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CytoSorbents Issues Shareholder Update Letter on Consent Solicitation Statement and Up-Listing Plans

Thursday November 6, 2014

MONMOUTH JUNCTION, N.J., Nov. 6, 2014 /PRNewswire/ -- CytoSorbents Corporation (CTSO), a critical care immunotherapy company commercializing its European Union approved CytoSorb® blood filter to treat life-threatening illnesses in the intensive care unit, issued a letter to its shareholders from its Chief Executive Officer and President, Dr. Phillip Chan, as follows:

Dear Shareholders and Friends,

This is an exciting time for CytoSorbents Corporation ("CytoSorbents" or the "Company") and our shareholders. As previously disclosed, we are preparing to up-list our company from the OTCBB to a national securities exchange by the end of the year. We plan to apply for listing to the NASDAQ Capital Market. You will soon be receiving a consent solicitation statement asking you to provide your written consent in favor of certain proposals that are necessary in anticipation of an up-list.

As previously disclosed, we believe there are numerous potential advantages to up-listing, including but not limited to:

  • Increased visibility – Many institutional investors cannot invest in OTCBB-listed companies that trade under $1.00 per share, due to various restrictions. Because of this, we believe the visibility of the Company is below the radar of most major institutional investors, including pension funds and fund families. With an up-listing, we believe we can better leverage positive news and press releases about the Company. Similarly, we believe that reports and recommendations made by analysts who cover our company will be more impactful, since Brean Capital, H.C Wainwright, and Merriman Capital have exclusively institutional investor distribution, while Zacks also has many institutional investor clients.

  • Improved liquidity for investors – Many investors of OTCBB-listed companies complain about the difficulty in buying and selling stock because of poor liquidity in the market. Because of this lack of liquidity, the share prices for these stocks are typically more volatile, and are subject to large swings with small trades. In addition, investors in penny stocks often find it difficult to find brokers who will accept and hold such shares. We believe up-listing will alleviate some of these concerns. For example, NASDAQ has reported that on average, trading volumes in the 3 months following an up-listing often exceed two times (2x) the trading volumes for such stock prior to up-listing.

  • Increased credibility – National exchanges, including the NASDAQ Capital Market, have very rigorous governance standards, SEC reporting, and Sarbanes-Oxley compliance requirements in order to achieve and maintain listing. We believe compliance with these standards increases the visibility of the Company and provides security for investors. Additionally, we believe an up-listed company removes any perceived stigma of being a "penny stock"

  • Potential for lower cost of capital/less shareholder dilution – We believe when raising capital, OTCBB-listed companies pay a penalty, in terms of higher costs of capital, for poor liquidity and a relative lack of competitive buyers. We believe national exchange-listed companies have more options to raise capital at more attractive rates

  • Eligibility for potential inclusion in the Russell 2000 – This small cap market index fund selects representative small cap companies for inclusion into the fund, which is used as a surrogate marker for the general health of the small cap sector. Inclusion can often increase demand for a company's stock, as other funds that are based upon this index will need to buy the stock as well. While we do not believe it likely that CytoSorbents will be included in this index in the near term, we believe up-listing increases the likelihood of our inclusion in the future.

As can be seen, there are many advantages to up-listing. To do so, we have invested a great deal of time and effort into the process. Now, we ask for your consent.

To that end, we are asking you to specifically consent to and approve the following 5 proposals:

With the filing of our consent solicitation statement, the Board of Directors and management are asking shareholders to consent to and approve five items. The Board of Directors and management encourage you to read the consent solicitation statement and vote in favor of the 5 listed proposals on or before December 1, 2014. To facilitate your decision making, I wanted to take the opportunity to summarize what we are looking to accomplish and why.

Why is this the right time? We have stated repeatedly that we would wait until the Company is well-positioned before up-listing. As you have seen from our recent press releases, we believe we have made a tremendous amount of operational progress, with hopefully more to come, highlighted by our trailing 12 month CytoSorb® revenues which, as of Q3 2014, is expected to be approximately $2.6 million, or more than three times what we achieved in 2013. We believe this growth was based on broad adoption and usage by physicians, and significant strength in direct, distributor, and partner sales. We will go over our operational progress in much greater detail in next week's earnings release and conference call on November 12, 2014 at 4:15PM EST.

  • 1. To authorize our Board of Directors, in its discretion, to amend our Articles of Incorporation, as amended, to effect a reverse stock split of our Common Stock, with a reverse split ratio of 25-to-one (25:1).

    The goal of the reverse split is two-fold. The first is to ensure that we meet the minimum per share price requirement for listing on a national exchange. With respect to the NASDAQ Capital Markets, that requirement is at least $4.00 per share. The second is to have a manageable and reasonable number of shares, post-split. Please be aware that the ratio of the reverse split is an arbitrary number and does NOT change the value of your holdings. For example, if you have 100,000 shares at $0.25 per share before the reverse split (total value = $25,000), you would have 4,000 shares after the split at $6.25 per share (total value = $25,000).

  • 2. To authorize our Board of Directors, in its discretion, to amend our Articles of Incorporation, as amended, to reduce the total number of authorized shares of Common Stock from 800,000,000 to 50,000,000 – National exchanges, including the NASDAQ Capital Market, have very rigorous governance standards, SEC reporting, and Sarbanes-Oxley compliance requirements in order to achieve and maintain listing. We believe compliance with these standards increases the visibility of the Company and provides security for investors. Additionally, we believe an up-listed company removes any perceived stigma of being a "penny stock"

  • 3. To authorize our Board of Directors, in its discretion, to amend our Articles of Incorporation, as amended, to reduce the total number of authorized shares of undesignated preferred stock from 100,000,000 to 5,000,000 – We believe when raising capital, OTCBB-listed companies pay a penalty, in terms of higher costs of capital, for poor liquidity and a relative lack of competitive buyers. We believe national exchange-listed companies have more options to raise capital at more attractive rates

  • 4. To approve the form, terms and provision of the CytoSorbents Corporation 2014 Long-Term Incentive Plan; and – This small cap market index fund selects representative small cap companies for inclusion into the fund, which is used as a surrogate marker for the general health of the small cap sector. Inclusion can often increase demand for a company's stock, as other funds that are based upon this index will need to buy the stock as well. While we do not believe it likely that CytoSorbents will be included in this index in the near term, we believe up-listing increases the likelihood of our inclusion in the future.

  • 5. To approve the change of domicile of the Company from the State of Nevada to the State of Delaware through the merger of the Company with and into CytoSorbents Corporation, a newly-organized, wholly-owned subsidiary of the Company organized under the laws of the State of Delaware. - CytoSorbents Corporation is currently a Nevada corporation. We believe most national exchange listed companies are more commonly incorporated in Delaware. Delaware incorporation is seen as more shareholder friendly than Nevada incorporation and provides companies with a deep body of case law relating to corporate disputes. In order to effect a change in incorporation, we need to do this in two steps. First, we have established CytoSorbents Corporation as a Delaware corporation and as a wholly-owned subsidiary of ours ("CytoSorbents DE"). CytoSorbents DE will merge with us and absorb us, with CytoSorbents DE being the surviving corporation. Provided that shareholders approve these 5 proposals, we believe this conversion to a Delaware corporation should be seamless and invisible to the shareholder.


Hopefully this helps to explain what we believe the value is for up-listing to a national exchange and why each of these proposals is important to approve. Please fill out your consent forms either online or on paper. If the latter, please return them in the pre-paid envelopes no later than December 1, 2014. Again, should you have questions, please feel free to reach out to Amy Vogel via email at avogel@cytosorbents.com prior to the earnings release so that we can address any shareholder questions in the earnings conference call next week.

Thank you again for your continued shareholder support.

Best,

Phillip

Dr. Phillip Chan, MD, PhD
Chief Executive Officer and President
CytoSorbents Corporation

About CytoSorbents Corporation

CytoSorbents Corporation is a critical care focused immunotherapy company using blood purification to modulate inflammation -- with the goal of preventing or treating multiple organ failure in life-threatening illnesses. Organ failure is the cause of nearly half of all deaths in the intensive care unit, with little to improve clinical outcome. CytoSorb®, the Company's flagship product, is approved in the European Union as a safe and effective extracorporeal cytokine adsorber, designed to reduce the "cytokine storm" that could otherwise cause massive inflammation, organ failure and death in common critical illnesses such as sepsis, burn injury, trauma, lung injury, and pancreatitis. These are conditions where the risk of death is extremely high, yet no effective treatments exist. CytoSorb® is also being used during and after cardiac surgery to try to remove inflammatory mediators, such as cytokines and free hemoglobin, which can lead to post-operative complications, including multiple organ failure.

CytoSorbents' purification technologies are based on biocompatible, highly porous polymer beads that can actively remove toxic substances from blood and other bodily fluids by pore capture and surface adsorption. CytoSorbents has numerous products under development based upon this unique blood purification technology, protected by 32 issued U.S. patents and multiple applications pending, including HemoDefend™, ContrastSorb, DrugSorb, and others. Additional information is available for download on the Company's website: http://www.cytosorbents.com/

Forward-Looking Statements

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Contact:
Company Contact
CytoSorbents, Inc
Dr. Phillip Chan
Chief Executive Officer
(732) 329-8885 ext. *823
pchan@cytosorbents.com
Investor Contact

Amy Vogel
(732) 329-8885 ext. *825
avogel@cytosorbents.com
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Source: CytoSorbents Corporation

 
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