What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-01 compared with 2023-05-02 · 111 added, 65 removed, 212 unchanged (45% of the section changed)

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We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, other than as required under the Federal securities laws.

This discussion of our financial condition and the results of operations should be read together with the financial statements, including the notes contained elsewhere in this Quarterly Report on Form 10-Q, and the financial statements, including the notes thereto, contained in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 9, 2023.

We are a leader in the treatment of life-threatening conditions in the intensive care (“ICU”) and cardiac surgery using blood purification via our proprietary polymer adsorption technology.

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FDA and Health Canada marketing approval.

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

CytoSorb is used during and after cardiac surgery to remove inflammatory mediators, such as cytokines, activated complement, and free hemoglobin that can lead to post-operative complications such as acute kidney injury, lung injury, and shock.

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

CytoSorb has been used globally in more than 7,650 COVID-19 patients todate.

CytoSorb has also been granted FDA Breakthrough Designation for the removal of ticagrelor in a cardiopulmonary bypass circuit during emergent and urgent cardiothoracic surgery.

CytoSorb was also granted a second FDA Breakthrough Device designation for the removal of the Direct Oral Anticoagulants (DOACs) apixaban and rivaroxaban in a cardiopulmonary bypass circuit to reduce the likelihood of serious perioperative bleeding during urgent cardiothoracic surgery.

CytoSorb has been used globally in more than 7,650 COVID-19 patients to date.

DrugSorb-ATR has been granted FDA Breakthrough Designation for the removal of ticagrelor in a cardiopulmonary bypass circuit during emergent and urgent cardiothoracic surgery.

DrugSorb-ATR was also granted a second FDA Breakthrough Device designation for the removal of the Direct Oral Anticoagulants (DOACs) apixaban and rivaroxaban in a cardiopulmonary bypass circuit to reduce the likelihood of serious perioperative bleeding during urgent cardiothoracic surgery.

We are focusing on three key objectives that we believe are the key to driving sustainable, long-term growth:

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• DrugSorb-ATR — an investigational extracorporeal antithrombotic removal system based on the same polymer technology as CytoSorb that is being evaluated in the U.S.

STAR-T and future STAR-D pivotal randomized, controlled trials to reduce the level of antithrombotic drugs, ticagrelor, apixaban and rivaroxaban to reduce bleeding complications in patients undergoing cardiothoracic surgery while on these drugs.

STAR-T and STAR-D pivotal randomized, controlled trials to reduce the level of antithrombotic drugs, ticagrelor, apixaban and rivaroxaban to reduce bleeding complications in patients undergoing cardiothoracic surgery while on these drugs.

• ECOS-300CY — an adsorption cartridge approved in the E.U.

for use with ex vivo organ perfusion systems to remove cytokines and other inflammatory mediators in the organ perfusate, with the goal of maintaining or improving solid organ function prior to transplant.

for use with ex vivo organ perfusion systems to remove cytokines and other inflammatory mediators in the organ perfusate, with the goal of maintaining or improving solid organ function.

prior to transplant.

In 2021, commercialization of PerSorb™ and Aferetica’s PerLife™ ex vivo organ perfusion system commenced in Italy.

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This was done under the previously announced FDA Breakthrough Device Designation granted for the removal of ticagrelor in a cardiopulmonary bypass circuit to reduce the likelihood of serious perioperative bleeding during urgent cardiac surgery.

In October 2021, the first patient was enrolled, and the STAR-T study is now actively recruiting at multiple U.S.

In November 2022, the first milestone was completed with the first one-third of patients enrolled, triggering the first Data Safety Monitoring Board (DSMB) meeting.

The DSMB recommended to continue the study as planned without any modifications.

In October 2021, the first patient was enrolled, and in November 2022 the first milestone was completed with the first one-third of patients enrolled, triggering the first independent Data Safety Monitoring Board (DSMB) meeting.

The DSMB recommended continuing the study as planned without any modifications.

In 2022, we also received FDA approval to expand the study to Canada and subsequently received Health Canada approval allowing inclusion of Canadian sites into the STAR-T trial in January 2023.

In April 2023, the study reached the 2 nd milestone of 67% enrollment or 80 patients.

The study is expected to reach 100% enrollment sometime in the summer of 2023.

Because of the brisk enrollment of the trial, we have elected to forego an interim analysis at this stage which would have otherwise taken several months to conclude, and instead focus on completing trial enrollment on schedule and initiate the final study analysis, while preserving the full statistical power of the study.

In April 2023, the study reached the 2 nd milestone of 67% enrollment or 80 patients triggering the second independent DSMB meeting.

The DSMB again recommended continuing the study as planned without any modifications.

The STAR-T study completed enrollment in July 2023.

Operational activities are now focused on collection and cleaning of data leading to database lock in order to perform analyses and generate the results of the study.

In October 2021, we also received full FDA approval of an Investigational Device Exemption (IDE) application to conduct a double-blind, randomized, controlled clinical study for up to 120 patients entitled, “ S afe and T imely A ntithrombotic R emoval – D irect Oral Anticoagulants ( STAR-D ),” in the United States to support FDA marketing approval.

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The international S afe and T imely A ntithrombotic R emoval ( STAR ) Registry is designed to capture real world clinical and health economic outcomes with intraoperative antithrombotic drug removal.

The Registry is actively recruiting in the U.K., Germany, Austria and Sweden and is planned to expand to additional countries in 2023.

The intent of the Registry is to report outcomes at international conferences and submit the results for publication on a rolling basis as enrollment progresses with estimated first data readouts in 2023.

The Registry is actively recruiting in the U.K., Germany, Austria, Sweden and Belgium and is planned to expand to additional countries in 2023.

Data outputs from the STAR Registry have already been reported at the EuroPCR 2023 conference in Paris in May 2023 with additional data planned for release at the European Association of Cardiothoracic Surgery conference in Vienna in October 2023.

The Registry will continue to report analyses at international conferences and submit the results for publication on a rolling basis as enrollment progresses.

In April 2020, we received U.S.

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ECMO centers were presented at the International Symposium of Intensive Care Medicine conference in August 2021 in Brussels, Belgium, and published in the peer reviewed journal Frontiers in Medicine.

The CTC registry completed enrollment with 100 patients from five centers, and the final results mirror the high survival (74%) seen in the previous analysis and have been submitted for publication.

The CTC registry completed enrollment with 100 patients from five centers, and the final results mirror the high survival (74%) seen in the previous analysis and were recently published in the prestigious journal Critical Care.

The German PROCYSS multicenter, randomized controlled trial evaluating the ability of CytoSorb to restore hemodynamic stability in patients with refractory septic shock is actively enrolling.

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The international COSMOS Registry was designed to capture real world outcomes and device utilization patterns across multiple critical care indications including but not limited to sepsis, acute respiratory failure, postoperative vasoplegia, acute liver failure, and acute pancreatitis.

The Registry is actively enrolling in Spain and Germany with plans to expand in more countries in 2023.

The Registry is actively enrolling in Spain, Germany and Italy with plans to expand in more countries in 2023.

The intent of the Registry is to report outcomes at international conferences and submit the results for publication on a rolling basis as enrollment progresses.

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Our core customer base accounts for the majority of our direct sales and grew by 20-25% at the start of the pandemic and has remained stable since.

We are in close contact with all of these accounts and have confirmed that COVID-19 related issues, including its effect on staffing and numbers of ICU patients, were the primary issue for volatility in ordering.

We have begun to see an easing of these negative impacts of COVID-19 and we have experienced a return to in-person selling, which we believe will reinvigorate growth.

Although the acute care hospital market is still suffering from staffing shortages, decreased procedural revenues, and strained budgets in the aftermath of the COVID pandemic, we are experiencing significantly improving numbers of in-person meetings with customers at hospitals and at scientific conferences which we believe are critical to effective sales, as hospital visiting restrictions have generally been lifted, though some restrictions still remain in certain areas.

• New Therapy Divisions:

We have established three distinct therapy divisions within our commercial operations including Critical Care, Cardiovascular, and Liver/Kidney/other to develop these markets internationally with the focus of leaders with area-specific medical and commercial expertise, who will work closely with our sales teams and best serve the needs and interests of our customers.

We have already seen our efforts bear fruit with now more than 150 cardiac surgery centers internationally who have begun to use CytoSorb to remove antithrombotic drugs during urgent cardiac surgery, for example.

We have already seen our efforts bear fruit with increasing numbers of cardiac surgery centers internationally who have begun to use CytoSorb to remove antithrombotic drugs during urgent cardiac surgery, for example.

We believe this infrastructure will yield many more similar successes across a broad array of applications.

• New Exclusive Private Hospital Chain Partnerships:

We are now the preferred supplier of hemoadsorption technology to the three largest private hospital chains in Germany, including Asklepios Kliniken GmbH, and the former hospitals of RHÖN-KLINIKUM AG.

We are now the preferred supplier of hemoadsorption technology to the three largest private hospital chains in Germany, including Asklepios Kliniken GmbH, Helios, and the former hospitals of RHÖN-KLINIKUM AG.

Many of these hospitals are already current customers and our agreements facilitate access and sales of CytoSorb to these and all other relevant institutions within these hospital networks.

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o Liver disease:

In the treatment of acute liver disease, CytoSorb outperforms the market leading MARS® platform (Baxter) in the ex vivo removal of many liver toxins, but has the added benefit of removing cytokines and inflammatory mediators, while being much easier to use.

In real-world practice, CytoSorb has replaced MARS at many accounts.

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This would greatly simplify treatment with CytoSorb in the ICU - potentially enabling its more ubiquitous and earlier use on more patients while opening the door for more new applications in the emergency room, surgery suites, and elsewhere, in what we call the “hospital-wide” application.

We have initially partnered with a major international dialysis company to distribute a high-quality hemoperfusion machine in Germany, Austria, and Luxembourg and are in the midst of a soft launch, to be followed by a broader rollout in these countries later this year, and in more countries in the not-to-distant future.

We have initially partnered with a major international dialysis company, Nikkiso, to distribute a high-quality hemoperfusion machine in Germany, Austria, and Luxembourg and are in the midst of a soft launch.

The machine is only as good as the therapy that is being run on it, and CytoSorb is the market leading cytokine adsorbing technology that makes this an excellent combination treatment and a potentially game-changing new business model going forward.

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The use of CytoSorb in patients infected with COVID-19 in Italy, China, Germany and France began in March 2020.

During the pandemic, CytoSorb has been used to treat dangerous inflammation and related life-threatening complications in more than 7,650 COVID-19 patients in more than 30 countries.

During the pandemic, CytoSorb has been used to treat dangerous inflammation and related life-threatening complications in more than 7,650

COVID-19 patients in more than 30 countries.

Based upon initial data and reports from physicians treating these complications, CytoSorb use has generally been associated with a marked reduction in cytokine storm and inflammation, improved lung function, weaning from mechanical ventilation, decannulation from extracorporeal membrane oxygenation (ECMO), and a reversal of shock.

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Primary results on observed ICU mortality of COVID-19 patients with acute respiratory distress syndrome (ARDS) requiring extracorporeal membrane oxygenation (ECMO) and treated with CytoSorb according to FDA EUA criteria were presented at the International Symposium of Intensive Care Medicine conference in September 2021 in Brussels, Belgium.

In December 2021, we announced the publication of these results in the peer-reviewed journal Frontiers in Medicine .

The CTC Registry has completed enrollment and the final results confirming high survival (74%) were presented at the European Society of Intensive Care Medicine conference in October 2022 and also have been submitted for publication.

In December 2021, we announced the publication of results on the first 52 patients in the peer-reviewed journal Frontiers in Medicine, demonstrating high 90-day survival (73%) The CTC Registry has completed enrollment at 100 patients and 5 U.S.

ECMO centers, confirming high 90-day survival (74%).

The final results of the CTC Registry with 100 patients, and a discussion of “enhanced lung rest” due to the combination therapy of CytoSorb with ECMO, were published recently in the journal, Critical Care.

Government Research Grants:

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For a complete discussion of the various research grants we have obtained, please refer to the section entitled Government Research Grants included in Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 9, 2023.

The following additional research grant has been awarded subsequent to the filing of our Annual Report on Form 10-K:

On May 12, 2023, the Company was granted a Phase I Small Business Innovation Research (SBIR) award from the United States Department of the Air Force (DAF) valued at $74,918 to explore new ways to treat combat injuries.

As of June 30, 2023, we have earned $24,600 in funding under the contract and have approximately $50,300 remaining under the contract.

Research and Development Update

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Our recruiting process is ongoing, so that we can obtain the technical staff required to be able to timely execute on our various grant and non-grant related research and development projects.

As of March 31, 2023, the revenue remaining to be earned on open grant contracts is $9.9 million.

