NUWELLIS, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our interim condensed consolidated
financial statements and related notes included in Part I, Item 1 of this
Quarterly Report on Form 10-Q and the audited consolidated financial statements
and related notes and Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in our Annual Report on Form 10-K
for the year ended December 31, 2021. This discussion contains forward-looking
statements that involve risks and uncertainties.  Our actual results could
differ materially from those anticipated in the forward-looking statements as a
result of a variety of factors, including those discussed in Part I, Item 1A
"Risk Factors," in our Annual Report on Form 10-K for the year ended December
31, 2021 and in our subsequent filings with the Securities and Exchange
Commission (the "SEC").

Unless otherwise stated or the context requires, Nuwellis, Company, we, us, and our, refer to Nuwellis, Inc. and its subsidiary.

OVERVIEW

About Nuwellis

We are a medical device company dedicated to transforming the lives of patients
suffering from fluid overload through science, collaboration, and innovative
technology. The Company is focused on developing, manufacturing, and
commercializing medical devices used in ultrafiltration therapy, including the
Aquadex System. The Aquadex SmartFlow system is indicated for temporary (up to
eight hours) or extended (longer than 8 hours in patients who require
hospitalization) use in adult and pediatric patients weighing 20 kg or more
whose fluid overload is unresponsive to medical management, including diuretics.

Prior to July 2016, we were focused on developing the C-Pulse System for
treatment of Class III and ambulatory Class IV heart failure. In August 2016, we
acquired the Aquadex Business from a subsidiary of Baxter, a global leader in
the hospital products and dialysis markets. In September 2016, we announced a
refocus of our strategy that included halting all clinical evaluations of the
C-Pulse System related technology to fully focus our resources on our recently
acquired Aquadex Business. On May 23, 2017, we announced that we were changing
our name from Sunshine Heart, Inc. to CHF Solutions, Inc. to more appropriately
reflect the direction of our business at that time. On April 27, 2021, we
announced that we were changing our name from CHF Solutions, Inc. to Nuwellis,
Inc. to reflect the expansion of our customer base from treating fluid imbalance
resulting from congestive heart failure to also include critical care and
pediatrics applications.

Impact of the COVID-19 pandemic

During 2021 and through the third quarter of 2022, we continue to be subject to
challenging social and economic conditions created as a result of the outbreak
of the novel strain of coronavirus, SARS-CoV-2. The resulting impact of the
COVID-19 pandemic created disruptions in our operations resulting from rapid and
evolving changes implemented to keep our customers, their patients, and our
employees safe. These changes included restrictions on hospital access imposed
on our field employees by customers dealing on the front lines of COVID-19 and
managing the spread of the virus, changes to work practices by requiring
employees to work remotely, and increased protocols to ensure the safety of
those employees that remained on site. The ongoing impact of the COVID-19
outbreak on our operational and financial performance will depend on certain
future developments, including the duration and spread of the outbreak, the
ongoing impact on our customers and hospital access restrictions imposed on our
field employees, and effects on our vendors and supply chain, all of which
remain uncertain and cannot be predicted.

We may experience curtailed customer demand or constrained supply that could
materially adversely impact our business, results of operations and overall
financial performance in future periods. Specifically, we may experience
negative impacts from changes in how we conduct business due to the COVID-19
pandemic, including but not limited to restrictions on travel and in-person
meetings, production delays, warehouses and staffing disruptions and shortages,
decreases or delays in customer demand and spending, and difficulties or changes
to our sales process and customer support.

We have experienced changes to our sales practices due to restrictions on
hospital access and believe that revenue in other areas was negatively impacted
by these restrictions. In addition, the disruption created by COVID-19 has
created significant uncertainty about our ability to access the capital markets
in future periods. As of the filing date of this Form 10-Q, the extent to which
COVID-19 may continue to impact our financial condition or results of operations
is uncertain and cannot be reasonably estimated but could be material and last
for an extended period of time. The effect of the COVID-19 pandemic may not be
fully reflected in our results of operations and overall financial performance
until future periods. See Part 1, Item 1-A "Risk Factors" in our Annual Report
on Form 10-K for the year ended December 31, 2021.

