What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-03-09 compared with 2022-03-10 · 243 added, 225 removed, 850 unchanged (36% of the section changed)

15 unchanged sentences

Information required to be disclosed by this Item about our board of directors is incorporated in this Annual Report on Form 10-K by reference from the section entitled “Nomination and Election of Directors” contained in our definitive proxy statement for our 2023 annual meeting of stockholders scheduled to be held on June 6, 2023, which we intend to file within 120 days of the end of our fiscal year.

Information required to be disclosed by this Item about the Section 16(a) compliance of our directors and executive officers is incorporated in this Annual Report on Form 10-K by reference from the section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” contained in our definitive proxy statement for our 2022 annual meeting of stockholders scheduled to be held on June 7, 2022, which we intend to file within 120 days of the end of our fiscal year.

To the extent required, information required to be disclosed by this Item about the Section 16(a) compliance of our directors and executive officers is incorporated in this Annual Report on Form 10-K by reference from the section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” contained in our definitive proxy statement for our 2023 annual meeting of stockholders scheduled to be held on June 6, 2023, which we intend to file within 120 days of the end of our fiscal year.

Information required to be disclosed by this Item about our board of directors, the audit committee of our board of directors, our audit committee financial expert, our Code of Business Conduct and Ethics, and other corporate governance matters is incorporated in this Annual Report on Form 10-K by reference from the section entitled “Board of Directors and Corporate Governance Matters” contained in our definitive proxy statement for our 2023 annual meeting of stockholders scheduled to be held on June 6, 2023, which we intend to file within 120 days of the end of our fiscal year.

15 unchanged sentences

The following consolidated financial statements and reports of independent registered public accounting firm are included herein:

Reports of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

8 unchanged sentences

Amended and Restated Bylaws of CytoSorbents Corporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on April 8, 2021).

Description of Capital Stock of CytoSorbents Corporation.

Description of Capital Stock of CytoSorbents Corporation (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K filed on March 10, 2022).

Amended and Restated Employment Agreement, dated as of July 30, 2019, by and between CytoSorbents Medical, Inc.

8 unchanged sentences

Robert Bartlett Effective as of January 1, 2015 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 9, 2016).

Separation Agreement and Release, dated December 9, 2019, by and between CytoSorbents Corporation and Dr.

Eric Mortensen incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 12, 2019).

Lease Agreement between Princeton Corporate Plaza LLC and the Registrant dated as of March 9, 2000 (incorporated by reference to Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K filed on March 31, 2015).

4 unchanged sentences

Royalty Agreement between Guillermina Vega Montiel and the Registrant dated as of August 11, 2003 (incorporated by reference to Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K filed on March 31, 2015).

Assignment and Assumption of Certain Royalty Rights, dated as of November 22, 2022, by and among Robert Shipley Living Trust, ROKK, LLC, and CytoSorbents Medical, Inc.

Stipulated Order and Settlement Agreement between Bro-Tech Corporation, Purolite International Ltd.

5 unchanged sentences

1 to the CytoSorbents Corporation 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s registration statement on Form S-8, filed on November 4, 2014).

Amendment No.

1 to the CytoSorbents Corporation 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s registration statement on Form S-8, filed on November 4, 2014).

Amended and Restated CytoSorbents Corporation 2014 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-8, filed with the SEC on August 26, 2019).

7 unchanged sentences

and Western Alliance Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 20, 2022).

Fifth Amendment to the Amended and Restated Loan and Security Agreement, dated as of December 28, 2022, by and among CytoSorbents Corporation, CytoSorbents Medical, Inc.

and Western Alliance Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 29, 2022).

Success Fee Letter, dated as of March 29, 2018, by and among CytoSorbents Corporation, CytoSorbents Medical, Inc.

6 unchanged sentences

Open Market Sale AgreementSM, dated as of December 30, 2021, by and between CytoSorbents Corporation and Jefferies LLC (incorporated by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 30, 2021).

Marketing Agreement, dated as of August 1, 2022, by and between CytoSorbents Corporation and Fresenius Medical Care Deutschland GmbH (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 3, 2022).

Lease, dated as of March 26, 2021, by and between 300 CR LLC and CytoSorbents Medical, Inc.

(incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 31, 2021).

Sixth Amendment to the Amended and Restated Loan and Security Agreement, dated as of March 8, 2023, by and among CytoSorbents Corporation, CytoSorbents Medical, Inc.

and Western Alliance Bank.

List of Subsidiaries.

61 unchanged sentences

Opinion on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Cytosorbents Corporation (the "Company") as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "consolidated financial statements").

We have audited the accompanying consolidated balance sheets of Cytosorbents Corporation (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

4 unchanged sentences

Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

8 unchanged sentences

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

An entity’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

An entity’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and directors of the entity;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

1 unchanged sentence

Critical Audit Matter

The critical audit matters communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Stock Based Compensation

Description of the Matter

As discussed in Notes 2 and 11 of the consolidated financial statements, the Company grants stock-based awards including stock options, restricted stock units and performance-based stock awards to their employees as compensation for their service.

The Company recorded approximately $4,020,000 in stock-based compensation expense during the year ended December 31, 2021.

Certain awards include performance conditions that only vest if those conditions are met, and the quantity of awards received can range based on the level performance achieved.

In 2021, the Company had 1,323,4000 of such awards outstanding, and recorded stock-based compensation expense related to these performance awards of approximately $273,000.

The Company recorded approximately $3,424,000 of stock-based compensation expense during the year ended December 31, 2022.

Certain awards include performance conditions that only vest if those conditions are met, and the quantity of awards received can range based on the level of performance achieved.

In 2022, the Company granted 2,528,800 of such awards and recorded stock-based compensation expense related to these performance awards of approximately $180,440.

Auditing the Company’s accounting for stock-based compensation required complex auditor judgment due to the number and the variety of the types of equity awards, the subjectivity of assumptions used to value stock-based awards and the frequent use of performance-based vesting conditions.

2 unchanged sentences

Addressing the matter involved obtaining an understanding, evaluating the design and testing the operating effectiveness of controls over the Company’s process for determining stock-based compensation expense, including testing management’s review controls over the underlying calculations, the significant assumptions used in valuing certain awards, identification of the terms of the performance conditions and the key inputs used in determining the outcome of each performance condition.

We assessed the appropriateness of judgments made by management in determining key assumptions related to the awards, such as service inception date based on the annual performance conditions.

We assessed the appropriateness of judgments made by management in determining key assumptions related to the awards.

We tested the accuracy of the data used in measuring the awards by agreeing the underlying inputs, such as grant date, grant price, performance targets and vesting terms, among others, back to source documents, such as compensation meeting minutes or award letters.

Additionally, we tested the related valuation report on volatility prepared by its specialists by involving our internal valuation specialists to assess the valuation methodologies and assumptions used.

We determined whether performance targets were satisfied in accordance with the contractual conditions, and recalculated grant date fair value by multiplying the awarded quantity of awards by the grant price.

We also evaluated the adequacy of the Company’s stock-based compensation disclosures included in Notes 2 and 11 in relation to these matters.

/s/ WithumSmith+Brown, PC

Additionally, we tested the related valuation report on volatility prepared by the Company’s specialists by involving our internal valuation specialists to assess the valuation methodologies and assumptions used.

We determined whether performance targets were satisfied in accordance with the contractual conditions through review of source documents, press releases, and board minutes and recalculated grant date fair value by multiplying the awarded quantity of awards by the grant price.

We also evaluated the adequacy of the Company’s stock-based compensation disclosures included in Notes 2 and 11 in relation to this matter.

We have served as the Company’s auditor since 2004.

/s/ WithumSmith+Brown, PC

East Brunswick, New Jersey

18 unchanged sentences

Lease liability, net of current portion

Long-term debt

Total Liabilities

6 unchanged sentences

Additional paid-in capital

Accumulated other comprehensive income (loss)

( 1,734,078 )

Accumulated other comprehensive income

Accumulated deficit

22 unchanged sentences

( 1,201,067 )

( 1,033,661 )

Gain (loss) on foreign currency transactions

( 2,448,583 )

( 2,577,913 )

Miscellaneous expense

Total other income (expense), net

6 unchanged sentences

Benefit from income taxes

Net loss attributable to common shareholders

Net loss attributable to common stockholders

( 32,812,583 )

8 unchanged sentences

Other comprehensive income (loss):

Currency translation adjustment

Foreign currency translation adjustment

( 2,260,056 )

16 unchanged sentences

Issuance of restricted stock options

Proceeds from exercise of warrants

Cashless exercise of warrants

Proceeds from exercise of stock options

Cashless exercise of stock options

Other comprehensive income, foreign translation adjustment

Other comprehensive income, foreign currency translation adjustment

( 2,260,056 )

( 7,837,188 )

Balance at December 31, 2020

( 1,734,078 )

( 196,626,647 )

Stock-based compensation - employees, consultants and directors

3 unchanged sentences

Cashless exercise of stock options

Other comprehensive income, foreign translation adjustment

( 2,260,056 )

Other comprehensive income, foreign currency translation adjustment

( 24,558,648 )

2 unchanged sentences

( 221,185,295 )

( 196,626,647 )

Stock-based compensation - employees, consultants and directors

Issuance of common stock - offerings, net of fees incurred

Legal/audit fees related to ATM offering

Issuance of restricted stock options

Proceeds from exercise of stock options

Cashless exercise of stock options

Other comprehensive loss, foreign translation adjustment

Other comprehensive loss, foreign currency translation adjustment

Stock issued to vendor in lieu of cash payment

( 32,812,583 )

9 unchanged sentences

( 7,837,188 )

Adjustments to reconcile net loss to net cash used by operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Non-cash compensation

2 unchanged sentences

Bad debt expense (recovery)

Loss on disposal of fixed assets

Impairment of patents

Foreign currency transaction (gains) losses

9 unchanged sentences

Accounts payable and accrued expenses

Net cash used by operating activities

( 3,248,978 )

Net cash used in operating activities

( 28,234,282 )

( 14,005,599 )

( 5,613,286 )

Cash flows from investing activities:

1 unchanged sentence

( 6,087,365 )

Net cash used by investing activities

( 3,641,248 )

Net cash used in investing activities

( 6,455,576 )

( 4,281,261 )

( 1,676,218 )

Cash flows from financing activities:

9 unchanged sentences

Effect of exchange rates on cash

Net change in cash and cash equivalents

Net change in cash, cash equivalents and restricted cash

( 29,993,140 )

( 17,596,435 )

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Cash, cash equivalents and restricted cash at beginning of year

Cash, cash equivalents and restricted cash at end of year

Supplemental disclosure of cash flow information:

1 unchanged sentence

Supplemental disclosure of non-cash financing activities:

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

2 unchanged sentences

Notes to Consolidated Financial Statements

December 31, 2022

BASIS OF PRESENTATION:

The accompanying consolidated financial statements include the results of CytoSorbents Corporation (the “Parent”), CytoSorbents Medical Inc., its wholly owned operating subsidiary (the “Subsidiary”), and CytoSorbents Europe GmbH, its wholly owned European subsidiary (the “European Subsidiary”).

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

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

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

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

These entities are collectively referred to as the “Company”.

