What changed in this filing

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Item 1A. Risk Factors

2023-03-09 compared with 2022-03-10 · 40 added, 38 removed, 386 unchanged (17% of the section changed)

10 unchanged sentences

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

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.

As of December 31, 2022, we had current assets of approximately $33.8 million, including cash, cash equivalents and restricted cash on hand of approximately $23.8 million and current liabilities of approximately $9.7 million.

For year ended December 31, 2022, 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 $35 million, which included approximately $6.3 million of capital spending and improvements related to our new manufacturing facility and corporate headquarters.

Our current and historical cash burn is not necessarily indicative of our future use of cash and cash equivalents.

We are currently well-capitalized but may require additional financing in the future in order to complete additional clinical studies and to support the commercialization of our proposed products.

We are currently adequately capitalized but will require additional financing in the future in order to complete additional clinical studies and to support the commercialization of our proposed products.

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

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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.

All of the $25 million of our total shelf amount allocated to our ATM facility was available as of December 31, 2022.

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.

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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.

On December 27, 2022, the Company drew down the first $5 million tranche of the Term C loans available under the terms of the Fourth Amendment.

On December 28, 2022 (the “Fifth Amendment Date”), the Company entered into the Fifth Amendment of its Amended Loan and Security Agreement with Bridge Bank.

The Fifth Amendment extends the draw period under the Fourth Amendment to the earlier of (i) March 1, 2023 and (ii) the occurrence of an Event of Default.

On March 9, 2023, the Company entered into the Sixth Amendment of its Amended Loan and Security Agreement.

The Sixth Amendment further extends the draw period to March 24, 2023.

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

Should the financing we require be unavailable to us, or on terms unacceptable to us when we require it, the consequences could have a material adverse effect on our business, operating results, financial condition and prospects.

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

Food and Drug Administration and other health authorities, which could result in delays of reviews and approvals, including with respect to CytoSorb and our product candidates.

Food and Drug Administration and other health authorities, which could result in delays of reviews and approvals, including with respect to DrugSorb-ATR and our product candidates.

The evolving COVID-19 pandemic has impacted and is likely to continue to directly or indirectly impact our clinical trials, including but not limited to, the anticipated completion date of these trials and the pace of enrollment in our clinical trials for at least the next several months and possibly longer as patients may avoid or may not be able to travel to healthcare facilities and physicians’ offices unless due to a health emergency and clinical trial staff can no longer get to the clinic.

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.

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

There may be new or further delays in patient enrollment in the PROCYSS and the 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.

STAR-T randomized, controlled trial and in November 2022, we temporarily paused the STAR-D trial for business reasons.

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.

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.

As of the date of this filing, our manufacturing facilities remain operational and we have resumed 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.

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 and following 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.

For example, widespread staffing shortages, decreased availability of hospital beds, fewer patients, 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 years ended December 31, 2022 and 2021, respectively, and may contribute to lower-than-expected sales of CytoSorb 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.

3 unchanged sentences

The Company estimated that approximately $0.3 million and $6.3 million of its 2022 and 2021 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.

As the pandemic continues to ease and the amount of our revenues attributable to the treatment of COVID-19 is reduced, 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 sales seasonality is affected by a number of factors, including but not limited to, hospital budgets and buying patterns, customer, employee 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.

4 unchanged sentences

With the launch of our CytoSorb product in the EU and elsewhere, there can be no assurance that we will be able to successfully manage the balance of our research and development operations with our planned commercial enterprise.

Potential investors should be aware of the problems, delays, expenses and difficulties frequently encountered by an enterprise in balancing development, which include unanticipated problems relating to testing, product registration, regulatory compliance and manufacturing, with commercialization, which includes problems with market adoption, reimbursement, marketing problems and additional costs.

Potential investors should be aware of the problems, delays, expenses and difficulties frequently encountered by an enterprise in balancing development, which include unanticipated problems relating to testing, product registration, product labeling, regulatory compliance and manufacturing, with commercialization, which includes problems with market adoption, reimbursement, marketing problems and additional costs.

Our products and product candidates will require significant additional research and testing, and we will need to overcome significant regulatory burdens prior to commercialization in other countries, such as the U.S., and for ongoing compliance for our CE Mark.

Although we believe we are currently well-capitalized, we may need to raise additional funds to complete additional clinical studies and obtain regulatory approvals in other countries before we can begin selling our products in markets not covered by our CE Mark.

In addition, we may be required to spend significant funds on building out and expanding our commercial operations.

Although we believe we are currently adequately capitalized, we will need to raise additional funds to complete additional clinical studies and obtain regulatory approvals in other countries before we can begin selling our products in markets not covered by our CE Mark.

There can be no assurance that after the expenditure of substantial funds and efforts, we will successfully develop and commercialize any products, generate any significant revenues or ever achieve and maintain a substantial level of sales of our products.

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

On September 30, 2022, Ms.

Bloch notified the Company of her intention to retire effective March 31, 2023.

A search has been initiated for Ms.

Bloch’s replacement.

Bloch and the Company expect to enter into a consulting arrangement under which Ms.

Bloch will continue to provide services to the Company in a limited capacity following the effective date of her retirement.

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.

4 unchanged sentences

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.

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

These conditions are expected to persist into 2023 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.

28 unchanged sentences

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.

34 unchanged sentences

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 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.

26 unchanged sentences

In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs and medical devices to be reviewed and/or approved by necessary government agencies as well as affect whether we receive timely payment of amounts awarded to us under grants and contracts with government agencies, including DARPA, which would adversely affect our business.

For example, over the last several years, including from December 22, 2018 until January 25, 2019, the U.S.

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If we or the third-party manufacturers of our products fail to adequately establish, supervise and conduct all aspects of the manufacturing processes, we may not be able to commercialize our products on a timely basis, or at all.

In the second quarter of 2018 we quadrupled our manufacturing capacity upon the official completion of the expansion of our CytoSorb manufacturing facility in New Jersey.

In connection with the increased demand for the CytoSorb device to treat COVID-19 patients, our commercial distribution of CytoSorb has been, and may continue to be, delayed.

Supply issues remain a potential cause of delay due to impact on COVID-19 on our material and logistics suppliers.

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 requirements.

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.

Due to our limited marketing, sales and distribution experience, we may be unsuccessful in our efforts to sell our products.

5 unchanged sentences

If for any reason any party we engage is unable or chooses not to perform its obligations under our marketing and distribution agreement, we would experience delays in product sales and incur increased costs, which would harm our business and financial results.

Weakness in the global economy, and in particular in the United States and Europe, could negatively impact our revenue and operating results.

The United States and Europe and other economies may suffer from uncertainty, volatility, disruption, and other adverse conditions, such as inflation or the rising cost of energy, and these conditions have adversely impacted and may continue to adversely impact the business community and the financial markets.

Adverse economic and financial market conditions may negatively affect our markets, thereby negatively impacting our revenue and operating results.

As a result, if economic and financial market conditions weaken or deteriorate, then our revenue and operating results, including our ability to grow and expand our business and operations, could be materially and adversely affected.

Our results of operations can be significantly affected by foreign currency fluctuations and regulations.

39 unchanged sentences

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.

For example, in response to the 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.

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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.

28 unchanged sentences

The price of our common stock has been highly volatile due to factors that will continue to affect the price of our stock.

Our common stock closed as high as $11.48 and as low as $4.05 per share between January 1, 2021 December 31, 2021 on Nasdaq.

Our common stock closed as high as $4.23 and as low as $1.03 per share between January 1, 2022 and December 31, 2022 on Nasdaq.

On March 7, 2023, the closing price of our common stock, as reported on Nasdaq, was $3.80.

42 unchanged sentences

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