What changed in this filing

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Item 1. Financial Statements

2024-08-13 compared with 2024-05-09 · 272 added, 196 removed, 531 unchanged (47% of the section changed)

4 unchanged sentences

Cash and cash equivalents

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

Grants and accounts receivable, net of allowance of $ 88,017 as of June 30, 2024 and $ 49,663 at December 31, 2023

Prepaid expenses and other current assets

6 unchanged sentences

Accounts payable

Lease liability – current portion

Current maturities of long-term debt

Lease liability – current portion

Accrued expenses and other current liabilities

1 unchanged sentence

Lease liability, net of current portion

Long-term debt net of current maturities

Long-term debt

Total Liabilities

2 unchanged sentences

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

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

no shares issued and outstanding at June 30, 2024 and December 31, 2023

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

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

54,306,415 and 54,240,265 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

8 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Three Months Ended March 31,

Three months ended June 30,

Six months ended June 30,

CytoSorb sales

3 unchanged sentences

Cost of revenue

Operating expenses:

Other expenses:

Research and development

1 unchanged sentence

Selling, general and administrative

Total operating expenses

Total expenses

Loss from operations

1 unchanged sentence

( 6,559,237 )

( 8,344,341 )

( 14,450,832 )

Other income (expense):

Interest income (expense), net

Miscellaneous income/(expense)

Gain (loss) on foreign currency transactions

( 1,969,916 )

Miscellaneous income (expense)

Total other income (expense), net

3 unchanged sentences

( 6,153,084 )

Provision for income taxes

( 10,501,007 )

( 13,478,967 )

Benefit from income taxes

Net loss attributable to common stockholders

1 unchanged sentence

( 6,153,084 )

( 10,501,007 )

( 13,478,967 )

Basic and diluted net loss per common share

2 unchanged sentences

( 6,153,084 )

( 10,501,007 )

( 13,478,967 )

Other comprehensive income (loss):

Foreign currency translation adjustment

( 1,000,882 )

Comprehensive loss

1 unchanged sentence

( 6,545,758 )

( 8,856,510 )

( 14,479,849 )

See accompanying notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

For the three and six months ended June 30, 2024 and 2023 (Unaudited)

Comprehensive

Stockholders’

Income (Loss)

Balance at March 31, 2024

( 288,863,133 )

Stock-based compensation - employees, consultants and directors

Warrants issued in connection with long-term debt

Other comprehensive loss:

foreign translation adjustment

Issuance of restricted stock units

( 4,143,146 )

Balance at June 30, 2024

( 293,006,279 )

Balance at December 31, 2023

1 unchanged sentence

Stock-based compensation - employees, consultants and directors

Issuance of common stock, net of fees incurred

Other comprehensive income (loss):

foreign currency translation adjustment

Warrants issued in connection with long-term debt

Other comprehensive income:

foreign translation adjustment

Issuance of common stock offerings, net of fees

Issuance of restricted stock units

( 10,501,007 )

Balance at June 30, 2024

( 293,006,279 )

Comprehensive

Stockholders’

Income (Loss)

Balance at March 31, 2023

( 261,323,761 )

Stock-based compensation - employees, consultants and directors

Other comprehensive loss:

foreign translation adjustment

Issuance of common stock offerings, net of fees

Proceeds from exercise of stock options for cash

Issuance of restricted stock units

( 6,153,084 )

Balance at June 30, 2023

( 267,476,845 )

Balance at December 31, 2022

1 unchanged sentence

Stock-based compensation - employees, consultants and directors

Issuance of common stock offerings, net of fees incurred

Other comprehensive income (loss):

foreign currency translation adjustment

Other comprehensive income:

foreign translation adjustment

( 1,000,882 )

Issuance of common stock offerings, net of fees

Proceeds from exercise of stock options for cash

Issuance of restricted stock units

Legal/audit fees related to ATM offering

Proceeds from the exercise of stock options for cash

( 13,478,967 )

Balance at March 31, 2023

Balance at June 30, 2023

( 267,476,845 )

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three

Cash flows from operating activities:

2 unchanged sentences

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

Non-cash restricted stock unit compensation

Accrued final fee

Non-cash compensation

Depreciation and amortization

Bad debt expense

Amortization of right-of-use asset

Impairment of patents

Write off of patent cost

Bad debt expense (recovery)

Stock-based compensation

Foreign currency transaction (gain) loss

Foreign currency translation (gain) loss

( 1,075,656 )

Changes in operating assets and liabilities:

Grants and accounts receivable

( 1,952,413 )

( 1,271,716 )

Prepaid expenses and other current assets

9 unchanged sentences

Cash flows from financing activities:

Proceeds from long-term debt

Repayment of long-term debt

Issuance of common stock, net of fees incurred

( 5,000,000 )

Payment of final fee

Payment of loan costs

Equity contributions - net of fees incurred

Proceeds from exercise of stock options

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

Effect of exchange rates on cash

1 unchanged sentence

( 8,993,043 )

( 3,096,157 )

Cash, cash equivalents and restricted cash - beginning of period

3 unchanged sentences

Supplemental disclosure of non-cash financing activities:

Settlement of accrued bonuses with restricted stock units

Capital expenditures included in accounts payable

Warrants issued in connection with long-term debt

Issuance of restricted stock units

See accompanying notes to consolidated financial statements.

1 unchanged sentence

Notes to Consolidated Financial Statements

March 31, 2024

June 30, 2024

BASIS OF PRESENTATION

4 unchanged sentences

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 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 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.

The results for the three and six months ended June 30, 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 June 30, 2024, the Company’s cash, cash equivalents and restricted cash balances were approximately $ 14.9 million, including approximately $8.4 million in cash and cash equivalents and approximately $ 6.5 million in restricted cash, the unrestricted portion of 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 is actively pursuing financing sources, including less or non-dilutive debt financing, royalty financing, strategic or direct investments, equity financing, and/or combinations thereof.

The Company continues to pursue additional milestones related to its recently announced Avenue debt facility that would increase its unrestricted cash position by up to $ 10 million.

If these milestones are not achieved, we will need to raise additional capital to support our ongoing operations in the future.

Meanwhile the Company continues to evaluate other traditional and alternative sources of capital, including additional 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.

17 unchanged sentences

CytoSorb is also being used during and after cardiac surgery to remove inflammatory mediators that can lead to post-operative complications, including multiple organ failure.

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

In January 2020, CytoSorb

received EU CE Mark label expansion to include the removal of ticagrelor during cardiopulmonary bypass in patients undergoing cardiothoracic surgery.

In May 2020, CytoSorb also received EU CE Mark label expansion to include rivaroxaban removal for the same indication.

21 unchanged sentences

This includes Asklepios Klinik St.

Georg in Hamburg, Germany, which pioneered the use of CytoSorb to remove antithrombotic drugs during cardiothoracic surgery and is well-known for their seminal publication on CytoSorb use for this application during emergency cardiac surgery in patients at high risk of bleeding.

In June 2022, the Company announced that, following a successful pilot program in three countries, the Company signed an expanded non-exclusive agreement with Nikkiso Europe GmbH (“Nikkiso”) to distribute Nikkiso’s PureADJUST stand-alone hemoperfusion pump and accessories in a total of 14 countries.

In addition to securing the rights to sell Nikkiso’s stand-alone pump and accessories in Germany, Austria, and Luxembourg, the Company entered into an expanded multi-country reseller agreement with Nikkiso covering the following countries:

Belgium, Bosnia and Herzegovina, Croatia, Finland, France, Iceland, Lichtenstein, Poland, Serbia, Slovenia and Switzerland.

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

Georg in Hamburg, Germany, which pioneered the use of CytoSorb to remove antithrombotic drugs during cardiothoracic surgery and is well-known for their seminal publications on CytoSorb use for this application during emergency cardiac surgery in patients at high risk of bleeding.

In June 2024, the Company announced the launch and immediate availability of its PuriFi™ hemoperfusion machine in the EU, following approval and certification under the EU Medical Device Regulation (MDR).

Prior to this, beginning in June 2022 the company had a non-exclusive agreement with Nikkiso Europe GmbH (“Nikkiso”) to distribute Nikkiso’s PureADJUST stand-alone

hemoperfusion pump and accessories in a total of 14 countries.

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

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

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

8 unchanged sentences

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

The Company has numerous products under development based upon this unique blood purification technology which, as of June 30, 2024, is protected by 22 issued U.S.

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

12 unchanged sentences

The Euro is the functional currency of 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.

Foreign currency transaction gain (loss) included in net loss amounted to approximately $( 544,000 ) and $ 415,000 for the three months ended June 30, 2024 and 2023, respectively.

Foreign currency transaction gain (loss) included in net loss amounted to approximately $( 1,970,000 ) and $ 1,076,000 for the six months ended June 30, 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.