In years prior to December 31, 2020, the Company’s consolidated financial statements were prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

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

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

As of December 31, 2021, the Company’s cash, cash equivalents and restricted cash balances were approximately $ 53.8 million, which the Company expects will fund the Company’s operations well beyond twelve months from the issuance of these financial statements.

As of December 31, 2022, the Company’s cash, cash equivalents and restricted cash balances were approximately $ 23.8 million, which the Company expects will fund the Company’s operations beyond twelve months from the issuance of these consolidated financial statements.

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.

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

In 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.

In October 2022, the Company formed CytoSorbents France SAS to provide marketing and direct sales services in France.

CytoSorb, the Company’s flagship product, was approved in the European Union (“EU”) in March 2011 and is currently being marketed and distributed in more than 75 countries around the world, as an effective extracorporeal cytokine absorber, designed to reduce the “cytokine storm” or “cytokine release syndrome” seen in critical illnesses that may result in massive inflammation, organ failure, and patient death.

In May 2018, the Company received a label extension for CytoSorb covering use of the device for the removal of bilirubin and myoglobin which allows for the use of the device in the treatment of liver failure and trauma, respectively.

9 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.

2 unchanged sentences

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.

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.

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.

To help support the increased marketing and promotional efforts of the expanded collaboration, CytoSorbents has agreed to subsidize a portion of the marketing costs through a royalty payment to Fresenius Medical Care based on CytoSorb sales in the intensive care unit on Fresenius Medical Care platforms, excluding the United States.

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.

Certain initial activities have been completed with the formal launch of this program expected to occur sometime in 2023.

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.

10 unchanged sentences

and CytoSorbents Europe GmbH.

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

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

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

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

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

14 unchanged sentences

Grants receivable represent amounts due from U.S.

government agencies and are included in Grants and Accounts Receivable.

government agencies and are included in grants and accounts Receivable in the accompanying consolidated balance sheets.

Accounts receivable are unsecured, non-interest-bearing customer obligations due under normal trade terms.

7 unchanged sentences

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

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 was included in cost of goods sold at the time of the loss in September 2022.

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

In December 2022, the claim was approved in the amount of approximately $ 299,000 and, accordingly, has been recorded as a reduction to cost of goods sold in the accompanying consolidated statement of operations and comprehensive loss.

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 year ended December 31, 2022, the Company wrote-off patent costs of approximately $ 636,000 related to the impairment of certain issued patents and pending patent applications in certain specific jurisdictions, the abandonment of certain patent defense costs that are no longer being pursued and the abandonment of certain pending patent application costs in the ordinary course of business.

Revenue Recognition

3 unchanged sentences

Grant Revenue:

Revenue from grant income is based on contractual agreements.

Revenue from grant income is based on contractual agreements with various agencies of the U.S.

Certain agreements provide for reimbursement of costs, other agreements provide for reimbursement of costs and an overhead margin and certain agreements are performance based, where revenue is earned based upon the achievement of milestones outlined in the contract.

1 unchanged sentence

Costs are recorded as incurred.

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

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

3 unchanged sentences

Advertising costs are charged to activities when incurred.

Advertising expense amounted to approximately $ 615,000 , $ 285,000 and $ 314,000 in 2021, 2020 and 2019, respectively, and is included in selling, general, and administrative expenses on the consolidated statements of operations and comprehensive loss.

Advertising expense amounted to approximately $ 582,000 , $ 615,000 and $ 285,000 in 2022, 2021 and 2020, respectively, and is included in selling, general, and administrative expenses in the consolidated statements of operations and comprehensive loss.

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

4 unchanged sentences

Additionally, net operating losses generated subsequent to the reverse merger may be limited in the event of changes in ownership.

The Tax Cuts and Jobs Act reduced the U.S.

In 2017, the Tax Cuts and Jobs Act reduced the U.S.

federal corporate tax rate from 35 % to 21 %.

1 unchanged sentence

The Company follows the accounting standards associated with uncertain tax provisions.

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

The Company had no unrecognized tax benefits as of December 31, 2022 or 2021.

The Company files tax returns in the U.S.

2 unchanged sentences

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

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

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

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities.

Actual results could differ from these estimates.

The valuation of options granted is a significant estimate in these consolidated financial statements.

The valuation of options granted, allowance for doubtful accounts and recoverability of patents are significant estimates in these consolidated financial statements.

Concentration of Credit Risk

4 unchanged sentences

(See Note 3 for further information relating to the Company’s revenue.)

As of December 31, 2022, two distributors accounted for approximately 27 % of outstanding grants and accounts receivables.

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

As of December 31, 2020, no agency, distributor/strategic partners or direct customer represented more than 10 % of outstanding grants

and accounts receivable.

For the years ended December 31, 2022, 2021 and 2020, no agency, distributor/strategic partners or direct customer represented more than 10 % of the Company’s total revenue.

19 unchanged sentences

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

The Company intends to implement the provisions of this ASU during the first quarter of 2022.

The Company implemented the provisions of this ASU during 2022.

In June 2016, the FASB, issued ASU No.

2016-13 entitled, “Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments”.

This ASU provides guidance on the calculation of credit losses, which includes the allowance for doubtful accounts on trade accounts receivable.

The updated guidance is effective for public entities for fiscal years beginning after December 15, 2022.

The Company is evaluating the impact of the updated guidance but does not believe that this will have a significant impact on its financial statements.

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

6 unchanged sentences

Total product revenue

Grant and other income:

Grant income:

United States

8 unchanged sentences

Total product revenue

Grant and other income:

Grant income:

United States

8 unchanged sentences

Total product revenue

Grant and other income:

Grant income:

United States

6 unchanged sentences

The Company sells its CytoSorb device using both its own sales force (direct sales) and through the use of distributors and/or strategic partners.

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

sale in the United States.

However, in April 2020, the Company was granted Emergency Use Authorization (“EUA”) of CytoSorb for use in critically-ill patients infected with COVID-19 by the United States Food and Drug Administration (the “FDA”).

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

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

However, in April 2020, the Company was granted Emergency Use Authorization (“EUA”) of CytoSorb for use in critically-ill patients infected with COVID-19 by the FDA.

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

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

3 unchanged sentences

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

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

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

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

1 unchanged sentence

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

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

These contracts have terms ranging from 1 to 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.

2 unchanged sentences

Government Grants

The Company has been the recipient of various grant contracts from various agencies of the United States government, primarily the Department of Defense, to perform various research and development activities.

The Company has been the recipient of numerous grant contracts from various agencies of the U.S.

The purpose of these grant contracts is to perform various research and development activities.

The type of research required is outlined in each contract.

These contracts fall into one of the following categories:

6 unchanged sentences

The amount to be invoiced for each milestone is documented in the contract.

These government contracts have terms ranging from three months to four years.

The Company may apply for an extension of the term of the contract in order to complete its research and development activities but would not receive additional funding during the extension period in excess of the original contract.

See Note 2 regarding the accounting policies related to these contracts.

In summary, the contracts the Company has with customers are the distributor/strategic partner contracts related to CytoSorb product sales, agreements with direct customers related to free-of-charge product and credit rebates based upon achieving minimum purchase levels, and contracts with various government agencies related to the Company’s grants.

The Company does not currently incur any outside/third-party incremental costs to obtain any of these contracts.

The Company does incur internal costs, primarily salary related costs, to obtain the contracts related to the grants.

The Company does incur internal costs, primarily salary related costs, to obtain the contracts related to the government grants.

Company employees spend time reviewing the program requirements and developing the budget and related proposal to submit to the grantor agency.

4 unchanged sentences

December 31, 2021

Contract receivables, which are included in accounts receivable

Contract receivables, which are included in grants and accounts receivable

Contract liabilities, which are included in accrued expenses and other current liabilities

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 $ 303,824 and $ 286,301 at December 31, 2021 and 2020, respectively, and deferred grant revenue related to the billing on fixed price contracts in excess of costs incurred, which amounted to $ 1,947,353 and $ 728,351 at December 31, 2021 and 2020, respectively.

Contract receivables represent balances due from product sales to distributors amounting to $ 2,944,031 and $ 2,265,159 at December 31, 2022 and 2021, respectively, and billed and unbilled amounts due on government contracts amounting to $ 878,421 and $ 735,549 at December 31, 2022 and 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 $ 178,134 and $ 303,824 at December 31, 2022 and 2021, respectively, and deferred grant revenue related to the billing on fixed price government contracts in excess of costs incurred, which amounted to $ 1,516,772 and $ 1,947,343 at December 31, 2022 and 2021, respectively.

PROPERTY AND EQUIPMENT, NET:

15 unchanged sentences

Amortization expense amounted to $ 194,056 , $ 160,422 and $ 106,842 for the years ended December 31, 2022, 2021 and 2020, respectively.

Amortization expense for the next five years will be approximately $ 192,000 for the year ended December 31, 2022;

approximately $ 189,000 for the year ended December 31, 2023;

approximately $ 189,000 for the year ended December 31, 2024;

approximately $ 189,000 for the year ended December 31, 2025 and approximately $ 188,000 for the year ended December 31, 2026.

Amortization expense for the next five years will be approximately $ 201,000 for the year ending December 31, 2023;

approximately $ 201,000 for the year ending December 31, 2024;

approximately $ 201,000 for the year ending December 31, 2025;

approximately $ 200,000 for the year ending December 31, 2026 and approximately $ 196,000 for the year ending December 31, 2027.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:

4 unchanged sentences

Accrued accounts payable

Accrued royalties

Professional fees

Accrued royalties

Customer rebates

Sales, payroll and income taxes payable

Travel and entertainment

Board of Director fees

Sales, payroll and income taxes payable

LONG-TERM DEBT:

2 unchanged sentences

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

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

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

In connection with the execution of the First Amendment, the draw period for the Term B Loan was extended to August 15, 2019 and the Company drew down the full $ 5.0 million Term B Loan on the Settlement Date, bringing the total outstanding debt to $ 15 million at July 31, 2019.

3 unchanged sentences

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

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

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

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

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”).

On December 28, 2022 (the “Fifth Amendment Date”), the Company entered into the Fifth Amendment of its Amended Loan and Security Agreement with Bridge Bank.

The Fifth Amendment extends the draw period under the Fourth Amendment to the earlier of (i) March 1, 2023 and (ii) the occurrence of an Event of Default.

On March 9, 2023, the Company entered into the Sixth Amendment of its Amended Loan and Security Agreement.

The Sixth Amendment further extends the draw period to March 24, 2023.

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

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

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

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

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

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

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

On the Third Amendment Closing Date, the Company paid a non-refundable closing fee of $ 75,000 and the total unamortized loan costs related to the Term Loans amounted to approximately

These costs were amortized and written off as a charge to interest expense.

For the years ended December 31, 2021, 2020, and 2019, the Company recorded interest expense amounting to $ 75,000 , $ 76,718 and $ 33,175 , respectively related to these costs.

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

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

For the years ended December 31, 2021, 2020 and 2019 the Company recorded interest expense of $ 0 , $ 246,095 , and $ 82,031 , respectively, related to accrual and payment of the final fee.

On December 27, 2022, the Company drew down the first $ 5 million tranche of the Term C loans available under the terms of the Fourth Amendment.

