12,164,000			8,273,000
Less valuation allowance		(12,164,000	)		(8,273,000	)
Deferred tax assets	$	-		$	-

At December 31, 2011, the Company had potentially utilizable Federal and state net operating loss tax carryforwards of approximately $25,331,000 and $15,517,000, respectively. The net operating loss tax carryforwards will start to expire in 2026 for Federal purposes and 2013 for state purposes.

The utilization of the Company’s net operating losses may be subject to a substantial limitation due to the “change of ownership provisions” under Section 382 of the Internal Revenue Code and similar state provisions. Such limitation may result in the expiration of the net operating loss carryforwards before their utilization.

The effective tax rate varied from the statutory rate as follows:

	December 31,
	2011			2010
Statutory Federal tax rate		(34.0	)%		(34.0	)%
State income tax rate (net of Federal)		(6.0	)%		(1.3	)%
Debt discount amortization		0.0	%		4.9	%
Federal Qualified Therapeutic Discovery Project Grant		0.0	%		(1.2	)%
Other permanent differences		3.9	%		3.3	%
Sale of State of New Jersey net operating losses (net of Federal)		(6.9	)%		(1.7	)%
Effect of valuation allowance		36.1	%		27.5	%
Effective tax rate		(6.9	)%		(2.5	)%

A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The net change in the total valuation allowance for the years ended December 31, 2011 and 2010 and for the period from July 28, 2006 (inception) to December 31, 2011 was $3,891,000, $2,110,000, and $12,164,000, respectively. The tax benefit assumed the Federal statutory tax rate of 34% and a state tax rate of 6% and has been fully offset by the aforementioned valuation allowance.

F-13

CORMEDIX INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

In July 2006, the Company adopted guidance under ASC Topic 740-10 which clarifies the accounting and disclosure for uncertainty in income taxes. The adoption of this interpretation did not have a material impact on the Company’s financial statements.

Management believes that the Company does not have any tax positions that will result in a material impact on the Company’s financial statements because of the adoption of ASC 740-10. However management’s conclusion may be subject to adjustment at a later date based on ongoing analyses of tax laws, regulations and related Interpretations. The Company will report any tax-related interest and penalties related to uncertain tax positions as a component of income tax expense. The Company’s tax returns from 2008 to 2011 remain open.

Note 5 — Commitments:

Operating Lease:

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 60 months, with a commencement date of April 1, 2010, an expiration date of March 31, 2015, and lease payments beginning on July 1, 2010. In accordance with the lease agreement, the Company has deposited $13,342 with the landlord, the equivalent of two months’ rent. The Company had a one-time right to terminate the lease after two years from the commencement date, provided the Company gave the landlord notice of its election to exercise this option on or before 18 months after April 1, 2010. The Company has not elected to exercise the early termination option. The Company also has been granted the option to extend the lease term for one additional period of three years, commencing the day following the then-current expiration date of the term, March 31, 2015, provided the Company delivers notice to the landlord no later than nine months prior to March 31, 2015. The total 60 - month lease obligation is approximately $389,000. The Company’s total remaining lease obligation is $267,224 as of December 31, 2011, as set forth below:

Schedule of Future Minimum Lease Payments

Years Ending December 31,	Amount
2012	$	80,057
2013		82,697
2014		83,576
2015		20,894
Total	$	267,224

Employment Agreements:

As of December 31, 2011, the Company has employment agreements with its executive officers which have an aggregate financial obligation through the end of their respective agreements of approximately $488,000.

On January 14, 2011, the Company entered into an amendment to the employment agreement, effective January 1, 2011, with its President and Chief Executive Officer, John C. Houghton (the “Houghton Amendment”). The Houghton Amendment amended that certain Amended and Restated Employment Agreement, dated as of November 25, 2009, by and between the Company and Mr. Houghton to (i) increase Mr. Houghton's annual base salary to $350,000 and (ii) increase the amount of the discretionary bonus Mr. Houghton may receive upon the achievement of certain Milestones (as defined under the Houghton Amendment), at the sole discretion of the Company’s Board, to up to 40% of Mr. Houghton’s annual base salary.

On January 14, 2011, the Company also entered into an amendment to the employment agreement, effective January 1, 2011, with its Chief Financial Officer, Brian Lenz (the “Lenz Amendment”). The Lenz Amendment amended that certain Employment Agreement, dated as of February 4, 2010, by and between the Company and Mr. Lenz to (i) increase Mr. Lenz’s annual base salary to $250,000 and (ii) eliminate Mr. Lenz’s annual guaranteed bonus.

