What changed in this filing

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Item 1. Financial Statements

2023-11-09 compared with 2023-08-01 · 178 added, 180 removed, 588 unchanged (38% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

Cash and cash equivalents

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

Grants and accounts receivable, net of allowance for doubtful accounts of $ 56,893 as of September 30, 2023 and $ 76,041 at December 31, 2022

Prepaid expenses and other current assets

6 unchanged sentences

Accounts payable

Current maturities of long-term debt

Lease liability – current portion

2 unchanged sentences

Lease liability, net of current portion

Long-term debt

Long-term debt, net of current maturities

Total Liabilities

2 unchanged sentences

Preferred Stock, par value $ 0.001 , 5,000,000 shares authorized;

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

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

Common Stock, par value $ 0.001 , 100,000,000 shares authorized;

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

44,438,509 and 43,635,715 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

5 unchanged sentences

Total Liabilities and Stockholders’ Equity

See accompanying notes to consolidated financial statements .

See accompanying notes to the condensed consolidated financial statements .

CYTOSORBENTS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

CytoSorb sales

6 unchanged sentences

Selling, general and administrative

Total expenses

Total other expenses

Loss from operations

5 unchanged sentences

Interest income (expense), net

Gain (loss) on foreign currency transactions

Loss on foreign currency transactions

( 1,809,652 )

( 3,230,315 )

( 6,966,613 )

Miscellaneous income (expense)

Total other income (expense), net

Total other expense, net

( 1,843,322 )

( 3,183,499 )

( 6,880,933 )

Loss before benefit from income taxes

15 unchanged sentences

( 32,046,457 )

Other comprehensive income (loss):

Other comprehensive income:

Currency translation adjustment

( 1,000,882 )

Total comprehensive loss

3 unchanged sentences

( 26,371,522 )

See accompanying notes to consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

CYTOSORBENTS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

For the three and nine months ended September 30, 2023 and 2022 (Unaudited)

Comprehensive

Stockholders’

Income (Loss)

Balance at March 31, 2023

Balance at June 30, 2023

( 267,476,845 )

Stock-based compensation - employees, consultants and directors

Other comprehensive loss:

Other comprehensive income:

foreign translation adjustment

4 unchanged sentences

( 9,193,520 )

Balance at June 30, 2023

Balance at September 30, 2023

( 276,670,365 )

4 unchanged sentences

foreign translation adjustment

( 1,000,882 )

Issuance of common stock offerings, net of fees

4 unchanged sentences

( 22,672,487 )

Balance at June 30, 2023

Balance at September 30, 2023

( 276,670,365 )

1 unchanged sentence

Stockholders’

Income (Loss)

Balance at March 31, 2022

Balance at June 30, 2022

( 241,030,915 )

Stock-based compensation - employees, consultants and directors

Other comprehensive loss:

Other comprehensive income:

foreign translation adjustment

3 unchanged sentences

( 12,200,837 )

Balance at June 30, 2022

Balance at September 30, 2022

( 253,231,752 )

9 unchanged sentences

( 32,046,457 )

Balance at June 30, 2022

Balance at September 30, 2022

( 253,231,752 )

See accompanying notes to consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

CYTOSORBENTS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

September 30,

Cash flows from operating activities:

7 unchanged sentences

Write-off of patent cost

Bad debt expense (recovery)

Bad debt expense

Stock-based compensation

Foreign currency translation (gain) loss

( 1,075,656 )

Foreign currency translation loss

Changes in operating assets and liabilities:

Grants and accounts receivable

( 1,271,716 )

Prepaid expenses and other current assets

26 unchanged sentences

Issuance of restricted stock units

See accompanying notes to consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

CytoSorbents Corporation

Notes to Consolidated Financial Statements

June 30, 2023

September 30, 2023

BASIS OF PRESENTATION

4 unchanged sentences

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

The results for the three and 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.

The results for the three and nine months ended September 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 September 30, 2023, the Company’s cash and cash equivalents were approximately $ 10.0 million, including $ 8.4 million in cash and cash equivalents 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.

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

PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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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.

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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 July 2023, the Company announced that enrollment in the STAR-T trial completed, and in August 2023, the Company announced completion of the STAR-T trial, following the last scheduled patient follow-up.

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.

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

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

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

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

In May 2022, the Company announced that the Company entered into a 3-year preferred supplier agreement with Asklepios, making CytoSorb available without restrictions to all of the approximate 170 healthcare facilities across 14 states throughout Germany at which Asklepios operates.

In May 2022, the Company announced that the Company entered into a three-year preferred supplier agreement with Asklepios, making CytoSorb available without restrictions to all of the approximately 170 healthcare facilities across 14 states throughout Germany at which Asklepios operates.

This includes Asklepios Klinik St.

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The Company will also be able to provide field support services in these countries.

In September 2023, the distribution agreement with Nikkiso expired, and the Company indicated that it would not seek renewal of the agreement.

The Company is actively working with a new supplier to provide a stand-alone hemoperfusion pump.

In August 2022, the Company entered into a Marketing Agreement (the “Marketing Agreement”) with Fresenius Medical Care Deutschland GmbH (“Fresenius”), which expands the Company’s strategic partnership with Fresenius by establishing a multi-stage global collaboration to combat life-threatening diseases in critical care.

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Compared to the prior co-marketing agreement between the parties, the Marketing Agreement intends to increase the commitments from both parties and to ensure an ongoing and consistent level of marketing and promotional activity specifically focused around CytoSorb, where Fresenius will actively market and promote CytoSorb as the featured blood purification therapy for removal of cytokines, bilirubin, and myoglobin on its critical care platforms.

Specifically, the Marketing Agreement provides that various Fresenius-led in-person, virtual, social media, and web-based marketing programs and events will feature the CytoSorb therapy and highlight the cooperation between the two companies in the field of critical care during the Term.

Specifically, the Marketing Agreement provides that various Fresenius-led in-person, virtual, social media, and web-based

marketing programs and events will feature the CytoSorb therapy and highlight the cooperation between the two companies in the field of critical care during the Term.

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

In addition to strengthening and expanding the global marketing of CytoSorb, the Company and Fresenius also plan to work together to bring new innovative

solutions to the market.

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 in the second half of 2023.

The launch of this program is expected to occur in 2024.

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, as of June 30, 2023, is protected by 19 issued U.S.

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

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

12 unchanged sentences

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.

Foreign currency transaction gain/(loss) included in net loss amounted to approximately ($ 1,810,000 ) and ($ 3,230,000 ) for the three months ended September 30, 2023 and 2022, respectively.

Foreign currency transaction gain/(loss) included in net loss amounted to approximately ($ 734,000 ) and ($ 6,967,000 ) for the nine months ended September 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.

4 unchanged sentences

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

June 30, 2023

September 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 $ 66,000 and $ 76,000 as of June 30, 2023 and December 31, 2022, respectively.

The allowance for doubtful accounts amounted to approximately $ 57,000 and $ 76,000 as of September 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 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;

At September 30, 2023 and December 31, 2022, the Company’s inventory was comprised of finished goods, which amounted to $ 1,389,151 and $ 1,567,871 , respectively;

work in process which amounted to $ 1,140,784 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.

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.

During the three and nine months ended September 30, 2023, the Company recorded impairment charges of approximately $ 183,000 and $ 476,000 , respectively, related to certain patent costs.

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

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

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

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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 sheets.

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

3 unchanged sentences

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

Advertising expenses amounted to approximately $ 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.

Advertising expenses amounted to approximately $ 49,000 and $ 143,000 for the three months ended September 30, 2023 and 2022, respectively, and approximately $ 143,000 and $ 358,000 for the nine months ended September 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 June 30, 2023 or December 31, 2022.

The Company had no unrecognized tax benefits at September 30, 2023 or December 31, 2022.

The Company files tax returns in the U.S.

16 unchanged sentences

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

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

As of September 30, 2023, one distributor accounted for approximately 26 % 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.

For the three months ended September 30, 2023, no distributor or direct customers accounted for more than 10 % of the Company's total revenue and for the nine months ended September 30, 2023, one distributor accounted for approximately 10 % of the total revenue.

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

Financial Instruments

12 unchanged sentences

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

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.

Total freight costs amounted to approximately $ 140,000 and $ 79,000 , respectively, for the three months ended September 30, 2023 and 2022, and $ 341,000 and $ 166,000 , respectively, for the nine months ended September 30, 2023 and 2022.

Effect of Recent Accounting Pronouncements

2 unchanged sentences

Measurement of Credit Losses on Financial Instruments”.

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

This ASU provides guidance on the

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

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

The Company implemented the updated guidance during the six months ended June 30, 2023, and this did not have significant impact on its consolidated financial statements.

The Company implemented the updated guidance during the nine months ended September 30, 2023, and this did not have significant impact on its consolidated financial statements.

STOCKHOLDERS’ EQUITY

13 unchanged sentences

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.

During the nine months ended September 30, 2023, the Company 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 nine months ended September 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 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.

Total share-based employee, director, and consultant compensation amounted to approximately $ 1,086,000 and $ 2,487,000 for the three and nine months ended September 30, 2023, respectively, and approximately $ 1,005,000 and $ 2,554,000 for the three and nine months ended September 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 six months ended June 30, 2023 is as follows:

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

Exercise Price

Outstanding, December 31, 2022

Outstanding, June 30, 2023

Outstanding, September 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 $ 3.71 per share) and expected life of the stock option ( 10 years ), the current price of the underlying stock and its expected volatility ( 70.9 %), expected dividends ( 0 )% on the stock and the risk free interest rate (ranging from 3.50 % to 4.61 %) 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.

The intrinsic value is calculated as the difference between the market value of the shares as of September 30, 2023 of $ 1.88 and the exercise price of the shares.

Options Outstanding

Outstanding at

September 30,

$ 1.11 - $ 13.20

1 unchanged sentence

Exercisable at

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

September 30,

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

Non-vested, December 31, 2022

( 1,550,666 )

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.

Non-vested, September 30, 2023

As of September 30, 2023, the Company had approximately $ 7,990,000 of total unrecognized compensation cost related to stock options which will be amortized over approximately 41 months .

Awards of Stock Options

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 quarter on the first anniversary of the grant date, one quarter on the second anniversary of the grant date, one quarter on the third anniversary of the grant date and one quarter on fourth anniversary of the grant date.

The grant date fair value of these unvested options

amounted to approximately $ 2,665,000 .

During the three and nine months ended September 30, 2023, the Company recorded approximately $ 196,000 of stock option expense related to these options.

On July 7, 2023, the Board of Directors granted options to purchase 56,130 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 $ 156,000 .

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.

During the three and nine months ended September 30, 2023, the Company recorded approximately $ 34,000 of stock option expense related to these options.

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 $ 278,000 .

During the three and nine months ended September 30, 2023, the Company recorded approximately $ 65,000 of stock option expense related to these options.

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 $ 56,000 .

During the three and nine months ended September 30, 2023, the Company recorded approximately $ 13,000 of stock option expense related to these options.

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 $ 992,000 .

During the three and nine months ended September 30, 2023, the Company recorded approximately $ 144,000 of stock option expense related to these options.

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, and one half on the second anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 426,000 .

During the three and nine months ended September 30, 2023, the Company recorded approximately $ 36,000 of stock option expense related to these options.

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

These options 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.

The grant date fair value of these unvested options amounted to approximately $ 320,000 .

As of September 30, 2023, none of these milestones have been met.

Accordingly, no charge for these options has been recorded in the consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2023.

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

Alexander 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.

D’Amico was also granted options to purchase 215,000 shares of common stock that 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.

All of these options were forfeited upon the termination of Mr.

D’Amico’s employment agreement.

During the nine months ended September 30, 2023, 263,000 options were awarded to newly hired employees in connection with their employment agreements.

Change in Control-Based Awards of Restricted Stock Units:

5 unchanged sentences

December 31, 2022

June 30, 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 and six months ended June 30, 2023 and 2022.

September 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 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 $ 2,220,000 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.

For the three and nine months ended September 30, 2023 and 2022, the Company recorded (income) expense of approximately $ 0 and $ 177,000 , and $( 245,000 ) and $ 50,000 , respectively, related to these restricted stock unit awards.

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

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

For the three and 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.

For the three and nine months ended September 30, 2023 and 2022, the Company recorded a charge of approximately $ 106,000 and $ 214,000 , and $ 200,000 and $ 214,000 , respectively, related to these restricted stock unit awards.

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

For the three and nine months ended September 30, 2023 and 2022, the Company recorded a charge of approximately $ 102,000 and $ 0 , and $ 102,000 and $ 0 , respectively, related to these restricted stock unit awards.

On September 18, 2023, a named executive officer was granted 45,000 restricted stock units.

This award was valued at approximately $ 89,000 at the date of issuance, based upon the market price of the Company's common stock at the date of the grant, and vested (will vest) one-third on the date of the grant, one-third on the first anniversary of the date of the grant, and one-third on the second anniversary of the date of the grant.

For the three and nine months ended September 30, 2023 and 2022, the Company recorded a charge of approximately $ 50,000 and $ 0 , and $ 50,000 and $ 0 , respectively, related to these restricted stock unit awards.

On January 23, 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.

1 unchanged sentence

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:

For the three and nine months ended September 30, 2023 and 2022, the Company recorded a charge (income) of approximately $ 8,000 and $ 0 , and $ 54,000 and $( 34,000 ), respectively, related to all restricted stock units.

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

D'Amico was awarded 45,000 restricted stock units which were scheduled to 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 15,000 restricted stock units which were scheduled to vest either upon a Change of Control or will cliff vest on the second anniversary of the date of the grant, subject to Mr.

D'Amico's continued service with the Company as of the applicable vesting date.

D'Amico's and the Company's mutual agreement to terminate his employment, effective August 28, 2023, all 60,000 of his restricted stock units were forfeited.

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

Non-vested, December 31, 2022

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:

Non-vested, September 30, 2023

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

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

United States

8 unchanged sentences

Total revenue

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

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

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

United States

50 unchanged sentences

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

June 30, 2023

September 30, 2023

December 31, 2022

1 unchanged sentence

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

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.

Contract receivables represent balances due from product sales to distributors amounting to $ 4,122,442 and $ 2,944,031 at September 30, 2023 and December 31, 2022, respectively, and billed and unbilled amounts due on government contracts amounting to $ 404,638 and $ 878,421 at September 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 $ 135,410 and $ 166,065 as of September 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 $ 1,492,772 and $ 1,516,772 at September 30, 2023 and December 31, 2022, respectively.

LONG-TERM DEBT, NET

27 unchanged sentences

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

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.

For the three and nine months ended September 30, 2023, the Company recorded interest expense of approximately $ 10,714 and $ 32,143 , respectively,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 June 30, 2023:

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

Principal payments of long-term debt are due as follows during the 12-month periods ending September 30th:

COMMITMENTS AND CONTINGENCIES

Payroll Tax Examination

In December 2021, the Company was notified that its European subsidiary, CytoSorbents Europe GmbH, would be subject to an audit of their payroll tax and social cost filings for the four-year period from 2018 through 2021.

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

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

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

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

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

As of 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.

Employment Agreements

On July 30, 2019, CytoSorbents Corporation entered into amended and restated executive employment agreements with its principal executives, Dr.

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

Bloch, the Company’s former Chief Financial Officer.

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

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

13 unchanged sentences

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

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

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

Unless terminated earlier by Ms.

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

On September 18, 2023, the Company entered into a new Employment Agreement with Ms.

Bloch pursuant to which Ms.

Bloch will continue to serve as the Company’s Chief Financial Officer.

Bloch’s service under the Employment Agreement has replaced and terminated the Consulting Agreement disclosed above.

The Employment 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 agreement provides for certain termination benefits in the event of termination without “Cause” or voluntary termination of employment for “Good Reason”, as defined in each agreement.

Unless terminated sooner by either the Company or Ms.

Bloch, the Employment Agreement will remain in effect until December 31, 2025, and thereafter, as mutually agreed between the Company and Ms.

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.

On August 28, 2023, the Company and Mr.

D’Amico mutually agreed to terminate Mr.

D’Amico’s employment with the Company.

D’Amico and the Company entered into a Mutual Termination and Release Agreement (the “Termination and Release Agreement”), pursuant to which the Company and Mr.

D’Amico have mutually agreed to terminate the Employment Agreement in its entirety.

In addition, under the Termination and Release Agreement, the Company and Mr.

D’Amico have agreed to customary and mutual non-disparagement and release provisions.

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

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

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 has settled a litigation matter.

As part of the settlement agreement, the Company 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 September 30, 2023.

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

3 unchanged sentences

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

For the three months ended 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.

For the three months ended September 30, 2023 and 2022, the Company recorded royalty expenses of approximately $ 229,000 and $ 187,000 , respectively.

For the nine months ended September 30, 2023 and 2022, the Company recorded royalty expenses of approximately $ 703,000 and $ 627,000 , 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 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.

For the three and nine months ended September 30, 2023, the Company did not record any expense related to this agreement as the launch of this program is expected to occur in 2024.

License Agreement

1 unchanged sentence

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

For the three months ended June 30, 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.

For the three months ended September 30, 2023 and 2022 pursuant to the terms of the license agreement, the Company recorded licensing expenses of approximately $ 308,000 and $ 312,000 , respectively.

For the nine months ended September 30, 2023 and 2022 pursuant to the terms of the license agreement, the Company recorded licensing expenses of approximately $ 940,000 and $ 1,046,000 , respectively.

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

35 unchanged sentences

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

September 30,

Right-of-use asset

2 unchanged sentences

Lease liability, net of current portion

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

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

Total lease payments

1 unchanged sentence

( 11,147,546 )

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.

For the three months ended September 30, 2023 and 2022, operating cash flows paid in connection with operating leases amounted to approximately $ 633,000 and $ 659,000 , respectively, and $ 1,801,000 and $ 2,057,000 , respectively, for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023 and December 31, 2022, the weighted average remaining lease term was 12.9 years and 13.1 years, respectively.

NET LOSS PER SHARE

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.

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 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.

Basic loss per share and diluted loss per share for the three months ended September 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 14,119,000 and 11,428,000 incremental shares at September 30, 2023 and 2022, respectively, have been excluded from the computation of diluted loss per share as they are anti-dilutive.

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

What changed 10-Q

Item 1. Financial Statements