What changed in this filing

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Item 1A. Risk Factors

2024-03-15 compared with 2023-03-09 · 43 added, 42 removed, 384 unchanged (18% of the section changed)

9 unchanged sentences

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.

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

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

As of December 31, 2023, we had current assets of approximately $25.7 million, including cash, cash equivalents and restricted cash on hand of approximately $15.6 million and current liabilities of approximately $14.5 million.

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

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.

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;

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 our research and development programs;

● progress and costs associated with pre-clinical studies and clinical studies;

● 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 related to business development activities;

● costs of developing sales, marketing and distribution channels;

● market acceptance and reimbursement of our products;

● cost for training physicians and other health care personnel.

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

and cost for training physicians and other health care personnel.

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.

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

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.

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.

The Company received gross proceeds of approximately $57.5 million from the Offering.

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.

Approximately $135.0 million of this amount was available as of December 31, 2023.

We have also allocated $25 million of our total shelf amount to our ATM facility.

As of December 31, 2023, approximately $20.3 million was available for use under the ATM facility.

On December 13, 2023, the Company closed on a registered direct offering for the sale, directly to investors, of 7,733,090 registered shares of common stock and warrants to purchase up to 2,706,561 shares of common stock (the “Offering”).

Each share of common stock and accompanying warrant to purchase up to 0.35 shares of common stock, were sold together for a combined purchase price of $1.33, for an aggregate purchase price of approximately $10,285,000.

After deducting transaction fees and expenses payable by the Company in connection with the Offering, the Company received net proceeds of approximately $9,785,000, excluding any proceeds that may be received upon the exercise of the warrants.

Each warrant is immediately cash exercisable at an exercise price of $2.00 per share and will expire on the fifth anniversary of the issue date.

The Company’s executive officers, directors, and certain non-executive officer employees of the Company also participated in the Offering with a combined investment of $435,000.

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, 2023, the Company sold 2,656,464 shares pursuant to the Sale Agreement, at an average selling price of $1.76 per share, generating net proceeds of approximately $4,532,000.

There were no sales pursuant to the Sale Agreement during the year ended December 31, 2022.

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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.

In addition, in the event that additional funds are obtained through arrangements with collaborative partners or other non-dilutive sources, we may have to relinquish economic and/or proprietary rights to some of our technologies or products under development that we would otherwise seek to develop or commercialize by ourselves.

Such events may have a material adverse effect on our business, operating results, financial condition and prospects.

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

Therefore, no further draws are available as of the date of this filing.

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.

A pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, may materially and adversely affect our business and operations.

The outbreak of COVID-19 originated in Wuhan, China in December 2019 and has since spread around the globe.

As an example, outbreak of COVID-19 originated in Wuhan, China in December 2019 and has since spread around the globe.

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 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.

The COVID-19 pandemic affected the United States and global economies with lingering effects that can 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.

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.

The evolving COVID-19 pandemic has impacted and may 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 nts 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.

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

STAR-T randomized, controlled trial and in November 2022 and recently, we terminated 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 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.

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.

6 unchanged sentences

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.

The Company did not have any COVID-19 related sales in 2023.

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.

48 unchanged sentences

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.

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.

The employment agreements for the Named Executive Officers above have automatically renewed for another one-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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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”).

Our products are subject to international regulation as medical devices under the Medical Devices Directive and, once our CE Mark under MDD expires in December 2028 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.

9 unchanged sentences

A re-certification audit was conducted in April 2019.

The successful completion of this audit CE-certifies CytoSorb under the current Medical Device Directive (93/42/EEC) until May 2024.

The successful completion of this audit CE-certifies CytoSorb under the current Medical Device Directive (93/42/EEC) until December 2028.

Prior to the expiration of such certificate, we will apply for certification under the new Medical Devices Regulation (MDR).

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These entities represent significant competition for us.

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.

For the year ended December 31, 2022, we derived a majority of our net product sales from sales in Germany.

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 year ended December 31, 2023, we derived approximately 42% 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.

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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.

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.

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.

4 unchanged sentences

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

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.

from the EU, or the war 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.

Additionally, global events such as the current COVID-19 coronavirus pandemic, war between Russia and Ukraine, and the Israel-Hamas war, 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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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.

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.

60 unchanged sentences

● announcements of clinical data, analyst or media reports;

● financial status:

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

34 unchanged sentences

Although any sale of securities pursuant to the “at-the-market” offerings will result in a concomitant increase in cash for each share sold, it may result in shareholder dilution and may cause our share price to fall.

Unresolved Staff Comments.

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