Under the terms of the Fourth Amendment, commencing on February 1, 2023, the Company is required to make monthly payments of interest only through December 2023.

The interest-only period will be further extended through June 2024 provided the Company has met both the required reserves test and the seventy-five percent test, as set forth in the Fourth Amendment, as of November 30, 2023.

Commencing on January 1, 2024, if the Company does not meet both the required reserves test and the seventy-five percent test, the Company shall make equal monthly payments of principal of $ 208,333 , together with accrued and unpaid interest.

Commencing on July 1, 2024, if the Company meets both the required reserves test and the seventy-five percent test, the Company shall make equal monthly payments of principal of $ 277,778 , together with accrued and unpaid interest.

In either event, all unpaid principal and accrued and unpaid interest shall be due and payable in full on 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 was 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 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 Loans 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).

2018 Success Fee Letter:

Pursuant to the amended 2018 Letter, the Borrower shall pay to the Bank a success fee in the amount equal to 6.37 % of the funded amount of the Term B Loan (as defined in the Restated Loan and Security Agreement) (the "Success Fee”) upon the first occurrence of any of the following events:

Pursuant to the amended 2018 Letter, the Borrower shall pay to the Bank a success fee in the amount equal to 6.37 % of the funded amount of the Term B Loan (as defined in the Restated Loan and Security Agreement) (the “Success Fee”) upon the first occurrence of any of the following events:

(a) a sale or other disposition by the Borrower of all or substantially all of its assets;

(b) a merger or consolidation of the Borrower into or with another person or entity, where the holders of the Borrower’s outstanding voting equity securities as of immediately prior to such merger or consolidation hold less than a majority of the issued and outstanding voting equity securities of the successor or surviving person or entity as of immediately following the consummation of such merger or consolidation;

(c) a transaction or a series of related transactions in which any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding of the Borrower ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the Board of Directors of the Borrower, who did not have such power before such transaction;

(c) a transaction or a series of related transactions in which any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding of the Borrower ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the Board of Directors of the Borrower, who did not have such power before such transaction;

or (d) the closing price per share for the Company’s common stock on the Nasdaq Capital Market being the greater of (i) 70 % or more over $ 7.05 , the closing price of the Company’s common stock on March 29, 2018 (after giving effect to any stock splits or consolidations effected after the date thereof) for five successive business days, or (ii) at least 26.13 % more than the average price of Company’s common stock for the 365-day period ending on the date of the funding of the Term B Loan.

6 unchanged sentences

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

Paycheck Protection Program:

On April 13, 2020, the Company received approximately $ 1,411,000 in loan proceeds from the Paycheck Protection Program (the “PPP”) administered by the Small Business Administration (the “SBA”) of the United States government.

This program was established under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

On April 29, 2020, following a reassessment of the Company’s financial and operating position, including cash on hand and access to public capital markets, the Company repaid the PPP loan.

Long-term debt consists of the following as of December 31, 2022:

Principal amount

Less Current maturities

Long-term debt net of current maturities

Principal payments of long-term debt are due as follows during the years ending December 31:

The Company leases its operating facilities in both the United States and Germany under operating lease agreements.

2 unchanged sentences

The lease commenced on June 1, 2021.

The Early Term

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

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

The lease also contains two five-year renewal options;

8 unchanged sentences

In April 2021, the Company provided the landlord with a letter of credit in the amount of approximately $ 1,467,000 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 %.

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.

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

The Company’s base rent is approximately $ 35,000 per month.

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.

The Company will continue to lease the remaining space until December 31, 2022, at which time the Company will vacate the remaining space and the lease will terminate.

The Company’s base rent for the remaining space will be approximately $ 20,000 per month.

Monthly operating expenses will be approximately $ 11,000 per month.

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

The Company’s base rent was approximately $ 35,000 per month.

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

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

The Company continued to lease the remaining space until December 31, 2022, at which time the lease terminated and the Company vacated the space.

The Company’s base rent for the remaining space was approximately $ 20,000 per month.

Monthly operating expenses were approximately $ 11,000 per month.

In addition, the Company agreed to increase its security deposit by approximately $ 54,000 to a total of $ 150,000 .

At the end of the lease term, the entire security deposit will be paid to the landlord for the purpose of making any needed repairs to the vacated premises, and the Company will have no further obligation to pay for repairs to the vacated premises.

At the end of the lease term, the entire security deposit was paid to the landlord for the purpose of making any needed repairs to the vacated premises, and the Company has no further obligation to pay for repairs to the vacated premises.

Effective April 1, 2021, the Company adjusted its incremental borrowing rate to the incremental borrowing rate used in the College Road lease and recalculated the right of use asset and lease liability under the amended terms of this lease.

28 unchanged sentences

INCOME TAXES:

The Company accounts for income taxes under FASB ASC 740 ("ASC 740").

The Company accounts for income taxes under FASB ASC 740 (“ASC 740”).

Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

14 unchanged sentences

Foreign tax provision

As of December 31, 2021, the Company had federal net operating loss ("NOL") carryforwards of approximately $ 83.5 million, state NOL carry forwards of approximately $ 9.3 million, and foreign NOL carry forwards of approximately $ 29.9 million, which may be available to offset future taxable income, if any.

The Company has deemed any foreign earnings will be indefinitely reinvested.

Currently, foreign operations have resulted in an accumulated deficit.

The Company will continue to analyze their stance if their circumstances change in the future.

As of December 31, 2022, the Company had federal net operating loss (“NOL”) carryforwards of approximately $ 87.4 million, state NOL carry forwards of approximately $ 5.5 million, and foreign NOL carry forwards of approximately $ 42.7 million, which may be available to offset future taxable income, if any.