F-14

CORMEDIX INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

On February 25, 2011, the Company entered into an employment agreement with Mark A. Klausner, M.D. (the “Klausner Employment Agreement”). Pursuant to the Klausner Employment Agreement, Dr. Klausner will serve as the Company’s Chief Medical Officer for an initial term of two years commencing on March 1, 2011, which term will extend automatically for additional one-year periods unless appropriate notice is given by one of parties. Dr. Klausner will receive an annual base salary of $310,000, and will be eligible for annual bonus payments of up to 35% of his base salary, based upon the achievement of certain milestones as established annually by the Company’s Chief Executive Officer, in consultation with the Company’s Board of Directors and Dr. Klausner.

Pursuant to the Klausner Employment Agreement, if the Company terminates Dr. Klausner as a result of his death or Disability (as defined under the Klausner Employment Agreement), Dr. Klausner or his estate, as applicable, will receive his base salary and any accrued but unpaid benefits through the termination date (the “Accrued Compensation”), plus his base salary for a period of 90 days, and all his unvested restricted shares and stock options that are scheduled to vest on or before the next succeeding anniversary of March 1, 2011 will be accelerated and vest as of the termination date. If the Company terminates Dr. Klausner for Cause (as defined under the Klausner Employment Agreement), if Dr. Klausner terminates his employment other than for Good Reason (as defined under the Klausner Employment Agreement), or if Dr. Klausner’s employment terminates by expiration of the term of the Klausner Employment Agreement, Dr. Klausner will receive the Accrued Compensation only. If the Company terminates Dr. Klausner within two months prior to or six months following the occurrence of a Change of Control (as defined under the Klausner Employment Agreement), and on the date of termination the fair market value of the Company’s common stock on a fully-diluted basis is more than $50 million (as determined by the Board of Directors in good faith), Dr. Klausner will receive the Accrued Compensation, his base salary and benefits for a period of three months following his termination, and all his unvested restricted shares and stock options will be accelerated and vest as of the termination date. If the Company terminates Dr. Klausner for reasons other than those stated above or Dr. Klausner terminates his employment for Good Reason, Dr. Klausner will receive the Accrued Compensation and his base salary and benefits for a period of six months following his termination, and all his unvested restricted shares and stock options that are scheduled to vest within the 12 months following his termination will be accelerated and vest as of the termination date.

On March 1, 2011, in connection with the Klausner Employment Agreement, the Company issued to Dr. Klausner an option to purchase 356,000 shares of the Company’s common stock at an exercise price of $1.61 per share. Such option will vest in equal installments on each of the first three anniversaries of the grant date. The stock option had an approximate fair value of approximately $453,100 at the date of grant based on the Black-Scholes option-pricing model.

On September 30, 2011, the Company entered into a separation and general release agreement with John C. Houghton, the Company's previous President and Chief Executive Officer. The separation and release agreement provides, among other things, Mr. Houghton a continuation of base salary for four months of approximately $118,000; a continuation of Mr. Houghton's health insurance benefits on the same terms and conditions as in effect prior to the separation date through March 31, 2012, resulting in a charge of approximately $21,000; an extension of the period of time in which Mr. Houghton may exercise certain previously granted and vested stock options from ninety (90) days to two and one-half (2.5) years and a waiver and release by Mr. Houghton of any and all claims that he may have against the Company. The extended exercise term qualified as a modification under Accounting Standards Codification (“ASC”) 718, Compensation-Stock Compensation and resulted in a non-cash charge of approximately $75,000. The additional non-cash charged was calculated by valuing the vested options before and after the modification using the Black-Scholes option pricing model. In addition, Mr. Houghton provided certain transition services to the Company on an as-needed basis through the end of 2011. Also, effective as of September 30, 2011, Mr. Houghton resigned as a member of the Board of Directors of the Company. Richard M. Cohen, a member of the Company's Board of Directors, has been serving as the Company's Executive Chairman and was appointed as the Company’s Interim Chief Executive Officer as a full-time employee, effective November 4, 2011.

F-15

CORMEDIX INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

Other:

The Company has entered into various contracts with third parties in connection with the development of the licensed technology described in Note 10.

In the normal course of business, the Company enters into contracts that contain a variety of indemnifications with its employees, licensors, suppliers and service providers. Further, the Company indemnifies its directors and officers who are, or were, serving at the Company’s request in such capacities. The Company’s maximum exposure under these arrangements is unknown as of December 31, 2011. The Company does not anticipate recognizing any significant losses relating to these arrangements.

Note 6 — 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.

