What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-13 · 158 added, 288 removed, 515 unchanged (46% of the section changed)

1 unchanged sentence

CYTOSORBENTS CORPORATION

CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

Cash and cash equivalents

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

Grants and accounts receivable, net of allowance of $ 160,246 as of September 30, 2024 and $ 49,663 at December 31, 2023

Prepaid expenses and other current assets

16 unchanged sentences

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

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

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

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

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

54,500,613 and 54,240,265 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

Accumulated other comprehensive income

Accumulated other comprehensive income (loss)

Accumulated deficit

3 unchanged sentences

Total Liabilities and Stockholders’ Equity

See accompanying notes to consolidated financial statements .

See accompanying notes to condensed consolidated financial statements .

CYTOSORBENTS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three months ended June 30,

Six months ended June 30,

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three months ended September 30,

Nine months ended September 30,

CytoSorb sales

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Other income (expense):

Interest income (expense), net

Interest expense, net

Gain (loss) on foreign currency transactions

( 1,809,652 )

Miscellaneous income (expense)

Miscellaneous income

Total other income (expense), net

25 unchanged sentences

( 22,017,695 )

See accompanying notes to consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

CYTOSORBENTS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the three and nine months ended September 30, 2024 and 2023 (Unaudited)

Comprehensive

1 unchanged sentence

Income (Loss)

Balance at March 31, 2024

Balance at June 30, 2024

( 293,006,279 )

Stock-based compensation - employees, consultants and directors

Warrants issued in connection with long-term debt

Other comprehensive loss:

foreign translation adjustment

( 2,330,743 )

ATM activation fees

Issuance of restricted stock units

1 unchanged sentence

( 2,334,091 )

Balance at June 30, 2024

Balance at September 30, 2024

( 295,340,370 )

2 unchanged sentences

Stock-based compensation - employees, consultants and directors

Warrants issued in connection with long-term debt

Other comprehensive income:

Other comprehensive loss:

foreign translation adjustment

Issuance of common stock offerings, net of fees

Warrants issued in connection with long-term debt

Issuance of restricted stock units

1 unchanged sentence

( 12,835,098 )

Balance at June 30, 2024

Balance at September 30, 2024

( 295,340,370 )

2 unchanged sentences

Income (Loss)

Balance at March 31, 2023

Balance at June 30, 2023

( 267,476,845 )

7 unchanged sentences

( 9,193,520 )

Balance at June 30, 2023

Balance at September 30, 2023

( 276,670,365 )

4 unchanged sentences

foreign translation adjustment

( 1,000,882 )

Issuance of common stock offerings, net of fees

4 unchanged sentences

( 22,672,487 )

Balance at June 30, 2023

Balance at September 30, 2023

( 276,670,365 )

See accompanying notes to consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

CYTOSORBENTS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

September 30,

Cash flows from operating activities:

3 unchanged sentences

Accrued final fee

Amortization of debt discount

Amortization of loan costs

Non-cash compensation

2 unchanged sentences

Write off of patent cost

Bad debt expense (recovery)

Bad debt expense

Stock-based compensation

Foreign currency translation (gain) loss

( 1,075,656 )

Changes in operating assets and liabilities:

Grants and accounts receivable

( 1,952,413 )

( 1,271,716 )

Prepaid expenses and other current assets

16 unchanged sentences

Proceeds from exercise of stock options

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Effect of exchange rates on cash

1 unchanged sentence

( 3,445,809 )

( 13,785,520 )

Cash, cash equivalents and restricted cash - beginning of period

5 unchanged sentences

Issuance of restricted stock units

See accompanying notes to consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

CytoSorbents Corporation

Notes to Consolidated Financial Statements

June 30, 2024

Notes to Condensed Consolidated Financial Statements

September 30, 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.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company as of September 30, 2024 and December 31, 2023, and for the three and nine months ended September 30, 2024 and 2023.

The Company’s condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and;

therefore, do not include all information and footnotes necessary for a fair presentation of consolidated financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States ("U.S.

GAAP") and should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2023, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

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.

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GAAP have been condensed or omitted.

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 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.

The results for the three and nine months ended September 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 September 30, 2024, the Company’s cash, cash equivalents and restricted cash balances were approximately $ 12.2 million, including approximately $ 5.7 million in cash and cash equivalents and approximately $ 6.5 million in restricted cash, of which the unrestricted portion 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 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.

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

If these milestones are not achieved, the Company 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.

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PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Please see Note 2 to the Company's consolidated financial statements included in the Company's Annual Report on Form 10 - K for the year ended December 31, 2023, filed with the Securities and Exchange Commission ("SEC") on March 14, 2024, for a description of all significant accounting policies.

Nature of Business

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The Company, through its wholly-owned European subsidiary, CytoSorbents Europe GmbH, conducts sales and marketing related operations for the CytoSorb device.

In March 2016, the Company formed CytoSorbents Switzerland GmbH, a wholly-owned subsidiary of CytoSorbents Europe GmbH.

This subsidiary, which began operations during the second quarter of 2016, provides marketing and direct sales services in Switzerland.

In November 2018, the Company formed CytoSorbents Poland Sp.

z.o.o., a wholly-owned subsidiary of CytoSorbents Europe GmbH.

This subsidiary, which began operations during the first quarter of 2019, provides marketing and direct sales services in Poland.

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, 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.

CytoSorb, the Company’s flagship product, was approved in the European Union (“EU”) in March 2011 and is currently being marketed and distributed in more than 75 countries around the world, as an effective extracorporeal cytokine absorber, designed to reduce the “cytokine storm” or “cytokine release syndrome” seen in critical illnesses that may result in massive inflammation, organ failure, and patient death.

In May 2018, the Company received a label extension for CytoSorb covering use of the device for the removal of bilirubin and myoglobin which allows for the use of the device in the treatment of liver failure and trauma, respectively.

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

In April 2020, CytoSorb received United States Food and Drug Administration (“FDA”) Emergency Use Authorization (“EUA”) of CytoSorb for use in adult critically ill COVID-19 patients with imminent or confirmed respiratory failure.

The CytoSorb device has neither been cleared nor approved for the indication to treat patients with COVID-19 infection.

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

In April 2020, the Company also announced that the FDA had granted Breakthrough Designation for its DrugSorb-ATR Antithrombotic Removal System for the removal of ticagrelor in a cardiopulmonary bypass circuit during emergent and urgent cardiothoracic surgery.

The Breakthrough Devices Program provides for more effective treatment of life-threatening or irreversibly debilitating disease or conditions, in this case the need to reverse the effects of ticagrelor in emergent or urgent cardiac surgery that can otherwise cause a high risk of serious or life-threatening bleeding.

Through Breakthrough Designation, the FDA intends to work with CytoSorbents to expedite the development, assessment, and regulatory review of CytoSorbents’ technology for the removal of ticagrelor, while maintaining statutory standards of regulatory approval (e.g., 510(k), de novo 510(k) or premarket approval) consistent with the FDA’s mission to protect and promote public health.

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 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.

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

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.

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

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

This includes Asklepios Klinik St.

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.

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.

The Marketing Agreement provides for the combined marketing and promotion of CytoSorb with Fresenius’ critical care products by Fresenius’ marketing organization worldwide, excluding the United States.

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”).

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.

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

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

The Marketing Agreement also includes the certification of compatibility of CytoSorb for usage on Fresenius’ current critical care platforms.

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

The technology is based upon biocompatible, highly porous polymer sorbent beads that can actively remove toxic substances from blood and other bodily fluids by pore capture and surface adsorption.

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

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

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.

Management believes that any near-term expiring patents will not have a significant impact on the Company’s ongoing business.

Stock Market Listing

On December 17, 2014, the Company’s common stock, par value $ 0.001 per share, was approved for listing on the Nasdaq Capital Market (“Nasdaq”), and it began trading on Nasdaq on December 23, 2014 under the symbol “CTSO.” Previously, the Company’s common stock traded in the over-the-counter-market on the OTC Bulletin Board.

Basis of Consolidation and Foreign Currency Translation

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and CytoSorbents Europe GmbH.

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

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.

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The Euro is the functional currency of the European Subsidiary.

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.

Foreign currency transaction gain (loss) included in net loss amounted to approximately $ 2,650,000 and $( 1,810,000 ) for the three months ended September 30, 2024 and 2023, respectively.

Foreign currency transaction gain (loss) included in net loss amounted to approximately $ 680,000 and $( 734,000 ) for the nine months ended September 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 condensed consolidated balance sheet date.

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

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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

September 30, 2024

December 31, 2023

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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 consolidated financial statements as a whole for the three and six months ended June 30, 2024.

The total amount of write-offs was immaterial to the consolidated financial statements as a whole for the three and nine months ended September 30, 2024 and 2023.

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

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

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;

At September 30, 2024 and December 31, 2023, the Company’s inventory was comprised of finished goods, which amounted to $ 1,430,325 and $ 2,155,457 , respectively;

work in process, which amounted to $ 1,049,319 and $ 838,871 , respectively;

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Donated devices are removed from inventory and charged to selling, general and administrative expenses.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation.

Depreciation of property and equipment is provided for by the straight-line method over the estimated useful lives of the related assets.

Leasehold improvements are amortized over the lesser of their economic useful lives or the term of the related leases.

Gains and losses on depreciable assets retired or sold are recognized in the consolidated statements of operations and comprehensive loss in the year of disposal.

Repairs and maintenance expenditures are expensed as incurred.

Legal costs incurred to establish and successfully defend patents are capitalized.

When patents are issued, capitalized costs are amortized on the straight-line method over the related patent term.

In the event a patent is abandoned, the net book value of the patent is written off.

Impairment or Disposal of Long-Lived Assets

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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 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.

During the three months ended September 30, 2024 and 2023, the Company recorded impairment charges of approximately $ 64,000 and $ 183,000 , respectively, and during the nine months ended September 30, 2024 and 2023, the Company recorded impairment charges of approximately $ 313,000 and $ 476,000 , 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

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 and Clinical Trial Expenses

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 $ 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.

Deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities.

Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse.

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.

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 has no t recorded income tax expense or income tax benefit for the three and nine months ended September 30, 2024, and 2023 due to the generation of net operating losses, the benefits of which have been fully reserved.

Deferred income taxes are accounted for using the balance sheet approach, which requires recognition of deferred tax assets and liabilities for the expected future consequences of temporary differences between the financial reporting basis and the tax basis of assets and liabilities.

A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized.

A full valuation allowance has been established on the deferred tax asset as it is more likely than not that a future tax benefit will not be realized.

In addition, future utilization of the available net operating loss carryforward may be limited under Internal Revenue Code Section 382 as a result of changes in ownership.

The Company follows accounting standards associated with uncertain tax positions.

The Company had no unrecognized tax benefits at June 30, 2024.

The Company had no unrecognized tax benefits at September 30, 2024.

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

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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.

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, the United Kingdom and India, 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.

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 June 30, 2024, two distributors accounted for approximately 30 % of outstanding grants and accounts receivable.

As of September 30, 2024, two distributors accounted for approximately 31 % 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 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

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.

For the three months ended September 30, 2024 and 2023, no distributor or direct customers accounted for more than 10 % of the Company’s total revenue.

For the nine months ended September 30, 2024 and 2023, one distributor accounted for approximately 10 % for each period, of the Company’s total revenue.

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”).

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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 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.

The computation of diluted loss per share does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings (see Note 8).

Stock-Based Compensation

The Company accounts for its stock-based compensation under the recognition requirements of accounting standards for accounting for stock-based compensation, for employees and directors, whereby each option granted is valued at fair market value on the date of grant.

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.

Accordingly, these warrants have been classified as equity as of September 30, 2024 and December 31, 2023.

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 $ 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.

Total freight costs amounted to approximately $ 89,000 and $ 140,000 , respectively, for the three months ended September 30, 2024 and 2023, and $ 267,000 and $ 341,000 , respectively, for the nine months ended September 30, 2024 and 2023.

Effect of Recent Accounting Pronouncements

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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.

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

In December 2023, the FASB issued ASU No.

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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.

The Company plans to adopt the provisions of ASU 2023-07 in the first quarter of fiscal 2025 and continues to evaluate the disclosure requirements related to the new standard.

On April 3, 2024, the Financial Accounting Standards Board (the "FASB") began a project related to the accounting and reporting of government grants.

The FASB has decided to pursue an International Accounting Standards ("IAS") 20 accounting model.

Under IAS 20, a grant relating to income may be reported separately as 'other income' or deducted from the related expense.

The FASB expects to issue and exposure draft of a proposed ASU in the fourth quarter of 2024.

The company is evaluating its accounting and reporting policy for government grants relative to this project and the requirements of IAS 20.

STOCKHOLDERS’ EQUITY

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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.

On September 26, 2024, the Company filed Amendment No.

1 to the Form S-3 with the SEC.

The 2024 Shelf was declared effective by the SEC on September 30, 2024.

Because 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 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.

However, as a result of limitations related to our market capitalization discussed above, the Company may offer and sell shares of the Company's common stock having an aggregate offering price of up to approximately $ 19,700,000 from time to time through the Agent.

If the Company's public float increases above $75,000,000, the Company may sell additional amounts under the Sales Agreement.

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 2024 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.

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

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 .

During the nine months ended September 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 .

In addition, the Company incurred ATM activation fees of approximately $ 41,000 during the three and nine months ended September 30, 2024.

Stock-Based Compensation

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 six months ended June 30, 2024 is as follows:

Total share-based employee, director, and consultant compensation amounted to approximately $ 782,000 and $ 2,345,000 for the three and nine months ended September 30, 2024, respectively, and approximately $ 1,086,000 and $ 2,487,000 for the three and nine months ended September 30, 2023, respectively.

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

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

Exercise Price

Outstanding, December 31, 2023

Outstanding, June 30, 2024

( 1,018,794 )

Outstanding, September 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 $ 1.08 per share) and expected life of the stock option ( 6 years ), the current price of the underlying stock and its expected volatility ( 77.8 %), expected dividends ( 0 )% on the stock and the risk free interest rate (ranging from 3.60 % 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.

The intrinsic value is calculated as the difference between the market value of the shares as of September 30, 2024 of $ 1.50 and the exercise price of the shares.

Options Outstanding

Outstanding at

September 30,

$ 0.84 - $ 13.20

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Exercisable at

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

September 30,

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

Non-vested, December 31, 2023

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.

( 1,018,794 )

( 1,528,637 )

Non-vested, September 30, 2024

As of September 30, 2024, the Company had approximately $ 3,540,000 of total unrecognized compensation cost related to stock options which will be amortized over approximately 35 months .

On March 29, 2024, the Company 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 .

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.

On April 2, 2024, the Company 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 .

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.

On April 2, 2024, the Company 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.

On April 2, 2024, the Company 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.

On April 2, 2024, the Company 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, and 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.

On April 8, 2024, the Company 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.

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.

On August 14, 2024, the Company granted, in connection with the appointment of its new Chief Financial Officer, options to purchase 80,000 shares of common stock which will vest as follows:

41,000 options upon the six - month anniversary of the date of grant and 13,000 options upon each of the first, second and third anniversaries of the date of grant.

The Company 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.

During the nine months ended September 30, 2024, 78,000 options were awarded to newly hired employees or to consultants in connection with their employment or consulting agreements.

Change in Control-Based Awards of Restricted Stock Units:

The Board of Directors has granted restricted stock units to members of the Board of Directors, to the Company’s executive officers, and to 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.

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, as amended.

The following table is a summary of these restricted stock units:

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December 31, 2023

June 30, 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 and six months ended June 30, 2024 and 2023.

September 30, 2024

Other Awards of Restricted Stock Units:

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

For the three and six months ended June 30, 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.

For the three and nine months ended September 30, 2024 and 2023, the Company recorded a charge (income) of approximately $( 67,000 ) and $ 27,000 , and $ 106,000 and $ 214,000 , respectively, related to these restricted stock unit awards.

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

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

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, 2024 and 2023, the Company recorded a charge (income) of approximately $( 234,000 ) and $( 13,000 ) and $ 102,000 and $ 0 , respectively, related to these restricted stock unit awards.

On September 18, 2023, a former 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.

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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 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.

For the three and nine months ended September 30, 2024 and 2023, the Company recorded a charge (income) of approximately $( 1,000 ) and $ 9,000 and $ 50,000 and $ 0 , 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.

For the three and nine months ended September 30, 2024 and 2023, the Company recorded a charge of approximately $ 41,000 and $ 81,000 and $ 0 and $ 0 , respectively, related to these restricted stock unit awards.

On August 14, 2024, the Company granted, in connection with the appointment of its new Chief Financial Officer, 65,000 restricted stock units.

This award was valued at approximately $ 63,000 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 will vest equally on the first anniversary of the date of the grant and the second anniversary of the date of the grant.

For the three and nine months ended September 30, 2024 and 2023, the Company recorded a charge of approximately $ 4,000 and $ 4,000 and $ 0 and $ 0 , respectively, related to these restricted stock unit awards.

Additionally, certain employees were offered a total of 213,000 restricted stock units as a condition of their employment.

These awards were valued at approximately $ 517,000 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.

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:

40,000 of these restricted stock units valued at $ 149,000 were forfeited as of September 30, 2024.

33,000 of these restricted stock units valued at approximately $ 231,000 were vested as of September 30, 2024.

The remaining 140,000 of these restricted stock units will vest upon the earlier of a Change in Control or in three or four years from the date of the award, whichever occurs first.

For the three and nine months ended September 30, 2024 and 2023, the Company recorded a charge (income) of approximately $( 23,000 ) and $( 186,000 ), and $ 8,000 and $ 0 , respectively, related to these restricted stock unit awards.

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

Non-vested, December 31, 2023

Non-vested, June 30, 2024

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

Non-vested, September 30, 2024

As of September 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.

Another 1,645,569 warrants were issued on June 28, 2024 in connection with the closing of the Company’s Loan and Security Agreement with Avenue Capital Group (see Note 5).

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:

These warrants can be exercised into common stock.

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

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

United States

8 unchanged sentences

Total revenue

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

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

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

United States

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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 EUA of CytoSorb for use in critically-ill patients infected with COVID-19 with imminent or confirmed respiratory failure by the FDA.

However, in April 2020, the Company was granted 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”).

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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See Note 2 regarding the accounting policies related to these contracts.

The Company is evaluating the potential reclassification of grant income and related costs of goods sold to net with research and development expenses.

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.

5 unchanged sentences

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

June 30, 2024

September 30, 2024

December 31, 2023

1 unchanged sentence

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

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

Contract receivables represent balances due from product sales to distributors amounting to $ 4,528,972 and $ 3,270,724 at September 30, 2024 and December 31, 2023, respectively, and billed and unbilled amounts due on government contracts amounting to $ 316,261 and $ 575,547 at September 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 $ 51,192 and $ 196,322 as of September 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 $ 786,400 and $ 1,376,819 at June 30, 2024 and December 31, 2023, respectively.

LONG-TERM DEBT, NET

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(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 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.

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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.

During the three and nine months ended September 30, 2024, the Company recorded interest expense of approximately $ 58,000 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.

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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.

For the three and nine months ended September 30, 2024, the Company recorded interest expense of approximately $ 132,000 related to the debt discount.

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

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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 of September 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.

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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:

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

Principal amount

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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.

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

On June 28, 2024, concurrent with the closing of the Avenue Capital Group 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:

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COMMITMENTS AND CONTINGENCIES

Employment Agreements

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

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

Bloch, the Company’s former Chief Financial Officer.

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

On April 12, 2020, CytoSorbents Corporation entered into an executive employment agreement with Dr.

Efthymios Deliargyris, who began employment as Chief Medical Officer on May 1, 2020, with an initial term that expired on December 31, 2021.

After the expiration of the initial terms, the employment agreements will automatically renew for additional terms of one year unless either party provides written notice of non-renewal at least 60 days prior to a renewal.

In January 2024, these employment agreements automatically renewed for an additional one year .

The foregoing employment agreements each provide for base salary and other customary benefits which include participation in group insurance plans, paid time off and reimbursement of certain business-related expenses, including travel and continuing educational expenses, as well as bonus and/or equity awards at the discretion of the Board of Directors.

In addition, the agreements provide for certain termination benefits in the event of termination without “Cause” or voluntary termination of employment for “Good Reason”, as defined in each agreement.

The agreements also provide for certain benefits in the event of a “Change of Control” of the Company, as defined in each agreement.

Effective March 31, 2023, Ms.

Bloch retired from her role as Chief Financial Officer of the Company.

Bloch’s employment agreement expired on March 31, 2023, upon her retirement from the Company.

In connection with Ms.

Bloch’s retirement, the Company and Ms.

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

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.

Bloch pursuant to which Ms.

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

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

The Employment Agreement provides for base salary and other customary benefits which include participation in group insurance plans, paid time off and reimbursement of certain business-related expenses, including travel and continuing educational expenses, as well as bonus and/or equity awards at the discretion of the Board of Directors.

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

Unless terminated sooner by either the Company or Ms.

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

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

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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.

These amounts were received by the Company in 2003.

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

For the three months ended June 30, 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.

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 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.

License Agreement

In an agreement dated September 1, 2006, the Company entered into a license agreement which provides the Company the exclusive right to use its patented technology and proprietary know-how relating to adsorbent polymers for a period of 18 years .

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

For the three months ended June 30, 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.

Royalty/License Agreements

The Company is party to various royalty and license agreements that require the payment of royalty fees.

Royalty expense amounted to approximately $ 354,000 and $ 537,000 , respectively, for the three months ended September 30, 2024 and 2023.

For the nine months ended September 30, 2024 and 2023, royalty expense amounted to approximately $ 1,594,000 and $ 1,643,000 , respectively.

In addition, the Company’s license agreement with Purolite expired on August 6, 2024.

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

The Company leases its operating facilities in both the United States and Germany under operating lease agreements.

2 unchanged sentences

The lease commenced on June 1, 2021.

The Early Term commenced on June 1, 2021 and lasted until September 30, 2021.

The Early Term commenced on June 1, 2021 and ended September 30, 2021.

The lease also contains two five-year renewal options;

however, the Company has determined that it is not likely that they will exercise these options.

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

however, the Company had determined that it is not likely that they will exercise these options.

Commencing on September 30, 2021, the remaining lease term will end in 15.5 years.

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

26 unchanged sentences

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

September 30,

Right-of-use asset

2 unchanged sentences

Lease liability, net of current portion

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

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

Total lease payments

1 unchanged sentence

( 9,861,333 )

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.

For the three months ended September 30, 2024 and 2023, operating cash flows paid in connection with operating leases amounted to approximately $ 547,000 and $ 633,000 , respectively, and $ 1,684,000 and $ 1,801,000 , respectively, for the nine months ended September 30, 2024 and 2023.

As of September 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 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.

Basic loss per share and diluted loss per share for the three and nine months ended September 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 20,328,000 and 14,119,000 incremental shares at September 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