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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Newellis Inc | NASDAQ:NUWE | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.778 | 18.34% | 5.02 | 4.60 | 6.96 | 6.61 | 4.06 | 4.06 | 673,972 | 05:00:08 |
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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|
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Title of each class
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Trading Symbol(s)
|
Name of each exchange on which registered
|
|
|
The Nasdaq Stock Market LLC
(
) |
Large accelerated filer ☐
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Accelerated filer ☐
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|
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Smaller reporting company
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Emerging growth company
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4
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Item 1.
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4
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Item 1A.
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21 | |
Item 1B.
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34 |
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Item 1C.
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34 | |
Item 2.
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35 | |
Item 3.
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35
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Item 4.
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35
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36 | ||
Item 5.
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36 | |
Item 6.
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36
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Item 7.
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36
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Item 7A.
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45
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Item 8.
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45
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Item 9.
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66
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Item 9A.
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66 | |
Item 9B.
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67
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Item 9C
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67
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67
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Item 10.
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67
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Item 11.
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71 | |
Item 12.
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77
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Item 13.
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78
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Item 14.
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79
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80 |
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Item 15.
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80 | |
Item 16
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92 |
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92 |
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.
|
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 |
From Premier Applied Sciences database.
|
16 |
Reimbursement estimates from MCRA.
|
17 |
Costanzo MR, et al. J Am Coll Cardiol. 2017;69(19):2428-2445.
|
18 |
McIlvennan CK, Eapen ZJ, Allen LA. Circulation. 2015 May
19;131(20):1796-803.
|
19
|
From Premier Applied Sciences database.
|
20 |
Ahmed A, et al. Eur Heart J. 2006 Jun;27(12):1431-9.
|
21 |
Kazory A & Costanzo MR. Adv Chronic Kidney Dis. 2018; 25(5):
434-442; 30.
|
22 |
Testani JM, Hanberg JS, Cheng S et al. Circ Heart Fail. 2016; 9(1):
e002370.
|
23
|
Testani JM, Hanberg JS, Cheng S et al. Circ Heart Fail.
2016; 9(1): e002370.
|
24 |
Costanzo MR, et al. J Am Coll Cardiol. 2017;69(19):2428-2445.
|
25 |
Kamath SA. Int J of Nephrol. 2011: 1-6.
|
26 |
Felker MG & Mentz RJ. J Am Coll Cardiol. 2012;59(24):2145-53.
|
27 |
Testani JM. Circ Heart Fail. 2016 Jan;9(1):e002370.
|
28 |
Hoorn EJ & Ellison DH. Am J Kidney Dis. 2017;69(1):136-142.
|
29 |
Gheorghiade M, et al. Eur Heart J Suppl. 2005; 7:B13– 19.
|
30 |
Orso D, et al. Eur Rev Med Pharmacol Sci. 2021 Apr;25(7):2971-2980.
|
31 |
Costanzo MR, et al. J Am Coll Cardiol. 2017;69(19):2428- 2445.
|
32 |
Thandra A, et al. Clin Invest. 2023; 365(2): 145-51.
|
33 |
Felker GM, et al. N Engl J Med. 2011; 364:797–805.
|
34 |
Costanzo MR, et al. J Am Coll Cardiol. 2007; 49(6):675-683.
|
•
|
Reduces hospitalization by 81%40 compared to diuretics;
|
• |
Rehospitalizations with Aquadex were 48% lower than the national average at 30 days;41
|
• |
Reduces length of hospital stay when initiated early, resulting in average savings of $3,975 (14%);42
|
• |
Stabilizes or improves cardiac hemodynamics;43, 44
|
• |
Safe, easy-to-use, and flexible in application;
|
• |
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;
|
• |
Can be performed via peripheral or central venous access;
|
• |
Predictably removes excess isotonic fluid (extracts water and sodium while sparing potassium and magnesium; decrease risk of electrolyte abnormalities);45, 46
|
35 |
Agostoni PG, et al. J Am Coll Cardiol. 1993; 21(2):424-431.
|
36 |
Kazory A, et al. Cardiorenal Med. 2023;13(1)1-8.
|
37 |
Costanza MR, et. al. Value Health. 2018; 21 (Suppl 1):S167.
|
38 |
SAFE Trial: Jaski BE, et al. J Card Fail. 2003; 9(3): 227-231.
|
39 |
RAPID Trial: Bart BA, et al. J Am Coll Cardiol. 2005; 46(11):
2043-2046.
|
40 |
Watson R et al. Am Heart J Plus: Cardiol: Res & Pract. 2022; 242:1-6.
|
41 |
Watson R et al. Am Heart J Plus: Cardiol: Res & Pract. 2022; 242:1-6.
|
42 |
Costanza MR, et. al. Value Health. 2018; 21 (Suppl 1):S167.
|
43 |
Boga M, et al. Perf. 2000; 15:143-150.
|
44 |
Kiziltepe U, et al. Ann Thorac Surg 2001;71:684–93.
|
45 |
Kazory A, et al. Cardiorenal Med. 2023;13(1)1-8.
|
46 |
Agostoni PG et al. J Am Coll Cardiol. 1993;21(2):424-31.
|
• |
No significant changes to kidney function;47
|
• |
The use of continuous hematocrit monitoring and SvO2 sensor provides guided-therapy ultrafiltration.48
|
• |
Following ultrafiltration, neurohormonal activation is reset toward a more physiological condition and diuretic efficacy is restored;49
|
• |
Provides highly automated operation with only one setting required to begin therapy;
|
• |
Utilizes a single-use, disposable auto-loading blood filter circuit that facilitates easy set-up; and
|
• |
Has a built-in console that guides the medical practitioner through the setup and operational process.
|
• |
A console, a piece of capital equipment containing electromechanical pumps, an LCD screen and stand;
|
• |
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
|
• |
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.
|
47 |
Kazory A, et al. Cardiorenal Med. 2023;13(1)1-8.
|
48 |
Starr MC, et al. Pediatric Nephrology. 2024; 39(2):597-601.
|
49 |
Costanzo MR, et al. J Am Coll Cardiol. 2005; 46(11): 2047-51.
|
50 |
Shah, K, et al. J Am Coll Cardiol. 2017 Nov, 70 (20) 2476–2486.
|
51 |
Bozhurt B, et al. J Card Fail. J Card Fail. 2023; 29(10): 1412-42.
|
52 |
Benjamin EJ, et al. Circ. 2017;135:00-00. (e378).
|
53 |
Fonarow GC, et al. Rev Cardiovasc Med. 2003; 4: s21-30.
|
54 |
Testani JM, et al. Circ Heart Fail. 2016; 9(1): e002370.
|
55 |
Arrigo M et al. Nat Rev Dis Primers. 2020; 6(16):1-15.
|
56 |
Fonarow et al. Rev Cardiovasc Med. 2003;4: Suppl 7:S21-30.
|
57 |
Costanzo MR, et al. J Am Coll Cardiol. 2017 May
16;69(19):2428-2445.
|
58 |
Sax D, et al. J Card Fail. 2022: 28(10): 1545-59.
|
59 |
Voigt J, et al. Clin Cardiol. 2014;37(5): 312–321.
|
60 |
Heidenreich PA, et al. Circ Heart Fail. 2013;6(3):606-619.
|
61 |
McIlvennan C et al. Circ. 2015; 131(20): 1796-1803.
|
62 |
See Appendix to Company Investor Presentation filed with the SEC on Form 8-K/A, dated January 9, 2024.
|
63 |
https://idataresearch.com/new-study-shows-approximately-340000-cabg-procedures-per-year-in-the-united-states/.
|
64 |
https://idataresearch.com/over-182000-heart-valve-replacements-per-year-in-the-united-states/.
|
65 |
Grand View Research. Market Research Report. 2015; 978-1-68038-603-5.
|
66 |
Kruger A et al. J Cardiovasc Dev Dis. 2023;10(6);263-78.
|
67 |
Bowdish ME, et al. Ann Thorac Surg. 2021;111(6):1770-1780.
|
68 |
Xu J, et al. Medicine. 2015.94(33):e1360.
|
69 |
Xu J, et al. Medicine. 2015;94(33):e1360.
|
70 |
Granado RC et al. BMC Nephro. 2016;17:109-18.
|
71 |
Crawford TC, et al. Ann Thorac Surg. 2017;103:32-40.
|
72 |
Iribane A, et al. Ann Thorac Surg. 2014;98:1274-80.
|
73 |
Iribarne A, et al. Ann Thorac Surg. 2014 Oct; 98(4): 1274-80.
|
74 |
Beckles DL et al. J Card Surg.2022; 37: 2951-57.
|
75 |
Engelman D, et al. Ann Thorac Surg. 2023;115:11-5A
|
76 |
See Appendix to Company Investor Presentation filed with the SEC on Form 8-K/A, dated January 9, 2024.
|
77 |
Jayaprasad, N. Heart Views. 2016; 17(3): 92–99.
|
78 |
https://www.cdc.gov/ncbddd/heartdefects/data.html.
|
79 |
Karamlou T, et al. J Thorac Cardiovasc Surg. 2013 Feb;
145(2):470-5.
|
80 |
https://www.organdonor.gov/about/donors/child-infant.html.
|
81 |
Sutherland SM, et al. Am J Kidney Dis. 2010; 55(2):315-25.
|
82 |
Gillespie RS, et al. Ped Nephro. 2004; 19(12):1394-99.
|
83 |
See Appendix to Company Investor Presentation filed with the SEC on Form 8-K/A, dated January 9, 2024.
|
•
|
Composite win ratio analysis of Cardiovascular (CV) mortality, HF events, and quality of life within 30 days:
|
○
|
CV mortality
|
○ |
HF event
|
○ |
Change in Kansas City Cardiomyopathy Questionnaire (KCCQ) score
|
• |
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
|
• |
Treatment crossovers
|
84 |
Watson R, et al. Am Heart J Plus: Cardiol Res & Pract 24. 2022;
1-6.
|
85 |
Watson R, et al. Am Heart J Plus: Cardiol Res & Pract 24. 2022;
1-6.
|
86 |
Kazory et al. Cardiorenal Med. 2023;13:1-8.
|
87 |
Kazory A, et al. Cardio Renal Med. 2023.12(1):1-8.
|
88 |
Costanzo MR, et al. Val in Health. 2018: 21(1): s167.
|
89 |
Costanzo MR, et al. JACC: Heart Failure. 2016;4(2):95-105.
|
90 |
Menon S, et al. Clin J Am Soc Nephrol. 2019;14(10):1432-1440.
|
91 |
Menon S, et al. Clin J Am Soc Nephrol. 2019;14(10):1432-1440.
|
92 |
Elliott MJ. Ann Thorac Surg. 1993;56:1518-22. fluid overload
|
93 |
Selewski DT, et al. Crit Care Med. 2012; 40(9): 2694-2699.
|
94 |
Riley AA. BMC Nephrology. 2018; 19:268-80.
|
95 |
https://www.ncbi.nlm.nih.gov/pubmed/23833312
|
96 |
Urban S, et al. Adv Clin Exp Med. 2021;30(7):737-746.
|
97 |
Grodin JL, et al. Eur J of Heart Fail. 2018;20(7):1148-1156.
|
98 |
Rao VS, et al. Circ Heart Fail. 2019;12 (6):e005552.
|
99 |
Urban S, et al. Adv Clin Exp Med. 2021;30(7):737-746.
|
100 |
Beckles D. et al. J of Card Surg. Fail. 2022; 37(10): 2951-2957.
|
101
|
Pinney S, et al. Poster from Heart Failure Society of America Meeting; October 2022; Washington, DC.
|
102 |
Hass DC, et al. Amer Heart J Plus.; Cardio Res & Pract 2022; 24:1-6 (100230)
|
103 |
Starr MC, et al. Pediatric Nephrology, September 2023
|
104 |
Crismale, J. et al. Clinical Transplantation, 2024; 38:e15221.
|
•
|
establishment registration and device listing upon the commencement of manufacturing;
|
•
|
the Quality System Regulation (“QSR”), which requires manufacturers, including third-party manufacturers, to follow the FDA design control regulations;
|
• |
labeling regulations, which prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling and promotional activities;
|
• |
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;
|
• |
corrections and removal reporting regulations, which require that manufacturers report to the FDA field corrections; and
|
• |
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.
|
•
|
warning letters or untitled letters;
|
• |
fines, injunctions and civil penalties;
|
• |
product recall or seizure;
|
• |
unanticipated expenditures;
|
• |
delays in clearing or refusal to clear products;
|
• |
withdrawal or suspension of FDA clearance;
|
• |
orders for physician notification or device repair, replacement or refund;
|
• |
operating restrictions, partial suspension or total shutdown of production or clinical trials; or
|
• |
criminal prosecution.
|
• |
apply for MDR certification with an MDR Notified Body by 26 May 2024 and before their MDD certificate expires, and
|
• |
have a contract in place with an MDR Notified Body before 26 September 2024.
|
•
|
halt use of our Aquadex System;
|
• |
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
|
• |
redesign our system.
|
•
|
our quarterly or annual operating results;
|
• |
changes in our earnings estimates;
|
• |
investment recommendations by securities analysts following our business or our industry;
|
• |
additions or departures of key personnel;
|
• |
changes in the business, earnings estimates or market perceptions of our competitors;
|
• |
our failure to achieve operating results consistent with securities analysts’ projections;
|
• |
future announcements concerning us, including our clinical and product development strategy, or our competitors;
|
• |
regulatory developments, disclosure regarding completed, ongoing or future clinical studies and enforcement actions bearing on advertising, marketing or sales;
|
• |
acquisition or loss of significant manufacturers, distributors or suppliers or an inability to obtain sufficient quantities of materials needed to manufacture our system;
|
• |
fluctuations of investor interest in the medical device sector;
|
• |
changes in industry, general market or economic conditions; and
|
• |
announcements of legislative or regulatory changes.
|
ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
|
ITEM 6. |
[Reserved].
|
ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
Year Ended
December 31, 2023
|
Year Ended
December 31, 2022
|
Increase (Decrease)
|
% Change
|
|||||||||||
$
|
8,864
|
$
|
8,543
|
$
|
321
|
3.8
|
%
|
(in thousands)
|
Year Ended
December 31, 2023
|
Year Ended
December 31, 2022
|
Increase (Decrease)
|
% Change
|
|||||||||||
Cost of goods sold
|
$
|
3,881
|
$
|
3,788
|
$
|
93
|
2.5
|
%
|
|||||||
Selling, general and administrative
|
$
|
17,191 |
$
|
17,584 |
$
|
(393 |
) | (2.2 |
%) | ||||||
Research and development
|
$
|
5,422 |
$ | 4,342 |
$ | 1,080 |
24.9 |
% |
(in thousands)
|
Year Ended
December 31, 2023
|
Year Ended
December 31, 2022
|
Increase (Decrease)
|
% Change
|
||||||||||||
Income tax expense
|
$
|
8
|
$
|
9
|
$
|
(1
|
)
|
(11.1
|
%)
|
(in thousands)
|
Payments Due by Period
|
|||||||||||||||||||
Less than 1 year
|
1-3 years
|
3-5 years
|
More than 5 years
|
Total
|
||||||||||||||||
Operating Lease
|
$
|
257
|
$
|
536
|
$
|
69
|
$
|
-
|
$
|
862
|
||||||||||
Financing Leases
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Total
|
$
|
257
|
$
|
536
|
$
|
69
|
$
|
-
|
$
|
862
|
• |
With the assistance of firm personnel having specialized skills and knowledge, we tested the models and methodologies used to calculate the fair value of the warrants at each measurement date including an
independent re-calculation.
|
• |
Performed audit procedures surrounding management’s assumptions utilized in the valuation model.
|
December 31,
2023
|
December 31,
2022
|
|||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Marketable securities
|
||||||||
Accounts receivable
|
|
|
||||||
Inventories, net
|
|
|
||||||
Other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Property, plant and equipment, net
|
|
|
||||||
Operating lease right-of-use asset
|
|
|
||||||
Other assets
|
|
|
||||||
TOTAL ASSETS
|
$
|
|
$
|
|
||||
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities
|
||||||||
Accounts payable and accrued liabilities
|
$
|
|
$
|
|
||||
Accrued compensation
|
|
|
||||||
Current portion of operating lease liability
|
|
|
||||||
Current portion of finance lease liability
|
|
|
||||||
Other current liabilities
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Common stock warrant liability |
||||||||
Operating lease liability
|
|
|
||||||
Total liabilities
|
|
|
||||||
Commitments and contingencies
|
||||||||
Mezzanine Equity
|
||||||||
Series J Convertible Preferred Stock as of December 31, 2023 and December 31, 2022, par value $
|
||||||||
Stockholders’ equity
|
||||||||
Series A junior participating preferred stock as of December 31, 2023
and December 31, 2022, par value $
|
|
|
||||||
Series F convertible preferred stock as of December 31, 2023 and
December 31, 2022, par value $
|
|
|
||||||
Series I convertible preferred stock as of December 31, 2023 and December 31, 2022, par value $
|
||||||||
Preferred stock as of December 31, 2023 and December 31, 2022, par value $
|
|
|
||||||
Common stock as of December 31, 2023 and December 31, 2022, par value $
|
|
|
||||||
Additional paid‑in capital
|
|
|
||||||
Accumulated other comprehensive income:
|
||||||||
Foreign currency translation adjustment
|
(
|
)
|
(
|
)
|
||||
Unrealized gain (loss) on marketable securities
|
||||||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||
Total stockholders’ equity
|
|
|
||||||
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
|
$
|
|
$
|
|
Year Ended
December 31,
|
||||||||
2023
|
2022
|
|||||||
Net sales
|
$
|
|
$
|
|
||||
Cost of goods sold
|
|
|
||||||
Gross profit
|
||||||||
Operating expenses: |
||||||||
Selling, general and administrative
|
|
|
||||||
Research and development
|
|
|
||||||
Total operating expenses
|
|
|
||||||
Loss from operations
|
(
|
)
|
(
|
)
|
||||
Other income (expense), net |
||||||||
Other income
|
|
|
||||||
Financing expense
|
( |
) | ( |
) | ||||
Change in fair value of warrant liability
|
||||||||
Loss before income taxes
|
(
|
)
|
(
|
)
|
||||
Income tax expense
|
(
|
)
|
(
|
)
|
||||
Net loss
|
(
|
)
|
(
|
)
|
||||
Deemed dividend attributable to Series J Convertible Preferred Stock
|
( |
) | ||||||
Dividend on Series J Convertible Preferred Stock |
( |
) | ||||||
Net loss attributable to common stockholders |
$ | ( |
) | $ | ( |
) | ||
Basic and diluted loss per share
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Weighted average shares outstanding – basic and diluted
|
|
|
||||||
Other comprehensive loss:
|
||||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Unrealized (loss) gain on marketable securities
|
( |
) | ||||||
Unrealized foreign currency translation adjustment
|
(
|
)
|
(
|
)
|
||||
Total comprehensive loss
|
$
|
(
|
)
|
$
|
(
|
)
|
Outstanding
Shares of
Common
Stock
|
Common
Stock
|
Additional
Paid in
Capital
|
Accumulated
Other
Comprehensive
Income
|
Accumulated
Deficit
|
Stockholders’
Equity
|
|||||||||||||||||||
Balance December 31, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||
Net loss
|
—
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Unrealized foreign currency translation adjustment | — | ( |
) | ( |
) | |||||||||||||||||||
Unrealized gain on marketable securities |
— | |||||||||||||||||||||||
Stock-based compensation
|
|
|
|
|
|
|
||||||||||||||||||
Issuance of common stock, net
|
|
|
|
|
|
|
||||||||||||||||||
Issuance of common stock from preferred series I stock conversions
|
||||||||||||||||||||||||
Balance December 31, 2022
|
|
|
|
|
(
|
)
|
|
|||||||||||||||||
Net loss
|
—
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Unrealized foreign currency translation adjustment
|
—
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
Unrealized gain on marketable securities
|
— | ( |
) | ( |
) | |||||||||||||||||||
Stock-based compensation
|
|
|
|
|
|
|
||||||||||||||||||
Issuance costs related to 2022 common stock offering
|
— | ( |
) | ( |
) | |||||||||||||||||||
Issuance of common stock from preferred series I stock conversions
|
||||||||||||||||||||||||
Issuance of common stock from exercise of warrants
|
||||||||||||||||||||||||
Reclassification of warrants to equity
|
— | |||||||||||||||||||||||
Issuance of common stock from ATM offering, net
|
||||||||||||||||||||||||
Issuance of common stock from conversion of Series J Convertible Preferred Stock
|
||||||||||||||||||||||||
Series J Convertible Preferred Stock deemed dividend
|
— | ( |
) | ( |
) | |||||||||||||||||||
Series J Convertible Preferred Stock PIK dividend
|
— | ( |
) | ( |
) | |||||||||||||||||||
Balance December 31, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
For the years ended December 31,
|
||||||||
2023
|
2022
|
|||||||
Operating Activities
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Adjustments to reconcile net loss to cash flows from operating activities:
|
||||||||
Depreciation and amortization
|
|
|
||||||
Stock-based compensation expense
|
|
|
||||||
Change in fair value of warrant liability
|
( |
) | ( |
) | ||||
Financing expense
|
||||||||
Net realized and unrealized gains on marketable securities |
( |
) | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(
|
)
|
(
|
)
|
||||
Inventory
|
|
|
||||||
Other current assets
|
(
|
)
|
(
|
)
|
||||
Other assets and liabilities
|
(
|
)
|
(
|
)
|
||||
Accounts payable and accrued expenses
|
(
|
)
|
|
|||||
Net cash used in operations
|
(
|
)
|
(
|
)
|
||||
Investing activities:
|
||||||||
Additions to intangible assets
|
( |
) | ||||||
Proceeds from sales of marketable securities
|
||||||||
Purchase of property and equipment
|
( |
) |
(
|
)
|
||||
Net cash provided by investing activities |
|
|
||||||
Financing activities:
|
||||||||
Proceeds from public stock offerings, net
|
|
|
||||||
Proceeds from Series J Preferred Stock and Warrants
|
|
|
||||||
Proceeds from the exercise of warrants
|
||||||||
Payments on finance lease liability
|
(
|
)
|
(
|
)
|
||||
Net cash provided by financing activities
|
|
|
||||||
Effect of exchange rate changes on cash
|
(
|
)
|
(
|
)
|
||||
Net increase in cash and cash equivalents
|
(
|
)
|
|
|||||
Cash and cash equivalents—beginning of year
|
|
|
||||||
Cash and cash equivalents—end of year
|
$
|
|
$
|
|
||||
Supplemental schedule of non-cash activities
|
||||||||
Inventory transferred to property, plant and equipment
|
$
|
|
$
|
|
||||
Issuance of Common Stock for exercise of Series I Warrants |
$ | $ | ||||||
Issuance of Series J Preferred Stock for exercise of Warrants | $ | $ | ||||||
Deemed dividend on Series J Preferred Stock |
$ | $ | ||||||
Series J Preferred Stock issued for payment in kind dividend
|
$ | $ | ||||||
Supplemental cash flow information
|
||||||||
Cash paid for income taxes
|
$
|
|
$
|
|
(in thousands)
|
2023
|
2022
|
||||||
Finished Goods
|
$
|
|
$
|
|
||||
Work in Process
|
|
|
||||||
Raw Materials
|
|
|
||||||
Inventory Reserve | ( |
) | ( |
) | ||||
Total
|
$
|
|
$
|
|
Production Equipment
|
|
Office Furniture and Fixtures
|
|
Computer Software and Equipment
|
|
Loaners and demo equipment
|
|
Leasehold improvements
|
|
December 31,
|
||||||||
2023
|
2022
|
|||||||
Stock options
|
|
|
||||||
Warrants to purchase common stock
|
|
|
||||||
Series F convertible preferred stock
|
|
|
||||||
Series I convertible preferred stock |
||||||||
Series J convertible preferred stock |
||||||||
Total
|
|
|
(in thousands, except per share amounts)
|
2023
|
2022
|
||||||
Net loss to common stockholders |
$
|
(
|
)
|
$
|
(
|
)
|
||
Deemed dividend attributable to Series J Convertible Preferred Stock
|
( |
) |
|
|||||
Dividend on Series J Convertible Preferred Stock |
( |
) | ||||||
Net loss after deemed dividend
|
( |
) |
(
|
)
|
||||
Weighted average shares outstanding
|
|
|
||||||
Basic and diluted loss per share
|
$
|
(
|
)
|
$
|
(
|
)
|
(in thousands)
|
December 31, 2023
|
December 31, 2022
|
||||||
Production Equipment
|
$
|
|
$
|
|
||||
Loaners and Demo Equipment
|
|
|
||||||
Computer Software and Equipment
|
|
|
||||||
Office Furniture & Fixtures
|
|
|
||||||
Leasehold Improvements
|
|
|
||||||
Total
|
|
|
||||||
Accumulated Depreciation
|
(
|
)
|
(
|
)
|
||||
$
|
|
$
|
|
(in thousands)
|
2023
|
2022
|
||||||
Selling, general and administrative
|
$
|
|
$
|
|
||||
Research and development
|
|
|
||||||
Total
|
$
|
|
$
|
|
2023
|
2022
|
|||||||||||||||
Options
Outstanding
|
Weighted
Average
Exercise
Price
|
Options
Outstanding
|
Weighted
Average
Exercise
Price
|
|||||||||||||
Beginning Balance
|
|
$
|
|
|
$
|
|
||||||||||
Granted
|
|
|
|
|
||||||||||||
Exercised
|
|
|
|
|
||||||||||||
Forfeited/expired
|
(
|
)
|
|
(
|
)
|
|
||||||||||
Outstanding at December 31
|
|
$
|
|
|
$
|
|
||||||||||
Vested at December 31
|
|
$
|
|
|
$
|
|
2023
|
2022
|
|||||||
Expected dividend yield
|
|
%
|
|
%
|
||||
Risk-free interest rate
|
|
%
|
|
%
|
||||
Expected volatility
|
|
%
|
|
%
|
||||
Expected life (in years)
|
|
|
● |
Level 1 - Financial instruments with unadjusted quoted prices listed on active market exchanges.
|
● |
Level 2 - Financial instruments lacking unadjusted, quoted prices from active market exchanges, including over-the-counter traded financial instruments. The prices for the financial
instruments are determined using prices for recently traded financial instruments with similar underlying terms as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly
quoted intervals.
|
● |
Level 3 - Financial instruments that are not actively traded on a market exchange. This category includes situations where there is little, if any, market activity for the financial
instrument. The prices are determined using significant unobservable inputs or valuation techniques.
|
2023
|
2022
|
|||||||||||||||
(in thousands)
|
Fair Value
|
Level 1
|
Fair Value
|
Level 1
|
||||||||||||
Marketable securities
|
|
|
|
|
$
|
|
$
|
|
(in thousands)
|
2023 | |||
Balance at December 31, 2021
|
$ | |||
October 18, 2022, issuance of Series I warrants
|
|
|||
Change in fair value
|
(
|
)
|
||
Balance at December 31,
2022 |
||||
Change in fair value |
||||
Issuance of Common Stock
for exercise of Series I warrants |
( |
) | ||
October 17, 2023, issuance of Series J warrants |
||||
Exercise of Series J
warrants |
( |
) | ||
Change in fair value | ( |
) | ||
Balance at December 31, 2023
|
$
|
|
2023
|
2022
|
|||||||
Risk-free interest rates, adjusted for continuous compounding
|
|
%
|
|
%
|
||||
Term (years)
|
|
|
||||||
Expected volatility
|
|
%
|
|
%
|
||||
Dates and probability of future equity raises
|
|
|
(in thousands)
|
2023
|
2022
|
||||||
Domestic
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Foreign
|
|
|
||||||
Loss before income taxes
|
$
|
(
|
)
|
$
|
(
|
)
|
(in thousands)
|
2023
|
2022
|
||||||
Current:
|
||||||||
United States and state
|
$
|
|
$
|
|
||||
Foreign, net
|
(
|
)
|
(
|
)
|
||||
Deferred:
|
||||||||
United States and state
|
|
|
||||||
Foreign
|
|
|
||||||
Total income tax expense
|
$
|
(
|
)
|
$
|
(
|
)
|
(in thousands)
|
2023
|
2022
|
||||||
Statutory federal income tax benefit
|
$
|
|
$
|
|
||||
State tax benefit, net of federal taxes
|
|
|
||||||
Foreign tax
|
(
|
)
|
(
|
)
|
||||
Nondeductible/nontaxable items
|
(
|
)
|
|
|||||
Other
|
(
|
)
|
(
|
)
|
||||
Valuation allowance (increase) decrease
|
(
|
)
|
(
|
)
|
||||
Total income tax expense
|
$
|
(
|
)
|
$
|
(
|
)
|
(in thousands)
|
2023
|
2022
|
||||||
Deferred tax assets:
|
||||||||
Noncurrent:
|
||||||||
Accrued leave
|
$
|
|
$
|
|
||||
Stock based compensation
|
|
|
||||||
Net operating loss carryforward
|
|
|
||||||
Other
|
|
|
||||||
Intangibles
|
|
|
||||||
R&D credit carryforward
|
|
|
||||||
Total deferred tax assets
|
|
|
||||||
Less: valuation allowance
|
(
|
)
|
(
|
)
|
||||
Total
|
$
|
|
$
|
|
(in thousands)
|
2023
|
2022
|
||||||
Operating lease cost
|
$
|
|
$
|
|
||||
Variable lease cost
|
|
|
||||||
Total
|
$
|
|
$
|
|
(in thousands) |
2023
|
|||
2024
|
$
|
|
||
2025
|
|
|||
2026 | ||||
2027 | ||||
Total lease payments
|
|
|||
Less: Interest
|
(
|
)
|
||
Present value of lease liability
|
$
|
|
Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
|
Name
|
|
Age
|
|
Position(s)
|
|
Director Class –
Term Ending
|
Nestor Jaramillo, Jr.
|
|
66
|
|
President & Chief Executive Officer; Director
|
|
Class I – 2026
|
Robert B. Scott
|
|
44
|
|
Chief Financial Officer
|
|
N/A
|
Neil P. Ayotte
|
|
61
|
|
Senior Vice President, General Counsel and Chief Compliance Officer
|
|
N/A
|
John L. Erb
|
|
75
|
|
Chairman of the Board; Director
|
|
Class III – 2025
|
Maria Rosa Costanzo
|
|
69
|
|
Director
|
|
Class II – 2024
|
Archelle Georgiou, M.D.
|
|
61
|
|
Director
|
|
Class II – 2024
|
Michael McCormick
|
|
62
|
|
Director
|
|
Class I – 2026
|
David McDonald
|
|
63
|
|
Director
|
|
Class I – 2026
|
Gregory D. Waller
|
|
74
|
|
Director
|
|
Class III – 2025
|
Name
|
Fees Earned or
Paid in Cash ($)
|
Option Awards
($)(1)(3)
|
Total
($)
|
|||||||||
Steve Brandt(4)
|
15,167
|
0
|
15,167
|
|||||||||
Maria Rosa Costanzo, M.D.
|
53,792
|
0
|
(2)
|
53,792
|
||||||||
John Erb
|
60,000
|
5,859
|
65,859
|
|||||||||
Archelle Georgiou, M.D.(5)
|
0
|
0
|
0
|
|||||||||
Michael McCormick(6)
|
25,664
|
0
|
25,664
|
|||||||||
David McDonald(7)
|
0
|
0
|
0
|
|||||||||
Jon W. Salveson(8)
|
53,750
|
5,859
|
59,609
|
|||||||||
Gregory D. Waller
|
63,000
|
5,859
|
68,859
|
|||||||||
Warren S. Watson(9)
|
49,326
|
5,859
|
55,185
|
|||||||||
Total
|
320,699
|
23,436
|
344,135
|
(1) |
This amount reflects stock options granted under the 2013 Directors’ Plan on May 19, 2023. The amounts reported represent the grant date fair value of the stock options. Valuation assumptions used in
determining the grant date fair value are included in Note 5 to the consolidated financial statements for the year ended December 31, 2023, which are included in this Annual Report on Form 10-K. The grant date fair value per share of the
stock options granted on May 19, 2023 to all directors was approximately $2.73 per share.
|
(2) |
Dr. Costanzo elected not to receive any equity compensation for her role as a director.
|
(3) |
As of December 31, 2023, each non-employee director had the following number of shares underlying outstanding options (both vested and unvested): Dr. Costanzo
0; Mr. Erb 2,391, Dr. Georgiou 0; Mr. McCormick 0, Mr. McDonald 0, and Mr. Waller 2,408.
|
(4) |
Mr. Brandt resigned from the Board effective January 16, 2023.
|
(5) |
Dr. Georgiou was appointed to the Board effective November 1, 2023.
|
(6) |
Mr. McCormick was appointed to the Board effective June 1, 2023.
|
(7) |
Mr. McDonald was appointed to the Board effective November 1, 2023.
|
(8) |
Mr. Salveson resigned from the Board effective October 31, 2023.
|
(9) |
Mr. Watson resigned from the Board effective June 2, 2023.
|
Name and Principal Position
|
Year
|
|
Salary
($)
|
Option
Awards
($)(1)(2)
|
Non-equity
Incentive Plan
Compensation
($)
|
All Other
Compensation
($)(3)
|
Total
($)
|
|||||||||||
Nestor Jaramillo, Jr.
President & Chief Executive Officer
|
2023
|
|
420,582
|
168,891
|
—
|
17,130
|
606,603
|
|||||||||||
|
2022
|
|
412,337
|
86,238
|
199,117
|
17,022
|
714,714
|
|||||||||||
Robert B. Scott
Chief Financial Officer(4)
|
2023
|
|
243,157
|
38,811
|
—
|
9,442
|
291,410
|
|||||||||||
|
2022
|
|
—
|
—
|
—
|
—
|
—
|
|||||||||||
Lynn L. Blake
Former Chief Financial Officer(5)
|
2023
|
|
248,681
|
99,982
|
—
|
11,040
|
359,703
|
|||||||||||
|
2022
|
|
65,417
|
—
|
26,744
|
642
|
92,803
|
|||||||||||
Neil P. Ayotte SVP,
General Counsel & Chief Compliance Officer
|
2023
|
|
326,457
|
63,945
|
—
|
16,083
|
406,485
|
|||||||||||
|
2022
|
|
289,848
|
22,434
|
92,165
|
9,104
|
413,551
|
(1) |
Reflects a stock option granted under the Company’s New Hire Equity Incentive Plan or 2021 Inducement Plan, as applicable.
|
(2) |
The fair value of each stock option is estimated at the grant date using the Black-Scholes option pricing model. The fair value of stock options under the Black-Scholes option pricing model requires management
to make assumptions regarding projected employee stock option exercise behaviors, risk-free interest rates, volatility of the Company’s stock price and expected dividends, if any.
|
(3) |
For each named executive officer, amounts include employer matching contributions made on the officer’s behalf to the Company’s 401(k) Plan, contributions to the officer’s health savings account and Company
payments for life insurance premiums.
|
(4) |
Mr. Scott was promoted to Chief Financial Officer of the Company effective September 2, 2023.
|
(5) |
Ms. Blake resigned as Chief Financial Officer effective September 1, 2023.
|
|
2022
|
2023
|
|||||||||||||||||
|
Target
|
Earned
|
Target
|
Earned
|
|||||||||||||||
Name
|
% of Base Salary
|
|
$ |
|
$ |
% of Base Salary
|
|
$ |
|
$ |
|||||||||
Nestor Jaramillo, Jr.
|
55
|
226,785
|
199,117
|
65
|
273,378
|
0
|
|||||||||||||
Lynn Blake
|
45
|
29,438
|
26,744
|
45
|
0
|
0
|
|||||||||||||
Robert B. Scott
|
25
|
60,789
|
44,828
|
40
|
74,743
|
0
|
|||||||||||||
Neil Ayotte
|
35
|
101,447
|
92,165
|
45
|
146,906
|
0
|
|
Option Awards(1)
|
||||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#) Exercisable
|
Number of Securities
Underlying Unexercised
Options
(#) Unexercisable
|
Option
Exercise Price
($)
|
Option
Expiration
Date
|
|||||||||
Nestor Jaramillo, Jr.
|
28
|
—
|
10,260.00
|
|
5/22/2029
|
||||||||
|
92
|
35
|
930.00
|
|
1/22/2031
|
||||||||
|
1,019
|
560
|
363.00
|
|
5/19/2031
|
||||||||
|
442
|
569
|
94.00
|
|
3/3/2032
|
||||||||
|
—
|
22,820
|
7.72
|
|
3/3/2033
|
||||||||
Lynn Blake
|
—
|
—
|
—
|
|
—
|
||||||||
Robert B. Scott
|
9
|
3
|
930.00
|
|
1/22/2031
|
||||||||
|
38
|
21
|
359.00
|
|
5/18/2031
|
||||||||
|
22
|
30
|
94.00
|
|
3/3/2032
|
||||||||
|
—
|
1,133
|
7.72
|
|
3/3/2033
|
||||||||
|
—
|
18,643
|
1.79
|
|
9/2/2033
|
||||||||
Neil P. Ayotte
|
260
|
156
|
398.00
|
|
6/22/2031
|
||||||||
|
115
|
148
|
94.00
|
|
3/3/2032
|
||||||||
|
—
|
8,640
|
7.72
|
|
3/3/2033
|
(1) |
The underlying shares vest as follows: 25% of the shares vest on the one-year anniversary of the grant date; the remaining shares vest in 36 equal consecutive monthly installments thereafter, so that all of the
shares will be vested on the four-year anniversary of the grant date.
|
• |
Stock Options. Generally, if a participant’s continuous service terminates:
|
○
|
other than for cause or upon the participant’s death or disability, the participant may exercise his or her option (to the extent the option was vested as of the date of termination) within such period of
time ending on the earlier of (i) the date three months following the termination or (ii) the expiration of the term of the option. If the option is not exercised within such period, it will terminate.
|
○ |
upon the participant’s disability, the participant may exercise his or her option (to the extent the option was vested as of the date of termination) within such period of time ending on the earlier of (i) the
date 12 months following the termination or (ii) the expiration of the term of the option. If the option is not exercised within such period, it will terminate as a result of the participant’s death, or if the participant dies within the
period during which the option may be exercised after the termination of the participant’s continuous service for a reason other than death, the option may be exercised (to the extent the option was vested as of the date of death) by the
participant’s estate within the period ending on the earlier of (i) the date 18 months following the date of death or (ii) the expiration of the term of the option. If the option is not exercised within such period, it will terminate.
|
○ |
for cause, the option will terminate upon the date of termination, and the participant will be prohibited from exercising his or her option from and after such time.
|
•
|
An annual base salary initially set at $385,000, to be reviewed at least annually (currently $420,582 for 2023);
|
• |
An opportunity for Mr. Jaramillo to receive an annual performance bonus in an amount of up to fifty-five percent (55%) (currently sixty-five percent (65%) as of 2023) of Mr. Jaramillo’s annual base salary for
such fiscal year based upon achievement of certain performance goals to be established by the Board;
|
• |
An opportunity to receive equity awards as determined by the Compensation Committee of the Board based on Mr. Jaramillo’s performance;
|
• |
Prior to January 31, 2023, an opportunity to receive a stock option to purchase a number of shares of the Company’s common stock equal to 2.4% of the outstanding shares of common stock and preferred stock
calculated on an as-converted basis to shares of the Company’s common stock basis, following approval of the Board. In connection therewith, in May 2021, Mr. Jaramillo was awarded a stock option to acquire 1,579 shares of the Company’s common
stock at an exercise price of $363 per share;
|
• |
Participation in welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee
life, group life, accidental death and travel accident insurance plans and programs) to the extent available generally or to other senior executive officers of the Company;
|
• |
Prompt reimbursement for all reasonable expenses incurred by Mr. Jaramillo in accordance with the plans, practices, policies and programs of the Company; and
|
• |
Twenty-two (22) days paid time off (PTO), to accrue and to be used in accordance with the Company’s policies and practices in effect from time to time, as well as all recognized Company holidays.
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|
Name of Beneficial Owner
|
Number
of Shares
|
Right to
Acquire(1)
|
Total
|
Aggregate
Percent of
Class(2)
|
||||||||||||
John L. Erb
|
4
|
6,219
|
(3)
|
6,223
|
*
|
|||||||||||
Michael McCormick
|
—
|
17,364
|
17,364
|
*
|
||||||||||||
Maria Rosa Costanzo, M.D.
|
—
|
—
|
—
|
—
|
||||||||||||
Archelle Georgiou, M.D.
|
—
|
4,736
|
4,736
|
*
|
||||||||||||
Gregory D. Waller
|
—
|
2,230
|
(4)
|
2,230
|
*
|
|||||||||||
David McDonald
|
—
|
4,736
|
4,736
|
|||||||||||||
Robert B. Scott
|
—
|
127
|
(5)
|
127
|
*
|
|||||||||||
Nestor Jaramillo, Jr.
|
4,098
|
2,759
|
(6)
|
6,857
|
*
|
|||||||||||
Neil P. Ayotte
|
—
|
791
|
(7)
|
791
|
*
|
|||||||||||
Lynn Blake
|
100
|
—
|
100
|
*
|
||||||||||||
All current directors and executive officers as a group (9 persons)
|
4,202 |
38,962 |
(8) | 43,164 |
* |
% |
*
|
Less than one percent.
|
(1) |
Except as otherwise described below, amounts reflect the number of shares that such holder could acquire through (i) the exercise of outstanding stock
options, (ii) the vesting/settlement of outstanding RSUs, (iii) the exercise of outstanding warrants to purchase common stock, and (iv) the conversion of outstanding Series F Preferred Stock, in each case within 60 days after February 29,
2024.
|
(2) |
Based on 6,801,443 shares outstanding as of March 1, 2024.
|
(3) |
Consists of (i) 2,213 shares issuable upon the exercise of outstanding stock options, (ii) 6 shares issuable upon the exercise of outstanding warrants to
purchase common stock, and (iii) 4,000 shares issuable upon conversion of outstanding shares of Series F Convertible Preferred Stock (assuming all 127 shares of Series F Convertible Preferred Stock held by Mr. Erb are converted at once and
rounded up to the nearest whole share).
|
(4) |
Consists of 2,230 shares issuable upon the exercise of outstanding stock options.
|
(5) |
Consists of 127 shares issuable upon the exercise of outstanding stock options.
|
(6) |
Consists of 2,759 shares issuable upon the exercise of outstanding stock options.
|
(7) |
Consists of 791 shares issuable upon the exercise of outstanding stock options.
|
(8) |
Consists of (i) 0 shares issuable upon the vesting/settlement of outstanding RSUs, (ii) 34,956 shares issuable upon the exercise of outstanding stock options, (iii) 6 shares issuable upon the exercise of
outstanding warrants to purchase common stock, and (iv) 4,000 shares issuable upon conversion of outstanding shares of Series F Convertible Preferred Stock (assuming all shares Series F Convertible Preferred Stock are converted at once and
rounded up to the nearest whole shares).
|
Plan category
|
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a)
|
Weighted-
average exercise
price of
outstanding
options, warrants
and rights
(b)
|
Number of securities
remaining available for future
issuance under equity
compensation plans (excluding
securities reflected in column
(a))
(c)
|
|||||||||||
Equity compensation plans approved by security holders
|
104,684
|
(1)
|
$
|
29.52
|
1,025
|
(2)
|
||||||||
Equity compensation plans not approved by security holders
|
6,232
|
(3)
|
$
|
142.94
|
40,846
|
(4)
|
||||||||
Total
|
110,916
|
$
|
35.90
|
41,871
|
(1)
|
Consists of shares of our common stock that may be issued pursuant to outstanding stock options under the Second Amended and Restated 2011 Equity Incentive Plan (the “2011 Plan”), the 2017 Equity Incentive
Plan (the “2017 Plan”) and the 2013 Directors’ Plan. The 2013 Non-Employee Directors’ Equity Incentive Plan (the “2013 Directors’ Plan”) expired in May 2023.
|
(2) |
Consists of 1,025 shares of our common stock remaining available for future issuance under the 2017 Plan and 0 shares of our common stock remaining available for future issuance under the 2013 Directors’ Plan.
No additional awards may be issued under the 2002 Stock Plan or the 2011 Equity Incentive Plan. The 2017 Equity Incentive Plan contains an “evergreen” provision, pursuant to which the number of shares available for issuance under the plan
automatically adjusts by a percentage of the number of fully diluted shares outstanding. Specifically, pursuant to the 2017 Equity Incentive Plan, the share reserve under the plan will automatically increase on January 1st of each year, for a
period of not more than ten years, commencing on January 1, 2018 and ending on (and including) January 1, 2027, to an amount equal to 17% of the fully diluted shares outstanding on December 31st of the preceding calendar year; provided that
the Board may act prior to January 1st of a given year to provide that there will be no January 1st increase in the share reserve for such year or that the increase in the share reserve for such year will be a lesser number of shares than
would otherwise occur. Prior to its expiration in May 2023 and pursuant to the terms of the 2013 Directors’ Plan, the share reserve under the plan automatically increased on January 1st of each year, for a period of not more than ten years,
commencing on January 1, 2014 and ending on (and including) January 1, 2023, by an amount equal to 2% of the fully diluted shares outstanding on December 31st of the preceding calendar year; provided that the Board may act prior to January
1st of a given year to provide that there will be no January 1st increase in the share reserve for such year or that the increase in the share reserve for such year will be a lesser number of shares than would otherwise occur.
|
(3) |
Consists of shares of our common stock that may be issued pursuant to outstanding stock options under the New Hire Plan. The Board approved the New Hire Plan in July 2013. The New Hire Plan was superseded by
our 2021 Inducement Plan in May 2021. The New Hire Plan provided for the grant of the following awards: options not intended to qualify as “incentive stock options” under Section 422 of the Code, restricted stock awards, RSU awards, stock
appreciation rights and other stock awards. Eligible award recipients are individuals entering into employment with the Company who were not previously employees or directors of the Company or following a bona
fide period of non-employment. All awards constituted inducements material to such individuals entering into employment with the Company within the meaning of the Nasdaq listing rules, and all awards must be granted either by the
Compensation Committee or a majority of the Company’s independent directors. Promptly following the grant of an award under the New Hire Plan, the Company (i) issued a press release disclosing the material terms of the award and (ii) notified
Nasdaq that it granted such award in reliance on the “inducement grant exemption” from Nasdaq’s stockholder approval requirements for equity compensation plans. As of May 2021, we are no longer issuing awards under the New Hire Plan.
|
(4) |
Consists of shares of our common stock that may be issued pursuant to outstanding stock options under the Company’s 2021 Inducement Plan. The Board approved the 2021 Inducement Plan in May 2021. The 2021
Inducement Plan provides for the grant of the following awards: options not intended to qualify as “incentive stock options” under Section 422 of the Code, restricted stock awards, RSU awards, stock appreciation rights, performance stock
awards, performance cash awards, and other stock awards. Eligible award recipients are individuals entering into employment with the Company who were not previously employees or directors of the Company or following a bona fide period of non-employment. All awards must constitute inducements material to such individuals entering into employment with the Company within the meaning of the Nasdaq listing rules, and all
awards must be granted either by the Compensation Committee or a majority of the Company’s independent directors. Promptly following the grant of an award under the 2021 Inducement Plan, the Company must (i) issue a press release disclosing
the material terms of the award and (ii) notify Nasdaq that it granted such award in reliance on the “inducement grant exemption” from Nasdaq’s stockholder approval requirements for equity compensation plans.
|
2022
($)
|
2023
($)
|
|||||||
Audit Fees(1)
|
333,755
|
378,500 |
||||||
Audit-Related Fees(2)
|
122,500
|
279,025 |
||||||
Tax Fees(3)(4)
|
33,400
|
32,800 |
||||||
All Other Fees
|
—
|
—
|
||||||
Total
|
489,655
|
690,325 |
(1)
|
Audit fees in 2023 and 2022 consisted of fees relating to the audit of the Company’s annual consolidated financial statements included in our Annual Report on Form 10-K and the review of interim condensed
consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q.
|
(2) |
Audit-Related fees consisted of reviews of the Company’s registration statements, consents and the completion of comfort letter procedures associated with the Company’s securities offerings.
|
(3) |
Tax fees in 2023 and 2022 consisted of fees for tax compliance, and tax planning services. Such fees primarily related to federal and state tax compliance and planning.
|
(a)
|
Financial Statements: The financial statements filed as part of this report are listed in Part II, Item 8.
|
(b)
|
Financial Statement Schedules: The schedules are either not applicable or the required information is presented in the consolidated financial statements or notes thereto.
|
(c)
|
Exhibits: The following exhibits are incorporated by reference or filed as part of this Annual Report on Form 10-K:
|
Incorporated By Reference
|
||||||
Exhibit
Number
|
Exhibit Description
|
Form
|
File
Number
|
Date of
First
Filing
|
Exhibit
Number
|
Filed
Herewith
|
Fourth Amended and Restated Certificate of Incorporation
|
10
|
001-35312
|
February 1, 2012
|
3.1
|
||
Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation
|
8-K
|
001-35312
|
January 13, 2017
|
3.1
|
||
Certificate of Amendment to Fourth Amended and Restated Certificate of Incorporation
|
8-K
|
001-35312
|
May 23, 2017
|
3.1
|
||
Certificate of Amendment to Fourth Amended and Restated Certificate of Incorporation
|
8-K
|
001-35312
|
October 12, 2017
|
3.1
|
||
Certificate of Amendment to Fourth Amended and Restated Certificate of Incorporation
|
8-K
|
001-35312
|
January 2, 2019
|
3.1
|
||
Certificate of Amendment to Fourth Amended and Restated Certificate of Incorporation
|
8-K/A
|
001-35312
|
October 16, 2020
|
3.1
|
Certificate of Amendment to Fourth Amended and Restated Certificate of Incorporation
|
8-K
|
001.-35312
|
April 27, 2021
|
3.1
|
||
Certificate of Amendment to Fourth Amended and Restated Certificate of Incorporation
|
8-K
|
001-35312
|
December 9, 2022
|
3.1
|
||
Third Amended and Restated Bylaws
|
8-K
|
001-35312
|
April 27, 2021
|
3.2
|
||
Amendment to Third Amended and Restated Bylaws
|
8-K
|
001-35312
|
October 5, 2022
|
3.1
|
||
Form of Certificate of Designation of Series A Junior Participating Preferred Stock
|
8-K
|
001-35312
|
June 14, 2013
|
3.1
|
||
Form of Certificate of Designation of Preferences, Rights and Limitations of Series F Convertible Preferred Stock
|
S-1/A
|
001-35312
|
November 17, 2017
|
3.7
|
||
Certificate of Designation of Preferences, Rights and Limitations of Series I Convertible Preferred Stock
|
8-K
|
001-35312
|
October 18, 2022
|
3.1
|
||
Certificate of Designation of Preferences, Rights and Limitations of Series J Convertible Preferred Stock
|
8-K
|
001-35312
|
October 17, 2023
|
3.1
|
||
Form of Warrant to purchase shares of common stock
|
S-1/A
|
333-221010
|
November 17, 2017
|
4.9
|
||
Form of Series 1 and Series 2 Warrant to Purchase Shares of Common Stock
|
S-1/A
|
333-209102
|
February 25, 2019
|
4.10
|
||
Common Stock Purchase Warrant, dated May 30, 2019, between the Company and Redington, Inc.
|
10-Q
|
001-35312
|
August 8, 2019
|
4.1
|
Form of common stock Purchase Warrant issued pursuant to the Securities Purchase Agreement, dated October 23, 2019, among the Company and the purchasers signatory thereto
|
8-K | 001-35312 | October 23,2019 |
4.1 | ||
Form of common stock Purchase Warrant issued pursuant to the Securities Purchase Agreement, dated November 4, 2019, among the Company and the purchasers signatory thereto
|
8-K
|
001-35312
|
November 4, 2019
|
4.1
|
||
Form of common stock Pre-Funded Purchase Warrant issued pursuant to the Securities Purchase Agreement, dated November 4, 2019, among the Company and the purchasers signatory thereto
|
8-K
|
001-35312
|
November 4, 2019
|
4.2
|
||
Form of Common Stock Purchase Warrant
|
S-1/A
|
333-235385
|
January 23, 2020
|
4.15
|
||
Form of common stock Purchase Warrant issued pursuant to the Securities Purchase Agreement, dated March 19, 2020, among the Company and the purchasers identified on the signature pages thereto
|
8-K
|
001-35312
|
March 20, 2020
|
4.1
|
||
Form of common stock Purchase Warrant issued pursuant to the Securities Purchase Agreement, dated March 30, 2020, among the Company and the purchasers identified on the signature pages thereto
|
8-K
|
001-35312
|
March 30, 2020
|
4.1
|
||
Form of common stock Purchase Warrant issued pursuant to the Securities Purchase Agreement, dated May 1, 2020, among the Company and the purchasers identified on the signature pages thereto
|
8-K
|
001-35312
|
May 4, 2020
|
4.1
|
Form of Warrant to Purchase Shares of Common Stock
|
S-1/A
|
333-24145
|
August 17, 2020
|
4.19
|
||
Warrant to purchase shares of Common Stock
|
S-1/A
|
333-267368
|
October 13, 2022
|
4.20
|
||
Form of Warrant to purchase shares of common stock
|
S-1/A
|
333-274610
|
September 29, 2023
|
4.13
|
||
Description of Securities
|
X
|
|||||
Patent License Agreement between Sunshine Heart, Inc. and Gambro UF Solutions, Inc. dated August 5, 2016
|
8-K
|
001-35312
|
August 8, 2016
|
10.1
|
||
2013 Non-Employee Directors’ Equity Incentive Plan†
|
14A
|
001-35312
|
April 5, 2013
|
App. A
|
||
Form of Stock Option Grant Notice and Option Agreement for 2013 Non-Employee Directors’ Equity Incentive Plan†
|
10-K
|
001-35312
|
May 29, 2013
|
10.2
|
||
Form of Restricted Stock Unit Award Grant Notice and Agreement for 2013 Non-Employee Directors’ Equity Incentive Plan†
|
10-K
|
001-35312
|
March 20, 2015
|
10.11
|
||
New-Hire Equity Incentive Plan†
|
10-Q
|
001-35312
|
August 8, 2013
|
10.1
|
||
First Amendment to New-Hire Equity Incentive Plan†
|
10-Q
|
001-35312
|
November 12, 2013
|
10.1
|
||
Second Amendment to New-Hire Equity Incentive Plan†
|
S-8
|
333-202904
|
March 20, 2015
|
99.12
|
||
Third Amendment to New-Hire Equity Incentive Plan†
|
S-8
|
333-210215
|
March 15, 2016
|
99.13
|
Fourth Amendment to New-Hire Equity Incentive Plan†
|
8-K
|
001-35312
|
May 30, 2017
|
10.4
|
||
Fifth Amendment to New-Hire Equity Incentive Plan†
|
8-K
|
001-35312
|
January 18, 2018
|
10.1
|
||
Sixth Amendment to New-Hire Equity Incentive Plan†
|
10-Q
|
001-35312
|
August 8, 2019
|
10.2
|
||
Seventh Amendment to New-Hire Equity Incentive Plan†
|
8-K
|
001-35312
|
December 6, 2019
|
10.1
|
||
Eighth Amendment to New-Hire Equity Incentive Plan†
|
8-K/A
|
001-35312
|
February 25, 2021
|
10.1
|
||
Form of Stock Option Grant Notice and Option Agreement for New-Hire Equity Incentive Plan†
|
10-Q
|
001-35312
|
November 12, 2013
|
10.2
|
||
2017 Equity Incentive Plan†
|
8-K
|
001-35312
|
May 30, 2017
|
10.1
|
||
First Amendment to the 2017 Equity Incentive Plan†
|
14A
|
001-35312
|
September 11, 2020
|
App. A
|
||
Second Amendment to the 2017 Equity Incentive Plan†
|
10-K
|
001-35312
|
March 3, 2023
|
10.17 |
|
|
Form of Stock Option Grant Notice and Option Agreement for 2017 Equity Incentive Plan†
|
8-K
|
001-35312
|
May 30, 2017
|
10.2
|
||
Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement for 2017 Equity Incentive Plan†
|
8-K
|
001-35312
|
May 30, 2017
|
10.3
|
||
Nuwellis, Inc. 2021 Inducement Plan†
|
8-K
|
001-35312
|
May 20, 2021
|
10.1
|
||
First Amendment to the 2021 Inducement Plan†
|
8-K
|
001-35312
|
April 21, 2022
|
10.1
|
||
Second Amendment to the 2021 Inducement Plan †
|
8-K
|
001-35312
|
March 1, 2023
|
10.1
|
Form of Stock Option Grant Notice, Option Agreement and Notice of Exercise under the Nuwellis, Inc. 2021 Inducement Plan†
|
8-K
|
001-35312
|
May 20, 2021
|
10.2
|
||
Form of Indemnity Agreement for the Company’s executive officers and directors†
|
10
|
001-35312
|
September 30, 2011
|
10.1
|
||
Form of Change in Control Agreement for the Company’s executive officers†
|
10-K
|
001-35312
|
March 20, 2015
|
10.16
|
||
Non-Employee Director Compensation Policy (effective August 18, 2021)†
|
10-Q
|
001-35312
|
November 10, 2021
|
10.2
|
||
Non-Employee Director Compensation Policy (effective January 1, 2023) †
|
10-K
|
001-35312
|
March 3, 2023
|
10.27
|
||
Lease Agreement dated October 21, 2011 by and between the Company and Silver Prairie Crossroads, LLC
|
10
|
001-35312
|
December 16, 2011
|
10.18
|
||
Second Amendment to Lease, dated as of April 20, 2015, by and between the Company and Capital Partners Industrial Fund I, LLLP dba Prairie Crossroads Business Center
|
8-K
|
001-35312
|
April 23, 2015
|
10.1
|
||
Third Amendment to Lease, dated as of August 3, 2018, by and between the Company and Capital Partners Industrial Fund I, LLLP
|
10-Q
|
001-35312
|
November 7, 2018
|
10.2
|
||
Fourth Amendment to Lease, dated as of November 18, 2021, by and between the Company and Capital Partners Industrial Fund I, LLLP
|
8-K
|
001-35312
|
November 23, 2021
|
10.1
|
Executive Employment Agreement between Sunshine Heart, Inc. and John L. Erb, dated March 1, 2016†
|
8-K
|
001-35312
|
March 2, 2016
|
10.1
|
||
Letter Agreement dated February 15, 2017 among the Company, Sabby Volatility Warrant Master Fund, Ltd. and Sabby Healthcare Master Fund, Ltd.
|
8-K
|
003-35312
|
February 16, 2017
|
10.1
|
||
Warrant Agency Agreement between the Company and American Stock Transfer & Trust Company, LLC dated April 24, 2017
|
8-K
|
001-35312
|
April 25, 2017
|
10.1
|
||
Form of Warrant Reprice Agreement
|
8-K
|
001-35312
|
June 29, 2018
|
10.1
|
||
Warrant Agency Agreement, dated as of March 12, 2019, between the Company and American Stock Transfer & Trust Company, LLC
|
8-K
|
001-35312
|
March 13, 2019
|
4.2
|
||
Underwriting Agreement, dated as of March 8, 2019, by and between the Company and Ladenburg Thalmann & Co. Inc.
|
8-K
|
001-35312
|
March 13, 2019
|
1.1
|
||
Form of Employee Proprietary Information, Inventions Assignment and Non-Competition Agreement for the Company’s employees, including executive officers†
|
10-Q
|
001-35312
|
May, 9, 2019
|
10.3
|
||
Offer Letter, by and between the Company and Nestor Jaramillo, dated April 12, 2019†
|
10-Q
|
001-35312
|
May 9, 2019
|
10.5
|
Placement Agency Agreement, dated as of October 23, 2019, by and between the Company and Ladenburg Thalmann & Co. Inc.
|
8-K
|
001-35312
|
October 23, 2019
|
1.1
|
||
Form of Securities Purchase Agreement, dated as of October 23, 2019, by and among the Company and the purchasers identified on the signature pages thereto
|
8-K
|
001-35312
|
October 23, 2019
|
10.1
|
||
Placement Agency Agreement, dated as of November 4, 2019, by and between the Company and Ladenburg Thalmann & Co. Inc.
|
8-K
|
001-35312
|
November 4, 2019
|
1.1
|
||
Form of Securities Purchase Agreement, dated as of November 4, 2019, by and among the Company and the purchasers identified on the signature pages thereto
|
8-K
|
001-35312
|
November 4, 2019
|
10.1
|
||
Underwriting Agreement dated as of January 24, 2020, by and between the Company and Ladenburg Thalmann & Co. Inc.
|
8-K
|
001-35312
|
January 29, 2020
|
1.1
|
||
Warrant Agency Agreement, dated as of January 28, 2020, between the Company and American Stock Transfer & Trust Company, LLC.
|
8-K
|
001-35312
|
January 29, 2020
|
4.2
|
||
Placement Agency Agreement, dated as of March 19, 2020, by and between the Company and Ladenburg Thalmann & Co. Inc.
|
8-K
|
001-35312
|
March 20, 2020
|
1.1
|
Form of Securities Purchase Agreement, dated as of March 19, 2020, by and among the Company and the purchasers identified on the signature pages thereto
|
8-K
|
001-35312
|
March 20, 2020
|
10.1
|
||
Placement Agency Agreement, dated as of March 30, 2020, by and between the Company and Ladenburg Thalmann & Co. Inc.
|
8-K
|
001-35312
|
March 30, 2020
|
1.1
|
||
Form of Securities Purchase Agreement, dated as of March 30, 2020, by and among the Company and the purchasers identified on the signature pages thereto
|
8-K
|
001-35312
|
March 30, 2020
|
10.1
|
||
Form of Securities Purchase Agreement, dated as of May 1, 2020, by and among the Company and the purchasers identified on the signature pages thereto
|
8-K
|
001-35312
|
May 4, 2020
|
10.1
|
||
Underwriting Agreement, dated as of August 19, 2020, by and between the Company and Ladenburg Thalman & Co. Inc.
|
8-K
|
001-35312
|
August 21, 2020
|
1.1
|
||
Warrant Agency Agreement, dated as of August 21, 2020, between the Company and American Stock Transfer & Trust Company, LLC
|
8-K
|
001-35312
|
August 21, 2020
|
4.2
|
||
Executive Employment Agreement, dated January 16, 2021, by and between the Company and Nestor Jaramillo, Jr.†
|
8-K
|
001-35312
|
January 19, 2021
|
10.1
|
||
Executive Employment Agreement, dated January 16, 2021, by and between the Company and John L. Erb†
|
8-K
|
001-35312
|
January 19, 2021
|
10.2
|
Offer Letter by and between the Company and George Montague, effective as of June 28, 2021†
|
8-K
|
001-35312
|
June 22, 2021
|
10.1
|
||
Offer letter by and between the Company and Neil P. Ayotte, effective as of June 7, 2021†
|
10-Q
|
001-35312
|
August 12, 2021
|
10.4
|
||
Underwriting Agreement dated September 15, 2021, between the Company and Ladenburg Thalmann & Co. Inc., as the Representative of the several underwriters named in Schedule I thereto.
|
8-K
|
001-35312
|
September 17, 2021
|
1.1
|
||
Warrant Agency Agreement, dated as of October 18, 2022, between the Company and American Stock Transfer & Trust Company, LLC
|
8-K
|
001-35312
|
October 18, 2022
|
4.2
|
||
Leak-Out Agreement
|
S-1/A
|
333-267368
|
September 30, 2022
|
10.70
|
||
Offer Letter by and between the Company and Lynn Blake, effective as of October 19, 2022†
|
8-K
|
001-35312
|
October 5, 2022
|
10.1
|
||
First Amendment to Offer Letter between the Company and Lynn Blake†
|
8-K
|
001-35312
|
December 9, 2022
|
10.1
|
||
Underwriting Agreement dated as of October 14, 2022, by and between Nuwellis, Inc. and Ladenburg Thalmann & Co. Inc.
|
8-K
|
001-35312
|
October 18, 2022
|
1.1
|
||
License and Distribution Agreement with SeaStar Medical Holding Corporation, dated as of December 27, 2022+
|
10-K
|
001-35312
|
March 3, 2023
|
10.63
|
|
|
At The Market Offering Agreement, dated as of March 2, 2023, by and between the Company and Ladenburg Thalmann & Co. Inc.
|
10-K
|
001-35312
|
March 3, 2023
|
1.1
|
Supply and Collaboration Agreement dated as of June 19, 2023 by and between the Company and DaVita Inc.
|
8-K
|
001-35312
|
June 21, 2023
|
10.1
|
||
Registration Rights Agreement dated as of June 19, 2023 by and between the Company and DaVita Inc.
|
8-K
|
001-35312
|
June 21, 2023
|
10.2
|
||
DaVita Inc. Common Stock Warrant Agreement
|
8-K
|
001-35312
|
June 21, 2023
|
4.1
|
||
Transition Agreement dated August 4, 2023 by and between Nuwellis, Inc. and Lynn Blake
|
8-K
|
001-35312
|
August 8, 2023
|
10.1
|
||
Offer Letter by and between Nuwellis, Inc. and Robert B. Scott, effective as of September 2, 2023
|
8-K
|
001-35312
|
August 18, 2023
|
10.1
|
||
Placement Agency Agreement dated as of October 12, 2023, by and between Nuwellis, Inc., Lake Street Capital Markets, LLC and Maxim Group LLC
|
8-K
|
001-35312
|
October 17, 2023
|
1.1
|
||
Form of Securities Purchase Agreement
|
S-1/A
|
333-274610
|
September 29, 2023
|
10.69
|
||
Form of Warrant Agency Agreement
|
8-K
|
001-35312
|
October 17, 2023
|
4.2
|
||
10.73 |
Consulting Agreement dated August 4, 2023 by and between Nuwellis, Inc. and Lunn Blake† | S-1/A |
333-274610 | September 29, 2023 | 10.68 |
|
List of Subsidiaries
|
X
|
|||||
Consent of Baker Tilly US, LLP
|
X
|
|||||
Power of Attorney (included on signature page)
|
X
|
Section 302 Certification—CEO
|
X
|
|||||
Section 302 Certification—CFO
|
X
|
|||||
Section 906 Certification—CEO
|
X
|
|||||
Section 906 Certification — CFO
|
X
|
|||||
Policy for the Recovery of Erroneously Award Compensation
|
X
|
|||||
101.INS
|
Inline XBRL Instance Document
|
X
|
||||
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document
|
X
|
||||
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
X
|
||||
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
X
|
||||
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
X
|
||||
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
X
|
||||
104
|
Cover Page Interactive Data File (formatted as Inline XBRL contained in Exhibit 101)
|
X
|
†
|
Indicates management compensatory plan, contract or arrangement.
|
+ |
Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request. Certain portions of the
License and Distribution Agreement, Warrant and Supply Agreement have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K because the Company customarily and actually treats the redacted information as private or confidential and
the omitted information is not material. Copies of the unredacted License and Distribution Agreement, Warrant and Supply Agreement will be furnished to the SEC upon request.
|
Date: March 11, 2024
|
NUWELLIS, INC.
|
|
By:
|
/S/ NESTOR JARAMILLO JR
|
|
Nestor Jaramillo Jr
|
||
President and Chief Executive Officer
|
Signature
|
Title
|
Date
|
||
/S/ NESTOR JARAMILLO JR
|
President, Chief Executive Officer and Director
|
March 11, 2024
|
||
Nestor Jaramillo Jr
|
(principal executive officer)
|
|||
/S/ ROBERT SCOTT
|
Chief Financial Officer
|
March 11, 2024
|
||
Robert Scott
|
(principal financial and accounting officer)
|
|||
/S/ JOHN L. ERB
|
Chairman of the Board and Director
|
March 11, 2024
|
||
John L. Erb
|
||||
/S/ MARIA ROSA COSTANZO
|
Director
|
March 11, 2024
|
||
Maria Rosa Costanzo M.D.
|
||||
/S/ DAVE McDONALD
|
Director
|
March 11, 2024
|
||
David McDonald
|
||||
/S/ GREGORY D. WALLER
|
Director
|
March 11, 2024
|
||
Gregory D. Waller
|
||||
/S/ MIKE McCORMICK
|
Director
|
March 11, 2024
|
||
Mike McCormick
|
||||
/S/ ARCHELLE GEORGIOU, M.D.
|
Director
|
March 11, 2024
|
||
Archelle Georgiou, M.D.
|
•
|
the number of directors on our board of directors, the classification of our board of directors and the terms of the members of our board of
directors;
|
|
•
|
the limitations on removal of any of our directors described below under “-Anti-Takeover Effects of Certain Provisions of Our Certificate of
Incorporation and Bylaws and Delaware Law;”
|
|
•
|
the ability of our directors to fill any vacancy on our board of directors by the affirmative vote of a majority of the directors then in office
under certain circumstances;
|
|
•
|
the ability of our board of directors to adopt, amend or repeal our bylaws and the super-majority vote of our stockholders required to adopt, amend
or repeal our bylaws described above;
|
|
•
|
the limitation on action of our stockholders by written action described below under “-Anti-Takeover Effects of Certain Provisions of Our
Certificate of Incorporation and Bylaws and Delaware Law;”
|
|
•
|
the choice of forum provision described below under “-Choice of Forum;”
|
|
•
|
the limitations on director liability and indemnification described below under the heading “-Limitation on Liability of Directors and
Indemnification;” and
|
|
•
|
the super-majority voting requirement to amend our certificate of incorporation described above.
|
•
|
providing for our board of directors to be divided into three classes with staggered three-year terms, with only one class of directors being
elected at each annual meeting of our stockholders and the other classes continuing for the remainder of their respective three-year terms;
|
|
•
|
authorizing our board of directors to issue from time to time any series of preferred stock and fix the voting powers, designation, powers,
preferences and rights of the shares of such series of preferred stock;
|
|
•
|
prohibiting stockholders from acting by written consent in lieu of a meeting;
|
|
•
|
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;
|
|
•
|
requiring a 662∕3% super-majority stockholder approval in order for stockholders to alter, amend or repeal certain provisions of our certificate of
incorporation;
|
|
•
|
requiring a 662∕3% super-majority stockholder approval in order for stockholders to adopt, amend or repeal our bylaws;
|
|
•
|
providing that, subject to the rights of the holders of any series of preferred stock to elect additional directors under specified circumstances,
neither the board of directors nor any individual director may be removed without cause;
|
|
•
|
creating the possibility that our board of directors could prevent a coercive takeover of our Company due to the significant amount of authorized,
but unissued shares of our common stock and preferred stock;
|
•
|
providing that, subject to the rights of the holders of any series of preferred stock, the number of directors shall be fixed from time to time
exclusively by our board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors; and
|
|
•
|
providing that any vacancies on our board of directors under certain circumstances will be filled only by a majority of our board of directors then
in office, even if less than a quorum, and not by the stockholders.
|
•
|
prior to that date, our board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an
interested stockholder;
|
|
•
|
upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least
85% of our voting stock outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by
(i) persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange
offer; or
|
|
•
|
on or subsequent to that date, the business combination is approved by our board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least 66 2 ∕ 3 % of the outstanding voting stock that is not owned by the interested stockholder.
|
•
|
breach of their duty of loyalty to us or our stockholders;
|
|
•
|
act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
|
|
•
|
unlawful payment of dividends or redemption of shares as provided in Section 174 of the DGCL; or
|
|
•
|
transaction from which the directors derived an improper personal benefit.
|
Entity
|
Jurisdiction of Formation
|
|
Sunshine Heart Ireland Limited
|
Ireland
|
/s/ Baker Tilly US, LLP
|
|
Minneapolis, Minnesota
|
|
March 11, 2024
|
1. |
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2023 of Nuwellis, Inc.
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: March 11, 2024
|
|
/S/ NESTOR JARAMILLO JR
|
|
Nestor Jaramillo Jr
|
|
Chief Executive Officer
|
1. |
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2023 of Nuwellis, Inc.
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: March 11, 2024
|
|
/S/ ROBERT SCOTT
|
|
Robert Scott
|
|
Chief Financial Officer
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: March 11, 2024
|
/S/ NESTOR JARAMILLO JR
|
Nestor Jaramillo Jr
|
|
Chief Executive Officer
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: March 11, 2024
|
/S/ ROBERT SCOTT
|
Robert Scott
|
|
Chief Financial Officer
|
(f) |
“Effective Date” means December 1, 2023.
|
(n) |
“SEC” means the U.S. Securities and Exchange Commission.
|
(o) |
“Section 409A” means Section 409A of the Code.
|
4. |
Recovery of Erroneously Awarded Compensation.
|
[Name/Title]
|
|
[Date]
|
Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands |
Common Stock [Member] |
Common Stock [Member]
Series I Convertible Preferred Stock [Member]
|
Common Stock [Member]
Series J Convertible Preferred Stock [Member]
|
Additional Paid in Capital [Member] |
Additional Paid in Capital [Member]
Series I Convertible Preferred Stock [Member]
|
Additional Paid in Capital [Member]
Series J Convertible Preferred Stock [Member]
|
Accumulated Other Comprehensive Income [Member] |
Accumulated Other Comprehensive Income [Member]
Series I Convertible Preferred Stock [Member]
|
Accumulated Other Comprehensive Income [Member]
Series J Convertible Preferred Stock [Member]
|
Accumulated Deficit [Member] |
Accumulated Deficit [Member]
Series I Convertible Preferred Stock [Member]
|
Accumulated Deficit [Member]
Series J Convertible Preferred Stock [Member]
|
Total |
Series I Convertible Preferred Stock [Member] |
Series J Convertible Preferred Stock [Member] |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at Dec. 31, 2021 | $ 0 | $ 278,874 | $ (35) | $ (252,892) | $ 25,947 | ||||||||||
Balance (in shares) at Dec. 31, 2021 | 105,376 | ||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Net loss | $ 0 | 0 | 0 | (14,525) | (14,525) | ||||||||||
Unrealized foreign currency translation adjustment | 0 | 0 | (7) | 0 | (7) | ||||||||||
Unrealized gain on marketable securities | 0 | 0 | 80 | 0 | 80 | ||||||||||
Stock-based compensation | $ 0 | 862 | 0 | 0 | 862 | ||||||||||
Stock-based compensation (in shares) | 0 | ||||||||||||||
Issuance of common stock from ATM offering, net | $ 0 | 0 | 0 | 0 | 0 | ||||||||||
Issuance of common stock from ATM offering, net (in shares) | 209,940 | ||||||||||||||
Issuance of common stock from conversion of convertible preferred stock | $ 0 | 0 | 0 | 0 | 0 | ||||||||||
Issuance of common stock from conversion of convertible preferred stock (in shares) | 221,078 | ||||||||||||||
Balance at Dec. 31, 2022 | $ 0 | 279,736 | 38 | (267,417) | 12,357 | ||||||||||
Balance (in shares) at Dec. 31, 2022 | 536,394 | ||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Net loss | $ 0 | 0 | 0 | (20,209) | (20,209) | ||||||||||
Unrealized foreign currency translation adjustment | 0 | 0 | (13) | 0 | (13) | ||||||||||
Unrealized gain on marketable securities | 0 | 0 | (56) | 0 | (56) | ||||||||||
Stock-based compensation | $ 0 | 670 | 0 | 0 | 670 | ||||||||||
Stock-based compensation (in shares) | 0 | ||||||||||||||
Issuance of common stock from ATM offering, net | $ 0 | 2,119 | 0 | 0 | 2,119 | ||||||||||
Issuance of common stock from ATM offering, net (in shares) | 657,333 | ||||||||||||||
Issuance of common stock from conversion of convertible preferred stock | $ 0 | $ 1 | $ 0 | $ 2,620 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 2,621 | |||||
Issuance of common stock from conversion of convertible preferred stock (in shares) | 10,493 | 3,417,079 | |||||||||||||
Issuance costs related to 2022 common stock offering | $ 0 | (11) | 0 | 0 | (11) | ||||||||||
Issuance of common stock from exercise of warrants | $ 0 | $ 307 | $ 0 | $ 0 | $ 307 | ||||||||||
Issuance of common stock from warrant conversions (in shares) | 1,061,162 | ||||||||||||||
Reclassification of warrants to equity | 0 | 7,623 | 0 | 0 | 7,623 | ||||||||||
Series J Convertible Preferred Stock deemed dividend | 0 | (2,297) | 0 | 0 | (2,297) | ||||||||||
Series J Convertible Preferred Stock PIK dividend | 0 | (121) | 0 | 0 | (121) | ||||||||||
Balance at Dec. 31, 2023 | $ 1 | $ 290,646 | $ (31) | $ (287,626) | $ 2,990 | ||||||||||
Balance (in shares) at Dec. 31, 2023 | 5,682,461 |
Nature of Business and Significant Accounting Policies |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nature of Business and Significant Accounting Policies |
Note 1—Nature of Business and Significant Accounting Policies
Nature of Business
Nuwellis, Inc. (the “Company”) is a medical technology company focused on developing, manufacturing and commercializing the Aquadex FlexFlow® and Aquadex SmartFlow® systems
(collectively, the “Aquadex System”) for ultrafiltration therapy. 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. Nuwellis, Inc. is a Delaware corporation headquartered in Minneapolis with
a wholly owned subsidiary in Ireland. The Company has been listed on Nasdaq since February 2012.
In August 2016, the Company acquired the business associated with the Aquadex System (the “Aquadex Business”) from a subsidiary of Baxter International, Inc. (“Baxter”), and
refocused its strategy to fully devote its resources to the Aquadex Business. On April 27, 2021, the
Company announced that it was changing its name from CHF Solutions, Inc. to Nuwellis, Inc. to reflect the expansion of its customer base from treating fluid imbalance resulting from congestive heart failure to also include critical
care and pediatrics applications.
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating
decision-maker in deciding how to allocate resources and assess performance. The Company and the Company’s chief operating decision-maker, the Company’s chief executive officer, views the Company’s operations and manages its business as a
single operating segment. At December 31, 2023 and 2022, long-lived assets were located primarily in the United States.
Going Concern
The Company’s financial statements have been prepared and presented on a basis assuming it continues as a going concern. During the years ended December 31, 2023 and 2022, the
Company incurred losses from operations and net cash outflows from operating activities as disclosed in the consolidated statements of operations and cash flows, respectively. As of December 31, 2023, the Company had an accumulated deficit of
$287.6 million, and it expects to incur losses for the immediate future. To date, the Company has been funded by equity financings,
and although the Company believes that it will be able to successfully fund its operations, there can be no assurance that it will be able to do so or that it will ever operate profitably. These factors raise substantial doubt about the
Company’s ability to continue as a going concern through at least twelve months from the report date.
The
Company became a revenue-generating company after acquiring the Aquadex Business in August 2016. The Company expects to incur additional losses in the near-term as it grows the Aquadex Business, including investments in expanding its sales and marketing capabilities, purchasing inventory, manufacturing components, investing in clinical
research and new product development, and complying with the requirements related to being a U.S. public company. To become and remain profitable, the Company must succeed in expanding the adoption and market acceptance of the Aquadex System. This will require the Company to
succeed in training personnel at hospitals and effectively and efficiently manufacturing, marketing, and distributing the Aquadex System and related components. There can be no assurance that the Company will succeed in these activities,
and it may never generate revenues sufficient to achieve profitability.
During 2021 and through December 31, 2023, the Company closed on underwritten public equity offerings for aggregate net proceeds of approximately $40.9 million after deducting the underwriting discounts and commissions and other costs associated with the offerings. See Note 4—Stockholders’ Equity for additional related
disclosure. The Company will require additional funding to grow its Aquadex Business, which may not be available on terms favorable to the Company, or at all. The Company may receive those funds from the proceeds from future
warrant exercises, issuances of equity securities, or other financing transactions.
The Company believes that its existing capital
resources will be sufficient to support its operating plan through May 31, 2024. However, the Company will seek to raise additional capital to support its growth or other strategic initiatives through debt, equity, or a combination thereof.
There can be no assurance we will be successful in raising additional capital.
Basis of Presentation
The
accompanying consolidated financial statements include the accounts of Nuwellis, Inc. and its wholly owned subsidiary, Sunshine Heart Ireland Limited. All intercompany accounts and transactions between consolidated entities have been
eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and term deposits with original maturities of three months or less. The carrying value of these instruments approximates fair value. The
balances, at times, may exceed federally insured limits. The Company has not experienced any losses on its cash and cash equivalents.
Marketable securities
The Company’s marketable securities typically consist of investment-grade, U.S. dollar-denominated fixed and
floating-rate debt, which are classified as available-for-sale and included in current assets. Most marketable securities mature within twelve months from their date of purchase and generally are intended to fund current operations.
Securities are valued based on market prices for similar assets using third party certified pricing sources. Available-for-sale securities are carried at fair value with unrealized gains and losses reported as a component of shareholders’
equity in accumulated other comprehensive income (loss).
Available-for-sale securities are reviewed for possible impairment at
least quarterly, or more frequently if circumstances arise that may indicate impairment. When the fair value of the securities declines below the amortized cost basis and impairment is indicated, it must be determined whether the
impairment is other than temporary. Impairment is considered to be other than temporary if the Company: (i) intends to sell the security, (ii) will more likely than not be forced to sell the security before recovering its cost, or (iii)
does not expect to recover the security’s amortized cost basis. If the decline in fair value is considered other than temporary, the cost basis of the security is adjusted to its fair market value and the realized loss is reported in
earnings. Subsequent increases or decreases in fair value are reported as a component of shareholders’ equity in accumulated other comprehensive gain (loss).
Accounts Receivable
Accounts receivables are unsecured, recorded at net realizable value, and do not bear interest. The Company makes judgments as to its ability to collect outstanding receivables based
upon significant patterns of collectability, historical experience, and management’s evaluation of specific accounts, and it will provide an allowance for credit losses when collection becomes doubtful. The Company performs credit evaluations
of its customers’ financial condition on an as-needed basis. Payment is generally due 30 days from the invoice date and accounts
past 30 days are individually analyzed for collectability. When all collection efforts have been exhausted, the account is written
off against the related allowance. To date the Company has not experienced any write-offs or significant deterioration in the aging of its accounts receivable, and therefore, no allowance for doubtful accounts was considered necessary as of December 31, 2023, or December 31, 2022. As of December 31, 2023, two
customers represented 14% and 15% of the total accounts receivable balance.
As of December 31, 2022, two customers represented 15% and 10%
of the total accounts receivable balance.
Inventories
Inventories are recorded at the lower of cost or net realizable value using the first-in, first-out method. Overhead is allocated to manufactured finished goods inventory based on
the normal capacity of the Company’s production facilities. Abnormal amounts of overhead, if any, are expensed as incurred. On a regular basis, the Company reviews its inventory and identifies that which is excess, slow moving, and obsolete
by considering factors such as inventory levels and expected product life. A reserve is established for any identified excess, slow moving, and obsolete inventory through a charge to cost of goods sold. Inventories consisted of the following
as of December 31:
Other Current Assets
Other current assets represent prepayments and deposits made by the Company.
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is computed based upon the estimated useful life of the respective asset. Leasehold
improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the assets. Repairs and maintenance cost is expensed as incurred. The cost and accumulated depreciation of property,
plant and equipment retired or otherwise disposed of is removed from the related accounts, and any residual values are charged to expense. Depreciation expense has been calculated using the following estimated useful lives:
Depreciation and amortization expense was $362,000 and $372,000 for the years ended December 31, 2023, and 2022, respectively.
Property,
plant and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. If the impairment tests indicate that the carrying value of the
asset or asset group is greater than the expected undiscounted cash flows to be generated by such asset or asset group, further analysis is performed to determine the fair value of the asset or asset group. To the extent the fair value of
the asset or asset group is less than its carrying value, an impairment loss is recognized equal to the amount the fair value of the asset or asset group is exceeded by its carrying amount. Assets to be disposed of are carried at the lower
of their carrying value or fair value less costs to sell. Considerable management judgment is necessary to estimate the fair value of assets or asset groups, and accordingly, actual results could vary significantly from such estimates.
The Company continues to report operating losses and negative cash flows from
operations, both of which it considers to be indicators of potential impairment. Therefore, the Company evaluates its long-lived assets for potential impairment at each reporting period. The Company has concluded that its cash flows from
the various long-lived assets are highly interrelated and, as a result, the Company consists of a single asset group. As the Company expects to continue incurring losses in the foreseeable future, the undiscounted cash flow step was
bypassed, and the Company proceeded to fair value the asset group. The Company has determined the fair value of the asset group using its market capitalization determined with level 1 fair value inputs. For the operating lease
right-of-use asset the Company believes that the remaining lease payments represent a fair value of the right of use asset.
There have been no impairment losses recognized for the years ended December 31, 2023, or 2022.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. Accordingly, the Company recognizes revenue when its customers obtain control of its products or services, in an amount that reflects the consideration that the Company expects to
receive in exchange for those goods and services. See Note 2 – Revenue Recognition, for additional disclosures. For the year ended December 31, 2023, two customers represented 13.9% and 12.6%
of net sales. For the year ended December 31, 2022, one customer
represented 12.5% of net sales.
Foreign Currency Translation
Sales and expenses denominated in foreign currencies are translated at average exchange rates in effect throughout the year. Assets and liabilities of foreign operations are
translated at period-end exchange rates with the impacts of foreign currency translation recorded in cumulative translation adjustment, a component of accumulated other comprehensive income. Foreign currency
transactions gains and losses are included in other expense, net in the consolidated statements of operations and other comprehensive loss.
Stock-Based Compensation
The Company recognizes all
share-based payments to employees, directors, and consultants, including grants of stock options and common stock awards, in the consolidated statement of operations and comprehensive loss as an operating expense based on their fair
values as established at the grant date. Equity instruments issued to non-employees include common stock awards or warrants to purchase shares of our common stock. These common stock awards or warrants are either fully vested and
exercisable at the date of grant or vest over a certain period during which services are provided. The Company expenses the fair market value of fully vested awards at the time of grant, and of unvested awards over the period in which the
related services are received.
The Company computes the estimated fair values of stock options using the Black-Scholes option pricing model. Market price at the date of grant is used to
calculate the fair value of common stock awards.
Stock-based compensation expense is recorded based on awards ultimately expected to vest and is reduced for forfeitures. See Note 5—Stock-Based Compensation, for
further information regarding the assumptions used to calculate the fair value of stock-based compensation.
Income Taxes
Deferred income taxes are provided on a liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit
carryforwards. Deferred tax liabilities are recognized for taxable temporary differences, which are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax
positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the
relevant tax authority.
Loss per Share
Basic loss per share is computed based on the net loss for each period divided by the weighted average number of common shares outstanding. The net loss allocable to common stockholders for the year ended December 31, 2023, includes a deemed dividend from the Series
J Convertible Preferred Stock of $2.3 million and a payment in kind dividend from the Series J Convertible Preferred Stock of $0.1 million. (see Note 4 — Stockholders’ Equity).
Diluted earnings per share is computed based on
the net loss allocable to common stockholders for each period divided by the weighted average number of common shares outstanding, increased by the number of additional shares that would have been outstanding had the potentially dilutive
common shares been issued, and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include shares underlying
outstanding convertible preferred stock, warrants, stock options and other stock-based awards granted under stock-based compensation plans.
The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as
of the end of each year presented:
The following table reconciles reported net loss with reported net loss per share for the years ended December 31:
Research and Development
Research
and development (R&D) costs include activities related to development, design, and testing improvements of the Aquadex System and potential related new products. These R&D costs also include expenses related to clinical research
that the Company may sponsor or conduct to enhance understanding of the product and its use. R&D costs are expensed as incurred.
Recent Accounting Pronouncements
In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13,
“Financial Instruments – Credit Losses.” This ASU added a new impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity
recognizes as an allowance its estimate of expected credit losses. The CECL model applies to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. The CECL model does not
have a minimum threshold for recognition of impairment losses, and entities will need to measure expected credit losses on assets that have a low risk of loss. As a smaller reporting company pursuant to Rule 12b-2 of the Securities
Exchange Act of 1934, as amended, these changes become effective for the Company on January 1, 2023. The Company has adopted the new standard effective January 1, 2023, which didn’t have a material impact on the consolidated financial
statements.
The Company evaluates subsequent events through the date the consolidated financial statements are filed for events requiring adjustment to or disclosure in the
consolidated financial statements.
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Revenue Recognition |
12 Months Ended |
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Dec. 31, 2023 | |
Revenue Recognition [Abstract] | |
Revenue Recognition |
Note 2 – Revenue Recognition
Net Sales
The Company sells its products in the
United States primarily through a direct salesforce. Customers who purchase the Company’s products include hospitals and clinics throughout the United States. In countries outside the United States, the Company sells its products through a
limited number of specialty healthcare distributors in Austria, 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. These distributors resell the Company’s products to hospitals and clinics in their respective geographies.
Revenue from product sales is recognized when the customer or distributor obtains control of the product, which occurs at a point in time, most frequently upon shipment of the product or receipt of the product, depending on shipment terms. The Company’s standard shipping terms are FOB shipping point unless the customer requests that control and title to the inventory transfer upon delivery. Revenue is measured as the amount of consideration we expect to receive, adjusted for any applicable estimates of variable consideration and other factors affecting the transaction price, which is based on the invoiced price, in exchange for transferring products. All revenue is recognized when the Company satisfies its performance obligations under the contract. The majority of the Company’s contracts have a single performance obligation and are short term in nature. The Company has entered into extended service plans with customers, which are recognized over time. This revenue represents less than 1% of net sales for each of the years ended December 31, 2023, and 2022. The unfulfilled performance obligations related to these extended service plans are included in deferred revenue, which is included in other current liabilities on the consolidated balance sheets. The majority of the deferred revenue is expected to be recognized within one year. Sales taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales. Revenue includes shipment and handling fees charged to customers. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of goods sold. Product Returns: The Company offers customers a limited right of return for its product in case of non-conformity or performance issues. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company currently estimates product return liabilities using available industry data and its own historical sales and returns information. The Company has received minimal returns to date and believes that future returns of its products will continue to be minimal. Therefore, revenue recognized is not currently impacted by variable consideration related to product returns. |
Property, Plant and Equipment |
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Property, Plant and Equipment |
Note 3—Property, Plant and Equipment
Property, plant and equipment were as follows:
Depreciation and amortization expense was $362,000 and $372,000 for the
years ended December 31, 2023, and 2022, respectively.
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Stockholders' Equity |
12 Months Ended |
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Dec. 31, 2023 | |
Stockholders' Equity [Abstract] | |
Stockholders' Equity |
Note 4—Stockholders’ Equity
Series F Convertible Preferred Stock: On November 27, 2017, the Company closed on an underwritten public offering Series F Convertible
Preferred Stock and warrants to purchase shares of common stock for gross proceeds of $18.0 million. Net proceeds totaled
approximately $16.2 million after deducting the underwriting discounts and commissions and other costs associated with the
offering.
The offering was comprised of Series F convertible preferred stock, convertible into shares of the Company’s common stock at a conversion price of $189,000 per share. Each share of Series F convertible preferred stock was accompanied by a Series 1 warrant, which was to expire on the first
anniversary of its issuance, to purchase 16 shares of the Company’s common stock at an exercise price of $189,000 per share, and a Series 2 warrant, which expires on the seventh anniversary of its issuance, to purchase 4 shares of the Company’s common stock at an exercise price of $189,000 per share. The Series F convertible preferred stock has full ratchet price-based anti-dilution protection, subject to customary carve-outs, in the event of a down-round financing at a price per share
below the conversion price of the Series F convertible preferred stock (which protection will expire if, during any 20 of 30 consecutive trading days, the volume weighted average price of the Company’s common stock exceeds 300% of the then-effective conversion price of the Series F convertible preferred stock and the daily dollar trading volume for each trading day during such period
exceeds $200,000). The exercise price of the warrants is fixed and does not contain any variable pricing features, nor any price
based anti-dilutive features, apart from customary adjustments for stock splits, combinations, reclassifications, stock dividends or fundamental transactions. A total of 18,000 shares of Series F convertible preferred stock convertible into 96
shares of common stock and warrants to purchase 191 shares of common stock were issued in the offering.
Effective March 12, 2019, the conversion price of the Series F convertible preferred stock was reduced from $89,040 to $15,750, the per share price to the public of the
Series G convertible preferred stock issued in the March 2019 Offering. Effective October 25, 2019, the conversion price of the Series F convertible preferred stock was reduced from $15,750 to $4,230, and on November 6, 2019, from $4,230 to $2,983, the per share
price to the public in the October and November 2019 transactions, respectively. Effective January 28, 2020, the conversion price of the Series F convertible preferred stock was reduced from $2,983 to $1,650, the per share price to the public of the
Series H convertible preferred stock which closed in an underwritten public offering on January 28, 2020, described below. Effective March 23, 2020, the conversion price of the Series F convertible preferred stock was reduced from $1,650 to $900, the per share price
to the public in the March 2020 transaction, described below. In connection with the September 2021 offering, the conversion price of the Series F convertible preferred stock was reduced from $550 to $250, the per share price to the public in the
September 2021 offering, described below. In connection with the October 2022 offering, the conversion price of the Series F convertible preferred stock was reduced from $250 to $25, the per share price to the public in the
October 2020 offering, described below. In connection with the
October 2023 offering, the conversion price of the Series F convertible preferred stock was reduced from $25 to $1.01, the per share price to the public in the October 2023 offering, described below.
As of December 31, 2023 and December 31, 2022, 127
shares of the Series F convertible preferred stock remained outstanding.
Market-Based Warrants: On May 30, 2019, the Company granted a market-based warrant to a consultant in exchange for investor relations
services. The warrant represents the right to acquire up to 33 shares of the Company’s common stock at an exercise price of $9,540 per share, the closing stock price of the Company’s common shares on May 30, 2019. The warrant is subject to a vesting schedule based on the
Company achieving certain market stock prices within a specified period of time. The warrant expires on May 30, 2024. None of
these warrants had vested as of December 31, 2023.
Series H Convertible Preferred Stock and January 2020 Offering: On January 28, 2020, the Company closed on an underwritten public offering
of common stock, Series H convertible preferred stock, and warrants to purchase shares of common stock for gross proceeds of $9.7
million, which included the full exercise of the underwriter’s over-allotment option to purchase additional shares and warrants (“January 2020 Offering”). Net proceeds totaled approximately $8.6 million after deducting the underwriting discounts and commissions and other costs associated with the offering. The Series H convertible preferred stock included a
beneficial conversion amount of $1.6 million, representing the intrinsic value of the shares at the time of issuance, and $0.2 million of down-round protection in connection with the re-pricing of the warrants following the March 2020 offering described below.
The January 2020 Offering was comprised of 2,015
shares of common stock priced at $1,650 per share and 115,173 shares of Series H convertible preferred stock, convertible into common stock at $1,650 per share, including the full exercise of the over-allotment option. Each share of Series H convertible preferred stock and each share of common stock was
accompanied by a warrant to purchase common stock. The warrants are exercisable into 5,855 shares of common stock. The
conversion price of the preferred stock issued in the transaction is fixed and does not contain any variable pricing feature or any price-based anti-dilutive feature. The preferred stock issued in this transaction includes a beneficial
ownership blocker but has no dividend rights (except to the extent that dividends are also paid on the common stock) or liquidation preference, and, subject to limited exceptions, has no voting rights. The securities comprising the units are
immediately separable and were issued separately. The warrants were exercisable beginning on the closing date and expire on the fifth anniversary of the closing date and had an initial exercise price per share equal to $1,650 per share, subject to appropriate adjustment in the event of subsequent equity sales of common stock or securities convertible into common
stock for an exercise price per share less than the exercise price per share of the warrants then in effect (but in no event lower than 10%
of the applicable unit offering price), or in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting our common stock. Effective March 23, 2020,
the exercise price of these warrants was reduced from $1,650 to $900, the per share price to the public in the March 2020 offering, described below.
As of December 31, 2023 and 2022, there were 6,532 warrants
outstanding.
March 2020 Offering: On March 23, 2020, the Company closed on a registered direct offering of 1,387 shares of its common stock at a price to the public of $900
per share, for gross proceeds of approximately $1.2 million, or $1.0 million net proceeds, after deducting commissions and offering expenses. In a concurrent private placement, the Company agreed to issue to the investors in the
registered direct offering warrants to purchase up to 1,387 shares of the Company’s common stock. The warrants to purchase up to 1,387 shares of common stock have an exercise price of $1,118 per share, were exercisable six months from the date of issuance, and will expire from the date of issuance.
April 2020 Offering: On April 1, 2020, the Company closed on a registered direct offering of 1,710 shares of its common stock at a price to the public of $1,302
per share, for gross proceeds of approximately $2.2 million, prior to deduction of commissions and offering expenses related to the
transaction. In a concurrent private placement, the Company agreed to issue to the investors in the registered direct offering warrants to purchase up to 855 shares of the Company’s common stock. The warrants have an exercise price of $1,115
per share, were exercisable immediately, and will expire from the date of issuance.
May 2020 Offering: On May 5, 2020, the Company closed on a registered direct offering of 1,199 shares of its common stock at a price to the public of $1,418
per share, for gross proceeds of approximately $1.7 million, prior to deduction of commissions and offering expenses related to the
transaction. In a concurrent private placement, the Company agreed to issue to the investors in the registered direct offering warrants to purchase up to 600 shares of the Company’s common stock. The warrants have an exercise price of $1,230
per share, were exercisable immediately, and will expire from the date of issuance.
August 2020 Offering: On August 21, 2020, the Company closed on an underwritten public offering of common stock and warrants to purchase
shares of common stock for gross proceeds of approximately $14.4 million, which included the full exercise of the underwriter’s
over-allotment option to purchase additional shares and warrants (“August 2020 Offering”). Net proceeds totaled approximately $13.0
million after deducting the underwriting discounts and commissions and other costs associated with the offering. The August 2020 Offering was comprised of 10,647 shares of common stock priced at $1,350 per
share. Each share of common stock was accompanied by a warrant to purchase common stock. The warrants are exercisable into 10,647
shares of common stock. The securities comprising the units are immediately separable and were issued separately. The warrants were exercisable beginning on the effective date of our stockholders’ approval of a reverse stock split
in an amount sufficient to permit the exercise in full of the warrants, which occurred on October 6, 2020, and will expire on the five-year
anniversary of the closing date.
March 2021 Offering: On March 19, 2021, the Company closed on an
underwritten public offering of 37,958 shares of common stock, for gross proceeds of approximately $20.9 million (the “March 2021 Offering”). Net proceeds totaled approximately $18.9 million after deducting the underwriting discounts and commissions and other costs associated with the offering and after giving effect to the underwriters’ full exercise of
their overallotment option.
In connection with the March 2021 Offering, the conversion price of the Series F convertible preferred stock was reduced from $900 to $550, the per share price
to the public in the March 2021 Offering. In addition, the exercise price of the common stock warrants issued in connection with the January 2020 Offering was reduced from $900 to $550, the per share price to the public in the March 2021
Offering.
September 2021 Offering: On September 17, 2021, the Company closed on an
underwritten public offering of 40,056 shares of common stock, for gross proceeds of approximately $10.0 million (the “September 2021 Offering”). Net proceeds totaled approximately $9.0 million after deducting the underwriting discounts and commissions and other costs associated with the offering and after giving effect to the underwriters’ full exercise of
their overallotment option.
In connection with the September 2021 Offering, the conversion price of the Series F convertible preferred stock was reduced from $550 to $250, the per share price
to the public in the September 2021 Offering. In addition, the exercise price of the common stock warrants issued in connection with the January 2020 Offering was reduced from $550 to $250, the per share price to the public in the September 2021
Offering.
October 2022 Offering: On October 18, 2022, the Company closed on an underwritten public offering of 209,940 shares of common stock and 23,157,124
shares of Series I convertible preferred stock, for gross proceeds of approximately $11.0 million (the “October 2022 Offering”).
Net proceeds totaled approximately $9.4 million after deducting underwriting discounts and commissions and other costs associated
with the offering and after giving effect to the underwriters’ full exercise of their overallotment option.
The offering was comprised of (1) 209,940 Class A Units, priced at a public offering price of $25 per Class A Unit, with each Class A Unit consisting of one share of common stock and 1.5 warrants to purchase one share of common stock at an exercise price of $25 per share, and (2) 23,157,124 Class B Units, priced at a public offering price of $0.25 per Class B Unit, with each Class B Unit consisting of one share of Series I convertible preferred stock, convertible into one share of common stock for
every one hundred shares of Series I convertible preferred stock, and 1.5 warrants to
purchase one share of common stock for every one hundred shares of Series I convertible preferred stock The warrants included a cashless exercise provision that upon becoming exercisable, the warrant holders could exercise at a $0.00 exercise price.
The warrants became exercisable beginning on the effective date of a reverse stock split in an amount sufficient to permit the exercise in full of the warrants,
contingent upon stockholder approval of such reverse stock split and of the exercisability of the warrants under Nasdaq rules and will expire on the sixth anniversary of the initial exercise date.
The warrants were reflected as a liability and were valued on day 1. The valuation exceeded the gross proceeds of the offering, which resulted in a day 1 financing expense of $7.7 million. The warrants were re-measured at fair value as of December 31, 2022, with the fair value change being recorded as non-operating
income.
On December 8, 2022, following a special meeting of stockholders, the Company’s board of directors approved a reverse stock split of the Company’s issued and outstanding shares of common stock. On December 9, 2022, the Company
filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Certificate of Incorporation to effect the Reverse Stock Split. The Reverse Stock Split became effective as of 5:00 p.m. Eastern Time on
December 9, 2022, and the Company’s common stock began trading on a split-adjusted basis when the market opened on December 12, 2022. The conversion price of the preferred stock issued in
the transaction was fixed and does not contain any variable pricing feature or any price-based anti-dilutive feature. The preferred stock issued in this transaction includes a beneficial ownership blocker but has no dividend rights
(except to the extent that dividends are also paid on the common stock) or liquidation preference and, subject to limited exceptions, has no voting rights. The securities comprising the units are immediately separable and were issued
separately.
In connection with the October 2022 Offering, the conversion price of the Series F convertible preferred stock was reduced from $250 to $25, the per share price
to the public in the October 2022 Offering. In addition, the exercise price of the common stock warrants issued in connection with the January 2020 Offering was reduced from $250 to $25, the per share price to the public in the
October 2022 Offering. In connection with the October 2023 offering, the conversion price of the Series F convertible preferred stock was reduced from $25 to $1.01, the per share price to the public in the October 2023 offering, described below.
Reverse Stock Split: On December 5, 2022, the Company’s stockholders approved a reverse split of its outstanding common stock at a ratio in the range of to and, on December 8, 2022, the Company’s board of directors approved a reverse split of the Company’s outstanding common stock that became effective after trading on December 9, 2022. This reverse stock split did not change the par value of the Company’s common stock or the number of common or preferred shares authorized by the Company’s Fourth Amended and Restated Certificate of Incorporation, as amended. All share and per-share amounts have been retroactively adjusted to reflect the reverse stock splits for all periods presented. 2023 At-the-Market Program: In March 2023, the Company filed a Prospectus Supplement to its Registration Statement on Form S-3 with the SEC
in connection with a proposed At-the-Market Securities offering (the “At-the-Market Program”). During 2023, the Company issued 657,333
shares of common stock under the At-the-Market Program for gross proceeds of approximately $2.3 million. Net proceeds totaled
approximately $2.1 million after deducting the underwriting discounts and commissions and other costs associated with the offering.
Supply Agreement Warrants: On June 19, 2023, we entered into a Supply and Collaboration Agreement with DaVita Inc., a Delaware corporation,
pursuant to which DaVita will pilot the Aquadex ultrafiltration therapy system to treat adult patients with congestive heart failure and related conditions within select U.S. markets. The pilot program launched in the third quarter 2023 and
will extend through May 31, 2024. Through the Pilot, ultrafiltration therapy using Aquadex will be offered at a combination of DaVita’s hospital customer and outpatient center locations, with both companies collaborating on the roll-out of
the therapy, clinician training, and patient support. At the conclusion of the Pilot, DaVita has the option, in its sole discretion, to extend the Supply Agreement with the Company for continued provision of both inpatient and outpatient
ultrafiltration services for up to 10 years.
October 2023 Offering: On October 12, 2023, Nuwellis, Inc. entered into a Placement Agency Agreement with Lake Street Capital Markets, LLC
and Maxim Group LLC, pursuant to which the Company issued and sold, in a best efforts registered public offering by the Company, 150,000
units, with each Unit consisting of (A) one share of the Company’s Series J Convertible Redeemable Preferred Stock, par value $0.0001 per share, and (B) one
warrant to purchase one-half of one (0.50) share of Series J Convertible Preferred Stock, at a price to the public of $15.00 per Unit, less placement agent fees and commissions. The public offering price of $15.00 per Unit reflects the issuance of the Series J Convertible Preferred Stock with an original issue discount of 40%. The Company is also registering under the Registration Statement (as defined below) an additional 362,933 shares of Series J Convertible Preferred Stock that will be issued, if and when the Company’s Board of Directors declares such dividends, as paid in-kind
dividends and the shares of Common Stock issuable upon conversion of the Series J Convertible Preferred Stock issued as PIK dividends.
The Units, the shares of Series J Convertible Preferred Stock, the Warrants, the PIK Dividend Shares, the PIK Conversion Shares as well as the shares of Series J Convertible
Preferred Stock issuable upon exercise of the Warrants and the shares of the Company’s common stock, par value $0.0001 per share,
issuable upon conversion of the Series J Convertible Preferred Stock, were offered and sold by the Company pursuant to an effective registration statement on Form S-1, as amended (File No. 333-274610), which was initially filed with the
Securities Exchange Commission on September 21, 2023, as amended on September 29, 2023, and declared effective by the SEC on September 29, 2023 with an additional registration statement on Form S-1 filed on October 6, 2023 pursuant to Rule
462(c). A final prospectus relating to the Offering was filed with the SEC on October 13, 2023. The closing of the Offering contemplated by the Placement Agency Agreement occurred on October 17, 2023.
On October 17, 2023, the Company also entered into a warrant agency agreement with the Company’s transfer agent, Equiniti Trust Company, LLC, who will act as warrant agent for the
Company, setting forth the terms and conditions of the Warrants sold in this Offering.
Each Warrant has an exercise price of $7.50 per one-half of one (0.5) share of Series J Convertible Preferred Stock, is immediately exercisable and will expire three (3) years from the date of issuance.
There is no established trading market for the Series J Convertible Preferred Stock or the Warrants and we do not expect a market to develop. In addition, we do not intend to list
the Series J Convertible Preferred Stock or the Warrants on The Nasdaq Capital Market or any other national securities exchange or any other nationally recognized trading system.
The gross proceeds to the Company from the October 17, 2023, Offering were $2.25
million. Net proceeds were approximately $1.5 million after deducting placement agent fees and commissions and Offering expenses
payable by the Company. The Company used the net proceeds from the Offering for working capital and for general corporate purposes.
The Series J Convertible Preferred Stock is classified as mezzanine equity and accreted to reflect its redemption value as of each reporting date. The accretion will be reflected as a deemed
dividend adjustment to arrive at net loss attributed to common stockholders for earnings per share calculations.
The warrants are recorded as a liability and re-measured at fair value as of each reporting date with fair value changes being recorded as non-operating income or
expense. The warrants were valued on day 1 and exceeded the gross proceeds of the offering. This resulted in a day 1 financing expense of $2.7
million.
Underwriter and Placement Agent Fees: In connection with the offerings described above, the Company paid the underwriter or placement agent,
as applicable, an aggregate cash fee equal to 8% of the aggregate gross proceeds raised in each of the offerings, except with
respect to the issuances made pursuant to the At-the-Market Program, for which the placement fee was equal to 3% of the aggregate
gross proceeds.
In conjunction with the Supply
Agreement, the Company issued DaVita a warrant to purchase up to an aggregate of 1,289,081 shares of common stock of the Company,
par value $0.0001 per share, at an exercise price of $3.2996 per share, provided that at no time can the DaVita Warrant be exercised for an amount of shares that would represent greater than 19.9% ownership in the Company subject to certain vesting milestones. The DaVita Warrant is expected to vest in four tranches as follows: (i) 25% upon receipt of notice to extend the
Supply Agreement past the initial pilot-term; (ii) 25% upon the attainment by the Company of a net revenue achievement from
DaVita’s efforts pursuant to the Supply Agreement within twelve months of Ultrafiltration Services Approval; (iii) 25% upon the attainment by the Company of a net revenue achievement from DaVita’s efforts pursuant to the Supply Agreement within twenty-four months of Ultrafiltration Services Approval; and (iv) 25% upon the attainment by the Company of a net revenue achievement from DaVita’s efforts pursuant to the Supply Agreement within thirty-six months of Ultrafiltration Services Approval. This warrant had not
vested as of December 31, 2023.
The Company evaluated the accounting treatment for the DaVita Warrant pursuant to ASC 718, “Stock Compensation,” and ASC 480, “Distinguishing Liabilities from Equity,” and concluded
that the DaVita Warrant should be classified as an equity instrument on the balance sheet as of December 31, 2023. In accordance with this treatment, the Company’s management concluded none of the performance-based vesting conditions of the
DaVita Warrant were probable of vesting as of December 31, 2023, and therefore, no expense associated with the DaVita Warrant was recognized in the Company’s financial statements as of that date. The Company will continue to evaluate the
probability of achieving the performance milestones associated with the DaVita Supply Agreement and will record the related equity-based expense in its financial statements based on the grant date fair value of the DaVita Warrant when
management deems it is probable that the performance-based vesting conditions will be achieved.
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Stock-Based Compensation |
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Stock-Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation |
Note 5— Stock-Based Compensation
Stock Options and Restricted Stock Awards
The Company has various share-based compensation plans, including the Third Amended and Restated 2017 Equity Incentive Plan, the 2013 Non-Employee Directors’ Equity Incentive Plan
and the 2021 Inducement Plan (collectively, the “Plans”). The Plans are designed to assist in attracting, motivating, and retaining employees and directors and to recognize the
importance of employees to the long-term performance and success of the Company. The Company has also granted stock options to certain non-employees outside of the Plans.
The Company recognized stock-based compensation expense related to grants of stock options and common stock awards to employees, directors and consultants of $670,000 and $862,000 during the
years ended December 31, 2023 and 2022, respectively. The following table summarizes the stock-based compensation expense that was recognized in the consolidated statements of operations for the years ended December 31,
The majority of the common stock awards and options to purchase common stock vest on the anniversary of the date of grant, which ranges from
to four years. Stock-based compensation expense
related to these awards is recognized on a straight-line basis over the related vesting term in most cases, which generally is the service period. It is the Company’s policy to issue new shares upon the exercise of options.Stock Options: The following is a summary of the Plans’ stock option activity during the years ended December 31:
For options outstanding and vested at December 31, 2023 and 2022, the weighted average remaining contractual life was 9.18 years and 8.79 years, respectively. There
were no option exercises in 2023 or 2022. The total fair value of options that vested in 2023 and 2022 was $614,100, and $1.1 million,
respectively, at the fair value of the options as of the date of grant.
Valuation Assumptions: The fair value of each stock option is estimated at the grant date using the Black-Scholes option pricing model. The
fair value of stock options under the Black-Scholes option pricing model requires management to make assumptions regarding projected employee stock option exercise behaviors, risk-free interest rates, volatility of the Company’s stock price,
and expected dividends.
The Company has not historically paid cash dividends to its common stockholders and currently does not anticipate paying any cash dividends in the foreseeable future. As a result,
the Company has assumed a dividend yield of 0%. The risk-free interest rate is based upon the rates of U.S. Treasury bills with a
term that approximates the expected life of the option. Since the Company has limited historical exercise data to reasonably estimate the expected life of its option awards, the expected life is calculated using a simplified method. Expected
volatility is based on historical volatility of the Company’s stock.
The following table provides the weighted average assumptions used in the Black-Scholes option pricing model for the years ended December 31:
The weighted-average fair value of stock options granted in 2023 and 2022 was $6.09
and $76.05, respectively. As of December 31, 2023, the total compensation cost related to all non-vested stock option awards not
yet recognized was approximately $1.1 million and is expected to be recognized over the remaining weighted-average life of 3.01 years.
Warrants: Warrants to purchase 2,963 and 679 shares of common stock were outstanding on December 31, 2023 and 2022,
respectively. Exercisable warrants were 151,583 and 679,244 on December 31, 2023 and 2022, respectively. As of December 31, 2023, warrants outstanding were exercisable at prices ranging from $3.30 to $189,000 per share and are exercisable over a
period ranging from immediately to 4.8 years.
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Fair Value of Financial Instruments |
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Fair Value of Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments |
Note 6—Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, marketable securities, and warrants.
Pursuant to the requirements of ASC Topic 820 “Fair Value Measurement,” the Company’s financial assets and liabilities measured at fair value
on a recurring basis are classified and disclosed in one of the following three categories:
All cash equivalents and marketable securities are considered Level 1 measurements for all periods
presented.
The available-for-sale marketable securities primarily consist of investment-grade, U.S. dollar-denominated
fixed and floating-rate debt, measured at fair value on a recurring basis.
The fair value of the Company’s common stock warrant liability related to the investor warrants issued in
the October 2023 and October 2022 public offerings, were calculated using a Monte Carlo valuation model and were classified as Level 3 in the fair value hierarchy.
The following is a roll-forward of the fair value of Level 3 warrants:
Fair values were calculated using the following assumptions:
A significant change in the inputs used for the Monte Carlo valuation models, such as the expected
volatility, risk-free interest rate, or probability of future equity financings, in isolation, would result in significantly higher or lower fair value measurements. In combination, changes in these inputs could result in a significantly
higher or lower fair value measurement if the input changes were to be aligned or could result in a minimally higher or lower fair value measurement if the input changes were of a compensating nature.
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Income Taxes |
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Income Taxes |
Note 7—Income Taxes
Domestic and foreign income (loss) before income taxes consists of the following for the years ended December 31:
The components of income tax expense consist of the following for the years ended December 31:
Actual income tax expense differs from statutory federal income tax expense as follows for the years ended December 31:
Deferred taxes consist of the following as of December 31:
As of December 31, 2023, the Company had federal net operating loss (“NOL”)
carryforwards of approximately $212.2 million and state NOL carryforwards of $61.7 million. Approximately $119.7 million of federal NOL
carryforwards will expire between and . Pursuant to the Tax Cuts and Jobs Act of 2017, NOLs generated after 2017 of approximately $92.5
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 loss carryovers.
The Company provides for a valuation allowance when it is more likely than not that it will not realize a portion of the deferred tax assets. The Company has established a valuation
allowance for U.S. and foreign deferred tax assets due to the uncertainty that enough taxable income will be generated in those taxing jurisdictions to utilize the assets. Therefore, the Company has not reflected any benefit of such deferred
tax assets in the accompanying consolidated financial statements. For the years ended December 31, 2023 and 2022, the valuation allowance increased by $3.8 million and $4.3 million, respectively. The current year increase was primarily due to the
federal and state net operating losses generated.
During 2023 and 2022, the Company believes it experienced an ownership change as defined in Section 382 of the Internal Revenue Code, which will limit the ability to utilize the
Company’s net operating losses (NOLs). The Company may have experienced additional ownership changes in earlier years further limiting the NOL carryforwards that may be utilized. The Company has not yet completed a formal Section 382
analysis. The general limitation rules allow the Company to utilize its NOLs subject to an annual limitation that is determined by multiplying the federal long-term tax-exempt rate by the Company’s value immediately before the ownership
change.
The accounting guidance related to uncertain tax positions prescribes a recognition threshold and measurement attribute for recognition and measurement of a tax position taken or
expected to be taken in a tax return. It also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company had no material uncertain tax positions as of December 31, 2023 or 2022.
The Company recognizes interest and penalties on unrecognized tax benefits as well as interest received from favorable tax settlements within income tax expense. At December 31, 2023
and 2022, the Company recorded no accrued interest or penalties related to uncertain tax positions.
The tax years ended December 31, 2020 through December 31, 2023 remain open to examination by the Internal Revenue Service and by the various states where the Company is subject to
taxation. Additionally, the returns of the Company’s Irish subsidiary are subject to examination by tax authorities for the tax years ended December 31, 2020 and subsequent years.
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Operating Leases |
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Operating Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Leases |
Note 8—Operating Leases
The Company leases a 23,000 square foot facility located in Eden Prairie, Minnesota for office and manufacturing space under a non-cancelable operating lease that expires in March 2027. In
November 2021, the Company entered into a fourth amendment to the lease, extending the term of the lease from March 31, 2022, to March 31, 2027. This facility serves as our corporate headquarters and houses substantially all our functional
areas. Monthly rent and common area maintenance charges, including estimated property tax for our headquarters, total approximately $34,000.
The lease contains provisions for annual inflationary adjustments. Rent expense is being recorded on a straight-line basis over the term of the lease. Beginning on April 1, 2022, the annual base rent was $10.50 per square foot, subject to annual increases of $0.32 to $0.34 per square foot thereafter.
The cost components of the Company’s operating lease were as follows for the year ended December 31:
Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs for our leased office and manufacturing space.
Maturities of our lease liability for the Company’s operating lease are as follows as of December 31:
As of December 31, 2023 and 2022, the remaining lease terms were 3.25
and 4.25 years, respectively, and discount rates were 6.25% and 6.25% respectively. For the years ended December 31, 2023, and
2022, the operating cash outflows from the Company’s operating lease for office and manufacturing space were $249,000 and $238,000, respectively.
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Finance Lease Liability |
12 Months Ended |
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Dec. 31, 2023 | |
Finance Lease Liability [Abstract] | |
Finance Lease Liability |
Note 9—Finance Lease Liability
In 2020, the Company entered into lease agreements to finance equipment valued at $98,000.
The equipment consisted of computer hardware and audio-visual equipment and is included in
in the
accompanying consolidated financial statements. The principal amount under the lease agreements was $93,000 at the date the lease
commenced, the implied interest rate is 7.5%, and the term of the lease is 39 months. |
Commitments and Contingencies |
12 Months Ended |
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Dec. 31, 2023 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies |
Note 10—Commitments and Contingencies
Employee Retirement Plan
The Company has a 401(k) plan that provides a retirement benefit to substantially all full-time U.S. employees. Eligible employees may contribute a percentage of their annual
compensation, subject to Internal Revenue Service limitations, with the Company matching a portion of the employees’ contributions at the discretion of the Company. Matching contributions totaled $268,000 and $185,000 for the years ended December 31, 2023,
and 2022, respectively.
Milestone Payment
On December 27, 2022, the Company entered into a license and distribution agreement with SeaStar Medical
Holding Corporation, (Nasdaq: ICU), a medical device company developing proprietary solutions to reduce the consequences of dysregulated immune responses including hyperinflammation on vital organs (“SeaStar”), appointing the Company as
the exclusive U.S. distributor to promote, advertise, market, distribute and sell certain products. As a part of this agreement, the Company agreed to pay SeaStar, a milestone payment of $450,000, upon its receipt of a Human Device Exemption (HDE) approval from the U.S. Food and Drug Administration’s (FDA). This payment is due on the later to occur of
30 days after achievement of the milestone event or April 1, 2024. As of December 31, 2023, the Company concluded it was
probable HDE approval would be obtained and recorded a liability of $450,000 on the consolidated balance sheet. On February 22,
2024, SeaStar obtained HDE approval.
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Related Party Transactions |
12 Months Ended |
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Dec. 31, 2023 | |
Related Party Transactions [Abstract] | |
Related Party Transactions |
Note 11—Related Party Transactions
There were no related
party transactions requiring disclosure during the year ended December 31, 2023, and 2022.
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Insider Trading Arrangements |
3 Months Ended |
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Dec. 31, 2023 | |
Insider Trading Arrangements [Line Items] | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
Nature of Business and Significant Accounting Policies (Policies) |
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Nature of Business and Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Going Concern |
Going Concern
The Company’s financial statements have been prepared and presented on a basis assuming it continues as a going concern. During the years ended December 31, 2023 and 2022, the
Company incurred losses from operations and net cash outflows from operating activities as disclosed in the consolidated statements of operations and cash flows, respectively. As of December 31, 2023, the Company had an accumulated deficit of
$287.6 million, and it expects to incur losses for the immediate future. To date, the Company has been funded by equity financings,
and although the Company believes that it will be able to successfully fund its operations, there can be no assurance that it will be able to do so or that it will ever operate profitably. These factors raise substantial doubt about the
Company’s ability to continue as a going concern through at least twelve months from the report date.
The
Company became a revenue-generating company after acquiring the Aquadex Business in August 2016. The Company expects to incur additional losses in the near-term as it grows the Aquadex Business, including investments in expanding its sales and marketing capabilities, purchasing inventory, manufacturing components, investing in clinical
research and new product development, and complying with the requirements related to being a U.S. public company. To become and remain profitable, the Company must succeed in expanding the adoption and market acceptance of the Aquadex System. This will require the Company to
succeed in training personnel at hospitals and effectively and efficiently manufacturing, marketing, and distributing the Aquadex System and related components. There can be no assurance that the Company will succeed in these activities,
and it may never generate revenues sufficient to achieve profitability.
During 2021 and through December 31, 2023, the Company closed on underwritten public equity offerings for aggregate net proceeds of approximately $40.9 million after deducting the underwriting discounts and commissions and other costs associated with the offerings. See Note 4—Stockholders’ Equity for additional related
disclosure. The Company will require additional funding to grow its Aquadex Business, which may not be available on terms favorable to the Company, or at all. The Company may receive those funds from the proceeds from future
warrant exercises, issuances of equity securities, or other financing transactions.
The Company believes that its existing capital
resources will be sufficient to support its operating plan through May 31, 2024. However, the Company will seek to raise additional capital to support its growth or other strategic initiatives through debt, equity, or a combination thereof.
There can be no assurance we will be successful in raising additional capital.
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Segment Information |
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating
decision-maker in deciding how to allocate resources and assess performance. The Company and the Company’s chief operating decision-maker, the Company’s chief executive officer, views the Company’s operations and manages its business as a
single operating segment. At December 31, 2023 and 2022, long-lived assets were located primarily in the United States.
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Basis of Presentation |
Basis of Presentation
The
accompanying consolidated financial statements include the accounts of Nuwellis, Inc. and its wholly owned subsidiary, Sunshine Heart Ireland Limited. All intercompany accounts and transactions between consolidated entities have been
eliminated.
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Use of Estimates |
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.
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Cash and Cash Equivalents |
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and term deposits with original maturities of three months or less. The carrying value of these instruments approximates fair value. The
balances, at times, may exceed federally insured limits. The Company has not experienced any losses on its cash and cash equivalents.
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Marketable securities |
Marketable securities
The Company’s marketable securities typically consist of investment-grade, U.S. dollar-denominated fixed and
floating-rate debt, which are classified as available-for-sale and included in current assets. Most marketable securities mature within twelve months from their date of purchase and generally are intended to fund current operations.
Securities are valued based on market prices for similar assets using third party certified pricing sources. Available-for-sale securities are carried at fair value with unrealized gains and losses reported as a component of shareholders’
equity in accumulated other comprehensive income (loss).
Available-for-sale securities are reviewed for possible impairment at
least quarterly, or more frequently if circumstances arise that may indicate impairment. When the fair value of the securities declines below the amortized cost basis and impairment is indicated, it must be determined whether the
impairment is other than temporary. Impairment is considered to be other than temporary if the Company: (i) intends to sell the security, (ii) will more likely than not be forced to sell the security before recovering its cost, or (iii)
does not expect to recover the security’s amortized cost basis. If the decline in fair value is considered other than temporary, the cost basis of the security is adjusted to its fair market value and the realized loss is reported in
earnings. Subsequent increases or decreases in fair value are reported as a component of shareholders’ equity in accumulated other comprehensive gain (loss).
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Accounts Receivable |
Accounts Receivable
Accounts receivables are unsecured, recorded at net realizable value, and do not bear interest. The Company makes judgments as to its ability to collect outstanding receivables based
upon significant patterns of collectability, historical experience, and management’s evaluation of specific accounts, and it will provide an allowance for credit losses when collection becomes doubtful. The Company performs credit evaluations
of its customers’ financial condition on an as-needed basis. Payment is generally due 30 days from the invoice date and accounts
past 30 days are individually analyzed for collectability. When all collection efforts have been exhausted, the account is written
off against the related allowance. To date the Company has not experienced any write-offs or significant deterioration in the aging of its accounts receivable, and therefore, no allowance for doubtful accounts was considered necessary as of December 31, 2023, or December 31, 2022. As of December 31, 2023, two
customers represented 14% and 15% of the total accounts receivable balance.
As of December 31, 2022, two customers represented 15% and 10%
of the total accounts receivable balance.
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Inventories |
Inventories
Inventories are recorded at the lower of cost or net realizable value using the first-in, first-out method. Overhead is allocated to manufactured finished goods inventory based on
the normal capacity of the Company’s production facilities. Abnormal amounts of overhead, if any, are expensed as incurred. On a regular basis, the Company reviews its inventory and identifies that which is excess, slow moving, and obsolete
by considering factors such as inventory levels and expected product life. A reserve is established for any identified excess, slow moving, and obsolete inventory through a charge to cost of goods sold. Inventories consisted of the following
as of December 31:
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Other Current Assets |
Other Current Assets
Other current assets represent prepayments and deposits made by the Company.
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Property, Plant and Equipment |
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is computed based upon the estimated useful life of the respective asset. Leasehold
improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the assets. Repairs and maintenance cost is expensed as incurred. The cost and accumulated depreciation of property,
plant and equipment retired or otherwise disposed of is removed from the related accounts, and any residual values are charged to expense. Depreciation expense has been calculated using the following estimated useful lives:
Depreciation and amortization expense was $362,000 and $372,000 for the years ended December 31, 2023, and 2022, respectively.
Property,
plant and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. If the impairment tests indicate that the carrying value of the
asset or asset group is greater than the expected undiscounted cash flows to be generated by such asset or asset group, further analysis is performed to determine the fair value of the asset or asset group. To the extent the fair value of
the asset or asset group is less than its carrying value, an impairment loss is recognized equal to the amount the fair value of the asset or asset group is exceeded by its carrying amount. Assets to be disposed of are carried at the lower
of their carrying value or fair value less costs to sell. Considerable management judgment is necessary to estimate the fair value of assets or asset groups, and accordingly, actual results could vary significantly from such estimates.
The Company continues to report operating losses and negative cash flows from
operations, both of which it considers to be indicators of potential impairment. Therefore, the Company evaluates its long-lived assets for potential impairment at each reporting period. The Company has concluded that its cash flows from
the various long-lived assets are highly interrelated and, as a result, the Company consists of a single asset group. As the Company expects to continue incurring losses in the foreseeable future, the undiscounted cash flow step was
bypassed, and the Company proceeded to fair value the asset group. The Company has determined the fair value of the asset group using its market capitalization determined with level 1 fair value inputs. For the operating lease
right-of-use asset the Company believes that the remaining lease payments represent a fair value of the right of use asset.
There have been no impairment losses recognized for the years ended December 31, 2023, or 2022.
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Revenue Recognition |
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. Accordingly, the Company recognizes revenue when its customers obtain control of its products or services, in an amount that reflects the consideration that the Company expects to
receive in exchange for those goods and services. See Note 2 – Revenue Recognition, for additional disclosures. For the year ended December 31, 2023, two customers represented 13.9% and 12.6%
of net sales. For the year ended December 31, 2022, one customer
represented 12.5% of net sales.
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Foreign Currency Translation |
Foreign Currency Translation
Sales and expenses denominated in foreign currencies are translated at average exchange rates in effect throughout the year. Assets and liabilities of foreign operations are
translated at period-end exchange rates with the impacts of foreign currency translation recorded in cumulative translation adjustment, a component of accumulated other comprehensive income. Foreign currency
transactions gains and losses are included in other expense, net in the consolidated statements of operations and other comprehensive loss.
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Stock-Based Compensation |
Stock-Based Compensation
The Company recognizes all
share-based payments to employees, directors, and consultants, including grants of stock options and common stock awards, in the consolidated statement of operations and comprehensive loss as an operating expense based on their fair
values as established at the grant date. Equity instruments issued to non-employees include common stock awards or warrants to purchase shares of our common stock. These common stock awards or warrants are either fully vested and
exercisable at the date of grant or vest over a certain period during which services are provided. The Company expenses the fair market value of fully vested awards at the time of grant, and of unvested awards over the period in which the
related services are received.
The Company computes the estimated fair values of stock options using the Black-Scholes option pricing model. Market price at the date of grant is used to
calculate the fair value of common stock awards.
Stock-based compensation expense is recorded based on awards ultimately expected to vest and is reduced for forfeitures. See Note 5—Stock-Based Compensation, for
further information regarding the assumptions used to calculate the fair value of stock-based compensation.
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Income Taxes |
Income Taxes
Deferred income taxes are provided on a liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit
carryforwards. Deferred tax liabilities are recognized for taxable temporary differences, which are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax
positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the
relevant tax authority.
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Loss per Share |
Loss per Share
Basic loss per share is computed based on the net loss for each period divided by the weighted average number of common shares outstanding. The net loss allocable to common stockholders for the year ended December 31, 2023, includes a deemed dividend from the Series
J Convertible Preferred Stock of $2.3 million and a payment in kind dividend from the Series J Convertible Preferred Stock of $0.1 million. (see Note 4 — Stockholders’ Equity).
Diluted earnings per share is computed based on
the net loss allocable to common stockholders for each period divided by the weighted average number of common shares outstanding, increased by the number of additional shares that would have been outstanding had the potentially dilutive
common shares been issued, and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include shares underlying
outstanding convertible preferred stock, warrants, stock options and other stock-based awards granted under stock-based compensation plans.
The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as
of the end of each year presented:
The following table reconciles reported net loss with reported net loss per share for the years ended December 31:
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Research and Development |
Research and Development
Research
and development (R&D) costs include activities related to development, design, and testing improvements of the Aquadex System and potential related new products. These R&D costs also include expenses related to clinical research
that the Company may sponsor or conduct to enhance understanding of the product and its use. R&D costs are expensed as incurred.
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Recent Accounting Pronouncements |
Recent Accounting Pronouncements
In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13,
“Financial Instruments – Credit Losses.” This ASU added a new impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity
recognizes as an allowance its estimate of expected credit losses. The CECL model applies to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. The CECL model does not
have a minimum threshold for recognition of impairment losses, and entities will need to measure expected credit losses on assets that have a low risk of loss. As a smaller reporting company pursuant to Rule 12b-2 of the Securities
Exchange Act of 1934, as amended, these changes become effective for the Company on January 1, 2023. The Company has adopted the new standard effective January 1, 2023, which didn’t have a material impact on the consolidated financial
statements.
The Company evaluates subsequent events through the date the consolidated financial statements are filed for events requiring adjustment to or disclosure in the
consolidated financial statements.
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Nature of Business and Significant Accounting Policies (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Business and Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories consisted of the following
as of December 31:
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Estimated Useful Lives | Depreciation expense has been calculated using the following estimated useful lives:
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Potential Shares of Common Stock not Included in Diluted Net Loss Per Share |
The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as
of the end of each year presented:
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Reconciles Reported Net Loss with Reported Net Loss Per Share |
The following table reconciles reported net loss with reported net loss per share for the years ended December 31:
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Property, Plant and Equipment (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment |
Property, plant and equipment were as follows:
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Stock-Based Compensation (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock-Based Compensation Expense | The following table summarizes the stock-based compensation expense that was recognized in the consolidated statements of operations for the years ended December 31,
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Summary of Plan Stock Option Activity | The following is a summary of the Plans’ stock option activity during the years ended December 31:
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Weighted Average Assumptions used in Black-Scholes Option Pricing Model |
The following table provides the weighted average assumptions used in the Black-Scholes option pricing model for the years ended December 31:
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Fair Value of Financial Instruments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-Sale Marketable Securities Measured at Fair Value on Recurring Basis |
The available-for-sale marketable securities primarily consist of investment-grade, U.S. dollar-denominated
fixed and floating-rate debt, measured at fair value on a recurring basis.
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Roll-Forward of Fair Value of Level 3 Warrants |
The following is a roll-forward of the fair value of Level 3 warrants:
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Fair Value Assumptions |
Fair values were calculated using the following assumptions:
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Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic and Foreign Income (Loss) Before Income Taxes |
Domestic and foreign income (loss) before income taxes consists of the following for the years ended December 31:
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Components of Income Tax Expense |
The components of income tax expense consist of the following for the years ended December 31:
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Actual Income Tax Expense Differs from Statutory Federal Income Tax Expense |
Actual income tax expense differs from statutory federal income tax expense as follows for the years ended December 31:
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Deferred Taxes |
Deferred taxes consist of the following as of December 31:
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Operating Leases (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
Operating Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Cost Components of Operating Leases |
The cost components of the Company’s operating lease were as follows for the year ended December 31:
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Maturities of Lease Liability |
Maturities of our lease liability for the Company’s operating lease are as follows as of December 31:
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Property, Plant and Equipment (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
Property, Plant and Equipment, Gross [Abstract] | ||
Property, Plant and Equipment, Gross | $ 4,210 | $ 4,151 |
Accumulated Depreciation | (3,482) | (3,171) |
Property, Plant and Equipment, Net | 728 | 980 |
Depreciation and amortization expense | 362 | 372 |
Production Equipment [Member] | ||
Property, Plant and Equipment, Gross [Abstract] | ||
Property, Plant and Equipment, Gross | 1,360 | 1,360 |
Loaners and Demo Equipment [Member] | ||
Property, Plant and Equipment, Gross [Abstract] | ||
Property, Plant and Equipment, Gross | 1,534 | 1,444 |
Computer Software and Equipment [Member] | ||
Property, Plant and Equipment, Gross [Abstract] | ||
Property, Plant and Equipment, Gross | 688 | 719 |
Office Furniture & Fixtures [Member] | ||
Property, Plant and Equipment, Gross [Abstract] | ||
Property, Plant and Equipment, Gross | 375 | 375 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment, Gross [Abstract] | ||
Property, Plant and Equipment, Gross | $ 253 | $ 253 |
Stock-Based Compensation, Warrants (Details) - Warrants [Member] - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
Class of Warrant or Right [Abstract] | ||
Warrants to purchase shares of common stock (in shares) | 2,963,000 | 679,000 |
Exercisable warrants (in shares) | 151,583 | 679,244 |
Minimum [Member] | ||
Class of Warrant or Right [Abstract] | ||
Exercise price of warrants (in dollars per share) | $ 3.3 | |
Maximum [Member] | ||
Class of Warrant or Right [Abstract] | ||
Exercise price of warrants (in dollars per share) | $ 189,000 | |
Warrants exercisable period | 4 years 9 months 18 days |
Fair Value of Financial Instruments, Available-for-Sale Marketable Securities Measured at Fair Value on Recurring Basis (Details) - Recurring [Member] - USD ($) $ in Thousands |
Dec. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Available-for-sale marketable securities [Abstract] | ||
Marketable securities | $ 0 | $ 569 |
Level 1 [Member] | ||
Available-for-sale marketable securities [Abstract] | ||
Marketable securities | $ 0 | $ 569 |
Fair Value of Financial Instruments, Roll-Forward of Fair Value of Level 3 Warrants (Details) - Warrant [Member] - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
Roll-Forward of Fair Value of Level 3 Warrants [Roll Forward] | ||
Beginning balance | $ 6,868 | $ 0 |
Ending balance | 2,483 | 6,868 |
October 18, 2022 Series I Warrants Issuance [Member] | ||
Roll-Forward of Fair Value of Level 3 Warrants [Roll Forward] | ||
Issuance | 18,695 | |
Issuance of Common Stock for exercise of warrants | (7,623) | |
Change in fair value | 755 | $ (11,827) |
October 17, 2023 Series J Warrants Issuance [Member] | ||
Roll-Forward of Fair Value of Level 3 Warrants [Roll Forward] | ||
Issuance | 4,965 | |
Exercise of warrants | (536) | |
Change in fair value | $ (1,586) |
Income Taxes, Domestic and Foreign Income (Loss) Before Income Taxes (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
Domestic and foreign income (loss) before income taxes [Abstract] | ||
Domestic | $ (20,233) | $ (14,551) |
Foreign | 32 | 35 |
Loss before income taxes | $ (20,201) | $ (14,516) |
Income Taxes, Components of Income Tax Expense (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
Current [Abstract] | ||
United States and state | $ 0 | $ 0 |
Foreign, net | (8) | (9) |
Deferred [Abstract] | ||
United States and state | 0 | 0 |
Foreign | 0 | 0 |
Total income tax expense | $ (8) | $ (9) |
Income Taxes, Effective Income Tax Rate Reconciliation (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
Effective income tax rate reconciliation [Abstract] | ||
Statutory federal income tax benefit | $ 4,242 | $ 3,048 |
State tax benefit, net of federal taxes | 531 | 783 |
Foreign tax | (1) | (1) |
Nondeductible/nontaxable items | (694) | 548 |
Other | (295) | (41) |
Valuation allowance (increase) decrease | (3,791) | (4,346) |
Total income tax expense | $ (8) | $ (9) |
Operating Leases (Details) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2023
USD ($)
ft²
$ / ft²
|
Dec. 31, 2022
USD ($)
|
|
Operating Leases [Abstract] | ||
Area of property leased under operating lease | ft² | 23,000 | |
Monthly rent and common area maintenance charges | $ 34 | |
Annual base rent (per square foot) | $ / ft² | 10.5 | |
Cost Components of Operating Leases [Abstract] | ||
Operating lease cost | $ 249 | $ 238 |
Variable lease cost | 142 | 127 |
Total | 391 | $ 365 |
Maturities of Lease Liability [Abstract] | ||
2024 | 257 | |
2025 | 264 | |
2026 | 272 | |
2027 | 69 | |
Total lease payments | 862 | |
Less: Interest | (102) | |
Present value of lease liability | $ 760 | |
Remaining lease term | 3 years 3 months | 4 years 3 months |
Discount rate | 6.25% | 6.25% |
Operating cash outflows from operating lease | $ 249 | $ 238 |
Minimum [Member] | ||
Operating Leases [Abstract] | ||
Annual increase per square foot (in dollars per square foot) | $ / ft² | 0.32 | |
Maximum [Member] | ||
Operating Leases [Abstract] | ||
Annual increase per square foot (in dollars per square foot) | $ / ft² | 0.34 |
Finance Lease Liability (Details) - USD ($) |
Dec. 31, 2023 |
Dec. 31, 2020 |
---|---|---|
Finance Lease Liability [Abstract] | ||
Value of finance lease equipment | $ 98,000 | |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Property, Plant and Equipment, Net | |
Principal amount under lease agreement | $ 93,000 | |
Implied interest rate | 7.50% | |
Finance lease term | 39 months |
Commitments and Contingencies (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 27, 2022 |
Dec. 31, 2023 |
Dec. 31, 2022 |
|
Employee Retirement Plan [Abstract] | |||
Employer's matching contribution | $ 268 | $ 185 | |
SeaStar Medical Holding Corporation [Member] | |||
Commitments and Contingencies [Abstract] | |||
Milestone payments | $ 450 | ||
Payment period after achievement of milestone event | 30 days |
Related Party Transactions (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
Related Party Transactions [Abstract] | ||
Amount of related party transactions | $ 0 | $ 0 |
1 Year Newellis Chart |
1 Month Newellis Chart |
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