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COMMON STOCK, STOCK-BASED COMPENSATION AND WARRANTS

3 Months Ended

Mar. 31, 2025

COMMON STOCK, STOCK-BASED COMPENSATION AND WARRANTS

COMMON STOCK, STOCK-BASED COMPENSATION AND WARRANTS

4.

COMMON STOCK, STOCK-BASED COMPENSATION AND WARRANTS

Common Stock

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 ($5.4 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 of one share of common stock of the Company, one Series A Right Warrant to purchase one share of common stock, and one Series B Right Warrant to purchase one share of common stock (collectively, the “Rights Warrants”). Up to an additional 6.25 million shares of common stock may be issued upon exercise of the Right Warrants. Once the 6.25 million shares of common stock reserved for the Right Warrants are issued, the remaining outstanding and unexercised Right Warrants will expire worthless. The Series A Right Warrants and the Series B Right Warrants expire on February 24, 2025 and April 10, 2025, respectively. The warrants do not have a redemption feature and are classified as equity instruments. A fair value of $288,442 and $54,563 has been allocated to the Series A Right Warrant and the Series B Right Warrant, respectively, and recorded within additional paid-in capital. The warrants were valued on the date of issuance using the Monte Carlo pricing model with the following assumptions:


		Series A Right Warrant			Series B Right Warrant
Common Stock Price as of Issuance Date		$	0.94		$	0.94
Risk-Free Rate			4.31	%		4.27	%
Dividend Rate			0.00	%		0.00	%
Volatility			88.90	%		97.19	%
Minimum Exercise Price		$	1.00		$	2.00
Maximum Exercise Price		$	2.00		$	4.00
Formula for Exercise Price			90% of the 5-day volume weighted average stock price as of the exercise date rounded down to the nearest cent, not to fall outside the range of the maximum and minimum exercise prices.

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 condensed consolidated balance sheets to become unrestricted, and available for use.

The Right Warrants are exercisable commencing on their date of issuance and the exercise price is equal to (i) in the case of the Series A Right Warrants, 90% of the 5-day volume weighted average price of 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 Common Stock over the last 5-trading days prior to the extended expiration date of the Series B Right Warrants on June 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 ($1.4 million net of fees). All of the remaining 4.85 million Series A Right Warrants expired on February 24, 2025. As of March 31, 2025, the number of Series B Right Warrants unexercised warrants amounted to 6.25 million, of which only 4.85 million can be exercised pursuant to the maximum number of shares reserved for the Rights Warrants. On April 4, 2025, the Board of Directors extended the expiration date of the Series B Right Warrants from April 10, 2025 to June 10, 2025.

Shelf Registration

On July 26, 2024, the Company filed a registration statement on Form S-3 with the Securities and Exchange Commission (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 Form S-3 with the Securities and Exchange Commission (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.

Stock-Based Compensation

The following table summarizes the Company’s stock-based compensation expense:


		Three Months Ended March 31,
Stock-based compensation expense by category		2025			2024
Stock-options		$	679,148		$	734,210
Restricted stock-units (“RSUs”)			139,278			225,255
Total stock-based compensation expense		$	818,426		$	959,465

Stock-based compensation expense was recorded as follows: $59,000, $132,000 and $627,000 in cost of goods sold, research and development, and selling, general and administrative expenses for the three months ended March 31, 2025, respectively, and $959,000 was recorded in the selling, general and administrative expenses for the three months ended March 31, 2024 within the condensed consolidated statements of operations and comprehensive loss.

Stock-options

The summary of the stock option activity for the three months ended March 31, 2025, is as follows:


							Weighted
				Weighted			Average
				Average			Remaining
				Exercise Price			Contractual
		Shares		per Share			Life (Years)
Outstanding, December 31, 2024		12,341,914		$	3.55		6.81
Granted		39,500			1.03		—
Forfeited		(46,876)			2.05		—
Expired		(34,781)			5.27		—
Outstanding, March 31, 2025		12,299,757		$	3.54		6.74

The Company estimated the fair value of stock options granted during the three months ended March 31, 2025 using a Black-Scholes pricing model, which used the following inputs:


Exercise price (per share)		$	1.01 - $1.30
Expected volatility			80.7	%
Expected term*			6 years
Risk free rate			4.01% - 4.40	%
Dividends			0	%

*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 as the difference between the market value of the shares as of March 31, 2025, of $1.00 and the exercise price of the shares.


Options Outstanding
		Number		Weighted			Weighted
Range of		Outstanding at		Average			Average		Aggregate
Exercise		March 31,		Exercise			Remaining		Intrinsic
Price		2025		Price			Life (Years)		Value
$0.84 - $13.20		12,299,757		$	3.54		6.74		$	138,015


Options Exercisable
Number		Weighted
Exercisable at		Average			Aggregate
March 31,		Exercise			Intrinsic
2025		Price			Value
6,949,591		$	4.98		$	32,038

The summary of the status of the Company’s non-vested options for the three months ended March 31, 2025 is as follows:


				Weighted
				Average
				Grant Date
		Shares		Fair Value

Non-vested, December 31, 2024		6,234,550		$	1.09
Granted		39,500		$	0.75
Forfeited		(46,876)		$	1.34
Vested		(877,008)		$	1.02
Non-vested, March 31, 2025		5,350,166		$	1.10

As of March 31, 2025, the Company had approximately $2,267,000 of total unrecognized compensation cost related to stock options which will, on average, be amortized over approximately 35 months.

Change in Control-Based RSUs

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 Amended and Restated CytoSorbents Corporation 2014 Long-Term Incentive Plan.

The following table is a summary of these restricted stock units:


		Total		Intrinsic Value
Outstanding, December 31, 2024		2,809,500		$	2,556,645
Granted		43,500			—
Vested		(35,000)			—
Forfeited		(30,500)			—
Outstanding, March 31, 2025		2,787,500		$	2,787,500

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 have ever been recorded in the Company’s condensed consolidated statements of operations and comprehensive loss.

Other RSU Awards

The following table outlines the restricted stock unit activity for the three months ended March 31, 2025:


				Weighted
				Average
				Grant Date
		Shares		Fair Value
Non-vested, January 1, 2025		641,336		$	1.31
Granted		35,000			1.03
Vested		(65,000)			0.96
Non-vested, March 31, 2025		611,336		$	1.33

As of March 31, 2025, the remaining weighted average vesting period for restricted stock awards subject to vesting was 28 months and the remaining unrecognized restricted stock unit compensation expense was $407,000.

Warrants related to the December 2023 equity offering and June 2024 Loan and Security Agreement

As of March 31, 2025, the Company had 4,352,130 warrants outstanding. 2,706,561 warrants outstanding are related to the Company’s December 13, 2023 offering, and 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 closing of the Company’s Loan and Security Agreement with Avenue Capital Group (see note 6. Long-Term Debt). 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 can be exercised into common stock.