What changed in this filing

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Item 1. Financial Statements

2022-08-02 compared with 2022-05-03 · 186 added, 105 removed, 479 unchanged (38% of the section changed)

4 unchanged sentences

Cash and cash equivalents

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

Grants and accounts receivable, net of allowance for doubtful accounts of $ 81,971 as of June 30, 2022 and $ 60,539 at December 31, 2021

Prepaid expenses and other current assets

14 unchanged sentences

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

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

- 0 - shares issued and outstanding at June 30, 2022 and December 31, 2021

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

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

43,574,619 and 43,478,487 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

8 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three Months Ended March 31,

Three months ended June 30,

Six months ended June 30,

CytoSorb sales

Oher product sales

Total product sales

9 unchanged sentences

( 4,924,733 )

( 16,148,185 )

( 7,776,923 )

Other income/(expense):

Interest expense, net

Miscellaneous income

Loss on foreign currency transactions

Interest income (expense), net

Gain (loss) on foreign currency transactions

( 2,523,006 )

( 3,736,296 )

Total other expense, net

( 1,071,376 )

Miscellaneous income (expense)

Total other income (expense), net

( 2,522,172 )

( 3,697,435 )

( 1,068,428 )

Loss before benefit from income taxes

1 unchanged sentence

( 4,677,530 )

( 19,845,620 )

( 8,845,351 )

Benefit from income taxes

Net loss attributable to common stockholders

Net loss attributable to common shareholders

( 10,879,222 )

( 4,677,530 )

( 19,845,620 )

( 8,845,351 )

Basic and diluted net loss per common share

2 unchanged sentences

( 4,677,530 )

Other comprehensive income:

( 19,845,620 )

( 8,845,351 )

Other comprehensive income (loss):

Currency translation adjustment

Comprehensive loss

Total Comprehensive loss

( 8,826,007 )

( 4,942,029 )

( 16,829,494 )

( 7,952,114 )

See accompanying notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

For the three and six months ended June 30, 2022 and 2021 (Unaudited)

Comprehensive

1 unchanged sentence

Income (Loss)

Balance at March 31, 2022

( 230,151,693 )

Stock-based compensation - employees, consultants and directors

Other comprehensive loss:

foreign translation adjustment

Stock issued to vendor in lieu of cash payment

Issuance of restricted stock units

( 10,879,222 )

Balance at June 30, 2022

( 241,030,915 )

Balance at December 31, 2021

3 unchanged sentences

foreign translation adjustment

Issuance of common stock - offerings, net of fees incurred

Stock issued to vendor in lieu of cash payment

Issuance of restricted stock units

Legal/audit fees related to ATM offering

( 19,845,620 )

Balance at June 30, 2022

( 241,030,915 )

Comprehensive

Stockholders’

Income (Loss)

Balance at March 31, 2021

( 200,794,468 )

Stock-based compensation - employees, consultants and directors

Other comprehensive loss:

foreign translation adjustment

Proceeds from exercise of stock options

Cashless exercise of stock options

Issuance of restricted stock units

( 4,677,530 )

Balance at June 30, 2021

( 205,471,998 )

Balance at December 31, 2020

9 unchanged sentences

( 8,845,351 )

Balance at March 31, 2021

Balance at June 30, 2021

( 205,471,998 )

8 unchanged sentences

Depreciation and amortization

Bad debt expense

Amortization of right of use asset

Impairment of patents

Bad debt expense (recovery)

Stock-based compensation

2 unchanged sentences

Grants and accounts receivable

( 1,102,610 )

Prepaid expenses and other current assets

1 unchanged sentence

( 2,286,125 )

Net cash used by operating activities

Net cash used in operating activities

( 16,159,163 )

2 unchanged sentences

Purchases of property and equipment

( 5,234,163 )

( 1,217,254 )

Payments for patent costs

Net cash used by investing activities

Net cash used in investing activities

( 5,532,963 )

( 1,591,018 )

Cash flows from financing activities:

1 unchanged sentence

Proceeds from exercise of stock options

Net cash (used by) provided by financing activities

Net cash provided by (used in) financing activities

Effect of exchange rates on cash

7 unchanged sentences

Supplemental disclosure of non-cash financing activities:

Settlement of accrued bonuses with restricted stock units

Issuance of common stock to vendor in lieu of cash payment

Capital expenditures included in accounts payable

Settlement of accrued bonuses with restricted stock units

See accompanying notes to consolidated financial statements.

1 unchanged sentence

Notes to Consolidated Financial Statements

March 31, 2022

June 30, 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 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.

The results for the three and six months ended June 30, 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 June 30, 2022, the Company’s cash, cash equivalents and restricted cash balances were approximately $ 31.9 million, which the Company expects will fund the Company’s operations beyond twelve months from the issuance of these consolidated financial statements.

In addition, the Company has $ 15 million of debt availability and $ 25 million of availability under its ATM facility to provide additional liquidity, as needed.

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

10 unchanged sentences

This subsidiary, which began operations during the first quarter of 2019, provides marketing and direct sales services in Poland.

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 the Company’s clinical trial activities in the United Kingdom.

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 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.

11 unchanged sentences

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

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

Food and Drug Administration (FDA).

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

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

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

In May 2022, the Company announced that the Company entered into a 3-year preferred supplier agreement with Asklepios, making CytoSorb available without restrictions to all of the approximate 170 healthcare facilities across 14 states throughout Germany at which Asklepios operates.

This includes Asklepios Klinik St.

Georg in Hamburg, Germany, which pioneered the use of CytoSorb to remove antithrombotic drugs during cardiothoracic surgery, and is well-known for their seminal publication on CytoSorb use for this application during emergency cardiac surgery in patients at high risk of bleeding.

In June 2022, the Company announced that, following a successful pilot program in three countries, the Company signed an expanded non-exclusive agreement with Nikkiso Europe GmbH (“Nikkiso”) to distribute Nikkiso’s PureADJUST stand-alone hemoperfusion pump and accessories in a total of 14 countries.

In addition to securing the rights to sell Nikkiso’s stand-alone pump and accessories in Germany, Austria, and Luxembourg, the Company entered into an expanded multi-country reseller agreement with Nikkiso covering the following countries:

Belgium, Bosnia and Herzegovina, Croatia, Finland, France, Iceland, Lichtenstein, Poland, Serbia, Slovenia and Switzerland.

The Company will also be able to provide field support services in these countries.

If FDA marketing approval is obtained for either the removal of ticagrelor or direct oral anticoagulants indications, the device would be marketed as DrugSorb-ATR in the United States.

15 unchanged sentences

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

The Euro is the functional currency of the European Subsidiary.

Foreign currency transaction loss included in net loss amounted to approximately $( 1,213,000 ) 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 Euro is the functional currency of CytoSorbents Europe GmbH.

Foreign currency transaction gain (loss) included in net loss amounted to approximately $( 2,523,000 ) and $ 234,000 for the three months ended June 30, 2022 and 2021, respectively.

Foreign currency transaction (loss) included in net loss amounted to approximately $( 3,736,000 ) and $( 1,071,000 ) for the six months ended June 30, 2022 and 2021, respectively.

The Company translates assets and liabilities 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 during the period.

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

Cash and Cash Equivalents

Cash, Cash Equivalents and Restricted Cash

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

June 30, 2022

December 31, 2021

12 unchanged sentences

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

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

The allowance for doubtful accounts amounted to approximately $ 82,000 and $ 61,000 at June 30, 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 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;

At June 30, 2022 and December 31, 2021, the Company’s inventory was comprised of finished goods, which amounted to $ 3,076,822 and $ 3,084,606 , respectively;

work in process which amounted to $ 1,322,818 and $ 1,322,736 , respectively;

14 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.

During the three and six months ended June 30, 2022, the Company recorded an impairment charge of approximately $ 126,000 and $ 431,000 , respectively, related to certain patent costs.

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

10 unchanged sentences

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

Research and Development

Research and Development and Clinical Trial Expenses

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

Advertising Expenses

Advertising expenses are charged to activities when incurred.

Advertising expenses amounted to approximately $ 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.

Advertising expenses are included in selling, general, and administrative expenses on the consolidated statements of operations and comprehensive loss when incurred.

Advertising expenses amounted to approximately $ 115,000 and $ 148,000 for the three months ended June 30, 2022 and 2021, respectively, and approximately $ 196,000 and $ 302,000 for the six months ended June 30, 2022 and 2021, respectively.

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

6 unchanged sentences

The Company follows accounting standards associated with uncertain tax positions.

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

The Company had no unrecognized tax benefits at June 30, 2022 or December 31, 2021.

The Company files tax returns in the U.S.

2 unchanged sentences

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

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.

CytoSorbents Medical Limited 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

7 unchanged sentences

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.

Substantially all of the Company’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 March 31, 2022, one distributor accounted for approximately 22 % of outstanding grants and accounts receivable.

As of June 30, 2022, one distributor accounted for approximately 20 % 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.

For the three months and six months ended June 30, 2022, no distributor accounted for more than 10 % of the Company’s total revenue and for the three and six months ended June 30, 2021 no distributor accounted for more than 10 % of the Company’s total revenue.

Financial Instruments

2 unchanged sentences

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.

Diluted loss per common share is computed using the treasury stock method utilizing 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.

7 unchanged sentences

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

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

Total freight costs amounted to approximately $ 18,000 and $ 77,000 , respectively, for the three months ended June 30, 2022 and 2021, and $ 87,000 and $ 140,000 , respectively, for the six months ended June 30, 2022 and 2021.

Effect of Recent Accounting Pronouncements

1 unchanged sentence

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.

ASU 2021-10 is effective for annual periods beginning after December 15, 2021.

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

9 unchanged sentences

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.

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).

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 may sell, from time to time, at its option, shares of the Company’s common stock having an aggregate offering price of up to $ 25 million through the 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 will be 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.

Subject to the terms of the Sales Agreement, the Agent is required to use its 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.

There have been no sales under the Sale Agreement.

In addition, during the year ended December 31, 2021 and during the six months ended June 30, 2022, the Company paid approximately $ 90,000 and $ 40,000 , respectively, in expenses related to the Sale Agreement.

Stock-Based Compensation

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:

Total share-based employee, director, and consultant compensation amounted to approximately $ 761,000 and $ 1,549,000 for the three and six months ended June 30, 2022, respectively, and $ 1,558,000 and $ 2,226,000 for the three and six months ended June 30, 2021, respectively.

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

The summary of the stock option activity for the six months ended June 30, 2022 is as follows:

Exercise Price

1 unchanged sentence

( 1,184,044 )

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.

Outstanding, June 30, 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 $ 1.76 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 ( 62.9 %), expected dividends ( 0 %) on the stock and the risk free interest rate (ranging from 1.52 % to 3.37 %) 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 June 30, 2022 of $ 2.19 and the exercise price of the shares.

Options Outstanding

3 unchanged sentences

Exercisable at

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

The summary of the status of the Company’s non-vested options for the six months ended June 30, 2022 is as follows:

Non-vested, December 31, 2021

( 1,184,044 )

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 .

Non-vested, June 30, 2022

As of June 30, 2022, the Company had approximately $ 4,099,000 of total unrecognized compensation cost related to stock options which will be amortized over approximately 36 months .

Change in Control-Based Awards of Restricted Stock Units:

5 unchanged sentences

December 31, 2021

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.

June 30, 2022

Other Awards of Restricted Stock Units:

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 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.

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 vested one third on the date of the grant, one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant.

For the three and six months ended June 30, 2022 and 2021, the Company recorded a charge of approximately $ 0 and $ 0 , and $ 0 and $ 12,000 , 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 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.

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 vested one third on the date of the grant, one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant.

For the three and six months ended June 30, 2022 and 2021, the Company recorded a charge of approximately $ 0 and $ 103,000 , and $ 0 and $ 93,000 , 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 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.

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 vested one third on the date of the grant, one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant.

For the three and six months ended June 30, 2022 and 2021, the Company recorded (income) expense of approximately $ 0 and $ 84,000 , and $( 65,000 ) and $ 84,000 , related to these restricted stock unit awards, respectively.

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 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 $ 2,220,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vested (or will vest) one third on the date of the grant, one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant.

For the three and six months ended June 30, 2022 and 2021, the Company recorded (income) expense of approximately $( 304,000 ) and $ 854,000 , and $( 127,000 ) and $ 854,000 , respectively, related to these restricted stock unit awards.

Additionally, in 2021 and 2020 certain employees were offered 91,750 restricted stock units as a condition of their employment.

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

45,000 of the restricted stock units were forfeited in 2022.

16,750 of these restricted stock units vest upon the earlier of a Change in Control or one- third after the second anniversary of the award, one- third on the third anniversary of the award, and one- third on the fourth anniversary of the award.

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

For the three months ended March 31, 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:

For the three and six months ended June 30, 2022 and 2021, the Company recorded (income) expense of approximately $( 82,000 ) and $ 33,000 , and $( 34,000 ) and $ 87,000 , respectively, related to these restricted stock unit awards.

The following table outlines the restricted stock unit activity for the six months ended June 30, 2022:

Non-vested, December 31, 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:

Non-vested, June 30, 2022

The following table disaggregates the Company’s revenue by customer type and geographic area for the three months ended June 30, 2022:

United States

8 unchanged sentences

Total revenue

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

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

United States

8 unchanged sentences

Total revenue

The following table disaggregates the Company’s revenue by customer type and geographic area for the six months ended June 30, 2022:

United States

Distributors/

Strategic Partners

Product sales:

United States

All other countries

Total product revenue

Grant and other income:

United States

Total revenue

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

United States

Distributors/

Strategic Partners

Product sales:

United States

All other countries

Total product revenue

Grant and other income:

United States

Total revenue

The Company has two primary revenue streams:

4 unchanged sentences

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

However, in April 2020, the Company was granted 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”).

However, in April 2020, the Company was granted EUA of CytoSorb for use in critically-ill patients infected with COVID-19 with imminent or confirmed respiratory failure by 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.

9 unchanged sentences

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

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

Certain distributors are eligible for volume discount pricing if their unit sales are in excess of the base amount in the contract.

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

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

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

Government Grants

15 unchanged sentences

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

March 31, 2022

June 30, 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, 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.

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 $ 35,162 and $ 303,824 as of June 30, 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 $ 2,076,148 and $ 1,947,353 at June 30, 2022 and December 31, 2021, respectively.

LONG-TERM DEBT, NET

7 unchanged sentences

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

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).

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 and entered into the Fourth Amendment Success Fee Letter (the “2022 Success Fee Letter”).

The Fourth Amendment provides a tranche of term loans (the “Term” 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 %.

26 unchanged sentences

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.

This liability is included in accrued expenses and other current liabilities in the consolidated balance sheets as of December 31, 2021 and June 30, 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.

The audit is on-going and is expected to be completed in 2022, subject to the availability of the German tax authorities.

Employment Agreements

17 unchanged sentences

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

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

For the three months ended June 30, 2022 and 2021, the Company recorded royalty expenses of approximately $ 208,000 and $ 339,000 , respectively.

For the six months ended June 30, 2022 and 2021, the Company recorded royalty expenses of approximately $ 440,000 and $ 640,000 , respectively.

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

2 unchanged sentences

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

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

For the three months ended June 30, 2022 and 2021 pursuant to the terms of the license agreement, the Company recorded licensing expenses of approximately $ 347,000 and $ 564,000 , respectively.

For the six months ended June 30, 2022 and 2021 pursuant to the terms of the license agreement, the Company recorded licensing expenses of approximately $ 734,000 and $ 1,066,000 , respectively.

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

16 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 for the difference between the rent expense recognized and the required payments under the lease.

In addition, due to the six months of rent abatement and annual base rent escalations during the remaining lease term that commenced on September 30, 2021, the Company will recognize rent expense on this lease on a 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.

2 unchanged sentences

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

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

Under the terms of this amendment, the Company vacated 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.

13 unchanged sentences

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

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

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

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

11 unchanged sentences

Lease liability, net of current portion

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

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

Total lease payments

Present value discount

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.

( 12,768,880 )

For the three months ended June 30, 2022 and 2021, operating cash flows paid in connection with operating leases amounted to approximately $ 685,000 and $ 430,000 , and $ 1,398,000 and $ 661,000 for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022 and December 31, 2021, the weighted average remaining lease term was 13.1 years and 14.3 years, respectively.

NET LOSS PER SHARE

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.

Basic loss per share and diluted loss per share for the three months ended June 30, 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 8,630,000 and 9,905,000 incremental shares at June 30, 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 .

On August 1, 2022, the Company entered into a Marketing Agreement (the “Marketing Agreement”) with Fresenius Medical Care Deutschland GmbH (“Fresenius”), which expands the Company’s strategic partnership with Fresenius by establishing a multi-stage global collaboration to combat life-threatening diseases in critical care.

The Marketing Agreement provides for the combined marketing and promotion of CytoSorb with Fresenius’ critical care products by Fresenius’ marketing organization worldwide, excluding the United States.

The Marketing Agreement has an initial term of three years, with an automatic renewal for an additional two years at the end of such initial term, subject to earlier termination by either of the parties (the “Term”).

Compared to the prior co-marketing agreement between the parties, the Marketing Agreement intends to increase the commitments from both parties and to ensure an ongoing and consistent level of marketing and promotional activity specifically focused around CytoSorb, where Fresenius will actively market and promote CytoSorb as the featured blood purification therapy for removal of cytokines, bilirubin, and myoglobin on its critical care platforms.

Specifically, the Marketing Agreement provides that various Fresenius-led in-person, virtual, social media, and web-based marketing programs and events will feature the CytoSorb therapy and highlight the cooperation between the two companies in the field of critical care during the Term.

In addition to strengthening and expanding the global marketing of CytoSorb, the Company and Fresenius also plan to work together to bring new innovative solutions to the market.

The Marketing Agreement also includes the certification of compatibility between CytoSorb and Fresenius’ current critical care platforms.

To help support the increased marketing and promotional efforts of the expanded collaboration, the Company has agreed to subsidize a portion of the marketing costs through royalty payments to Fresenius.

Initially, the Marketing Agreement provides for royalty payments equal to 0.9 % of the Company’s net sales of CytoSorb products made during the Term (excluding net sales in the United States).

This initial royalty rate was determined based on certain assumptions regarding the percentage of the Company’s sale of CytoSorb products that are used with the Fresenius critical care platforms in the intensive care unit outside of the United States, but is subject to adjustment if the Company determines that the underlying assumptions have changed significantly.

The foregoing summary of the Marketing Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Marketing Agreement, a copy of which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ending September 30, 2022.

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