significant expenses and operating losses for the foreseeable future. These factors raise substantial doubt about our ability to continue as a going concern. Because Delcaths business does
not generate positive cash flow from operating activities, the Company will need to obtain substantial additional capital in order to fund clinical trial research and support development efforts relating to Ocular Melanoma liver metastases, ICC, HCC
or other indications, and to fully commercialize the product. The Company believes it will be able to raise additional capital in the event it is in its best interest to do so. The Company anticipates raising such additional capital by either
borrowing money, selling shares of Delcaths capital stock, or entering into strategic alliances with appropriate partners. To the extent additional capital is not available when needed or on acceptable terms, the Company may be forced to
abandon some or all of its development and commercialization efforts, which would have a material adverse effect on the prospects of its business. Further, the Companys assumptions relating to its cash requirements may differ materially from
its actual requirements because of a number of factors, including significant unforeseen delays in the regulatory approval process, changes in the timing, scope, focus and direction of clinical trials and costs related to commercializing the
product.
The Company has funded its operations through a combination of private placements and public offerings of its securities in each
of 2000, 2003, 2009, 2010, 2011, 2012, 2013, 2015, 2016, 2018 and 2019, including registered direct offerings in 2007, 2009 and 2013, at the market equity offering programs in 2012 and 2013, and by the private placement of convertible
notes in 2016 and 2018, and, most recently, on July 15, 2019, the Company raised $20.0 million in the closing of a private placement of convertible preferred stock and warrants to purchase common stock. For a detailed discussion of the
Companys various sales of debt and equity securities see Notes 8, 9, and 14 to the Companys condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q as well as Notes 10 and 11 to the Companys
audited consolidated financial statements contained in its Annual Report for the fiscal year ended December 31, 2018.
In October 2018, the
Company filed a registration statement on Form S-3 with the SEC, which was declared effective on December 21, 2018 and allowed the Company to offer and sell, from time to time in one or more offerings, up to $100.0 million of common stock, preferred
stock, warrants, debt securities and stock purchase contracts as it deems prudent or necessary to raise capital at a later date. The Company has lost its Form S-3 eligibility due to the late filing of its Annual Report for the year ended December
31, 2018.
The Company intends to use the net proceeds from any future offerings for general corporate purposes, including, but not limited
to, funding of clinical trials, obtaining regulatory approvals, commercialization of its products, capital expenditures and working capital.
Results of Operations for the Year Ended December 31, 2018; Comparisons of Results of the Years Ended December 31, 2018 and
2017
Revenue
The Company recorded approximately $3.4 million in product revenue during the year ended December 31, 2018. During the same period in
2017, Delcath recorded $2.7 million in total revenue related to product sales. The year over year increase is a result of greater product sales in 2018 as Delcath continues to see increased market acceptance of its product in the EU,
particularly in Germany where the establishment of the ZE code has contributed to increased treatments.
Additionally, the Company recorded
approximately $29,000 in other revenue which is related to the amortization of certain payments pursuant to a definitive licensing agreement for CHEMOSAT commercialization in Europe between the Company and medac Gesellschaft für klinische
Spezialpräparate mbH (Medac) signed on December 17, 2018 and discussed further in Part I, Item 1 under the section captioned Market Access and Commercial Clinical Adoption above.
The adoption of ASC 606 on January 1, 2018 had no impact on the amount and timing of revenue recognition related to product sales.
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