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 annual interest rate of 10% 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 1,697,966 Units, which consist of 3,395,932 shares of common stock and warrants to purchase 1,697,966 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”) with an original maturity date of 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, consisting 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, consisting 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”) with a maturity date of October 29, 2011. Under the terms of the Third Bridge Notes, the aggregate amount of principal and 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.

F-16

CORMEDIX INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

In addition, in connection with the private placement of the Third Bridge Notes, each noteholder received 503,034 warrants to purchase such number of shares 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.

Note 7 — Stockholders’ Equity (Deficiency):

Common Stock:

During July 2006, the Company issued 510,503 shares of Common Stock to its founders for proceeds of $4,000 or $0.008 per share.

In accordance with the Shiva Contribution Agreement (see Note 10), during August 2006, the Company issued 800,000 shares of Series B Common Stock, 50,000 shares of Series C Common Stock, 50,000 shares of Series D Common Stock, 50,000 shares of Series E Common Stock and 50,000 shares of Series F Common Stock to Shiva Biomedical, LLC at $0.008 per share. These shares of Series B-F Common Stock were subsequently surrendered by Shiva in exchange for Common Stock in October 2009, as described below, and were eliminated from the Company’s certificate of incorporation pursuant to an amendment effected in connection with such exchange. During 2006, the Company recorded $1,000 in deferred stock issuances for these shares of Series B-F Common Stock which were issued but were held in escrow until achievement of certain future clinical milestones (see Note 10).

During November 2006, the Company issued 53,743 shares of Common Stock to an employee in connection with an employment agreement for proceeds of $421 or $0.008 per share which vest equally over a three year period. In connection with this stock issuance, the Company recorded compensation expense at $1.72 per share for a total of $0, $0 and $92,649 of compensation expense for the years ended December 31, 2011 and 2010 and the period from July 28, 2006 (inception) to December 31, 2011, respectively. As of December 31, 2010, the total compensation expense has been recognized.

During January and March 2007, the Company issued 27,056 shares of Common Stock to employees in connection with employment agreements for proceeds of $212 or $0.008 per share which vest equally over a three year period. In connection with this stock issuance, the Company recorded compensation expense at $1.72 per share for a total of $0, $1,296 and $46,641 of compensation expense for the years ended December 31, 2011 and 2010 and the period from July 28, 2006 (inception) to December 31, 2011, respectively. As of December 31, 2010, the total compensation expense has been recognized.

During March 2007, the Company issued 193,936 shares of Non-Voting Subordinated Class A Common Stock to technology finders for proceeds of $194 or $0.008 per share which vest equally over a three year period. In connection with this stock issuance, the Company recorded compensation expense at $1.72 per share for a total of $0, $0 and $42,666 of compensation expense for the years ended December 31, 2011 and 2010 and the period from July 28, 2006 (inception) to December 31, 2011, respectively. As of December 31, 2010, the total compensation expense has been recognized.

In accordance with the NDP License Agreement (see Note 10), during January 2008, the Company issued 39,980 shares of Common Stock to ND Partners LLC at $8.23 per share. During 2008, the Company recorded $328,948 in research and development expense in connection with this issuance. In addition, under the NDP License Agreement, the Company issued an additional 15,992 shares of Common Stock which are being held in escrow pending the achievement of certain regulatory and sales-based milestones. During 2008, the Company recorded $125 in deferred stock issuances for this common stock which was issued but is being held in escrow (see Note 10).

F-17

CORMEDIX INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

During May 2008, the Company issued 939 shares of Common Stock to a consultant in lieu of payment for consulting services at $8.23 per share. During 2008, the Company recorded $7,721 in research and development expense in connection with this issuance.

During July 2009, the Company issued 639 shares of Common Stock to a consultant as partial payment for consulting services at $32.05 per share. During 2009, the Company recorded $20,450 in research and development expense in connection with this issuance.

Pursuant to an amendment to the Shiva Contribution Agreement, dated as of October 6, 2009, and a corresponding common stock exchange and stockholder agreement of the same date (the “Exchange Agreement”), during October 2009, the Company issued 98,739 shares of Common Stock to Shiva Biomedical, LLC at $32.05 per share in exchange for the surrender by Shiva of all rights to the Series B-F Common Stock. During 2009, the Company recorded $3,164,502 in research and development expense in connection with the issuance. See Note 10.

During October 2009, the Company issued 28,156 shares of Common Stock to ND Partners LLC at $32.05 per share in accordance with the NDP License Agreement as a result of anti-dilution adjustments in connection with the issuance of shares to Shiva Biomedical, LLC under the Exchange Agreement. During 2009, the Company recorded $902,344 in connection with the issuance. See Note 10.

During October 2009, the Company issued 11,263 shares of Common Stock into escrow for the benefit of ND Partners LLC at $32.05 per share in accordance with the NDP License Agreement as a result of anti-dilution adjustments in connection with the issuance of shares to Shiva Biomedical, LLC under the Exchange Agreement. See Note 10.

During February 2010, the Company issued 4,059 shares of Common Stock to a consultant as payment for consulting services at $32.05 per share. During 2010, the Company recorded $130,091 in general and administrative expense in connection with this issuance.

During February 2010, the Company issued 24,750 shares of Common Stock to technology finders as a result of the conversion of Non-Voting Subordinated Class A Common Stock to Common Stock.

During March 2010, the Company issued a total of 5,914,431 shares of Common Stock to the holders of its convertible notes has a result of the conversion of such notes into Common Stock in conjunction with the IPO. See Notes 6 and 8.

During March 2010, the Company issued a total of 828,024 shares of Common Stock to Shiva Biomedical, LLC and ND Partners LLC at $3.125 per share, as a result of anti-dilution adjustments pursuant to their respective agreements, of which 145,543 shares are being held in escrow for ND Partners LLC pending the achievement of certain regulatory and sales-based milestones. The anti-dilution provisions under these agreements were terminated upon the completion of the Company’s IPO in March 2010. See Note 10.

During March 2010, the Company issued 3,850,000 shares of Common Stock in connection with the Company’s IPO at a per share price of $3.125.

Common Stock Options:

In 2006, the Company established a stock incentive plan (the “Plan”) under which restricted stock, stock options and other awards based on the Company’s common stock could be granted to the Company’s employees, directors, consultants, advisors and other independent contractors. On January 28, 2010, the Company amended and restated the Plan to, among other things, increase the shares of common stock issuable under the Plan from 925,000 to 2,300,000. Options issuable under the Plan have a maximum term of ten years, vest over a period to be determined by the Company’s Board of Directors (the “Board”), and have an exercise price at or above the fair market value on the date of grant.

F-18

CORMEDIX INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

During the year ended December 31, 2011, the Company granted options to purchase 886,000 shares of common stock under the Plan to various employees, officers, directors and a consultant ranging from $1.10 to $2.10 per share. During the year ended December 31, 2010, the Company granted options to purchase 1,639,215 shares of common stock under the Plan to various employees, officers and directors, including options to purchase 1,589,215 shares at an exercise price of $3.125 per share and options to purchase 50,000 shares at an exercise price of $1.57 per share. Each option granted to employees during the years ended December 31, 2011 and 2010 has a ten-year term and vests equally over a three-year period. The options granted to directors during the year ended December 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 $692,403, $1,167,081 and $2,324,880 of stock-based compensation expense during the years ended December 31, 2011 and 2010 and the period from July 28, 2006 (inception) to December 31, 2011, respectively, in accordance with ASC 718.

A summary of the Company’s stock options activity under the Plan and related information is as follows:

	Year Ended December 31, 2011					Year Ended December 31, 2010
	Shares			Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding at beginning of period		1,662,827		$	3.15		23,612	$	8.23
Granted		886,000		$	1.67		1,639,215	$	3.08
Cancelled		(1,312,485	)	$	2.79		-		-
Outstanding at end of period and expected to vest		1,236,342		$	2.47		1,662,827	$	3.15
Options exercisable		476,014		$	3.02		57,231	$	4.66
Weighted-average fair value of options granted during the period				$	1.33			$	2.47

The weighted average remaining contractual life of stock options outstanding at December 31, 2011 is 8.6 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 December 31, 2011 for those options that have an exercise price below the quoted closing price. As of December 31, 2011, all stock options have an exercise price at or above the quoted closing price of the common stock of the Company, resulting in no intrinsic value.

As of December 31, 2011, the total compensation expense related to non-vested options not yet recognized totaled $749,113. The weighted-average vesting period over which the total compensation expense related to non-vested options not yet recognized at December 31, 2011 was approximately 1.6 years.

Warrants

As of December 31, 2011, there were warrants issued in 2008 to consultants to purchase 17,869 shares with an exercise price of $10.66 and 18,250 warrants to purchase shares with an exercise price of $7.84 which have been issued to placement agents in connection with the Company’s previous Convertible Note financings. The warrants are fully vested.

See Note 6 for a discussion of warrants issued in connection with the Third Bridge Notes. See Note 8 for a discussion of warrants issued in connection with the Company’s IPO.

F-19

CORMEDIX INC.
(A Development Stage Company)

NOTES TO 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 $678,284.

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 into the fourth quarter of 2012.

Note 9 — Fair Value Measurements:

The fair value of the Company’s cash and cash equivalents and accounts payable at December 31, 2011 and 2010 are estimated to approximate their carrying values due to the relative liquidity and short term nature of these instruments.

Note 10 — License Agreements:

On July 28, 2006, the Company entered into a contribution agreement (as amended on October 6, 2009 and on February 22, 2010) (the “Shiva Contribution Agreement”) with Shiva Biomedical, LLC, a New Jersey limited liability company (“Shiva”), and certain other parties. Pursuant to the Shiva Contribution Agreement, Shiva contributed to the Company its kidney products business and granted the Company an exclusive, worldwide license agreement for a patent estate covering proprietary formulations of the first “iron chelator” for kidney diseases, specifically deferiprone (the “Compound”), and a biomarker diagnostic test for measuring levels of labile iron (the “Test”). Specifically, the Company licensed treatment, formulation and dosing regimens and methods of using the Compound and the Test, for the treatment and diagnosis of diseases and disorders, and the corresponding United States and foreign patents and applications in all fields of use (collectively, the “Shiva Technology”). As consideration in part for the rights to the Shiva Technology, the Company paid Shiva an initial licensing fee of $500,000 and granted Shiva up to a 20% equity interest in the Company consisting of shares of the Company’s Series B, C, D, E and F Common Stock which were placed in escrow to be released upon the achievement of certain clinical milestones. Pursuant to the October 2009 amendment and corresponding Exchange Agreement, Shiva surrendered all rights to such shares in exchange for 7.0% of the outstanding shares of Common Stock as of the date of exchange, or 98,739 shares (see Note 7). The Company was also obligated to issue additional shares of Common Stock to Shiva sufficient to maintain its ownership percentage at 7.0% of the outstanding Common Stock on a fully diluted basis, and the Company issued an additional 412,338 shares to Shiva at a price of $3.125 per share as a result this obligation in connection with the Company’s IPO; however, such anti-dilution obligation terminated upon the completion of the IPO. In addition, the Company will be required to make substantial payments to Shiva upon the achievement of certain clinical and regulatory based milestones. The maximum aggregate amount of such milestone payments, assuming achievement of all milestones, is $10,000,000. Events that trigger milestone payments include, but are not limited to, the reaching of various stages of clinical trials and regulatory approval processes. In the event that the Shiva Technology is commercialized, the Company is obligated to pay to Shiva annual royalties based upon net sales of the product. In the event that the Company sublicenses the Shiva Technology to a third party, the Company is obligated to pay to Shiva a portion of the royalties, fees or other lump-sum payments it receives from the sublicense, subject to certain deductions. Through December 31, 2011, no milestone payments or royalty payments have been earned by or paid to Shiva. The Company has the right to terminate the Shiva Contribution Agreement for any reason upon 30 days prior written notice. Should the Shiva Contribution Agreement be terminated by either party, the Company is obligated to reassign to Shiva all of the Company’s intellectual property rights with respect to the Shiva Technology.

On February 22, 2010, the Company and Shiva entered into an amendment to the Shiva Contribution Agreement, pursuant to which the Company’s deadline for meeting a certain development progress requirement was extended from April 30, 2010 to June 30, 2010 and the Company paid $25,000 to Shiva following completion of the Company’s IPO, as partial reimbursement for Shiva’s expenses in connection with such amendment and prior amendments to the Shiva Contribution Agreement.

F-20

CORMEDIX INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

On August 29, 2011, the Company and Shiva entered into an amendment to the Shiva Contribution Agreement, pursuant to certain changes with respect to the development and milestone payments of the licensed products.

On December 1, 2011, the Company issued Shiva a notice of termination letter of the license agreement and, as such, has no further financial obligation to Shiva.

During the years ended December 31, 2011 and 2010 and the period from July 28, 2006 (Inception) to December 31, 2011, the Company expensed $100,000, $1,288,556 and $4,920,310, respectively, in connection with the Shiva Contribution Agreement.

In connection with the Shiva Contribution Agreement, on July 28, 2006, the Company entered into a Consulting Agreement with Dr. Sudhir Shah, which was amended and restated on April 1, 2010 as a Scientific Advisory Board Agreement (the “Shah Consulting Agreement”) and was further amended and restated on August 29, 2011. Pursuant to the Shah Consulting Agreement, as amended, for a period of one year commencing on April 1, 2010, Dr. Shah provides the Company with consulting services involving areas mutually agreed to by Dr. Shah and the Company and beginning on August 29, 2011 provides consulting services for up to 17.5 hours per month and serves on one of the Company’s Scientific Advisory Boards. During the years ended December 31, 2011 and 2010 and the period from July 28, 2006 (Inception) to December 31, 2011, the Company expensed $29,000, $84,000 and $196,000, respectively, in connection with the Shah Consulting Agreement.

