美國
證券交易委員會
華盛頓特區 20549
表單
在截至的季度期間
要麼
委員會文件編號：
（註冊人章程中規定的確切名稱）
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（州或其他司法管轄區 |
| （美國國稅局僱主識別號） |
公司或組織） |
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（主要行政辦公室地址） | （郵政編碼） |
(
（註冊人的電話號碼，包括區號）
根據該法第12（b）條註冊的證券：
每個課程的標題 | 交易符號 | 註冊的每個交易所的名稱 |
用勾號指明註冊人 (1) 是否在過去 12 個月內（或在要求註冊人提交此類報告的較短時間內）提交了 1934 年《證券交易法》第 13 條或第 15 (d) 條要求提交的所有報告，以及 (2) 在過去的 90 天內是否受到此類申報要求的約束。 þ
用複選標記表明註冊人是否在過去 12 個月內（或者在要求註冊人提交此類文件的較短時間內）以電子方式提交了根據第 S-T 法規（本章第 232.405 節）第 405 條要求提交的所有交互式數據文件。
用複選標記指明註冊人是大型加速申報人、加速申報人、非加速申報人、小型申報公司還是新興成長型公司。參見《交易法》第12b-2條中 「大型加速申報人」、「加速申報公司」、「小型申報公司」 和 「新興成長型公司」 的定義。
大型加速文件管理器 | ☐ | 加速過濾器 | ☐ |
☑ | 規模較小的申報公司 | ||
| 新興成長型公司 |
如果是新興成長型公司，請用複選標記表明註冊人是否選擇不使用延長的過渡期來遵守根據《交易法》第13（a）條規定的任何新的或修訂後的財務會計準則。 ☐
用複選標記表明註冊人是否爲空殼公司（定義見《交易法》第12b-2條）。
截至 2024 年 11 月 5 日，有
Cytosorbents 公司
10-Q表格
目錄
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本季度10-Q報告中包括我們的商標和商號，例如「cytosorbents」，「cytosorbents XL」，「ecos-300cy」，「betasorb」，「contrastsorb」，「drugsorb」，「hemodefend-rbc」，“hemodefend-bga"，"k+「ontrol」 和 「VetResQ」 是受適用的知識產權法保護且屬於 CytoSorbents 公司和我們的子公司的財產。這份第10-Q表格的季度報告還包含其他公司的商標、商號和服務標誌,這些商標、商號和服務標誌是其各自所有者的財產。僅爲方便起見，商標、商號和服務標誌在此季度報告的10-Q表格中可能會無商標符號、「r」符號或「，」符號出現，但此類引用不意味着以任何方式表明我們將不會完全根據適用法律的要求主張我們對這些商標、商號和服務標誌或適用許可方的權利。我們不打算使用或展示其他方的商標、商號或服務標誌來暗示,且這樣的使用或展示不應被理解爲暗示我們與這些其他方的關係，或者暗示我們受到這些其他方的認可或贊助。” SM 我們在此季度報告的10-Q表格中對其他方的商標、商號或服務標誌的使用或展示,不打算暗示我們與其之間存在關係，或暗示我們受到這些其他方的認可或贊助。我們將不遺餘力地根據適用法律的要求主張我們或相關許可方對這些商標、商號和服務標誌的權利。
2
第一部分 — 財務信息
第 1 項。財務報表。
細胞吸附劑公司
簡明的合併資產負債表
九月三十日 | ||||||
| 2024 | 十二月三十一日 | ||||
| （未經審計） |
| 2023 | |||
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資產 |
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流動資產： |
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現金和現金等價物 | $ | | $ | | ||
補助金和應收賬款，扣除備抵金美元 |
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庫存 |
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預付費用和其他流動資產 |
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流動資產總額 |
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財產和設備，淨額 |
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限制性現金 | | | ||||
使用權資產 | | | ||||
其他資產 |
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總資產 | $ | | $ | | ||
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負債和股東權益 |
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流動負債： |
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應付賬款 | $ | | $ | | ||
長期債務的當前到期日 | — | | ||||
租賃負債——流動部分 | | | ||||
應計費用和其他流動負債 |
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流動負債總額 |
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租賃負債，扣除流動部分 | | | ||||
長期債務 | | | ||||
負債總額 |
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承諾和意外開支（附註6） |
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股東權益： |
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優先股，面值美元 | ||||||
普通股，面值 $ |
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額外的實收資本 |
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累計其他綜合收益（虧損） |
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累計赤字 |
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股東權益總額 |
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負債和股東權益總額 | $ | | $ | | ||
見簡明合併財務報表的附註.
3
細胞吸附劑公司
簡明的合併運營報表和綜合虧損
截至9月30日的三個月 | 截至9月30日的九個月 | |||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||
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收入： |
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CytoSorb 的銷售額 | $ | | $ | | $ | | $ | | ||||
其他產品銷售 |
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產品總銷售額 |
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補助金收入 |
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總收入 |
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收入成本 |
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毛利潤 |
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其他費用： |
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研究和開發 |
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法律、財務和其他諮詢 |
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銷售、一般和管理 |
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支出總額 |
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運營損失 |
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其他收入（支出）： |
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利息支出，淨額 |
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外幣交易的收益（虧損） | | ( | | ( | ||||||||
雜項收入 | — | — | — | | ||||||||
其他收入（支出）總額，淨額 |
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所得稅收益前的虧損 |
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從所得稅中受益 |
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歸屬於普通股股東的淨虧損 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
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普通股每股基本虧損和攤薄後淨虧損 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
已發行普通股的加權平均數 |
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淨虧損 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
其他綜合收益（虧損）： |
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外幣折算調整 |
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綜合損失 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
參見簡明合併財務報表的附註。
4
cytosorbents公司
股東權益變動簡明合併財務報表
截至2024年9月30日和2023年9月30日止三個月及九個月（未經審計）
| 累積的 | ||||||||||||||||
額外的 | 其他 | ||||||||||||||||
| 普通股 | 實繳 | 綜合 | 累積的 | 股東的 | ||||||||||||
| 股份 |
| 面值 |
| 資本 |
| 收益（損失） |
| 赤字 |
| 股權 | ||||||
2024年6月30日餘額 | | $ | | $ | | $ | | $ | ( | $ | | ||||||
股票補償-員工，顧問和董事 | — | — | | — | — | | |||||||||||
其他綜合損失：外匯翻譯調整 | — | — | — | ( | — | ( | |||||||||||
ATM激活費用 | — | — | ( | — | — | ( | |||||||||||
發行受限制的股票單位 | | | | — | — | | |||||||||||
淨損失 | — | — | — | — | ( | ( | |||||||||||
2024年9月30日的餘額 | $ | $ | | $ | ( | $ | ( | $ | | ||||||||
2023年12月31日結餘爲 | | $ | | $ | | $ | | $ | ( | $ | | ||||||
基於股票的報酬 - 員工、顧問和董事 |
| — |
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其他綜合損失：外幣翻譯調整 |
| — |
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普通股發行，扣除費用後淨額 | | | | — | — | | |||||||||||
與長期債務發行的認股權證 | — | — | | — | — | | |||||||||||
發行受限制股票單位 | | | | — | — | | |||||||||||
淨損失 |
| — |
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2024年9月30日的餘額 |
| $ | $ | | $ | ( | $ | ( | $ | | |||||||
| 累積的 | ||||||||||||||||
額外的 | 其他 | ||||||||||||||||
| 普通股 | 實繳 | 綜合 | 累積的 | 股東的 | ||||||||||||
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| 面值 |
| 資本 |
| 收益（損失） |
| 赤字 |
| 股權 | |||||
2023年6月30日的餘額 | | $ | | $ | | $ | | $ | ( | $ | | ||||||
基於股票的薪酬 - 員工、顧問和董事 | — | — | | — | — | | |||||||||||
其他綜合損失：外幣翻譯調整 | — | — | — | | — | | |||||||||||
普通股發行，扣除費用後的淨額 | | | | — | — | | |||||||||||
行權期權以獲得現金 | | | | — | — | | |||||||||||
發行限制性股票單位 | | | | — | — | | |||||||||||
淨損失 | — | — | — | — | ( | ( | |||||||||||
2023年9月30日餘額 | | $ | | $ | | $ | | $ | ( | $ | | ||||||
2022年12月31日餘額 | | $ | | $ | | $ | | $ | ( | $ | | ||||||
員工、顧問和董事的股票補償 |
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其他綜合收益：外幣翻譯調整 |
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常股發行金額，扣除費用 | | | | — | — | | |||||||||||
行使期權以換取現金 |
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發行限制性股票單位 |
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與ATM發行相關的法律/審計費用 | — | — | ( | — | — | ( | |||||||||||
淨損失 |
| — |
| — |
| — |
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| ( |
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2023年9月30日餘額 |
| | $ | | $ | | $ | | $ | ( | $ | | |||||
請參閱附註事項的簡明合併財務報表。
5
CYTOSORBENTS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine months | Nine months | ||||
ended | ended | |||||
September 30, | September 30, | |||||
| 2024 | 2023 | ||||
|
| (Unaudited) |
| (Unaudited) | ||
Cash flows from operating activities: |
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Accrued final fee | | | ||||
Amortization of debt discount | | — | ||||
Amortization of loan costs | | — | ||||
Non-cash compensation | ( |
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Depreciation and amortization | |
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Amortization of right-of-use asset | | | ||||
Write off of patent cost | |
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Bad debt expense | | | ||||
Stock-based compensation | |
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Foreign currency translation (gain) loss | ( |
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Changes in operating assets and liabilities: |
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Grants and accounts receivable | ( |
| ( | |||
Inventories | |
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Prepaid expenses and other current assets | |
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Other assets | |
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Accounts payable and accrued expenses | ( |
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Net cash used in operating activities | ( |
| ( | |||
Cash flows from investing activities: |
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Purchases of property and equipment | ( |
| ( | |||
Payments for patent costs | ( |
| ( | |||
Net cash used in investing activities | ( |
| ( | |||
Cash flows from financing activities: |
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Proceeds from long-term debt | | — | ||||
Repayment of long-term debt | ( |
| — | |||
Payment of final fee | ( | — | ||||
Payment of loan costs | ( |
| — | |||
Equity contributions - net of fees incurred | | | ||||
Proceeds from exercise of stock options | — | | ||||
Net cash provided by financing activities | | | ||||
Effect of exchange rates on cash | |
| ( | |||
Net change in cash, cash equivalents and restricted cash | ( |
| ( | |||
Cash, cash equivalents and restricted cash - beginning of period | |
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Cash, cash equivalents and restricted cash - end of period | $ | | $ | | ||
Supplemental disclosure of cash flow information: |
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Cash paid during the period for interest | $ | | $ | | ||
Supplemental disclosure of non-cash financing activities: |
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Warrants issued in connection with long-term debt | $ | | $ | — | ||
Issuance of restricted stock units | $ | | $ | | ||
See accompanying notes to condensed consolidated financial statements.
6
CytoSorbents Corporation
Notes to Condensed Consolidated Financial Statements
(UNAUDITED)
September 30, 2024
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company as of September 30, 2024 and December 31, 2023, and for the three and nine months ended September 30, 2024 and 2023. The Company’s condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and; therefore, do not include all information and footnotes necessary for a fair presentation of consolidated financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") and should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2023, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments, for a fair presentation of the Company’s consolidated financial position and results of operations for the interim periods presented. Certain information and disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The results for the three and nine months ended September 30, 2024 and 2023, are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or period.
As of September 30, 2024, the Company’s cash, cash equivalents and restricted cash balances were approximately $
2. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Please see Note 2 to the Company's consolidated financial statements included in the Company's Annual Report on Form 10 - K for the year ended December 31, 2023, filed with the Securities and Exchange Commission ("SEC") on March 14, 2024, for a description of all significant accounting policies.
Nature of Business
The Company is a leader in the treatment of life-threatening conditions in intensive care and cardiac surgery using blood purification. The Company, through its subsidiary CytoSorbents Medical, Inc. (formerly known as CytoSorbents, Inc.), is engaged in the research, development and commercialization of medical devices with its blood purification technology platform which incorporates a proprietary adsorbent, porous polymer technology. The Company, through its wholly-owned European subsidiary, CytoSorbents Europe GmbH, conducts sales and marketing related operations for the CytoSorb device.
Basis of Consolidation and Foreign Currency Translation
The consolidated financial statements include the accounts of CytoSorbents Corporation and its wholly-owned subsidiaries, CytoSorbents Medical, Inc. and CytoSorbents Europe GmbH. All significant intercompany transactions and balances have been eliminated in consolidation.
7
Translation gains and losses resulting from the process of remeasuring into the United States of America dollar the foreign currency financial statements of the European subsidiary, for which the United States of America dollar is the functional currency, are included in operations. The Euro is the functional currency of the European Subsidiary. Foreign currency transaction gain (loss) included in net loss amounted to approximately $
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
The following table provides a reconciliation of cash and cash equivalents and restricted cash to amounts shown in the consolidated balance sheets:
| September 30, 2024 |
| December 31, 2023 | |||
Cash and cash equivalents | $ | $ | | |||
Restricted cash |
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Total cash, cash equivalents and restricted cash | $ | | $ | | ||
Restricted Cash
The Company’s total restricted cash in the amount of $
Grants and Accounts Receivable
Trade accounts receivable consist of amounts due from direct customers, distributors and agencies of the U.S. government and are presented at net realizable value. At each balance sheet date, the Company estimates an expected allowance for credit losses inherent in the Company’s accounts receivable portfolio based on historical experience, specific allowances for known troubled accounts, and other available evidence. In addition, also at each reporting date, this estimate is updated to reflect any changes in credit risk since the receivable was initially recorded. This estimate is calculated on a pooled basis where similar risk characteristics exist. The Company has identified the following portfolio segments: direct customers, distributors/strategic partners and the U.S. government.
A fixed reserve percentage for each pool is derived from a review of the Company’s historical losses in relation to the total pool. This estimate is adjusted quarterly for management’s assessment of current conditions, reasonable and supportable forecasts regarding future events, and any other factors deemed relevant by the Company. The Company believes historical loss information is a reasonable starting point in which to calculate the expected allowance for credit losses as the Company’s portfolio segments have remained constant over the Company’s historical evaluation period.
The Company writes off receivables when there is information that indicates the debtor is facing significant financial difficulty and there is no possibility of recovery. If any recoveries are made from any accounts previously written off, they are recognized as an offset to credit loss expense in the year of recovery. The total amount of write-offs was immaterial to the consolidated financial statements as a whole for the three and nine months ended September 30, 2024 and 2023.
The allowance for credit losses reflects accounts receivable balances that are written off when management determines they are uncollectible.
The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist, and measures the allowance for credit losses using the following methods:
8
Direct Customers—The Company measures expected credit losses on direct customer receivables using an aging methodology. The risk of loss for direct customer receivables is low based on the Company’s historical experience. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and supportable forecasts.
Distributors/Strategic Partners—The Company measures expected credit losses on distributor receivables using an individual reserve methodology. The risk of loss in this portfolio is low based on the Company’s historical experience. The estimate of expected credit losses considers the past payment history of each distributor.
U.S. Government— These receivables are related to the Company’s government grants. The Company measures expected credit losses on these receivables using an individual reserve methodology. The risk of loss in this portfolio is very low based on the Company’s historical experience, as these receivables are supported by approved grant award contracts.
Inventories
Inventories are valued at the lower of cost or net realizable value under the first in, first out (FIFO) method. At September 30, 2024 and December 31, 2023, the Company’s inventory was comprised of finished goods, which amounted to $
Impairment or Disposal of Long-Lived Assets
The Company assesses the impairment of patents and other long-lived assets under accounting standards for the impairment or disposal of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. For long-lived assets to be held and used, the Company recognizes an impairment loss only if its carrying amount is not recoverable through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and fair value. During the three months ended September 30, 2024 and 2023, the Company recorded impairment charges of approximately $
Income Taxes
The Company has
Deferred income taxes are accounted for using the balance sheet approach, which requires recognition of deferred tax assets and liabilities for the expected future consequences of temporary differences between the financial reporting basis and the tax basis of assets and liabilities. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized. A full valuation allowance has been established on the deferred tax asset as it is more likely than not that a future tax benefit will not be realized. In addition, future utilization of the available net operating loss carryforward may be limited under Internal Revenue Code Section 382 as a result of changes in ownership.
The Company follows accounting standards associated with uncertain tax positions. The Company had
The Company utilizes the Technology Business Tax Certificate Transfer Program to sell a portion of its New Jersey Net Operating Loss carryforwards to an industrial company.
9
Concentration of Credit Risk
The Company maintains cash balances, at times, with financial institutions in excess of amounts insured by the Federal Deposit Insurance Corporation (“FDIC”). Beginning in April of 2023, the Company joined the IntraFi network, and established an Insured Cash Sweep (“ICS”) account whereby all cash that was previously held in the Company’s money market account at Bridge Bank is swept daily in increments of less than $250,000 and deposited in a number of IntraFi’s
A significant portion of the Company’s revenues are from product sales in Germany. Substantially all of the Company’s grant and other income are from government agencies in the United States. (See Note 4 for further information relating to the Company’s revenue.)
As of September 30, 2024,
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 “Distinguishing Liabilities From Equity” (“ASC 480”) and ASC 815 “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance, and will remain as a component of equity thereafter. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.
The warrants issued upon the closing of the Company’s December 13, 2023 offering and the closing of the Company’s June 2024 debt financing both met the criteria for equity classification under ASC 815. Accordingly, these warrants have been classified as equity as of September 30, 2024 and December 31, 2023.
Shipping and Handling Costs
The cost of shipping product to customers and distributors is typically borne by the customer or distributor. The Company records other shipping and handling costs in cost of revenue. Total freight costs amounted to approximately $
10
Effect of Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”). ASU2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. The Company adopted the provisions of ASU 2020-06 on January 1, 2024. This did not have a material impact on the Company’s consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09 entitled “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. This ASU provides guidance related to additional disclosures that will be required related to income taxes. The updated guidance is effective for public entities for fiscal years beginning after December 15, 2024. This ASU will result in additional disclosures in the Company’s consolidated financial statements related to income taxes in 2025.
In November 2023, the FASB issued ASU No. 2023-07 (“ASU 2023-07”), “Improvements to Reportable Segment Disclosures”. The guidance primarily will require enhanced disclosures about significant segment expenses. All disclosure requirements under ASU 2023-07 and existing segment disclosures in ASC 280, “Segment Reporting” are also required for public entities with a single reportable segment. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. A retrospective approach is required to be applied to all prior periods presented in the financial statements. The Company plans to adopt the provisions of ASU 2023-07 in the first quarter of fiscal 2025 and continues to evaluate the disclosure requirements related to the new standard.
On April 3, 2024, the Financial Accounting Standards Board (the "FASB") began a project related to the accounting and reporting of government grants. The FASB has decided to pursue an International Accounting Standards ("IAS") 20 accounting model. Under IAS 20, a grant relating to income may be reported separately as 'other income' or deducted from the related expense. The FASB expects to issue and exposure draft of a proposed ASU in the fourth quarter of 2024. The company is evaluating its accounting and reporting policy for government grants relative to this project and the requirements of IAS 20.
3. STOCKHOLDERS’ EQUITY
Preferred Stock
In June 2019, the Company amended and restated its certificate of incorporation. The amended and restated certificate of incorporation authorizes the issuance of up to
Common Stock
In June 2019, the Company amended and restated its certificate of incorporation. The amended and restated certificate of incorporation increased the number of shares of common stock authorized for issuance from
Shelf Registration
On July 14, 2021, the Company filed a registration statement on Form S-3 with the SEC, which was amended on July 20, 2021 and declared effective by the SEC on July 27, 2021 (as amended, the “2021 Shelf”). The 2021 Shelf enables the Company to offer and sell, in one or more offerings, any combination of common stock, preferred stock, senior or subordinated debt securities, warrants and units, up to a total dollar amount of $
11
Open Market Sale Agreement with Jefferies LLC
On December 30, 2021, the Company entered into an Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC (the “Agent”), pursuant to which the Company may sell, from time to time, at its option, shares of the Company’s common stock having an aggregate offering price of up to $
Subject to the terms of the Sales Agreement, the Agent is required to use its commercially reasonable efforts consistent with their normal sales and trading practices to sell the shares of the Company’s common stock from time to time, based upon the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company is required to pay the Agent a commission of up to
Stock-Based Compensation
Total share-based employee, director, and consultant compensation amounted to approximately $
The summary of the stock option activity for the nine months ended September 30, 2024 is as follows:
| Weighted | ||||||
| Weighted | Average | |||||
| Average | Remaining | |||||
Exercise Price | Contractual | ||||||
|
| Shares |
| per Share |
| Life (Years) | |
Outstanding, December 31, 2023 |
| $ | |
| |||
Granted |
| $ | |
| |||
Forfeited |
| ( | $ | |
| ||
Expired |
| ( | $ | |
| ||
Exercised |
| — | $ | — |
| ||
Outstanding, September 30, 2024 |
| | $ | |
| ||
The fair value of each stock option was estimated using the Black Scholes pricing model, which takes into account as of the grant date the exercise price (ranging from $
12
The intrinsic value is calculated as the difference between the market value of the shares as of September 30, 2024 of $
Options Outstanding | ||||||||||
| Number | Weighted | Weighted | |||||||
Range of | Outstanding at | Average | Average | Aggregate | ||||||
Exercise | September 30, | Exercise | Remaining | Intrinsic | ||||||
Price |
| 2024 |
| Price |
| Life (Years) |
| Value | ||
$ |
| | $ |
| $ | | ||||
Options Exercisable | ||||||
Number | Weighted |
| ||||
Exercisable at | Average | Aggregate | ||||
September 30, | Exercise | Intrinsic | ||||
2024 |
| Price |
| Value | ||
$ | | $ | | |||
The summary of the status of the Company’s non-vested options for the nine months ended September 30, 2024 is as follows:
| Weighted | ||||
| Average | ||||
| Grant Date | ||||
| Shares |
| Fair Value | ||
| |||||
Non-vested, December 31, 2023 |
| | $ | | |
Granted |
| | $ | | |
Forfeited |
| ( | $ | | |
Vested |
| ( | $ | | |
Non-vested, September 30, 2024 |
| | $ | | |
As of September 30, 2024, the Company had approximately $
On March 29, 2024, the Company granted options to purchase
On April 2, 2024, the Company granted options to purchase
On April 2, 2024, the Company granted options to purchase
On April 2, 2024, the Company granted options to purchase
On April 2, 2024, the Company granted options to purchase
On April 8, 2024, the Company granted options to purchase
13
On August 14, 2024, the Company granted, in connection with the appointment of its new Chief Financial Officer, options to purchase
During the nine months ended September 30, 2024,
Change in Control-Based Awards of Restricted Stock Units:
The Board of Directors has granted restricted stock units to members of the Board of Directors, to the Company’s executive officers, and to employees of the Company. These restricted stock units will only vest upon a Change in Control of the Company, as defined in the Amended and Restated CytoSorbents Corporation 2014 Long-Term Incentive Plan, as amended.
The following table is a summary of these restricted stock units:
Restricted Stock Units | |||||||||||
|
| Board of |
| Executive |
| Other |
| ||||
Directors | Management |
| Employees |
| Total | Intrinsic Value | |||||
December 31, 2023 |
| |
| |
| |
| |
| $ | |
Granted |
| |
| |
| |
| |
| ||
Forfeited |
| |
| |
| ( |
| ( |
| ||
September 30, 2024 |
| |
| |
| |
| | $ | | |
Due to the uncertainty over whether these restricted stock units will vest, which only happens upon a Change in Control,
Other Awards of Restricted Stock Units:
On August 10, 2022, certain named executive officers and senior managers were granted
On July 7, 2023, certain named executive officers and senior managers were granted
On September 18, 2023, a former named executive officer was granted
14
On April 2, 2024, the Board of Directors granted
On August 14, 2024, the Company granted, in connection with the appointment of its new Chief Financial Officer,
Additionally, certain employees were offered a total of
The following table outlines the restricted stock unit activity for the nine months ended September 30, 2024:
| Weighted | ||||
| Average | ||||
| Grant Date | ||||
|
| Shares |
| Fair Value | |
Non-vested, December 31, 2023 |
| | $ | | |
Granted | | $ | | ||
Vested |
| ( | $ | | |
Forfeited | ( | $ | | ||
Non-vested, September 30, 2024 | | $ | | ||
Warrants:
As of September 30, 2024, the Company had
15
4. REVENUE
The following table disaggregates the Company’s revenue by customer type and geographic area for the three months ended September 30, 2024:
| United States | |||||||||||
| Distributors/ | Government | ||||||||||
|
| Direct |
| Strategic Partners |
| Agencies |
| Total | ||||
Product sales: |
|
|
|
|
|
|
|
| ||||
United States | $ | | $ | — | $ | — | $ | | ||||
Germany |
| |
| — |
| — |
| | ||||
All other countries |
| |
| |
| — |
| | ||||
Total product revenue |
| | |
| — |
| | |||||
Grant and other income: |
|
|
|
| ||||||||
United States |
| — |
| — |
| |
| | ||||
|
|
|
| |||||||||
Total revenue | $ | | $ | | $ | | $ | | ||||
The following table disaggregates the Company’s revenue by customer type and geographic area for the three months ended September 30, 2023:
| United States | |||||||||||
| Distributors/ | Government | ||||||||||
|
| Direct |
| Strategic Partners |
| Agencies |
| Total | ||||
Product sales: |
|
|
|
|
|
|
|
| ||||
United States | $ | | $ | — | $ | — | $ | | ||||
Germany |
| |
| — |
| — |
| | ||||
All other countries |
| |
| |
| — |
| | ||||
Total product revenue |
| |
| |
| — |
| | ||||
Grant and other income: |
|
|
|
| ||||||||
United States |
| — |
| — |
| |
| | ||||
|
|
|
| |||||||||
Total revenue | $ | | $ | | $ | | $ | | ||||
The following table disaggregates the Company’s revenue by customer type and geographic area for the nine months ended September 30, 2024:
| United States | |||||||||||
| Distributors/ | Government | ||||||||||
|
| Direct |
| Strategic Partners |
| Agencies |
| Total | ||||
Product sales: |
|
|
|
|
|
|
|
| ||||
United States | $ | | $ | | $ | — | $ | | ||||
Germany |
| |
| — |
| — |
| | ||||
All other countries |
| |
| |
| — |
| | ||||
Total product revenue |
| | |
| — |
| | |||||
Grant and other income: |
|
|
|
| ||||||||
United States |
| — |
| — |
| |
| | ||||
|
|
|
| |||||||||
Total revenue | $ | | $ | | $ | | $ | | ||||
16
The following table disaggregates the Company’s revenue by customer type and geographic area for the nine months ended September 30, 2023:
| United States | |||||||||||
| Distributors/ | Government | ||||||||||
|
| Direct |
| Strategic Partners |
| Agencies |
| Total | ||||
Product sales: |
|
|
|
|
|
|
|
| ||||
United States | $ | | $ | — | $ | — | $ | | ||||
Germany |
| |
| — |
| — |
| | ||||
All other countries |
| |
| |
| — |
| | ||||
Total product revenue |
| | |
| — |
| | |||||
Grant and other income: |
|
|
|
| ||||||||
United States |
| — |
| — |
| |
| | ||||
|
|
|
| |||||||||
Total revenue | $ | | $ | | $ | | $ | | ||||
The Company has
CytoSorb Sales
The Company sells its CytoSorb device using both its own sales force (direct sales) and through the use of distributors and/or strategic partners. The majority of sales of the device are outside the United States, as CytoSorb is not yet approved for commercial sale in the United States. However, in April 2020, the Company was granted Emergency Use Authorization (“EUA”) of CytoSorb for use in critically-ill patients infected with COVID-19 with imminent or confirmed respiratory failure by the United States Food and Drug Administration (the “FDA”). Direct sales outside the United States relate to sales to hospitals located in Germany, Switzerland, Austria, Belgium, Luxembourg, Poland, the Netherlands, Sweden, Denmark, Norway and the United Kingdom. Direct sales are fulfilled from the Company’s warehouse facility in Berlin, Germany. There are no formal sales contracts with any direct customers relating to product price or minimum purchase requirements. However, there are agreements in place with certain direct customers that provide for either free of charge product or rebate credits based upon achieving minimum purchase levels. The Company records the value of these items earned as a reduction of revenue. These customers submit purchase orders and the order is fulfilled and shipped directly to the customer. Prices to all direct customers are based on a standard price list based on the packaged quantity (6 packs versus 12 packs).
Distributor and strategic partner sales make up the remaining product sales. These distributors are located in various countries throughout the world. The Company has a formal written contract with each distributor/strategic partner. These contracts have terms ranging from
Most distributor’s/strategic partner’s contracts have minimum annual purchase requirements in order to maintain exclusivity in their respective territories.
There is no additional consideration or monetary penalty that would be required to be paid to CytoSorbents if a distributor does not meet the minimum purchase commitments included in the contract, however, at the discretion of the Company, the distributor may lose its exclusive rights in the territory if such commitments are not met.
Government Grants
The Company has been the recipient of various grant contracts from various agencies of the United States government, primarily the Department of Defense, to perform various research and development activities. These contracts fall into one of the following categories:
| 1. | Fixed price – the Company invoices the contract amount in equal installments over the term of the contract without regard to the timing of the costs incurred related to this contract. If billings on fixed price contracts exceed the costs incurred, revenue will be deferred to the extent of the excess billings. |
17
| 2. | Cost reimbursement – the Company submits monthly invoices during the term of the contract for the amount of direct costs incurred during that month plus an agreed upon percentage that relates to allowable overhead and general and administrative expenses. Cumulative amounts invoiced may not exceed the maximum amount of funding stipulated in the contract. |
| 3. | Cost plus – this type of contract is similar to a cost reimbursement contract but this type also allows for the Company to additionally invoice for a fee amount that is included in the contract. |
| 4. | Performance based – the Company submits invoices only upon the achievement of the milestones listed in the contract. The amount to be invoiced for each milestone is documented in the contract. |
These government contracts have terms ranging from three months to four years. The Company may apply for an extension of the term of the contract in order to complete its research and development activities but would not receive additional funding during the extension period in excess of the original contract. See Note 2 regarding the accounting policies related to these contracts. The Company is evaluating the potential reclassification of grant income and related costs of goods sold to net with research and development expenses.
In summary, the contracts the Company has with customers are the distributor/strategic partner contracts related to CytoSorb product sales, agreements with direct customers related to free-of-charge product and credit rebates based upon achieving minimum purchase levels, and contracts with various government agencies related to the Company’s grants. The Company does not currently incur any outside/third party incremental costs to obtain any of these contracts. The Company does incur internal costs, primarily salary related costs, to obtain the contracts related to the grants. Company employees spend time reviewing the program requirements and developing the budget and related proposal to submit to the grantor agency. There may additionally be travel expenditures involved with meeting with government agency officials during the negotiation of the contract. These internal costs are expensed as incurred.
The following table provides information about receivables and contract liabilities from contracts with customers:
| September 30, 2024 |
| December 31, 2023 | |||
Receivables, which are included in grants and accounts receivable | $ | | $ | | ||
Contract liabilities, which are included in accrued expenses and other current liabilities | $ | | $ | | ||
Contract receivables represent balances due from product sales to distributors amounting to $
Contract liabilities represent the value of free of charge goods and credit rebates earned in accordance with the terms of certain direct customer agreements, which amounted to $
5. LONG-TERM DEBT, NET
Avenue Capital Group:
On June 28, 2024 (the “Closing Date”), the Company entered into a Loan and Security Agreement (as amended, supplemented, restated or otherwise modified as of the date hereof and from time to time, the “Loan and Security Agreement”) with Avenue Venture Opportunities Fund, L.P., a Delaware limited partnership (“Avenue”), Avenue Venture Opportunities Fund II, L.P., a Delaware limited partnership (“Avenue 2” and, together with Avenue, the “Lenders”), and Avenue Capital Management II, L.P., a Delaware limited partnership (the “Administrative and Collateral Agent”).
18
Under the Loan and Security Agreement, the Lenders have agreed to loan to the Company up to an aggregate of $
Commencing on August 1, 2024, the Company shall make monthly payments during the term of each Growth Capital Loan of interest only during the initial
The Capital Growth Loans are evidenced by secured promissory notes issued to the Lenders by the Company. If the Company elects to prepay the Growth Capital Loan(s) pursuant to the terms of the Loan and Security Agreement, it will owe a prepayment fee to the Lenders, as follows: (1) for a prepayment made on or after the funding date of a Growth Capital Loan through and including the first anniversary of such funding date, an amount equal to
Events of default which may cause repayment of the Commitment to be accelerated include, among other customary events of default, (1) non-payment of any obligation when due, (2) the failure to perform any obligation required under the Loan and Security Agreement and to cure such default within a reasonable time frame, (3) the occurrence of any circumstance that has a Material Adverse Effect (as defined in the Loan and Security Agreement), (4) default beyond any applicable grace period or cure under any other agreement involving the borrowing of money in excess of the Threshold Amount (as defined in the Loan and Security Agreement), (5) any judgment(s) singly or in the aggregate in excess of the Threshold Amount entered against the Company that remain unsatisfied, unvacated or unstayed for
19
As additional consideration for the Commitment, on June 28, 2024, the Company also issued each Lender a warrant instrument (each, a “Warrant”) entitling the Lenders to purchase an aggregate of
The Lenders were also granted the right while the Commitment is outstanding to convert up to an aggregate amount of $
The Company’s and CytoSorbents Medical’s obligations under the Loan and Security Agreement are joint and several. The obligations under the Loan and Security Agreement are secured by a first priority security interest in favor of the Lenders with respect to the Company’s Shares (as defined in the Loan and Security Agreement) and the Company’s Collateral (as defined in the Loan and Security Agreement), which includes the Company’s intellectual property, pursuant to that certain Intellectual Property Security Agreement, dated as of June 28, 2024, by and between the Company and the Administrative and Collateral Agent.
Long-term debt consists of the following as of September 30, 2024:
Principal amount |
| $ | |
Accrued final fee |
| | |
Less unamortized debt discount | ( | ||
Less unamortized debt acquisition costs | ( | ||
Subtotal |
| | |
Less Current maturities |
| — | |
Long-term debt net of current maturities | $ | |
Principal payments of long-term debt are due as follows during the periods ending September 30:
2025 |
| $ | — |
2026 |
| | |
2027 |
| | |
2028 | — | ||
Total | $ | |
Bridge Bank:
On June 28, 2024, concurrent with the closing of the Avenue Capital Group financing discussed above, the Company paid off its existing outstanding debt with Bridge Bank. The following items survive the termination of the Bridge Bank Amended and Restated Loan and Security Agreement and related amendments:
20
2018 Success Fee Letter:
Pursuant to the amended 2018 Letter, the Borrower shall pay to the Bank a success fee in the amount equal to
2022 Success Fee Letter:
Pursuant to the 2022 Success Fee Letter, the Borrower will pay to the Bank a success fee equal to (i)
6. COMMITMENTS AND CONTINGENCIES
Litigation
The Company is, from time to time, subject to claims and litigation arising in the ordinary course of business. The Company intends to defend vigorously against any future claims and litigation.
On March 5, 2024, Danielle Greene, a former employee, filed a complaint against us in the Superior Court of New Jersey, Law Division, Mercer County, alleging breach of the New Jersey Conscientious Employee Protection Act (“CEPA”). The complaint specifically alleges that we violated the provisions of the CEPA by allegedly terminating Ms. Greene in retaliation for complaining about certain business practices. We dispute these allegations and intend to vigorously defend against them, but there can be no assurance as to the outcome of the litigation.
Royalty/License Agreements
The Company is party to various royalty and license agreements that require the payment of royalty fees. Royalty expense amounted to approximately $
21
7. LEASES
The Company leases its operating facilities in both the United States and Germany under operating lease agreements. In March 2021, CytoSorbents Medical Inc. entered into a lease agreement for a new operating facility at 305 College Road East, Princeton, New Jersey, which contains office, laboratory, manufacturing and warehouse space. The lease commenced on June 1, 2021. The Early Term commenced on June 1, 2021 and ended September 30, 2021. The lease also contains
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 $
In January 2021, CytoSorbents Europe GmbH entered into a lease for
Right-Of-Use Asset and Lease Liability
The Company’s consolidated balance sheets reflect the value of the right-of-use asset and related lease liability. This value was calculated based on the present value of the remaining base rent lease payments. The remaining lease payments include the renewal periods for both of the facilities in Germany and do not include the renewal periods for the United States facility. The discount rate used was the Company’s incremental borrowing rate, which is
| September 30, | December 31, | ||||
|
| 2024 |
| 2023 | ||
Right-of-use asset | $ | | $ | | ||
Total lease liability | $ | | $ | | ||
Less current portion |
| ( |
| ( | ||
Lease liability, net of current portion | $ | | $ | | ||
22
The maturities of the lease liabilities are as follows for the periods ending September 30:
2025 |
| $ | |
2026 |
| | |
2027 |
| | |
2028 |
| | |
2029 |
| | |
Thereafter |
| | |
Total lease payments | | ||
Present value discount | ( | ||
Total | $ | |
For the three months ended September 30, 2024 and 2023, operating cash flows paid in connection with operating leases amounted to approximately $
As of September 30, 2024 and December 31, 2023, the weighted average remaining lease term was years
8. NET LOSS PER SHARE
Basic loss per share and diluted loss per share for the three and nine months ended September 30, 2024 and 2023 have been computed by dividing the net loss for each respective period by the weighted average number of shares outstanding during that period.
All outstanding warrants, options and restricted stock awards representing approximately
23
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 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.
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, ECMO, heart-lung machines). 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. 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. 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.
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 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. 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.
24
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, “Safe and Timely Antithrombotic Removal – Ticagrelor (“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. sites. 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. Army, 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.
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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.
Results of Operations:
Comparison for the three months ended September 30, 2024 and 2023:
| Three Months Ended September 30, | ||||||||||
2024 | 2023 | ||||||||||
% of | % of | ||||||||||
| Amount |
| Revenue |
| Amount |
| Revenue | ||||
(dollars in thousands) | |||||||||||
Revenues: | |||||||||||
CytoSorb sales | $ | 8,586,274 |
| 91.4 | % | $ | 7,709,085 | 87.5 | % | ||
Other sales |
| 26,521 |
| 0.3 | 44,931 | 0.5 | |||||
Total product sales |
| 8,612,795 |
| 91.7 | 7,754,016 | 88.0 | |||||
Grant income |
| 777,593 |
| 8.3 | 1,056,831 | 12.0 | |||||
Total revenue |
| 9,390,388 |
| 100.0 | 8,810,847 | 100.0 | |||||
Cost of goods sold |
| 4,108,773 |
| 43.8 | 3,203,981 | 36.4 | |||||
Gross profit |
| 5,281,615 |
| 56.2 | 5,606,866 | 63.6 | |||||
Operating expenses: |
|
|
| ||||||||
Research and development |
| 1,851,230 |
| 19.7 | 3,749,197 | 42.6 | |||||
Legal, financial and other consulting |
| 823,914 |
| 8.8 | 1,103,475 | 12.5 | |||||
Selling, general and administrative |
| 7,002,718 |
| 74.6 | 8,104,392 | 92.0 | |||||
Total operating expenses |
| 9,677,862 |
| 103.1 | 12,957,064 | 147.1 | |||||
Loss from operations |
| (4,396,247) |
| (46.9) | (7,350,198) | (83.4) | |||||
Other income (expense): |
|
|
| ||||||||
Interest expense, net |
| (588,153) |
| (6.3) | (33,670) | (0.4) | |||||
Gain (loss) on foreign currency transactions |
| 2,650,309 |
| 28.2 | (1,809,652) | (20.5) | |||||
Total other income (expense), net |
| 2,062,156 |
| 21.9 | (1,843,322) | (20.9) | |||||
Net loss | $ | (2,334,091) |
| (25.0) | % | $ | (9,193,520) | (104.3) | % | ||
Revenues:
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.
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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.
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.
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%.
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. 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 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.
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Comparison for the nine months ended September 30, 2024 and 2023:
Nine Months Ended September 30, | |||||||||||
2024 | 2023 | ||||||||||
% of | % of | ||||||||||
| Amount |
| Revenue |
| Amount |
| Revenue | ||||
(dollars in thousands) | |||||||||||
Revenues: |
|
|
|
|
| ||||||
CytoSorb sales | $ | 26,381,455 |
| 90.8 | % | $ | 23,681,183 |
| 85.5 | % | |
Other sales |
| 62,649 |
| 0.2 |
| 55,284 |
| 0.2 |
| ||
Total product sales |
| 26,444,104 |
| 91.0 |
| 23,736,468 |
| 85.7 |
| ||
Grant income |
| 2,627,212 |
| 9.0 |
| 3,944,696 |
| 14.3 |
| ||
Total revenue |
| 29,071,316 |
| 100.0 |
| 27,681,164 |
| 100.0 |
| ||
Cost of goods sold |
| 10,716,394 |
| 36.9 |
| 10,600,421 |
| 38.3 |
| ||
Gross profit |
| 18,354,922 |
| 63.1 |
| 17,080,743 |
| 61.7 |
| ||
Operating expenses: |
|
|
|
|
|
|
|
|
| ||
Research and development |
| 5,619,040 |
| 19.3 |
| 11,632,416 |
| 42.0 |
| ||
Legal, financial and other consulting |
| 2,325,351 |
| 8.0 |
| 2,957,739 |
| 10.7 |
| ||
Selling, general and administrative |
| 23,151,118 |
| 79.6 |
| 24,358,418 |
| 88.0 |
| ||
Total operating expenses |
| 31,095,509 |
| 106.9 |
| 38,948,572 |
| 140.7 |
| ||
Loss from operations |
| (12,740,587) |
| (43.8) |
| (218,687,829) |
| (79.0) |
| ||
Other income (expense): |
|
|
|
|
|
|
|
|
| ||
Interest expense, net |
| (774,903) |
| (2.7) |
| (105,662) |
| (0.4) |
| ||
Gain (loss) on foreign currency transactions |
| 680,392 |
| 2.3 |
| (733,997) |
| (2.6) |
| ||
Miscellaneous income |
| — |
| — |
| 35,000 |
| 0.1 |
| ||
Total other income (expense), net |
| (94,511) |
| (0.4) |
| (804,659) |
| (2.9) |
| ||
Net loss | $ | (12,835,098) |
| (44.2) | % | $ | (22,672,488) |
| (81.9) | % | |
Revenues:
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.
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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.
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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.
30
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. 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.
Critical Accounting Policies and Estimates
A discussion of our critical accounting policies and estimates is contained in our Annual Report on Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
We maintain disclosure controls and procedures designed to ensure information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosures. A controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
No change in our internal control over financial reporting occurred during the three and nine months ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become involved in litigation or other legal proceedings arising in the ordinary course of business. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact because of defense and settlement costs, diversion of management resources and other factors.
On March 5, 2024, Danielle Greene, a former employee, filed a complaint against us in the Superior Court of New Jersey, Law Division, Mercer County, alleging breach of the New Jersey Conscientious Employee Protection Act (“CEPA”). The complaint specifically alleges that we violated the provisions of the CEPA by allegedly terminating Ms. Greene in retaliation for complaining about certain business practices. We dispute these allegations and intend to vigorously defend against them, but there can be no assurance as to the outcome of the litigation.
Item 1A. Risk Factors.
For a discussion of risks that affect the Company’s business, please refer to Part I, Item IA, “Risk Factors” in 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
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Item 6. Exhibits.
Number |
| Description |
10.1 | Amendment to the Amended and Restated CytoSorbents Corporation 2014 Long-Term Incentive Plan. | |
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101 | The following materials from CytoSorbents Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets at September 30, 2024 and December 31, 2023, (ii) Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023, (iii) Consolidated Statement of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2024 and 2023, (iv) Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 and (v) Notes to Consolidated Financial Statements. | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CYTOSORBENTS CORPORATION | |
|
| |
Dated: November 7, 2024 | By: | /s/ Phillip P. Chan |
|
| Name: Phillip P. Chan |
|
| Title: Chief Executive Officer |
|
| (Principal Executive Officer) |
Dated: November 7, 2024 | By: | /s/ Peter J. Mariani |
|
| Name: Peter J. Mariani |
|
| Title: Chief Financial Officer |
|
| (Principal Financial and Accounting Officer) |
34