Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the results of operations and financial condition for the fiscal years ended December 31, 2023, 2022 and 2021 should be read in conjunction with our consolidated financial statements, and the notes to those consolidated financial statements that are included elsewhere in this Report.

Overview

We are a leader in the treatment of life-threatening conditions in intensive care (“ICU”) and cardiac surgery using blood purification via our proprietary polymer adsorption technology. We have a number of products commercialized and in development based on this technology platform. Our flagship product, CytoSorb®, is already commercialized, and is being used to reduce deadly uncontrolled inflammation and dangerous substances in hospitalized patients around the world, with the goal of preventing or treating multiple organ failure, bleeding, and other potentially fatal complications. Organ failure is the cause of nearly half of all deaths in the ICU, with little to improve clinical outcome. CytoSorb, is approved in the European Union (“EU”) as an effective extracorporeal cytokine absorber, designed to reduce the “cytokine storm” or “cytokine release syndrome” that could otherwise cause massive inflammation, organ failure and death in common critical illnesses such as sepsis, burn injury, trauma, lung injury, cytokine release syndrome due to cancer immunotherapy, and pancreatitis. These are conditions where the mortality is extremely high, yet few to no effective treatments exist. In May 2018, we received a label expansion for CytoSorb covering use of the device for the removal of bilirubin and myoglobin in the treatment of liver disease and trauma, respectively. In January 2020, we received CE-Mark label expansion for CytoSorb covering the use of the device for the removal of the anti-platelet agent, ticagrelor, in patients undergoing surgery requiring cardiopulmonary bypass. In April 2020, the United States Food and Drug Administration (the “FDA”) granted Breakthrough Device Designation to CytoSorb for the removal of ticagrelor in a cardiopulmonary bypass circuit during emergent and urgent cardiothoracic surgery. In April 2020, we announced that the U.S. FDA has granted U.S. Emergency Use Authorization (“EUA”) of CytoSorb for use in critically ill patients with COVID-19 infection and respiratory failure. In May 2020, we received a CE-Mark label expansion for CytoSorb for the removal of rivaroxaban during cardiothoracic surgery requiring cardiopulmonary bypass. In August 2021, the Company announced that it was granted a second Breakthrough Device Designation for its DrugSorb-ATR Antithrombotic Removal System by the FDA to remove the direct oral anticoagulants, rivaroxaban and apixaban. The Company has completed its pivotal randomized, controlled clinical trial in the U.S. and Canada, called the STAR-T trial, evaluating the use of DrugSorb-ATR during cardiothoracic surgery to prevent or reduce perioperative bleeding complications in pursuit of U.S. FDA and Health Canada marketing approval. We believe that the safety and efficacy results of the STAR-T trial will support regulatory submissions for marketing approval by the FDA and Health Canada.

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CytoSorb is used during and after cardiac surgery to remove inflammatory mediators, such as cytokines, activated complement, and free hemoglobin that can lead to post-operative complications such as acute kidney injury, lung injury, shock, and stroke. We believe CytoSorb has the potential to be used in many other inflammatory conditions, including the treatment of autoimmune disease flares, cytokine release syndrome in cancer immunotherapy, and other applications in cancer, such as cancer cachexia. CytoSorb has been used globally in more than 228,000 human treatments to date in critical illnesses and in cardiac surgery. CytoSorb has received CE-Mark label expansions for the removal of bilirubin (liver disease), myoglobin (trauma) and both ticagrelor and rivaroxaban during cardiothoracic surgery. CytoSorb has also received FDA Emergency Use Authorization in the United States for use in critically-ill COVID-19 patients with imminent or confirmed respiratory failure, in defined circumstances. The EUA will be effective until a declaration is made that the circumstances justifying the EUA have terminated or until revoked by the FDA. CytoSorb has been used globally in more than 7,650 human treatments to date in COVID-19 patients. CytoSorb has also been granted FDA Breakthrough Designation for the removal of ticagrelor in a cardiopulmonary bypass circuit during emergent and urgent cardiothoracic surgery. CytoSorb was also granted a second FDA Breakthrough Device designation for the removal of the Direct Oral Anticoagulants (DOACs) apixaban and rivaroxaban in a cardiopulmonary bypass circuit to reduce the likelihood of serious perioperative bleeding during urgent cardiothoracic surgery.

Our 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. The technology is protected by 19 issued U.S. patents and multiple international patents, with applications pending both in the U.S. and internationally. We have numerous other product candidates under development based upon this unique blood purification technology, including CytoSorb XL, K+ontrol, HemoDefend-RBC, HemoDefend-BGA, ContrastSorb, DrugSorb, DrugSorb-ATR and others.

Our proprietary polymer technologies form the basis of a broad technology portfolio. Some of our products and product candidates include:

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We have 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, or DARPA, the U.S. Army, the U.S. Air Force, U.S. Special Operations Command, and others.

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 rising 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 of the year ended December 31, 2023 and 2022

Revenues:

For the year ended December 31, 2023, we generated total revenue, which includes product revenue and grant income, of approximately $36,349,000 as compared to revenues of approximately $34,689,000 for the year ended December 31, 2022, an increase of approximately $1,660,000, or 5%. Revenue from CytoSorb product sales was approximately $31,015,000 for the year ended December 31, 2023, as compared to approximately $28,573,000 in the year ended December 31, 2022, an increase of approximately $2,442,000, or 9%. Other product revenue was approximately $70,000 for the year ended December 31, 2023, as compared to $787,000 for the year ended December 31, 2022, a decrease of approximately $717,000. Covid-19 product sales were -0- in 2023 and approximately $300,000 in 2022. Direct sales increased by approximately $928,000, or 5% and distributor sales increased by approximately $797,000, or 7% during the year ended December 31, 2023, as compared to the year ended December 31, 2022. The increase in the average exchange rate of the Euro to the U.S. dollar also positively impacted 2023 product sales by approximately $780,000. For the year ended December 31, 2023, the average exchange rate of the Euro to the U.S. dollar was $1.08 as compared to an average exchange rate of $1.05 for the year ended December 31, 2022.

Grant income was approximately $5,264,000 for the year ended December 31, 2023, as compared to approximately $5,329,000 for the year ended December 31, 2022, a decrease of approximately $65,000, or 1%.

Cost of Revenue:

For the years ended December 31, 2023 and 2022, cost of revenue was approximately $13,957,000 and $13,956,000, respectively. Grant cost of revenue increased approximately $41,000 during the year ended December 31, 2023, as compared to the year ended December 31, 2022. Product cost of revenues decreased approximately $39,000 during the year ended December 31, 2023, as compared to the year ended December 31, 2022. Product gross margins were approximately 72% for the year ended December 31, 2023, and approximately 70% for the year ended December 31, 2022. This increase was primarily due to inefficiencies related to the relocation of our production activities to our new manufacturing facility in Princeton, New Jersey during the year ended December 31, 2022, that did not recur in 2023.

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Gross Profit:

Gross profit was approximately $22,392,000 for the year ended December 31, 2023, an increase of approximately $1,659,000 or 8%, versus gross profit of $20,733,000 in 2022. This increase is attributed to increased sales and the increase in product gross margin percentage as discussed above.

Research and Development Expenses:

Our research and development costs were approximately $15,729,000 and $15,119,000 for the years ended December 31, 2023 and 2022, respectively, an increase of approximately $610,000, or 4%. This increase was related to 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 and approximately $720,000 of costs related to pre-commercialization activities related to DrugSorb ATR. These increases were offset by a decrease in clinical trial related costs of approximately $940,000, due primarily to the termination of our STAR-D clinical trial in the U.S., and other non-grant related research and development costs of approximately $20,000.

Legal, Financial and Other Consulting Expenses:

Our legal, financial and other consulting costs were approximately $4,272,000 and $2,848,000 for the years ended December 31, 2023 and 2022, respectively, an increase of approximately $1,424,000, or 50%. This increase was due to an increase in legal fees of approximately $1,010,000 due to the abandonment of certain issued patents and patent applications, fees related to Company’s equity transactions and the settlement of a litigation matter; an increase in employment agency fees of approximately $178,000 related to the hiring of certain management personnel, an increase in consulting fees of approximately $179,000 related to regulatory matters on DrugSorb-ATR and an increase in accounting fees of approximately $57,000.

Selling, General and Administrative Expenses:

Our selling, general and administrative expenses were approximately $33,600,000 and $34,288,000 for the years ended December 31, 2023 and 2022, respectively, a decrease of approximately $688,000, or 2%. This decrease was due to a decrease in sales and marketing costs, which include advertising and conference attendance, of approximately $839,000, a decrease in royalty expense of approximately $109,000, a decrease in non-cash stock compensation expense (which includes both stock options and restricted stock units) of approximately $115,000, a decrease in commercial insurance of approximately $165,000 and a decrease in public relations costs of approximately $135,000. These decreases were offset by an increase in salaries, commissions, and related costs of approximately $532,000 and an increase in other general and administrative costs of approximately $143,000.

Gain (Loss) on Foreign Currency Transactions:

For the year ended December 31, 2023, the gain on foreign currency transactions was approximately $1,949,000, as compared to a loss on foreign currency transactions of approximately $2,449,000 for the year ended December 31, 2022. The 2023 gain is directly related to the increase of the exchange rate of the Euro as of December 31, 2023, as compared to December 31, 2022. The exchange rate of the Euro to the U.S. dollar was $1.11 per Euro as of December 31, 2023, as compared to $1.07 per Euro at December 31, 2022. The 2022 loss is directly related to the decrease in the exchange rate of the Euro as of December 31, 2022, as compared to December 31, 2021. The exchange rate of the Euro to the U.S. dollar was $1.07 per Euro as of December 31, 2022, as compared to $1.14 per Euro at December 31, 2021.

Benefit from Income Taxes:

Our benefit from income taxes was approximately $814,000 and $1,093,000 for the years ended December 31, 2023 and 2022, respectively. This benefit was realized by utilizing the New Jersey Technology Business Tax Certificate Transfer Program whereby the State of New Jersey allows us to sell a portion of our state net operating losses to a third party.

Comparison of the year ended December 31, 2022 and 2021

Revenues:

For the year ended December 31, 2022, we generated total revenue, which includes product revenue and grant income, of approximately $34,689,000 as compared to revenues of approximately $43,166,000 for the year ended December 31, 2021, a decrease of approximately $8,477,000, or 20%. Revenue from product sales was approximately $29,360,000 for the year ended December 31,

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2022, as compared to approximately $40,109,000 in the year ended December 31, 2021, a decrease of approximately $10,749,000 or 27%. Direct sales decreased by approximately $8,983,000 and distributor sales decreased by approximately $1,766,000 during the year ended December 31, 2022 as compared to the year ended December 31, 2021. Sales to hospitals in the United States under the EUA granted by the FDA amounted to approximately $300,000 for the year ended December 31, 2022, as compared to approximately $1,690,000 in 2021. Though difficult to quantify, we estimate that approximately $300,000 and approximately $6,300,000 of total product sales during the years ended December 31, 2022 and 2021 was due to the demand for CytoSorb to treat COVID-19 patients. In addition, as a result of the decrease in the average exchange rate of the Euro to the U.S. dollar, 2022 product sales were negatively impacted by approximately $3,127,000. For the year ended December 31, 2022, the average exchange rate of the Euro to the U.S. dollar was $1.05 as compared to an average exchange rate of $1.18 for the year ended December 31, 2021.

Grant income was approximately $5,329,000 for the year ended December 31, 2022 as compared to approximately $3,057,000 for the year ended December 31, 2021, an increase of approximately $2,272,000, or 74%. During the year ended December 31, 2021, our research and development employees were either deployed to work-from-home status or reassigned to assist in activities related to increasing the production of CytoSorb. In 2022, research and development employees were assigned primarily to grant related activities.

Cost of Revenue:

For the years ended December 31, 2022 and 2021, cost of revenue was approximately $13,956,000 and $11,047,000, respectively, an increase of approximately $2,909,000. This increase was due to an increase in grant cost of revenue of approximately $2,210,000 due to the increase in billable hours charged to our grant related projects. Product cost of revenues increased approximately $698,000 during the year ended December 31, 2022 as compared to the year ended December 31, 2021. This increase was primarily due to an equipment failure of a refrigeration unit at our new manufacturing facility that caused a net write-off (after insurance proceeds) of approximately $300,000 of work-in-process inventory (see Note 2 to the financial statements) and inefficiencies associated with lower production due to a decrease in production volume and inefficiencies associated with relocating our production activities to the new facility. Product gross margins were approximately 70% for the year ended December 31, 2022 and approximately 80% for the year ended December 31, 2021.

Gross Profit:

Gross profit was approximately $20,733,000 for the year ended December 31, 2022, a decrease of approximately $11,385,000 or 35%, versus gross profit of $32,118,000 in 2021. This decrease is attributed to lower sales, the inventory write-off related to an equipment failure and inefficiencies associated with the process of relocating our production activities to the new facility as discussed above.

Research and Development Expenses:

Our research and development costs were approximately $15,119,000 and $16,381,000 for the years ended December 31, 2022 and 2021, respectively, a decrease of approximately $1,262,000, or 8%. This decrease was due to a decrease in clinical trial related costs of approximately $2,448,000, due primarily to the temporary pause of our STAR-D clinical trial in the U.S. and the discontinuation of the Hep-On-Fire clinical trial in Germany, a decrease in rent expense to research and development of approximately $685,000 related to our new facility and a decrease in non-grant related research and development costs of approximately $187,000. These decreases were offset by an increase in salaries related to our clinical trial activities of approximately $1,694,000 due to the hiring of additional clinical expertise and an increase in other research and development labor costs of approximately $364,000 related to the hiring of additional scientific expertise.

Legal, Financial and Other Consulting Expenses:

Our legal, financial and other consulting costs were approximately $2,848,000 and $2,732,000 for the years ended December 31, 2022 and 2021, respectively, an increase of approximately $116,000, or 4%. This increase was due to an increase in legal fees of approximately $685,000 due to the abandonment of certain issued patents and patent applications and an increase in accounting fees of approximately $169,000. These increases were offset by a decrease in consulting fees of approximately $396,000 and a decrease in hiring fees of approximately $342,000.

Selling, General and Administrative Expenses:

Our selling, general and administrative expenses were approximately $34,288,000 and $35,750,000 for the years ended December 31, 2022 and 2021, respectively, a decrease of approximately $1,462,000, or 4%. This decrease was due to a decrease of

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salary and commission costs of approximately $594,000 due to a reduction in commissions due to lower sales, a decrease in royalty expense of approximately $915,000 due to lower sales, a decrease in non-cash restricted stock expense of approximately $1,771,000 related to restricted stock units granted to the Company’s executive officers, a decrease in non-cash stock compensation expense of approximately $597,000 and a decrease in other general and administrative expenses of approximately $324,000. These decreases were offset by an increase sales and marketing costs, which include advertising and conference attendance, of approximately $797,000, an increase in travel and entertainment costs of approximately $530,000 and an increase in occupancy costs of approximately $1,412,000 related to the rent expense on our new manufacturing facility.

Gain (Loss) on Foreign Currency Transactions:

For the year ended December 31, 2022, the loss on foreign currency transactions was approximately $2,449,000, as compared to a loss on foreign currency transactions of approximately $2,578,000 for the year ended December 31, 2021. The 2022 loss is directly related to the decrease of the exchange rate of the Euro as of December 31, 2022 as compared to December 31, 2021. The exchange rate of the Euro to the U.S. dollar was $1.07 per Euro at December 31, 2022 as compared to $1.14 per Euro at December 31, 2021. The 2021 loss is directly related to the decrease in the exchange rate of the Euro as of December 31, 2021, as compared to December 31, 2020. The exchange rate of the Euro to the U.S. dollar was $1.14 per Euro at December 31, 2021 as compared to $1.22 per Euro at December 31, 2020.

Benefit from Income Taxes:

Our benefit from income taxes was approximately $1,093,000 and $736,000 for the years ended December 31, 2022 and 2021, respectively. This benefit was realized by utilizing the New Jersey Technology Business Tax Certificate Transfer Program whereby the State of New Jersey allows us to sell a portion of our state net operating losses to a third party.

Liquidity and Capital Resources

Since inception, our operations have been primarily financed through the issuance of debt and equity securities. As of December 31, 2023, we had current assets of approximately $25.7 million and current liabilities of approximately $14.5 million. As of December 31, 2023, $25 million of our total shelf amount was allocated to our ATM facility, of which approximately $20.3 million remained available. During the year ended December 31, 2023, the Company sold 2,656,464 shares pursuant to the Sale Agreement, at an average selling price of $1.76 per share, generating net proceeds of approximately $4,532,000.

In April of 2023, we received approximately $1,000,000 in cash from the approved sale of our net operating losses and research and development credits from the State of New Jersey. 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.

On December 13, 2023, the Company closed on a registered direct offering for the sale, directly to investors, of 7,733,090 registered shares of common stock and warrants to purchase up to 2,706,561 shares of common stock (the “Offering”). Each share of common stock and accompanying warrant to purchase up to 0.35 shares of common stock, were sold together for a combined purchase price of $1.33, for an aggregate purchase price of approximately $10,285,000. After deducting transaction fees and expenses payable by the Company in connection with the Offering, the Company received net proceeds of approximately $9,785,000, excluding any proceeds that may be received upon the exercise of the warrants. Each warrant is immediately cash exercisable at an exercise price of $2.00 per share and will expire on the fifth anniversary of the issue date.

We are also managing our resources proactively, continuing to invest in key areas such as our U.S. pivotal STAR-T trial, which includes the detailed analysis of trial data and the preparation of our application for marketing approval to the U.S. FDA. We have also instituted and continue to maintain tight control over expenditures.

As of December 31, 2023, 2023, we have approximately $15.6 million in cash, including approximately $14.1 million and $1.5 million in unrestricted and restricted cash, respectively. We believe this is sufficient to fund the Company’s operations into the fourth quarter of 2024. We will need to raise additional capital to support our ongoing operations in the future, and the Company is actively pursuing financing sources, including less or non-dilutive debt financing, royalty financing, strategic or direct investments, equity financing, and/or combinations thereof. There can be no assurance that management will be successful in these endeavors.

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Loan and Security Agreement

The Company and its wholly-owned subsidiary, CytoSorbents Medical, Inc. (together, the “Borrower”), are parties to that certain Loan and Security Agreement (“Original Agreement”) with Bridge Bank, a division of Western Alliance Bank, (the “Bank”), which was most recently amended on January 19, 2022 (the “Fourth Amendment Date”) under that certain Fourth Amendment to the Amended and Restated Loan and Security Agreement (the “Fourth Amendment” and the Original Agreement, as so amended, the “Loan Agreement”). Under the Loan Agreement, the Bank has agreed to loan a tranche of term loans in the aggregate amount of $15 million, which are available for the Company to draw down at its sole discretion in three tranches of $5 million each at any time during the period commencing on the Fourth Amendment Date and ending on the earlier of (i) December 31, 2022 and (ii) the occurrence of an Event of Default (as defined in the Loan Agreement) (the “Term C Loan”). On December 27, 2022, the Company drew down the first $5 million tranche of the Term C loans available under the terms of the Fourth Amendment. On December 28, 2022 (the “Fifth Amendment Date”), the Company entered into the Fifth Amendment of its Amended Loan and Security Agreement with Bridge Bank. The Fifth Amendment extended the draw period under the Fourth Amendment to the earlier of (i) March 1, 2023 and (ii) the occurrence of an Event of Default. On March 9, 2023, the Company entered into the Sixth Amendment of its Amended Loan and Security Agreement. The Sixth Amendment further extended the draw period to March 24, 2023. Therefore, no further draws are available as of the date of this filing. For further discussion regarding the Loan Agreement please see Note 7 – Long Term Debt to our Consolidated Financial Statements, included elsewhere in this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. We believe the following critical accounting policies and estimates have significant effect in the preparation of our consolidated financial statements.

Patents

Legal costs incurred to establish patents are capitalized. When patents are issued, capitalized costs are amortized on the straight-line method over the related patent term. In the event a patent is abandoned, the net book value of the patent is written off.

Revenue Recognition

Revenue is recognized when the Company ships its products to its direct customers and distributors/strategic partners. Revenue is recognized on its grant awards with agencies of U.S. government in accordance with the terms of the award contract. See Note 3 to our consolidated financial statements for a description of the types of government contracts. The amount of revenue recognized reflects the consideration the Company expects to be entitled to receive in exchange for the products shipped or the services provided under their grant contracts. To achieve this core principle, the Company applies the following five steps:

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Research and Development

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

Stock Based-Compensation

We account for our stock-based compensation under the recognition requirements of accounting standards for accounting for stock-based compensation for employees and directors whereby each option granted is valued at fair market value on the date of grant. Under these accounting standards, the fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model.

We also follow the guidance of accounting standards for accounting for equity instruments that are issued to other than employees for acquiring, or in conjunction with selling, goods or services for equity instruments issued to consultants.

Lease Commitments

We currently operate our leased facility in Princeton, New Jersey and two leased facilities in Berlin, Germany as follows:

Critical Accounting Policies and Estimates

Patents

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Revenue Recognition

Product Sales: Revenues from sales of products to both direct and distributor/strategic partner customers are recognized at the time when control passes to the customer, in accordance with the terms of their respective contracts. Recognition of revenue occurs as each performance obligation is completed.

Grant Revenue: Revenue from grant income is based on contractual agreements with various agencies of the United States government. Certain agreements provide for reimbursement of costs, other agreements provide for reimbursement of costs and an overhead margin and certain agreements are performance based, where revenue is earned based upon the achievement of milestones outlined in the contract. Revenues are recognized when the associated performance obligation is fulfilled. Costs are recorded as incurred. Amounts invoiced in excess of costs actually incurred on fixed price contracts are classified as deferred revenue and are included in accrued expenses and other current liabilities in the consolidated balance sheet. Costs subject to reimbursement by these grants have been reflected as costs of revenue.

Research and Development

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

Stock Based-Compensation

Lease Commitments

We currently operate our leased facility in Princeton, New Jersey and two leased facilities in Berlin, Germany as follows:

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to certain market risks in the ordinary course of business. These risks result primarily from changes in foreign currency exchange rates and interest rates. In addition, international operations are subject to risks related to differing economic conditions, changes in political climate, differing tax structures and other regulations and restrictions.

To date we have not utilized derivative financial instruments or derivative commodity instruments. We do not expect to employ these or other strategies to hedge market risk in the foreseeable future. Cash is held in checking, savings, and money market funds, which are subject to minimal credit and market risk. We generate sales in both dollars and euros most significantly, the majority of our sales are in Euros and changes in the exchange rate of the Euro to the U.S. dollar may positively or negatively impact our revenue. On the other hand, should sales decline due to a devaluation of the Euro relative to the U.S. dollar, expenses related to our European subsidiary would also decline. This produces a natural currency hedge. We believe that the market risks associated with these financial instruments are immaterial, although there can be no guarantee that these market risks will be immaterial to us in the future.

Item 8. Financial Statements and Supplementary Data.

Our Consolidated Financial Statements and notes thereto are included elsewhere in this Annual Report on Form 10-K and incorporated herein by reference. See Item 15 of Part IV.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In accordance with Rules 13a-15 and 15d-15, under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2023, to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

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

Changes in Internal Control over Financial Reporting

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

Item 9B. Other Information.

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection.

None.

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PART III

Item 10. Directors, Executive Officers and Control Persons.

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

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

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

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

The text of our Code of Business Conduct and Ethics, which applies to our directors and employees (including our principal executive officer, principal financial officer, and principal accounting officer or controller, and persons performing similar functions), is posted in the “Corporate Governance” section of our website, www.cytosorbents.com. A copy of the Code of Business Conduct and Ethics can be obtained free of charge on our website. We intend to disclose on our website any amendments to, or waivers from, our Code of Business Conduct and Ethics that are required to be disclosed pursuant to the rules of the Securities and Exchange Commission and The Nasdaq Stock Market.

The information presented on our website is not a part of this Annual Report on Form 10-K and the reference to our website is intended to be an inactive textual reference only.

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Item 11. Executive Compensation.

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

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information required to be disclosed by this Item is incorporated in this Annual Report on Form 10-K by reference from the sections entitled “Principal Stockholders,” “Stock Ownership of Directors, Nominees for Director, and Executive Officers” and “Equity Compensation Plan Information” contained in our definitive proxy statement for our 2024 annual meeting of stockholders scheduled to be held on June 6, 2024, which we intend to file within 120 days of the end of our fiscal year.

Item 13. Certain Relationships and Related Transactions and Director Independence.

Information required to be disclosed by this Item is incorporated in this Annual Report on Form 10-K by reference from the section(s) entitled “Certain Relationships and Related Party Transactions” and “Board of Directors and Corporate Governance Matters,” “Compensation for Executive Officers and Directors, “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” contained in our definitive proxy statement for our 2024 annual meeting of stockholders scheduled to be held on June 6, 2024, which we intend to file within 120 days of the end of our fiscal year.

Item 14. Principal Accounting Fees and Services.

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

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PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) Financial Statements and Schedules:

1. Financial Statements

The following consolidated financial statements and reports of independent registered public accounting firm are included herein:

Report of Independent Registered Public Accounting Firm F-3

Consolidated Balance Sheets F-5

Consolidated Statements of Operations and Comprehensive Loss F-6

Consolidated Statements of Changes in Stockholders’ Equity F-7

Consolidated Statements of Cash Flows F-8

Notes to Consolidated Financial Statements F-9

2. Financial Statement Schedules

Not applicable.

3. List of Exhibits

Exhibit

No. Description

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21.1* List of Subsidiaries.

23.1* Consent of WithumSmith+Brown, PC.

97* Compensation Recoupment Policy

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* Filed or furnished herewith.

In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

Item 16. Form 10-K Summary.

None.

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SIGNATURES

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

CYTOSORBENTS CORPORATION

By: /s/ Dr. Phillip P. Chan

Dr. Phillip P. Chan

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ Dr. Phillip P. Chan Chief Executive Officer (Principal March 14, 2024

Dr. Phillip P. Chan Executive Officer) and Director

/s/ Kathleen P. Bloch Chief Financial Officer March 14, 2024

Kathleen P. Bloch (Principal Financial and Accounting Officer)

/s/ Michael G. Bator Chairman of the Board March 14, 2024

Michael G. Bator

/s/ Alan D. Sobel Director March 14, 2024

Alan D. Sobel

/s/ Edward R. Jones Director March 14, 2024

Edward R. Jones

/s/Jiny Kim Director March 14, 2024

Jiny Kim

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FINANCIAL STATEMENTS

Page

Management’s Report on Internal Control Over Financial Reporting F-2

Report of Independent Registered Public Accounting Firm F-3

Consolidated Balance Sheets at December 31, 2023 and 2022 F-5

Notes to Consolidated Financial Statements F-9

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Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal control over financial reporting may vary over time. Management, with the participation of the Chief Executive Officer and the Chief Financial Officer, working with an external consultant, conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal-Control –Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that internal control over financial reporting was effective as of December 31, 2023.

/s/ Dr. Phillip P. Chan /s/ Kathleen P. Bloch

Dr. Phillip P. Chan Kathleen P. Bloch

Chief Executive Officer Chief Financial Officer

(Principal Executive Officer) (Principal Financial Officer)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Cytosorbents Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Cytosorbents Corporation (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Cytosorbents Corporation as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt Regarding Going Concern

The accompanying consolidated financial statements have been prepared assuming that the entity will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the entity has suffered recurring losses from operations, has experienced cash used from operations, and has an accumulated deficit, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

Basis for Opinion

These consolidated financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to Cytosorbents Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Cytosorbents Corporation is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

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Stock Based Compensation

Description of the Matter

As discussed in Notes 2 and 11 to the consolidated financial statements, the Company grants stock-based awards including stock options, restricted stock units and performance-based stock awards to their employees as compensation for their service. The Company recorded approximately $3,329,000 of stock-based compensation expense during the year ended December 31, 2023. In 2023, the Company granted 1,227,750 performance awards, and recorded stock-based compensation expense of approximately $354,000 related to these awards. The number of shares awarded are contingent on certain performance metrics, and the quantity of awards received can range based on the level of performance achieved.

Auditing the Company’s accounting for stock-based compensation required complex auditor judgment due to the number and the variety of the types of equity awards, the subjectivity of assumptions used to value stock-based awards and the frequent use of performance-based vesting conditions. In particular, judgment was required to evaluate the nature of the annual performance conditions, as well as to assess the satisfaction of the performance targets.

How we Addressed the Matter in our Audit

Addressing the matter involved obtaining an understanding of and evaluating the design of controls over the Company’s process for determining stock-based compensation expense, including management’s review controls over the underlying calculations, the significant assumptions used in valuing certain awards, identification of the terms of the performance conditions and the key inputs used in determining the outcome of each performance condition. We assessed the appropriateness of judgments made by management in determining key assumptions related to the awards. We tested the accuracy of the data used in measuring the awards by agreeing the underlying inputs, such as grant date, grant price, performance targets and vesting terms, among others, back to source documents, such as compensation meeting minutes or award letters. Additionally, we tested the related valuation report on volatility prepared by the Company’s specialists by involving our internal valuation specialists to assess the valuation methodologies and assumptions used. We determined whether performance targets were satisfied in accordance with the contractual conditions through review of source documents, press releases, and board minutes and recalculated grant date fair value by multiplying the awarded quantity of awards by the fair value. We sampled a selection of grants and recalculated the fair value of those grants without exception. Further, we sampled a selection of grants and recalculated the stock compensation expense recorded as of December 31, 2023. We also evaluated the adequacy of the Company’s stock-based compensation disclosures included in Notes 2 and 11 in relation to this matter.

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

/s/ WithumSmith+Brown, PC

East Brunswick, New Jersey

March 14, 2024

PCAOB ID Number 100

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CYTOSORBENTS CORPORATION

CONSOLIDATED BALANCE SHEETS

ASSETS

Current Assets:

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Current maturities of long-term debt 2,500,000 —

Commitments and Contingencies (Note 10)

Stockholders’ Equity:

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

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CYTOSORBENTS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Year ended Year ended Year ended

December 31, December 31, December 31,

Revenue:

Operating expenses:

Other income (expense):

Miscellaneous income (expense) 96,754 (67,303) —

Basic and diluted net loss per common share $ (0.64) $ (0.75) $ (0.57)

Comprehensive loss:

Other comprehensive income (loss):

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

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CYTOSORBENTS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY

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

Accumulated

Additional Other

Common Stock Paid-In Comprehensive Accumulated Stockholders’

Shares Par value Capital Income (Loss) Deficit Equity

Cashless exercise of stock options 10,724 10 (2,842) — — (2,832)

Legal/audit fees related to ATM offering — — (40,358) — — (40,358)

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

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CYTOSORBENTS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended Year ended Year ended

December 31, December 31, December 31,

Cash flows from operating activities:

Accrued final fee 42,857 — —

Loss on disposal of fixed assets — 132,303 —

Changes in operating assets and liabilities:

Cash flows from investing activities:

Cash flows from financing activities:

Proceeds from long-term debt — 5,000,000 —

Proceeds from exercise of stock options 218,278 — 805,199

Supplemental disclosure of cash flow information:

Cash paid during the year for interest $ 376,668 $ — $ —

Supplemental disclosure of non-cash financing activities:

Capital expenditures included in accounts payable $ — 359,965 —

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

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CYTOSORBENTS CORPORATION

Notes to Consolidated Financial Statements

December 31, 2023

1. BASIS OF PRESENTATION:

The accompanying consolidated financial statements include the results of CytoSorbents Corporation (the “Parent”), CytoSorbents Medical Inc., its wholly owned operating subsidiary (the “Subsidiary”), and CytoSorbents Europe GmbH, its wholly owned European subsidiary (the “European Subsidiary”). In addition, the consolidated financial statements include CytoSorbents Switzerland, CytoSorbents Poland Sp. z.o.o., CytoSorbents Medical UK Limited, and CytoSorbents France SAS, the wholly owned subsidiaries of CytoSorbents Europe GmbH, and CytoSorbents UK Limited and CytoSorbents India Private Limited, wholly-owned subsidiaries of CytoSorbents Medical, Inc. These entities are collectively referred to as the “Company”.

As of December 31, 2023, the Company’s total cash and cash equivalents were approximately $15.6 million, including approximately $14.1 million in cash and cash equivalents and approximately $1.5 million in restricted cash, which is not expected to fund the Company’s operations beyond the next twelve months from the issuance of these consolidated financial statements. This matter raises substantial doubt about the Company’s ability to continue as a going concern. As a result, the accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company is actively pursuing financing sources, including less or non-dilutive debt financing, royalty financing, strategic or direct investments, equity financing, and/or combinations thereof. There can be no assurance that management will be successful in these endeavors.

2. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF 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. In March 2016, the Company formed CytoSorbents Switzerland GmbH, a wholly owned subsidiary of CytoSorbents Europe GmbH. This subsidiary, which began operations during the second quarter of 2016, provides marketing and direct sales services in Switzerland. In November 2018, the Company formed CytoSorbents Poland Sp. z.o.o., a wholly owned subsidiary of CytoSorbents Europe GmbH. This subsidiary, which began operations during the first quarter of 2019, provides marketing and direct sales services in Poland. In the third quarter of 2019, the Company formed CytoSorbents UK Limited, a wholly owned subsidiary of CytoSorbents Medical, Inc., which is responsible for the management of the Company’s clinical trial activities in the United Kingdom. In March 2022, the Company formed CytoSorbents Medical UK Limited to provide marketing and direct sales services in the United Kingdom and the Republic of Ireland, a wholly-owned subsidiary of CytoSorbents Europe, GmbH. In October 2022, the Company formed CytoSorbents France SAS, a wholly-owned subsidiary of CytoSorbents Europe, GmbH, to provide marketing and direct sales services in France. In May 2023, the Company formed CytoSorbents India Private Limited to provide marketing and direct sales services in India. CytoSorb, the Company’s flagship product, was approved in the European Union (“EU”) in March 2011 and is currently being marketed and distributed in more than 75 countries around the world, as an effective extracorporeal cytokine absorber, designed to reduce the “cytokine storm” or “cytokine release syndrome” seen in critical illnesses that may result in massive inflammation, organ failure, and patient death. In May 2018, the Company received a label extension for CytoSorb covering use of the device for the removal of bilirubin and myoglobin which allows for the use of the device in the treatment of liver failure and trauma, respectively. CytoSorb is also being used during and after cardiac surgery to remove inflammatory mediators that can lead to post-operative complications, including multiple organ failure. In January 2020, CytoSorb received EU CE Mark label expansion to include the removal of ticagrelor during cardiopulmonary bypass in patients undergoing cardiothoracic surgery. In May 2020, CytoSorb also received EU CE Mark label expansion to include rivaroxaban removal for the same indication.

In April 2020, CytoSorb received United States Food and Drug Administration (“FDA”) Emergency Use Authorization (“EUA”) of CytoSorb for use in adult critically ill COVID-19 patients with imminent or confirmed respiratory failure. The CytoSorb device has neither been cleared nor approved for the indication to treat patients with COVID-19 infection. The EUA will be effective until a declaration is made that the circumstances justifying the EUA have terminated or until revoked by the FDA.

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In April 2020, the Company also announced that the FDA had granted Breakthrough Designation for its DrugSorb-ATR Antithrombotic Removal System for the removal of ticagrelor in a cardiopulmonary bypass circuit during emergent and urgent cardiothoracic surgery. The Breakthrough Devices Program provides for more effective treatment of life-threatening or irreversibly debilitating disease or conditions, in this case the need to reverse the effects of ticagrelor in emergent or urgent cardiac surgery that can otherwise cause a high risk of serious or life-threatening bleeding. Through Breakthrough Designation, the FDA intends to work with CytoSorbents to expedite the development, assessment, and regulatory review of CytoSorbents’ technology for the removal of ticagrelor, while maintaining statutory standards of regulatory approval (e.g., 510(k), de novo 510(k) or premarket approval) consistent with the FDA’s mission to protect and promote public health. In July 2021, the Company received full approval of its Investigative Device Exemption (“IDE”) to conduct the pivotal STAR-T (Safe and Timely Antithrombotic Removal – Ticagrelor) double-blind randomized control trial (“RCT”) for up to 120 patients in the United States to support FDA marketing approval. In July 2023, the Company announced that enrollment in the STAR-T trial has completed, and in August 2023, the Company announced completion of the STAR-T trial, following the last scheduled patient follow-up. In December 2023, the Company announced that the independent Data Safety Monitoring Board (the “DSMB”) performed a final review of the full unblinded data on all 140 patients in the STAR-T trial and concluded there were no issues with device safety, meeting the primary safety endpoint of the study. The Company has also performed the initial data analysis on the primary effectiveness endpoint of STAR-T trial. Based on this analysis, the study did not meet the primary effectiveness endpoint in the overall patient population that underwent different types of cardiac surgeries. However, the study did demonstrate evidence of reduced bleeding complications in patients in the pre-specified isolated coronary artery bypass graft (“CABG”) surgery population, representing more than 90% of the overall study population. The Company expects to complete the analysis of the full trial results during the first quarter of 2024. Pending this final analysis, the Company believes the safety and effectiveness data from STAR-T will support the regulatory submission of DrugSorb-ATR to the U.S. FDA and Health Canada.

In August 2021, the Company announced that it was granted a second Breakthrough Device designation for its DrugSorb-ATR Antithrombotic Removal System by the FDA. This Breakthrough Device designation covers the removal of the Direct Oral Anticoagulants (DOACs) apixaban and rivaroxaban in a cardiopulmonary bypass circuit to reduce the likelihood of serious perioperative bleeding during urgent cardiothoracic surgery. In October 2021, the Company also received full FDA approval of an IDE application to conduct a double-blind, randomized, controlled clinical study for up to 120 patients entitled, “Safe and Timely Antithrombotic Removal – Direct Oral Anticoagulants (STAR-D),” in the United States to support FDA marketing approval.

If FDA marketing approval is obtained for either the removal of ticagrelor or direct oral anticoagulants indications, the device will be marketed as DrugSorb-ATR in the United States. The DrugSorb-ATR Antithrombotic Removal System is based on the same polymer technology as CytoSorb.

In May 2022, the Company announced that the Company entered into a three-year preferred supplier agreement with Asklepios, making CytoSorb available without restrictions to all of the approximately 170 healthcare facilities across 14 states throughout Germany at which Asklepios operates. This includes Asklepios Klinik St. Georg in Hamburg, Germany, which pioneered the use of CytoSorb to remove antithrombotic drugs during cardiothoracic surgery and is well-known for their seminal publication on CytoSorb use for this application during emergency cardiac surgery in patients at high risk of bleeding.

In June 2022, the Company announced that, following a successful pilot program in three countries, the Company signed an expanded non-exclusive agreement with Nikkiso Europe GmbH (“Nikkiso”) to distribute Nikkiso’s PureADJUST stand-alone hemoperfusion pump and accessories in a total of 14 countries. In addition to securing the rights to sell Nikkiso’s stand-alone pump and accessories in Germany, Austria, and Luxembourg, the Company entered into an expanded multi-country reseller agreement with Nikkiso covering the following countries: Belgium, Bosnia and Herzegovina, Croatia, Finland, France, Iceland, Lichtenstein, Poland, Serbia, Slovenia and Switzerland. The Company will also be able to provide field support services in these countries. In September 2023, the distribution agreement with Nikkiso expired, and the Company indicated that it would not seek renewal of the agreement. The Company is actively working with a new supplier to provide a stand-alone hemoperfusion pump.

In August 2022, the Company entered into a Marketing Agreement (the “Marketing Agreement”) with Fresenius Medical Care Deutschland GmbH (“Fresenius”), which expands the Company’s strategic partnership with Fresenius by establishing a multi-stage global collaboration to combat life-threatening diseases in critical care. The Marketing Agreement provides for the combined marketing and promotion of CytoSorb with Fresenius’ critical care products by Fresenius’ marketing organization worldwide, excluding the United States. The Marketing Agreement has an initial term of three years, with an automatic renewal for an additional two years at the end of such initial term, subject to earlier termination by either of the parties (the “Term”). Compared to the prior co-marketing agreement between the parties, the Marketing Agreement intends to increase the commitments from both parties and to ensure an ongoing and consistent level of marketing and promotional activity specifically focused around CytoSorb, where Fresenius will actively market and promote CytoSorb as the featured blood purification therapy for removal of cytokines, bilirubin, and myoglobin on its critical care platforms. Specifically, the Marketing Agreement provides that various Fresenius-led in-person, virtual, social media, and web-based

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marketing programs and events will feature the CytoSorb therapy and highlight the cooperation between the two companies in the field of critical care during the Term. To help support the increased marketing and promotional efforts of the expanded collaboration, CytoSorbents has agreed to subsidize a portion of the marketing costs through a royalty payment to Fresenius Medical Care based on CytoSorb sales in the intensive care unit on Fresenius Medical Care platforms, excluding the United States. In addition to strengthening and expanding the global marketing of CytoSorb, the Company and Fresenius also plan to work together to bring new innovative solutions to the market. The Marketing Agreement also includes the certification of compatibility of CytoSorb for usage on Fresenius’ current critical care platforms. The launch of this program is expected to occur in 2024.

The technology is based upon biocompatible, highly porous polymer sorbent beads that can actively remove toxic substances from blood and other bodily fluids by pore capture and surface adsorption. The Company has numerous products under development based upon this unique blood purification technology which, as of December 31, 2023, is protected by 19 issued U.S. patents and multiple international patents, with applications pending both in the U.S. and internationally, including HemoDefend, ContrastSorb, DrugSorb, DrugSorb-ATR and others. These patents and patent applications are directed to various compositions and methods of use related to the Company’s blood purification technologies and are expected to expire between 2024 and 2038, absent any patent term extensions. Management believes that any near-term expiring patents will not have a significant impact on the Company’s ongoing business.

Stock Market Listing

On December 17, 2014 the Company’s common stock was approved for listing on The Nasdaq Capital Market (“Nasdaq”), and it began trading on Nasdaq on December 23, 2014 under the symbol “CTSO”. Previously, the Company’s common stock traded in the over-the-counter-market on the OTC Bulletin Board.

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. In addition, the consolidated financial statements include CytoSorbents Switzerland GmbH, CytoSorbents Poland Sp. z.o.o., CytoSorbents Medical UK Limited and CytoSorbents France SAS, wholly owned subsidiaries of CytoSorbents Europe GmbH, and CytoSorbents UK Limited and CytoSorbents India Private Limited, wholly-owned subsidiaries of CytoSorbents Medical, Inc. All significant intercompany transactions and balances have been eliminated in consolidation.

Translation gains and losses resulting from the process of remeasuring into the United States of America dollar, the foreign currency financial statements of the European subsidiary, for which the United States of America dollar is the functional currency, are included in operations. Foreign currency transaction gain (loss) included in net loss amounted to approximately $1,949,000, $(2,449,000) and $(2,578,000) for the years ended December 31, 2023, 2022 and 2021, respectively. The Company translates assets and liabilities of the European subsidiary, whose functional currency is their local currency, at the exchange rate in effect at the balance sheet date. The Company translates revenue and expenses at the daily average exchange rates. The Company includes accumulated net translation adjustments in accumulated other comprehensive income (loss) as a component of stockholders’ equity.

Cash and Cash Equivalents

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

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

December 31,

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Restricted Cash

The Company’s total restricted cash in the amount of $1,483,958 and $1,687,459 as of December 31, 2023 and 2022, respectively, consisted of cash of $1,467,459 for each year that the Company is obligated to maintain as collateral for the outstanding letter of credit with Bridge Bank that was provided to the landlord of the College Road facility as security and cash of $16,499 and $220,000 as of December 31, 2023 and 2022, respectively, that the Company is obligated to maintain as collateral for the credit limit on the Company’s credit card account.

Accounts Receivable and Allowance for Credit Losses

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 financial statements as a whole for the year ended December 31, 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:

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. Cost is determined using a first-in first-out (“FIFO”) basis. At December 31, 2023 and 2022, the Company’s inventory was comprised of finished goods, which amounted to $2,155,457 and $1,567,871, respectively, work in process which amounted to $838,871 and $1,280,368, respectively, and raw materials which amounted to $685,801 and $613,347, respectively. Devices used in clinical trials or for research and development purposes are removed from inventory and charged to research and development expenses at the time of their use. Donated devices are removed from inventory and charged to selling, general and administrative expenses.

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Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation. Depreciation of property and equipment is provided for by the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the lesser of their economic useful lives or the term of the related leases. Gains and losses on depreciable assets retired or sold are recognized in the statements of operations in the year of disposal. Repairs and maintenance expenditures are expensed as incurred.

Patents

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 years ended December 31, 2023 and 2022, the Company wrote-off patent costs of approximately $656,000 and $636,000, respectively, related to the impairment of certain issued patents and pending patent applications in certain specific jurisdictions and the abandonment of certain pending patent application costs in the ordinary course of business. This charge is included in legal, financial and other consulting in the consolidated statements of operations and comprehensive loss.

Revenue Recognition

Revenue is recognized when the Company ships its products to its direct customers and distributors/strategic partners. Revenue is recognized on its grant awards with agencies of U.S. government in accordance with the terms of the award contract. See Note 3 for a description of the types of government contracts. The amount of revenue recognized reflects the consideration the Company expects to be entitled to receive in exchange for the products shipped or the services provided under their grant contracts. To achieve this core principle, the Company applies the following five steps:

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Research and Development

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

Advertising Expenses

Advertising costs are charged to activities when incurred. Advertising expense amounted to approximately $253,000, $582,000 and $615,000 in 2023, 2022 and 2021, respectively, and is included in selling, general, and administrative expenses in the consolidated statements of operations and comprehensive loss.

Income Taxes

Income taxes are accounted for under the asset and liability method prescribed by accounting standards for accounting for income taxes. Deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax asset will not be realized. Under Section 382 of the Internal Revenue Code, the net operating losses generated prior to the previously completed reverse merger may be limited due to the change in ownership. Additionally, net operating losses generated subsequent to the reverse merger may be limited in the event of changes in ownership. In 2017, the Tax Cuts and Jobs Act reduced the U.S. federal corporate tax rate from 35% to 21%. See Note 9 for the impact of the tax rate change on deferred tax assets and liabilities.

The Company follows the accounting standards associated with uncertain tax provisions. The Company is accounting for an uncertain tax position of approximate $2.1 million for the year ended December 31, 2023. The Company had no unrecognized tax benefits as of December 31, 2022. The Company files tax returns in the U.S. federal and state jurisdictions.

The Company utilizes the Technology Business Tax Certificate Transfer Program to sell a portion of its New Jersey Net Operating Loss tax carryforwards and Research and Development credits to an industrial company.

CytoSorbents Europe GmbH, CytoSorbents Switzerland GmbH, CytoSorbents Poland Sp. z.o.o., CytoSorbents UK Limited, CytoSorbents Medical UK Limited and CytoSorbents France SAS file an annual corporate tax return, a VAT return and a trade tax return in Germany, Switzerland, Poland, France and the United Kingdom, respectively.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets, liabilities at the date of the balance sheet, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The valuation of options granted, allowance for credit losses and recoverability of patents are significant estimates in these consolidated financial statements.

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. Beginning in April of 2023, the Company joined the IntraFi network, and established an Insured CashSweep (“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 4,000 member banks. This arrangement provides FDIC insurance coverage for all of the cash balances previously held in the money market account, which represents all of the cash and cash equivalents held at Bridge Bank. This arrangement excludes the restricted cash balances. Management monitors the soundness of these institutions in an effort to minimize its collection risk of these balances.

A significant portion of the Company’s revenues are from product sales in Germany. Substantially all of the Company’s grant and other income are from grant agencies in the United States. (See Note 3 for further information relating to the Company’s revenue.)

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As of December 31, 2023, one distributor accounted for approximately 19% of outstanding grants and accounts receivables. As of December 31, 2022, two distributors accounted for approximately 27% of outstanding grants and accounts receivables. For the years ended December 31, 2023, 2022 and 2021, no agency, distributor/strategic partner or direct customer represented more than 10% of the Company’s total revenue.

Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities approximate their fair values due to their short-term nature.

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 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. 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.

As the warrants issued upon the closing of the Company’s December 13, 2023 Offering meet the criteria for equity classification under ASC 815, the warrants are classified as equity as of December 31, 2023.

Net Loss per Common Share

Basic net loss per share is computed by dividing loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed using the treasury stock method on the basis of the weighted-average number of shares of common stock plus the dilutive effect of potential common shares outstanding during the period. Dilutive potential common shares include outstanding warrants, stock options and restricted shares. The computation of diluted net loss per share does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings (see Note 12).

Stock-Based Compensation

The Company accounts for its stock-based compensation under the recognition requirements of accounting standards for accounting for stock-based compensation for employees and directors whereby each option granted is valued at fair market value on the date of grant. Under these accounting standards, the fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model.

The Company also follows the guidance of accounting standards for accounting for equity instruments that are issued to non-employees for acquiring, or in conjunction with selling, goods or services for equity instruments issued to consultants.

Shipping and Handling Costs

The cost of shipping product to customers and distributors is typically borne by the customer or distributor. The Company records shipping and handling costs in cost of revenue. Total freight costs amounted to approximately $464,000, $297,000 and $276,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

Effect of Recent Accounting Pronouncements

In June 2016, the FASB, issued ASU No. 2016-13 entitled, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This ASU provides guidance on the calculation of credit losses, which includes the allowance for doubtful accounts on trade accounts receivable. The updated guidance is effective for public entities for fiscal years beginning after

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December 15, 2022. The Company implemented the updated guidance as of January 1, 2023, and this did not have significant impact on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”). 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 will adopt the provisions of ASU 2020-06 on January 1, 2024. This is not expected to have a material impact on the Company’s financial statements.

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.

3. REVENUE:

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

United States

Distributors/ Government

Direct Strategic Partners Agencies Total

Product sales:

Grant income:

The following table disaggregates the Company’s revenue by customer type and geographic area for the year ended December 31, 2022:

United States

Distributors/ Government

Direct Strategic Partners Agencies Total

Product sales:

Grant income:

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The following table disaggregates the Company’s revenue by customer type and geographic area for the year ended December 31, 2021:

United States

Distributors/ Government

Direct Strategic Partners Agencies Total

Product sales:

Grant income:

The Company has two primary revenue streams: (1) sales of the CytoSorb device and related device accessories and (2) grant income from contracts with various agencies of the United States government. The following is a brief description of each revenue stream.

CytoSorb Sales

The Company sells its CytoSorb device using both its own sales force (direct sales) and through the use of distributors and/or strategic partners. The majority of sales of the device are outside the U.S., as CytoSorb is not yet approved for commercial sale in the United States. However, in April 2020, the Company was granted Emergency Use Authorization (“EUA”) of CytoSorb for use in critically ill patients infected with COVID-19 by the FDA. Direct sales outside the United States relate to sales to hospitals located in Germany, Switzerland, Austria, Belgium, Luxembourg, Poland, the Netherlands, Sweden, Denmark, Norway and the United Kingdom. Direct sales are fulfilled from the Company’s office in Berlin, Germany. 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 vs. 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 one to five years in length, with three years being the typical term. In addition, certain distributors are eligible for volume discount pricing if their unit sales are in excess of the base amount in the contract.

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 numerous grant contracts from various agencies of the U.S. government. The purpose of these grant contracts is to perform various research and development activities. The type of research required is outlined in each contract. These contracts fall into one of the following categories:

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These government contracts have terms ranging from three months to four years. The Company may apply for an extension of the term of the contract in order to complete its research and development activities but would not receive additional funding during the extension period in excess of the original contract. See Note 2 regarding the accounting policies related to these contracts.

In summary, the contracts the Company has with customers are the distributor/strategic partner contracts related to CytoSorb product sales, agreements with direct customers related to free-of-charge product and credit rebates based upon achieving minimum purchase levels, and contracts with various government agencies related to the Company’s grants. The Company does not currently incur any outside/third-party incremental costs to obtain any of these contracts. The Company does incur internal costs, primarily salary related costs, to obtain the contracts related to the government grants. Company employees spend time reviewing the program requirements and developing the budget and related proposal to submit to the grantor agency. There may additionally be travel expenditures involved with meeting with government agency officials during the negotiation of the contract. These internal costs are expensed as incurred.

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

Contract receivables represent balances due from product sales to distributors amounting to $3,270,724 and $2,944,031 at December 31, 2023 and 2022, respectively, and billed and unbilled amounts due on government contracts amounting to $575,547 and $878,421 at December 31, 2023 and 2022, respectively. Contract receivable amounted to $3,000,708 as of January 1, 2022.

Contract liabilities represent the value of free of charge goods and credit rebates earned in accordance with the terms of certain direct customer agreements, which amounted to $196,322 and $178,134 at December 31, 2023 and 2022, respectively, and deferred grant revenue related to the billing on fixed price government contracts in excess of costs incurred, which amounted to $1,376,819 and $1,516,772 at December 31, 2023 and 2022, respectively. Contract liabilities amounted to $2,251,177 as of January 1, 2022.

4. PROPERTY AND EQUIPMENT, NET:

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

Depreciation/

December 31 Amortization

Depreciation expense for the years ended December 31, 2023, 2022 and 2021 amounted to $1,239,600, $688,565 and $571,156 respectively.

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5. OTHER ASSETS:

Other assets consist of the following:

December 31

Less accumulated amortization of patents issued (1,021,233) (848,999)

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

Amortization expense for the next five years will be approximately $218,000 for the year ending December 31, 2024; approximately $218,000 for the year ending December 31, 2025; approximately $217,000 for the year ending December 31, 2026; approximately $212,000 for the year ending December 31, 2027 and approximately $212,000 for the year ending December 31, 2028.

6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:

Accrued expenses and other current liabilities consist of the following:

December 31

Sales, payroll and income taxes payable 56,423 21,871

7. LONG-TERM DEBT:

On June 30, 2016, the Company and its wholly owned subsidiary, CytoSorbents Medical, Inc. (together, the “Borrower”), entered into a Loan and Security Agreement with Bridge Bank, a division of Western Alliance Bank, (the “Bank”), pursuant to which the Company borrowed $10 million in two equal tranches of $5 million (the “Original Term Loans”). On March 29, 2018, the Original Term Loans were refinanced with the Bank pursuant to an Amended and Restated Loan and Security Agreement by and between the Bank and the Borrower (the “Amended and Restated Loan and Security Agreement”), under which the Bank agreed to loan the Borrower up to an aggregate of $15 million to be disbursed in two tranches (1) one tranche of $10 million (the “Term A Loan”), which was funded on the Closing Date and used to refinance the Original Term Loans, and (2) a second tranche of $5 million which may be disbursed at the Borrower’s sole request prior to March 31, 2019 provided certain conditions are met (the “Term B Loan” and together with the Term A Loan, the “Term Loans”). On July 31, 2019, the Borrower entered into the First Amendment to the Amended and Restated Loan and Security Agreement (the “First Amendment”) with the Bank, which amended certain provisions of the Amended and Restated Loan and Security Agreement and the 2018 Success Fee Letter (the “2018 Letter”). In connection with the execution of the First Amendment, the draw period for the Term B Loan was extended to August 15, 2019 and the Company drew down the full $5.0 million Term B Loan on the Settlement Date, bringing the total outstanding debt to $15 million at July 31, 2019. The proceeds of Term Loans were used for general business requirements in accordance with the Amended and Restated Loan and Security Agreement. On December 4, 2020 (the

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“Third Amendment Closing Date”), the Company closed on the Third Amendment (the “Third Amendment”) of its Amended Loan and Security Agreement with Bridge Bank. Under the terms of the Amendment, the Company repaid the outstanding principal balance of its existing $15 million term loans and simultaneously received a commitment from Bridge Bank to provide a new term loan of $15 million, if needed. On January 19, 2022 (the “Fourth Amendment Closing Date”), the Company closed on the Fourth Amendment (the “Fourth Amendment”) of its Amended Loan and Security Agreement with Bridge Bank. Under the terms of the Amendment, the Company received a commitment from Bridge Bank to provide a new term loan of up to $15 million, if needed and entered into the Fourth Amendment Success Fee Letter (the “2022 Success Fee Letter”). On December 28, 2022 (the “Fifth Amendment Date”), the Company entered into the Fifth Amendment of its Amended Loan and Security Agreement with Bridge Bank. The Fifth Amendment extends the draw period under the Fourth Amendment to the earlier of (i) March 1, 2023 and (ii) the occurrence of an Event of Default. On March 9, 2023, the Company entered into the Sixth Amendment of its Amended Loan and Security Agreement. The Sixth Amendment further extends the draw period to March 24, 2023. Therefore, no further draws are available as of the date of this filing.

The Fourth Amendment provides a tranche of term loans (the “Term C Loans”) in the aggregate amount of $15 million, which are available for the Company to draw down at its sole discretion in three tranches of $5 million each at any time during the period commencing on the Fourth Amendment Date and ending on the earlier of (i) December 31, 2022 and (ii) the occurrence of an Event of Default (as defined in the Amended Loan and Security Agreement). The Term C Loans shall bear interest at the Index Rate (defined in the Amendment as the greater of 3.25% or the Prime Rate as published by the Wall Street Journal on the last business date of the month immediately preceding the month in which the interest will accrue) plus 1.25%. Pursuant to the Fourth Amendment, interest on the Term C Loans is subject to an interest rate cap of 8.00%. On December 27, 2022, the Company drew down the first $5 million tranche of the Term C loans available under the terms of the Fourth Amendment. Under the terms of the Fourth Amendment, commencing on February 1, 2023, the Company is required to make monthly payments of interest only through December 2023. The interest-only period will be further extended through June 2024 provided the Company has met both the required reserves test and the seventy-five percent test, as set forth in the Fourth Amendment, as of November 30, 2023. The Company did not meet the required reserves test as of November 30, 2023, and accordingly, commencing on January 1, 2024, the Company is required to make equal monthly payments of principal of $208,333, together with accrued and unpaid interest, through December 1, 2025 at which time the loan balance will be paid in full.

On the Fourth Amendment Closing Date, the Company was required to pay a non-refundable closing fee of approximately $18,750, which was amortized as a monthly charge to interest expense. On the Third Amendment Closing Date, the Company paid a non-refundable closing fee of $75,000, which was amortized as a charge to interest expense. In addition, the Amended and Restated Loan and Security Agreement requires the Company to pay a non-refundable final fee equal to 2.5% of the principal amount of the Term Loan funded upon the earlier of the (i) the maturity date or (ii) termination of the Term Loans via acceleration or prepayment. This final fee is being accrued and charged to interest expense over the term of the loan. For the year ended December 31, 2023, the Company recorded interest expense of approximately $43,000 related to the final fee. The Term Loans are evidenced by a secured promissory note issued to the Bank by the Company. If the Company elects to prepay the Term Loans pursuant to the terms of the Amended and Restated Loan and Security Agreement, it will owe a prepayment fee to the Bank, as follows: (1) for a prepayment made on or after the funding date of a Term Loan through and including the first anniversary of such funding date, an amount equal to 2.0% of the principal amount of such Term Loan prepaid; (2) for a prepayment made after the first anniversary of the funding date of a Term Loan through and including the second anniversary of such funding date, an amount equal to 1.5% of the principal amount of such Term Loan prepaid; and (3) for a prepayment made after the second anniversary of the funding date of a Term Loan, an amount equal to 1.0% of the principal amount of such Term Loan prepaid.

The Company’s and CytoSorbents Medical, Inc.’s obligations under the Amended and Restated Loan and Security Agreement are joint and severable and are secured by a first priority security interest in favor of the Bank with respect to the Company’s Shares (as defined in the Amended and Restated Loan and Security Agreement) and the Borrower’s Collateral (as defined in the Amended and Restated Loan and Security Agreement, which definition excludes the Borrower’s intellectual property and other customary exceptions).

2018 Success Fee Letter

Pursuant to the amended 2018 Letter, the Borrower shall pay to the Bank a success fee in the amount equal to 6.37% of the funded amount of the Term B Loan (as defined in the Restated Loan and Security Agreement) (the “Success Fee”) upon the first occurrence of any of the following events: (a) a sale or other disposition by the Borrower of all or substantially all of its assets; (b) a merger or consolidation of the Borrower into or with another person or entity, where the holders of the Borrower’s outstanding voting equity securities as of immediately prior to such merger or consolidation hold less than a majority of the issued and outstanding voting equity securities of the successor or surviving person or entity as of immediately following the consummation of such merger or consolidation; (c) a transaction or a series of related transactions in which any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of a sufficient number of shares of all classes of stock then

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outstanding of the Borrower ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the Board of Directors of the Borrower, who did not have such power before such transaction; or (d) the closing price per share for the Company’s common stock on the Nasdaq Capital Market being the greater of (i) 70% or more over $7.05, the closing price of the Company’s common stock on March 29, 2018 (after giving effect to any stock splits or consolidations effected after the date thereof) for five successive business days, or (ii) at least 26.13% more than the average price of Company’s common stock for the 365-day period ending on the date of the funding of the Term B Loan. This obligation shall terminate on the fifth anniversary of the funding of the Term B Loan and shall survive the termination of the loan agreement and the prepayment of the Term B Loan.

2022 Success Fee Letter

Pursuant to the 2022 Success Fee Letter, the Borrower will pay to the Bank a success fee equal to (i) 1% of $5 million if the Company draws down the first tranche of the Term C Loan and is payable only if the Company’s stock price equals or exceeds $8 for five consecutive trading days; (ii) 1.5% of $5 million if the Company draws down the second tranche of the Term C Loan and is payable only if the Company’s stock price equals or exceeds $10 for five consecutive trading days; and (iii) 2% of $5,000,000 if the Company draws down the third tranche of the Term C Loan and is payable only if the Company’s stock price equals or exceeds $12 for five consecutive trading days (together, the “Success Fee”). Borrower may pay the Success Fee in cash or in shares of common stock, at Borrower’s sole discretion. The right of Bank to receive the Success Fees and the obligation of the Borrower to pay the Success Fees hereunder shall terminate on the date that is fifth anniversary of the funding date of the last Term C Loans made but shall survive the termination of the Loan Agreement and any prepayment of the Term C Loans.

Long-term debt consists of the following as of December 31, 2023:

Accrued final fee 42,857

Long-term debt net of current maturities $ 2,542,857

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

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8. 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 lasted until September 30, 2021. The lease also contains twofive-year renewal options; however, the Company has determined that it is not likely that they will exercise these options. Commencing on September 30, 2021, the remaining lease term will last for 15.5 years. The lease requires monthly rental payments of $25,208 for the Initial Early Term, $88,254 for the Early Term and initial monthly payments of approximately $111,171 in the first year of the remaining term. Following the first year of the remaining term, the annual base rent will increase by approximately 2.75% annually over the remaining term. The lease also contains six months of rent abatement (months 1, 2, 3, 25, 26 and 27 of the remaining lease term). In addition to the base rent, payments of operating expenses and real estate taxes will be required. These payments are to be based on actual amounts incurred during 2021 multiplied by the Company’s share of the total building space (92.3%). The landlord will also provide an allowance of approximately $1,455,000 related to certain building improvements as outlined in the lease. In April 2021, the Company provided the landlord with a letter of credit in the amount of approximately $1,467,000 as security. The Company has determined that this lease should be treated as an operating lease in accordance with the provisions of Accounting Standards Codification (“ASC”) 842. On April 1, 2021, the Company recorded a Right-of-Use asset and related lease liability of approximately $11.6 million, which represents the estimated present value of the lease payments at the commencement date discounted at the Company’s incremental borrowing rate of 9.8%. In addition, due to the six months of rent abatement and annual base rent escalations during the remaining lease term that commenced on September 30, 2021, the Company will recognize rent expense on this lease on a straight-line basis over the remaining term of the lease for the difference between the rent expense recognized and the required payments under the lease.

In September 2021, the Company extended its two operating leases for its office facility in Germany. These leases require combined base rent payments amounting to approximately $12,100 per month. The initial lease term of both leases ends August 31, 2026. In addition, the Company is obligated to monthly operating expenses of approximately $3,000 per month. Both leases have a five-year option to renew that would extend the lease term to August 31, 2031. There are no provisions in the leases to increase the base rent during the renewal period. There were no lease incentives and no initial direct costs were incurred related to these leases.

In January 2021, CytoSorbents Europe GmbH entered into a lease for 1,068 square meters of additional warehouse space. The lease commenced on April 1, 2021 and requires monthly payments of base rent of $7,784 and other costs of approximately $239 and has a term of five years. The lease also has an option to extend the lease term for an additional five-year period through March 31, 2031. The Company has determined that this lease should be treated as an operating lease in accordance with the provisions of ASC 842. On April 1, 2020, the Company recorded a Right-of-Use asset and related lease liability at the estimated present value of the lease payments at the commencement date of approximately $594,000.

Right-of-Use Asset and Lease Liability

The Company’s consolidated balance sheets reflect the value of the right-of-use asset and related lease liability. This value was calculated based on the present value of the remaining base rent lease payments. The remaining lease payments include all expected renewals for all periods as the Company has determined that it is probable that the renewal options will be exercised under each of the lease agreements. The discount rate used was the Company’s incremental borrowing rate, which is 9.8%, as the Company could not determine the rate implicit in the lease. As a result, the value of the right-of-use asset and related lease liability is as follows:

CTSO US Equity

CTSO · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection.

Item 10. Directors, Executive Officers and Control Persons.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary.

CTSO US Equity☆

CTSO · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection.

Item 10. Directors, Executive Officers and Control Persons.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary.

CTSO US Equity