NUWELLIS, INC.
ANNUAL REPORT ON FORM 10-K
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Unless the context requires otherwise, references in this Annual Report on Form 10-K (this "Annual Report" or "Report") to "we," "us," "the Company" and "our" refer to Nuwellis, Inc. (the "Company").
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements relate to
us, our business prospects and our results of operations and are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those
anticipated by such forward-looking statements. Forward-looking statements are based on management's current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management's beliefs and
assumptions are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. Factors that could cause or contribute to such differences
include, but are not limited to, those described under the heading “Risk Factors” included in this Annual Report on Form 10-K that includes a discussion of important factors that may cause our actual results to differ materially from those
expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove
to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve
our objectives and plans in any specified time frame, or at all. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. In some cases, you can identify
forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of these terms
or other comparable terminology, although not all forward-looking statements contain these words. Except as required by law, we undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that
might subsequently arise. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the U.S. Securities and Exchange Commission (the “SEC”) that advise interested parties of the risks and factors that may affect our business.
PART I
Overview
We are a commercial-stage medical technology company dedicated to transforming the lives of patients suffering from fluid overload through science, collaboration, and innovative technology. The
company is focused on developing, manufacturing, and commercializing medical devices used in ultrafiltration therapy, including the Aquadex FlexFlow® and the Aquadex SmartFlow® systems (collectively the “Aquadex System”). The Aquadex SmartFlow®
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.
Please note that selected authors in the citations below are either current consultants to the Company or were previously compensated consultants. Each author typically is required to disclose any
actual or potential conflicts of interests at the time they submitted their written manuscript to the potential publication. Dr. Sean Pinney for example, is the principal investigator under the Company’s current REVERSE-HF heart failure clinical
study. Additionally, Dr. Maria Rosa Costanzo, joined the Company’s Board of Directors in September, 2019, though many of her cited publications preceded her membership on the Board of Directors. Since joining the Company’s Board, Dr. Costanzo
has declined any equity ownership in the Company, although she has accepted cash remuneration for her Board and Committee participation.
Fluid Overload
Fluid overload, also known as hypervolemia, is a condition in which there is too much fluid in the blood, vital organs, and interstitial space, and generally refers to the expansion of the
extracellular fluid volume. Although the body does need some amount of fluid to remain healthy, too much can cause an imbalance and damage to an individual’s health.1
The signs and symptoms of fluid overload are not always the same in each patient and may vary. However, possible signs and symptoms of fluid overload include pulmonary edema/pleural effusion,
peripheral edema, anasarca (swelling of the skin) ascites, jugular vein distention and dyspnea.2 Medical conditions or diseases where excess fluid accumulates in the
body are heart failure, kidney failure, nephrotic syndrome, cirrhosis, or burn injuries/trauma. Individuals may also suffer from temporary fluid overload following certain surgical procedures, such as cardiac surgery.3 The diagnosis of fluid overload can be made through a variety of tests/exams such as a physical exam (weight, presence of pulmonary rales, and edema), blood chemistry, natriuretic peptides,
liver enzymes, hemoglobin and hematocrit, blood volume analysis, and/or bioimpedance analysis.4 Fluid overload has a significant association with the combined events
of death, infection, bleeding, arrhythmia, and pulmonary edema5 and is a leading cause of hospital readmissions with patients suffering from heart failure and
patients following cardiac surgery.6
1 Murugan R et al. Nature Rev Nephrol. 2020; 1-14.
2 Koratala A et al. Cardiorenal Med. 2022;12(4):141-154.
3 Vaara ST et al. Crit Care.2012; 16: 1-11.
4 Koratala A et al Cardiorenal Med. 2022;12(4):141-154
5 Stein, A, et. al. Critical Care, 2012:16:R99.
6 Iribarne A, et al. Ann Thorac Surg. 2014; 98(4): 1274-80.
The condition of fluid overload is often observed in patients with heart failure and secondary oliguric states,7
although in pediatric patients, fluid overload is associated with significant increases in mortality.8 9 Congestion or fluid overload, the hallmark of decompensated heart failure (HF), is the primary reason for hospitalization in 90% of these patients.10 11 For this reason, diuretics have been the cornerstone of heart failure treatment for more than 50 years.12 Over the past 20 years, approaches to treatment have changed dramatically.13
These dramatic improvements include new medications and new technologies, such as ultrafiltration, to help treat fluid overload. Each year there are over 1 million heart failure hospitalizations in
the United States, and 90% of those hospitalizations are due to symptoms of fluid overload.14 These patients are hospitalized on average for 8 days at a cost of
approximately $24,000, as to which reimbursement does not cover the full cost.15
Treatments for Fluid Overload
Diuretics
Treatment for fluid overload has traditionally been achieved through use of oral or loop diuretics which may be accompanied by use of other categories of medications, such as angiotensin-converting
enzyme (ACE) inhibitors, sodium-glucose co-transporter 2 (SGLT-2) inhibitors, Aldosterone receptor antagonists (MRAs), beta-blockers, and inotropic drugs. Chronic diuretic use has been associated with increased long-term mortality and
hospitalizations in a wide spectrum of chronic systolic and diastolic HF patients.16 We believe that diuretics, particularly at high doses, may be deleterious to
patients. Additionally, between 10-40% of heart failure patients are refractory to diuretics,17 with diuretic resistance associated with a higher risk of in-hospital
worsening of heart failure, increase mortality after discharge, and a 3-fold increase in rehospitalization rates.18 In addition, patients with heart failure and
cardiorenal syndrome have diminished response to loop diuretics, making these agents less effective at relieving congestion.19 Also, long-term use of diuretics has
been associated with kidney damage.20 One study found that approximately 40% of heart failure patients have poor diuretic response.21 This poor response is possibly due to noncompliance or high intake of salt, poor drug absorption, insufficient kidney response to drug, and reduced diuretic secretion.22 Despite treatment with loop diuretics, patients are frequently hospitalized and treated for recurrent symptoms and signs of fluid overload.
7 Ronco C, Costanzo MR, Bellomo R, et al. (2010) Fluid Overload Diagnosis and Management. Basel, Switzerland: Karger.
8 Sutherland SM, et al. Am J Kidney Disease. 2010; 5(2): 316-25.
9 Gillespie RS, et al. Ped Nephro. 2004; 19(12): 1394-99.
10 Kazory A & Costanzo MR. Adv Chronic Kidney Dis. 2018; 25(5): 434-442.
11 Fonarow GC. Rev Cardiovasc Med. 2003; 4: s21-30.
12 Kamath SA. Int J of Nephrol. 2011; 1-6.
13 Ellison DH. Cardio.2001;96:132-143
14 Costanzo MR, et al. J Am Coll Cardiol. 2017 May 16;69(19):2428-2445.
15 Gheorghiade M, et al. Eur Heart J Suppl. 2005; 7:B13- 19.
16 Ahmed A, et al. Eur Heart J. 2006 Jun;27(12):1431-9.
17 Testani JM, Hanberg JS, Cheng S et al. Circ Heart Fail. 2016; 9(1): e002370.
18 Costanzo MR, et al. J Am Coll Cardiol. 2017;69(19):2428-2445.
19 Kamath SA. Int J of Nephrol. 2011: 1-6.
20 Felker MG & Mentz RJ. J Am Coll Cardiol. 2012;59(24):2145-53.
21 Testani JM. Circ Heart Fail. 2016 Jan;9(1):e002370.
22 Hoorn EJ & Ellison DH. Am J Kidney Dis. 2017;69(1):136-142.
Nearly one-half of hospitalized patients with heart failure are discharged with residual fluid excess after receiving conventional diuretic therapies.23 Additionally, one study found that 24% of such patients were readmitted to the hospital within 30 days of their discharge, and up to 42-50% were readmitted at 90 days and 6 months respectively.24 25 Regardless of diuretic strategy, 42% of acutely decompensated heart failure
subjects in the DOSE (Diuretic Optimization Strategies Evaluation) trial reached the composite endpoint of death, rehospitalization, or emergency department visit at 60 days.26 We believe that there is an association of chronic loop diuretic therapy and greater resource utilization at hospitals.27 Therefore, an
alternative therapy to help stabilize or improve patient care is needed.
Ultrafiltration.
Ultrafiltration, or aquapheresis, is an alternative therapy to diuretics for fluid removal in patients with volume overload. Ultrafiltration has been a well-documented technique in the treatment of
fluid overload in heart failure patients for over 20 years.28 We believe that ultrafiltration is a safe and effective therapy to treat fluid overload and congestion
by removing the overload of fluid and congestion by removing extra fluid and salt.29 With ultrafiltration, medical practitioners can specify and control the amount
of fluid to be extracted at a safe, predictable, and effective rate. The use of ultrafiltration therapy in subgroups of patients, such as heart failure and post-cardiac surgery, has demonstrated clinical benefits in treating fluid overload signs
and symptoms. In addition to the clinical benefits of ultrafiltration, we believe the data suggests that the therapy provides economic advantages. One hospital cost analysis demonstrated a total cost savings of $3,975 per patient when using
ultrafiltration as compared to diuretic therapy over 90 days.30
The Aquadex System
The Aquadex System is designed and clinically proven to simply, safely, and precisely remove excess fluid (primarily excess salt and water) from patients suffering from fluid overload who have failed
diuretic therapy.
With the Aquadex System, medical practitioners can specify and control the amount of fluid to be extracted at a safe, predictable, and effective rate. The Aquadex System has been shown to have no
clinically significant impact on electrolyte balance, blood pressure or heart rate.31 32
Unlike other forms of ultrafiltration, which typically require administration specifically by a nephrologist, the Aquadex System may be prescribed by any physician and administered by a healthcare provider, both of whom have received training in
extracorporeal therapies. The Company estimates it has treated more than 30,000 patients across all three (3) of our customer categories, since it reintroduced the Aquadex System to the U.S. market in 2016.
23 Orso D, et al. Eur Rev Med Pharmacol Sci. 2021 Apr;25(7):2971-2980.
24 Costanzo MR, et al. J Am Coll Cardiol. 2017;69(19):2428- 2445.
25 Thandra A, et al. Clin Invest. 2023; 365(2): 145-51.
26 Felker GM, et al. N Engl J Med. 2011; 364:797-805.
27 Costanzo MR, et al. J Am Coll Cardiol. 2007; 49(6):675-683.
28 Agostoni PG, et al. J Am Coll Cardiol. 1993; 21(2):424-431.
29 Kazory A, et al. Cardiorenal Med. 2023;13(1)1-8.
30 Costanza MR, et. al. Value Health. 2018; 21 (Suppl 1):S167.
31 SAFE Trial: Jaski BE, et al. J Card Fail. 2003; 9(3): 227-231.
32 RAPID Trial: Bart BA, et al. J Am Coll Cardiol. 2005; 46(11): 2043-2046.
Benefits of the Aquadex System
The Aquadex System offers a safe approach to treating fluid overload and:
| • |
In a single center, retrospective analysis of 335 consecutive patients, patients in whom there was follow-up for 12 months, there were 1.74 fewer rehospitalizations for HF in the year following UF when
compared to the 12 months preceding UF; 33
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| • |
Analysis of an Aquadex program in community-based regional hospitals with 30 patients showed refractory acute decompensated heart failure (ADHF) patients benefited from significant volume loss (mean loss of
9.40 + 4.55L) and weight reduction (mean decrease of 7.40kg) along with stable renal function and remarkable clinical benefit as well as a statistically significant reduction in the ADHF rehospitalization rate at 60 days (p=0.013). 34
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In a re-appraisal of the AVOID-HF trial (n=224 patients), including an additional 31 adjudicated events to complete the dataset, demonstrated that patients treated with AUF had a 60% reduction in heart
failure events at 30 days compared to intravenous diuretics (p=0.014) and significantly fewer HF hospitalizations at 30 days (p=0.032). 35
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Rehospitalizations at 30 days with Aquadex were 12.4% compared with the national average at 30 days of 24%;
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Reduces length of hospital stay when initiated early, resulting in average savings of $3,975 (14%);36
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Stabilizes or improves cardiac hemodynamics;37 38
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Safe, easy-to-use, and flexible in application;
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Provides complete control over rate and total volume of fluid removed by allowing a medical practitioner to specify the amount of fluid to be removed from each individual patient;
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Can be performed via peripheral or central venous access;
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Predictably removes excess isotonic fluid (extracts water and sodium while sparing potassium and magnesium; decrease risk of electrolyte abnormalities);38 40
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No significant changes to kidney function;41
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The use of continuous hematocrit monitoring and SvO2 sensor provides guided-therapy ultrafiltration.42
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Following ultrafiltration, neurohormonal activation is reset toward a more physiological condition and diuretic efficacy is restored;43
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Provides highly automated operation with only one setting required to begin therapy;
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Utilizes a single-use, disposable auto-loading blood filter circuit that facilitates easy set-up; and
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Has a built-in console that guides the medical practitioner through the setup and operational process.
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Components of the Aquadex System
The Aquadex System consists of:
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A console, a piece of capital equipment containing electromechanical pumps, an LCD screen and stand;
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A one-time disposable blood circuit set, an integrated collection of tubing, filter, sensors, and connectors that contain and deliver the blood from and back to the patient; and
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A disposable catheter, a small, dual-lumen, extended-length catheter designed to access the peripheral venous system of the patient and to simultaneously withdraw blood and return filtered blood to the
patient.
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33 Watson R, et al. Am Heart J Plus: Cardiol Res & Pract 24. 2022; 1-6.
34 Chinta et al. Current Problems in Cardiology. 49 (2024) 102716.
35 Pinney et al. J Am Coll Cardiol HF. Feb 19, 2025.
36 Costanza MR, et. al. Value Health. 2018; 21 (Suppl 1):S167.
37 Boga M, et al. Perf. 2000; 15:143-150.
38 Kiziltepe U, et al. Ann Thorac Surg 2001;71:684-93.
39 Kazory A, et al. Cardiorenal Med. 2023;13(1)1-8.
40 Agostoni PG et al. J Am Coll Cardiol. 1993;21(2):424-31.
41 Kazory A, et al. Cardiorenal Med. 2023;13(1)1-8.
42 Starr MC, et al. Pediatric Nephrology. 2024; 39(2):597-601.
43 Costanzo MR, et al. J Am Coll Cardiol. 2005; 46(11): 2047-51.
Our Market Opportunity
The Aquadex System is used for the treatment of patients suffering from fluid overload who have failed medical therapy including diuretics. We are currently focusing our commercial activities in three
primary clinical areas where fluid overload is prevalent: heart failure, critical care, and pediatrics.
Heart Failure
Heart disease is the leading cause of death in the United States and other developed countries. In fact, approximately 50% of patients who develop heart failure die within five years of diagnosis. The
five-year mortality rate for heart failure, regardless of heart function, is approximately 75% across all phenotypes.44 Approximately 6.7 million Americans over 20
years of age have heart failure, and the prevalence is expected to rise to 8.5 million Americans by 2030.45 Based on the Atherosclerosis Risk in Communities Study
from 2005 to 2013, conducted by the National Heart, Lung and Blood Institute, there are an estimated 960,000 new heart failure cases annually.46 Annual
hospitalizations for heart failure exceed one million in both the United States and Europe, and more than 90% are due to symptoms and signs of fluid overload.47 In
addition, approximately 68% of the patients are discharged with sub-optimal results.
Heart failure is a syndrome that can have an acute onset or is a progressive disease caused by impairment of the heart’s ability to pump blood to the various organs of the body. Patients with heart
failure and fluid overload commonly experience shortness of breath, fatigue, difficulty exercising and swelling of the legs. The heart becomes weak or stiff and enlarges over time, making it harder for the heart to pump the blood needed for the
body to function properly. The severity of heart failure depends on how well a person’s heart pumps blood throughout the body.48
According to a nationwide study of over 140,000 patients suffering from acute decompensated heart failure, over 38% of patients discharged were still symptomatic and about half of the patients were
discharged with less than five pounds of lost fluid.49 This clinical evidence from the ADHERE registry shows patients are discharged too early, while still showing
evidence of fluid overload.
As a result of not fully having their fluid imbalance properly addressed prior to discharge from the hospital, patients are frequently being readmitted, with one study showing 30-day readmissions of
24% and 6-month readmissions of 44%.50 51
Heart failure often requires inpatient treatment, and it carries a huge economic burden in the United States, costing the nation an estimated $60.2 billion each year, with hospital costs accounting
for 62% of the economic burden.52 As the population ages, healthcare expenditures are expected to increase substantially.53 Therefore, therapies aimed at treating congestion and fluid overload are essential from a patient care and healthcare economics perspective.
To remove the excess fluid, patients suffering from heart failure may receive ultrafiltration therapy in two settings: (i) inpatient care: provided to a
patient admitted to a hospital, extended care facility, nursing home or other longer-term care facility; and (ii) outpatient care: provided to a patient who is not admitted to a facility, but receives
treatment at a doctor’s office, clinic, or hospital outpatient department.
44 Shah, K, et al. J Am Coll Cardiol. 2017 Nov, 70 (20) 2476-2486.
45 Bozhurt B, et al. J Card Fail. J Card Fail. 2023;
29(10): 1412-42.
46 Benjamin EJ, et al. Circ. 2017;135:00-00. (e378).
47 Fonarow GC, et al. Rev Cardiovasc Med. 2003; 4: s21-30.
48 Arrigo M et al. Nat Rev Dis Primers. 2020; 6(16):1-15.
49 Fonarow et al. Rev Cardiovasc Med. 2003;4: Suppl 7:S21-30.
450 Costanzo MR, et al. J Am Coll Cardiol. 2017 May 16;69(19):2428-2445.
51 Sax D, et al. J Card Fail. 2022: 28(10): 1545-59.
52 Voigt J, et al. Clin Cardiol. 2014;37(5): 312-321.
53 Heidenreich PA, et al. Circ Heart Fail. 2013;6(3):606-619.
Hospitals in the United States also face potential penalties for heart failure readmissions. As part of the Patient Protection and Affordable Care Act of 2012, as amended (the “Affordable Care Act”),
Medicare instituted the Hospital Readmissions Reduction Program, which penalizes hospitals with high 30-day readmission rates for heart failure and other common diseases and procedures. This penalty can be as high as 3% of reimbursement for all
Medicare admissions. Technologies that help reduce readmissions, such as the Aquadex System, can help hospitals mitigate these penalties.54
The Company believes the total U.S. heart failure market is approximately $1 billion55 and that roughly 20% of its
revenue is derived from the treatment of heart failures patients.
Critical Care
Patients suffer from fluid overload in connection with a variety of critical care procedures and treatments, including cardiac surgery, cardiogenic shock, liver and other organ transplants,
ventricular assist device (“VAD”) implants, extra corporeal membrane oxygenation (“ECMO”) therapy, sepsis, liver disease and severe burns. According to the National Center for Health Sciences, over 7.3 million cardiovascular operations are
performed each year in the United States, including an estimated 340,000 coronary-artery bypass grafting (“CABG”) procedures,56 Cardiac surgery is associated with a
degree of fluid overload due to cardiopulmonary bypass.57 Intravenous fluid therapy is an integral treatment for patients undergoing surgery and in critical care
units.58 Fluid overload in post-cardiac surgery can readily occur because surgery can affect the pumping actions of the heart, leading to postoperative hemodynamic
instability.59 The condition often remains symptomless for several days until clinical symptoms become apparent, when treatment is almost always too late and
ineffective.60
Major complications after cardiac operations are associated with an increased risk for operative death, longer hospital length of stay, and higher rates of discharge to a location other than home.61 As many as 80% of cardiac surgery patients may have stage 1 or greater cardiac-surgery-associated acute kidney injury (CSA-AKI). 62 In the recent publication A Turnkey Order Set for Prevention of CSA-AKI the new CSA-AKI Guidelines suggest the avoidance of other nephrotoxic agents including loop diuretics. 62
Hospital readmissions are a common problem in cardiac surgery and remain high. Approximately 20% of patients who undergo cardiac operations require readmission, an outcome with significant health
economic implications. Volume overload was among the top three most prevalent causes for first readmission within 30 days and beyond 30 days.63 It is estimated that
13.5% of post cardiac surgery patients are readmitted due to fluid overload within 30 days of discharge. Positive research has been recently published demonstrating the value of ultrafiltration in high-risk coronary artery bypass grafting
surgery.64 It is also encouraging to see ultrafiltration being recommended for cardiac surgery patients who are unresponsive to diuretics in a recently published
turnkey order set proposed by the Enhanced Recovery After Surgery (“ERAS”) Society consensus guidelines.62
The Company believes it can expand use cases for the Aquadex System, without any additional clinical trial or other labeling changes at the U.S. Food and Drug Administration (“FDA”) to support its use
in the applications identified immediately above.
The Company believes the total U.S. critical care failure market is approximately $900 million.65 In 2024, the Company
derived approximately 40% of its revenue from the treatment of critical care patients.
54 McIlvennan C et al. Circ. 2015; 131(20): 1796-1803.
55 See Appendix to Company Investor Presentation filed with the SEC on Form 8-K/A, dated January 9, 2024.
56 https://idataresearch.com/new-study-shows-approximately-340000-cabg-procedures-per-year-in-the-united-states/.
57 Kruger A et al. J Cardiovasc Dev Dis. 2023;10(6);263-78.
58 Bowdish ME, et al. Ann Thorac Surg. 2021;111(6):1770-1780.
59 Xu J, et al. Medicine. 2015.94(33):e1360.
60 Xu J, et al. Medicine. 2015;94(33):e1360.
61 Crawford TC, et al. Ann Thorac Surg. 2017;103:32-40.
62 Engelman D, et al. Ann Thorac Surg. 2023;115:11-5A
63 Iribane A, et al. Ann Thorac Surg. 2014;98:1274-80.
64 Beckles DL et al. J Card Surg.2022; 37: 2951-57.
65 See Appendix to Company Investor Presentation filed with the SEC on Form 8-K/A, dated January 9, 2024.
Pediatrics
Many of the conditions and procedures faced by adult patients also occur in pediatric patients, such as cardiac surgery, organ transplants, heart failure and ECMO therapy. Similar to adult patients,
these conditions and procedures may lead to fluid overload. While incidence data is not readily available, it is estimated that there are approximately 10,000 to 14,000 pediatric patients with heart failure.67 Fluid overload drives pediatric morbidity and mortality risk in critically ill patients. In one pediatric study, a 3% increase in mortality was observed for every 1% increase in fluid overload, and
children who are more than 20% fluid overloaded have an odds ratio for mortality of 8.5 compared to children who are less than 20% fluid overloaded.68 69
The Company believes that the total U.S. pediatric market for fluid overload is approximately $130 million.70 In 2024,
the Company derived approximately 40% of its revenue from the treatment of pediatric patients.
While the Aquadex System is only FDA cleared for the treatment of pediatric patients weighing 20 kg or more, the Company is aware that many children’s hospitals in the U.S. are modifying the way that
the Aquadex System is used in a manner that is deemed to be off-label by the Company and FDA in order to provide dialysis to neonates and other premature infants who weigh less than 20 kg and who were born either without kidneys or without normal
kidney function. These patients typically have very few other treatment options given the large extracorporeal blood volume required by standard dialysis machines the need for blood priming of the dialysis circuit and the use of large catheters.
By comparison, the Aquadex extracorporeal blood volume is only 35 ml.
It is because of this unmet medical need the Company has undertaken the development of a dedicated Continuous Renal Replacement Therapy (“CRRT”) device intended for patients weighing between 2.5 and
above kg. See - Product Development Activities below.
67 Jayaprasad, N. Heart Views. 2016; 17(3): 92-99.
68 Sutherland SM, et al. Am J Kidney Dis. 2010; 55(2):315-25.
69 Gillespie RS, et al. Ped Nephro. 2004; 19(12):1394-99.
70 See Appendix to Company Investor Presentation filed with the SEC on Form 8-K/A, dated January 9, 2024.
Growing Clinical Evidence
In March 2025, data from the ULTRA-PEDs multicenter, single-arm pediatric registry was presented at the Advances in Critical Care Nephrology’s AKI & CRRT meeting. The Company launched the registry
in November 2020 and conducted the registry at seven clinical sites prior to closure in October 2023 with 97 patients enrolled. The results indicated that the Aquadex®
device can provide both standard ultrafiltration and modified continuous veno-venous hemofiltration (CVVH) in children with end stage renal disease (ESRD) or acute kidney injury (AKI) across a wide weight spectrum. Two-thirds of procedures lasted
for the intended duration, and very few patients could not tolerate the Aquadex® procedure.71,
72
In January 2023, we began designing an IDE clinical study for the Company’s dedicated pediatric device currently under development. The design was reviewed with FDA in May 2023 and the study is
anticipated to begin enrollment in 2026.
In December 2021, we launched the REVERSE-HF prospective, multicenter, randomized controlled trial (RCT) to evaluate ultrafiltration compared to IV diuretics in patients with heart failure (HF).
Seventeen clinical sites nationwide have been activated to enroll patients in this RCT and fourteen sites have contributed to patient enrollment, which began in June 2022. As of February 28, 2025, there are 155 patients enrolled in REVERSE-HF.
The primary effectiveness endpoint is the time to first HF Event within 30 days, as a comparison between Aquadex therapy and IV Loop Diuretics.
Secondary endpoints will be analyzed as a comparison between Aquadex and IV Loop Diuretics:
| • |
Composite win ratio analysis of Cardiovascular (CV) mortality, HF events, and quality of life within 30 days:
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○ |
Change in Kansas City Cardiomyopathy Questionnaire (KCCQ) score
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• Time to first HF event within 90 days
• Time to first HF event or all-cause death within 90 days
• HF events within 30 and 90 days
The Company intends to target a total of 20 sites and hopes to complete enrollment by mid-2026 with a total of 372 patients. The protocol for REVERSE-HF permits an interim data analysis once
enrollment reaches 80% of its targeted enrollment, and the Company hopes to complete analysis of the primary endpoint and to publish the results in the second half of 2026.
71 Starr et al. Epidemiology and Outcomes of Children with AKI or ESKD treated with Aquadex. AKI & CRRT meeting; March 2025, San
Deigo, CA.
72 Goldstein et al. Aquadex Technical Performance in Children with AKI or ESKD. AKI & CRRT meeting; March 2025, San Deigo, CA.
In February 2025, a re-appraisal of the complete dataset, including an additional 31 adjudicated events, from the AVOID-HF trial, demonstrated that patients treated with adjustable ultrafiltration
(AUF) had a 60% reduction in heart failure events (HF) at 30 days (p=0.014) compared to adjustable intravenous diuretics (ALD) and significantly fewer HF hospitalizations at 30 days (p=0.032). 73 Additionally, a hierarchical composite endpoint of 30-day cardiovascular (CV) mortality, HF events (including HF rehospitalization, unscheduled outpatient or emergency room treatment with intravenous loop
diuretics, vasoactive drugs, or ultrafiltration) and change in quality of life was evaluated using the Finkelstein-Schoenfeld win ratio (WR) method. In the composite outcome, there were 2 CV deaths within 30-days. AUF won in 71.0% of the HF
event-related paired comparisons (versus 29.0% for ALD) and in 53.4% of quality of life comparisons (versus 46.6% for ALD), resulting in a WR = 1.43 (p=0.056) favoring ultrafiltration. 73 This updated evidence further suggests that AUF may be more effective than ALD at reducing HF events and HF rehospitalizations and shows a clear trend towards a sustained clinical benefit when evaluating a
holistic composite outcome including CV mortality, HF events and quality of life. 73 The re-analysis was also presented as a Late Breaking Clinical Trial podium
presentation at the Technology and HF Therapeutics Conference in March 3-5, 2024, in Boston. 74
A former reanalysis of the original AVOID-HF dataset, using a similar WR composite method, was presented at the Annual Scientific Session of the Heart Failure Society of America in September 2022, “Revisiting The Aquapheresis Versus Intravenous Diuretics And Hospitalizations For Heart Failure (AVOID-HF) Trial: Further Evidence Supporting Aquapheresis To Reduce Heart Failure Events,” exploring CV
mortality within 90 days and HF events within 30 days. This WR analysis also yielded results favoring ultrafiltration, demonstrating that AUF is safe and more
effective than ALD in reducing CV mortality and subsequent HF events for hospitalized heart failure patients. 75
In June 2024, analysis of an Aquadex program, Outcomes of Ultrafiltration in community-based hospitals, showed diuretic refractory acute decompensated heart
failure (ADHF) patients benefited from significant volume loss and weight reduction along with stable renal function and remarkable clinical benefit. 76 All 30
patients treated over the first-year cohort were included in a retrospective analysis that demonstrated Aquadex therapy provided a statistically significant reduction in heart failure rehospitalization rate at 60 days (p=0.013) and numerically
fewer ADHF readmissions at 30 days from UF initiation compared to the pre-UF era. 76 The study demonstrated that a successful Aquadex program is reproducible and can
be coordinated by general cardiologists without the need for a dedicated heart failure unit. 76
In November 2023, a retrospective case series and literature review conducted by The Mount Sinai Hospital, “Utilization of aquapheresis among hospitalized patients
with end-stage liver disease: A case series and literature review,” utilization of ultrafiltration from January 2020 through July 2023 in patients with
decompensated cirrhosis in the intensive care unit (ICU) found that the introduction of ultrafiltration earlier in a patient’s hospital course may reduce the risk of kidney injury and diuretic-induced electrolyte derangement and reduce the risk
of development of sequential organ failures in patients with decompensated cirrhosis. 77
In September 2023, a third-party, single-center case study review of pediatric patients showed the Aquadex System successfully treated small patients without hemodynamic instability or other
complications, demonstrating that therapy is an effective treatment option for fluid overload. Patient treatment was guided with the continuous hematocrit monitoring function built within the Aquadex System, supporting safe and effective fluid
removal in critically ill pediatric patients.78
In December 2022, a third-party, single-center, real-world retrospective study of 335 consecutive patients treated with the Aquadex FlexFlow® System, “Ten Year Real World Experience with Ultrafiltration for the Management of Acute Decompensated Heart Failure,” compared previous randomized controlled clinical trials
with ultrafiltration and demonstrated that ultrafiltration compares favorably in reducing heart failure rehospitalizations (2.14 hospitalizations per year before Aquadex versus 0.4 hospitalizations per year one year after Aquadex), renal function
response, and weight/volume loss. 75 The study found ultrafiltration to be safe with regard to renal function despite the cohort in this study being sicker than
those studied in other clinical trials, and that Ultrafiltration can be a safe and effective strategy for decongestion in clinical practice wherein the benefits outweigh the potential risks of kidney dysfunction requiring hemodialysis and major
bleeding events.79
In February 2022, a third party retrospectively reviewed and concluded, “The Use of Ultrafiltration as a fluid management strategy for High-Risk Coronary Artery
Bypass Grafting,” that ultrafiltration is a safe and effective modality to manage fluid balance in a patient population with relatively high Society of Thoracic Surgery (“STS”) scores, but a prospective multicenter study would be
warranted in this patient cohort. 76
Additionally, another peer-reviewed publication advocates for early clinical application of ultrafiltration in diuretic resistant patients80 and a cost analysis demonstrated that compared to diuretics, ultrafiltration resulted in a total cost savings of 14.4% at 90 days due to reduced readmissions.81
Jain et al. pooled data from seven randomized controlled trials of ultrafiltration with a total of 771 patients and concluded that extracorporeal ultrafiltration is associated with more efficient fluid and sodium
removal compared with medical therapy, hence leading to a reduction in readmission rates and a potential salutary impact on financial burden associated with the care of heart failure patients.82 Wobbe et al pooled data from eight randomized controlled trials enrolling 801 participants and studied the effectiveness of ultrafiltration compared to diuretics, demonstrating ultrafiltration increases fluid
removal (difference in means 1372.5 mL; p < 0.001) and weight loss (difference in means 1.592 kg; p < 0.001), lower incidences of worsening heart failure
(OR 0.63; p = 0.022) and rehospitalization for heart failure (OR 0.54; p = 0.003) suggesting ultrafiltration is a safe and effective treatment option for
volume-overloaded heart failure. 83
One 2019 peer-reviewed paper reported on a multicenter, retrospective case series of children who received kidney replacement therapy (“KRT”) with an ultrafiltration device.84 Patients were grouped according to weight and primary disease state (e.g. kidney, cardiac or other) and received one of three treatment modalities. The study found that of the 72 patients
who weighed less than 10 kg, 43 or 60% survived to the end of therapy or transitioned to another modality of kidney support. 23 or 32% survived to hospital discharge. Among patients who weighed between 10-20 kg, 13 or 100% survived to the end of
KRT treatment. Among patients who weighed more than 20 kg, 33 or 97% survived to KRT discontinuation and 23 or 68% survived to hospital discharge.84
73 Pinney et al. Ultrafiltration for Management of Decompensated Heart Failure: A re-appraisal of AVOID-HF. J Am Coll Cardiol HF. Feb 19, 2025.
74 Pinney S, et al. Podium Presentation from Technology and HF Therapeutics Conference; March 2024, in Boston, MA.
75 Pinney S, et al. Poster from Heart Failure Society of America Meeting; October 2022; Washington, DC.
76 Chinta et al. Current Problems in Cardiology. 49 (2024) 102716.
77 Crismale, J. et al. Clinical Transplantation. 2024; 38:e15221.
78 Starr MC, et al. Pediatric Nephrology. September 2023.
75 Watson R, et al. Am Heart J Plus: Cardiol Res & Pract 24. 2022; 1-6.
79 Beckles D. et al. J of Card Surg. Fail. 2022; 37(10): 2951-2957.
77 Kazory et al. Cardiorenal Med. 2023;13:1-8.
81 Costanzo MR, et al. J of Med Econ. 2019: 22(6): 577-583.
82 Jain et al. Heart Fail Rev. 2016.
83 Wobbe et al. Heart Fail Rev. 2021; 26:577–585.
84 Menon S, et al. Clin J Am Soc Nephrol. 2019;14(10):1432-1440.
Product Development Activities
As we expand our commercialization efforts in the pediatric market, we are developing a CRRT device, branded Vivian, to address the unmet and specific needs of pediatric patients weighing 2.5kg and
above who do not have functioning kidneys and who need kidney replacement therapy for survival. Approximately 10,300 children suffer from AKI, of these, over 1800 are neonates. 85 Funded in part by a $1.7 million grant from the National Institute of Health, the Company completed preliminary engineering testing for its dedicated pediatric system in the fourth quarter of 2023. The Company intends to
submit an IDE with the FDA in the third quarter of 2026, with U.S. commercialization of this product expected in the second quarter of 2028.
85 Sutherland et al. Clin J Am Soc Nephrol. 2013 Oct 7; 8(10): 1661–1669.
Our Strategy
Our vision is to transform the lives of patients suffering from fluid overload through science, collaboration and innovation. We provide healthcare professionals with a reliable, predictable, and
easy-to-use mechanical pump and filtration system to remove excess fluid in fluid overloaded patients. We believe that our technology will provide a competitive advantage in the fluid management market by providing improved clinical benefits and
reducing the cost of care relative to other treatment alternatives.
Our strategic focus is to demonstrate a strong business model by driving revenue growth. Growing revenue is the key metric employees, stockholders and potential investors will use to judge our
performance. Our field-based employees include both sales representatives and clinical education specialists in 9 sales territories in the United States. We also have distribution agreements in several countries in Europe, South America, the
Middle East, and Asia. We intend to focus on the acute needs of fluid overloaded patients in cardiac surgery and other areas of critical care, while continuing to support heart failure patients in the inpatient setting, and the outpatient
setting. With our “FDA 510(k) clearance for use in pediatric patients weighing 20kg or more, we have expanded our commercialization efforts to treatments for pediatric patients.
Critical Care: We have launched a marketing campaign focused on the benefits of the Aquadex System in treating patients suffering from fluid overload following
cardiac surgery procedures, such as CABG surgery, valve repairs and replacements procedures, VAD implants and other cardiac surgical procedures. Additionally, we realigned our salesforce to further focus on the acute needs of fluid overloaded
patients in the critical care setting. We believe that we will continue to grow revenue in this faster-growing segment of our business by leveraging the synergies between heart failure cardiologists and cardiovascular surgeons, traditional
technology adoption rates of cardiac surgeons, and product purchase cycle of the cardiac surgical and other critical care centers at large hospitals.
Pediatrics: Ultrafiltration is used by physicians to treat fluid overload in various conditions in pediatric patients, including heart failure, cardiac
surgery,86 ECMO therapy,87 solid organ transplantation,88 and kidney replacement therapy for neonatal patients. In February 2020, the Company received FDA 510(k) clearance for the Aquadex System to include pediatric patients who weigh 20kg or
more. With this clearance, we expanded our commercialization efforts to include promotion to physicians and hospitals who treat this pediatric population, and we are invested in the development of new clinical evidence around use of
ultrafiltration in pediatric patients, including the ULTRA-Peds pediatrics registry that concluded in 2023. We are also investing in the development of a new dedicated pediatric device, to further address the needs of the pediatric population,
and in clinical studies supporting the use of this device.
Heart Failure In-Patients: Heart failure patients suffering from fluid overload may be treated in an inpatient setting, such as a hospital, extended care
facility or nursing home. Historically, our commercial efforts have been primarily focused on use of the Aquadex System in the inpatient setting in large hospital accounts. We intend to continue to support our sales efforts on inpatient
facilities, leveraging the clinical benefits and economic advantages of using the Aquadex System over diuretic therapy. We are investing in additional clinical evidence supporting the use of ultrafiltration in patients with decompensated heart
failure including a multicenter, randomized controlled trial, the REVERSE-HF study, comparing ultrafiltration and IV diuretics.
Heart Failure Out-Patients: Further, we intend to expand the use of the Aquadex System with heart failure patients in the outpatient setting, such as an
infusion clinic or hospital outpatient department (e.g., observation unit). On January 1, 2022, the American Medical Association granted a new and dedicated Category III Current Procedural Terminology (CPT) code, 0692T, for Therapeutic
Ultrafiltration. Healthcare providers can utilize this code when using Aquadex to deliver ultrafiltration to adult and pediatric patients weighing more than 20kg (both inpatient and outpatient). In addition, on January 1, 2025, the CPT code was
associated with a level II Ambulatory Payment Code (APC) code that provides higher reimbursement for therapeutic ultrafiltration administered in the outpatient setting per day and will facilitate the migration of the therapy to this setting for a
subset of the patient population, which may relieve some of the growing pressure on hospital systems and improve hospital economics and patient quality of life. Continued focus on driving positive coverage policies for various targeted private
payers will be an ongoing strategy for the Company.
Outside the United States, the Aquadex System is sold by independent specialty distributors who in turn sell to hospitals and clinics in their geographic regions. We currently have distribution
relationships in Austria, Belarus, Brazil, Colombia, Czech Republic, Germany, Greece, Hong Kong, India, Indonesia, Israel, Italy, Panama, Romania, Singapore, Slovak Republic, Spain, Switzerland, Thailand, United Arab Emirates and the United
Kingdom. We received CE Mark Certification for our 24-Hour Blood Circuit Set in January 2022 to be used with the Aquadex SmartFlow® system. The CE marking (as defined below) allows us to market the 24-hour Blood Circuit in the European Union (EU)
and all other countries that recognize this certification. This new circuit will help us expand access to ultrafiltration among patients who need no more than 24 hours of therapeutic ultrafiltration in the inpatient setting. Additionally, this
circuit can provide a more economical solution for hospitals to treat patients in the outpatient/ambulatory setting, where therapy can be delivered for up to 8 hours. Such use in the outpatient setting provides us with the flexibility to better
meet the clinical and healthcare economic needs of European markets, while at the same time improving lives by seeking to prevent hospitalizations.
Besides driving near-term revenue growth through sales of the Aquadex System, we intend to develop product enhancements to improve performance and customer satisfaction. We have projects designed to
improve venous access for the Aquadex catheter and enhance the functionality of the hematocrit sensor that is part of the Aquadex console. As we expand our commercialization efforts in the pediatric market, we are developing a CRRT console to
address the unmet and specific needs of pediatric patients who do not have functioning kidneys and need kidney replacement therapy for survival.
86 Elliott MJ. Ann Thorac Surg. 1993;56:1518-22.
87 Selewski DT, et al. Crit Care Med. 2012; 40(9): 2694-2699.
88 Riley AA. BMC Nephrology. 2018; 19:268-80.
Sales and Marketing
As of December 31, 2024, we had 19 full-time employees in sales and marketing. We have 9 sales territories in the United States. Our U.S. field salesforce includes sales managers, account managers and
clinical education specialists who provide training, technical and other support services to our customers. Following the acquisition of the business associated with the Aquadex System (the “Aquadex Business”) from Baxter in August 2016, our
direct salesforce was focused initially on re-engaging hospital accounts that had ordered Aquadex blood sets in prior years, re-educating customers on the therapy, and assessing each hospital’s use of the Aquadex System to gain additional
opportunity for increased utilization, primarily in heart failure. In 2018, we expanded our commercialization efforts to include post-cardiac surgery. In September 2019, we realigned our salesforce to further focus on the acute needs of fluid
overloaded patients in the critical care setting, while still supporting heart failure. We expanded our commercialization efforts to include pediatrics, following receipt of 510(k) clearance of the Aquadex system to include pediatric patients who
weigh 20kg or more in February 2020.
In the United States, our target customers for the Aquadex System include healthcare systems and academic hospitals specializing in advanced treatment of chronic heart failure and/or critical care
patients. With the FDA 510(k) clearance of the Aquadex SmartFlow® system for patients weighing over 20kg, we are also targeting pediatric hospitals. Our largest customer represented 14.4% of our 2024 annual revenue. The loss of this customer
would have a material adverse effect on our revenue.
Clinical Experience
Several large-scale, multi-center, randomized, controlled trials have evaluated the use of ultrafiltration using the Aquadex System on patients with acute decompensated heart failure compared to
standard-of-care treatment with intravenous diuretics. These trials followed early-stage studies which primarily focused on safety of ultrafiltration treatment with the Aquadex System.
The UNLOAD trial enrolled 200 patients and showed that average weight and fluid loss were greater in the ultrafiltration group 48 hours following randomization. 89 No differences were noted in symptoms of dyspnea between the groups. In addition, through 90 days of follow-up, the ultrafiltration group experienced significantly fewer re-hospitalizations and
unscheduled medical visits for heart failure, while renal function assessed by serum creatinine level was not significantly different between the groups. 89
The CARRESS trial studied 188 randomized acute decompensated heart failure patients over the course of 96 hours and found no difference in weight loss and an increase in creatinine level relative to
the control group treated with intravenous diuretics. The creatinine increase was interpreted as a sign of potential worsening renal function in the ultrafiltration group. We believe that the trial results were impacted by centers unfamiliar with
the use of ultrafiltration therapy, that more than one third of the ultrafiltration group received diuretics instead of ultrafiltration, ultrafiltration rates were fixed rather than utilizing adjusted ultrafiltration rates according to patient
characteristics whereas diuretic doses were titrated based on urine output, and that the diuretic regimen employed was not representative of standard-of-care.86 In
addition, subsequent analyses of the CARRESS study cohort have been published since the original study results. One protocol analysis showed that ultrafiltration had higher net fluid loss and weight reduction compared to intravenous diuretics,
and there were no significant differences in long-term outcomes.90 An additional sub-study analysis on urinary biomarkers showed that although further worsening
creatinine levels were reported, decongestion and renal function recovery at 60 days were superior in patients with increased tubular injury markers.91 The data
suggests that the benefits of decongestion may outweigh modest or transient increases in serum creatinine during ultrafiltration. Thus, we believe that a change in creatinine should not dissuade the use of ultrafiltration.
Disparate results between UNLOAD and CARRESS led to initiation of the AVOID-HF trial, designed to prospectively address the question of patient outcomes when treated with ultrafiltration versus
intravenous diuretics for acute decompensated heart failure (HF), was initiated by Baxter International, Inc. (“Baxter”) in 2016.92 Trial design assumptions
indicated that 810 patients would need to be randomized to achieve adequate statistical power. However, the study was terminated by Baxter at 224 patients, for business reasons unrelated to patient outcomes or device safety. Despite being
underpowered, the results of AVOID-HF indicated distinct trends toward a greater amount of time free of heart failure events within 90 days, favoring the ultrafiltration group over diuretics with 62 days to first event for ultrafiltration
patients and 34 days to first event for diuretic patients. In addition, pre-specified secondary endpoints demonstrated significant reductions in heart failure rehospitalizations and days in the hospital and cardiovascular events at 30 days. No
significant differences were observed in creatinine level between the groups during treatment and up to 90 days following treatment. In totality, AVOID-HF recapitulated the results of both UNLOAD and CARRESS while providing evidence that had
AVOID-HF been followed to completion, it is our belief that the trial would likely have met its primary endpoint of improved outcome in acute decompensated heart failure patients.
89 Costanzo MR, et al. J Am Coll Cardiol. 2007; 49(6):675-683
86 Urban S, et al. Adv Clin Exp Med. 2021;30(7):737-746.
90 Grodin JL, et al. Eur J of Heart Fail. 2018;20(7):1148-1156.
91 Rao VS, et al. Circ Heart Fail. 2019;12 (6):e005552.92 Costanzo MR, et al. JACC: Heart Failure. 2016;4(2):95-105.
Research and Development
Research and Development costs include activities related to development, design, and testing improvements to the Aquadex System and potential related products. The Aquadex system software may require
periodic modifications for feature additions and performance improvements. We will make such design changes as needed based on proactive and reactive mechanisms. Research and development costs also include expenses related to our clinical
research.
In 2021 we initiated a product development project designed to enhance the functionality of the hematocrit sensor that is part of the Aquadex console. The Company expects this sensor effort to be
completed in 2025.
In 2021, we also initiated a product development project to develop a pediatric continuous renal replacement therapy (CRRT) device. We successfully completed functional system prototypes in 2022 and
preliminary engineering testing in 2023. The Company intends to submit an IDE with the FDA in the third quarter of 2026 for this pediatric CRRT device, with commercialization expected in the United States in the second quarter of 2028 following
completion of the IDE study.
Manufacturers and Suppliers
We manufacture the Aquadex System at our 23,000 square foot facility in Eden Prairie, Minnesota. We have manufactured the Aquadex SmartFlow® console and blood circuits since its development in 2019.
We purchase parts and components for the Aquadex System from third-party manufacturers and suppliers. We believe that our current manufacturing facility is suitable and adequate to meet anticipated manufacturing demands, and that, if necessary,
suitable additional or substitute space will be available to accommodate expansion of our operations.
Intellectual Property
We have submitted patent applications to establish an intellectual property portfolio through which we seek to protect our system and technology. In connection with our acquisition of the Aquadex
Business, we entered into a patent license agreement with Baxter for patents used in connection with the Aquadex System to make, have made, use, sell, offer for sale and import the Aquadex System in the “field of use.”
The rights granted to us under the patent license agreement will automatically revert to Baxter in the event we cease operation of the Aquadex Business or we file for, have filed against us, or
otherwise undertake any bankruptcy, reorganization, insolvency, moratorium, or other similar proceeding. We estimate that the last expiring patent licensed from Baxter has a term to mid-2025. We estimate that most of our currently issued U.S.
patents will expire by 2027.
In addition to the licensed patents, Nuwellis has ten (10) company-owned patents, including two (2) patents issued within the last two years.
A number of Nuwellis issued patents in the United States are directed to the C-Pulse® Heart Assist System (the “C-Pulse System”) for treatment of Class III and ambulatory Class IV heart failure of
which the last expiring issued U.S. patent has a term to 2026. Given the strategic refocus away from the C-Pulse System and toward the Aquadex System, we have chosen to limit the maintenance of issued C-Pulse System related patents to those
innovations that are of high value.
