What changed in this filing

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Item 1. Financial Statements

2021-05-04 compared with 2020-11-04 · 208 added, 252 removed, 384 unchanged (55% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

Cash and cash equivalents

Grants and accounts receivable, net of allowance for doubtful accounts of $ 69,640 at September 30, 2020 and $ 145,313 at December 31, 2019

Grants and accounts receivable, net of allowance for doubtful accounts of $ 65,026 at March 31, 2021 and $ 46,851 at December 31, 2020

Prepaid expenses and other current assets

1 unchanged sentence

Property and equipment, net

Right of use asset

Right of use assets

LIABILITIES AND STOCKHOLDERS' EQUITY

1 unchanged sentence

Accounts payable

Current maturities of long-term debt

Lease liability – current portion

1 unchanged sentence

Total current liabilities

Long term debt, net of current maturities and debt issuance costs

Lease liability, net of current portion

3 unchanged sentences

Preferred Stock, Par Value $ 0.001 , 5,000,000 shares authorized;

-0- shares issued and outstanding at September 30, 2020 and December 31, 2019

- 0 - shares issued and outstanding at March 31, 2021 and December 31, 2020

Common Stock, Par Value $ 0.001 , 100,000,000 shares authorized;

43,175,685 and 32,616,107 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

43,272,372 and 43,221,999 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

( 1,734,078 )

Accumulated deficit

6 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three months ended

Nine months ended

September 30,

Three Months Ended March 31,

CytoSorb sales

Total product sales

Total revenue

8 unchanged sentences

( 2,478,754 )

( 7,736,069 )

( 13,542,735 )

Other income/(expense):

Other expense:

Interest expense, net

Gain (loss) on foreign currency transactions

( 1,051,854 )

Total other income (expense), net

( 1,257,515 )

Loss on foreign currency transactions

( 1,305,506 )

Net loss before benefit from income taxes

Total other expense, net

( 1,315,630 )

Loss before benefit from income taxes

( 4,167,821 )

4 unchanged sentences

( 3,452,779 )

( 15,316,292 )

Basic and diluted net loss per common share

2 unchanged sentences

( 3,452,779 )

( 15,316,292 )

Other comprehensive income (loss):

Other comprehensive income:

Currency translation adjustment

( 1,047,749 )

( 1,043,280 )

Comprehensive loss

1 unchanged sentence

( 2,842,951 )

( 8,202,744 )

( 14,448,049 )

See accompanying notes to consolidated financial statements.

CYTOSORBENTS CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

For the three and nine months ended September 30, 2020 (Unaudited)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the three months ended March 31, 2021 and 2020 (Unaudited):

Comprehensive

1 unchanged sentence

Income (Loss)

Balance at June 30, 2020

( 195,109,194 )

Stock based compensation - employees, consultants and directors

Issuance of common stock, net of fees

Other comprehensive (loss):

foreign translation adjustment

( 1,047,749 )

Proceeds from exercise of stock options

Issuance of restricted stock units

Balance at September 30, 2020

( 195,948,923 )

Balance at December 31, 2020

( 1,734,078 )

Stock based compensation - employees, consultants and directors

Issuance of common stock, net of fees

Other comprehensive income:

foreign translation adjustment

( 196,626,647 )

( 1,043,280 )

Proceeds from exercise of stock options

Cashless exercise of stock options

Issuance of restricted stock units

( 7,159,464 )

Balance at September 30, 2020

( 195,948,923 )

Comprehensive

Stockholders’

Balance at June 30, 2019

( 177,955,046 )

Stock-based compensation - employees, consultants and directors

2 unchanged sentences

Proceeds from exercise of stock options

Cashless exercise of stock options

Issuance of restricted stock units

Fees related to Open Market Sales Agreement

( 4,167,821 )

Balance at September 30, 2019

Balance at March 31, 2021

( 200,794,468 )

5 unchanged sentences

Proceeds from exercise of stock options

Cashless exercise of warrants

Issuance of restricted stock units

Cashless exercise of stock options

Fees related to Open Market Sales Agreement

Proceeds from exercise of warrants

Issuance of common stock, net of fees incurred

( 3,452,779 )

Balance at September 30, 2019

Balance at March 31, 2020

( 192,242,238 )

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended

September 30,

Cash flows from operating activities:

2 unchanged sentences

Adjustments to reconcile net loss to net cash used by operating activities:

Non-cash compensation

Non-cash restricted stock unit compensation

Depreciation and amortization

Amortization of debt costs

Bad debt recoveries

Bad debt expense

Stock-based compensation

Foreign currency transaction (gain) loss

( 1,416,577 )

Foreign currency transaction loss

Changes in operating assets and liabilities:

3 unchanged sentences

Accounts payable and accrued expenses

( 1,055,356 )

Net cash used by operating activities

5 unchanged sentences

Net cash used by investing activities

( 1,410,082 )

( 1,116,894 )

Cash flows from financing activities:

Equity contributions-net of fees

Fees related to equity facility

Proceeds from long-term debt

Repayment of long-term debt

( 1,410,900 )

Payment of debt acquisition costs

Equity contributions - net of fees incurred

Proceeds from exercise of stock options

Proceeds from exercise of warrants

Net cash provided by financing activities

8 unchanged sentences

Settlement of accrued bonuses with restricted stock units

See accompanying notes to financial statements.

Equity contribution proceeds in transit

See accompanying notes to consolidated financial statements.

CytoSorbents Corporation

Notes to Consolidated Financial Statements

September 30, 2020

March 31, 2021

BASIS OF PRESENTATION

4 unchanged sentences

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on March 9, 2021.

The results for the three and nine months ended September 30, 2020 and 2019 are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or period.

The results for the three months ended March 31, 2021 and 2020 are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or period.

Prior to June 30, 2020, the Company's consolidated financial statements were prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

1 unchanged sentence

Gross proceeds from the Offering amounted to approximately $ 57.5 million and, after deducting the underwriting discounts and commissions and expenses related to the Offering, the Company received total net proceeds of approximately $ 53.8 million.

