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Item 1. Financial Statements

2023-05-02 compared with 2022-11-03 · 174 added, 268 removed, 455 unchanged (49% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

Cash and cash equivalents

Grants and accounts receivable, net of allowance for doubtful accounts of $ 66,634 as of September 30, 2022 and $ 60,539 at December 31, 2021

Grants and accounts receivable, net of allowance for doubtful accounts of $ 46,510 as of March 31, 2023 and $ 76,041 as of December 31, 2022

Prepaid expenses and other current assets

10 unchanged sentences

Lease liability, net of current portion

Long-term debt

Total Liabilities

2 unchanged sentences

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

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

no shares issued and outstanding as of March 31, 2023 and December 31, 2022

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

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

43,851,380 and 43,635,715 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

8 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three months ended September 30,

Nine months ended September 30,

For the Three Months Ended March 31,

CytoSorb sales

Other product sales

Total product sales

9 unchanged sentences

( 7,791,135 )

( 25,165,524 )

( 13,182,924 )

Other income (expense):

Interest income (expense), net

Loss on foreign currency transactions

( 3,230,315 )

( 1,013,051 )

( 6,966,613 )

( 2,084,425 )

Miscellaneous income/(expense)

Total other expense

( 3,183,499 )

( 1,000,285 )

Gain/(Loss) on foreign currency transactions

( 1,213,290 )

Total other expense, net

( 1,175,263 )

2 unchanged sentences

( 8,966,398 )

( 32,046,457 )

( 15,251,636 )

Benefit from income taxes

Net loss attributable to common shareholders

( 12,200,837 )

( 6,406,285 )

Provision for income taxes

Net loss attributable to common stockholders

( 7,325,883 )

4 unchanged sentences

( 8,966,398 )

( 32,046,457 )

( 15,251,636 )

Other comprehensive income/(loss):

Currency translation adjustment

Total Comprehensive loss

( 9,542,028 )

( 5,598,320 )

Foreign currency translation adjustment

Comprehensive loss

( 7,934,091 )

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

For the three months ended March 31, 2023 and 2022 (Unaudited)

Comprehensive

Stockholders’

Income (Loss)

Balance at June 30, 2022

( 241,030,915 )

Stock-based compensation - employees, consultants and directors

Other comprehensive loss:

foreign translation adjustment

Stock issued to vendor in lieu of cash payment

Issuance of restricted stock units

( 12,200,837 )

Balance at September 30, 2022

( 253,231,752 )

Balance at December 31, 2022

1 unchanged sentence

Stock-based compensation - employees, consultants and directors

Other comprehensive income:

foreign translation adjustment

Stock issued to vendor in lieu of cash payment

Issuance of restricted stock units

Legal/audit fees related to ATM offering

( 32,046,457 )

Balance at September 30, 2022

( 253,231,752 )

Comprehensive

Stockholders’

Income (Loss)

Balance at June 30, 2021

( 205,471,998 )

Stock-based compensation - employees, consultants and directors

Issuance of common stock - offerings, net of fees incurred

Other comprehensive loss:

foreign translation adjustment

Proceeds from exercise of stock options

Cashless exercise of stock options

Issuance of restricted stock units

foreign currency translation adjustment

Legal/audit fees related to ATM offering

Proceeds from the exercise of stock options for cash

( 7,325,883 )

Balance at September 30, 2021

Balance at March 31, 2023

( 261,323,761 )

1 unchanged sentence

( 221,185,295 )

( 196,626,647 )

Stock-based compensation - employees, consultants and directors

Other comprehensive income:

foreign translation adjustment

Proceeds from exercise of stock options

Cashless exercise of stock options

foreign currency translation adjustment

Legal/audit fees related to ATM offering

Issuance of restricted stock units

1 unchanged sentence

( 8,966,398 )

Balance at September 30, 2021

Balance at March 31, 2022

( 230,151,693 )

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

September 30,

For the three

Cash flows from operating activities:

1 unchanged sentence

( 8,966,398 )

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 restricted stock unit compensation

