What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-08-03 · 165 added, 136 removed, 171 unchanged (64% of the section changed)

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Organ failure is the cause of nearly half of all deaths in the intensive care unit (“ICU”), with little to improve clinical outcome.

CytoSorb, our flagship product, is approved in the European Union (“EU”) as a safe and effective extracorporeal cytokine filter and is 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, our flagship product, is approved in the European Union (“EU”) as an extracorporeal cytokine adsorber and is 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.

These are conditions where the mortality is extremely high, yet few to no effective treatments exist.

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We believe the current addressable market in the United States for ticagrelor removal in cardiac surgery is approximately $250 million based on our current pricing model, assuming FDA marketing approval, that could expand to $500 million should ticagrelor gain market share as the only reversible mainstream anti-platelet agent.

In the event that DrugSorb-ATR also obtains FDA marketing approval to remove novel oral anticoagulants (“NOACs”) such as rivaroxaban and apixaban, we believe the total addressable market in the United States for ticagrelor and NOAC removal during cardiac surgery could potentially increase to approximately $1.0 billion.

In the event that DrugSorb-ATR obtains FDA marketing approval to be used prophylactically to remove ticagrelor and NOACs in all patients undergoing surgery, we believe it would potentially expand the total addressable market in the United States to approximately $2.0 billion.

In August 2021, the Company announced that it has been 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 the event that DrugSorb-ATR also obtains FDA marketing approval to remove the DOACs apixaban and rivaroxaban, we believe the total addressable market in the United States for ticagrelor and DOAC removal during cardiothoracic surgery could potentially increase to approximately $1.0 billion.

In the event that DrugSorb-ATR obtains FDA marketing approval to be used prophylactically to remove ticagrelor apixaban and rivaroxaban in all patients undergoing surgery, we believe it would potentially expand the total addressable market in the United States to approximately $2.0 billion.

CytoSorb is used during and after cardiac surgery to remove inflammatory mediators, such as cytokines, activated complement, and free hemoglobin that can lead to post-operative complications such as acute kidney injury, lung injury, shock, and stroke.

We believe CytoSorb has the potential to be used in many other inflammatory conditions, including the treatment of autoimmune disease flares, cytokine release syndrome in cancer immunotherapy, and other applications in cancer, such as cancer cachexia.

CytoSorb has been used globally in more than an estimated 143,000 human treatments to date in critical illnesses and in cardiac surgery.

More than 152,000 CytoSorb devices have been utilized to date in critical illnesses and in cardiac surgery.

CytoSorb has received CE-Mark label expansions for the removal of bilirubin (liver disease), myoglobin (trauma) and both ticagrelor and rivaroxaban during cardiothoracic surgery.

CytoSorb has also received FDA Emergency Use Authorization in the United States for use in critically-ill COVID-19 patients with imminent or confirmed respiratory failure, in defined circumstances.

CytoSorb has also received FDA Emergency Use Authorization (EUA) in the United States for use in adult critically-ill COVID-19 patients with imminent or confirmed respiratory failure, in defined circumstances.

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

CytoSorb has been used globally in more than 6,900 human treatments to date in COVID-19 patients.

CytoSorbents’ technology has also been granted FDA Breakthrough Designation for the removal of ticagrelor in a cardiopulmonary bypass circuit during emergent and urgent cardiothoracic surgery, and if FDA marketing approval for this indication is obtained, would be marketed as DrugSorb-ATR antithrombotic removal system in the United States.

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

CytoSorbents’ technology has also been granted two FDA Breakthrough Designations for the removal of ticagrelor and the removal of the direct oral anticoagulants (“DOACs”) apixaban and rivaroxaban in a cardiopulmonary bypass circuit during urgent cardiothoracic surgery, and if FDA marketing approval is obtained for these indications, the device would be marketed as the DrugSorb-ATR Antithrombotic Removal System in the United States.

In July 2021, the Company received full approval of its Investigational Device Exemption (“IDE”) by the FDA 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 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.

Our purification technologies are based on biocompatible, highly porous polymer beads that can actively remove toxic substances from blood and other bodily fluids by pore capture and surface adsorption.

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When used with standard of care therapy, that includes antibiotics, the goal of CytoSorb in sepsis is to reduce excessive levels of cytokines and other inflammatory toxins, to help reduce the SIRS response and either prevent or treat organ failure.

In addition to the sepsis indication, we intend to conduct or support additional clinical studies in sepsis, cardiac surgery, and other critical care diseases where CytoSorb and our other products in development could be used, such as ARDS, liver disease, trauma, severe burn injury, acute pancreatitis, and in other acute conditions that may benefit by the reduction of cytokines in the bloodstream.

Some examples include the prevention of post-operative complications of cardiac surgery (cardiopulmonary bypass surgery) and damage to organs donated for transplant prior to organ harvest.

We intend to generate additional clinical data to expand the scope of clinical experience for marketing purposes, to increase the number of treated patients, and to support potential future publications and regulatory submissions.

We intend to conduct or support additional clinical studies in the future in the core applications of critical care medicine and cardiac surgery.

Our proprietary polymer technologies form the basis of a broad technology portfolio.

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• DrugSorb-ATR — an investigational extracorporeal antithrombotic removal system based on the same polymer technology as CytoSorb that is being evaluated in the U.S.

STAR-T pivotal randomized, controlled trial to reduce the antithrombotic drug, ticagrelor, and reduce bleeding complications in patients undergoing cardiothoracic surgery while on the drug.

STAR-T and STAR-D pivotal randomized, controlled trial to reduce the antithrombotic drugs, ticagrelor, apixaban and rivaroxaban to reduce bleeding complications in patients undergoing cardiothoracic surgery while on these drugs.

• ECOS-300CY — an adsorption cartridge approved in the E.U.

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The following discusses the status of our clinical studies subsequent to the filing of the Company’s Annual Report on Form 10-K:

The REFRESH 2-AKI study in the United States has resumed enrollment at multiple trial centers with the remaining sites planned to start by end of 2021.

Notwithstanding potential COVID-19 related delays we project that the milestone of the interim analysis will be reached in 2022 .

In March 2021, we announced the filing of an Investigational Device Exemption (IDE) application to conduct a double-blind, randomized, controlled clinical study for up to 120 patients entitled, “ S afe and T imely A ntithrombotic R emoval – T icagrelor ( STAR-T ),” in the United States to support FDA marketing approval.

