☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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No. 68-0533453
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(State or Other Jurisdiction of Incorporation or Organization)
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(
I.R.S. Employer Identification No.)
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Large accelerated filer
☐
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Accelerated filer
☐
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Non-accelerated filer
☐
(Do not check if a smaller reporting company)
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Smaller reporting company
☒
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Emerging growth company
☐
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Page Number
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||
PART I—FINANCIAL INFORMATION
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||
Item 1
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3
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3
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||
4
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5
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||
6
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Item 2
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13
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Item 3
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18
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Item 4
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18
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PART II—OTHER INFORMATION
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||
Item 1
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19
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Item 1A
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19
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Item 2
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20
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Item 3
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20
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Item 4
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20
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Item 5
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20
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Item 6
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20
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March 31,
2018
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December 31,
2017
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|||||||
ASSETS
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(unaudited)
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|||||||
Current assets
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||||||||
Cash and cash equivalents
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$
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10,504
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$
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15,595
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||||
Accounts receivable
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658
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545
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||||||
Inventory
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2,525
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1,588
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||||||
Other current assets
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130
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136
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||||||
Total current assets
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13,817
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17,864
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||||||
Property, plant and equipment, net
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573
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570
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||||||
Other assets
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21
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21
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||||||
TOTAL ASSETS
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$
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14,411
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$
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18,455
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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||||||||
Current liabilities
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||||||||
Accounts payable
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$
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1,051
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$
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862
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||||
Accrued compensation
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650
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1,021
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||||||
Other current liabilities
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198
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208
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||||||
Total current liabilities
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1,899
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2,091
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||||||
Other liabilities
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126
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126
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||||||
Total liabilities
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2,025
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2,217
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||||||
Commitments and contingencies
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—
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—
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||||||
Stockholders’ equity
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||||||||
Series A junior participating preferred stock as of March 31, 2018 and December 31, 2017, par value $0.0001 per share; authorized 30,000 shares, none outstanding
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—
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—
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||||||
Series F convertible preferred stock as of March 31, 2018 and December 31, 2017, par value $0.0001 per share; authorized 1,748 and 3,780 shares, respectively, issued and outstanding 1,748 and 3,780, respectively
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—
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—
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||||||
Preferred stock as of March 31, 2018 and December 31, 2017, par value $0.0001 per share; authorized 39,968,252 and 39,966,220 shares, none outstanding
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—
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—
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||||||
Common stock as of March 31, 2018 and December 31, 2017, par value $0.0001 per share; authorized 100,000,000 shares, issued and outstanding 4,252,134 and 3,798,929, respectively
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—
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—
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||||||
Additional paid‑in capital
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197,868
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197,367
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||||||
Accumulated other comprehensive income:
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||||||||
Foreign currency translation adjustment
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1,228
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1,227
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||||||
Accumulated deficit
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(186,710
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)
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(182,356
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)
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Total stockholders’ equity
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12,386
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16,238
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||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
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$
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14,411
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$
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18,455
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Three months ended
March 31,
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||||||||
2018
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2017
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|||||||
Net sales
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$
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1,037
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$
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901
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||||
Costs and Expenses:
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||||||||
Cost of goods sold
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901
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514
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||||||
Selling, general and administrative
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4,011
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2,387
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||||||
Research and development
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479
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308
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||||||
Total costs and expenses
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5,391
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3,209
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||||||
Loss from operations
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(4,354
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)
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(2,308
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)
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||||
Other income (expense):
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||||||||
Other income, net
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—
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6
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||||||
Warrant valuation expense
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—
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(67
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)
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|||||
Change in fair value of warrant liability
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—
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1,429
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||||||
Total other income (expense)
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—
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1,368
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||||||
Loss before income taxes
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(4,354
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)
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(940
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)
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||||
Income tax expense
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—
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—
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||||||
Net loss
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$
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(4,354
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)
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$
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(940
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)
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Basic and diluted loss per share
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$
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(1.08
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)
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$
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(35.05
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)
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Weighted average shares outstanding – basic and diluted
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4,031
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79
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||||||
Other comprehensive income (loss):
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||||||||
Foreign currency translation adjustments
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$
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1
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$
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(1
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)
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Total comprehensive loss
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$
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(4,353
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)
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$
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(941
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)
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Three months ended
March 31,
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||||||||
2018
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2017
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|||||||
Operating Activities:
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||||||||
Net loss
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$
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(4,354
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)
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$
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(940
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)
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Adjustments to reconcile net loss to cash flows from operating activities:
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||||||||
Depreciation and amortization
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54
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215
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||||||
Stock-based compensation expense, net
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500
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166
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||||||
Change in fair value of warrant liability
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—
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(1,429
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)
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|||||
Warrant valuation expense
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—
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67
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||||||
Changes in operating assets and liabilities:
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||||||||
Accounts receivable
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(113
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)
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(124
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)
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Inventory
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(937
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)
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(153
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)
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Other current assets
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6
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49
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||||||
Accounts payable and accrued expenses
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(192
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)
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535
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|||||
Net cash used in operations
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(5,036
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)
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(1,614
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)
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Investing Activities:
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||||||||
Purchases of property and equipment
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(57
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)
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—
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|||||
Net cash used in investing activities
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(57
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)
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—
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|||||
Financing Activities:
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||||||||
Net proceeds from the sale of preferred stock and warrants
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—
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184
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||||||
Net proceeds from exercise of warrants
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—
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1,768
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||||||
Net cash provided by financing activities
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—
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1,952
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||||||
Effect of exchange rate changes on cash and cash equivalents
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2
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—
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||||||
Net increase (decrease) in cash and cash equivalents
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(5,091
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)
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338
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|||||
Cash and cash equivalents - beginning of period
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15,595
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1,323
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||||||
Cash and cash equivalents - end of period
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$
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10,504
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$
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1,661
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Supplement schedule of non-cash activities
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||||||||
Warrants issued as inducement to warrant exercise
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$
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—
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$
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509
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||||
Conversion of temporary equity to permanent equity
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$
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—
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$
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485
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||||
Supplemental cash flow information
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||||||||
Cash paid for income taxes
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$
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—
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$
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—
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(000 in thousands)
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March 31,
2018
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December 31,
2017
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||||||
Finished Goods
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$
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1,088
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$
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902
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||||
Work in Process
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274
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217
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||||||
Raw Materials
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1,163
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469
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||||||
Total
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$
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2,525
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$
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1,588
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March 31
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||||||||
2018
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2017
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|||||||
Stock options
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1,996,304
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2,873
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||||||
Restricted stock units
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180
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543
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||||||
Warrants to purchase common stock
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8,522,684
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46,339
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||||||
Series F convertible preferred stock
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389,804
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-
|
||||||
Total
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10,908,972
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49,755
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(in thousands, except per share amounts)
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2018
|
2017
|
||||||
Net loss
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$
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(4,354
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)
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$
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(940
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)
|
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Deemed dividend to preferred shareholders (see Note 4)
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-
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(1,828
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)
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|||||
Net loss after deemed dividend
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(4,354
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)
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(2,768
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)
|
||||
Weighted average shares outstanding
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4,031
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79
|
||||||
Basic and diluted loss per share
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$
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(1.08
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)
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$
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(35.05
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)
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Three months ended March 31,
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||||||||
(in thousands)
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2018
|
2017
|
||||||
Selling, general and administrative expense
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$
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450
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$
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141
|
||||
Research and development expense
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50
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25
|
||||||
Total stock-based compensation expense
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$
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500
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$
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166
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· |
Level 1
- Financial instruments with unadjusted quoted prices listed on active market exchanges.
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· |
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.
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· |
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.
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Three months ended March 31, 2017
(in thousands)
|
||||
Balance December 31, 2016
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$
|
1,843
|
||
Change in fair value
|
(1,475
|
)
|
||
Exercise of warrants
|
(368
|
)
|
||
Ending balance as of March 31, 2017
|
$
|
-
|
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
March 31, 2018
|
Three Months Ended
March 31, 2017
|
Increase (Decrease)
|
% Change
|
||||||||||||
$
|
1,037
|
$
|
901
|
$
|
136
|
15.1
|
%
|
(
dollars in thousands)
|
Three Months Ended
March 31, 2018
|
Three Months Ended
March 31, 2017
|
Increase (Decrease)
|
% Change
|
||||||||||||
Cost of goods sold
|
$
|
901
|
$
|
514
|
$
|
387
|
75.3
|
%
|
||||||||
Selling, general and administrative
|
$
|
4,011
|
$
|
2,387
|
$
|
1,624
|
68.0
|
%
|
||||||||
Research and development
|
$
|
479
|
$
|
308
|
$
|
171
|
55.5
|
%
|
(
dollars in thousands)
|
Three Months Ended
March 31, 2018
|
Three Months Ended
March 31, 2017
|
Increase (Decrease)
|
% Change
|
||||||||||||
Change in fair value of warrant liability
|
$
|
-
|
$
|
1,429
|
$
|
(1,429
|
)
|
100
|
%
|
|||||||
Warrant valuation expense
|
$
|
-
|
$
|
(67
|
)
|
$
|
67
|
100
|
%
|
• |
changes in the prices at which we sell our consoles and disposable blood sets and catheters;
|
• |
our bulk ordering practices by our customers;
|
• |
general economic uncertainties and political concerns;
|
• |
introduction of new products, product enhancements and new applications by our competitors;
|
• |
the timing of the introduction and market acceptance of new products, product enhancements and new applications;
|
• |
changes in demand for our Aquadex FlexFlow System;
|
• |
our ability to maintain sales volumes at a level sufficient to cover fixed manufacturing and operating costs;
|
• |
the effect of regulatory approvals and changes in domestic and foreign regulatory requirements;
|
• |
our highly variable sales cycle;
|
• |
changes in customers’ or potential customers’ budgets as a result of, among other things, reimbursement policies of government programs and private insurers for treatments that use the Aquadex FlexFlow System;
|
• |
variances in shipment volumes as a result of product, supply chain and training issues; and
|
• |
increased product costs.
|
Incorporated By Reference
|
|||||||||||||
Exhibit
Number
|
Exhibit Description
|
Form
|
File
Number
|
Date of First Filing
|
Exhibit
Number
|
Filed
Herewith
|
Furnished Herewith
|
||||||
10.1
|
Fifth Amendment to New-Hire Equity Incentive Plan
|
8-K
|
001-35312
|
January 18, 2018
|
10.1
|
||||||||
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
|
||||||||||||
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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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: May 10, 2018
|
By:
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/s/ John L. Erb
|
|
John L. Erb
|
|||
Chief Executive Officer and Chairman of the Board
|
|||
(principal executive officer)
|
|||
Date: May 10, 2018
|
By:
|
/s/ Claudia Drayton
|
|
Claudia Drayton
|
|||
Chief Financial Officer
|
|||
(principal financial officer)
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of CHF Solutions, Inc. for the quarterly period ended March 31, 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: May 10, 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 March 31, 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: May 10, 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: May 10, 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: May 10, 2018
|
/s/ Claudia Drayton
|
|
Claudia Drayton
|
||
Chief Financial Officer
|