Depreciation and amortization

Bad debt expense

Amortization of right of use asset

Impairment of patents

Bad debt expense

Stock-based compensation

Foreign currency transaction loss

Foreign currency transaction (gain) loss

Changes in operating assets and liabilities:

Grants and accounts receivable

( 2,099,051 )

Prepaid expenses and other current assets

6 unchanged sentences

Purchases of property and equipment

( 5,873,928 )

( 2,108,821 )

Payments for patent costs

Net cash used in investing activities

( 6,249,496 )

( 2,608,512 )

Cash flows from financing activities:

1 unchanged sentence

Proceeds from exercise of stock options

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Effect of exchange rates on cash

7 unchanged sentences

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

Capital expenditures included in accounts payable

See accompanying notes to consolidated financial statements.

1 unchanged sentence

Notes to Consolidated Financial Statements

September 30, 2022

March 31, 2023

BASIS OF PRESENTATION

The interim consolidated financial statements of CytoSorbents Corporation (the “Company”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments, for a fair statement of the Company’s consolidated financial position and results of operations for the interim periods presented.

In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments, for a fair presentation of the Company’s consolidated financial position and results of operations for the interim periods presented.

Certain information and disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S.

1 unchanged sentence

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on March 9, 2023.

The results for the three and nine months ended September 30, 2022 and 2021 are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or period.

As of September 30, 2022, the Company’s cash and cash equivalents balances were approximately $22.6 million, which the Company expects will fund the Company’s operations beyond twelve months from the issuance of these consolidated financial statements.

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

The results for the three months ended March 31, 2023 and 2022, are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or period.

As of March 31, 2023, the Company’s cash, cash equivalents and restricted cash balances were approximately $ 20.7 million, which the Company expects will fund the Company’s operations beyond twelve months from the issuance of these financial statements.

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

12 unchanged sentences

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.

5 unchanged sentences

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

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

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

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

19 unchanged sentences

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.

The launch of this program is 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

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

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

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.

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

The Euro is the functional currency of CytoSorbents Europe GmbH.

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

Foreign currency transaction loss included in net loss amounted to approximately $ 6,967,000 and $ 2,084,000 for the nine months ended September 30, 2022 and 2021, respectively.

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

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

The Euro is the functional currency of the European Subsidiary.

Foreign currency transaction gain (loss) included in net loss amounted to approximately $ 661,000 and $( 1,213,000 ) for the three months ended March 31, 2023 and 2022, respectively.

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

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

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

Cash, Cash Equivalents and Restricted Cash

Cash and Cash Equivalents

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

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

September 30, 2022

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

March 31, 2023

December 31, 2022

11 unchanged sentences

Management reviews accounts receivable periodically to determine collectability.

Balances that are determined to be uncollectible are

written off to the allowance for doubtful accounts.

The allowance for doubtful accounts amounted to approximately $ 67,000 and $ 61,000 at September 30, 2022 and December 31, 2021, respectively.

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

The allowance for doubtful accounts amounted to approximately $ 47,000 and $ 76,000 at March 31, 2023 and December 31, 2022, respectively.

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

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

At March 31, 2023 and December 31, 2022, the Company’s inventory was comprised of finished goods, which amounted to $ 839,033 and $ 1,567,871 , respectively;

work in process which amounted to $ 289,123 and $ 1,280,368 , respectively;

2 unchanged sentences

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

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

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

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

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

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

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

The claim is currently under review by the insurance company.

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

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

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

Property and Equipment

10 unchanged sentences

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

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

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

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

There was no impairment recorded during the three months ended March 31, 2023.

During the three months ended March 31, 2023 and 2022, the Company recorded an impairment charge of approximately $ 111,000 and $ 306,000 , respectively, related to certain patent costs.

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

10 unchanged sentences

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

Research and Development and Clinical Trial Expenses

Research and Development

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

Advertising Expenses

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

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

Advertising expenses are charged to activities when incurred.

Advertising expenses amounted to approximately $ 55,000 and $ 81,000 for the three months ended March 31, 2023 and 2022, respectively, and are included in selling, general, and administrative expenses on the consolidated statements of operations and comprehensive loss.

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

6 unchanged sentences

The Company follows accounting standards associated with uncertain tax positions.

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

The Company had no unrecognized tax benefits at March 31, 2023 or December 31, 2022.

The Company files tax returns in the U.S.

1 unchanged sentence

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

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

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

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

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 U.S.

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

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, liabilities at the date of the balance sheet, and the reported amounts of revenues and expenses during the reporting period.

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

The Company maintains cash balances, at times, with financial institutions in excess of amounts insured by the Federal Deposit Insurance Corporation.

The Company maintains cash balances, at times, with financial institutions in excess of amounts insured by the Federal Deposit Insurance Corporation (“FDIC”).

Beginning in April of 2023, the Company joined the IntraFi network, and established an Insured Cash Sweep (“ICS”) account whereby all cash that was previously held in the Company’s money market account at Bridge Bank is swept daily in increments of less than $ 250,000 and deposited in a number of IntraFi’s 4,000 member banks.

This arrangement provides FDIC insurance coverage for all of the cash balances previously held in the money market account, which represents all of the cash and cash equivalents held at Bridge Bank.

This arrangement excludes the restricted cash balances.

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

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

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

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

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

As of September 30, 2022, two distributors accounted for approximately 39 % of outstanding grants and accounts receivable.

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

For the three

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

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

As of March 31, 2023, two distributors accounted for approximately 30 % of outstanding grants and accounts receivable.

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

For the three months ended March 31, 2023, one distributor accounted for approximately 11 % of the Company’s total revenue and for the three months ended March 31, 2022, no customer accounted for more than 10 % of the Company’s total revenue.

Financial Instruments

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

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

Net Loss Per Common Share

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

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

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

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

7 unchanged sentences

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

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

Total freight costs amounted to approximately $ 78,000 and $ 68,000 , respectively, for the three months ended March 31, 2023 and 2022.

Effect of Recent Accounting Pronouncements

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

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

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

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

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 implemented the updated guidance during the three months ended March 31, 2023 and this did not have significant impact on its consolidated financial statements.

STOCKHOLDERS’ EQUITY

8 unchanged sentences

Open Market Sale Agreement with Jefferies LLC

On December 30, 2021, the Company entered into an Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC (the “Agent”), pursuant to which the Company may sell, from time to time, at its option, shares of the Company’s common stock having an aggregate offering price of up to $ 25 million through the Agent, as the Company’s sales agent.

All shares of the Company’s common stock offered and sold, or to be offered and sold under the Sale Agreement will be issued and sold pursuant to the Company’s 2021 Shelf by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, in block transactions or if specified by the Company, in privately negotiated transactions.

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

On December 30, 2021, the Company entered into an Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC (the “Agent”), pursuant to which the Company could sell, from time to time, at its option, shares of the Company’s common stock having an aggregate offering price of up to $ 25 million through the Agent, as the Company’s sales agent.

All shares of the Company’s common stock offered and sold, or to be offered and sold under the Sale Agreement would have been issued and sold pursuant to the Company’s 2021 Shelf by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, in block transactions or if specified by the Company, in privately negotiated transactions.

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

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 have been no sales under the Sale Agreement.

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

There were no sales pursuant to the Sale Agreement during the year ended December 31, 2022.

During the three months ended March 31, 2023, the Company sold 197,665 shares of its common stock, generating net proceeds of approximately $ 698,000 .

In addition, during the year ended December 31, 2022 and during the three months ended March 31, 2023, the Company paid approximately $ 90,000 and $ 57,000 , respectively, in expenses related to the Sale Agreement.

Stock-Based Compensation

Total share-based employee, director, and consultant compensation amounted to approximately $ 1,005,000 and $ 2,554,000 for the three and nine months ended September 30, 2022, respectively, and $ 999,000 and $ 3,224,000 for the three and nine months ended September 30, 2021, respectively.

Total share-based employee, director, and consultant compensation for the three months ended March 31, 2023 and 2022, amounted to approximately $ 830,000 and $ 787,000 , respectively.

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

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

The summary of the stock option activity for the three months ended March 31, 2023, is as follows:

Exercise Price

Outstanding, December 31, 2022

( 1,221,475 )

Outstanding, September 30, 2022

The fair value of each stock option was estimated using the Black Scholes pricing model, which takes into account as of the grant date the exercise price (ranging from $ 1.39 to $ 3.91 per share) and expected life of the stock option ( 10 years ), the current price of the underlying stock and its expected volatility ( 64.7 %), expected dividends ( 0 %) on the stock and the risk free interest rate (ranging from 1.52 % to 3.91 %) for the expected term of the stock option.

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

Outstanding, March 31, 2023

The fair value of each stock option was estimated using the Black Scholes pricing model, which takes into account as of the grant date the exercise price (ranging from $ 1.55 to $ 3.50 per share) and expected life of the stock option ( 6 years ), the current price of the underlying stock and its expected volatility ( 70.4 %), expected dividends (- 0 - percent) on the stock and the risk free interest rate (ranging from 3.54 to 4.22 %) for the expected term of the stock option.

The intrinsic value is calculated as the difference between the market value of the shares as of March 31, 2023, of $ 3.37 and the exercise price of the shares.

Options Outstanding

Outstanding at

September 30,

$ 1.11 - $ 13.20

1 unchanged sentence

Exercisable at

September 30,

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

The summary of the status of the Company’s non-vested options for the three months ended March 31, 2023, is as follows:

Non-vested, December 31, 2022

( 1,221,475 )

Non-vested, September 30, 2022

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

Awards of Stock Options:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The grant date fair value of these unvested

options amounted to approximately $ 562,000 .

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

Non-vested, March 31, 2023

As of March 31, 2023, the Company had approximately $ 3,781,000 of total unrecognized compensation cost related to stock options which will be amortized over approximately 47 months .

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

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

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

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

As of March 31, 2023, 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 quarter ended March 31, 2023.

Change in Control-Based Awards of Restricted Stock Units:

5 unchanged sentences

December 31, 2022

September 30, 2022

Due to the uncertainty over whether these restricted stock units will vest, which only happens upon a Change in Control, no charge for these restricted stock units has been recorded in the consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022 and 2021.

March 31, 2023

Other Awards of Restricted Stock Units:

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

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

For the three and nine months ended September 30, 2022 and 2021, the Company recorded expense of approximately $ 0 and $ 0 , and $ 0 and $ 12,000 , respectively, related to these restricted stock unit awards.

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

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

For the three and nine months ended September 30, 2022 and 2021, the Company recorded expense of approximately $ 0 and $ 54,000 , and $ 0 and $ 259,000 , respectively, related to these restricted stock unit awards.

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

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

For the three and nine months ended September 30, 2022 and 2021, the Company recorded (income) expense of approximately $ 0 and $ 84,000 , and $( 65,000 ) and $ 443,000 , related to these restricted stock unit awards, respectively.

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

For the three months ended March 31, 2023 and 2022, the Company recorded a charge of approximately $ 0 and a reduction of expense of approximately $( 65,000 ), respectively, related to these restricted stock unit awards.

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

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

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

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

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

For the three months ended March 31, 2023 and 2022, the Company recorded a charge of approximately $ 177,000 and $ 177,000 , respectively, related to these restricted stock unit awards.

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

These awards were valued at approximately $ 563,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vested (or will vest) one third on the date of the grant, one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant.

For the three and nine months ended September 30, 2022 and 2021, the Company recorded expense of approximately $ 214,000 and $ 0 , and $ 214,000 and $ 0 , respectively, related to these restricted stock unit awards.

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

For the three months ended March 31, 2023 and 2022, the Company recorded a charge of approximately $ 47,000 and $ 0 , respectively, related to these restricted stock unit awards.

Additionally, in 2021 certain employees were offered 91,750 restricted stock units and in 2022 certain employees were offered 30,000 restricted stock units, as a condition of their employment.

These awards were valued at approximately $ 778,068 at the date of issuance.

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

45,000 of the restricted stock units valued at $ 375,750 were forfeited in 2022.

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

For the three and nine months ended September 30, 2022 and 2021, the Company recorded (income) expense of approximately $ 0 and $ 45,000 , and $( 34,000 ) and $ 131,000 , respectively, related to these restricted stock unit awards.

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

For the three months ended March 31, 2023 and 2022, the Company recorded a charge of approximately $ 27,000 and $ 47,000 respectively, related to these restricted stock unit awards.

The following table outlines the restricted stock unit activity for the three months ended March 31, 2023:

Non-vested, December 31, 2022

Non-vested, September 30, 2022

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

United States

Distributors/

Strategic Partners

Product sales:

United States

All other countries

Total product revenue

Grant and other income:

United States

Total revenue

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

United States

Distributors/

Strategic Partners

Product sales:

United States

All other countries

Total product revenue

Grant and other income:

United States

Total revenue

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

Non-vested, March 31, 2023

The following table disaggregates the Company’s revenue by customer type and geographic area for the three months ended March 31, 2023:

United States

8 unchanged sentences

Total revenue

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

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

United States

15 unchanged sentences

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

FDA Emergency Use Authorization (EUA) of CytoSorb for use in critically-ill patients infected with COVID-19 with imminent or confirmed respiratory failure by FDA.

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

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

9 unchanged sentences

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

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

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

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

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

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

Government Grants

8 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.

5 unchanged sentences

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

September 30, 2022

March 31, 2023

December 31, 2022

Receivables, which are included in grants and 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 $ 78,466 and $ 303,824 as of September 30, 2022 and December 31, 2021, respectively, and deferred grant revenue related to the billing on fixed price contracts in excess of costs incurred , which amounted to $ 1,644,080 and $ 1,947,353 at September 30, 2022 and December 31, 2021, respectively.

Contract receivables represent balances due from product sales to distributors amounting to $ 3,329,854 and $ 2,944,031 at March 31, 2023 and December 31, 2022, respectively, and billed and unbilled amounts due on government contracts amounting to $ 675,165 and $ 878,421 at March 31, 2023 and December 31, 2022, 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 $ 176,647 and $ 166,065 at March 31, 2023 and December 31, 2022, respectively, and deferred grant revenue related to the billing on fixed price government contracts in excess of costs incurred, which amounted to $ 1,440,548 and $ 1,516,772 at March 31, 2023 and December 31, 2022, respectively.

LONG-TERM DEBT, NET

9 unchanged sentences

Under the terms of the Amendment, the Company received a commitment from Bridge Bank to provide a new term loan of up to $ 15 million, if needed and entered into the Fourth Amendment Success Fee Letter (the “2022 Success Fee Letter”).

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 extended the draw period to March 24, 2023.

Therefore, no further draws are available as of the date of this filing.

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 %.

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 Loans until the amortization date, which is January 1, 2024.

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

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

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

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

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

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 75% 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 75% 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.

This final fee is being accrued and charged to interest expense over the term of the loan.

For the three months ended March 31, 2023, the Company recorded interest expense of approximately $ 10,714 related to the final fee.

The Term Loans are evidenced by a secured promissory note issued to the Bank by the Company.

If the Company elects to prepay the Term Loans pursuant to the terms of the Amended and Restated Loan and Security Agreement, it will owe a prepayment fee to the Bank, as follows:

(1) for a prepayment made on or after the funding date of a Term Loan through and including the first anniversary of such funding date, an amount equal to 2.0 % of the principal amount of such Term Loan prepaid;

(2) for a prepayment made after the first anniversary of the funding date of a Term Loan through and including the second anniversary of such funding date, an amount equal to 1.5 % of the principal amount of such Term Loan prepaid;

and (3) for a prepayment made after the second anniversary of the funding date of a Term Loan, an amount equal to 1.0 % of the principal amount of such Term Loan prepaid.

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).

11 unchanged sentences

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

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

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 the 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.

