What changed in this filing

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Item 1. Financial Statements

2023-08-01 compared with 2023-05-02 · 255 added, 116 removed, 513 unchanged (42% of the section changed)

4 unchanged sentences

Cash and cash equivalents

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

Grants and accounts receivable, net of allowance for doubtful accounts of $ 66,448 as of June 30, 2023 and $ 76,041 at December 31, 2022

Prepaid expenses and other current assets

15 unchanged sentences

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

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

- 0 - shares issued and outstanding at June 30, 2023 and December 31, 2022

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

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

44,193,696 and 43,635,715 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

8 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Three Months Ended March 31,

Three months ended June 30,

Six months ended June 30,

CytoSorb sales

Other product sales

Total product sales

9 unchanged sentences

( 8,357,050 )

( 14,450,832 )

( 16,148,185 )

Other income (expense):

Interest income (expense), net

Miscellaneous income/(expense)

Gain (loss) on foreign currency transactions

( 2,523,006 )

Total other expense, net

( 3,736,296 )

Miscellaneous income (expense)

Total other income (expense), net

( 2,522,172 )

( 3,697,435 )

Loss before benefit from income taxes

1 unchanged sentence

( 10,879,222 )

Provision for income taxes

( 13,478,967 )

( 19,845,620 )

Benefit from income taxes

Net loss attributable to common stockholders

1 unchanged sentence

( 10,879,222 )

( 13,478,967 )

( 19,845,620 )

Basic and diluted net loss per common share

2 unchanged sentences

( 10,879,222 )

( 13,478,967 )

( 19,845,620 )

Other comprehensive income (loss):

Foreign currency translation adjustment

Comprehensive loss

Currency translation adjustment

( 1,000,882 )

Total comprehensive loss

( 6,545,758 )

( 8,826,007 )

( 14,479,849 )

( 16,829,494 )

See accompanying notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

For the three and six months ended June 30, 2023 and 2022 (Unaudited)

Comprehensive

Stockholders’

Balance at December 31, 2022

Income (Loss)

Balance at March 31, 2023

( 261,323,761 )

Stock-based compensation - employees, consultants and directors

Issuance of common stock - offerings, net of fees incurred

Other comprehensive loss:

foreign currency translation adjustment

foreign translation adjustment

Issuance of common stock offerings, net of fees

Proceeds from exercise of stock options for cash

Issuance of restricted stock units

( 6,153,084 )

Balance at June 30, 2023

( 267,476,845 )

Balance at December 31, 2022

( 253,997,878 )

Stock-based compensation - employees, consultants and directors

Other comprehensive income:

foreign translation adjustment

( 1,000,882 )

Issuance of common stock offerings, net of fees

Proceeds from exercise of stock options for cash

Issuance of restricted stock units

Legal/audit fees related to ATM offering

Proceeds from the exercise of stock options for cash

( 13,478,967 )

Balance at June 30, 2023

( 267,476,845 )

Comprehensive

Stockholders’

Income (Loss)

Balance at March 31, 2022

( 230,151,693 )

Stock-based compensation - employees, consultants and directors

Other comprehensive loss:

foreign translation adjustment

Stock issued to vendor in lieu of cash payment

Issuance of restricted stock units

( 10,879,222 )

Balance at June 30, 2022

( 241,030,915 )

Balance at December 31, 2021

2 unchanged sentences

Other comprehensive income:

foreign currency translation adjustment

Legal/audit fees related to ATM offering

foreign translation adjustment

Stock issued to vendor in lieu of cash payment

Issuance of restricted stock units

Legal/audit fees related to ATM offering

( 19,845,620 )

Balance at March 31, 2022

Balance at June 30, 2022

( 241,030,915 )

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three

Cash flows from operating activities:

2 unchanged sentences

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

Non-cash restricted stock unit compensation

Accrued Final Fee

Non-cash compensation

Depreciation and amortization

Bad debt expense

Amortization of right of use asset

Impairment of patents

Write off of patent cost

Bad debt expense (recovery)

Stock-based compensation

Foreign currency transaction (gain) loss

Foreign currency translation (gain) loss

( 1,075,656 )

Changes in operating assets and liabilities:

Grants and accounts receivable

( 1,271,716 )

Prepaid expenses and other current assets

6 unchanged sentences

Purchases of property and equipment

( 5,234,163 )

Payments for patent costs

Net cash used in investing activities

( 5,532,963 )

Cash flows from financing activities:

1 unchanged sentence

Proceeds from exercise of stock options

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

Effect of exchange rates on cash

7 unchanged sentences

Supplemental disclosure of non-cash financing activities:

Settlement of accrued bonuses with restricted stock units

Issuance of common stock to vendor in lieu of cash payment

Capital expenditures included in accounts payable

Issuance of restricted stock units

See accompanying notes to consolidated financial statements.

1 unchanged sentence

Notes to Consolidated Financial Statements

March 31, 2023

June 30, 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 presentation 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 statement 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 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.

The results for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or period.

As of June 30, 2023, the Company’s cash and cash equivalents were approximately $ 13.2 million, and approximately $ 1.7 million in restricted cash, which is not expected to fund the Company’s operations beyond the next twelve months from the issuance of these consolidated financial statements.

This matter raises substantial doubt about the Company’s ability to continue as a going concern.

As a result, the accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The Company expects to raise additional capital in the future.

PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 unchanged sentences

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

In May 2023, the Company formed CytoSorbents India Private Limited to provide marketing and direct sales services in India.

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.

4 unchanged sentences

In April 2020, CytoSorb received United States Food and Drug Administration (“FDA”) Emergency Use Authorization (“EUA”) of CytoSorb for use in adult critically-ill COVID-19 patients with imminent or confirmed respiratory failure.

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

The CytoSorb device has

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

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

3 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 July 2023, the Company announced that the Company has completed enrollment in the STAR-T trial.

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.

16 unchanged sentences

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.

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 launch of this program is expected to occur in the second half of 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.

The Company has numerous products under development based upon this unique blood purification technology, which is protected by 19 issued U.S.

The Company has numerous products under development based upon this unique blood purification technology which, as of June 30, 2023, is protected by 19 issued U.S.

patents and multiple international patents, with applications pending both in the U.S.

8 unchanged sentences

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.

and CytoSorbents Medical UK Limited, wholly owned subsidiaries of CytoSorbents Europe GmbH, and CytoSorbents UK Limited and CytoSorbents India Private Limited, wholly-owned subsidiaries 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 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 Euro is the functional currency of CytoSorbents Europe GmbH.

Foreign currency transaction gain (loss) included in net loss amounted to approximately $ 415,000 and $( 2,523,000 ) for the three months ended June 30, 2023 and 2022, respectively.

Foreign currency transaction (loss) included in net loss amounted to approximately $ 1,076,000 and $( 3,736,000 ) for the six months ended June 30, 2023 and 2022, respectively.

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

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

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

Cash and Cash Equivalents

Cash, Cash Equivalents and Restricted Cash

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

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

March 31, 2023

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

June 30, 2023

December 31, 2022

12 unchanged sentences

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

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

The allowance for doubtful accounts amounted to approximately $ 66,000 and $ 76,000 as of June 30, 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.

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;

At June 30, 2023 and December 31, 2022, the Company’s inventory was comprised of finished goods, which amounted to $ 949,296 and $ 1,567,871 , respectively;

work in process which amounted to $ 578,480 and $ 1,280,368 , respectively;

14 unchanged sentences

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

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.

During the three and six months ended June 30, 2023, the Company recorded an impairment charge of approximately $ 21,000 and $ 293,000 , respectively, related to certain patent costs.

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

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

8 unchanged sentences

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.

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.

Research and Development

Research and Development and Clinical Trial Expenses

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

Advertising Expenses

Advertising expenses are charged to activities when incurred.

Advertising expenses amounted to approximately $ 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.

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 $ 38,000 and $ 115,000 for the three months ended June 30, 2023 and 2022, respectively, and approximately $ 93,000 and $ 196,000 for the six months ended June 30, 2023 and 2022, respectively.

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

6 unchanged sentences

The Company follows accounting standards associated with uncertain tax positions.

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

The Company had no unrecognized tax benefits at June 30, 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.

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.

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

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

Use of Estimates

11 unchanged sentences

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

As of June 30, 2023, two distributors accounted for approximately 36 % of outstanding grants and accounts receivable.

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

For the three months and six months ended June 30, 2023, one distributor accounted for approximately 12 % and 11 %, respectively, of the Company’s total revenue and for the three and six months ended June 30, 2022, no distributor accounted for more than 10 % of the Company’s total revenue.

Financial Instruments

2 unchanged sentences

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

Diluted loss per common share 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.