On January 30, 2008, the Company entered into a License and Assignment Agreement (the “NDP License Agreement”) with ND Partners LLC, a Delaware limited liability company (“NDP”). Pursuant to the NDP License Agreement, NDP granted the Company exclusive, worldwide licenses for certain antimicrobial catheter lock solutions, processes for treating and inhibiting infections, a biocidal lock system and a taurolidine delivery apparatus, and the corresponding United States and foreign patents and applications (the “NDP Technology”). The Company acquired such licenses and patents through our assignment and assumption of NDP’s rights under certain separate license agreements by and between NDP and Dr. Hans-Dietrich Polaschegg, Dr. Klaus Sodemann and Dr. Johannes Reinmueller. NDP also granted the Company exclusive licenses, with the right to grant sublicenses, to use and display certain trademarks in connection with the NDP Technology. As consideration in part for the rights to the NDP Technology, the Company paid NDP an initial licensing fee of $325,000 and granted NDP a 5% equity interest in the Company, consisting of 39,980 shares of the Company’s Common Stock. In connection with this stock issuance, the Company recorded $328,948 of research and development expense in 2008. In addition, the Company is required to make payments to NDP upon the achievement of certain regulatory and sales-based milestones. Certain of the milestone payments are to be made in the form of shares of common stock currently held in escrow for NDP, and other milestone payments are to be paid in cash. The Company was also obligated to issue additional shares of common stock to NDP sufficient to maintain its ownership percentage at 5.0% of the outstanding common stock (7.0%, including the escrow shares) on a fully diluted basis, until such time that the Company has raised $25 million through the sale of its equity securities or until an initial public offering, reverse merger or a sale of the Company. As a result of this obligation, in October 2009, the Company issued an additional 28,156 shares to NDP and an additional 11,263 shares into the escrow, at a price of $32.05 per share, in connection with the issuance of shares to Shiva under the Exchange Agreement as described above, and in March 2010 the Company issued an additional 297,398 shares to NDP and an additional 118,288 shares into the escrow, at a price of $3.125 per share, in connection with the Company’s IPO; however, such anti-dilution obligation terminated upon the completion of the IPO. The maximum aggregate number of shares issuable upon achievement of milestones and the number of shares held in escrow as of December 31, 2011 is 145,543 shares of common stock. The maximum aggregate amount of cash payments upon achievement of milestones is $3,000,000. Events that trigger milestone payments include but are not limited to the reaching of various stages of regulatory approval processes and certain worldwide net sales amounts. Through December 31, 2011, no milestone payments have been earned by or paid to NDP.

The NDP License Agreement may be terminated by the Company on a country-by-country basis upon 60 days prior written notice. If the NDP License Agreement is terminated by either party, the Company’s rights to the NDP Technology will revert back to NDP.

F-21

CORMEDIX INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

During the years ended December 31, 2011 and 2010 and the period from July 28, 2006 (Inception) to December 31, 2011, the Company expensed $0, $929,367 and $2,515,782, respectively, in connection with the NDP License Agreement.

On January 30, 2008, the Company also entered into an Exclusive License and Consulting Agreement with Dr. Polaschegg (the “Polaschegg License Agreement”). The Polaschegg License Agreement replaced the original license agreement between NDP and Dr. Polaschegg that the Company was assigned and the Company assumed under the NDP License Agreement. Pursuant to the Polaschegg License Agreement, Dr. Polaschegg granted the Company an exclusive, worldwide license for a certain antimicrobial solution and certain taurolidine treatments and the corresponding United States patent applications (the “Polaschegg Technology”), and agreed to provide the Company with certain consulting services. As consideration for the rights to the Polaschegg Technology, the Company paid Dr. Polaschegg an initial payment of $5,000 and agreed to pay Dr. Polaschegg certain royalty payments ranging from 1% to 3% of the net sales of the Polaschegg Technology. The Polaschegg License Agreement also sets forth certain minimum royalty payments (on an annual basis) to be made to Dr. Polaschegg in connection with the Polaschegg Technology, which payments range from $10,000 to $90,000. As compensation for Dr. Polaschegg’s consulting services to be provided under the Polaschegg License Agreement, Dr. Polaschegg is being paid €200 per hour for services consisting of scientific work and €250 per hour for services consisting of legal work.

The Company may terminate the Polaschegg License Agreement with respect to any piece of the Polaschegg Technology upon 60 days notice. If the Polaschegg License Agreement is terminated with respect to any piece of the Polaschegg Technology by either party, all rights with respect to such portion of the Polaschegg Technology will revert to Dr. Polaschegg.

During the years ended December 31, 2011 and 2010 and the period from July 28, 2006 (Inception) to December 31, 2011, the Company expensed approximately $93,000, $132,000 and $471,000, respectively, in connection with the Polaschegg License Agreement.

Note 11 – Other Income

During November 2010, the Company received approximately $391,000, net of expenses, from the Qualifying Therapeutic Discovery Project (“QTDP”) program which was recorded as other income. The QTDP program was established as a result of the Patient Protection and Affordable Care Act of 2010 to provide tax credits or grants to taxpayers with no more than 250 employees in an amount equal to 50% of eligible 2009 and 2010 expenses related to a QTDP. The QTDP program targeted projects that show potential to produce new therapies to treat areas of unmet medical need or prevent, detect or treat chronic or acute diseases and conditions, reduce long-term health care costs in the United States, or significantly advance the goal of curing cancer within the next 30 years. As part of the review process for research projects, the Department of Health and Human Services evaluated each project and only projects that show a reasonable potential to meet these goals were certified as eligible for the credit or grant. Allocation of the credit also took into consideration which projects show the greatest potential to create and sustain high-quality, high-paying U.S. jobs and to advance U.S. competitiveness in life, biological and medical sciences. The grant amounts were further limited because the QTDP program was oversubscribed resulting in the Company receiving significantly less than 50% of its qualifying expenditures.

Note 12 – Retirement Plan:

On May 1, 2010, the Company adopted a 401(k) savings plan (the “401(k) Plan”) for the benefit of its employees. Under the Safe Harbor provisions of the 401(k) Plan, the Company is required to make contributions equal to 3% of eligible compensation for each eligible employee whether or not the employee contributes to the 401(k) Plan. For the years ended December 31, 2011 and 2010 and from July 28, 2006 (inception) through December 31, 2011, the Company has recorded $26,651, $6,369 and $33,020, respectively, of required contributions in accordance to the Safe Harbor provision of the 401(k) Plan.

F-22

CORMEDIX INC.
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

Note 13 — Subsequent Events:

On January 3, 2012, the Company received $493,855 from the sale of its unused Net Operating Losses (“NOLs”), through the State of New Jersey’s Economic Development Authority (“NJEDA”) Technology Business Tax Certificate Transfer Program. As of December 31, 2011, $1,196,581 of NOLs has been approved for future sale under the NJEDA program. In order to realize these benefits, the Company must apply to the NJEDA each year and must meet various requirements for continuing eligibility. In addition, the program must continue to be funded by the State of New Jersey and there are limitations based on the level of participation by other companies. Any future tax benefits will be recognized in the financial statements as specific sales are approved.

On February 29, 2012, the Company and Dr. Mark A. Klausner, the Company’s Chief Medical Officer, agreed to amend Dr. Klausner’s employment agreement (the “Employment Agreement”) in order to reduce the Company’s overhead expenditures and help achieve the Company’s strategic focus of achieving CE Mark approval for the Company’s Neutrolin^® product candidate. The amendment to the Employment Agreement (the “Amendment”), effective as of March 1, 2012, provides for a fifty percent (50%) reduction in both Dr. Klausner’s services to the Company and his compensation. Pursuant to the Amendment, the Company shall pay Dr. Klausner an annual base salary equal to $155,000 (the “Base Salary”) and, at the sole discretion of the Board of Directors of the Company, the Company shall pay Dr. Klausner an additional cash bonus each calendar year during the Term (as defined below) in an amount equal to up to 35% of the aggregate Base Salary. The Amendment maintained the term of the Employment Agreement (the “Term”), which commenced on March 1, 2011 and shall continue for two (2) years, unless earlier terminated. Except as discussed above, the terms and conditions of the Employment Agreement shall otherwise remain in full force and effect.

F-23

EXHIBIT INDEX

Exhibit No.		Description

3.1		Form of Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.3 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 1, 2010).

3.2		Form of Amended and Restated By-laws (incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 1, 2010).

4.1		Specimen common stock certificate (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 19, 2010).

4.2		Specimen Unit certificate (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 19, 2010).

4.3		Specimen warrant certificate (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 19, 2010).

4.4		Form of warrant agreement (incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 19, 2010).

4.5		Common Stock Exchange and Stockholder Agreement, dated as of October 6, 2009, by and between CorMedix Inc. and Shiva Biomedical, LLC (incorporated by reference to Exhibit 4.6 to the Registration Statement on Form S-1 (File No. 333-163380), filed with the SEC on November 25, 2009).

