What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-14 · 103 added, 52 removed, 106 unchanged (59% of the section changed)

28 unchanged sentences

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.

CytoSorbents’ lead product, CytoSorb®, is approved in the European Union and distributed in more than 70 countries worldwide, with nearly 300,000 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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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.

The Company believes these items can be most effectively and expeditiously resolved through the formal appeal process.

In July, the Company participated in an appeal hearing with the FDA for supervisory review (administrative appeal) under 21 CFR 10.75.

The appeal hearing included FDA senior leadership, Company management and our external surgical experts.

The Company continues to believe that remaining deficiencies in its DeNovo application can be effectively resolved through this supervisory review process which is expected to be completed by the end of August 2025, and 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.

On June 26, 2025, Health Canada issued a Notice of Refusal of the Company’s Medical Device License application, identifying remaining deficiencies that must be addressed before the application can be granted and the device is authorized for commercialization.

As part of Health Canada’s prescribed reconsideration process, and following discussions with Health Cananda, the Company has filed a Level 1 “Request for Reconsideration” and with agreement from the Medical Devices Directorate Bureau Director will pursue the review following conclusion of the Company’s review with the FDA.

If marketing authorization is not received as part of the reconsideration process, the Company can then file a formal Appeal with the Director General of the Medical Devices Directorate.

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

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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.

Summary of Operational and Recent Business Highlights

● Total revenue was $18.3 million for the six months ended June 30, 2025, an increase of $0.5 million, or 2.9%, compared to the prior year.

● Gross profit was $13.0 million for the six months ended June 30, 2025, a decrease of $0.4 million, or 2.7%, compared to the prior year.

Gross margin was 71% for the six months ended June 30, 2025, compared to 75% in the prior year.

● Our loss from operations improved by 8.8% to approximately $7.5 million, from $8.2 million for the six months ended June 30, 2025, and 2024, respectively.

This improvement was driven by a 5.0% reduction in total operating expense year over year.

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● 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).

● Appointed Thomas Shannon as Vice President of Marketing for North America to lead the marketing strategy and execution of DrugSorb-ATR in the U.S.

and appointed Melanie Grossman, CPA as Vice President and Corporate Controller.

● On May 22, 2025, a new contemporary real-world data analysis was presented at EuroPCR, highlighting the intraoperative use of the Company’s technology to significantly reduce the severity of bleeding in urgent coronary artery bypass grafting (CABG) patients on the blood thinner, ticagrelor (Brilinta®, AstraZeneca) who had not completed the recommended drug washout period.

Storey, et al.

Early CABG with intraoperative hemadsorption in patients on ticagrelor;

Cardiovascular Revascularization Medicine.) The information in this data analysis are referenced for general information only and are not incorporated by reference into this Report.

● On July 31, 2025 the Company highlighted data demonstrating the vital and evolving role of CytoSorb therapy in the treatment of sepsis and septic shock–among the deadliest challenges in critical care medicine.

Recent data demonstrate early and intensive use of CytoSorb therapy improves clinical outcomes for patients suffering from these conditions.

The Company will present a World Sepsis Day Global Webinar on September 10, 2025 in commermoration of Sepsis Awareness Month and World Sepsis Day.

See our Current Report on Form 8-K, filed with the SEC on August 1, 2025, for additional information.

Results of Operations:

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

Three Months Ended March 31,

Product revenue

Comparison for the three months ended June 30, 2025 and 2024:

Three Months Ended June 30,

(in thousands)

Cost of goods sold

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Total other income (expense), net

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.

Income (Loss) before benefit from income taxes

For the three months ended June 30, 2025, we generated total revenue of approximately $9.6 million, an increase of approximately $0.8 million, or 8.8%, as compared to revenues of approximately $8.8 million for the three months ended June 30, 2024.

Revenue growth was led by strength in our direct German and International territories compared to lower performance in the second quarter of 2024 and the first quarter of 2025.

The Company began a proactive reorganization and strategic realignment of our German commercial team and sales approach in the first quarter of 2025.

We are making steady progress with this important initiative and are pleased with this initial improvement in our second quarter of 2025, and remain confident it will lead to stronger execution and improved performance in Germany and our financial results overall this year.

Gross profit was approximately $6.8 million for the three months ended June 30, 2025, an increase of approximately $0.3 million, or 4.8%, as compared to gross profit of $6.5 million for the three months ended June 30, 2024.

Gross margins were 70.9% and 73.5% for the three months ended June 30, 2025 and 2024, respectively.

The decrease in gross margin was primarily due to the write - off of inventory of $0.1 million which had a negative impact on gross margin of 1.5%.

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%.

Our research and development costs were approximately $1.3 million and $1.5 million for the three months ended June 30, 2025 and 2024, respectively, a decrease of approximately $0.3 million, or 16.9%.

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.

Our selling, general and administrative expenses were approximately $9.2 million and $8.6 million for the three months ended June 30, 2025 and 2024, respectively, an increase of approximately $0.6 million, or 7.2%.

This increase was mainly due to higher legal, financial and consulting costs of $0.5 million and net other compensation expenses of $0.1 million, partially offset by lower royalty expenses of and $0.2 million.

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.

For the three months ended June 30, 2025, the gain on foreign currency transactions was approximately $6.2 million, as compared to a loss on foreign currency transactions of approximately $0.5 million for the three months ended June 30, 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.

dollar as of June 30, 2025 to $1.17 per Euro from $1.08 at March 31, 2025.

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.

dollar as of June 30, 2024, to $1.07 per Euro from $1.08 per Euro at March 31, 2024.

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.

Our loss from operations was flat at approximately $3.6 million for each of the three months ended June 30, 2025 and 2024.

Comparison for the six months ended June 30, 2025 and 2024:

Six Months Ended June 30,

(in thousands)

Cost of goods sold

Operating expenses:

Research and development

Selling, general and administrative

Total operating expenses

Loss from operations

Other income (expense):

Interest expense, net

Gain (loss) on foreign currency transactions

Total other income (expense), net

Income (loss) before benefit from income taxes

For the six months ended June 30, 2025, we generated total revenue of approximately $18.3 million, an increase of approximately $0.5 million, or 2.9%, and 1.8% on a constant currency basis, as compared to revenues of approximately $17.8 million for the six months ended June 30, 2024.

Revenue growth was led by strength in our direct German and International territories compared to lower performance in the second quarter of 2024 and the first quarter of 2025.

The Company began a proactive reorganization and strategic realignment of our German commercial team and sales approach in the first quarter of 2025.

We are making steady progress with this important initiative, and are pleased with this initial improvement in our second quarter of 2025, and remain confident it will lead to stronger execution and improved performance in Germany and our financial results overall this year.

Gross profit was approximately $13.0 million for the six months ended June 30, 2025, a decrease of approximately $0.4 million, or 2.7%, as compared to gross profit of $13.4 million for the six months ended June 30, 2024.

Gross margins were 71.0% and 75.0% for the six months ended June 30, 2025 and 2024, respectively.

The decrease in gross margin was primarily due to a 8.9% reduction in the number of units produced, and the write-off of inventory of $0.3 million which had a negative impact on gross margin of 1.4%.

Research and Development Expenses

Our research and development costs were approximately $2.9 million and $3.8 million for the six months ended June 30, 2025 and 2024, respectively, a decrease of approximately $0.8 million, or 22.4%.

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 $17.6 million and $17.8 million for the six months ended June 30, 2025 and 2024, respectively, a decrease of approximately $0.2 million, or 1.3%.

This decrease was mainly due to decreases in stock-based compensation and royalty expenses of $0.9 million and $0.7 million, respectively, which was partially offset by increases in legal, financial and consulting costs of $0.5 million, and net other compensation expenses of approximately $0.6 million.

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 six months ended June 30, 2025, the gain on foreign currency transactions was approximately $9.2 million, as compared to a loss on foreign currency transactions of approximately $2.0 million for the six months ended June 30, 2024.

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

dollar as of June 30, 2025 to $1.17 per Euro from $1.03 per Euro at 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 June 30, 2024, to $1.07 per Euro from $1.11 per Euro at December 31, 2023.

Loss From Operations

Our loss from operations decreased by 9.4% to approximately $7.5 million, from $8.2 million for the six months ended June 30, 2025, and 2024, respectively.

This improvement was primarily the result of a 5.0% reduction in operating expenses year over year, partially offset by the decrease in gross profit.

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.

As of June 30, 2025, we had current assets of approximately $23.0 million and current liabilities of approximately $9.8 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.

Approximately $149.7 million of this amount was available as of June 30, 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.

At June 30, 2025, approximately $19.4 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.

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 with an expiration date of February 24, 2025, and one Series B Right Warrant to purchase one share of common stock with an expiration date of April 10, 2025.

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

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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.

On April 4, 2025, the Board of Directors extended the expiration date of the Series B Right Warrants from April 10, 2025 to June 10, 2025.

On June 11, 2025, the 5-day volume weighted average price of Common Stock over the last five-trading days prior to June 10, 2025 was lower than the minimum required price of $2.00 and, as a result, the Series B Right Warrants issued in connection with the previously announced Rights Offering expired worthless pursuant to their terms.

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 the 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 over the past year.

As of June 30, 2025, we had approximately $11.7 million in cash, including approximately $10.2 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 potential regulatory approval and introduction of DrugSorb-ATR in the U.S.

and Canada which decisions are expected in 2025, our ability to successfully 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 achieve the Interest-Only Milestone of the Avenue Capital Commitment and extend the interest-only period by six months to January 1, 2027.

Additional sources of liquidity available to us include the 2024 Shelf, other public or private equity offerings, debt financing or from other sources.

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

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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.

As a result of these additional uncertainties, the accompanying condensed 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.

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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;

If the 2nd tranche is fully funded by December 2025, and the Company achieves the Interest-Only Milestone of the Avenue Capital Commitment, 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.

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 satisfied the second condition of the debt covenant which now allows for the $5.0 million of restricted cash on the Company’s consolidated balance sheets to become unrestricted, and available for use.

The Company believes these items can be most effectively and expeditiously resolved through the formal appeal process.

In July, the Company participated in an appeal hearing with the FDA for supervisory review (administrative appeal) under 21 CFR 10.75.

The appeal hearing included FDA senior leadership, Company management and our external surgical experts.

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.

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

Critical Accounting Policies and Estimates

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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