Cytosorbents Corp New Standards Disclosure

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:

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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:

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* 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.