What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-09 compared with 2023-08-01 · 102 added, 85 removed, 238 unchanged (44% of the section changed)

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This Quarterly report on Form 10-Q includes “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include, but are not limited to, statements about our plans, objectives, representations and contentions and our expectations of the effects of the COVID-19 pandemic and are not historical facts and typically are identified by use of terms such as “may,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” and similar words, although some forward-looking statements are expressed differently.

These forward-looking statements include, but are not limited to, statements about our plans, objectives, representations and contentions and are not historical facts and typically are identified by use of terms such as “may,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” and similar words, although some forward-looking statements are expressed differently.

You should be aware that the forward-looking statements included herein represent management’s current judgment and expectations, but our actual results, events and performance could differ materially from those in the forward-looking statements.

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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.

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.

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 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.

The STAR-T study completed in August 2023 with final patient follow-up.

Currently the trial remains blinded, with focus on finalizing data monitoring to get to database lock, at which point data analysis will begin.

We expect to complete our initial STAR-T data analysis before year-end.

We intend to announce whether we believe the results from STAR-T can support an FDA marketing approval application thereafter.

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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This Breakthrough Device designation covers the removal of the Direct Oral Anticoagulants (DOACs) apixaban and rivaroxaban in a cardiopulmonary bypass circuit to reduce the likelihood of serious perioperative bleeding during urgent cardiac surgery.

Study enrollment was paused in November of 2022 for business reasons and is scheduled to resume after completion of the STAR-T trial.

Study enrollment was paused in November of 2022 for business reasons and we believe that the study will resume after completion of the STAR-T trial activities.

In January 2020, CytoSorb received European Union CE Mark label expansion to include the removal of ticagrelor during cardiopulmonary bypass in patients undergoing cardiothoracic surgery.

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

Data outputs from the STAR Registry have already been reported at the EuroPCR 2023 conference in Paris in May 2023 and

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.

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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, Germany and Italy with plans to expand in more countries in 2023.

The Registry is actively recruiting in Spain, Germany and Italy with plans to expand into additional countries.

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.

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.

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 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:

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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, Nikkiso, to distribute a high-quality hemoperfusion machine in Germany, Austria, and Luxembourg and are in the midst of a soft launch.

We initially partnered with a major international dialysis company, Nikkiso, to distribute a high-quality hemoperfusion machine.

The Nikkiso agreement expired in September 2023.

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

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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We are committed to funding Company-sponsored studies in key areas that we believe will drive international adoption and usage, with the goal of becoming a standard of care for those applications.

Strategic Partner Update

On November 8, 2023, Biocon Biologics (“Biocon”) announced that it entered into a definitive agreement with Eris Lifesciences (“Eris”) for the divestiture of its Dermatology and Nephrology branded formulations business units in India.

This transaction is expected to close by the end of November 2023.

In connection with this proposed transfer, the Company and Eris have entered into a temporary agreement for the distribution of CytoSorb ® products in India.

This temporary agreement has the same terms as the Company’s existing distribution agreement with Biocon except for the expiration date of the agreement, which has been updated from September 13, 2026, under the existing Biocon distribution agreement to December 31, 2025, under the temporary agreement.

Both the Company and Eris have agreed that they will use their best efforts to negotiate and finalize a new distribution agreement that will be commercially attractive to both parties.

As a result, Eris would act the Company’s exclusive distributor of CytoSorb ® products in India.

If a new distribution agreement with Eris is not executed by December 31, 2025, this temporary agreement will become null and void.

COVID-19 Business Update

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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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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.

As of September 30, 2023, we have earned the $74,918 in funding and no further funding remains under this contract.

Research and Development Update

Our research and development work levels have returned back to pre-pandemic levels.

The hiring of key technical staff remains a challenge in the current economic environment.

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 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.

As of September 30, 2023, the revenue remaining to be earned on open grant contracts is $7.6 million.

Overall, grant funded programs, HemoDefend-BGA™ (Universal Plasma),

HemoDefend-RBC™ and K + ontrol™, have been the beneficiary of approximately $15.8 million, $4.7 million and $7.7 million in total funding, respectively, awarded to date.

We have completed a strategic review of our research and development programs based on technical feasibility, regulatory complexity and market opportunity to assess what projects have the highest chance of commercial success.

As a result of this analysis, we have concluded, the best opportunity for commercialization resides with the HemoDefend-BGA and DrugSorb-ATR products.

We are consolidating our research and development teams onto these two projects as we conclude our grant obligations with respect to HemoDefend-RBC and K + ontrol™.

Impact of Inflation and Other Issues:

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

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%.

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

Revenue from product sales was approximately $7,754,000 in the three months ended September 30, 2023, as compared to approximately $6,463,000 in the three months ended September 30, 2022, an increase of approximately $1,291,000, or 20%.

Direct sales increased approximately $586,000, or 16%.