                                       13

————————————————– ——————————

  Table of Contents

Recent Developments

Public Offerings
On October 18, 2022, the Company closed on the October 2022 Offering, for gross
proceeds of approximately $11.0 million. Net proceeds totaled approximately $9.8
million after deducting the underwriting discounts and commissions and other
costs associated with the offering and after giving effect to the underwriters'
full exercise of their overallotment option.

The offering was comprised of (1) 20,994,044 Class A Units, priced at a public
offering price of $0.25 per Class A Unit, with each Class A Unit consisting of
one share of common stock and 1.5 warrants to purchase one share of common stock
at an exercise price of $0.25 per share, and (2) 23,157,124 Class B Units,
priced at a public offering price of $0.25 per Class B Unit, with each Class B
Unit consisting of one share of Series I convertible preferred stock,
convertible into one share of common stock, and 1.5 warrants to purchase one
share of common stock with an exercise price of $0.25 per share.

The warrants will be exercisable beginning on the effective date of a reverse
stock split in an amount sufficient to permit the exercise in full of the
warrants, contingent upon stockholder approval of such reverse stock split and
of the exercisability of the warrants under Nasdaq rules and will expire on the
sixth anniversary of the initial exercise date. The stockholder meetings will be
held on or before December 9, 2022. The conversion price of the preferred stock
issued in the transaction is fixed and does not contain any variable pricing
feature or any price-based anti-dilutive feature. The preferred stock issued in
this transaction includes a beneficial ownership blocker but has no dividend
rights (except to the extent that dividends are also paid on the common stock)
or liquidation preference, and, subject to limited exceptions, has no voting
rights. The securities comprising the units are immediately separable and were
issued separately.

In connection with the October 2022 Offering, the conversion price of the Series
F convertible preferred stock was reduced from $2.50 to $0.25, the per share
price to the public in the October 2022 Offering. In addition, the exercise
price of the common stock warrants issued in connection with the January 2020
Offering was reduced from $2.50 to $1.65, based on "reset" provisions in the
Warrant agreement.

Selling Agent Fees: In connection with the Offerings described above, the Company paid the Selling Agent an aggregate cash selling fee equal to 8% of the aggregate gross proceeds generated by each of the Offerings.

Preliminary Proxy Statement
On October 28, 2022, the Company filed a preliminary proxy statement seeking
stockholder approval for a reverse stock split of our outstanding common stock
at a ratio in the range of 1-for-50 to 1-for-100 and approval to increase the
aggregate maximum number of shares of Common Stock that may be issued under the
2017 Equity Incentive Plan. The Company filed another preliminary proxy
statement seeking stockholder approval to issue up to 66,226,752 shares of our
common stock upon the exercise of our warrants issued to investors in the
October 2022 Offering that may be equal to or exceed 20% of our common stock
outstanding before the October 2022 Underwritten Offering.

Nasdaq Notice
On May 31, 2022, we received a letter (the "Notice") from the Listing
Qualifications Department (the "Staff") of the Nasdaq Stock Market ("Nasdaq")
informing us that because the closing bid price for our common stock listed on
Nasdaq was below $1.00 for 30 consecutive trading days, we were not in
compliance with the minimum bid price requirement for continued listing on the
Nasdaq Capital Market, as set forth in Nasdaq Marketplace Rule 5550(a)(2) (the
"Minimum Bid Price Requirement").

In accordance with Nasdaq Marketplace Rule 5810(c)(3)(A), the Company has a
period of 180 calendar days from May 31, 2022, or until November 28, 2022, to
regain compliance with the Minimum Bid Price Requirement. If at any time before
November 28, 2022, the closing bid price of the Company's common stock closes at
or above $1.00 per share for a minimum of 10 consecutive trading days (which
number of days may be extended by Nasdaq), Nasdaq will provide written
notification that the Company has achieved compliance with the Minimum Bid Price
Requirement, and the matter would be resolved.