1 unchanged sentence

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

Cash and Cash Equivalents

Cash, Cash Equivalents and Restricted Cash

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

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

March 31, 2024

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

June 30, 2024

December 31, 2023

3 unchanged sentences

Restricted Cash

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.

Accounts Receivable and Allowance for Credit Losses

The Company’s total restricted cash in the amount of $ 6,483,958 consists of cash of $ 5,000,000 which is restricted in accordance with the terms of the debt agreement with Avenue Capital Group (see Note 5), cash of $ 1,467,458 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 $ 16,500 that the Company is obligated to maintain as collateral for the credit limit on the Company’s credit card accounts.

Grants and Accounts Receivable

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

10 unchanged sentences

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 total amount of write-offs was immaterial to the consolidated financial statements as a whole for the three and six months ended June 30, 2024.

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

10 unchanged sentences

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

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;

At June 30, 2024 and December 31, 2023, the Company’s inventory was comprised of finished goods, which amounted to $ 2,459,604 and $ 2,155,457 , respectively;

work in process, which amounted to $ 1,048,360 and $ 838,871 , respectively;

14 unchanged sentences

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

During the three 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.

During the three months ended June 30, 2024 and 2023, the Company recorded impairment charges of approximately $ 185,000 and $ 21,000 , respectively, and during the six months ended June 30, 2024 and 2023, the Company recorded impairment charges of approximately $ 250,000 and $ 293,000 , 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.

22 unchanged sentences

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

Research and Development

Research and Development and Clinical Trial Expenses

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

Advertising Expenses

Advertising expenses are charged to activities when incurred.

Advertising expenses amounted to approximately $ 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.

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 $ 93,000 and $ 38,000 for the three months ended June 30, 2024 and 2023, respectively, and approximately $ 138,000 and $ 93,000 for the six months ended June 30, 2024 and 2023, respectively.

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

7 unchanged sentences

The Company follows accounting standards associated with uncertain tax positions.

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 had no unrecognized tax benefits at June 30, 2024.

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

The Company files tax returns in the U.S.

2 unchanged sentences

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.

Actual results could differ from these estimates.

9 unchanged sentences

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

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

As of June 30, 2024, two distributors accounted for approximately 30 % 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.

For the three and six months ended June 30, 2024, one distributor accounted for approximately 14 % and 12 % of the Company’s total revenue.

For the three months and six months ended June 30, 2023, one distributor accounted for approximately 12 % and 11 %, respectively, of the Company’s total revenue.

Financial Instruments

6 unchanged sentences

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.

The warrants issued upon the closing of the Company’s December 13, 2023 Offering and the closing of the Company’s June 2024 debt financing both met the criteria for equity classification under ASC 815.

Accordingly, these warrants have been classified as equity as of June 30, 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 on the basis of the weighted-average number of shares of common stock plus the dilutive effect of potential common shares outstanding during the period.

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

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

3 unchanged sentences

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 non-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 other than employees for acquiring, or in conjunction with selling, goods or services for equity instruments issued to consultants.

Shipping and Handling Costs

1 unchanged sentence

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

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

Total freight costs amounted to approximately $ 64,000 and $ 122,000 , respectively, for the three months ended June 30, 2024 and 2023, and $ 178,000 and $ 200,000 , respectively, for the six months ended June 30, 2024 and 2023.

Effect of Recent Accounting Pronouncements

11 unchanged sentences

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

In November 2023, the FASB issued ASU No.

2023-07 (“ASU 2023-07”), Improvements to Reportable Segment Disclosures.

The guidance primarily will require enhanced disclosures about significant segment expenses.

All disclosure requirements under ASU 2023-07 and existing segment disclosures in ASC 280, Segment Reporting are also required for public entities with a single reportable segment.

The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

A retrospective approach is required to be applied to all prior periods presented in the financial statements.

The Company plans to adopt the provisions of ASU 2023-07 in the fourth quarter of fiscal 2024 and continues to evaluate the disclosure requirements related to the new standard.

STOCKHOLDERS’ EQUITY

4 unchanged sentences

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

On July 14, 2021, the Company filed a registration statement on Form S-3 with the SEC, which was amended on July 20, 2021 and declared effective by the SEC on July 27, 2021 (as amended, the “2021 Shelf”).

The 2021 Shelf enables the Company to offer and sell, in one or more offerings, any combination of common stock, preferred stock, senior or subordinated debt securities, warrants and units, up to a total dollar amount of $ 150 million.

On July 26, 2024, the Company filed a registration statement on Form S-3 with the SEC (the “2024 Shelf”), which enables the Company to offer and sell in one or more offerings, any combination of common stock, preferred stock, senior or subordinated debt securities, warrants and units, up to a total dollar amount of $ 150 million.

The SEC has not yet declared the 2024 Shelf to be effective, however, the Company continues to be able to utilize the 2021 Shelf to offer securities.

Because of the Company’s market capitalization is less than $75 million, it will be subject to baby shelf rules which limit the amount of securities sales the Company can make to one-third of its public market float over a 12-month period.

Open Market Sale Agreement with Jefferies LLC

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

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

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

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

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

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

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

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

There were no sales under the 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 .

During the six months ended June 30, 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 $ 53,000 .

Stock-Based Compensation

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.

Total share-based employee, director, and consultant compensation amounted to approximately $ 829,000 and $ 1,563,000 for the three and six months ended June 30, 2024, respectively, and approximately $ 570,000 and $ 1,401,000 for the three and six months ended June 30, 2023, respectively.

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

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

The summary of the stock option activity for the six months ended June 30, 2024 is as follows:

Exercise Price

Outstanding, December 31, 2023

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.

Outstanding, June 30, 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 $ 0.84 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 ( 76.6 %), expected dividends ( 0 )% on the stock and the risk free interest rate (ranging from 3.86 % to 4.65 %) for the expected term of the stock option.

The intrinsic value is calculated as the difference between the market value of the shares as of June 30, 2024 of $ 0.703 and the exercise price of the shares.

Options Outstanding

3 unchanged sentences

Exercisable at

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

The summary of the status of the Company’s non-vested options for the six months ended June 30, 2024 is as follows:

Non-vested, December 31, 2023

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.

Non-vested, June 30, 2024

As of June 30, 2024, the Company had approximately $ 4,419,000 of total unrecognized compensation cost related to stock options which will be amortized over approximately 36 months .

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.

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

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

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.

These options will vest only upon the achievement of certain milestones pursuant to the terms of the Company’s existing 2022-2025 performance pool in place for the Company’s management team.

On April 2, 2024, the Board of Directors granted options to purchase 1,214,400 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 $ 830,000 .

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 April 2, 2024, the Board of Directors granted options to purchase 922,147 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 $ 71,000 .

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 $ 380,000 .

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

The grant date fair value of these unvested options amounted to approximately $ 85,000 .

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.

During the six months ended June 30, 2024, 64,000 options were awarded to newly hired employees and consultants in connection with their employment or consulting agreements.

Change in Control-Based Awards of Restricted Stock Units:

5 unchanged sentences

December 31, 2023

March 31, 2024

Due to the uncertainty over whether these restricted stock units will vest, which only happens upon a Change in Control, no charge for these restricted stock units has been recorded in the consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023.

June 30, 2024

Other Awards of Restricted Stock Units:

1 unchanged sentence

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 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.

For the three and six months ended June 30, 2024, and 2023, the Company recorded a charge of approximately $ 47,000 and $ 94,000 , and $ 47,000 and $ 94,000 , respectively, related to these restricted stock unit awards.

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

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

For the three and six months ended June 30, 2024, the Company recorded a charge of approximately $ 110,000 and $ 221,000 , 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.These restricted stock units vested (will vest) as follows:

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.

For the three and six months ended June 30, 2024, the Company recorded a charge of approximately $ 5,000 and $ 10,000 , respectively, related to these restricted stock unit awards.

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

These awards were valued at approximately $ 328,000 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 one half on the first anniversary of the grant date and one half on the second anniversary of the grant date.

For the three and six months ended June 30, 2024, the Company recorded a charge of approximately $ 40,000 and $ 40,000 , respectively, related to these restricted stock unit awards.

Additionally, certain employees were offered a total of 103,000 restricted stock units as a condition of their employment.

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

40,000 of the restricted stock units valued at $ 149,000 were forfeited in Q2 2024.

20,000 of the restricted stock units valued at $ 132,000 were vested in Q2 2024.

13,000 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:

The other 30,000 of these restricted stock units vest upon the earlier of a Change in Control or three years from the date of the award.

For the three and six months ended June 30, 2024, and 2023, the Company recorded a charge (income) of approximately $( 191,000 ) and $( 163,000 ), and $ 19,000 and $ 46,000 , respectively, related to these restricted stock unit awards.

