What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-03-09 compared with 2020-03-05 · 12 added, 889 removed, 38 unchanged (96% of the section changed)

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

Market Information

Beginning on December

23, 2014, our common stock began trading on Nasdaq under the symbol “CTSO.”

Previously, the Company’s common

stock traded in the over-the counter-market on the OTC Bulletin Board.

Beginning on December 23, 2014, our common stock began trading on Nasdaq under the symbol “CTSO.” Previously, the Company’s common stock traded in the over-the counter-market on the OTC Bulletin Board.

Approximate Number of Equity Security Holders

As of February 15,

2020, there were approximately 8,400 stockholders of record.

Because shares of our Common Stock are held by depositaries, brokers

and other nominees, the number of beneficial holders of our shares is larger than the number of stockholders of record.

As of February 15, 2021, there were approximately 12,300 stockholders of record.

Because shares of our common stock are held by depositaries, brokers and other nominees, the number of beneficial holders of our shares is larger than the number of stockholders of record.

Stock Performance Graph

The following graph

shows the value of an investment of $100 on December 31, 2014 in each of CytoSorbents Corporation common stock, the Russell 2000

Index and the Nasdaq Biotech Index.

All values assume reinvestment of the pretax value of dividends and are calculated as of December

31 st of each year.

The historical stock price performance of the Company’s common stock shown in the performance

graph is not necessarily indicative of future stock price performance.

The following graph shows the value of an investment of $100 on December 31, 2015 in each of CytoSorbents Corporation common stock, the Russell 2000 Index and the Nasdaq Biotech Index.

All values assume reinvestment of the pretax value of dividends and are calculated as of December 31 st of each year.

The historical stock price performance of the Company’s common stock shown in the performance graph is not necessarily indicative of future stock price performance.

CytoSorbents Corporation vs.

2000 Index and Nasdaq Biotech Index

Comparison of 5 Year Total Cumulative

Russell 2000 Index and Nasdaq Biotech Index

Comparison of 5 Year Total Cumulative Return

Value of a $100 Investment on December 31, 2015

Issuer Purchases of Securities

There were no repurchases

of the Company’s securities during the year ended December 31, 2019.

There were no repurchases of the Company’s securities during the year ended December 31, 2020.

Recent Sales of Unregistered Securities

We had no sales of

unregistered securities in 2019 that have not been previously disclosed in a Current Report on Form 8-K or Quarterly Report on

We had no sales of unregistered securities in 2020 that have not been previously disclosed in a Current Report on Form 8-K or Quarterly Report on Form 10-Q.

Selected Financial Data.

The following table

summarizes our selected financial data for the periods and as of the dates indicated, which have been derived from our audited

financial statements and related notes and should be read together with the section titled “Management’s Discussion

and Analysis of Financial Condition and Results of Operations”

and with our consolidated financial statements and related

notes, which are included elsewhere in this Annual Report.

Year Ended December 31,

The following table summarizes our selected financial data for the periods and as of the dates indicated, which have been derived from our audited financial statements and related notes and should be read together with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with our consolidated financial statements and related notes, which are included elsewhere in this Annual Report.

Other revenue

7 unchanged sentences

Loss from operations

(18,974,064 )

(15,584,928 )

(11,492,125 )

Other income (expense):

3 unchanged sentences

Loss before benefit from income taxes

(20,358,090 )

(17,830,725 )

(12,082,006 )

Benefit from income taxes

(19,265,644 )

(17,211,179 )

(11,763,456 )

Net loss available to common stockholders, basic and diluted

$ (19,265,644 )

$ (17,211,179 )

$ (8,796,530 )

$ (11,763,456 )

$ (9,477,208 )

Weighted average common shares outstanding, basic and diluted

3 unchanged sentences

Cash and cash equivalents

Short term investments

Working capital

7 unchanged sentences

Total stockholders’ equity

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

The following discussion

and analysis of the results of operations and financial condition for the fiscal years ended December 31, 2019, 2018 and 2017 should

be read in conjunction with our financial statements, and the notes to those financial statements that are included elsewhere in

We are a leader in

critical care immunotherapy using blood purification technology to treat deadly inflammation in hospitalized patients around the

The technology is based upon biocompatible, highly porous polymer sorbent beads that are capable of extracting unwanted

substances from blood and other bodily fluids.

The technology is protected by 21 issued U.S.

patents, multiple issued foreign patents

and multiple applications pending both in the U.S.

and internationally.

Our intellectual property consists of composition of matter,

materials, methods of production, systems incorporating the technology and multiple medical uses with expiration dates ranging

from one to 16 years.

In March 2011, we

received EU regulatory approval under the CE Mark and Medical Devices Directive for our flagship product, CytoSorb, as an

extracorporeal cytokine filter indicated for use in clinical situations where cytokines are elevated.

The goal of CytoSorb is

to prevent or treat organ failure by reducing cytokine storm and the potentially deadly systemic inflammatory response

syndrome in diseases such as sepsis, trauma, burn injury, acute respiratory distress syndrome, pancreatitis, liver failure,

and many others.

Organ failure is the leading cause of death in the ICU, and remains a major unmet medical need, with little

more than supportive care therapy (e.g., mechanical ventilation, dialysis, vasopressors, fluid support, ECMO, etc.) as

treatment options.

By potentially preventing or treating organ failure, CytoSorb may improve clinical outcome, including

survival, while reducing the need for costly ICU treatment, thereby potentially saving significant healthcare costs.

is also being used during and after cardiac surgery to remove inflammatory mediators, such as cytokines and free hemoglobin,

which can lead to post-operative complications including multiple organ failure.

In January 2018, the Company received

approval for the first CytoSorb label expansion increasing treatment time from six hours to 24 hours.

In May 2018, the

Company received the second label expansion for CytoSorb covering use of the device for the removal of bilirubin and

myoglobin in the treatment of liver failure and trauma, respectively.

In January 2020, the Company received the third a label

expansion for CytoSorb covering the use of the device for the removal of the anti-platelet agent, ticagrelor, in cardiac

patients during surgery requiring cardiopulmonary bypass.

Our CE Mark enables

CytoSorb to be sold throughout all 27 countries of the EU and the United Kingdom.

In addition, many countries outside the EU accept

CE Mark approval for medical devices, but may also require registration with or without additional clinical studies.

approved indication enables CytoSorb to be used “on-label”

in diseases where cytokines are elevated including, but

not limited to, critical illnesses such as those mentioned above, autoimmune disease flares, cancer cachexia, and many other conditions

where cytokine-induced inflammation plays a detrimental role.

As part of the CE

Mark approval process, we completed our randomized, controlled, European Sepsis Trial amongst fourteen trial sites in Germany

in 2011, with enrollment of 100 patients with predominantly septic shock and respiratory failure.

The trial established that

CytoSorb was safe in this critically-ill population, and that it was able to broadly reduce key cytokines from the blood of

these patients.

We plan to conduct larger, prospective studies in septic patients in the future to confirm the European

Sepsis Trial findings.

In addition to CE

Mark approval, we also achieved ISO 13485:20016 Full Quality Systems certification, an internationally recognized quality

standard designed to ensure that medical device manufacturers have the necessary comprehensive management systems in place to

safely design, develop, manufacture and distribute medical devices in the EU.