As of September 30, 2020, the Company’s cash balance was approximately $ 88.0 million, which the Company expects will fund the Company’s operations well beyond the next twelve months.

As a result, the Company has determined that the going concern risk has been eliminated.

As of March 31, 2021, the Company’s cash balance was approximately $ 68.5 million, which the Company expects will fund the Company’s operations well beyond the next twelve months.

As a result, the Company has determined that the going concern risk has been substantially mitigated.

PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

11 unchanged sentences

which is responsible for the management of our clinical trial activities in the United Kingdom.

CytoSorb, the Company’s flagship product, was approved in the European Union (“EU”) in March 2011, and is currently being marketed and distributed in sixty-six countries around the world, as a safe and effective extracorporeal cytokine absorber, designed to reduce the “cytokine storm” that could otherwise cause massive inflammation, organ failure and death in common critical illnesses such as sepsis, burn injury, trauma, lung injury, and pancreatitis.

CytoSorb, the Company’s flagship product, was approved in the European Union (“EU”) in March 2011, and is currently being marketed and distributed in sixty-seven countries around the world, as a safe and effective extracorporeal cytokine absorber, designed to reduce the “cytokine storm” that could otherwise cause massive inflammation, organ failure and death in common critical illnesses such as sepsis, burn injury, trauma, lung injury, and pancreatitis.

In May 2018, the Company received a label extension for CytoSorb covering use of the device for the removal of bilirubin and myoglobin which allows for the use of the device in the treatment of liver failure and trauma, respectively.

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 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.

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.

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.

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.

15 unchanged sentences

In addition, the consolidated financial statements include CytoSorbents Switzerland GmbH and CytoSorbents Poland Sp.

z.o.o., wholly owned subsidiaries of CytoSorbents Europe GmbH.

z.o.o., wholly owned subsidiaries of CytoSorbents Europe GmbH, and CytoSorbents UK Limited, a wholly-owned subsidiary of CytoSorbents Medical, Inc.

All significant intercompany transactions and balances have been eliminated in consolidation.

Translation gains and losses resulting from the process of remeasuring into the United States Dollar, the foreign currency financial statements of CytoSorbents Europe GmbH, for which the Euro is the functional currency, are included in operations.

Foreign currency transaction gain (loss) included in net loss amounted to approximately $ 1,381,000 and $( 956,000 ) for the three months ended September 30, 2020 and 2019, respectively.

Foreign currency transaction gain (loss) included in net loss amounted to approximately $ 1,417,000 and $( 1,052,000 ) for the nine months ended September 30, 2020 and 2019, respectively.

Translation gains and losses resulting from the process of remeasuring into the United States Dollar, the foreign currency financial statements of the European subsidiary are included in operations.

The Euro is the functional currency of the European Subsidiary.

Foreign currency transaction loss included in net loss amounted to approximately $( 1,306,000 ) and $( 668,000 ) for the three months ended March 31, 2021 and 2020, respectively.

The Company translates assets and liabilities of CytoSorbents Europe GmbH at the exchange rate in effect at the consolidated balance sheet date.

The Company translates revenue and expenses at the daily average exchange rates.

The Company includes accumulated net translation adjustments in accumulated other comprehensive income (loss) as a component of stockholders’ equity.

The Company includes accumulated net translation adjustments in accumulated other comprehensive loss as a component of stockholders’ equity.

Cash and Cash Equivalents

8 unchanged sentences

Balances that are determined to be uncollectible are written off to the allowance for doubtful accounts.

The allowance for doubtful accounts contains a general accrual for estimated bad debts and amounted to approximately $ 65,000 and $ 47,000 at March 31, 2021 and December 31, 2020, respectively.

Inventories are valued at the lower of cost or net realizable value under the first in, first out (FIFO) method.

At September 30, 2020 and December 31, 2019, the Company’s inventory was comprised of finished goods, which amounted to $ 637,735 and $ 305,452 , respectively;

At March 31, 2021 and December 31, 2020, the Company’s inventory was comprised of finished goods, which amounted to $ 1,622,401 and $ 1,164,635 , respectively;

work in process which amounted to $ 1,176,067 and $ 1,222,062 , respectively;

1 unchanged sentence

Devices used in clinical trials or for research and development purposes are removed from inventory and charged to research and development expenses at the time of their use.

Donated devices are removed from inventory and charged to selling, general and administrative expenses.

Property and Equipment

14 unchanged sentences

Recognition of revenue occurs as each performance obligation is completed.

Grant Income :

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.

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.

Amounts invoiced in excess of costs actually incurred on fixed price contracts are classified as deferred revenue.

Costs subject to reimbursement by these grants have been reflected as costs of revenue.

3 unchanged sentences

Advertising expenses are charged to activities when incurred.

Advertising expenses amounted to approximately $ 32,000 and $ 70,000 for the three months ended September 30, 2020 and 2019, respectively, and approximately $ 118,000 and $ 215,000 for the nine months ended September 30, 2020 and 2019, respectively, and are included in selling, general, and administrative expenses on the consolidated statements of operations.

Advertising expenses amounted to approximately $ 154,000 and $ 31,500 for the three months ended March 31, 2021 and 2020, respectively, and are included in selling, general, and administrative expenses on the consolidated statements of operations and comprehensive loss.

Income taxes are accounted for under the asset and liability method prescribed by accounting standards for accounting for income taxes.

6 unchanged sentences

The Company follows accounting standards associated with uncertain tax positions.

The Company had no unrecognized tax benefits at September 30, 2020 or December 31, 2019.

The Company had no unrecognized tax benefits at March 31, 2021 or December 31, 2020.

The Company files tax returns in the U.S.

12 unchanged sentences

A significant portion of our revenues are from product sales in Germany.

Substantially all of our grant and other income are from grant agencies in the United States.

Substantially all of our grant and other income are from government agencies in the United States.

