What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2023-11-09 · 264 added, 303 removed, 463 unchanged (55% 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 $ 56,893 as of September 30, 2023 and $ 76,041 at December 31, 2022

Grants and accounts receivable, net of allowances of $ 48,229 and $ 49,663 as of March 31, 2024 and December 31, 2023, respectively

Prepaid expenses and other current assets

6 unchanged sentences

Accounts payable

Current maturities of long-term debt

Lease liability – current portion

Current maturities of long-term debt

Accrued expenses and other current liabilities

6 unchanged sentences

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

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

no shares issued and outstanding as of March 31, 2024 and December 31, 2023

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

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

54,293,555 and 54,240,265 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital

5 unchanged sentences

Total Liabilities and Stockholders’ Equity

See accompanying notes to the condensed consolidated financial statements .

See accompanying notes to consolidated financial statements .

CYTOSORBENTS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three months ended September 30,

Nine months ended September 30,

For the Three Months Ended March 31,

CytoSorb sales

Other product sales

Total product sales

1 unchanged sentence

Cost of revenue

Other expenses:

Operating expenses:

Research and development

1 unchanged sentence

Selling, general and administrative

Total other expenses

Total operating expenses

Loss from operations

1 unchanged sentence

( 7,891,596 )

( 21,867,828 )

( 25,165,524 )

Other income (expense):

Interest income (expense), net

Loss on foreign currency transactions

( 1,809,652 )

( 3,230,315 )

( 6,966,613 )

Miscellaneous income/(expense)

Total other expense, net

( 1,843,322 )

Gain (Loss) on foreign currency transactions

( 1,425,690 )

Total other income (expense), net

( 1,432,343 )

2 unchanged sentences

( 7,325,883 )

( 22,672,487 )

( 32,046,457 )

Benefit from income taxes

Provision for income taxes

Net loss attributable to common stockholders

1 unchanged sentence

( 7,325,883 )

( 22,672,487 )

( 32,046,457 )

Basic and diluted net loss per common share

2 unchanged sentences

( 7,325,883 )

( 22,672,487 )

( 32,046,457 )

Other comprehensive income:

Currency translation adjustment

Total comprehensive loss

( 7,537,846 )

( 9,542,028 )

Other comprehensive income/(loss):

Foreign currency translation adjustment

Comprehensive loss

( 5,134,686 )

( 7,934,091 )

See accompanying notes to the condensed consolidated financial statements.

See accompanying notes to consolidated financial statements.

CYTOSORBENTS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

For the three months ended March 31, 2024 and 2023 (Unaudited)

Comprehensive

Stockholders’

Balance at June 30, 2023

( 267,476,845 )

Stock-based compensation - employees, consultants and directors

Other comprehensive income:

foreign translation adjustment

Issuance of common stock offerings, net of fees

Proceeds from exercise of stock options for cash

Issuance of restricted stock units

( 9,193,520 )

Balance at September 30, 2023

( 276,670,365 )

Balance at December 31, 2023

1 unchanged sentence

Stock-based compensation - employees, consultants and directors

Other comprehensive income:

foreign translation adjustment

Issuance of common stock offerings, net of fees

Proceeds from exercise of stock options for cash

Issuance of restricted stock units

Legal/audit fees related to ATM offering

( 22,672,487 )

Balance at September 30, 2023

( 276,670,365 )

Comprehensive

Stockholders’

Balance at June 30, 2022

( 241,030,915 )

Stock-based compensation - employees, consultants and directors

Other comprehensive income:

foreign translation adjustment

Stock issued to vendor in lieu of cash payment

Issuance of restricted stock units

Issuance of common stock, net of fees incurred

Other comprehensive income (loss):

foreign currency translation adjustment

( 6,357,861 )

Balance at September 30, 2022

Balance at March 31, 2024

( 288,863,133 )

2 unchanged sentences

Stock-based compensation - employees, consultants and directors

Other comprehensive income:

foreign translation adjustment

Stock issued to vendor in lieu of cash payment

Issuance of restricted stock units

Issuance of common stock offerings, net of fees incurred

Other comprehensive income (loss):

foreign currency translation adjustment

Legal/audit fees related to ATM offering

Proceeds from the exercise of stock options for cash

( 7,325,883 )

Balance at September 30, 2022

Balance at March 31, 2023

( 261,323,761 )

See accompanying notes to the condensed consolidated financial statements.

See accompanying notes to consolidated financial statements.

