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Cytosorbents (CTSO) Risk Analysis
Risk Overview Q3, 2024
Risk Change Over Time
- Debt & Financing - Risk 1We may 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. Our current and historical cash burn is not necessarily indicative of our future use of cash and cash equivalents. 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. 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. 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. 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. 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.
Risk Highlights Q3, 2024
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 39
- Share Price & Shareholder Rights - Risk 1Anti-takeover provisions in our charter documents and under Delaware law could prevent or delay transactions that our stockholders may favor and may prevent stockholders from changing the direction of our business or our management.
After giving effect to our merger into our wholly-owned Delaware subsidiary, provisions of our certificate of incorporation, as amended and restated, and bylaws may discourage, delay or prevent a merger or acquisition that our stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares, and may also frustrate or prevent any attempt by stockholders to change the direction or management of us. For example, these provisions: - authorize the issuance of "blank check" preferred stock without any need for action by stockholders;- eliminate the ability of stockholders to call special meetings of stockholders;- prohibit stockholder action by written consent; and - establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.
- Share Price & Shareholder Rights - Risk 2Our 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.
On December 3, 2014, we effected a twenty-five-for-one (25:1) reverse split of our common stock. Immediately after the reverse stock split, we changed our state of incorporation from the State of Nevada to the State of Delaware pursuant to an Agreement and Plan of Merger, dated December 3, 2014, whereby we merged with and into our recently formed, wholly-owned Delaware subsidiary. Pursuant to the Agreement and Plan of Merger effecting the merger, we adopted the certificate of incorporation, as amended and restated, and bylaws of our Delaware subsidiary as our certificate of incorporation and bylaws at effective time of the merger. As a result, our certificate of incorporation, as amended and restated, authorizes the issuance of up to 5,000,000 shares of "blank check" preferred stock, with such designation rights and preferences as may be determined from time to time by the Board of Directors. Currently, our certificate of incorporation, as amended and restated, which was effective June 12, 2019, authorizes the issuance of up to 100,000,000 shares of common stock, of which approximately 45,760,000 shares remain available for issuance as of December 31, 2023 and may be issued by us without stockholder approval.
- Share Price & Shareholder Rights - Risk 3Directors, executive officers and principal stockholders own a significant percentage of the shares of common stock, which will limit your ability to influence corporate matters.
Our directors, executive officers and principal stockholders together beneficially own a significant percentage of the voting control of the common stock on a fully diluted basis. Accordingly, these stockholders could have a significant influence over the outcome of any corporate transaction or other matter submitted to stockholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets and also could prevent or cause a change in control. The interests of these stockholders may differ from the interests of our other stockholders. 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.
- Share Price & Shareholder Rights - Risk 4The 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 $4.17 and as low as $1.09 per share between January 1, 2023 and December 31, 2023 on Nasdaq. On March 13, 2024, the closing price of our common stock, as reported on Nasdaq, was $1.01. Historically, medical device company securities such as our common stock have experienced extreme price fluctuations. Some of the factors leading to this volatility include, but are not limited to: - fluctuations in our operating results;- announcements of product releases by us or our competitors;- announcements of clinical data, analyst or media reports;- financial status: - announcements of acquisitions and/or partnerships by us and our competitors; and - general market conditions. There is no assurance that the price of our common stock will not continue to be volatile.
- Share Price & Shareholder Rights - Risk 5Future 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"). Pursuant to the Sale Agreement we may offer to sell, from time-to-time shares of our common stock through "at-the-market" offerings, up to a maximum of $25,000,000. We are not obligated to make or continue to make any sale of shares of our common stock under the "at-the-market" offerings. 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.
- Share Price & Shareholder Rights - Risk 6Our common stock is thinly traded on The Nasdaq Capital Market exchange and no assurances can be made about stock performance, liquidity, or maintenance of our Nasdaq listing.
Prior to December 23, 2014, our common stock was quoted on the OTCQB, which provided significantly less liquidity than a securities exchange (such as the New York Stock Exchange or the Nasdaq Stock Market). On December 17, 2014, our common stock was approved for trading on Nasdaq. Beginning on December 23, 2014, our common stock began trading on Nasdaq under the symbol "CTSO." Although currently listed on Nasdaq, there can be no assurance that we will continue to meet Nasdaq's minimum listing requirements or that of any other national exchange. In addition, there can be no assurances that a liquid market will be created for our common stock. If we are unable to maintain listing on Nasdaq or if a liquid market for our common stock does not develop, our common stock may remain thinly traded.
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