As of June 30, 2023, the revenue remaining to be earned on open grant contracts is $8.7 million.

Overall, grant funded programs, HemoDefend-BGA™ (Universal Plasma), HemoDefend-RBC™ and K + ontrol™, continue to progress and we have been the beneficiary of approximately $15.8 million, $4.7 million and $7.7 million in total funding, respectively, awarded to date.

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Inflationary pressures may continue to impact our product gross margins in the future.

Comparison for the three months ended March 31, 2023 and 2022:

Revenue from product sales was approximately $7,910,000 in the three months ended March 31, 2023, as compared to approximately $7,924,000 in the three months ended March 31, 2022, a decrease of approximately $14,000.

As a result of the decrease in the average exchange rate of the Euro to the U.S.

dollar, 2023 product sales were negatively impacted by approximately $349,000.

For the three months ended March 31, 2023, the average exchange rate of the Euro to the U.S.

dollar was $1.07 as compared to an average exchange rate of $1.12 for the three months ended March 31, 2022.

Direct sales decreased approximately $202,000, or 4%.

Comparison for the three months ended June 30, 2023 and 2022:

Revenue from product sales was approximately $8,072,000 in the three months ended June 30, 2023, as compared to approximately $7,331,000 in the three months ended June 30, 2022, an increase of approximately $741,000, or 10%.

Direct sales increased approximately $331,000, or 8%.

Distributor sales increased approximately $410,000, or 14%.

There were no sales to hospitals in the United States under the EUA granted by the FDA for the three months ended March 31, 2023, as compared to sales of approximately $155,000 in the first quarter of 2022.

There were no sales related to the demand for CytoSorb to treat COVID-19 patients during the three months ended March 31, 2023 as compared to approximately $300,000 in the first quarter of 2022.

Grant income was approximately $1,539,000 for the three months ended March 31, 2023 as compared to approximately $767,000 for the three months ended March 31, 2022, an increase of approximately $772,000, or 101%.

This increase was a result of a strategic decision to deploy our research and development employees exclusively to grant related activities during the three months ended March 31, 2023.

In addition, revenue earned on new grant awards was approximately $312,000 during the three months ended March 31, 2023.

Total revenues were approximately $9,449,000 for the three months ended March 31, 2023, as compared to total revenues of approximately $8,691,000 for the three months ended March 31, 2022, an increase of approximately $758,000, or 9%.

The increase in the average exchange rate of the Euro to the U.S.

dollar positively impacted second quarter 2023 product sales by approximately $187,000.

For the three months ended June 30, 2023, the average exchange rate of the Euro to the U.S.

dollar was $1.09 was compared to an average exchange rate of $1.06 for the three months ended June 30, 2022.

There were no sales related to the demand for CytoSorb to treat COVID-19 patients during the three months ended June 30, 2023 or for the three months ended June 30, 2022.

Grant income was approximately $1,348,000 for the three months ended June 30, 2023 as compared to approximately $1,165,000 for the three months ended June 30, 2022, an increase of approximately $183,000, or 16%.

This increase was a result of a strategic decision to deploy our research and development employees exclusively to grant related activities during the three months ended June 30, 2023.

Total revenues were approximately $9,421,000 for the three months ended June 30, 2023, as compared to total revenues of approximately $8,496,000 for the three months ended June 30, 2022, an increase of approximately $925,000, or 11%.

Cost of Revenues:

For the three months ended March 30, 2023 and 2022, cost of revenue was approximately $3,994,000 and $2,278,000, respectively, an increase of approximately $1,716,000.

Product cost of revenues increased approximately $976,000 during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

This increase was due start-up activities related to our new manufacturing facility.

Product gross margins were approximately 68% for the three months ended March 31, 2023, as compared to approximately 80% for the three months ended March 31, 2022, also due to start-up activities.

For the three months ended June 30, 2023 and 2022, cost of revenue was approximately $3,402,000 and $3,551,000, respectively, a decrease of approximately $149,000.

Product cost of revenue was approximately $2,093,000 and $2,453,000, respectively, for the three months ended June 30, 2023 and 2022, a decrease of approximately $360,000.

The decrease is due primarily to inefficiencies associated with the relocation of our production activities to our new manufacturing facility in Princeton, New Jersey during the second quarter of 2022 that did not recur in the second quarter of 2023.