CYTOSORBENTS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

September 30,

For the three

Cash flows from operating activities:

2 unchanged sentences

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

Accrued final fee

Non-cash compensation

Non-cash restricted stock unit compensation

Depreciation and amortization

Amortization of right-of-use asset

Write-off of patent cost

Bad debt expense

Amortization of right-of-use asset

Impairment of patents

Stock-based compensation

Foreign currency translation loss

Foreign currency transaction (gain) loss

Changes in operating assets and liabilities:

8 unchanged sentences

Purchases of property and equipment

( 5,873,928 )

Payments for patent costs

Net cash used in investing activities

( 6,249,496 )

Cash flows from financing activities:

Equity contributions - net of fees incurred

Repayment of long-term debt

Issuance of common stock, net of fees incurred

Proceeds from exercise of stock options

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Effect of exchange rates on cash

7 unchanged sentences

Supplemental disclosure of non-cash financing activities:

Issuance of common stock to vendor in lieu of cash payment

Settlement of accrued bonuses with restricted stock units

Capital expenditures included in accounts payable

Issuance of restricted stock units

See accompanying notes to the condensed consolidated financial statements.

See accompanying notes to consolidated financial statements.

CYTOSORBENTS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

March 31, 2024

BASIS OF PRESENTATION

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

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

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

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

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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, 2023, included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2024.

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.

The results for the three months ended March 31, 2024 and 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 March 31, 2024, the Company’s cash, cash equivalents and restricted cash balances were approximately $ 10.1 million, including approximately $ 8.6 million in cash and cash equivalents and approximately $ 1.5 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 will need to raise additional capital to support our ongoing operations in the future.

The Company is actively pursuing financing sources, including less or non-dilutive debt financing, royalty financing, strategic or direct investments, equity financing, and/or combinations thereof.

There can be no assurance that management will be successful in these endeavors.

PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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In the third quarter of 2019, the Company formed CytoSorbents UK Limited, a wholly-owned subsidiary of CytoSorbents Medical, Inc., which is responsible for the management of the Company’s clinical trial activities in the United Kingdom.

In March 2022, the Company formed CytoSorbents Medical UK Limited to provide marketing and direct sales services in the United Kingdom and the Republic of Ireland.

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

In March 2022, the Company formed CytoSorbents Medical UK Limited to provide marketing and direct sales services in the United Kingdom and the Republic of Ireland, a wholly-owned subsidiary of CytoSorbents Europe, GmbH.

In October 2022, the Company formed CytoSorbents France SAS, a wholly-owned subsidiary of CytoSorbents Europe, GmbH, to provide marketing and direct sales services in France.

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

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

In December 2023, the Company announced that the independent Data Safety Monitoring Board (the “DSMB”) performed a final review of the full unblinded data on all 140 patients in the STAR-T trial and concluded there were no issues with device safety, meeting the primary safety endpoint of the study.

The Company has also performed the initial data analysis on the primary effectiveness endpoint of STAR-T trial.

Based on this analysis, the study did not meet the primary effectiveness endpoint in the overall patient population that underwent different types of cardiac surgeries.

However, the study did demonstrate evidence of reduced bleeding complications, including serious bleeding events, in patients in the pre-specified isolated coronary artery bypass graft (“CABG”) surgery population, representing more than 90% of the overall study population.

The topline results of 140-patient, double-blinded, multicenter, pivotal STAR-T randomized, controlled trial were featured as a late breaking presentation at the 104 th Annual Meeting of the American Association for Thoracic Surgery (AATS) held in Toronto, Canada on April 28, 2024.

The Company believes the safety and effectiveness data from STAR-T will support the parallel regulatory submission of DrugSorb-ATR to the FDA and Health Canada in the third quarter of 2024.

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.

The study has been postponed while the Company concentrates its clinical focus on STAR-T.

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.

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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.

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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 September 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 December 31, 2023, is protected by 21 issued U.S.

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

and internationally, including HemoDefend, ContrastSorb, DrugSorb, DrugSorb-ATR and others.

and internationally.

These patents and patent applications are directed to various compositions and methods of use related to the Company’s blood purification technologies and are expected to expire between 2024 and 2038, absent any patent term extensions.

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

and CytoSorbents Medical UK Limited, wholly owned subsidiaries of CytoSorbents Europe GmbH, and CytoSorbents UK Limited and CytoSorbents India Private Limited, wholly-owned subsidiaries of CytoSorbents Medical, Inc.

z.o.o., CytoSorbents Medical UK Limited and CytoSorbents France SAS, wholly-owned subsidiaries of CytoSorbents Europe GmbH, and CytoSorbents UK Limited and CytoSorbents India Private Limited, wholly-owned subsidiaries of CytoSorbents Medical, Inc.

All significant intercompany transactions and balances have been eliminated in consolidation.

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

The Euro is the functional currency of CytoSorbents Europe GmbH.

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.

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

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

Cash, Cash Equivalents and Restricted Cash

Translation gains and losses resulting from the process of remeasuring into the United States of America dollar, the foreign currency financial statements of the European subsidiary, for which the United States of America dollar is the functional currency, are included in operations.

The Euro is the functional currency of the European Subsidiary.

Foreign currency transaction gain (loss) included in net loss amounted to approximately $( 1,426,000 ) and $ 661,000 for the three months ended March 31, 2024 and 2023, respectively.

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

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

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

Cash and Cash Equivalents

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

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

September 30, 2023

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

March 31, 2024

December 31, 2023

4 unchanged sentences

The Company’s total restricted cash in the amount of $ 1,483,958 consists of cash of $ 1,467,459 that the Company is obligated to maintain as collateral for the outstanding letter of credit with Bridge Bank that was provided to the landlord of the College Road facility as security and cash of $ 16,499 that the Company is obligated to maintain as collateral for the credit limit on the Company’s credit card accounts.

Grants and Accounts Receivable

Grants receivable represent amounts due from U.S.

government agencies and are included in grants and accounts receivable.

Accounts receivable are unsecured, non-interest bearing customer obligations due under normal trade terms.

The Company sells its devices to various hospitals and distributors.

The Company performs ongoing credit evaluations of its customers’ financial conditions.

Management reviews accounts receivable periodically to determine collectability.

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

The allowance for doubtful accounts amounted to approximately $ 57,000 and $ 76,000 as of September 30, 2023 and December 31, 2022, respectively.

Accounts Receivable and Allowance for Credit Losses

Trade accounts receivable consist of amounts due from direct customers, distributors and agencies of the U.S.

government and are presented at net realizable value.

At each balance sheet date, the Company estimates an expected allowance for credit losses inherent in the Company’s accounts receivable portfolio based on historical experience, specific allowances for known troubled accounts, and other available evidence.

In addition, also at each reporting date, this estimate is updated to reflect any changes in credit risk since the receivable was initially recorded.

This estimate is calculated on a pooled basis where similar risk characteristics exist.

The Company has identified the following portfolio segments:

direct customers, distributors/strategic partners and the U.S.

A fixed reserve percentage for each pool is derived from a review of the Company’s historical losses in relation to the total pool.

This estimate is adjusted quarterly for management’s assessment of current conditions, reasonable and supportable forecasts regarding future events, and any other factors deemed relevant by the Company.

The Company believes historical loss information is a reasonable starting point in which to calculate the expected allowance for credit losses as the Company’s portfolio segments have remained constant over the Company’s historical evaluation period.

The Company writes off receivables when there is information that indicates the debtor is facing significant financial difficulty and there is no possibility of recovery.

If any recoveries are made from any accounts previously written off, they are recognized as an offset to credit loss expense in the year of recovery.

The total amount of write-offs was immaterial to the financial statements as a whole for the three months ended March 31, 2024.

The allowance for credit losses reflects accounts receivable balances that are written off when management determines they are uncollectible.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist, and measures the allowance for credit losses using the following methods:

Direct Customers—The Company measures expected credit losses on direct customer receivables using an aging methodology.

The risk of loss for direct customer receivables is low based on the Company’s historical experience.

The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and supportable forecasts.

Distributors/Strategic Partners—The Company measures expected credit losses on distributor receivables using an individual reserve methodology.

The risk of loss in this portfolio is low based on the Company’s historical experience.

The estimate of expected credit losses considers the past payment history of each distributor.

Government— These receivables are related to the Company’s government grants.

The Company measures expected credit losses on these receivables using an individual reserve methodology.

The risk of loss in this portfolio is very low based on the Company’s historical experience, as these receivables are supported by approved grant award contracts.

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

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;

At March 31, 2024 and December 31, 2023, the Company’s inventory was comprised of finished goods, which amounted to $ 2,013,420 and $ 2,155,457 , respectively;

work in process which amounted to $ 1,107,630 and $ 838,871 , respectively;

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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 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.

