What changed in this filing

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Item 1A. Risk Factors

2023-11-09 compared with 2023-08-01 · 45 added, 2 removed, 14 unchanged (77% of the section changed)

Risk Factors.

For a discussion of risks that affect the Company’s business, please refer to Part I, Item IA, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 9, 2023, as supplemented by the following additional risk factor, which shall be deemed to replace, in its entirety, the risk factor in our Annual Report on Form 10-K entitled, “ We have a history of losses and expect to incur substantial future losses .”

For a discussion of risks that affect the Company’s business, please refer to Part I, Item IA, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 9, 2023, as supplemented by the following additional risk factors, which shall be deemed to replace, in their entirety, the following respective risk factors in our Annual Report on Form 10-K:

“ We have a history of losses and expect to incur substantial future losses .”, “ Our business could be harmed by adverse economic conditions in Germany, our primary geographical market, or by economic and/or political instability in the EU or elsewhere caused by Brexit, trade conflicts, or other factors.

”, “ Our business may be negatively affected if the United States and/or the countries in which we sell our products participate in wars, military actions or are otherwise the target of international terrorism .” and “ We may require additional capital in the future to fund our operations .”

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 experienced substantial operating losses since inception.

As of June 30, 2023, we had an accumulated deficit of approximately $267,477,000, which included net losses of approximately $6,153,000 and $10,879,000 for the three months ended June 30, 2023 and 2022, respectively, and included net losses of approximately $13,479,000 and $19,846,000 for the six months ended June 30, 2023 and 2022, respectively.

As of September 30, 2023, we had an accumulated deficit of approximately $276,670,000, which included net losses of approximately $9,914,000 and $12,201,000 for the three months ended September 30, 2023 and 2022, respectively, and included net losses of approximately $22,672,000 and $32,046,000 for the nine months ended September 30, 2023 and 2022, respectively.

Due in part to these losses, our audited consolidated financial statements have been prepared assuming we will continue as a going concern, and the auditors’ report on those financial statements express substantial doubt about our ability to continue as a going concern.

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Our failure with respect to any or all of these matters would have a material adverse effect on our business, operating results, financial condition and prospects.

Our business could be harmed by adverse economic conditions in Germany, our primary geographical market, or by economic and/or political instability in Germany, the EU or elsewhere caused by various factors.

For the nine months ended September 30, 2023, we derived approximately 40% of our net product sales from sales in Germany.

Despite modest European and global growth, there are many economic and political issues that could negatively impact the health of Germany’s economy, the broader EU economy, and the world economy overall.

Examples include the uncertainty over the implications of the United Kingdom’s exit from the EU, also known as “Brexit,” economic instability in a number of EU member countries, and changes

in the political leadership in the EU and United States.

Germany and other European countries face additional risks to their local economies, some of which include the impact of foreign exchange fluctuations, unemployment, tightening of monetary policy, the economic burden of immigration, diminished liquidity and reliance on debt, the rising cost of healthcare, and other factors.

In addition, the German government, insurance companies, health maintenance organizations and other payers of healthcare costs continue to focus on healthcare reform and containment of healthcare costs.

For example, German state and federal governments are considering hospital reforms which would de-emphasize the direct related group payment systems and instead emphasize base payments focused on quality measures and appropriate patient care.

These discussions are preliminary, and because the ultimate scope, implementation and timing of these reforms remains uncertain, we cannot accurately predict the impact that such reforms may have on our business or our results of operations.

Furthermore, we cannot predict whether Germany’s economy will continue to grow or decline consistent with the overall global economy, which decline would negatively impact the demand for medical devices and healthcare technologies generally and lead to reduced spending on the products we provide.

In addition, continued healthcare cost containment efforts may result in lower prices and a reduction or elimination of reimbursement for our products.

Due to the concentration of our product sales in this country, any of the foregoing may have a negative impact on our revenues, business operations and financial condition.

Our business may be negatively affected if the United States and/or the countries in which we sell our products participate in wars, military actions or are otherwise the target of international terrorism.

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

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 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 or new conflicts, such as the evolving conflict between Israel and Gaza and the surrounding areas, 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 will require additional capital in the future to fund our operations.

As of September 30, 2023, the Company had cash on hand of approximately $10.0 million, which includes approximately $8.4 million of cash and cash equivalents and $1.7 million of restricted cash, current assets of approximately $19.3 million and current liabilities of approximately $12.0 million.

The Company will require additional financing in the future to support the commercialization of its products and proposed products, to initiate and complete new additional clinical studies, and for general working capital purposes.

If the Company were to obtain such additional financing through equity financing, the current ownership interest of its stockholders would be diluted and there can be no assurance that the Company will be successful in its capital raising efforts.

Should the financing the Company requires be unavailable to the Company, or on terms unacceptable to the Company when the Company requires it, the consequences could have a material adverse effect on the Company’s business, operating results, financial condition and prospects.

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

● rate of sales growth and adoption of the Company’s products in the marketplace;

● product gross margin;

● continued progress and cost of the Company’s research and development programs;

● progress with and cost of the Company’s pre-clinical studies and clinical studies;

● the time and costs involved in obtaining regulatory clearance in other countries and/or for other indications;

● costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims;

● costs of developing sales, marketing and distribution channels;

● market acceptance and reimbursement of the Company’s products;

and cost for training physicians and other health care personnel.

The Company has an effective shelf registration statement with the SEC which enables it to raise up to $105 million in equity financing, after giving effect to this Offering.

In addition, on December 30, 2021, the Company entered into an Open Market Sale Agreement with Jefferies LLC for the offer and sale of up to an aggregate of $25,000,000 of shares of the Company’s common stock.

During the three months ended June 30, 2023, the Company sold a total of 230,605 shares of its common stock at an average price of $3.47 per share, under the terms of the Open Market Sale Agreement, generating net proceeds of approximately $776,000.

The Company is currently evaluating various financing alternatives, including debt financing, strategic partnerships and other non-equity financing arrangements, including royalty financing.

While there can be no assurance that the Company will be successful in obtaining alternative non-equity financing, if such financing is obtained through arrangements with collaborative partners or other non-dilutive sources, such as royalty financing, the Company may have to relinquish economic and/or proprietary rights to some of its technologies or products under development that it would otherwise seek to develop or commercialize itself.

Such events may have a material adverse effect on the Company’s business, operating results, financial condition and prospects.

Unregistered Sales of Equity Securities and Use of Proceeds.

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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-Q

Item 1A. Risk Factors