The REFRESH 2-AKI study in the United States has resumed enrollment at multiple trial centers and has reached enrollment of 178 subjects.

After accounting for the required roll-ins at each site and some enrolled patients who ultimately did not undergo the scheduled procedure, a total of 111 patients have been randomized as of November 1, 2021.

The goal of the study is to achieve the milestone of the interim analysis in 2022, however, the ongoing COVID-19 pandemic is causing enrollment delays associated with postponement or deferral of elective cardiac surgeries and shortage in research staff, creating uncertainty of this target .

In July 2021, we received full FDA approval of an Investigational Device Exemption (IDE) application to conduct a double-blind, randomized, controlled clinical study for up to 120 patients entitled, “ S afe and T imely A ntithrombotic R emoval – T icagrelor ( STAR-T ),” in the United States to support FDA marketing approval.

This was done under the previously announced FDA Breakthrough Designation granted for the removal of ticagrelor in a cardiopulmonary bypass circuit during urgent and emergent cardiac surgery.

The FDA granted full IDE approval of this IDE in July 2021and operational activities to begin enrollment are under way.

We expect to begin enrollment in the third quarter of 2021, have all study sites activated by the end of the year, and complete the study in 2022.

In April 2020, we received Emergency Use Authorization for the treatment of critically ill COVID-19 patients with evidence of hyperinflammation and confirmed or imminent respiratory failure.

In October 2021, the first patient was enrolled and the STAR-T study is now actively recruiting at multiple sites.

Pending any COVID-19 related delays we expect that the study will complete enrollment in 2022.

In October 2021, we received full FDA approval of an Investigational Device Exemption (IDE) application to conduct a double-blind, randomized, controlled clinical study for up to 120 patients entitled, “ S afe and T imely A ntithrombotic R emoval – D irect Oral Anticoagulants T icagrelor ( STAR-D ),” in the United States to support FDA marketing approval.

This was done under the previously announced FDA Breakthrough Designation granted for our DrugSorb-ATR Antithrombotic Removal System.

Study start-up activities have begun with enrollment expected to begin in the first quarter of 2022.

In April 2020, we received Emergency Use Authorization for the treatment of adult critically ill COVID-19 patients with evidence of hyperinflammation and confirmed or imminent respiratory failure.

The C ytoSorb T herapy in C OVID-19 ( CTC ) Registry was launched to capture outcomes and device utilization patterns from multiple US participating centers.

Primary results on observed ICU mortality of COVID-19 patients with acute respiratory distress syndrome (ARDS) requiring extracorporeal membrane oxygenation (ECMO) and treated with CytoSorb according to FDA Emergency Use Authorization criteria, have been accepted for presentation at the International Symposium of Intensive Care Medicine conference at the end of August 2021 in Brussels, Belgium, and have also been submitted for journal publication.

In December 2020, the Company initiated CYTATION (CytoSorb Ticagrelor Hemoadsorption), a Company-sponsored multicenter study in Germany to prospectively evaluate the removal of ticagrelor during cardiopulmonary bypass in patients on ticagrelor undergoing emergent cardiothoracic surgery.

The first patients have been enrolled, but due to the continuing impact of the COVID-19 pandemic, the execution of the CYTATION study has been delayed.

The German PROCYSS multicenter, randomized controlled trial evaluating the ability of CytoSorb to restore hemodynamic stability in patients with refractory septic shock recently received ethics approval and is on track to begin enrollment in 2021, pending any COVID-19 related delays.

We also plan to initiate the German multicenter Hep-On-Fire single-arm trial evaluating CytoSorb in patients suffering from acute liver failure due to alcoholic hepatitis later this year, pending any COVID-19 related delays.

Primary results on observed ICU mortality of COVID-19 patients with acute respiratory distress syndrome (ARDS) requiring extracorporeal membrane oxygenation (ECMO) and treated with CytoSorb according to FDA Emergency Use Authorization criteria were presented at the International Symposium of Intensive Care Medicine conference at the end of August 2021 in Brussels, Belgium, and have also been submitted for journal publication.

CYTATION (CytoSorb Ticagrelor Hemoadsorption) is a company-sponsored multicenter study in Germany to prospectively evaluate the removal of ticagrelor during emergent cardiothoracic surgery.

The study is actively recruiting patients at all 3 German sites plus a recently added clinical site in Luxembourg.

Pending any uncertainty introduced by COVID-19 related delays we expect that the study will complete enrollment in 2022.

The German PROCYSS multicenter, randomized controlled trial evaluating the ability of CytoSorb to restore hemodynamic stability in patients with refractory septic shock is now actively recruiting.

The speed of enrollment remains uncertain due to COVID-19, however we currently estimate completion of the study by end of 2023.

The German multicenter Hep-On-Fire single-arm trial evaluating CytoSorb in patients suffering from acute liver failure due to alcoholic hepatitis has received Ethics Committee approval in October 2021.

Study start-up activities are ongoing, and we expect that the study will begin enrollment in the first quarter of 2022.

CytoSorb received European Union CE Mark label expansion for the removal of ticagrelor and rivaroxaban during cardiopulmonary bypass in patients undergoing cardiothoracic surgery in January 2020 and May 2020, respectively.

Although the severity and duration of the COVID-19 pandemic is uncertain, we are in the process of launching the STAR (Safe and Timely Antithrombotic Removal) Registry in Europe during 2021 to capture real world clinical and economic outcomes in this latest approved indication.

We will be ready to receive data entry from Germany and the U.K.

this quarter, with plans to gradually expand to additional E.U.

Initial data release is planned for 2022.

The German government-sponsored and investigator-initiated REMOVE endocarditis study completed its enrollment with a total of 289 patients in early-2020, but the COVID-19 pandemic has caused delays in data monitoring and data analysis.

Topline results data are expected to be reported in second half of 2021.

We designed the international, multicenter STAR ( S afe and T imely A ntithrombotic R emoval) Registry with the purpose of capturing real world clinical and economic outcomes in the antithrombotic removal application.

The registry is currently actively enrolling patients and we estimate that first data readouts from the STAR Registry will begin in 2022.

The German government-sponsored and investigator-initiated REMOVE all-comer endocarditis study presented topline results at the European Association of CardioThoracic Surgery (EACTS) annual meeting in Barcelona, Spain in October 2021.

