QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
No.
|
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
(I.R.S. Employer
Identification No.)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
|
|
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
|
|
Smaller reporting company
|
|
Emerging growth company
|
Page Number
|
||
PART I—FINANCIAL INFORMATION
|
||
Item 1
|
3 |
|
3
|
||
4
|
||
5
|
||
6
|
||
7
|
||
Item 2
|
13 | |
Item 3
|
21
|
|
Item 4
|
21 | |
PART II—OTHER INFORMATION
|
||
Item 1
|
22 | |
Item 1A
|
22 | |
Item 2
|
23 |
|
Item 3
|
23 | |
Item 4
|
23 | |
Item 5
|
23 | |
Item 6
|
23 |
September 30,
2022
|
December 31,
2021
|
|||||||
ASSETS
|
(unaudited)
|
|||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Accounts receivable
|
|
|
||||||
Inventories
|
|
|
||||||
Other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Property, plant and equipment, net
|
|
|
||||||
Operating lease right-of-use asset
|
|
|
||||||
Other assets
|
|
|
||||||
TOTAL ASSETS
|
$
|
|
$
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities
|
||||||||
Accounts payable
|
$
|
|
$
|
|
||||
Accrued compensation
|
|
|
||||||
Current portion of operating lease liability
|
|
|
||||||
Current portion of finance lease liability
|
|
|
||||||
Other current liabilities
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Operating lease liability
|
|
|
||||||
Finance lease liability
|
|
|||||||
Other long-term liability
|
||||||||
Total liabilities
|
|
|
||||||
Commitments and contingencies
|
||||||||
Stockholders’ equity
|
||||||||
Series A junior participating preferred stock as of September 30,
2022 and December 31,
2021, par value $
|
|
|
||||||
Series F convertible preferred stock as of both September 30,
2022 and December 31,
2021, par value $
|
|
|
||||||
Preferred stock as of both September 30, 2022 and December 31, 2021, par value $
|
|
|
||||||
Common stock as of September 30, 2022 and December 31, 2021, par value $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated other comprehensive income:
|
||||||||
Foreign currency translation adjustment
|
(
|
)
|
(
|
)
|
||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||
Total stockholders’ equity
|
|
|
||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
|
$
|
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2022
|
2021
|
2022 | 2021 | |||||||||||||
Net sales
|
$
|
|
$
|
|
$ | $ | ||||||||||
Cost of goods sold
|
|
|
||||||||||||||
Gross profit
|
|
|
||||||||||||||
Operating expenses:
|
||||||||||||||||
Selling, general and administrative
|
|
|
||||||||||||||
Research and development
|
|
|
||||||||||||||
Total operating expenses
|
|
|
||||||||||||||
Loss from operations
|
(
|
)
|
(
|
)
|
( |
) | ( |
) | ||||||||
Other income (expense), net
|
|
(
|
)
|
( |
) | |||||||||||
Loss before income taxes
|
(
|
)
|
(
|
)
|
( |
) | ( |
) | ||||||||
Income tax expense
|
(
|
)
|
(
|
)
|
( |
) | ( |
) | ||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$ | ( |
) | $ | ( |
) | ||||
Basic and diluted loss per share
|
$
|
(
|
)
|
$
|
(
|
)
|
$ | ( |
) | $ | ( |
) | ||||
Weighted average shares outstanding – basic and diluted
|
|
|
||||||||||||||
Other comprehensive loss:
|
||||||||||||||||
Foreign currency translation adjustments
|
$
|
|
$
|
|
$ | $ | ( |
) | ||||||||
Total comprehensive loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$ | ( |
) | $ | ( |
) |
Outstanding
Shares of
Common Stock
|
Common
Stock
|
Additional
Paid in
Capital
|
Accumulated
Other
Comprehensive
Income
|
Accumulated
Deficit
|
Stockholders’
Equity
|
|||||||||||||||||||
Balance December 31, 2020
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||
Net loss
|
—
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Foreign currency translation adjustment
|
—
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
Stock-based compensation, net
|
|
|
|
|
|
|
||||||||||||||||||
Issuance of common, net
|
|
|
|
|
|
|
||||||||||||||||||
Exercise of warrants
|
|
|
|
|
|
|
||||||||||||||||||
Balance March 31, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||
Net loss
|
— |
( |
) | ( |
) | |||||||||||||||||||
Foreign currency translation adjustment
|
— |
|||||||||||||||||||||||
Stock-based compensation, net
|
||||||||||||||||||||||||
Issuance costs related to common stock offering
|
— | ( |
) | ( |
) | |||||||||||||||||||
Exercise of warrants
|
||||||||||||||||||||||||
Balance June 30, 2021
|
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
Net loss
|
— | ( |
) | ( |
) | |||||||||||||||||||
Foreign currency translation adjustment
|
— | |||||||||||||||||||||||
Stock-based compensation, net
|
||||||||||||||||||||||||
Issuance of common stock, net
|
||||||||||||||||||||||||
Balance September 30, 2021
|
$ |
$ |
$ |
( |
) | $ |
( |
) | $ |
Outstanding
Shares of
Common Stock
|
Common
Stock
|
Additional
Paid in
Capital
|
Accumulated
Other
Comprehensive
Loss
|
Accumulated
Deficit
|
Stockholders’
Equity
|
|||||||||||||||||||
Balance December 31, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||
Net loss
|
—
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Foreign currency translation adjustment
|
—
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
Stock-based compensation, net
|
|
|
|
|
|
|
||||||||||||||||||
Balance March 31, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||
Net loss
|
— |
( |
) | ( |
) | |||||||||||||||||||
Foreign currency translation adjustment
|
— |
|||||||||||||||||||||||
Stock-based compensation, net
|
||||||||||||||||||||||||
Balance June 30, 2022
|
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
Net loss
|
— | ( |
) | ( |
) | |||||||||||||||||||
Foreign currency translation adjustment
|
— | |||||||||||||||||||||||
Stock-based compensation, net
|
||||||||||||||||||||||||
Balance September 30, 2022
|
$ |
$ |
$ |
( |
) | $ |
( |
) | $ |
