STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2022

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

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.

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:

				Weighted
		Weighted		Average
		Average		Remaining
		Exercise Price		Contractual
	Shares	per Share		Life (Years)
Outstanding, December 31, 2021	6,885,978	$	7.09	7.15
Granted	2,674,055	$	2.00	—
Forfeited	(1,221,475)	$	8.77	—
Expired	(162,668)	$	8.14	—
Exercised	—	$	—	—
Outstanding, September 30, 2022	8,175,890	$	5.15	7.17

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.

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.

Options Outstanding
	Number	Weighted		Weighted
Range of	Outstanding at	Average		Average	Aggregate
Exercise	September 30,	Exercise		Remaining	Intrinsic
Price	2022	Price		Life (Years)	Value
$1.39 - $13.20	8,175,890	$	5.15	7.17	$	—

Options Exercisable
Number	Weighted
Exercisable at	Average		Aggregate
September 30,	Exercise		Intrinsic
2022	Price		Value
4,611,352	$	6.36	$	—

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

		Weighted
		Average
		Grant Date
	Shares	Fair Value
Non-vested, December 31, 2021	2,994,846	$	4.68
Granted	2,674,055	$	1.21
Forfeited	(1,221,475)	$	8.77
Vested	(882,888)	$	3.74
Non-vested, September 30, 2022	3,564,538	$	2.13

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

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.

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

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

	Restricted Stock Units
	Board of	Executive	Other
	Directors	Management	Employees	Total	Intrinsic Value
December 31, 2021	277,200	724,500	1,709,500	2,711,200	$	11,359,928
Granted	69,300	55,000	339,250	463,550
Forfeited	—	—	(235,750)	(235,750)
September 30, 2022	346,500	779,500	1,813,000	2,939,000	$	3,997,040

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

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:

		Weighted
		Average
		Grant Date
	Shares	Fair Value
Non-vested, December 31, 2021	304,962	$	8.08
Granted	288,500	$	1.95
Vested	(235,120)	$	5.38
Forfeited	(45,000)	$	8.35
Non-vested, September 30, 2022	313,342	$	4.42