The REMOVE investigators stated that although intraoperative hemoadsorption reduced plasma cytokines at the end of surgery it did not reduce the severity of post-operative organ dysfunction (primary outcome determined by change in SOFA score) or any of the secondary endpoints including 30-day mortality.

The investigators also concluded there was “no signal for harm due to the use of CytoSorb in patients undergoing surgery for infective endocarditis”.

The preliminary results abstract is available online and the authors stated that results have also been submitted for publication.

CytoSorbents is working collaboratively with the REMOVE investigators to conduct additional exploratory analyses to potentially identify subgroups that may have benefited from CytoSorb and to also inform potential future studies in this application.

COVID-19 Business Update

COVID-19 patients develop life-threatening complications such as ARDS, shock (i.e.

COVID-19 patients develop life-threatening complications such as acute respiratory distress syndrome (ARDS), shock (i.e.

a potentially fatal drop in blood pressure), kidney failure, acute cardiac injury, thromboses and emboli, and secondary bacterial infections.

The underlying cause for these complications is often a cytokine storm that results in a massive, systemic inflammatory response, leading to the damage of vital organs such as the lungs, heart, and kidneys, and ultimately multiple organ failure and death in many cases.

CytoSorb has been used in more than 143,000 treatments as an approved treatment of cytokine storm in the European Union and is distributed in 68 countries around the world, where it has helped physicians control severe inflammation while helping to reverse shock and improve lung and other organ function.

The use of CytoSorb in patients infected with COVID-19 in Italy, China, Germany and France began in March 2020.

CytoSorb has now been used in approximately 6,500 COVID-19 patients to help treat cytokine storm and the related life-threatening complications in more than 30 countries.

CytoSorb has now been used to treat dangerous inflammation and related life-threatening complications in approximately 6,900 COVID-19 patients in

more than 30 countries.

Based upon initial data and reports from physicians treating these complications, CytoSorb use has generally been associated with a marked reduction in cytokine storm and inflammation, improved lung function, weaning from mechanical ventilation, decannulation from extracorporeal membrane oxygenation (ECMO), and a reversal of shock.

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CytoSorb has also been recommended in the National Treatment Guidelines from Panama for Adult COVID-19 Patients if patients have either refractory shock or have severe or refractory respiratory failure requiring either high ventilator support or extracorporeal membrane oxygenation.

CytoSorb has received approval from the Drugs Controller

General of India to treat COVID-19 patients in certain instances.

CytoSorb has received approval from the Drugs Controller General of India to treat COVID-19 patients in certain instances.

CytoSorb has also received approval to treat patients with COVID-19 from the Israel Ministry of Health (AMAR).

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under the FDA’s Expanded Access Program (“EAP”).

On April 13, 2020, we announced that the FDA, in a different program than the EAP, granted Emergency Use Authorization (EUA) of CytoSorb for use in U.S.

On April 13, 2020, we announced that the FDA, in a different program than the EAP, granted Emergency Use Authorization (EUA) of CytoSorb for use in adult U.S.

COVID-19 patients.

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

The CTC (CytoSorb Therapy in COVID-19) Registry has been launched and is systematically capturing usage patterns and outcomes associated with the use of CytoSorb under the EUA at U.S.

institutions.

The CTC (CytoSorb Therapy in COVID-19) Registry was launched to capture outcomes and device utilization patterns from multiple US participating centers.

Primary results on observed ICU mortality of COVID-19 patients with acute respiratory distress syndrome (ARDS) requiring extracorporeal membrane oxygenation (ECMO) and treated with CytoSorb according to FDA Emergency Use Authorization criteria were presented at the International Symposium of Intensive Care Medicine conference at the end of August 2021 in Brussels, Belgium, and have also been submitted for journal publication.

Government Research Grants

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Research and Development Update

Our research and development efforts are gaining momentum despite the disruption brought on by the COVID-19 pandemic.

Since the start of the year, internal and government grant funding have supported the expansion of our R&D staff by approximately 30%, and we expect to increase headcount further by the end of the year to support work associated with awarded grants and contracts.

The revenue remaining to be earned on open grant contracts is $12.1 million.

To facilitate this growth, we have relocated half the team to the new facility in Princeton, New Jersey where we were able to occupy existing labs with minimal disruption to program timelines.

Overall, grant funded programs, HemoDefend-BGA™ (Universal Plasma), HemoDefend-RBC™ and K + ontrol™, continue to progress and have been the beneficiary of ~$9.6 million, $4.7 million and $7.0 million in total funding, respectively, awarded to date.

We are pleased to report acceleration of our HemoDefend-RBC™ filter development, which is designed to remove non-infectious contaminants in transfused packed red blood cells that can cause transfusion reactions.

We are currently producing devices for the required preclinical testing that is expected to start this quarter, to support an investigational device exemption (IDE) application to run a small (<30 patient) human study to support FDA marketing approval.

Comparison for the three months ended June 30, 2021 and 2020:

Revenue from product sales was approximately $11,365,000 in the three months ended June 30, 2021, as compared to approximately $9,520,000 in the three months ended June 30, 2020, an increase of approximately $1,845,000, or 19%.

This increase was driven by an

increase in direct sales of approximately $1,492,000 resulting from sales to both new customers and repeat orders from existing customers and an increase in distributor sales of approximately $353,000.

Sales to hospitals in the United States under the EUA granted by the FDA amounted to approximately $362,000 for the three months ended June 30, 2021.

Though difficult to quantitate, we estimate that approximately $1.7 million of total product sales in the second quarter of 2021 was due to the demand for CytoSorb to treat COVID-19 patients.

In addition, as a result of the increase in the average exchange rate of the Euro to the U.S.

dollar, 2021 product sales were positively impacted by approximately $819,000.

For the three months ended June 30, 2021, the average exchange rate of the Euro to the U.S.

dollar was $1.21 as compared to an average exchange rate of $1.10 for the three months ended June 30, 2020.

Grant income was approximately $659,000 for the three months ended June 30, 2021 as compared to approximately $275,000 for the three months ended June 30, 2020, an increase of approximately $384,000, or 140%.

This increase was a result of the easing of the COVID-19 pandemic during the three months ended June 30, 2021 and a corresponding increase in grant related work.

