Cytosorbents Corp 10-K

Item 7. 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, 2020, 2019 and 2018 should be read in conjunction with our financial statements, and the notes to those financial statements that are included elsewhere in this Report. Overview We are a leader in critical care immunotherapy using blood purification technology to treat deadly inflammation in hospitalized patients around the world. 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 16 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 15 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. CytoSorb 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, we received a label expansion for CytoSorb covering use of the device for the removal of bilirubin and myoglobin in the treatment of liver disease and trauma, respectively. In January 2020, we received CE-Mark label expansion for CytoSorb covering the use of the device for the removal of the anti-platelet agent, ticagrelor, in patients undergoing surgery requiring cardiopulmonary bypass. In April 2020, the United States Food and Drug Administration (the “FDA”) granted Breakthrough Designation to CytoSorb for the removal of ticagrelor in a cardiopulmonary bypass circuit during emergent and urgent cardiothoracic surgery. In April 2020, we announced that the FDA has granted Emergency Use Authorization (“EUA”) of CytoSorb for use in patients with COVID-19 infection. In May 2020, we received CE-Mark label expansion for CytoSorb for the removal of rivaroxaban during cardiothoracic 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. The broad 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. 62 Table of Contents 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 Switzerland. 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. 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. ​ In January 2020, we received CE-Mark label expansion approving the use of CytoSorb to remove the anti-platelet agent, ticagrelor, in cardiac patients during surgery requiring cardiopulmonary bypass. ​ In April 2020, the Company announced that the United States Food and Drug Administration (the “FDA”) granted Emergency Use Authorization (“EUA”) of CytoSorb for use in critically-ill patients infected with COVID-19. Under the EUA, the Company can make CytoSorb available, through commercial sales, to all hospitals in the United States for use in patients, 18 years of age or older, with confirmed COVID-19 infection who are admitted to the intensive care unit (ICU) with confirmed or imminent respiratory failure who have early acute lung injury or acute respiratory distress syndrome (ARDS), severe disease, or life-threatening illness resulting in respiratory failure, septic shock, and/or multiple organ dysfunction or failure. The CytoSorb device has neither been cleared nor approved for the indication to treat patients with COVID-19 infection. The EUA will be effective until a declaration is made that the circumstances justifying the EUA have terminated or until revoked by the FDA. ​ In April 2020, the Company also announced that the FDA had granted Breakthrough Designation to CytoSorb for the removal of ticagrelor in a cardiopulmonary bypass circuit during emergent and urgent cardiothoracic surgery. The Breakthrough Devices Program provides for more effective treatment of life-threatening or irreversibly debilitating disease or conditions, in this case the need to reverse the effects of ticagrelor in emergent or urgent cardiac surgery that can otherwise cause a high risk of serious or life-threatening bleeding. Through Breakthrough Designation, the FDA intends to work with CytoSorbents to expedite the development, assessment, and regulatory review of CytoSorb for the removal of ticagrelor, while maintaining statutory standards of regulatory approval (e.g., 510(k), de novo 510(k) or premarket approval) consistent with the FDA’s mission to protect and promote public health. ​ In May 2020, we received CE-Mark label expansion approving the use of CytoSorb for the removal of rivaroxaban, a widely-used Factor Xa inhibitor and novel oral anticoagulant, during cardiothoracic surgery requiring cardiopulmonary bypass. With this announcement, and the E.U. approval earlier this year to remove ticagrelor , for the same indication, CytoSorb is providing cardiac surgeons and perfusionists an easy-to-use and rapid new treatment option to help reduce the risk of serious and potentially fatal perioperative bleeding complications caused by these two drugs, in separate categories of blood thinners . At the end of 2020, 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. As of March 1, 2021, our European commercialization team includes 95 people. Overall, we have established either direct sales or distribution (via distributors or strategic partners) of CytoSorb in 67 countries worldwide. Registration of CytoSorb is typically required in each of these countries prior to active commercialization. With CE Mark approval, this can be typically achieved within several months in EU countries. Outside of the EU, the process is more variable and can take several months to more than a year due to different requirements for documentation and clinical data. Variability in the timing of registration affects the initiation of active commercialization in these countries, which affects the timing of expected CytoSorb sales. We actively support all of our distributors and strategic partners in the product registration process. We cannot generally predict the timing of these registrations, and there can be no guarantee that we will ultimately achieve registration in countries where we have established distribution. For example, in August 2014 we announced exclusive distribution of CytoSorb in Taiwan with Hemoscien Corporation. However, in March 2015, due to the complexity we encountered with Taiwanese product registration, we elected to terminate our agreement with Hemoscien. Outside of the EU, CytoSorb has distribution in Turkey, India, Sri Lanka, Australia, New 63 Table of Contents Zealand, Russia, Serbia, Norway, Vietnam, Malaysia, Hong Kong, Chile, Panama, Costa Rica, Colombia, Brazil, Mexico, Argentina , Perú, Guatemala , Ecuador , Bolivia , the Dominican Republic , El Salvador , Iceland, Israel, UAE, Iran, Saudi Arabia and other Middle Eastern countries, and South Korea. We cannot guarantee that we will generate meaningful sales in the countries where we have established registration, due to other factors such as market adoption and reimbursement. For example, in December 2019, we discontinued our distributor relationship with Dr. Reddy’s in South Africa due to lack of market adoption. We continuously evaluate other potential distributor and strategic partner networks in other countries that accept CE Mark approval. 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 Biologics Limited, 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 ICU. To promote the success of CytoSorb, Fresenius agreed to also engage in the ongoing clinical development of the product. This 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. The terms 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 for France. 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. Under the terms of these agreements, Fresenius Medical Care has the exclusive rights to distribute CytoSorb for acute care and other hospital applications in South Korea and Mexico. Commercial sales of CytoSorb are underway in both countries after securing market registration clearance from Korean and Mexican health authorities in 2020. 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 August 2020, we announced an initial collaboration with Terumo to exclusively sell CytoSorb to hospitals in ten U.S. COVID-19 hotspot states including Alabama, Arizona, California, Georgia, Louisiana, Mississippi, New Mexico, Oregon, Texas, and Washington. CytoSorb previously received Emergency Use Authorization (EUA) by the U.S. Food and Drug Administration (FDA) for use in adult, critically-ill COVID-19 patients with imminent or confirmed respiratory failure. Under the initial terms of the agreement, Terumo will ensure hospitals in the defined hot-spot states have access to the CytoSorb therapy for use in critically-ill COVID-19 64 Table of Contents patients that meet strict criteria under CytoSorbents' EUA. CytoSorbents will provide all primary clinical and technical training, customer support, and product fulfillment. 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. In March 2021, we announced a strategic partnership with B. Braun Avitum AG, and the launch of a global co-marketing agreement to promote the use of CytoSorb with B Braun’s latest OMNI ® continuous blood purification platform and OMNIset® Plus bloodline set (set version 3.0 or higher). 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. In addition, we now have more than 50 investigator-initiated studies planned, enrolling or completed in many countries such as Germany, Austria, Switzerland, the Netherlands, Hungary, the United Kingdom, India, and the U.S. These trials, which are funded and supported by well-known university hospitals and KOLs, are post-market clinical studies. They have provided and are expected to continue to provide invaluable information regarding the success of the device in the treatment of sepsis, cardiac surgery, liver failure, and many other indications, and if successful, will be integral in helping to drive additional usage and adoption of CytoSorb. In February 2015, the U.S. 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, 65 Table of Contents controlled, multi-center, clinical study designed to evaluate intraoperative use of two CytoSorb devices 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 higher 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. Based on the 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. In addition, 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. Since then, the Company and its new CRO have completed a comprehensive program to re-monitor existing data, collect new data, and analyze the safety data from the 153 patients included in the trial to date. These data were reviewed by the DMC resulting in a favorable opinion on safety, dated July 24, 2020, and the recommendation to resume the trial with only minor modifications. The Company has been undertaking multiple activities in preparation to resume the study, which is estimated to take place in the first half of 2021. If the study is successful, we plan to submit a PMA application to the FDA in 2023 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. The study enrolled its first patient in January 2018. An interim analysis of the first 50 patients has been completed. On February 4, 2019, Prof. Dr. med. 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. Dr. med. 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. There were no device-associated adverse events in the CytoSorb group.” The study completed enrollment in 2020 but the COVID-19 pandemic has caused delays in data monitoring and data analysis. Topline data are expected to be reported in the first half of 2021 with full data presentation at a major international conference also in 2021. In September 2019, a new publication entitled, &quot;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,&quot; in the journal Critical Care. 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 score. 