(See Note 4 for further information relating to the Company’s revenue.)

As of September 30, 2020, one distributor accounted for approximately 20 % of outstanding grants and accounts receivable.

As of March 31, 2021, one distributor accounted for approximately 21 % of outstanding grants and accounts receivable.

As of December 31, 2020, no agency, distributor/strategic partners or direct customer represented more than 10 % of outstanding grants and accounts receivables.

For the three months ended September 30, 2020, one distributor accounted for approximately 13 % of the Company's total revenue.

For the nine months ended September 30, 2020, no agency, distributor, or direct customer represented more than 10 % of the Company’s total revenue.

For the three and nine months ended September 30, 2019, no agency, distributor, or direct customer represented more than 10 %of the Company’s total revenue.

For the three months ended March 31, 2021 one distributor accounted for approximately 11 % of the Company's total revenue and for the three months ended March 31, 2020, no agency, distributor, or direct customer represented more than 10 % of the Company’s total revenue.

Financial Instruments

The carrying values of cash and cash equivalents, short-term investments, accounts payable, notes payable, and other debt obligations approximate their fair values due to their short-term nature.

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities approximate their fair values due to their short-term nature.

Net Loss Per Common Share

Basic earnings per share is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding during the period.

Diluted earnings per common share is computed using the treasury stock method on the basis of the weighted-average number of shares of common stock plus the dilutive effect of potential common shares outstanding during the period.

Dilutive potential common shares include outstanding warrants, stock options and restricted shares.

Diluted earnings per common share are computed using the treasury stock method on the basis of the weighted-average number of shares of common stock plus the dilutive effect of potential common shares outstanding during the period.

Dilutive potential common shares include outstanding stock options and restricted shares.

The computation of diluted earnings per share does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings (See Note 8).

6 unchanged sentences

The Company records other shipping and handling costs in cost of revenue.

Total freight costs amounted to approximately $ 188,000 and $ 133,000 , respectively, for the three months ended September 30, 2020 and 2019, and $ 471,000 and $ 491,000 , respectively, for the nine months ended September 30, 2020 and 2019.

Total freight costs amounted to approximately $ 63,000 and $ 133,000 , respectively, for the three months ended March 31, 2021 and 2020.

STOCKHOLDERS’ EQUITY

7 unchanged sentences

The Company completed the Offering pursuant to the terms of an Underwriting Agreement, dated as of July 21, 2020, by and among the Company and Cowen and Company, LLC and SVB Leerink LLC, as representatives of the several underwriters named therein.

The Company received gross proceeds of approximately $ 57.5 million from the Offering.

After deducting the underwriting discounts and commissions and fees and expenses payable by the Company in connection with the Offering, the Company received net proceeds of approximately $ 53.8 million.

The Company received gross proceeds of approximately $ 57.5 million from the Offering and after deducting the underwriting discounts and commissions and fees and expenses payable by the Company in connection with the Offering, the Company received net proceeds of approximately $ 53.8 million.

Shelf Registration

1 unchanged sentence

The 2018 Shelf, which was declared effective on August 7, 2018, enables the Company to offer and sell, in one or more offerings, any combination of common stock, preferred stock, senior or subordinated debt securities, warrants and units, up to a total dollar amount of $ 150 million.

Termination of Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co.

On May 31, 2019, the Company delivered to Cantor Fitzgerald & Co.

(“Cantor”) written notice of termination (the “Termination Notice”) of the Controlled Equity Offering Sales Agreement, dated November 4, 2015, by and between the Company and Cantor, as amended by Amendment No.

1 to Sales Agreement, dated July 26, 2018 (collectively, the “Sales Agreement”).

In accordance with Section 13(b) thereof, the Sales Agreement terminated on June 10, 2019, ten (10) days after the delivery of the Termination Notice.

As provided in the Sales Agreement, the Sales Agreement terminated without liability of any party to any other party, except that certain provisions of the Sales Agreement identified therein shall remain in full force and effect notwithstanding the termination.

Pursuant to the Sales Agreement, the Company offered and sold, from time to time through Cantor, shares of the Company’s common stock.

In the aggregate, the Company sold 2,094,140 shares pursuant to the Sales Agreement, at an average selling price of $ 8.72 per share, generating net proceeds of approximately $ 17,718,000 from November 4, 2015 through December 31, 2018.

There were no sales during the year ended December 31, 2019.

Open Market Sale Agreement with Jefferies LLC and B.

2 unchanged sentences

Riley FBR, Inc.

(each an “Agent” and, together, the “Agents”), pursuant to which the Company may sell, from time to time, at its option, shares of the Company’s common stock having an aggregate offering price of up to $ 25,000,000 through the Agents, as the Company’s sales agents.

(each an “Agent” and, together, the “Agents”), pursuant to which the Company may sell, from time to time, at its option, shares of the Company’s common stock having an aggregate offering price of up to $ 25 million through the Agents, as the Company’s sales agents.

All shares of the Company’s common stock offered and sold, or to be offered and sold under the New Sale Agreement were or will be issued and sold pursuant to the Company’s 2018 Shelf by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, in block transactions or if specified by the Company, in privately negotiated transactions.

5 unchanged sentences

During the year ended December 31, 2019, the Company sold 191,244 shares pursuant to the Amended Sale Agreement, at an average selling price of $ 4.11 per share, generating net proceeds of approximately $ 762,000 .

During the nine months ended September 30, 2020, the Company sold 4,110,625 shares pursuant to the Amended Sale Agreement, at an average selling price of $ 6.64 per share, generating net proceeds of approximately $ 26,476,000 .

In the aggregate, the Company has sold 4,301,869 shares pursuant to the Amended Sale Agreement, at an average selling price of $ 6.53 per share, generating net proceeds of approximately $ 27,238,000 .

In addition, during the nine months ended September 30, 2020, the Company paid approximately $ 49,000 in expenses related to the Amended Sale Agreement.

During the year ended December 31, 2020, the Company sold 4,110,625 shares pursuant to the Amended Sale Agreement, at an average selling price of $ 6.64 per share, generating net proceeds of approximately $ 26.5 million.

There were no sales during the three months ended March 31, 2021.

In addition, during the year ended December 31, 2020, the Company paid approximately $ 49,000 in expenses related to the Amended Sale Agreement.

Stock-Based Compensation

Total share-based employee, director, and consultant compensation amounted to approximately $ 1,088,000 and $ 802,000 for the three months ended September 30, 2020 and 2019, and approximately $ 2,864,000 and $ 1,175,000 for the nine months ended September 30, 2020 and 2019, respectively.

These amounts are included in the consolidated statements of operations and comprehensive loss under selling, general and administrative expenses.

The summary of the stock option activity for the nine months ended September 30, 2020 is as follows:

Total share-based employee, director, and consultant compensation for the three months ended March 31, 2021 and 2020 amounted to approximately $ 667,000 and $ 729,000 , respectively.

These amounts are included in the statement of operations under general and administrative expenses.

The summary of the stock option activity for the three months ended March 31, 2021 is as follows:

Exercise Price

Outstanding, December 31, 2020

Outstanding, September 30, 2020

The fair value of each stock option was estimated using the Black Scholes pricing model which takes into account as of the grant date the exercise price (ranging from $ 5.68 to $ 10.58 per share) and expected life of the stock option ( 10 years ), the current price of the underlying stock and its expected volatility (ranging from 64.8 percent to 69.8 percent), expected dividends (- 0 - percent) on the stock and the risk free interest rate (ranging from 0.28 to 0.36 percent) for the term of the stock option.

The intrinsic value is calculated at the difference between the market value as of September 30, 2020 of $ 7.975 and the exercise price of the shares.

Outstanding, March 31, 2021

The fair value of each stock option was estimated using the Black Scholes pricing model, which takes into account as of the grant date the exercise price (ranging from $ 8.23 to $ 11.39 per share) and expected life of the stock option ( 10 years ), the current price of the underlying stock and its expected volatility ( 60.7 percent), expected dividends (- 0 - percent) on the stock and the risk free interest rate (ranging from 0.47 to 1.03 percent) for the expected term of the stock option.

The intrinsic value is calculated as the difference between the market value as of March 31, 2021 of $ 8.68 and the exercise price of the shares.

Options Outstanding

Outstanding at

September 30,

$ 2.65 - $ 14.50

1 unchanged sentence

Exercisable at

September 30,

The summary of the status of the Company’s non-vested options for the nine months ended September 30, 2020 is as follows:

The summary of the status of the Company’s non-vested options for the three months ended March 31, 2021 is as follows:

Non-vested, December 31, 2020

Non-vested, September 30, 2020

As of September 30, 2020, the Company had approximately $ 3,233,000 of total unrecognized compensation cost related to stock options which will be expensed over 30 months .

On February 28, 2020, the Board of Directors granted options to purchase 1,041,325 shares of common stock to the Company’s employees which will vest upon the achievement of certain specific, predetermined milestones related to the Company’s 2020 operations.

Once awarded, these options will vest in four equal traunches, the first traunch vesting on the date of the award.

The grant date fair value of these unvested options amounted to approximately $ 6,279,000 .

Based upon an assessment by management, which was reviewed with the Board of Directors, as of September 30, 2020, the Company met approximately 62.5 % of these milestones, and

accordingly we have recorded $ 419,000 and $ 616,000 in stock option expense related to these options in the three and nine months ended September 30, 2020, respectively.

Non-vested, March 31, 2021

As of March 31, 2021, the Company had approximately $ 5,300,000 of total unrecognized compensation cost related to stock options which will be amortized over approximately 35 months .

Change in Control-Based Awards of Restricted Stock Units:

The Board of Directors has granted restricted stock units to members of the Board of Directors, to the Company’s executive officers, and to certain employees of the Company.

These specific restricted stock units will only vest upon a Change in Control of the Company, as defined in the Company's Amended and Restated 2014 Long-Term Incentive Plan.

The Board of Directors has granted restricted stock units to members of the Board of Directors, to the Company’s executive officers, and to employees of the Company.

These restricted stock units will only vest upon a Change in Control of the Company, as defined in the Amended and Restated CytoSorbents Corporation 2014 Long-Term Incentive Plan.

The following table is a summary of these restricted stock units:

2 unchanged sentences

December 31, 2020

September 30, 2020

Due to the uncertainty over whether these restricted stock units will vest, which will only happen upon a Change in Control, no charge for these restricted stock units has been recorded in the consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2020 and 2019.

Performance-Based Awards of Restricted Stock Units:

Pursuant to a review of the compensation of the senior management of the Company and managements’ performance in 2017, on February 28, 2018, the Board of Directors granted 146,200 restricted stock units to certain senior managers of the Company in order to settle bonuses accrued as of December 31, 2016.

These awards were valued at approximately $ 1,148,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vest one third on the date of the grant one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant.

For the three and nine months ended September 30, 2020 and 2019, the Company recorded a charge (credit) of approximately $ 0 and $ 96,000 , and $( 23,000 ) and $ 298,000 , related to these restricted stock unit awards , respectively.

March 31, 2021

Due to the uncertainty over whether these restricted stock units will vest, which only happens upon a Change in Control, no charge for these restricted stock units has been recorded in the consolidated statements of operations for the three months ended March 31, 2021 and 2020.

Other Awards of Restricted Stock Units:

Pursuant to a review of the compensation of the senior management of the Company and managements’ performance in 2018, on March 4, 2019 the Board of Directors granted 22,220 restricted stock units to certain senior managers of the Company in order to settle bonuses accrued as of December 31, 2018.

These awards were valued at approximately $ 179,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vest one third on the date of the grant one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant.

For the three and nine months ended September 30, 2020 and 2019, the Company recorded a charge of approximately $ 12,000 and $ 15,000 , and $ 22,000 and $ 34,000 , related to these restricted stock unit awards , respectively.

