What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-02 · 147 added, 89 removed, 576 unchanged (29% 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 $ 81,971 as of June 30, 2022 and $ 60,539 at December 31, 2021

Grants and accounts receivable, net of allowance for doubtful accounts of $ 66,634 as of September 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;

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

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

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

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

43,634,845 and 43,478,487 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

8 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

CytoSorb sales

14 unchanged sentences

Interest income (expense), net

Gain (loss) on foreign currency transactions

Loss on foreign currency transactions

( 3,230,315 )

1 unchanged sentence

( 6,966,613 )

( 2,084,425 )

Miscellaneous income (expense)

Total other income (expense), net

Total other expense

( 3,183,499 )

1 unchanged sentence

( 6,880,933 )

( 2,068,712 )

Loss before benefit from income taxes

25 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

For the three and nine months ended September 30, 2022 and 2021 (Unaudited)

Comprehensive

1 unchanged sentence

Income (Loss)

Balance at March 31, 2022

Balance at June 30, 2022

( 241,030,915 )

6 unchanged sentences

( 12,200,837 )

Balance at June 30, 2022

Balance at September 30, 2022

( 253,231,752 )

9 unchanged sentences

( 32,046,457 )

Balance at June 30, 2022

Balance at September 30, 2022

( 253,231,752 )

2 unchanged sentences

Income (Loss)

Balance at March 31, 2021

Balance at June 30, 2021

( 205,471,998 )

7 unchanged sentences

( 6,406,285 )

Balance at June 30, 2021

Balance at September 30, 2021

( 211,878,283 )

10 unchanged sentences

( 15,251,636 )

Balance at June 30, 2021

Balance at September 30, 2021

( 211,878,283 )

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

September 30,

Cash flows from operating activities:

6 unchanged sentences

Impairment of patents

Bad debt expense (recovery)

Bad debt expense

Stock-based compensation

36 unchanged sentences

Notes to Consolidated Financial Statements

June 30, 2022

September 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 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.

The results for the three and nine months ended September 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 September 30, 2022, the Company’s cash and cash equivalents balances were approximately $22.6 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.

20 unchanged sentences

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

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

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

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

5 unchanged sentences

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

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

The DrugSorb-ATR Antithrombotic Removal System is based on the same polymer technology as CytoSorb.

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.

5 unchanged sentences

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.

The DrugSorb-ATR Antithrombotic Removal System is based on the same polymer technology as CytoSorb.

In August 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.

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 of CytoSorb for usage on Fresenius’ current critical care platforms.

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

14 unchanged sentences

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.

Foreign currency transaction loss included in net loss amounted to approximately $ 3,230,000 and $ 1,013,000 for the three months ended September 30, 2022 and 2021, respectively.

Foreign currency transaction loss included in net loss amounted to approximately $ 6,967,000 and $ 2,084,000 for the nine months ended September 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.

4 unchanged sentences

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

June 30, 2022

September 30, 2022

December 31, 2021

11 unchanged sentences

Management reviews accounts receivable periodically to determine collectability.

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

The allowance for doubtful accounts amounted to approximately $ 82,000 and $ 61,000 at June 30, 2022 and December 31, 2021, respectively.

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 September 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 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;

As of September 30, 2022 and December 31, 2021, the Company’s inventory was comprised of finished goods, which amounted to $ 2,075,570 and $ 3,084,606 , respectively;

work in process which amounted to $ 818,909 and $ 1,322,736 , respectively;

2 unchanged sentences

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

In September 2022, the Company experienced an equipment failure of a refrigeration unit at its new College Road manufacturing facility.

This equipment stored various items of work-in-process inventory.

The Company determined all the items that were stored in this unit were required to be scrapped.

The value of this inventory was approximately $ 599,000 .

Accordingly, this inventory was written-off and is included in cost of goods sold in the accompanying consolidated statements of operations and comprehensive loss in the three and nine months ended September 30, 2022.

The Company has filed a claim with its insurance carrier related to this loss.

The claim is currently under review by the insurance company.

The claim has not yet been approved nor has a reimbursement amount been determined.

Accordingly, in the third quarter of 2022, the Company has not recorded any provision for insurance reimbursement.

The Company expects to record the insurance reimbursement at the time that the amount to be reimbursed is determined and approved by the insurance carrier.

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 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.

There were no charges for impairments during the three months ended September 30, 2022.

During the nine months ended September 30, 2022, the Company recorded an impairment charge of approximately $ 431,000 related to certain patent costs.

There were no impairment charges during either of the three and nine months ended September 30, 2021.

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

14 unchanged sentences

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.

Advertising expenses amounted to approximately $ 143,000 and $ 151,000 for the three months ended September 30, 2022 and 2021, respectively, and approximately $ 358,000 and $ 455,000 for the nine months ended September 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 June 30, 2022 or December 31, 2021.

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

The Company files tax returns in the U.S.

12 unchanged sentences

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

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

Substantially all of the Company’s grant income is from government agencies in the United States.

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

As of June 30, 2022, one distributor accounted for approximately 20 % of outstanding grants and accounts receivable.

As of September 30, 2022, two distributors accounted for approximately 39 % 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 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.

For the three

months ended September 30, 2022, one distributor accounted for approximately 16 % of the Company’s total revenue and for the nine months ended September 30, 2022, no distributor or direct customer accounted for more than 10 % of total revenue.

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

Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities approximate their fair values due to their short-term nature.

The carrying values of cash and cash equivalents, grants and accounts receivable, accounts payable and accrued expenses and other current liabilities approximate their fair values due to their short-term nature.

Net Loss Per Common Share

10 unchanged sentences

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

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.

Total freight costs amounted to approximately $ 79,000 and $ 56,000 , respectively, for the three months ended September 30, 2022 and 2021, and $ 166,000 and $ 196,000 , respectively, for the nine months ended September 30, 2022 and 2021.

Effect of Recent Accounting Pronouncements

2 unchanged sentences

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.

The Company intends to implement the provisions of ASU 2021-10 during 2022 and does not believe this ASU will have a material impact on the Company’s financial statements.

STOCKHOLDERS’ EQUITY

13 unchanged sentences

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.

In addition, during the year ended December 31, 2021 and during the nine months ended September 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 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.

Total share-based employee, director, and consultant compensation amounted to approximately $ 1,005,000 and $ 2,554,000 for the three and nine months ended September 30, 2022, respectively, and $ 999,000 and $ 3,224,000 for the three and nine months ended September 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:

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

Exercise Price

1 unchanged sentence

( 1,221,475 )

Outstanding, June 30, 2022

Outstanding, September 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 $ 1.39 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 ( 64.7 %), expected dividends ( 0 %) on the stock and the risk free interest rate (ranging from 1.52 % to 3.91 %) 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.

The intrinsic value is calculated as the difference between the market value of the shares as of September 30, 2022 of $ 1.36 and the exercise price of the shares.

Options Outstanding

Outstanding at

September 30,

$ 1.39 - $ 13.20

1 unchanged sentence

Exercisable at

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

September 30,

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

Non-vested, December 31, 2021

( 1,221,475 )

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 .

Non-vested, September 30, 2022

As of September 30, 2022, the Company had approximately $ 5,471,000 of total unrecognized compensation cost related to stock options which will be amortized over approximately 46 months .

Awards of Stock Options:

On August 10, 2022, the Board of Directors granted options to purchase 1,163,800 shares of common stock to the Company’s employees which will be awarded based upon each employee’s 2022 individual performance evaluation.

Once awarded, these options will vest one quarter on February 15, 2023, one quarter on February 15, 2024, one quarter on February 15, 2025 and one quarter on February 15, 2026.

The grant date fair value of these unvested options amounted to approximately $ 1,381,000 .

During the three and nine months ended September 30, 2022, the Company recorded approximately $ 65,000 of stock option expense related to these options.

On August 10, 2022, the Board of Directors granted options to purchase 772,905 shares of common stock to the Company’s employees.

These options will vest one eighth on the six-month anniversary of the grant date, one eighth on the first anniversary of the grant date, one quarter on second anniversary of the grant date, one quarter on third anniversary of the grant date and one quarter on fourth anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 917,000 .

During the three and nine months ended September 30, 2022, the Company recorded approximately $ 32,000 of stock option expense related to these options.

On August 10, 2022, the Board of Directors granted options to purchase 113,850 shares of common stock to members of the Company’s Board of Directors.

These options will vest one quarter on the grant date, one quarter on September 30, 2022, one quarter on 12/31/2022, and one quarter on 3/31/2023.

The grant date fair value of these unvested options amounted to approximately $ 135,000 .

During the three and nine months ended September 30, 2022, the Company recorded approximately $ 68,000 of stock option expense related to these options.

On August 10, 2022, the Board of Directors granted options to purchase 1,163,800 shares of common stock to certain senior managers of the Company.

These options will vest one quarter on the grant date, one quarter on the first anniversary of the grant date, one quarter on second anniversary of the grant date, one quarter on third anniversary of the grant date.

The grant date fair value of these unvested

options amounted to approximately $ 562,000 .

During the three and nine months ended September 30, 2022, the Company recorded approximately $ 132,000 of stock option expense related to these options.

On August 10, 2022, the Board of Directors granted options to purchase 1,365,000 shares of common stock to certain senior managers of the Company which will only vest upon the achievement of certain specific, predetermined milestones related to the Company’s long-term performance goals.

The grant date fair value of these unvested options amounted to approximately $ 1,620,000 .

As of September 30, 2022, none of these milestones has been met.

Accordingly, no charge for these options has been recorded in the consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022.

Change in Control-Based Awards of Restricted Stock Units:

5 unchanged sentences

December 31, 2021

June 30, 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 and six months ended June 30, 2022 and 2021.

September 30, 2022

Other Awards of Restricted Stock Units:

1 unchanged sentence

These awards were valued at approximately $ 179,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and 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.

For the three and nine months ended September 30, 2022 and 2021, the Company recorded expense 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 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.

For the three and nine months ended September 30, 2022 and 2021, the Company recorded expense of approximately $ 0 and $ 54,000 , and $ 0 and $ 259,000 , 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 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.

For the three and nine months ended September 30, 2022 and 2021, the Company recorded (income) expense of approximately $ 0 and $ 84,000 , and $( 65,000 ) and $ 443,000 , 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 $ 2,220,000 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.

For the three and nine months ended September 30, 2022 and 2021, the

Company recorded expense of approximately $ 177,000 and $ 177,000 , and $ 50,000 and $ 1,030,000 , respectively, related to these restricted stock unit awards.

On August 10, 2022, certain named executive officers and senior managers were granted 288,500 restricted stock units.

These awards were valued at approximately $ 563,000 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 nine months ended September 30, 2022 and 2021, the Company recorded expense of approximately $ 214,000 and $ 0 , and $ 214,000 and $ 0 , 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.

3 unchanged sentences

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 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:

For the three and nine months ended September 30, 2022 and 2021, the Company recorded (income) expense of approximately $ 0 and $ 45,000 , and $( 34,000 ) 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, 2022:

Non-vested, December 31, 2021

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:

Non-vested, September 30, 2022

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

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:

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

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

United States

14 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 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.

However, in April 2020, the Company was granted U.S.

FDA Emergency Use Authorization (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, Norway and the United Kingdom.

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

28 unchanged sentences

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

June 30, 2022

September 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 $ 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.

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 $ 78,466 and $ 303,824 as of September 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 $ 1,644,080 and $ 1,947,353 at September 30, 2022 and December 31, 2021, respectively.

LONG-TERM DEBT, NET

9 unchanged sentences

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 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 Fourth Amendment, together with the Amended Loan and Security Agreement, provides for a period of interest only payments on the Term C Loans 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.

The maturity date of the Term C Loans 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).

17 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 sheets as of December 31, 2021 and June 30, 2022.

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

12 unchanged sentences

The agreements also provide for certain benefits in the event of a “Change of Control” of the Company, as defined in each agreement.

On September 30, 2022, Ms.

Bloch notified the Company of her intention to retire effective March 31, 2023.

A search has been initiated for Ms.

Bloch’s replacement.

Bloch and the Company expect to enter into a consulting arrangement under which Ms.

Bloch will continue to provide services to the Company in a limited capacity following the effective date of her retirement.

The Company is, from time to time, subject to claims and litigation arising in the ordinary course of business.

1 unchanged sentence

The Company is not currently a party to any legal proceedings.

Royalty Agreement

Royalty Agreements

Pursuant to an agreement dated August 11, 2003, an existing investor agreed to make a $ 4 million equity investment in the Company.

1 unchanged sentence

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

For the three months ended June 30, 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.

For the three months ended September 30, 2022 and 2021, the Company recorded royalty expenses of approximately $ 187,000 and $ 265,000 , respectively.

For the nine months ended September 30, 2022 and 2021, the Company recorded royalty expenses of approximately $ 627,000 and $ 904,000 , respectively.

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

On August 1, 2022, the Company entered into the Marketing Agreement with 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 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”) 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.

For the three and nine months ended September 30, 2022, the Company recorded royalty expenses of approximately $ 48,000 .

This expense is included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss.

License Agreement

1 unchanged sentence

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

For the three months ended June 30, 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.

For the three months ended September 30, 2022 and 2021 pursuant to the terms of the license agreement, the Company recorded licensing expenses of

approximately $ 312,000 and $ 441,000 , respectively.

For the nine months ended September 30, 2022 and 2021, pursuant to the terms of the license agreement, the Company recorded licensing expenses of approximately $ 1,046,000 and $ 1,507,000 , respectively.

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

14 unchanged sentences

In April 2021, the Company provided the landlord with a letter of credit in the amount of approximately $ 1,334,000 as security.

The Company has determined that this lease should be treated as an operating lease in accordance with the provisions of ASC 842.

The Company has determined that this lease should be treated as an operating lease in accordance with the provisions of Accounting Standards Codification (“ASC”) 842.

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 %.

30 unchanged sentences

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

September 30,

Right-of-use asset

2 unchanged sentences

Lease liability, net of current portion

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

The maturities of the lease liabilities are as follows during the years ended September 30th:

Total lease payments

1 unchanged sentence

( 12,439,250 )

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.

For the three months ended September 30, 2022 and 2021, operating cash flows paid in connection with operating leases amounted to approximately $ 659,000 and $ 593,000 , and $ 2,057,000 and $ 1,248,000 for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022 and December 31, 2021, the weighted average remaining lease term was 12.8 years and 14.3 years, respectively.

NET LOSS PER SHARE

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 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.

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.

Basic loss per share and diluted loss per share for the three months ended September 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 11,428,000 and 9,891,000 incremental shares at September 30, 2022 and 2021, respectively, have been excluded from the computation of diluted loss per share as they are anti-dilutive.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements