CytoSorbents(CTSO) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements, highlighting a going concern warning - The company's cash position of approximately $11.7 million (including restricted cash) as of June 30, 2025, raises substantial doubt about its ability to continue as a going concern[20] Condensed Consolidated Balance Sheets Balance sheet shows increased cash and total assets, stable liabilities, and higher stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $10,204 | $3,280 | | Total current assets | $22,987 | $21,604 | | Total assets | $47,990 | $47,372 | | Liabilities & Equity | | | | Total current liabilities | $9,842 | $9,825 | | Long-term debt | $14,377 | $13,996 | | Total liabilities | $36,404 | $36,265 | | Total stockholders' equity | $11,586 | $11,107 | Condensed Consolidated Statements of Operations and Comprehensive Loss Q2 2025 net income marks a turnaround from Q2 2024 loss, driven by a significant foreign currency gain Key Operating Results (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $9,617 | $8,842 | $18,344 | $17,831 | | Gross Profit | $6,814 | $6,503 | $13,021 | $13,376 | | Loss from Operations | ($3,615) | ($3,570) | ($7,502) | ($8,227) | | Gain (loss) on foreign currency | $6,178 | ($544) | $9,192 | ($1,970) | | Net Income (Loss) | $1,947 | ($4,294) | $469 | ($10,384) | | Diluted EPS | $0.03 | ($0.08) | $0.01 | ($0.19) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved, with financing activities leading to a net increase in cash Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($4,975) | ($9,624) | | Net cash used in investing activities | ($179) | ($246) | | Net cash provided by financing activities | $6,831 | $9,263 | | Net change in cash, cash equivalents, and restricted cash | $1,962 | ($671) | | Cash, cash equivalents, and restricted cash – end of period | $11,726 | $14,944 | Notes to Condensed Consolidated Financial Statements Notes detail financial statements, including business, going concern warning, policies, revenue, and financing - In January 2025, the company closed a Rights Offering, raising gross proceeds of $6.25 million ($5.4 million net). An additional $1.6 million in gross proceeds ($1.4 million net) was raised in February 2025 from the exercise of Series A warrants[39][43] - The company has a loan agreement with Avenue Capital Group for up to $20 million. Tranche 1 of $15 million has been funded. A second tranche of up to $5 million is available through December 31, 2025, contingent upon receiving FDA marketing approval for its DrugSorb-ATR application[69] Revenue by Geography for Six Months Ended June 30, 2025 (in thousands) | Region | Direct Sales | Distributors/Partners | Total | | :--- | :--- | :--- | :--- | | United States | $124 | $0 | $124 | | Germany | $6,151 | $0 | $6,151 | | All other countries | $4,098 | $7,971 | $12,069 | | Total | $10,373 | $7,971 | $18,344 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, liquidity challenges, and regulatory setbacks for DrugSorb-ATR - The FDA issued a denial letter in April 2025 for the company's De Novo Request for DrugSorb-ATR. The company is pursuing a formal appeal and expects a final regulatory decision in 2025[97] - Health Canada issued a Notice of Refusal for the company's Medical Device License application for DrugSorb-ATR in June 2025. The company has filed a "Request for Reconsideration"[98] Results of Operations Q2 2025 revenue increased, gross margin decreased, and a foreign currency gain drove net income for H1 Revenue and Gross Profit Comparison (in thousands) | Period | Revenue | % Change | Gross Profit | Gross Margin | | :--- | :--- | :--- | :--- | :--- | | Q2 2025 | $9,617 | 8.8% | $6,814 | 70.9% | | Q2 2024 | $8,842 | - | $6,503 | 73.5% | | H1 2025 | $18,344 | 2.9% | $13,021 | 71.0% | | H1 2024 | $17,831 | - | $13,376 | 75.0% | - The decrease in R&D expenses for the six months ended June 30, 2025, was driven by the completion of the STAR-T clinical trial and other cost reductions[113] - A gain on foreign currency transactions of $9.2 million for H1 2025 was directly related to the increase in the spot exchange rate of the Euro to the U.S. dollar during the period[115] Liquidity and Capital Resources Cash position raises substantial doubt about going concern, with future capital dependent on regulatory approvals - The company's cash position of $11.7 million as of June 30, 2025, raises substantial doubt about its ability to continue as a going concern[122] - The company has an effective shelf registration statement to raise up to $150 million, with approximately $149.7 million available as of June 30, 2025. It also has an ATM facility with $19.4 million available[118] - In early 2025, the company raised a total of $6.8 million in net proceeds from a Rights Offering and subsequent warrant exercises, which also satisfied a debt covenant to unrestrict $5 million of cash[119] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide market risk disclosures - As a smaller reporting company, CytoSorbents is not required to provide quantitative and qualitative disclosures about market risk[131] Item 4. Controls and Procedures Disclosure controls were ineffective due to a material weakness in accounting for stock-based compensation - Disclosure controls and procedures were concluded to be ineffective as of June 30, 2025, due to a material weakness in internal controls[132] - The identified material weakness relates to controls over the accounting for Restricted Stock Units (RSUs), specifically ensuring grants and vesting activities were recorded in the proper accounts and at the proper amounts[135] - Management has begun implementing a remediation plan, including redesigning control procedures and enhancing documentation, with the expectation of full implementation during the fiscal year ending December 31, 2025[136] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect - The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business[141] Item 1A. Risk Factors Primary risk is failing to obtain FDA or Health Canada authorization for DrugSorb-ATR, materially harming revenue - A primary risk is the potential failure to obtain regulatory authorization for DrugSorb-ATR in the U.S. and Canada. The FDA issued a denial letter on April 25, 2025, and Health Canada issued a Notice of Refusal on June 26, 2025[144][145] - The company is actively pursuing an appeal with the FDA through a supervisory review process and has filed a "Request for Reconsideration" with Health Canada[144][145] - An unsuccessful appeal could significantly impact the company's ability to generate substantial sales of its product candidates in the U.S. and Canada[146] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - None[150] Item 5. Other Information Chief Medical Officer adopted a Rule 10b5-1 trading plan to sell incentive stock options - On June 13, 2025, the Chief Medical Officer adopted a Rule 10b5-1 trading plan to sell up to 157,500 incentive stock options[153] Item 6. Exhibits Exhibits include CEO and CFO certifications and XBRL interactive data files - The exhibits include certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, and XBRL interactive data files[158]