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

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

7 unchanged sentences

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

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

Total freight costs amounted to approximately $ 122,000 and $ 18,000 , respectively, for the three months ended June 30, 2023 and 2022, and $ 200,000 and $ 87,000 , respectively, for the six months ended June 30, 2023 and 2022.

Effect of Recent Accounting Pronouncements

In June 2016, the FASB, issued ASU No.

In June 2016, the Financial Accounting Standards Board, issued Accounting Standards Update (“ASU”) No.

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

2 unchanged sentences

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.

The Company implemented the updated guidance during the six months ended June 30, 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 could sell, from time to time, at its option, shares of the Company’s common stock having an aggregate offering price of up to $ 25 million through the Agent, as the Company’s sales agent.

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

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

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

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

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

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

There were no sales pursuant to the 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.

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

During the six months ended June 30, 2023, the Company sold 428,270 shares pursuant to the Amended Sale Agreement, at an average selling price of $ 3.55 per share, generating net proceeds of approximately $ 1,475,000 .

During the period from July 1, 2023 through July 31, 2023, the Company sold 162,078 shares pursuant to the Sale Agreement, at an average selling price of $ 4.02 per share, generating net proceeds of approximately $ 632,000 .

In the aggregate, through July 31, 2023, the Company has sold 590,348 shares pursuant to the Sale Agreement, at an average selling price of $ 3.68 per share, generating net proceeds of approximately $ 2,107,000 .

In addition, during the year ended December 31, 2022 and during the six months ended June 30, 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 for the three months ended March 31, 2023 and 2022, amounted to approximately $ 830,000 and $ 787,000 , respectively.

Total share-based employee, director, and consultant compensation amounted to approximately $ 570,000 and $ 1,401,000 for the three and six months ended June 30, 2023, respectively, and approximately $ 761,000 and $ 1,549,000 for the three and six months ended June 30, 2022, 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 three months ended March 31, 2023, is as follows:

The summary of the stock option activity for the six months ended June 30, 2023 is as follows:

Exercise Price

Outstanding, December 31, 2022

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.

Outstanding, June 30, 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 ( 10 years ), the current price of the underlying stock and its expected volatility ( 70.6 %), expected dividends ( 0 )% on the stock and the risk free interest rate (ranging from 3.50 % 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 June 30, 2023 of $ 3.59 and the exercise price of the shares.

Options Outstanding

3 unchanged sentences

Exercisable at

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

The summary of the status of the Company’s non-vested options for the six months ended June 30, 2023 is as follows:

Non-vested, December 31, 2022

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 .

( 1,020,198 )

Non-vested, June 30, 2023

As of June 30, 2023, the Company had approximately $ 3,188,000 of total unrecognized compensation cost related to stock options which will be amortized over approximately 44 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 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.

As of June 30, 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 three and six months ended June 30, 2023.

Change in Control-Based Awards of Restricted Stock Units:

5 unchanged sentences

December 31, 2022

March 31, 2023

Due to the uncertainty over whether these restricted stock units will vest, which only happens upon a Change in Control, no charge for these restricted stock units has been recorded in the consolidated statements of operations and comprehensive loss for the three months ended March 31, 2023 and 2022.

June 30, 2023

Other Awards of Restricted Stock Units:

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

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

For the three months ended March 31, 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.

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

For the three and six months ended June 30, 2023 and 2022, the Company recorded expense of approximately $ 0 and $ 0 , respectively, and $ 0 and $ 84,000 , 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 $ 2,120,000 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.

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

For the three and six months ended June 30, 2023 and 2022, the Company recorded (income) expense of approximately $( 422,000 ) and $( 245,000 ), respectively, and $( 304,000 ) and $ 854,000 , 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 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 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 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:

For the three and six months ended June 30, 2023, the Company recorded a charge of approximately $ 47,000 and $ 94,000 , respectively, related to these restricted stock unit awards.

In 2023, an employee was awarded 30,000 restricted stock units, as a condition of her employment.

These awards were valued at $ 64,200 at the date of issuance.

Also in 2023, 2,500 restricted stock units were forfeited.

The remaining unvested restricted stock awards will vest based upon a change of control or over the next two to four years, whichever occurs first.

For the three and six months ended June 30, 2023 and 2022, the Company recorded a charge (income) of approximately $ 19,000 and $ 46,000 , respectively, and $( 82,000 ) and $ 33,000 , respectively, related to all restricted stock units.

The following table outlines the restricted stock unit activity for the six months ended June 30, 2023:

Non-vested, December 31, 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:

Non-vested, June 30, 2023

The following table disaggregates the Company’s revenue by customer type and geographic area for the three months ended June 30, 2023:

United States

8 unchanged sentences

Total revenue

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

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

United States

8 unchanged sentences

Total revenue

The following table disaggregates the Company’s revenue by customer type and geographic area for the six months ended June 30, 2023:

United States

Distributors/

Strategic Partners

Product sales:

United States

All other countries

Total product revenue

Grant and other income:

United States

Total revenue

The following table disaggregates the Company's revenue by customer type and geographic area for the six months ended June 30, 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 Company has two primary revenue streams:

19 unchanged sentences

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

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

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

Government Grants

18 unchanged sentences

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

March 31, 2023

June 30, 2023

December 31, 2022

Contract receivables, which are included in grants and accounts receivable

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 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.

Contract receivables represent balances due from product sales to distributors amounting to $ 4,006,006 and $ 2,944,031 at June 30, 2023 and December 31, 2022, respectively, and billed and unbilled amounts due on government contracts amounting to $ 749,144 and $ 878,421 at June 30, 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 $ 145,370 and $ 166,065 as of June 30, 2023 and December 31, 2022, respectively, and deferred grant revenue related to the billing on fixed price contracts in excess of costs incurred, which amounted to $ 1,436,279 and $ 1,516,772 at June 30, 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.

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.

15 unchanged sentences

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.

For the three and six months ended June 30, 2023, the Company recorded interest expense of approximately $ 10,714 and $ 21,429 related to the final fee.

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

17 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 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:

Long-term debt consists of the following as of June 30, 2023:

Principal amount

2 unchanged sentences

Long-term debt net of current maturities

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

Principal payments of long-term debt are due as follows during the periods ending June 30:

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

Accordingly, the Company has 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 .

1 unchanged sentence

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.

As of June 30, 2023, approximately $ 84,000 remains accrued.

This liability is included in accrued expenses and other current liabilities in the consolidated balance sheet as of December 31, 2022 and June 30, 2023.

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

24 unchanged sentences

The Company intends to defend vigorously against any future claims and litigation.

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

Royalty Agreements

The Company is expected to settle a litigation matter.

As part of the expected settlement agreement, the Company estimates that it will be required pay a total of $ 280,000 to settle this matter in return for a release of all claims against the Company.

This liability is included in accrued expenses and other current liabilities in the consolidated balance sheet as of June 30, 2023.

The expense related to this settlement is included in legal financial and other consulting expenses on the consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 3023.

The Company is not currently a party to any other litigation.

Royalty Agreement

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

1 unchanged sentence

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

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

For the three months ended June 30, 2023 and 2022, the Company recorded royalty expenses of approximately $ 240,000 and $ 208,000 , respectively.

For the six months ended June 30, 2023 and 2022, the Company recorded royalty expenses of approximately $ 474,000 and $ 440,000 , respectively.

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

5 unchanged sentences

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 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.

For the three and six months ended June 30, 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 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.

For the three months ended June 30, 2023 and 2022 pursuant to the terms of the license agreement, the Company recorded licensing expenses of approximately $ 320,000 and $ 347,000 , respectively.

For the six months ended June 30, 2023 and 2022 pursuant to the terms of the license agreement, the Company recorded licensing expenses of approximately $ 632,000 and $ 734,000 , respectively.

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

39 unchanged sentences

Lease liability, net of current portion

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

The maturities of the lease liabilities are as follows for the periods ending June 30:

Total lease payments

1 unchanged sentence

( 11,467,302 )

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.

For the three months ended June 30, 2023 and 2022, operating cash flows paid in connection with operating leases amounted to approximately $ 466,000 and $ 685,000 , respectively, and $ 1,099,000 and $ 1,398,000 ,respectively, for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023 and December 31, 2022, the weighted average remaining lease term was years 13.4 and 13.1 years, respectively.

NET LOSS PER SHARE

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.

Basic loss per share and diluted loss per share for the three months ended June 30, 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 11,904,000 and 8,630,000 incremental shares at June 30, 2023 and 2022, respectively, have been excluded from the computation of diluted loss per share as they are anti-dilutive.

SUBSEQUENT EVENTS

On July 19, 2023, the Company announced the appointment of Alexander D’Amico as Chief Financial Officer effective August 7, 2023.

The Company entered into an executive employment agreement with Mr.

D’Amico with an initial term commencing on August 7, 2023 and expiring on December 31, 2025.

After the expiration of the initial term, this employment agreement 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.

This agreement provides 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.

In addition, the agreements provide for certain termination benefits in the event of termination without “Cause” or voluntary termination of employment for “Good Reason”, as defined in the agreement.

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

On July 7, 2023, the Board of Directors granted options to purchase 1,138,750 shares of common stock to the Company’s employees which will be awarded based upon each employee’s 2023 individual performance evaluation.

Once awarded, these options will vest one half on the first anniversary of the grant date, one quarter on the second anniversary of the grant date, and one quarter on the third anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 2,811,000 .

On July 7, 2023, the Board of Directors granted options to purchase 76,130 shares of common stock to certain of the Company’s employees.

These options will vest in full on the first anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 172,000 .

On July 7, 2023, the Board of Directors granted options to purchase 100,000 shares of common stock to members of the Company’s Board of Directors.

These options will vest in full on the first anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 226,000 .

On July 7, 2023, the Board of Directors granted options to purchase 20,000 shares of common stock to a named executive officer of the Company.

These options will vest in full on the first anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 45,000 .

On July 7, 2023, the Board of Directors granted options to purchase 424,000 shares of common stock to certain senior managers of the Company.

These options will vest one half 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 $ 1,019,000 .

On July 7, 2023, the Board of Directors granted options to purchase 182,000 shares of common stock to the named executive officers and certain senior managers of the Company.

These options were awarded as a one-time award to each executive officer or senior manager in order to account for lost wages resulting from the salary freezes implemented by the Company over the preceding two years and to account for recent inflation.

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

The grant date fair value of these unvested options amounted to approximately $ 424,000 .

On July 7, 2023, certain named executive officers and senior managers were granted 250,000 restricted stock units.

These awards were valued at approximately $ 883,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant.

These awards vest two thirds on the first anniversary of the date of the grant, and one-third on the second anniversary of the date of the grant.

On July 7, 2023, the Board of Directors granted options to purchase 115,000 shares of common stock to a certain senior manager of the Company.

These options 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 $ 276,000 .

On July 7, 2023, the Board of Directors granted 61,500 restricted stock units to certain employees of the Company.

These restricted stock units will only vest upon a Change in Control of the Company, as defined in the Amended and Restated CytoSorbents Corporation 2014 Long-Term Incentive Plan.

On July 10, 2023, in connection with his appointment as Chief Financial Officer, Mr.

D’Amico was awarded options to purchase 70,000 shares of common stock which will vest as follows:

25,000 options upon the six-month anniversary of the date of grant and 15,000 options upon each of the first, second and third anniversaries of the date of grant.

The grant date fair value of these unvested options amount to approximately $ 166,000 .

Additionally, on July 10, 2023, Mr.

D’Amico was awarded 45,000 restricted stock units which will vest one half on the first anniversary of the grant date and one half on the second anniversary of the grant date.

These restricted stock units were valued at approximately $ 157,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant.

Additionally, on July 10, 2023, Mr.

D’Amico was awarded 215,000 restricted stock units which will only vest upon a Change in Control of the Company, as defined in the Amended and Restated CytoSorbents Corporation 2014 Long-Term Incentive Plan.

Additionally, on July 10, 2023, Mr.

D’Amico was awarded options to purchase 150,000 shares of common stock which will vest only upon the achievement of certain milestones pursuant to the terms of the Company’s existing 2022-2025 performance pool in place for the Company’s management team.

Additionally, on July 10, 2023, Mr.

D’Amico was awarded 15,000 restricted stock units which will vest either upon a Change of Control or will cliff vest on the second anniversary of the date of grant, subject to the executive officer’s continued service with the Company as of the applicable vesting date.

Except for the option to purchase 70,000 shares of common stock and option to purchase 150,000 shares of common stock, in each case awarded to Mr.

D’Amico, as further described above, each of the equity grants listed above were awarded on a contingent basis.

Pursuant to this contingent award structure, the awards will be subject to cash settlement unless prior to the settlement date, the Company has received prior stockholder approval of an amendment to the Amended and Restated CytoSorbents Corporation 2014 Long-Term Incentive Plan to increase the number of shares of the Company’s common stock available for issuance pursuant to awards granted thereunder and such increase is, at a minimum, sufficient to permit the non-cash settlement of the contingent awards.

The Company is expected to settle a litigation matter.

See Note 6, Litigation, for details regarding this expected settlement.

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