4.6		Stockholder Agreement, dated as of January 30, 2008, between the Company and ND Partners LLC (incorporated by reference to Exhibit 4.7 to the Registration Statement on Form S-1 (File No. 333-163380), filed with the SEC on November 25, 2009).

4.11		Form of Third Bridge Warrant (incorporated by reference to Exhibit 4.18 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on January 20, 2010).

10.1		Contribution Agreement, dated as of July 28, 2006, by and between Shiva Biomedical, LLC, Picton Pharmaceuticals, Inc., Picton Holding Company, Inc., and the stockholders of Picton Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on December 31, 2009).‡

10.2		Amendment to Contribution Agreement, dated as of October 6, 2009, by and between Shiva Biomedical, LLC and CorMedix, Inc. (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on December 31, 2009).‡

10.3		Amendment No. 2 to Contribution Agreement, dated as of February 22, 2010, by and between the Company and Shiva Biomedical, LLC (incorporated by reference to Exhibit 10.15 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 1, 2010).

10.4		License and Assignment Agreement, dated as of January 30, 2008, between the Company and ND Partners LLC. (incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on December 31, 2009).‡

10.5		Escrow Agreement, dated as of January 30, 2008, among the Company, ND Partners LLC and the Secretary of the Company, as Escrow Agent (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1 (File No. 333-163380), filed with the SEC on November 25, 2009).

10.6		Exclusive License and Consulting Agreement, dated as of January 30, 2008, between the Company and Hans-Dietrich Polaschegg (incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 1, 2010).‡

10.7		Amended and Restated Consulting Agreement, dated as of January 10, 2008, between the Company and Sudhir V. Shah, M.D. (incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-1 (File No. 333-163380), filed with the SEC on November 25, 2009).

10.8		Consulting Agreement, dated as of January 30, 2008, between the Company and Frank Prosl (incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-1 (File No. 333-163380), filed with the SEC on November 25, 2009).

10.9		Supply Agreement, dated as of December 7, 2009, between the Company and Navinta, LLC (incorporated by reference to Exhibit 10.13 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 1, 2010).‡

10.10		Manufacture and Development Agreement, dated as of March 5, 2007, by and between the Company and Emcure Pharmaceuticals USA, Inc. (incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on December 31, 2009).‡

10.13		Employment Agreement, dated as of February 4, 2010, between the Company and Brian Lenz (incorporated by reference to Exhibit 10.16 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 1, 2010).

10.14		Amendment to Employment Agreement, dated as of January 14, 2011, by and between CorMedix Inc. and Brian Lenz (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed with the SEC on January 19, 2011).

10.15		Employment Agreement, dated as of February 25, 2011, between the Company and Mark Klausner, M.D. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the SEC on March 3, 2011).

10.16		Amended and Restated 2006 Stock Incentive Plan (incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 1, 2010).

10.17		Form of Indemnification Agreement between the Company and each of its directors and executive officers (incorporated by reference to Exhibit 10.17 to the Registration Statement on Form S-1/A (File No. 333-163380), filed with the SEC on March 1, 2010).

10.18		Separation and General Release Agreement, effective as of September 30, 2011, by and between the Company and John C. Houghton (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q, filed with the SEC on November 10, 2011).

10.19		Amendment No. 3 to Contribution Agreement, effective as of August 31, 2011, by and between the Company and Shiva Biomedical , LLC (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q, filed with the SEC on November 10, 2011). ‡

23.1		Consent of Independent Registered Public Accounting Firm.*

31.1		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 Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101		The following materials from CorMedix Inc. Form 10-K for the year ended December 31, 2011, formatted in Extensible Business Reporting Language (XBRL): (i) Balance Sheets at December 31, 2011 and December 31, 2010, (ii) Statements of Operations for the years ended December 31, 2011 and 2010 and for the Cumulative Period from July 28, 2006 (inception) through December 31, 2011, (iii) Statements of Changes in Stockholders’ Equity for the year ended December 31, 2011, (iv) Statements of Cash Flows for the years ended December 31, 2011 and 2010 and for the Cumulative Period from July 28, 2006 (inception) through December 31, 2011 and (v) Notes to the Financial Statements.**

Filed herewith.

‡

Confidential treatment has been granted for portions of this document. The omitted portions of this document have been filed separately with the SEC.