We manufacture CytoSorb at our manufacturing

facilities in New Jersey for sale and for additional clinical studies.

We also established specific reimbursement for

CytoSorb in Germany.

We have also been assigned two specific procedure codes for our

CytoSorb device in Switzerland that are pending reimbursement valuation assignment.

From September 2011

through June 2012, we began a controlled market release of CytoSorb in select geographic territories in Germany with the primary

goal of preparing for commercialization of CytoSorb in Germany in terms of manufacturing, reimbursement, logistics, infrastructure,

marketing, contacts, and other key issues.

In late June 2012,

following the establishment of our European subsidiary, CytoSorbents Europe GmbH, we began the commercial launch of CytoSorb in

Germany with the hiring of Dr.

Christian Steiner as Vice President of Sales and Marketing and three additional sales representatives.

The fourth quarter of 2012 represented the first full quarter of direct sales with the full sales team in place.

During this period,

we expanded our direct sales efforts to include both Austria and Switzerland.

In March 2016, we established

CytoSorbents Switzerland GmbH, a wholly-owned subsidiary of CytoSorbents Europe GmbH, to conduct marketing and direct sales in

This subsidiary began operations during the second quarter of 2016.

In 2017, we further expanded our direct sales

efforts into Belgium and Luxemburg.

On March 5, 2019, the

Company announced the expansion of direct sales of CytoSorb for all applications to Poland and the Netherlands, and critical care

applications to Sweden, Denmark and Norway.

As part of this effort, the Company established CytoSorbents Poland Sp.

Z.o.o., a wholly-owned

subsidiary of CytoSorbents Europe GmbH.

At the end of 2018,

we had hundreds of KOLs in our commercialized territories worldwide in critical care, cardiac surgery, and blood purification who

were either using CytoSorb or supporting its use in clinical practice or clinical trials.

In the third quarter

of 2019, we established CytoSorbents UK Limited, a wholly-owned subsidiary of CytoSorbents Medical, Inc., to manage our clinical

trial activities in the United Kingdom.

As of February 10,

2020, our European commercialization team includes 79 people.

We have complemented

our direct sales efforts with sales to distributors and/or corporate partners.

In 2013, we reached agreement with distributors

in the United Kingdom, Ireland, the Netherlands, Russia and Turkey.

In December 2014, we entered into an exclusive agreement with

Smart Medical Solutions S.R.L., to distribute CytoSorb for critical care applications in Romania and the neighboring Republic of

In 2015, we announced exclusive distribution agreements with Aferetica s.r.l.

to distribute CytoSorb in Italy, AlphaMedix

to distribute CytoSorb in Israel, TekMed Pty Ltd.

to distribute CytoSorb in Australia and New Zealand, and Hoang Long Pharma

to distribute CytoSorb in Vietnam.

In June 2016, we announced an exclusive distribution agreement with Palex Medical SA to distribute

CytoSorb in Spain and Portugal.

In September 2016, we announced an exclusive agreement with Armaghan Salamat Kish Group (Arsak)

to distribute CytoSorb in Iran.

In April 2017, we entered into a distribution agreement with KRA Technical Services to distribute

CytoSorb in Qatar.

In July 2017, we announced an exclusive agreement with Droguería, Ramón, González, Revilla

to distribute CytoSorb in Panama.

In April 2018, we entered into exclusive agreements with Pharmaworld and Chong Lap

to distribute CytoSorb in Lebanon and Hong Kong, respectively.

As of the third quarter of 2018, we had expanded

distribution to include Bosnia, Herzegovina, and Croatia with Medis, d.o.o.;

Estonia, Latvia, and Lithuania with SIA Scanmed;

Montenegro and Serbia with Mar Medica, d.o.o.

and Cardiotec Vascular Ltda., in Chile.

In March 2019, we announced the registration

of CytoSorb in Israel and the change to Gad Medical as the distributor in Israel.

As of July 2019, we expanded distribution to

include a new distributor in Saudi Arabia with Al Mofadaly Trading Est.

In August 2019, we announced expanded distribution in Latin

America with the addition of Conatti Medical in Brazil, Service & Medical Columbia in Columbia and Nutricare Costa Rica in

We have been working

to expand the number and scope of our strategic partnerships.

In September 2013, we entered into a strategic partnership with Biocon

Ltd., India’s largest biopharmaceuticals company, with an initial distribution agreement for India and select emerging markets,

under which Biocon has the exclusive commercialization rights for CytoSorb initially focused on sepsis.

In October 2014, the Biocon

partnership was expanded to include all critical care applications and cardiac surgery.

In addition, Biocon committed to higher

annual minimum purchases of CytoSorb to maintain distribution exclusivity and committed to conduct and publish results from multiple

investigator-initiated studies and patient case studies.

In December 2017, the Biocon partnership was further expanded to include

exclusive distribution of CytoSorb in Malaysia.

Under the terms of the agreement, Biocon has committed to minimum annual purchases

in Malaysia to maintain exclusivity this territory.

In addition, the term of the original agreement was extended to December 2022.

In December 2014, we

entered into a multi-country strategic partnership with Fresenius Medical Care AG & Co KGaA (“Fresenius”) to commercialize

the CytoSorb therapy.

Under the agreement reflecting the terms of the partnership, Fresenius was granted exclusive rights to distribute

CytoSorb for critical care applications in France, Poland, Sweden, Denmark, Norway, and Finland.

The partnership allows Fresenius

to offer an innovative and easy way to use blood purification therapy for removing cytokines in patients that are treated in the

To promote the success of CytoSorb, Fresenius agreed to also engage in the ongoing clinical development of the product.

includes the support and publication of a number of small case series and patient case reports as well as the potential for future

larger, clinical collaborations.

In May 2016, Fresenius launched the product in the six countries for which it was granted exclusive

distribution rights.

In January 2017, the Fresenius partnership was expanded pursuant to a revised three year agreement.

of the revised three-year agreement extended Fresenius’

exclusive distributorship of CytoSorb for all critical care applications

in their existing territories through 2019 and include guaranteed minimum quarterly orders and payments, evaluable every one and

a half years.

At the same time, we entered into a new comprehensive co-marketing agreement with Fresenius.

Under the terms of the

co-marketing agreement, CytoSorbents and Fresenius agreed to jointly market CytoSorb to Fresenius’

critical care customer

base in all countries where CytoSorb is being actively commercialized.

CytoSorb will continue to be sold by our direct sales force

or through our international network of distributors and partners, while Fresenius sells all ancillary products to their customers.

Fresenius further agreed to provide written endorsements of CytoSorb for use with their multiFiltrate and multiFiltratePRO acute

care dialysis machines that can be used by us and our distribution partners to promote CytoSorb worldwide.

Training and preparation

for this co-marketing program began in five initial countries in 2017 and is continuing, with implementation of the co-marketing

program in additional countries planned for the future.

In December 2018, the

Fresenius agreement originally signed in 2014 was amended, thereby modifying the territory to include exclusive distribution rights

for Czech Republic and Finland and all critical care medicine and intensive care unit (ICU) applications on dialysis or ECMO machines

In addition, starting in 2019, Poland, Sweden, Denmark, and Norway were transitioned into the co-marketing program.