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. A protocol amendment was submitted to expand the population of eligible patients to now include patients requiring urgent cardiac surgery. These changes were approved by the UK Medicines and Healthcare products Regulatory Agency (MHRA) at the end of February 2020. In December 2020, CytoSorbents initiated CYTATION (CytoSorb Ticagrelor Hemoadsorption), a Company-sponsored multicenter study in Germany 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 a standard of care to reduce the risk of heart attacks and strokes in patients with acute coronary syndromes. Unfortunately, given the absence of an approved treatment to reverse the antithrombotic effects of ticagrelor, treated patients who require urgent or emergent cardiothoracic surgery may either proceed at high risk for severe perioperative bleeding (as high as 65% higher risk due to ticagrelor) or stay waiting for days in the hospital until the ticagrelor antithrombotic effect washes out. Neither option is optimal since patients proceeding to surgery are at great risk for serious or even fatal 66 Table of Contents bleeding and patients waiting for washout are at risk of a thrombotic complications such as a stroke or heart attack, while delaying surgery and increasing hospitalization costs. The benefits of CytoSorb in this setting are both clinical and economic. In the publication in 2019 by Hassan et al, outcomes of 55 patients requiring emergent cardiac surgery while on ticagrelor or rivaroxaban therapy were evaluated according to the use of CytoSorb. Antithrombotic (either ticagrelor or rivaroxaban) removal with CytoSorb was associated with significant reductions in operative time, need for red blood cell and platelet transfusions and re-operations to control bleeding and those clinical benefits resulted in shorter length of ICU stay. These significant clinical benefits are expected to also result in substantial economic benefits. This was demonstrated in the publication by Javanbakht et al. in 2019, that projected an average cost savings of £3,982 per patient (approximately $5,000 USD per patient), including the cost of the CytoSorb adsorber. The primary objective in both TISORB and CYTATION studies 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. Due to the COVID-19 pandemic, the execution of the TISORB trial has been greatly impacted and ongoing national restrictions in the U.K. on the conduct of non-COVID clinical studies add further uncertainty to TISORB. In Germany, however, clinical research is continuing and we therefore expect that the CYTATION study will not be equally impacted. In January 2020, CytoSorb received European Union CE Mark label expansion to include the removal of ticagrelor during cardiopulmonary bypass in patients undergoing cardiothoracic surgery. In May 2020, CytoSorb also received European Union CE Mark label expansion to include rivaroxaban removal for the same indication. We have recently announced the Safe and Timely Antithrombotic Removal (STAR) development program that will comprise of a number of clinical projects relating to the antithrombotic removal application. The first study is the STAR Registry scheduled to commence enrollment in 2021 that will capture real world use of CytoSorb for this indication. The registry will initially launch in Europe with the intent of expanding to the United States and the rest of the territories where CytoSorb is available in the future. We anticipate that additional clinical studies on antithrombotic removal will be conducted as part of the STAR program. ​ The market focus of CytoSorb is the 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. or Europe to treat it. 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, liver disease, 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 polymer technologies form the basis of a broad technology portfolio. Some of our products and product candidates include : · CytoSorb - an extracorporeal hemoperfusion cartridge approved in the EU for cytokine removal, with the goal of reducing SIRS and sepsis and preventing or treating organ failure. ​ ● ECOS-300CY - an adsorption cartridge for use with ex vivo organ perfusion systems to remove cytokines and other inflammatory mediators in the organ perfusate, with the goal of improving solid organ support or rehabilitation. ​ · 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 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. 67 Table of Contents ● HemoDefend-RBC—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. ● HemoDefend-BGA—a development-stage purification technology that can remove anti-A and anti-B antibodies from plasma and whole blood, to enable “universal plasma,” and safer whole blood transfusions, respectively. ● K + ontrol—a development-stage blood purification technology designed to reduce excessive levels of potassium in the blood that can be fatal in severe hyperkalemia. ● ContrastSorb—a development-stage extracorporeal hemoperfusion cartridge designed to remove IV contrast from the blood of high risk patients undergoing radiological imaging with contrast, or interventional radiology procedures such as cardiac catheterization and angioplasty. 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 b2-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. Army, U.S. Special Operations Command, and others. Results of Operations Comparison of the year ended December 31, 2020 and 2019 Revenues: For the year ended December 31, 2020, we generated total revenue, which includes product revenue and grant income, of approximately $41,005,000 as compared to revenues of approximately $24,949,000 for the year ended December 31, 2019, an increase of approximately $16,056,000, or 64%. Revenue from product sales was approximately $39,453,000 for the year ended December 31, 2020, as compared to approximately $22,766,000 in the year ended December 31, 2019, an increase of approximately $16,787,000 or 73%. This increase was driven by an increase in direct sales of approximately $8,917,000 resulting from sales to both new customers and repeat orders from existing customers and an increase in distributor sales of approximately $7,769,000. Sales to hospitals in the United States under the EUA granted by the FDA amounted to approximately $1,341,000 for the year ended December 31, 2020. Though difficult to quantitate, we estimate that approximately $9.4 million of total product sales during the year ended December 31, 2020 was due to the demand for CytoSorb to treat COVID-19 patients. In addition, as a result of the increase in the average exchange rate of the