What changed in this filing

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Item 1. Financial Statements

2022-05-03 compared with 2021-11-04 · 180 added, 252 removed, 404 unchanged (52% 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 $ 51,357 at September 30, 2021 and $ 46,851 at December 31, 2020

Grants and accounts receivable, net of allowance for doubtful accounts of $ 66,752 as of March 31, 2022 and $ 60,539 as of December 31, 2021

Prepaid expenses and other current assets

1 unchanged sentence

Property and equipment, net

Restricted cash

Right of use assets

10 unchanged sentences

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

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

No shares issued and outstanding as of March 31, 2022 and December 31, 2021

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

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

and 43,505,948 and 43,478,487 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

Accumulated other comprehensive loss

( 1,734,078 )

Accumulated other comprehensive income

Accumulated deficit

6 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three months ended September 30,

Nine months ended September 30,

Three Months Ended March 31,

CytoSorb sales

Oher product sales

Total product sales

9 unchanged sentences

( 2,852,191 )

( 13,182,924 )

( 7,736,069 )

Other income (expense):

Interest income (expense), net

Gain (loss) on foreign currency transactions

Interest expense, net

Miscellaneous income

Loss on foreign currency transactions

( 1,213,290 )

( 1,305,506 )

Total other income (expense), net

Total other expense, net

( 1,175,263 )

3 unchanged sentences

( 4,167,821 )

( 7,159,464 )

Benefit from income taxes

Net loss attributable to common shareholders

( 6,406,285 )

Net loss attributable to common stockholders

( 8,966,398 )

4 unchanged sentences

( 4,167,821 )

( 7,159,464 )

Other comprehensive income (loss):

Other comprehensive income:

Currency translation adjustment

( 1,047,749 )

( 1,043,280 )

Comprehensive loss

1 unchanged sentence

( 3,010,085 )

( 13,550,434 )

( 8,202,744 )

See accompanying notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

For the three months ended March 31, 2022 and 2021 (Unaudited)

Comprehensive

1 unchanged sentence

Income (Loss)

Balance at June 30, 2021

( 205,471,998 )

Stock-based compensation - employees, consultants and directors

Other comprehensive loss:

foreign translation adjustment

Proceeds from exercise of stock options

Cashless exercise of stock options

Issuance of restricted stock units

( 6,406,285 )

Balance at September 30, 2021

( 211,878,283 )

Balance at December 31, 2021

( 221,185,295 )

( 196,626,647 )

Stock-based compensation - employees, consultants and directors

1 unchanged sentence

foreign translation adjustment

Proceeds from exercise of stock options

Cashless exercise of stock options

Issuance of common stock - offerings, net of fees incurred

Issuance of restricted stock units

1 unchanged sentence

( 8,966,398 )

Balance at September 30, 2021

( 211,878,283 )

Comprehensive

Stockholders’

Income (Loss)

Balance at June 30, 2020

( 195,109,194 )

Stock-based compensation - employees, consultants and directors

Other comprehensive loss foreign translation adjustment

( 1,047,749 )

Proceeds from exercise of stock options

Cashless exercise of stock options

Issuance of common stock, net of fees incurred

Issuance of restricted stock units

Balance at September 30, 2020

Balance at March 31, 2022

( 230,151,693 )

1 unchanged sentence

( 1,734,078 )

( 196,626,647 )

Stock-based compensation - employees, consultants and directors

1 unchanged sentence

foreign translation adjustment

( 1,043,280 )

Proceeds from exercise of stock options

1 unchanged sentence

Issuance of restricted stock units

Issuance of common stock, net of fees incurred

( 4,167,821 )

Balance at September 30, 2020

Balance at March 31, 2021

( 200,794,468 )

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

September 30,

Cash flows from operating activities:

4 unchanged sentences

Depreciation and amortization

Amortization of debt costs

Bad debt expense (recovery)

Bad debt expense

Amortization of right of use asset

Impairment of patents

Stock-based compensation

Foreign currency transaction (gain) loss

( 1,416,577 )

Foreign currency transaction loss

Changes in operating assets and liabilities:

Grants and accounts receivable

( 1,083,938 )

( 2,099,051 )

Prepaid expenses and other current assets

Accounts payable and accrued expenses

( 1,203,761 )

Net cash used by operating activities

3 unchanged sentences

Purchases of property and equipment

( 2,108,821 )

Payments for patent costs

Net cash used by investing activities

( 2,608,512 )

( 1,410,082 )

Cash flows from financing activities:

Proceeds from long-term debt

Repayment of long-term debt

( 1,410,900 )

Equity contributions - net of fees incurred

Proceeds from exercise of stock options

Net cash provided by financing activities

Net cash (used by) provided by financing activities

Effect of exchange rates on cash

Net change in cash and cash equivalents

Net change in cash, cash equivalents and restricted cash

( 9,114,893 )

Cash and cash equivalents - beginning of period

Cash and cash equivalents - end of period

( 2,953,316 )

Cash, cash equivalents and restricted cash - beginning of period

Cash, cash equivalents and restricted cash - end of period

Supplemental disclosure of cash flow information:

2 unchanged sentences

Settlement of accrued bonuses with restricted stock units

Capital expenditures included in accounts payable

See accompanying notes to consolidated financial statements.

1 unchanged sentence

Notes to Consolidated Financial Statements

September 30, 2021

March 31, 2022

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, 2021 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on March 10, 2022.

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.

On July 24, 2020, the Company closed an underwritten public offering of 6,052,631 shares of its common stock at a public offering price of $ 9.50 per share (the “Offering”).

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

As of September 30, 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.

The results for the three months ended March 31, 2022 and 2021 are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or period.

As of March 31, 2022, the Company’s cash, cash equivalents and restricted cash balances were approximately $ 44.7 million, which the Company expects will fund the Company’s operations beyond twelve months from the issuance of these financial statements.

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

PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

10 unchanged sentences

In the third quarter of 2019, the Company formed CytoSorbents UK Limited, a wholly-owned subsidiary of CytoSorbents Medical, Inc.

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

CytoSorb, the Company’s flagship product, was approved in the European Union (“EU”) in March 2011, and is currently being marketed and distributed in 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.

which is responsible for the management of the Company’s clinical trial activities in the United Kingdom.

In March 2022, the Company formed CytoSorbents Medical UK Limited to provide marketing and direct sales services in the United Kingdom and the Republic of Ireland.

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 an 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.

19 unchanged sentences

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

These patents and patent applications are directed to various compositions and methods of use related to our blood purification technologies and are expected to expire between 2022 and 2037, absent any patent term extensions.

Management believes that any near-term expiring patents will not have a significant impact on our ongoing business.

These patents and patent applications are directed to various compositions and methods of use related to the Company’s blood purification technologies and are expected to expire between 2022 and 2038, absent any patent term extensions.

Management believes that any near-term expiring patents will not have a significant impact on the Company’s ongoing business.

Stock Market Listing

3 unchanged sentences

and CytoSorbents Europe GmbH.

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

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

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

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

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

1 unchanged sentence

The Euro is the functional currency of the European Subsidiary.

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.

Foreign currency transaction loss included in net loss amounted to approximately $( 1,213,000 ) and $( 1,306,000 ) for the three months ended March 31, 2022 and 2021, respectively.

The Company translates assets and liabilities of all of its foreign subsidiaries at the exchange rate in effect at the consolidated balance sheet date.

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

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

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

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

The following table provides a reconciliation of cash and cash equivalents and restricted cash to amounts shown in the consolidated balance sheets:

March 31, 2022

December 31, 2021

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash

Restricted Cash

The Company’s total restricted cash in the amount of $ 1,687,459 consists of cash of $ 1,467,459 that the Company is obligated to maintain as collateral for the outstanding letter of credit with Bridge Bank that was provided to the landlord of the College Road facility as security and cash of $ 220,000 that the Company is obligated to maintain as collateral for the credit limit on the Company’s credit card accounts.

Grants and Accounts Receivable

6 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 $ 51,000 and $ 47,000 at September 30, 2021 and December 31, 2020, respectively.

The allowance for doubtful accounts amounted to approximately $ 67,000 and $ 61,000 at March 31, 2022 and December 31, 2021, respectively.

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

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;

At March 31, 2022 and December 31, 2021, the Company’s inventory was comprised of finished goods, which amounted to $ 3,363,744 and $ 3,084,606 , respectively;

work in process which amounted to $ 1,638,447 and $ 1,322,736 , respectively;

1 unchanged sentence

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

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

Property and Equipment

10 unchanged sentences

For long-lived assets to be held and used, the Company recognizes an impairment loss only if its carrying amount is not recoverable through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and fair value.

During the three months ended March 31, 2022, the Company recorded an impairment charge of approximately $ 306,000 related to certain patent costs.

This charge is included in legal, financial and other consulting in the consolidated statements of operations and comprehensive loss.

Revenue Recognition

2 unchanged sentences

Recognition of revenue occurs as each performance obligation is completed.

Grant Income:

Grant Revenue :

Revenue from grant income is based on contractual agreements.

3 unchanged sentences

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.

Research and Development and Clinical Trial Expenses

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

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

Research and Development

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

Advertising Expenses

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

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.

Advertising expenses are charged to activities when incurred.

Advertising expenses amounted to approximately $ 81,000 and $ 154,000 for the three months ended March 31, 2022 and 2021, respectively, and are included in selling, general, and administrative expenses on the consolidated statements of operations and comprehensive loss.

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

6 unchanged sentences

The Company follows accounting standards associated with uncertain tax positions.

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

The Company had no unrecognized tax benefits at March 31, 2022 or December 31, 2021.

The Company files tax returns in the U.S.

federal and state jurisdictions.

The Company utilizes the Technology Business Tax Certificate Transfer Program to sell a portion of its New Jersey Net Operating Loss carry forwards to an industrial company.

The Company utilizes the Technology Business Tax Certificate Transfer Program to sell a portion of its New Jersey Net Operating Loss carryforwards to an industrial company.

Each of CytoSorbents Europe GmbH, CytoSorbents Switzerland GmbH, CytoSorbents Poland Sp.

and CytoSorbents UK Limited file an annual corporate tax return, VAT return and a trade tax return in Germany, Switzerland, Poland and the United Kingdom, respectively.

and CytoSorbents UK Limited files an annual corporate tax return, VAT return and a trade tax return in Germany, Switzerland, Poland and the United Kingdom, respectively.

Use of Estimates

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

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

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

Actual results could differ from these estimates.

3 unchanged sentences

Management monitors the soundness of these institutions in an effort to minimize its collection risk of these balances.

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

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

A significant portion of the Company's revenues are from product sales in Germany.

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

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

As of September 30, 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.

As of March 31, 2022, one distributor accounted for approximately 22 % of outstanding grants and accounts receivable.

As of December 31, 2021, one distributor accounted for approximately 12 % of outstanding grants and accounts receivables.

For the three months ended March 31, 2022, no distributor accounted for more than 10 % of the Company's total revenue and for the three months ended March 31, 2021, one distributor accounted for approximately 11 % of the Company's total revenue.

Financial Instruments

1 unchanged sentence

Net Loss Per Common Share

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

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

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

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

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

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

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

Stock-Based Compensation

1 unchanged sentence

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 $ 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.

Total freight costs amounted to approximately $ 68,000 and $ 63,000 , respectively, for the three months ended March 31, 2022 and 2021.

Effect of Recent Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board (the “FASB”), issued Accounting Standards Update (“ASU”) 2021-10, “Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance”.

ASU 2021-10 will require enhanced disclosures related to the Company’s contracts with the U.S.

The ASU is effective for annual periods beginning after December 15, 2021.

The Company intends to implement the provisions of ASU 2021-10 during 2022.

STOCKHOLDERS’ EQUITY

4 unchanged sentences

The amended and restated certificate of incorporation increased the number of shares of common stock authorized for issuance from 50,000,000 shares to 100,000,000 shares.

July 24, 2020 Offering

On July 24, 2020, the Company closed an underwritten public offering of 6,052,631 shares of its common stock at a public offering price of $ 9.50 per share (the "Offering").

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

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

Shelf Registration

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, 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 “Sale Agreement”) with Jefferies LLC and B.

Riley FBR, Inc.

(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.

Open Market Sale Agreement with Jefferies LLC

On December 30, 2021, the Company entered into an Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC (the “Agent”), 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 Agent, as the Company’s sales agent.

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 2021 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.

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 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.

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

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

Subject to the terms of the Sales Agreement, the Agent is 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 Agent 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.

There were no sales pursuant to the Amended Sale Agreement during the year ended December 31, 2021 or during the three months ended March 31, 2022.

In addition, during the year ended December 31, 2021 and during the three months ended March 31, 2022, the Company paid approximately $ 90,000 and $ 40,000 , respectively, in expenses related to the Amended Sale Agreement.

Stock-Based Compensation

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 nine months ended September 30, 2021 is as follows:

Total share-based employee, director, and consultant compensation for the three months ended March 31, 2022 and 2021 amounted to approximately $ 787,000 and $ 667,000 , respectively.

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

The summary of the stock option activity for the three months ended March 31, 2022 is as follows:

Exercise Price

Outstanding, December 31, 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 September 30, 2021 of $ 8.12 and the exercise price of the shares.

( 1,105,125 )

Outstanding, March 31, 2022

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 $ 2.98 to $ 3.91 per share) and expected life of the stock option ( 10 years ), the current price of the underlying stock and its expected volatility ( 59.3 percent), expected dividends (- 0 - percent) on the stock and the risk free interest rate (ranging from 1.52 to 2.52 percent) for the expected term of the stock option.

The intrinsic value is calculated as the difference between the market value of the shares as of March 31, 2022 of $ 3.19 and the exercise price of the shares.

Options Outstanding

Outstanding at

September 30,

$ 2.65 - $ 14.50

1 unchanged sentence

Exercisable at

September 30,

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

The summary of the status of the Company’s non-vested options for the three months ended March 31, 2022 is as follows:

Non-vested, December 31, 2021

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 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.

( 1,105,125 )

Non-vested, March 31, 2022

As of March 31, 2022, the Company had approximately $ 6,073,000 of total unrecognized compensation cost related to stock options which will be amortized over approximately 38 months .

Change in Control-Based Awards of Restricted Stock Units:

5 unchanged sentences

December 31, 2021

September 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 nine months ended September 30, 2021 and 2020.

March 31, 2022

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 and comprehensive loss for the three months ended March 31, 2022 and 2021.

Other Awards of Restricted Stock Units:

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.

On March 4, 2019, certain named executive officers and senior managers were granted 22,220 restricted stock units.

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

For the three and nine months ended September 30, 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.

For the three months ended March 31, 2022 and 2021, the Company recorded a charge of approximately $ 0 and $ 11,000 respectively, related to these restricted stock unit awards.

On July 22, 2019, certain named executive officers and senior managers were granted 180,300 restricted stock units.

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

For the three and nine months ended September 30, 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.

For the three months ended March 31, 2022 and 2021, the Company recorded a charge of approximately $ 0 and $ 103,000 , respectively, related to these restricted stock unit awards.

On February 28, 2020, certain named executive officers and senior managers were granted 168,100 restricted stock units.

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

For the three and nine months ended September 30, 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.

For the three months ended March 31, 2022 and 2021, the Company recorded a reduction of expense of approximately $ 65,000 for the three months ended March 31, 2022 and an expense of approximately $ 274,000 for the three months ended March 31, 2021 related to these restricted stock unit awards.

On April 12, 2021, certain named executive officers and senior managers were granted 235,765 restricted stock units.

These awards were valued at approximately $ 2,120,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vest one third on the date of the grant, one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant.

For the three and nine months ended September 30, 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.

For the three months ended March 31, 2022 and 2021, the Company recorded a charge of approximately $ 177,000 and $ 0 , respectively, related to these restricted stock unit awards.

Additionally, in 2021 certain employees were offered 91,750 restricted stock units , respectively, as a condition of their employment.

These awards were valued at approximately $ 713,868 at the date of issuance.

1 unchanged sentence

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 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:

For the three months ended March 31, 2022 and 2021, the Company recorded a charge of approximately $ 47,000 and $ 54,000 respectively, related to these restricted stock unit awards.

The following table outlines the restricted stock unit activity for the three months ended March 31, 2022:

Non-vested, December 31, 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

Distributors/

Strategic Partners

Product sales:

United States

All other countries

Total product revenue

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 September 30, 2020:

United States

Distributors/

Strategic Partners

Product sales:

United States

All other countries

Total product revenue

Grant income:

United States

Total revenue

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

Non-vested, March 31, 2022

The following table disaggregates the Company’s revenue by customer type and geographic area for the three months ended March 31, 2022:

United States

5 unchanged sentences

Total product revenue

Grant income:

Grant and other income:

United States

Total revenue

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

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

United States

5 unchanged sentences

Total product revenue

Grant income:

Grant and other income:

United States

2 unchanged sentences

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

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

The following is a brief description of each revenue stream.

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The 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 adult 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 U.S.

Emergency Use Authorization (“EUA”) of CytoSorb for use in critically-ill patients infected with COVID-19 with imminent or confirmed respiratory failure by the United States Food and Drug Administration (the “FDA”).

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

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

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

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 annual 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 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 or 12 packs).

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

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

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

These distributors are located in various countries throughout the world.

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

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

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

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

Cumulative amounts invoiced may not exceed the maximum amount of funding stipulated in the contract.

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

September 30, 2021

March 31, 2022

December 31, 2021

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 income related to the billing on fixed price contracts in excess of costs incurred as of September 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, which amounted to $ 259,543 and $ 303,824 as of March 31, 2022 and December 31, 2021, respectively, and deferred grant revenue related to the billing on fixed price contracts in excess of costs incurred , which amounted to $ 2,175,909 and $ 1,947,353 at March 31, 2022 and December 31, 2021, respectively.

LONG-TERM DEBT, NET

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

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

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

(1) one tranche of $ 10 million (the “Term A Loan”), which was funded on the Closing Date and used to refinance the Original Term Loans, and (2) a second tranche of $ 5 million which may be disbursed at the Borrower’s sole request prior to March 31, 2019 provided certain conditions are met (the “Term B Loan” and together with the Term A Loan, the “Term Loans”).

On March 29, 2018, the Original Term Loans were refinanced with the Bank pursuant to an Amended and Restated Loan and Security Agreement by and between the Bank and the Borrower (the “Amended and Restated Loan and Security Agreement”), under which the Bank agreed to loan the Borrower up to an aggregate of $ 15 million to be disbursed in two tranches (1) one tranche of $ 10 million (the “Term A Loan”), which was funded on the Closing Date and used to refinance the Original Term Loans, and (2) a second tranche of $ 5 million which may be disbursed at the Borrower’s sole request prior to March 31, 2019 provided certain conditions are met (the “Term B Loan” and together with the Term A Loan, the “Term Loans”).

On July 31, 2019, the Borrower entered into the First Amendment to the Amended and Restated Loan and Security Agreement (the “First Amendment”) with the Bank, which amended certain provisions of the Amended and Restated Loan and Security Agreement and the 2018 Success Fee Letter (the “2018 Letter”).

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.

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.

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

On December 4, 2020 (the “Closing Date”), the Company closed on the Third Amendment (the “Third Amendment”) of its Amended Loan and Security Agreement with Bridge Bank.

Under the terms of the Amendment, the Company repaid the outstanding principal balance of its existing $ 15 million term loans and simultaneously received a commitment from Bridge Bank to provide a new term loan of $ 15 million (the “New Term Loan”), if needed.

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

The New Term Loan, if drawn, shall bear interest at the Index Rate (defined in the Amendment as the greater of 3.25% or the Prime Rate as published by the Wall Street Journal on the last business date of the month immediately preceding the month in which the interest will accrue) plus 1.25 %.

In addition, the Company would be required to make payments of interest-only commencing on the first day of the month after the New Term Loan was made until January 2023.

The interest-only period may be further extended through July 2023 if the Company maintains compliance with certain conditions as outlined in the Amendment.

Following the interest-only period, the Company will be required to make equal monthly payments of principal and interest until maturity of the New Term Loan.

The maturity date of the New Term Loan is December 1, 2024.

On the Closing Date, the Company was required to pay a non-refundable closing fee of $ 75,000 .

As of the Closing Date, the total unamortized loan costs related to the Term Loans amounted to approximately $ 45,000 .

These costs were written off on the Closing Date as a charge to interest expense.

In addition, the Amended and Restated Loan and Security Agreement requires the Company to pay a non-refundable final fee equal to 2.5 % of the principal amount of each Term Loan funded upon the earlier of the (i) April 1, 2022 maturity date or (ii) termination of the Term Loan via acceleration or prepayment.

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

On December 4, 2020 (the “Third Amendment Closing Date”), the Company closed on the Third Amendment (the “Third Amendment”) of its Amended Loan and Security Agreement with Bridge Bank.

On January 19, 2022 (the "Fourth Amendment Closing Date"), the Company closed on the Fourth Amendment (the "Fourth Amendment") of its Amended Loan and Security Agreement with Bridge Bank.

Under the terms of the Amendment, the Company received a commitment from Bridge Bank to provide a new term loan of up to $ 15 million, if needed.

The Fourth Amendment provides a tranche of term loans (the “Term C Loans") in the aggregate amount of $ 15 million, which are available for the Company to draw down at its sole discretion in three tranches of $ 5 million each at any time during the period commencing on the Fourth Amendment Date and ending on the earlier of (i) December 31, 2022 and (ii) the occurrence of an Event of Default (as defined in the Amended Loan and Security Agreement).

The Term C Loans, if taken, shall bear interest at the Index Rate (defined in the Amendment as the greater of 3.25% or the Prime Rate as published by the Wall Street Journal on the last business date of the month immediately preceding the month in which the interest will accrue) plus 1.25 %.

Pursuant to the Fourth Amendment, interest on the Term C Loans is subject to an interest rate cap of 8.00 %.

The Fourth Amendment, together with the Amended Loan and Security Agreement, provides for a period of interest only payments on the Term C Loan until the amortization date, which is January 1, 2024.

The interest-only period may be further extended through July 2024 if the Company maintains compliance with certain conditions as outlined in the Fourth Amendment.

Following the interest-only period, the Company will be required to make equal monthly payments of principal and interest until maturity of the Term C Loans.

The maturity date of the Term C Loan is December 1, 2025.

On the Fourth Amendment Closing Date, the Company was required to pay a non-refundable closing fee of approximately $ 18,750 , which will amortized as a monthly charge to interest expense.

On the Third Amendment Closing Date, the Company paid a non-refundable closing fee of $ 75,000 , which was amortized and written off as a charge to interest expense.

In addition, the Amended and Restated Loan and Security Agreement requires the Company to pay a non-refundable final fee equal to 2.5 % of the principal amount of the Term Loan funded upon the earlier of the (i) the maturity date or (ii) termination of the Term Loan via acceleration or prepayment.

The Company’s and CytoSorbents Medical, Inc.’s obligations under the Amended and Restated Loan and Security Agreement are joint and severable and are secured by a first priority security interest in favor of the Bank with respect to the Company’s Shares (as defined in the Amended and Restated Loan and Security Agreement) and the Borrower’s Collateral (as defined in the Amended and Restated Loan and Security Agreement, which definition excludes the Borrower’s intellectual property and other customary exceptions).

6 unchanged sentences

This obligation shall terminate on the fifth anniversary of the funding of the Term B Loan and shall survive the termination of the loan agreement and the prepayment of the Term B Loan.

2022 Success Fee Letter:

Pursuant to the 2022 Success Fee Letter, the Borrower will pay to the Bank a success fee equal to (i) 1 % of $ 5 million if the Company draws down the first tranche of the Term C Loan and is payable only if the Company’s stock price equals or exceeds $ 8 for five consecutive trading days;

(ii) 1.5 % of $ 5 million if the Company draws down the second tranche of the Term C Loan and is payable only if the Company’s stock price equals or exceeds $ 10 for five consecutive trading days;

and (iii) 2 % of $ 5,000,000 if the Company draws down the third tranche of the Term C Loan and is payable only if the Company’s stock price equals or exceeds $ 12 for five consecutive trading days (together, the “Success Fee”).

Borrower may pay the Success Fee in cash or in shares of common stock, at Borrower's sole discretion.

The right of Bank to receive the Success Fees and the obligation of the Borrower to pay the Success Fees hereunder shall terminate on the date that is fifth anniversary of the funding date of the last Term C Loans made but shall survive the termination of the Loan Agreement and any prepayment of the Term C Loans.

COMMITMENTS AND CONTINGENCIES

Customs Examination

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

The audit commenced in early December 2020.

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

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

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

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

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

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

The German Customs Authority informed us that the Company must use the code that carries the 1.7% tax.

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.

Payroll Tax Examination

In December 2021, the Company was notified that its European subsidiary, CytoSorbents Europe GmbH, would be subject to an audit of their payroll tax and social cost filings for the four-year period from 2018 through 2021.

The Company has determined that payroll taxes and social costs were not paid on certain employee expense reimbursements as is required by German tax rules.

Accordingly, the Company has accrued approximately $ 598,000 as an estimate of this liability.

This liability is included in accrued expenses and other current liabilities in the consolidated balance sheet as of December 31, 2021 and March 31, 2022.

Approximately $ 154,000 of this liability relates to 2021, approximately $ 131,000 relates to 2020, approximately $ 175,000 relates to 2019 and approximately $ 138,000 relates to 2018.

The audit is on-going and is expected to be completed during the second quarter of 2022.

Employment Agreements

4 unchanged sentences

On April 12, 2020, CytoSorbents Corporation entered into an executive employment agreement with Dr.

Efthymios Deliargyris, who began employment as Chief Medical Officer on May 1, 2020, with an initial term that expires on December 31, 2021.

Efthymios Deliargyris, who began employment as Chief Medical Officer on May 1, 2020, with an initial term that expired on December 31, 2021.

After the expiration of the initial terms, the employment agreements will automatically renew for additional terms of one year unless either party provides written notice of non-renewal at least 60 days prior to a renewal.

In January 2022, these employment agreements automatically renewed for an additional 1 year .

The foregoing employment agreements each provide for base salary and other customary benefits which include participation in group insurance plans, paid time off and reimbursement of certain business-related expenses, including travel and continuing educational expenses, as well as bonus and/or equity awards at the discretion of the Board of Directors.

8 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 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.

For the three months ended March 31, 2022 and 2021, the Company recorded royalty expenses of approximately $ 232,000 and $ 301,000 , 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 date of the agreement.

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.

For the three months ended March 31, 2022 and 2021 per the terms of the license agreement, the Company recorded licensing expenses of approximately $ 387,000 and $ 501,000 , respectively.

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

3 unchanged sentences

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.

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

The Early Term commenced on June 1, 2021 and lasted until September 30, 2021.

The lease also contains two five-year renewal options;

however, the Company has determined that it is not likely that they will exercise these options.

Commencing on September 30, 2021, the remaining lease term will last for 15.5 years.

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

7 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 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.

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 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 the existing Monmouth Junction facility which became effective May 31, 2021.

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

2 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.

19 unchanged sentences

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

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

The discount rate used was the Company’s incremental borrowing rate, which is 9.8 %, 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 September 30:

The maturities of the lease liabilities are as follows as of March 31, 2022:

Total lease payments

Present value discount

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.

For the three months ended March 31, 2022 and 2021, operating cash flows paid in connection with operating leases amounted to approximately $ 712,765 and $ 230,865 , respectively.

As of March 31, 2022 and December 31, 2021, the weighted average remaining lease term was 13.5 years and 14.3 years, respectively.

NET LOSS PER SHARE

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.

Basic loss per share and diluted loss per share for the three months ended March 31, 2022 and 2021 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 8,825,000 and 7,821,000 incremental shares as of March 31, 2022 and 2021, respectively, have been excluded from the computation of diluted loss per share as they are anti-dilutive.

SUBSEQUENT EVENT

On April 5, 2022, the Company announced the appointment of Ms.

Jiny Kim, MBA, to its Board of Directors as a new independent director for a term expiring at the Company's 2022 Annual Meeting, scheduled for June 7, 2022, at which time Ms.

Kim is expected to stand for re-election.

Concurrent with her appointment as director, she received an award of 17,250 stock options.

These options will vest in four equal quarterly tranches, commencing on the three-month anniversary of her appointment.

These options will be fully vested on April 5, 2023.

The grant date fair value of these unvested options amounted to approximately $ 13,000 .

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