Cytori Reports Consolidation, Restructuring of Operations

Cytori Therapeutics (NASDAQ: CYTX) today announced its updated strategy andplan to restructure its operations and reduce costs. In addition, Cytori hasalso provided an interim update on some important business items.Corporate Strategy and RestructuringOver the last few months, the Company's board and management team have beencarefully re-evaluating corporate strategy and the resources required toachieve the Company's goal to be a leader in the cell therapy industry. Goingforward, the Company will focus on delivering value by limiting its activitiesto: expanding the US clinical pipeline, building on current governmental andcorporate partnerships and ensuring that its commercial efforts are cash flowpositive immediately. To accomplish this, the Company has: (1) restructuredsenior management and the global commercial and development teams, (2)consolidated operations, and (3) reduced duplicative activities andunnecessary expenses. Dr. Marc H. Hedrick, Cytori's President and CEO, noted:“Besides significant changes in strategy and expense reductions, we are alsoworking in partnership with our lenders, with whom we have an outstandingrelationship, to strengthen our financial position for the next 12-24 months.In this regard, our lenders have recently provided us a temporary waiver ofthe liquidity threshold that requires us to maintain certain minimum cashbalances, and we are in discussions with them for the overall restructuring ofthe loan. I will provide more details on our restructuring and long termfinancial plan in forthcoming releases and on our Q3 conference call.”As a part of the restructuring effort, Mr. Clyde Shores, Cytori's ExecutiveVice President of Marketing and Sales, resigned and a number of otheremployees have left or will be leaving the Company after a brief transitionperiod. After the transition period, the Company will have reduced the numberof full time employees from a peak of 119 earlier this year to approximately77 employees. As a consequence of these efforts, we estimate that we willincur a one-time restructuring charge of approximately $500,000. Theconsolidation and cost reduction initiatives over the past several months areexpected to lower our operating expenses by more than $8 million on anannualized basis.“My first order of business as the new CFO at Cytori will be focused onputting the Company on a sustainable financial path by both strengthening thebalance sheet and significantly reducing expenses. I believe that the Companycan be more effective in delivering near term value to the shareholders afterthese measures are implemented,” said Mr. Tiago Girao, Vice President ofFinance and Chief Financial Officer of Cytori. “We will provide additionaldetails on the steps we are implementing to improve the focus and performanceof the Company over the next several months. Personally, I am honored to bepart of the leadership team and to have the opportunity to bring Cytori'sground breaking medical technology to suffering patients.”Business update * Clinical pipeline update * On September 19^th, Cytori filed its responses and related data to FDA regarding the ATHENA trial hold. FDA feedback is anticipated in 30 days. * Cytori has received conditional approval from FDA to begin a US IDE trial on patients with Osteoarthritis and enrollment will likely begin in the first quarter of 2015. In light of this approval and the restructuring, Cytori is assessing the merits of continuing its current RECOVER trial for acute muscle tears. * Cytori anticipates that the U.S. pilot clinical trial for burn injury as part of its BARDA contract and subsequent receipt of the related $8m milestone, will move forward when the Company's next generation system is available for clinical trial use, which is expected in 2015. * The Japanese government sponsored pivotal clinical trial for urinary incontinence is undergoing review with MHLW and should commence enrolling next year. * BARDA contract and next generation technology development * Activities related to Option 1 of Cytori's contract with BARDA are now ongoing. Cytori is actively drawing on the initial $12m which supports research and development work while also covering a substantial portion of overhead. * Cytori's development of its next generation platform technology is proceeding. Initial product release is expected in 2015. * Commercial Restructuring & Revenue Forecast * Despite the impact of the cost reduction efforts, Cytori continues to anticipate modest overall revenue growth in 2014. * Overall revenue growth in 2015 and 2016 will likely continue to be modest but should show a positive contribution margin beginning in 2015 based on the combination of recent expense reductions and forecasted increases in sales to Lorem Vascular and other partners, as well as through Cytori's leaner direct sales teams in both Japan and Europe. * The new regenerative medicine law in Japan has completed its public comment period and, based on current feedback, the Company believes the outcome could be favorable to Cytori's business prospects in Japan in 2015 and beyond. * Warrant Exercise * In September, we received approximately $4 million as a result of warrant exercises following the amendment of the June 4, 2014 warrants as announced by the Company on September 8, 2014.