Disclosures

Cytosorbents Corporation

I, Andy DSilva , certify that this report reflects my personal beliefs about this company and that no portion of my compensation was, is or will be directly or indirectly related to the specific recommendations or views discussed in this report.

Disclosure

  • B. Riley & Co., LLC does and seeks to do business with companies covered in its research reports.
  • A portion of this analyst’s compensation is based on the sales, trading and investment banking activities of B. Riley & Co., LLC.
  • B. Riley & Co., LLC makes a market in the securities of the company covered in this report.
Disclosure Chart

Ratings Distribution as of March 27, 2017
Rating Number of Companies Percent of Total Number of Companies with
Investment Banking Relationships
Percent of Total
Buy 158 67.8% 19 8.2%
Neutral 74 31.8% 1 0.4%
Sell 1 0.4% 0 0.0%
Total 233 100% 20 8.6%

Explanation of B. Riley & Co. LLC's Rating System

  • Buy: We generally expect "Buy" rated stocks to materially outperform both the S&P 500 and Russell 2000 as well as other stocks in their sector. Further, we believe that the potential reward relative to the potential risk is particularly attractive.
  • Neutral: We generally believe "Neutral" rated stocks will perform roughly in line with the S&P 500 and Russell 2000 over the intermediate and long term.
  • Sell: We generally expect "Sell" rated stocks to materially underperform both the S&P 500 and Russell 2000 as well as other stocks in their sector. Further, we believe that the potential reward relative to the potential risk is particularly unattractive.

Risks and Considerations

  • Competition - The industry is highly competitive and many of the Company's competitors have greater resources.
  • Distribution/Sales Dependency - The Company relies heavily on its indirect sales channel for much of its sales. A loss of a major distributor or changes in a distributor's payment practices could prove to be detrimental to future sales growth.
  • Financial Results - Any slow down or other changes in the capital spending pattern of the industry may negatively affect the Company's sales.
  • Financial Results - The Company has a history of operating losses. Although the Company is focused on achieving profitability, there are no assurances that the Company will meet its goals or be able to sustain profitability in future periods.
  • Financial Results - The Company has raised money via public offerings several times in the past and may need to do so again if it can not sustain positive cash flow.
  • Financial Results - Unpredictable timing of customer orders.
  • Government Funding - Historically, the Company has generated significant revenues from various departments of the U.S. Government. Should funding to these departments be reduced, programs in which the Company participates in may be scaled down or cut, thereby hurting the Company's financial results.
  • Growth Plan - There are many factors that may impact the company's ability to achieve its stated growth objectives.
  • Industry Change - The industry is subject to rapid technological change.
  • Interest Rates - The Company's balance sheet is liability sensitive and fed rate cuts should have a beneficial effect on the net interest margin. However, most of the Company's liabilities are LIBOR-based and to the extent that LIBOR and fed funds rates diverge, the fed rate cuts will have lesser impact on the Company's funding costs.
  • International Operations - The Company derives a significant portion of its revenues from outside the United States. The Company is subject to foreign exchange risk and the risks inherent in managing a global Company.
  • Liquidity and Solvency - The Company has a significant debt load and interest expense, which may hamper its ability to invest in the business. Also, the Company may need to raise additional capital in the future and access to such capital is difficult to predict.
  • Litigation - The Company is at risk of patent lawsuits, although we believe its patent portfolio provides adequate protection.
  • Litigation - The industry is litigious and the Company is likely to be involved in lawsuits, whether future or current. Negative results in these cases could result in significant cash payments by the Company.
  • Loss of Key Personnel - In our opinion, the current management team will be instrumental in executing the Company's growth strategy. The resignation of a key member of management would have a negative impact on the Company.
  • Operating leases - The Company is subject to significant lease liability. Should results deteriorate and the Company be forced to close stores, cash costs to get out of leases could be considerable.
  • Product Concentration - A large percentage of the Company's revenues are from one line of products. Any weakness in those sales would have a significant negative impact on the Company's results.
  • General Industry - The Company could miss our estimates and/or their financial guidance.
  • Sales Cycle - The Company's sales cycle could lengthen beyond what is normal.
  • Further Potential Risks - See the Company's SEC filings, particularly its 10-K filing, for a discussion of further potential risks.

Additional Risks and Considerations

    • Adoption: If adoption of CytoSorb® fails to materialize or does so at a slower rate than we estimate, our valuation could be materially impacted.
    • Negative investigator initiated study & clinical trial data: If upcoming research on CytoSorb® fails to impress, the opportunity for the product could diminish and our valuation could be adversely impacted.
    • Limited capital: CTSO is a small company with limited resources which may force the company to scale back on aggressive sales and marketing efforts. CTSO may also need to raise capital to sustain operations which could further dilute existing shareholders.
    • Loss of distributors or partners: If CTSO loses existing distributors/partners or is unable to find new distributors/partners, its growth could be stalled.
    • Brutal competition: There are many larger companies that focus on CTSO's markets. These companies could develop new, more effective technologies that could decrease the company's ability to obtain market share.
    • Loss of management & other key employees: The loss of certain employees and executives could disrupt operations and severely impact the company.
    • Reimbursement: If the company is unable to establish reimbursement from (insurance) payers in its various target regions or does so slower than expected, our estimates and valuation could be materially impacted.