The federal NOL carryforwards of $ 47.8 million, if not utilized, will expire between 2022 and 2037.

1 unchanged sentence

The state NOL carryforwards of $ 5.5 million, if not utilized, will begin to expire in 2042.

As of December 31, 2021, the Company had Federal and state research and development tax credit carryforwards of approximately $ 2.7 million and $ 70,000 , respectively, available to reduce future tax liabilities, which will begin to expire at various dates starting in 2022.

As of December 31, 2022, the Company had Federal and state research and development tax credit carryforwards of approximately $ 3.7 million and $ 0.3 million, respectively, available to reduce future tax liabilities, which will begin to expire at various dates starting in 2023.

The NOL carry forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities.

3 unchanged sentences

Subsequent ownership changes may further affect the limitation in future years.

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act ("Tax Reform Legislation"), which made significant changes to U.S.

federal income tax law.

The Company expected that certain aspects of the Tax Reform Legislation will positively impact the Company’s future after-tax earnings in the U.S., primarily due to the lower federal statutory tax rate.

Set forth below is a discussion of certain provisions of the Tax Reform Legislation and a preliminary assessment of the effect of such provisions on the Company’s results of operations, cash flows and consolidated financial statements.

Beginning January 1, 2018, the Company’s U.S.

income, if any, is taxed at a 21 percent federal corporate rate.

Further, the Company is required to recognize the effect of this rate change on its deferred tax assets and liabilities, and deferred tax asset valuation allowances in the period the tax rate change is enacted.

The Company does not expect any material non-cash impact from this rate change, with adjustments to deferred tax balances offset by adjustments to deferred tax valuation allowances.

Further, the Tax Reform Legislation provides for a one-time “deemed repatriation” of accumulated foreign earnings for the year ended December 31, 2017.

The Company did not pay U.S.

federal cash taxes on the deemed repatriation due to an accumulated deficit in foreign earnings for tax purposes.

The Company does not expect that its future foreign earnings will be subject to U.S.

federal income tax.

The Global Intangible Low-Taxed Income ("GILTI") provisions of the Tax Reform Act, enacted on December 22, 2017, require the Company to include in its U.S.

income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets.

An accounting policy election is available to either account for the tax effects of GILTI in the period that is subject to such taxes or to provide deferred taxes for book and tax basis differences that upon reversal may be subject to such taxes.

The Company has elected to account for the tax effects of this provision in the period that is subject to such tax.

The Company concluded it was not subject to GILTI in 2019 and as such there was no impact from GILTI included in its 2019 provision.

The Company does not expect to be subject to GILTI.

However, in accordance with FASB guidance, the Company’s policy will be to recognize GILTI in the period it arises and it will not recognize a deferred charge with regard to GILTI.

In addition, the Tax Reform Legislation provides for 100 percent bonus depreciation on tangible property expenditures through 2022.

The bonus depreciation percentage is phased down from 100 percent beginning in 2023 through 2026.

We do not expect this to have a material impact to the Company.

We record tax benefits related to uncertain tax positions taken or expected to be taken on a tax return when such benefits meet a more likely than not threshold.

We recognize interest related to unrecognized tax benefits in interest expense and penalties in operating expenses.

Currently, the Company is not accounting for any uncertain tax positions.

Due to The Tax Cuts and Jobs Act of 2017 (TCJA) there was a change in the deductibility of research and experimental expenditures that took effect for taxable periods that begin after December 31, 2021.

Prior to January 1, 2022, the Company expensed research and experimental expenditures under §174(a) in the year that books recognized the expense.

The Company has adopted §174(b) for taxable years 2022 and beyond.

Domestic and foreign research and experimental expenditures will be capitalized and amortized over a period no less than 60 months and 180 months, respectively.

Sale of Net Operating Losses (NOLs)

9 unchanged sentences

Lease liability

§174(b) research and development

Gross deferred tax assets

4 unchanged sentences

Deferred tax liability:

Right of Use Asset

( 3,542,958 )

( 3,885,225 )

Net deferred tax assets

12 unchanged sentences

Change in valuation allowance

Sale of state R&D credit and NOL

Effective income tax rate

COMMITMENTS AND CONTINGENCIES:

Customs Examination

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

The audit commenced in early December 2020.

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

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

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

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

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

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

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

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

This assessment was paid by the Company in October 2021.

Payroll Tax Examination

1 unchanged sentence

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

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

Accordingly, the Company accrued approximately $ 598,000 as an estimate of this liability as of December 31, 2021.

In January 2023, the Company received an assessment from the German tax authorities for the payroll tax audit of approximately $ 90,000 .

In addition, it was determined that the Company would owe additional social security and VAT taxes related to this matter of approximately $ 83,000 .

Accordingly, the Company has adjusted its accrual related to this payroll tax audit to approximately $ 173,000 as of December 31, 2022.

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

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

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

The expense related this examination is included in selling, general and administrative expenses on the consolidated statements of operations and comprehensive loss.

Employment Agreements

4 unchanged sentences

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

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

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

These employment agreements have automatically renewed for an additional 1 year .

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

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

1 unchanged sentence

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.

4 unchanged sentences

These amounts were received by the Company in 2003.

In connection with this agreement the Company granted the investor a future royalty of 3 % on all gross revenues received by the Company from the sale of its CytoSorb device.

For the years ended December 31, 2021, 2020 and 2019, the Company recorded royalty expenses of approximately $ 1,193,000 , $ 1,172,000 , and $ 675,000 ,

respectively.

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 years ended December 31, 2022, 2021 and 2020, the Company recorded royalty expenses of approximately $ 849,000 , $ 1,193,000 , and $ 1,172,000 , 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 year ended December 31, 2022, the Company did not record any expense related to this agreement as Fresenius did not commence any marketing activities as defined by the agreement.