Finally, the guaranteed minimum quarterly purchases and payments requirements were removed for 2019.

In addition, in this

December 2018 reconfiguration of territories, the Fresenius partnership was expanded to include South Korea and Mexico.

terms of these agreements, Fresenius Medical Care has the exclusive rights to distribute CytoSorb for acute care and other hospital

applications in Korea and Mexico.

Commercial sales of CytoSorb are expected to commence after securing market registration clearance

from Korean and Mexican health authorities.

These multi-year agreements include an initial stocking order and are subject to annual

minimum purchases of CytoSorb to maintain exclusivity.

In September 2016,

we entered into a multi-country strategic partnership with Terumo Cardiovascular Group to commercialize CytoSorb for cardiac surgery

applications.

Under the terms of the agreement, Terumo has exclusive rights to distribute the CytoSorb cardiopulmonary bypass (“CPB”)

procedure pack for intra-operative use during cardiac surgery in France, Sweden, Denmark, Norway, Finland and Iceland.

Terumo launched

the product in these six countries in December 2016.

In March 2017, we announced

a partnership with Dr.

Reddy’s Laboratories to exclusively distribute CytoSorb in South Africa for multiple applications.

In December 2019, we discontinued this partnership.

We continuously evaluate

other potential distributor and strategic partner networks in other countries where we are approved to market the device.

Concurrent with

our commercialization plans, we intend to conduct or support additional clinical studies in sepsis, cardiac surgery, and

other critical care diseases to generate additional clinical data to expend the scope of clinical experience for marketing

purposes, to increase the number of treated patients, and to support potential future publications.

We have completed a

single arm, dose ranging trial in Germany amongst several clinical trial sites supporting the safety and efficacy of CytoSorb

when used 24 hours per day for seven days, each day with a new device.

addition, we now have more than 50 investigator-initiated studies planned, enrolling or completed in Germany, Austria,

Switzerland, the Netherlands, Hungary, the United Kingdom, India, and the U.S.

Approximately 20 of these studies are

currently enrolling patients.

Others have been completed.

These trials, which are funded and supported by well-known

university hospitals and KOLs, are post-market clinical studies.

They have provided and will continue to provide invaluable

information regarding the success of the device in the treatment of sepsis, cardiac surgery, trauma, and many other

indications, and if successful, will be integral in helping to drive additional usage and adoption of

In February 2015, the

Food and Drug Administration (the “FDA”) approved our Investigational Device Exemption (“IDE”) application

to commence a planned U.S.

cardiac surgery feasibility study called REFRESH I (REduction of FREe Hemoglobin) amongst 20 patients

and three U.S.

clinical sites.

The FDA subsequently approved an amendment to the protocol, expanding the study to a 40-patient

randomized controlled study (20 treatment, 20 control) in eight clinical centers.

REFRESH I represented the first part of a larger

clinical trial strategy intended to support the approval of CytoSorb in the U.S.

for intra-operative use during cardiac surgery.

The REFRESH I study

was designed to evaluate the safety and feasibility of CytoSorb when used intra-operatively with a heart-lung machine to reduce

plasma free hemoglobin (pfHb) and cytokines in patients undergoing complex cardiac surgery.

The study was not powered to

measure effect on clinical outcomes.

The length, complexity and invasiveness of these procedures cause hemolysis and inflammation,

leading to high levels of plasma free hemoglobin, cytokines, activated complement, and other substances.

These inflammatory

mediators are correlated with the incidence of serious post-operative complications such as kidney injury, renal failure and other

organ dysfunction.

The goal of CytoSorb is to actively remove these inflammatory and toxic substances as they are being generated

during the surgery and reduce complications.

Enrollment was completed with 46 patients.

A total of 38 patients were evaluable for

pfHb and completed all aspects of the study.

The primary safety

and efficacy endpoints of the study were the assessment of serious device related adverse events and the change in plasma free

hemoglobin levels, respectively.

On October 5, 2016, we announced positive top-line safety data.

In addition, following a

detailed review of all reported adverse events in a total of 46 enrolled patients, the independent Data Safety Monitoring Board

(“DSMB”) found no serious device related adverse events with the CytoSorb device, achieving the primary safety endpoint

of the study.

In addition, the therapy was well-tolerated and technically feasible, implementing easily into the cardiopulmonary

bypass circuit without the need for an additional external blood pump.

The REFRESH I study represented the first randomized

controlled study demonstrating the safety of intra-operative CytoSorb use in patients undergoing high risk cardiac operations.

Investigators of the

REFRESH I study submitted an abstract with data, including free hemoglobin data, from the REFRESH I study which was selected for

a podium presentation at the American Association of Thoracic Surgery conference on May 1, 2017.

On May 5, 2017, we announced additional

REFRESH I data, including data from the study on the reduction of pfHb and activated complement, and in May 2019, the manuscript

of the REFRESH I study was electronically published in the journal, Seminars in Thoracic and Cardiovascular Surgery.

In December 2017,

the FDA approved our IDE application for our REFRESH 2-AKI study, permitting us to conduct this pivotal study designed to provide

the key safety and efficacy data needed to support United States regulatory approval for CytoSorb in cardiac surgery, which we

plan to pursue via the premarket approval (PMA) pathway.

The REFRESH 2-AKI study is a randomized, controlled, multi-center,

clinical study designed to evaluate intraoperative CytoSorb use as a therapy to reduce the incidence and severity of AKI, as measured

by Kidney Disease Improving Global Outcomes (KDIGO) criteria, following complex cardiac surgery.

Postoperative AKI following

cardiac surgery is common and is associated with 1-5 year mortality, and is a risk factor for developing chronic kidney disease

requiring hemodialysis in the future.

The study will enroll up to 400 patients at increased risk of cardiovascular surgery-associated

AKI, undergoing elective, non-emergent open-heart surgery for either valve replacement, or aortic reconstruction with hypothermic

cardiac arrest.

In April 2018, we announced the first patient enrollment into the pivotal U.S.

REFRESH 2-AKI study.

recommendations of key clinical advisors, a protocol amendment was submitted to the FDA on July 19, 2018 to improve operational

aspects of the patient screening process and expand the inclusion criteria.

It was the preference of clinical trial sites

to defer enrollment until the amendment was approved by the FDA, announced in September 2018.

On November 25, 2019 the Company

announced a pause in enrollment for the REFRESH 2-AKI study.

The study’s Data Monitoring Committee (the “DMC”)

recommended this pause following a blinded, interim, milestone review of clinical study data.

The DMC requested that additional

clinical data and data analysis, not pre-specified in the current version of the protocol, be provided by Company.

the Company appointed NAMSA as the new contract research organization (“CRO”) for the study to improve the monitoring

of patient safety endpoints.

As of November 25, 2019, the study had enrolled 153 patients at 25 initiated sites.

Assuming a timely

restart of the study expected by mid-year 2020, we anticipate progressing to a pre-specified interim analysis at 200 patients

enrolled, where the DMC will evaluate the trial for safety and futility, by Q4 2020-Q1 2021.

Assuming no changes to the trial

by the DMC, we expect to complete enrollment in the REFRESH 2-AKI study by the end of 2021.

However, there can be no assurance

the study will be restarted or will enroll patients in a timely manner.

We cannot predict the outcome of a DMC-led interim analysis,

which could have a number of different outcomes such as:

1) continuation of the trial unchanged 2) continuation of trial but with

modifications such as an expansion of the study or a change in the protocol 3) discontinuation of the study due to futility 4)

termination of the study by the FDA or DMC due to potential new safety signals, or 5) other outcomes.

These outcomes may trigger

business and/or clinical decisions on the trial based on factors such as the cost, timing, probability of success of the study,

and other factors.

Because of this, there can be no assurances that trial will continue or have a positive outcome.

the study is successful, we plan to submit a PMA application to the FDA in 2022 for U.S.

regulatory approval.

The German government,

via the German Federal Ministry of Education and Research, is funding a 250 patient, multi-center randomized, controlled study

(“REMOVE”) using CytoSorb during valve replacement open heart surgery in patients with infective endocarditis.

study enrolled its first patient in January 2018.

An interim analysis of the first 50 patients has been completed.

4, 2019, Prof.

Frank Brunkhorst, Director of the Center for Clinical Studies at Jena University Hospital, who is

providing management and oversight to the REMOVE study, and Prof.

Torsten Doenst, Director of the Clinic for Cardiac and

Thoracic Surgery at the University of Jena, provided the following joint statement, “The Scientific Advisory Board (SAB)

of the Center of Sepsis Control and Care (CSCC) and the Data Safety Monitoring Board (DSMB) of the REMOVE study recommended continuation

of the study, based upon results of a pre-specified interim analysis that analyzed cytokine and vasoactive mediator levels as an

indicator of the mechanistic mode of action of the device in 28 CytoSorb-treated patients and 22 control patients.

were no device-associated adverse events in the CytoSorb group.”

As of January 31, 2020, enrollment of the study was complete

with 288 patients enrolled.

Analysis of the study data and issuance of the study report is anticipated to be completed by mid-2020.

In September 2019,

we announced that Hannover Medical School in Germany will begin the first clinical study, called CYTORELEASE, evaluating

the use of CytoSorb in treating CRS and inflammation of the brain called CAR-related Encephalopathy Syndrome (“CRES”),

following CAR-T cell immunotherapy.

The CYTORELEASE trial, entitled “Effectivity of Extracorporeal Cytokine Adsorption

(CytoSorb) as Additive Treatment of CAR-T Cell Associated Cytokine Release Syndrome (“CRS”) and Encephalopathy Syndrome

(“CRES”),”

is a randomized, controlled pilot study in 34 cancer patients who have received CAR-T cell immunotherapy

and who have developed either severe CRS or CRES for a duration less than 6 hours.

Patients will receive either standard

of care therapy versus standard of care therapy plus CytoSorb hemoadsorption.

The primary endpoint of the study is a plasma

reduction of the pro-inflammatory cytokine interleukin-6 (IL-6).

Secondary and exploratory endpoints will examine other potential

clinical benefits such as improvements in CRES, shock, and other organ injury.

The trial has been approved by the Hannover

Medical School ethics committee and has been screening patients for enrollment.

September 2019, a new publication entitled, "Hemoadsorption with CytoSorb showed a decreased observed versus expected 28-day

all-cause mortality in ICU patients with septic shock:

a propensity-score-weighted retrospective study,"

in the journal Critical

In this study, clinical researchers at Maasstad Hospital and at Erasmus University Medical Center in Rotterdam, Netherlands

conducted a retrospective evaluation of 116 patients with septic shock, who required vasopressors to increase their blood pressure,

and renal replacement therapy (RRT) due to kidney failure.

Of these, 49 patients received standard of care therapy, and

67 were treated with standard of care plus CytoSorb.

Both groups were compared by stabilized Inverse Probability of Treatment

Weights (sIPTW) to overcome baseline differences in the type of sepsis, age, comorbidities, surgery vs no surgery, Sequential

Organ Failure Assessment (SOFA) score, use of the vasopressor noradrenaline, and lactate levels.

Patients treated with standard

of care and CytoSorb had a statistically significant reduction in 28-day all-cause mortality compared to standard of care alone

(53% vs 72% control, p<0.04), based on the sIPTW analysis.

In addition, observed 28-day all-cause mortality in the CytoSorb

treatment group was significantly lower than the predicted mortality (48% observed vs 75% predicted, p<0.001), based on SOFA

In October 2019,

CytoSorbents initiated TISORB (Ticagrelor CytoSorb Hemoadsorption), a Company-sponsored, multicenter study in the United

Kingdom to prospectively evaluate the removal of ticagrelor during cardiopulmonary bypass in patients on ticagrelor

undergoing emergent cardiothoracic surgery.

Ticagrelor (Brilinta®, Astra Zeneca) is a potent platelet inhibitor and

antithrombotic therapy and recognized as standard of care to reduce the risk of heart attacks and strokes in patients with

advanced cardiovascular disease.

Unfortunately, given the absence of an approved treatment to reverse the antithrombotic

effects of ticagrelor, the approximately 4% of patients requiring emergency cardiothoracic surgery experience an upto 65%

risk of severe or massive perioperative bleeding with potential negative clinical outcomes or death, with significantly

increased costs to the hospital and healthcare system.

On October 5, 2019, we presented

data showing the cost effectiveness of CytoSorb when used intraoperatively to remove ticagrelor in patients undergoing

emergency open heart surgery at the 33 rd Annual Meeting of the European Association for Cardio-Thoracic

Surgery (EACTS).

This study predicts an average cost savings of £3,982 per patient (approximately $5,000

USD per patient), including the cost of the CytoSorb adsorber.

The primary endpoint of the TISORB study is the change in

platelet reactivity and ticagrelor blood concentration before and after cardiopulmonary bypass for patients undergoing

CytoSorb hemoadsorption removal of ticagrelor from their blood.

A protocol amendment was submitted to expand the population

of eligible patients to now include patients requiring urgent cardiac surgery, and third-party consent.

These changes were

approved by the UK Medicines and Healthcare products Regulatory Agency (MHRA) at the end of February, with approvals pending

from the key regional ethics committees (RECs).

We intend to enroll thirty patients who will have received ticagrelor within

48 hours of undergoing emergent or urgent cardiothoracic surgery with cardiopulmonary bypass.

As of March 5, 2020, the

Company has initiated six sites and one patient has been enrolled.

Once we receive REC approvals, enrollment is expected to

accelerate and be complete in the second half of 2020.

In January 2020, CytoSorb received E.U.

CE Mark label expansion to

include the removal of ticagrelor.

The market focus of

CytoSorb is prevention or treatment of organ failure in life-threatening conditions, including commonly seen illnesses in the ICU

such as infection and sepsis, trauma, burn injury, ARDS, and others.

Severe sepsis and septic shock, a potentially life-threatening

systemic inflammatory response to a serious infection, accounts for approximately 10% to 20% of all ICU admissions and is one of

the largest target markets for CytoSorb.

Sepsis is a major unmet medical need with no approved products in the U.S.

As with other critical care illnesses, multiple organ failure is the primary cause of death in sepsis.

When used with

standard of care therapy, that includes antibiotics, the goal of CytoSorb in sepsis is to reduce the excessive levels of cytokines

and other inflammatory toxins, to help reduce the SIRS response and either prevent or treat organ failure.

We intend to conduct

or support additional clinical studies in sepsis, cardiac surgery, and other critical care diseases where CytoSorb could be used,

such as ARDS, trauma, severe burn injury, acute pancreatitis, and other acute conditions that may benefit by the reductions of

cytokines in the bloodstream.

Some examples include the prevention of post-operative complications of cardiac surgery (cardiopulmonary

bypass surgery) and damage to organs for transplant prior to organ harvest.

We intend to generate additional clinical data to expand

the scope of clinical experience for marketing purposes, to increase the number of treated patients, and to support potential future

publications.

Our proprietary hemocompatible porous polymer

bead technology forms the basis of a broad technology portfolio.

Some of our products include:

CytoSorb - an extracorporeal hemoperfusion cartridge approved in the EU for cytokine removal, with the goal of reducing SIRS and preventing or treating organ failure.

CytoSorb XL –

an intended next generation successor to CytoSorb currently in advanced pre-clinical testing designed to reduce a broad range of cytokines and inflammatory mediators, including lipopolysaccharide (LPS) endotoxin, from blood.

VetResQ - a broad spectrum blood purification adsorber designed to help treat deadly inflammation and toxic injury in animals with critical illnesses such as septic shock, toxic shock syndrome, severe systemic inflammation, toxin-mediated diseases, pancreatitis, trauma, liver failure, and drug intoxication.

VetResQ is being commercialized in the United States.

HemoDefend –

a development-stage blood purification technology designed to remove non-infectious contaminants in blood transfusion products, with the goal of reducing transfusion reactions and improving the quality and safety of blood.

With the support of NHLBI, we plan to initiate a U.S.

pivotal trial designed to support U.S.

FDA approval, expected to begin by the end of 2020.

K+ontrol –

a development-stage blood purification technology designed to reduce excessive levels of potassium in the blood in severe hyperkalemia.

ContrastSorb –

a development-stage extracorporeal hemoperfusion cartridge designed to remove IV contrast from the blood of high risk patients undergoing CT imaging with contrast, or interventional radiology procedures such as cardiac catheterization.

The goal of ContrastSorb is to prevent contrast-induced nephropathy.

DrugSorb –

a development-stage extracorporeal hemoperfusion cartridge designed to remove toxic chemicals from the blood (e.g., drug overdose, high dose regional chemotherapy).

BetaSorb –

a development-stage extracorporeal hemoperfusion cartridge designed to remove mid-molecular weight toxins, such as b 2-microglobulin, that standard high-flux dialysis cannot remove effectively.

The goal of BetaSorb is to improve the efficacy of dialysis or hemofiltration.

We have been successful

in obtaining technology development contracts from governmental agencies such as the National Institutes of Health and the U.S.

Department of Defense, including the Defense Advanced Research Projects Agency, or DARPA, the U.S.

Special Operations

Command, and others.

Results of Operations

Our financial statements

have been presented on the basis that it is a going concern, which contemplates the realization of revenues and the satisfaction

of liabilities in the normal course of business.

We have incurred losses from inception of operations.

These factors raise substantial

doubt about our ability to continue as a going concern.

Comparison of the year ended December

31, 2019 and 2018

For the year ended

December 31, 2019, we generated total revenue, which includes product revenue and grant income, of approximately $24,949,000 as

compared to revenues of approximately $22,504,000 for the year ended December 31, 2018, an increase of approximately $2,445,000,

Revenue from product sales was approximately $22,766,000 for the year ended December 31, 2019, as compared to approximately

$20,252,000 in the year ended December 31, 2018, an increase of approximately $2,514,000 or 12%.

This increase was primarily driven

by an increase in direct sales of approximately $3,194,000 resulting from both new customers and repeat orders from existing customers.

This increase was offset by a decrease in distributor sales of approximately $680,000.

In addition, sales were negatively impacted

by approximately $1,201,000 as a result of the decrease in the average exchange rate of the Euro to the U.S.

ended December 31, 2019, the average exchange rate of the Euro to the U.S.

dollar was $1.12 as compared to an average exchange

rate of $1.18 for the year ended December 31, 2018.

Cost of Revenue:

For the years ended

December 31, 2019 and 2018, cost of revenue was approximately $7,364,000 and $7,489,000, respectively, a decrease of approximately

Product cost of revenues decreased approximately $63,000 during the year ended December 31, 2019 as compared to the year

ended December 31, 2018 as a result of achieved production efficiencies.

Product gross margins were approximately 77% for the year

ended December 31, 2019 and approximately 74% for the year ended December 31, 2018.

Gross Profit:

Gross profit was approximately

$17,586,000 for the year ended December 31, 2019, an increase of approximately $2,571,000 or 17%, over gross profit of $15,015,000

This increase is attributed to an increase in CytoSorb product sales during 2019 as well as achieved production efficiencies.

Research and Development Expenses:

Our research and development

costs were approximately $12,092,000 and $7,723,000 for the years ended December 31, 2019 and 2018, respectively, an increase of

approximately $4,369,000, or 57%.

This increase was due to an increase in clinical trial and related costs of approximately$3,890,000,

which include expenditures related to our REFRESH 2-AKI study and our TISORB study, an increase in non-clinical research and development

salary related costs of approximately $223,000, decreases in direct labor and other costs being deployed toward grant-funded activities

of approximately $62,000, which had the effect of increasing the amount of our non-reimbursable research and development costs

and an increase in our non-grant related research and development costs of approximately $194,000.

Legal, Financial and Other Consulting

Our legal, financial

and other consulting costs were approximately $2,462,000 and $2,002,000 for the years ended December 31, 2019 and 2018, respectively,

an increase of approximately $460,000, or 23%.

This increase was due to an increase in legal fees of approximately $334,000 related

to patent matters and certain corporate initiatives, an increase in employment agency fees of approximately $88,000 related to

the hiring of senior level personnel, an increase in accounting and auditing fees of approximately $24,000 and an increase in consulting

fees of approximately $14,000.

Selling, General and Administrative

Our selling, general

and administrative expenses were approximately $22,006,000 and $20,874,000 for the years ended December 31, 2019 and 2018, respectively,

an increase of approximately $1,132,000, or 5%.

This increase was due to an increase in salaries, commissions and related costs

of approximately $2,323,000, additional sales and marketing costs, which include advertising and conference attendance of approximately

$863,000, an increase in royalty expenses of approximately $198,000 due to the increase in product sales, and an increase in restricted

stock expense of approximately $226,000 related to restricted stock units granted to the Company’s executive officers, an

increase in public relations cost of approximately $78,000 and increase in other general and administrative costs of approximately

These increases were offset by a decrease in non-cash stock compensation expense of approximately $2,771,000.

Interest Expense, Net:

For the year ended

December 31, 2019, interest expense, net was approximately $1,034,000, as compared to interest expense, net of approximately $1,461,000

for the year ended December 31, 2018.

