Cytosorbents Corp. 10-Q Summary (Period Ended June 30, 2010)
Business Context and Reporting Period
Cytosorbents Corp. (f/k/a MedaSorb Technologies Corporation) is a development-stage company focused on the research, development, and commercialization of a blood purification technology (CytoSorb) for treating sepsis and other acute conditions. The company has not yet generated revenue and is dependent on financing to fund operations. This report covers the quarterly period ended June 30, 2010, and the six-month period ended on that date.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2010 | Six Months Ended June 30, 2009 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(1,645,329) | $(1,612,096) |
| Net Loss Available to Common Shareholders | $(2,840,380) | $(1,951,861) |
| Cash and Cash Equivalents (End of Period) | $595,524 | $1,423,608 |
| Total Current Liabilities | $1,224,304 | $970,765 |
| Notes Payable | $172,500 | $0 |
| Accumulated Deficit | $(81,742,901) | $(78,902,521) |
| Net Cash Used in Operating Activities | $(1,174,561) | $(1,511,646) |
Material Changes vs. Prior Period
- Liquidity Decline: Cash and cash equivalents decreased by approximately $1.0 million (from $1.59M to $595.5K) due to operating losses and patent costs.
- Debt Issuance: The company issued a new $172,500 promissory note in January 2010, increasing current liabilities.
- Stock Structure: Significant conversions of Series A and Series B Preferred Stock into Common Stock occurred during the period. Additionally, non-cash stock dividends totaling $1.19 million were recorded.
- Expense Composition: Research and development expenses decreased slightly to $1.03 million for the six months ended June 30, 2010, compared to $1.07 million in the prior year period. General and administrative expenses also decreased slightly.
Outlook, Risks, and Management Commentary
- Going Concern: The company has an accumulated deficit of over $81 million and negative cash flows from operations since inception. Management expresses substantial doubt about the ability to continue as a going concern without additional financing.
- Capital Resources: Management believes current cash is sufficient to fund operations into the fourth quarter of 2010. A funding agreement with Lincoln Park Capital Fund, LLC, allows for the potential purchase of up to $6 million of common stock, though no assurance is given that this will be utilized.
- Clinical Progress: The company is conducting a clinical study in Germany for its CytoSorb device (targeting sepsis). As of June 30, 2010, 75 patients had been enrolled out of a target of 100. No serious adverse events attributable to the device have been reported.
- Risks: Key risks include the inability to secure future financing, failure to obtain regulatory approvals (CE Mark in Europe or FDA in the US), and the uncertainty of commercializing the technology.
Investor Verification Checklist
- Runway: Verify if the company has secured the additional funding required to operate beyond Q4 2010, as current cash ($595k) is insufficient for long-term clinical completion.
- Lincoln Park Agreement: Confirm the status of the $6 million purchase agreement with Lincoln Park Capital Fund and whether any sales have been executed under this facility.
- Clinical Trial Status: Monitor the completion of the German clinical trial (target 100 patients) and the subsequent timeline for CE Mark application.
- Dilution: Review the impact of outstanding warrants (approx. 20.8 million shares) and options (approx. 39.5 million shares) on future share count and dilution.
- Debt Terms: Examine the terms of the new $172,500 note and the subsequent $800,000 notes issued in August 2010 (subsequent event), specifically regarding conversion rates and warrant coverage.