CTSO CytoSorbents Corporation

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

Or

(Registrant’s telephone number, including area code)

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Securities registered pursuant to Section 12(b) of the Act:

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ  Yes ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐  Yes þ  No

As of November 2, 2022, there were 43,635,715 shares of the issuer’s common stock outstanding.

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CytoSorbents Corporation

FORM 10-Q

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This Quarterly Report on Form 10-Q includes our trademarks and trade names, such as “CytoSorb,” “CytoSorb XL,” “ECOS-300CY,” “BetaSorb,” “ContrastSorb,” “DrugSorb,” “DrugSorb-ATR,” “HemoDefend-RBC,” “HemoDefend-BGA,” “K+ontrol” and “VetResQ,” which are protected under applicable intellectual property laws and are the property of CytoSorbents Corporation and our subsidiaries. This Quarterly Report on Form 10-Q also contains the trademarks, trade names and service marks of other companies, which are the property of their respective owners. Solely for convenience, trademarks, trade names and service marks referred to in this Quarterly Report on Form 10-Q may appear without the ™, ®, or ^SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks, trade names and service marks. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.

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See accompanying notes to consolidated financial statements.

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See accompanying notes to consolidated financial statements.

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See accompanying notes to consolidated financial statements.

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CytoSorbents Corporation

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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 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 would 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 3-year preferred supplier agreement with Asklepios, making CytoSorb available without restrictions to all of the approximate 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 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 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. 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 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 is protected by 21 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.

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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 2022 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, par value $0.001 per share, 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. and CytoSorbents Medical UK Limited, wholly owned subsidiaries of CytoSorbents Europe GmbH, and CytoSorbents UK Limited, a wholly-owned subsidiary 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 Dollar, the foreign currency financial statements of the European subsidiary are included in operations. The Euro is the functional currency of CytoSorbents Europe GmbH. Foreign currency transaction loss included in net loss amounted to approximately $3,230,000 and $1,013,000 for the three months ended September 30, 2022 and 2021, respectively. Foreign currency transaction loss included in net loss amounted to approximately $6,967,000 and $2,084,000 for the nine months ended September 30, 2022 and 2021, respectively. The Company translates assets and liabilities of its foreign subsidiaries at the exchange rate in effect at the consolidated balance sheet date. The Company translates revenue and expenses at the daily average exchange rates during the period. The Company includes accumulated net translation adjustments in accumulated other comprehensive income as a component of stockholders’ equity.

Restricted Cash

The Company’s total restricted cash in the amount of $1,687,459 consists of cash of $1,467,459 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 $220,000 that the Company is obligated to maintain as collateral for the credit limit on the Company’s credit card accounts.

Grants and Accounts Receivable

Grants receivable represent amounts due from U.S. government agencies and are included in Grants and Accounts Receivable.

Accounts receivable are unsecured, non-interest bearing customer obligations due under normal trade terms. The Company sells its devices to various hospitals and distributors. The Company performs ongoing credit evaluations of its customers’ financial conditions. Management reviews accounts receivable periodically to determine collectability. Balances that are determined to be uncollectible are

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written off to the allowance for doubtful accounts. The allowance for doubtful accounts amounted to approximately $67,000 and $61,000 at September 30, 2022 and December 31, 2021, respectively.

Inventories

Inventories are valued at the lower of cost or net realizable value under the first in, first out (FIFO) method. As of September 30, 2022 and December 31, 2021, the Company’s inventory was comprised of finished goods, which amounted to $2,075,570 and $3,084,606, respectively; work in process which amounted to $818,909 and $1,322,736, respectively; and raw materials, which amounted to $647,117 and $358,756, 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.

In September 2022, the Company experienced an equipment failure of a refrigeration unit at its new College Road manufacturing facility. This equipment stored various items of work-in-process inventory. The Company determined all the items that were stored in this unit were required to be scrapped. The value of this inventory was approximately $599,000. Accordingly, this inventory was written-off and is included in cost of goods sold in the accompanying consolidated statements of operations and comprehensive loss in the three and nine months ended September 30, 2022. The Company has filed a claim with its insurance carrier related to this loss. The claim is currently under review by the insurance company. The claim has not yet been approved nor has a reimbursement amount been determined. Accordingly, in the third quarter of 2022, the Company has not recorded any provision for insurance reimbursement. The Company expects to record the insurance reimbursement at the time that the amount to be reimbursed is determined and approved by the insurance carrier.

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 consolidated statements of operations and comprehensive loss in the year of disposal. Repairs and maintenance expenditures are expensed as incurred.

Patents

Legal costs incurred to establish and successfully defend 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. There were no charges for impairments during the three months ended September 30, 2022. During the nine months ended September 30, 2022, the Company recorded an impairment charge of approximately $431,000 related to certain patent costs. There were no impairment charges during either of the three and nine months ended September 30, 2021. This charge is included in legal, financial and other consulting in the consolidated statements of operations and comprehensive loss.

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.

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Grant Revenue: Revenue from grant income is based on contractual agreements. 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 and Clinical Trial Expenses

All research and development costs, payments to laboratories and research consultants are expensed when incurred.

Advertising Expenses

Advertising expenses are included in selling, general, and administrative expenses on the consolidated statements of operations and comprehensive loss when incurred. Advertising expenses amounted to approximately $143,000 and $151,000 for the three months ended September 30, 2022 and 2021, respectively, and approximately $358,000 and $455,000 for the nine months ended September 30, 2022 and 2021, respectively.

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. The Company has provided a valuation allowance against all deferred tax assets. 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 accounting standards associated with uncertain tax positions. The Company had no unrecognized tax benefits at September 30, 2022 or December 31, 2021. 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 carryforwards to an industrial company.

Each of CytoSorbents Europe GmbH, CytoSorbents Switzerland GmbH, CytoSorbents Poland Sp. Z.o.o. CytoSorbents Medical Limited and CytoSorbents UK Limited files an annual corporate tax return, VAT return and a trade tax return in Germany, Switzerland, Poland and the United Kingdom, respectively.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. Actual results could differ from these estimates. The valuation of options granted is a significant estimate 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. 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 income is from government agencies in the United States. (See Note 4 for further information relating to the Company’s revenue.)

As of September 30, 2022, two distributors accounted for approximately 39% of outstanding grants and accounts receivable. As of December 31, 2021, one distributor accounted for approximately 12% of outstanding grants and accounts receivables. For the three

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months ended September 30, 2022, one distributor accounted for approximately 16% of the Company’s total revenue and for the nine months ended September 30, 2022, no distributor or direct customer accounted for more than 10% of total revenue. For the three and nine months ended September 30, 2021, no distributor or direct customer accounted for more than 10% of the Company’s total revenue.

Financial Instruments

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

Net Loss Per Common Share

Basic loss per share is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed using the treasury stock method utilizing 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 stock options and restricted shares. The computation of diluted loss per share does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings (see Note 8).

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 other than 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 other shipping and handling costs in cost of revenue. Total freight costs amounted to approximately $79,000 and $56,000, respectively, for the three months ended September 30, 2022 and 2021, and $166,000 and $196,000, respectively, for the nine months ended September 30, 2022 and 2021.

Effect of Recent Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board (the “FASB”), issued Accounting Standards Update (“ASU”) 2021-10, “Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance”. ASU 2021-10 will require enhanced disclosures related to the Company’s contracts with the U.S. Government. ASU 2021-10 is effective for annual periods beginning after December 15, 2021. The Company intends to implement the provisions of ASU 2021-10 during 2022 and does not believe this ASU will have a material impact on the Company’s financial statements.

3.    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

In June 2019, the Company amended and restated its certificate of incorporation. The amended and restated certificate of incorporation increased the number of shares of common stock authorized for issuance from 50,000,000 shares to 100,000,000 shares.

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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.

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. 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 2021 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. There have been no sales under the Sale Agreement. In addition, during the year ended December 31, 2021 and during the nine months ended September 30, 2022, the Company paid approximately $90,000 and $40,000, respectively, in expenses related to the Sale Agreement.

Stock-Based Compensation

Total share-based employee, director, and consultant compensation amounted to approximately $1,005,000 and $2,554,000 for the three and nine months ended September 30, 2022, respectively, and $999,000 and $3,224,000 for the three and nine months ended September 30, 2021, respectively. These amounts are included in the consolidated statements of operations and comprehensive loss under selling, general and administrative expenses.

The summary of the stock option activity for the nine months ended September 30, 2022 is as follows:

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The fair value of each stock option was estimated using the Black Scholes pricing model, which takes into account as of the grant date the exercise price (ranging from $1.39 to $3.91 per share) and expected life of the stock option (10 years), the current price of the underlying stock and its expected volatility (64.7%), expected dividends (0%) on the stock and the risk free interest rate (ranging from 1.52% to 3.91%) for the expected term of the stock option.

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The intrinsic value is calculated as the difference between the market value of the shares as of September 30, 2022 of $1.36 and the exercise price of the shares.

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The summary of the status of the Company’s non-vested options for the nine months ended September 30, 2022 is as follows:

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As of September 30, 2022, the Company had approximately $5,471,000 of total unrecognized compensation cost related to stock options which will be amortized over approximately 46 months.

Awards of Stock Options:

On August 10, 2022, the Board of Directors granted options to purchase 1,163,800 shares of common stock to the Company’s employees which will be awarded based upon each employee’s 2022 individual performance evaluation. Once awarded, these options will vest one quarter on February 15, 2023, one quarter on February 15, 2024, one quarter on February 15, 2025 and one quarter on February 15, 2026. The grant date fair value of these unvested options amounted to approximately $1,381,000. During the three and nine months ended September 30, 2022, the Company recorded approximately $65,000 of stock option expense related to these options.

