CytoSorbents(CTSO) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's financial information, including consolidated financial statements and management's discussion and analysis Item 1. Financial Statements Presents unaudited consolidated financial statements for Q2 and H1 2024, including a going concern disclosure due to current cash position - Management expresses substantial doubt about the company's ability to continue as a going concern, as current unrestricted cash is insufficient for operations beyond the next twelve months without additional capital[13] Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Items | June 30, 2024 ($) | December 31, 2023 ($) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $8,458,708 | $14,131,137 | | Total current assets | $21,955,300 | $25,702,823 | | Total Assets | $53,426,791 | $53,260,634 | | Liabilities & Equity | | | | Total current liabilities | $10,336,268 | $14,545,955 | | Long-term debt | $13,673,195 | $2,542,857 | | Total Liabilities | $36,690,188 | $29,985,471 | | Total Stockholders' Equity | $16,736,603 | $23,275,163 | Consolidated Statements of Operations Highlights (Unaudited) | Metric | Q2 2024 ($) | Q2 2023 ($) | H1 2024 ($) | H1 2023 ($) | | :--- | :--- | :--- | :--- | :--- | | Total product sales | $8,841,789 | $8,072,412 | $17,831,309 | $15,982,451 | | Total revenue | $9,894,636 | $9,420,821 | $19,680,928 | $18,870,317 | | Gross profit | $6,502,729 | $6,018,550 | $13,073,307 | $11,473,877 | | Loss from operations | ($3,418,822) | ($6,559,237) | ($8,344,341) | ($14,450,832) | | Net loss | ($4,143,146) | ($6,153,084) | ($10,501,007) | ($13,478,967) | | Basic and diluted net loss per share | ($0.08) | ($0.14) | ($0.19) | ($0.31) | Consolidated Statements of Cash Flows Highlights (Unaudited, Six Months Ended June 30) | Cash Flow Activity | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | ($9,624,412) | ($10,041,497) | | Net cash used in investing activities | ($246,883) | ($542,599) | | Net cash provided by financing activities | $9,262,875 | $1,615,401 | | Net change in cash, cash equivalents and restricted cash | ($672,429) | ($8,993,043) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses business overview, strategic objectives, financial performance for Q2 and H1 2024, liquidity challenges, and ongoing going concern uncertainty Overview and Key Objectives The company, a leader in blood purification, focuses on three key objectives: DrugSorb-ATR regulatory approval, CytoSorb sales growth, and cash burn reduction - The company's three primary strategic objectives include obtaining FDA and Health Canada marketing approval for DrugSorb™-ATR, growing core CytoSorb sales to achieve profitability, and reducing cash burn through expense control[123] - CytoSorb has been used in over 248,000 human treatments globally and holds CE-Mark label expansions and FDA Emergency Use Authorization for specific conditions[120] Clinical Studies Update The completed STAR-T trial for DrugSorb-ATR met safety but not overall effectiveness, showing reduced bleeding in the CABG subgroup, supporting Q3 2024 regulatory submissions - The pivotal STAR-T trial for DrugSorb-ATR met its primary safety endpoint but not overall effectiveness, though it showed reduced bleeding in the CABG surgery subgroup (>90% of patients)[130] - The company plans parallel regulatory submissions of DrugSorb-ATR to the FDA and Health Canada in Q3 2024 based on STAR-T trial data[130] - The STAR-D study for DOAC removal has been postponed to prioritize STAR-T regulatory filings[131] Results of Operations Comparative financial analysis for Q2 and H1 2024 shows increased product sales, improved gross margins, and reduced operating expenses, leading to a lower net loss Revenue Comparison (Q2 2024 vs Q2 2023) | Revenue Source | Q2 2024 ($) | Q2 2023 ($) | Change ($) | % Change | | :--- | :--- | :--- | :--- | :--- | | Product Sales | $8,842,000 | $8,072,000 | +$770,000 | +10% | | Grant Income | $1,053,000 | $1,348,000 | -$295,000 | -22% | | Total Revenue | $9,895,000 | $9,421,000 | +$474,000 | +5% | Revenue Comparison (H1 2024 vs H1 2023) | Revenue Source | H1 2024 ($) | H1 2023 ($) | Change ($) | % Change | | :--- | :--- | :--- | :--- | :--- | | Product Sales | $17,831,000 | $15,982,000 | +$1,849,000 | +12% | | Grant Income | $1,850,000 | $2,888,000 | -$1,038,000 | -36% | | Total Revenue | $19,681,000 | $18,870,000 | +$811,000 | +4% | - R&D expenses decreased by approximately $2.1 million in Q2 2024 and $4.1 million in H1 2024 due to the completion of the STAR-T clinical trial[153][159] - Product gross margins improved from 74% to 75% in Q2 2024 and from 71% to 74% in H1 2024, driven by operating efficiencies at the new manufacturing facility[152][158] Liquidity and Capital Resources As of June 30, 2024, the company had $8.4 million unrestricted cash, raising going concern doubt, despite securing a new $20 million term-loan facility with Avenue Capital Group - The company's $8.4 million in unrestricted cash as of June 30, 2024, is expected to fund operations into Q2 2025, raising substantial doubt about going concern[167][173] - In June 2024, the company secured a $20 million term-loan facility with Avenue Capital Group, with an initial $15 million tranche funded, providing $10 million in unrestricted cash and repaying existing debt[165] - The company is pursuing milestones for the Avenue debt facility to potentially release an additional $5 million in restricted cash and access another $5 million tranche, increasing unrestricted cash by up to $10 million[167][173] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company states that quantitative and qualitative disclosures about market risk are not applicable for this period - Quantitative and qualitative disclosures about market risk are not applicable for this reporting period[174] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures are effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are functioning effectively as of the period end[176] - No material changes to internal control over financial reporting occurred during the quarter[177] PART II. OTHER INFORMATION This section covers other required disclosures, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings The company is not party to material litigation but is defending against a former employee's CEPA complaint filed March 5, 2024 - A former employee filed a complaint on March 5, 2024, alleging retaliatory termination under the New Jersey CEPA[180] - The company disputes the CEPA allegations and intends to defend vigorously, though the outcome is not assured[180] Item 1A. Risk Factors This section refers readers to the company's Annual Report on Form 10-K for a comprehensive discussion of business risks - For a discussion of business risks, the company refers to Part I, Item 1A, 'Risk Factors' in its Annual Report on Form 10-K for the year ended December 31, 2023[181] Other Items (Items 2, 3, 4, 5) The company reports no activity for unregistered sales of equity securities, defaults upon senior securities, mine safety disclosures, or other information - The company reported 'None' or 'Not applicable' for Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information)[181] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including XBRL financial statements and Sarbanes-Oxley Act officer certifications - Exhibits include XBRL financial data and officer certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[182]