During the three months ended June 30, 2020, our research and development employees were either deployed to work-from-home status or reassigned to assist in activities related to increasing the production of CytoSorb.

Total revenues were approximately $12,024,000 for the three months ended June 30, 2021, as compared to total revenues of approximately $9,795,000 for the three months ended June 30, 2020, an increase of approximately $2,229,000, or 23%.

Our research and development efforts have experienced challenges due to the COVID-19 pandemic.

Due primarily to the ongoing pandemic, we have encountered challenges hiring the required technical staff.

Our recruiting process is ongoing, so that we can obtain the technical staff required to be able to timely execute on our various grant and non-grant related research and development projects.

As of September 30, 2021, the revenue remaining to be earned on open grant contracts is $11.3 million.

Overall, grant funded programs, HemoDefend-BGA™ (Universal Plasma), HemoDefend-RBC™ and K + ontrol™, continue to progress and have been the beneficiary of approximately $9.6 million, $4.7 million and $7.0 million in total funding, respectively, awarded to date.

The development of our HemoDefend-RBC™ filter, which is designed to remove non-infectious contaminants in transfused packed red blood cells that can cause transfusion reactions, has also been impacted by the COVID-19 pandemic.

The development of this filter

requires the use blood procured from commercial blood banks to perform the validation testing necessary to support an IDE submission.

Currently, due primarily to the COVID-19 pandemic, the national blood supply is experiencing blood shortages and will not supply blood for research purposes.

As a result, we have experienced disruptions in our blood supply and cannot predict when deliveries will stabilize.

We are continuing to seek alternative supplies of blood to support the required validation testing.

This may delay an IDE submission.

Comparison for the three months ended September 30, 2021 and 2020:

Revenue from product sales was approximately $8,902,000 in the three months ended September 30, 2021, as compared to approximately $10,246,000 in the three months ended September 30, 2020, a decrease of approximately $1,344,000, or 13%.

This decrease was driven by a decrease in direct sales of approximately $1,264,000 resulting primarily from lower sales in Germany due to COVID-19 pandemic-driven market conditions.

This was driven by a wave in new Delta variant-related COVID-19 cases in Germany, which accelerated through August and has continued to date.

This prompted many hospitals throughout Germany to reduce elective surgical procedures, to reserve ICU beds, and to either maintain or reinstitute restrictions such as visitation rights to non-essential visitors, in preparation of COVID-19 hospitalizations.

However, unlike prior waves in Germany, the rates of severe COVID-19 illness requiring ICU care, and death have been disproportionately very low.

This is being partly attributed to high rates of vaccinations that are associated with reduced severity of illness, reduced need for hospitalization, and risk of death.

These factors led to a decrease in both COVID-19 and core non-COVID-19 CytoSorb sales in Germany.

Sales to hospitals in the United States under the EUA granted by the FDA amounted to approximately $577,000 for the three months ended September 30, 2021.

Though difficult to quantitate, we estimate that approximately $1.1 million of total product sales in the third quarter of 2021 was due to the demand for CytoSorb to treat COVID-19 patients.

In addition, the change in the average exchange rate of the Euro to the U.S.

dollar did not have a significant impact on product sales during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.

Grant income was approximately $859,000 for the three months ended September 30, 2021 as compared to approximately $301,000 for the three months ended September 30, 2020, an increase of approximately $558,000, or 185%.

This increase was a result of the easing of the COVID-19 pandemic in the United States during the three months ended September 30, 2021 and a corresponding increase in grant related work.

During the three months ended September 30, 2020, our research and development employees were either deployed to work-from-home status or reassigned to assist in activities related to increasing the production of CytoSorb.

Total revenues were approximately $9,760,000 for the three months ended September 30, 2021, as compared to total revenues of approximately $10,547,000 for the three months ended September 30, 2020, a decrease of approximately $787,000, or 7%.

Cost of Revenues:

For the three months ended June 30, 2021 and 2020, cost of revenue was approximately $2,710,000 and $3,250,000, respectively, a decrease of approximately $540,000.

Product cost of revenue was approximately $2,094,000 and $2,901,000, respectively, for the three months ended June 30, 2021 and 2020, a decrease of approximately $807,000.

This decrease was due to certain costs associated with the rapid ramp-up of production during the three months ended June 30, 2020 that did not recur during the three months ended June 30, 2021.

Product gross margins were approximately 82% for the three months ended June 30, 2021 as compared to approximately 70% for the three months ended June 30, 2020.

The increase in the gross margin percentage in 2021 was due manufacturing efficiencies achieved during the three months ended June 30, 2021 and the impact of the ramp-up costs incurred during the three months ended June 30, 2020 that did not recur in 2021.

For the three months ended September 30, 2021 and 2020, cost of revenue was approximately $2,463,000 and $2,890,000, respectively, a decrease of approximately $427,000.

Product cost of revenue was approximately $1,642,000 and $2,622,000, respectively, for the three months ended September 30, 2021 and 2020, a decrease of approximately $980,000.

This decrease was due to lower sales and because certain costs associated with the rapid ramp-up of production during the three months ended September 30, 2020 that did not recur during the three months ended September 30, 2021.

Product gross margins were approximately 82% for the three months ended September 30, 2021 as compared to approximately 74% for the three months ended September 30, 2020.

The increase in the gross margin percentage in 2021 was due to manufacturing efficiencies achieved during the three months ended September 30, 2021 and the impact of the ramp-up costs incurred during the three months ended September 30, 2020 that did not recur in 2021.

Research and Development Expenses :

For the three months ended June 30, 2021, research and development expenses were approximately $3,699,000, as compared to research and development expenses of approximately $2,406,000 for the three months ended June 30, 2020, an increase of approximately $1,293,000.

This increase was due to an increase in our clinical trial activities of approximately $452,000 due to pre-enrollment activities related to our STAR-T trial in the United States, an increase in salaries related to our clinical trial activities of approximately $506,000 due to the hiring of clinical expertise, an increase in rent expense of approximately $181,000 related to rent expense on our new facility and an increase in non-grant related research and development labor and other costs of approximately $154,000.

For the three months ended September 30, 2021, research and development expenses were approximately $4,262,000, as compared to approximately $1,753,000 for the three months ended September 30, 2020, an increase of approximately $2,509,000.

This increase was due to an increase in costs associated with our clinical trial activities of approximately $1,578,000, an increase in salaries related to our clinical trial activities of approximately $465,000 due to the hiring of clinical expertise, an increase in rent expense of approximately $328,000 related to rent expense on our new facility and an increase in other research and development labor and other costs of approximately $138,000.

Legal, Financial and Other Consulting Expenses:

Legal, financial and other consulting expenses were approximately $718,000 for the three months ended June 30, 2021, as compared to approximately $846,000 for the three months ended June 30, 2020.

The decrease of approximately $128,000 was due to a decrease in legal fees of approximately $98,000, a decrease in employment agency fees of approximately $46,000, and a decrease in accounting and auditing fees of approximately $23,000.

The decreases were offset by an increase in consulting fees of approximately $39,000.

Legal, financial and other consulting expenses were approximately $665,000 for the three months ended September 30, 2021, as compared to approximately $580,000 for the three months ended September 30, 2020.

The increase of approximately $85,000 was due to an increase in consulting fees of approximately $95,000, an increase in legal fees of approximately $81,000 and an increase in accounting fees of approximately $12,000.

These increases were offset by a decrease in employment agency fees of approximately $103,000.

Selling, General and Administrative Expenses:

Selling, general and administrative expenses were approximately $9,821,000 for the three months ended June 30, 2021, as compared to approximately $6,591,000 for the three months ending June 30, 2020, an increase of $3,231,000.

Approximately $1,396,000, or 43%, of this increase was associated with non-cash related expenses including restricted stock expense of approximately $884,000 related to restricted stock units granted to the Company’s executive officers and an increase in stock compensation expense of approximately $512,000.

The remaining increases in selling, general and administrative expense are related to an increase in salaries, commissions and related costs of approximately $1,127,000, an increase in royalty expenses of approximately $156,000 due to the increase in product sales, an increase in commercial insurance of approximately $194,000 and an increase in sales and marketing costs, which include

advertising and conference attendance of approximately $229,000 and an increase in other general and administrative expenses of approximately $129,000.

Interest Expense, net:

For the three months ended June 30, 2021, net interest income was approximately $13,000, as compared to net interest expense of approximately $274,000 for the three months ended June 30, 2020.

Selling, general and administrative expenses were approximately $7,777,000 for the three months ended September 30, 2021, as compared to approximately $7,282,000 for the three months ending September 30, 2020, an increase of $495,000.

This increase is related to an increase in salaries, commissions and related costs of approximately $296,000, an increase in sales and marketing costs, which include advertising and conference attendance of approximately $499,000, an increase in travel and entertainment costs of approximately $72,000 and an increase in non-cash restricted stock expense of approximately $32,000 related to restricted stock units granted to the Company’s executive officers.

These increases were offset by a decrease in non-cash stock option compensation expense of approximately $90,000, a decrease in royalty expense of approximately $110,000 due to a decrease in sales, a decrease in public relations expense of approximately $73,000 and a decrease in other general and administrative expenses of approximately $131,000.

Interest Income/(Expense), net:

For the three months ended September 30, 2021, net interest income was approximately $13,000, as compared to net interest expense of approximately $261,000 for the three months ended September 30, 2020.

This decrease in net interest expense was the result of the payoff of our outstanding term loans with Bridge Bank in December of 2020.

Gain (Loss) on Foreign Currency Transactions:

For the three months ended June 30, 2021, the gain on foreign currency transactions was approximately $234,000 as compared to a gain of approximately $705,000 for the three months ended June 30, 2020.

The 2021 gain was directly related to the increase in the spot exchange rate of the Euro to the U.S.

dollar at June 30, 2021 as compared to March 31, 2021.

For the three months ended September 30, 2021, the loss on foreign currency transactions was approximately $(1,013,000) as compared to a gain of approximately $1,380,000 for the three months ended September 30, 2020.

The loss for the three months ended September 30, 2021 was directly related to the decrease in the spot exchange rate of the Euro to the U.S.

dollar at September 30, 2021 as compared to June 30, 2021.

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

dollar was $1.18 per Euro at June 30, 2021, as compared to $1.17 per Euro at March 31, 2021.

The 2020 gain was directly related to the increase in the spot exchange rate of the Euro at June 30, 2020 as compared to March 31, 2020.

dollar was $1.16 per Euro at September 30, 2021, as compared to $1.18 per Euro at June 30, 2021.

The 2020 gain was directly related to the increase in the spot exchange rate of the Euro at September 30, 2020 as compared to June 30, 2020.

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

dollar was $1.12 per Euro at June 30, 2020, as compared to $1.10 per Euro at March 31, 2020.

Comparison for the six months ended June 30, 2021 and 2020:

Revenue from product sales was approximately $21,509,000 in the six months ended June 30, 2021, as compared to approximately $17,676,000 in the six months ended June 30, 2020, an increase of approximately $3,833,000, or 22%.

dollar was $1.17 per Euro at September 30, 2020, as compared to $1.12 per Euro at June 30, 2020.

Comparison for the nine months ended September 30, 2021 and 2020:

Revenue from product sales was approximately $30,411,000 in the nine months ended September 30, 2021, as compared to approximately $27,922,000 in the nine months ended September 30, 2020, an increase of approximately $2,489,000, or 9%.

This increase was driven by an increase in direct sales of approximately $836,000 resulting from sales to both new customers and repeat orders from existing customers and an increase in distributor sales of approximately $1,653,000.

Sales to hospitals in the United States under the EUA granted by the FDA amounted to approximately $666,000 for the six months ended June 30, 2021.

Though difficult to quantitate, we estimate that approximately $3.5 million of total product sales in the six months ended June 30, 2021 was due to the demand for CytoSorb to treat COVID-19 patients.

Sales to hospitals in the United States under the EUA granted by the FDA amounted to approximately $ 1,243,000 for the nine months ended September 30, 2021.

Though difficult to quantitate, we estimate that approximately $4.6 million of total product sales in the nine months ended September 30, 2021 was due to the demand for CytoSorb to treat COVID-19 patients.

In addition, as a result of the increase in the average exchange rate of the Euro to the U.S.

dollar, 2021 product sales were positively impacted by approximately $1,606,000.