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 date of the agreement.

For the years ended December 31, 2021, 2020 and 2019 per the terms of the license agreement, the Company recorded licensing expenses of approximately $ 1,988,000 $ 1,954,000 and $ 1,125,000 , respectively.

For the years ended December 31, 2022, 2021 and 2020 per the terms of the license agreement, the Company recorded licensing expenses of

approximately $ 1,416,000 , $ 1,988,000 and $ 1,954,000 , respectively.

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

5 unchanged sentences

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

July 24, 2020 Offering

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

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

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

Shelf Registration

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

The 2018 Shelf, which was declared effective on August 7, 2018, enabled the Company to offer and sell, in one or more offerings, any combination of common stock, preferred stock, senior or subordinated debt securities, warrants and units, up to a total dollar amount of $ 150 million.

The 2018 Shelf terminated automatically upon the 2021 Shelf (as defined below) being declared effective on July 27, 2021.

On July 14, 2021, the Company filed a registration statement on Form S-3 with the SEC, which was amended on July 20, 2021 and declared effective by the SEC on July 27, 2021 (as amended, the “2021 Shelf”).

The 2021 Shelf enables the Company to offer and sell, in one or more offerings, any combination of common stock, preferred stock, senior or subordinated debt securities, warrants and units, up to a total dollar amount of $ 150 million.

Open Market Sale Agreement with Jefferies LLC and B.

Riley FBR, Inc.

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

Riley FBR, Inc.

(each an “Agent” and, together, the “Agents”), pursuant to which the Company could sell, from time to time, at its option, shares of the Company’s common stock having an aggregate offering price of up to $ 25 million through the Agents, as the Company’s sales agents.

All shares of the Company’s common stock offered and sold, or to be offered and sold under the Sale Agreement would have been issued and sold pursuant to the Company’s 2018 Shelf by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, in block transactions or if specified by the Company, in privately negotiated transactions.

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

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

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

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

During the year ended December 31, 2019, the Company sold 191,244 shares pursuant to the Amended Sale Agreement, at an average selling price of $ 4.11 per share, generating net proceeds of approximately $ 762,000 .

During the year ended December 31, 2020, the Company sold 4,110,625 shares pursuant to the Amended Sale Agreement, at an average selling price of $ 6.64 per share, generating net proceeds of approximately $ 26.5 million.

There were no sales pursuant to the Amended Sale Agreement during the year ended December 31, 2021.

In the aggregate, the Company has sold 4,301,869 shares pursuant to the Amended Sale Agreement, at an average selling price of $ 6.53 per share, generating net proceeds of approximately $ 27.2 million.

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

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

Open Market Sale Agreement with Jefferies LLC

3 unchanged sentences

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.

There were no sales pursuant to the Amended Sale Agreement during the years ended December 31, 2022 and 2021, respectively.

In addition, during the year ended December 31, 2021, the Company paid approximately $ 90,000 related to the Amended Sale Agreement.

6 unchanged sentences

The Compensation Committee is authorized to select from among eligible employees, directors, advisors and consultants those individuals to whom incentives are to be granted and to determine the number of shares to be subject to, and the terms and conditions of the options.

The Compensation Committee is also authorized to prescribe, amend and rescind terms relating to options granted under the Plans.

The Compensation Committee is also authorized to prescribe, amend and rescind terms relating to options granted under

Generally, the interpretation and construction of any provision of the Plans or any options granted hereunder is within the discretion of the Compensation Committee.

The 2014 Plan provides that options may or may not be Incentive Stock Options (“ISOs”) within the meaning of Section 422 of the Internal Revenue Code.

Only employees of the Company are eligible to receive ISOs, while employees and non-employee directors, advisors and consultants are eligible to receive options, which are not ISOs, i.e.

“Non-Qualified Options.” Because the Company has not obtained shareholder approval of the 2006 Plan, all options granted thereunder to date are “Non-Qualified Options” and until such shareholder approval is obtained, all future options issued under the 2006 Plan will also be “Non-Qualified Options.”

Only employees of the Company are eligible to receive ISOs, while employees and non-employee directors, advisors and consultants are eligible to receive options, which are not ISOs, i.e., “Non-Qualified Options.” Because the Company has not obtained shareholder approval of the 2006 Plan, all options granted thereunder to date are “Non-Qualified Options” and until such shareholder approval is obtained, all future options issued under the 2006 Plan will also be “Non-Qualified Options.”

In December 2014, the Company’s received shareholder approval authorizing the Board of Directors to implement the form, terms and provisions of the 2014 Plan.

7 unchanged sentences

Outstanding, December 31, 2021

( 1,270,155 )

Outstanding, December 31, 2022

6 unchanged sentences

December 31, 2020

3.84 to $ 8.25 per share

5.00 - $ 10.58 per share

61.7 % to 69.8

17 unchanged sentences

Non-vested, January 1, 2022

( 1,270,155 )

Non-vested, December 31, 2022

1 unchanged sentence

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 .

The Company has recorded approximately $ 180,440 in stock option expense related to these options for the year ended December 31, 2022.

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 .

The Company has recorded approximately $ 89,662 in stock option expense related to these options for the year ended December 31, 2022.

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 December 31, 2022, and one quarter on March 31, 2023.

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

The Company has recorded approximately $ 101,336 in stock option expense related to these options for the year ended December 31, 2022.

On August 10, 2022, the Board of Directors granted options to purchase 473,750 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 .

The Company has recorded approximately $ 160,944 in stock option expense related to these options for the year ended December 31, 2022.

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 December 31, 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 year ended December 31, 2022.