For the three months ended March 31, 2021 and 2020, the Company recorded a charge of approximately $ 11,000 and $ 9,000 respectively, related to these restricted stock unit awards.

Pursuant to a review of the compensation of the senior management of the Company and managements’ performance in 2019, on July 22, 2019 the Board of Directors granted 180,300 restricted stock units to certain senior managers of the Company in order to settle bonuses accrued as of December 31, 2019.

These awards were valued at approximately $ 1,300,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vest one third on the date of the grant, one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant.

For the three and nine months ended September 30, 2020 and 2019, the Company recorded a charge of approximately $ 256,000 and $ 103,000 and $ 461,000 and $ 525,000 , related to these restricted stock unit awards , respectively.

For the three months ended March 31, 2021 and 2020, the Company recorded a charge of approximately $ 103,000 and $ 103,000 , respectively, related to these restricted stock unit awards.

Pursuant to a review of the compensation of the senior management of the Company and managements’ performance in 2019, on February 28, 2020, the Board of Directors granted 168,100 restricted stock units to certain senior managers of the Company in order to settle bonuses accrued as of December 31, 2020.

These awards were valued at approximately $ 1,014,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vest one third on the date of the grant one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant.

For the three and nine

months ended September 30, 2020 and 2019, the Company recorded a charge of approximately $ 84,000 and $ 0 and $ 535,000 and $ 0 , related to these restricted stock unit awards , respectively.

The following table is a summary of the activity related to these restricted stock units during the nine months ended September 30, 2020:

Non-vested, January 1, 2020

Non-vested, September 30, 2020

As of September 30, 2020, the Company had no warrants outstanding.

The following table disaggregates the Company’s revenue by customer type and geographic area for the three months ended September 30, 2020:

United States

Distributors/

Strategic Partners

Product sales:

United States

All other countries

Total product revenue

Grant and other income:

United States

Total revenue

The following table disaggregates the Company’s revenue by customer type and geographic area for the three months ended September 30, 2019:

United States

Distributors/

Strategic Partners

Product sales:

United States

All other countries

Total product revenue

Grant and other income:

United States

Total revenue

The following table disaggregates the Company's revenue by customer type and geographic area for the nine months ended September 30, 2020:

For the three months ended March 31, 2021 and 2020, the Company recorded a charge of approximately $ 274,000 and $ 366,000 respectively, related to these restricted stock unit awards.

Additionally, in 2020 certain employees were offered 60,000 restricted stock units as a condition of their employment.

These awards were valued at approximately $ 465,900 at the date of issuance.

30,000 of these restricted stock units vest upon the earlier of a Change in Control or one -third after the second anniversary of the award, one -third on the third anniversary of the award, and one -third on the fourth anniversary of the award.

The other 30,000 of these restricted stock units vest upon the earlier of a Change in Control or four years from the date of the award.

For the three months ended March 31, 2021 and 2020, the Company recorded a charge of approximately $ 54,000 and $ 0 respectively, related to these restricted stock unit awards.

The following table outlines the restricted stock unit activity for the three months ended March 31, 2021:

Non-vested, December 31, 2020

Non-vested, March 31, 2021

The following table disaggregates the Company’s revenue by customer type and geographic area for the three months ended March 31, 2021:

United States

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Total revenue

The following table disaggregates the Company's revenue by customer type and geographic area for the nine months ended September 30, 2019:

The following table disaggregates the Company’s revenue by customer type and geographic area for the three months ended March 31, 2020:

United States

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(1) sales of the CytoSorb device and related device accessories and (2) grant income from contracts with various agencies of the United States government.

Both of these revenue streams are within the scope of this accounting pronouncement.

The following is a brief description of each revenue stream.

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The Company sells its CytoSorb device using both its own sales force (direct sales) and through the use of distributors and/or strategic partners.

All sales of the device are outside the United States, as CytoSorb is not yet approved in the United States, other than in respect of the EUA.

The majority of sales of the device are outside the United States, as CytoSorb is not yet approved for commercial sale in the United States.

However, in April 2020, the Company was granted Emergency Use Authorization (“EUA”) of CytoSorb for use in critically-ill patients infected with COVID-19 by the United States Food and Drug Administration (the “FDA”).

Direct sales outside the United States relate to sales to hospitals located in Germany, Switzerland, Austria, Belgium, Luxembourg, Poland, the Netherlands, Sweden, Denmark and Norway.

Direct sales are fulfilled from the Company's office in Berlin, Germany.

Direct sales relate to sales to hospitals located in Germany, Switzerland, Austria, Belgium, Luxembourg, Poland, the Netherlands, Sweden, Denmark and Norway.

There are no formal sales contracts with any direct customers relating to product price or minimum purchase requirements.

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These contracts have terms ranging from 1 - 5 years in length, with three years being the typical term.

In addition, certain distributors are eligible for volume discount pricing if their unit sales are in excess of the base requirement per the contract.

Each distributor's/strategic partner's contract has minimum annual purchase requirements in order to maintain exclusivity in their respective territories.

There is no additional consideration or monetary penalty that would be required to be paid to the Company if a distributor does not meet the minimum purchase commitments included in the contract, however, at the discretion of the Company, the distributor may lose its exclusive rights in the territory if such commitments are not met.

In addition, certain distributors are eligible for volume discount pricing if their unit sales are in excess of the base amount in the contract.

Most distributor's/strategic partner's contracts have minimum annual purchase requirements in order to maintain exclusivity in their respective territories.

There is no additional consideration or monetary penalty that would be required to be paid to CytoSorbents if a distributor does not meet the minimum purchase commitments included in the contract, however, at the discretion of the Company, the distributor may lose its exclusive rights in the territory if such commitments are not met.

Government Grants

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Fixed price – the Company invoices the contract amount in equal installments over the term of the contract without regard to the timing of the costs incurred related to this contract.

If billings on fixed price contracts exceed the costs incurred, revenue will be deferred to the extent of the excess billings.

Cost reimbursement – the Company submits monthly invoices during the term of the contract for the amount of direct costs incurred during that month plus an agreed percentage that relates to allowable overhead and general and administrative expenses.

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The following table provides information about receivables and contract liabilities from contracts with customers:

September 30, 2020

March 31, 2021

December 31, 2020

Receivables, which are included in grants and accounts receivable

Contract liabilities

Contract liabilities represent the value of free of charge goods and credit rebates earned in accordance with the terms of certain direct customer agreements during the periods ended September 30, 2020 and December 31, 2019, and deferred revenue on distributor/strategic partner contracts.

Deferred revenue is the difference between the average selling price anticipated for the year ended 2020 and the actual price invoiced during the nine months ended September 30, 2020.

There was no deferred revenue liability as of December 31, 2019.

Contract liabilities, which are included in accrued expenses and other current liabilities

Contract receivables represent balances due from sales to distributors and amounts invoiced on grant contracts.

Contract liabilities represent the value of free of charge goods and credit rebates earned in accordance with the terms of certain direct customer agreements and deferred grant revenue related to the billing on fixed price contracts in excess of costs incurred as of March 31, 2021 and December 31, 2020.

LONG-TERM DEBT, NET

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(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 “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 could have been disbursed at the Borrower’s sole request prior to March 31, 2019 provided certain conditions were met (the “Term B Loan” and together with the Term A Loan, the “Term Loans”).

On July 31, 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 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.

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

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 6.91 % at September 30, 2020.

On the Closing Date, the Company was 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 was outstanding of $ 85,938 .

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

As of the Closing Date, the total unamortized loan costs related to the Term Loans amounted to $ 130,060 .

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 three and nine months ended September 30, 2020, the Company recorded interest expense amounting to $ 8,524 and $ 25,573 , and for both the three and nine months ended September 30, 2019 the Company recorded interest expense amounting to $ 8,393 and $ 24,651 , respectively, related to these costs.

Under the terms of the First Amendment, commencing on the first calendar day of the calendar month after the Term B Loan was made, the Company is 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.

Since the Company has complied with its obligations under the financial covenant revenue test through March 2020, commencing on November 1, 2020, the Company will make equal monthly payments of principal of $ 833,333 , together with accrued and unpaid interest.

All unpaid principal and accrued and unpaid interest will be due and payable in full on April 1, 2022.

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”), if needed.

Under the terms of the Third Amendment, the Company may, at its sole discretion, draw down the New Term Loan at any time over the next twelve months.

The New Term Loan, if drawn, shall bear interest at the Index Rate (defined in the 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 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 with 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.

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.

This final fee is being accrued and charged to interest expense over the term of the Term Loans.

For the three and nine months ended September 30, 2020 and 2019, the Company recorded interest expense of $ 27,344 and $ 23,437 , respectively, and $ 82,031 and $ 54,687 , respectively, related to the final fee.

The Term Loans are evidenced by secured promissory notes issued to the Bank by the Company.

If the Company elects 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.

The Company is in compliance with these covenants.

On the Closing Date, the Company paid a final fee of $ 375,000 .

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).

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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.

Long-term debt consists of the following at September 30, 2020:

Principal amount

Less unamortized debt acquisition costs

Plus accrued final fee

Less Current maturities

( 9,166,667 )

Long-term debt net of current maturities

Principal payments of long-term debt are due as follows during the twelve months ending September 30 th :

Payroll Protection Program:

On April 13, 2020, the Company received approximately $ 1,411,000 in loan proceeds from the Payroll Protection Program (the "PPP") administered by the Small Business Administration (the "SBA") of the United States government.

This program was established under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act").

On April 29, 2020, following a reassessment of the Company's financial and operating position, including cash on hand and access to public capital markets, the Company repaid the PPP 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.

COMMITMENTS AND CONTINGENCIES

Customs Examination

In October 2020, the Company received a notice from the German Customs Authorities that they would be conducting an audit of the Company’s import transactions for the years 2018 through 2020 in order to determine if any import taxes would be due.

The audit commenced in early December 2020.

The primary import activity of the Company is the importation of CytoSorb devices from the United States.

The German Customs Authorities are challenging the Harmonized Code that the Company utilizes to import the CytoSorb devices into Germany.

The code that has been utilized by the Company has zero import taxes associated with it.

The German Customs Authorities have indicated that the Company’s device might be better classified under a different code which has a 1.7 % tax attached to it.

As part of the audit process, the Company has provided the German Customs Authorities with extensive information about the CytoSorb device, including data regarding the uses of the device, as well as the instructions for use.

In addition, employees of the Company gave the auditors a technical presentation of the scientific properties of the device, focusing on it as an adsorber, as opposed to a filter.

On March 15, 2021, based on a review of all the information presented to the German Customs Authority’s technical staff, the German Customs Authority informed us that the Company must use the code that carries the 1.7% tax.

The audit process is on-going and the authorities have indicated it is expected to be completed by approximately June 30, 2021.

Based on a thorough review of these facts, management has concluded that it is probable that this contingency is likely to occur.

Approximately $ 132,000 of the expense relates to 2018, approximately $ 229,000 relates to 2019, approximately $ 371,000 relates to 2020 and approximately $ 89,000 relates to the three months ended March 31, 2021.

Accordingly, an expense and related liability in the amount of approximately $ 821,000 has been recorded to cost of goods sold in the Company’s March 31, 2021 consolidated financial statements related to this contingency.

Employment Agreements

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The agreements also provide for certain benefits in the event of a “Change of Control” of the Company, as defined in each agreement.

The Company is from time to time subject to claims and litigation arising out of the ordinary course of business.

The Company is, from time to time, subject to claims and litigation arising in the ordinary course of business.

The Company intends to defend vigorously against any future claims and litigation.

The Company is not currently a party to any significant legal proceedings.

Royalty Agreements

In 2003, the Company granted a perpetual royalty (the “Royalty”) equal to three percent of all gross revenues received by the Company from sales of CytoSorb in the applications of sepsis, cardiopulmonary bypass surgery, organ donor, chemotherapy and inflammation control.

For the three months ended September 30, 2020 and 2019, the Company has recorded royalty costs of approximately $ 306,000 and $ 169,000 , respectively.

For the nine months ended September 30, 2020 and 2019, the Company has recorded royalty costs of approximately $ 829,000 and $ 478,000 , respectively.

License Agreements

In March 2006, the Company entered into a license agreement which provides the Company the exclusive right to use its patented technology and proprietary know how relating to adsorbent polymers for a period of 18 years.

Under the terms of the agreement, the Company has agreed to pay royalties of 2.5 % to 5 % on the sale of certain of its products if and when those products are sold commercially for a term not greater than 18 years commencing with the first sale of such product.

For the three months ended September 30, 2020 and 2019, per the terms of the license agreement, the Company has recorded royalty costs of approximately $ 510,000 and $ 282,000 , respectively.

For the nine months ended September 30, 2020 and 2019, the Company recorded royalty costs of approximately $ 1,381,000 and $ 797,000 , respectively.

Effective January 1, 2019, the Company adopted the provisions of Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842).

The provisions of this ASU require the Company to record a right-of-use asset and related lease liability related to their leases.

The Company is not currently a party to any legal proceedings.

Royalty Agreement

Pursuant to an agreement dated August 11, 2003, an existing investor agreed to make a $ 4 million equity investment in the Company.

These amounts were received by the Company in 2003.

In connection with this agreement the Company granted the investor a perpetual royalty of 3 % on all gross revenues received by the Company from the sale of its CytoSorb device which such rights were assigned to an existing investor in 2017.

For the three months ended March 31, 2021 and 2020, the Company recorded royalty expenses of approximately $ 301,000 and $ 242,000 , respectively.

These expenses are included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss.

License Agreement

In an agreement dated September 1, 2006, the Company entered into a license agreement which provides the Company the exclusive right to use its patented technology and proprietary know how relating to adsorbent polymers for a period of 18 years.

Under the terms of the agreement, the Company has agreed to pay license fees of 2.5 % to 5 % on the sale of certain of its products if and when those products are sold commercially for a term not greater than 18 years commencing with the first sale of such product.

For the three months ended March 31, 2021 and 2020 per the terms of the license agreement, the Company recorded licensing expenses of approximately $ 501,000 and $ 404,000 , respectively.

These expenses are included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss.

The Company leases its operating facilities in both the United States and Germany under operating lease agreements.

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There were no lease incentives and no initial direct costs were incurred related to these leases.

Initial Measurement of Right-Of-Use Asset and Lease Liability:

Right-Of-Use Asset and Lease Liability:

The Company's consolidated balance sheets reflect the value of the right-of-use asset and related lease liability.

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As a result, the value of the right-of- use asset and related lease liability is as follows:

September 30,

Right-of-use asset

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Lease liability, net of current portion

The maturities of the lease liabilities due in the twelve months ending September 30, 2020:

For the three months ended September 30, 2020 and 2019, operating cash flows paid in connection with operating leases amounted to approximately $ 211,000 and $ 234,000 , and $ 658,000 and $ 674,000 for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020 and December 31, 2019, the weighted average remaining lease term was 4.3 years and 4.10 years, respectively.

The maturities of the lease liabilities are as follows during the year ended March 31:

For the three months ended March 31, 2021 and 2020, operating cash flows paid in connection with operating leases amounted to approximately $ 230,865 and $ 234,000 , respectively.

As of March 31, 2021 and December 31, 2020, the weighted average remaining lease term was 4.

0 years, respectively.

In March 2021, CytoSorbents Medical Inc.

entered into a lease agreement for a new operating facility which contains office, laboratory, manufacturing and warehouse space.

The commencement date of the lease is the date the landlord receives approval for the construction of certain improvements.

The Initial Early Term begins on the commencement date (April 1, 2021) and lasts to June 1, 2021.

The Early Term commences on June 1, 2021 and lasts until the date of issuance of the certificate of occupancy for the manufacturing space (expected to be September 30, 2021).

The lease also contains two five-year renewal options however the Company has determined that it is not likely that they will exercise these options.

Commencing on the date of the receipt of the certificate of occupancy (September 30, 2021), the remaining lease term will last for 15.5 years.

The lease requires monthly rental payments of $ 25,208 for the Initial Early Term, $ 88,254 for the Early Term and initial monthly payments of approximately $ 111,171 in the first year of the remaining term.

Following the first year of the remaining term, the annual base rent will increase by approximately 2.75 % annually over the remaining term.

The lease also contains six months of rent abatement (months 1, 2, 3, 25, 26 and 27 of the remaining lease term).

In addition to the base rent, payments of operating expenses and real estate taxes will be required.

These payments are to be based on actual amounts incurred during 2021 times the Company’s share of the total building space ( 92.3 %).

The landlord will also provide an allowance of approximately $ 1,455,000 related to certain building improvements as outlined in the lease.

In April 2021, the Company was required to provide the landlord with a letter of credit in the amount of approximately $ 1,334,000 as security.

The Company has determined that this lease should be treated as an operating lease in accordance with the provisions of ASC 842.

On April 1, 2021, the Company will record a Right of Use asset and related lease liability of approximately $ 11.6 million, which represents the estimated present value of the lease payments at the commencement date discounted at the Company’s incremental borrowing rate of 9.8 %.

In addition, due to the six months of rent abatement and annual base rent escalations, the Company will recognize rent expense on this lease on straight line basis over the term of the lease and record a liability for the difference between the rent expense recognized and the required payments under the lease.

In January 2021, CytoSorbents Europe GmbH entered into a lease for 1,068 square meters of additional warehouse space.

The lease commences on April 1, 2021, requires monthly payments of base rent of $ 7,784 and other costs of approximately $ 239 and has a term of five years .

The lease also has an option to extend the lease term for an additional five-year period through March 31, 2031.

The Company has determined that this lease should be treated as an operating lease in accordance with the provisions of ASC 842.

On April 1, 2020, the Company will record a Right of Use asset and related lease liability at the estimated present value of the lease payments at the commencement date.

This amounted to approximately $ 594,000 .

In April 2021, the Company entered into a Twentieth Amendment to Lease with the landlord which will become effective May 31, 2021.

This amendment extends the term of the lease for the Company’s existing facility to May 31, 2022.

The Company’s base rent will be approximately $ 35,000 per month.

In addition, the Company is obligated to pay monthly operating expenses of approximately $ 30,000 per month.

Under the terms of this amendment, the Company will vacate a portion of the space as of May 31, 2022.

The Company will continue to lease the remaining space until December 31, 2022, at which time the Company will vacate the remaining space and the lease will terminate.

The Company’s base rent for the remaining space will be approximately $ 20,000 per month.

Monthly operating expenses will be approximately $ 11,000 per month.

In addition, the Company agreed to increase its security deposit by approximately $ 54,000 to a total of $ 150,000 .

At the end of the lease term, the entire security deposit will be paid to the landlord for the purpose of making any needed repairs to the vacated premises, and the Company will have no further obligation to pay for repairs to the vacated premises.

Effective April 1, 2021, the Company adjusted its incremental borrowing rate to the incremental borrowing rate used in the College Road lease and recalculated the right of use asset and lease liability under the amended terms of this lease.

In addition, the Company also adjusted the incremental borrowing rate and related right of use asset and lease liability on the existing Germany office lease effective April 1, 2021.

NET LOSS PER SHARE

Basic loss per share and diluted loss per share for the three months ended September 30, 2020 and 2019 have been computed by dividing the net loss for each respective period by the weighted average number of shares outstanding during that period.

All outstanding warrants and options and restricted stock awards representing approximately 7,749,000 and 7,329,000 incremental shares at September 30, 2020 and 2019, respectively, have been excluded from the computation of diluted loss per share as they are anti-dilutive.

Basic loss per share and diluted loss per share for the three months ended March 31, 2021 and 2020 have been computed by dividing the net loss for each respective period by the weighted average number of shares outstanding during that period.

All outstanding options and restricted stock awards representing approximately 7,821,000 and 7,891,000 incremental shares at March 31, 2021 and 2020, respectively, have been excluded from the computation of diluted loss per share as they are anti-dilutive.

SUBSEQUENT EVENTS

On October 9, 2020, the Company announced that the U.S.

Army Medical Research Acquisition Activity (USAMRAA), has awarded the Company a two-year SBIR Sequential Phase II contract valued at $ 1,098,588 to optimize development of the HemoDefend-BGA™ adsorber.

The HemoDefend-BGA adsorber can rapidly remove greater than 99 % of anti-A and anti-B antibodies from plasma to create a “universal plasma” that could be administered to anyone, irrespective of blood type, while maintaining critical coagulation activity.

On April 28, 2021, the Company entered into a Twentieth Amendment to Lease with the landlord which will become effective May 31, 2021.

This amendment extends the term of the lease for the Company’s existing facility to May 31, 2022.

The Company’s base rent will be approximately $ 35,000 per month.

Under the terms of this amendment, the Company will vacate a portion of the space as of May 31, 2022.

The Company will continue to lease the remaining space until December 31, 2022, at which time the Company will vacate the remaining space and the lease will terminate.

The Company’s base rent for the remaining space will be approximately $ 20,000 per month.

In addition, the Company agreed to increase its security deposit by approximately $ 54,000 to a total of $ 150,000 .

On April 19, 2021, the Company received notification that it received a U.S.

Army Medical Research Acquisition Activity Award (the “USAMRAAA”) entitled "Investigation of a potassium adsorber for the treatment of hyperkalemia induced by traumatic injury and acute kidney injury in austere medicine."

The USAMRAAA Phase II Sequential Award, for up to $ 1,499,987 , was granted to the Company to continue development of two novel and distinct treatment options for life-threatening hyperkalemia.

This Award is being funded by the USAMRAAA under Contract No.

W81XWH21C0045.

On April 12, 2021, the Board of Directors approved the 2021 operating milestones.

The Board also granted options to purchase 1,323,400 shares of Common Stock to certain specified Company employees.

These options will vest only upon the achievement of certain specific, predetermined milestones related to the Company’s 2021 operating performance.

Once awarded, these options will vest in four equal tranches, the first tranche vesting on the date of the award and the remaining tranches vest on each of the three subsequent anniversaries of the Board’s determination.

The grant date fair value of these unvested options amounted to approximately $ 7,111,566 based upon the Black Sholes calculation.

On April 12, 2021, the Board granted options to purchase 350,450 shares of Common Stock at an exercise price of $ 8.99 per share to certain executives of the Company.

These options will vest in four equal tranches, the first tranche vesting on the date of the award and the remaining tranches vest on each of the three subsequent anniversaries of the award, subject to applicable executive’s continued service as of applicable vesting date.

Additionally, on April 12, 2021, the Board granted 235,765 restricted stock units to certain executives of the Company.

These restricted stock unit will vest in three equal tranches, the first tranche vesting on the date of the award and the remaining two tranches vest on the subsequent anniversaries of the award, subject to applicable executive’s continued service as of applicable vesting date and will be settled into Common Stock upon vesting.

On April 12, 2021, the Board granted options to purchase 86,250 shares of Common Stock at an exercise price of $ 8.99 to non-employee members of the Company’s Board of Directors.

One quarter of these options vested on April 12, 2021, one quarter will vest on June 30, 2021, one quarter will vest on September 30, 2021 and one quarter will vest on December 31, 2021, subject to the director’s continued service as of the applicable vesting date.

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-Q

Item 1. Financial Statements