For the six months ended June 30, 2021, the average exchange rate of the Euro to the U.S.

dollar was $1.21 as compared to an average exchange rate of $1.10 for the six months ended June 30, 2020.

Grant income was approximately $1,114,000 for the six months ended June 30, 2021 as compared to approximately $826,000 for the six months ended June 30, 2020, an increase of approximately $288,000 or 35%.

This increase was a result of the easing of the COVID-19 pandemic during the three months ended June 30, 2021 and a corresponding increase in grant related work.

During the six months ended June 30, 2020, our research and development employees were either deployed to work-from-home status or reassigned to assist in activities related to increasing the production of CytoSorb.

Total revenues were approximately $22,623,000 for the six months ended June 30, 2021, as compared to total revenues of approximately $18,502,000 for the six months ended June 30, 2020, an increase of approximately $4,121,000, or 22%.

For the nine months ended September 30, 2021, the average exchange rate of the Euro to the U.S.

dollar was $1.20 as compared to an average exchange rate of $1.12 for the nine months ended September 30, 2020.

Grant income was approximately $1,973,000 for the nine months ended September 30, 2021 as compared to approximately $1,127,000 for the nine months ended September 30, 2020, an increase of approximately $846,000 or 75%.

This increase was a result of the easing of the COVID-19 pandemic in the United States during the nine months ended September 30, 2021 and a corresponding increase in

grant related work.

During the nine months ended September 30, 2020, our research and development employees were either deployed to work-from-home status or reassigned to assist in activities related to increasing the production of CytoSorb.

Total revenues were approximately $32,383,000 for the nine months ended September 30, 2021, as compared to total revenues of approximately $29,049,000 for the nine months ended September 30, 2020, an increase of approximately $3,334,000 , or 11%.

Cost of Revenues:

For the six months ended June 30, 2021 and 2020, cost of revenue was approximately $5,462,000 and $5,635,000, respectively, a decrease of approximately $173,000.

Product cost of revenue was approximately $4,426,000 and $4,878,000, respectively, for the six months ended June 30, 2021 and 2020, a decrease of approximately $452,000.

This decrease was related to certain costs associated with the rapid ramp-up of production of approximately $884,000 during the period ended June 30, 2020 that did not recur during the period ended June 30, 2021.

These decreases were offset by the negative impact of non-recurring costs related to prior years tariffs as a result of an audit by the German Customs Authorities of approximately $732,000 (see Note 6 to the financial statements) and the offsetting non-recurring positive impact of the Employee Retention Tax Credit of approximately $388,000, both of which were recorded in the first quarter of 2021.

Product gross margins were approximately 79% for the six months ended June 30, 2021 and approximately 72% for the six months ended June 30, 2020.

Excluding the impact of the non-recurring costs outlined above, product gross margins were approximately 81% for the six months ended June 30, 2021.

For the nine months ended September 30, 2021 and 2020, cost of revenue was approximately $7,925,000 and $8,525,000, respectively, a decrease of approximately $600,000.

Product cost of revenue was approximately $6,068,000 and $7,500,000, respectively, for the nine months ended September 30, 2021 and 2020, a decrease of approximately $1,432,000.

This decrease was related to certain costs associated with the rapid ramp-up of production during the period ended September 30, 2020 that did not recur during the period ended September 30, 2021.

These decreases were offset by the negative impact of non-recurring costs related to prior years tariffs as a result of an audit by the German Customs Authorities of approximately $732,000 and the offsetting non-recurring positive impact of the Employee Retention Tax Credit of approximately $388,000, both of which were recorded in the first quarter of 2021.

Product gross margins were approximately 80% for the nine months ended September 30, 2021 compared to approximately 73% for the nine months ended September 30, 2020.

Research and Development Expenses :

For the six months ended June 30, 2021, research and development expenses were approximately $5,981,000 as compared to research and development expenses of approximately $4,371,000 for the six months ended June 30, 2020, an increase of approximately $1,610,000.

This increase was due to an increase in costs associated with our clinical trial activities of approximately $839,000, an increase in salaries related to our clinical trial activities of approximately $457,000 due to the hiring of clinical expertise, an increase in rent expense of approximately $181,000 related to rent expense on our new facility and an increase in non-grant related research and development labor and other costs of approximately $133,000.

For the nine months ended September 30, 2021, research and development expenses were approximately $10,244,000 as compared to research and development expenses of approximately $6,125,000 for the nine months ended September 30, 2020, an increase of approximately $4,119,000.

This increase was due to an increase in costs associated with our clinical trial activities of approximately $2,035,000, an increase in salaries related to our clinical trial activities of approximately $1,304,000 due to the hiring of clinical expertise, an increase in rent expense of approximately $509,000 related to rent expense on our new facility and an increase in other research and development labor and other costs of approximately $271,000.

Legal, Financial and Other Consulting Expenses:

Legal, financial and other consulting expenses were approximately $1,426,000 for the six months ended June 30, 2021, as compared to approximately $1,365,000 for the six months ending June 30, 2020.

The increase of approximately $61,000 was due to an increase in hiring fees of approximately $105,000 due to the hiring of certain senior level personnel and an increase in consulting fees of approximately $150,000 primarily related to certain financial advisory and information systems consulting fees.

Legal, financial and other consulting expenses were approximately $2,090,000 for the nine months ended September 30, 2021, as compared to approximately $1,945,000 for the nine months ending September 30, 2020.

The increase of approximately $145,000 was due to an increase an increase in consulting fees of approximately $244,000.

These increases were offset by decreases in legal fees of approximately $76,000 and accounting fees of approximately $23,000.

Selling, General and Administrative Expenses:

Selling, general and administrative expenses were approximately $17,531,000 for the six months ended June 30, 2021, as compared to $12,908,000 for the six months ended June 30, 2020, an increase of $4,623,000.

This increase is related to an increase in salaries, commissions and related costs of approximately $2,699,000, an increase in royalty expenses of approximately $312,000 due to the increase in product sales, and an increase in non-cash restricted stock expense of approximately $849,000 related to restricted stock units granted to the Company’s executive officers, an increase in non-cash stock compensation expense of approximately $450,000, an increase in commercial insurance of approximately $260,000 and an increase in sales and marketing costs, which include advertising and conference attendance and other general and administrative expenses of approximately $243,000.