On August 10, 2022, the Board of Directors granted options to purchase 772,905 shares of common stock to the Company’s employees. These options will vest one eighth on the six-month anniversary of the grant date, one eighth on the first anniversary of the grant date, one quarter on second anniversary of the grant date, one quarter on third anniversary of the grant date and one quarter on fourth anniversary of the grant date. The grant date fair value of these unvested options amounted to approximately $917,000. During the three and nine months ended September 30, 2022, the Company recorded approximately $32,000 of stock option expense related to these options.

On August 10, 2022, the Board of Directors granted options to purchase 113,850 shares of common stock to members of the Company’s Board of Directors. These options will vest one quarter on the grant date, one quarter on September 30, 2022, one quarter on 12/31/2022, and one quarter on 3/31/2023. The grant date fair value of these unvested options amounted to approximately $135,000. During the three and nine months ended September 30, 2022, the Company recorded approximately $68,000 of stock option expense related to these options.

On August 10, 2022, the Board of Directors granted options to purchase 1,163,800 shares of common stock to certain senior managers of the Company. These options will vest one quarter on the grant date, one quarter on the first anniversary of the grant date, one quarter on second anniversary of the grant date, one quarter on third anniversary of the grant date. The grant date fair value of these unvested

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options amounted to approximately $562,000. During the three and nine months ended September 30, 2022, the Company recorded approximately $132,000 of stock option expense related to these options.

On August 10, 2022, the Board of Directors granted options to purchase 1,365,000 shares of common stock to certain senior managers of the Company which will only vest upon the achievement of certain specific, predetermined milestones related to the Company’s long-term performance goals. The grant date fair value of these unvested options amounted to approximately $1,620,000. As of September 30, 2022, none of these milestones has been met. Accordingly, no charge for these options has been recorded in the consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022.

Due to the uncertainty over whether these restricted stock units will vest, which only happens upon a Change in Control, no charge for these restricted stock units has been recorded in the consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022 and 2021.

Other Awards of Restricted Stock Units:

On March 4, 2019, certain named executive officers and senior managers were granted 22,220 restricted stock units. These awards were valued at approximately $179,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vested one third on the date of the grant, one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant. For the three and nine months ended September 30, 2022 and 2021, the Company recorded expense of approximately $0 and $0, and $0 and $12,000, respectively, related to these restricted stock unit awards.

On July 22, 2019, certain named executive officers and senior managers were granted 180,300 restricted stock units. These awards were valued at approximately $1,300,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vested one third on the date of the grant, one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant. For the three and nine months ended September 30, 2022 and 2021, the Company recorded expense of approximately $0 and $54,000, and $0 and $259,000, respectively, related to these restricted stock unit awards.

On February 28, 2020, certain named executive officers and senior managers were granted 168,100 restricted stock units. These awards were valued at approximately $1,014,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vested one third on the date of the grant, one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant. For the three and nine months ended September 30, 2022 and 2021, the Company recorded (income) expense of approximately $0 and $84,000, and $(65,000) and $443,000, related to these restricted stock unit awards, respectively.

On April 12, 2021, certain named executive officers and senior managers were granted 235,765 restricted stock units. These awards were valued at approximately $2,220,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vested (or will vest) one third on the date of the grant, one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant. For the three and nine months ended September 30, 2022 and 2021, the

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Company recorded expense of approximately $177,000 and $177,000, and $50,000 and $1,030,000, respectively, related to these restricted stock unit awards.

On August 10, 2022, certain named executive officers and senior managers were granted 288,500 restricted stock units. These awards were valued at approximately $563,000 at the date of issuance, based upon the market price of the Company’s common stock at the date of the grant, and vested (or will vest) one third on the date of the grant, one third on the first anniversary of the date of the grant, and one third on the second anniversary of the date of the grant. For the three and nine months ended September 30, 2022 and 2021, the Company recorded expense of approximately $214,000 and $0, and $214,000 and $0, respectively, related to these restricted stock unit awards.

Additionally, in 2021 and 2020 certain employees were offered 91,750 restricted stock units as a condition of their employment. These awards were valued at approximately $713,868 at the date of issuance. 45,000 of the restricted stock units were forfeited in 2022. 16,750 of these restricted stock units vest upon the earlier of a Change in Control or one-third after the second anniversary of the award, one-third on the third anniversary of the award, and one-third on the fourth anniversary of the award. The other 30,000 of these restricted stock units vest upon the earlier of a Change in Control or four years from the date of the award. For the three and nine months ended September 30, 2022 and 2021, the Company recorded (income) expense of approximately $0 and $45,000, and $(34,000) and $131,000, respectively, related to these restricted stock unit awards.

The following table outlines the restricted stock unit activity for the nine months ended September 30, 2022:

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