In addition, we have four pending patent applications in the United States unrelated to our dedicated pediatric device in development.
We also have filed a family of patent applications related to our dedicated pediatric device in development. This has resulted in four (4) issued United States patents, five (5) pending United States
patent applications and a pending international patent application filed under the Patent Cooperation Treaty.
Our pending and future patent applications may not issue as patents or, if issued, may not issue in a form that will provide us any financial return. Even if issued, existing or future patents may be
challenged, narrowed, invalidated or circumvented, which could limit our ability to obtain commercial benefits from them.
At this time, we are not a party to any legal proceedings that relate to patents or intellectual property rights or any other subject matter.
Competition
Competition from medical device companies and medical device divisions of healthcare companies, pharmaceutical companies and gene- and cell-based therapies is intense and expected to increase. The
vast majority of patients with fluid overload receive pharmacological treatment (diuretics) as the standard of care. There are no direct competitors for the Aquadex System in heart failure or critical care in the United States, other than
diuretics. Other systems, such as Baxter’s Prismaflex, a filter-based device that is approved for continuous renal replacement therapy for patients weighing 20kg or more with acute renal failure and/or fluid overload, represent indirect
competitors, as they can only be used to conduct ultrafiltration with significant limitations. In pediatrics, the Carpediem system distributed by Medtronic is indicated for use in acute kidney injury or fluid overloaded patients requiring
hemodialysis or hemofiltration therapy, and Baxter’s HF20 Set is authorized under an Emergency Use Authorization to deliver CRRT to treat patients of low weight (8-20kg) in an acute care environment during the COVID-19 pandemic. Additionally,
Medtronic and DaVita have recently formed a joint venture, called Mozarc Medical, to pursue a variety of kidney applications across each of our customer categories.
Our ability to compete effectively depends upon our ability to demonstrate the advantages of ultrafiltration as compared to diuretics, a pharmacological treatment that is currently the standard of
care. In addition, we need to distinguish the Aquadex System from the indirect competition of other devices that can also be used to conduct ultrafiltration.
Third-Party Reimbursement
In the United States, our products are purchased primarily by customers such as hospitals or other healthcare providers. Customers bill various third-party payers for covered services provided to
patients. These payers, which include federal healthcare programs (e.g., Medicare and Medicaid), state healthcare programs, private health insurance companies, and managed care organizations, then reimburse our customers based on established
payment formulas that consider part or all of the costs associated with these devices and the related procedures performed.
While the agency responsible for administering the Medicare program, the Centers for Medicare and Medicaid Services, has not issued a formal national coverage determination for ultrafiltration using
the Aquadex System, there is established CMS reimbursement in absence of the policy. On January 1, 2022, a new and dedicated Category III Current Procedural Terminology (CPT) code, 0692T, became effective for Therapeutic Ultrafiltration.
Healthcare providers can utilize this code when using Aquadex to deliver ultrafiltration to adult and pediatric patients weighing more than 20kg. On January 1, 2025, the CPT code was reassigned to a level II Ambulatory Payment Classification
(APC) code that provides substantial daily reimbursement for therapeutic ultrafiltration administered in the outpatient setting. Additionally, a number of private insurers have approved reimbursement for use of the products included in the
Aquadex System for specific indications and points of service as well, and patients and providers may seek insurance coverage on a case-by-case basis.
Legislative proposals can substantially change the way healthcare is financed by both governmental and private insurers and may negatively impact payment rates for our system. Also, from time to time,
there are numerous legislative, regulatory and other proposals both at the federal and state levels that may impact payment rates for our system. It remains uncertain whether there will be any future changes that will be proposed or finalized and
what effect, if any, such legislation or regulations would have on our business. However, in the United States and international markets, we expect that both government and third-party payers will continue to attempt to contain or reduce the
costs of healthcare by challenging the prices charged, or deny coverage, for healthcare products and services.
Government Regulations
Regulation by governmental authorities in the United States and foreign countries is a significant factor in the manufacture and marketing of our current system and any future products and in our
ongoing research and development activities. In particular, medical devices are subject to rigorous preclinical testing as a condition of 510(k) clearance by the FDA and by similar authorities in foreign countries. Any proposed products will
require regulatory clearance/approval prior to commercialization.
United States
The Federal Food, Drug, and Cosmetic Act (“FDC Act”) and the FDA’s implementing regulations govern medical device design and development, preclinical and clinical testing, premarket clearance or
approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, and post-market surveillance. Medical devices and their manufacturers are also subject to inspection by
the FDA. The FDC Act, supplemented by other federal and state laws, also provides civil and criminal penalties for violations of its provisions. We manufacture and market medical devices that are regulated by the FDA, comparable state agencies
and regulatory bodies in other countries.
Unless an exemption applies, each medical device we intend to commercially distribute in the U.S. will require 510(k) clearance.
510(k) Clearance. To obtain 510(k) clearance for a medical device, an applicant must submit a premarket notification to the FDA demonstrating that the device
is “substantially equivalent” to a predicate device legally marketed in the United States. A device is substantially equivalent if, with respect to the predicate device, it has the same intended use and has either (i) the same technological
characteristics or (ii) different technological characteristics and the information submitted demonstrates that the device is as safe and effective as a legally marketed device and does not raise different questions of safety or effectiveness. A
showing of substantial equivalence sometimes, but not always, requires clinical data. The 510(k) clearance process cannot exceed 90 days from the date the FDA accepts the 510(k) submission After a device has received 510(k) clearance for a
specific indication for use, any modification to that device that could “significantly affect its safety or effectiveness,” such as a significant change in the design, materials, method of manufacture or which results in “major change” to the
product performance, may require a new 510(k) clearance. The determination as to whether new 510(k) is needed is initially left to the manufacturer; however, the FDA may review this determination to evaluate the regulatory status of the modified
product at any time and may require the manufacturer to cease marketing the modified device until 510(k) clearance is received.
The Aquadex FlexFlow system was granted FDA 510(k) clearance for commercial use on June 3, 2002. On February 4, 2020, we received 510(k) clearance of the Aquadex SmartFlow® system for use in adult and
pediatric patients weighing 20 kg or more whose fluid overload is unresponsive to medical management. The Aquadex SmartFlow incorporates diagnostic tools for physicians to use during an Aquadex therapy to more precisely determine the amount of
excess fluid to be removed, the rate of ultrafiltration, and when to stop therapy as dry weight is approached.
Clinical Trials. To obtain FDA clearance to market certain devices, clinical trials may be required to support a 510(k) application. Premarket clinical trials
generally require submission of an application for an IDE to the FDA prior to commencing the trial. FDA approval of an IDE allows clinical testing to go forward but does not bind the FDA to accept the results of the trial as sufficient to prove
the product’s safety and efficacy, even if the trial meets its intended success criteria.
All clinical trials must be conducted in accordance with regulations and requirements collectively known as “Good Clinical Practices”. Good Clinical Practices include, but is not limited to, the FDA’s
IDE regulations, which describe the conduct of clinical trials with medical devices. They also prohibit promotion, test marketing or commercialization of an investigational device and any representation that such a device is safe or effective for
the purposes being investigated. Good Clinical Practices also include the FDA’s regulations for institutional review board approval and for protection of human subjects (such as informed consent), as well as disclosure of financial interests by
clinical investigators. Required records and reports are subject to inspection by the FDA.
The results of clinical trials may be unfavorable or, even if the intended safety and efficacy success criteria are achieved, may not be considered sufficient for the FDA to grant clearance of a
product. The commencement or completion of any clinical trial may be delayed or halted or be inadequate to support clearance of a 510(k) application for numerous reasons.
Continuing Regulation. After a device is cleared for use and placed in commercial distribution, numerous regulatory requirements continue to apply. These
include:
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establishment registration and device listing upon the commencement of manufacturing;
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the Quality System Regulation (“QSR”), which requires manufacturers, including third-party manufacturers, to follow the FDA design control regulations;
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labeling regulations, which prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling and promotional activities;
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medical device reporting regulations, which require that manufacturers report to the FDA if a device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely
cause or contribute to a death or serious injury if malfunctions were to recur;
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corrections and removal reporting regulations, which require that manufacturers report to the FDA field corrections; and
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product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDC Act caused by the device that may present a risk to health.
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In addition, the FDA may require a company to conduct post-market studies or order it to establish and maintain a system for tracking its products through the chain of distribution to the patient
level.
Failure to comply with applicable regulatory requirements, including those applicable to the conduct of clinical trials, can result in enforcement action by the FDA, which may lead to any of the
following sanctions:
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warning letters or untitled letters;
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fines, injunctions and civil penalties;
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product recall or seizure;
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unanticipated expenditures;
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delays in clearing or refusal to clear products;
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withdrawal or suspension of FDA clearance;
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orders for physician notification or device repair, replacement or refund;
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operating restrictions, partial suspension or total shutdown of production or clinical trials; or
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We and our contract manufacturers are also required to manufacture our products in compliance with Current Good Manufacturing Practice requirements set forth in the QSR. The QSR requires a quality
system for the design, manufacture, packaging, labeling, storage, installation and servicing of marketed devices, and includes extensive requirements with respect to quality management and organization, device design, buildings, equipment,
purchase and handling of components, production and process controls, packaging and labeling controls, device evaluation, distribution, installation, complaint handling, servicing and record keeping. The FDA enforces the QSR through periodic
announced and unannounced inspections that may include the manufacturing facilities of subcontractors. If the FDA believes that we or any of our contract manufacturers or regulated suppliers are not in compliance with these requirements, it can
shut down our manufacturing operations, require recall of our products, refuse to clear or approve new marketing applications, institute legal proceedings to detain or seize products, enjoin future violations or assess civil and criminal
penalties against us or our officers or other employees. Any such action by the FDA would have a material adverse effect on our business.
European Union
In order to import and sell our products in member countries of the European Union, or EU, medical devices currently must comply with the essential requirements of the European Union Medical Devices
Directive (Council Directive 93/42/EEC). Compliance with these requirements is a prerequisite to be able to affix the Conformité Européene, or CE, Mark (“CE Mark”) to our products, without which they cannot be sold or marketed in the EU. To
demonstrate compliance with the essential requirements we must undergo a conformity assessment procedure, which varies according to the type of medical device and its classification. Except for low-risk medical devices (Class I non-sterile,
non-measuring devices), where the manufacturer can issue an EC Declaration of Conformity based on a self-assessment of the conformity of its products with the essential requirements of the European Union Medical Devices Directive, a conformity
assessment procedure requires the intervention of a “Notified Body”, an organization accredited by a member state of the EU to conduct conformity assessments. Depending on the relevant conformity assessment procedure, the Notified Body would
typically audit and examine the technical file and the quality system for the manufacture, design and final inspection of our devices. The Notified Body issues a certificate of conformity following successful completion of a conformity assessment
procedure conducted in relation to the medical device and its manufacturer and their conformity with the essential requirements. This certificate entitles the manufacturer to affix the CE Mark to its medical devices after having prepared and
signed a related EC Declaration of Conformity.
The EU Medical Device Regulation 2017/745 (“MDR”) was adopted in April 2017. The MDR replaces the existing Medical Device Directives (MDD 93/42/EEC and AIMDD 90/385/EEC). The new MDR
went into effect on May 26, 2021, and the new CE Mark product must comply with new MDR or AIMDD 90/385/EEC after this date. As of May 26, 2021, companies that have devices on the market with CE Mark under MDD 93/42/EEC or AIMDD 90/385/EEC must
meet the transitional provisions of the new MDR. Devices lawfully placed on the market under MDD 93/42/EEC or AIMDD 90/385/EEC before May 26, 2021, may continue to be made available on the market until May 27, 2024, provided the CE Mark was
issued prior to this date, the manufacturer continues to comply with either one of the directives, and that no significant changes are made in the design and intended purpose of the applicable medical device. Recently EU parliament issued an
amendment and approved the new timeline for EU MDR compliance. The new timeline is now December 31, 2028. All medical devices entering the EU after December 31st, 2028, will need to have a new CE Mark under the MDR, even if they have been on the
market previously under the MDD/AIMDD. The amendment also removes the date after which devices can no longer be made available (“sell-off” deadline). Legacy devices can therefore continue to be made available on the market and put into service
after 26/05/2025. This removal applies unconditionally: devices that will not be brought into compliance with the MDD regulation are also beneficiaries. Manufacturers are required to update their technical documentation and processes to meet the
new MDR regulations. Nuwellis received the CE Mark for Aquadex SmartFlow® on January 13, 2020. Nuwellis received the renewal certificate to include the 24-Hour blood circuit on September 3, 2021. Our CE certificate for Aquadex SmartFlow® System
is under MDD/93/42 EEC and was valid through May 26, 2024, which allowed us to sell the Aquadex SmartFlow® System into the EU and satisfy the distribution demand. During fiscal 2024 we filed a formal application and signed a contract with our
Notified Body, GMED, for Aquadex SmartFlow certification under the new MDR and extended our EC certificate to December 31, 2028.
Any one or more of these factors associated with international operations could increase our costs, reduce our revenues, or disrupt our operations, which could have a material adverse effect on our
business, financial condition, and results of operations.
Employees
As of December 31, 2024, we had 38 employees all of whom are full-time. None of our employees are covered by a collective bargaining agreement. We consider relations with our employees to be good.
Legal Proceedings
We are not currently subject to any legal proceedings.
Company History
Prior to July 2016, we were focused on developing the C-Pulse System for treatment of Class III and ambulatory Class IV heart failure. In August 2016, we acquired the Aquadex Business from a
subsidiary of Baxter. In September 2016, we announced a strategic refocus of our strategy that included halting all clinical evaluations of the C-Pulse System related technology to fully focus our resources on our recently acquired Aquadex
Business. On April 27, 2021, we announced that we were changing our name from CHF Solutions, Inc. to Nuwellis, Inc. to reflect the expansion of our customer base from treating fluid imbalance resulting from congestive heart failure to also
include critical care and pediatrics applications.
Corporate Information
Nuwellis, Inc. was incorporated in Delaware on August 22, 2002. We began operating our business in November 1999 through Sunshine Heart Company Pty Limited, which dissolved as a wholly owned
Australian subsidiary of Nuwellis, Inc. in 2020. Our common stock began trading on Nasdaq on February 16, 2012.
Our principal executive offices are located at 12988 Valley View Road, Eden Prairie, Minnesota 55344, and our telephone number is (952) 345-4200. Our website address is www.nuwellis.com. Our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act will be made available free of charge on our website as
soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. These reports are also available on the SEC’s website, www.sec.gov. The information on, or that may be accessed through, any
websites noted herein is not incorporated by reference into and should not be considered a part of this Annual Report on Form 10-K.
We are a “smaller reporting company” under federal securities laws. For as long as we continue to be a smaller reporting company, we may take advantage of exemptions from various reporting
requirements that are applicable to other public companies, including, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We may continue to be a smaller reporting company if either (i)
the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less
than $700 million. As long as we remain a smaller reporting company and non-accelerated filer, we are exempt from the attestation requirement in the assessment of our internal control over financial reporting by our independent auditors pursuant
to section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) but are required to make our own internal assessment of the effectiveness of our internal controls over financial reporting.
Except as described above, no other changes have been made to the Form 10-K, and this Report does not otherwise amend, update or change the financial statements or other disclosures in the Form 10-K.
This Report speaks as of the filing date of the Form 10-K and does not (i) reflect events, results or developments that occurred or facts that became known after the filing date of the Form 10-K or (ii) modify or update those disclosures affected
by subsequent events, results, developments or facts. Among other things, forward-looking statements made in the Form 10-K have not been revised to reflect events, results or developments that occurred or facts that became known to us after the
date of the Form 10-K, and such statements should be read in conjunction with our filings with the SEC subsequent to the Form 10-K. This Report should be read in conjunction with the Company’s other filings with the SEC subsequent to March 11,
2025.
Our business faces many risks. We believe the risks described below are the material risks we face. However, the risks described below may not be the only risks we face. Additional unknown risks or
risks that we currently consider immaterial may also impair our business operations. If any of the events or circumstances described below actually occurs, our business, financial condition or results of operations could suffer, and the trading
price of our shares of common stock could decline significantly. Investors should consider the specific risk factors discussed below, together with the “Cautionary Note Regarding Forward-Looking Statements” and the other information contained in
this Annual Report on Form 10-K and the other documents that we will file from time to time with the SEC.
Summary of Risk Factors
Our business is subject to a number of risks. The principal factors and uncertainties include, among others:
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We have limited history of operations and limited experience in sales and marketing, and we might be unsuccessful in increasing our sales and cannot assure you that we will ever generate substantial revenue
or be profitable.
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We have incurred operating losses since our inception and anticipate that we will continue to incur operating losses in the near-term. To date, we have been funded by equity financings, and although we
believe that we will be able to successfully fund our operations, there can be no assurance that we will be able to do so or that we will ever operate profitably.
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We will need to raise additional capital to fund our operations beyond May 31, 2025. If additional capital is not available, we will have to delay, reduce or cease operations. These factors raise
substantial doubt about the Company’s ability to continue as a going concern through the next twelve months.
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If we do not comply with certain tax regulations, including VAT, and similar regulations, we may be subject to additional taxes, customs duties, interest, and penalties in material amounts, which could
materially harm our financial condition and operating results.
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We have previously identified a material weakness in connection with our internal control over financial reporting which, if not remediated, could adversely affect our business, reputation and stock price.
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Our near-term prospects are highly dependent on revenues from a single product, the Aquadex System. We face significant challenges in expanding market acceptance of the Aquadex System, which could adversely
affect our potential sales.
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Nasdaq may delist our common stock from its exchange which could limit your ability to make transactions in our securities and subject us to additional trading restrictions.
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Sales of a substantial number of shares of our common stock by our stockholders in the public market could cause our stock price to fall.
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We depend on a limited number of customers, the loss of which, or failure of which to order our products in a particular period, could cause our revenues to decline.
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We have limited commercial manufacturing experience and could experience difficulty in producing commercial volumes of the Aquadex System and related components or may need to depend on third parties for
manufacturing.
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We depend upon third-party suppliers, including single source suppliers, making us vulnerable to supply problems and price fluctuations.
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If we cannot develop adequate distribution, customer service and technical support networks, then we may not be able to market and distribute the Aquadex System effectively and our sales will suffer.
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We compete against many companies, some of which have longer operating histories, more established products and greater resources than we do, which may prevent us from achieving further market penetration
or improving operating results.
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Significant additional governmental regulation could subject us to unanticipated delays which would adversely affect our sales.
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Product defects, resulting in lawsuits for product liability, could harm our business, results of operations and financial condition.
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We may face significant risks associated with international operations, which could have a material adverse effect on our business, financial condition and results of operations.
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If we are not able to maintain sufficient quality controls, then the approval or clearance of our products by the European Union, the FDA or other relevant authorities could be withdrawn, delayed or denied
and our sales will suffer.
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If we fail to comply with federal and state laws regarding off-label use of our products, we could face substantial civil and criminal penalties and our business, financial condition, results of operations,
and prospects could be adversely affected.
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If we violate any provisions of the Federal Food, Drug, and Cosmetic Act or any other statutes or regulations, then we could be subject to enforcement actions by the FDA or other governmental agencies.
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We cannot assure you that our products will be safe or that there will not be serious injuries or product malfunctions. Further, we are required under applicable law to report any circumstances relating to
our medically approved products that could result in deaths or serious injuries. These circumstances could trigger recalls, class action lawsuits and other events that could cause us to incur expenses and may also limit our ability to
generate revenues from such products.
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We face significant uncertainty in the industry due to government healthcare reform and changes to healthcare regulations.
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We are subject, directly or indirectly, to United States federal and state healthcare fraud and abuse and false claims laws and regulations. Prosecutions under such laws have increased in recent years and
we may become subject to such litigation. If we are unable to, or have not fully complied with such laws, we could face substantial penalties.
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Failure to comply with anti-bribery, anti-corruption, and anti-money laundering laws could subject us to penalties and other adverse consequences.
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If we acquire other businesses, products or technologies, we could incur additional impairment charges and will be subject to risks that could hurt our business.
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We may not be able to protect our intellectual property rights effectively, which could have an adverse effect on our business, financial condition or results of operations.
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Intellectual property litigation could be costly and disruptive to us.
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If we were unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and system could be adversely affected.
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Our products could infringe patent rights of others, which may require costly litigation and, if we are not successful, could cause us to pay substantial damages or limit our ability to commercialize our
products.
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We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
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Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could
adversely affect our business and our reputation.
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The trading price of our common stock price has been, and could continue to be, volatile.
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The rights of holders of our capital stock will be subject to, and could be adversely affected by, the rights of holders of our outstanding preferred stock and stock that may be issued in the future.
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A more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.
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Our ability to use U.S. net operating loss carryforwards and other tax attributes might be limited.
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We do not intend to pay cash dividends on our common stock in the foreseeable future.
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There may be future sales of our securities or other dilution of our equity, which may adversely affect the market price of our common stock.
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Worldwide economic and market conditions, an unstable economy, a decline in consumer-spending levels and other adverse developments, including inflation, could adversely affect our business, results of operations and liquidity, and
stock price.
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Changes in spending or budgetary priorities may materially adversely affect our business.
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Changes to U.S. tariff and import/export regulations may have a negative effect on our suppliers and/or service providers and, in turn, could have a material adverse impact on our financial condition.
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Risks Related to Our Business
We have limited history of operations and limited experience in sales and marketing, and we might be unsuccessful in increasing our sales and cannot assure you that we will ever
generate substantial revenue or be profitable.
Prior to our acquisition of the Aquadex Business in August 2016, we did not have a product approved for commercial sale and focused our resources on developing and manufacturing our C-Pulse System. On
September 29, 2016, we announced a strategic refocus of our strategy that included halting all clinical evaluations of the C-Pulse System to fully focus our resources on commercializing our Aquadex System, taking actions to reduce our cash burn
in connection with such strategic refocus and reviewing potential strategic alliances and financing alternatives. In addition, our business strategy depends in part on our ability to grow our business by establishing an effective sales force and
selling our products to hospitals and other healthcare facilities while controlling costs. In addition to heart failure, we have expanded our commercialization efforts into critical care and post-cardiac surgery. In February 2020, we received
510(k) clearance of the Aquadex SmartFlow system to include pediatric patients who weigh 20kg or more. With this 510(k) clearance, we have expanded our commercialization efforts into pediatrics. We have limited prior experience with respect to
sales or marketing of the Aquadex System across heart failure, critical care, post-cardiac surgery and pediatrics. If we are unsuccessful at marketing and selling our Aquadex System, our operations and potential revenues will be materially
adversely affected.
We have incurred operating losses since our inception and anticipate that we will continue to incur operating losses in the near-term.
We are an emerging company with a history of incurring net losses. We have incurred net losses since our inception, including net losses of $11.2 million as of December 31, 2024. As of December 31,
2024, our accumulated deficit was $298.8 million.
Prior to August 2016, we did not have any products approved for commercialization, generated only limited revenue from our clinical studies and had significant operating losses as we incurred costs
associated with the conduct of clinical studies and our research and development programs for our C-Pulse System. We became a revenue-generating company only after acquiring the Aquadex Business from a subsidiary of Baxter in August 2016. We
expect to incur additional losses in the near-term as we grow the Aquadex Business, including investments in expanding our sales and marketing capabilities, manufacturing components, and complying with the requirements related to being a U.S.
public company listed on Nasdaq. To become and remain profitable, we must succeed in expanding the adoption and market acceptance of the Aquadex System. This will require us to succeed in a range of challenging activities, including training
personnel at hospitals and effectively and efficiently manufacturing, marketing and distributing the Aquadex System and related components. There can be no assurance that we will succeed in these activities, and we may never generate revenues
sufficient to achieve profitability. If we do achieve profitability, we may not be able to sustain it.
We will need to raise additional capital to fund our operations through the end of fiscal year 2025. If additional capital is not available, we will have to delay, reduce, or cease
operations.
We believe that we have sufficient capital to fund our operations through May 31, 2025. We will need to raise additional capital to fund our operations through the end of fiscal year 2025. Changing
circumstances may cause us to consume capital significantly faster than we currently anticipate and could adversely affect our ability to raise additional capital. Additional financing may not be available when we need it or may not be available
on terms that are favorable to us. In addition, the risk that we may not be able to continue as a going concern may make it more difficult to obtain necessary additional funding on terms favorable to us, or at all. If we raise additional funding
through the issuance of equity securities, our stockholders may suffer dilution and our ability to use our net operating losses to offset future income may be limited. If we raise additional funding through debt financing, we may be required to
accept terms that restrict our ability to incur additional indebtedness, require us to use our cash to make payments under such indebtedness, force us to maintain specified liquidity or other ratios or restrict our ability to pay dividends or
make acquisitions. If we are unable to secure additional funding, our development programs and our commercialization efforts would be delayed, reduced or eliminated, our relationships with our suppliers and manufacturers may be harmed, and we may
not be able to continue our operations.
If we do not comply with certain tax regulations, including VAT, and similar regulations, we may be subject to additional taxes, customs duties, interest, and penalties in material
amounts, which could materially harm our financial condition and operating results.
As a result of supplying our business customers in the European Union, we are subject to the Value Added Tax, or VAT, which is typically applied to all goods and services purchased and sold throughout
Europe.
It is possible that we could face VAT audits in the future and that our liability for these taxes could exceed our estimates if non-U.S. tax authorities assert that we are obligated to collect
additional tax amounts from our customers and remit those taxes to those authorities. Such an audit could be expensive and time-consuming and result in substantial management distraction. If the matter were to be resolved in a manner adverse to
us, it could have a material adverse effect on our results of operations and financial condition. Additionally, we could be subject to interest and penalties for any assessment of taxes that could be deemed overdue.
Changes in or the improper application of VAT may negatively impact our operating results. Fluctuations in tax rates and duties, changes in tax legislation or regulation or adverse outcomes of these
examinations could have a material adverse effect on our results of operations, financial condition, and cash flows.
We have identified a material weakness in connection with our internal control over financial reporting which, if not remediated, could adversely affect our business, reputation
and stock price.
We review and update our internal controls, disclosure controls and procedures, and corporate governance policies as our Company continues to evolve. In addition, we are required to comply with the
internal control evaluation and certification requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”) and management is required to report annually on our internal control over financial reporting. Our independent registered public
accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of SOX until the date we are no longer a “smaller reporting company” as defined by applicable
SEC rules.
Our management’s evaluation of the effectiveness of our internal controls over financial reporting as of December 31, 2024, concluded that our controls were not effective, due to material weaknesses
resulting from insufficient headcount to fully ensure adequate segregation of duties relating to the accounting and financial reporting function and the information technology function. Additionally, the company did not prepare and retain
contemporaneous documentation to evidence the implementation and operation of controls, including controls related to the review of balance sheet reconciliations, the preparation and recording of journal entries, the review of period-end
financial reporting checklists and controls over user access. A material weakness is a deficiency or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material
misstatement of the Company's interim or annual condensed consolidated financial statements will not be prevented or detected on a timely basis.
Subject to limitations on liquidity that may prevent or delay additional hirings, the Company is taking steps to remediate these material weaknesses as soon as possible. We can give no assurance that
these measures will remediate the material weakness in internal control, or that additional material weaknesses or significant deficiencies in our internal control over financial reporting will not be identified in the future. Our failure to
implement and maintain effective internal control over financial reporting could result in errors in our financial statements that may lead to restatements of our financial statements or cause us to fail to meet our reporting obligations. Any
such failure could also lead to reputational damage and a decrease in the market price of our stock.
Our near-term prospects are highly dependent on revenues from a single product, the Aquadex System. We face significant challenges in expanding market acceptance of the Aquadex
System, which could adversely affect our potential sales.
Our near-term prospects are highly dependent on revenues from a single product, the Aquadex System, and we have no other commercial products at this time. The established market or customer base for
our Aquadex System is limited and our success depends on our ability to increase adoption and utilization of the Aquadex System. Acceptance of our product in the marketplace by health care providers is uncertain, and our failure to achieve
sufficient market acceptance will significantly limit our ability to generate revenue and be profitable. Market acceptance will require substantial marketing efforts and the expenditure of significant funds by us to inform health care providers
of the benefits of using the Aquadex System and to provide further training on its use. We may not be able to build key relationships with health care providers to drive further sales in the United States or sell the Aquadex System outside the
United States. Product orders may be cancelled, patients or customers currently using our products may cease to do so and patients or customers expected to begin using our products may not. In addition, market acceptance of the Aquadex System may
require that we make enhancements to the system or its components. We cannot be sure that we will be able to successfully develop such enhancements, or that if developed they will be viewed favorable by the market. Our ability to achieve
acceptance of our Aquadex System depends on our ability to demonstrate the safety, efficacy, ease-of-use and cost-effectiveness of the system. We may not be able to expand the adoption and market acceptance of the Aquadex System to both the
inpatient and outpatient markets and our potential sales could be harmed.
We depend on a limited number of customers, the loss of which, or failure of which to order our products in a particular period, could cause our revenues to decline.
Our ten largest customers represented 49.4% and 50.4% of our revenues in the twelve months ended December 31, 2024, and 2023, respectively, with our largest customer representing 14.4% and 13.9%,
respectively, of our revenues during such periods. Customer ordering patterns may vary significantly from quarter.
Customer ordering patterns may vary significantly from quarter to quarter, or customers may discontinue providing therapies using our products. If one of our largest customers
reduced its purchases in a fiscal period, our revenues for that period may be materially adversely affected. Further, if one of our largest customers discontinued the use of our products, our revenues may be materially adversely affected.
We have limited commercial manufacturing experience and could experience difficulty in producing commercial volumes of the Aquadex System and related components or may need to
depend on third parties for manufacturing.
We have limited experience in commercial manufacturing of the Aquadex System. Following the acquisition of the Aquadex Business in 2016, we began manufacturing Aquadex FlexFlow® consoles and blood
circuits in-house in the fourth quarter of 2017 and Aquadex FlexFlow® catheters in-house in the third quarter of 2018. We have manufactured the Aquadex SmartFlow® console since its development in 2019. However, because we have limited prior
commercial manufacturing experience, we may incur manufacturing inefficiencies, delays, or interruptions. We may not be able to achieve low-cost manufacturing capabilities and processes that will enable us to manufacture the Aquadex System or
related components in significant volumes, while meeting the legal, regulatory, quality, price, durability, engineering, design and production standards required to market our products successfully. If we experience difficulties with our
manufacturing operations, we may experience delays in providing products and services to our customers, and our business could be harmed.
We depend upon third-party suppliers, including single-source suppliers, making us vulnerable to supply problems and price fluctuations.
We will rely on third-party suppliers, including single-source suppliers, to provide us with certain components of the Aquadex System. We have no long-term contracts with the majority of our
third-party suppliers that guarantee volume or the continuation of payment terms. We depend on our suppliers to provide us with materials in a timely manner that meet our quality, quantity and cost requirements. The forecasts of demand we use to
determine order quantities and lead times for components purchased from outside suppliers may be incorrect. If we do not increase our sales volumes, which drive our demand for our suppliers’ products, we may not procure volumes sufficient to
receive favorable pricing, which could impact our gross margins if we are unable to pass along price differences to our customers. Recent global economic cost inflation trends could unfavorably impact pricing from our suppliers, which could
impact our gross margins if we are unable to pass along price differences to our customers. Our failure to obtain required components or subassemblies when needed and at a reasonable cost would adversely affect our business. These suppliers may
encounter problems during manufacturing for a variety of reasons, any of which could delay or impede their ability to meet our demand. Any difficulties in locating and hiring third-party suppliers, or in the ability of third-party suppliers to
supply quantities of our products at the times and in the quantities, we need, could have a material adverse effect on our business.
If we cannot develop adequate distribution, customer service and technical support networks,
then we may not be able to market and distribute the Aquadex System effectively and our sales will suffer.
Our strategy requires us to provide a significant amount of customer service, maintenance, and other technical service to our customers. To provide these services, we have begun, and will need to
continue, to develop a network of distribution and a staff of employees and independent contractors in each of the areas in which we intend to operate. We cannot assure that we will be able to organize and manage this network on a cost-effective
basis. If we cannot effectively organize and manage this network, then it may be difficult for us to distribute our products and to provide competitive service and support to our customers, in which case customers may be unable, or decide not, to
order our products and our sales will suffer.
We compete against many companies, some of which have longer operating histories, more established products and greater resources than we do, which may prevent us from achieving
further market penetration or improving operating results.
Competition from medical device companies and medical device divisions of health care companies, pharmaceutical companies and gene- and cell-based therapies is intense and expected to increase. The
vast majority of patients with fluid overload receive pharmacological treatment (diuretics) as a standard of care. There are no direct competitors for the Aquadex System in heart failure or critical care in the U.S., other than diuretics. Other
systems, such as Baxter’s Prismaflex, a filter-based device that is approved for continuous renal replacement therapy for patients weighing 20kg or more with acute renal failure and/or fluid overload. In pediatrics, the Carpe diem system
distributed by Medtronic is indicated for use in acute kidney injury or fluid overloaded patients requiring hemodialysis or hemofiltration therapy, and Baxter’s HF20 Set is authorized under an Emergency Use Authorization to deliver CRRT to treat
patients of low weight (8-20 kg) in an acute care environment during the COVID-19 pandemic.
Our ability to compete effectively depends upon our ability to demonstrate the advantages of ultrafiltration as compared to diuretics, a pharmacological treatment that is currently the standard of
care. In addition, we need to distinguish Aquadex System from the indirect competition of other devices that can also be used to conduct ultrafiltration.
Significant additional governmental regulation could subject us to unanticipated delays which would adversely affect our sales.
Our business strategy depends in part on our ability to expand the use of the Aquadex System in the market as quickly as possible. To achieve expanded market use of the Aquadex System, we may develop
additional enhancements to the system or its components. Depending on their nature, such enhancements may be subject to review by the FDA and regulatory authorities outside of the United States under the applicable regulations. Any regulatory
delay in our ability to implement enhancements to the Aquadex System or its components could have an adverse effect on our potential sales.
Health care laws in the United States and other countries are subject to ongoing changes, including changes to the amount of reimbursement for hospital services. Additional laws and regulations, or
changes to existing laws and regulations that are applicable to our business may be enacted or promulgated, and the interpretation, application or enforcement of the existing laws and regulations may change. In that regard, the Trump
administration’s legislative and regulatory agendas, as they relate to the healthcare and medical device industries, remain uncertain. We cannot predict the nature of any future laws, regulations, interpretations, applications or enforcements or
the specific effects any of these might have on our business. However, in the United States and international markets, we expect that both government and third-party payers will continue to attempt to contain or reduce the costs of health care by
challenging the prices charged, or deny coverage, for health care products and services. Any future laws, regulations, interpretations, applications or enforcement could delay or prevent regulatory approval or clearance of our Aquadex System and
our ability to market our Aquadex System. Moreover, changes that result in our failure to comply with the requirements of applicable laws and regulations could result in the types of enforcement actions by the FDA and/or other agencies as
described above, all of which could impair our ability to have manufactured and to sell the affected products.
In the United States, the products included in the Aquadex System are purchased primarily by customers, such as hospitals or other health care providers. Customers bill various third-party payers for
covered therapies involving the Aquadex System provided to patients. These payers, which include federal health care programs (e.g., Medicare and Medicaid), state health care programs, private health insurance companies and managed care
organizations, then reimburse our customers based on established payment formulas that consider part or all of the cost associated with these devices and the related procedures performed. Legislative proposals can substantially change the way
health care is financed by both governmental and private insurers and may negatively impact payment rates for our system.
While the agency responsible for administering the Medicare program, the Centers for Medicare and Medicaid Services, has not issued a favorable national coverage determination under its
Investigational Device Exception Studies Program for ultrafiltration using the Aquadex System, a number of private insurers have approved reimbursement for the products included in the Aquadex System for specific indications and points of
service. In addition, patients and providers may seek insurance coverage on a case-by-case basis. On January 1, 2022, a new and dedicated Category III CPT code, 0692T, became effective for Therapeutic Ultrafiltration. Healthcare providers can
utilize this code when using Aquadex to deliver ultrafiltration to adult and pediatric patients (≥ 20kg). The approved temporary Therapeutic Ultrafiltration Category III CPT code will be in effect for at least five years and provides additional
reimbursement for ultrafiltration administered in the outpatient setting.
Product defects, resulting in lawsuits for product liability, could harm our business, results of operations and financial condition.
The design, manufacture and marketing of medical devices involve certain inherent risks. Manufacturing or design defects, unanticipated use of a product or inadequate disclosure of risks relating to
the use of the product can lead to injury or other adverse events. These events could lead to recalls or safety alerts relating to a product (either voluntary or required by the FDA or similar governmental authorities in other countries), and
could result, in certain cases, in the removal of a product from the market. Any recall of our Aquadex System or any related components could result in significant costs, as well as negative publicity and damage to our reputation that could
reduce demand for our products. Personal injuries relating to the use of our products could also result in product liability claims being brought against us. In some circumstances, such adverse events could also cause delays in new product
approvals.
We may be held liable if any product we develop or commercialize causes injury or is found otherwise unsuitable during product testing, manufacturing, marketing, sale or consumer use. The safety
studies we must perform, and the regulatory approvals required to commercialize our products will not protect us from any such liability. We carry product liability insurance with a $6.0 million aggregate limit. However, if there are product
liability claims against us, our insurance may be insufficient to cover the expense of defending against such claims or may be insufficient to pay or settle such claims. Furthermore, we may be unable to obtain adequate product liability insurance
coverage for commercial sales of any approved product. If such insurance is insufficient to protect us, our business, results of operations and financial condition will be harmed. If any product liability claim is made against us, our reputation
and future sales will be damaged, even if we have adequate insurance coverage. Even if a product liability claim against us is without merit or if we are not found liable for any damages, a product liability claim could result in decreased
interest in our registry studies, decreased demand for our system, if approved for commercialization, injury to our reputation, diversion of management’s attention from operating our business, withdrawal of study participants, significant costs
of related litigation, loss of revenue or the inability to commercialize our products.
On December 11, 2024, we sent a notice to affected customers that we were voluntarily recalling specific lots of the AquaFlexFlow UF 500 Plus extracorporeal blood circuit which is used with the
Aquadex Smartflow® or Aquadex FlexFlow® System. The lots were recalled due to failures of the blood circuit associated with too many mismatch alarms. The blood circuits may indicate “Ultrafiltrate Weight Mismatch” or “Excessive Weight Mismatch”
alarms while in use. If not addressed, this failure could result in excess fluid removal from a patient leading to Acute Volume Depletion. We were made aware of five reported incidences of blood circuit product failures, with three leading to
patient dehydration and requiring administration of fluids. The recall was conducted with the knowledge of the U.S. Food and Drug Administration which has characterized the Class of the recall as Class 1.
We may face significant risks associated with international operations, which could have a material adverse effect on our business, financial condition and results
of operations.
We market our products globally. Our international operations are subject to a number of risks, including the following: fluctuations in exchange rates of the United States dollar
could adversely affect our results of operations, we may face difficulties in enforcing and collecting accounts receivable under some countries’ legal systems, have our products serviced or conduct other operations, political instability could
disrupt our operations, some governments and customers may have longer payment cycles, with resulting adverse effects on our cash flow, and some countries could impose additional taxes or restrict the import of our products. In addition,
regulations in individual countries or regions may restrict our ability to sell our products. Most countries, including the countries in the EU, require approval or registration to import and/or sell our products in the country.
The EU MDR was published in May 2017. There was a three-year transition period for companies to comply with the new MDR requirements, until May 2020. Due to the COVID, the date was extended to May
2021. To ensure a high level of public health protection and avoidance of device shortage, on March 20 2023, Regulation (EU) 2023/607 amended the MDR as regards the transitional provisions from May 26, 2024 further based on the different device
classifications, provided certain criteria are met.
Our legacy devices, the Aquadex SmartFlow system, including the console and blood circuit, is considered non-implantable, class IIb device. The EU MDR transition period has been extended from May 26,
2024 to December 31, 2028.
We are in the process of entering into MDR certification contract with our Notify Body which will allow Nuwellis to market Aquadex SmartFlow® through December 31, 2028. Nuwellis intends to complete
MDR certification and CE Mark under MDR prior to the extension deadline of December 31, 2028.
Any one or more of these factors associated with international operations could increase our costs, reduce our revenues, or disrupt our operations, which could have a material
adverse effect on our business, financial condition, and results of operations.
If we are not able to maintain sufficient quality controls, then the approval or clearance of our products by the EU, the FDA or other relevant authorities could be withdrawn,
delayed or denied and our sales will suffer.
Approval or clearance of our products could be withdrawn, delayed, or denied by the EU, the FDA and the relevant authorities of other countries if our manufacturing facilities do not comply with their
respective manufacturing requirements. The EU imposes requirements on quality control systems of manufacturers, which are inspected and certified on a periodic basis and may be subject to additional unannounced inspections. Failure to comply with
these requirements could prevent us from marketing our products in the European Union Community. The FDA also imposes requirements through quality system requirements, or QSR, regulations, which include requirements for good manufacturing
practices, or GMP. Failure to comply with these requirements could prevent us from obtaining FDA approval of our products and from marketing such products in the United States. Our manufacturing facilities have not been inspected and certified by
a Notified Body. We cannot be sure that our facilities or the processes we use will comply or continue to comply with their respective requirements on a timely basis or at all, which could delay or prevent obtaining the approvals we need to
market our products in the European Union Community and the United States.
To market our products in the European Community, the United States and other countries, where approved, manufacturers of such products must continue to comply or ensure compliance with the relevant
manufacturing requirements. Although we cannot control the manufacturers of our products, if we choose to subcontract manufacturing to a contract manufacturer, we may need to expend time, resources and effort in product manufacturing and quality
control to assist with their continued compliance with these requirements. If violations of applicable requirements are noted during periodic inspections of the manufacturing facilities of our manufacturers or we fail to address issues raised by
the FDA in these inspections, then we may not be able to continue to market the products manufactured in such facilities and our revenues may be materially adversely affected.
If we violate any provisions of the FDC Act or any other statutes or regulations, then we could be subject to enforcement actions by the FDA or other governmental agencies.
We face a significant compliance burden under the FDC Act and other applicable statutes and regulations which govern the testing, labeling, storage, record keeping, distribution, sale, marketing,
advertising and promotion of our medically approved products.
If we violate the FDC Act or other regulatory requirements at any time during or after the product development and/or approval process, we could be subject to enforcement actions by the FDA or other
agencies, including: fines, injunctions, civil penalties, recalls or seizures of products, total or partial suspension of the production of our products, withdrawal of any existing approvals or pre-market clearances of our products, refusal to
approve or clear new applications or notices relating to our products, recommendations that we not be allowed to enter into government contracts and criminal prosecution. Any of the above could have a material adverse effect on our business,
financial condition and results of operations.
We cannot assure you that our products will be safe or that there will not be serious injuries or product malfunctions. Further, we are required under applicable law to report any
circumstances relating to our medically approved products that could result in deaths or serious injuries. These circumstances could trigger recalls, class action lawsuits and other events that could cause us to incur expenses and may also limit
our ability to generate revenues from such products.
We cannot assure you that our products will prove to be safe or that there will not be serious injuries or product malfunctions, which could trigger recalls, class action lawsuits and other events
that could cause us to incur significant expenses, limit our ability to market our products and generate revenues from such products or cause us reputational harm.
Under the FDC Act, we are required to submit medical device reports, or MDRs, to the FDA to report device-related deaths, serious injuries and malfunctions of medically approved products that could
result in death or serious injury if they were to recur. Depending on their significance, MDRs could trigger events that could cause us to incur expenses and may also limit our ability to generate revenues from such products, such as the
following: information contained in the MDRs could trigger FDA regulatory actions such as inspections, recalls and patient/physician notifications; because the reports are publicly available, MDRs could become the basis for private lawsuits,
including class actions; and if we fail to submit a required MDR to the FDA, the FDA could take enforcement action against us.
If any of these events occur, then we could incur significant expenses and it could become more difficult for us to market and sell our products and to generate revenues from sales. Other countries
may impose analogous reporting requirements that could cause us to incur expenses and may also limit our ability to generate revenues from sales of our products.
We face significant uncertainty in the industry due to government healthcare reform and changes to healthcare regulations.
Since its implementation beginning in 2010, the Affordable Care Act has significantly changed, and continues to change, how health care services are covered, delivered and financed in the United
States. The Affordable Care Act is extremely complex, and, as a result, additional legislation is likely to be considered and enacted over time. The impact of the Affordable Care Act on the health care industry is extensive and includes, among
other things, the federal government assuming a larger role in the health care system, expanding healthcare coverage of United States citizens and mandating basic healthcare benefits. The future of the Affordable Care Act and its implementation,
however, is uncertain as the Affordable Care Act has continuously been the subject of legal and political challenges and national debate, which itself constitutes a risk. To date, the Affordable Care Act has survived three major Supreme Court
challenges and no bills wholly repealing the Affordable Care Act have passed both chambers of Congress. Whether or not the Affordable Care Act remains in effect, it is expected that federal and state governments will continue to consider various
reform proposals in the health care industry.
The Affordable Care Act includes a Hospital Readmission Reduction program and is designed to reduce payments to hospitals with excess heart failure readmissions, among other conditions. The penalty to
hospitals can be significant, as much as 3% of total Medicare reimbursement. We believe the Aquadex System may offer hospitals an economic benefit for using the device on a regular basis for in-patient or out-patient usage to avoid readmissions
for heart failure; however, if the Hospital Readmission Reduction program is repealed, hospitals may not be as inclined to take measures to reduce readmissions.
In addition, any healthcare reforms enacted in the future may, like the Affordable Care Act, be phased in over a number of years, but if enacted, could reduce our revenue, increase our costs, or
require us to revise the ways in which we conduct business or put us at risk for loss of business. In addition, our results of operations, financial position and cash flows could be materially adversely affected by changes under the Affordable
Care Act and changes under any federal or state legislation adopted in the future.
Moreover, the Physician Payment Sunshine Act (the “Sunshine Act”), which was enacted as part of the Affordable Care Act, requires applicable medical device companies to track and publicly report, with
limited exceptions, all payments and other transfers of value to physicians and teaching hospitals in the U.S. Implementing regulations for these tracking and reporting obligations were finalized in 2013, and companies have been required to track
payments made since August 1, 2013. If we fail to comply with the data collection and reporting obligations imposed by the Sunshine Act, we may be subject to substantial civil monetary penalties.
We are subject, directly or indirectly, to United States federal and state healthcare fraud and abuse and false claims laws and regulations. Prosecutions under such laws have
increased in recent years and we may become subject to such litigation. If we are unable to, or have not fully complied with such laws, we could face substantial penalties.
Our operations are directly, or indirectly through customers, subject to various state and federal fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the Stark law
and federal False Claims Act (the “FCA”). These laws may impact, among other things, our sales, marketing and education programs.
The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either
the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal healthcare program such as the Medicare and Medicaid programs. Several courts have interpreted the statute’s intent
requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has been violated. The Anti-Kickback Statute is broad and, despite a series of narrow
safe harbors, prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry. Penalties for violations of the federal Anti-Kickback Statute include criminal penalties and civil sanctions such as fines,
imprisonment and possible exclusion from Medicare, Medicaid and other federal healthcare programs. Many states have also adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare
items or services reimbursed by any source, not only the Medicare and Medicaid programs. The physician self-referral laws, commonly referred to as the Stark law, is a strict liability statute that generally prohibits physicians from making
referrals for the furnishing of any “designated health services,” for which payment may be made under the Medicare or Medicaid programs, to any entity with which the physician (or an immediate family member) has an ownership interest or
compensation arrangement, unless an applicable exception applies. Moreover, many states have adopted or are considering adopting similar laws, some of which extend beyond the scope of the Stark law to prohibit the payment or receipt of
remuneration for the prohibited referral of patients for designated healthcare services and physician self-referrals, regardless of the source of the payment for the patient’s care. If it is determined that any of the relationships we may have
with physicians violate the Stark law or similar statutes, we could become subject to civil and criminal penalties. The imposition of any such penalties could harm our business.
The FCA prohibits persons from knowingly filing, or causing to be filed, a false claim to, or the knowing use of false statements to obtain payment from the federal government. Suits filed under the
FCA, known as “qui tam” actions, can be brought by any individual on behalf of the government and such individuals, commonly known as “whistleblowers,” may share in any amounts paid by the entity to the government in fines or settlement. The
frequency of filing qui tam actions has increased significantly in recent years, causing greater numbers of medical device, pharmaceutical and healthcare companies to have to defend a FCA action. When an entity is determined to have violated the
federal FCA, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. Various states have also enacted laws modeled after the federal FCA.
We are unable to predict whether we could be subject to actions under any of these laws, or the impact of such actions. If we are found to be in violation of any of the laws described above or other
applicable state and federal fraud and abuse laws, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from government healthcare reimbursement programs and the curtailment or restructuring of our
operations.
Failure to comply with anti-bribery, anti-corruption, and anti-money laundering laws could subject us to penalties and other adverse consequences.
We are subject to the Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act and other anti-corruption, anti-bribery and anti-money laundering laws in various jurisdictions both domestic and
abroad. The FCPA prohibits any U.S. individual or business from paying, offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing
any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The U.K. Bribery Act is similar but even broader in scope in that it prohibits bribery of private (non-government) persons
as well. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of
the corporation, including its international subsidiary, and to devise and maintain an adequate system of internal accounting controls for international operations. Our distribution arrangements outside the U.S. presents some risk under these
laws. Our distributors may sell our products to healthcare providers that are owned, controlled or managed by a foreign government and its employees, including healthcare providers may be deemed to be a foreign official under the FCPA. We could
be held liable for the actions of our distributors. While we have policies and procedures to address compliance with these laws, we cannot assure you that our distributors will not take actions in violation of our policies and applicable law,
for which we may be ultimately held responsible. Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil
and criminal penalties or injunctions, adverse media coverage and other consequences. Any investigations, actions or sanctions could adversely affect our business, operating results and financial condition.
If we acquire other businesses, products or technologies, we could incur additional impairment charges and will be subject to risks that could hurt our business.
We may pursue acquisitions to obtain complementary businesses, products or technologies. Any such acquisition may not produce the revenues, earnings or business synergies that we anticipate, and an
acquired business, product or technology might not perform as we expect. Our management could spend a significant amount of time, effort and money in identifying, pursuing and completing the acquisition. If we complete an acquisition, we may
encounter significant difficulties and incur substantial expenses in integrating the operations and personnel of the acquired businesses, products or technologies into our operations. In particular, we may lose the services of key employees and
we may make changes in management that impair the acquired business’s relationships with employees, vendors and customers. Additionally, we may acquire development-stage companies that are not yet profitable and which require continued
investment, which could decrease our future earnings or increase our futures losses.
Any of these outcomes could prevent us from realizing the anticipated benefits of an acquisition. To pay for an acquisition, we might use stock or cash. Alternatively, we might borrow money from a
bank or other lender. If we use stock, our stockholders would experience dilution of their ownership interests. If we use cash or debt financing, our financial liquidity would be reduced.
As a result of a potential acquisition, we may be required to capitalize a significant amount of intangibles, including goodwill. We would be required to review our definite-lived intangible assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows derived from such assets. In addition, we would be required to
evaluate goodwill for impairment annually, or to the extent events or conditions indicate a risk of possible impairment during the interim periods prior to its annual impairment test. In the year ended December 31, 2017, we recognized impairment
charges of $4.0 million related to goodwill and intangibles assets from our acquisition of the Aquadex Business. If we were required to recognize impairment charges related to future acquisitions, those charges could decrease our future earnings
or increase our future losses.
Risks Related to Our Intellectual Property
We may not be able to protect our intellectual property rights effectively, which could have an adverse effect on our business, financial condition or results of operations
Our success depends in part on our ability to obtain and maintain protection in the United States and other countries of the intellectual property relating to or incorporated into our Aquadex System
and related components. On August 5, 2016, upon closing of our acquisition of the Aquadex Business, we entered into a patent license agreement with Baxter pursuant to which we obtained, for no additional consideration, a world-wide license which
at the time, included 49 exclusively licensed and 9 non-exclusively licensed patents used in connection with the Aquadex System to make, have made, use, sell, offer for sale and import, the Aquadex System in the “field of use” as defined in the
license. The license is exclusive, with respect to some patents, and non-exclusive, with respect to other patents. Under the patent license agreement, Baxter has agreed to use commercially reasonable efforts to continue maintenance of seven
“required maintenance patents,” and we have agreed to reimburse Baxter for all fees, costs, and expenses (internal or external) incurred by Baxter in connection with such continued maintenance. The rights granted to us under the patent license
agreement will automatically revert to Baxter in the event we cease operation of the Aquadex Business or we file for, or have filed against us, or otherwise undertake any bankruptcy, reorganization, insolvency, moratorium, or other similar
proceeding. We estimate that the patents licensed from Baxter will expire by mid-2025.
We have four (4) pending patent applications unrelated to our dedicated pediatric device in development. We have filed five (5) patent applications related to our dedicated pediatric device in
development. These resulted in four (4) issued patents, 1 abandoned application, and five (5) pending patent applications. The first issued patent involves a mechanical design for the therapy bags to allow easy load/unload by the user. The second
issued patent involves transport mode operation on battery power, enabling patient mobility. Other pending patent applications involve an extracorporeal blood filtration machine that includes flexible source line connection, open vs. closed loop
fluid collection controls, a self-emptying bag, improved density measurement techniques, algorithm to ensure reliable auto clamp safety engagement, a blood leak detector that can detect hemolyzed blood, and mechanical cartridge design to ease
manufacturing assembly and user setup.
In addition, given the strategic refocus away from the C-Pulse System and towards the Aquadex System, we have chosen to limit the maintenance of issued C-Pulse System patents.
Our pending and future patent applications may not issue as patents or, if issued, may not issue in a form that will provide us any financial return. Even if issued, existing or future patents may be
challenged, narrowed, invalidated or circumvented, which could limit our ability to obtain commercial benefits from them. Changes in patent laws or their interpretation in the United States and other countries could also diminish the value of our
intellectual property or narrow the scope of our patent protection. In addition, the legal systems of certain countries do not favor the aggressive enforcement of patents, and the laws of foreign countries may not protect our rights to the same
extent as the laws of the United States. In order to preserve and enforce our patent and other intellectual property rights, we may need to make claims or file lawsuits against third parties. This can entail significant costs to us and divert our
management’s attention from our business.
Intellectual property litigation could be costly and disruptive to us.
In recent years, there has been significant litigation involving intellectual property rights in the medical device industry. From time to time, third parties may assert patent, copyright, trademark
and other intellectual property rights to technologies used in our business. Any claims, with or without merit, could be time-consuming, result in costly litigation, divert the efforts of our technical and management personnel or require us to
pay substantial damages. If we are unsuccessful in defending ourselves against these types of claims, we may be required to do one or more of the following:
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halt use of our Aquadex System;
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attempt to obtain a license to sell or use the relevant technology or substitute technology, which license may not be available on reasonable terms or at all; or
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In the event a claim against us were successful and we could not obtain a license to the relevant technology on acceptable terms or license a substitute technology or redesign our system to avoid
infringement, our business, results of operations and financial condition would be significantly harmed.
If we were unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and system could be adversely affected.
In addition to patented technology, we rely on our unpatented proprietary technology, trade secrets, processes and know-how. We generally seek to protect this information by confidentiality agreements
with our employees, consultants, scientific advisors and third parties. These agreements may be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently
developed by competitors. To the extent that our employees, consultants or contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
Our products could infringe patent rights of others, which may require costly litigation and, if we are not successful, could cause us to pay substantial damages or limit our
ability to commercialize our products.
Our commercial success depends, in part, on our ability to increase adoption of the Aquadex System without infringing the patents and other proprietary rights of third parties. As our industry expands
and more patents are issued, the risk increases that there may be patents issued to third parties that relate to our system and technologies of which we are not aware or that we must challenge to continue our operations as currently contemplated.
Our system may infringe or may be alleged to infringe these patents.
In addition, some patent applications in the United States may be maintained in secrecy until the patents are issued because patent applications in the United States and many foreign jurisdictions are
typically not published until 18 months after filing, and because publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our
issued patents or our pending applications or that we were the first to invent the technology. Another party may have filed, and may in the future file, patent applications covering our system or technology similar to ours. Any such patent
application may have priority over our patent applications or patents, which could further require us to obtain rights to issued patents covering such technologies. If another party has filed a U.S. patent application on inventions similar to
ours, we may have to participate in an interference or derivation proceeding declared by the U.S. Patent and Trademark Office to determine priority of invention in the United States. The costs of these proceedings could be substantial, and it is
possible that such efforts would be unsuccessful if the other party had independently arrived at the same or similar invention prior to our own invention, resulting in a loss of our U.S. patent position with respect to such inventions.
We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
As is common in our industry, we employ individuals who were previously employed at other medical device companies, including our competitors or potential competitors. Although no claims against us
are currently pending, we may be subject to claims that these employees, or we, have used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if
we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.
Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us
to liability, which could adversely affect our business and our reputation.
In the ordinary course of our business, we may collect and store sensitive data, including legally protected health information, personally identifiable information, intellectual property and
proprietary business information owned or controlled by ourselves or others. At times we may have access to limited amounts of protected health information as part of other healthcare providers’ provision of treatment to patients with our medical
devices. We manage and maintain our applications and data utilizing on-site systems. These applications and data encompass a wide variety of business-critical information including research and development information, commercial information, and
business and financial information. We face four primary risks relative to protecting this critical information, including: loss of access risk; inappropriate disclosure risk; inappropriate modification risk; and the risk of our being unable to
adequately monitor our controls over the first three risks.
The secure processing, storage, maintenance, and transmission of this critical information is vital to our operations and business strategy. Although we take measures to protect sensitive information
from cyberattacks and other unauthorized access or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers or viruses or breached due to employee error, malfeasance, or other disruptions. Any such breach
or interruption could compromise our networks and the information stored there could be accessed by unauthorized parties, publicly disclosed, lost, or stolen. Any such access, disclosure or other loss of information could result in legal claims
or proceedings, liability under laws and regulations that protect the privacy of personal information and regulatory penalties. To the extent that we may engage in activities regulated by the Health Insurance Portability and Accountability Act
and the Health Information Technology for Clinical and Economic Health Act we may have additional regulatory and reporting obligations. We are also subject to the General Data Protection Regulation (EU) 2016/679 due to our business in the EU.
Although we believe we have implemented security measures, there is no guarantee we can protect our systems and data from unauthorized access, loss or dissemination that could also disrupt our operations, including our ability to conduct our
analyses, conduct research and development activities, collect, process, and prepare company financial information, provide information about our products and other patient and physician education and outreach efforts through our website, manage
the administrative aspects of our business, and damage our reputation, any of which could adversely affect our business.
In addition, the interpretation and application of consumer, health-related, and data protection laws in the United States, Europe and elsewhere are often uncertain, contradictory, and
in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices. If so, this could result in government-imposed fines or orders requiring that we change our practices, which could
adversely affect our business. In addition, these privacy regulations may differ from country to country, and may vary based on whether testing is performed in the
United States or in the local country. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business.
Risks Related to Our Common Stock
Nasdaq may delist our common stock from its exchange which could limit your ability to make transactions in our securities and subject us to additional trading restrictions.
Our common stock is listed on the Nasdaq Capital Market under the symbol “NUWE”. In order to maintain that listing, we must satisfy minimum financial and other requirements including, without
limitation, the minimum stockholders’ equity requirement and the minimum bid price requirement. There can be no assurances that we will be successful in maintaining, or if we fall out of compliance, in regaining compliance with the continued
listing requirements and maintaining the listing of our common stock on the NASDAQ Capital Market.
On December 7, 2023, we received a notice from Nasdaq (the “Notice”) informing us that because the closing bid price for our Common Stock was below $1.00 for 30 consecutive trading days, we were not
in compliance with the minimum bid price requirement for continued listing on Nasdaq, as set forth in Nasdaq Marketplace Rule 5550(a)(2) (the “Minimum Bid Price Requirement”).
In accordance with Nasdaq Marketplace Rule 5810(c)(3)(A), we were granted a period of 180 calendar days from December 7, 2023, or until June 4, 2024, to regain
compliance with the Minimum Bid Price Requirement. Subsequently, on May 23, 2024, we received a letter from the Listing Qualifications Staff (the “Staff”) informing the Company that it was not in compliance with the minimum stockholders’
equity requirement for continued listing on Nasdaq, under Listing Rule 5550(b)(1) (the “Stockholder’s Equity Requirement”), because the Company’s stockholders’ equity of $885,000, as reported in the Company’s Quarterly Report on Form 10-Q for
the period ended March 31, 2024, was below the required minimum of $2.5 million, and because, as of May 23, 2024, the Company did not meet the alternative compliance standards, relating to the market value of listed securities of $35 million
or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years.
As a result, on June 5, 2024, we received a letter from Nasdaq indicating the Company’s continued non-compliance with Nasdaq Marketplace Rule 5550(a)(2) (the “Letter”). The Letter further informed
the Company that the Common Stock would be delisted from Nasdaq unless the Company appeals the Staff's delisting determination by requesting a hearing before the Nasdaq Hearings Panel (the “Panel”). The Company's requested a hearing to request
additional time to meet the Stockholder Equity Requirement which stayed any further delisting action by the Staff pending the ultimate outcome of the hearing. The Common Stock will remain listed and eligible for trading on Nasdaq at least
pending the ultimate conclusion of the hearing process.
On June 27, 2024, we effected a 1-for-35 reverse stock split of our outstanding Common Stock. Additionally, in 2020, the SEC approved a Nasdaq rule change to expedite delisting of securities of
companies that have had one or more reverse stock splits with a cumulative ratio of one for 250 or more shares over the prior two-year period. Under the new rules, if a company falls out of compliance with the $1.00 minimum bid price after
completing reverse stock splits over the immediately preceding two years that cumulatively result in a ratio one for 250 shares, the company will not be able to avail itself of any compliance periods and Nasdaq will instead require the issuance
of a Staff delisting determination, which is appealable to a hearings panel. Our ability to remain listed on Nasdaq may be negatively impacted by this Nasdaq rule.
On July 18, 2024, the Company received a letter from the Staff informing the Company that it had regained compliance with the Minimum Bid Price Requirement, but that because it was still
non-compliant with the Stockholder’s Equity Requirement the hearing would continue as scheduled as to the matter of the Stockholder’s Equity Requirement On July 23, 2024, the Company addressed the Panel and presented its plan of compliance for
the Stockholder’s Equity Requirement to the Panel and on August 8, 2024, the Company was notified by Nasdaq that the Panel had granted the Company’s request for continued listing, subject to, among other things, the Company’s filing of its
Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, evidencing compliance with the Stockholder’s Equity Requirement. On November 12, 2024, we filed our Quarterly Report on Form 10-Q for the quarter ended September 30, 2024
evidencing compliance with the Stockholder’s Equity Requirement. On December 17, 2024 we received a letter from the Staff indicating that the Company regained compliance with the Stockholder’s Equity Requirement, as required by the Panel. The
letter also indicated that pursuant to Nasdaq Listing Rule 5815(d)(4)(B), the Company will be subject to a Mandatory Panel Monitor for a period of one year from the date of the letter. If, within that one-year monitoring period, the Staff finds
the Company out of compliance with the Stockholder’s Equity Requirement, the Company will not be permitted to provide the Staff with a plan of compliance with respect to the deficiency and the Staff will not be permitted to grant additional
time for the Company to regain compliance with respect to that deficiency, nor will the Company be afforded an applicable cure or compliance period; instead, the Staff will issue a delisting letter and the Company will have the opportunity to
request a new hearing, where the Company’s securities may be at that time subject to delisting.
If our Common Stock is delisted from Nasdaq, our ability to raise capital through public offerings of our securities and to finance our operations could be adversely affected. We also believe that
delisting would likely result in decreased liquidity and/or increased volatility in our Common Stock and could harm our business and future prospects. In addition, we believe that, if our Common Stock is delisted, our stockholders would likely
find it more difficult to obtain accurate quotations as to the price of the Common Stock and it may be more difficult for stockholders to buy or sell our Common Stock at competitive market prices, or at all.
If our Common Stock is delisted, our Common Stock would likely then trade only in the over-the-counter market. If our Common Stock were to trade on the over-the-counter market, selling our Common
Stock could be more difficult because smaller quantities of shares would likely be bought and sold, transactions could be delayed, and we could face significant material adverse consequences, including: a limited availability of market
quotations for our securities; reduced liquidity with respect to our securities; a determination that our shares are a “penny stock,” which will require brokers trading in our securities to adhere to more stringent rules, possibly resulting in
a reduced level of trading activity in the secondary trading market for our securities; a reduced amount of news and analyst coverage for us; and a decreased ability to issue additional securities or obtain additional financing in the future.
These factors could result in lower prices and larger spreads in the bid and ask prices for our Common Stock and would substantially impair our ability to raise additional funds and could result in a loss of institutional investor interest and
fewer development opportunities for us.
In addition to the foregoing, if our Common Stock is delisted from Nasdaq and it trades on the over-the-counter market, the application of the “penny stock” rules could adversely affect the
market price of our Common Stock and increase the transaction costs to sell those shares. The SEC has adopted regulations which generally define a “penny stock” as an equity security that has a market price of less than $5.00 per share, subject
to specific exemptions. If our Common Stock is delisted from Nasdaq and it trades on the over-the-counter market at a price of less than $5.00 per share, our Common Stock would be considered a penny stock. The SEC’s penny stock rules require a
broker-dealer, before a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer
must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and the salesperson in the transaction, and monthly account statements showing the market value of each penny stock
held in the customer’s account. In addition, the penny stock rules generally require that before a transaction in a penny stock occurs, the broker-dealer must make a special written determination that the penny stock is a suitable investment
for the purchaser and receive the purchaser’s agreement to the transaction. If applicable in the future, these rules may restrict the ability of brokers-dealers to sell our Common Stock and may affect the ability of investors to sell their
shares, until our Common Stock no longer is considered a penny stock.
We continue to actively monitor our performance with respect to the listing standards and will consider available options to resolve any deficiency and maintain compliance with the Nasdaq rules.
There can be no assurance that we will be able to maintain compliance or, if we fall out of compliance, regain compliance with any deficiency, or if we implement an option that regains our compliance, maintain compliance thereafter.
Sales of a substantial number of shares of our common stock by our stockholders in the public market could cause our stock price to fall.
The number of shares of common stock issuable upon conversion of our outstanding preferred stock and exercise of outstanding warrants is significant in relation to the number of shares of our common
stock currently outstanding.
As of December 31, 2024, we have warrants to purchase 5,303,254 shares of common stock outstanding, with exercise prices ranging from $1.72 to $148,000 with a weighted-average exercise price of $5.65.
As of December 31, 2024, there were 127 shares of Series F Convertible Redeemable Preferred Stock, par value $0.0001 per share (the “Series F Convertible Preferred Stock”) outstanding, convertible
into 68,961 shares of common stock. The certificate of designation for our Series F Convertible Preferred Stock contains an anti-dilution provision, which provision requires the lowering of the applicable conversion price, as then in effect, to
the purchase price per share of common stock or common stock equivalents issued in the future. If the effective price per share on a common-stock equivalent basis in a future equity offering is lower than the then-current conversion price of the
Series F Convertible Preferred Stock, then such conversion price shall be reduced to such lower price and additional shares of common stock will be issuable upon the conversion of the of the Series F Convertible Preferred Stock. To the extent the
outstanding shares of Series F Convertible Preferred Stock become exercisable for additional shares of common stock, holders of our common stock will experience further dilution.
As of December 31, 2024, there were 102 shares of Series J Convertible Preferred Stock (as defined below) outstanding, convertible into 72 shares of common stock and 23,762 Series J Convertible
Preferred Stock issuable upon the exercise of 1,920 warrants issued in the October 2023 Offering (as defined below).
If any security holder determines to sell a substantial number of shares into the market at any given time, there may not be sufficient demand in the market to purchase the shares without a decline in
the market price for our common stock. Moreover, continuous sales into the market of a number of shares in excess of the typical trading volume for our common stock could depress the trading market for our common stock over an extended period of
time. Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur could significantly reduce the market price of our common stock and impair our ability to raise adequate capital
through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our common stock. As of December 31, 2024, we have outstanding warrants to purchase an aggregate of
approximately 5,303,254 shares of our common stock, and options to purchase an aggregate of approximately 3,873 shares of our common stock, which, if exercised, may further increase the number of shares of our common stock outstanding and the
number of shares eligible for resale in the public market.
The rights of holders of our capital stock will be subject to, and could be adversely affected by, the rights of holders of our outstanding preferred stock and stock that may be
issued in the future.
Our board of directors has authority, without further stockholder approval, to issue additional shares of preferred stock with such rights, preferences and privileges as our board may determine. These
rights, preferences and privileges may include dividend rights, conversion rights, voting rights and liquidation rights that may be greater than the rights of our common stock.
Our board of directors has previously approved, pursuant to this authority, the issuance of preferred stock, and we have 127 shares of Series F Convertible Preferred Stock outstanding and 102 shares
of Series J Convertible Preferred Stock outstanding as of December 31, 2024. Upon liquidation, dissolution or winding-up of the Company, holders of our Series F Convertible Preferred Stock and Series J Convertible Preferred Stock have the right
to receive, out of the assets, whether capital or surplus, of the Company an amount equal to the par value, plus any accrued and unpaid dividends thereon, for each share of such preferred stock held by such holder before any distribution or
payment shall be made to the holders of our common stock, and, following such payment, such holders are entitled to receive the same amount that a holder of common stock would receive if such preferred stock was fully converted, pari passu with
all the holders of common stock.
Our board of directors may issue additional series of preferred stock. As a result, the rights of holders of our capital stock will be subject to, and could be adversely affected by, the rights of
holders of any stock that may be issued in the future.
There may be future sales of our securities or other dilution of our equity, which may adversely affect the market price of our common stock.
We are generally not restricted from issuing additional common stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock. The
market price of our common stock could decline as a result of sales of common stock or securities that are convertible into or exchangeable for, or that represent the right to receive, common stock after this offering or the perception that such
sales could occur.
We have a large number of authorized but unissued shares of stock, which could negatively impact a potential investor if they purchased our common stock.
On June 27, 2024, we effected a 1-for-35 reverse split of our outstanding common stock. This reverse stock split did not change the par value of our common stock or the number of common or preferred
shares authorized by our Fourth Amended and Restated Certificate of Incorporation, as amended (our “Certificate of Incorporation”). Because the number of authorized shares of our common stock was not reduced proportionately, the reverse stock
split increased our board of directors’ ability to issue authorized and unissued shares without further stockholder action. As of December 31, 2024 our Certificate of Incorporation provides for 100,000,000 shares of authorized common stock and
40,000,000 shares of authorized preferred stock, 30,000 of which are designated Series A Junior Participating Preferred Stock, 18,000 of which are designated Series F Convertible Preferred Stock, 600,000 of which are designated Series J
Convertible Redeemable Preferred Stock and we have 4,373,968 shares of common stock outstanding, 5,398,003 shares reserved for issuance upon the conversion, exercise or vesting of outstanding preferred stock, warrants and options, 23,762 Series J
Convertible Preferred Stock issuable upon the exercise of 1,920 warrants issued in the October 2023 Offering, and 42,175 shares of common stock reserved for future grant under the Company’s equity incentive plans.
With respect to authorized but unissued and unreserved shares, we could also use such shares to oppose a hostile takeover attempt or delay or prevent changes in control or changes in or removal of
management. The issuance of additional shares of common stock or securities convertible into common stock may have a dilutive effect on earnings per share and relative voting power and may cause a decline in the trading price of our common stock.
We could use the shares that are available for future issuance in dilutive equity financing transactions, or to oppose a hostile takeover attempt or delay or prevent changes in control or changes in or removal of management, including
transactions that are favored by a majority of the stockholders or in which the stockholders might otherwise receive a premium for their shares over then-current market prices or benefit in some other manner.
A more active, liquid trading market for our common stock may not develop, and the price of our common stock may fluctuate significantly.
Historically, the market price of our common stock has fluctuated over a wide range. There has been relatively limited trading volume in the market for our common stock, and a more active, liquid
public trading market may not develop or may not be sustained. Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability to sell its shares of common stock at the time it wishes to sell them or at a
price that it considers acceptable. If a more active, liquid public trading market does not develop we may be limited in our ability to raise capital by selling shares of common stock and our ability to acquire other companies or assets by using
shares of our common stock as consideration. In addition, if there is a thin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a large float,
our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stock may be more volatile, and it would be harder for a stockholder to liquidate any investment in
our common stock. Furthermore, the stock market is subject to significant price and volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:
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our quarterly or annual operating results;
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changes in our earnings estimates;
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investment recommendations by securities analysts following our business or our industry;
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additions or departures of key personnel;
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changes in the business, earnings estimates or market perceptions of our competitors;
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our failure to achieve operating results consistent with securities analysts’ projections;
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future announcements concerning us, including our clinical and product development strategy, or our competitors;
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regulatory developments, disclosure regarding completed, ongoing or future clinical studies and enforcement actions bearing on advertising, marketing or sales;
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acquisition or loss of significant manufacturers, distributors or suppliers or an inability to obtain sufficient quantities of materials needed to manufacture our system;
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fluctuations of investor interest in the medical device sector;
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changes in industry, general market or economic conditions; and
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announcements of legislative or regulatory changes.
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The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securities of many companies, including companies in
the health care industry. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate based upon factors that have little or nothing to do with us and these fluctuations could
materially reduce our stock price.
Our ability to use U.S. net operating loss carryforwards might be limited.
As of December 31, 2024, we had U.S. net operating loss (“NOL”) carryforwards of approximately $220.2 million for U.S. federal income tax purposes. Approximately $119.2 million of NOL carryforwards
will expire from 2025 through 2038. Pursuant to the Tax Cuts and Jobs Act of 2017, the NOL carryforwards generated in 2019 through 2024 totaling approximately $101.0 million do not expire. The expiration of state NOL carryforwards will vary by
jurisdiction. In addition, future utilization of NOL carryforwards in the U.S. may be subject to certain limitations under Section 382 of the Internal Revenue Code. The company does not have any foreign tax loss carryovers.
We believe the Company may have experienced additional ownership changes under Section 382 of the Internal Revenue Code in the current and earlier years further limiting the NOL carryforwards that may
be utilized. We have not yet completed a formal Section 382 analysis. As a result, prior or future changes in ownership could put limitations on the availability of our NOL carryforwards. In addition, our ability to utilize the current NOL
carryforwards might be further limited by future issuances of our common stock.
We do not intend to pay cash dividends on our common stock in the foreseeable future.
We have never declared or paid any cash dividends on our common stock, and we currently do not anticipate paying any cash dividends in the foreseeable future. We intend to retain any earnings to
finance the development and expansion of our products and business. Accordingly, our stockholders will not realize a return on their investments unless the trading price of our common stock appreciates.
Provisions in our charter documents and Delaware law may delay or deter a change-in-control transaction or limit our stockholders’ ability to obtain a favorable judicial forum for
disputes with us or our directors, officers, or employees.
Delaware law and certain provisions of our Certificate of Incorporation and bylaws make it harder for a third party to acquire us, even if doing so might be beneficial to our stockholders. These
provisions include, among other things: authorizing our board of directors to issue, from time to time, any series of preferred stock and fix the designation, powers, preferences and rights of the shares of such series of preferred stock;
prohibiting stockholders from acting by written consent; requiring advance notice of stockholder intention to put forth director nominees or bring up other business at a stockholders’ meeting; prohibiting stockholders from calling a special
meeting of stockholders; and requiring at least two-thirds of the voting power of our outstanding stock entitled to vote to amend or repeal certain provisions of our Certificate of Incorporation or bylaws. Section 203 of the Delaware General
Corporation Law from which we did not elect to opt out, provides that if a holder acquires 15% or more of our stock without prior approval of our board of directors, that holder will be subject to certain restrictions on its ability to acquire us
within three years. These provisions may delay or deter a change in control of us, and they could limit the price that investors might be willing to pay in the future for shares of our common stock.
Further, our Certificate of Incorporation establishes that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the exclusive
forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law; or any action asserting a
claim against us that is governed by the internal affairs doctrine. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other
employees, which may discourage lawsuits against us and our directors, officers and other employees.
We are a “smaller reporting company” under federal securities laws and we cannot be certain whether the reduced reporting requirements applicable to such companies will make our
common stock less attractive to investors.
We are a “smaller reporting company” under federal securities laws. For as long as we continue to be a smaller reporting company, we may take advantage of exemptions from various reporting
requirements that are applicable to other public companies, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We may continue to be a smaller reporting company if either (i)
the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less
than $700 million. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market
for our common stock and our stock price may decline or be more volatile.
Worldwide economic and market conditions, an unstable economy, a decline in consumer-spending levels and other adverse developments, including inflation, could adversely affect our business,
results of operations and liquidity, and stock price.
As widely reported, in recent years, global credit and financial markets have experienced volatility and disruptions, including declines in consumer confidence, concerns about declines in economic growth and
unemployment, increases in the rate of inflation, increases in borrowing rates and changes in liquidity and credit availability, and uncertainty about geopolitical events and other challenges affecting the global economy, including most recently
in connection with actions undertaken by the U.S. Federal Reserve Board to address inflation, the Ukraine-Russia and Israel-Hamas conflicts, the continuing effects of the COVID-19 pandemic and supply chain disruptions. These factors could lead to
further disruption, instability, and volatility in global markets, continue to increase inflation, disrupt supply chains, adversely affect consumer confidence and disposable income levels and have other impacts on our business. Furthermore, our
stock price may decline due in part to the volatility of the stock market and any general economic downturn. These factors could have a negative impact on our potential sales and operating results.
Changes in spending or budgetary priorities may materially adversely affect our business.
Our business is dependent upon the FDA and the FDA’s ability to timely respond to our drug development activities. On January 20, 2025, President Trump signed an executive order creating an advisory commission, the
“Department of Government Efficiency” to reform federal government processes and reduce expenditures. Pressures on and uncertainty surrounding the U.S. federal government’s budget, and potential changes in budgetary priorities and spending
levels, could adversely affect staffing levels and the funding for the FDA. Disruptions in how the FDA operates due to these policies may materially adversely affect our business.
Changes to U.S. tariff and import/export regulations may have a negative effect on our suppliers and/or service providers and, in turn, could have a material
adverse impact on our financial condition.
The United States has recently enacted and proposed to enact significant new tariffs. Additionally, President Trump has directed various federal agencies to further evaluate
key aspects of U.S. trade policy and there has been ongoing discussion and commentary regarding potential significant changes to U.S. trade policies, treaties and tariffs. There continues to exist significant uncertainty about the future
relationship between the United States and other countries with respect to such trade policies, treaties and tariffs. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic
conditions and the stability of global financial markets, and may significantly impact the cost of Aquadex System, and other parts and supplies sourced internationally or impact the cost of service providers located outside of the United States,
which in turn would negatively impact us.
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Unresolved Staff Comments.
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Not applicable.
