CytoSorbents(US:CTSO)2022-08-01 16:00PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited consolidated financial statements for Q2 and H1 2022 and 2021 detail the company's financial position and performance Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2022 ($) | December 31, 2021 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | 30,164,055 | 52,137,707 | | Total Assets | 71,205,278 | 89,519,282 | | Total Liabilities | 23,645,511 | 26,941,085 | | Total Stockholders' Equity | 47,559,767 | 62,578,197 | Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2022 ($) | Three Months Ended June 30, 2021 ($) | Six Months Ended June 30, 2022 ($) | Six Months Ended June 30, 2021 ($) | | :--- | :--- | :--- | :--- | :--- | | Total revenue | 8,495,558 | 12,024,069 | 17,186,982 | 22,622,916 | | Gross margin | 4,944,856 | 9,313,852 | 11,358,643 | 17,161,255 | | Loss from operations | (8,357,050) | (4,924,733) | (16,148,185) | (7,776,923) | | Net loss | (10,879,222) | (4,677,530) | (19,845,620) | (8,845,351) | | Net loss per share | (0.25) | (0.11) | (0.46) | (0.20) | Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2022 ($) | Six Months Ended June 30, 2021 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | (16,159,163) | (4,380,482) | | Net cash used in investing activities | (5,532,963) | (1,591,018) | | Net cash provided by (used in) financing activities | (40,359) | 206,405 | | Net change in cash, cash equivalents and restricted cash | (21,973,652) | (5,812,523) | Notes to Consolidated Financial Statements Notes detail accounting policies, going concern status, product approvals, revenue breakdown, and a significant subsequent marketing agreement - The company is a leader in blood purification for life-threatening conditions, with its flagship product CytoSorb approved in the EU and under Emergency Use Authorization (EUA) in the US for COVID-19, and has received two FDA Breakthrough Designations for its DrugSorb-ATR system303133 - As of June 30, 2022, the company had $31.9 million in cash, cash equivalents, and restricted cash, which, along with $15 million of debt availability and a $25 million ATM facility, is believed sufficient to fund operations for more than twelve months, mitigating going concern risk29 Revenue by Geography (Six Months Ended June 30) | Region | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Germany (Product Sales) | 6,766,295 | 12,016,342 | | All other countries (Product Sales) | 7,965,921 | 8,826,783 | | United States (Product Sales) | 522,976 | 665,681 | | United States (Grant Income) | 1,931,790 | 1,114,110 | | Total Revenue | 17,186,982 | 22,622,916 | - Subsequent to the quarter end, on August 1, 2022, the company entered into a multi-year global marketing agreement with Fresenius Medical Care to promote CytoSorb worldwide (excluding the U.S.), with CytoSorbents paying Fresenius a royalty of 0.9% of applicable net sales to support these efforts132134135 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial performance, key objectives, and liquidity, highlighting a 29% Q2 2022 revenue decrease and focus on FDA approval and strategic partnerships Results of Operations Q2 2022 total revenues decreased 29% to $8.5 million, driven by a 36% drop in product sales due to currency and reduced COVID-19 demand, resulting in a widened net loss Q2 2022 vs Q2 2021 Performance | Metric | Q2 2022 ($M) | Q2 2021 ($M) | Change (%) | | :--- | :--- | :--- | :--- | | Product Sales | 7.3 | 11.4 | -36 | | Total Revenue | 8.5 | 12.0 | -29 | | Product Gross Margin | 67% | 82% | -15 p.p. | | R&D Expenses | 4.2 | 3.7 | +13 | | Net Loss | (10.9) | (4.7) | +132 | - The decrease in Q2 2022 product sales was primarily caused by an unfavorable currency impact of ~$840,000 and a decline in COVID-19 related demand, which was estimated to be de minimis in Q2 2022 compared to ~$1.7 million in Q2 2021186 - Product gross margin fell to 67% in Q2 2022 from 82% in Q2 2021, mainly due to production inefficiencies associated with the relocation to the new manufacturing facility in Princeton, NJ190 - The company recorded a foreign currency transaction loss of $2.5 million in Q2 2022, compared to a gain of $0.2 million in Q2 2021, due to the weakening of the Euro against the U.S. dollar194 Liquidity and Capital Resources As of June 30, 2022, the company held $31.9 million in cash and equivalents, with additional facilities, sufficient to fund operations for over twelve months despite a $12.9 million Q2 cash burn - The company holds $31.9 million in cash, cash equivalents, and restricted cash as of June 30, 2022207226 - Additional liquidity includes $15 million of debt availability and $25 million available under an ATM facility206226 - Q2 2022 cash burn was approximately $12.9 million, including $4.8 million in non-recurring expenditures for the new manufacturing facility, with an adjusted burn of approximately $6.5 million excluding these and other factors207 - Management believes it has sufficient cash to fund operations beyond twelve months from the issuance of the financial statements210226 Clinical and Business Updates The company focuses on U.S. FDA approval for DrugSorb-ATR, growing CytoSorb sales, manufacturing transition, and strategic partnerships, with pivotal trials completing in 2023 - The company's four key objectives are: 1) Open the U.S. market with FDA approval for DrugSorb-ATR, 2) Grow core CytoSorb sales to profitability, 3) Transition production to the new New Jersey facility, and 4) Forge and expand strategic partnerships145 - The U.S. pivotal trials, STAR-T and STAR-D, are actively enrolling patients to support FDA marketing approval for DrugSorb-ATR, with enrollment expected to be completed in 2023156157 - A new 3-year preferred supplier agreement with Asklepios makes CytoSorb available to approximately 170 healthcare facilities across Germany167 Item 3. Quantitative and Qualitative Disclosures About Market Risk Primary market risk is foreign currency exchange rates, particularly the Euro, impacting revenue but partially offset by a natural hedge from Euro-denominated operating expenses - The company's main market risk is foreign currency exchange rates, as the majority of its sales are in Euros228 - A natural currency hedge exists because a decline in the Euro that reduces revenue also reduces the U.S. dollar equivalent of Euro-denominated operating expenses228 Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2022, 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 were effective as of the end of the period covered by the report230 - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls231 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any legal proceedings - The company is not currently a party to any legal proceedings234 Item 1A. Risk Factors This section refers to the detailed discussion of risk factors in the Annual Report on Form 10-K filed on March 10, 2022 - For a discussion of risks affecting the company, readers are referred to the 'Risk Factors' section in the Annual Report on Form 10-K filed on March 10, 2022235 Other Part II Items This section covers remaining Part II items, reporting no unregistered sales of equity securities, no defaults, no mine safety disclosures, and listing filed exhibits including officer certifications - The company reported no unregistered sales of equity securities, no defaults upon senior securities, or other material information for the period237239243 - The exhibits filed with the report include certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act245