On April 12, 2021, the Board of Directors granted options to purchase 1,323,400 shares of common stock to the Company’s employees which will vest upon the achievement of certain specific, predetermined milestones related to the Company’s 2021 operations.

1 unchanged sentence

The grant date fair value of these unvested options amounted to approximately $ 7,042,000 .

We have recorded approximately $ 273,000 in stock option expense related to these options for the year ended December 31, 2021 in accordance with the determination made by the Board of Directors on March 1, 2022

On March 1, 2022, Board of Directors determined that the Company met approximately 19 % of these milestones, and accordingly, the Company has recorded $ 314,000 , and $ 273,000 in stock option expense related to these options for the years ended December 31, 2022, and 2021, respectively.

On February 28, 2020, the Board of Directors granted options to purchase 1,114,325 shares of common stock to the Company’s employees which will vest upon the achievement of certain specific, predetermined milestones related to the Company’s 2020 operations.

The grant date fair value of these unvested options amounted to approximately $ 3,883,000 .

On April 12, 2021, Board of Directors determined that the Company met approximately 88 % of these milestones, and accordingly we have recorded $ 1,070,000 and $ 914,000 in stock option expense related to these options for the year ended December 31, 2021, and 2020, respectively.

On July 22, 2019, the Board of Directors granted options to purchase 926,800 shares of common stock to the Company's employees which will vest upon the achievement of certain specific, predetermined milestones related to the Company's 2019 operations.

The grant date fair value of these unvested options amounted to approximately $ 4,294,000 .

On February 18, 2020, Board of Directors determined that the Company has met 35 % of these milestones, and accordingly the Company has recorded approximately $ 667,000 and $ 735,000 of stock option expense related to these options for the years ended December 31, 2021, and 2020, respectively.

On April 12, 2021, Board of Directors determined that the Company met approximately 88 % of these milestones, and accordingly, the Company has recorded $ 951,000 and $ 1,070,000 in stock option expense related to these options for the years ended December 31, 2022, and 2021, respectively.

Change in Control-Based Awards of Restricted Stock Units:

10 unchanged sentences

December 31, 2022

Due to the uncertainty over whether these restricted stock units will vest, which will only happen 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 year ended December 31, 2021.

Due to the uncertainty over whether these restricted stock units will vest, which will only happen upon a Change in Control, no charge for these restricted stock units has been recorded in the consolidated statement of operations and comprehensive loss through the year ended December 31, 2022.

Performance-Based Awards of Restricted Stock Units:

Pursuant to a review of the compensation of the senior management of the Company and managements’ performance in 2018, on March 4, 2019, the Board of Directors granted 22,220 restricted stock units to certain senior managers of the Company.

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 years ended December 31, 2021, and 2020, the Company recorded a charge of approximately $ 11,000 and $ 33,000 , respectively related to these restricted stock unit awards.

Pursuant to a review of the compensation of the senior management of the Company and managements' performance in 2019, on July 22, 2019, the Board of Directors granted 180,300 restricted stock units to certain senior managers of the Company.

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 years ended December 31, 2021, and 2020, the Company recorded a charge of approximately $ 259,000 and $ 564,000 , respectively related to these restricted stock unit awards.

Pursuant to a review of the compensation of the senior management of the Company and managements' performance in 2020, on February 28, 2020, the Board of Directors granted 168,100 restricted stock units to certain senior managers of the Company.

Pursuant to a review of the compensation of the senior management of the Company and management’s performance in 2020, on February 28, 2020, the Board of Directors granted 168,100 restricted stock units to certain senior managers of the Company.

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 years ended December 31, 2021 and 2020, the Company recorded a charge of approximately $ 528,000 and $ 619,000 related to these restricted stock unit awards.

For the years ended December 31, 2022 and 2021, the Company recorded (income) expense of approximately $( 65,000 ) and $ 528,000 , respectively, related to these restricted stock unit awards.

Pursuant to a review of the compensation of the senior management of the Company and management’s performance in 2021, on April 12, 2021, the Board of Directors granted 235,765 restricted stock units to certain senior managers of the Company.

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 years ended December 31, 2021, the Company recorded a charge of approximately $ 1,207,000 related to these restricted stock unit awards.

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

For the years ended December 31, 2022 and 2021, the Company recorded a charge of approximately $ 226,000 and $ 1,207,000 , 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 year ended December 31, 2022 and 2021, the Company recorded expense of approximately $ 260,000 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.

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

46,750 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.

46,750 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 45,000 of these restricted stock units vest upon the earlier of a Change in Control or four years from the date of the award.

For the years ended December 31, 2021, the Company recorded a charge of approximately $ 178,000 related to these restricted stock unit awards.

For the years ended December 31, 2022 and 2021, the Company recorded (income) expense of approximately $( 16,000 ) and $ 178,000 , respectively, related to these restricted stock unit awards.

The following table outlines the restricted stock unit activity for the year ended December 31, 2022:

12 unchanged sentences

Matching contributions amounted to approximately $ 442,000 , $ 355,000 and $ 59,200 for the years ended December 31, 2022, 2021 and 2020, respectively.

SUBSEQUENT EVENT:

On January 19, 2022, the Company closed on 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.

QUARTERLY FINANCIAL RESULTS (UNAUDITED):

11 unchanged sentences

( 12,200,837 )

( 9,307,012 )

Net loss per share, basic and diluted

8 unchanged sentences

( 4,677,530 )

( 6,406,285 )

( 9,307,012 )

Net loss per share, basic and diluted

8 unchanged sentences

( 2,866,956 )

( 6,885,061 )

( 3,949,351 )

Net loss per share, basic and diluted

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-K

Item 9A. Controls and Procedures