Nuwellis(NUWE) - 2025 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION This section details the company's financial performance, condition, and cash flows, alongside management's analysis, market risk disclosures, and internal control effectiveness Item 1. Financial Statements The unaudited condensed consolidated financial statements for Q1 2025 reveal a net loss of $3.0 million and an accumulated deficit of $301.8 million, raising substantial doubt about the company's going concern ability - The company's financial statements have been prepared on a going concern basis, but its history of losses, an accumulated deficit of $301.8 million as of March 31, 2025, and expected future losses raise substantial doubt about its ability to continue operations for at least twelve months from the filing date[23] - Existing capital resources are projected to be sufficient to support the operating plan only through May 31, 2025, requiring additional capital to continue operations and growth initiatives[26][75] Condensed Consolidated Balance Sheets This table provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of March 31, 2025, and December 31, 2024 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $2,557 | $5,095 | | Total current assets | $6,123 | $8,855 | | Total Assets | $7,006 | $9,864 | | Liabilities & Equity | | | | Total current liabilities | $2,749 | $2,559 | | Total liabilities | $3,424 | $3,334 | | Total stockholders' equity | $3,578 | $6,528 | | Total Liabilities & Equity | $7,006 | $9,864 | Condensed Consolidated Statements of Operations This table outlines the company's financial performance for the three months ended March 31, 2025 and 2024, including net sales, gross profit, operating expenses, and net loss Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net sales | $1,904 | $1,857 | | Gross profit | $1,067 | $1,191 | | Total operating expenses | $4,127 | $5,940 | | Loss from operations | $(3,060) | $(4,749) | | Net loss | $(3,014) | $(4,330) | | Basic and diluted loss per share | $(0.69) | $(24.11) | Condensed Consolidated Statements of Cash Flows This table details the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,536) | $(2,862) | | Net cash used in investing activities | $0 | $(29) | | Net cash provided by financing activities | $0 | $500 | | Net decrease in cash and cash equivalents | $(2,538) | $(2,400) | | Cash and cash equivalents - end of period | $2,557 | $1,400 | Notes to Condensed Consolidated Financial Statements These notes provide essential context and additional details for the condensed consolidated financial statements, covering business operations, significant customer relationships, and recent strategic developments - The company's primary business is the commercialization of the Aquadex SmartFlow® system for ultrafiltration therapy in patients with fluid overload[19] - In Q1 2025, one customer accounted for 14% of net sales; as of March 31, 2025, three customers represented 15%, 10%, and 10% of the accounts receivable balance[28][29] - On May 12, 2025, the company announced a strategic agreement with KDI Precision Manufacturing, which will assume assembly responsibilities for the Aquadex SmartFlow® Console and related products[55][56] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 2.5% increase in Q1 2025 net sales, offset by a gross margin decline, alongside a 30.5% reduction in operating expenses and a critical liquidity situation requiring urgent additional financing Results of Operations This section analyzes the company's net sales, cost of goods sold, and operating expenses, highlighting key changes and their drivers for the current and prior periods Comparison of Operating Results (in thousands) | Metric | Q1 2025 | Q1 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,904 | $1,857 | $47 | 2.5% | | Cost of goods sold | $837 | $666 | $171 | 25.7% | | Selling, general and administrative | $3,577 | $4,606 | $(1,029) | (22.3)% | | Research and development | $550 | $1,334 | $(784) | (58.8)% | - The increase in net sales was driven by a 4% increase in circuit sales and higher console sales, partially offset by lower international sales[78] - The decrease in SG&A and R&D expenses was primarily due to reduced headcount, lower compensation-related expenses, and decreased project spending[81][82] Liquidity and Capital Resources This section details the company's historical funding sources, current cash position, and projected capital needs, emphasizing the urgency for additional financing to sustain operations - The company has historically funded operations through equity issuances, including several offerings in 2024 that raised gross proceeds of approximately $5.3 million[83][86][90] - As of March 31, 2025, cash and cash equivalents were $2.6 million, a decrease from $5.1 million at the end of 2024[96] - Net cash used in operating activities decreased to $2.5 million in Q1 2025 from $2.9 million in Q1 2024, reflecting a lower net loss and changes in working capital[97] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company states this section is not applicable, indicating no significant exposure to market risks requiring detailed disclosure - The company has determined that quantitative and qualitative disclosures about market risk are not applicable[102] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025, due to two material weaknesses in internal controls over financial reporting, with remediation planned - Management concluded that disclosure controls and procedures were not effective at a reasonable assurance level as of March 31, 2025[105] - The ineffectiveness was attributed to two material weaknesses in controls over financial reporting, as detailed in the 2024 Annual Report on Form 10-K[105] PART II—OTHER INFORMATION This section covers legal proceedings, updated risk factors, equity sales, potential defaults, and other miscellaneous information and exhibits Item 1. Legal Proceedings The company reports no legal proceedings requiring disclosure for the period - The company reports no legal proceedings[108] Item 1A. Risk Factors This section supplements previously disclosed risk factors, emphasizing risks from off-label product use, U.S. trade policies, FDA disruptions, and reliance on sole source suppliers - The company faces risks of substantial civil and criminal penalties if its communications are deemed to be marketing or promoting its products for "off-label" uses, particularly as the Aquadex System is being used for pediatric patients weighing under the cleared 20 kg[110][112][114] - Changes in U.S. trade policies and tariffs could have a material adverse impact, as the company sources certain raw materials for the Aquadex System from China[118] - The business is dependent on sole source suppliers, including a single fully validated third-party sterilizer, and any interruption in supply could significantly harm production and business operations[124] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the quarter - The company reports no unregistered sales of equity securities for the period[127] Item 3. Defaults Upon Senior Securities The company states this section is not applicable, indicating no defaults on senior securities - The company states that this item is not applicable[128] Item 4. Mine Safety Disclosures The company states this section is not applicable - The company states that this item is not applicable[129] Item 5. Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended March 31, 2025 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[130] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - The report includes an exhibit index listing all documents filed with the 10-Q, such as CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906[131][135]