During the three months ended March 31, 2024 and 2023, the Company recorded an impairment charge of approximately $ 64,000 and $ 111,000 , respectively, related to the impairment of certain issued patents and pending patent applications in certain specific jurisdictions and the abandonment of certain pending patent application costs in the ordinary course of business.

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

Revenue Recognition

Product Sales :

Revenues from sales of products to both direct and distributor/strategic partner customers are recognized at the time when control passes to the customer, in accordance with the terms of their respective contracts.

Recognition of revenue occurs as each performance obligation is completed.

Grant Revenue :

Revenue from grant income is based on contractual agreements.

Certain agreements provide for reimbursement of costs, other agreements provide for reimbursement of costs and an overhead margin and certain agreements are performance based, where revenue is earned based upon the achievement of milestones outlined in the contract.

Revenues are recognized when the associated performance obligation is fulfilled.

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 sheets.

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

Research and Development and Clinical Trial Expenses

Revenue is recognized when the Company ships its products to its direct customers and distributors/strategic partners.

Revenue is recognized on its grant awards with agencies of U.S.

government in accordance with the terms of the award contract.

See Note 4 for a description of the types of government contracts.

The amount of revenue recognized reflects the consideration the Company expects to be entitled to receive in exchange for the products shipped or the services provided under their grant contracts.

To achieve this core principle, the Company applies the following five steps:

Identify Contracts with Customers - The Company’s contracts with its direct customers are generally in the form of a purchase order.

The Company has formal written contracts with each of its distributors/strategic partners that define their respective territories and minimum purchase commitments which must be met in order to maintain exclusivity in their territory.

Distributors/strategic partner customers also submit purchase orders with each order that define the terms of shipment and transaction price.

The Company has a contract for each grant award with various agencies of the U.S.

Identify Performance Obligations - The performance obligations in contracts with direct customers and distributors/strategic partners are for the shipment of the CytoSorb device and related accessory parts.

The performance obligations for government contracts are dependent on the contract type, however, these are generally based on the costs incurred related to each government contract.

Determine Transaction Price - The price charged is based on the Company’s price list for the CytoSorb device and related accessory parts for both direct customers and distributor/strategic partners.

The Company does not permit returns for product sales.

The Company also provides for certain rebates and discounts to direct customers for sales of its product that are earned based upon sales volume.

These amounts, which are earned based on calendar year sales volume, are recorded as a reduction of sales as earned.

The transaction prices for government contracts are dependent on the type of contract and are outlined in each contract.

Allocate Transaction Price to Performance Obligations - The transaction price for the performance obligation is based on the purchase orders received for both direct customers and on the type of contract and are outlined in each contract.

The transaction prices for government contract performance obligations are dependent on the type of contract and are generally based on costs incurred.

Recognize Revenue as Performance Obligations are Satisfied - The Company satisfies its performance obligation to direct customers and distributors/strategic partners generally upon shipment of the products.

The Company satisfies its performance obligations on government contracts generally upon incurring costs on each contract.

The Company records deferred revenue related to fixed price government contracts to the extent that billings exceed costs incurred.

Research and Development

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

Advertising Expenses

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

Advertising expenses amounted to approximately $ 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.

Advertising expenses are charged to activities when incurred.

Advertising expenses amounted to approximately $ 45,000 and $ 55,000 for the three months ended March 31, 2024 and 2023, respectively, and are included in selling, general, and administrative expenses on the consolidated statements of operations and comprehensive loss.

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

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A valuation allowance is provided if it is more likely than not that some or all of the deferred tax asset will not be realized.

The Company has provided a valuation allowance against all deferred tax assets.

Under Section 382 of the Internal Revenue Code, the net operating losses generated prior to the previously completed reverse merger may be limited due to the change in ownership.

Additionally, net operating losses generated subsequent to the reverse merger may be limited in the event of changes in ownership.

In 2017, the Tax Cuts and Jobs Act reduced the U.S.

federal corporate tax rate from 35 % to 21 %.

The Company follows accounting standards associated with uncertain tax positions.

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

The Company had no unrecognized tax benefits at March 31, 2024.

The Company is accounting for an uncertain tax position of approximate $ 2.1 million for the year ended December 31, 2023.

The Company files tax returns in the U.S.

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

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

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

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

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

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets, liabilities at the date of the balance sheet, and the reported amounts of revenues and expenses during the reporting period.

reporting period.

Actual results could differ from these estimates.

The valuation of options granted, allowance for doubtful accounts and recoverability of patents are significant estimates in these consolidated financial statements.

The valuation of options granted, allowance for credit losses, and recoverability of patents are significant estimates in these consolidated financial statements.

Concentration of Credit Risk

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

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 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.

As of March 31, 2024, one distributor accounted for approximately 17 % of outstanding grants and accounts receivable.

As of December 31, 2023, one distributor accounted for approximately 19 % of outstanding grants and accounts receivable.

For the three months ended March 31, 2024, no customer accounted for more than 10 % of the Company’s total revenue and for the three months ended March 31, 2023, one distributor accounted for approximately 11 % of the Company’s total revenue.

Financial Instruments

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

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 “Distinguishing Liabilities From Equity” (“ASC 480”) and ASC 815 “Derivatives and Hedging” (“ASC 815”).

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance, and will remain as a component of equity thereafter.

For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter.

Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.

As the warrants issued upon the closing of the Company’s December 13, 2023 Offering meet the criteria for equity classification under ASC 815, the warrants are classified as equity as of March 31, 2024 and December 31, 2023.

Net Loss Per Common Share

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

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

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

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

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Under these accounting standards, the fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model.

The Company also follows the guidance of accounting standards for accounting for equity instruments that are issued to other than employees for acquiring, or in conjunction with selling, goods or services for equity instruments issued to consultants.

The Company also follows the guidance of accounting standards for accounting for equity instruments that are issued to non-employees for acquiring, or in conjunction with selling, goods or services for equity instruments issued to consultants.

Shipping and Handling Costs

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

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.

Total freight costs amounted to approximately $ 114,000 and $ 78,000 , respectively, for the three months ended March 31, 2024 and 2023.

Effect of Recent Accounting Pronouncements

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

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

Measurement of Credit Losses on Financial Instruments”.

This ASU provides guidance on the

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

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”).

ASU2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S.

The ASU’s amendments are effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years.

The Company adopted the provisions of ASU 2020-06 on January 1, 2024.

This did not have a material impact on the Company’s financial statements.

In December 2023, the FASB issued ASU No.

2023-09 entitled “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”.

This ASU provides guidance related to additional disclosures that will be required related to income taxes.

The updated guidance is effective for public entities for fiscal years beginning after December 15, 2024.

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.

This ASU will result in additional disclosures in the Company’s consolidated financial statements related to income taxes in 2025.

STOCKHOLDERS’ EQUITY

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The amended and restated certificate of incorporation increased the number of shares of common stock authorized for issuance from 50,000,000 shares to 100,000,000 shares.

December 13, 2023 Offering

On December 13, 2023, the Company closed on a registered direct offering for the sale, directly to investors, of 7,733,090 registered shares of common stock and warrants to purchase up to 2,706,561 shares of common stock (the “Offering”).

Each share of common stock and accompanying warrant to purchase up to 0.35 shares of common stock, were sold together for a combined purchase price of $ 1.33 , for an aggregate purchase price of approximately $ 10,285,000 .

After deducting transaction fees and expenses payable by the Company in connection with the Offering, the Company received net proceeds of approximately $ 9,785,000 , excluding any proceeds that may be received upon the exercise of the warrants.

Each warrant is immediately cash exercisable at an exercise price of $ 2.00 per share and will expire on the fifth anniversary of the issue date.

The Company’s executive officers, directors, and certain non-executive officer employees of the Company also participated in the Offering with a combined investment of $ 435,000 .

Shelf Registration

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Open Market Sale Agreement with Jefferies LLC

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

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

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

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

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

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

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

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

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.

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

During the year ended December 31, 2023, the Company sold 2,656,464 shares pursuant to the Sale Agreement, at an average selling price of $ 1.76 per share, generating net proceeds of approximately $ 4,532,000 .

In addition, during the year ended December 31, 2023, the Company paid approximately $ 61,000 in expenses related to the Sale Agreement.

During the three months ended March 31, 2024, the Company sold 53,290 shares pursuant to the Sales Agreement at an average selling price of $ 1.03 per share, generating net proceeds of approximately $ 55,000 .

Stock-Based Compensation

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.

Total share-based employee, director, and consultant compensation for the three months ended March 31, 2024 and 2023, amounted to approximately $ 734,000 and $ 830,000 , respectively.

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

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

The summary of the stock option activity for the three months ended March 31, 2024, is as follows:

Exercise Price

Outstanding, December 31, 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 September 30, 2023 of $ 1.88 and the exercise price of the shares.

Outstanding, March 31, 2024

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 $ 0.94 to $ 0.99 per share) and expected life of the stock option ( 6 years ), the current price of the underlying stock and its expected volatility ( 75.6 %), expected dividends (- 0 -percent) on the stock and the risk free interest rate (ranging from 3.86 to 4.21 %) for the expected term of the stock option.

The intrinsic value is calculated as the difference between the market value of the shares as of March 31, 2024, of $ 0.95 and the exercise price of the shares.

Options Outstanding

Outstanding at

September 30,

$ 0.94 - $ 13.20

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Exercisable at

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:

The summary of the status of the Company’s non-vested options for the three months ended March 31, 2024, is as follows:

Non-vested, December 31, 2023

( 1,550,666 )

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 .

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.

Non-vested, March 31, 2024

As of March 31, 2024, the Company had approximately $ 4,055,000 of total unrecognized compensation cost related to stock options which will be amortized over approximately 39 months .

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

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

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

As of March 31, 2024, none of these milestones has been met.

Accordingly, no charge for these options has been recorded in the consolidated statements of operations and comprehensive loss for the quarter ended March 31, 2024.

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.

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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.

As of March 31, 2024, none of these milestones has been met.

Accordingly, no charge for these options has been recorded in the consolidated statements of operations and comprehensive loss for the quarter ended March 31, 2024.

On March 29, 2024, the Board of Directors granted options to purchase 380,480 shares of common stock to certain executive officers and certain other non-executive officer employees related to the Company’s salary reduction for stock options program.

The grant date fair value of these unvested options amounted to approximately $ 249,000 .

These options will vest in full on January 31, 2025.

Accordingly, the Company has recorded approximately $ 2,400 of stock option expense related to these options for the three months ended March 31, 2024.

During the three months ended March 31, 2024, 26,000 options were awarded to newly hired employees in connection with their employment agreements.

Change in Control-Based Awards of Restricted Stock Units:

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December 31, 2023

September 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 nine months ended September 30, 2023 and 2022.

March 31, 2024

Other Awards of Restricted Stock Units:

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

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

For the three and nine months ended September 30, 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 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.

For each of the three months ended March 31, 2024 and 2023, the Company recorded a charge of approximately $ 47,000 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.

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-third 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 months ended March 31, 2024 and 2023, the Company recorded a charge of approximately $ 110,000 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.

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

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

For the three and 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:

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.These restricted stock units vested (will vest) as follows:

25,000 on the date of the grant, 10,000 on the first anniversary of the date of the grant and 10,000 on the second anniversary of the date of the grant.

For the three months ended March 31, 2024 and 2023, the Company recorded a charge of approximately $ 5,000 and $ 0 , respectively, related to these restricted stock unit awards.

Additionally, on January 14, 2024, an employee was granted 30,000 restricted stock units as a condition of his employment.

Also, as of March 31, 2023, certain other employees were previously granted a total of 73,000 restricted stock units as a condition of their employment.

These awards were valued at approximately $ 410,000 at the date of issuance.

30,000 of these restricted stock units vest upon the earlier of a Change in Control or one-third after the second anniversary of the award, one-third on the third anniversary of the award, and one-third on the fourth anniversary of the award;

30,000 of these restricted stock units vest upon the earlier of a Change in Control or the fourth anniversary of the award, and 15,000 of these restricted stock units vest upon the earlier of a Change in Control or one-third after the first anniversary of the award, one-third on the second anniversary of the award, and one-third on the third anniversary of the award.

For the three months ended March 31, 2023 and 2022, the Company recorded a charge of approximately $ 28,000 and $ 27,000 respectively, related to these restricted stock unit awards.

The following table outlines the restricted stock unit activity for the three months ended March 31, 2024:

Non-vested, December 31, 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

Distributors/

Strategic Partners

Product sales:

United States

All other countries

Total product revenue

Grant and other income:

United States

Total revenue

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

United States

Distributors/

Strategic Partners

Product sales:

United States

All other countries

Total product revenue

Grant and other income:

United States

Total revenue

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

Non-vested, March 31, 2024

As of December 31, 2023, the Company had 2,706,561 warrants outstanding related to the Company’s December 13, 2023 Offering.

These warrants are immediately cash exercisable at an exercise price of $ 2.00 per share and expire on December 13, 2028.

The following table disaggregates the Company’s revenue by customer type and geographic area for the three months ended March 31, 2024:

United States

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Total revenue

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

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

United States

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The majority of sales of the device are outside the United States, as CytoSorb is not yet approved for commercial sale in the United States.

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

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

However, in April 2020, the Company was granted EUA of CytoSorb for use in critically-ill patients infected with COVID-19 with imminent or confirmed respiratory failure by the FDA.

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

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

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

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

Government Grants

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In summary, the contracts the Company has with customers are the distributor/strategic partner contracts related to CytoSorb product sales, agreements with direct customers related to free-of-charge product and credit rebates based upon achieving minimum purchase levels, and contracts with various government agencies related to the Company’s grants.

The Company does not currently incur any outside/third party incremental costs to obtain any of these contracts.

The Company does not currently incur any

outside/third party incremental costs to obtain any of these contracts.

The Company does incur internal costs, primarily salary related costs, to obtain the contracts related to the grants.

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

September 30, 2023

March 31, 2024

December 31, 2023

Receivables, which are included in grants and accounts receivable

Contract receivables, which are included in grants and accounts receivable

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

Contract receivables represent balances due from 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.

Contract receivables represent balances due from product sales to distributors amounting to $ 4,538,868 and $ 3,270,724 at March 31, 2024 and December 31, 2023, respectively, and billed and unbilled amounts due on government contracts amounting to $ 435,710 and $ 575,547 at March 31, 2024 and December 31, 2023, 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 $ 191,727 and $ 196,322 at March 31, 2024 and December 31, 2023, respectively, and deferred grant revenue related to the billing on fixed price government contracts in excess of costs incurred, which amounted to $ 1,403,924 and $ 1,376,819 at March 31, 2024 and December 31, 2023, respectively.

LONG-TERM DEBT, NET

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On March 9, 2023, the Company entered into the Sixth Amendment of its Amended Loan and Security Agreement.

The Sixth Amendment further extended the draw period to March 24, 2023.

The Sixth Amendment further extends the draw period to March 24, 2023.

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

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The Term C Loans shall bear interest at the Index Rate (defined in the Amendment as the greater of 3.25 % or the Prime Rate as published by the Wall Street Journal on the last business date of the month immediately preceding the month in which the interest will accrue) plus 1.25 %.

Pursuant to the Fourth Amendment, interest on the Term C Loans is subject to an interest rate cap of 8.00 %.

Pursuant to the Fourth Amendment, interest on the Term

C Loans is subject to an interest rate cap of 8.00 %.

On December 27, 2022, the Company drew down the first $ 5 million tranche of the Term C loans available under the terms of the Fourth Amendment.

1 unchanged sentence

The interest-only period will be further extended through June 2024 provided the Company has met both the required reserves test and the seventy-five percent test, as set forth in the Fourth Amendment, as of November 30, 2023.

Commencing on January 1, 2024, if the Company does not meet both the required reserves test and the 75% test, the Company shall make equal monthly payments of principal of $ 208,333 , together with accrued and unpaid interest.

Commencing on July 1, 2024, if the Company meets both the required reserves test and the 75% test, the Company shall make equal monthly payments of principal of $ 277,778 , together with accrued and unpaid interest.

In either event, all unpaid principal and accrued and unpaid interest shall be due and payable in full on December 1, 2025.

The Company did not meet the required reserves test as of November 30, 2023, and accordingly, commencing on January 1, 2024, the Company is required to make equal monthly payments of principal of $ 208,333 , together with accrued and unpaid interest, through December 1, 2025 at which time the loan balance will be paid in full.

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

2 unchanged sentences

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

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.

For each the three month periods ended March 31, 2024 and 2023, the Company recorded interest expense of approximately $ 10,700 related to the final fee.

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

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(ii) 1.5 % of $ 5 million if the Company draws down the second tranche of the Term C Loan and is payable only if the Company’s stock price equals or exceeds $ 10 for five consecutive trading days;

and (iii) 2 % of $ 5,000,000 if the Company draws down the third tranche of the Term C Loan and is payable only if the Company’s stock price equals or exceeds $ 12 for five consecutive trading days (together, the “Success Fee”).

and (iii) 2 % of $ 5,000,000 if the Company draws down the third tranche of the Term C Loan and is payable only if the Company’s stock price equals or exceeds $ 12 for five

consecutive trading days (together, the “Success Fee”).

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

The right of Bank to receive the Success Fees and the obligation of the Borrower to pay the Success Fees hereunder shall terminate on the date that is 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 September 30, 2023:

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

Long-term debt consists of the following as of March 31, 2024:

Principal amount

1 unchanged sentence

Less Current maturities

( 2,500,000 )

Long-term debt net of current maturities

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

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

COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

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.

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

Bloch, the Company’s former Chief Financial Officer.

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

12 unchanged sentences

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

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

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

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

6 unchanged sentences

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 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 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 nine months ended September 30, 3023.

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

Royalty Agreement

On March 5, 2024, Danielle Greene, a former employee, filed a complaint against us in the Superior Court of New Jersey, Law Division, Mercer County, alleging breach of the New Jersey Conscientious Employee Protection Act (“CEPA”).

The complaint specifically alleges that we violated the provisions of the CEPA by allegedly terminating Ms.

Greene in retaliation for complaining about certain business practices.

We dispute these allegations and intend to vigorously defend against them, but there can be no assurance as to the outcome of the litigation.

Royalty Agreements

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

1 unchanged sentence

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

For the three months ended 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.

For the three months ended March 31, 2024 and 2023, the Company recorded royalty expenses of approximately $ 267,000 and $ 234,000 , respectively.

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

On August 1, 2022, the Company entered into the Marketing Agreement with Fresenius, which expands the Company’s strategic partnership with Fresenius by establishing a multi-stage global collaboration to combat life-threatening diseases in critical care.

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

The Marketing Agreement has an initial term of three years, with an automatic renewal for an additional two years at the end of such initial term, subject to earlier termination by either of the parties (the “Term”) To help support the increased marketing and promotional efforts of the expanded collaboration, the Company has agreed to subsidize a portion of the marketing costs through royalty payments to Fresenius.

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

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

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

For the three months ended March 31, 2024, the Company did not record any expense related to this agreement.

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 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.

For the three months ended March 31, 2024 and 2023 per the terms of the license agreement, the Company recorded licensing expenses of approximately $ 446,000 and $ 390,000 , respectively.

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

12 unchanged sentences

These payments are to be based on actual amounts incurred during 2021 multiplied by the Company’s share of the total building space ( 92.3 %).

The landlord will also provide an allowance of approximately $ 1,455,000 related to certain building improvements as outlined in the lease.

The landlord will also provide an allowance of approximately

$ 1,455,000 related to certain building improvements as outlined in the lease.

In April 2021, the Company provided the landlord with a letter of credit in the amount of approximately $ 1,467,000 as security.

20 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 September 30:

The maturities of the lease liabilities are as follows as of March 31, 2024:

Total lease payments

1 unchanged sentence

( 10,502,947 )

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.

For the three months ended March 31, 2024 and 2023, operating cash flows paid in connection with operating leases amounted to approximately $ 552,000 and $ 633,000 , respectively.

As of March 31, 2024 and December 31, 2023, the weighted average remaining lease term was 12.4 and 12.7 years, respectively.

NET LOSS PER SHARE

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.

Basic loss per share and diluted loss per share for the three months ended March 31, 2024 and 2023 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 warrants, options and restricted stock awards representing approximately 16,061,000 and 10,855,000 incremental shares as of March 31, 2024 and 2023, respectively, have been excluded from the computation of diluted loss per share as they are anti-dilutive.

SUBSEQUENT EVENTS

On April 2, 2024, the Board of Directors granted options to purchase 1,124,400 shares of common stock to the Company’s employees which will be awarded based upon each employee’s 2024 individual performance evaluation.

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

The grant date fair value of these unvested options amounted to approximately $ 763,000 .

On April 2, 2024, the Board of Directors granted options to purchase 931,548 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 $ 594,000 .

On April 2, 2024, the Board of Directors granted options to purchase 110,000 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 $ 70,000 .

On April 2, 2024, the Board of Directors granted options to purchase 556,000 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 $ 377,000 .

On April 2, 2024, the Board of Directors granted 343,000 restricted stock units to certain senior managers of the Company.

These restricted stock units 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 restricted stock units amounted to approximately $ 328,000 .

On April 2, 2024, the Board of Directors granted 69,750 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.

The grant date fair value of these unvested restricted stock units amounted to approximately $ 67,000 .

On April 8, 2024, the Board of Directors granted options to purchase 131,339 shares of common stock to employees related to the Company’s salary reduction for stock options program.

The grant date fair value of these unvested options amounted to approximately $ 84,000 .

These options will vest in full on January 31, 2025.

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