Nine months ended
September 30,
|
||||||||
2022
|
2021
|
|||||||
Operating Activities:
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Adjustments to reconcile net loss to cash flows used in operating activities:
|
||||||||
Depreciation and amortization
|
|
|
||||||
Stock-based compensation expense, net
|
|
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(
|
)
|
(
|
)
|
||||
Inventory
|
(
|
)
|
(
|
)
|
||||
Other current assets
|
(
|
)
|
(
|
)
|
||||
Other assets and liabilities
|
(
|
)
|
|
|||||
Accounts payable and accrued expenses
|
|
|
||||||
Net cash used in operating activities
|
(
|
)
|
(
|
)
|
||||
Investing Activities:
|
||||||||
Purchases of property and equipment
|
(
|
)
|
(
|
)
|
||||
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
Financing Activities:
|
||||||||
Proceeds from public stock offerings, net
|
|
|
||||||
Proceeds from warrant exercises
|
|
|
||||||
Payments on finance lease liability
|
(
|
)
|
(
|
)
|
||||
Net cash (used in) provided by financing activities
|
(
|
)
|
|
|||||
Effect of exchange rate changes on cash
|
|
(
|
)
|
|||||
Net increase (decrease) in cash and cash equivalents
|
(
|
)
|
|
|||||
Cash and cash equivalents - beginning of period
|
|
|
||||||
Cash and cash equivalents - end of period
|
$
|
|
$
|
|
||||
Supplemental cash flow information
|
||||||||
Inventory transferred to property, plant and equipment
|
$
|
|
$
|
|
(in thousands)
|
September 30,
2022
|
December 31, 2021
|
||||||
Finished Goods
|
$
|
|
$
|
|
||||
Work in Process
|
|
|
||||||
Raw Materials
|
|
|
||||||
Total
|
$
|
|
$
|
|
September 30,
|
||||||||
2022
|
2021
|
|||||||
Stock options
|
|
|
||||||
Warrants to purchase common stock
|
|
|
||||||
Series F convertible preferred stock
|
|
|
||||||
Total
|
|
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
(in thousands, except per share amounts)
|
||||||||||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Deemed dividend to preferred shareholders (see note 3)
|
|
|
|
(
|
)
|
|||||||||||
Net loss after deemed dividend
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Weighted average shares outstanding
|
|
|
|
|
||||||||||||
Basic and diluted loss per share
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
Three months ended
September 30,
|
Nine
months ended
September 30,
|
|||||||||||||||
(in thousands)
|
2022
|
2021
|
2022
|
2021
|
||||||||||||
Selling, general and administrative expense
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Research and development expense
|
|
|
|
|
||||||||||||
Total stock-based compensation expense
|
$
|
|
$
|
|
$
|
|
$
|
|
ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Three Months Ended
September 30, 2022
|
Three Months Ended
September 30, 2021
|
Increase (Decrease)
|
% Change
|
|||||||||||
$
|
2,065
|
$
|
1,853
|
$
|
212
|
11.4
|
%
|
(in thousands)
|
Three Months Ended
September 30, 2022
|
Three Months Ended
September 30, 2021
|
Increase (Decrease)
|
% Change
|
||||||||||||
Cost of goods sold
|
$
|
806
|
$
|
733
|
$
|
73
|
10.0
|
%
|
||||||||
Selling, general and administrative
|
$
|
4,251
|
$
|
4,645
|
$
|
(394
|
)
|
(8.5
|
)%
|
|||||||
Research and development
|
$
|
928
|
$
|
1,726
|
$
|
(798
|
)
|
(46.2
|
)%
|
Nine Months Ended
September 30, 2022
|
Nine Months Ended
September 30, 2021
|
Increase (Decrease)
|
% Change
|
|||||||||||
$
|
6,204
|
$
|
6,279
|
$
|
(75
|
)
|
(1.2
|
)%
|
(in thousands)
|
Nine Months Ended
September 30, 2022
|
Nine Months Ended
September 30, 2021
|
Increase (Decrease)
|
% Change
|
||||||||||||
Cost of goods sold
|
$
|
2,780
|
$
|
2,682
|
$
|
98
|
3.7
|
%
|
||||||||
Selling, general and administrative
|
$
|
12,920
|
$
|
14,945
|
$
|
(2,025
|
)
|
(13.5
|
)%
|
|||||||
Research and development
|
$
|
3,141
|
$
|
3,847
|
$
|
(706
|
)
|
(18.3
|
)%
|
ITEM 1. |
LEGAL PROCEEDINGS
|
ITEM 1A. |
RISK FACTORS
|
ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
ITEM 3. |
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4. |
MINE SAFETY DISCLOSURES
|
ITEM 5. |
OTHER INFORMATION
|
ITEM 6. |
EXHIBITS
|
Incorporated By Reference
|
||||||||||||||
Exhibit
Number
|
Exhibit Description
|
Form
|
File
Number
|
Date of First Filing
|
Exhibit
Number
|
Filed
Herewith
|
Furnished
Herewith
|
|||||||
|
Fourth Amended and Restated Certificate of Incorporation
|
10
|
001-35312
|
February 1, 2012
|
3.1
|
|||||||||
|
Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation
|
8-K
|
001-35312
|
January 13, 2017
|
3.1
|
|||||||||
|
Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation
|
8-K
|
001-35312
|
May 23, 2017
|
3.1
|
|||||||||
|
Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation
|
8-K
|
001-35312
|
October 12, 2017
|
3.1
|
|||||||||
Certificate of Amendment to Fourth Amended and Restated Certificate of Incorporation
|
8-K/A
|
001-35312
|
October 16, 2020
|
3.1
|
||||||||||
Certificate of Amendment to Fourth Amended and Restated Certificate of Incorporation
|
8-K
|
001-35312
|
January 2, 2019
|
3.1
|
||||||||||
Certificate of Amendment to Fourth Amended and Restated Certificate of Incorporation
|
8-K
|
001-35312
|
April 27, 2021
|
3.1
|
||||||||||
Form of Certificate of Designation of Series A Junior Participating Preferred Stock
|
8-K
|
001-35312
|
June 14, 2013
|
3.1
|
||||||||||
Form of Certificate of Designation of Preferences, Rights and Limitations of Series F Convertible Preferred Stock
|
S-1/A
|
333-221010
|
November 17, 2017
|
3.7
|
||||||||||
Certificate of Designation of Preferences, Rights and Limitations of Series G Convertible Preferred Stock
|
8-K
|
001-35312
|
March 13, 2019
|
3.1
|
||||||||||
Certificate of Designation of Preferences, Rights and Limitations of Series H Convertible Preferred Stock
|
8-K
|
001-35312
|
January 29, 2020
|
3.1
|
||||||||||
Certificate of Designation of Preferences, Rights and Limitations of Series I Convertible Preferred Stock.
|
8-K
|
001-35312
|
October 18, 2022
|
3.1
|
||||||||||
Second Amended and Restated Bylaws
|
8-K
|
001-35312
|
April 27, 2021
|
3.2
|
Incorporated By Reference
|
||||||||||||||
Exhibit
Number
|
Exhibit Description
|
Form
|
File
Number
|
Date of First Filing
|
Exhibit
Number
|
Filed
Herewith
|
Furnished
Herewith
|
|||||||
Amendment to Second Amended and Restated Bylaws
|
8-K
|
001-35312
|
October 5, 2022
|
3.1
|
||||||||||
Form of Warrant to Purchase Shares of Common Stock
|
S-1/A
|
333-267368
|
October 13, 2022
|
4.20
|
||||||||||
Offer Letter by and between Nuwellis, Inc. and Lynn Blake, effective as of October 24, 2022
|
8-K
|
001-35312
|
October 5, 2022
|
10.1
|
||||||||||
Underwriting Agreement dated as of October 14, 2022, by and between Nuwellis, Inc. and Ladenburg Thalmann & Co. Inc.
|
8-K
|
001-35312
|
October 18, 2022
|
1.1
|
||||||||||
Warrant Agency Agreement
|
8-K
|
001-35312
|
October 18, 2022
|
4.2
|
||||||||||
Leak-Out Agreement
|
S-1/A
|
333-267368
|
September 30, 2022
|
10.70
|
||||||||||
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
X
|
|||||||||||||
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
X
|
|||||||||||||
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
X
|
|||||||||||||
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
X
|
|||||||||||||
101.INS
|
Inline XBRL Instance Document
|
X
|
||||||||||||
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document
|
X
|
||||||||||||
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
X
|
||||||||||||
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
X
|
||||||||||||
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
X
|
||||||||||||
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
X
|
||||||||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
X
|
Nuwellis, Inc.
|
||
Date: November 8, 2022
|
By:
|
/s/ Nestor Jaramillo, Jr.
|
Nestor Jaramillo, Jr.
|
||
Chief Executive Officer
|
||
Date: November 8, 2022
|
By:
|
/s/ Lynn L. Blake
|
Lynn L. Blake
|
||
Chief Financial Officer
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of Nuwellis, Inc. for the quarterly period ended September 30, 2022;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
Date: November 8, 2022
|
/s/ Nestor Jaramillo, Jr.
|
Nestor Jaramillo, Jr.
|
|
Chief Executive Officer
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
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Date: November 8, 2022
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/s/ Lynn L. Blake
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Lynn L. Blake
|
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Chief Financial Officer
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Date: November 8, 2022
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/s/ Nestor Jaramillo, Jr.
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Nestor Jaramillo, Jr.
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Chief Executive Officer
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(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: November 8, 2022
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/s/ Lynn L. Blake
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Lynn L. Blake
|
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Chief Financial Officer
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Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Condensed Consolidated Statements of Operations and Comprehensive Loss [Abstract] | ||||
Net sales | $ 2,065 | $ 1,853 | $ 6,204 | $ 6,279 |
Cost of goods sold | 806 | 733 | 2,780 | 2,682 |
Gross profit | 1,259 | 1,120 | 3,424 | 3,597 |
Operating expenses: | ||||
Selling, general and administrative | 4,251 | 4,645 | 12,920 | 14,945 |
Research and development | 928 | 1,726 | 3,141 | 3,847 |
Total operating expenses | 5,179 | 6,371 | 16,061 | 18,792 |
Loss from operations | (3,920) | (5,251) | (12,637) | (15,195) |
Other income (expense), net | 52 | (19) | 14 | (22) |
Loss before income taxes | (3,868) | (5,270) | (12,623) | (15,217) |
Income tax expense | (2) | (2) | (6) | (7) |
Net loss | $ (3,870) | $ (5,272) | $ (12,629) | $ (15,224) |
Basic loss per share (in dollars per share) | $ (0.37) | $ (0.75) | $ (1.2) | $ (2.72) |
Diluted loss per share (in dollars per share) | $ (0.37) | $ (0.75) | $ (1.2) | $ (2.72) |
Weighted average shares outstanding - basic (in shares) | 10,538 | 7,098 | 10,538 | 5,624 |
Weighted average shares outstanding - diluted (in shares) | 10,538 | 7,098 | 10,538 | 5,624 |
Other comprehensive loss: | ||||
Foreign currency translation adjustments | $ 2 | $ 0 | $ 1 | $ (3) |
Total comprehensive loss | $ (3,868) | $ (5,272) | $ (12,628) | $ (15,227) |
Nature of Business and Basis of Presentation |
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Nature of Business and Basis of Presentation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Business and Basis of Presentation |
Note 1 – Nature of Business and Basis of Presentation
Nature of Business: Nuwellis, Inc. (the “Company”) is a medical device company focused on developing, manufacturing and commercializing the Aquadex FlexFlow® and
Aquadex SmartFlow® systems (collectively, the “Aquadex System”) for ultrafiltration therapy. The Aquadex System is indicated for temporary (up to eight hours) or extended (longer than 8 hours in patients who require hospitalization) use in
adult and pediatric patients weighing 20 kg or more whose fluid overload is unresponsive to medical management, including diuretics. Nuwellis, Inc. is a Delaware corporation headquartered in Minneapolis with a wholly owned subsidiary in
Ireland. The Company’s common stock began trading on the Nasdaq Stock Market in February 2012.
In August 2016, the Company acquired the business associated with the Aquadex System (the “Aquadex
Business”) from a subsidiary of Baxter International, Inc. (“Baxter”) and refocused its strategy to fully devote its resources to the Aquadex Business. On April 27, 2021, the Company announced that it was changing its name from CHF Solutions, Inc.
to Nuwellis, Inc. to reflect the expansion of its customer base from treating fluid imbalance resulting from congestive heart failure to also include critical care and pediatric applications.
Principles of Consolidation: The accompanying condensed consolidated balance sheet as of September 30, 2022, which has been derived from the consolidated audited financial statements and the
unaudited condensed consolidated financial statements has been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to
Form 10-Q and Article 8 of Regulation S-X. Certain information and note disclosures normally included in the audited annual consolidated financial statements have been condensed or omitted pursuant to those rules and regulations. Accordingly,
they do not include all of the information necessary for a fair presentation of results of operations, comprehensive loss, financial condition, and cash flows in conformity with U.S. GAAP. In the opinion of management, the condensed
consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of the Company for the periods presented. Operating results for interim periods
are not necessarily indicative of results that may be expected for the year as a whole. The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the consolidated financial statements and during the reporting period. Actual results could differ materially from these estimates.
These condensed
consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Liquidity: The
Company’s consolidated financial statements have been prepared and presented on a basis assuming it continues as a going concern. During the years ended December 31, 2021, and 2020 and through September 30, 2022, the Company incurred losses
from operations and net cash outflows from operating activities as disclosed in the consolidated statements of operations and cash flows, respectively. As of September 30, 2022, the Company had an accumulated deficit of $265.5 million and it expects to incur losses in the immediate future. To date, the Company has been funded by equity financings, and although the
Company believes that it will be able to successfully fund its operations, there can be no assurance that it will be able to do so or that it will ever operate profitably.
The Company became a revenue-generating company after
acquiring the Aquadex Business in August 2016. The Company expects to incur additional losses in the near term as it grows the Aquadex Business, including investments in expanding its sales and marketing capabilities, purchasing inventory,
manufacturing components, and complying with the requirements related to being a U.S. public company. To become and remain profitable, the Company must succeed in expanding the adoption and market acceptance of the Aquadex System. This will
require the Company to succeed in training personnel at hospitals and in outpatient care settings and in effectively and efficiently manufacturing, marketing and distributing the Aquadex System and related components. There can be no assurance
that the Company will succeed in these activities, and it may never generate revenues sufficient to achieve profitability.
During 2021, the Company closed on underwritten public equity offerings for
aggregate net proceeds of approximately $27.9 million after deducting the underwriting discounts and commissions and other costs
associated with the offerings. In addition, during 2021 we received approximately $1,300
in proceeds from the exercise of investor warrants. See Note 3—Stockholders’ Equity for additional related disclosure. The Company will require additional funding to grow its Aquadex Business, which may not be available on terms favorable to
the Company, or at all. The Company may receive those funds from the proceeds from future warrant exercises, issuances of equity securities, or other financing transactions. Should warrant exercises not materialize or future capital raising be
unsuccessful, the Company may not be able to continue as a going concern. No adjustments have been made relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the
Company not continue as a going concern.
The Company believes that its existing capital resources will
be sufficient to support its operating plan through December 31, 2023. However, the Company may seek to raise additional capital to support its growth or other strategic initiatives through debt, equity or a combination thereof. There can be no
assurance the Company will be successful in raising additional capital.
Revenue Recognition: The Company recognizes revenue in accordance with Accounting Standards Codification, Topic 606, Revenue from Contracts with Customers.
Accordingly, the Company recognizes revenue when its customers obtain control of its products or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods and services. See Note 2 –
Revenue Recognition below for additional disclosures. For the three months ended September 30, 2022, one customer represented 12% of net sales. For the nine months ended September 30, 2022, two customers each represented 13% and 10% of net sales. For the three months ended September 30, 2021, two customers represented 14% and 12% of net sales. For the nine months ended September 30, 2021, two customers represented 12% and 11% of net sales.
Accounts Receivable:
Accounts receivable are unsecured, are recorded at net realizable value, and do not bear interest. The Company makes judgments as to its ability to collect outstanding receivables based upon significant patterns of collectability, historical
experience, and management’s evaluation of specific accounts and will provide an allowance for credit losses when collection becomes doubtful. The Company performs credit evaluations of its customers’ financial condition on an as-needed basis.
Payment is generally due 30 days from the invoice date and accounts past 30 days are individually analyzed for collectability. When all collection efforts have been exhausted, the account is written off against the related allowance. To date the Company has not
experienced any write-offs or significant deterioration of the aging of its accounts receivable, and therefore, no allowance for
doubtful accounts was considered necessary as of September 30, 2022, or December 31, 2021. As of September 30, 2022, one customer
represented 19% of the accounts receivable balance. As of December 31, 2021, two customers represented 12% and 11% of the accounts receivable balance.
Inventories: Inventories represent finished goods purchased from the Company’s suppliers and are recorded as the lower of cost or net realizable value using the first-in first-out
method. Overhead is allocated to manufactured finished goods inventory based on the normal capacity of the Company’s production facilities. Abnormal amounts of overhead, if any, are expensed as incurred. Inventories consisted of the following:
Loss per share: Basic loss per share is computed based on the
net loss for each period divided by the weighted average number of common shares outstanding. The net loss allocable to common stockholders for the nine months ended September 30, 2021 includes a deemed dividend of $33,000 that resulted from the change in the exercise price of warrants as a result of the March 2021 offering. See Note 3 – Stockholders’ Equity below
for additional disclosures.
Diluted earnings per share is computed based on the net loss
allocable to common stockholders for each period divided by the weighted average number of common shares outstanding, increased by the number of additional shares that would have been outstanding had the potentially dilutive common shares been
issued, and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include shares underlying outstanding convertible
preferred stock, warrants, stock options and other stock-based awards granted under stock-based compensation plans.
The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be
anti-dilutive as of the end of each period presented:
The following table reconciles reported net loss with reported net loss per share for each of the three and nine months ended September 30:
Subsequent events: The Company evaluates events through the
date the condensed consolidated financial statements are filed for events requiring adjustment to or disclosure in the condensed consolidated financial statements.
|
Revenue Recognition |
9 Months Ended |
---|---|
Sep. 30, 2022 | |
Revenue Recognition [Abstract] | |
Revenue Recognition |
Note 2 – Revenue Recognition
Net Sales: The Company sells its products in the United States primarily through a direct sales force. Customers who purchase the Company’s products include hospitals and clinics throughout the
United States. In countries outside the United States, the Company sells its products through a limited number of specialty healthcare distributors in Austria, Brazil, Colombia, The Czech Republic, Germany, Greece, Hong Kong, India, Israel,
Italy, Panama, Romania, Singapore, Slovakia, Spain, Switzerland, Thailand, United Arab Emirates, and the United Kingdom. These distributors resell the Company’s products to hospitals and clinics in their respective geographies.
Revenue from product sales is recognized when the customer or distributor obtains control of the
product, which occurs at a point in time, most frequently upon shipment of the product or receipt of the product, depending on shipment terms. The Company’s standard shipping terms are FOB shipping point unless the customer requests that control
and title to the inventory transfer upon delivery.
Revenue is measured as the amount of consideration we expect to receive, adjusted for any applicable
estimates of variable consideration and other factors affecting the transaction price, which is based on the invoiced price, in exchange for transferring products. All revenue is recognized when the Company satisfies its performance obligations
under the contract. The majority of the Company’s contracts have a single performance obligation and are short term in nature. The Company has entered into extended service plans with customers whose related revenue is recognized over time. This
revenue represents less than 1% of net sales for the three and nine months ended September 30, 2022, and 2021. The unfulfilled
performance obligations related to these extended service plans are included in deferred revenue, which is included in other current liabilities on the consolidated balance sheets. The majority of the deferred revenue is expected to be recognized
within one year.
Sales taxes and value added taxes in foreign jurisdictions that are collected from customers and
remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales. Revenue includes shipment and handling fees charged to customers. Shipping and handling costs associated with outbound freight after
control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of goods sold.
Product Returns: The Company
offers customers a limited right of return for its product in case of non-conformity or performance issues. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of
revenue in the period the related product revenue is recognized. The Company currently estimates product return liabilities using available industry data and its own historical sales and returns information. The Company has not received any
returns to date and believes that future returns of its products will be minimal. Therefore, revenue recognized is not currently impacted by variable consideration related to product returns.
|
Stockholders' Equity |
9 Months Ended |
---|---|
Sep. 30, 2022 | |
Stockholders' Equity [Abstract] | |
Stockholders' Equity |
Note 3 – Stockholders’ Equity
Series F Convertible Preferred Stock: On November 27, 2017, the Company closed on an underwritten
public offering Series F convertible preferred stock and warrants to purchase shares of common stock for gross proceeds of $18.0
million. Net proceeds totaled approximately $16.2 million after deducting the underwriting discounts and commissions and other costs
associated with the offering.
The offering was comprised of Series F
convertible preferred stock, convertible into shares of the Company’s common stock at an initial conversion price of $1,890.00 per share.
Each share of Series F convertible preferred stock was accompanied by a Series 1 warrant (which expired on the first anniversary of its issuance) to purchase 16 shares of the Company’s common stock at an exercise price of $1,890.00 per
share, and a Series 2 warrant, which expires on the seventh anniversary of its issuance, to purchase 16 shares of the Company’s common
stock at an exercise price of $1,890.00 per share. The Series F convertible preferred stock has full ratchet price based anti-dilution
protection, subject to customary carve-outs, in the event of a down-round financing at a price per share below the conversion price of the Series F convertible preferred stock (which protection will expire if, during any 20 of 30 consecutive trading days, the
volume weighted average price of the Company’s common stock exceeds 300% of the then-effective conversion price of the Series F
convertible preferred stock and the daily dollar trading volume for each trading day during such period exceeds $200,000). The exercise
price of the warrants is fixed and does not contain any variable pricing features, nor any price-based anti-dilutive features, apart from customary adjustments for stock splits, combinations, reclassifications, stock dividends or fundamental
transactions. A total of 18,000 shares of Series F convertible preferred stock initially convertible into 9,557 shares of common stock and warrants to purchase 19,122
shares of common stock were issued in the offering.
Effective March 12, 2019, the conversion
price of the Series F convertible preferred stock was reduced from $890.40 to $157.50, the per share price to the public of the Series G convertible preferred stock issued in the March 2019 Offering. Effective October 25, 2019, the conversion price of the Series F
convertible preferred stock was reduced from $157.50 to $42.30, and further reduced on November 6, 2019, from $42.30 to $29.83, the per share price to the public in the October and November 2019 transactions, respectively. Effective January 28, 2020, the conversion price
of the Series F convertible preferred stock was reduced from $29.83 to $16.50, the per share price to the public of the Series H convertible preferred stock, which closed in an underwritten public offering on January 28, 2020, described below. Effective March
23, 2020, the conversion price of the Series F convertible preferred stock was reduced from $16.50 to $9.00, the per share price to the public in the March 2020 transaction, described below. In connection with the September 2021 offering, the conversion
price of the Series F convertible preferred stock was reduced from $5.50 to $2.50, the per share price to the public in the September 2021 offering, described below.
As of September 30, 2022, and December 31,
2021, 127 shares of the Series F convertible preferred stock remained outstanding.
March 2021 Offering: On March 19, 2021, the Company closed on an underwritten public
offering of 3,795,816 shares of common stock, for gross proceeds of approximately $20.9 million (the “March 2021 Offering”). Net proceeds totaled approximately $18.9
million after deducting the underwriting discounts and commissions and other costs associated with the offering and after giving effect to the underwriters’ full exercise of their overallotment option.
In connection with the March 2021 Offering, the conversion price
of the Series F convertible preferred stock was reduced from $9.00 to $5.50, the per share price to the public in the March 2021 Offering. In addition, the exercise price of the common stock warrants issued in connection with the January 2020
Offering was reduced from $9.00 to $5.50,
the per share price to the public in the March 2021 Offering.
September 2021 Offering: On September 17, 2021, the Company closed on an underwritten
public offering of 4,005,588 shares of common stock, for gross proceeds of approximately $10.0 million (the “September 2021 Offering”). Net proceeds totaled approximately $9.0 million after deducting the underwriting discounts and commissions and other costs associated with the offering and after giving effect to the underwriters’ full exercise of their overallotment option.
In connection with the September 2021 Offering, the conversion
price of the Series F convertible preferred stock was reduced from $5.50 to $2.50, the per share price to the public in the September 2021 Offering. In addition, the exercise price of the common stock warrants issued in connection with the January
2020 Offering was reduced from $5.50 to $2.50,
the per share price to the public in the September 2021 Offering.
Placement Agent Fees: In connection with the offerings described above, the Company paid the placement agent an
aggregate cash placement fee equal to 8% of the aggregate gross proceeds raised in each of the offerings.
Market-Based Warrants: On May 30, 2019, the Company granted a market-based warrant to a consultant in exchange
for investor relations services. The warrant represents the right to acquire up to 3,334 shares of the Company’s common stock at an
exercise price of $95.40 per share, the closing stock price of the Company’s common shares on May 30, 2019. The warrant is subject to a
vesting schedule based on the Company achieving certain market stock prices within a specified period of time. The warrant expires on May 30, 2024. The warrant was valued at $57.90 per share using the Monte Carlo valuation methodology and was expensed over the term of the consulting engagement, which was twelve months. Significant inputs used for the Monte
Carlo valuation were the expected stock price volatility of 136.21%, and management’s expectations regarding the timing of regulatory
clearance for an expanded label in pediatrics. None of these warrants had vested as of September 30, 2022.
Reverse Stock Split: On October 6, 2020, the
Company’s stockholders approved a reverse split of its outstanding common stock at a ratio in the range of to and, on October 9, 2020, the board of directors approved a reverse split of the Company’s outstanding common stock that became effective after trading on October 16, 2020. This reverse stock split did not change the par value of the
Company’s common stock or the number of common or preferred shares authorized by the Company’s Fourth Amended and Restated Certificate of Incorporation, as amended. All share and per-share amounts have been retroactively adjusted to reflect
the reverse stock splits for all periods presented.
|
Stock-Based Compensation |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation |
Note 4 - Stock-Based
Compensation
Under the fair value recognition provisions of
U.S. GAAP for accounting for stock-based compensation, the Company measures stock-based compensation expense at the grant date based on the fair value of the award and recognizes the compensation expense over the requisite service period, which is
generally the vesting period.
The following table presents the classification of stock-based compensation expense
recognized for the periods below:
|
Income Taxes |
9 Months Ended |
---|---|
Sep. 30, 2022 | |
Income Taxes [Abstract] | |
Income Taxes |
Note 5 – Income Taxes
The Company provides for a valuation allowance when it is more
likely than not that it will not realize a portion of its deferred tax assets. The Company has established a full valuation allowance for U.S. and foreign deferred tax assets due to the uncertainty that enough taxable income will be generated in
those taxing jurisdictions to utilize the assets. Therefore, the Company has not reflected any benefit of such deferred tax assets in the accompanying condensed consolidated financial statements.
As of September 30, 2022, there were no material changes to what
the Company disclosed regarding tax uncertainties or penalties in its Annual Report on Form 10-K for the year ended December 31, 2021.
|
Operating Leases |
9 Months Ended |
---|---|
Sep. 30, 2022 | |
Operating Leases [Abstract] | |
Operating Leases |
Note 6—Operating Leases
The Company leases a 23,000 square foot facility located in Eden Prairie, Minnesota for office and manufacturing space under
a non-cancelable operating lease that expires in March 2027. In November 2021, the Company entered into a fourth amendment to the lease, extending the term of the lease from March 31, 2022 to March 31, 2027. This facility serves as our corporate
headquarters and houses substantially all of our functional areas. Monthly rent and common area maintenance charges, including estimated property tax for our headquarters, total approximately $29,000. The lease contains provisions for annual inflationary adjustments. Rent expense is being recorded on a straight-line basis over the term of the lease. Beginning on
April 1, 2022, the annual base rent is $10.50 per square foot, subject to annual increases of $0.32 to $0.34 per square foot.
|
Finance Lease Liability |
9 Months Ended |
---|---|
Sep. 30, 2022 | |
Finance Lease Liability [Abstract] | |
Finance Lease Liability |
Note 7—Finance Lease Liability
In 2020, the Company entered into lease agreements to finance
equipment valued at $98,000. The equipment consisted of computer hardware and audio-visual equipment and is included in
in the accompanying consolidated financial statements. The principal amount under the lease agreements was $93,000 at the date the lease commenced, the implied interest rate is 7.5%, and the term of the lease is 39 months. |
Commitments and Contingencies |
9 Months Ended |
---|---|
Sep. 30, 2022 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies |
Note 8—Commitments and Contingencies
Employee Retirement Plan: The Company has a 401(k) retirement savings plan
that provides retirement benefits to substantially all full-time U.S. employees. Eligible employees may contribute a percentage of their annual compensation, subject to Internal Revenue Service (“IRS”) limitations, with the Company matching a
portion of the employees’ contributions at the discretion of the Company.
Non-refundable Technology License Fee: On June 24, 2021, the Company
entered into a research and development collaboration agreement with Koronis Biomedical Corporation (KBT) to design and develop an integrated continuous renal replacement therapy device. This agreement became effective on August 5, 2021, when
KBT received approval of a $1.7 million grant from the National Institutes of Health (NIH) to support this project. As part of this
agreement, the Company pays KBT a non-refundable technology license fee of $428,160, payable in twelve equal monthly installments commencing on June 1, 2022. The Company has recorded a liability for the non-refundable technology license fee,
with $285,440 included in Accounts Payable. The full amount of $428,160 was expensed and included in Research and Development Expense for the year ended December 31, 2021.
|
Subsequent Events |
9 Months Ended |
---|---|
Sep. 30, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events |
Note 9 – Subsequent
Events
On October 18, 2022, the
Company closed on an underwritten public offering of 20,994,044 shares of common stock and 23,157,124 shares of Series I convertible preferred stock, for gross proceeds of approximately $11.0 million (the “October 2022 Offering”). Net proceeds totaled approximately $9.8
million after deducting underwriting discounts and commissions and other costs associated with the offering and after giving effect to the underwriters’ full exercise of their overallotment option.
The offering was comprised of (1) 20,994,044 Class A Units, priced at a public offering price
of $0.25 per Class A Unit, with each Class A Unit consisting of one share of common stock and 1.5 warrants to purchase one share of common
stock at an exercise price of $0.25 per share, and (2) 23,157,124 Class B Units, priced at a public offering price of $0.25 per
Class B Unit, with each Class B Unit consisting of one share of Series I convertible preferred stock, convertible into one share of
common stock, and 1.5 warrants to purchase one share of common stock with an exercise price of $0.25 per share.
The warrants will be exercisable beginning on the effective date of a reverse stock split in an amount sufficient to permit the exercise in full of the warrants, contingent upon stockholder approval of such
reverse stock split and of the exercisability of the warrants under Nasdaq rules and will expire on the sixth anniversary of the initial exercise date. The stockholder meetings will be held on or before December 9, 2022. The conversion price of
the preferred stock issued in the transaction is fixed and does not contain any variable pricing feature or any price-based anti-dilutive feature. The preferred stock issued in this transaction includes a beneficial ownership blocker but has no
dividend rights (except to the extent that dividends are also paid on the common stock) or liquidation preference and, subject to limited exceptions, has no voting rights. The securities comprising the units are immediately separable and were
issued separately.
In connection with the
October 2022 Offering, the conversion price of the Series F convertible preferred stock was reduced from $2.50 to $0.25, the per share price to the public in the October 2022 Offering. In addition, the exercise price of the common stock warrants issued in connection
with the January 2020 Offering was reduced from $2.50 to $1.65, based on ”reset” provisions in the Warrant agreement.
On October 28, 2022, the
Company filed a preliminary proxy statement seeking stockholder approval for a reverse stock split of our outstanding common stock at a ratio in the range of
to and approval to increase the aggregate maximum number of
shares of Common Stock that may be issued under the 2017 Equity Incentive Plan. The Company filed another preliminary proxy statement seeking stockholder approval to issue up to 66,226,752 shares of our common stock upon the exercise of our warrants issued to investors in the October 2022 Offering that may be equal to or exceed 20% of our common stock outstanding before the October 2022 Offering. |
Nature of Business and Basis of Presentation (Policies) |
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Nature of Business and Basis of Presentation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation |
Principles of Consolidation: The accompanying condensed consolidated balance sheet as of September 30, 2022, which has been derived from the consolidated audited financial statements and the
unaudited condensed consolidated financial statements has been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to
Form 10-Q and Article 8 of Regulation S-X. Certain information and note disclosures normally included in the audited annual consolidated financial statements have been condensed or omitted pursuant to those rules and regulations. Accordingly,
they do not include all of the information necessary for a fair presentation of results of operations, comprehensive loss, financial condition, and cash flows in conformity with U.S. GAAP. In the opinion of management, the condensed
consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of the Company for the periods presented. Operating results for interim periods
are not necessarily indicative of results that may be expected for the year as a whole. The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the consolidated financial statements and during the reporting period. Actual results could differ materially from these estimates.
These condensed
consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
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Liquidity |
Liquidity: The
Company’s consolidated financial statements have been prepared and presented on a basis assuming it continues as a going concern. During the years ended December 31, 2021, and 2020 and through September 30, 2022, the Company incurred losses
from operations and net cash outflows from operating activities as disclosed in the consolidated statements of operations and cash flows, respectively. As of September 30, 2022, the Company had an accumulated deficit of $265.5 million and it expects to incur losses in the immediate future. To date, the Company has been funded by equity financings, and although the
Company believes that it will be able to successfully fund its operations, there can be no assurance that it will be able to do so or that it will ever operate profitably.
The Company became a revenue-generating company after
acquiring the Aquadex Business in August 2016. The Company expects to incur additional losses in the near term as it grows the Aquadex Business, including investments in expanding its sales and marketing capabilities, purchasing inventory,
manufacturing components, and complying with the requirements related to being a U.S. public company. To become and remain profitable, the Company must succeed in expanding the adoption and market acceptance of the Aquadex System. This will
require the Company to succeed in training personnel at hospitals and in outpatient care settings and in effectively and efficiently manufacturing, marketing and distributing the Aquadex System and related components. There can be no assurance
that the Company will succeed in these activities, and it may never generate revenues sufficient to achieve profitability.
During 2021, the Company closed on underwritten public equity offerings for
aggregate net proceeds of approximately $27.9 million after deducting the underwriting discounts and commissions and other costs
associated with the offerings. In addition, during 2021 we received approximately $1,300
in proceeds from the exercise of investor warrants. See Note 3—Stockholders’ Equity for additional related disclosure. The Company will require additional funding to grow its Aquadex Business, which may not be available on terms favorable to
the Company, or at all. The Company may receive those funds from the proceeds from future warrant exercises, issuances of equity securities, or other financing transactions. Should warrant exercises not materialize or future capital raising be
unsuccessful, the Company may not be able to continue as a going concern. No adjustments have been made relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the
Company not continue as a going concern.
The Company believes that its existing capital resources will
be sufficient to support its operating plan through December 31, 2023. However, the Company may seek to raise additional capital to support its growth or other strategic initiatives through debt, equity or a combination thereof. There can be no
assurance the Company will be successful in raising additional capital.
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Revenue Recognition |
Revenue Recognition: The Company recognizes revenue in accordance with Accounting Standards Codification, Topic 606, Revenue from Contracts with Customers.
Accordingly, the Company recognizes revenue when its customers obtain control of its products or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods and services. See Note 2 –
Revenue Recognition below for additional disclosures. For the three months ended September 30, 2022, one customer represented 12% of net sales. For the nine months ended September 30, 2022, two customers each represented 13% and 10% of net sales. For the three months ended September 30, 2021, two customers represented 14% and 12% of net sales. For the nine months ended September 30, 2021, two customers represented 12% and 11% of net sales.
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Accounts Receivable |
Accounts Receivable:
Accounts receivable are unsecured, are recorded at net realizable value, and do not bear interest. The Company makes judgments as to its ability to collect outstanding receivables based upon significant patterns of collectability, historical
experience, and management’s evaluation of specific accounts and will provide an allowance for credit losses when collection becomes doubtful. The Company performs credit evaluations of its customers’ financial condition on an as-needed basis.
Payment is generally due 30 days from the invoice date and accounts past 30 days are individually analyzed for collectability. When all collection efforts have been exhausted, the account is written off against the related allowance. To date the Company has not
experienced any write-offs or significant deterioration of the aging of its accounts receivable, and therefore, no allowance for
doubtful accounts was considered necessary as of September 30, 2022, or December 31, 2021. As of September 30, 2022, one customer
represented 19% of the accounts receivable balance. As of December 31, 2021, two customers represented 12% and 11% of the accounts receivable balance.
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Inventories |
Inventories: Inventories represent finished goods purchased from the Company’s suppliers and are recorded as the lower of cost or net realizable value using the first-in first-out
method. Overhead is allocated to manufactured finished goods inventory based on the normal capacity of the Company’s production facilities. Abnormal amounts of overhead, if any, are expensed as incurred. Inventories consisted of the following:
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Loss per Share |
Loss per share: Basic loss per share is computed based on the
net loss for each period divided by the weighted average number of common shares outstanding. The net loss allocable to common stockholders for the nine months ended September 30, 2021 includes a deemed dividend of $33,000 that resulted from the change in the exercise price of warrants as a result of the March 2021 offering. See Note 3 – Stockholders’ Equity below
for additional disclosures.
Diluted earnings per share is computed based on the net loss
allocable to common stockholders for each period divided by the weighted average number of common shares outstanding, increased by the number of additional shares that would have been outstanding had the potentially dilutive common shares been
issued, and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include shares underlying outstanding convertible
preferred stock, warrants, stock options and other stock-based awards granted under stock-based compensation plans.
The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be
anti-dilutive as of the end of each period presented:
The following table reconciles reported net loss with reported net loss per share for each of the three and nine months ended September 30:
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Subsequent events |
Subsequent events: The Company evaluates events through the
date the condensed consolidated financial statements are filed for events requiring adjustment to or disclosure in the condensed consolidated financial statements.
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Nature of Business and Basis of Presentation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Business and Basis of Presentation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories consisted of the following:
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Potential Shares of Common Stock not Included in Diluted Net Loss Per Share |
The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be
anti-dilutive as of the end of each period presented:
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Reconciliation of Reported Net Loss with Reported Net Loss Per Share |
The following table reconciles reported net loss with reported net loss per share for each of the three and nine months ended September 30:
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Stock-Based Compensation (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Classification of Stock-Based Compensation Expense |
The following table presents the classification of stock-based compensation expense
recognized for the periods below:
|
Revenue Recognition (Details) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-04-01 | ||||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Abstract] | ||||
Expected timing of satisfaction, period | 1 year | 1 year | ||
Sales Revenue [Member] | Customer Concentration Risk [Member] | ASC 606 [Member] | Maximum [Member] | ||||
Revenue, Performance Obligation [Abstract] | ||||
Percentage of net sales | 1.00% | 1.00% | 1.00% | 1.00% |
Stock-Based Compensation (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Stock-Based Compensation Expense Items [Abstract] | ||||
Stock-based compensation expense | $ 220 | $ 256 | $ 697 | $ 993 |
Selling, General and Administrative Expense [Member] | ||||
Stock-Based Compensation Expense Items [Abstract] | ||||
Stock-based compensation expense | 199 | 216 | 624 | 894 |
Research and Development Expense [Member] | ||||
Stock-Based Compensation Expense Items [Abstract] | ||||
Stock-based compensation expense | $ 21 | $ 40 | $ 73 | $ 99 |
Operating Leases (Details) |
9 Months Ended |
---|---|
Sep. 30, 2022
USD ($)
$ / ft²
ft²
| |
Operating Lease s [Abstract] | |
Area of property leased under operating lease | ft² | 23,000 |
Monthly rent and common area maintenance charges | $ | $ 29,000 |
Annual base rent (per square foot) | 10.5 |
Minimum [Member] | |
Operating Lease s [Abstract] | |
Annual increase per square foot (in dollars per square foot) | 0.32 |
Maximum [Member] | |
Operating Lease s [Abstract] | |
Annual increase per square foot (in dollars per square foot) | 0.34 |
Finance Lease Liability (Details) |
Dec. 31, 2020
USD ($)
|
---|---|
Finance Lease Liability [Abstract] | |
Value of finance lease equipment | $ 98,000 |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Property, Plant and Equipment, Net |
Principal amount under lease agreement | $ 93,000 |
Implied interest rate | 7.50% |
Finance lease term | 39 months |
Commitments and Contingencies (Details) - Koronis Biomedical Corporation [Member] |
12 Months Ended | ||
---|---|---|---|
Aug. 05, 2021
USD ($)
Installment
|
Dec. 31, 2021
USD ($)
|
Sep. 30, 2022
USD ($)
|
|
Commitments and Contingencies [Abstract] | |||
Amount of grant approval received | $ 1,700,000 | ||
Non-refundable technology license fee | $ 428,160 | ||
Number of equal monthly installments | Installment | 12 | ||
Research and Development Expense [Member] | |||
Commitments and Contingencies [Abstract] | |||
Non-refundable technology license fee expenses | $ 428,160 | ||
Accounts Payable [Member] | |||
Commitments and Contingencies [Abstract] | |||
Non-refundable technology license fee | $ 285,440 |
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