Euro to the U.S. dollar, sales were positively impacted by approximately $693,000. For the year ended December 31, 2020, the average exchange rate of the Euro to the U.S. dollar was $1.14 as compared to an average exchange rate of $1.12 for the year ended December 31, 2019. Cost of Revenue: For the years ended December 31, 2020 and 2019, cost of revenue was approximately $11,052,000 and $7,364,000, respectively, an increase of approximately $3,688,000. Product cost of revenues increased approximately $4,180,000 during the year ended December 31, 2020 as compared to the year ended December 31, 2019 as a result of the increase in product sales. Product gross margins were approximately 76% for the year ended December 31, 2020 and approximately 77% for the year ended December 31, 2019. The decrease in gross margin was due to an increase in percent contribution of lower margin distributor sales as well as certain costs associated with the rapid ramp-up of production during the year ended December 31, 2020. Gross Profit: Gross profit was approximately $29,952,000 for the year ended December 31, 2020, an increase of approximately $12,366,000 or 70%, over gross profit of $17,586,000 in 2019. This increase is attributed to an increase in CytoSorb product sales during 2020. 68 Table of Contents Research and Development Expenses: Our research and development costs were approximately $8,811,000 and $12,092,000 for the years ended December 31, 2020 and 2019, respectively, a decrease of approximately $3,281,000, or 27%. This decrease was due to a decrease in clinical trial and related costs of approximately $3,769,000, due primarily to the pause in our Company-sponsored clinical trials as a result of hospital restrictions due to the COVID-19 pandemic, and a decrease in our non-grant related research and development costs of approximately $393,000. These decreases were offset by an increase in non-clinical research and development salary related costs of approximately $160,000 due primarily to COVID-19 related incentive pay, decreases in direct labor and other costs being deployed toward grant-funded activities of approximately $675,000, which had the effect of increasing the amount of our non-reimbursable research and development costs and an increase in new product development costs of approximately $46,000. Legal, Financial and Other Consulting Expenses: Our legal, financial and other consulting costs were approximately $3,048,000 and $2,462,000 for the years ended December 31, 2020 and 2019, respectively, an increase of approximately $586,000, or 24%. This increase was due to an increase in employment agency fees of approximately $395,000 related to the hiring of senior level personnel, an increase in consulting fees of approximately $219,000 primarily related to certain financial advisory fees and an increase in accounting and auditing fees of approximately $40,000. These increases were offset by a decrease in legal fees of approximately $70,000. Selling, General and Administrative Expenses: Our selling, general and administrative expenses were approximately $28,464,000 and $22,006,000 for the years ended December 31, 2020 and 2019, respectively, an increase of approximately $6,458,000, or 29%. This increase was due to an increase in salaries, commissions and related costs of approximately $4,849,000 due primarily to headcount additions and increased commissions due to increase sales, an increase in royalty expenses of approximately $1,327,000 due to the increase in product sales, and an increase in non-cash stock option expense of approximately $1,879,000. These increases were offset by reductions in sales and marketing costs, which include advertising and conference attendance of approximately $824,000 and travel and entertainment and other general and administrative expenses of approximately $773,000. These reductions were due primarily to travel restrictions related to the COVID-19 pandemic. Interest Expense, Net: For the year ended December 31, 2020, interest expense, net was approximately $1,201,000, as compared to interest expense, net of approximately $1,034,000 for the year ended December 31, 2019. This increase in net interest expense of approximately $167,000 is related to the final fee that was due upon repayment of our term loans in conjunction with the Third Amendment to the Amended Loan and Security Agreement with Bridge Bank that closed on December 4, 2020. Gain (Loss) on Foreign Currency Transactions: For the year ended December 31, 2020, the gain on foreign currency transactions was approximately $2,607,000, as compared to a loss on foreign currency transactions of approximately $350,000 for the year ended December 31, 2019. The 2020 gain is directly related to the increase of the exchange rate of the Euro at December 31, 2020 as compared to December 31, 2019. The exchange rate of the Euro to the U.S. dollar was $1.22 per Euro at December 31, 2020 as compared to $1.12 per Euro at December 31, 2019. 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. Benefit from Income Taxes: Our benefit from income taxes was approximately $1,127,000 and $1,092,000 for the years ended December 31, 2020 and 2019, 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. 69 Table of Contents Comparison of the year ended December 31, 2019 and 2018 Revenues: 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, or 11%. 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. dollar. For the year 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 $125,000. 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 in 2018. 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 Expenses: 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 Expenses: 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 $215,000. These increases were offset by a decrease in non-cash stock compensation expense of approximately $2,771,000. 70 Table of Contents 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 31, 2019. 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. ​ History of Operating Losses We have experienced substantial operating losses since inception. As of December 31, 2020, we had an accumulated deficit of approximately $196,627,000, which included losses of approximately $7,837,000, $19,266,000 and $17,211,000 for years ended December 31, 2020, 2019 and 2018, 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 $40,323,000, $36,560,000 and $30,599,000 for the years ended December 31, 2020, 2019 and 2018, 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. At December 31, 2020, we had current assets of approximately $82,453,000 including cash on hand of approximately $71,422,000 and had current liabilities of approximately $10,153,000. During the period from January 1, 2020 through July 15, 2020, we raised approximately $26,427,000 by utilizing our ATM facility with co-agents Jefferies LLC and B. Riley FBR. In addition, we received net proceeds of approximately $53,800,000 from our underwritten public offering that closed on July 24, 2020. Also, we expect to receive approximately $1,127,000 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 2021. ​ We believe that we have sufficient cash to fund our operations and clinical trial activities well into the future. Loan and Security Agreement: On June 30, 2016, the Company and its 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 the Company borrowed $10 million in two equal tranches of $5 million (the “Original Term Loans”). On March 29, 2018, 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”). On July 31, 2019, 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 71 Table of Contents 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 the Company 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. On December 4, 2020 (the “Closing Date”), the Company closed on the Third Amendment (the “Third Amendment”) of its Amended Loan and Security Agreement with Bridge Bank. Under the terms of the Amendment, the Company repaid the outstanding principal balance of its existing $15 million term loans and simultaneously received a commitment from Bridge Bank to provide a new term loan of $15 million (the “New Term Loan”), which can be drawn down at the Company’s discretion at any time prior to December 4, 2021. ​ The New Term Loan, if drawn, shall bear interest at the Index Rate (defined in the Third Amendment as the greater of 3.25% or the Prime Rate as published by the Wall Street Journal on the last business date of the month the immediately preceding the month in which the interest will accrue) plus 1.25%. In addition, the Company would be required to make payments of interest-only commencing on the first day of the month after the New Term Loan was made until January 2023. The interest-only period may be further extended through July 2023 if the Company maintains compliance certain conditions as outlined in the Amendment. Following the interest-only period, the Company will be required to make equal monthly payments of principal and interest until maturity of the New Term Loan. The maturity date of the New Term Loan is December 1, 2024. On the Closing Date, the Company was required to pay a non-refundable closing fee of $75,000. As of the Closing Date, the total unamortized loan costs related to the Term Loans amounted to approximately $45,000. These costs were written off on the closing date as a charge to interest expense. For the years ended December 31, 2020, 2019, and 2018, the Company recorded interest expense amounting to $76,718, $33,175, and $31,946, respectively related to these costs. In addition, the Amended and Restated Loan and Security Agreement requires the Company 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. On the Closing Date, the Company paid a final fee of $325,000. For the years ended December 31, 2020, 2019 and 2018 the Company recorded interest expense of $246,095, $82,031 and $65,104, respectively, related to accrual and payment of the final fee. The Company’s 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 the Company’s 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). 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; (c) 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 owner” (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 the Company’s common stock on the Nasdaq Capital Market being the greater of (i) 70% or more over $7.05, the closing price of the Company’s 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. This obligation shall terminate on the fifth anniversary of the funding of the Term B Loan and shall survive the termination of the loan agreement and the prepayment of the Term B Loan. Critical Accounting Policies and Estimates 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 72 Table of Contents reporting period. Actual results could differ from those estimates. We believe the following critical accounting policies and estimates have significant effect in the preparation of our consolidated financial statements. Patents 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. Grant Revenue : 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. Lease Commitments We currently operate a facility near Princeton, New Jersey with approximately 20,821 sq. ft., housing research laboratories, clinical manufacturing operations and administrative offices, under a lease agreement which expires in May 2021. The lease includes a one year option to renew. We expect to secure additional square footage to support increased manufacturing capacity in the future. Our monthly base rent is approximately $33,600 and, additionally, we reimburse the landlord for monthly operating expenses of approximately $29,700. 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. In January 2021, we entered to a lease for additional warehouse space in Germany. The lease commences on April 1, 2021, requires monthly payments of base rent and other costs of approximately $7,900 and has a term of five years. The lease also has an option to extend the lease term for an additional five years.