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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%.

dollar positively impacted third quarter 2023 product sales by approximately $508,000.

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

dollar was $1.09 as compared to an average exchange rate of $1.01 for the three months ended September 30, 2022.

Grant income was approximately $1,057,000 for the three months ended September 30, 2023 as compared to approximately $1,649,000 for the three months ended September 30, 2022, a decrease of approximately $592,000, or 36%.

This decrease was a result of the conclusion of several grants during the three months ended September 30, 2023.

Total revenues were approximately $8,811,000 for the three months ended September 30, 2023, as compared to total revenues of approximately $8,111,000 for the three months ended September 30, 2022, an increase of approximately $700,000, or 9%.

Cost of Revenues:

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.

For the three months ended September 30, 2023 and 2022, cost of revenue was approximately $3,204,000 and $4,494,000, respectively, a decrease of approximately $1,290,000.

Product cost of revenue was approximately $2,161,000 and $2,916,000, respectively, for the three months ended September 30, 2023 and 2022, a decrease of approximately $755,000.

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 three months ended September 30, 2022 that did not recur in 2023.

Product gross margins were approximately 72% for the three months ended September 30, 2023 as compared to approximately 55% for the three months ended September 30, 2022.

Research and Development Expenses :

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.

For the three months ended September 30, 2023, research and development expenses were approximately $3,749,000, as compared to research and development expenses of approximately $3,290,000 for the three months ended September 30, 2022, an increase of approximately $459,000.

This increase was due to an increase in our clinical trial activities of approximately $164,000 resulting from the costs related to our Star-T trial, approximately $147,000 in commercial readiness activities related to DrugSorb ATR and an increase in other non-grant research and development activities of approximately $148,000.

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.

Legal, financial, and other consulting expenses were approximately $1,103,000 for the three months ended September 30, 2023, as compared to approximately $610,000 for the three months ended September 30, 2022, an increase of approximately $494,000.

This increase was due to costs related to the abandonment of certain patent applications of approximately $183,000, other increases in legal expenses of approximately $42,000, an increase in consulting costs of approximately $152,000 related to regulatory matters on DrugSorb-ATR, an increase in employment agency fees of approximately $93,000 and an increase in accounting fees of approximately $24,000.

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.

Selling, general and administrative expenses were approximately $8,104,000 for the three months ended September 30, 2023, as compared to approximately $8,735,000 for the three months ending September 30, 2022, a decrease of $631,000.

This decrease was due to a decrease in advertising costs of approximately $683,000, a decrease in salaries, commissions and related costs of approximately $28,000, and a decrease in non-cash restricted stock expense of approximately $105,000.

These decreases were offset by an increase in non-cash stock compensation expense of approximately $81,000, an increase in travel and entertainment costs of approximately $73,000 and an increase in other general and administrative costs of approximately $31,000.

Loss on Foreign Currency Transactions:

For the three months ended September 30, 2023, the loss on foreign currency transactions was approximately $1,810,000 as compared to a loss of approximately $3,230,000 for the three months ended September 30, 2022.

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

dollar at September 30, 2023 as compared to June 30, 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.

dollar was $1.06 per Euro at September 30, 2023, as compared to $1.09 per Euro at June 30, 2023.

The 2022 loss was directly related to the decrease in the spot exchange rate of the Euro to the U.S.

dollar at September 30, 2022 as compared to June 30, 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%.

dollar was $0.98 per Euro at September 30, 2022, as compared to $1.05 per Euro at June 30, 2022.

Comparison for the nine months ended September 30, 2023 and 2022:

Revenue from product sales was approximately $23,736,000 for the nine months ended September 30, 2023, as compared to approximately $21,718,000 for the nine months ended September 30, 2022, an increase of approximately $2,019,000, or 9%.

Direct sales increased by approximately $716,000, or 6%.

Distributor sales increased by approximately $1,303,000, or 15%.

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%.

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

dollar positively impacted product sales for the nine months ended September 30, 2023 by approximately $404,000.

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

dollar was $1.08 as compared to an average exchange rate of $1.06 for the nine months ended September 30, 2022.

Grant income was approximately $3,945,000 for the nine months ended September 30, 2023 as compared to approximately $3,580,000 for the nine months ended September 30, 2022, an increase of approximately $364,000 or 10%.

This increase is the result of the impact of new grants awarded during the nine months ended September 30, 2023.

Total revenues were approximately $27,681,000 for the nine months ended September 30, 2023, as compared to total revenues of approximately $25,298,000 for the nine months ended September 30, 2022, an increase of approximately $2,383,000, or 9%.

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.

For the nine months ended September 30, 2023 and 2022, cost of revenue was approximately $10,600,000 and $10,322,000, respectively, an increase of approximately $278,000.

Product cost of revenue was approximately $6,785,000 and $6,924,000, respectively, for the nine months ended September 30, 2023 and 2022, a decrease of approximately $139,000.

The decrease in product cost of revenue was due to a reduction in the cost per device manufactured as we begin to realize production efficiencies at our new manufacturing facility in Princeton, New Jersey.

Grant cost of revenue for the nine months ended September 30, 2023 was approximately $3,815,000 as compared to $3,398,000 for the nine months ended September 30, 2022, an increase of approximately $417,000.

This increase in cost

of grant revenue was due primarily to an increase in grant revenue.

Product gross margins were approximately 71% for the nine months ended September 30, 2023 and approximately 68% for the nine months ended September 30, 2022.

The increase in product gross margin is due primarily to inefficiencies associated with the relocation of our production activities to our new manufacturing facility in Princeton, New Jersey during the nine months ended September 30, 2022 that did not recur in 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.

For the nine months ended September 30, 2023, research and development expenses were approximately $11,632,000 as compared to approximately $11,717,000 for the nine months ended September 30, 2022, a decrease of approximately $85,000.

This decrease was due to a decrease in costs associated with our clinical trial activities of approximately $1,270,000 related to the pause of our STAR-D trial in November 2022.

This decreases was offset by approximately $850,000 of costs incurred related to pre-production manufacturing activities required to bring the new manufacturing plant to a state of commercial readiness, approximately $268,000 of costs related to commercial readiness activities related to DrugSorb ATR and an increase of other non-grant related research and development activities of approximately $67,000.

Legal, Financial and Other Consulting Expenses:

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.

Legal, financial, and other consulting expenses were approximately $2,958,000 for the nine months ended September 30, 2023, as compared to approximately $2,089,000 for the nine months ending September 30, 2022.

The increase of approximately $869,000 was due to settlement costs of certain pending litigation matters of approximately $280,000, and increase in legal fees of approximately $205,000, an increase in employment agency fees of approximately $174,000, an increase in consulting costs of approximately $153,000 related to regulatory matters on DrugSorb-ATR, an increase in costs related to the abandonment of certain patent applications of approximately $45,000 and an increase in accounting fees of approximately $12,000.

Selling, General and Administrative Expenses:

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

Selling, general and administrative expenses were approximately $24,358,000 for the nine months ended September 30, 2023, as compared to $26,335,000 for the nine months ended September 30, 2022, a decrease of $1,977,000.

This decrease was due to a decrease in salaries, commissions and related costs of approximately $712,000, a decrease in advertising costs of approximately $643,000, a decrease in travel and entertainment expenses of approximately $54,000, a decrease in non-cash stock compensation expense of approximately $67,000, a decrease in commercial insurance expenses of approximately $173,000, a decrease in public relations costs of approximately $156,000, a decrease in royalty expense of approximately $78,000, a decrease in occupancy costs of approximately $83,000 and a decrease in other general and administrative expenses of approximately $11,000.

Loss on Foreign Currency Transactions:

For the nine months ended September 30, 2023, the loss on foreign currency transactions was approximately $734,000 as compared to a loss of approximately $6,967,000 for the nine months ended September 30, 2022.

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

dollar as of September 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 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.

dollar was $1.06 per Euro as of September 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 to U.S.

dollar which was $0.98 as of September 30, 2022 as compared to $1.14 as of December 31, 2021.

History of Operating Losses:

We have experienced substantial operating losses since inception.

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.

As of September 30, 2023, we had an accumulated deficit of approximately $276,670,000, which included losses of approximately $22,672,000 and $32,046,000 for the nine-month periods ended September 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 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.

As of September 30, 2023, we had current assets of approximately $19,261,000 and current liabilities of approximately $11,972,000.

As of September 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.

We are also managing our resources proactively, continuing to invest in key areas such as our U.S.

pivotal STAR-T trial.

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.

pivotal STAR-T trial and we have instituted tight cost controls.

At September 30, 2023, we have approximately $10.0 million in cash, including approximately $8.4 million and $1.7 million in unrestricted and restricted cash, respectively.

We believe this is sufficient to fund the Company’s operations through the first quarter of 2024.

We will need to raise additional capital to support our ongoing operations in the future, and are currently pursuing different sources, including less or non-dilutive debt financing, royalty financing, strategic or direct investments, equity financing, and/or combinations thereof.

COVID-19 Impact on Financial Results

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Because of this, the pandemic was a catalyst for CytoSorb orders from existing customers and also from new hospitals in countries where CytoSorb was not previously sold.

We believe this awareness of CytoSorb increased overall usage during the COVID-19 pandemic and may help to drive further CytoSorb sales in the future.

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.

We believe this awareness of CytoSorb increased overall usage during the COVID-19 pandemic.

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

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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.

As of September 30, 2023, the Company’s cash position was approximately $10.0 million, with cash and cash equivalents of approximately $8.4 million, and approximately $1.7 million in restricted cash, which is not expected to fund the Company’s operations beyond 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.

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

Critical Accounting Policies and Estimates

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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