The following table outlines the restricted stock unit activity for the six months ended June 30, 2024:

Non-vested, December 31, 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:

Non-vested, June 30, 2024

As of June 30, 2024, the Company had 4,352,130 warrants outstanding.

2,706,561 warrants outstanding are related to the Company’s December 13, 2023 Offering and these warrants are immediately cash exercisable at an exercise price of $ 2.00 per share and expire on December 13, 2028.

Another 1,645,569 warrants were issued on June 28, 2024 in connection with the Company’s Loan and Security Agreement with Avenue and these warrants have an exercise price of $ 0.79 and expire on June 28, 2029.

The number of warrants is fixed, however, the exercise price may be adjusted down if the Company raises equity (excluding sales of equity utilizing the Company’s at-the-market equity facility) at a share price that is lower than $ 0.79 .

These warrants are excisable into common stock.

The following table disaggregates the Company’s revenue by customer type and geographic area for the three months ended June 30, 2024:

United States

8 unchanged sentences

Total revenue

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

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

United States

8 unchanged sentences

Total revenue

The following table disaggregates the Company’s revenue by customer type and geographic area for the six months ended June 30, 2024:

United States

Distributors/

Strategic Partners

Product sales:

United States

All other countries

Total product revenue

Grant and other income:

United States

Total revenue

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

33 unchanged sentences

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:

March 31, 2024

June 30, 2024

December 31, 2023

Contract receivables, which are included in grants and accounts receivable

Receivables, which are included in grants and accounts receivable

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

Contract receivables represent balances due from product sales to distributors amounting to $ 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.

Contract receivables represent balances due from product sales to distributors amounting to $ 5,424,751 and $ 3,270,724 at June 30, 2024 and December 31, 2023, respectively, and billed and unbilled amounts due on government contracts amounting to $ 482,057 and $ 575,547 at June 30, 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 $ 201,887 and $ 196,322 as of June 30, 2024 and December 31, 2023, respectively, and deferred grant revenue related to the billing on fixed price contracts in excess of costs incurred, which amounted to $ 1,096,163 and $ 1,376,819 at June 30, 2024 and December 31, 2023, respectively.

LONG-TERM DEBT, NET

On June 30, 2016, the Company and its wholly - owned subsidiary, CytoSorbents Medical, Inc.

(together, the “Borrower”), entered into a Loan and Security Agreement with Bridge Bank, a division of Western Alliance Bank, (the “Bank”), pursuant to which the Company borrowed $ 10 million in two equal tranches of $ 5 million (the “Original Term Loans”).

On March 29, 2018, the Original Term Loans were refinanced with the Bank pursuant to an Amended and Restated Loan and Security Agreement by and between the Bank and the Borrower (the “Amended and Restated Loan and Security Agreement”), under which the Bank agreed to loan the Borrower up to an aggregate of $ 15 million to be disbursed in two tranches (1) one tranche of $ 10 million (the “Term A Loan”), which was funded on the Closing Date and used to refinance the Original Term Loans, and (2) a second tranche of $ 5 million which may be disbursed at the Borrower’s sole request prior to March 31, 2019 provided certain conditions are met (the “Term B Loan” and together with the Term A Loan, the “Term Loans”).

On July 31, 2019, the Borrower entered into the First Amendment to the Amended and Restated Loan and Security Agreement (the “First Amendment”) with the Bank, which amended certain provisions of the Amended and Restated Loan and Security Agreement and the 2018 Success Fee Letter (the “2018 Letter”).

In connection with the execution of the First Amendment, the draw period for the Term B Loan was extended to August 15, 2019 and the Company drew down the full $ 5.0 million Term B Loan on the Settlement Date, bringing the total outstanding debt to $ 15 million at July 31, 2019.

The proceeds of Term Loans were used for general business requirements in accordance with the Amended and Restated Loan and Security Agreement.

On December 4, 2020 (the “Third Amendment Closing Date”), the Company closed on the Third Amendment (the “Third Amendment”) of its Amended Loan and Security Agreement with Bridge Bank.

Under the terms of the Amendment, the Company repaid the outstanding principal balance of its existing $ 15 million term loans and simultaneously received a commitment from Bridge Bank to provide a new term loan of $ 15 million, if needed.

On January 19, 2022 (the “Fourth Amendment Closing Date”), the Company closed on the Fourth Amendment (the “Fourth Amendment”) of its Amended Loan and Security Agreement with Bridge Bank.