The Notice also disclosed that in the event the Company does not regain
compliance with the Minimum Bid Price Requirement by November 28, 2022, the
Company may be eligible for additional time to comply. To qualify for additional
time, the Company would be required to meet the continued listing requirement
for market value of publicly held shares and all other initial listing standards
for Nasdaq, with the exception of the Minimum Bid Price Requirement, and would
need to provide written notice of our intention to cure the deficiency during
the second compliance period, by effecting a reverse stock split, if necessary.
The Company currently intends to make application for this additional
remediation period. If the Company meets these requirements, Nasdaq will inform
the Company that it has been granted an additional 180 calendar days. However,
if it appears to the Staff that the Company will not be able to cure the
deficiency, or if the Company is otherwise not eligible, Nasdaq will provide
notice that the Company's securities will be subject to delisting.

                                       14

————————————————– ——————————

Contents

The Company intends to continue actively monitoring the closing bid price for
the Company's common stock between now and November 28, 2022, and it will
consider available options to resolve the deficiency and regain compliance with
the Minimum Bid Price Requirement. If the Company does not regain compliance
within the allotted compliance period, including any extensions that may be
granted by Nasdaq, Nasdaq will provide notice that the Company's common stock
will be subject to delisting. The Company would then be entitled to appeal that
determination to a Nasdaq hearings panel. There can be no assurance that the
Company will regain compliance with the Minimum Bid Price Requirement during the
180-day compliance period, secure a second period of 180 calendar days to regain
compliance, or maintain compliance with the other Nasdaq listing requirements.

Appointment of Lynn L. Blake
Effective October 19, 2022, Lynn L. Blake was appointed as Chief Financial
Officer of the Company. Ms. Blake, age 55, previously served as a Managing
Director at Growth Operators Advisory Services LLC since January 2020. Prior to
that, she served as the Senior Vice President, Chief Financial Officer of
Tactile Systems Technology, Inc. (Nasdaq: TCMD) from 2016 to 2018. Earlier in
her career, she served as Senior Vice President, Chief Financial Officer of
Taylor-Wharton International LLC and as Senior Vice President, Chief Financial
Officer of Analysts International Corporation. Ms. Blake earned her Bachelor of
Business Administration degree from the University of Wisconsin-Madison, with
majors in Accounting and Finance, and she earned her Master of Business
Administration degree from the University of Minnesota, Carlson School of
Management, with a dual concentration in Finance and Strategic Management.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We have adopted various accounting policies in preparing the condensed consolidated financial statements in accordance with generally accepted accounting principles in United States (WE GAAP). Our significant accounting policies are described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended
December 31, 2021.

The preparation of the condensed consolidated financial statements, in
conformity with U.S. GAAP, requires us to make estimates and assumptions that
affect the amounts reported in the condensed consolidated financial statements
and accompanying notes. Our estimates and assumptions, including those related
to stock-based compensation, valuation of equity and debt securities, and income
tax reserves are updated as appropriate, which in most cases is quarterly. We
base our estimates on historical experience, valuations, or various assumptions
that are believed to be reasonable under the circumstances. There have been no
material changes to our critical accounting policies and estimates from the
information provided in Part II, Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations included in our Annual Report on
Form 10-K for the year ended December 31, 2021.

Revenue Recognition: We recognize revenue in accordance with Accounting
Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers.
Accordingly, we recognize revenue when our customers obtain control of their
products or services, in an amount that reflects the consideration that we
expect to receive in exchange for those goods and services. See Note 2 - Revenue
Recognition, included in Part I, Item 1 of this Quarterly Report on Form 10-Q,
for additional disclosures.

Accounts Receivable: Our accounts receivable generally have terms that require
payment within 30 days. We did not establish an allowance for doubtful accounts
as of September 30, 2022, as we have not experienced any accounts receivable
write-offs or experienced a deterioration in the aging of our receivables, and
we do not expect to experience write-offs in the future.

Inventory: Inventory consists of finished goods, raw materials and sub-assemblies and is recorded at the lower of cost or net realizable value using the first-in, first-out method.

Stock-Based Compensation: We recognize all share-based payments to employees,
directors and consultants, including grants of stock options and common stock
awards, in the consolidated statement of operations and comprehensive loss as an
operating expense based on their fair values as established at the grant date.
Other equity instruments issued to non-employees consist of warrants to purchase
shares of our common stock. These warrants are either fully vested and
exercisable at the date of grant or vest over a certain period during which
services are provided.

We compute the estimated fair values of stock options and warrants using the
Black-Scholes option pricing model and market-based warrants using a Monte Carlo
valuation model. Market price at the date of grant is used to calculate the fair
value of any restricted stock units and common stock awards.

                                       15

————————————————– ——————————

Contents

We expense the fair market value of fully vested awards at the time of grant,
and of unvested awards over the period in which the related services are
received. Stock-based compensation expense is based on awards ultimately
expected to vest and is reduced for estimated forfeitures except for
market-based warrants, which are expensed based on the grant date fair value
regardless of whether the award vests. Forfeitures are estimated at the time of
grant and revised in subsequent periods if actual forfeitures differ from those
estimates.

Loss per share: Basic loss per share is computed based on the net loss for each
period divided by the weighted average number of common shares outstanding. The
net loss allocable to common stockholders for the nine months ended September
30, 2021 includes a deemed dividend of $33,000 that resulted from the change in
the exercise price of warrants as a result of the March 2021 Offering. See Note
3 - Stockholders' Equity for additional disclosures.

Diluted earnings per share is computed based on the net loss allocable to common
stockholders for each period divided by the weighted average number of common
shares outstanding, increased by the number of additional shares that would have
been outstanding had the potentially dilutive common shares been issued, and
reduced by the number of shares the Company could have repurchased from the
proceeds from issuance of the potentially dilutive shares. Potentially dilutive
shares of common stock include shares underlying outstanding convertible
preferred stock, warrants, stock options and other stock-based awards granted
under stock-based compensation plans.

Impairment of Long-Lived Assets: Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset or asset group may not be recoverable. If the impairment test indicates
that the carrying value of the asset or asset group is greater than the expected
undiscounted cash flows to be generated by such asset or asset group, further
analysis is performed to determine the fair value of the asset or asset group.
To the extent the fair value of the asset or asset group is less than its
carrying value, an impairment loss is recognized equal to the excess amount of
the carrying value over the fair value of the asset or asset group. Assets to be
disposed of are carried at the lower of their carrying value or fair value less
costs to sell. Considerable management judgment is necessary to estimate the
fair value of assets or asset groups and accordingly, actual results could vary
significantly from such estimates.

The Company continues to report operating losses and negative cash flows from
operations, both of which it considers to be indicators of potential impairment.
Therefore, the Company evaluates its long-lived assets for potential impairment
at each reporting period. The Company has concluded that its cash flows from the
various long-lived assets are highly interrelated and, as a result, the Company
consists of a single asset group. As the Company expects to continue incurring
losses in the foreseeable future, the undiscounted cash flow step was bypassed,
and the Company proceeded to fair value the asset group. The Company has
determined the fair value of the asset group using expected cash flows
associated with its loaner consoles by considering sales prices for similar
assets and by estimating future discounted cash flows expected from the
consoles. For recently acquired assets within the asset group, primarily
equipment, the Company determined the fair value based on the replacement cost.
Because the Company consists of one asset group, consideration is also given to
the relationship between the Company's market capitalization and its carrying
value to further support the Company's determination of fair value. There have
been no impairment losses recognized for the year ended December 31, 2021, or
the nine months ended September 30, 2022.

Liquidity: Our financial statements have been prepared and presented on a basis
assuming we continue to operate as a going concern. During the years ended
December 31, 2021, and 2020 and through September 30, 2022, we incurred losses
from operations and net cash outflows from operating activities as disclosed in
the consolidated statements of operations and cash flows, respectively. At
September 30, 2022, we had an accumulated deficit of $265.5 million, and we
expect to incur losses for the foreseeable future. To date, we have been funded
by equity financings, and although we believe that we will be able to
successfully fund our operations, there can be no assurance that we will be able
to do so or that we will ever operate profitably.

We became a revenue-generating company after acquiring the Aquadex Business in
August 2016. We expect to incur additional losses in the near term as we grow
the Aquadex Business, including investments in expanding our sales and marketing
capabilities, purchasing inventory, manufacturing components, and complying with
the requirements related to being a U.S. public company. To become and remain
profitable, we must succeed in expanding the adoption and market acceptance of
the Aquadex System. This will require us to succeed in training personnel at
hospitals and outpatient care settings and in effectively and efficiently
manufacturing, marketing and distributing the Aquadex System and related
components. There can be no assurance that we will succeed in these activities,
and we may never generate revenues sufficient to achieve profitability.

                                       16

————————————————– ——————————

Contents

During 2021, we closed an underwritten public and other equity offerings for
aggregate net proceeds of approximately $27.9 million after deducting the
underwriting discounts, commissions and offering expenses, as applicable, and
other costs associated with the offerings. In addition, during 2021 we received
approximately $1,300 in proceeds from the exercise of investor warrants. See
Note 3 -Stockholders' Equity, to the condensed consolidated financial statements
of this Form 10-Q. The Company also recently closed on the October 2022
Offering. See Note 9 - Subsequent Events. The Company will require additional
funding to grow its 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.

We believe that our existing capital resources will be sufficient to support our
operating plan through December 31, 2023, however, there can be no assurance of
this. We may seek to raise additional capital to support our growth or other
strategic initiatives through equity.

NEW ACCOUNTING PRONOUNCEMENTS

During the financial quarter ended September 30, 2022no new accounting pronouncements have been issued but have not yet been adopted that the Company expects will have a material effect on the consolidated financial position, net loss or cash flows of the Company.

FINANCIAL OVERVIEW

We are a medical device company focused on commercializing the Aquadex system
for ultrafiltration treatment of patients with fluid overload who have failed
diuretic therapy. Activities since inception have consisted principally of
raising capital, performing research and development and conducting pre-clinical
and clinical studies. During 2016, we acquired the Aquadex Business and
announced that we were halting all clinical evaluations of our prior technology,
the C-Pulse System. Since then, our activities have consisted mainly of
expanding our sales and marketing capabilities and developing additional
clinical evidence in support of our therapy. As of September 30, 2022, we had an
accumulated deficit of $265.6 million, and we expect to incur losses for the
foreseeable future. To date, we have been funded by public and private equity
financing and debt. Although we believe that we will be able to successfully
fund our operations, there can be no assurance that we will be able to do so or
that we will ever operate profitably.

Operating results

Comparison of Three Months Ended September 30, 2022, to Three Months Ended
September 30, 2021

Net Sales
(in thousands)

Three Months Ended      Three Months Ended
September 30, 2022      September 30, 2021       Increase (Decrease)       % Change
$             2,065     $             1,853     $                 212           11.4 %



Revenue is generated mainly from the sale of disposable blood filters
("circuits") and catheters used in conjunction with the Aquadex System consoles,
in addition to sales of the consoles themselves. We sell primarily in the United
States to hospitals and clinics through our direct salesforce. We sell outside
of the United States to independent specialty distributors who in turn sell to
hospitals and clinics in their geographic regions. The increase in sales is
attributable to an increase in console shipments, partially offset by decreased
U.S. circuit sales.

Costs and Expenses
Our costs and expenses were as follows:

(in thousands)                             Three Months Ended      Three Months Ended        Increase
                                           September 30, 2022      September 30, 2021       (Decrease)        % Change
Cost of goods sold                         $               806     $               733     $          73           10.0 %
Selling, general and administrative        $             4,251     $             4,645     $        (394 )         (8.5 )%
Research and development                   $               928     $             1,726     $        (798 )        (46.2 )%



Cost of Goods Sold
The increase in cost of goods sold for the three months ended September 30,
2022, compared to the three months ended September 30, 2021, was primarily due
to higher fixed overhead absorption because of increased console sales in the
quarter.

                                       17

————————————————– ——————————

Contents

Selling, General and Administrative Expense
The decrease in selling, general and administrative expense primarily reflects
the Company's ongoing expense reduction efforts.  Selling, general and
administrative expenses were also lower due to unfilled positions in the current
year quarter.

Research and Development Expense
The decrease in R&D expense was primarily driven by timing of expenses
associated with investments in new products as well as non-recurring license fee
expense of $428,160 in the prior year quarter.

Comparison of Nine Months Ended September 30, 2022 to Nine Months Ended
September 30, 2021

Net Sales
(in thousands)

 Nine Months Ended       Nine Months Ended
September 30, 2022      September 30, 2021       Increase (Decrease)       % Change
$             6,204     $             6,279     $                 (75 )         (1.2 )%



Revenue is generated mainly from the sale of disposable blood filters
("circuits") and catheters used in conjunction with the Aquadex system consoles,
in addition to sales of the consoles themselves. We sell primarily in the United
States to hospitals and clinics through our direct salesforce. We sell outside
of the United States to independent specialty distributors who in turn sell to
hospitals and clinics in their geographic regions. The decrease in sales is
attributable to decreased sales of circuits partially offset by increased
console sales.

                                       18

————————————————– ——————————

Contents

Costs and Expenses
Our costs and expenses were as follows:

(in thousands)                                   Nine Months Ended        Nine Months Ended
                                                 September 30, 2022       September 30, 2021       Increase (Decrease)       % Change
Cost of goods sold                              $              2,780     $              2,682     $                  98            3.7 %
Selling, general and administrative             $             12,920     $             14,945     $              (2,025 )        (13.5 )%
Research and development                        $              3,141     $              3,847     $                (706 )        (18.3 )%



Cost of Goods Sold
The increase in cost of goods sold for the nine months ended September 30, 2022,
compared to the nine months ended September 30, 2021, was primarily due to lower
fixed overhead absorption because of decreased sales and finished goods
inventory, as well as a $97,000 inventory write-off resulting from the
discontinuation of a distribution agreement.

Selling, General and Administrative Expense
The decrease in selling, general and administrative expense primarily reflects
the Company's ongoing expense reduction efforts.  Selling, general and
administrative expenses were also lower due to unfilled positions and
non-recurring expenses in the prior year period.

Research and development expenses The decrease in R&D expenses is mainly explained by the timing of expenses associated with investments in new products and by a $428,160
technology license fees during the prior year period.

Cash and capital resources

Sources of Liquidity
We have funded our operations primarily through cash on hand and a series of
equity issuances.

On March 19, 2021, we closed on an underwritten public offering of 3,795,816
shares of common stock, which included the full exercise of the underwriter's
over-allotment option, for gross proceeds of approximately $20.9 million. Net
proceeds totaled approximately $18.9 million after deducting the underwriting
discounts and commissions and other costs associated with the offering and after
giving effect to the underwriters' full exercise of their overallotment option.

The offering was comprised of (1) 20,994,044 Class A Units, priced at a public
offering price of $0.25 per Class A Unit, with each Class A Unit consisting of
one share of common stock and 1.5 warrants to purchase one share of common stock
at an exercise price of $0.25 per share, and (2) 23,157,124 Class B Units,
priced at a public offering price of $0.25 per Class B Unit, with each Class B
Unit consisting of one share of Series I convertible preferred stock,
convertible into one share of common stock, and 1.5 warrants to purchase one
share of common stock with an exercise price of $0.25 per share.

The warrants will be exercisable beginning on the effective date of a reverse
stock split in an amount sufficient to permit the exercise in full of the
warrants, contingent upon stockholder approval of such reverse stock split and
of the exercisability of the warrants under Nasdaq rules and will expire on the
sixth anniversary of the initial exercise date. The stockholder meetings will be
held on or before December 9, 2022. The conversion price of the preferred stock
issued in the transaction is fixed and does not contain any variable pricing
feature or any price-based anti-dilutive feature. The preferred stock issued in
this transaction includes a beneficial ownership blocker but has no dividend
rights (except to the extent that dividends are also paid on the common stock)
or liquidation preference and, subject to limited exceptions, has no voting
rights. The securities comprising the units are immediately separable and were
issued separately.

On September 17, 2021, the Company closed on an underwritten public offering of
4,005,588 shares of common stock for gross proceeds of approximately $10.0
million. Net proceeds totaled approximately $9.0 million after deducting the
underwriting discounts and commissions and other costs associated with the
offering and after giving effect to the underwriters' full exercise of their
overallotment option.

As of September 30, 2022 and December 31, 2021, cash and cash equivalents were
$12.1 million and $24.2 million, respectively. Our business strategy and ability
to fund our operations in the future depends in part on our ability to grow the
Aquadex Business by expanding our salesforce, selling our products to hospitals,
outpatient centers and other healthcare facilities, and controlling costs. While
we expect to continue to receive proceeds from the exercise of warrants, we will
need to seek additional financing in the future, which, to date, has been
through offerings of our equity. The disruption created by COVID-19 in our
operations, our sales outlook, and to the capital markets where we would seek
such financing has created uncertainty about our ability to access the capital
markets in future periods.

                                       19

————————————————– ——————————

Contents

On October 18, 2022, the Company closed on the October 2022 Offering for gross
proceeds of approximately $11.0 million. Net proceeds totaled approximately $9.8
million after deducting the underwriting discounts and commissions and other
costs associated with the offering and after giving effect to the underwriters'
full exercise of their overallotment option.

In connection with the October 2022 Offering, the conversion price of the Series
F convertible preferred stock was reduced from $2.50 to $0.25, the per share
price to the public in the October 2022 Offering. In addition, the exercise
price of the common stock warrants issued in connection with the January 2020
Offering was reduced from $2.50 to $1.65, based on "reset" provisions in the
Warrant agreement.  See Recent Events.

Cash Flows from Operating Activities
Net cash used in operating activities was $12.0 million and $13.7 million for
the nine months ended September 30, 2022, and 2021, respectively. The net cash
used in each of these periods primarily reflects the net loss for those periods,
offset in part by non-cash expenses including stock-based compensation,
depreciation and amortization and the effects of changes in operating assets and
liabilities, including working capital.

Cash Flows from Investing Activities
Net cash used in investing activities was $103,000 and $191,000 for the nine
months ended September 30, 2022, and 2021, respectively. The cash used in
investing activities was for the purchase of manufacturing, laboratory and
office equipment.

Cash Flows from Financing Activities
As described above, net cash (used) provided by financing activities was
($28,000) and $27.9 million for the nine months ended September 30, 2022, and
2021, respectively.

Capital Resource Requirements
As of September 30, 2022, we did not have any material commitments for capital
expenditures.

Off-balance sheet arrangements

We have no off-balance sheet transactions, arrangements, obligations (including
contingent obligations), or other relationships with unconsolidated entities or
other persons that have, or may have, a material effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources.

Forward-looking statements and risk factors

Certain statements in this Quarterly Report on Form 10-Q are forward-looking
statements within the meaning of the safe harbor provisions of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), that are based on
management's beliefs, assumptions and expectations and information currently
available to management. All statements that address future operating
performance, events or developments that we expect or anticipate will occur in
the future are forward-looking statements, including without limitation, our
expectations regarding the potential impacts of the COVID-19 pandemic on our
business operations, cash flow, business development, and employees, our ability
to execute on our strategic realignments, our post-market clinical data
collection activities, benefits of our products to patients, our expectations
with respect to product development and commercialization efforts, our ability
to increase market and physician acceptance of our products, potentially
competitive product offerings, the possibility that we may be unable to raise
sufficient funds necessary for our anticipated operations, intellectual property
protection, our ability to integrate acquired businesses, our expectations
regarding anticipated synergies with and benefits from acquired businesses and
other risks and uncertainties described in our filings with the SEC. In some
cases, you can identify forward-looking statements by the following words:
"anticipate," "believe," "continue," "could," "estimate," "expect," "intend,"
"may," "ongoing," "plan," "potential," "predict," "project," "should," "will,"
"would" or the negative of these terms or other comparable terminology, although
not all forward-looking statements contain these words. Management believes that
these forward-looking statements are reasonable as and when made. However, you
should not place undue reliance on forward-looking statements because they speak
only as of the date when made. We undertake no obligation to revise any
forward-looking statements in order to reflect events or circumstances that
might subsequently arise. Forward-looking statements are subject to a number of
risks and uncertainties that could cause actual events to adversely differ from
the expectations indicated in these forward-looking statements, including
without limitation, the risks and uncertainties described in our Annual Report
on Form 10-K for the fiscal year ended December 31, 2021, in other reports filed
thereafter with the SEC, which risk factors may by updated from time to time,
and in this Quarterly Report on Form 10-Q for the quarter ended September 30,
2022. We operate in an evolving environment. New risk factors and uncertainties
may emerge from time to time, and it is not possible for us to predict all risk
factors and uncertainties. We may not actually achieve the plans, projections or
expectations disclosed in forward-looking statements, and actual results,
developments or events could differ materially from those disclosed in the
forward-looking statements. Forward-looking statements are subject to a number
of risks and uncertainties, including without limitation, the possibility that
regulatory authorities do not accept our application or approve the marketing of
our products, the possibility we may be unable to raise the funds necessary for
the development and commercialization of our products, and those described in
our filings with the SEC.

                                       20

————————————————– ——————————

Contents

On May 31, 2022, we received the Notice from the Staff of Nasdaq informing us
that because the closing bid price for our common stock listed on Nasdaq was
below $1.00 for 30 consecutive trading days, we were not in compliance with the
Minimum Bid Price Requirement for continued listing on the Nasdaq Capital
Market, as set forth in Nasdaq Marketplace Rule 5550(a)(2).

In accordance with Nasdaq Marketplace Rule 5810(c)(3)(A), the Company has a
period of 180 calendar days from May 31, 2022, or until November 28, 2022, to
regain compliance with the Minimum Bid Price Requirement. If at any time before
November 28, 2022, the closing bid price of the Company's common stock closes at
or above $1.00 per share for a minimum of 10 consecutive trading days (which
number of days may be extended by Nasdaq), Nasdaq will provide written
notification that the Company has achieved compliance with the Minimum Bid Price
Requirement, and the matter would be resolved.

The Notice also disclosed that in the event the Company does not regain
compliance with the Minimum Bid Price Requirement by November 28, 2022, the
Company may be eligible for additional time to comply. To qualify for additional
time, the Company would be required to meet the continued listing requirement
for market value of publicly held shares and all other initial listing standards
for Nasdaq, with the exception of the Minimum Bid Price Requirement, and would
need to provide written notice of our intention to cure the deficiency during
the second compliance period, by effecting a reverse stock split, if necessary.
The Company currently intends to make application for this additional
remediation period. If the Company meets these requirements, Nasdaq will inform
the Company that it has been granted an additional 180 calendar days. However,
if it appears to the Staff that the Company will not be able to cure the
deficiency, or if the Company is otherwise not eligible, Nasdaq will provide
notice that the Company's securities will be subject to delisting.

The Company intends to continue actively monitoring the closing bid price for
the Company's common stock between now and November 28, 2022, and it will
consider available options to resolve the deficiency and regain compliance with
the Minimum Bid Price Requirement. If the Company does not regain compliance
within the allotted compliance period, including any extensions that may be
granted by Nasdaq, Nasdaq will provide notice that the Company's common stock
will be subject to delisting. The Company would then be entitled to appeal that
determination to a Nasdaq hearings panel. There can be no assurance that the
Company will regain compliance with the Minimum Bid Price Requirement during the
180-day compliance period, secure a second period of 180 calendar days to regain
compliance, or maintain compliance with the other Nasdaq listing requirements.

If we fail to maintain compliance with the Minimum Bid Price Requirement, or any
other of the continued listing requirements of Nasdaq, Nasdaq may take steps to
delist our common stock. If such delisting should occur, it would likely have a
negative effect on the price of our common stock and would impair an investor's
ability to sell or purchase our common stock when desired. In the event of a
delisting, we can provide no assurance that any action taken by us to restore
compliance with listing requirements would allow our common stock to become
listed again, stabilize the market price or improve the liquidity of our common
stock, prevent our common stock from dropping below the Minimum Bid Price
Requirement, or prevent future non-compliance with Nasdaq's listing
requirements.

© Edgar Online, source Previews

About Jason Norton

Check Also

Low stock price triggers Nasdaq delisting warning for AlerisLife

AlerisLife (Nasdaq: ALR) needs to raise its stock price or face possible delisting from the …