What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-08-03 · 128 added, 120 removed, 528 unchanged (32% 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 $ 68,334 at June 30, 2021 and $ 46,851 at December 31, 2020

Grants and accounts receivable, net of allowance for doubtful accounts of $ 51,357 at September 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 June 30, 2021 and December 31, 2020

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

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

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

43,475,648 and 43,221,999 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

9 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

CytoSorb sales

16 unchanged sentences

( 1,013,051 )

( 2,084,425 )

Total other income (expense), net

( 1,000,285 )

Loss before benefit from income taxes

( 2,068,712 )

Loss before benefit from income taxes

( 6,406,285 )

6 unchanged sentences

( 7,159,464 )

( 6,319,735 )

Basic and diluted net loss per common share

3 unchanged sentences

( 7,159,464 )

( 6,319,735 )

Other comprehensive income (loss):

Currency translation adjustment

( 1,047,749 )

( 1,043,280 )

Comprehensive loss

6 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

For the three and nine months ended September 30, 2021 (Unaudited)

Comprehensive

1 unchanged sentence

Income (Loss)

Balance at March 31, 2021

Balance at June 30, 2021

( 205,471,998 )

7 unchanged sentences

( 6,406,285 )

Balance at June 30, 2021

Balance at September 30, 2021

( 211,878,283 )

10 unchanged sentences

( 15,251,636 )

Balance at June 30, 2021

Balance at September 30, 2021

( 211,878,283 )

2 unchanged sentences

Income (Loss)

Balance at March 31, 2020

Balance at June 30, 2020

( 195,109,194 )

Stock-based compensation - employees, consultants and directors

Other comprehensive lossi:

foreign translation adjustment

Other comprehensive loss foreign translation adjustment

( 1,047,749 )

Proceeds from exercise of stock options

1 unchanged sentence

Issuance of common stock, net of fees incurred

( 2,866,956 )

Balance at June 30, 2020

Issuance of restricted stock units

Balance at September 30, 2020

( 195,948,923 )

4 unchanged sentences

foreign translation adjustment

( 1,043,280 )

Proceeds from exercise of stock options

4 unchanged sentences

( 7,159,464 )

Balance at June 30, 2020

Balance at September 30, 2020

( 195,948,923 )

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

September 30,

Cash flows from operating activities:

8 unchanged sentences

Foreign currency transaction (gain) loss

( 1,416,577 )

Changes in operating assets and liabilities:

1 unchanged sentence

( 1,083,938 )

( 2,099,051 )

Prepaid expenses and other current assets

11 unchanged sentences

Cash flows from financing activities:

Proceed from long-term debt

Proceeds from long-term debt

Repayment of long-term debt

15 unchanged sentences

Notes to Consolidated Financial Statements

June 30, 2021

September 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 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.

The results for the three and nine months ended September 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 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 of September 30, 2021, the Company’s cash balance was approximately $ 61 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.

12 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 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.

CytoSorb, the Company’s flagship product, was approved in the European Union (“EU”) in March 2011, and is currently being marketed and distributed in more than 70 countries around the world, as a safe and effective extracorporeal cytokine absorber, designed to reduce the “cytokine storm” or “cytokine release syndrome” seen in critical illnesses that may result in massive inflammation, organ failure and patient death.

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.

CytoSorb is also being used during and after cardiac surgery to remove inflammatory mediators that can lead to post-operative complications, including multiple organ failure.

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.

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.

In April 2020, CytoSorb received United States Food and Drug Administration (“FDA”) Emergency Use Authorization (“EUA”) of CytoSorb for use in adult critically-ill COVID-19 patients with imminent or confirmed respiratory failure.

The CytoSorb device has neither been cleared nor approved for the indication to treat patients with COVID-19 infection.

The EUA will be effective until a declaration is made that the circumstances justifying the EUA have terminated or until revoked by the FDA.

In April 2020, the Company also announced that the FDA had granted Breakthrough Designation to CytoSorb for the removal of ticagrelor in a cardiopulmonary bypass circuit during emergent and urgent cardiothoracic surgery.

In April 2020, the Company also announced that the FDA had granted Breakthrough Designation for its DrugSorb-ATR Antithrombotic Removal System for the removal of ticagrelor in a cardiopulmonary bypass circuit during emergent and urgent cardiothoracic surgery.

The Breakthrough Devices Program provides for more effective treatment of life-threatening or irreversibly debilitating disease or conditions, in this case the need to reverse the effects of ticagrelor in emergent or urgent cardiac surgery that can otherwise cause a high risk of serious or life-threatening bleeding.

Through Breakthrough Designation, the FDA intends to work with CytoSorbents to expedite the development, assessment, and regulatory review of 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.

In July 2021, the Company received full approval of its Investigative Device Exemption (“IDE”) to conduct the pivotal STAR-T (Safe and Timely Antithrombotic Removal – Ticagrelor) double-blind randomized control trial (“RCT”) for up to 120 patients in the United States to support FDA marketing approval.

In August 2021, the Company announced that it was granted a second Breakthrough Device designation for its DrugSorb-ATR Antithrombotic Removal System by the U.S.

Food and Drug Administration (FDA).

This Breakthrough Device designation covers the removal of the Direct Oral Anticoagulants (DOACs) apixaban and rivaroxaban in a cardiopulmonary bypass circuit to reduce the likelihood of serious perioperative bleeding during urgent cardiothoracic surgery.

In October 2021, the Company also received full FDA approval of an IDE application to conduct a double-blind, randomized, controlled clinical study for up to 120 patients entitled, “Safe and Timely Antithrombotic Removal – Direct Oral Anticoagulants (STAR-D),” in the United States to support FDA marketing approval.

If FDA marketing approval is obtained for either the removal of ticagrelor or direct oral anticoagulants indications, 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.

15 unchanged sentences

The Euro is the functional currency of the European Subsidiary.

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.

Foreign currency transaction gain (loss) included in net loss amounted to approximately $( 1,013,000 ) and $ 1,381,000 for the three months ended September 30, 2021 and 2020, respectively.

Foreign currency transaction gain (loss) included in net loss amounted to approximately $( 2,084,000 ) and $ 1,417,000 for the nine months ended September 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.

11 unchanged sentences

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

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.

The allowance for doubtful accounts contains an accrual for estimated bad debts and amounted to approximately $ 51,000 and $ 47,000 at September 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 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;

At September 30, 2021 and December 31, 2020, the Company’s inventory was comprised of finished goods, which amounted to $ 3,014,349 and $ 1,164,635 respectively;

work in process, which amounted to $ 1,111,064 and $ 1,222,062 , respectively;

17 unchanged sentences

Recognition of revenue occurs as each performance obligation is completed.

Grant Revenue:

Grant Income:

Revenue from grant income is based on contractual agreements.

2 unchanged sentences

Costs are recorded as incurred.

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

Amounts invoiced in excess of costs actually incurred on fixed price contracts are classified as deferred revenue and are included in accrued expenses and other current liabilities in the consolidated balance sheet.

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

3 unchanged sentences

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.

Advertising expenses amounted to approximately $ 151,000 and $ 32,000 for the three months ended September 30, 2021 and 2020, respectively, and approximately $ 455,000 and $ 118,000 for the nine months ended September 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 June 30, 2021 or December 31, 2020.

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

The Company files tax returns in the U.S.

14 unchanged sentences

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

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 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.

As of September 30, 2021, two distributors accounted for approximately 22 % 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 receivable.

For the three months ended September 30, 2021, no agency, distributor, or direct customer represented more than 10 % of the Company's total revenue.

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

For the nine months ended September 30, 2021 and 2020, no agency, distributor, or direct customer represented more than 10 %of the Company’s total revenue.

Financial Instruments

8 unchanged sentences

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

Additionally, the value of restricted stock units (RSU) is based on the closing price on the date of the award vests.

The Company also follows the guidance of accounting standards for accounting for equity instruments that are issued to other than employees for acquiring, or in conjunction with selling, goods or services for equity instruments issued to consultants.

2 unchanged sentences

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

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.

Total freight costs amounted to approximately $ 56,000 and $ 188,000 , respectively, for the three months ended September 30, 2021 and 2020, and $ 196,000 and $ 471,000 , respectively, for the nine months ended September 30, 2021 and 2020.

STOCKHOLDERS’ EQUITY

10 unchanged sentences

On July 26, 2018, the Company filed a registration statement on Form S-3 with the SEC (as amended, the “2018 Shelf”).

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.

The 2018 Shelf, which was declared effective on August 7, 2018, enabled 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 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 and declared effective by the SEC on July 27, 2021 (as amended, the “2021 Shelf”).

The 2021 Shelf 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.

Open Market Sale Agreement with Jefferies LLC and B.

Riley FBR, Inc.

On July 9, 2019, the Company entered into an Open Market Sale Agreement (the “New Sale Agreement”) with Jefferies LLC and B.

On July 9, 2019, the Company entered into an Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC and B.

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 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.

On April 20, 2020, the Company and the Agents entered into an amendment to the New Sale Agreement (the "Amendment") to provide for an increase in the aggregate offering amount under the New Sales Agreement, such that as of April 20, 2020, the Company may offer and sell Shares having an additional aggregate offering price of up to $ 50 million under the New Sale Agreement, as amended by the Amendment (the "Amended Sale Agreement").

Subject to the terms of the Amended Sales Agreement, the Agents are required to use their commercially reasonable efforts consistent with their normal sales and trading practices to sell the shares of the Company’s common stock from time to time, based upon the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company may impose).

The Company is required to pay the Agents a commission of up to 3.0 % of the gross proceeds from the sale of the shares of the Company’s common stock sold thereunder, if any.

(each an “Agent” and, together, the “Agents”), pursuant to which the Company could 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 Sale Agreement would have been 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.

On April 20, 2020, the Company and the Agents entered into an amendment to the Sale Agreement (the "Amendment") to provide for an increase in the aggregate offering amount under the Sales Agreement, such that as of April 20, 2020, the Company could offer and sell Shares having an additional aggregate offering price of up to $ 50 million under the Sale Agreement, as amended by the Amendment (the "Amended Sale Agreement").

Subject to the terms of the Amended Sales Agreement, the Agents were required to use their commercially reasonable efforts consistent with their normal sales and trading practices to sell the shares of the Company’s common stock from time to time, based upon the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company may impose).

The Company was required to pay the Agents a commission of up to 3.0 % of the gross proceeds from the sale of the shares of the Company’s common stock sold thereunder, if any.

The Company has also agreed to provide the Agents with customary indemnification rights.

The offering of the shares of the Company’s common stock under the Amended Sales Agreement will terminate upon the earliest of (a) the sale of the maximum number or amount of the shares of the Company’s stock permitted to be sold under the Amended Sale Agreement and (b) the termination of the Amended Sale Agreement by the parties thereto.

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 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 and six months ended June 30, 2021.

There were no sales pursuant to the Amended Sale Agreement during the three and nine months ended September 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.

2 unchanged sentences

Stock-Based Compensation

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.

Total share-based employee, director, and consultant compensation amounted to approximately $ 999,000 and $ 3,224,000 for the three and nine months ended September 30, 2021, and $ 1,088,000 and $ 2,864,000 for the three and nine months ended September 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:

The summary of the stock option activity for the nine months ended September 30, 2021 is as follows:

Exercise Price

Outstanding, December 31, 2020

Outstanding, June 30, 2021

Outstanding, September 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 $ 7.00 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 1.12 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.

The intrinsic value is calculated as the difference between the market value as of September 30, 2021 of $ 8.12 and the exercise price of the shares.

Options Outstanding

Outstanding at

September 30,

$ 2.65 - $ 14.50

1 unchanged sentence

Exercisable at

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

September 30,

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

Non-vested, December 31, 2020

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 .

Non-vested, September 30, 2021

As of September 30, 2021, the Company had approximately $ 5,665,000 of total unrecognized compensation cost related to stock options which will be amortized over approximately 44 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 $ 7,042,000 .

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.

Based upon an assessment by management, which was reviewed with the Board of Directors, as of September 30, 2021, the Company met approximately 19 % of these milestones which will vest over 4 years , and accordingly we have recorded $ 124,000 and $ 338,000 in stock option expense related to these options in each of the three- and nine-month periods ended September 30, 2021, respectively.

Change in Control-Based Awards of Restricted Stock Units:

5 unchanged sentences

December 31, 2020

June 30, 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 and six months ended June 30, 2021 and 2020.

September 30, 2021

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.

Pursuant to a review of the compensation of the senior management of the Company and management’s 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 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.

For the three and nine months ended September 30, 2021 and 2020, the Company recorded a charge of approximately $ 0 and $ 12,000 , and $ 12,000 and $ 22,000 , related to these restricted stock unit awards, respectively.

Pursuant to a review of the compensation of the senior management of the Company and management’s 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 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.

For the three and nine months ended September 30, 2021 and 2020, the Company recorded a charge of approximately $ 54,000 and $ 259,000 , and $ 256,000 and $ 461,000 , related to these restricted stock unit awards, respectively.

Pursuant to a review of the compensation of the senior management of the Company and management’s 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 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.

For the three and nine months ended September 30, 2021 and 2020, the Company recorded a charge of approximately $ 84,000 and $ 443,000 , and $ 84,000 and $ 535,000 , related to these restricted stock unit awards, respectively.

Pursuant to a review of the compensation of the senior management of the Company and management’s 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.

For the three and nine months ended September 30, 2021, the Company recorded a charge of approximately $ 177,000 and $ 1,030,000 related to these restricted stock unit awards, respectively.

Additionally, in 2021 certain employees were offered 88,000 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 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:

For the three and nine months ended September 30, 2021, the Company recorded a charge of approximately $ 45,000 and $ 131,000 , respectively, related to these restricted stock unit awards.

The following table outlines the restricted stock unit activity for the nine months ended September 30, 2021:

Non-vested, December 31, 2020

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:

Non-vested, September 30, 2021

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

United States

5 unchanged sentences

Total product revenue

Grant and other income:

Grant income:

United States

Total revenue

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

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

United States

5 unchanged sentences

Total product revenue

Grant and other income:

Grant 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, 2021:

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

United States

5 unchanged sentences

Total product revenue

Grant and other income:

Grant 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:

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

United States

5 unchanged sentences

Total product revenue

Grant and other income:

Grant income:

United States

7 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 with imminent or confirmed respiratory failure 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 adult 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.

1 unchanged sentence

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

However, there are agreements in place with certain direct customers that provide for either free of charge product or rebate credits based upon achieving minimum purchase levels.

However, there are agreements in place with certain direct customers that provide for either free of charge product or rebate credits based upon achieving minimum annual purchase levels.

The Company records the value of these items earned as a reduction of revenue.

These customers submit purchase orders and the order is fulfilled and shipped directly to the customer.

Prices to all direct customers are based on a standard price list based on the packaged quantity (6 packs vs 12 packs).

Prices to all direct customers are based on a standard price list based on the packaged quantity (6 packs or 12 packs).

Distributor and strategic partner sales make up the remaining product sales.

These distributors are located in various countries throughout the world.

These distributors and strategic partners are located in various countries throughout the world.

The Company has a formal written contract with each distributor/strategic partner.

20 unchanged sentences

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

June 30, 2021

September 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 June 30, 2021 and December 31, 2020.

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 income related to the billing on fixed price contracts in excess of costs incurred as of September 30, 2021 and December 31, 2020.

LONG-TERM DEBT, NET

On June 30, 2016, the Company and its wholly-owned subsidiary, CytoSorbents Medical, Inc.

On September 30, 2016, the Company and its wholly-owned subsidiary, CytoSorbents Medical, Inc.

(together, the “Borrower”), entered into a Loan and Security Agreement with Bridge Bank, a division of Western Alliance Bank, (the “Bank”), pursuant to which the Company borrowed $ 10 million in two equal tranches of $ 5 million (the “Original Term Loans”).

2 unchanged sentences

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”).

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 million at July 31, 2019.

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 July 31, 2019, the Settlement Date, bringing the total outstanding debt to $ 15 million at July 31, 2019.

The proceeds of Term Loans were used for general business requirements in accordance with the Amended and Restated Loan and Security Agreement.

31 unchanged sentences

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.

The audit process has been completed and the authorities have issued an assessment of approximately $ 641,000 for the periods through December 31, 2020.

This assessment was accrued in accounts payable at September 30, 2021 and paid by the Company in October 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 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.

For the three months ended September 30, 2021 and 2020, the Company recorded royalty expenses of approximately $ 265,000 and $ 306,000 , respectively.

For the nine months ended September 30, 2021 and 2020, the Company recorded royalty expenses of approximately $ 904,000 and $ 829,000 , respectively.

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

1 unchanged sentence

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 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.

For the three months ended September 30, 2021 and 2020 per the terms of the license agreement, the Company recorded licensing expenses of approximately $ 441,000 and $ 510,000 , respectively.

For the nine months ended September 30, 2021 and 2020 per the terms of the license agreement, the Company recorded licensing expenses of approximately $ 1,507,000 and $ 1,381,000 , respectively.

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

2 unchanged sentences

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).

The lease commenced on June 1, 2021.

The Initial Early Term began on the commencement date (April 1, 2021) and lasted two months.

The Early Term commenced on June 1, 2021 and lasts until the earlier of the date of the issuance of the certificate of occupancy for the manufacturing space or 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.

4 unchanged sentences

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 %).

These payments are to be based on actual amounts incurred during 2021 multiplied by 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.

2 unchanged sentences

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 addition, due to the six months of rent abatement and annual base rent escalations during the remaining lease term that commenced 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.

3 unchanged sentences

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 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.

4 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.

In September 2021, the Company extended its two operating leases for its office facility in Germany.

These leases require combined base rent payments amounting to approximately $ 12,100 per month.

12 unchanged sentences

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 remaining lease payments include all expected renewals for all periods 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 9.8 %, 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:

September 30,

Right-of-use asset

2 unchanged sentences

Lease liability, net of current portion

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

The maturities of the lease liabilities are as follows during the year ended September 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.

For the three months ended September 30, 2021 and 2020, operating cash flows paid in connection with operating leases amounted to approximately $ 593,000 and $ 211,000 , respectively and $ 1,248,000 and $ 658,000 for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021 and December 31, 2020, the weighted average remaining lease term was 14.4 years and 4.0 years, respectively.

NET LOSS PER SHARE

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.

Basic loss per share and diluted loss per share for the three months ended September 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 9,891,000 and 7,749,000 incremental shares at September 30, 2021 and 2020, respectively, have been excluded from the computation of diluted loss per share as they are anti-dilutive.

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