Under the terms of the Amendment, the Company received a commitment from Bridge Bank to provide a new term loan of up to $ 15 million, if needed and entered into the Fourth Amendment Success Fee Letter (the “2022 Success Fee Letter”).

On December 28, 2022 (the “Fifth Amendment Date”), the Company entered into the Fifth Amendment of its Amended Loan and Security Agreement with Bridge Bank.

The Fifth Amendment extends the draw period under the Fourth Amendment to the earlier of (i) March 1, 2023 and (ii) the occurrence of an Event of Default.

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

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.

The Fourth Amendment provides a tranche of term loans (the “Term C Loans”) in the aggregate amount of $ 15 million, which are available for the Company to draw down at its sole discretion in three tranches of $ 5 million each at any time during the period commencing on the Fourth Amendment Date and ending on the earlier of (i) December 31, 2022 and (ii) the occurrence of an Event of Default (as defined in the Amended Loan and Security Agreement).

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 %.

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.

Under the terms of the Fourth Amendment, commencing on February 1, 2023, the Company is required to make monthly payments of interest only through December 2023.

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.

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.

On the Third Amendment Closing Date, the Company paid a non-refundable closing fee of $ 75,000 , which was amortized as a charge to interest expense.

In addition, the Amended and Restated Loan and Security Agreement requires the Company to pay a non-refundable final fee equal to 2.5 % of the principal amount of the Term Loan funded upon the earlier of the (i) the maturity date or (ii) termination of the Term Loans via acceleration or prepayment.

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

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.

If the Company elects to prepay the Term Loans pursuant to the terms of the Amended and Restated Loan and Security Agreement, it will owe a prepayment fee to the Bank, as follows:

(1) for a prepayment made on or after the funding date of a Term Loan through and including the first anniversary of such funding date, an amount equal to 2.0 % of the principal amount of such Term Loan prepaid;

(2) for a prepayment made after the first anniversary of the funding date of a Term Loan through and including the second anniversary of such funding date, an amount equal to 1.5 % of the principal amount of such Term Loan prepaid;

and (3) for a prepayment made after the second anniversary of the funding date of a Term Loan, an amount equal to 1.0 % of the principal amount of such Term Loan prepaid.

The Company’s and CytoSorbents Medical, Inc.’s obligations under the Amended and Restated Loan and Security Agreement are joint and severable and are secured by a first priority security interest in favor of the Bank with respect to the Company’s Shares (as defined in the Amended and Restated Loan and Security Agreement) and the Borrower’s Collateral (as defined in the Amended and Restated Loan and Security Agreement, which definition excludes the Borrower’s intellectual property and other customary exceptions).

Avenue Capital Group:

On June 28, 2024 (the “Closing Date”), the Company entered into a Loan and Security Agreement (as amended, supplemented, restated or otherwise modified as of the date hereof and from time to time, the “Loan and Security Agreement”) with Avenue Venture Opportunities Fund, L.P., a Delaware limited partnership (“Avenue”), Avenue Venture Opportunities Fund II, L.P., a Delaware limited partnership (“Avenue 2” and, together with Avenue, the “Lenders”), and Avenue Capital Management II, L.P., a Delaware limited partnership (the “Administrative and Collateral Agent”).

Under the Loan and Security Agreement, the Lenders have agreed to loan to the Company up to an aggregate of $ 20 million, to be disbursed in two tranches:

(1) one tranche of $ 15 million (“Growth Capital Loan Tranche 1”) on the Closing Date, with $ 4.5 million funded by Avenue and $ 10.5 million funded by Avenue 2, of which $ 10 million is available to the Company on the Closing Date and $ 5 million constitutes restricted cash subject to release to the Company prior to March 31, 2025, provided (i) the FDA has accepted Company’s application for review with respect to DrugSorb-ATR De Novo 510(k) and (ii) the Company has received a minimum of $ 3 million in net proceeds from the sale of its equity securities after the Closing Date.

The restriction will be released on a dollar for dollar

basis for equity raised between $ 3 million and $ 5 million and (2) a second tranche of up to $ 5 million, which may be disbursed at the Company’s request between July 1, 2025 and December 31, 2025, provided that the Company receives FDA marketing approval of its DrugSorb-ATR application (“Growth Capital Loan Tranche 2” and together with Growth Capital Loan Tranche 1, the “Growth Capital Loans” or the “Commitment”).

