What changed in this filing

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Item 1A. Risk Factors

2025-03-31 compared with 2024-03-15 · 117 added, 65 removed, 362 unchanged (33% of the section changed)

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We have experienced substantial operating losses since inception.

As of December 31, 2023, we had an accumulated deficit of approximately $282,505,000, which included net losses of approximately $28,507,000, $32,813,000 and $24,559,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

As of December 31, 2024, we had an accumulated deficit of approximately $304.0M, which included net losses of approximately $20.7M and $29.2M for the years ended December 31, 2024 and 2023, respectively.

Our losses have resulted principally from costs incurred in the research and development of our polymer technology, clinical studies and general and administrative expenses.

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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.

For year ended December 31, 2023, 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 $22.6 million, which included approximately $0.5 million of capital spending and improvements related to our new manufacturing facility and corporate headquarters.

As of December 31, 2024, we had current assets of approximately $21.9 million, including cash and cash equivalents of $3.3 million and current liabilities of approximately $9.8 million.

For the year ended December 31, 2024, 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 $15.1 million.

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

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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.

We have an effective shelf registration statement dated September 30, 2024 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.

Approximately $149.7 million of this amount was available as of December 31, 2024.

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.

A December 31, 2024, approximately $19.4 million was available for use under the ATM facility.

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

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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.

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.

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 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.

During the year ended December 31, 2024, the Company sold 382,823 shares pursuant to the Sale Agreement, at an average selling price of $1.04 per share, generating net proceeds of approximately $388,000.

In June 2024, we closed on a $20 million term-loan facility with Avenue Capital Group which provided an initial tranche of $15 million at the closing, of which $10 million was immediately available at closing and $5 million that remained classified as restricted cash through January 10, 2025, when it was released from its restriction.

Another tranche of $5 million may be disbursed at the Company’s request between July 1, 2025 and December 31, 2025, provided that the Company receives FDA marketing approval of its DrugSorb-ATR application.

Concurrently with the closing of the first tranche, the Company paid off our existing debt with Bridge Bank.

On January 10, 2025, we closed the subscription period of its previously announced shareholder Rights Offering (the “Rights Offering”), raising aggregate gross proceeds of $6.25 million from the sale of all 6.25 million Units reserved for the Rights Offering.

Participants in the Rights Offering received Units, each Unit comprising of one share of common stock of the Company, one Series A Right Warrant to purchase one share of common stock, and one Series B Right Warrant to purchase one share of common stock.

The Right Warrants, as discussed below, will provide additional opportunity to purchase up to an additional 6,250,000 shares of common stock.

Proceeds from the Rights Offering satisfied the second condition of a debt covenant which now allows for the $5.0 million of restricted cash on our consolidated balance sheet to become unrestricted, and available for use.

The Right Warrants are exercisable commencing on their date of issuance and the exercise price shall be equal to (i) in the case of the Series A Right Warrants, 90% of the 5-day volume weighted average price of our Common Stock over the last 5-trading days prior to the expiration date of the Series A Right Warrants on February 24, 2025, rounded down to the nearest whole cent but (x) not lower than $1.00 and (y) not higher than $2.00, and (ii) in the case of the Series B Right Warrants, 90% of the 5-day volume weighted average price of our common stock over the last 5-trading days prior to the expiration date of the Series B Right Warrants on April 10, 2025, rounded down to the nearest whole cent but (x) not lower than $2.00 and (y) not higher than $4.00.

On February 24, 2025, approximately 1.4 million Series A Right Warrants were exercised by holders, including members of management and the Board of Directors, at an exercise price of $1.13 per warrant, providing an additional $1.6 Million in aggregate gross proceeds.

As of the issuance date of this Annual Report on Form 10-K, we have raised a total of $7.3 million, net of offering fees, through the Rights Offering, and the exercise of the Series A Right Warrants.

The equity raises also provided for $5 million of restricted cash to become unrestricted.

As a result, our proforma unrestricted cash and cash equivalents, a non-GAAP measure, on December 31, 2024, assuming the net proceeds from the Rights Offering and the Series A Right Warrant exercise had occurred at that date, has increased by $12.3 million to $15.6 million, compared to the reported amount of $3.3 million

The Company will continue 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.

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

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 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.

A pandemic, epidemic or outbreak of an infectious disease may materially and adversely affect our business and operations.

As an example, an outbreak of an infectious disease could originate and spread rapidly, affecting global economies.

Such an event could

cause disruptions in our global supply chain, our ability to obtain raw materials, the manufacturing of and demand for our lead product, CytoSorb, the commercialization of CytoSorb, our research and development activities, and the conduct of current and future clinical trials.

It could also 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 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.

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 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.

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, 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.

The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change.

We do not yet know the full extent of potential delays or impacts on our business, financing or clinical trial activities or on healthcare systems or the global economy as a whole.

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.

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.

Such an event may impact 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, as patients may avoid or may not be able to travel to healthcare facilities and physicians’ offices, and clinical trial staff may experience disruptions.

Such facilities and offices may be required to focus limited resources on other matters, and may not be available, in whole or in part, for clinical trial services.

There may be delays in patient enrollment in our clinical trials.

In addition, employee disruptions and remote working environments related to such an event and the federal, state and local responses to it, 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.

We may experience challenges in hiring necessary staff members to conduct our research and development activities, including technical staff.

Further, the potential economic impact brought on by, and the duration of, such an event is difficult to assess or predict, but could impact the global financial markets and reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity.

Additionally, the stock market may experience volatility, and macro factors may impact our critical care and cardiac surgery markets, including in certain geographies.

The ultimate impact of such an event is highly uncertain and subject to change.

Our operating results are subject to seasonal fluctuation.

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

Our total revenue is 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, 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.

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.

See “A pandemic, epidemic or outbreak of an infectious disease 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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CytoSorb is currently reimbursed in Germany under government-funded insurance, and in other countries may be covered under the diagnosis-related group (“DRG”), or “lump sum payment” reimbursement, or other generalized reimbursement for acute care medical products.

See “Risk Factors ― “ 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.

” We are continuously working to obtain or improve upon the type and amount of reimbursement available to us in countries where CytoSorb is available, and as we attempt to move from an existing reimbursement platform to a new reimbursement platform, we may experience interruptions and/or reductions in the amount available for reimbursement.

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We depend upon key personnel who may terminate their employment with us at any time.

As of March 5, 2024, we had 186 full-time and part-time employees as well as several consultants and temporary employees.

As of the issuance date of this Annual Report on Form 10-K, we had 149 full-time and part-time employees as well as several consultants and temporary employees.

Our success will depend to a significant degree upon the continued services of our key management team and advisors, including, Dr.

Phillip Chan, our Chief Executive Officer;

Bloch, our Chief Financial Officer;

Mariani, our Chief Financial Officer;

Vincent Capponi, our President and Chief Operating Officer and Dr.

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Bloch, Chief Financial Officer.

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

Each agreement 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.

On August 14, 2024, CytoSorbents Corporation entered into an executive employment agreement with Peter J.

Mariani, who began employment as Chief Financial Officer on August 14, 2024 following the retirement of former CFO Kathy Bloch, with an initial term that expires on December 31, 2025.

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.

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We may be unable to recruit such personnel on a timely basis, if at all.

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

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.

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As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain.

Our pending and future patent applications may not result in patents being issued, and even if issued, the patents may not meaningfully protect our products or product candidates, effectively prevent competitors and third parties from commercializing competitive products or otherwise provide us with any competitive advantage.

from commercializing competitive products or otherwise provide us with any competitive advantage.

Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative products in a non-infringing manner.

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The Settlement Agreement provides us with the exclusive right to use our patented technology and proprietary know how relating to adsorbent polymers for a period of 18 years.

Under the terms of the Settlement Agreement, we have agreed to pay Purolite royalties of 2.5% to 5% on the sale of certain of our products through 2024, after which time no royalties will be due under this settlement agreement.

Under the terms of the Settlement Agreement, we have agreed to pay Purolite royalties of 2.5% to 5% on the sale of certain of our products through August 2024, after which time no royalties are due under this settlement agreement.

The expiration or loss of patent protection may adversely affect our future revenues and operating earnings.

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The regulatory pathways available to us may impact the level and type of data necessary to support our applications, and the post-marketing requirements to which we and our products will be subject.

Inadequate funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner, affect whether government agencies promptly pay amounts awarded under grants from such agencies, or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

Inadequate funding for the FDA, the SEC and other government agencies, or the downsizing thereof in connection with proposals to reduce or eliminate budgetary deficits, could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner, affect whether government agencies award, promptly pay or continue to fund amounts awarded under grants from such agencies, or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new drugs and medical devices can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes.

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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.

Average review times at the FDA have fluctuated in recent years as a result.

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 which would adversely affect our business.

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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.

Additionally, proposals to reduce or eliminate budgetary deficits have sometimes included reduced allocations to U.S.

government agencies that fund research and development activities.

Our business could be negatively impacted by changes in the domestic and global political environment.

We ship our products internationally and as a result are subject to negative impacts in the global political environment.

For example, specific legislative and regulatory proposals can be introduced to change international trade law, regulations or interpretations thereof (possibly with retroactive effect) of various jurisdictions or limit treaty benefits that, if enacted, could materially increase the cost of our goods to export internationally, increase our effective tax rate, or have a material adverse impact on our financial condition and results of operation.

