Cytosorbents Corp 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Cautionary Notes Regarding Forward-Looking Statements 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. Overview We are a leader in the treatment of life-threatening conditions in the intensive care unit and cardiac surgery through blood purification. CytoSorbents’ proprietary blood purification technologies are based on biocompatible, highly porous polymer beads that can actively remove toxic substances from blood and other bodily fluids by pore capture and surface adsorption. Cartridges filled with these beads can be used with standard blood pumps already in the hospital (e.g. 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 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 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. Additional CE mark extensions were granted for bilirubin and myoglobin removal in clinical conditions such as liver disease and trauma, respectively, and for ticagrelor and rivaroxaban removal in cardiothoracic surgery procedures. CytoSorb has also received FDA EUA in the United States for use in adult critically ill COVID-19 patients with impending or confirmed respiratory failure, to reduce pro-inflammatory cytokine levels. CytoSorb is not yet approved in the United States. 20 Table of Contents In the U.S. 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 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. 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. 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). 21 Table of Contents Results of Operations: Comparison for the three months ended March 31, 2025 and 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ ​ 2025 ​ ​ 2024 ​ ​ ​ ​ ​ ​ % of ​ ​ ​ ​ % of ​ ​ Amount Revenue Amount Revenue ​ Product revenue ​ $ 8,727,238 ​ 100 % $ 8,989,520 ​ 100 % Cost of goods sold ​ ​ 2,519,641 28.9 ​ ​ 2,115,910 ​ 23.5 ​ Gross profit ​ 6,207,597 71.1 ​ ​ 6,873,610 ​ 76.5 ​ Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ 1,662,925 19.1 ​ ​ 2,246,911 ​ 25.0 ​ Selling, general and administrative ​ 8,431,880 96.6 ​ ​ 9,283,067 ​ 103.3 ​ Total operating expenses ​ 10,094,805 115.7 ​ ​ 11,529,978 ​ 128.3 ​ Loss from operations ​ (3,887,208) (44.5) ​ ​ (4,656,368) ​ (51.8) ​ Other income (expense): ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense, net ​ (605,134) (6.9) ​ ​ (6,653) ​ (0.1) ​ Gain (loss) on foreign currency transactions ​ 3,013,984 34.5 ​ ​ (1,425,690) ​ (15.9) ​ Total other income (expense), net ​ 2,408,850 27.6 ​ ​ (1,432,343) ​ (15.9) ​ Loss before benefit from income taxes ​ $ (1,478,358) (16.9) % $ (6,088,711) ​ (67.7) % ​ Revenues 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 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. 22 Table of Contents Research and Development Expenses 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 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 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 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 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 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. 23 Table of Contents 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. 24 Table of Contents Critical Accounting Policies and Estimates Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. 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. ​ Item 3. Quantitative and Qualitative Disclosures About Market Risk. 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.