The proceeds from the Commitment were used to pay off the existing outstanding debt with Bridge Bank, and will additionally be used for working capital purposes and to fund general business requirements in accordance with the terms of the Loan and Security Agreement.

Each Growth Capital Loan shall bear interest at a variable rate per annum equal to the greater of (A) the Prime Rate (as defined in the Loan and Security Agreement) plus five percent ( 5.00 %) or (B) thirteen and one-half percent ( 13.50 %).

Commencing on August 1, 2024, the Company shall make monthly payments during the term of each Growth Capital Loan of interest only during the initial 25-month period following the Closing Date (as may be extended to the 30 months anniversary of the Closing Date upon satisfaction of certain conditions) and thereafter to maturity in equal monthly installments of principal plus accrued and unpaid interest.

All unpaid principal and accrued and unpaid interest shall be due and payable in full on July 1, 2027;

provided, however that if the Company draws the full amount of Growth Capital Loan Tranche 2 by December 2025, all unpaid principal and accrued and unpaid interest shall be due and payable in full by January 1, 2028.

In addition, the Loan and Security Agreement required the Company to pay a non-refundable commitment fee equal to 1.00 % of the Commitment due and payable on the Closing Date.

In addition to the non-refundable commitment fee, the Company also paid financial advisor fees and legal fees of approximately $ 640,000 related to the Commitment.

These costs are being amortized over the loan period as a charge to interest expense.

During the three and six months ended June 30, 2024, the Company recorded interest expense of approximately $ 2,000 related to these costs.

In addition, the Loan and Security Agreement requires the Company to pay a non-refundable final payment equal to 4.5 % of the original commitment amount.

This final payment has been accrued and included as part of the debt discount.

This discount will be charged to interest expense over the term of the loan.

For the three and six months ended June 30, 2024, the Company recorded interest expense of approximately $ 2,500 related to the debt discount.

The Capital Growth Loans are evidenced by secured promissory notes issued to the Lenders by the Company.

If the Company elects to prepay the Growth Capital Loan(s) pursuant to the terms of the Loan and Security Agreement, it will owe a prepayment fee to the Lenders, as follows:

(1) for a prepayment made on or after the funding date of a Growth Capital Loan through and including the first anniversary of such funding date, an amount equal to 3.00 % of the principal amount of such Growth Capital Loan prepaid;

(2) for a prepayment made after the first anniversary of the funding date of a Growth Capital Loan through and including the second anniversary of such funding date, an amount equal to 2.00 % of the principal amount of such Growth Capital Loan prepaid;

and (3) for a prepayment made any time after the second anniversary of the funding date of a Growth Capital Loan, an amount equal to 1.00 % of the principal amount of such Growth Capital Loan prepaid.

Events of default which may cause repayment of the Commitment to be accelerated include, among other customary events of default, (1) non-payment of any obligation when due, (2) the failure to perform any obligation required under the Loan and Security Agreement and to cure such default within a reasonable time frame, (3) the occurrence of any circumstance that has a Material Adverse Effect (as defined in the Loan and Security Agreement), (4) default beyond any applicable grace period or cure under any other agreement involving the borrowing of money in excess of the Threshold Amount (as defined in the Loan and Security Agreement), (5) any judgment(s) singly or in the aggregate in excess of the Threshold Amount entered against the Company that remain unsatisfied, unvacated or unstayed for 15 days or more after entry thereof (to the extent not otherwise covered by independent third-party insurance), and (6) if the Company becomes insolvent or starts an insolvency proceeding or if an insolvency proceeding is brought by a third party against the Company and such proceeding is not dismissed or stayed within 45 days .

The Loan and Security Agreement includes customary loan conditions, company representations and warranties, company affirmative covenants and company negative covenants for secured transactions of this type.

As of June 30, 2024, the Company was in compliance with these covenants.

As additional consideration for the Commitment, on June 28, 2024, the Company also issued each Lender a warrant instrument (each, a “Warrant”) entitling the Lenders to purchase an aggregate of 1,645,569 shares of the Company’s common stock for cash at the exercise price of $ 0.79 and expire on June 28, 2029.

These warrants meet the criteria for equity classification under ASC 815.

Accordingly, the Company has recorded a debt discount and additional paid in capital of approximately $690,000 related to these warrants as of June 30, 2024.

This discount will be charged to interest expense over the term of the loan.

The Lenders were also granted the right while the Commitment is outstanding to convert up to an aggregate amount of $ 2,000,000 of the principal amount of the outstanding Growth Capital Loans into the Company’s common stock at a fixed conversion price of 120 % of the Closing Price (as defined in the warrant) or $ 0.95 per share (the “Conversion Option”).

The Company’s and CytoSorbents Medical’s obligations under the Loan and Security Agreement are joint and several.

The obligations under the Loan and Security Agreement are secured by a first priority security interest in favor of the Lenders with respect to the Company’s Shares (as defined in the Loan and Security Agreement) and the Company’s Collateral (as defined in the Loan and Security Agreement), which includes the Company’s intellectual property, pursuant to that certain Intellectual Property Security Agreement, dated as of June 28, 2024, by and between the Company and the Administrative and Collateral Agent.

Long-term debt consists of the following as of June 30, 2024:

Principal amount

Accrued final fee

Less unamortized debt discount

( 1,588,209 )

Less unamortized debt acquisition costs

Less Current maturities

Long-term debt net of current maturities

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

On June 28, 2024, concurrent with the closing of the Avenue financing discussed above, the Company paid off its existing outstanding debt with Bridge Bank.

The following items survive the termination of the Bridge Bank Amended and Restated Loan and Security Agreement and related amendments:

2018 Success Fee Letter:

4 unchanged sentences

or (d) the closing price per share for the Company’s common stock on the Nasdaq Capital Market being the greater of (i) 70 % or more over $ 7.05 , the closing price of the Company’s common stock on March 29, 2018 (after giving effect to any stock splits or consolidations effected after the date thereof) for five successive business days, or (ii) at least 26.13 % more than the average price of Company’s common stock for the 365-day period ending on the date of the funding of the Term B Loan.

This obligation shall terminate on the fifth anniversary of the funding of the Term B Loan and shall survive the termination of the loan agreement and the prepayment of the Term B Loan.

This obligation terminated on the fifth anniversary of the funding of the Term B Loan which was July 31, 2024.

2022 Success Fee Letter:

1 unchanged sentence

(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”).

As of June 28, 2024, the Company had drawn down only the first tranche of the Term C Loan.

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 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

Accrued final fee

Less Current maturities

( 2,500,000 )

Long-term debt net of current maturities

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

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.

The termination date of this Letter is December 27, 2027.

COMMITMENTS AND CONTINGENCIES

36 unchanged sentences

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

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

For the three months ended June 30, 2024 and 2023, the Company recorded royalty expenses of approximately $ 264,000 and $ 240,000 , respectively.

For the six months ended June 30, 2024 and 2023, the Company recorded royalty expenses of approximately $ 531,000 and $ 474,000 , 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.

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.

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

For the three and six months ended June 30, 2024 and 2023, the Company did not record any expense related to this agreement.

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

2 unchanged sentences

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

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

For the three months ended June 30, 2024 and 2023 per the terms of the license agreement, the Company recorded licensing expenses of approximately $ 352,000 and $ 320,000 , respectively.

For the six months ended June 30, 2024 and 2023 per the terms of the license agreement, the Company recorded licensing expenses of approximately $ 709,000 and $ 632,000 , 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.

17 unchanged sentences

This value was calculated based on the present value of the remaining base rent lease payments.

The remaining lease payments include the renewal periods for both facilities as the Company has determined that it is probable that the renewal options will be exercised under each of the lease agreements.

The remaining lease payments include the renewal periods for both of the facilities in Germany and do not include the renewal periods for the United States facility.

The discount rate used was the Company’s incremental borrowing rate, which is 9.8 %, as the Company could not determine the rate implicit in the lease.

4 unchanged sentences

Lease liability, net of current portion

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

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

Total lease payments

1 unchanged sentence

( 10,181,031 )

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.

For the three months ended June 30, 2024 and 2023, operating cash flows paid in connection with operating leases amounted to approximately $ 566,000 and $ 466,000 , respectively, and $ 1,137,000 and $ 1,099,000 ,respectively, for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024 and December 31, 2023, the weighted average remaining lease term was years 11.9 and 12.7 years, respectively.

NET LOSS PER SHARE

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.

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.

Basic loss per share and diluted loss per share for the three and six months ended June 30, 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 20,266,000 and 11,904,000 incremental shares at June 30, 2024 and 2023, respectively, have been excluded from the computation of diluted loss per share as they are anti-dilutive.

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

What changed 10-Q

Item 1. Financial Statements