Long-term debt consists of the following as of March 31, 2023:

Principal amount

Accrued final fee

Less Current maturities

Long-term debt net of current maturities

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

COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

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

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

This liability is included in accrued expenses and other current liabilities in the consolidated balance sheets as of December 31, 2021 and September 30, 2022.

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

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

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.

As of March 31, 2023, approximately $ 83,000 remains accrued.

This liability is included in accrued expenses and other current liabilities in the consolidated balance sheet as of December 31, 2022 and March 31, 2023.

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

Employment Agreements

1 unchanged sentence

Chan, Chief Executive Officer, Vincent Capponi, President and Chief Operating Officer, and Kathleen P.

Bloch, Chief Financial Officer.

Bloch, the Company’s former Chief Financial Officer.

Each of the agreements has an initial term of three years and was retroactively effective as of January 1, 2019.

2 unchanged sentences

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

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

In January 2023, these employment agreements automatically renewed for an additional one year .

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

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.

Effective March 31, 2023, Ms.

Bloch retired from her role as Chief Financial Officer of the Company.

Bloch’s employment agreement expired on March 31, 2023, upon her retirement from the Company.

In connection with Ms.

Bloch’s retirement, the Company and Ms.

Bloch entered into a Consulting Agreement, dated as of March 31, 2023 (the “Consulting Agreement”), pursuant to which Ms.

Bloch will serve as a consultant to the Company and as the Company’s Interim Chief Financial Officer.

In accordance with the terms of the Consulting Agreement, Ms.

Bloch will continue to provide services to the Company which are customary in scope to those typically provided by a public company Chief Financial Officer.

Unless terminated earlier by Ms.

Bloch or by the Company upon fourteen days written notice, the Consulting Agreement will remain in effect until December 31, 2025, and thereafter as mutually agreed between the Company and Ms.

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

5 unchanged sentences

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

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

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

For the three months ended March 31, 2023 and 2022, the Company recorded royalty expenses of approximately $ 234,000 and $ 232,000 , 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.

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

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

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

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

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

For the three months ended March 31, 2023, 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 first sale of such product.

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

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

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

For the three months ended March 31, 2023 and 2022 per the terms of the license agreement, the Company recorded licensing expenses of approximately $ 390,000 and $ 387,000 , respectively.

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

17 unchanged sentences

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 vacated a portion of the space as of May 31, 2022.

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

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.

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.

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.

In addition, the Company also adjusted the incremental borrowing rate and related right of use asset and lease liability on the existing Germany office lease effective April 1, 2021.

In September 2021, the Company extended its two operating leases for its office facility in Germany.

6 unchanged sentences

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

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

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

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

7 unchanged sentences

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

September 30,

Right-of-use asset

2 unchanged sentences

Lease liability, net of current portion

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

The maturities of the lease liabilities are as follows as of March 31, 2023:

Total lease payments

1 unchanged sentence

( 11,789,045 )

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

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

For the three months ended March 31, 2023 and 2022, operating cash flows paid in connection with operating leases amounted to approximately $ 633,000 and $ 713,000 , respectively.

As of March 31, 2023 and December 31, 2022, the weighted average remaining lease term was 13.4 years and 13.6 years, respectively.

NET LOSS PER SHARE

Basic loss per share and diluted loss per share for the three months ended September 30, 2022 and 2021 have been computed by dividing the net loss for each respective period by the weighted average number of shares outstanding during that period.

All outstanding options and restricted stock awards representing approximately 11,428,000 and 9,891,000 incremental shares at September 30, 2022 and 2021, respectively, have been excluded from the computation of diluted loss per share as they are anti-dilutive.

Basic loss per share and diluted loss per share for the three months ended March 31, 2023 and 2022 have been computed by dividing the net loss for each respective period by the weighted average number of shares outstanding during that period.

All outstanding options and restricted stock awards representing approximately 10,855,000 and 8,825,000 incremental shares as of March 31, 2023 and 2022, respectively, have been excluded from the computation of diluted loss per share as they are anti-dilutive.

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

What changed 10-Q

Item 1. Financial Statements