Product gross margins were approximately 74% for the three months ended June 30, 2023 as compared to approximately 67% for the three months ended June 30, 2022.

Research and Development Expenses :

For the three months ended March 31, 2023, research and development expenses were approximately $4,214,000 as compared to research and development expenses of approximately $4,243,000 for the three months ended March 31, 2022, a decrease of approximately $29,000.

This decrease was due to a decrease in clinical trial costs of approximately $807,000 related to the pause of our STAR-D trial in November 2022, and a decrease in non-grant related research and development activities of approximately $72,000.

For the three months ended June 30, 2023, research and development expenses were approximately $3,669,000, as compared to research and development expenses of approximately $4,183,000 for the three months ended June 30, 2022, a decrease of approximately $514,000.

This decrease was due to a decrease in our clinical trial activities of approximately $627,000 related to the pause of our STAR-D trial in November 2022.

This decrease was offset by approximately $70,000 of costs incurred related to pre-production manufacturing activities required to bring the new manufacturing plant to a state of commercial readiness and an increase in non-grant related research and development costs of approximately $43,000.

Legal, Financial and Other Consulting Expenses:

Legal, financial, and other consulting expenses were approximately $1,185,000 for the three months ended June 30, 2023, as compared to approximately $679,000 for the three months ended June 30, 2022, an increase of approximately $506,000.

This increase was due to an increase in legal fees and expected settlement costs of pending litigation of approximately $306,000 (see Note 6), other increases in

legal expenses of approximately $174,000 and the write-off of certain patent costs and an increase in accounting fees and other consulting fees of approximately $26,000.

Selling, General and Administrative Expenses:

Selling, general and administrative expenses were approximately $7,724,000 for the three months ended June 30, 2023, as compared to approximately $8,439,000 for the three months ending June 30, 2022, a decrease of $715,000.

This decrease was due to a decrease in non-cash stock compensation expense of approximately $191,000, a decrease in travel and entertainment expenses of approximately $99,000, a decrease in public relations costs of approximately $96,000, a decrease in advertising costs of approximately $82,000, a decrease in royalty expense of approximately $73,000, a decrease in commercial insurance of approximately $56,000, a decrease in salaries, commissions and related costs of approximately $43,000, and a decrease in other general and administrative expenses of approximately $75,000.

Gain (Loss) on Foreign Currency Transactions:

For the three months ended June 30, 2023, the gain on foreign currency transactions was approximately $415,000 as compared to a loss of approximately $2,523,000 for the three months ended June 30, 2022.

The 2023 gain was directly related to the increase in the spot exchange rate of the Euro to the U.S.

dollar at June 30, 2023 as compared to March 31, 2023.

The spot exchange rate of the Euro to the U.S.

dollar was $1.091 per Euro at June 30, 2023, as compared to $1.086 per Euro at March 31, 2023.

The 2022 loss was directly related to the decrease in the spot exchange rate of the Euro at June 30, 2022 as compared to March 31, 2022.

The spot exchange rate of the Euro to the U.S.

dollar was $1.05 per Euro as of June 30, 2022, as compared to $1.11 per Euro as of March 31, 2022.

Comparison for the six months ended June 30, 2023 and 2022:

Revenue from product sales was approximately $15,982,000 for the six months ended June 30, 2023, as compared to approximately $15,255,000 for the six months ended June 30, 2022, an increase of approximately $727,000, or 5%.

Distributor sales increased by approximately $597,000, or 10%.

Overall direct sales increased by approximately $130,000, or 1%.

The change in the exchange rate of the Euro to U.S.

dollar did not have a significant impact on product sales during the six months ended June 30, 2023.

Grant income was approximately $2,888,000 for the six months ended June 30, 2023 as compared to approximately $1,932,000 for the six months ended June 30, 2022, an increase of approximately $956,000 or 49%.

During the six months ended June 30, 2022, our research and development employees were either deployed to work-from-home status or reassigned to assist in activities related to increasing the production of CytoSorb.

In 2023, research and development employees were assigned exclusively to grant and other research and development activities.

Total revenues were approximately $18,870,000 for the six months ended June 30, 2023, as compared to total revenues of approximately $17,187,000 for the six months ended June 30, 2022, an increase of approximately $1,683,000, or 10%.

Cost of Revenues:

For the six months ended June 30, 2023 and 2022, cost of revenue was approximately $7,396,000 and $5,828,000, respectively, an increase of approximately $1,568,000.

Product cost of revenue was approximately $4,624,000 and $4,008,000, respectively, for the six months ended June 30, 2023 and 2022, an increase of approximately $616,000 and grant cost of revenue increased by approximately $952,000.

These increases were due primarily to an increases in both product sales and grant revenue.

Product gross margins were approximately 71% for the six months ended June 30, 2023 and approximately 74% for the six months ended June 30, 2022.

The reduction in product gross margin is due primarily to start-up costs associated with our new manufacturing facility in Princeton, New Jersey during the six months ended June 30, 2023.

Research and Development Expenses:

For the six months ended June 30, 2023, research and development expenses were approximately $7,883,000 as compared to research and development expenses of approximately $8,427,000 for the six months ended June 30, 2022, a decrease of approximately $544,000.

This decrease was due to a decrease in costs associated with our clinical trial activities of approximately $1,434,000 related to the pause of our STAR-D trial in November 2022, and a decrease in non-grant related research and development activities of approximately $29,000.

These decreases were offset by approximately $919,000 of costs incurred related to pre-production manufacturing activities required to bring the new manufacturing plant to a state of commercial readiness.

Legal, Financial and Other Consulting Expenses:

Legal, financial and other consulting expenses were approximately $669,000 for the three months ended March 31, 2023, as compared to approximately $801,000 for the three months ended March 31, 2022, a decrease of approximately $132,000.

This decrease was due to a decrease in legal fees of approximately $174,000 related to the abandonment of certain patent applications in 2022 and a decrease in accounting and other consulting costs of approximately $33,000.

These decreases were offset by an increase in employment agency fees of approximately $75,000.

Legal, financial, and other consulting expenses were approximately $1,854,000 for the six months ended June 30, 2023, as compared to approximately $1,480,000 for the six months ending June 30, 2022.

The increase of approximately $374,000 was due to an increase in legal fees and expected settlement costs of pending litigation of approximately $306,000 (see Note 6) and an increase in employment agency fees of approximately $80,000.

These increases were offset by a decrease in consulting fees of approximately $12,000.

Selling, General and Administrative Expenses:

Selling, general and administrative expenses were approximately $8,463,000 for the three months ended March 31, 2023, as compared to approximately $9,161,000 for the three months ending March 31, 2022, a decrease of approximately $698,000.

This decrease was due to a decrease in salaries, commissions and related costs of approximately $641,000, a decrease in commercial insurance expenses of approximately $76,000, a decrease in travel and entertainment expenses of approximately $28,000, a decrease in public relations costs of approximately $23,000, a decrease in advertising costs of approximately $18,000 and a decrease in other general and administrative expenses of approximately $46,000.

These decreases were offset by increases in non-cash stock compensation and non-cash restricted stock expense of approximately $134,000.

Selling, general and administrative expenses were approximately $16,187,000 for the six months ended June 30, 2023, as compared to $17,600,000 for the six months ended June 30, 2022, a decrease of $1,413,000.

This decrease was due to a decrease in salaries, commissions and related costs of approximately $683,000, a decrease in non-cash stock compensation expense of approximately $148,000, a decrease in commercial insurance expenses of approximately $131,000, a decrease in travel and entertainment expenses of approximately $127,000, a decrease in public relations costs of approximately $119,000, a decrease in advertising costs of approximately $100,000, a decrease in royalty expense of approximately $68,000 and a decrease in other general and administrative expenses of approximately $37,000

Gain (Loss) on Foreign Currency Transactions:

For the three months ended March 31, 2023, the gain on foreign currency transactions was approximately $661,000 as compared to a loss of approximately $1,213,000 for the three months ended March 31, 2022.

For the six months ended June 30, 2023, the gain on foreign currency transactions was approximately $1,076,000 as compared to a loss of approximately $3,736,000 for the six months ended June 30, 2022.

The 2023 gain was directly related to the increase in the spot exchange rate of the Euro to the U.S.

dollar as of March 31, 2023 as compared to December 31, 2022.

dollar as of June 30, 2023 as compared to December 31, 2022.

The spot exchange rate of the Euro to the U.S.

dollar was $1.09 per Euro as of March 31, 2023, as compared to $1.07 per Euro as of December 31, 2022.

Interest Expense, net:

For the three months ended March 31, 2023, interest expense was approximately $63,000, as compared to interest income of approximately $8,000 for the three months ended March 31, 2022.

The change was the result of interest incurred related to the draw down of the $5,000,000 Term Loan with Bridge Bank in December 2022.

dollar was $1.09 per Euro as of June 30, 2023, as compared to $1.07 per Euro at December 31, 2022.

The 2022 loss was directly related to the decrease in the spot exchange rate of the Euro as of June 30, 2022 as compared to December 31, 2021.

History of Operating Losses:

We have experienced substantial operating losses since inception.

As of March 31, 2023, we had an accumulated deficit of approximately $261,324,000, which included a loss of approximately $7,326,000 for the three-month periods ended March 31, 2023.

As of June 30, 2023, we had an accumulated deficit of approximately $267,477,000, which included losses of approximately $13,479,000 and $19,846,000 for the six-month periods ended June 30, 2023 and 2022, respectively.

Historically, losses have resulted principally from costs incurred in the research and development of our polymer technology, clinical studies, and general and administrative expenses.

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Since inception, our operations have been primarily financed through the issuance of debt and equity securities.

As of March 31, 2023, we had current assets of approximately $28,165,000 and current liabilities of approximately $10,436,000.

As of March 31, 2023, $25 million of our total shelf amount was allocated to our ATM facility, of which approximately $24.3 million is still available.

As of June 30, 2023, we had current assets of approximately $23,644,000 and current liabilities of approximately $10,351,000.

As of June 30, 2023, $25 million of our total shelf amount was allocated to our ATM facility, of which approximately $22.8 million is still available.

In April of 2023, we received approximately $1,000,000 in cash from the approved sale of our net operating losses and research and development credits from the State of New Jersey.

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pivotal STAR-T trial.

We have instituted tighter cost controls which are expected to materially reduce our planned cash burn in 2023.

We believe that we have sufficient cash to fund the Company’s operations beyond twelve months from the issuance of the accompanying financial statements.

We have instituted tight cost controls which are expected to materially reduce our planned cash burn in 2023.

We believe that we have sufficient cash to fund the Company’s operations through 2023.

We will need to raise additional capital to support our ongoing operations in the future.

COVID-19 Impact on Financial Results

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However, starting in the third quarter of 2021, the protracted COVID-19 pandemic began to have a negative impact on our business, due to pandemic-driven adverse market conditions worldwide, especially in Germany which is our largest market.

The excessive workload in hospitals due to COVID has led to an exodus of healthcare workers from acute care worldwide, leaving hospitals short-staffed, particularly nursing.

The excessive workload on healthcare workers due to COVID has led to an exodus of healthcare workers, particularly nurses, worldwide, leaving hospitals short-staffed.

This in turn has forced the reduction in ICU beds and allowable patient censuses, and reduced the scheduling of revenue generating surgical procedures, resulting in decreased revenue and economic weakness at hospitals.

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This is mainly attributed to high rates of vaccinations, natural immunity, and the availability of anti-viral drugs that are associated with reduced severity of illness, reduced need for hospitalization, and risk of death.

These factors, in turn, have decreased the numbers of patients treatable with CytoSorb.

Additionally, COVID slowed our ability to generate clinical data to support our sales and marketing efforts.

These factors, in turn, have decreased the numbers of COVID-19 patients treatable with CytoSorb.

Additionally, prior to 2023, COVID had slowed our ability to generate clinical data to support our sales and marketing efforts.

Currently, we are seeing an easing of the of the negative impacts of COVID-19.

8 unchanged sentences

Commencing on September 30, 2021, the remaining lease term will last for 15.5 years.

The lease required monthly rental payments of $25,208 for the Initial Early Term, $88,254 for the Early Term and initial monthly payments of approximately $111,171 in the first year of the remaining term.

The lease requires monthly rental payments of $25,208 for the Initial Early Term, $88,254 for the Early Term and initial monthly payments of approximately $111,171 in the first year of the remaining term.

Following the first year of the remaining term, the annual base rent will increase by approximately 2.75% annually over the remaining term.

14 unchanged sentences

We have no off-balance sheet arrangements.

Going Concern

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 new twelve months from the issuance of these

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.

Critical Accounting Policies and Estimates

3 unchanged sentences

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 2. Management’s Discussion and Analysis