Selling, general and administrative expenses were approximately $25,308,000 for the nine months ended September 30, 2021, as compared to $20,190,000 for the nine months ended September 30, 2020, an increase of $5,118,000.

This increase is related to an increase in salaries, commissions and related costs of approximately $2,994,000, an increase in royalty expenses of approximately $201,000 due to the increase in product sales, and an increase in non-cash restricted stock expense of approximately $881,000 related to restricted stock units granted to the Company’s executive officers, an increase in non-cash stock option compensation expense of approximately $360,000, an increase in commercial insurance of approximately $209,000, an increase in sales and marketing costs, which include advertising and conference attendance and other general and administrative expenses of approximately $536,000 and an increase in other general and administrative costs of approximately $54,000.

These increases were offset by a decrease in travel and entertainment costs of approximately $117,000 due primarily to travel restrictions related to the COVID-19 pandemic.

Interest Expense, net:

For the six months ended June 30, 2021, interest income was approximately $3,000, as compared to interest expense of approximately $579,000 for the six months ended June 30, 2020.

Interest Income/(Expense), net:

For the nine months ended September 30, 2021, interest income was approximately $16,000, as compared to interest expense of approximately $840,000 for the nine months ended September 30, 2020.

This decrease in net interest expense of approximately $856,000 was the result of the payoff of our outstanding term loans with Bridge Bank in December of 2020.

Gain (Loss) on Foreign Currency Transactions:

For the six months ended June 30, 2021, the loss on foreign currency transactions was approximately $1,071,000 as compared to a gain of approximately $36,000 for the six months ended June 30, 2020.

The 2021 loss was directly related to the decrease in the spot exchange rate of the Euro to the U.S.

dollar at June 30, 2021 as compared to December 31, 2020.

For the nine months ended September 30, 2021, the loss on foreign currency transactions was approximately $(2,084,000) as compared to a gain of approximately $1,417,000 for the nine months ended September 30, 2020.

The loss for the nine months ended September 30, 2021 was directly related to the decrease in the spot exchange rate of the Euro to the U.S.

dollar at September 30, 2021 as compared to December 31, 2020.

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

dollar was $1.18 per Euro at June 30, 2021, as compared to $1.22 per Euro at December 31, 2020.

The 2020 gain was directly related to the increase in the spot exchange rate of the Euro at June 30, 2020 as compared to December 31, 2019.

dollar was $1.16 per Euro at September 30, 2021, as compared to $1.22 per Euro at December 31, 2020.

The 2020 gain was directly related to the increase in the spot exchange rate of the Euro at September 30, 2020 as compared to December 31, 2019.

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

dollar was $1.17 per Euro at September 30, 2020, as compared to $1.12 per Euro at December 31, 2019.

History of Operating Losses :

We have experienced substantial operating losses since inception.

As of June 30, 2021, we had an accumulated deficit of approximately $205,472,000, which included losses of approximately $8,845,000 and $6,320,000 for the six month periods ended June 30, 2021 and 2020, respectively.

As of September 30, 2021, we had an accumulated deficit of approximately $211,878,000, which included losses of approximately $15,252,000 and $ 7,159,000 for the nine-month periods ended September 30, 2021 and 2020, respectively.

Historically, losses have resulted principally from costs incurred in the research and development of our polymer technology, clinical studies, and general and administrative expenses.

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Since inception, our operations have been primarily financed through the issuance of debt and equity securities.

At June 30, 2021, we had current assets of approximately $77,085,000 including cash on hand of approximately $65,609,000 and current liabilities of

approximately $10,796,000.

As of September 30, 2021, we had current assets of approximately $72,752,000 including cash on hand of approximately $61,043,000 and current liabilities of approximately $11,070,000.

During the period from January 1, 2020 through July 15, 2020, we raised approximately $26,427,000 by utilizing our ATM facility with co-agents Jefferies LLC and B.

In addition, we received net proceeds of approximately $53,800,000 from our underwritten public offering that closed on July 24, 2020.

Also, we received approximately $1,127,000 in cash from the approved sale of our net operating losses and research and development credits from the State of New Jersey during the three months ended June 30, 2021.

We believe that we have sufficient cash to fund our operations well into the future.

COVID-19 Impact on Financial Results

Product revenues in 2021 were positively impacted by underlying strength in our critical care and cardiac surgery business, and the use of CytoSorb to treat critically-ill COVID-19 patients in the ICU.

Though difficult to quantitate, we estimate that approximately $1.7 million and $3.5 million of our revenues were directly or indirectly related to COVID-19 during the three and six month periods ended June 30, 2021, respectively.

Given the order patterns we are currently experiencing, we expect the COVID-19 pandemic will have a much lower impact on product revenues in the second half of 2021.

Product revenues in the three months ended September 30, 2021 were negatively impacted by pandemic-driven adverse market conditions, especially in Germany which is our largest market.

This was driven by a wave in new COVID-19 cases in Germany, driven by the Delta variant, which accelerated through August and, after peaking in mid-September, has continued to date.

However, unlike prior waves in Germany, the rates of severe COVID-19 illness requiring ICU care, and death have been disproportionately very low.

This is being partly attributed to high rates of vaccinations that are associated with reduced severity of illness, reduced need for hospitalization, and risk of death.

Our product revenues decreased by 13% during the three months ended September 30, 2021 to approximately $8.9 million from approximately $10.2 million in the three months ended September 30, 2020.

Though difficult to quantitate, we estimate that approximately $1.1 million of our product revenues were directly or indirectly related to COVID-19 during the three-month period ended September 30, 2021 as compared to $2.7 million during the three months ended September 30, 2020.

Given the order patterns we are currently experiencing, we expect the COVID-19 pandemic will have a similar impact on product revenues in the fourth quarter of 2021.

COVID-19 revenues are expected to decline in future periods, as increasing vaccinations globally result in fewer new cases, hospitalizations, and deaths from COVID-19.

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In addition, as a result of the EUA granted by the FDA on April 11, 2020, we began shipping CytoSorb to hospitals in the United States.

Sales to hospitals in the United States under the EUA amounted to approximately $362,000 and $666,000 for the three and six months ended June 30, 2021, respectively.

Sales to hospitals in the United States under the EUA amounted to approximately $577,000 and $1,243,000 for the three and nine months ended September 30, 2021, respectively.

We are continuing to receive inquiries and orders for CytoSorb.

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sales will have on our overall product sales during the remainder of 2021.

The COVID-19 pandemic has generally been a positive driver for CytoSorb sales and it has highlighted the use of CytoSorb to treat cytokine storm and hyperinflammation.

The COVID-19 pandemic had generally been a positive driver for CytoSorb sales and it has highlighted the use of CytoSorb to treat cytokine storm and hyperinflammation.

This has been a catalyst for CytoSorb orders from existing customers, but also from new hospitals in countries where CytoSorb was not previously sold.

We believe this increased usage during the COVID-19 pandemic, as well as increased awareness of CytoSorb resulting from the increased sales, could help drive further CytoSorb sales in the future.

However, since the beginning of the COVID-19 pandemic, we have experienced disruptions to our normal sales processes, which decreased access of our sales force to hospitals, decreased effectiveness of virtual medical conferences, limited our ability to market new indications, such as ticagrelor and rivaroxaban removal, reduced the number of surgeries and other non-COVID-19 hospitalized patients, and slowed our ability to generate clinical data to support our sales and marketing efforts.

We believe this awareness of CytoSorb increased overall usage during the COVID-19 pandemic and could help drive further CytoSorb sales in the future.

However, since the beginning of the COVID-19 pandemic, we have experienced disruptions to our normal sales processes, which disruptions have been amplified more recently in Germany as a result of a wave of new COVID-19 cases.

For example, we have experienced decreased access of our sales representatives to hospitals and fewer sales meetings with physicians, decreased effectiveness of virtual medical conferences, and limits on our ability to market new indications, such as ticagrelor and rivaroxaban removal.

Additionally, hospitals have reduced the number of surgeries and other non-COVID-19 hospitalized patients and slowed our ability to generate clinical data to support our sales and marketing efforts.

These factors negatively impacted our critical care and cardiac surgery markets in Germany, resulting in lower-than-expected sales of CytoSorb during the third quarter ended September 30, 2021.

With the pandemic in flux, it is difficult to predict what the near-term impact of COVID-19 will have on overall ongoing product sales.

Grant revenues have been negatively impacted by the COVID-19 pandemic during 2020 and 2021.

Grant income was negatively impacted by the COVID-19 pandemic during 2020 and the first half of 2021.

Our research and development employees were either deployed to work-from-home or reassigned to assist in production activities to increase production of CytoSorb.

Currently, the team is executing upon our grant contracts, but this may change depending on the severity of COVID-19 cases.

As a result, grant revenue may be reduced until such time as the pandemic is over, however, this reduction is not expected to have a material impact on our financial results because of the low gross margins associated with grant activities.

There has been a worldwide slowdown in clinical trial activities as medical providers focus on COVID-19 patients and this resulted in the temporary pause in enrollment of our CYTATION study in Germany and other clinical trials in Europe.

Because of ongoing COVID-19-related delays in the U.K., we elected to stop our TISORB single arm trial, in favor of dedicating those resources to the U.S.

STAR-T randomized controlled trial.

The clinical study results of the REMOVE study sponsored by the German government have also been delayed as a result of COVID-19.

based REFRESH 2-AKI trial was paused as a result of COVID-19, but has since resumed enrollment.

These clinical trial activities and related expenses are expected to increase substantially as the impact of the COVID-19 pandemic continues to ease.

In addition, certain of our second quarter 2021 selling, general, and administrative expenses, such as travel and conference expenses, were lower than pre-COVID-19 levels due to the continuing restrictions on travel and the cancelling of medical and investor conferences during the pandemic.

Currently, the team is executing upon our grant contracts.

Our grant income increased by 285% during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.

However, this may change depending on whether there is a resurgence of COVID-19.

As a result, grant income may be reduced until such time as the pandemic is over, however, this reduction is not expected to have a material impact on our financial results because of the low gross margins associated with grant activities.

There has been a worldwide slowdown in clinical trial activities as medical providers focus on COVID-19 patients.

This has resulted in temporary pauses and delays in a number of our company-sponsored clinical trials.

In addition, because of ongoing COVID-19-related delays in the U.K., we elected to stop our TISORB single arm trial in April 2021, in favor of dedicating those resources to the U.S.

STAR-T randomized controlled trial in the United States which has begun enrollment.

These clinical trial activities and related expenses are expected to increase substantially as the impact of the COVID-19 pandemic continues to ease, especially in the U.S.

In addition to the acute impact of the pandemic relating to the strain from high COVID-19 patient numbers, major healthcare systems throughout the world, including the United States and Germany, where we have substantial clinical trial activities, are also challenged by the long-term effects of the pandemic on the health care system and are encountering difficulty retaining and recruiting hospital personnel including personnel needed to support research activities.

It is uncertain when these complex headwinds on health care delivery and clinical research activities will resolve and until then these factors may result in reduced capabilities of institutions to contribute patient recruitment into clinical trials with the potential to slow enrollment in our company-sponsored clinical trials.

In addition, certain of our third quarter 2021 selling, general, and administrative expenses, such as travel and conference expenses, were lower than pre-COVID-19 levels due to the continuing restrictions on travel and the cancelling of medical and investor conferences during the pandemic.

This is also a temporary situation which is not expected to continue once the pandemic is contained.

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The commencement date of the lease was April 1, 2021.

The Initial Early Term began on the commencement date (April 1, 2021) and lasts to 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 date of issuance of the certificate of occupancy for the manufacturing space (expected to be September 30, 2021).

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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.

In September 2016, the Company’s wholly-owned subsidiary, CytoSorbents Europe GmbH, entered into a five-year lease agreement with Klimik GmbH for 760 square meters of office and warehouse space.

In May 2018, CytoSorbents Europe GmbH entered into an additional lease agreement with Klimik GmbH which expanded its office and warehouse space to 960 square meters.

The leases have a total rent obligation of $8,827 per month.

Both leases expire on August 31, 2021.

The leases also provide the Company with an option to extend the terms for an additional five-year period through August 31, 2026.

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

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

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.

The initial lease term of both leases ends August 31, 2026.

In addition, the Company is obligated to monthly operating expenses of approximately $3,000 per month.

Both leases have a five year option to renew that would extend the lease term to August 31, 2031.

Off-balance Sheet Arrangements

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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 from the date of issuance of these financial statements.

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

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 2. Management’s Discussion and Analysis