What changed in this filing

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Item 1A. Risk Factors

2022-03-10 compared with 2021-03-09 · 64 added, 46 removed, 360 unchanged (23% of the section changed)

Risks Related to our Business and our Industry

We have a history of losses and expect to incur substantial future losses, and the report of our auditor on our consolidated financial statements expresses substantial doubt about our ability to continue as a going concern .

We have a history of losses and expect to incur substantial future losses.

We have experienced substantial operating losses since inception.

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We may require additional capital in the future to fund our operations.

As of December 31, 2020, we had current assets of approximately $82,453,000, including cash on hand of approximately $71,422,000 and current liabilities of approximately $10,153,000.

As of December 31, 2021, we had current assets of approximately $64,299,000, including cash, cash equivalents and restricted cash on hand of approximately $53,825,000 and current liabilities of approximately $13,690,000.

For year ended December 31, 2021, our cash burn, which we define as the total of cash used in operating and investing activities from our statement of cash flows, was approximately $18,286,000.

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There can be no assurance that we will be successful in our capital raising efforts.

The amount of long-term capital needed is expected to depend on many factors, including:

The amount of long-term capital needed is expected to depend on many factors, including but not limited to:

● rate of sales growth and adoption of our products in the marketplace;

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We have an effective shelf registration statement dated July 14, 2021 with the SEC which enables us to raise up to $150 million in one or more offerings, through the issuance and sale of any combination of equity securities, debt securities, warrants and units.

As of December 31, 2020, $50 million of the total shelf amount was allocated to our ATM facility, of which approximately $22 million remains available.

In addition, as a result of our $57.5 million July 24, 2000 equity raise, the amount remaining on the existing shelf registration statement is approximately $42.5 million.

On July 24, 2020, the Company closed the Offering of 6,052,631 shares of its common stock at a public offering price of $9.50 per share.

All of this amount is available as we have not utilized the existing shelf.

As of December 31, 2021, $25 million of the total shelf amount was allocated to our ATM facility, all of which is still available.

On July 24, 2020, the Company closed on the Offering of 6,052,631 shares of its common stock at a public offering price of $9.50 per share.

The Company completed the Offering pursuant to the terms of an Underwriting Agreement, dated as of July 21, 2020, by and among the Company and Cowen and Company, LLC and SVB Leerink LLC, as representatives of the several underwriters named therein.

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After deducting the underwriting discounts and commissions and fees and expenses payable by the Company in connection with the Offering, the Company received net proceeds of approximately $53.8 million.

On July 9, 2019 we entered into an Open Market Sale Agreement with Jefferies LLC and B.

Riley FBR, Inc., which we amended in April 2020 (as amended the “Sale Agreement”).

On December 30, 2021, we entered into an Open Market Sale Agreement with Jefferies LLC (the “Sale Agreement”).

Pursuant to the Sale Agreement we may offer to sell, from time to time, shares of our common stock, up to a maximum of $25,000,000.

During the year ended December 31, 2019, the Company sold 191,244 shares pursuant to the Sale Agreement, at an average selling price of $4.11 per share, generating net proceeds of approximately $762,000.

During the year ended December 31, 2020, the Company sold 4,110,625 shares pursuant to the Amended Sale Agreement, at an average selling price of $6.64 per share, generating net proceeds of approximately $26.5 million.

In the aggregate, the Company has sold 4,301,869 shares pursuant to the Amended Sale Agreement, at an average selling price of $6.53 per share, generating net proceeds of approximately $27.2 million.

On July 31, 2019 (the “Settlement Date”) we entered into the First Amendment to the Amended and Restated Loan and Security Agreement (the “First Amendment”) with Bridge Bank, which amended certain provisions of the Amended and Restated Loan and Security Agreement (the “Restated Loan and Security Agreement”) and the 2018 Success Fee Letter, each previously entered into by and among us and Bridge Bank on March 28, 2018.

In connection with the execution of the First Amendment, the draw period for the Term B Loan (as defined therein) was extended to August 15, 2019 and we drew down the full $5.0 million Term B Loan on the Settlement Date, bringing the total outstanding debt to $15.0 million at July 31, 2019.

On December 4, 2020, the Company closed on the Third Amendment of its Amended Loan and Security Agreement with Bridge Bank.

Under the terms of the Amendment, the Company repaid the outstanding principal balance of its existing $15 million term loans and simultaneously received a commitment from Bridge Bank to provide a new term loan of $15 million, which the Company may draw down at its discretion at any time prior to December 4, 2021.

There were no sales pursuant to the Sale Agreement during the year ended December 31, 2021.

On January 19, 2022 (the “Fourth Amendment Closing Date”), the Company closed on the Fourth Amendment (the “Fourth Amendment”) of its Amended Loan and Security Agreement with Bridge Bank.

Under the terms of the Amendment, the Company received a commitment from Bridge Bank to provide a new term loan of up to $15 million, if needed until December 31, 2022.

Despite the foregoing, we may require additional financing in the future.

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On March 11, 2020, the World Health Organization declared the outbreak a pandemic.

The COVID-19 pandemic is affecting the United States and global economies has affected and is likely to continue to affect our operations and those of third parties on which we rely, including by causing disruptions in our raw material supply, the manufacturing of our lead product, CytoSorb, the commercialization of CytoSorb, and the conduct of current and future clinical trials.

The COVID-19 pandemic is affecting the United States and global economies and is likely to continue to affect our operations and those of third parties on which we rely, including by causing disruptions in our global supply chain, our ability to obtain raw materials, the manufacturing of and short-term demand for our lead product, CytoSorb, the commercialization of CytoSorb, our research and development activities and the conduct of current and future clinical trials.

In addition, the COVID-19 pandemic has affected and is likely to continue to affect the operations of the U.S.

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Such facilities and offices have and may continue to be required to focus limited resources on non-clinical trial matters, including treatment of COVID-19 patients, and may not be available, in whole or in part, for clinical trial services.

In particular, due to delays resulting from impacts of the COVID-19 pandemic, analysis of the study data and issuance of the study report for the 250 patient, multi-center randomized, controlled study (“REMOVE”) using CytoSorb during valve replacement open heart surgery in patients with infective endocarditis is now anticipated to be completed in mid-2021(rather than by mid-2020 that we initially anticipated), with top-line data potentially this quarter, and there may be further delays in patient enrollment in the REFRESH 2, TISORB, and CYTATION clinical trials.

There may be new or further delays in patient enrollment in the PROCYSS, Hep-On-Fire and STAR clinical trials.

For example, in April 2021 we stopped the TISORB single arm study due to continued delays and poor enrollment caused by the COVID-19 pandemic in the U.K., in favor of redirecting those resources to the U.S.

STAR-T randomized, controlled trial.

In addition, employee disruptions and remote working environments related to the COVID-19 pandemic and the federal, state and local responses to such virus, could materially impact the efficiency and pace with which we work and develop our product candidates, our ability to execute and invoice upon government grants and contracts, and the manufacturing of CytoSorb.

Further, while the potential economic impact brought on by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity.

As of the date of this filing, our manufacturing facilities remain operational and we have resumed certain research and development activities that were temporarily suspended as a result of the COVID-19 pandemic, however we have experienced, and may continue to experience, challenges in hiring necessary staff members to conduct our research and development activities, including technical staff.

We have also experienced, and may continue to experience, disruptions in our blood supply used for research purposes and we cannot predict when this supply will stabilize.

Further, while the potential economic impact brought on by,

and the duration of, the COVID-19 pandemic is difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity.

Additionally, the stock market has been unusually volatile during the COVID-19 outbreak and such volatility may continue.

Macro factors have impacted, and may continue to negatively impact, our critical care and cardiac surgery markets, including in certain geographies such as Germany.

For example, increased hospital restrictions resulting in decreased access of our sales representatives to hospitals and fewer sales meetings with physicians resulted in lower-than-expected sales of CytoSorb during the year ended December 31, 2021 and may contribute to lower-than-expected sales of CytoSob in the future.

To date, during certain periods of the COVID-19 pandemic, our stock price fluctuated significantly, and such fluctuation will likely continue to occur.

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However, these effects could have a material impact on our liquidity, capital resources, operations and business and those of the third parties on which we rely.

In 2020, the Company estimated that approximately $9.4 million of its product sales were related to the treatment of COVID-19 patients.

Should the pandemic ease, it is uncertain whether the Company will be able to replace some or all of this revenue in 2021.

The Company estimated that approximately $6.3 million and $9.4 million of its 2021 and 2020 product sales, respectively, were related to the treatment of COVID-19 patients.

As the pandemic continues to ease, it is uncertain whether the Company will be able to replace some or all of this revenue in the future.

Our operating results are subject to seasonal fluctuation.

Our total revenue and product sales are subject to seasonal fluctuation.

Our sales seasonality is affected by a number of factors, including but not limited to, hospital budgets and buying patterns, customer and healthcare worker vacation schedules, religious, national, and state holidays, scientific and medical conference schedules, seasonal illnesses such as influenza, seasonal or weather-related differences in hospital admissions and the timing of insurance benefits, among others.

Our normal seasonality cycle has also been impacted by the COVID-19 pandemic and related events, making it more difficult to predict and determine a more consistent seasonality trend.

See “A pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, may materially and adversely affect our business and operations.” As a result, seasonality has had, and we expect it to continue to have, an impact on our results of operations.

Although historically we have been a research and development company, we are in the process of commercializing our products.

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Bloch, Chief Financial Officer.

Each of the agreements has an initial term of three years, and was retroactively effective as of January 1, 2019.

Each of the agreements had an initial term of three years and were retroactively effective as of January 1, 2019.

On April 12, 2020, CytoSorbents Corporation entered into an executive employment agreement with Dr.

Efthymios Deliargyris, who began employment as Chief Medical Officer on May 1, 2020, with an initial term that expires on December 31, 2021.

After the expiration of the initial terms, the employment agreements will automatically renew for additional terms of one year unless either party provides written notice of non-renewal at least 60 days prior to a renewal.

After the expiration of the initial terms, the employment agreements automatically renew for additional terms of one year unless either party provides written notice of non-renewal at least 60 days prior to a renewal.

The employment agreements for the Named Executive Officers above have automatically renewed for another year term.

There can be no assurance that key management personnel or other members of our management team and advisors will continue to provide services to us.

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Management and other employees may voluntarily terminate their employment with us at any time.

Additionally, the increasing demand for qualified personnel may make it more difficult for us to attract and retain qualified employees.

Changing demographics and labor work force trends may make it difficult for us to replace departing employees at our manufacturing and other facilities and we may experience increased turnover rates.

labor market conditions are currently challenging and labor shortages have been exacerbated by the COVID-19 pandemic.

These conditions are expected to persist into 2022

and may lead to higher labor costs.

If we fail to attract and retain qualified personnel, or if we experience labor shortages, we may experience higher costs and other difficulties.

The loss of services of key personnel, or the inability to attract and retain additional qualified personnel, could result in delays in development or approval of our products, loss of sales and diversion of management resources.

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Changes in the patent laws, implementing regulations or interpretation of the patent laws in the United States and other countries may also diminish the value of our patents or narrow the scope of our patent protection.

The laws of foreign countries may not protect our rights to the same extent as the laws of the United States, and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions.

The laws of foreign countries may not protect

our rights to the same extent as the laws of the United States, and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions.

We cannot be certain that our patents and patent rights will be effective in protecting our products, product candidates and technologies.

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It is manufactured at our manufacturing facility in New Jersey under ISO 13485 Full Quality Systems certification.

The manufacturing and marketing of our products will be subject to extensive and rigorous government regulation in the EU, as well as in the U.S.

The manufacturing and marketing of our products is subject to extensive and rigorous government regulation in the EU, as well as in the U.S.

and in other countries.

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There can be no assurance that we will ever obtain the necessary additional approvals to sell our products in the United States or other non-EU countries.

Even if we do ultimately receive FDA approval or clearance for any of our products, we will be subject to extensive ongoing regulation.

Even if we do ultimately receive FDA approval or clearance for any of our

products, we will be subject to extensive ongoing regulation.

While we have received approval from our notified body to apply the CE mark to our CytoSorb device, we will be subject to extensive ongoing regulation and auditing requirements to maintain the CE mark.

Our products will be subject to international regulation as medical devices under the Medical Devices Directive.

Our products are subject to international regulation as medical devices under the Medical Devices Directive and, once our CE Mark under MDD expires in May 2024 will be subject to the new European Union Medical Device Regulation ("MDR").

In Europe, which we expect to provide the initial market for our products, the notified body and Competent Authority govern, where applicable, development, clinical studies, labeling, manufacturing, registration, notification, clearance or approval, marketing, distribution, record keeping, and reporting requirements for medical devices.

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If we fail to maintain the CE Mark in the European Union, we will not be able to commercially sell and market CytoSorb.

In March 2011, CytoSorb, was “CE marked” in the EU as an extracorporeal cytokine filter indicated for use in clinical situations where cytokines are elevated, allowing for commercial marketing.

In March 2011, CytoSorb, was “CE marked” in the EU as an extracorporeal cytokine adsorber indicated for use in clinical situations where cytokines are elevated, allowing for commercial marketing.

The CE Mark demonstrates that a conformity assessment has been carried out and the product complies with the Medical Devices Directive.

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Further, in our operations as a public company, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

Clinical study results for our CytoSorb device may not be indicative of our future clinical study results, and we cannot assure you that any clinical study results will lead to results sufficient for necessary regulatory clearances or product sales.

Clinical study results for our CytoSorb and/or DrugSorb-ATR device may not be indicative of our future clinical study results, and we cannot assure you that any clinical study results will lead to results sufficient for necessary regulatory clearances or product sales.

Additionally, clinical and pre-clinical data is susceptible to varying interpretations, which could delay, limit, reduce, or prevent additional regulatory clearances or product sales.

To date, we have conducted limited clinical studies on our CytoSorb product.

To date, we have conducted limited clinical studies on our CytoSorb and DrugSorb-ATR product.

There can be no assurance that we will successfully complete additional clinical studies or that our current or future clinical studies will lead to results necessary to receive additional regulatory approvals in markets not covered by the CE Mark.

While clinical studies conducted by us and others have produced results we believe to be encouraging, data already obtained, or in the future obtained, from pre-clinical studies and clinical studies do not necessarily predict the results that will be obtained from later pre-clinical studies and clinical studies.

CytoSorb and our other products and product candidates may fail to show the desired safety and efficacy in clinical development despite positive results in previous studies, which could result in decreased sales of our products and product candidates and have an adverse effect on our business and results of operations.

CytoSorb, DrugSorb-ATR and our other products and product candidates may fail to show the desired safety and efficacy in clinical development despite positive results in previous studies, which could result in decreased sales of our products and product candidates and have an adverse effect on our business and results of operations.

Moreover, pre-clinical and clinical data are susceptible to varying interpretations, which could delay, limit or prevent additional regulatory approvals in markets not covered by the CE Mark.

A number of companies in the medical device and pharmaceutical industries have suffered significant setbacks in advanced clinical studies, even after promising results in earlier studies.

The failure to adequately demonstrate the safety and effectiveness of CytoSorb or another product under development could delay or prevent regulatory clearance of the device, resulting in delays to commercialization, and could materially harm our business and results of operations.

Even though we have received approval to apply the CE Mark to our CytoSorb device as a cytokine adsorber, there can be no assurance that we will be able to receive approval under the MDR for other potential applications of CytoSorb, or that we will receive regulatory clearance from authorities in other targeted regions or countries.

The failure to adequately demonstrate the safety and effectiveness of CytoSorb, DrugSorb-ATR or another product under development could delay or prevent regulatory clearance of the device, resulting in delays to commercialization, and could materially harm our business and results of operations.

Even though we have received approval to apply the CE Mark to our CytoSorb device as a cytokine adsorber, there can be no assurance that we will be able to receive approval under the MDR for other potential applications of CytoSorb, or that we will receive regulatory clearance or marketing approval from authorities in other targeted regions or countries.

We rely extensively on research and testing facilities at various universities and institutions, which could adversely affect us should we lose access to those facilities.

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We have limited manufacturing experience and capabilities, we may not be able to manufacture sufficient quantities at an acceptable cost or quality, or without shut-downs or delays.

In March 2011, we received approval from our notified body to apply the CE Mark to our CytoSorb device for commercial sale as a cytokine filter.

In March 2011, we received approval from our notified body to apply the CE Mark to our CytoSorb device for commercial sale as a cytokine adsorber.

We also achieved ISO 13485:2003 Full Quality Systems certification, and have since upgraded to ISO 13485:2016 Full Quality Systems certification, an internationally recognized quality standard designed to ensure that medical device manufacturers have the necessary comprehensive management systems in place to safely design, develop, manufacture and distribute medical devices in the EU.

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In an attempt to reduce such delays, we have scaled, and preordered materials where possible to minimize disruptions in supply and will likely need to continue to scale up and increase our manufacturing capabilities in the future.

To the extent we are required to expand our manufacturing capabilities, including the use of new or additional manufacturing facilities, our production may be delayed as we seek compliance with regulatory requirments.

No assurance can be given that we will be able to successfully source or leverage new manufacturing facilities or, once sourced, scale up such manufacturing facilities, and do so at an acceptable cost or quality, or that we will have sufficient financial or technical resources to do so on a timely basis or at all.

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Interruptions in international relationships such as the recent exit by the U.K.

from the EU, and trade disputes such as the current trade negotiations between the U.S.

and China, could result in changes to regulations governing our products and our intellectual property, disruption of our manufacturing or commercial operations, or otherwise affect our ability to do business.

Additionally, global events such as the current COVID-19 coronavirus pandemic, that slow worldwide economies, disrupt travel and trade, and destabilize financial markets, may interfere with our ability to raise capital, sell and market our products, obtain reimbursement and payment of our products, or reduce the ability of our customers to pay for our product.

from the EU, or the rapidly evolving conflict between Russia and Ukraine, and trade disputes such as the current trade negotiations between the U.S.

and China, could result in changes to regulations governing our products and our intellectual property, disruption of our manufacturing or commercial operations, our inability to timely engage with and collect payment from customers in Russia and other affected regions, or otherwise affect our ability to do business.

Additionally, global events such as the current COVID-19 coronavirus pandemic and the conflict in Ukraine, that have or could, slow worldwide economies, disrupt travel and trade, and destabilize financial markets, may interfere with our ability to raise capital, sell and market our products, obtain reimbursement and payment of our products, or reduce the ability of our customers to pay for our product.

Although these global problems transcend our company and afflict companies across industries and borders, these and similar events could adversely affect us, or our business partners or customers.

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Involvement in a war or other military action or international acts of terrorism may cause significant disruption to commerce throughout the world.

inability to access capital markets, our business and results of operations could be materially and adversely affected.

We are unable to predict whether acts of international terrorism or the involvement in a war or other military actions by the United States and/or the countries in which we sell our products will result in any long-term commercial disruptions or if such involvement or responses will have any long-term material adverse effect on our business, results of operations, or financial condition.

To the extent that such disruptions result in (i) delays or cancellations of customer orders, (ii) a general decrease in consumer spending on healthcare technology, (iii) our inability to effectively market and distribute our products globally (iv) our inability to timely engage with and collect payment from our customers or (v) our inability to access capital markets, our business and results of operations could be materially and adversely affected.

For example, in response to the rapidly developing conflict between Russia and Ukraine, the United States has imposed and may further impose, and other countries may additionally impose, broad sanctions or other restrictive actions against governmental and other entities in Russia.

CytoSorb is currently distributed in Russia.

While the existing sanctions do not currently prohibit the distribution of CytoSorb in Russia, additional sanctions may be imposed in the future that could prevent us from selling CytoSorb in this or other affected regions.

Additionally, further escalation of geopolitical tensions could have a broader impact that extends into other markets where we do business.

We are unable to predict whether acts of international terrorism or the involvement in a war or other military actions by the United States and/or the countries in which we sell or distribute our products, including Russia, will result in any long-term commercial disruptions or if such involvement or responses will have any long-term material adverse effect on our business, results of operations, or financial condition.

We could be adversely affected by violations of the Foreign Corrupt Practices Act and similar worldwide anti-bribery laws.

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In the ordinary course of our business, we generate, collect and store proprietary information, including intellectual property and business information, as well as employee personal data.

The secure storage, maintenance, and transmission of and access to this information is important to our operations our day-to-day business and our reputation.

The secure storage, maintenance, and transmission of and access to this

information is important to our operations our day-to-day business and our reputation.

Security breaches have become more common across industries.

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Further, we may not be immediately aware of any unpermitted access by hacker or other breaches and we may be unable to quickly and effectively remediate any such breaches.

Any such compromise of our data security and access to,

or public disclosure or loss of, confidential business or proprietary information could disrupt our operations, damage our reputation, provide our competitors with valuable information, and subject us to additional costs which could adversely affect our business.

Any such compromise of our data security and access to, or public disclosure or loss of, confidential business or proprietary information could disrupt our operations, damage our reputation, provide our competitors with valuable information, and subject us to additional costs which could adversely affect our business.

Our failure to comply with data protection laws and regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.

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announcements of product releases by us or our competitors;

● announcements of clinical data, analyst or media reports;

announcements of acquisitions and/or partnerships by us and our competitors;

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Future sales of our common stock may cause our share price to fall.

On July 9, 2019 we entered into an Open Market Sale Agreement with Jefferies LLC and B.

Riley FBR, Inc., which we amended in April 2020 (as amended the “Sale Agreement”).

On December 30, 2021 we entered into an Open Market Sale Agreement with Jefferies LLC (the “Sale Agreement”).

Pursuant to the Sale Agreement we may offer to sell, from time to time shares of our common stock through “at-the-market” offerings, up to a maximum of $25,000,000.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors