☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
No. 68-0533453
|
|
(State or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S. Employer Identification No.)
|
12988 Valley View Road, Eden Prairie, MN 55344
|
(Address of Principal Executive Offices) (Zip Code)
|
(952) 345-4200
|
(Registrant’s Telephone Number, Including Area Code)
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
||
Non-accelerated filer ☒
|
Smaller reporting company ☒
|
||
Emerging growth company ☐
|
Page Number
|
||
PART I—FINANCIAL INFORMATION
|
||
Item 1
|
3
|
|
3
|
||
4
|
||
5
|
||
6
|
||
Item 2
|
13
|
|
Item 3
|
21
|
|
Item 4
|
21
|
|
PART II—OTHER INFORMATION
|
||
Item 1
|
21
|
|
Item 1A
|
22
|
|
Item 2
|
22
|
|
Item 3
|
22
|
|
Item 4
|
22
|
|
Item 5
|
22
|
|
Item 6
|
23
|
(In thousands, except share and per share amounts)
|
September 30,
2018
(unaudited)
|
December
31, 2017
|
||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$
|
8,222
|
$
|
15,595
|
||||
Accounts receivable
|
787
|
545
|
||||||
Inventory
|
1,948
|
1,588
|
||||||
Other current assets
|
240
|
136
|
||||||
Total current assets
|
11,197
|
17,864
|
||||||
Property, plant and equipment, net
|
573
|
570
|
||||||
Other assets
|
21
|
21
|
||||||
TOTAL ASSETS
|
$
|
11,791
|
$
|
18,455
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities
|
||||||||
Accounts payable and accrued expenses
|
$
|
617
|
$
|
862
|
||||
Accrued compensation
|
1,315
|
1,021
|
||||||
Other current liabilities
|
80
|
208
|
||||||
Total current liabilities
|
2,012
|
2,091
|
||||||
Other liabilities
|
126
|
126
|
||||||
Total liabilities
|
2,138
|
2,217
|
||||||
Commitments and contingencies
|
—
|
—
|
||||||
Stockholders’ equity
|
||||||||
Series A junior participating preferred stock as of September 30, 2018 and December 31, 2017, par value
$0.0001 per share; authorized 30,000 shares, none outstanding
|
—
|
—
|
||||||
Series F convertible preferred stock as of September 30, 2018 and December 31, 2017, par value $0.0001 per
share; authorized 565 and 3,780 shares, respectively, issued and outstanding 565 and 3,780, respectively
|
—
|
—
|
||||||
Preferred stock as of September 30,
2018 and December 31, 2017, par value $0.0001 per share; authorized 39,969,435 and 39,966,220 shares, none outstanding
|
—
|
—
|
||||||
Common stock as of September 30,
2018 and December 31, 2017, par value $0.0001 per share; authorized 100,000,000 shares, issued and outstanding 7,074,407 and 3,798,929, respectively
|
1
|
—
|
||||||
Additional paid‑in capital
|
203,559
|
197,367
|
||||||
Accumulated other comprehensive income:
|
||||||||
Foreign currency translation adjustment
|
1,225
|
1,227
|
||||||
Accumulated deficit
|
(195,132
|
)
|
(182,356
|
)
|
||||
Total stockholders’ equity
|
9,653
|
16,238
|
||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
11,791
|
$
|
18,455
|
(In thousands, except per share amounts)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
||||||||||||||
2018
|
2017
|
2018
|
2017
|
|||||||||||||
Net sales
|
$
|
1,363
|
$
|
957
|
$
|
3,499
|
$
|
2,722
|
||||||||
Costs and expenses:
|
||||||||||||||||
Cost of goods sold
|
915
|
782
|
2,686
|
1,912
|
||||||||||||
Selling, general and administrative
|
3,713
|
2,671
|
11,489
|
7,478
|
||||||||||||
Research and development
|
985
|
367
|
2,107
|
1,002
|
||||||||||||
Total costs and expenses
|
5,613
|
3,820
|
16,282
|
10,392
|
||||||||||||
Loss from operations
|
(4,250
|
)
|
(2,863
|
)
|
(12,783
|
)
|
(7,670
|
)
|
||||||||
Other income (expense):
|
||||||||||||||||
Other income, net
|
10
|
17
|
10
|
28
|
||||||||||||
Warrant valuation expense
|
-
|
-
|
-
|
(67
|
)
|
|||||||||||
Change in fair value of warrant liability
|
-
|
4
|
-
|
1,470
|
||||||||||||
Total other income
|
10
|
21
|
10
|
1,431
|
||||||||||||
Loss before income taxes
|
(4,240
|
)
|
(2,842
|
)
|
(12,773
|
)
|
(6,239
|
)
|
||||||||
Income tax expense, net
|
(1
|
)
|
(5
|
)
|
(3
|
)
|
(6
|
)
|
||||||||
Net loss
|
$
|
(4,241
|
)
|
$
|
(2,847
|
)
|
$
|
(12,776
|
)
|
$
|
(6,245
|
)
|
||||
Basic and diluted loss per share
|
$
|
(0.61
|
)
|
$
|
(4.55
|
)
|
$
|
(2.47
|
)
|
$
|
(25.36
|
)
|
||||
Weighted average shares outstanding – basic and diluted
|
6,987
|
626
|
5,171
|
359
|
||||||||||||
Other comprehensive loss:
|
||||||||||||||||
Foreign currency translation adjustments
|
$
|
(1
|
)
|
$
|
(1
|
)
|
$
|
(2
|
)
|
$
|
(7
|
)
|
||||
Total comprehensive loss
|
$
|
(4,242
|
)
|
$
|
(2,848
|
)
|
$
|
(12,778
|
)
|
$
|
(6,252
|
)
|
(in thousands)
|
Nine months ended
September 30,
|
|||||||
2018
|
2017
|
|||||||
Operating Activities:
|
||||||||
Net loss
|
$
|
(12,776
|
)
|
$
|
(6,245
|
)
|
||
Adjustments to reconcile net loss to cash flows used in operating activities:
|
||||||||
Depreciation and amortization expense
|
174
|
656
|
||||||
Stock-based compensation expense
|
1,544
|
391
|
||||||
Change in fair value of warrant liability
|
-
|
(1,470
|
)
|
|||||
Warrant valuation expense
|
-
|
67
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(242
|
)
|
(498
|
)
|
||||
Inventory
|
(360
|
)
|
(660
|
)
|
||||
Other current and long-term assets
|
(104
|
)
|
28
|
|||||
Accounts payable and accrued expenses
|
(79
|
)
|
(1,038
|
)
|
||||
Net cash used in operations
|
(11,843
|
)
|
(8,769
|
)
|
||||
Investing Activities:
|
||||||||
Purchases of property and equipment
|
(177
|
)
|
(206
|
)
|
||||
Net cash used in investing activities
|
(177
|
)
|
(206
|
)
|
||||
Financing Activities:
|
||||||||
Net proceeds from public stock offering
|
4,649
|
8,002
|
||||||
Net proceeds from exercise of warrants
|
-
|
1,981
|
||||||
Net proceeds from the sale of common stock, preferred stock, and warrants
|
-
|
184
|
||||||
Net cash provided by financing activities
|
4,649
|
10,167
|
||||||
Effect of exchange rate changes on cash
|
(2
|
)
|
(2
|
)
|
||||
Net increase (decrease) in cash and cash equivalents
|
(7,373
|
)
|
1,190
|
|||||
Cash and cash equivalents - beginning of period
|
15,595
|
1,323
|
||||||
Cash and cash equivalents - end of period
|
$
|
8,222
|
$
|
2,513
|
||||
Supplement schedule of non-cash activities
|
||||||||
Warrants issued as inducement to warrant exercise
|
$
|
-
|
$
|
509
|
||||
Conversion of temporary equity to permanent equity
|
$
|
-
|
$
|
485
|
||||
Supplemental cash flow information
|
||||||||
Cash paid for income taxes
|
$
|
-
|
$
|
8
|
(in thousands)
|
September 30,
2018
|
December 31,
2017
|
||||||
Finished Goods
|
$
|
810
|
$
|
902
|
||||
Work in Process
|
91
|
217
|
||||||
Raw Materials
|
1,047
|
469
|
||||||
Total
|
$
|
1,948
|
$
|
1,588
|
September 30
|
||||||||
2018
|
2017
|
|||||||
Stock options
|
1,987,502
|
36,874
|
||||||
Restricted stock units
|
90
|
324
|
||||||
Warrants to purchase common stock
|
8,522,672
|
496,629
|
||||||
Series F convertible preferred stock
|
266,680
|
-
|
||||||
Total
|
10,776,944
|
533,827
|
(in thousands, except per share amounts)
|
Three months
|
Nine Months
|
||||||
Net loss
|
$
|
(2,847
|
)
|
$
|
(6,245
|
)
|
||
Deemed dividend to preferred shareholders (see Note 4)
|
-
|
(2,851
|
)
|
|||||
Net loss after deemed dividend
|
(2,847
|
)
|
(9,096
|
)
|
||||
Weighted average shares outstanding
|
626
|
359
|
||||||
Basic and diluted loss per share
|
$
|
(4.55
|
)
|
$
|
(25.36
|
)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
(in thousands)
|
2018
|
2017
|
2018
|
2017
|
||||||||||||
Selling, general and administrative expense
|
$
|
440
|
$
|
106
|
$
|
1,446
|
$
|
351
|
||||||||
Research and development expense
|
(3
|
)
|
5
|
98
|
43
|
|||||||||||
Total stock-based compensation expense
|
$
|
437
|
$
|
111
|
$
|
1,544
|
$
|
394
|
· |
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.
|
Nine months ended September
30, 2017 (in thousands)
|
||||
Balance December 31, 2016
|
$
|
1,843
|
||
Change in fair value
|
(1,469
|
)
|
||
Exercise of warrants
|
(368
|
)
|
||
Ending balance as of September 30, 2017
|
$
|
6
|
|
As of Dec. 31,
2016 |
As of date of
exercise
|
||||||
Risk-free interest rates, adjusted for continuous compounding
|
1.47/1.96
|
%
|
1.45-1.99
|
%
|
||||
Term (years)
|
3.1/5.3
|
2.84-5.50
|
||||||
Expected volatility
|
55.3/49.8
|
%
|
49.9-58.5
|
%
|
||||
Dates and probability of future equity raises
|
various
|
various
|
Three Months Ended
September 30, 2018
|
Three Months Ended
September 30, 2017
|
Increase
|
% Change
|
|||||||||||
$
|
1,363
|
$
|
957
|
$
|
406
|
42.4
|
%
|
(dollars in thousands)
|
Three Months Ended
September 30, 2018
|
Three Months Ended
September 30, 2017
|
Increase
|
% Change
|
||||||||||||
Cost of goods sold
|
$
|
915
|
$
|
782
|
$
|
133
|
17.0
|
%
|
||||||||
Selling, general and administrative
|
$
|
3,713
|
$
|
2,671
|
$
|
1,042
|
39.0
|
%
|
||||||||
Research and development
|
$
|
985
|
$
|
367
|
$
|
618
|
168.4
|
%
|
(dollars in thousands)
|
Three Months Ended
September 30, 2018
|
Three Months Ended
September 30, 2017
|
Decrease
|
% Change
|
||||||||||||
Other income, net
|
$
|
10
|
$
|
-17
|
$
|
(7
|
)
|
(41.2
|
)%
|
|||||||
Change in fair value of warrant liability
|
$
|
-
|
$
|
4
|
$
|
(4
|
)
|
(100.0
|
)%
|
Nine Months Ended
September 30, 2018
|
Nine Months Ended
September 30, 2017
|
Increase
|
% Change
|
|||||||||||
$
|
3,499
|
$
|
2,722
|
$
|
777
|
28.5
|
%
|
(dollars in thousands)
|
Nine Months Ended
September 30, 2018
|
Nine Months Ended
September 30, 2017
|
Increase
|
% Change
|
||||||||||||
Cost of goods sold
|
$
|
2,686
|
$
|
1,912
|
$
|
774
|
40.5
|
%
|
||||||||
Selling, general and administrative
|
$
|
11,489
|
$
|
7,478
|
$
|
4,011
|
53.6
|
%
|
||||||||
Research and development
|
$
|
2,107
|
$
|
1,002
|
$
|
1,105
|
110.3
|
%
|
(dollars in thousands)
|
Nine Months Ended
September 30, 2018
|
Nine Months Ended
September 30, 2017
|
Decrease
|
% Change
|
||||||||||||
Change in fair value of warrant liability
|
$
|
-
|
$
|
1,470
|
$
|
(1,470
|
)
|
(100.0
|
)%
|
|||||||
Warrant valuation expense
|
$
|
-
|
$
|
(67
|
)
|
$
|
(67
|
)
|
(100.0
|
)%
|
||||||
Other income, net
|
$
|
10
|
$
|
28
|
$
|
(18
|
)
|
(64.3
|
)%
|
Incorporated By Reference
|
|||||||||||||
Exhibit
Number
|
Exhibit Description
|
Form
|
File
Number
|
Date of First
Filing
|
Exhibit
Number
|
Filed
Herewith
|
Furnished
Herewith
|
||||||
Fourth Amended and Restated Certificate of Incorporation
|
10
|
001-35312
|
February 1, 2012
|
3.1
|
|||||||||
|
Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation
|
8-K
|
001-35312
|
January 13, 2017
|
3.1
|
||||||||
Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation
|
8-K
|
001-35312
|
May 23, 2017
|
3.1
|
|||||||||
Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation
|
8-K
|
001-35312
|
October 12, 2017
|
3.1
|
|||||||||
Second Amended and Restated Bylaws
|
8-K
|
001-35312
|
May 23, 2017
|
3.2
|
|||||||||
Form of Common Stock Purchase Warrant issued pursuant to the Letter Agreement dated February 15, 2017
|
8-K
|
001-35312
|
February 16, 2017
|
4.1
|
|||||||||
Form of Warrant to purchase shares of common stock
|
S-1/A
|
333-216841
|
April 4, 2017
|
4.8
|
|||||||||
Separation and Release Agreement, dated as of August 6, 2018, between the Company and James Breidenstein
|
X
|
||||||||||||
Third Amendment to Lease, dated as of August 3, 2018, by and between the Company and Capital Partners Industrial Fund I, LLLP
|
X
|
||||||||||||
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
X
|
||||||||||||
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
X
|
||||||||||||
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
X
|
Incorporated By Reference
|
|||||||||||||
Exhibit
Number
|
Exhibit Description
|
Form |
File
Number
|
Date of First
Filing
|
Exhibit
Number
|
Filed
Herewith
|
Furnished
Herewith
|
||||||
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
X
|
||||||||||||
101.INS
|
XBRL Instance Document
|
X
|
|||||||||||
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
X
|
|||||||||||
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
X
|
|||||||||||
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
X
|
|||||||||||
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
X
|
|||||||||||
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
X
|
CHF Solutions, Inc.
|
|||
Date: November 7, 2018
|
By:
|
/s/ John L. Erb
|
|
John L. Erb
|
|||
Chief Executive Officer and Chairman of the Board
|
|||
(principal executive officer)
|
Date: November 7, 2018
|
By:
|
/s/ Claudia Drayton
|
|
Claudia Drayton
|
|||
Chief Financial Officer
|
|||
(principal financial officer)
|
CHF Solutions, Inc.
|
|||
By: | /s/ John Erb |
/s/ James Breidenstein
|
|
James Breidenstein
|
|||
John Erb
|
|||
CEO and Chairman of the Board
|
Date: 8/6/2018
|
A. |
Landlord, as successor in interest to Silver Prairie Crossroads, LLC, and Tenant are the current parties to that certain Office/Industrial Flex Lease dated October 21,
2011, as amended by that certain First Amendment to Lease Agreement dated August 16, 2013, as further amended by that certain Second Amendment to Lease dated April 20, 2015 (collectively, the “Lease”), for the lease by Tenant of
approximately 23,211 rentable square feet in the building located at 12988 Valley View Road, Eden Prairie, MN 55344, consisting, as more particularly described in the Lease (the “Premises”).
|
B. |
Effective May 24, 2017, Tenant changed its name from Sunshine Heart, Inc. to CHF Solutions, Inc.
|
C. |
Tenant and Landlord desire to amend the Lease to extend the term of the Lease, and to make certain other specific modifications to the Lease, upon the terms and
conditions hereinafter set forth.
|
1.0 |
Capitalized Terms. All capitalized terms referred to in this Amendment shall have the same
meaning defined in the Lease, except where expressly defined to the contrary in this Amendment.
|
2.0 |
Confirmation. Tenant acknowledges and agrees that: (a) Tenant is in sole possession of the
Premises demised under the Lease;(b) all work, improvements and furnishings required by Landlord under the Lease have been completed and accepted by Tenant; (c) Tenant has no offset, claim, recoupment or defense against the payment of
rent and other sums and the performance of all obligations of Tenant under the Lease and the Lease is binding on Tenant and is in full force and effect, and Tenant has no defenses to the enforcement of the Lease; (d) Tenant has not
assigned the Lease, or sublet the Premises, and (e) Tenant is not in default of the Lease and Tenant acknowledges that Landlord is not in default of the Lease. Landlord acknowledges and agrees that Landlord is not in default of the
Lease and Tenant is not in default of the Lease.
|
3.0 |
Term. The Term of the Lease shall be extended for an additional three (3) consecutive years
commencing April 1, 2019 such that it will expire on March 31, 2022 (the “Extension Term”).
|
4.0 |
Rent. The monthly Base Rent from and after April 1, 2019 shall be as follows:
|
Time Period
|
Monthly Base Rent
|
Annual Base Rent
|
Rate (PSF)
|
4/1/19-3/31/20
|
$17,408.25
|
$208,899.00
|
$9.00
|
4/1/20-3/31/21
|
$17,891.81
|
$214,701.75
|
$9.25
|
4/1/21-3/31/22
|
$18,375.38
|
$220,504.50
|
$9.50
|
5.0 |
Condition of Premises. Tenant shall accept the Premises in its as-is condition as of the
commencement of the Extension Term, and landlord shall have no obligation to make or pay for any alterations, additions, improvement or renovations in or to the premises to prepare the same for Tenant's occupancy during the Extension
Term, except to fund the Allowance as defined below.
|
6.0 |
Improvements By Tenant and Tenant Improvement Allowance. Tenant shall pay all costs it incurs
in constructing or installing improvements to the Premises. Landlord shall contribute to such improvements a cash allowance to Tenant in an amount not to exceed $30,000.00 (“Allowance”). Tenant shall pay all costs of the improvements
to the Premises that are in excess of the Allowance. The Allowance shall be used by Tenant for improvements to the Premises, such as replacing a toilet, the hot water heater, and certain HVAC systems, moving the Mitsubishi air
conditioning unit to the roof of the Building, and replacing lighting with LED lights, and all improvements shall be made subject to the terms and conditions of Article 15 of the Lease. The parties acknowledge that the foregoing are
examples and not a complete list of possible improvements and Tenant may make other improvements in its reasonable discretion and in accordance with the Lease. Any costs related to such improvements of Tenant for which Tenant requests
reimbursement from the Allowance, must be supported by reasonable documentation, such as (i) supporting invoices, (ii) receipt of purchase, information, and data as may be requested by Landlord from all general contractors,
subcontractors and mater ilmen performing work on the Premises; and (iii) a full and final sworn construction statement, together with final lien waivers from all contractors and subcontractors for all work performed at the Premises
by Tenant or at the request of Tenant. Provided Tenant is not in default under the Lease, as amended, Landlord agrees to reimburse Tenant for the improvement costs submitted with documentation required above, not to exceed the amount
of the Allowance, within thirty (30) days following receipt of Tenant’s request.
|
7.0 |
Real Estate Brokers. Notwithstanding anything to the contrary contained in the Lease,
Landlord and Tenant each represents and warrants to the other party that it has not authorized or employed, or acted by implication to authorize or employ, any real estate broker or salesman to act for it in connection with this
Amendment, except for Jason Simek of Colliers International on behalf of Landlord, who shall be paid a commission by Landlord pursuant to a separate written agreement. Landlord and Tenant shall each indemnify, defend and hold the
other party harmless from and against any and all claims by any other real estate broker or salesman whom the indemnifying party authorized or employed, or acted by implication to authorize or employ, to act for the indemnifying party
in connection with this Amendment.
|
8.0 |
Landlord’s Notice Address. Effective immediately, Landlord’s notice address under the Lease
is hereby amended and restated as follows: c/o Capital Partners, 900 2nd Avenue South, #1575, Minneapolis, MN 55402.
|
9.0 |
General Provisions.
|
9.1 |
Option Rights. All option rights, if any, contained in the Lease, including, without
limitation, options to extend or renew the term of the Lease or to expand the Premises, are hereby deleted and are of no force and effect.
|
9.2
|
Further Assurances.
Landlord and Tenant each agree to execute any and all documents and agreements reasonably requested by the other party to further evidence or effectuate this Amendment.
|
9.3 |
Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the
parties hereto and their successors and assigns.
|
9.4 |
Reaffirmation. As amended hereby, the Lease shall remain in full force and effect.
|
9.5 |
Conflicts. In case of any conflict between any term or provision of this Amendment and the
Lease, the term or provision of this Amendment shall govern.
|
9.6 |
.pdf Signatures. In order to expedite the transaction contemplated herein, signatures sent by
.pdf via e-mail may be used in place of original signatures on this Amendment or any other document or agreement in this transaction, other than those to be recorded in the public records. Landlord and Tenant intend to be bound by the
signatures on each .pdf document, are aware that the other party will rely on the .pdf signatures, and hereby waive any defenses to the enforcement of the terms of this Amendment or any other such document based on the form of
signature. In the event .pdf signatures are used in any instance, ink-signed originals of such document shall also promptly be exchanged by the parties.
|
9.7 |
Counterparts. This Amendment may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which when taken together shall constitute one agreement.
|
10.0 |
Effectiveness. The parties agree that the submission of a draft or copy of this Amendment for review or signature by a party is not intended, nor shall it
constitute or be deemed, by either party to be an offer to enter into a legally binding agreement with respect to the subject matter hereof and may not be relied on for any legal or equitable rights or obligations. Any draft or
document submitted by Landlord or its agents to Tenant shall not constitute a reservation of or option or offer in favor of Tenant. The parties shall be legally bound with respect to the subject matter hereof pursuant to the terms of
this Amendment only if, as and when all the parties have executed and delivered this Amendment to each other. Prior to the complete execution and delivery of this Amendment by all parties, each party shall be free to negotiate the
form and terms of this Amendment in a manner acceptable to each party in its sole and absolute discretion. The parties acknowledge and agree that the execution and delivery by one party prior to the execution and delivery of this
Amendment by the other party shall be of no force and effect and shall in no way prejudice the party so executing this Amendment or the party that has not executed this Amendment.
|
LANDLORD;
|
||
Capital Partners Industrial Fund I, LLLP
|
||
By;
|
/s/ Jason Simek |
|
Name;
|
Jason Simek |
|
Its:
|
Managing Patner |
TENANT:
|
||
CHF Solutions, Inc.
|
||
By:
|
/s/ Vitaliy Epshteyn |
|
Name:
|
Vitaliy Epshteyn |
|
Its:
|
VP of Operations |
1. |
I have reviewed this Quarterly Report on Form 10-Q of CHF Solutions, Inc. for the quarterly period ended September 30, 2018;
|
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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
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: November 7, 2018
|
/s/ John L.
Erb
|
|
John L. Erb
|
||
Chief Executive Officer
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of CHF Solutions, Inc. for the quarterly period ended September 30, 2018;
|
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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
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: November 7, 2018
|
/s/ Claudia Drayton
|
|
Claudia Drayton
|
||
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: November 7, 2018
|
/s/ John L. Erb
|
|
John L. Erb
|
||
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: November 7, 2018
|
/s/ Claudia
Drayton
|
|
Claudia Drayton
|
||
Chief Financial Officer
|
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Nov. 05, 2018 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | CHF Solutions, Inc. | |
Entity Central Index Key | 0001506492 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Ex Transition Period | false | |
Entity Common Stock, Shares Outstanding | 7,074,407 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 |
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) [Abstract] | ||||
Net sales | $ 1,363 | $ 957 | $ 3,499 | $ 2,722 |
Costs and expenses: | ||||
Cost of goods sold | 915 | 782 | 2,686 | 1,912 |
Selling, general and administrative | 3,713 | 2,671 | 11,489 | 7,478 |
Research and development | 985 | 367 | 2,107 | 1,002 |
Total costs and expenses | 5,613 | 3,820 | 16,282 | 10,392 |
Loss from operations | (4,250) | (2,863) | (12,783) | (7,670) |
Other income (expense): | ||||
Other income, net | 10 | 17 | 10 | 28 |
Warrant valuation expense | 0 | 0 | 0 | (67) |
Change in fair value of warrant liability | 0 | 4 | 0 | 1,470 |
Total other income | 10 | 21 | 10 | 1,431 |
Loss before income taxes | (4,240) | (2,842) | (12,773) | (6,239) |
Income tax expense, net | (1) | (5) | (3) | (6) |
Net loss | $ (4,241) | $ (2,847) | $ (12,776) | $ (6,245) |
Basic and diluted loss per share (in dollars per share) | $ (0.61) | $ (4.55) | $ (2.47) | $ (25.36) |
Weighted average shares outstanding - basic and diluted (in shares) | 6,987 | 626 | 5,171 | 359 |
Other comprehensive loss: | ||||
Foreign currency translation adjustments | $ (1) | $ (1) | $ (2) | $ (7) |
Total comprehensive loss | $ (4,242) | $ (2,848) | $ (12,778) | $ (6,252) |
Nature of Business and Basis of Presentation |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Business and Basis of Presentation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Business and Basis of Presentation | Note 1 – Nature of Business and Basis of Presentation Nature of Business: CHF Solutions, Inc. (the “Company”) is a medical device company focused on commercializing the Aquadex FlexFlow® System for aquapheresis therapy. The Aquadex FlexFlow System (“Aquadex”) is indicated for temporary (up to eight hours) ultrafiltration treatment of patients with fluid overload who have failed diuretic therapy and extended (longer than 8 hours) ultrafiltration treatment of patients with fluid overload who have failed diuretic therapy and require hospitalization. CHF Solutions, Inc. is a Delaware corporation headquartered in Eden Prairie, Minnesota with wholly owned subsidiaries in Australia, Ireland and Delaware. The Company has been listed on the Nasdaq Capital Market since February 2012. Prior to July 2016, the Company was focused on developing the C-Pulse® Heart Assist System for treatment of Class III and ambulatory Class IV heart failure. In August 2016, the Company acquired the Aquadex FlexFlow business from a subsidiary of Baxter International, Inc. (“Baxter”), a global leader in the hospital products and dialysis markets (herein referred to as the “Aquadex Business”). On September 29, 2016, the Company announced a strategic refocus of its strategy that included halting all clinical evaluations of its C-Pulse technology to fully focus its resources on its recently acquired Aquadex Business. On May 23, 2017, the Company announced it was changing its name from Sunshine Heart, Inc. to CHF Solutions, Inc. to more appropriately reflect the direction of its business. During 2017, the Company’s board of directors and stockholders approved two reverse stock splits (together, the “Reverse Stock Splits”). Neither reverse stock split changed 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. The first reverse stock split was a 1-for-30 reverse split of the Company’s outstanding common stock that became effective after trading on January 12, 2017. The second reverse stock split was a 1-for-20 reverse split of the Company’s outstanding common stock that became effective after trading on October 12, 2017. All share and per-share amounts have been retroactively adjusted to reflect the Reverse Stock Splits for all periods presented. Principles of Consolidation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and note disclosures normally included in the audited annual consolidated financial statements have been condensed or omitted pursuant to those rules and regulations. Accordingly, they do not include all of the information necessary for a fair presentation of results of operations, comprehensive loss, financial condition, and cash flows in conformity with U.S. GAAP. In the opinion of management, the condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of the Company for the periods presented. Operating results for interim periods are not necessarily indicative of results that may be expected for the year as a whole. The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Going Concern: The Company’s consolidated financial statements have been prepared and presented on a basis assuming it continues as a going concern. During the years ended December 31, 2017 and 2016 and through September 30, 2018, the Company incurred losses from operations and net cash outflows from operating activities as disclosed in the consolidated statements of operations and cash flows, respectively. As of September 30, 2018, the Company had an accumulated deficit of $195.1 million and it expects to incur losses for the immediate future. To date, the Company has been funded by debt and 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 the next twelve months. The Company became a revenue generating company after acquiring the Aquadex Business in August 2016. The Company expects to incur additional losses in the near-term as it grows the Aquadex Business, including investments in expanding its sales and marketing capabilities, purchasing inventory, manufacturing components, and complying with the requirements related to being a U.S. public company. To become and remain profitable, the Company must succeed in expanding the adoption and market acceptance of Aquadex. This will require the Company to succeed in training personnel at hospitals and in effectively and efficiently manufacturing, marketing and distributing Aquadex 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. On July 3, 2018, April 24, 2017 and on November 27, 2017, the Company closed on underwritten public equity offerings for aggregate net proceeds of approximately $28.8 million after deducting the underwriting discounts and commissions and other costs associated with the offerings (see Note 4 - Equity). The Company will require additional funding to grow its Aquadex Business, which may not be available on terms favorable to the Company, or at all. The Company may receive those funds from the proceeds from future warrant exercises, issuances of equity securities, or other financing transactions. Should warrant exercises not materialize or future capital raising be unsuccessful, the Company may not be able to continue as a going concern. No adjustments have been made relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company not continue as a going concern. Revenue Recognition: The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers, which the Company adopted effective January 1, 2018. 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 accounting policies and transition disclosures. Accounts Receivable: Accounts receivable are unsecured, are recorded at net realizable value, and do not bear interest. The Company makes judgments as to its ability to collect outstanding receivables based upon significant patterns of uncollectability, historical experience, and management’s evaluation of specific accounts and will provide an allowance for credit losses when collection becomes doubtful. The Company performs credit evaluations of its customers’ financial condition on an as-needed basis. Payment is generally due 30 days from the invoice date and accounts past 30 days are individually analyzed for collectability. When all collection efforts have been exhausted, the account is written off against the related allowance. The Company’s accounts receivable have terms that require payment in 30 days. To date the Company has not experienced any write-offs or significant deterioration of the aging of its accounts receivable, and therefore, no allowance for doubtful accounts was considered necessary as of September 30, 2018 or December 31, 2017. Inventories: Inventories represent finished goods purchased from the Company’s supplier and are recorded as the lower of cost or net realizable value using the first-in-first out method. Inventories consisted of the following:
Contingent consideration: In connection with the Company’s purchase of the Aquadex Business, the Company has an obligation to pay additional consideration that is contingent upon the occurrence of certain future events (see Note 8 – Commitment and Contingencies). Contingent consideration was recognized at the acquisition date at the estimated fair value of the contingent milestone payments. The fair value of the contingent consideration is remeasured to its estimated fair value at the end of each reporting period, with changes recorded to earnings. Loss per share: Basic loss 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. The net loss allocable to common stockholders for the nine months ended September 30, 2017, reflects a $1.0 million increase for the net deemed dividend to preferred stockholders provided in connection with the close of the public offering of Series E Convertible Preferred Stock in April of 2017 (see Note 4 - Equity), representing the intrinsic value of the shares at the time of issuance. In addition, the net loss allocable to common stockholders for the nine months ended September 30, 2017, reflects a $1.8 million increase for the net deemed dividend to preferred stockholders provided in connection with the shareholder approval of the Series C and D Convertible Preferred Stock offering in January of 2017 (see Note 4 - Equity), representing the intrinsic value of the shares at the time of issuance. Diluted loss 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. These potentially dilutive shares were excluded from the computation of loss per share as their effect was antidilutive due to the Company’s net loss in each of those periods. The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as of the end of each period presented:
The following table reconciles reported net loss with reported net loss per share for the periods ended September 30, 2017:
New Accounting Pronouncements: In May 2014, August 2015, March 2016, April 2016 and May 2016, the Financial Accounting Standards Board (“FASB”) issued amended revenue recognition guidance to clarify the principles for recognizing revenue from contracts with customers. The guidance requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The Company adopted this new standard on January 1, 2018, utilizing the modified retrospective approach. There were no impacts to the amount or timing of revenue that the Company had recognized in prior periods. See Note 2 - Revenue Recognition for additional accounting policy and transition disclosures. In February 2016, the FASB issued updated guidance to improve financial reporting about leasing transactions. This guidance will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The original guidance required application on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued new guidance which includes an option to not restate comparative periods in transition. This guidance is effective for the Company’s annual and quarterly periods beginning January 1, 2019. The Company is in the process of evaluating the impact that the adoption of this standard will have on its consolidated financial statements and is currently assessing its leases. The Company expects that the adoption of this guidance will result in a material increase in the assets and liabilities recorded on its consolidated balance sheets and additional qualitative and quantitative disclosures. The Company expects to use the effective date of this standard as the date of initial application, with no retrospective adjustments to prior comparative periods. The Securities and Exchange Commission (“SEC”) issued updated guidance which amends various SEC disclosure requirements that it has determined to be redundant, duplicative, overlapping, outdated, or superseded. Issued as part of the SEC’s ongoing disclosure effectiveness initiative, the final rule is expected November 5, 2018. The Company is evaluating the impact of the release will have on its consolidated financial statements and disclosures. |
Revenue Recognition |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
Revenue Recognition [Abstract] | |
Revenue Recognition | Note 2 – Revenue Recognition Net Sales The Company sells its products in the United States primarily through a direct sales force. Customers who purchase the Company’s products include hospitals and clinics throughout the United States. In countries outside the United States, the Company sells its products through a limited number of specialty healthcare distributors in the United Kingdom, Italy, Spain, Germany, and Southeast Asia. The majority of these distributors resell the Company’s products to hospitals and clinics in their respective geographies. Revenue from product sales are 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 includes shipment and handling fees charged to customers. Revenue is measured as the amount of consideration the Company expects 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 that are recognized over time. Revenue from extended service plans represents less than 1% of net sales for the both the three- and nine-month periods ended September 30, 2018. The unfulfilled performance obligations related to these extended service plans is included in deferred revenue in the amount of $41,250 and $38,000 as of September 30, 2018 and December 31, 2017, respectively. Deferred revenue is included in other current liabilities on the condensed consolidated balance sheets. The majority of the deferred revenue is expected to be recognized within one year. Sales taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales. Revenue includes shipment and handling fees charged to customers. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of goods sold. Product Returns: The Company offers customers a limited right of return for its product in case of non-conformity or performance issues. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company currently estimates product return liabilities using available industry data and its own historical sales and returns information. The Company has not received any returns to date and believes that future returns of its products will be minimal. Therefore, revenue recognized is not currently impacted by variable consideration related to product returns. |
Debt |
9 Months Ended |
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Sep. 30, 2018 | |
Debt [Abstract] | |
Debt | Note 3 – Debt On August 5, 2016, the Company entered into a loan and security agreement with Silicon Valley Bank (the “Bank”) for a $1.0 million revolving line of credit (the “Revolving Line”). Under the Revolving Line, the Company may borrow the lesser of $1.0 million or 80% of its eligible accounts (subject to customary exclusions), minus the outstanding principal balance of any advances under the Revolving Line. Advances under the Revolving Line, if any, accrue interest at a floating annual rate equal to 1.75% or 1.0% above the prime rate, depending on liquidity factors. The loan agreement contains customary representations, as well as customary affirmative and negative covenants. Outstanding borrowings, if any, are collateralized by all of the Company’s assets, excluding intellectual property which is subject to a negative pledge. Advances under the Revolving Line are subject to various conditions precedent, including compliance with financial covenants relating to net liquidity relative to monthly cash burn, which the Company may or may not meet depending on its cash position at any given point. The Revolving Line expires March 31, 2020. There were no borrowings outstanding under this facility as of September 30, 2018 or December 31, 2017. Warrants: In connection with the funding of term loans under prior agreements, the Company issued warrants to purchase 115 shares of common stock at an exercise price of $3,132 per share and warrants to purchase 55 shares of common stock at an exercise price of $2,208 per share to the Bank and one of its affiliates. The Company valued these warrants at $2,316 per share and $1,626 per share, respectively, utilizing the Black Scholes valuation model and the following assumptions: an expected dividend yield of 0%, an expected stock price volatility of 88.07% and 87.04%, a risk-free interest rate of 1.86% and 2.20%, and an expected life of 6.25 years. The warrants were fully vested on the date of grant and expire on February 2025, and June 2025, respectively. |
Equity |
9 Months Ended |
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Sep. 30, 2018 | |
Equity [Abstract] | |
Equity | Note 4 – Equity Series B/B-1 Convertible Preferred Stock: On July 20, 2016, the Company entered into a securities purchase agreement with an institutional investor for an offering of shares of convertible preferred stock and warrants with gross proceeds of approximately $3.5 million in a registered direct offering. The Series B issued under the securities purchase agreement was exchanged for Series B-1 Convertible Preferred Stock on October 30, 2016. The Series B-1 Convertible Preferred Stock was non-voting and was convertible into shares of common stock at the holder’s election at any time. Approximately $1.6 million of the proceeds were allocated to the preferred stock, representing the residual proceeds after the warrants were recorded at fair value (see below.) As of September 30, 2018, and December 31, 2017, all Series B/B-1-Convertible Preferred Stock had been converted into common stock and none were outstanding. Series C and D Convertible Preferred Stock: On October 30, 2016, the Company entered into a securities purchase agreement with an institutional investor for shares of convertible preferred stock and warrants with an aggregate purchase price of $3.8 million in a registered direct offering and simultaneous private placement. The first closing of the transaction occurred on November 3, 2016, whereby the Company received $3.6 million in gross proceeds and the second closing occurred on January 10, 2017, whereby the Company received gross proceeds of $0.2 million. The Series C and D Convertible Preferred Stock issued in the transaction included a contingent beneficial conversion amount of $1.3 million and $0.5 million, respectively, representing the intrinsic value of the shares at the time of issuance. This amount is reflected as an increase to the loss per share allocable to common stockholders in the nine-month period ended September 30, 2017 when the contingency for the conversion was resolved with the shareholder approval allowing for the conversion of the preferred stock into common stock. As of September 30, 2018, and December 31, 2017, all shares of the Series C and D Convertible Preferred Stock had been converted into common stock and none were outstanding. Series E Convertible Preferred Stock: On April 24, 2017, the Company closed on an underwritten public offering of a total of 2.8 million shares of common stock, 6,400 shares of Series E Convertible Preferred Stock convertible into 6.4 million shares of common stock, and warrants to purchase 9.2 million shares of common stock for gross proceeds of $9.2 million, which included the full exercise of the underwriter’s over-allotment option to purchase additional shares and warrants. Net proceeds totaled approximately $8.0 million after deducting the underwriting discounts and commissions and other costs associated with the offering. The Series E Convertible Preferred Stock included a beneficial conversion amount of $1.0 million, representing the intrinsic value of the shares at the time of issuance. This amount is reflected as an increase to the loss per share allocable to common stockholders in the nine months ended September 30, 2017. As of September 30, 2018, and December 31, 2017, all shares of the Series E Convertible Preferred Stock had been converted into common stock and none were outstanding. Series F Convertible Preferred Stock: On November 27, 2017, the Company closed on an underwritten public offering of Series F Convertible Preferred Stock (“Series F 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 preferred stock, convertible into shares of the Company’s common stock at a conversion price of $4.50 per share. Each share of Series F preferred stock was accompanied by a Series 1 warrant, which expires on the first anniversary of its issuance, to purchase 223 shares of the Company’s common stock at an exercise price of $4.50 per share, and a Series 2 warrant, which expires on the seventh anniversary of its issuance, to purchase 223 shares of the Company’s common stock at an exercise price of $4.50 per share. The Series F preferred stock and the warrants were immediately separable and were issued separately. The conversion price of the Series F preferred stock will be adjusted in the event of a stock split, combination, reclassification or stock dividend or if the Company consummates a fundamental transaction. The Series F preferred stock also 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 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 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 approximately 4.0 million shares of common stock and warrants to purchase approximately 8.0 million shares of common stock were issued in the offering. The Series F Convertible Preferred Stock included a beneficial conversion amount of $8.7 million, representing the intrinsic value of the shares at the time of issuance. As noted below, effective July 3, 2018, the conversion price of the Series F preferred stock was reduced from $4.50 to $2.12, the per share price to public in the July 2018 Offering described below, and now each share of the remaining Series F preferred stock is convertible into 472 shares of the Company’s common stock. As of September 30, 2018, and December 31, 2017, 17,435 and 14,220 shares of the Series F Convertible Preferred Stock had been converted into an aggregate of 3,899,210 and 3,171,060 shares of common stock and 565 and 3,780 remained outstanding, respectively. July 2018 Offering: On July 3, 2018, the Company closed on an underwritten public offering of 2,547,169 shares of its common stock at a public offering price of $2.12 per share, for gross proceeds of $5.4 million, including the full exercise of the underwriters’ over-allotment option to purchase additional shares of the Company’s common stock, prior to deducting underwriting discounts and commissions and offering expenses (the “July 2018 Offering”). In connection with the July 2018 Offering, and to induce certain institutional investors who hold warrants issued by the Company in November 2017 (“November 2017 Warrants”) to participate in the July 2018 Offering, the Company entered into letter agreements with such institutional investors (collectively, the “Warrant Reprice Agreements”). Pursuant to the terms of the Warrant Reprice Agreements, the Company agreed, effective July 3, 2018, to (a) reduce the per share exercise price of the November 2017 Warrants held by such institutional investors (the “Repriced Warrants”) to $2.12 and (b) extend the expiration date of the Repriced Warrants that were to expire on November 27, 2018 to November 27, 2019. The number of shares underlying the Repriced Warrants after the price reduction did not change. The Repriced Warrants are exercisable for 7,760,400 shares of common stock in the aggregate, of which, following such amendment, half expire on November 27, 2019 and half expire on November 27, 2024. The repricing of the warrants was accounted as an equity financing cost, with no impact to net proceeds from the offering. As noted above, the Company’s outstanding Series F preferred stock is subject to full-ratchet anti-dilution protection in the event the Company sells any common stock at a price lower than the then-conversion price of the Series F preferred stock. As a result of the July 2018 Offering, effective July 3, 2018, the conversion price of the Series F preferred stock was reduced from $4.50 to $2.12, the per share price to public in the July 2018 Offering. Placement Agent Fees: In connection with the issuance of the Series B, C and D Convertible Preferred Shares, the Company paid the placement agent an aggregate cash placement fee equal to 6% of the aggregate gross proceeds raised in the offering and issued warrants as described below. In connection with the issuance of the Series E and F Convertible Preferred Shares and the July 2018 Offering, the Company provided underwriting discounts and commissions of 9%, 8% and 8%, respectively, of the aggregate gross proceeds raised in the offering to the underwriters and issued no warrants to the underwriters in such transactions. Investor Warrants: In connection with the issuance of the Series B Convertible Preferred Stock in July 2016, the Company issued the investor, at no additional cost, warrants to purchase 6,149 shares of common stock at an exercise price of $564 per share. The warrants were exercisable for 36 months commencing six months from the closing date and were subject to a reduction of the exercise price if the Company subsequently issued common stock or equivalents at an effective price less than the current exercise price of such warrants. Concurrently with the closing of the Series C and D Convertible Preferred Stock and warrant financing on November 3, 2016, the exercise price for these warrants was adjusted to $102 per share. In connection with the issuance of the Series C and D Convertible Preferred Stock in November 2016, the Company issued the investor, at no additional cost, warrants to purchase 35,295 shares of common stock at an exercise price of $108 per share. In connection with the issuance of the Series D Convertible Preferred Stock at the second closing in January 2017, the Company issued the investor, at no additional cost, warrants to purchase 1,961 shares of common stock at an exercise price of $108 per share. The warrants were exercisable for 60 months commencing on the earlier of the day of the receipt of approval of the Company’s stockholders of a proposal to approve the issuance of the shares of common stock underlying the warrants, or the six-month anniversary of the date of issuance. These warrants were subject to a reduction of the exercise price if the Company subsequently issued common stock or equivalents at an effective price less than the current exercise price of such warrants. Warrant Exercise Agreement: On February 15, 2017, the Company entered into a letter agreement with the institutional investors that held the majority of its outstanding warrants (the ‘‘Original Warrants’’), to incent the cash exercise of the investor warrants described above on or before March 31, 2017. In exchange for any such exercise, the Company agreed to provide the investors a replacement warrant (the ‘‘Replacement Warrants’’) to purchase the same number of shares of common stock as were issued upon exercise of the Original Warrants, with an exercise price equal to the consolidated closing bid price of its common stock on the date of issuance. The Replacement Warrants were issued in the same form as the Original Warrants except the exercise prices are not subject to reduction for subsequent equity issuances and the Replacement Warrants do not allow the investor to demand that the Company purchase the Replacement Warrants in the event of a fundamental transaction involving the Company. In connection with this agreement, between February and March 2017, the investors exercised all of the Original Warrants for gross cash proceeds to the Company of $2.0 million, and the Company issued 43,396 Replacement Warrants with exercise prices ranging from $34.6 per share to $99.8 per share. The Company entered into the letter agreement with the investors to incent the exercise of the Original Warrants in order to receive the cash proceeds from the exercise of the Original Warrants and because the exercise of the Original Warrants would allow the Company to remove the warrant liability from its consolidated balance sheet and avoid future fair value adjustments and associated volatility in its consolidated financial statements, as the Replacement Warrants are not accounted for as liabilities based on their terms. As of September 30, 2018, and December 31, 2017, there were no Original Warrants outstanding and all Replacement Warrants under the letter agreement had been issued. Placement Agent Warrant: In connection with the issuance of the Series B, C and D Convertible Preferred Stock, the Company issued warrants to the placement agent to purchase an aggregate of 2,605 shares of common stock at exercise prices ranging from $126.0 per share to $810.0 per share. These warrants were issued at no additional cost, were exercisable immediately, and expire five years from the closing of each offering. These warrants do not contain repricing provisions. Warrant Valuation: Both the Original Warrants and placement agent warrants were accounted for as liabilities and were recorded at fair value on the date of issuance. These warrants must be measured and recorded at fair value for each subsequent reporting period that the warrants remain outstanding, and any changes in fair value must be recognized in the consolidated statement of operations. In connection with the warrant exchange agreement described above, the Company remeasured each Original Warrant as of the date of exercise and recorded $1.4 million for the change in fair value of these warrants as an unrealized gain in the accompanying consolidated statement of operations for the nine-month period ended September 30, 2017. The Replacement Warrants were valued at $0.5 million using the Black Scholes valuation model with the following assumptions: an expected dividend yield of 0%, expected stock price volatility of 49.65%-50.38%, risk-free interest rates of 1.95%-1.97% and an expected life of 5 years. The warrants have a five-year life and were fully vested at the date of grant. The terms of these warrants do not require them to be accounted for as liabilities and are therefore recorded in equity. As in incentive to early exercise the Original Warrants, the fair value provided to investors through the Replacement Warrants exceeded the fair value of the Original Warrants that was relinquished by the warrant holders by approximately $0.1 million, which has been reflected as an expense in the statement of operations for the nine-month period ending September 30, 2017. |
Stock-Based Compensation |
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Note 5 - Stock-Based Compensation Under the fair value recognition provisions of U.S. GAAP for accounting for stock-based compensation, the Company measures stock-based compensation expense at the grant date based on the fair value of the award and recognizes the compensation expense over the requisite service period, which is generally the vesting period. The following table presents the classification of stock-based compensation expense recognized for the periods below:
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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, warrants, and contingent consideration. 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:
The fair value of the Company’s common stock warrant liability related to the Original Warrants was calculated using a Monte Carlo valuation model and was classified as Level 3 in the fair value hierarchy. All Original Warrants were exercised during the nine months ended September 30, 2017. The fair value of the Company’s warrant liability related to the placement agent warrants was calculated using a Black Scholes valuation model and is classified as Level 3 in the fair value hierarchy. The following is a rollforward of the fair value of Level 3 warrants:
Fair values were calculated using the following assumptions:
The fair value of the Company’s contingent consideration related to the acquisition of the Aquadex Business from Baxter in August 2016 (see Note 8 – Commitments and Contingencies), was $126,000 as of both September 30, 2018 and December 31, 2017. The fair value was initially measured based on the consideration expected to be transferred (probability-weighted), discounted back to present value, and it is considered a Level 3 instrument. The discount rate used was determined at the time of measurement in accordance with accepted valuation methods. The Company measures the liability on a recurring basis using Level 3 inputs including probabilities of payment and projected payment dates. Changes to any of the inputs may result in significantly higher or lower fair value measurements. There were no changes in the fair value of the contingent consideration subsequent to the initial measurement. All cash equivalents are considered Level 1 measurements for all periods presented. The Company does not have any financial instruments classified as Level 2 or any other classified as Level 3 and there were no movements between these categories during the periods ended September 30, 2018 and December 31, 2017. The Company believes that the carrying amounts of all remaining financial instruments approximate their fair value due to their relatively short maturities. |
Income Taxes |
9 Months Ended |
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Sep. 30, 2018 | |
Income Taxes [Abstract] | |
Income Taxes | Note 7 – Income Taxes 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 full valuation allowance for U.S. and foreign deferred tax assets due to the uncertainty that enough taxable income will be generated in those taxing jurisdictions to utilize the assets. Therefore, the Company has not reflected any benefit of such deferred tax assets in the accompanying consolidated financial statements. As of September 30, 2018, there were no material changes to what the Company disclosed regarding tax uncertainties or penalties in its Annual Report on Form 10-K for the year ended December 31, 2017. |
Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2018 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | Note 8 - Commitments and Contingencies Leases: The Company leases office space under a non-cancelable operating lease with Capital Partners Industrial Fund I, LLLP that expires in March 2022. In August 2018, the Company entered into a Third Amendment to the lease, extending the term of the lease from March 31, 2019 to March 31, 2022. Beginning on April 1, 2019, the annual base rent shall be $9.00 per square foot, subject to annual increases of $0.25 per square foot. Rent expense is recognized using the straight-line method over the term of the lease. Employee Retirement Plan: The Company has a 401(k)-profit sharing plan that provides 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 employee’s contributions at the discretion of the Company. Contingent Consideration: As part of the acquisition of the Aquadex Business from Baxter in August 2016, the Company agreed that if it disposes of any of the Aquadex assets for a price that exceeds $4.0 million within three years of the closing, it will pay Baxter 40% of the amount of such excess. In addition, it also agreed that if shares of its common stock cease to be publicly traded on the Nasdaq Capital Market, Baxter has the option to require the Company to repurchase, in cash, all or any part of the common shares held by Baxter at a price equal to their fair market value, as determined by a third-party appraiser. |
Nature of Business and Basis of Presentation (Policies) |
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Nature of Business and Basis of Presentation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation | Principles of Consolidation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and note disclosures normally included in the audited annual consolidated financial statements have been condensed or omitted pursuant to those rules and regulations. Accordingly, they do not include all of the information necessary for a fair presentation of results of operations, comprehensive loss, financial condition, and cash flows in conformity with U.S. GAAP. In the opinion of management, the condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of the Company for the periods presented. Operating results for interim periods are not necessarily indicative of results that may be expected for the year as a whole. The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. |
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Going Concern | Going Concern: The Company’s consolidated financial statements have been prepared and presented on a basis assuming it continues as a going concern. During the years ended December 31, 2017 and 2016 and through September 30, 2018, the Company incurred losses from operations and net cash outflows from operating activities as disclosed in the consolidated statements of operations and cash flows, respectively. As of September 30, 2018, the Company had an accumulated deficit of $195.1 million and it expects to incur losses for the immediate future. To date, the Company has been funded by debt and 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 the next twelve months. The Company became a revenue generating company after acquiring the Aquadex Business in August 2016. The Company expects to incur additional losses in the near-term as it grows the Aquadex Business, including investments in expanding its sales and marketing capabilities, purchasing inventory, manufacturing components, and complying with the requirements related to being a U.S. public company. To become and remain profitable, the Company must succeed in expanding the adoption and market acceptance of Aquadex. This will require the Company to succeed in training personnel at hospitals and in effectively and efficiently manufacturing, marketing and distributing Aquadex 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. On July 3, 2018, April 24, 2017 and on November 27, 2017, the Company closed on underwritten public equity offerings for aggregate net proceeds of approximately $28.8 million after deducting the underwriting discounts and commissions and other costs associated with the offerings (see Note 4 - Equity). The Company will require additional funding to grow its Aquadex Business, which may not be available on terms favorable to the Company, or at all. The Company may receive those funds from the proceeds from future warrant exercises, issuances of equity securities, or other financing transactions. Should warrant exercises not materialize or future capital raising be unsuccessful, the Company may not be able to continue as a going concern. No adjustments have been made relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company not continue as a going concern. |
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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, which the Company adopted effective January 1, 2018. 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 accounting policies and transition disclosures. |
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Accounts Receivable | Accounts Receivable: Accounts receivable are unsecured, are recorded at net realizable value, and do not bear interest. The Company makes judgments as to its ability to collect outstanding receivables based upon significant patterns of uncollectability, historical experience, and management’s evaluation of specific accounts and will provide an allowance for credit losses when collection becomes doubtful. The Company performs credit evaluations of its customers’ financial condition on an as-needed basis. Payment is generally due 30 days from the invoice date and accounts past 30 days are individually analyzed for collectability. When all collection efforts have been exhausted, the account is written off against the related allowance. The Company’s accounts receivable have terms that require payment in 30 days. To date the Company has not experienced any write-offs or significant deterioration of the aging of its accounts receivable, and therefore, no allowance for doubtful accounts was considered necessary as of September 30, 2018 or December 31, 2017. |
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Inventories | Inventories: Inventories represent finished goods purchased from the Company’s supplier and are recorded as the lower of cost or net realizable value using the first-in-first out method. Inventories consisted of the following:
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Contingent Consideration | Contingent consideration: In connection with the Company’s purchase of the Aquadex Business, the Company has an obligation to pay additional consideration that is contingent upon the occurrence of certain future events (see Note 8 – Commitment and Contingencies). Contingent consideration was recognized at the acquisition date at the estimated fair value of the contingent milestone payments. The fair value of the contingent consideration is remeasured to its estimated fair value at the end of each reporting period, with changes recorded to earnings. |
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Loss per Share | Loss per share: Basic loss 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. The net loss allocable to common stockholders for the nine months ended September 30, 2017, reflects a $1.0 million increase for the net deemed dividend to preferred stockholders provided in connection with the close of the public offering of Series E Convertible Preferred Stock in April of 2017 (see Note 4 - Equity), representing the intrinsic value of the shares at the time of issuance. In addition, the net loss allocable to common stockholders for the nine months ended September 30, 2017, reflects a $1.8 million increase for the net deemed dividend to preferred stockholders provided in connection with the shareholder approval of the Series C and D Convertible Preferred Stock offering in January of 2017 (see Note 4 - Equity), representing the intrinsic value of the shares at the time of issuance. Diluted loss 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. These potentially dilutive shares were excluded from the computation of loss per share as their effect was antidilutive due to the Company’s net loss in each of those periods. The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as of the end of each period presented:
The following table reconciles reported net loss with reported net loss per share for the periods ended September 30, 2017:
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New Accounting Pronouncements | New Accounting Pronouncements: In May 2014, August 2015, March 2016, April 2016 and May 2016, the Financial Accounting Standards Board (“FASB”) issued amended revenue recognition guidance to clarify the principles for recognizing revenue from contracts with customers. The guidance requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The Company adopted this new standard on January 1, 2018, utilizing the modified retrospective approach. There were no impacts to the amount or timing of revenue that the Company had recognized in prior periods. See Note 2 - Revenue Recognition for additional accounting policy and transition disclosures. In February 2016, the FASB issued updated guidance to improve financial reporting about leasing transactions. This guidance will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The original guidance required application on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued new guidance which includes an option to not restate comparative periods in transition. This guidance is effective for the Company’s annual and quarterly periods beginning January 1, 2019. The Company is in the process of evaluating the impact that the adoption of this standard will have on its consolidated financial statements and is currently assessing its leases. The Company expects that the adoption of this guidance will result in a material increase in the assets and liabilities recorded on its consolidated balance sheets and additional qualitative and quantitative disclosures. The Company expects to use the effective date of this standard as the date of initial application, with no retrospective adjustments to prior comparative periods. The Securities and Exchange Commission (“SEC”) issued updated guidance which amends various SEC disclosure requirements that it has determined to be redundant, duplicative, overlapping, outdated, or superseded. Issued as part of the SEC’s ongoing disclosure effectiveness initiative, the final rule is expected November 5, 2018. The Company is evaluating the impact of the release will have on its consolidated financial statements and disclosures. |
Nature of Business and Basis of Presentation (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Business and Basis of Presentation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories consisted of the following:
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Potential Shares of Common Stock not Included in Diluted Net Loss Per Share | The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as of the end of each period presented:
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Reconciliation of Reported Net Loss with Reported Net Loss Per Share | The following table reconciles reported net loss with reported net loss per share for the periods ended September 30, 2017:
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Stock-Based Compensation (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Classification of Stock-Based Compensation Expense | The following table presents the classification of stock-based compensation expense recognized for the periods below:
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Fair Value of Financial Instruments (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Common Stock Warrant Liability Calculated Using a Monte Carlo Valuation Model Classified as Level 3 in Fair Value Hierarchy | The following is a rollforward of the fair value of Level 3 warrants:
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Summary of Fair Value Assumptions Used in Calculation of Monte Carlo Valuation Model | Fair values were calculated using the following assumptions:
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Nature of Business and Basis of Presentation, Nature of Business, Going Concern, Accounts Receivable and Inventories (Details) $ in Thousands |
9 Months Ended | 12 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Jul. 03, 2018
USD ($)
|
Nov. 27, 2017
USD ($)
|
Oct. 12, 2017 |
Apr. 24, 2017
USD ($)
|
Jan. 12, 2017 |
Sep. 30, 2018
USD ($)
|
Sep. 30, 2017
USD ($)
|
Dec. 31, 2017
USD ($)
StockSplit
|
|
Nature of Business [Abstract] | ||||||||
Number of reverse stock split | StockSplit | 2 | |||||||
Reverse stock split ratio | 20 | 30 | ||||||
Going Concern [Abstract] | ||||||||
Accumulated deficit | $ (195,132) | $ (182,356) | ||||||
Net proceeds from public stock offering | $ 28,800 | $ 28,800 | $ 28,800 | $ 4,649 | $ 8,002 | |||
Accounts Receivable [Abstract] | ||||||||
Accounts receivables maximum credit period from invoice date | 30 days | |||||||
Allowance for doubtful accounts | $ 0 | 0 | ||||||
Inventories [Abstract] | ||||||||
Finished Goods | 810 | 902 | ||||||
Work in Process | 91 | 217 | ||||||
Raw Materials | 1,047 | 469 | ||||||
Total | $ 1,948 | $ 1,588 |
Revenue Recognition (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2018 |
Dec. 31, 2017 |
|
Revenue, Performance Obligation [Abstract] | |||
Deferred revenue | $ 41,250 | $ 41,250 | $ 38,000 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-07-01 | |||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |||
Expected timing of satisfaction, period | 1 year | 1 year | |
Sales Revenue [Member] | Maximum [Member] | ASC 606 [Member] | |||
Revenue, Performance Obligation [Abstract] | |||
Percentage of net sales | 1.00% | 1.00% |
Debt, New Loan Agreement (Details) - Revolving Line [Member] - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Dec. 31, 2017 |
|
Line of Credit Facility [Abstract] | ||
Maximum borrowing capacity | $ 1,000 | |
Maximum borrowing capacity percentage of eligible accounts | 80.00% | |
Maturity date | Mar. 31, 2020 | |
Total borrowings outstanding | $ 0 | $ 0 |
Floating Annual Rate [Member] | ||
Line of Credit Facility [Abstract] | ||
Interest rate | 1.75% | |
Prime Rate [Member] | ||
Line of Credit Facility [Abstract] | ||
Interest rate | 1.00% |
Stock-Based Compensation (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Stock-Based Compensation Expense Items [Abstract] | ||||
Stock-based compensation expense | $ 437 | $ 111 | $ 1,544 | $ 394 |
Selling, General and Administrative Expense [Member] | ||||
Stock-Based Compensation Expense Items [Abstract] | ||||
Stock-based compensation expense | 440 | 106 | 1,446 | 351 |
Research and Development Expense [Member] | ||||
Stock-Based Compensation Expense Items [Abstract] | ||||
Stock-based compensation expense | $ (3) | $ 5 | $ 98 | $ 43 |
Commitments and Contingencies - (Details) |
9 Months Ended |
---|---|
Sep. 30, 2018
USD ($)
| |
Leases [Abstract] | |
Annual base rent from April 1, 2019 per square foot | $ 9 |
Annual increase per square foot | 0.25 |
Aquadex Product Line [Member] | |
Contingent Consideration [Abstract] | |
Sale or disposal of business assets threshold for contingent consideration | $ 4,000,000 |
Percentage of additional payments on disposal of business assets | 40.00% |
Aquadex Product Line [Member] | Maximum [Member] | |
Contingent Consideration [Abstract] | |
Contingent consideration period | 3 years |
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