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Item 9A. Controls and Procedures

2025-03-31 compared with 2024-03-15 · 874 added, 656 removed, 579 unchanged (73% of the section changed)

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In accordance with Rules 13a-15 and 15d-15, under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2023, to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Evaluation of our Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, mean controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Disclosure controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company on the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including, our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of December 31, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures are not designed at a reasonable assurance level and are not effective due to a material weakness, as further described below.

Management’s Annual Report on Internal Control over Financial Reporting

Our management’s report on internal control over financial reporting procedures (as defined in Rule 13a-15(f) under the Exchange Act) is included with the financial statements reflected in Item 8 of this Annual Report on Form 10-K and is incorporated herein by reference.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended.

Our internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes policies and procedures that:

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S.

GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements, errors or fraud.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

Also, projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on the evaluation of our disclosure controls and procedures as of December 31, 2024, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2024.

Changes in Internal Control Over Financial Reporting

No changes in our internal controls over financial reporting occurred during the fiscal quarter ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Discussion of Material Weakness

A material weakness (as defined in Rule 12b-2 under the Exchange Act) is a deficiency, or combination of deficiencies, in our internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis.

In connection with our preparation and the audit of our consolidated financial statements as of and for the year ended December 31, 2024, we identified a material weakness in our internal control over financial reporting related to the accounting for inventory and stock-based compensation corresponding to grants of Restricted Stock Units.

Specifically, our controls were not effectively designed or operating to ensure that inventory and restricted stock unit grants or vesting activities were recorded within the proper accounts and at the proper amounts.

Remediation Activities

We are actively engaged in remediating the identified material weakness.

Management has begun implementing measures to strengthen our internal control over financial reporting, including redesigning internal control procedures and enhancing documentation processes related to the accounting for restricted stock unit grant and vesting events.

These efforts are intended to ensure accurate and timely reporting in accordance with U.S.

GAAP for both interim and annual periods.

Key steps in our remediation plan include:

- Developing and implementing more robust control procedures to validate that the inputs and assumptions used in stock-based compensation expense calculation models are accurate and reflect proper application of generally accepted accounting principles.

- Increasing oversight and review by executive management to ensure the completeness and accuracy of restricted stock unit expense calculations and their corresponding Journal Entries.

We are committed to completing the remediation of this material weakness as expeditiously as possible and expect these enhancements to be fully implemented during the fiscal year ending December 31, 2025.

However, the material weakness will not be considered fully remediated until the new controls have been operational for a sufficient period of time and tested to demonstrate their effectiveness.

Notwithstanding the material weaknesses, management has concluded that the consolidated financial statements included elsewhere in this Annual Report present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with GAAP.

Other Information.

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Directors, Executive Officers and Control Persons.

Information required to be disclosed by this Item with respect to our executive officers is incorporated in this Annual Report on Form 10-K by reference from the section entitled “Officers and Key Employees” contained in our definitive proxy statement for our 2024 annual meeting of stockholders scheduled to be held on June 6, 2024, which we intend to file within 120 days of the end of our fiscal year.

Information required to be disclosed by this Item about our Board of Directors is incorporated in this Annual Report on Form 10-K by reference from the section entitled “Nomination and Election of Directors” contained in our definitive proxy statement for our 2024 annual meeting of stockholders scheduled to be held on June 6, 2024, which we intend to file within 120 days of the end of our fiscal year.

To the extent required, information required to be disclosed by this Item about the Section 16(a) compliance of our directors and executive officers is incorporated in this Annual Report on Form 10-K by reference from the section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” contained in our definitive proxy statement for our 2024 annual meeting of stockholders scheduled to be held on June 6, 2024, which we intend to file within 120 days of the end of our fiscal year.

Information required to be disclosed by this Item about our Board of Directors, the Audit Committee, our Audit Committee financial expert, our Code of Business Conduct and Ethics, and other corporate governance matters is incorporated in this Annual Report on Form 10-K by reference from the section entitled “Board of Directors and Corporate Governance Matters” contained in our definitive proxy statement for our 2024 annual meeting of stockholders scheduled to be held on June 6, 2024, which we intend to file within 120 days of the end of our fiscal year.

Information required by this Item regarding our executive officers, Board of Directors, Section 16(a) compliance, Audit Committee, Audit Committee financial expert, Code of Business Conduct and Ethics, and other corporate governance matters is incorporated by reference from our definitive proxy statement for our 2025 annual meeting of stockholders, scheduled for June 12, 2025.

This proxy statement, containing the sections “Officers and Key Employees,” “Nomination and Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” and “Board of Directors and Corporate Governance 1 Matters,” will be filed within 120 days of our fiscal year end

The text of our Code of Business Conduct and Ethics, which applies to our directors and employees (including our principal executive officer, principal financial officer, and principal accounting officer or controller, and persons performing similar functions), is posted in the “Corporate Governance” section of our website, www.cytosorbents.com.

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List of Exhibits

Second Amended and Restated Certificate of Incorporation, dated June 12, 2019 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on June 13, 2019).

Amended and Restated Bylaws of CytoSorbents Corporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on April 8, 2021).

Description of Capital Stock of CytoSorbents Corporation (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K filed on March 10, 2022).

Form of Warrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on December 11, 2023).

Second Amended and Restated Certificate of Incorporation, dated June 12, 2019 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8

Second Amended and Restated Bylaws of CytoSorbents Corporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8

Description of Capital Stock of CytoSorbents Corporation (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 10, 2022).

Form of Warrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 11, 2023).

Form of Subscription Right Warrant Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 9, 2024).

Form of Series A Right Warrant Certificate (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 9, 2024).

Form of Series B Right Warrant Certificate (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 9, 2024).

Amended and Restated Employment Agreement, dated as of July 30, 2019, by and between CytoSorbents Medical, Inc.

and Phillip P.

Chan (incorporated by reference to Exhibit 10.1 of the Registrant’s current report on Form 8-K filed on August 5, 2019).

Amended and Restated Employment Agreement, dated as of July 30 2019, by and between CytoSorbents Medical, Inc.

and Vincent Capponi (incorporated by reference to Exhibit 10.2 of the Registrant’s current report on Form 8-K filed on August 5, 2019).

Chan (incorporated by reference to Exhibit 10.1

Amended and Restated Employment Agreement, dated as of July 30

Amended and Restated Employment Agreement, dated as of July 30, 2019, by and between CytoSorbents Medical, Inc.

and Kathleen P.

Bloch (incorporated by reference to Exhibit 10.3 of the Registrant’s current report on Form 8-K filed on August 5, 2019).

Consulting Agreement with Dr.

Robert Bartlett Effective as of January 1, 2015 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 9, 2016).

Royalty Agreement between Guillermina Vega Montiel and the Registrant dated as of August 11, 2003 (incorporated by reference to Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K filed on March 31, 2015).

Assignment and Assumption of Certain Royalty Rights, dated as of November 22, 2022, by and among Robert Shipley Living Trust, ROKK, LLC, and CytoSorbents Medical, Inc (incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K filed on March 9,2023).

Stipulated Order and Settlement Agreement between Bro-Tech Corporation, Purolite International Ltd.

And the Registrant, dated August 7, 2006 (incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on September 8, 2006).

Distribution Agreement between Biocon Biologics Limited and the Registrant dated as of September 20, 2013 (incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K filed on March 31, 2015).

First Amendment to the Distribution Agreement between Biocon Biologics Limited and the Registrant, dated October 30, 2014 (incorporated by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K filed on March 31, 2015).

CytoSorbents Corporation 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on July 6, 2006).

Bloch (incorporated by reference to Exhibit 10.3

Employment Agreement by and between the Company and Efthymios Deliargyris, M.D., dated April 12, 2020 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 27, 2020).

Consulting Agreement, dated March 31, 2023, by and between the Company and Ms.

Bloch (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 6, 2023).

Employment Agreement, dated September 18, 2023, by and between the Company and Ms.

Kathleen Bloch (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on September 19, 2023).

Consulting Agreement, dated August 13, 2024, by and between the Company and Kathleen P.

Bloch (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 16, 2024).

Employment Agreement, dated August 14, 2024, by and between the Company and Mr.

Mariani (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 16, 2024).

Form of Payment Reduction Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 3, 2024).

Form of Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 3, 2024).

Restricted Stock Unit Award Agreement (Inducement Award), dated as of August 14, 2024, by and between the Registrant and Peter Mariani (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 16, 2024).

Nonstatutory Option Award Agreement (Inducement Award), dated as of August 14, 2024, by and between the Registrant and Peter Mariani (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 16, 2024).

Nonstatutory Option Award Agreement (Inducement Award), dated as of August 14, 2024, by and between the Registrant and Peter Mariani (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 16, 2024).

Stipulated Order and Settlement Agreement between Bro-Tech Corporation,

CytoSorbents Corporation 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form

Amendment No.

1 to the CytoSorbents Corporation 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s registration statement on Form S-8, filed on November 4, 2014).

1 to the CytoSorbents Corporation 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s registration statement on Form S-8 filed with the SEC on November 4, 2014).

Amended and Restated CytoSorbents Corporation 2014 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-8 filed with the SEC on August 26, 2019).

Amended and Restated Loan and Security Agreement, dated as of March 29, 2018, by and among CytoSorbents Corporation, CytoSorbents Medical, Inc.

and Western Alliance Bank (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on April 4, 2018).

and Western Alliance Bank (incorporated by reference to Exhibit 10.1

First Amendment to Amended and Restated Loan and Security Agreement, dated as of July 30, 2019, by and among CytoSorbents Corporation, CytoSorbents Medical, Inc.

and Western Alliance Bank (incorporated by reference to Exhibit 10.1 of the Registrant’s current report on Form 8-K filed on August 5, 2019).

and Western Alliance Bank (incorporated by reference to Exhibit 10.1

Third Amendment to Amended and Restated Loan and Security Agreement, dated as of December 4, 2020, by and among CytoSorbents Corporation, CytoSorbents Medical, Inc.

and Western Alliance Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 10, 2020).

and Western Alliance Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 10, 2020).

Fourth Amendment to the Amended and Restated Loan and Security Agreement, dated as of January 19, 2022, by and among CytoSorbents Corporation, CytoSorbents Medical, Inc.

and Western Alliance Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 20, 2022).

and Western Alliance Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 20, 2022).

Fifth Amendment to the Amended and Restated Loan and Security Agreement, dated as of December 28, 2022, by and among CytoSorbents Corporation, CytoSorbents Medical, Inc.

and Western Alliance Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 29, 2022).

and Western Alliance Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 29, 2022).

Sixth Amendment to the Amended and Restated Loan and Security Agreement, dated as of March 8, 2023, by and among CytoSorbents Corporation, CytoSorbents Medical, Inc.

and Western Alliance Bank (incorporated by reference to Exhibit 10.30 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 9, 2023).

Seventh Amendment to the Amended and Restated Loan and Security Agreement, dated as of May 16, 2023, by and among CytoSorbents Corporation, CytoSorbents Medical, Inc.

and Western Alliance Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 1, 2023).

Loan and Security Agreement, dated as of June 28, 2024, by and among CytoSorbents Corporation, the lenders, and the administrative and collateral agent party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 5, 2024).

Supplement to the Loan and Security Agreement, dated as of June 28, 2024, by and among CytoSorbents Corporation, the lenders, and the administrative and collateral agent party thereto (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 5, 2024).

Form of Warrant, by and between CytoSorbents Corporation and Avenue Venture Opportunities Fund, LP (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 5, 2024).

Success Fee Letter, dated as of March 29, 2018, by and among CytoSorbents Corporation, CytoSorbents Medical, Inc.

and Western Alliance Bank (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on April 2, 2018).

and Western Alliance Bank (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 4, 2018).

Success Fee Letter, dated as of January 19, 2022, by and among CytoSorbents Corporation, CytoSorbents Medical, Inc.

and Western Alliance Bank (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on January 20, 2022).

and Western Alliance Bank (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 20, 2022).

Exclusive Distribution Agreement, dated as of September 26, 2014, by and between CytoSorbents Europe GmbH and Aferetica s.r.l.

(incorporated by reference to Exhibit 10.23 of Registrant’s Annual Report on Form 10-K filed on March 7, 2019).

Amendment to Exclusive Distribution Agreement, dated December 15, 2014, by and between CytoSorbents Europe GmbH and Aferetica s.r.l (incorporated by reference to Exhibit 10.24 of Registrant’s Annual Report on Form 10-K filed on March 7, 2019).

Open Market Sale AgreementSM, dated as of December 30, 2021, by and between CytoSorbents Corporation and Jefferies LLC (incorporated by reference from Exhibit 1.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 30, 2021).

Marketing Agreement, dated as of August 1, 2022, by and between CytoSorbents Corporation and Fresenius Medical Care Deutschland GmbH (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 3, 2022).

(incorporated by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 7, 2019).

Amendment to Exclusive Distribution Agreement, dated December 15, 2014, by and between CytoSorbents Europe GmbH and Aferetica s.r.l (incorporated by reference to Exhibit 10.24 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 7, 2019).

Open Market Sale AgreementSM, dated as of December 30, 2021, by and between CytoSorbents Corporation and Jefferies LLC (incorporated by reference from Exhibit 1.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 30, 2021).

Lease, dated as of March 26, 2021, by and between 300 CR LLC and CytoSorbents Medical, Inc.

(incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 31, 2021).

Sixth Amendment to the Amended and Restated Loan and Security Agreement, dated as of March 8, 2023, by and among CytoSorbents Corporation, CytoSorbents Medical, Inc.

and Western Alliance Bank (incorporated by reference to Exhibit 10.30 to the Registrant’s Annual Report on Form 10-K filed on March 9,2023).

Seventh Amendment to the Amended and Restated Loan and Security Agreement, dated as of May 16, 2023, by and among CytoSorbents Corporation, CytoSorbents Medical, Inc.

and Western Alliance Bank (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on August 1, 2023).

Consulting Agreement, dated March 31, 2023, by and between the Company and Ms.

Bloch (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 6, 2023).

Employment Agreement, dated September 18, 2023, by and between the Company and Ms.

Kathleen Bloch (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on September 19, 2023).

Securities Purchase Agreement, dated as of December 11, 2023, by and among CytoSorbents Corporation and the investors party thereto (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 11, 2023).

List of Subsidiaries.

(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 31, 2021).

Securities Purchase Agreement, dated as of December 11, 2023, by and among CytoSorbents Corporation and the investors party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 11, 2023).

Insider Trading Policy.

List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 15, 2024).

Consent of WithumSmith+Brown, PC.

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Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Compensation Recoupment Policy

Compensation Recoupment Policy (incorporated by reference to Exhibit 97 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 15, 2024).

The following materials from CytoSorbents Form 10-K for the fiscal year ended December 31, 2023, formatted in Extensible Business Reporting Language (XBRL):

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Form 10-K Summary.

In accordance with Section 13 or 15(d) of the Exchange Act, CytoSorbents Corporation has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 14 th day of March, 2024.

CYTOSORBENTS CORPORATION

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Executive Officer) and Director

/s/ Kathleen P.

Chief Financial Officer

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FINANCIAL STATEMENTS

Management’s Report on Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm

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Notes to Consolidated Financial Statements

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act.

The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Further, because of changes in conditions, effectiveness of internal control over financial reporting may vary over time.

Management, with the participation of the Chief Executive Officer and the Chief Financial Officer, working with an external consultant, conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal-Control –Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management concluded that internal control over financial reporting was effective as of December 31, 2023.

/s/ Kathleen P.

Chief Executive Officer

Chief Financial Officer

(Principal Executive Officer)

(Principal Financial Officer)

March 14, 2024

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

To the Board of Directors and Stockholders

CytoSorbents Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Cytosorbents Corporation (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Cytosorbents Corporation as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of CytoSorbents Corporation (the ‘Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive loss, changes in stockholder’s equity, cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years ended December 31, 2024 and 2023, in conformity with accounting principles generally accepted in the United States of America.

Restatement of the Previously Issued Consolidated Financial Statements

As discussed in Note 12 to the consolidated financial statements, the 2023 consolidated financial statements have been restated to correct material misstatements related to stock-based compensation expense for restricted stock units and inventory.

Emphasis of the Matter – Restatement of Unaudited Interim Condensed Consolidated Financial Statements

As discussed in Note 12 to the consolidated financial statements, the unaudited interim condensed consolidated financial statements as of and for the three months ended March 30, 2024 and 2023, as of and for the three and six months ended June 30, 2024 and 2023, and as of and for the three and nine months ended September 30, 2024 and 2023, have been restated to correct material misstatements related to stock-based compensation expense for restricted stock units and inventory.

Substantial Doubt Regarding Going Concern

The accompanying consolidated financial statements have been prepared assuming that the entity will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the entity has suffered recurring losses from operations, has experienced cash used from operations, and has an accumulated deficit, which raise substantial doubt about its ability to continue as a going concern.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the entity has suffered recurring losses from operations, has experienced cash used in operations, and has an accumulated deficit, which raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our opinion is not modified with respect to this matter.

Basis for Opinion

These consolidated financial statements are the responsibility of the entity’s management.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to Cytosorbents Corporation in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Cytosorbents Corporation is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Stock Based Compensation

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Evaluation of warrants

Description of the Matter

As discussed in Notes 2 and 11 to the consolidated financial statements, the Company grants stock-based awards including stock options, restricted stock units and performance-based stock awards to their employees as compensation for their service.

The Company recorded approximately $3,329,000 of stock-based compensation expense during the year ended December 31, 2023.

In 2023, the Company granted 1,227,750 performance awards, and recorded stock-based compensation expense of approximately $354,000 related to these awards.

The number of shares awarded are contingent on certain performance metrics, and the quantity of awards received can range based on the level of performance achieved.

Auditing the Company’s accounting for stock-based compensation required complex auditor judgment due to the number and the variety of the types of equity awards, the subjectivity of assumptions used to value stock-based awards and the frequent use of performance-based vesting conditions.

In particular, judgment was required to evaluate the nature of the annual performance conditions, as well as to assess the satisfaction of the performance targets.

As described in Note 5 to the consolidated financial statements, the Company entered into a Loan and Security Agreement in June 2024.

As additional consideration for the commitment, the Company also issued the lender warrants with a fair value of $690,709 to purchase an aggregate of 1,645,569 shares of the Company’s common stock for cash at the exercise price of $0.79, which expire on June 28, 2029.

The Company determined that the warrants met all the criteria for equity classification and recorded them as a component of additional paid-in capital upon the closing of the transaction in July 2024.

The principal considerations for our determination of the financial statement classification of the warrants as a critical audit matter are the existence of complexities in applying the accounting standards related to certain warrant agreement provisions, including settlement provisions and derivative elements.

Auditing these elements involved especially complex auditor judgment, specialized knowledge and skills due to the terms of the applicable agreement

How We Addressed the Matter in Our Audit

Addressing the matter involved obtaining an understanding of and evaluating the design of controls over the Company’s process for determining stock-based compensation expense, including management’s review controls over the underlying calculations, the significant assumptions used in valuing certain awards, identification of the terms of the performance conditions and the key inputs used in determining the outcome of each performance condition.

We assessed the appropriateness of judgments made by management in determining key assumptions related to the awards.

We tested the accuracy of the data used in measuring the awards by agreeing the underlying inputs, such as grant date, grant price, performance targets and vesting terms, among others, back to source documents, such as compensation meeting minutes or award letters.

Additionally, we tested the related valuation report on volatility prepared by the Company’s specialists by involving our internal valuation specialists to assess the valuation methodologies and assumptions used.

We determined whether performance targets were satisfied in accordance with the contractual conditions through review of source documents, press releases, and board minutes and recalculated grant date fair value by multiplying the awarded quantity of awards by the fair value.

We sampled a selection of grants and recalculated the fair value of those grants without exception.

Further, we sampled a selection of grants and recalculated the stock compensation expense recorded as of December 31, 2023.

We also evaluated the adequacy of the Company’s stock-based compensation disclosures included in Notes 2 and 11 in relation to this matter.

We have served as the Company’s auditor since 2004.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, obtaining an understanding of and evaluating the design and implementation of controls over management’s process for the accounting treatment, reading the agreements, and evaluating the accounting for the warrant issuance.

Testing management’s process included (i) evaluating the internal controls and application of the accounting framework used by management;

(ii) testing the mathematical accuracy of management’s calculations;

(iii) testing the inputs and assumptions used and (iv) testing the completeness and accuracy of the underlying data used in the calculations.

Professionals with specialized skill and knowledge were used to assist in (i) evaluating management’s application of the accounting framework and (ii) testing the mathematical accuracy of management’s calculation and evaluating the conclusion related to the accounting classification of the warrant issuance.

/s/ WithumSmith+Brown, PC

We have served as the Company’s auditor since 2004.

East Brunswick, New Jersey

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CONSOLIDATED BALANCE SHEETS

At December 31,

Current Assets:

Cash and cash equivalents

Restricted cash, current

Grants and accounts receivable, net of allowances of $ 157,701 and $ 49,663 at December 31, 2024 and 2023, respectively

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Total Liabilities

Commitments and Contingencies (Note 10)

Commitments and Contingencies

Stockholders’ Equity:

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

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

54,240,265 and 43,635,715 shares issued and outstanding at December 31, 2023 and 2022, respectively

Common Stock, Par Value $ 0.001 , 100,000,000 shares authorized at December 31, 2024 and 2023;

and 54,830,146 and 54,240,265 shares issued and outstanding at December 31, 2024 and 2023, respectively

Additional paid-in capital

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CytoSorb sales

Total product sales

Total revenue

Cost of revenue

Product revenue

Cost of goods sold

Operating expenses:

Research and development

Legal, financial and other consulting

Research and development, net of grant income

Selling, general and administrative

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( 31,948,620 )

( 22,744,745 )

Other income (expense):

Interest income (expense), net

Gain (loss) on foreign currency transactions

Interest expense, net

( 1,399,092 )

Gain (loss) on foreign currency transactions

( 4,224,721 )

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( 5,623,843 )

( 2,549,906 )

Loss before benefit from income taxes

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( 30,060,499 )

( 25,294,651 )

Benefit from income taxes

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( 29,246,760 )

( 24,558,648 )

Basic and diluted net loss per common share

3 unchanged sentences

( 29,246,760 )

( 24,558,648 )

Other comprehensive income (loss):

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( 31,046,634 )

( 22,298,985 )

The Notes to Consolidated Financial Statements are an integral part of these statements.

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STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 and 2021

Comprehensive

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( 253,997,878 )

( 196,626,647 )

Stock-based compensation - employees, consultants and directors

Cumulative effect of adjustments to beginning balance

Stock-based compensation (as restated)

Proceeds from the exercise of stock options for cash, net of fees incurred

Issuance of common stock offerings, net of fees incurred

Issuance of restricted stock options

Proceeds from exercise of stock options

Cashless exercise of stock options

Other comprehensive income, foreign currency translation adjustment

( 24,558,648 )

Common stock issued upon vesting of restricted stock units, less shares withheld to cover taxes

Other comprehensive loss, foreign currency translation adjustment

( 1,799,874 )

Balance at December 31, 2021

( 1,799,874 )

Stock-based compensation - employees, consultants and directors

Legal/audit fees related to ATM offering

Issuance of restricted stock options

Other comprehensive loss, foreign currency translation adjustment

Stock issued to vendor in lieu of cash payment

Net loss (as restated)

( 29,246,760 )

Balance at December 31, 2022

Balance at December 31, 2023 (as restated)

( 283,289,661 )

Stock-based compensation - employees, consultants and directors

Proceeds from the exercise of stock options for cash

Stock-based compensation

Issuance of common stock offerings, net of fees incurred

Issuance of restricted stock options

Common stock issued upon vesting of restricted stock units, less shares withheld to cover taxes

Issuance of warrants

Other comprehensive loss, foreign currency translation adjustment

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( 20,718,957 )

( 28,507,394 )

Balance at December 31, 2024

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( 29,246,760 )

( 24,558,648 )

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

Accrued final fee

Non-cash compensation

Amortization of debt discount

Amortization of loan costs

Depreciation and amortization

Amortization of right-of-use asset

Bad debt expense (recovery)

Loss on disposal of fixed assets

Bad debt expense

Impairment of patents

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( 1,720,419 )

( 2,350,547 )

Prepaid expenses and other current assets

( 1,351,805 )

Accounts payable and accrued expenses

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( 21,655,136 )

( 14,005,599 )

Cash flows from investing activities:

Purchases of property and equipment

( 6,087,365 )

( 3,641,248 )

Net cash used in investing activities

( 6,455,576 )

( 4,281,261 )

Cash flows from financing activities:

Proceeds from long-term debt

Repayment of long-term debt

( 5,000,000 )

Payment of final fee

Payment of loan costs

Equity contributions - net of fees incurred

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( 8,216,931 )

( 17,596,435 )

Cash, cash equivalents, and restricted cash at beginning of year

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Supplemental disclosure of non-cash financing activities:

Issuance of common stock to vendor in lieu of cash payment

Warrants issued in connection with long-term debt

Capital expenditures included in accounts payable

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These entities are collectively referred to as the “Company”.

As of December 31, 2023, the Company’s total cash and cash equivalents were approximately $ 15.6 million, including approximately $ 14.1 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.

As of December 31, 2024, the Company’s total cash and cash equivalents and restricted cash was approximately $ 9.8 million, with $ 6.5 million classified as restricted, and $ 3.3 million as unrestricted and available to fund operations.

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.

As of the issuance date of this Annual Report on Form 10-K, the Company has raised a total of $ 7.3 million, net of offering fees, through the Rights Offering (see Note 13 – Subsequent Event), and the exercise of the Series A Right Warrants (see Note 13 – Subsequent Event).

The equity raises also provided for $ 5 million of restricted cash to become unrestricted.

As a result, our proforma unrestricted cash and cash equivalents, a non-GAAP measure, on December 31, 2024, assuming the net proceeds from the Rights Offering and the Series A Right Warrant exercise had occurred at that date, has increased by $ 12.3 million to $ 15.6 million, compared to the as reported amount of $ 3.3 million.

Our expected future capital requirements may depend on many factors including expanding our customer base and sales force, the timing and extent of spending in obtaining regulatory approval and introduction of new products, including the regulatory approval and introduction of DrugSorb-ATR in the U.S.

and Canada which is expected in 2025, and the related opportunity to receive Tranche 2 of Avenue Capital Commitment (See Note 5.

Long-Term Debt) by December 31, 2025 and extend the principal re-payment terms of the facility beginning in the third quarter of 2026.

Additional sources of liquidity available to us include issuance of additional equity securities through the Series B Right Warrant, or other public or private equity offerings, debt financings or from other sources.

The sale of additional equity may result in dilution to our shareholders.

There is no assurance that we will be able to secure funding on terms acceptable to us, or at all.

The increasing need for capital could also make it more difficult to obtain funding through either equity or debt.

Should additional capital not become available to us as needed, we may be required to take certain actions, such as slowing sales and marketing expansion, delaying further regulatory approvals, or reducing headcount.

As a result of these additional uncertainties, 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, additional grant funding, 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.

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The Company is a leader in the treatment of life-threatening conditions in intensive care and cardiac surgery using blood purification.

The Company, through its subsidiary CytoSorbents Medical, Inc.

(formerly known as CytoSorbents, Inc.), is engaged in the research, development and commercialization of medical devices with its blood purification technology platform which incorporates a proprietary adsorbent, porous polymer technology.

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 in patients in the pre-specified isolated coronary artery bypass graft (“CABG”) surgery population, representing more than 90% of the overall study population.

The Company expects to complete the analysis of the full trial results during the first quarter of 2024.

Pending this final analysis, the Company believes the safety and effectiveness data from STAR-T will support the regulatory submission of DrugSorb-ATR to the U.S.

FDA and Health Canada.

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.

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 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.

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.

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.

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 December 31, 2023, is protected by 19 issued U.S.

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

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

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 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.

The Company through its subsidiary CytoSorbents Medical, Inc and based in New Jersey, is engaged in the research, development and commercialization of medical devices with its blood purification technology platform which incorporates a proprietary adsorbent, porous polymer technology.

The Company, through its wholly-owned European subsidiary, CytoSorbents Europe GmbH, based in Berlin, Germany conducts sales and marketing related operations for the CytoSorb device outside of the United States.

Basis of Consolidation and Foreign Currency Translation

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

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

Foreign currency transaction gain (loss) included in net loss amounted to approximately $ 1,949,000 , $( 2,449,000 ) and $( 2,578,000 ) for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company translates assets and liabilities of the European subsidiary, whose functional currency is their local currency, at the exchange rate in effect at the balance sheet date.

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

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

Cash and Cash Equivalents

Sales and expenses denominated in foreign currencies are translated at average exchange rates in effect throughout the year.

Assets and liabilities of foreign operations are translated at period-end exchange rates with the impacts of foreign currency translation recorded in cumulative translation adjustment, a component of accumulated other comprehensive income.

Foreign currency transactions gains and losses are included in other income (loss), net in the consolidated statements of operations and other comprehensive loss.

Segment Information

The Company manages its operations and allocates resources as a single operating segment.

The Company’s chief operating decision-maker (“CODM”) is its Chief Executive Officer (“CEO”) who makes operating decisions, assesses financial performance and allocates resources based on consolidated financial information.

As such, the Company has determined that it operates in one reportable segment.

Cash, Cash Equivalents, and Restricted Cash

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

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

The Company’s restricted includes amounts held as collateral for a letter of credit with Bridge Bank, securing the College Road facility lease.

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

Cash and cash equivalents

Restricted cash, current

Restricted cash

Total cash, cash equivalents and restricted cash*

Restricted Cash

The Company’s total restricted cash in the amount of $ 1,483,958 and $ 1,687,459 as of December 31, 2023 and 2022, respectively, consisted of cash of $ 1,467,459 for each year 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 and $ 220,000 as of December 31, 2023 and 2022, respectively, that the Company is obligated to maintain as collateral for the credit limit on the Company’s credit card account.

Accounts Receivable and Allowance for Credit Losses

* See Note 1 – Basis of Presentation for further discussion regarding restricted cash.

Grants and Accounts Receivable (Net of Allowance for Credit Losses)

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

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Cost is determined using a first-in first-out (“FIFO”) basis.

At December 31, 2023 and 2022, the Company’s inventory was comprised of finished goods, which amounted to $ 2,155,457 and $ 1,567,871 , respectively, work in process which amounted to $ 838,871 and $ 1,280,368 , respectively, and raw materials which amounted to $ 685,801 and $ 613,347 , respectively.

Devices used in clinical trials or for research and development purposes are removed from inventory and charged to research and development expenses at the time of their use.

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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 years ended December 31, 2023 and 2022, the Company wrote-off patent costs of approximately $ 656,000 and $ 636,000 , 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 years ended December 31, 2024 and 2023, the Company wrote-off patent costs of approximately $ 333,735 and $ 655,685 , 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.

The Company accounts for leases in accordance with FASB Accounting Standards Update (“ASU”) 2016-02, Leases, Topic 842 (“ASC 842”).

Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term.

The Company determines if a contract contains a lease at the inception date and determines the lease classification, recognition, and measurement at commencement date.

ROU assets also include adjustments related to prepaid or deferred lease payments.

As the Company’s leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.

Options to extend a lease are included in the lease term when it is reasonably certain that the Company will exercise such options.

Certain of the Company’s lease agreements include provisions for the Company to pay the lessor for common area maintenance, real estate taxes, and insurance, which the Company accounts for as variable lease costs.

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 3 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.

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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.

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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, Net of Grant Income

All research and development costs, payments to laboratories, research consultants and costs related to clinical trials and studies are expensed when incurred.

Currently, accounting for grants does not fall under ASC 606, as the grantor will not benefit directly from the Company’s expansion or product development, and no products or services are transferred to the grantor.

As there is no authoritative guidance under U.S.

GAAP on accounting for grants to for profit business entities from government entities, the Company has adjusted its accounting policy for recording grants to analogize the guidance provided by International Accounting Standard 20 (“IAS 20”).

Accordingly, the Company has retroactively, as of January 1, 2023, reclassified grant income, net of expenses, as a reduction of research and development expenses.

Research and Development

All research and development costs, payments to laboratories, research consultants and costs related to clinical trials and studies are expensed when incurred.

Grant income, net of expenses, is presented as a reduction of research and development expenses.

Advertising Expenses

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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 %.

See Note 9 for the impact of the tax rate change on deferred tax assets and liabilities.

The Company follows the accounting standards associated with uncertain tax provisions.

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 as of December 31, 2022.

The Company is accounting for an uncertain tax position of approximate $ 2.2 and $ 2.1 million for the years ended December 31, 2024 and 2023, respectively.

The Company had no unrecognized tax benefits as of December 31, 2024 and 2023.

The Company files tax returns in the U.S.

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A significant portion of the Company’s revenues are from product sales in Germany.

Substantially all of the Company’s grant and other income are from grant agencies in the United States.

(See Note 3 for further information relating to the Company’s revenue.)

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

As of December 31, 2022, two distributors accounted for approximately 27 % of outstanding grants and accounts receivables.

For the years ended December 31, 2023, 2022 and 2021, no agency, distributor/strategic partner or direct customer represented more than 10 % of the Company’s total revenue.

As of December 31, 2024, and 2023 one distributor accounted for approximately 19 % of outstanding grants and accounts receivables.

For the years ended December 31, 2024 and 2023, one distributor accounted for 11 % and 10 %, respectively, of the Company’s total revenue.

Financial Instruments

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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 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 December 31, 2024 and December 31, 2023.

Stock-Based Compensation

The Company measures and recognizes compensation expense for all stock-based payment awards made to employees, including stock options, restricted shares (“RSUs”), based on estimated fair values at the award grant date.

The fair value of stock-based awards is amortized over the vesting period of the award using a straight-line method.

Stock-based compensation expense for awards with performance conditions is recognized when it is probable that the performance condition will be achieved and is then recognized over the requisite service period.

Any changes in the probability assessment are accounted for as a cumulative true up to the current period compensation cost.

To estimate the fair value of an award, the Company uses the Black-Scholes option pricing model.

This model requires inputs such as expected life, expected volatility, expected dividend yield of stock and risk-free interest rate.

These inputs are subjective and generally require significant analysis and judgment to develop.

While estimates of expected life and volatility are derived primarily from the Company’s historical data, the risk-free rate is based on the U.S.

Treasury yield curve in effect at the time of grant commensurate with the expected life assumption.

The Company accounts for forfeitures in the period they occur.

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.

Net Loss per Common Share

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

The computation of diluted net loss per share does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings (see Note 12).

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 computation of diluted net loss per share does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings.

The following table presents the calculation of net loss per share:

Years Ended December 31,

Basic and Diluted:

As Restated *

Net loss attributable to common stockholders per consolidated statements of operations

( 20,718,957 )

( 29,246,760 )

Weighted average common shares outstanding used to compute basic and diluted loss per share

Net loss per common share attributable to common stockholders, basic and diluted

* See Note 12 – Restatement of Previously Issued financial information for details.

The following table presents the potentially dilutive shares that were excluded from the computation of diluted net loss per share of common stock attributable to common stockholders, because their effect was anti-dilutive, as adjusted to give effect to the Stock Split:

As of December 31,

Stock options outstanding

Warrants for common stock

*Total number of RSUs include 2,809,500 units with a Change in Control-Based performance condition.

Shipping and Handling Costs

The cost of shipping product to customers and distributors is typically borne by the customer or distributor.

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

The cost of shipping products to customers and distributors is typically borne by the customer or distributor.

The Company records shipping and handling costs in cost of goods sold.

Total freight costs amounted to approximately $ 409,273 and $ 464,324 for the years ended December 31, 2024 and 2023, respectively.

Effect of Recent Accounting Pronouncements

In June 2016, the FASB, issued ASU No.

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

Measurement of Credit Losses on Financial Instruments”.

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

The updated guidance is effective for public entities for fiscal years beginning after

December 15, 2022.

The Company implemented the updated guidance as of January 1, 2023, and this did not have significant impact on its consolidated financial statements.

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

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The ASU’s amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

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

This is not expected to have a material impact on the Company’s financial statements.

The Company implemented the updated guidance as of January 1, 2024, and this did not have an impact on its consolidated financial statements.

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (Topic 280), which will require public companies to provide more transparency in both quarterly and annual reports about the expenses they incur from revenue generating reportable business segments.

In addition, the ASU requires that a public entity disclose significant segment expenses that are regularly provided to the chief operating decision maker, an amount for other segment items by reportable business segment, including a description of its composition, and the primary measures of a business segment’s profit or loss in assessing segment performance.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company implemented the updated guidance as of December 31, 2024, which resulted in the addition of new segments disclosures (see Note 11).

Also, the implementation of ASU 2023-07, did not have an impact on other disclosures to the consolidated financial statements.

In December 2023, the FASB issued ASU No.

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

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

United States

Distributors/

Strategic Partners

Product sales:

United States

All other countries

Total product revenue

Grant income:

United States

On November 19, 2024, the Financial Accounting Standards Board (the “FASB”) issued a proposed Accounting Standards Update to establish authoritative guidance for the accounting and reporting of government grants received by business entities.

The FASB has decided to pursue an International Accounting Standards 20 (“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 Company has evaluated its accounting and reporting policy for government grants relative to this project and the requirements of IAS 20.

As there is no authoritative guidance under U.S.

Accordingly, the Company has retroactively, as of January 1, 2023, reclassified grant income, net of expenses, as a reduction of research and development expenses.

Reclassification of Grant Income and Operating Expenses

As noted above on Effect of Recent Accounting Pronouncements the Company has retroactively, as of January 1, 2023, reclassified grant income, net of expenses, as a reduction of research and development expenses.

For the years ended December 31, 2024 and 2023, Grant Income and the related expenses were as follows:

Grant income-related expenses

( 3,583,233 )

( 5,129,952 )

In addition, the Company changed its accounting policy to report legal, financial and other consulting costs, which was previously its own separate line item within the Operating Expenses section of the Consolidated Statements of Operations and Comprehensive Loss to now being merged into the Selling, General and Administrative Expenses line item.

These expenses previously presented within legal, financial and other consulting costs are general and administrative in nature;

accordingly, the updated presentation would provide the user of the Consolidated Financial Statements a better picture of the purpose of those expenses.

For the years ended December 31, 2024 and 2023, the total amount of expenses that would have been reported as Legal, financial and other consulting costs under the previous accounting policy amounted to $ 3,199,357 and $ 4,272,296 , respectively.

For comparative purposes, the Company has recorded the following reclassification adjustments to the previously reported Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2023:

As Previously Reported

As Reclassified*

( 5,264,426 )

Total revenue

( 5,264,426 )

Cost of revenues

( 13,957,356 )

( 8,827,404 )

Research and development

( 15,728,915 )

( 15,594,442 )

Legal, financial and other consulting

( 4,272,296 )

Selling, general and administrative

( 33,600,065 )

( 4,272,296 )

( 37,872,361 )

Total operating expenses

( 53,601,276 )

( 53,466,803 )

* See Note 12 – Restatement to Previously Issued Financial Information for further adjustments to these line items.

For comparative purposes, the Company has recorded the following reclassification adjustments to the previously reported Consolidated Statements of Cash Flows:

As Previously Reported

As Reclassified*

Non-cash compensation

Stock-based compensation

* See Note 12 – Restatement to Previously Issued Financial Information for further adjustments to these line items.

* These reclassification adjustments reflected in these consolidated cash flows statements line items also reflect the restatement adjustments applicable to the statements of changes to stockholders’ equity.

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

United States

Distributors/

Strategic Partners

Product sales:

Product revenue:

United States

All other countries

Total product revenue

Grant income:

United States

Total revenue

Product revenue

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

United States

Distributors/

Strategic Partners

Product sales:

Product revenue:

United States

All other countries

Total product revenue

Grant income:

United States

Total revenue

The Company has two primary revenue streams:

(1) sales of the CytoSorb device and related device accessories and (2) grant income from contracts with various agencies of the United States government.

The following is a brief description of each revenue stream.

Product revenue

CytoSorb Sales

The Company sells its CytoSorb device using both its own sales force (direct sales) and through the use of distributors and/or strategic partners.

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

However, in April 2020, the Company was granted Emergency Use Authorization (“EUA”) of CytoSorb for use in critically ill patients infected with COVID-19 by the FDA.

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 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.

Direct sales are fulfilled from the Company’s office in Berlin, Germany.

Direct sales are fulfilled from the Company’s warehouse facility in Berlin, Germany.

There are no formal sales contracts with any direct customers relating to product price or minimum purchase requirements.

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These customers submit purchase orders and the order is fulfilled and shipped directly to the customer.

Prices to all direct customers are based on a standard price list based on the packaged quantity (6 packs vs.

Prices to all direct customers are based on a standard price list based on the packaged quantity (6 packs versus 12 packs).

Distributor and strategic partner sales make up the remaining product sales.

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The Company has a formal written contract with each distributor/strategic partner.

These contracts have terms ranging from one to five years in length, with three years being the typical term.

These contracts have terms ranging from 1 - 5 years in length, with three years being the typical term.

In addition, certain distributors are eligible for volume discount pricing if their unit sales are in excess of the base amount in the contract.

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

Government Grants

The Company has been the recipient of numerous grant contracts from various agencies of the U.S.

The purpose of these grant contracts is to perform various research and development activities.

The type of research required is outlined in each contract.

These contracts fall into one of the following categories:

Fixed price – the Company invoices the contract amount in equal installments over the term of the contract without regard to the timing of the costs incurred related to this contract.

If billings on fixed price contracts exceed the costs incurred, revenue will be deferred to the extent of the excess billings.

Cost reimbursement – the Company submits monthly invoices during the term of the contract for the amount of direct costs incurred during that month plus an agreed percentage that relates to allowable overhead and general and administrative expenses.

Cumulative amounts invoiced may not exceed the maximum amount of funding stipulated in the contract.

Cost plus – this type of contract is similar to a cost reimbursement contract but this type also allows for the Company to additionally invoice for a fee amount that is included in the contract.

Performance based - the Company submits invoices only upon the achievement of the milestones listed in the contract.

The amount to be invoiced for each milestone is documented in the contract.

These government contracts have terms ranging from three months to four years.

The Company may apply for an extension of the term of the contract in order to complete its research and development activities but would not receive additional funding during the extension period in excess of the original contract.

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

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 incur internal costs, primarily salary related costs, to obtain the contracts related to the government grants.

Company employees spend time reviewing the program requirements and developing the budget and related proposal to submit to the grantor agency.

There may additionally be travel expenditures involved with meeting with government agency officials during the negotiation of the contract.

These internal costs are expensed as incurred.

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

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Contract receivable amounted to $ 3,822,452 as of January 1, 2023.

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 $ 196,322 and $ 178,134 at December 31, 2023 and 2022, respectively, and deferred grant revenue related to the billing on fixed price government contracts in excess of costs incurred, which amounted to $ 1,376,819 and $ 1,516,772 at December 31, 2023 and 2022, respectively.

Contract liabilities amounted to $ 2,251,177 as of January 1, 2022.

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 $ 176,714 and $ 196,322 at December 31, 2024 and 2023, respectively, and deferred grant liability related to the billing on fixed price government contracts in excess of costs incurred, which amounted to $ 419,328 and $ 1,376,819 at December 31, 2024 and 2023, respectively.

BALANCE SHEET COMPONENTS

The Company had the following major classes of inventory:

As Restated *

Raw Materials

Work in Process

Finished Goods

* See Note 12 – Restatement of Previously Issued financial information for details.

Property and equipment - net

Property and equipment - net, consist of the following as of December 31,:

The Company’s Property and equipment - net, consist of the following:

Depreciation/

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Depreciation expense for the years ended December 31, 2024 and 2023, amounted to $ 1,341,262 and $ 1,239,600 , respectively.

OTHER ASSETS:

Other assets consist of the following:

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( 1,254,850 )

Security deposits

Amortization expense amounted to $ 222,836 , $ 194,056 , and $ 160,422 for the years ended December 31, 2023, 2022 and 2021, respectively.

Amortization expense for the next five years will be approximately $ 218,000 for the year ending December 31, 2024;

approximately $ 218,000 for the year ending December 31, 2025;

approximately $ 217,000 for the year ending December 31, 2026;

approximately $ 212,000 for the year ending December 31, 2027 and approximately $ 212,000 for the year ending December 31, 2028.

( 1,021,233 )

Patent amortization expense amounted to $ 235,146 , and $ 222,836 for the years ended December 31, 2024 and 2023, respectively.

Patent amortization expense for the next five years and thereafter is scheduled as follows:

Scheduled amortization of patents issued

Accrued expenses and other current liabilities

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Accrued salaries and commissions

Deferred revenue

Clinical studies

Accrued accounts payable

Professional fees

Accrued royalties

Customer rebates

Travel and entertainment

Board of Director fees

Sales, payroll and income taxes payable

Clinical studies

Deferred revenue

Accrued expenses and other current liabilities

* See Note 12 – Restatement of Previously Issued financial information for details.

LONG-TERM DEBT

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 the year ended December 31, 2023, the Company recorded interest expense of approximately $ 43,000 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).

2018 Success Fee Letter

Pursuant to the amended 2018 Letter, the Borrower shall pay to the Bank a success fee in the amount equal to 6.37 % of the funded amount of the Term B Loan (as defined in the Restated Loan and Security Agreement) (the “Success Fee”) upon the first occurrence of any of the following events:

(a) a sale or other disposition by the Borrower of all or substantially all of its assets;

(b) a merger or consolidation of the Borrower into or with another person or entity, where the holders of the Borrower’s outstanding voting equity securities as of immediately prior to such merger or consolidation hold less than a majority of the issued and outstanding voting equity securities of the successor or surviving person or entity as of immediately following the consummation of such merger or consolidation;

(c) a transaction or a series of related transactions in which any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of a sufficient number of shares of all classes of stock then

outstanding of the Borrower ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the Board of Directors of the Borrower, who did not have such power before such transaction;

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.

Avenue Capital Group:

On June 28, 2024 (the “Closing Date”), the Company entered into a Loan and Security Agreement with the Avenue Capital Group (“Loan”).

Avenue Capital Group agreed to loan the Company up to an aggregate of $ 20 million, to be disbursed in two tranches:

(1) one tranche of $ 15 million (“Tranche 1”), of which $ 10 million was available to the Company on the Closing Date and $ 5 million constitutes restricted cash, which was released from its restriction on January 10, 2025, as the following conditions were achieved:

(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 (“Tranche 2” and together with Tranche 1, the “Avenue Capital Commitment”).

The proceeds from the Avenue Capital 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.

Amounts borrowed under the Avenue Capital Commitment shall bear interest at a variable rate per annum equal to the greater of (A) the Prime Rate plus five percent ( 5.00 %) or (B) thirteen and one-half percent ( 13.50 )%.

On October 22, 2024 the Company announced that the FDA had accepted its application of DrugSorb-ATR, which was one of the two conditions required by the restricted cash debt covenant.

Proceeds from the Rights Offering on January 10, 2025 (See note 13 – Subsequent Event) satisfied the second condition of the debt covenant which now allows for the $ 5 million of restricted cash on the Company’s consolidated balance sheets to become unrestricted, and available for use.

The loan requires interest-only payments for the first 25 months, followed by equal monthly installments of principal plus accrued and unpaid interest until maturity.

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 Tranche 2 by December 2025, all unpaid principal and accrued and unpaid interest shall be due and payable in full by January 1, 2028.

As of the Closing Date, the Company recorded the following discounts:

Fair value of warrants issued to Avenue Capital Group

Debt issuance cost

Commitment fee paid on the Closing Date ( 1 % of the Avenue Capital Group commitment)

Total discounts recorded at inception against Avenue Capital Group Long Term Debt

The Company amortizes debt discounts as interest expense using the interest method through the maturity date.

The loan and security agreement included a final payment upon maturity of $ 900,000 .

The Company accretes the final payment as interest expense using the interest method through the maturity date.

Upon a prepayment, the Company would incur a fee ranging from 1 % to 3 % of the outstanding principal, depending of the time of payment in relation to the maturity date.

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 December 31, 2024, the Company was in compliance with these covenants.

As additional consideration for the Commitment, on June 28, 2024, the Company also issued Avenue Capital Group with warrants with a fair value of $ 690,709 to purchase an aggregate of 1,645,569 shares of the Company’s common stock for cash at the exercise price of $ 0.79 , which 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 meet the criteria for equity classification under ASC 815.

The Lenders were also granted the right while the Commitment is outstanding to convert up to an aggregate amount of $ 2 million 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 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.

As of December 31, 2024, long-term debt consists of the following:

Principal amount

Less unamortized debt discount

( 1,003,650 )

Less current maturities

Long-term debt net of current maturities

As of December 31, 2024, principal payments of long-term debt are due as follows:

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.

As of December 31, 2023, long-term debt consists of the following amounts due to Bridge Bank:

Principal amount

Accrued final fee

Less current maturities

Long-term debt net of current maturities

As of December 31, 2024, the following commitments survive after the termination of the Bridge Bank Amended and Restated Loan and Security Agreement and related amendments:

2022 Success Fee Letter

4 unchanged sentences

The right of Bank to receive the Success Fees and the obligation of the Borrower to pay the Success Fees hereunder shall terminate on the date that is 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 December 31, 2023:

Principal amount

Accrued final fee

Less Current maturities

Long-term debt net of current maturities

Principal payments of long-term debt are due as follows during the years ending December 31:

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

In March 2021, CytoSorbents Medical Inc.

entered into a lease agreement for a new operating facility at 305 College Road East, Princeton, New Jersey, which contains office, laboratory, manufacturing and warehouse space.

The lease commenced on June 1, 2021.

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

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.

Following the first year of the remaining term, the annual base rent will increase by approximately 2.75 % annually over the remaining term.

The lease also contains six months of rent abatement (months 1, 2, 3, 25, 26 and 27 of the remaining lease term).

In addition to the base rent, payments of operating expenses and real estate taxes will be required.

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.

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

The Company has determined that this lease should be treated as an operating lease in accordance with the provisions of Accounting Standards Codification (“ASC”) 842.

On April 1, 2021, the Company recorded a Right-of-Use asset and related lease liability of approximately $ 11.6 million, which represents the estimated present value of the lease payments at the commencement date discounted at the Company’s incremental borrowing rate of 9.8 %.

In addition, due to the six months of rent abatement and annual base rent escalations during the remaining lease term that commenced on September 30, 2021, the Company will recognize rent expense on this lease on a straight-line basis over the remaining term of the lease for the difference between the rent expense recognized and the required payments under the lease.

In September 2021, the Company extended its two operating leases for its office facility in Germany.

These leases require combined base rent payments amounting to approximately $ 12,100 per month.

The initial lease term of both leases ends August 31, 2026.

In addition, the Company is obligated to monthly operating expenses of approximately $ 3,000 per month.

Both leases have a five-year option to renew that would extend the lease term to August 31, 2031.

There are no provisions in the leases to increase the base rent during the renewal period.

There were no lease incentives and no initial direct costs were incurred related to these leases.

In January 2021, CytoSorbents Europe GmbH entered into a lease for 1,068 square meters of additional warehouse space.

The lease commenced on April 1, 2021 and requires monthly payments of base rent of $ 7,784 and other costs of approximately $ 239 and has a term of five years.

The lease also has an option to extend the lease term for an additional five-year period through March 31, 2031.

The Company has determined that this lease should be treated as an operating lease in accordance with the provisions of ASC 842.

On April 1, 2020, the Company recorded a Right-of-Use asset and related lease liability at the estimated present value of the lease payments at the commencement date of approximately $ 594,000 .

Right-of-Use Asset and Lease Liability

The Company’s consolidated balance sheets reflect the value of the right-of-use asset and related lease liability.

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

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

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.

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

The termination date of the 2022 Success Fee Letter is December 27, 2027.

The Company has operating leases that primarily relate to operating facilities in both the United States and Germany.

The Company leases its operating facilities under operating lease arrangements with varying expiration dates through March 2037.

As of December 31, 2024, the remaining lease term of the Company’s operating leases ranges from six to twelve years .

Supplemental statement of operations and cash flows related to operating leases is as follows:

For the year ended December 31,

Cash paid in connection with operating leases

Operating lease expense

Supplemental balance sheet information related to operating leases is as follows:

Right-of-use asset

Total lease liability

Less current portion

Lease liability – current portion

Lease liability – net of current portion

The maturities of the lease liabilities are as follows as of December 31, 2023:

Total lease payments

Present value discount

Total lease liability

Weighted average discount rate

Weighted average remaining lease term

As of December 31, 2024, the maturities of the lease liabilities are as follows:

Future operating lease payments

Imputed interest

( 9,544,184 )

For the years ended December 31, 2023, 2022 and 2021, operating cash flows paid in connection with operating leases amounted to approximately $ 2,403,000 , $ 2,935,000 and $ 1,968,000 , respectively.

As of December 31, 2023 and 2022, the weighted average remaining lease term was 12.7 years and 12.4 years, respectively.

INCOME TAXES:

The Company accounts for income taxes under FASB ASC 740 (“ASC 740”).

Total lease liability

The Company accounts for income taxes under ASC 740.

Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

7 unchanged sentences

( 30,060,499 )

( 29,319,133 )

( 33,905,168 )

( 25,294,651 )

The benefit from income taxes consists of the following:

Year Ended December 31,

The provision for income taxes consists of the following:

State Tax, including sale of New Jersey losses & credits

( 1,690,825 )

Foreign tax provision

( 1,690,825 )

The Company has deemed any foreign earnings will be indefinitely reinvested.

1 unchanged sentence

The Company will continue to analyze their stance if their circumstances change in the future.

As of December 31, 2023, the Company had federal net operating loss (“NOL”) carryforwards of approximately $ 97.2 million, state NOL carry forwards of approximately $ 17.6 million, and foreign NOL carry forwards of approximately $ 50.6 million, which may be available to offset future taxable income, if any.

As of December 31, 2024, the Company had federal net operating loss (“NOL”) carry forwards of $ 103,299,951 , state NOL carry forwards of $ 6,449,176 , and foreign NOL carry forwards of $ 59,061,197 which are available to reduce future taxable income.

Any unutilized NOL carry forwards will begin to expire at various dates starting in 2025 and some may be carried indefinitely.

As of December 31, 2024 and 2023, the Company had Federal and state research and development tax credit carryforwards of $ 2,224,012 and $ 0 (net of uncertain tax benefits), respectively, available to reduce future tax liabilities which will begin to expire at various dates starting in 2026.

The federal NOL carryforwards of $ 47.7 million, if not utilized, will expire between 2025 and 2038.

The federal NOL carryforwards of $ 55.7 million generated since 2018 are subject to an 80% limitation on taxable income , do not expire and will carry forward indefinitely.

The state NOL carryforwards of $ 17.6 million, if not utilized, will begin to expire in 2042.

As of December 31, 2023, the Company had Federal and state research and development tax credit carryforwards of approximately $ 2.1 million and $ 0.2 million, respectively, available to reduce future tax liabilities, which will begin to expire at various dates starting in 2026.

The NOL carry forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities.

3 unchanged sentences

Subsequent ownership changes may further affect the limitation in future years.

We record tax benefits related to uncertain tax positions taken or expected to be taken on a tax return when such benefits meet a more likely than not threshold.

We recognize interest related to unrecognized tax benefits in interest expense and penalties in operating expenses.

Currently, the Company is accounting for $ 2.1 million relating to uncertain tax positions for the year ended December 31, 2023.

Due to The Tax Cuts and Jobs Act of 2017 (TCJA) there was a change in the deductibility of research and experimental expenditures that took effect for taxable periods that begin after December 31, 2021.

Prior to January 1, 2022, the Company expensed research and experimental expenditures under §174(a) in the year that books recognized the expense.

The Company has adopted §174(b) for taxable years 2022 and beyond.

Domestic and foreign research and experimental expenditures will be capitalized and amortized over a period no less than 60 months and 180 months, respectively.

Sale of Net Operating Losses (NOLs)

The Company may be eligible, from time to time, to receive cash from the sale of its New Jersey Net Operating Losses and R&D tax credits under the State of New Jersey Technology Business Tax Certificate Transfer Program.

The Company will receive a net cash amount of approximately $ 816,000 from the approved sale of the 2022 state NOL and research and development credits in the first half of 2024.

The Company has not determined whether such a change has occurred and accordingly, the utilization of the net operating loss carryforwards may be subject to certain limitations.

The Company may be eligible, from time to time, to receive cash from the sale of its Net Operating Losses and R&D tax credits under the State of New Jersey Technology Business Tax Certificate Transfer Program.

As of December 31, 2024, the Company has accrued a receivable $ 1,690,825 from the approved sale of the 2023 state NOL and research and development credits.

The Company expects to collect this receivable in the first half of 2025.

The principal components of the Company’s deferred tax assets and liabilities are as follows:

Year Ended December 31,

Deferred tax assets:

Net operating loss carry forward

Current and long term deferred tax assets:

Net operating loss carryforward

Stock Options

Federal R&D Credit

NJ R&D Credit

Research and development credit carryforward

Charitable Contributions

Accruals and others

§174(b) research & experimental

§163(j) business interest expense

Lease Liability

§174(b) research and development

Gross deferred tax assets

2 unchanged sentences

( 45,334,554 )

( 31,242,130 )

Deferred tax liability:

2 unchanged sentences

( 3,389,756 )

( 3,885,225 )

Net deferred tax assets

3 unchanged sentences

Based on this assessment, management has established a full valuation allowance against all of the deferred tax assets for each period because it is more likely than not that all of the deferred tax assets will not be realized.

The increases in valuation allowance for the years ended December 31, 2023, 2022 and 2021 were $ 6,031,103 , $ 8,061,321 , and $ 6,447,656 , respectively.

The changes in valuation allowance for the years ended December 31, 2024 and 2023 were $ 2,933,127 and $ 6,031,103 , respectively.

A reconciliation of income tax (expense) benefit at the statutory federal income tax rate and income taxes as reflected in the financial statements is as follows:

4 unchanged sentences

Permanent items

Rate change and true-up

Other rate change and true-up

NJ NOL and R&D credit write-off

True up of foreign NOLs

NJ Amended NOL

Uncertain tax positions

Change in valuation allowance

Sale of state R&D credit and NOL

Sale of 2023 NJ R&D & NOL

Effective income tax rate

4 unchanged sentences

Increase for tax positions in current year

Decrease for tax positions due to payment or settlement

Decrease for tax positions due to limitation expirations

Balance at end of the year

The total amount of unrecognized tax benefits that could affect our effective tax rate, if recognized, was $ 2.2 million and $ 2.1 as of December 31, 2024 and 2023, respectively.

5 unchanged sentences

As of December 31, 2024, no significant adjustments have been proposed relative to our tax positions.

Although the outcome and timing of such events are highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits will not change during the next 12 months.

However, changes in the occurrence, expected outcomes and timing of those events could cause the Company’s current estimate to materially change in the future.

For year ended December 31, 2024, there are no interest and penalties relating to our uncertain tax positions.

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.

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 2023, 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 will serve 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.

On July 19, 2023, the Company announced the appointment of Alexander D’Amico as Chief Financial Officer effective August 7, 2023.

The Company entered into an executive employment agreement with Mr.

D’Amico with an initial term commencing on August 7, 2023 and expiring on December 31, 2025.

On August 28, 2023, the Company and Mr.

D’Amico mutually agreed to terminate Mr.

D’Amico’s employment with the Company.

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

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

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

D’Amico have agreed to customary and mutual non-disparagement and release provisions, payment of specific accrued expenses, and no severance payments or vesting of equity.

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

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

The Company has settled a litigation matter.

As part of the settlement agreement, the Company paid a total of $ 280,000 in November 2023 to settle this matter in return for a release of all claims against the Company.

The expense related to this settlement is included in legal financial and other consulting expenses on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.

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

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

Greene in retaliation for complaining about certain business practices.

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

The complaint specifically alleges that we violated the provisions of the CEPA by allegedly terminating the employee in retaliation for complaining about certain business practices.

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

Royalty Agreement

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 years ended December 31, 2023, 2022 and 2021, the Company recorded royalty expenses of approximately $ 923,000 , $ 849,000 , and $ 1,193,000 , 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.

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 years ended December 31, 2023 and 2022, the Company did not record any expense related to this agreement as the launch of this program is expected to occur in 2024.

License Agreement

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 date of the agreement.

For the years ended December 31, 2023, 2022 and 2021 per the terms of the license agreement, the Company recorded licensing expenses of approximately $ 1,233,000 , $ 1,416,000 and $ 1,988,000 , respectively.

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

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

Royalty expense amounted to approximately $ 1.9 million and $ 2.2 million for the years ended December 31, 2024 and 2023, respectively.

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

The decrease in royalty fees in 2024 was the result of the expiration of a 4 % royalty in August of 2024, net of increases in revenue applicable to royalty agreements.

In June 2014, the Company formed the CytoSorbents 401(k) Plan.

The plan is a defined contribution plan as described in section 401(k) of the Internal Revenue Code (“IRC”) covering substantially all full-time employees.

Employees are eligible to participate in the plan on the first day of the calendar quarter following three full months of employment.

Participants may defer up to 100 % of their eligible compensation subject to certain IRC limitations.

Effective January 1, 2021, the Company changed its matching contribution to 100 % of the participants contribution up to three percent of compensation plus 50 % of the participants contribution over three percent of compensation up to a maximum of five percent of compensation.

Matching contributions amounted to $ 472,022 and $ 405,408 for the years ended December 31, 2024 and 2023, respectively.

STOCKHOLDERS’ EQUITY

2 unchanged sentences

The amended and restated certificate of incorporation authorizes the issuance of up to 5,000,000 shares of “blank check” preferred stock, with such designation rights and preferences as may be determined from time to time by the Board of Directors.

In June 2019, the Company amended and restated its certificate of incorporation.

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.

For the years ended December 31, 2024 and 2023, issuance of common stock offerings, net of fees incurred were as follows:

For the year ended December 31, 2024

For the year ended December 31, 2023

Shares Issued

Proceeds, Net of Fees

Shares Issued

Proceeds, Net of Fees

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.

Open Market Sale Agreement with Jefferies LLC

December 13, 2023 Offering

On December 13, 2023, the Company closed on a registered direct offering for the sale of common stock, directly to investors, which included 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 (before issuance costs).

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.

2 unchanged sentences

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.

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 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.

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 $ 19.7 million from time to time through the Agent.

If the Company’s public float increases above $75 million, 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.

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.

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 years ended December 31, 2023 and 2022, the Company paid approximately $ 61,000 and $ 45,000 , respectively, in expenses related to the Sale Agreement.

STOCK-BASED COMPENSATION

Stock Option Plans

1 unchanged sentence

The Plans generally provide for the granting of stock, stock options, stock appreciation rights, restricted shares, or any combination of the foregoing to eligible participants.

In June 2024, the Company amended and restated CytoSorbents Corporation 2014 Long-term Incentive Plan (the “Plan”).

The amended and restated CytoSorbents Corporation 2014 Long-term Incentive Plan (the “Plan”) increased the number of shares to be reserved and authorized for issuance under the Plan by 7,500,000 shares to 20,900,000 shares of our Common Stock.

A total of 20,900,000 and 2,400,000 shares of common stock are reserved for issuance under the 2014 Plan and the 2006 Plan, respectively.

As of December 31, 2023, there were approximately 647,000 and 654,000 shares of common stock remaining for issuance under the 2014 Plan and the 2006 Plan, respectively.

The 2014 and 2006 Plans as well as grants issued outside of the Plans are administered by the Compensation Committee of the Board of Directors (the “Compensation Committee”).

The Compensation Committee is authorized to select from among eligible employees, directors, advisors and consultants those individuals to whom incentives are to be granted and to determine the number of shares to be subject to, and the terms and conditions of the options.

The Compensation Committee is also authorized to prescribe, amend and rescind terms relating to options granted under the Plans.

Generally, the interpretation and construction of any provision of the Plans or any options granted hereunder is within the discretion of the Compensation Committee.

The 2014 Plan provides that options may or may not be Incentive Stock Options (“ISOs”) within the meaning of Section 422 of the Internal Revenue Code.

Only employees of the Company are eligible to receive ISOs, while employees and non-employee directors, advisors and consultants are eligible to receive options, which are not ISOs, i.e., “Non-Qualified Options.” Because the Company has not obtained shareholder approval of the 2006 Plan, all options granted thereunder to date are “Non-Qualified Options” and until such shareholder approval is obtained, all future options issued under the 2006 Plan will also be “Non-Qualified Options.”

In December 2014, the Company received shareholder approval authorizing the Board of Directors to implement the form, terms and provisions of the 2014 Plan.

Accordingly, any options issued to employees under the 2014 Plan will be ISOs within the meaning of Section 422 of the Internal Revenue Code.

Stock-Based Compensation

Total share-based employee, director, and consultant compensation for the years ended December 31, 2023, 2022 and 2021 amounted to approximately $ 3,329,000 , $ 3,424,000 , and $ 4,021,000 , respectively.

As of December 31, 2024, there were approximately 3,700,000 and 654,000 shares of common stock remaining for issuance under the 2014 Plan and the 2006 Plan, respectively.

Total stock-based compensation expense for the year ended December 31, 2024 amounted to $ 3.8 million, of which $ 3.2 million and $ 0.6 million were for stock options and restricted stock units, respectively.

Total stock-based compensation expense for the year ended December 31, 2023 amounted to $ 4.2 million, of which $ 3.3 million and $ 0.9 million were for stock options and restricted stock units, respectively.

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

The summary of the stock option activity for the years ended December 31, 2024 and 2023 is as follows:

Outstanding January 1, 2021

Outstanding, December 31, 2022

( 1,270,155 )

Outstanding, December 31, 2023

( 1,391,897 )

Outstanding, December 31, 2024

During the third quarter of 2023, management identified a misstatement related to the number of granted options within the option roll forward activity disclosure for the year ended December 31, 2022.

The options granted were properly disclosed within the stock-based compensation footnote however;

the number was incorrectly omitted from the tabular disclosure.

The Company assessed the materiality of these misstatements on prior period financial statements in accordance with U.S.

Securities and Exchange Commission Staff Accounting Bulletin No.

99, Materiality, codified in ASC 250, Presentation of Financial Statements, and concluded that this misstatement was not material to any prior annual or interim period.

As such, the Company has revised the 2022 options granted and the options outstanding amounts as of December 31, 2022 to include the 1,365,000 options granted and disclosed.

The fair value of each stock option was estimated using the Black-Scholes pricing model which takes the following factors into account.

The fair value of each stock option was estimated using the Black-Scholes pricing model which takes the following inputs into account.

Expected Life

9 unchanged sentences

3.60 % to 4.65

December 31, 2023

1.17 - $ 3.71 per share

70.4 % to 75.6

3.50 % to 4.76

*The expected term of the options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term.

In addition, the Company recognizes forfeitures as they occur.

8 unchanged sentences

( 1,391,897 )

( 1,562,137 )

Non-vested, December 31, 2024

As of December 31, 2024, the Company had approximately $ 3,035,000 of total unrecognized compensation cost related to stock options which will, on average, be amortized over 32 months .

Awards of Stock Options:

On July 7, 2023, the Board of Directors granted options to purchase 1,138,750 shares of common stock to the Company’s employees which will be awarded based upon each employee’s 2023 individual performance evaluation.

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

The grant date fair value of these unvested options amounted to approximately $ 2,665,000 .

The Company has recorded approximately $ 260,000 in stock option expense related to these options for the year ended December 31, 2023.

On July 7, 2023, the Board of Directors granted options to purchase 56,130 shares of common stock to certain of the Company’s employees.

These options will vest in full on the first anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 178,000 .

The Company has recorded approximately $ 59,000 in stock option expense related to these options for the year ended December 31, 2023.

On July 7, 2023, the Board of Directors granted options to purchase 100,000 shares of common stock to members of the Company’s Board of Directors.

These options will vest in full on the first anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 234,000 .

The Company has recorded approximately $ 113,000 in stock option expense related to these options for the year ended December 31, 2023.

On July 7, 2023, the Board of Directors granted options to purchase 20,000 shares of common stock to a named executive officer of the Company.

These options will vest in full on the first anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 47,000 .

The Company has recorded approximately $ 23,000 in stock option expense related to these options for the year ended December 31, 2023.

On July 7, 2023, the Board of Directors granted options to purchase 424,000 shares of common stock to certain senior managers of the Company.

These options will vest one half on the first anniversary of the grant date, one quarter on second anniversary of the grant date, one quarter on third anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 992,000 .

The Company has recorded approximately $ 285,000 in stock option expense related to these options for the year ended December 31, 2023.

On July 7, 2023, the Board of Directors granted options to purchase 182,000 shares of common stock to the named executive officers and certain senior managers of the Company.

These options were awarded as a one-time award to each executive officer or senior manager in order to account for lost wages resulting from the salary freezes implemented by the Company over the preceding two years and to account for recent inflation.

These options will vest one half on the first anniversary of the grant date, one half on second anniversary of the grant date.

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

The Company has recorded approximately $ 104,000 in stock option expense related to these options for the year ended December 31, 2023.

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

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

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

As of December 31, 2023, none of these milestones has been met.

Accordingly, no charge for these options has been recorded in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.

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

Alexander D’Amico was awarded options to purchase 70,000 shares of common stock which will vest as follows:

25,000 options upon the six-month anniversary of the date of grant and 15,000 options upon each of the first, second and third anniversaries of the date of grant.

D’Amico was also granted options to purchase 215,000 shares of common stock that will vest only upon the achievement of certain milestones pursuant to the terms of the Company’s existing 2022-2025 performance pool in place for the Company’s management team.

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

D’Amico’s employment agreement.

On August 10, 2022, the Board of Directors granted options to purchase 1,163,800 shares of common stock to the Company’s employees which will be awarded based upon each employee’s 2022 individual performance evaluation.

Once awarded, these options will vest one quarter on February 15, 2023, one quarter on February 15, 2024, one quarter on February 15, 2025 and one quarter on February 15, 2026.

The grant date fair value of these unvested options amounted to approximately $ 1,381,000 .

The Company has recorded approximately $ 311,000 , and $ 180,000 in stock option expense related to these options for the years ended December 31, 2023, and 2022, respectively.

On August 10, 2022, the Board of Directors granted options to purchase 772,905 shares of common stock to the Company’s employees.

These options will vest one eighth on the six-month anniversary of the grant date, one eighth 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 and one quarter on fourth anniversary of the grant date.

The grant date fair value of these unvested options amounted to approximately $ 917,000 .

The Company has recorded approximately $ 201,000 , and $ 90,000 in stock option expense related to these options for the years ended December 31, 2023, and 2022, respectively.

On August 10, 2022, the Board of Directors granted options to purchase 113,850 shares of common stock to members of the Company’s Board of Directors.

These options will vest one quarter on the grant date, one quarter on September 30, 2022, one quarter on December 31, 2022, and one quarter on March 31, 2023.

The grant date fair value of these unvested options amounted to approximately $ 135,000 .

The Company has recorded approximately $ 34,000 , and $ 101,000 in stock option expense related to these options for the years ended December 31, 2023, and 2022, respectively.

On August 10, 2022, the Board of Directors granted options to purchase 473,750 shares of common stock to certain senior managers of the Company.

These options will vest one quarter on the grant date, one quarter 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 $ 562,000 .

The Company has recorded approximately $ 107,000 , and $ 161,000 in stock option expense related to these options for the years ended December 31, 2023, and 2022, respectively.

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

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

As of December 31, 2023, none of these milestones has been met.

Accordingly, no charge for these options has been recorded in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2023, and 2022.

On April 12, 2021, the Board of Directors granted options to purchase 1,323,400 shares of common stock to the Company’s employees which were designed to vest upon the achievement of certain specific, predetermined milestones related to the Company’s 2021 operations.

Once awarded, these options were designed to vest in four equal tranches, the first tranche vesting on the date of the award.

The grant date fair value of these unvested options amounted to approximately $ 7,042,000 .

On March 1, 2022, Board of Directors determined that the Company met approximately 19 % of these milestones, and accordingly, the Company has recorded $ 320,000 , and $ 314,000 in stock option expense related to these options for the years ended December 31, 2023, and 2022, respectively.

During the years ended December 31, 2023, 2022, and 2021, 281,000 , 196,900 and 281,880 options were awarded to newly hired employees, respectively, in connection with their employment agreements.

The summary of the status of the Company’s non-vested options for the year ended December 31, 2023, is as follows:

Non-vested, January 1, 2023

( 1,273,328 )

Non-vested, December 31, 2023

As of December 31, 2023, the Company had approximately $ 4,868,000 of total unrecognized compensation cost related to stock options which will, on average, be amortized over 42 months .

Change in Control-Based Awards of Restricted Stock Units:

1 unchanged sentence

These restricted stock units will only vest upon a Change in Control of the Company, as defined in the Company’s 2014 Long-Term Incentive Plan.

The following table is a summary the outstanding balance of these restricted stock units at the end of each of the past three calendar years::

The following table is a summary the outstanding balance of these restricted stock units at the end of each of the past two calendar years:

Intrinsic Value

4 unchanged sentences

December 31, 2024

Forfeited 2023

December 31, 2023

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

Performance-Based Awards of Restricted Stock Units:

Pursuant to a review of the compensation of the senior management of the Company and management’s performance in 2021, on April 12, 2021, the Board of Directors granted 235,765 restricted stock units to certain senior managers of the Company.

These awards were valued at approximately $ 2,120,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and 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 years ended December 31, 2023 and 2022, the Company recorded (income) expense of approximately $( 245,000 ) and $ 226,000 , respectively, related to these restricted stock unit awards.

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

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

For the years ended December 31, 2023 and 2022, the Company recorded expense of approximately $ 267,000 and $ 260,000 , 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 years ended December 31, 2023 and 2022, the Company recorded expense of approximately $ 213,000 and $ 0 , respectively, related to these restricted stock unit awards.

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

This award was valued at approximately $ 89,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vested (will vest) two-thirds 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 years ended December 31, 2023 and 2022, the Company recorded expense of approximately $ 55,000 and $ 0 , respectively, related to these restricted stock unit awards.

On January 23, 2023, an employee was awarded 30,000 restricted stock units, as a condition of her employment.

These awards were valued at $ 64,200 at the date of issuance.

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

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

For the year ended December 31, 2023 and 2022, the Company recorded (income) expense of approximately $ 80,000 and $( 16,000 ), respectively, related to these restricted stock unit awards.

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

D’Amico was awarded 45,000 restricted stock units which were scheduled to vest one half on the first anniversary of the grant date and one half on the second anniversary of the grant date.

These restricted stock units were valued at approximately $ 157,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant.

Additionally, on July 10, 2023, Mr.

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

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

D’Amico’s resignation effective August 28, 2023, all 60,000 of his restricted stock units were forfeited.

Other Restricted Stock Units:

The following table outlines the restricted stock unit activity (not related to change in control-based awards) for the year ended December 31, 2024:

Non-vested, January 1, 2024

Non-vested, December 31, 2024

The following table outlines the restricted stock unit activity for the year ended December 31, 2023:

1 unchanged sentence

Non-vested, December 31, 2023

At December 31, 2024 and December 31, 2023, the remaining weighted average vesting period for restricted stock awards subject to vesting was 43 months and 37 months , respectively and the remaining unrecognized restricted stock unit compensation expense was $ 538,000 and $ 842,000 , respectively.

As of December 31, 2024, 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.

NET LOSS PER SHARE:

Basic net loss per share and diluted net loss per share for the years ended December 31, 2023, 2022 and 2021 have been computed by dividing the net loss attributable to common shareholders for each respective period by the weighted average number of shares outstanding during that period.

All outstanding warrants and options and restricted stock awards representing approximately 16,819,000 , 11,312,000 and 9,902,000 incremental shares at December 31, 2023, 2022 and 2021, respectively, have been excluded from the computation of diluted net loss per share as they are anti-dilutive.

RETIREMENT PLAN:

In June 2014, the Company formed the CytoSorbents 401(k) Plan.

The plan is a defined contribution plan as described in section 401(k) of the Internal Revenue Code (“IRC”) covering substantially all full-time employees.

Employees are eligible to participate in the plan on the first day of the calendar quarter following three full months of employment.

Participants may defer up to 100 % of their eligible compensation subject to certain IRC limitations.Prior to 2021, the Company provided for a matching contribution of twenty percent of the participants’ contribution on a maximum of five percent of compensation.

Matching contributions amounted to approximately $ 405,000 , $ 442,000 and $ 355,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

QUARTERLY FINANCIAL RESULTS (UNAUDITED):

Summarized quarterly data for 2023, 2022 and 2021 are as follows:

For the Quarters Ended

Total revenue

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.

These warrants are exercisable into the Company’s common stock.

SEGMENT INFORMATION

The Company operates and manages its business as one reportable segment and one operating segment, which is the business of developing, testing and selling blood purification medical devices.

The Company’s chief operating decision maker, or CODM, is the Company’s Chief Executive Officer.

The CODM assesses performance of the segment and decides how to allocate resources based on Revenue growth, Gross Margin, Operating Expenses, adjusted net loss, adjusted EBITDA and cash burn (cash used in operating and investing activities) derived from the Company’s consolidated results of operations and cash flows and total assets of the segment.

The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets.

All material long-lived assets are located in New Jersey, and Berlin Germany.

Long-lived assets consist of property and equipment, net and operating lease right-of-use assets.

Factors used in determining the reportable segment include the nature of the Company’s operations, the organizational and reporting structure and the type of information reviewed by the CODM to allocate resources and evaluate financial performance.

The accounting policies of the segment are the same as those described in Note 2 to the consolidated financial statements of the Company included in this Annual Report on Form 10-K.

The Company operates as one reportable operating segment.

Consisting of one reportable operating segment, the components presented in the consolidated statements of operations also present the components of the Company’s single operating segment.

The CODM uses financial metrics to evaluate the Company’s spending and monitor budget versus actual results.

The monitoring of budgeted versus actual results is used in assessing performance of the segment and in establishing resource allocation across the organization.

The financial metrics used by the CODM in evaluating the Company’s spending and monitoring budget versus actual results are as follows:

As Restated *

Product revenue

Total Operating Expenses

EBITDA and Adjusted EBITDA (both non-GAAP measures):

( 20,718,957 )

( 29,246,760 )

Interest expense

Benefits from income taxes

( 1,690,825 )

Depreciation and amortization expense

Loss before interest expense, income taxes, depreciation and amortization (“EBITDA”), a non-GAAP measure

( 19,440,586 )

( 28,443,541 )

Stock-based compensation

Gain (loss) on foreign currency transactions

( 1,949,257 )

Adjusted EBITDA, a non-GAAP measure

( 11,456,331 )

( 26,237,456 )

Adjusted net loss, a non-GAAP measure:

( 20,718,957 )

( 29,246,760 )

Stock-based compensation

Gain (loss) on foreign currency transactions

( 1,949,257 )

Adjusted net loss, a non-GAAP measure

Total cash used in operating and investing activities

( 15,097,239 )

( 22,591,372 )

* See Note 12 – Restatement of Previously Issued financial information for details.

Significant expense categories regularly provided to the CODM consist of the following:

Years ended December 31,

Research and development:

Clinical expenses

Other research and development expenses

Total research and development

Selling, general and administrative

Commission expense

Royalty expense

Stock-based compensation

Legal, financial and consulting

Other general and administrative

Total selling, general and administrative

* See Note 12 – Restatement of Previously Issued financial information for details.

Capital expenditures of the segment totaled $ 669,430 and $ 936,236 for the years ended December 31, 2024 and 2023, respectively.

RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL INFORMATION

Restatement of Previously Issued Financial Information

During the year ended December 31, 2024, the Company identified and corrected the following errors, which were recorded incorrectly in previously issued financial statements included in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q:

- Overstatement of Inventory due to a clerical error.

- Understatement of stock-based compensation expense and related corrections of accrued liabilities, additional paid in capital, and accumulated deficit related to errors in the application of the Company’s accounting policy for RSUs.

Based on the Company’s accounting policy for stock-based compensation, expense for RSUs is measured and recorded against additional paid-in-capital based on estimated fair values at the award’s grant date.

The Company incorrectly adjusted compensation expense based on the fair value of the award at its vesting date.

In addition, the Company recorded part of the compensation expense against accrued liabilities.

The following periods were impacted by the restatement:

- the audited consolidated financial statements as of and for the year ended December 31, 2023,

- the interim unaudited condensed consolidated financial statements as of and for the first three quarters of the year ended December 31, 2023, and

- the interim unaudited condensed consolidated financial statements as of and for the first three quarters of the year ended December 31, 2024.

Summary of Effect of Restatement of Previously Issued Financial Information

The tables below summarize the impact of the restated amounts on the previously reported consolidated balance sheets for the impacted periods.

The Consolidated Balance Sheet adjustments in the tables below that impact the line items of additional paid-in

capital, accumulated deficit, and total stockholders’ equity also reflecting the same amounts that those line items were impacted in the Consolidated Statements of Changes in Stockholders’ Equity.

Liabilities and

Total Current

Additional paid-

Stockholders’

As of March 31, 2023, as previously reported (Unaudited)

( 261,323,761 )

Effect of restatement

As of March 31, 2023, as restated (Unaudited)

( 261,364,727 )

* The restatement adjustment reflected in these balance sheet line items also reflect the restatement adjustments applicable to the statements of stockholders’ equity.

Liabilities and

Total Current

Additional paid-

Stockholders’

As of June 30, 2023, as previously reported (Unaudited)

( 267,476,845 )

Effect of restatement

As of June 30, 2023, as restated (Unaudited)

( 267,965,940 )

* The restatement adjustment reflected in these balance sheet line items also reflect the restatement adjustments applicable to the statements of stockholders’ equity.

Liabilities and

Total Current

Additional paid-

Stockholders’

As of September 30, 2023, as previously reported (Unaudited)

( 276,670,365 )

Effect of restatement

As of September 30, 2023, as restated (Unaudited)

( 277,135,226 )

* The restatement adjustment reflected in these balance sheet line items also reflect the restatement adjustments applicable to the statements of stockholders’ equity.

Liabilities and

Total Current

Additional paid-

Stockholders’

As of December 31, 2023, as previously reported

( 282,505,272 )

Effect of restatement

As of December 31, 2023, as restated

( 283,289,661 )

* The restatement adjustment reflected in these balance sheet line items also reflect the restatement adjustments applicable to the statements of stockholders’ equity.

Liabilities and

Total Current

Additional paid-

Stockholders’

As of March 31, 2024, as previously reported (Unaudited)

( 288,863,133 )

Effect of restatement

As of March 31, 2024, as restated (Unaudited)

( 289,378,372 )

* The restatement adjustment reflected in these balance sheet line items also reflect the restatement adjustments applicable to the statements of stockholders’ equity.

Liabilities and

Total Current

Additional paid-

Stockholders’

As of June 30, 2024, as previously reported (Unaudited)

( 293,006,279 )

Effect of restatement

As of June 30, 2024, as restated (Unaudited)

( 293,673,480 )

* The restatement adjustment reflected in these balance sheet line items also reflect the restatement adjustments applicable to the statements of stockholders’ equity.

Liabilities and

Total Current

Additional paid-

Stockholders’

As of September 30, 2024, as previously reported (Unaudited)

( 295,340,370 )

Effect of restatement

( 1,099,333 )

As of September 30, 2024, as restated (Unaudited)

( 296,439,703 )

* The restatement adjustment reflected in these balance sheet line items also reflect the restatement adjustments applicable to the statements of stockholders’ equity.

The tables below summarize the impact of the restated and reclassified amounts on the previously reported consolidated statements of operations and comprehensive loss:

Three Months Ended (Unaudited)

September 30,

Cost of goods sold:

As previously reported (incl.

reclassification)

Effect of restatement

As restated and reclassified

Gross Profit:

As previously reported (incl.

reclassification)

Effect of restatement

As restated and reclassified

Selling, general and administrative:

As previously reported (incl.

reclassification)

Effect of restatement

As restated and reclassified

Total Operating Expenses:

As previously reported (incl.

reclassification)

Effect of restatement

As restated and reclassified

Loss From Operations

As previously reported

( 7,891,596 )

2 unchanged sentences

( 14,450,832 )

( 21,867,828 )

( 31,209,254 )

Effect of restatement

( 7,888,143 )

( 7,007,373 )

( 7,344,937 )

( 14,895,515 )

( 22,307,250 )

( 31,948,620 )

Loss Before Benefit From Income Taxes

As previously reported

( 7,325,883 )

( 6,153,084 )

( 9,193,520 )

( 13,478,967 )

( 22,672,487 )

( 29,321,134 )

Effect of restatement

( 7,322,430 )

( 6,601,220 )

( 9,188,259 )

( 13,923,650 )

( 23,111,909 )

( 30,060,499 )

Net Loss Attributable To Common Stockholders

As previously reported

( 7,325,883 )

2 unchanged sentences

( 13,478,967 )

Net loss per share, basic and diluted

Total revenue

( 22,672,487 )

( 28,507,395 )

Effect of restatement

( 7,322,430 )

( 6,601,220 )

( 9,188,259 )

( 13,923,650 )

( 23,111,909 )

( 29,246,760 )

Basic And Diluted Net Loss Per Common Share

As previously reported

Effect of restatement

Comprehensive Loss

As previously reported

( 7,934,091 )

( 6,545,758 )

( 7,537,846 )

( 14,479,849 )

( 22,017,695 )

( 30,307,269 )

Effect of restatement

( 7,930,638 )

( 6,993,894 )

( 7,532,585 )

( 14,924,532 )

( 22,457,117 )

( 31,046,634 )

Three Months Ended (Unaudited)

September 30,

Cost of goods sold :

As previously reported (Incl.

reclassification)

Effect of restatement

As restated and reclassified

Gross Profit:

As previously reported (Incl.

reclassification)

Effect of restatement

As restated and reclassified

Selling, general and administrative:

As previously reported (Incl.

reclassification)

Effect of restatement

As restated and reclassified

Total Operating Expenses:

As previously reported (Incl.

reclassification)

Effect of restatement

As restated and reclassified

Loss From Operations

As previously reported

( 4,925,518 )

2 unchanged sentences

( 8,344,341 )

( 12,740,587 )

Effect of restatement

( 4,656,368 )

( 3,570,785 )

( 4,829,679 )

( 8,227,154 )

( 13,056,832 )

Loss Before Benefit From Income Taxes

As previously reported

( 6,357,861 )

( 4,143,146 )

( 2,334,091 )

( 10,501,007 )

( 12,835,098 )

Effect of restatement

( 6,088,711 )

( 4,295,109 )

( 2,767,523 )

( 10,383,820 )

( 13,151,343 )

Net Loss Attributable To Common Stockholders

As previously reported

( 6,357,861 )

1 unchanged sentence

( 2,334,091 )

Net loss per share, basic and diluted

Total revenue

Loss from operations

( 10,501,007 )

( 12,835,098 )

Effect of restatement

( 6,088,711 )

( 4,295,109 )

( 2,767,523 )

( 10,383,820 )

( 13,151,343 )

Basic And Diluted Net Loss Per Common Share

As previously reported

Effect of restatement

Comprehensive Loss

As previously reported

( 5,134,686 )

( 3,721,824 )

( 4,664,834 )

( 8,856,510 )

( 13,521,344 )

Effect of restatement

( 4,865,536 )

( 3,873,787 )

( 5,098,266 )

( 8,739,323 )

( 13,837,589 )

The table below summarizes the impact of the restated amounts on the previously reported consolidated statements of cash flows.

The consolidated statements of cash flows adjustments in the tables below that impact the line items of stock-based compensation

also reflect the same amounts that the stock-based compensation line items was impacted by in the consolidated statements of changes in stockholders’ equity.

September 30,

Cash Flows From Operating Activities:

Net Loss Attributable To Common Stockholders:

As previously reported

( 7,325,883 )

2 unchanged sentences

( 28,507,394 )

Net loss per share, basic and diluted

Effect of restatement

( 7,322,430 )

( 13,923,650 )

( 23,111,909 )

( 29,246,760 )

Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:

Stock-Based Compensation*

As previously reported

Effect of restatement

As previously reported

Effect of restatement

Accounts Payable and accrued expenses

As previously reported

Cumulative effect of restatement adjustments on balance sheet (year-to-date)

Non-cash reclassification to additional paid-in-capital

* The restatement adjustment reflected in this statements of cash flows line items also reflect the restatement adjustments applicable to the statements of stockholders’ equity.

September 30,

Cash Flows From Operating Activities:

Net Loss Attributable To Common Stockholders:

As previously reported

( 6,357,861 )

( 10,501,007 )

( 12,835,098 )

Effect of restatement

( 6,088,711 )

( 10,383,820 )

( 13,151,343 )

Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:

Stock-Based Compensation*

As previously reported

Effect of restatement

Accounts Payable and accrued expenses

As previously reported

( 1,281,724 )

( 2,032,014 )

( 3,165,684 )

Cumulative effect of restatement adjustments on balance sheet (year-to-date)

Non-cash reclassification to additional paid-in-capital

( 1,281,724 )

( 2,032,014 )

( 3,165,684 )

* The restatement adjustment reflected in this statements of cash flows line items also reflect the restatement adjustments applicable to the statements of stockholders’ equity.

The table below summarizes the impact of the restated and reclassified amounts on the previously reported consolidated statements of changes in stockholders’ equity:

Three Months Ended (Unaudited)

September 30,

Net loss (row), Accumulated deficit (column), Stockholders’ equity (column)

As previously reported (incl.

reclassification)

( 7,325,883 )

( 6,153,084 )

( 9,193,520 )

( 13,478,967 )

( 22,672,487 )

( 28,507,394 )

Effect of restatement

As restated and reclassified

( 7,322,430 )

( 6,601,220 )

( 9,188,259 )

( 13,923,650 )

( 23,111,909 )

( 29,246,760 )

Stock-based compensation (row), Additional paid-in capital (column), Stockholders’ equity (column)

As previously reported (incl.

reclassification)

Effect of restatement

As restated and reclassified

Common stock issued upon vesting of restricted stock units, less shares withheld to cover taxes (row), Additional paid-in capital (column), Stockholders’ equity (column)

As previously reported (incl.

reclassification)

Effect of restatement

As restated and reclassified

Three Months Ended (Unaudited)

September 30,

Net loss (row), Accumulated deficit (column), Stockholders’ equity (column)

As previously reported (incl.

reclassification)

( 6,357,861 )

( 4,143,146 )

( 2,334,091 )

( 10,501,007 )

( 12,835,099 )

Effect of restatement

As restated and reclassified

( 6,088,711 )

( 4,295,109 )

( 2,767,523 )

( 10,383,820 )

( 13,151,344 )

Stock-based compensation (row), Additional paid-in capital (column), Stockholders’ equity (column)

As previously reported (incl.

reclassification)

Effect of restatement

As restated and reclassified

Common stock issued upon vesting of restricted stock units, less shares withheld to cover taxes (row), Additional paid-in capital (column), Stockholders’ equity (column)

As previously reported (incl.

reclassification)

Effect of restatement

As restated and reclassified

In relation to the errors discussed above, the consolidated statements of changes in stockholders’ equity includes a cumulative effect of adjustments to the beginning balances as of January 1, 2023 of additional paid-in-capital (increase of $ 777,310 ), accumulated deficit (decrease of $ 45,023 ) and stockholders’ equity (increase of $ 732,287 ).

SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date of issuance of these consolidated financial statements and has determined that there are no subsequent events outside the ordinary scope of business that require adjustment to, or disclosure in, the financial statements other than those described below.

Rights Offering

On January 10, 2025, the Company closed the subscription period of its previously announced rights offering (the “Rights Offering”), raising aggregate gross proceeds of $ 6.25 million ($ 5.8 million net of fees) from the sale of all 6.25 million Units reserved for the Rights Offering.

Participants in the Rights Offering received Units, each Unit comprising of one share of common stock of the Company, one Series A Right Warrant to purchase one share of common stock, and one Series B Right Warrant to purchase one share of common stock.

Up to an additional 6.25 million shares of common stock may be issued upon exercise of the Right Warrants.

Proceeds from the closing of the subscription period satisfy a debt covenant which allows for $ 5,000,000 of restricted cash on the Company’s consolidated balance sheets to now become unrestricted, and available for use.

The Right Warrants are exercisable commencing on their date of issuance and the exercise price shall be equal to (i) in the case of the Series A Right Warrants, 90 % of the 5-day volume weighted average price of our Common Stock over the last 5 -trading days prior to the expiration date of the Series A Right Warrants on February 24, 2025, rounded down to the nearest whole cent but (x) not lower than $ 1.00 and (y) not higher than $ 2.00 , and (ii) in the case of the Series B Right Warrants, 90 % of the 5-day volume weighted average price of our Common Stock over the last 5 -trading days prior to the expiration date of the Series B Right Warrants on April 10, 2025, rounded down to the nearest whole cent but (x) not lower than $ 2.00 and (y) not higher than $ 4.00 .

Exercise of the Right Warrants require additional investment separate from the purchase of the Units.

6.25 million shares of common stock have been reserved for exercise of the Right Warrants, after which any remaining unexercised Right Warrants will immediately expire worthless.

The Right Warrants are transferable until they have expired.

On February 24, 2025, approximately 1.4 million Series A Right Warrants were exercised by holders, including members of management and the Board of Directors, at an exercise price of $ 1.13 per warrant, providing an additional $ 1.6 million in aggregate gross proceeds ($ 1.5 million net of fees).

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-K

Item 9A. Controls and Procedures