This decrease in net interest expense of approximately $427,000 is related to the settlement

of the Success Fee with Bridge Bank in the amount of $637,000 that became due in May 2018 in accordance with the terms of the 2016

Success Fee Letter, offset by an increase in interest due to the draw down of the $5,000,000 Term B Loan with Bridge Bank on July

Gain (Loss) on Foreign Currency Transactions:

For the year ended

December 31, 2019, the loss on foreign currency transactions was approximately $350,000, as compared to a loss on foreign currency

transactions of approximately $785,000 for the year ended December 31, 2018.

The 2019 loss is directly related to the decrease

in the exchange rate of the Euro at December 31, 2019, as compared to December 31, 2018.

The exchange rate of the Euro to the U.S.

dollar was $1.12 per Euro at December 31, 2019 as compared to $1.15 per Euro at December 31, 2018.

The 2018 loss is directly related

to the decrease in the exchange rate of the Euro at December 31, 2018, as compared to December 31, 2017.

The exchange rate of the

Euro to the U.S.

dollar was $1.15 per Euro at December 31, 2018 as compared to $1.20 per Euro at December 31, 2017.

Benefit from Income Taxes:

Our benefit from income

taxes was approximately $1,092,000 and $620,000 for the years ended December 31, 2019 and 2018, respectively.

These benefits were

realized by utilizing the New Jersey Technology Business Tax Certificate Transfer Program whereby the State of New Jersey allows

us to sell a portion of our state net operating losses to a third party.

Comparison of the year ended December

31, 2018 and 2017

For the year ended

December 31, 2018, we generated total revenue, which includes product revenue and grant income, of approximately $22,504,000 as

compared to revenues of approximately $15,151,000 for the year ended December 31, 2017, an increase of approximately $7,353,000,

Revenue from product sales was approximately $20,252,000 for the year ended December 31, 2018, as compared to approximately

$13,382,000 in the year ended December 31, 2017, an increase of approximately $6,870,000 or 51%.

This increase was primarily driven

by increases in both direct and distributor sales from both new customers and repeat orders from existing customers.

approximately $792,000 of this increase was due to the increase in the average Euro to U.S.

dollar exchange rate for the year ended

December 31, 2018 as compared to the year ended December 31, 2017.

Grant income increased

by approximately $483,000, or 27%, to approximately $2,252,000 in 2018 from $1,769,000 in 2017 as a result of increased revenue

received from existing grants and revenue received from a new grant awarded in 2018.

Cost of Revenue:

For the years ended

December 31, 2018 and 2017, cost of revenue was approximately $7,489,000 and $5,518,000, respectively, an increase of approximately

$1,971,000, or 36%.

This increase is related to an increase in product cost of revenue of approximately $1,482,000 attributable

to increased sales in 2018.

Product gross margins were approximately 74% for the year ended December 31, 2018, as compared to approximately

71% for the year ended December 31, 2017, due to a reduction in the cost of devices manufactured as a result of production efficiencies

achieved and, to a lesser extent, the impact of the increase in the exchange rate of the Euro.

Grant income related expenses increased

by approximately $489,000 during the year ended December 31, 2018 as compared to the year ended December 31, 2017 due to an increase

in direct labor and other costs being deployed toward grant-funded activities during the year ended December 31, 2018 as compared

to the year ended December 31, 2017.

Gross Profit:

Gross profit was approximately

$15,015,000 for the year ended December 31, 2018, an increase of approximately $5,383,000 or 56%, over gross profit of $9,632,000

This increase is primarily attributed to an increase in CytoSorb product sales during 2018, and, to a lesser extent, a

result of the increase in product gross margins.

Research and Development Expenses:

Our research and development

costs were approximately $7,723,000 and $3,221,000 for the years ended December 31, 2018 and 2017, respectively, an increase of

approximately $4,502,000, or 140%.

This increase in research and development expenditures was due to an increase in our clinical

trial costs of approximately $4,179,000, which is primarily related to our REFRESH 2-AKI trial, an increase in non-clinical research

and development salary related costs of approximately $329,000 and an increase in new product development costs of approximately

$164,000 and increase in other non-grant related research and development costs of approximately $319,000.

These increases were

offset by an increase in direct labor and other costs being deployed toward grant-funded activities of approximately $489,000,

which had the effect of decreasing the amount of our non-reimbursable research and development costs.

Legal, Financial and Other Consulting

Our legal, financial

and other consulting costs were approximately $2,002,000 and $1,339,000 for the years ended December 31, 2018 and 2017, respectively,

an increase of approximately $663,000, or 50%.

This increase was due to an increase in employment agency fees of approximately

$271,000 related to the recruitment of senior level personnel, an increase in legal fees of approximately $254,000 related to certain

corporate initiatives, an increase in accounting fees of approximately $39,000 related to fees in Germany and an increase in other

professional fees of approximately $99,000.

Selling, General and Administrative

Our selling, general

and administrative expenses were approximately $20,874,000 and $14,914,000 for the years ended December 31, 2018 and 2017, respectively,

an increase of approximately $5,960,000, or 40%.

The increase in selling, general, and administrative expenses was due to

an increase in non-cash stock compensation expense of approximately $1,379,000 primarily based upon achievement of the 2018 operating

milestones, increases in salaries, commissions and related costs of approximately $2,831,000 due to headcount additions, an increase

in royalty expenses of approximately $555,000 due to the increase in product sales, additional sales and marketing costs, which

include advertising and conferences of approximately $343,000, an increase in travel and entertainment costs and other expenses

of approximately $453,000, an increase in occupancy cost of approximately $237,000 related to our manufacturing facility expansion,

an increase in public relations expense of approximately $98,000 and an increase in other G&A expenses of approximately $64,000.

Interest Expense, Net:

the year ended December 31, 2018, interest expense, net was approximately $1,461,000, as compared to interest expense, net of approximately

$749,000 for the year ended December 31, 2017.

This increase in net interest expense of approximately $712,000 is directly related

to the settlement of the Success Fee with Bridge Bank in the amount of $637,000 that became due in May 2018 in accordance

with the terms of the 2016 Success Fee Letter with Bridge Bank and the additional interest related to the drawdown of the Term

B Loan (as defined in the Loan and Security Agreement dated June 30, 2016 with Bridge Bank) on June 30, 2017 in the amount of $5,000,000.

Gain (Loss) on Foreign Currency Transactions:

For the year ended

December 31, 2018, the loss on foreign currency transactions was approximately $785,000, as compared to a gain on foreign currency

transactions of approximately $1,454,000 for the year ended December 31, 2017.

The 2018 loss is directly related to the decrease

in the exchange rate of the Euro at December 31, 2018, as compared to December 31, 2017.

The exchange rate of the Euro to the U.S.

dollar was $1.15 per Euro at December 31, 2018 as compared to $1.20 per Euro at December 31, 2017.

The 2017 income is directly

related to the increase in the exchange rate of the Euro at December 31, 2017, as compared to December 31, 2016.

The exchange rate

of the Euro to the U.S.

dollar was $1.20 per Euro at December 31, 2017 as compared to $1.05 per Euro at December 31, 2016.

Benefit from Income Taxes:

Our benefit from income

taxes was approximately $620,000 and $677,000 for the years ended December 31, 2018 and 2017, respectively.

These benefits were

realized by utilizing the New Jersey Technology Business Tax Certificate Transfer Program whereby the State of New Jersey allows

us to sell a portion of our state net operating losses to a third party.

History of Operating Losses

We have experienced

substantial operating losses since inception.

As of December 31, 2019, we had an accumulated deficit of approximately $188,789,000,

which included losses of approximately $19,266,000, $17,211,000 and $8,461,000 for years ended December 31, 2019, 2018 and 2017,

respectively.

Historically, our losses have resulted principally from costs incurred in the research and development of our polymer

technology, our legal, financial and consulting expenses, and selling, general and administrative expenses, which together were

approximately $36,560,000, $30,599,000 and $19,475,000 for the years ended December 31, 2019, 2018 and 2017, respectively.

Liquidity and Capital Resources

Since inception,

our operations have been primarily financed through the private and public placement of our debt and equity securities.

December 31, 2019, we had current assets of approximately $20,902,000 including cash on hand of approximately $12,232,000 and

had current liabilities of approximately $9,936,000.

During the period from January 1, 2020 through March 2, 2020, we raised

approximately $13,321,000 by utilizing our ATM facility with co-agents Jefferies LLC and B.

Also, we expect to

receive approximately $1,092,000 in cash from the approved sale of our net operating losses and research and development

credits from the State of New Jersey in the first quarter of 2020.

We believe that we

have sufficient cash to fund our operations into 2021.

We will need to raise additional capital to support our ongoing operations

in the future.

In addition, we will need to raise additional funds to support clinical trials in the U.S.

and in Europe.

Loan and Security Agreement:

On June 30, 2016,

we and our wholly-owned subsidiary, CytoSorbents Medical, Inc.

(together, the “Borrower”), entered into a Loan and

Security Agreement with Bridge Bank, a division of Western Alliance Bank, (the “Bank”), pursuant to which we borrowed

$10 million in two equal tranches of $5 million (the “Original Term Loans”).

On March 29, 2018 (the “Closing

Date”), the Original Term Loans were refinanced with the Bank pursuant to an Amended and Restated Loan and Security Agreement

by and between the Bank and the Borrower (the “Amended and Restated Loan and Security Agreement”), under which the

Bank agreed to loan the Borrower up to an aggregate of $15 million to be disbursed in two tranches (1) one tranche of $10 million

(the “Term A Loan”), which was funded on the Closing Date and used to refinance the Original Term Loans, and (2) a

second tranche of $5 million which may be disbursed at the Borrower’s sole request prior to March 31, 2019 provided certain

conditions are met (the “Term B Loan”

and together with the Term A Loan, the “Term Loans”).

2019 (the “Settlement Date”), the Borrower entered into the First Amendment to the Amended and Restated Loan and Security

Agreement (the “First Amendment”) with the Bank, which amended certain provisions of the Amended and Restated Loan

and Security Agreement and the 2018 Success Fee Letter (the “2018 Letter”).

In connection with the execution of the

First Amendment, the draw period for the Term B Loan was extended to August 15, 2019 and we drew down the full $5.0 million Term

B Loan on the Settlement Date, bringing the total outstanding debt to $15,000,000 at July 31, 2019.

The proceeds of Term Loans

were used for general business requirements in accordance with the Amended and Restated Loan and Security Agreement.

The outstanding

balances on Term Loans bear interest at the prime rate reported in the Wall Street Journal plus 3.66%.

This rate was 8.41% at December

On the Closing Date,

we were required to pay a non-refundable closing fee of $25,000, expenses incurred by the Bank related to the Amended and Restated

Loan and Security Agreement of $11,000 and a portion of the final fee for the period the Original Term Loans were outstanding of

In addition, we incurred legal expenses related to the Amended and Restated Loan and Security Agreement of $20,050 and

$4,212 related to the First Amendment.

As of the Settlement Date, the total unamortized loan costs related to the Term Loans amounted

These costs have been presented as a direct deduction from the proceeds of the loan on the consolidated balance sheet

in accordance with the provisions of ASC 850.

These costs are being amortized over the loan period as a charge to interest expense.

For the years ended December 31, 2019, 2018 and 2017, we recorded interest expense amounting to $33,175, $31,946, and $29,971,

respectively related to these costs.

After accounting for the various costs outlined above, the effective interest rate on the

Term A Loan was 9.1% as of March 29, 2018.

Under the terms of the First Amendment, commencing on the first calendar day of the

calendar month after Term B Loan was made, we are required to make monthly payments of interest-only through April 2020.

The interest-only

period will be further extended through November 2020 provided the Borrower has been compliant with its obligations under the financial

covenant revenue test set forth in the Amended and Restated Loan and Security Agreement for all months from the month immediately

after the month in which the Term B Loan is funded through March 2020.

Commencing on May 1, 2020, if we do not comply with financial

covenant revenue test, we must make equal monthly payments of principal of $625,000, together with accrued and unpaid interest.

Commencing on November 1, 2020, if we comply with the financial covenant revenue test, we must make equal monthly payments of principal

of $833,333, together with accrued and unpaid interest.

In either event, all unpaid principal and accrued and unpaid interest shall

be due and payable in full on April 1, 2022.

In addition, the Amended and Restated Loan and Security Agreement requires that we

to pay a non-refundable final fee equal to 2.5% of the principal amount of each Term Loan funded upon the earlier of the (i) April

1, 2022 maturity date or (ii) termination of the Term Loan via acceleration or prepayment.

This final fee is being accrued

and charged to interest expense over the term of the loan.

For the years ended December 31, 2019, 2018 and 2017, we recorded interest

expense of $82,031, $65,104 and 52,083, respectively, related to the final fee.

The Term Loans are evidenced by secured promissory

notes issued to the Bank by us.

If we elect to prepay the Term Loans pursuant to the terms of the Amended and Restated Loan and

Security Agreement, it will owe a prepayment fee to the Bank, as follows:

(1) for a prepayment made on or after the funding date

of a Term Loan through and including the first anniversary of such funding date, an amount equal to 2.0% of the principal amount

of such Term Loan prepaid;

(2) for a prepayment made after the first anniversary of the funding date of a Term Loan through and

including the second anniversary of such funding date, an amount equal to 1.5% of the principal amount of such Term Loan prepaid;

and (3) for a prepayment made after the second anniversary of the funding date of a Term Loan through April 1, 2022, an amount

equal to 1.0% of the principal amount of such Term Loan prepaid.

Events of default which

may cause repayment of the Term Loans to be accelerated include, among other customary events of default, (1) non-payment

of any obligation when due, (2) the failure to perform any obligation required under the Amended and Restated Loan and Security Agreement

and to cure such default within a reasonable time frame, (3) the occurrence of a Material Adverse Event (as defined in the Amended

and Restated Loan and Security Agreement), (4) the attachment or seizure of a material portion of the Borrower’s assets if

such attachment or seizure is not released, discharged or rescinded within 10 days, and (5) if the Borrower becomes insolvent or

starts an insolvency proceeding or if an insolvency proceeding is brought by a third party against the Borrower and such proceeding

is not dismissed or stayed within 30 days.

The Amended and Restated Loan and Security Agreement includes customary loan conditions,

Borrower representations and warranties, Borrower affirmative covenants and Borrower negative covenants for secured transactions

of this type.

We are in substantial compliance with these covenants.

Our and CytoSorbents

Medical, Inc.’s obligations under the Amended and Restated Loan and Security Agreement are joint and severable and are secured

by a first priority security interest in favor of the Bank with respect to our Shares (as defined in the Amended and Restated Loan

and Security Agreement) and the Borrower’s Collateral (as defined in the Amended and Restated Loan and Security Agreement,

which definition excludes the Borrower’s intellectual property and other customary exceptions).

2016 Success Fee Letter:

Pursuant to that certain

Success Fee Letter (the “2016 Letter”) entered into between the Borrower and the Bank in connection with the Original

Term Loans, the Borrower agreed to pay to the Bank a success fee in the amount equal to 6.37% of the funded amount of the Original

Term Loans (the “2016 Letter Success Fee”) upon the first occurrence of any of the following events:

(a) a sale or

other disposition by the Borrower of all or substantially all of its assets;

(b) a merger or consolidation of the Borrower into

or with another person or entity, where the holders of the Borrower’s outstanding voting equity securities as of immediately

prior to such merger or consolidation hold less than a majority of the issued and outstanding voting equity securities of the successor

or surviving person or entity as of immediately following the consummation of such merger or consolidation;

a series of related transactions in which any “person”

or “group”

(within the meaning of Section 13(d)

and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) becomes the “beneficial

(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of a sufficient number of shares of all

classes of stock then outstanding of the Borrower ordinarily entitled to vote in the election of directors, empowering such “person”

or “group”

to elect a majority of the Board of Directors of the Borrower, who did not have such power before such transaction;

or (d) the closing price per share for our common stock on Nasdaq being $8.00 (after giving effect to any stock splits or consolidations

effected after the date thereof) or more for five successive business days.

On May 18, 2018, the 2016 Letter Success Fee became

due to the Bank as result of an occurrence of the event described in clause (d) above.

The Company elected to satisfy the 2016

Letter Success Fee by issuing shares of its common stock, which was permitted under the terms of the 2016 Letter.

On May 23, 2018,

we issued 68,791 shares of its common stock in full satisfaction of the 2016 Letter Success Fee, and the obligations of the Borrower

under the 2016 Letter.

The 2016 Letter Success Fee was valued at $637,000 and was charged to interest expense.

2018 Success Fee Letter:

Pursuant to the amended

2018 Letter, the Borrower shall pay to the Bank a success fee in the amount equal to 6.37% of the funded amount of the Term B Loan

(as defined in the Restated Loan and Security Agreement) (the “Success Fee”) upon the first occurrence of any of the

following events:

(a) a sale or other disposition by the Borrower of all or substantially all of its assets;

(b) a merger or consolidation

of the Borrower into or with another person or entity, where the holders of the Borrower’s outstanding voting equity securities

as of immediately prior to such merger or consolidation hold less than a majority of the issued and outstanding voting equity securities

of the successor or surviving person or entity as of immediately following the consummation of such merger or consolidation;

a transaction or a series of related transactions in which any “person”

or “group”

(within the meaning

of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) becomes the “beneficial

(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of a sufficient number of shares of all

classes of stock then outstanding of the Borrower ordinarily entitled to vote in the election of directors, empowering such “person”

or “group”

to elect a majority of the Board of Directors of the Borrower, who did not have such power before such transaction;

or (d) the closing price per share for our common stock on the Nasdaq Capital Market being the greater of (i) 70% or more over

$7.05, the closing price of our common stock on March 29, 2018 (after giving effect to any stock splits or consolidations effected

after the date thereof) for five successive business days, or (ii) at least 26.13% more than the average price of Company’s

common stock for the 365 day period ending on the date of the funding of the Term B Loan.

Contractual Obligations

The following table

summarizes our obligations with regard to our contractual obligations as of December 31, 2019, and the expected timing of maturities

of those contractual obligations.

This table should be read in conjunction with the notes to financial statements included elsewhere

in this Annual Report on Form 10-K.

Operating lease obligations

Long-term debt

Effects of Recent Accounting Pronouncements

In February 2016, the

FASB issued ASU 2016-02, “Leases (Topic 842)”.

ASU 2016-02 outlines reporting requirements for lessees to recognize

a right-of-use asset and corresponding liability on the balance sheet for all leases covering a period of greater than 12 months.

The liability is to be measured as the present value of the future minimum lease payments, plus any initial direct costs.

payments are discounted using the rate implicit in the lease, or, if not known, the lessee’s incremental borrowing rate.

The updated guidance is effective for public entities for fiscal years beginning after December 31, 2018.

We adopted the updated

guidance effective January 1, 2019 by recording a right of use asset and corresponding lease liability of $1,449,437.

Critical Accounting Policies

The preparation of

financial statements in conformity with accounting principles generally accepted in the United States 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 the reported amounts of revenues and expenses during the reporting period.

Actual results

could differ from those estimates.

We believe the following critical accounting policies have significant effect in the preparation

of our consolidated financial statements.

Legal costs incurred

to establish patents are capitalized.

When patents are issued, capitalized costs are amortized on the straight-line method over

the related patent term.

In the event a patent is abandoned, the net book value of the patent is written off.

Revenue Recognition

Product Sales :

Revenues from sales of products to both direct and distributor/strategic partner customers are recognized at the time when control

passes to the customer, in accordance with the terms of their respective contracts.

Recognition of revenue occurs as each performance

obligation is completed.

Revenue from grant income is based on contractual agreements.

Certain agreements provide for reimbursement

of costs, other agreements provide for reimbursement of costs and an overhead margin and certain agreements are performance based,

where revenue is earned based upon the achievement of milestones outlined in the contract.

Revenues are recognized when the associated

performance obligation is fulfilled.

Costs are recorded as incurred.

Costs subject to reimbursement by these grants have been reflected

as costs of revenue.

Research and Development

All research and development

costs, payments to laboratories, research consultants and costs related to clinical trials and studies are expensed when incurred.

Stock Based-Compensation

We account for our

stock-based compensation under the recognition requirements of accounting standards for accounting for stock-based compensation

for employees and directors whereby each option granted is valued at fair market value on the date of grant.

Under these accounting

standards, the fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model.

We also follow the

guidance of accounting standards for accounting for equity instruments that are issued to other than employees for acquiring, or

in conjunction with selling, goods or services for equity instruments issued to consultants.

Off-Balance Sheet Arrangements

We currently operate

a facility near Princeton, New Jersey with approximately 19,920 sq.

ft., housing research laboratories, clinical manufacturing

operations and administrative offices, under a lease agreement which expires in May 2020.

The lease includes a one year option

We expect to secure additional square footage to support increased manufacturing capacity in the future.

base rent is approximately $32,400 and, additionally, we reimburse the landlord for monthly operating expenses of approximately

We also operate a facility

in Berlin, Germany housing our sales and administrative offices and warehouse space.

We entered into a lease for this office on

September 1, 2016.

The lease expires on August 31, 2021.

We rent this space for $9,000 per month.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity