Cytosorbents Corp

December 31, 2024

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, 2024, the Company’s total cash and cash equivalents and restricted cash was approximately $9.8 million, with $6.5 million classified as restricted, and $3.3 million as unrestricted and available to fund operations. This matter raises substantial doubt about the Company’s ability to continue as a going concern.

As of the issuance date of this Annual Report on Form 10-K, the Company has raised a total of $7.3 million, net of offering fees, through the Rights Offering (see Note 13 – Subsequent Event), and the exercise of the Series A Right Warrants (see Note 13 – Subsequent Event). The equity raises also provided for $5 million of restricted cash to become unrestricted. As a result, our proforma unrestricted cash and cash equivalents, a non-GAAP measure, on December 31, 2024, assuming the net proceeds from the Rights Offering and the Series A Right Warrant exercise had occurred at that date, has increased by $12.3 million to $15.6 million, compared to the as reported amount of $3.3 million.

Our expected future capital requirements may depend on many factors including expanding our customer base and sales force, the timing and extent of spending in obtaining regulatory approval and introduction of new products, including the regulatory approval and introduction of DrugSorb-ATR in the U.S. and Canada which is expected in 2025, and the related opportunity to receive Tranche 2 of Avenue Capital Commitment (See Note 5. Long-Term Debt) by December 31, 2025 and extend the principal re-payment terms of the facility beginning in the third quarter of 2026. Additional sources of liquidity available to us include issuance of additional equity securities through the Series B Right Warrant, or other public or private equity offerings, debt financings or from other sources. The sale of additional equity may result in dilution to our shareholders. There is no assurance that we will be able to secure funding on terms acceptable to us, or at all. The increasing need for capital could also make it more difficult to obtain funding through either equity or debt. Should additional capital not become available to us as needed, we may be required to take certain actions, such as slowing sales and marketing expansion, delaying further regulatory approvals, or reducing headcount. As a result of these additional uncertainties, 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, additional grant funding, 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 and based in New Jersey, 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, based in Berlin, Germany conducts sales and marketing related operations for the CytoSorb device outside of the United States.

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.

Sales and expenses denominated in foreign currencies are translated at average exchange rates in effect throughout the year. Assets and liabilities of foreign operations are translated at period-end exchange rates with the impacts of foreign currency translation recorded in cumulative translation adjustment, a component of accumulated other comprehensive income. Foreign currency transactions gains and losses are included in other income (loss), net in the consolidated statements of operations and other comprehensive loss.

Segment Information

The Company manages its operations and allocates resources as a single operating segment. The Company’s chief operating decision-maker (“CODM”) is its Chief Executive Officer (“CEO”) who makes operating decisions, assesses financial performance and allocates resources based on consolidated financial information. As such, the Company has determined that it operates inone reportable segment.

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company’s restricted includes amounts held as collateral for a letter of credit with Bridge Bank, securing the College Road facility lease.

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

• See Note 1 – Basis of Presentation for further discussion regarding restricted cash.

Grants and Accounts Receivable (Net of 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, 2024.

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. 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.

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

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.

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, 2024 and 2023, the Company wrote-off patent costs of approximately $333,735 and $655,685, 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.

Leases

The Company accounts for leases in accordance with FASB Accounting Standards Update (“ASU”) 2016-02, Leases, Topic 842 (“ASC 842”). Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. The Company determines if a contract contains a lease at the inception date and determines the lease classification, recognition, and measurement at commencement date. ROU assets also include adjustments related to prepaid or deferred lease payments. As the Company’s leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments. Options to extend a lease are included in the lease term when it is reasonably certain that the Company will exercise such options. Certain of the Company’s lease agreements include provisions for the Company to pay the lessor for common area maintenance, real estate taxes, and insurance, which the Company accounts for as variable lease costs.

Revenue Recognition

Revenue is recognized when the Company ships its products to its direct customers and distributors/strategic partners. 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:

Research and Development, Net of Grant Income

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

Currently, accounting for grants does not fall under ASC 606, as the grantor will not benefit directly from the Company’s expansion or product development, and no products or services are transferred to the grantor. As there is no authoritative guidance under U.S. GAAP on accounting for grants to for profit business entities from government entities, the Company has adjusted its accounting policy for recording grants to analogize the guidance provided by International Accounting Standard 20 (“IAS 20”). Accordingly, the Company has retroactively, as of January 1, 2023, reclassified grant income, net of expenses, as a reduction of research and development expenses.

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. Grant income, net of expenses, is presented as a reduction of research and development expenses.

Advertising Expenses

Advertising costs are charged to activities when incurred. Advertising expense amounted to approximately $335,284 and $252,686, in 2024 and 2023, 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.

The Company follows the accounting standards associated with uncertain tax provisions. The Company is accounting for an uncertain tax position of approximate $2.2 and $2.1 million for the years ended December 31, 2024 and 2023, respectively. The Company hadno unrecognized tax benefits as of December 31, 2024 and 2023. 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. (See Note 3 for further information relating to the Company’s revenue.)

As of December 31, 2024, and 2023 one distributor accounted for approximately 19% of outstanding grants and accounts receivables. For the years ended December 31, 2024 and 2023, one distributor accounted for 11% and 10%, respectively, 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.

The warrants issued upon the closing of the Company’s December 13, 2023, offering and the closing of the Company’s June 2024 debt financing both met the criteria for equity classification under ASC 815. Accordingly, these warrants have been classified as equity as of December 31, 2024 and December 31, 2023.

Stock-Based Compensation

The Company measures and recognizes compensation expense for all stock-based payment awards made to employees, including stock options, restricted shares (“RSUs”), based on estimated fair values at the award grant date. The fair value of stock-based awards is amortized over the vesting period of the award using a straight-line method.

Stock-based compensation expense for awards with performance conditions is recognized when it is probable that the performance condition will be achieved and is then recognized over the requisite service period. Any changes in the probability assessment are accounted for as a cumulative true up to the current period compensation cost.

To estimate the fair value of an award, the Company uses the Black-Scholes option pricing model. This model requires inputs such as expected life, expected volatility, expected dividend yield of stock and risk-free interest rate. These inputs are subjective and generally require significant analysis and judgment to develop. While estimates of expected life and volatility are derived primarily from the Company’s historical data, the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected life assumption. The Company accounts for forfeitures in the period they occur.

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.

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.

The following table presents the calculation of net loss per share:

The following table presents the potentially dilutive shares that were excluded from the computation of diluted net loss per share of common stock attributable to common stockholders, because their effect was anti-dilutive, as adjusted to give effect to the Stock Split:

*Total number of RSUs include 2,809,500 units with a Change in Control-Based performance condition.

Shipping and Handling Costs

The cost of shipping products to customers and distributors is typically borne by the customer or distributor. The Company records shipping and handling costs in cost of goods sold. Total freight costs amounted to approximately $409,273 and $464,324 for the years ended December 31, 2024 and 2023, respectively.

Effect of Recent Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”). ASU 2020-06 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, 2023, and interim periods within those fiscal years. The Company implemented the updated guidance as of January 1, 2024, and this did not have an impact on its consolidated financial statements.

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (Topic 280), which will require public companies to provide more transparency in both quarterly and annual reports about the expenses they incur from revenue generating reportable business segments. In addition, the ASU requires that a public entity disclose significant segment expenses that are regularly provided to the chief operating decision maker, an amount for other segment items by reportable business segment, including a description of its composition, and the primary measures of a business segment’s profit or loss in assessing segment performance. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company implemented the updated guidance as of December 31, 2024, which resulted in the addition of new segments disclosures (see Note 11). Also, the implementation of ASU 2023-07, did not have an impact on other disclosures to the consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09 entitled “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. This ASU provides guidance related to additional disclosures that will be required related to income taxes. The updated guidance is effective for public entities for fiscal years beginning after December 15, 2024. This ASU will result in additional disclosures in the Company’s consolidated financial statements related to income taxes in 2025.

On November 19, 2024, the Financial Accounting Standards Board (the “FASB”) issued a proposed Accounting Standards Update to establish authoritative guidance for the accounting and reporting of government grants received by business entities. The FASB has decided to pursue an International Accounting Standards 20 (“IAS 20”) accounting model. Under IAS 20, a grant relating to income may be reported separately as ‘other income’ or deducted from the related expense. The Company has evaluated its accounting and reporting policy for government grants relative to this project and the requirements of IAS 20. Currently, accounting for grants does not fall under ASC 606, as the grantor will not benefit directly from the Company’s expansion or product development, and no products or services are transferred to the grantor. As there is no authoritative guidance under U.S. GAAP on accounting for grants to for profit business entities from government entities, the Company has adjusted its accounting policy for recording grants to analogize the guidance provided by IAS 20. Accordingly, the Company has retroactively, as of January 1, 2023, reclassified grant income, net of expenses, as a reduction of research and development expenses.

Reclassification of Grant Income and Operating Expenses

As noted above on Effect of Recent Accounting Pronouncements the Company has retroactively, as of January 1, 2023, reclassified grant income, net of expenses, as a reduction of research and development expenses. For the years ended December 31, 2024 and 2023, Grant Income and the related expenses were as follows:

In addition, the Company changed its accounting policy to report legal, financial and other consulting costs, which was previously its own separate line item within the Operating Expenses section of the Consolidated Statements of Operations and Comprehensive Loss to now being merged into the Selling, General and Administrative Expenses line item. These expenses previously presented within legal, financial and other consulting costs are general and administrative in nature; accordingly, the updated presentation would provide the user of the Consolidated Financial Statements a better picture of the purpose of those expenses. For the years ended December 31, 2024 and 2023, the total amount of expenses that would have been reported as Legal, financial and other consulting costs under the previous accounting policy amounted to $3,199,357 and $4,272,296, respectively.

For comparative purposes, the Company has recorded the following reclassification adjustments to the previously reported Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2023:

• See Note 12 – Restatement to Previously Issued Financial Information for further adjustments to these line items.

For comparative purposes, the Company has recorded the following reclassification adjustments to the previously reported Consolidated Statements of Cash Flows:

• See Note 12 – Restatement to Previously Issued Financial Information for further adjustments to these line items. * These reclassification adjustments reflected in these consolidated cash flows statements line items also reflect the restatement adjustments applicable to the statements of changes to stockholders’ equity.

3. REVENUE

The following table disaggregates the Company’s revenue by customer type and geographic area for the year ended December 31, 2024:

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

CytoSorb Sales

The Company sells its CytoSorb device using both its own sales force (direct sales) and through the use of distributors and/or strategic partners. The majority of sales of the device are outside the United States, as CytoSorb is not yet approved for commercial sale in the United States. However, in April 2020, the Company was granted Emergency Use Authorization (“EUA”) of CytoSorb for use in critically-ill patients infected with COVID-19 with imminent or confirmed respiratory failure by the United States Food and Drug Administration (the “FDA”). Direct sales outside the United States relate to sales to hospitals located in Germany, Switzerland, Austria, Belgium, Luxembourg, Poland, the Netherlands, Sweden, Denmark, Norway and the United Kingdom. Direct sales are fulfilled from the Company’s warehouse facility in Berlin, Germany. There are no formal sales contracts with any direct customers relating to product price or minimum purchase requirements. However, there are agreements in place with certain direct customers that provide for either free of charge product or rebate credits based upon achieving minimum purchase levels. The Company records the value of these items earned as a reduction of revenue. These customers submit purchase orders and the order is fulfilled and shipped directly to the customer. Prices to all direct customers are based on a standard price list based on the packaged quantity (6 packs versus 12 packs).

Distributor and strategic partner sales make up the remaining product sales. These distributors are located in various countries throughout the world. The Company has a formal written contract with each distributor/strategic partner. These contracts have terms ranging from 1-5 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.

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. The Company does not currently incur any outside/third-party incremental costs to obtain any of these contracts.

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 $4,233,888 and $3,270,724 at December 31, 2024 and 2023, respectively, and billed and unbilled amounts due on government contracts amounting to $193,002 and $575,547 at December 31, 2024 and 2023, respectively. Contract receivable amounted to $3,822,452 as of January 1, 2023.

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 $176,714 and $196,322 at December 31, 2024 and 2023, respectively, and deferred grant liability related to the billing on fixed price government contracts in excess of costs incurred, which amounted to $419,328 and $1,376,819 at December 31, 2024 and 2023, respectively.

4. BALANCE SHEET COMPONENTS

Inventories

The Company had the following major classes of inventory:

Property and equipment - net

The Company’s Property and equipment - net, consist of the following:

Depreciation expense for the years ended December 31, 2024 and 2023, amounted to $1,341,262 and $1,239,600, respectively.

Other assets

Other assets consist of the following:

Patent amortization expense amounted to $235,146, and $222,836 for the years ended December 31, 2024 and 2023, respectively.

Patent amortization expense for the next five years and thereafter is scheduled as follows:

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following:

5. LONG-TERM DEBT

Avenue Capital Group:

On June 28, 2024 (the “Closing Date”), the Company entered into a Loan and Security Agreement with the Avenue Capital Group (“Loan”). Avenue Capital Group agreed to loan the Company up to an aggregate of $20 million, to be disbursed in two tranches: (1) one tranche of $15 million (“Tranche 1”), of which $10 million was available to the Company on the Closing Date and $5 million constitutes restricted cash, which was released from its restriction on January 10, 2025, as the following conditions were achieved: (i) the FDA has accepted Company’s application for review with respect to DrugSorb-ATR De Novo 510(k) and (ii) the Company has received a minimum of $3 million in net proceeds from the sale of its equity securities after the Closing Date. The restriction will be released on a dollar for dollar basis for equity raised between $3 million and $5 million and (2) a second tranche of up to $5 million, which may be disbursed at the Company’s request between July 1, 2025 and December 31, 2025, provided that the Company receives FDA marketing approval of its DrugSorb-ATR application (“Tranche 2” and together with Tranche 1, the “Avenue Capital Commitment”). The proceeds from the Avenue Capital Commitment were used to pay off the existing outstanding debt with Bridge

Bank and will additionally be used for working capital purposes and to fund general business requirements. Amounts borrowed under the Avenue Capital Commitment shall bear interest at a variable rate per annum equal to the greater of (A) the Prime Rate plus five percent (5.00%) or (B) thirteen and one-half percent (13.50)%.

On October 22, 2024 the Company announced that the FDA had accepted its application of DrugSorb-ATR, which was one of the two conditions required by the restricted cash debt covenant. Proceeds from the Rights Offering on January 10, 2025 (See note 13 – Subsequent Event) satisfied the second condition of the debt covenant which now allows for the $5 million of restricted cash on the Company’s consolidated balance sheets to become unrestricted, and available for use.

The loan requires interest-only payments for the first 25 months, followed by equal monthly installments of principal plus accrued and unpaid interest until maturity. All unpaid principal and accrued and unpaid interest shall be due and payable in full on July 1, 2027; provided, however that if the Company draws the full amount of Tranche 2 by December 2025, all unpaid principal and accrued and unpaid interest shall be due and payable in full by January 1, 2028.

As of the Closing Date, the Company recorded the following discounts:

The Company amortizes debt discounts as interest expense using the interest method through the maturity date. The loan and security agreement included a final payment upon maturity of $900,000. The Company accretes the final payment as interest expense using the interest method through the maturity date.

Upon a prepayment, the Company would incur a fee ranging from 1% to 3% of the outstanding principal, depending of the time of payment in relation to the maturity date.

The Loan and Security Agreement includes customary loan conditions, company representations and warranties, company affirmative covenants and company negative covenants for secured transactions of this type. As of December 31, 2024, the Company was in compliance with these covenants.

As additional consideration for the Commitment, on June 28, 2024, the Company also issued Avenue Capital Group with warrants with a fair value of $690,709 to purchase an aggregate of 1,645,569 shares of the Company’s common stock for cash at the exercise price of $0.79, which expire on June 28, 2029. The number of warrants is fixed, however, the exercise price may be adjusted down if the Company raises equity (excluding sales of equity utilizing the Company’s at-the-market equity facility) at a share price that is lower than $0.79. These warrants meet the criteria for equity classification under ASC 815.

The Lenders were also granted the right while the Commitment is outstanding to convert up to an aggregate amount of $2 million of the principal amount of the outstanding Growth Capital Loans into the Company’s common stock at a fixed conversion price of 120% of the Closing Price (as defined in the warrant) or $0.95 per share (the “Conversion Option”).

The Company’s obligations under the Loan and Security Agreement are joint and several. The obligations under the Loan and Security Agreement are secured by a first priority security interest in favor of the Lenders with respect to the Company’s Shares (as defined in the Loan and Security Agreement) and the Company’s Collateral (as defined in the Loan and Security Agreement), which includes the Company’s intellectual property, pursuant to that certain Intellectual Property Security Agreement, dated as of June 28, 2024, by and between the Company and the Administrative and Collateral Agent.

As of December 31, 2024, long-term debt consists of the following:

As of December 31, 2024, principal payments of long-term debt are due as follows:

Bridge Bank

On June 28, 2024, concurrent with the closing of the Avenue Capital Group financing discussed above, the Company paid off its existing outstanding debt with Bridge Bank.

As of December 31, 2023, long-term debt consists of the following amounts due to Bridge Bank:

As of December 31, 2024, the following commitments survive after the termination of the Bridge Bank Amended and Restated Loan and Security Agreement and related amendments:

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 forfive 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 forfive 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 forfive 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. The termination date of the 2022 Success Fee Letter is December 27, 2027.

6. LEASES

The Company has operating leases that primarily relate to operating facilities in both the United States and Germany. The Company leases its operating facilities under operating lease arrangements with varying expiration dates through March 2037. As of December 31, 2024, the remaining lease term of the Company’s operating leases ranges fromsix totwelve years.

Supplemental statement of operations and cash flows related to operating leases is as follows:

Supplemental balance sheet information related to operating leases is as follows:

As of December 31, 2024, the maturities of the lease liabilities are as follows:

7. INCOME TAXES

The Company accounts for income taxes under ASC 740. Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

The Company’s consolidated loss before income taxes for the years ended December 31, 2023, 2022 and 2021 is as follows:

The provision for income taxes consists of the following:

The Company has deemed any foreign earnings will be indefinitely reinvested. Currently, foreign operations have resulted in an accumulated deficit. The Company will continue to analyze their stance if their circumstances change in the future.

As of December 31, 2024, the Company had federal net operating loss (“NOL”) carry forwards of $103,299,951, state NOL carry forwards of $6,449,176, and foreign NOL carry forwards of $59,061,197 which are available to reduce future taxable income. Any unutilized NOL carry forwards will begin to expire at various dates starting in 2025 and some may be carried indefinitely. As of December 31, 2024 and 2023, the Company had Federal and state research and development tax credit carryforwards of $2,224,012 and $0 (net of uncertain tax benefits), respectively, available to reduce future tax liabilities which will begin to expire at various dates starting in 2026.

The federal NOL carryforwards of $47.7 million, if not utilized, will expire between 2025 and 2038. The federal NOL carryforwards of $55.7 million generated since 2018 are subject to an 80% limitation on taxable income, do not expire and will carry forward indefinitely.

The NOL carry forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. The NOLs may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state tax provisions. In addition to the new provisions enacted under the Tax Cuts and Jobs Act, This could limit the amount of NOLs that the Company can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will generally be determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has not determined whether such a change has occurred and accordingly, the utilization of the net operating loss carryforwards may be subject to certain limitations.

Sale of NOLs

The Company may be eligible, from time to time, to receive cash from the sale of its Net Operating Losses and R&D tax credits under the State of New Jersey Technology Business Tax Certificate Transfer Program.

As of December 31, 2024, the Company has accrued a receivable $1,690,825 from the approved sale of the 2023 state NOL and research and development credits. The Company expects to collect this receivable in the first half of 2025.

The principal components of the Company’s deferred tax assets and liabilities are as follows:

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on this assessment, management has established a full valuation allowance against all of the deferred tax assets for each period because it is more likely than not that all of the deferred tax assets will not be realized.

The changes in valuation allowance for the years ended December 31, 2024 and 2023 were $2,933,127 and $6,031,103, respectively.

A reconciliation of income tax (expense) benefit at the statutory federal income tax rate and income taxes as reflected in the financial statements is as follows:

A reconciliation of the unrecognized tax benefit balances is as follows:

The total amount of unrecognized tax benefits that could affect our effective tax rate, if recognized, was $2.2 million and $2.1 as of December 31, 2024 and 2023, respectively. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and New Jersey. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2019, although NOL carryforwards and tax credit carryforwards from any year are subject to examination and adjustment for at least three years following the year in which they are fully utilized. As of December 31, 2024, no significant adjustments have been proposed relative to our tax positions.

For year ended December 31, 2024, there areno interest and penalties relating to our uncertain tax positions.

8. COMMITMENTS AND CONTINGENCIES

Litigation

The Company is, from time to time, subject to claims and litigation arising in the ordinary course of business. The Company intends to defend vigorously against any future claims and litigation.

On March 5, 2024, a former employee, filed a complaint against us in the Superior Court of New Jersey, Law Division, Mercer County, alleging breach of the New Jersey Conscientious Employee Protection Act (“CEPA”). The complaint specifically alleges that we violated the provisions of the CEPA by allegedly terminating the employee in retaliation for complaining about certain business practices. We dispute these allegations and intend to vigorously defend against them, but there can be no assurance as to the outcome of the litigation.

Royalty Agreement

The Company is party to various royalty and license agreements that require the payment of royalty fees. Royalty expense amounted to approximately $1.9 million and $2.2 million for the years ended December 31, 2024 and 2023, respectively. Royalty expense is included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss. The decrease in royalty fees in 2024 was the result of the expiration of a 4% royalty in August of 2024, net of increases in revenue applicable to royalty agreements.

401 (k) Plan

In June 2014, the Company formed the CytoSorbents 401(k) Plan. The plan is a defined contribution plan as described in section 401(k) of the Internal Revenue Code (“IRC”) covering substantially all full-time employees. Employees are eligible to participate in the plan on the first day of the calendar quarter following three full months of employment. Participants may defer up to 100% of their eligible compensation subject to certain IRC limitations. Effective January 1, 2021, the Company changed its matching contribution to 100% of the participants contribution up tothree percent of compensation plus 50% of the participants contribution over three percent of compensation up to a maximum offive percent of compensation. Matching contributions amounted to $472,022 and $405,408 for the years ended December 31, 2024 and 2023, respectively.

9. STOCKHOLDERS’ EQUITY

Preferred Stock

In June 2019, the Company amended and restated its Certificate of Incorporation. The amended and restated certificate of incorporation authorizes the issuance of up to 5,000,000 shares of “blank check” preferred stock, with such designation rights and preferences as may be determined from time to time by the Board of Directors.

Common Stock

For the years ended December 31, 2024 and 2023, issuance of common stock offerings, net of fees incurred were as follows:

December 13, 2023 Offering

On December 13, 2023, the Company closed on a registered direct offering for the sale of common stock, directly to investors, which included 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 (before issuance costs). 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. The Company’s executive officers, directors, and certain non-executive officer employees of the Company also participated in the Offering with a combined investment of $435,000.

Shelf Registration

On July 14, 2021, the Company filed a registration statement on Form S-3 with the SEC, which was amended on July 20, 2021 and declared effective by the SEC on July 27, 2021 (as amended, the “2021 Shelf”). The 2021 Shelf enables the Company to offer and sell, in one or more offerings, any combination of common stock, preferred stock, senior or subordinated debt securities, warrants and units, up to a total dollar amount of $150 million and expires after three years. On July 26, 2024, the Company filed a registration statement on Form S-3 with the SEC (the “2024 Shelf”), which enables the Company to offer and sell in one or more offerings, any combination of common stock, preferred stock, senior or subordinated debt securities, warrants and units, up to a total dollar amount of $150 million. On September 26, 2024, the Company filed Amendment No. 1 to the Form S-3 with the SEC. The 2024 Shelf was declared effective by the SEC on September 30, 2024. Because the Company’s market capitalization is less than $75 million, it will be subject to baby shelf rules which limit the amount of securities sales the Company can make to one-third of its public market float over a 12-month period.

Open Market Sale Agreement with Jefferies LLC

On December 30, 2021, the Company entered into an Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC (the “Agent”), pursuant to which the Company may sell, from time to time, at its option, shares of the Company’s common stock having an aggregate offering price of up to $25 million through the Agent, as the Company’s sales agent. However, as a result of limitations related to our market capitalization discussed above, the Company may offer and sell shares of the Company’s common stock having an aggregate offering price of up to approximately $19.7 million from time to time through the Agent. If the Company’s public float increases above $75 million, the Company may sell additional amounts under the Sales Agreement. All shares of the Company’s common stock offered and sold, or to be offered and sold under the Sale Agreement will be issued and sold pursuant to the Company’s 2024 Shelf by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, in block transactions or if specified by the Company, in privately negotiated transactions.

Subject to the terms of the Sales Agreement, the Agent is required to use its commercially reasonable efforts consistent with their normal sales and trading practices to sell the shares of the Company’s common stock from time to time, based upon the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company is required to pay the Agent a commission of up to 3.0% of the gross proceeds from the sale of the shares of the Company’s common stock sold thereunder, if any.

10. STOCK-BASED COMPENSATION

Stock Option Plans

As of December 31, 2024, the Company hadtwo Long Term Incentive Plans (the “2014 Plan” and the “2006 Plan”) to attract, retain, and provide incentives to employees, officers, directors, and consultants. The Plans generally provide for the granting of stock, stock options, stock appreciation rights, restricted shares, or any combination of the foregoing to eligible participants.

In June 2024, the Company amended and restated CytoSorbents Corporation 2014 Long-term Incentive Plan (the “Plan”). The amended and restated CytoSorbents Corporation 2014 Long-term Incentive Plan (the “Plan”) increased the number of shares to be reserved and authorized for issuance under the Plan by 7,500,000 shares to 20,900,000 shares of our Common Stock.

A total of 20,900,000 and 2,400,000 shares of common stock are reserved for issuance under the 2014 Plan and the 2006 Plan, respectively. As of December 31, 2023, there were approximately 647,000 and 654,000 shares of common stock remaining for issuance under the 2014 Plan and the 2006 Plan, respectively. As of December 31, 2024, there were approximately 3,700,000 and 654,000 shares of common stock remaining for issuance under the 2014 Plan and the 2006 Plan, respectively.

Total stock-based compensation expense for the year ended December 31, 2024 amounted to $3.8 million, of which $3.2 million and $0.6 million were for stock options and restricted stock units, respectively. Total stock-based compensation expense for the year ended December 31, 2023 amounted to $4.2 million, of which $3.3 million and $0.9 million were for stock options and restricted stock units, respectively. These amounts are included in selling, general, and administrative expenses on the consolidated statements of operations and comprehensive loss.

The summary of the stock option activity for the years ended December 31, 2024 and 2023 is as follows:

The fair value of each stock option was estimated using the Black-Scholes pricing model which takes the following inputs into account.

*The expected term of the options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term.

In addition, the Company recognizes forfeitures as they occur.

The intrinsic value is calculated at the difference between the market value as of December 31, 2024 of $0.91 and the exercise price of the shares.

The summary of the status of the Company’s non-vested options for the year ended December 31, 2024, is as follows:

As of December 31, 2024, the Company had approximately $3,035,000 of total unrecognized compensation cost related to stock options which will, on average, be amortized over 32 months.

The summary of the status of the Company’s non-vested options for the year ended December 31, 2023, is as follows:

As of December 31, 2023, the Company had approximately $4,868,000 of total unrecognized compensation cost related to stock options which will, on average, be amortized over 42 months.

Change in Control-Based Awards of Restricted Stock Units:

The Board of Directors has granted restricted stock units to members of the Board of Directors, to the Company’s executive officers, and to employees of the Company. These restricted stock units will only vest upon a Change in Control of the Company, as defined in the Company’s 2014 Long-Term Incentive Plan.

The following table is a summary the outstanding balance of these restricted stock units at the end of each of the past two calendar years:

Due to the uncertainty over whether these restricted stock units will vest, which will only happen upon a Change in Control, no charge for these restricted stock units has been recorded in the consolidated statements of operations and comprehensive loss through the year ended December 31, 2024.

Other Restricted Stock Units:

The following table outlines the restricted stock unit activity (not related to change in control-based awards) for the year ended December 31, 2024:

The following table outlines the restricted stock unit activity for the year ended December 31, 2023:

At December 31, 2024 and December 31, 2023, the remaining weighted average vesting period for restricted stock awards subject to vesting was 43 months and 37 months, respectively and the remaining unrecognized restricted stock unit compensation expense was $538,000 and $842,000, respectively.

Warrants

As of December 31, 2024, the Company had 2,706,561 warrants outstanding related to the Company’s December 13, 2023 Offering. These warrants are immediately cash exercisable at an exercise price of $2.00 per share and expire on December 13, 2028. Another 1,645,569 warrants were issued on June 28, 2024 in connection with the Company’s Loan and Security Agreement with Avenue and these warrants have an exercise price of $0.79 and expire on June 28, 2029. The number of warrants is fixed, however, the exercise price may be adjusted down if the Company raises equity (excluding sales of equity utilizing the Company’s at-the-market equity facility) at a share price that is lower than $0.79. These warrants are exercisable into the Company’s common stock.

11. SEGMENT INFORMATION

The Company operates and manages its business asone reportable segment andone operating segment, which is the business of developing, testing and selling blood purification medical devices. The Company’s chief operating decision maker, or CODM, is the Company’s Chief Executive Officer. The CODM assesses performance of the segment and decides how to allocate resources based on Revenue growth, Gross Margin, Operating Expenses, adjusted net loss, adjusted EBITDA and cash burn (cash used in operating and investing activities) derived from the Company’s consolidated results of operations and cash flows and total assets of the segment.

The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets. All material long-lived assets are located in New Jersey, and Berlin Germany. Long-lived assets consist of property and equipment, net and operating lease right-of-use assets.

Factors used in determining the reportable segment include the nature of the Company’s operations, the organizational and reporting structure and the type of information reviewed by the CODM to allocate resources and evaluate financial performance. The accounting policies of the segment are the same as those described in Note 2 to the consolidated financial statements of the Company included in this Annual Report on Form 10-K.

The Company operates asone reportable operating segment. Consisting ofone reportable operating segment, the components presented in the consolidated statements of operations also present the components of the Company’s single operating segment.

The CODM uses financial metrics to evaluate the Company’s spending and monitor budget versus actual results. The monitoring of budgeted versus actual results is used in assessing performance of the segment and in establishing resource allocation across the organization. The financial metrics used by the CODM in evaluating the Company’s spending and monitoring budget versus actual results are as follows:

Significant expense categories regularly provided to the CODM consist of the following:

Capital expenditures of the segment totaled $669,430 and $936,236 for the years ended December 31, 2024 and 2023, respectively.

12. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL INFORMATION

Restatement of Previously Issued Financial Information

During the year ended December 31, 2024, the Company identified and corrected the following errors, which were recorded incorrectly in previously issued financial statements included in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q:

-Overstatement of Inventory due to a clerical error.

-Understatement of stock-based compensation expense and related corrections of accrued liabilities, additional paid in capital, and accumulated deficit related to errors in the application of the Company’s accounting policy for RSUs. Based on the Company’s accounting policy for stock-based compensation, expense for RSUs is measured and recorded against additional paid-in-capital based on estimated fair values at the award’s grant date. The Company incorrectly adjusted compensation expense based on the fair value of the award at its vesting date. In addition, the Company recorded part of the compensation expense against accrued liabilities.

The following periods were impacted by the restatement:

Summary of Effect of Restatement of Previously Issued Financial Information

The tables below summarize the impact of the restated amounts on the previously reported consolidated balance sheets for the impacted periods. The Consolidated Balance Sheet adjustments in the tables below that impact the line items of additional paid-in

capital, accumulated deficit, and total stockholders’ equity also reflecting the same amounts that those line items were impacted in the Consolidated Statements of Changes in Stockholders’ Equity.

The tables below summarize the impact of the restated and reclassified amounts on the previously reported consolidated statements of operations and comprehensive loss:

The table below summarizes the impact of the restated amounts on the previously reported consolidated statements of cash flows. The consolidated statements of cash flows adjustments in the tables below that impact the line items of stock-based compensation

also reflect the same amounts that the stock-based compensation line items was impacted by in the consolidated statements of changes in stockholders’ equity.

• The restatement adjustment reflected in this statements of cash flows line items also reflect the restatement adjustments applicable to the statements of stockholders’ equity.

• The restatement adjustment reflected in this statements of cash flows line items also reflect the restatement adjustments applicable to the statements of stockholders’ equity.

The table below summarizes the impact of the restated and reclassified amounts on the previously reported consolidated statements of changes in stockholders’ equity:

In relation to the errors discussed above, the consolidated statements of changes in stockholders’ equity includes a cumulative effect of adjustments to the beginning balances as of January 1, 2023 of additional paid-in-capital (increase of $777,310), accumulated deficit (decrease of $45,023) and stockholders’ equity (increase of $732,287).

13. SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date of issuance of these consolidated financial statements and has determined that there are no subsequent events outside the ordinary scope of business that require adjustment to, or disclosure in, the financial statements other than those described below.

Rights Offering

On January 10, 2025, the Company closed the subscription period of its previously announced rights offering (the “Rights Offering”), raising aggregate gross proceeds of $6.25 million ($5.8 million net of fees) from the sale of all 6.25 million Units reserved for the Rights Offering. Participants in the Rights Offering received Units, each Unit comprising ofone share of common stock of the Company, one Series A Right Warrant to purchaseone share of common stock, and one Series B Right Warrant to purchaseone share of common stock. Up to an additional 6.25 million shares of common stock may be issued upon exercise of the Right Warrants.

Proceeds from the closing of the subscription period satisfy a debt covenant which allows for $5,000,000 of restricted cash on the Company’s consolidated balance sheets to now become unrestricted, and available for use.

The Right Warrants are exercisable commencing on their date of issuance and the exercise price shall be equal to (i) in the case of the Series A Right Warrants,90% of the 5-day volume weighted average price of our Common Stock over the last 5-trading days prior to the expiration date of the Series A Right Warrants on February 24, 2025, rounded down to the nearest whole cent but (x) not lower than $1.00 and (y) not higher than $2.00, and (ii) in the case of the Series B Right Warrants,90% of the 5-day volume weighted average price of our Common Stock over the last 5-trading days prior to the expiration date of the Series B Right Warrants on April 10, 2025, rounded down to the nearest whole cent but (x) not lower than $2.00 and (y) not higher than $4.00.

Exercise of the Right Warrants require additional investment separate from the purchase of the Units.6.25 million shares of common stock have been reserved for exercise of the Right Warrants, after which any remaining unexercised Right Warrants will immediately expire worthless. The Right Warrants are transferable until they have expired.

On February 24, 2025, approximately 1.4 million Series A Right Warrants were exercised by holders, including members of management and the Board of Directors, at an exercise price of $1.13 per warrant, providing an additional $1.6 million in aggregate gross proceeds ($1.5 million net of fees).