What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-03 compared with 2021-05-04 · 198 added, 142 removed, 450 unchanged (43% of the section changed)

4 unchanged sentences

Cash and cash equivalents

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

Grants and accounts receivable, net of allowance for doubtful accounts of $ 68,334 at June 30, 2021 and $ 46,851 at December 31, 2020

Prepaid expenses and other current assets

13 unchanged sentences

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

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

- 0 - shares issued and outstanding at June 30, 2021 and December 31, 2020

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

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

43,337,905 and 43,221,999 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

9 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three Months Ended March 31,

Three months ended June 30,

Six months ended June 30,

CytoSorb sales

Total product sales

Total revenue

8 unchanged sentences

( 3,297,667 )

Other expense:

Interest expense, net

Loss on foreign currency transactions

( 7,776,923 )

Total other expense, net

( 5,776,421 )

Other income/(expense):

Interest income (expense), net

Gain (loss) on foreign currency transactions

( 1,071,376 )

Total other income (expense), net

( 1,068,428 )

Loss before benefit from income taxes

1 unchanged sentence

( 2,866,956 )

( 8,845,351 )

( 6,319,735 )

Benefit from income taxes

2 unchanged sentences

( 2,866,956 )

( 8,845,351 )

( 6,319,735 )

Basic and diluted net loss per common share

2 unchanged sentences

( 2,866,956 )

Other comprehensive income:

( 8,845,351 )

( 6,319,735 )

Other comprehensive income (loss):

Currency translation adjustment

2 unchanged sentences

( 3,472,315 )

( 7,952,114 )

( 6,315,266 )

See accompanying notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

For the three and six months ended June 30, 2021 (Unaudited)

Comprehensive

1 unchanged sentence

Income (Loss)

Balance at March 31, 2021

( 200,794,468 )

Stock-based compensation - employees, consultants and directors

Other comprehensive loss:

foreign translation adjustment

Proceeds from exercise of stock options

Cashless exercise of stock options

Issuance of restricted stock units

( 4,677,530 )

Balance at June 30, 2021

( 205,471,998 )

Balance at December 31, 2020

9 unchanged sentences

( 8,845,351 )

Balance at June 30, 2021

( 205,471,998 )

Comprehensive

Stockholders’

Income (Loss)

Balance at March 31, 2020

( 192,242,238 )

Stock-based compensation - employees, consultants and directors

Other comprehensive lossi:

foreign translation adjustment

Proceeds from exercise of stock options

Cashless exercise of stock options

Issuance of common stock, net of fees incurred

( 2,866,956 )

Balance at June 30, 2020

( 195,109,194 )

Balance at December 31, 2019

4 unchanged sentences

Proceeds from exercise of stock options

Cashless exercise of stock options

Issuance of restricted stock units

2 unchanged sentences

( 6,319,735 )

Balance at March 31, 2020

Balance at June 30, 2020

( 195,109,194 )

9 unchanged sentences

Amortization of debt costs

Bad debt expense

Bad debt expense (recovery)

Stock-based compensation

Foreign currency transaction loss

Foreign currency transaction (gain) loss

Changes in operating assets and liabilities:

3 unchanged sentences

Accounts payable and accrued expenses

( 1,055,356 )

Net cash used by operating activities

3 unchanged sentences

Purchases of property and equipment

( 1,217,254 )

Payments for patent costs

Net cash used by investing activities

( 1,591,018 )

( 1,005,920 )

Cash flows from financing activities:

Proceed from long-term debt

Repayment of long-term debt

( 1,410,900 )

Equity contributions - net of fees incurred

10 unchanged sentences

Settlement of accrued bonuses with restricted stock units

Equity contribution proceeds in transit

See accompanying notes to consolidated financial statements.

1 unchanged sentence

Notes to Consolidated Financial Statements

March 31, 2021

June 30, 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 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.

The results for the three and six months ended June 30, 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 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.

As of June 30, 2021, the Company’s cash balance was approximately $ 65.6 million, which the Company expects will fund the Company’s operations well beyond the next twelve months.

As a result, the Company continues to assert that the going concern risk has been substantially mitigated.

PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

The Company is a leader in critical care immunotherapy using blood purification technology to treat deadly inflammation in critically-ill and cardiac surgery patients around the world.

The Company is a leader in the treatment of life-threatening conditions in intensive care and cardiac surgery using blood purification.

The Company, through its subsidiary CytoSorbents Medical, Inc.

8 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-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.

CytoSorb, the Company’s flagship product, was approved in the European Union (“EU”) in March 2011, and is currently being marketed and distributed 68 countries around the world, as a safe and effective extracorporeal cytokine absorber, designed to reduce the “cytokine storm” or “cytokine release syndrome” 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 January 2020, CytoSorb received EU CE Mark label expansion to include the removal of ticagrelor during cardiopulmonary bypass in patients undergoing cardiothoracic surgery.

In May 2020, CytoSorb also received EU 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.

4 unchanged sentences

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.

Through Breakthrough Designation, the FDA intends to work with CytoSorbents to expedite the development, assessment, and regulatory review of CytoSorbents’ technology 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 July 2021, the Company received full approval of its Investigative Device Exemption (“IDE”) to conduct he pivotal STAR-T (Safe and Timely Antithrombotic Removal – Ticagrelor) double-blind randomized control trial (“RCT”) in the United States to support FDA marketing approval.

If FDA marketing approval for this indication is obtained, the device would be marketed as DrugSorb-ATR in the United States.

The DrugSorb-ATR antithrombotic removal system is based on the same polymer technology as CytoSorb.

The technology is based upon biocompatible, highly porous polymer sorbent beads that can actively remove toxic substances from blood and other bodily fluids by pore capture and surface adsorption.

1 unchanged sentence

patents and multiple international patents, with applications pending both in the U.S.

and internationally, including HemoDefend, ContrastSorb, DrugSorb, and others.

and internationally, including HemoDefend, ContrastSorb, DrugSorb, DrugSorb-ATR and others.

These patents and patent applications are directed to various compositions and methods of use related to our blood purification technologies and are expected to expire between 2022 and 2035, absent any patent term extensions.

10 unchanged sentences

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.

Foreign currency transaction gain included in net loss amounted to approximately $ 234,000 and $ 705,000 for the three months ended June 30, 2021 and 2020, respectively.

Foreign currency transaction gain (loss) included in net loss amounted to approximately $( 1,071,000 ) and $ 36,000 for the six months ended June 30, 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 loss as a component of stockholders’ equity.

The Company includes accumulated net translation adjustments in accumulated other comprehensive income (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.

The allowance for doubtful accounts contains an accrual for estimated bad debts and amounted to approximately $ 68,000 and $ 47,000 at June 30, 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 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;

At June 30, 2021 and December 31, 2020, the Company’s inventory was comprised of finished goods, which amounted to $ 2,303,011 and $ 1,164,635 , respectively;

work in process which amounted to $ 1,033,606 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

20 unchanged sentences

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.

Research and Development

All research and development costs, payments to laboratories and research consultants are expensed when incurred.

Costs subject to reimbursement by these grants have been reflected in cost of revenue.

Research and Development and Clinical Trial Expenses

All research and development and clinical trial costs, payments to laboratories and research consultants are expensed when incurred.

Advertising Expenses

Advertising expenses are charged to activities when incurred.

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.

Advertising expenses are charged to selling, general and administrative expenses when incurred.

Advertising expenses amounted to approximately $ 148,000 and $ 55,000 for the three months ended June 30, 2021 and 2020, respectively, and approximately $ 302,000 and $ 86,000 for the six months ended June 30, 2021 and 2020, respectively.

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 March 31, 2021 or December 31, 2020.

The Company had no unrecognized tax benefits at June 30, 2021 or December 31, 2020.

The Company files tax returns in the U.S.

5 unchanged sentences

The preparation of consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported periods.

Actual results could differ from these estimates.

6 unchanged sentences

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

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

As of June 30, 2021, no agency, distributor/strategic partner or direct customer accounted for more than 10 % 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 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.

For the three and six months ended June 30, 2021, no agency, distributor/strategic partner accounted for more than 10 %of the Company's total revenue.

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

Financial Instruments

12 unchanged sentences

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

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

Total freight costs amounted to approximately $ 77,000 and $ 149,000 , respectively, for the three months ended June 30, 2021 and 2020, and $ 140,000 and $ 282,000 , respectively, for the six months ended June 30, 2021 and 2020.

STOCKHOLDERS’ EQUITY

11 unchanged sentences

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.

The 2018 Shelf was set to expire in August 2021 and our ability to sell securities under the 2018 Shelf terminated automatically upon the 2021 Shelf (as defined below) being declared effective on July 27, 2021.

On July 14, 2021, the Company filed a registration statement on Form S-3 with the SEC, which was amended on July 20, 2021 (as amended, the “2021 Shelf”).

The 2021 Shelf would enable 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.

The 2021 Shelf was declared effective by the SEC on July 27, 2021.

Open Market Sale Agreement with Jefferies LLC and B.

11 unchanged sentences

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.

There were no sales during the three and six months ended June 30, 2021.

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 $ 27.2 million.

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

The Company may no longer offer and sell additional shares of the Company’s common stock under the Amended Sale Agreement following the declaration of effectiveness of the 2021 Shelf on July 27, 2021.

Stock-Based Compensation

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:

Total share-based employee, director, and consultant compensation amounted to approximately $ 1,558,000 and $ 2,226,000 for the three and six months ended June 30, 2021, and $ 1,046,000 and $ 1,776,000 for the three and six months ended June 30, 2020, 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 six months ended June 30, 2021 is as follows:

Exercise Price

Outstanding, December 31, 2020

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.

Outstanding, June 30, 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 $ 7.67 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 (ranging from 59.9 to 60.7 percent), expected dividends ( 0 percent) on the stock and the risk free interest rate (ranging from 0.47 to 1.05 percent) for the expected term of the stock option.

The intrinsic value is calculated as the difference between the market value as of June 30, 2021 of $ 7.55 and the exercise price of the shares.

Options Outstanding

3 unchanged sentences

Exercisable at

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

The summary of the status of the Company’s non-vested options for the six months ended June 30, 2021 is as follows:

Non-vested, December 31, 2020

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 .

Non-vested, June 30, 2021

As of June 30, 2021, the Company had approximately $ 5,988,000 of total unrecognized compensation cost related to stock options which will be amortized over approximately 47 months .

On April 12, 2021, the Board of Directors granted options to purchase 1,323,400 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 2021 operations.

The grant date fair value of these unvested options amounted to approximately $ 7,111,566 .

Based upon an assessment by management, which was reviewed with the Board of Directors, as of June 30, 2021, the Company met approximately 12 % of these milestones, and accordingly we have recorded $ 213,347 in stock option expense related to these options in each of the three and six month periods ended June 30, 2021, respectively.

Change in Control-Based Awards of Restricted Stock Units:

5 unchanged sentences

December 31, 2020

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.

June 30, 2021

Other Awards of Restricted Stock Units:

1 unchanged sentence

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 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.

For the three and six months ended June 30, 2021 and 2020, the Company recorded a charge of approximately $ 0 and $ 11,000 , and $ 12,000 and $ 21,000 , related to these restricted stock unit awards, respectively.

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 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.

For the three and six months ended June 30, 2021 and 2020, the Company recorded a charge of approximately $ 103,000 and $ 205,000 , and $ 93,000 and $ 196,000 , related to these restricted stock unit awards, respectively.

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, 2019.

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 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.

For the three and six months ended June 30, 2021 and 2020, the Company recorded a charge of approximately $ 84,000 and $ 359,000 , and $ 84,000 and $ 451,000 , related to these restricted stock unit awards, respectively.

Pursuant to a review of the compensation of the senior management of the Company and managements’ performance in 2021, on April 12, 2021 the Board of Directors granted 235,765 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 $ 2,220,000 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 six months ended June 30, 2021, the Company recorded a charge of approximately $ 854,000 and $ 854,000 , related to these restricted stock unit awards, respectively.

Additionally, in 2021 certain employees were offered 75,000 restricted stock units as a condition of their employment.

2 unchanged sentences

The other 45,000 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:

For the three and six months ended June 30, 2021, the Company recorded a charge of approximately $ 33,000 and $ 87,000 respectively, related to these restricted stock unit awards.

The following table outlines the restricted stock unit activity for the six months ended June 30, 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:

Non-vested, June 30, 2021

The following table disaggregates the Company’s revenue by customer type and geographic area for the three months ended June 30, 2021:

United States

8 unchanged sentences

Total revenue

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

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

United States

8 unchanged sentences

Total revenue

The following table disaggregates the Company’s revenue by customer type and geographic area for the six months ended June 30, 2021:

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 six months ended June 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 Company has two primary revenue streams:

5 unchanged sentences

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”).

However, in April 2020, the Company was granted Emergency Use Authorization (“EUA”) of CytoSorb for use in critically-ill patients infected with COVID-19 with imminent or confirmed respiratory failure 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 to these countries are fulfilled from the Company's office in Berlin, Germany.

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

27 unchanged sentences

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

March 31, 2021

June 30, 2021

December 31, 2020

2 unchanged sentences

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

8 unchanged sentences

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.

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

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 %.

23 unchanged sentences

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.

The German Customs Authorities have indicated that the Company’s device would 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.

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 September 30, 2021.

Based on a thorough review of these facts, during the three months ended March 31, 2021,the Company recorded approximately $ 132,000 of the expense related to 2018, approximately $ 229,000 related to 2019, approximately $ 371,000 related to 2020 and approximately $ 89,000 related to the three months ended March 31, 2021.

Commencing in April 2021, the Company began utilizing the code required by the Germany Customs Authority.

The Company recorded expense of approximately $ 116,000 related to this tax during the three months ended June 30, 2021.

Employment Agreements

16 unchanged sentences

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.

For the three months ended June 30, 2021 and 2020, the Company recorded royalty expenses of approximately $ 339,000 and $ 281,000 , respectively.

For the six months ended June 30, 2021 and 2020, the Company recorded royalty expenses of approximately $ 640,000 and $ 523,000 , respectively.

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

2 unchanged sentences

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.

For the three months ended June 30, 2021 and 2020 per the terms of the license agreement, the Company recorded licensing expenses of approximately $ 564,000 and $ 467,000 , respectively.

For the six months ended June 30, 2021 and 2020 per the terms of the license agreement, the Company recorded licensing expenses of approximately $ 1,066,000 and $ 871,000 , 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.

In the United States, in May 2020, the Company entered into a Nineteenth Amendment to Lease with the landlord which became effective May 1, 2020.

This amendment expands the Company’s space to 20,821 square feet and extends the term of the lease to May 31, 2021.

The Company’s base rent is approximately $ 34,000 per month.

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

The amendment also includes a one year renewal option.

The base rent for the renewal term will increase by the greater of five percent or the increase in the Consumer Price Index.

There were no lease incentives and no initial direct costs were incurred related to this lease amendment.

In Germany, the Company leases its operating facility under two operating lease agreements.

These leases require combined base rent payments amounting to approximately $ 9,000 per month.

The initial lease term of both leases ends August 31, 2021.

In addition, the Company is obligated to monthly operating expenses of approximately $ 2,900 per month.

Both leases have a five year option to renew that would extend the lease term to August 31, 2026.

There are no provisions in the leases to increase the base rent during the renewal period.

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

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.

This value was calculated based on the present value of the remaining base rent lease payments.

The remaining lease payments include the renewal periods for both facilities as the Company has determined that it is probable that the renewal options will be exercised under each of the lease agreements.

The discount rate used was the Company’s incremental borrowing rate, which is 9.16 %, as the Company could not determine the rate implicit in the lease.

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

Right-of-use asset

Total lease liability

Less current portion

Lease liability, net of current portion

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.

entered into a lease agreement for a new operating facility at 305 College Road East, Princeton, New Jersey, which contains office, laboratory, manufacturing and warehouse space.

The lease commenced on April 1, 2021.

The Initial Early Term began 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).

7 unchanged sentences

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.

In April 2021, the Company provided 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, 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.

On April 1, 2021, the Company recorded 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 during the remaining lease term that is expected to commence on September 30, 2021, the Company will recognize rent expense on this lease on straight line basis over the remaining term of the lease and record a liability for the difference between the rent expense recognized and the required payments under the lease.

In April 2021, the Company entered into a Twentieth Amendment to Lease with the landlord at our existing Monmouth Junction facility which became 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.

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

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

7 unchanged sentences

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.

In Germany, the Company leases its operating facility under two operating lease agreements.

These leases require combined base rent payments amounting to approximately $ 9,000 per month.

The initial lease term of both leases ends August 31, 2021.

In addition, the Company is obligated to monthly operating expenses of approximately $ 2,900 per month.

Both leases have a five year option to renew that would extend the lease term to August 31, 2026.

There are no provisions in the leases to increase the base rent during the renewal period.

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

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

The lease commenced on April 1, 2021 and 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 recorded a Right of Use asset and related lease liability at the estimated present value of the lease payments at the commencement date of approximately $ 594,000 .

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.

This value was calculated based on the present value of the remaining base rent lease payments.

The discount rate used was the Company’s incremental borrowing rate, which is 9.8 %, as the Company could not determine the rate implicit in the lease.

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

Right-of-use asset

Total lease liability

Less current portion

Lease liability, net of current portion

The maturities of the lease liabilities are as follows during the year ended June 30:

Total lease payments

Present value discount

( 13,691,777 )

For the three months ended June 30, 2021 and 2020, operating cash flows paid in connection with operating leases amounted to approximately $ 430,000 and $ 213,000 , and $ 661,000 and $ 447,000 for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021 and December 31, 2020, the weighted average remaining lease term was 14.2 years and 4.0 years, respectively.

NET LOSS PER SHARE

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 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 .

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.

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.

Basic loss per share and diluted loss per share for the three months ended June 30, 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 9,905,000 and 7,828,000 incremental shares at June 30, 2021 and 2020, respectively, have been excluded from the computation of diluted loss per share as they are anti-dilutive.

SUBSEQUENT EVENT

On July 14, 2021, the Company filed a registration statement on Form S-3 with the SEC, which was amended on July 20, 2021 (as amended, the “2021 Shelf”).

The 2021 Shelf was declared effective by the SEC on July 27, 2021.

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