We cannot predict whether industry initiatives to seek tariff carve-outs for devices or other life sciences goods and products will be successful.

We also cannot predict the effect on our tax and tariff burden, if any, of the imposition of new or increased tariffs by one country and the response of other countries that retaliate in response.

It is possible that these changes could adversely affect our business.

Additionally, we could be negatively impacted by political policy changes domestically.

For example, federal and state budgetary cuts at state and federal agencies, the withholding of federal grant funds, staffing shortages and the reallocation of regulatory priorities by key federal agencies that oversee our products, services, and associated reimbursement, including FDA and the U.S.

Department of Health and Human Services more broadly could adversely affect our business.

Such political developments may require us to allocate significant time, resources, and expense to modifying our policies and procedures, processes, systems, and practices to ensure compliance or adapt to the new regulatory climate, particularly to the extent such actions are subject to protracted and uncertain legal challenges.

To the extent changes in the political environment have a negative impact on us or on our markets, our business, results of operation, and financial condition could be materially and adversely affected in the future.

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.

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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.

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, 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.

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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.

We also achieved the Medical Device Single Audit Program (MDSAP) certification that is necessary for product approval in certain countries such as Canada.

We manufacture CytoSorb at our manufacturing facilities in New Jersey for sale in the EU and around the world, as well as for additional clinical studies.

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As such, we are subject to continual review and periodic inspections to assess compliance with cGMP/QSR requirements as required by our International notified body.

Accordingly, we must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.

Accordingly, we must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and

quality control.

We have limited experience in establishing, supervising and conducting commercial manufacturing.

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.

We depend on a limited number of suppliers for chemicals, other raw materials, and molded parts used in the development and manufacture of our products.

Although we typically second source and validate the quality of chemicals, raw materials, and molded parts any change in the availability of these components, or availability of single sourced materials, without an alternative source may result in lengthy delays or disruptions in manufacturing if we need to change or cannot identify a supplier for any reason which could have a material impact on our business and results of operations.

Our ability to manufacture and distribute products is dependent, in part, upon availability and quality of chemicals, raw materials, molded parts and other components supplied by third parties.

Any disruption in the supply of these ingredients or components or any problems in their standard of quality could materially affect our ability to manufacture and distribute our products, maintain sufficient inventory levels or otherwise meet customer demand, and could result in legal liabilities that could materially affect our ability to realize profits or otherwise harm our business, financial, and operating results.

We primarily source the raw materials for our products from domestic suppliers but may be required to source from international suppliers if our domestic suppliers are unable to meet our supply requirements.

Generally, we qualify only a single source of reagents and molded parts for use in each product due to the cost and time required to validate and qualify a second source of supply.

If we were to change the supplier of a raw material for a product, the cost for the material could be greater than the amount we paid with the previous supplier.

Changes in suppliers are rare but could occur as a result of a supplier’s business failing, an issue arising from an FDA inspection, failure to maintain our required standards of quality, or a force majeure event.

As a result, we carefully select suppliers, based on various factors including quality, reliability of supply, and long-term financial stability.

From time to time, we may experience temporary or long-term disruptions in the supply of certain of our raw materials that could have a material adverse effect on our business, financial condition and results of operations.

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

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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.

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.

For example, in October 2024, the German Parliament fully passed the Hospital Care Improvement Act mandating hospital reform beginning in January 2025 through 2029.

As part of the reform, government payments to hospitals would de-emphasize the DRG (diagnosis-related group) “lump sum” payment system that incentivizes revenue generation through more patients treated and procedures performed, and instead emphasize base payments focused on quality measures and appropriate patient care.

This is expected to favor a shift of routine operations and procedures to outpatient centers, consolidation of smaller hospitals into larger ones, and importantly, an increased focus of remaining hospitals on sicker patients, more complex operations such as cardiothoracic surgery and organ transplant, and on therapies that help reduce the severity of illness and help patients recover faster.

Hospitals must also meet strict quality standards to receive money for operations.

Although we believe our products are aligned with the goals of Germany healthcare reform, the ultimate scope, implementation and timing of these reforms remains uncertain and we cannot accurately predict the impact that such reforms may have on our business, our customers, our existing reimbursement and such policies and procedures for seeking reimbursement, 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.

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and other international geographies.

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

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, 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.

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

from the EU, the war between Russia and Ukraine, the conflict in the Middle East, and trade disputes such as the current trade negotiations between the U.S.

and China, or the threatened tariffs with China, Canada, and Mexico, 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, war between Russia and Ukraine, and the conflict in the Middle East, 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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In addition, changes in our products or changes in applicable export or import laws, tariffs, and regulations may create delays in the introduction and sale of our products in international markets or, in some cases, prevent the export or import of our products to certain countries, governments or persons altogether.

Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws, tariffs, and regulations, or change in the countries, governments, persons, products, or technologies targeted by such laws, tariffs, and regulations, could also result in decreased use of our products, or in our decreased ability to export or sell our products to existing or potential customers.

products to existing or potential customers.

Any decreased use of our products or limitation on our ability to export or sell our products would likely adversely affect our business, financial condition and results of operations.

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Legislators have stated that they intend to propose amendments to the CCPA before it goes into effect, and the California Attorney General will issue clarifying regulations.

Although the law includes limited exceptions, including for certain information collected as part of clinical trials as specified in the law, it may regulate or impact our processing of personal information depending on the context.

Although the law includes limited exceptions, including for certain information collected as part of clinical trials as specified in the law, it may regulate or impact our processing of

personal information depending on the context.

It remains unclear what, if any, modifications will be made to this legislation or how it will be interpreted.

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Third parties may be discouraged from making a tender offer or bid to acquire us because of this concentration of ownership.

As of December 31, 2023, two shareholders hold 11.5% of our shares and our directors and officers hold 6.4% of our shares on a fully diluted basis.

As of December 31, 2024, three shareholders hold 17.2% of our shares and our directors and officers hold 5.6% of our shares on a fully diluted basis.

Our Board of Directors may, without stockholder approval, issue and fix the terms of shares of preferred stock and issue additional shares of common stock adversely affecting the rights of holders of our common stock.

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

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

On September 30, 2024 we entered into a new 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 $20,000,000.

1 unchanged sentence

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.

The evaluation of potential financial misstatements and determination of the materiality and need to restate certain sections of our previously issued consolidated financial statements has been time consuming, resulted in additional expense and may subject us to additional risks and uncertainties, including loss of investor confidence, and the increased possibility of litigation and regulatory inquiries.

As discussed in Item 8’s Note 12 – Restatement of Previously Issued Financial Information, to correct misstatements in inventory and stock-based compensation for restricted stock units, we have restated certain sections of our audited consolidated financial statements as of and for the year ended December 31, 2023 and our interim unaudited consolidated financial statements contained in the Quarterly Reports on Form 10-Q as of and for the first three quarters of the years ended December 31, 2023 and December 31, 2024.

The process to identify and evaluate the materiality and impact of potential financial misstatements has been time consuming and resulted in additional expense.

The restatement may result in a loss of investor confidence in the accuracy of our financial disclosures and cause reputational risks for our business.

In addition, we have incurred, and may continue to incur, additional costs for accounting, audit and legal fees in connection with or related to the restatement.

For example, we have recently expended unanticipated fees for multiple accounting and legal advisors to assist with the application of technical accounting requirements.

Finally, the restatement could subject us to additional risks and uncertainties, including the increased possibility of litigation, regulatory inquiries, or other matters.

We have identified a material weakness in our internal control over financial reporting, which could, if not effectively remediated, result in additional restatements of our financial statements, and a failure to meet our reporting and financial obligations, each of which could adversely affect our results of operations and financial condition.

As discussed above, our management has concluded that we did not maintain effective internal control over financial reporting as of December 31, 2024, due to a material weakness relating to the accounting for stock-based compensation corresponding to grants of restricted stock units.

Specifically, our controls were not effectively designed or operating to ensure that restricted stock unit expense was properly accounted for.

We are actively engaged in remediating the identified material weakness.

Management has begun implementing measures to strengthen our internal control over financial reporting, including redesigning internal control procedures and enhancing documentation processes related to the accounting for restricted stock unit grant and vesting events.

These efforts are intended

to ensure accurate and timely reporting in accordance with U.S.

GAAP for both interim and annual periods.

Because of the inherent limitations in all control systems, no evaluation or strengthening of controls can provide absolute assurance that all control failures within the Company have been or will be detected.

Accounting standards are complex and are subject to changing guidance and differing interpretations.

Notwithstanding the exertion of significant effort and resources to interpret and apply accounting standards (and any related guidance), it is possible that they may be misinterpreted or misapplied, or that prior interpretations may be reconsidered and changed, which may result in technical accounting errors.

Any such accounting error could result in additional restatements of our previously issued consolidated financial statements.

Accordingly, we cannot be certain that our efforts to remediate the identified material weakness will ensure effective internal control over financial reporting going forward.

We also face risks associated with the cost of establishing, maintaining and enhancing effective internal control over financial reporting.

We have invested and expect to continue to invest significant resources in future years, to develop and maintain the necessary documentation and testing procedures required by Section 404(a) of the Sarbanes-Oxley Act.

Ensuring we have adequate internal financial and accounting controls and procedures in place to produce accurate financial statements on a timely basis is a costly and time-consuming effort.

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