NUWE 10-K & 10-Q changes, risk factors and insider trading

Risk Factors.

We will need to raise additional capital to fund our operations through the end of fiscal year 2026. If additional capital is not available, we will have to delay, reduce, or cease operations.

We believe that we have sufficient capital to fund our operations through the end of the second quarter of 2026. We will need to raise additional capital to fund our operations through the end of fiscal year 2026. Changing circumstances may cause us to consume capital significantly faster than we currently anticipate and could adversely affect our ability to raise additional capital. Additional financing may not be available when we need it or may not be available on terms that are favorable to us. In addition, the risk that we may not be able to continue as a going concern may make it more difficult to obtain necessary additional funding on terms favorable to us, or at all. If we raise additional funding through the issuance of equity securities, our stockholders may suffer dilution and our ability to use our net operating losses to offset future income may be limited. If we raise additional funding through debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, require us to use our cash to make payments under such indebtedness, force us to maintain specified liquidity or other ratios or restrict our ability to pay dividends or make acquisitions. If we are unable to secure additional funding, our development programs and our commercialization efforts would be delayed, reduced or eliminated, our relationships with our suppliers and manufacturers may be harmed, and we may not be able to continue our operations.

Our near-term prospects are highly dependent on revenues from a single product, the Aquadex System, and we have no other commercial products at this time. The established market or customer base for our Aquadex System is limited and our success depends on our ability to increase adoption and utilization of the Aquadex System. Acceptance of our product in the marketplace by healthcare providers is uncertain, and our failure to achieve sufficient market acceptance will significantly limit our ability to generate revenue and be profitable. Market acceptance will require substantial marketing efforts and the expenditure of significant funds by us to inform healthcare providers of the benefits of using the Aquadex System and to provide further training on its use. We may not be able to build key relationships with healthcare providers to drive further sales in the United States or sell the Aquadex System outside the United States. Product orders may be cancelled, patients or customers currently using our products may cease to do so and patients or customers expected to begin using our products may not do so. In addition, market acceptance of the Aquadex System may require that we make enhancements to the system or its components. We cannot be sure that we will be able to successfully develop such enhancements, or that if developed they will be viewed favorable by the market. Our ability to achieve acceptance of our Aquadex System depends on our ability to demonstrate the safety, efficacy, ease-of-use and cost-effectiveness of the system. We may not be able to expand the adoption and market acceptance of the Aquadex System to both the inpatient and outpatient markets and our potential sales could be harmed.

We do not own or operate, and currently have no plans to establish, any manufacturing facilities for our products. We currently rely, and expect to continue to rely, on third-party contract manufacturers to manufacture our products for our commercial use. We currently work exclusively with KDI Precision Manufacturing as the sole manufacturer for the production of the Aquadex SmartFlow® Console, AquaFlexFlow® Blood Circuits, and dELC® Catheters. If any issues arise in the manufacturing and we are unable to arrange for alternative third-party manufacturing sources, we are unable to find an alternative third party capable of reproducing the existing manufacturing method or we are unable to do so on commercially reasonable terms or in a timely manner, we may not be able to meet customer demand.

Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured our products, including:

reliance on the third party for regulatory compliance and quality assurance;

the possibility of breach of the manufacturing agreement by the third party because of factors beyond our control;

the possibility of termination or nonrenewal of the agreement by the third party, based on our own business priorities, at a time that is costly or damaging to us;

current manufacturer and any future manufacturers may not be able to manufacture our products at a cost or in quantities or in a timely manner necessary to make commercially successful products;

equipment malfunctions, power outages or other general disruptions experienced by our third-party manufacturers to their respective operations and other general problems with a multi-step manufacturing process; and the possible misappropriation or disclosure by the third party or others of our proprietary information, including our trade secrets and know-how.

If third-party manufacturers do not successfully carry out their contractual obligations or meet expected timelines our results of operations could be impacted. Our manufacturers are also subject to federal, state and local laws and regulations in the United States and abroad governing laboratory procedures and the use, manufacture, storage, handling and disposal of medical and hazardous materials. Although we believe that our manufacturers’ procedures for using, handling, storing and disposing of these materials comply with legally prescribed standards, we cannot completely eliminate the risk of contamination or injury resulting from medical or hazardous materials. As a result of any such contamination or injury, we may incur liability or local, city, state or federal authorities may curtail the use of these materials and interrupt our business operations. In the event of an accident, we could be held liable for damages or penalized with fines, and the liability could exceed our resources. Compliance with applicable environmental, health and safety laws and regulations are expensive, and current or future environmental regulations may impair our research, development and production efforts, which could harm our business, prospects, financial condition or results of operations.

On August 7, 2025, the Company announced its decision to exit selected international operations in order to focus on the U.S. market—where the Company is seeing the strongest growth and clinical demand. This strategic realignment supports Nuwellis’ core business strategy: investing in the markets driving revenue growth. With expanding traction in U.S. cardiac surgery and pediatric programs, and a rising opportunity in the hospital-based outpatient space, the Company is streamlining to prioritize investment in markets where it can have the most immediate and long-term impact.

Our manufacturing facilities have not been inspected and certified by a Notified Body. We cannot be sure that our facilities or the processes we use will comply or continue to comply with their respective requirements on a timely basis or at all, which could delay or prevent obtaining the approvals we need to market our products in the European Union Community and the United States.

Our products may cause or contribute to adverse medical events or be subject to failures or malfunctions that we are required to report to the FDA, and if we fail to do so, we would be subject to sanctions that could harm our reputation, business, financial condition and results of operations. The discovery of serious safety issues with our products, or a recall of our products either voluntarily or at the direction of the FDA or another governmental authority, could have a negative impact on us.

We are subject to the FDA’s medical device reporting regulations, which require us to report to the FDA when we receive or become aware of information that reasonably suggests that our product(s) may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, could cause or contribute to a death or serious injury. The timing of our obligation to report is triggered by the date we become aware of the adverse event as well as the nature of the event. We may fail to report adverse events of which we become aware within the prescribed timeframe. We may also fail to recognize that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of the product. Manufacturers are also expected to maintain certain policies, procedures, and records regarding complaints and medical device reporting. If we fail to comply with our reporting and recordkeeping obligations, the FDA could take action, including Warning letters, Untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearance or approval, seizure of our products or delay in clearance or approval of future products. In addition, information contained in an MDR could trigger FDA regulatory actions such as inspections, recalls and patient/physician notifications; and because the reports are publicly available, MDRs could become the basis for private lawsuits, including class actions.

The FDA has the authority to require the recall of a device in the event of material deficiencies or defects in design or manufacture or if it poses an unacceptable risk to health. We may also choose to voluntarily recall a product if any material deficiency is found. A government-mandated or voluntary recall by us could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing defects, labeling or design deficiencies, packaging defects or other deficiencies or failures to comply with applicable regulations. Depending on the corrective action we take to redress a product’s deficiencies or defects, the FDA may require, or we may decide, that we will need to obtain new clearances or approvals before we may market or distribute the corrected device. Seeking such clearances or approvals may delay our ability to replace the recalled devices in a timely manner. Moreover, if we do not adequately address problems associated with our devices, we may face additional regulatory enforcement action.

Companies are required to maintain certain records of recalls and corrections, even if they are not reportable to the FDA. We may, in the future, initiate voluntary withdrawals or corrections for our products that we determine do not require notification to the FDA. If the FDA disagrees with our determinations, it could require us to report those actions as recalls and we may be subject to enforcement action. A future recall announcement could harm our reputation with customers, potentially lead to product liability claims against us and negatively affect our sales. Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of time and capital, will distract management from operating our business and may harm our reputation and financial results.

Whether or not the Affordable Care Act remains in effect, it is expected that federal and state governments will continue to consider various reform proposals in the health care industry that may be adopted in the future. These reforms could have a material adverse effect on our industry generally and on our customers. We cannot predict what health care programs and regulations will be ultimately implemented at the federal or state level, particularly given the recent change in administration, or the effect of any future legislation or regulation. However, any healthcare reforms enacted in the future may, like the Affordable Care Act, be phased in over a number of years, but if enacted, could reduce our revenue, increase our costs, or require us to change the ways in which we conduct business or put us at risk for loss of business. In addition, our results of operations, financial position and cash flows could be materially adversely affected by changes under the Affordable Care Act and changes under any federal or state legislation adopted in the future.

Management’s Discussion and Analysis of Financial Conditions and Results of Operations.

Nasdaq Compliance

On June 18, 2025, Nuwellis, Inc. (the “Company”) received a letter (the “Deficiency Notice”) from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) informing the Company that because the closing bid price for the Company’s Common Stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company was 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”). The Deficiency Notice also indicated that the Company was not eligible for any compliance period specified in Nasdaq Listing Rule 5810(c)(3)(A) because the Company effected a reverse stock split over the prior one-year period or has effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one; accordingly, the Company was informed that its securities were subject to delisting from Nasdaq unless the Company timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”). As previously disclosed, the Company effected the 2024 Reverse Stock Split on June 27, 2024. The Company timely requested a hearing before the Panel, which was scheduled for August 12, 2025. At its annual meeting held on May 20, 2025, the Company’s stockholders approved a proposal allowing the board of directors of the Company to effect a reverse split in the range of 1-for-5 to 1-for-70. The Company’s board of directors authorized the 2025 Reverse Stock Split to regain compliance with the Minimum Bid Price Requirement. On July 22, 2025, the Company received formal notice from Nasdaq stating that it had resolved the previously disclosed bid price deficiency. As a result, the hearing previously scheduled with the Nasdaq Hearings Panel for August 12, 2025, was cancelled, and shares of the Company’s Common Stock continue to be listed and traded on the Nasdaq Capital Market under the ticker “NUWE.”

Public Offerings

On June 10, 2025, the Company announced the closing of its public offering of 61,444 shares of its Common Stock, pre-funded warrants to purchase 335,381 shares of Common Stock (all pre-funded warrants were exercised on this date), in each case with accompanying Series A Warrants to purchase up to 1,190,480 shares of Common Stock, Series B Warrants to purchase up to 396,829 shares of Common Stock and Placement Warrants to purchase up to 11,903 shares of Common Stock with gross proceeds of approximately $5.0 million, which included the full exercise of the underwriter’s over-allotment option to purchase additional shares and warrants. The public offering price per share of Common Stock and accompanying warrants is $12.60 per share and accompanying warrants, and the public offering price per pre-funded warrant and accompanying warrants is $12.5958 per pre-funded warrant and accompanying warrants. Each pre-funded warrant has an exercise price of $0.0042 per pre-funded warrant and was immediately exercisable. The Series B Warrants have an exercise price of $12.60 and will be exercisable for a period of five years following the receipt of stockholder approval which was obtained on August 4, 2025, as required by the applicable rules and regulations of Nasdaq. The Series A Warrants contain a one-time reset of the exercise price in the event that the Company implemented the 2025 Reverse Stock Split equal to the greater of: (i) 20% of the combined public offering price per share of Common Stock and accompanying warrants in the offering and (ii) the lowest daily volume weighted average price for the five trading days immediately following the date of the implementation of the 2025 Reverse Stock Split. After the reverse stock split was effectuated on July 3, 2025, the reset exercise price of the Series A warrants was set at $7.00 per share and there were no further contractual exercise price adjustments following the reverse split. The Series B Warrants include a zero cash exercise option allowing holders of a Series B Warrant the right to receive, without payment of any additional cash to the Company, an aggregate number of shares equal to the number of shares of Common Stock that would be issuable upon a cash exercise of such Series B Warrants.

The Series A and B warrants offered in this financing were determined to be classified as a liability on the condensed consolidated balance sheet. An independent valuation of the warrants was performed and reviewed with management. The Series A warrants were valued using the Monte Carlo Simulation Model utilizing US Treasury Rates, Volatility rates, Common Stock price and assumptions around date and likelihood of a reverse split exercise price adjustment. The Series B warrants were valued using the Common Stock price given the zero-exercise price. The valuation at issuance was $10.6 million for the Series A warrants and $3.9 million for the Series B warrants, and on June 30, 2025, was $10.0 million for the Series A warrants and $3.7 million for the Series B warrants, representing a warrant liability decrease of $0.8 million from issuance. The $0.8 million warrant liability decrease from issuance has been reported on the condensed consolidated statement of operations as a “Change in fair value of warrant liability.” The total warrant valuation of $14.5 million exceeded the gross proceeds of $5.0 million. Accordingly, if the warrant valuation exceeds the gross proceeds, the difference will be recorded as “Day 1 interest.” You will find this difference, along with other issuance costs (discounts, legal fees, printing) reported on the condensed consolidated statement of operations as “Financing expense.”

As a result of the above, the Company’s stockholders’ equity as of June 30, 2025 was below the Nasdaq Stockholders’ Equity Requirement. However, subsequently the liability associated with the Series A Warrants of $8.4 million was reclassified on July 14, 2025 as equity due to the exercise price being reset to the floor at $7.00 per share. The majority of the liability associated with the Series B Warrants has been removed as these were exercised into Common Stock. As of December 31, 2025, there were 6,268 Series B warrants still unexercised and the fair value of these warrants was $21,004.

Private Placement

On January 29, 2026, the Company entered into a securities purchase agreement with a certain institutional accredited investor in connection with a private placement for the offer, issuance and sale of (i) 994,537 pre-funded common stock purchase warrants (the “Pre-Funded Warrants”) to purchase up to 994,537 shares of the Company’s common stock (the “Pre-Funded Warrant Shares”), $0.0001 par value and (ii) 1,989,074 common warrants (the “Common Warrants”), and together with the Pre-Funded Warrants, to purchase up to 1,989,074 shares of Common Stock and together with the Pre-Funded Warrant Shares and the Pre-Funded Warrants, for a combined purchase price of $3.09.

Under the terms of the Pre-Funded Warrants and Common Warrants, a holder will not be entitled to exercise any portion of any Pre-Funded Warrant or Common Warrant, if, upon giving effect to such exercise, the aggregate number of shares of Common Stock beneficially owned by the holder (together with its affiliates, other persons acting or who could be deemed to be acting as a group together with the holder or any of the holder’s affiliates, and any other persons whose beneficial ownership of Common Stock would or could be aggregated with the holder’s or any of the holder’s affiliates for purposes of Section 13(d) or Section 16 of the Securities Exchange Act of 1934, as amended would exceed 4.99% (or, upon election by a holder prior to the issuance of any Pre-Funded Warrants or Common Warrants, 9.99%) of the number of shares of Common Stock outstanding immediately after giving effect to the exercise as such percentage ownership is calculated in accordance with Section 13(d) of the Exchange Act and the applicable regulations of the Securities and Exchange Commission. A holder may increase or decrease the Beneficial Ownership Limitation to a higher or lower percentage (not to exceed 9.99%), effective 61 days after written notice to the Company.

The gross proceeds from the Private Placement to the Company were approximately $3.1 million, before deducting the placement agent’s fees and related offering expenses. The Company intends to use the net proceeds from the Private Placement for working capital and general corporate purposes.

Warrant Inducement

On January 29, 2026, the Company entered into a warrant inducement offer letter with a certain investor to immediately exercise warrants issued to that investor in June 2025 and November 2024 at a reduced exercise price of $2.84 and the Company issued to the investor a new Common Stock Purchase Warrant (the “January Inducement Warrants”) to purchase up to a number of shares of common stock equal to 200% of the number of shares of Common Stock issued pursuant to the immediate exercise of the corresponding June 2025 warrants and November 2024 warrants. The January Inducement Warrants have an exercise price of $2.84 per share, were exercisable immediately upon issuance, and expire upon the five-year anniversary of the date that a resale registration statement related to the January Inducement Warrant issued in the January Inducement Offer becomes effective.

The Company received aggregate gross proceeds of approximately $1.9 million from the exercise of the June 2025 warrants and November 2024 warrants resulting in the issuance of up to an aggregate of 623,585 shares of Common Stock, subject to application of applicable beneficial ownership blockers. As of January 29, 2026, the Company had 1,686,892 shares of common stock issued and outstanding.

The Company also issued to the Placement Agent, or its designees, warrants to purchase up to 48,544 shares of our Common Stock as part of the compensation payable to the Placement Agent in connection with the Private Placement and January Inducement Offering. The Placement Agent Warrants have substantially the same terms as the January Inducement Warrants described above, except that the Placement Agent Warrants have an exercise price of $5.0985 per share.

Contract with KDI

On May 12, 2025, the Company announced it had finalized an agreement with KDI Precision Manufacturing to support the next phase of Nuwellis’ growth. The Company made a contractual payment of $240,000 on July 15, 2025 to initiate the transition of the production process to KDI. This strategic relationship is expected to expand Nuwellis' manufacturing capabilities, streamline operations, and enhance the Company's ability to deliver high-quality products to healthcare providers and patients. Under the agreement, KDI will assume assembly responsibilities for the Aquadex SmartFlow® Console, AquaFlexFlow® Blood Circuits, and dELC® Catheters. To ensure a seamless transition and protect product expertise, Nuwellis assembly employees were hired by KDI. Sales, customer service, product design, and post-market surveillance will continue to reside within Nuwellis. During the third quarter of 2025, console manufacturing and calibration of consoles were moved to the KDI facility. As of December 31, 2025, all circuit and catheter manufacturing personnel had transitioned to the KDI facility and were converted to KDI employees.

Reverse Stock Split

On June 19, 2025, the Board approved the 2025 Reverse Stock Split. On July 2, 2025, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Certificate of Incorporation (the “Certificate of Amendment”) to effect the 2025 Reverse Stock Split, which became effective as of 5:00 p.m. Eastern Time on July 3, 2025, and the Company’s Common Stock began trading on a split-adjusted basis when the market opened on July 7, 2025. When the 2025 Reverse Stock Split became effective, every forty-two shares of the Company’s issued and outstanding Common Stock (and such shares held in treasury) automatically converted into one share of Common Stock, without any change in the par value per share. In addition, a proportionate adjustment was made to the per share exercise price and the number of shares issuable upon the conversion of the Company’s outstanding shares of preferred stock and exercise of all outstanding stock options, restricted stock units and warrants to purchase shares of Common Stock and the number of shares reserved for issuance pursuant to the Company’s equity incentive compensation plans. Any fraction of a share of Common Stock that was created as a result of the 2025 Reverse Stock Split was rounded down to the next whole share and the stockholder received cash equal to the market value of the fractional share, determined by multiplying such fraction by the closing sales price of the Company’s Common Stock as reported on Nasdaq on the last trading day before the 2025 Reverse Stock Split becomes effective. All share and per-share amounts have been retroactively adjusted to reflect the reverse stock splits for all periods presented.

REVERSE-HF Clinical Trial

On July 17, 2025, the Company announced the termination of its REVERSE-HF clinical trial, a randomized post-market trial evaluating ultrafiltration versus IV loop diuretic therapy for fluid management in hospitalized heart failure patients. This decision reflects the Company’s strategic commitment to prioritize resources in areas demonstrating the greatest potential for patient impact and business growth—namely, outpatient heart failure, pediatric, and critical care. The Company anticipates it will save approximately $4.0M over the next 2.5 years by terminating the REVERSE-HF clinical trial.

International Operations

On August 7, 2025, the Company announced its decision to exit selected international operations in order to focus on the U.S. market—where the Company is seeing the strongest growth and clinical demand. This strategic realignment supports Nuwellis’ core business strategy: investing in the markets driving revenue growth. With expanding traction in U.S. cardiac surgery and pediatric programs, and a rising opportunity in the hospital-based outpatient space, the Company is streamlining to prioritize investment in markets where it can have the most immediate and long-term impact.

Stock Purchase Agreement

On January 29, 2026, the Company announced that it entered into a Securities Purchase Agreement to acquire all of the issued and outstanding capital stock of Rendiatech Ltd., an Israeli-based medical technology company focused on automated kidney function monitoring. The transaction is expected to close following the satisfaction of customary closing conditions.

At The Market Offering Agreement

On September 3, 2025, the Company entered into an At The Market Offering Agreement (the “Sales Agreement”) with Ladenburg Thalmann & Co. Inc. (“Ladenburg”) pursuant to which the Company may sell shares of the Company’s Common Stock, from time to time, at its option, through or to Ladenburg, as sales agent or principal. Sales of the Company’s Common Stock made pursuant to the Sales Agreement were made under the Company’s Registration Statement on Form S-3 (File No. 333-280647) and the prospectus supplement filed on September 3, 2025 with the Securities and Exchange Commission, in sales deemed to be “at the market offerings” as defined in Rule 415 promulgated under the Securities Act, initially having an aggregate offering price of up to $4,650,000. Ladenburg will use its commercially reasonable efforts to sell the Common Stock from time to time, based upon the Company’s instructions (including any price, time, or size limits or other customary parameters or conditions the Company may impose). As of December 31, 2025, the Company had sold 768,535 of Common Shares for net proceeds of approximately $3.2 million.

The Company is not obligated to make any sales of Common Stock under the Sales Agreement, and the Company cannot provide any assurances that it will issue any shares pursuant to the Sales Agreement. The offering of Common Stock pursuant to the Sales Agreement will terminate upon the termination of the Sales Agreement as permitted therein. The Company is obligated to pay Ladenburg an aggregate sales agent commission of up to 3.0% of the gross proceeds of the sale price for Common Stock sold under the Sales Agreement. The Company has also provided Ladenburg with customary indemnification rights and expense reimbursements for up to $50,000 of expenses in addition to ongoing diligence expenses. The representations, warranties and covenants contained in the Sales Agreement were made only for purposes of the Sales Agreement as of specific dates indicated therein, were solely for the benefit of Ladenburg and to allocate risk between the Company and Ladenburg, and as a result should not be relied on and may be subject to limitations agreed upon by the parties.

Robert B. Scott resigned from the Company as Chief Financial Officer effective October 24, 2025. Carisa Schultz was appointed by the Company’s board of directors to serve as Chief Financial Officer, Principal Financial Officer, and Principal Accounting Officer effective February 2, 2026.

Selling, general and administrative expenses increased slightly for the current fiscal year. This was primarily driven by the addition in headcount and compensation-related expenses and slightly higher professional service fees during fiscal year 2025.

Nasdaq may delist our common stock from its exchange which could limit your ability to make transactions in our securities and subject us to additional trading restrictions.

On June 8, 2026, the Company closed an offering of 54,381 shares of its common stock, pre-funded warrants to purchase 517,047 shares of common stock, in each case with accompanying Series C Warrants to purchase up to 1,714,286 shares of common stock and Series D Warrants to purchase up to 571,437 shares of common stock. The public offering price per share of common stock and accompanying warrants is $10.60 per share and accompanying warrants, and the public offering price per pre-funded warrant and accompanying warrants is $10.5965 per pre-funded warrant and accompanying warrants. The Series D Warrants had an exercise price of $10.60 and would be exercisable for a period of five years following the receipt of stockholder approval, as required by the applicable rules and regulations of Nasdaq. The Series C Warrants contain a one-time reset of the exercise price in the event that the Company implemented the 2026 Reverse Stock Split equal to the greater of: (i) 20% of the combined public offering price per share of common stock and accompanying warrants in the offering and (ii) the lowest daily volume weighted average price for the five trading days immediately following the date of the implementation of the 2026 Reverse Stock Split.

As a result of specific terms included in the Series C Warrants and the Series D Warrants, it was determined that outstanding Series C Warrants and the Series D Warrants should be classified as a liability on the Company’s balance sheet until (i) in the case of the Series C Warrants, the price reset is triggered in connection with the reverse split or (ii) the warrants are exercised for shares of common stock.

On June 25, 2026, the Company consummated a one-for-thirty-five reverse stock split of the Company’s issued and outstanding shares of common stock. As a result of this reverse stock split, the price reset provision of the Series C Warrants was triggered, resulting in the exercise price being reduced to $2.72 per share, and the transition of any outstanding Series C Warrants from being classified as a liability on the Company’s balance sheet into equity. On July 24, 2026 at a special meeting our stockholders approved, amongst other things, the exercise of the Series C Warrants and Series D Warrants in accordance with Nasdaq Listing Rule 5635(d). Following this special meeting, the holders of the Series D Warrants exercised a majority of the outstanding warrants, resulting in the removal of a majority of the liability associated with the outstanding Series D Warrants from the Company’s balance sheet.

As a result of the above, the Company’s stockholders’ equity as of June 30, 2026, as reported in the interim financial statements included in this Quarterly Report on Form 10-Q, was below the Stockholders’ Equity Requirement. However, as of the date of the filing of this Quarterly Report on Form 10-Q, the liability associated with the Series C Warrants has been reclassified as equity and a majority of the liability associated with the Series D Warrants has been removed, resulting in a pro forma stockholders’ equity of $4,392 (in thousands) as of June 30, 2026, and the Company believes it continues to be compliance with the minimum Stockholders’ Equity Requirement. However, there is no assurance that the Nasdaq Hearings Panel will agree with our conclusion or whether it will require a plan of compliance that details our ability to maintain compliance with the Stockholders’ Equity Requirement that we can provide.

On January 13, 2026, Nasdaq filed a rule proposal with the SEC to adopt a new continued listing requirement that would require all companies listed on Nasdaq to maintain a minimum market value of listed securities of $5 million. As proposed, if a company’s market value of listed securities falls below this threshold for 30 consecutive trading days, Nasdaq may immediately suspend trading and initiate delisting proceedings without affording the company a compliance cure period. This proposed rule would be in addition to Nasdaq’s existing continued listing requirements. On June 22, 2026, the SEC adopted the rule. If the market value of our common stock stays below the $5 million threshold or we otherwise fail to satisfy Nasdaq’s continued listing standards, we will face delisting proceedings on an accelerated basis. The delisting of our common stock from Nasdaq would materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, delisting would likely harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer business development opportunities. The effective date of the rule was July 23, 2026, however, on July 29, 2026, the SEC temporarily stayed the effectiveness of such rule. It is not currently known when or if the rule may be reimplemented by the SEC and Nasdaq.

We continue to actively monitor our performance with respect to the listing standards and will consider available options to resolve any deficiency and maintain compliance with the Nasdaq rules. There can be no assurance that we will be able to maintain compliance or, if we fall out of compliance, regain compliance with any deficiency, or if we implement an option that regains our compliance, maintain compliance thereafter.

If our Common Stock is delisted from Nasdaq, our ability to raise capital through public offerings of our securities and to finance our operations could be adversely affected. We also believe that delisting would likely result in decreased liquidity and/or increased volatility in our Common Stock and could harm our business and future prospects. In addition, we believe that, if our Common Stock is delisted, our stockholders would likely find it more difficult to obtain accurate quotations as to the price of the Common Stock and it may be more difficult for stockholders to buy or sell our Common Stock at competitive market prices, or at all. If our common stock is delisted by Nasdaq, the price of our common stock may decline and our common stock may be eligible to be quoted on the OTC Bulletin Board, another over-the-counter quotation system, or on the pink sheets, which would negatively affect the liquidity of our common stock and an investor may find it more difficult to dispose of their common stock or obtain accurate quotations as to the market value of our common stock. Any such delisting action may materially adversely affect our ability to raise capital or pursue strategic transactions on acceptable terms, or at all.

Closed a registered public offering on June 8, 2026, raising approximately $6.0 million in gross proceeds.

Effectuated a one-for-thirty-five (1-for-35) reverse stock split of the Company’s common stock, effective June 25, 2026.

Research and Development (R&D)

The increase in R&D expenses was primarily driven by increased headcount and compensation-related expenses and higher consulting fees associated with increased sustained engineering expenses and improvements to our quality system.

Comparison of six months ended June 30, 2026 to six months ended June 30, 2025

Net Sales

Revenue is generated mainly from the sale of disposable blood filters and catheters used in conjunction with the Aquadex system consoles. 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 in the current year period is primarily due to a 361% increase in console sales, and a 12% increase in circuits reflecting continued increases in the number of patients treated with the Aquadex therapy.

Costs and Expenses

Our costs and expenses were as follows:

Cost of Goods Sold

The decrease in cost of goods sold for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, was primarily due to the increase in margin from switching to contract manufacturing, KDI Precision Manufacturing.

Selling, General and Administrative

The increase in selling, general and administrative expenses was primarily driven by increased headcount and sales related compensation from a 20.5% increase in sales vs prior year, and higher professional services fees.