What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-14 compared with 2024-11-07 · 123 added, 201 removed, 35 unchanged (90% of the section changed)

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Cautionary Notes Regarding Forward-Looking Statements

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

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

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

Factors which could cause or contribute to such differences include, but are not limited to, the risks discussed in our Annual Report on Form 10-K, as updated by any risks reported in our Quarterly Reports on Form 10-Q and in the press releases and other communications to stockholders issued by us from time to time which attempt to advise interested parties of the risks and factors which may affect our business.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, other than as required under the Federal securities laws.

This Quarterly Report on Form 10-Q, or this Report, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act.

Forward-looking statements discuss matters that are not historical facts.

Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue,” negatives thereof or similar expressions.

These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations;

business strategies;

future cash flows;

financing plans;

plans and objectives of management;

any other statements regarding future operations, future cash needs, business plans and future financial results, and any other statements that are not historical facts.

Unless otherwise indicated, the terms “CytoSorbents,” “Company,” “we,” “us” and “our” refer to CytoSorbents Corporation.

From time to time, forward-looking statements also are included in our other periodic reports on Forms 10-K and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public.

Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors.

Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements.

In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the applicable Report or public statement.

All subsequent written and oral forward-looking statements concerning other matters addressed in this Report or public statement and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

For discussion of factors that we believe could cause our actual results to differ materially from expected and historical results see “Item 1A - Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

We are a leader in the treatment of life-threatening conditions in the intensive care unit and cardiac surgery through blood purification.

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Cartridges filled with these beads can be used with standard blood pumps already in the hospital (e.g.

dialysis, ECMO, heart-lung machines).

dialysis, continuous renal replacement therapy or CRRT, extracorporeal membrane oxygenation or ECMO, and heart-lung machines), where blood is repeatedly recirculated outside the body, through our cartridges where toxic substances are removed, and then back into the body.

CytoSorbents’ technologies are used in a number of broad applications.

Specifically, two important applicatons are 1) the removal of blood thinners during and after cardiothoracic surgery to reduce the risk of severe bleeding and 2) the removal of inflammatory agents in common critical illnesses such as sepsis, burn injury, trauma, lung injury, liver failure, cytokine release syndrome, and pancreatitis that can lead to massive inflammation, organ failure and patient death.

Specifically, two important applications are 1) the removal of blood thinners during and after cardiothoracic surgery to reduce the risk of severe bleeding, and 2) the removal of inflammatory agents and toxins in common critical illnesses that can lead to massive inflammation, organ failure and patient death.

The breadth of these critical illnesses include, for example, sepsis, burn injury, trauma, lung injury, liver failure, cytokine release syndrome, and pancreatitis as well as the removal of liver toxins that accumulate in acute liver dysfunction or failure the removal of myoglobin in severe rhabdomyolysis that can otherwise lead to renal failure.

In these diseases, the risk of death can be extremely high, and there are few, if any, effective treatments.

CytoSorbents’ lead product, CytoSorb®, is approved in the European Union and distributed in 76 countries worldwide, with more than 250,000 devices used cumulatively to date.

CytoSorbents’ lead product, CytoSorb®, is approved in the European Union and distributed in dozens of countries worldwide, with more than 270,000 devices used cumulatively to date.

CytoSorb was originally launched in the European Union under CE mark as the first cytokine adsorber.

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and Canada, CytoSorbents is developing the DrugSorb™-ATR antithrombotic removal system, an investigational device based on an equivalent polymer technology to CytoSorb, to reduce the severity of perioperative bleeding in high-risk surgery due to blood thinning drugs.

It has received two FDA Breakthrough Device Designations:

It has received two U.S.

Food and Drug Administration (“FDA”) Breakthrough Device Designations:

one for the removal of ticagrelor and another for the removal of the direct oral anticoagulants (DOAC) apixaban and rivaroxaban in a cardiopulmonary bypass circuit during urgent cardiothoracic procedures.

In September 2024, the Company submitted a De Novo medical device application to the FDA requesting marketing approval to reduce the severity of perioperative bleeding in CABG patients on the antithrombotic drug ticagrelor, which was accepted for substantive review in October 2024.

In November 2024, the Company received its Medical Device Single Audit Program (MDSAP) certification and submitted its Medical Device License (MDL) application to Health Canada.

The Company submitted a De Novo Request to the FDA in September 2024, requesting marketing authorization of DrugSorb-ATR to reduce the severity of perioperative bleeding in CABG patients on the antithrombotic drug ticagrelor, which was accepted for substantive review in October 2024.

On April 25, 2025, the FDA issued a denial letter regarding the Company’s De Novo Request for DrugSorb-ATR, identifying remaining deficiencies that must be addressed before the De Novo Request can be granted, and the device can be authorized for commercialization in the U.S.

The Company believes these items can be most effectively and expeditiously resolved through the formal appeal process, which facilitates engagement with FDA senior leadership and our external surgical experts.

The Company intends to file the appeal within 60 days of receipt of the denial letter, or by June 25, 2025.

Given the expedited timelines associated with the appeal process, the Company believes that a final regulatory decision can be achieved in 2025.

On November 1, 2024 we received Medical Device Single Audit Program (MDSAP) certification, a key regulatory milestone that certifies compliance of our quality management system with the standard regulatory requirements of Canada, the United States, Brazil, Japan and Australia;

and then promptly submitted our Medical Device License (MDL) marketing application to Health Canada on November 1, 2024, with MDSAP certification - a requirement for the submission.

CytoSorbents’ DrugSorb-ATR application with Health Canada remains under advanced review.

While Health Canada has indicated that application reviews are currently delayed beyond their target Market Authorization Time (MAT) due to a backlog, they have reaffirmed their commitment to issuing a decision as soon as possible.

We believe that we can receive a final regulatory decision in 2025.

DrugSorb-ATR is not yet granted or approved in the United States and Canada, respectively.

The Company has numerous marketed products and products under development based upon this unique blood purification technology protected by many issued U.S.

and international patents and registered trademarks, and multiple patent applications pending, including ECOS-300CY®, CytoSorb-XL™, HemoDefend-RBC™, HemoDefend-BGA™, VetResQ®, K+ontrol™, DrugSorb™, ContrastSorb, and others.

Clinical Studies Update

For a complete discussion regarding our clinical study history, please refer to the section entitled Clinical Studies included in Item 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on March 14, 2024.

The following includes certain updates regarding these clinical studies subsequent to the filing of the Company’s Annual Report on Form 10-K.

In July 2021, we received full FDA approval of an Investigational Device Exemption (IDE) application to conduct a double-blind, randomized, controlled clinical study in 120 patients entitled, “ S afe and T imely A ntithrombotic R emoval – T icagrelor (“ STAR-T” ),” in the United States to support FDA marketing approval.

This was done under the previously announced FDA Breakthrough Device Designation granted for the removal of ticagrelor in a cardiopulmonary bypass circuit to reduce the likelihood of serious perioperative bleeding during urgent cardiac surgery.

In October 2021, the first patient was enrolled, with the STAR-T study actively recruiting at multiple U.S.

In November 2022, the first milestone was completed with the first one-third of patients enrolled, triggering the first Data and Safety Monitoring Board (“DSMB”) meeting.

The DSMB recommended to continue the study as planned without any modifications.

In 2022, we also received FDA approval to expand the study to Canada and subsequently received Health Canada approval allowing inclusion of Canadian sites into the STAR-T trial in January 2023.

In early 2023, the study exceeded 50% enrollment and reached the 2nd milestone of 67% enrollment in the spring of 2023, triggering another DSMB safety review, which found no safety concerns and recommended completion of the trial.

The study completed enrollment in July of 2023 triggering the final DSMB safety review following database lock in December 2023, which also reported no safety concerns thereby meeting the primary safety endpoint of the study.

Based on the initial analysis of the STAR-T data, 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 that DrugSorb-ATR reduced the severity of perioperative bleeding in patients undergoing isolated coronary artery bypass graft (“CABG”) surgery who represented more than 90% of the overall study population.

The topline results of the U.S.

and Canadian 140-patient, pivotal STAR-T randomized controlled trial were presented at the 104th Annual Meeting of the American Association for Thoracic Surgery (“AATS”) held in Toronto, Canada on April 28, 2024.

The Company submitted the DrugSorb-ATR medical device De Novo marketing application to the FDA on September 27, 2024 and announced the acceptance of the application by FDA on October 22, 2024.

On November 1, 2024, the Company received its Medical Device Single Audit Program (MDSAP) certification and submitted its Medical Device License (MDL) application to Health Canada.

Government Research Grants:

We have historically been successful in obtaining technology development contracts from governmental agencies such as the National Institutes of Health and the U.S.

Department of Defense, including the Defense Advanced Research Projects Agency (“DARPA”), the U.S.

Special Operations Command (“USSOCOM”), the U.S.

Air Force, Air Force Material Command (“USAF/AFMC”) and others.

Currently, we have ongoing projects funded, in part, by the U.S.

Army Medical Research Acquisition Activity (“USAMRAA”), National Heart, Lung, and Blood Institute (“NHLBI”), and the USAF/AFMC.

For a complete discussion of the various research grants we have obtained, please refer to the section entitled Government Research Grants included in Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 14, 2024.

Research and Development Update

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

As of September 30, 2024, the revenue remaining to be earned on open grant contracts is $3.2 million.

Overall, grant funded programs, HemoDefend-BGA™ (Universal Plasma), HemoDefend-RBC™ and K + ontrol™, continue to progress and we have been the beneficiary of approximately $15.8 million, $4.7 million and $7.7 million in total funding, respectively, awarded to date.

Impact of Inflation and Other Issues:

The current high inflationary environment has impacted us in various ways.

Due to the current competitive labor market and high inflation, our labor costs have risen significantly in order to attract and retain qualified employees throughout our organization.

In addition, we have experienced raw material price increases primarily related to the oil-based chemicals used in the polymer manufacturing process as well additional requests for higher fuel surcharges from most suppliers.

Rising energy costs, including electricity and fossil fuels, have also made it more expensive to support our operations, manufacturing, and commercial activities.

We have also experienced increases in our transportation costs;

however, we have been able to substantially mitigate these cost increases by implementing bulk shipping methods.

In addition, we have been able to mitigate most supply chain issues that existed during the COVID-19 pandemic by ordering larger quantities of inventory as they were available.

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

Upon approval, the Company expects to rapidly commercialize DrugSorb-ATR in the U.S.

and Canada to address this large unmet medical need, with an initial estimated total addressable market of $300 million today to over $1 billion over time as we pursue additional indications for DrugSorb-ATR to remove additional classes of blood thinners and expansion of the antithrombotic removal application beyond cardiac surgery and across other surgical specialties.

We believe that DrugSorb-ATR has the potential to become an “all-in-one” countermeasure for these agents.

Our executive offices are located at 305 College Road East, Princeton, New Jersey 08540, and our telephone number is (732) 329-8885.

Our website address is http://www.cytosorbents.com.

We have included our website address as an inactive textual reference only.

We make available free of charge through our website our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material, or furnish it to the SEC.

We also similarly make available, free of charge on our website, the reports filed with the SEC by our executive officers, directors and 10% stockholders pursuant to Section 16 under the Exchange Act as soon as reasonably practicable after copies of those filings are provided to us by those persons.

We are not including the information contained at http://www.cytosorbents.com, or at any other website address, as part of, or incorporating it by reference into, this Quarterly Report on Form 10-Q.

Summary of Operational and Business Highlights

● Total product revenue was $8.7 million for the three months ended March 31, 2025, a decrease of $0.3 million, or 3%, compared to the prior year

● Gross profit was $6.2 million for the three months ended March 31, 2025, a decrease of $0.7 million, or 10%, compared to the prior year

● Our loss from operations improved by 17% to approximately $3.9 million, from $4.7 million for the three months ended March 31, 2025, and 2024, respectively.

This improvement was driven by a 12% reduction in total operating expense year over year.

● We strengthened our balance sheet with the completion of a shareholder Rights Offering in January 2025 that provided $5.4 million net proceeds, and then added another $1.4 million, net proceeds with the exercise of the Series A Right Warrant in February 2025.

● In April 2025, we further supplemented our cash balance with the receipt of $1.7 million from the sale of our 2023 and amended 2022 Net Operating Loss (NOL) and R&D tax credits from the Technology Business Tax Certificate Transfer Program, sponsored by the New Jersey Economic Development Authority (NJEDA).

Results of Operations:

Comparison for the three months ended September 30, 2024 and 2023:

Three Months Ended September 30,

(dollars in thousands)

CytoSorb sales

Total product sales

Total revenue

Comparison for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

Product revenue

Cost of goods sold

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Research and development

Legal, financial and other consulting

Selling, general and administrative

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Total other income (expense), net

Total revenues were approximately $9,390,000 for the three months ended September 30, 2024, as compared to total revenues of approximately $8,811,000 for the three months ended September 30, 2023, an increase of approximately $579,000 or 7%.

Changes in foreign currency impacted total revenue by 1% and 6%, for respective periods of 2024 and 2023, respectively.

Revenue from product sales was approximately $8,613,000 in the three months ended September 30, 2024, as compared to approximately $7,754,000 in the three months ended September 30, 2023, an increase of approximately $859,000, or 11%.

This increase was driven by an increase in direct sales of approximately 21% in the three months ended September 30, 2024 as compared to 2023.

In addition, distributor sales decreased by approximately 1% during the same period.

Grant income was approximately $777,000 for the three months ended September 30, 2024 as compared to approximately $1,057,000 for the three months ended September 30, 2023, a decrease of approximately $280,000, or 26%.

This decrease was due to the completion of several grants during 2023.

Gross Profit:

For the three months ended September 30, 2024, gross profit decreased approximately $327,000 to $5,281,000 from $5,607,000 for the three months ended September 30, 2023.

This decrease was due to a planned temporary slowdown in production to rebalance inventory levels coupled with a short-term manufacturing issue, which we believe is resolved, which resulted in a significantly lower number of CytoSorb devices produced in the quarter.

As a result, product gross margins, which exclude the impact of grant income and related costs, were approximately 61% for the three months ended September 30, 2024 as compared to approximately 72% for the three months ended September 30, 2023.

Loss before benefit from income taxes

For the three months ended March 31, 2025, we generated total revenue of approximately $8.7 million a decrease of approximately $0.3 million, or 2.9%, and flat on a constant currency basis, as compared to revenues of approximately $9.0 million for the three months ended March 31, 2024,.

Strong revenue growth in our distributor and other direct sales territories across the E.U.

was offset by a temporary disruption in direct sales in Germany during the quarter.

This was primarily due to our proactive reorganization and strategic realignment of our German commercial team and sales approach that is intended to renew sales growth in the country through deeper customer engagement, more effective market development, and improved sales representative productivity.

We are making steady progress with this important initiative and are confident it will lead to stronger execution and improved performance in Germany and our financial results overall this year.

Gross profit was approximately $6.2 million for the three months ended March 31, 2025, a decrease of approximately $0.7 million or 10%, as compared to gross profit of $6.9 million for the three months ended March 31, 2024.

Gross margins were 71.1% and 76.5% for the three months ended March 31, 2025 and 2024, respectively.

The decrease in gross margin was primarily due to a 23% reduction in the number of units produced, partially offset by an 11% reduction in production costs year over year.

Research and Development Expenses

For the three months ended September 30, 2024, research and development expenses were approximately $1,851,000 as compared to research and development expenses of approximately $3,749,000 for the three months ended September 30, 2023, a decrease of approximately $1,898,000, or 51%.

This decrease was driven by a decrease in our clinical trial costs due to the completion of the STAR-T clinical trial in December 2023.

Clinical expenses were approximately $962,000 in the three months ended September 30, 2024 and approximately $2,837,000 for the three months ended September 30, 2023, a decrease of approximately $1,875,000, or 66%.

Legal, Financial and Other Consulting Expenses:

Legal, financial, and other consulting expenses were approximately $824,000 for the three months ended September 30, 2024, as compared to approximately $1,104,000 for the three months ended September 30, 2023, a decrease of approximately $280,000, or 25%.

This decrease is related to costs associated with the write-off of certain patent applications that were incurred in 2023 that did not recur in 2024 and a decrease in regulatory consulting costs related to DrugSorb-ATR.

Our research and development costs were approximately $1.7 million and $2.2 million for the three months ended March 31, 2025 and 2024, respectively, a decrease of approximately $0.5 million, or 26%.

This decrease was driven by a decrease in our clinical trial costs due to the completion of the STAR-T clinical trial, and other payroll and project-related cost reductions.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were approximately $7,003,000 for the three months ended September 30, 2024, as compared to approximately $8,104,000 for the three months ending September 30, 2023, a decrease of approximately $1,101,000, or 14%.

This decrease was primarily due to reduction in non-cash stock compensation expense, a reduction in salaries and related expenses related to headcount reductions and a reduction in royalty expense due to the expiration of the Purolite license agreement on August 6, 2024.

Interest Expense, Net:

Interest expense, net, was approximately $588,000 for the three months ended September 30, 2024, compared to approximately $34,000 for the three months ended September 30, 2023.

The increase was due to interest incurred on the Avenue Capital Group debt that was closed during the second quarter of 2024, net of interest income received of approximately $121,000 on the total balance of cash and cash equivalents.

This financing increased the principal amount of our debt to $15,000,000 from $5,000,000 and the interest rate increased to 13.5% from 8%.

Our selling, general and administrative expenses were approximately $8.4 million and $9.3 million for the three months ended March 31, 2025 and 2024, respectively, a decrease of approximately $0.9 million, or 9%.

This decrease was mainly due to decreases in royalty expenses and stock-based compensation of $0.5 million and $0.3 million, respectively.

The decrease in royalty expense was the result of the expiration of a 4% royalty in August of 2024.

Gain (Loss) on Foreign Currency Transactions

For the three months ended September 30, 2024, the gain on foreign currency transactions was approximately $2,650,000 as compared to a loss of approximately $1,810,000 for the three months ended September 30, 2023.

For the three months ended March 31, 2025, the gain on foreign currency transactions was approximately $3.0 million, as compared to a loss on foreign currency transactions of approximately $1.4 million for the year three months ended March 31, 2024.

The gain was directly related to the increase in the spot exchange rate of the Euro to the U.S.

dollar at September 30, 2024 as compared to June 30, 2024.

The spot exchange rate of the Euro to the U.S.

dollar was $1.11 per Euro at September 30, 2024, as compared to $1.07 per Euro at June 30, 2024.

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

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

The spot exchange rate of the Euro to the U.S.

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

Comparison for the nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30,

(dollars in thousands)

CytoSorb sales

Total product sales

Total revenue

Cost of goods sold

Operating expenses:

Research and development

Legal, financial and other consulting

Selling, general and administrative

Total operating expenses

dollar as of March 31, 2025 of $1.08 from $1.04 at as December 31, 2024.

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

dollar as of March 31, 2024, to $1.08 from $1.11 at December 31, 2023.

Loss From Operations

(218,687,829)

Other income (expense):

Interest expense, net

Gain (loss) on foreign currency transactions

Miscellaneous income

Total other income (expense), net

Total revenues were approximately $29,071,000 for the nine months ended September 30, 2024, as compared to total revenues of approximately $27,681,000 for the nine months ended September 30, 2023, an increase of approximately $1,390,000, or 5%.

Changes in foreign currency impacted total revenue by 2% for each of the respective periods of 2024 and 2023, respectively.

Revenue from product sales was approximately $26,444,000 in the nine months ended September 30, 2024, as compared to approximately $23,736,000 in the nine months ended September 30, 2023, an increase of approximately $2,708,000, or 11%.

Distributor sales increased by 16% and direct sales increased by 8% for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Grant income was approximately $2,627,000 for the nine months ended September 30, 2024 as compared to approximately $3,945,000 for the nine months ended September 30, 2023, a decrease of approximately $1,318,000, or 33%.

This decrease was due to the completion of several grants during 2023.

Gross Profit:

For the nine months ended September 30, 2024, gross profit increased approximately $1,274,000 to $18,355,000 from $17,081,000 for the nine months ended September 30, 2023 due to increased revenue.

Product gross margins were approximately 69% for the nine months ended September 30, 2024 as compared to approximately 71% for the nine months ended September 30, 2023.

This decrease was due to a third quarter 2024 planned temporary slowdown in production to rebalance inventory levels coupled with a short-term manufacturing issue which resulted in a significantly lower number of CytoSorb devices produced.

Research and Development Expenses:

For the nine months ended September 30, 2024, research and development expenses were approximately $5,619,000, as compared to research and development expenses of approximately $11,632,000 for the nine months ended September 30, 2023, a decrease of approximately $6,013,000, or 52%.

This decrease was driven by a decrease in our clinical trial costs due to the completion of the STAR-T clinical trial in December 2023.

Clinical expenses were approximately $3,525,000 in the nine months ended September 30, 2024 and approximately $8,153,000 for the nine months ended September 30, 2023, a decrease of approximately $4,628,000, or 57%.

Non-grant related research and development costs decreased from approximately $3,479,000 in the nine months ended September 30, 2023 to approximately $2,094,000 in the nine months ended September 30, 2024, a decrease of approximately $1,385,000, or 40%.

This reduction was a result of headcount reductions related to our cost saving initiatives.

In addition, 2023 expenses included approximately $850,000 of costs incurred related to pre-production manufacturing activities required to bring the new manufacturing plant to a state of commercial readiness that did not recur in 2024.

Legal, Financial and Other Consulting Expenses:

Legal, financial, and other consulting expenses were approximately $2,325,000 for the nine months ended September 30, 2024, as compared to approximately $2,958,000 for the nine months ended September 30, 2023, a decrease of approximately $633,000, or 21%.

This decrease is related to settlement costs of certain pending litigation matters in 2023 and a reduction of hiring fees in the nine months ended September 30, 2024 as compared to 2023.

Selling, General and Administrative Expenses:

Selling, general and administrative expenses were approximately $23,151,000 for the nine months ended September 30, 2024, as compared to approximately $24,358,000 for the nine months ending September 30, 2023, a decrease of approximately $1,207,000, or 5%.

This decrease was primarily due to a reduction in salaries and related costs due to headcount reductions and a decrease in non-cash stock compensation.

These reductions were offset by a reduction in grant spending that reduced the overhead absorption benefit to selling, general and administrative expense.

Interest Expense, Net:

Interest expense, net, was approximately $775,000 for the nine months ended September 30, 2024, compared to approximately $106,000 for the nine months ended September 30, 2023.

The increase was due to interest incurred on the Avenue Capital Group debt that was closed during the second quarter of 2024, net of interest income received of approximately $270,000 on the total balance of cash and cash equivalents.

This financing increased the principal amount of our debt to $15,000,000 from $5,000,000 and the interest rate increased to 13.5% from 8%.

Gain (Loss) on Foreign Currency Transactions:

For the nine months ended September 30, 2024, the gain on foreign currency transactions was approximately $680,000 as compared to a loss of approximately $734,000 for the nine months ended September 30, 2023.

The 2024 gain was directly related to the increase in the spot exchange rate of the Euro to the U.S.

dollar at September 30, 2024 as compared to December 31, 2023.

The spot exchange rate of the Euro to the U.S.

dollar was $1.11 per Euro at September 30, 2024, as compared to $1.10 per Euro at December 31, 2023.

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

dollar at September 30, 2023 as compared to December 31, 2022.

The spot exchange rate of the Euro to the U.S.

dollar was $1.06 per Euro at September 30, 2023, as compared to $1.07 per Euro at December 31, 2022.

History of Operating Losses:

We have experienced substantial operating losses since inception.

As of September 30, 2024, we had an accumulated deficit of approximately $295,340,000, which included losses of approximately $12,835,000 and $22,672,000 for the nine-month periods ended September 30, 2024 and 2023, respectively.

Historically, losses have resulted principally from costs incurred in the research and development of our polymer technology, clinical studies, and general and administrative expenses.

Our loss from operations decreased by 17% to approximately $3.9 million, from $4.7 million for the three months ended March 31, 2025, and 2024, respectively.

This improvement was primarily the result of a 12% reduction in operating expenses year over year.

Liquidity and Capital Resources

Since inception, our operations have been primarily financed through the issuance of debt and equity securities.

As of September 30, 2024, we had current assets of approximately $16,597,000 and current liabilities of approximately $8,430,000.

As of September 30, 2024, $19.7 million of our total shelf amount was allocated to our ATM facility and remains available.

During the nine months ended September 30, 2024, the Company sold 53,290 shares pursuant to the Sale Agreement, at an average selling price of $1.03 per share, generating net proceeds of approximately $53,200.

In June of 2024, we closed on a $20 million term-loan facility with Avenue Capital Group which provided an initial tranche of $15 million at the closing of which $10 million was immediately available at closing and $5 million constitutes restricted cash subject to release to the Company prior to March 31, 2025, provided certain conditions are met.

Another tranche of $5 million 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.

Concurrently with the closing of the first tranche, the Company paid off our existing debt with Bridge Bank.

In March of 2024, we received approximately $880,000 in cash from the approved sale of our net operating losses and research and development credits from the State of New Jersey.

We are also managing our resources proactively, continuing to invest in key areas such as our regulatory submissions of DrugSorb-ATR to U.S.

FDA and Health Canada.

We have also instituted and continue to maintain tight control over expenditures.

As of September 30, 2024 we have approximately $12.2 million in cash, including approximately $5.7 million and $6.5 million in unrestricted and restricted cash, respectively of which the unrestricted portions not expected to fund the Company’s operations beyond the next twelve months from the issuance of these consolidated financial statements.

Our Avenue Capital Group debt facility provides for the release of between $3 million and $5 million of restricted cash upon the achievement of two milestones:

1) the receipt of the FDA’s acceptance of our DrugSorb-ATR submission, and 2) the raise of between $3 million and $5 million of additional equity financing.

Achievement of both milestones would provide an additional $6 million to $10 million of unrestricted cash.

With our cost cutting efforts, we believe this is sufficient to fund the Company’s operations through 2025.

On October 22, 2024, the Company announced the FDA acceptance of the DrugSorb-ATR marketing submission.

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

Meanwhile the Company continues to evaluate other traditional and alternative sources of capital, including additional less or non-dilutive debt financing, royalty financing, strategic or direct investments, equity financing, and/or combinations thereof.

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

Contractual Obligations

In March 2021, the Company 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 commencement date of the lease was April 1, 2021.

The Initial Early Term began on the commencement date (April 1, 2021) and lasted two months.

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

The lease also contains two five-year renewal options.

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

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

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.

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 also provided 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 $1,334,000 as security.

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, 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.

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.

Off-balance Sheet Arrangements

We have no off-balance sheet arrangements.

Going Concern

As of September 30, 2024, the Company’s cash, cash equivalents and restricted cash balances were approximately $12.2 million, including approximately $5.7 million in cash and cash equivalents and approximately $6.5 million in restricted cash, of which the unrestricted portion is not expected to fund the Company’s operations beyond the next twelve months from the issuance of these consolidated financial statements.

This matter raises substantial doubt about the Company’s ability to continue as a going concern.

As a result, the accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

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

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

As of March 31, 2025, we had current assets of approximately $25.4 million and current liabilities of approximately $9.7 million.

We have an effective shelf registration statement dated September 30, 2024 with the SEC which enables us to raise up to $150 million in one or more offerings, through the issuance and sale of any combination of equity securities, debt securities, warrants and units.

Approximately $149.6 million of this amount was available as of March 31, 2025.

We have also allocated $20 million of our total shelf amount to our ATM facility.

At March 31, 2025, approximately $19.6 million was available for use under the ATM facility.

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 ($5.4 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 allowed for $5 million of restricted cash on the Company’s consolidated balance sheets to now become unrestricted, and available for use.

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 ($1.4 million net of fees).

We are also proactively managing our resources with a focus on driving commercial success, investing in key areas such as our regulatory submissions of DrugSorb-ATR to U.S.

FDA and Health Canada and the development of clinical data.

We have also instituted and continue to maintain tight control over expenditures and have lowered our spending significantly over the past year.

As of March 31, 2025, we have approximately $13.1 million in cash, including approximately $11.6 million in unrestricted cash and cash equivalents and $1.5 million of non-current restricted cash which raises substantial doubt about the Company’s ability to continue as a going concern.

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, our ability to successfully respond to or appeal the denial letter received from the FDA relating to our De Novo Request for DrugSorb-ATR, and the related opportunity to receive Tranche 2 of Avenue Capital Commitment by December 31, 2025 and extend the principle 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 financing 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 routinely evaluates other 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.

Loan and Security Agreement

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

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 is available to the Company on the Closing Date and $5 million which remained classified as restricted cash through January 10, 2025, when it was released from its restriction as the following conditions were met:

(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.

A second tranche of up to $5 million, 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”).

All unpaid principal and accrued and unpaid interest shall be due and payable in full by the maturity date.

If the 2nd tranche is fully funded by December 2025, the maturity date is January 1, 2028;

otherwise, the maturity date is July 1, 2027.

Commencing on August 1, 2024, the Company makes monthly interest only payments during the initial 25-month period following the Closing Date, followed by equal monthly installments through the maturity date consisting of principal plus accrued and unpaid interest.

On October 22, 2024, the Company announced that the FDA had accepted its application of for 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 satisfied the second condition of the debt covenant which now allows for the $5,000,000 of restricted cash on the Company’s consolidated balance sheets to become unrestricted, and available for use.

On April 25, 2025, the FDA issued the Company a denial letter regarding the De Novo Request for DrugSorb-ATR, identifying remaining deficiencies that must be addressed before the De Novo Request can be approved, and the device can be authorized for commercialization in the U.S.

We are engaged in current discussions with the FDA to try to resolve the remaining issues.

However, if these conversations do not lead to a resolution, a formal appeal will be filed within 60 days (i.e., June 25, 2025).

The Company continues to anticipate a final regulatory decision in 2025.

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)%.

For further discussion regarding the Loan Agreement please see Long Term Debt note to our Consolidated Financial Statements, included elsewhere in this Quarterly Report on Form 10-Q.

Critical Accounting Policies and Estimates

A discussion of our critical accounting policies and estimates is contained in our Annual Report on Form 10-K.

Our condensed consolidated financial statements are prepared in accordance with U.S.

The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures.

On an ongoing basis, we evaluate our estimates and assumptions based on historical experience and on various other assumptions that we believe are reasonable under the circumstances.

Our actual results could differ from these estimates under different assumptions or conditions.

Refer to “Critical Accounting Estimates” contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024 for a complete discussion of our critical accounting estimates.

There have been no material changes to our critical accounting estimates since our Annual Report on Form 10-K for the year ended December 31, 2024.

Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis