Nuwellis, Inc.

Note 1 – Nature of Business and Basis of Presentation

Nature of Business: Nuwellis, Inc. (the “Company”) is a commercial-stage medical device company focused on advancing precision cardiorenal care in critical care settings, through the development, manufacture and commercialization of the Aquadex SmartFlow® system for ultrafiltration therapy. 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. Nuwellis, Inc. is a Delaware corporation headquartered in Minneapolis with a wholly owned subsidiary in Ireland which we are in the process of dissolving, along with another subsidiary incorporated under the laws of Israel. The Company has been listed on Nasdaq since February 2012.

In August 2016, the Company acquired the business associated with the Aquadex System (the “Aquadex Business”) from a subsidiary of Baxter International, Inc. (“Baxter”) and refocused its strategy to fully devote its resources to the Aquadex Business. On April 27, 2021, the Company announced that it was changing its name from CHF Solutions, Inc. to Nuwellis, Inc. to reflect the expansion of its customer base from treating fluid imbalance resulting from congestive heart failure to also include critical care and pediatrics applications.

In March, 2026, the Company acquired Rendiatech, Inc. (an Israeli corporation formed to acquire certain assets of RenalSense Ltd. following its bankruptcy), which develops automated kidney function monitoring technology. See Note 10 – Asset Acquisition for additional details.

Principles of Consolidation: The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and do not include all disclosures required by GAAP for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results expected for the full year.

*Acquisitions:*The Company evaluates acquisitions pursuant to ASC 805, Business Combinations, to determine whether the transaction should be accounted for as a business combination or an asset acquisition.

For asset acquisitions, the Company allocates the purchase price (including transaction costs) to the individual assets acquired and liabilities assumed on a relative fair value basis. Direct acquisition-related costs are capitalized as part of the purchase price.

Acquired In-Process Research and Development Expenses: Acquired in-process research and development activities include payments pursuant to the Company’s asset acquisition. In-process research and development that is acquired in a transaction that does not qualify as a business combination under U.S. GAAP and that does not have an alternative future use is recorded as Research and Development expense in the consolidated statements of operations in the period in which it is acquired.

The Company expensed $757 thousand of acquired in-process research and development related to the Rendiatech asset acquisition during the three months ended March 31, 2026, as it had no alternative future use.

Intangible Assets: Intangible assets comprise non-competition agreements and website development costs. Intangible assets with finite lives are amortized over the period the assets are expected to contribute directly or indirectly to future cash flows.

Intangible assets are reviewed for impairment annually or more frequently if indicators of impairment exist.

Going Concern: The Company’s condensed consolidated financial statements have been prepared assuming it will continue as a going concern. As of March 31, 2026, the Company had an accumulated deficit of $320.9 million and expects to continue incurring losses in the near term.

To date, the Company has been funded primarily through equity financings. The Company believes its existing capital resources will be sufficient to support its operating plan into the second quarter of 2026. It will also continue to evaluate opportunities to raise additional capital through debt, equity, or a combination thereof to support growth initiatives and strengthen its balance sheet. While the Company is confident in its ability to fund operations and execute on its strategic plan, there can be no assurance that additional capital will be available on favorable terms, or at all, or that the Company will achieve profitability.

These conditions, including continued operating losses, negative cash flows from operations, an accumulated deficit of $320.9 million, and the need for additional capital to fund ongoing operations and growth initiatives (including the integration of the Rendiatech acquisition), raise substantial doubt about the Company’s ability to continue as a going concern for at least twelve months from the date these financial statements are issued. While management’s plans, including recent financing activities, cost discipline initiatives, and contingency measures, are intended to address these conditions, such plans do not alleviate the substantial doubt. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Segment Information: Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision-maker in deciding how to allocate resources and assess performance. The Company and the Company’s chief operating decision-maker (the “CODM”), the chief executive officer, view the Company’s operations and manages its business as a single operating segment. On March 31, 2026 and December 31, 2025, long-lived assets were located primarily in the United States. See Note 9 — Segment Reporting for additional information.

Revenue Recognition: The Company recognizes revenue in accordance with Accounting Standards Codification, Topic 606, Revenue from Contracts with Customers, which the Company adopted effective January 1, 2018. Accordingly, the Company recognizes revenue when its customers obtain control of its products or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods and services. See Note 2 – Revenue Recognition below for additional disclosures. For the three months ended March 31, 2026, three customer represented 14%,11%, and 10% of net sales. For the three months ended March 31, 2025, one customer represented 14% of net sales.

Inventories consisted of the following:

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. See Note 3 – Stockholders’ Equity below 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.

The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as of the end of each period presented:

The following table reconciles reported net loss with reported net loss per share for each of the three months ended:

Recently Issued Accounting Pronouncements: In November 2024, the FASB issued ASU 2024-03, Income Statement: Reporting Comprehensive Income- Expense Disaggregation Disclosures, which requires detailed information about specified categories of expenses included in certain expense captions presented on the face of the income statement, as well as disclosures about selling expenses. This ASU is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements disclosures.

Subsequent Events: The Company evaluates events through the date the condensed consolidated financial statements are filed for events requiring adjustment to or disclosure in the condensed consolidated financial statements. See Note 11 – Subsequent Events below for additional disclosures.

Note 2 – Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which was adopted effective January 1, 2018. Revenue is recognized when control of promised goods or services is transferred to the customer in an amount that reflects the consideration expected to be received. The majority of contracts have a single performance obligation and are short-term in nature. Revenue from extended service plans (less than 1% of net sales) is recognized over time and included in deferred revenue (classified in other current liabilities). See Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025, for a full description of our revenue recognition policy.

International Exit: On August 7, 2025, the Company announced its decision to exit substantially all its international operations in order to focus exclusively on the U.S. market—where the Company is seeing the strongest growth and clinical demand. 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. As of March 31, 2026, the Company’s remaining accrued contractual exit fees and product repurchase obligations were $49 thousand.

Customer Concentration: For the three months ended March 31, 2026, three customers represented 14%,11%, and 10% of net sales. For the three months ended March 31, 2025, one customer represented 14% of net sales.

Product Returns and Other: The Company estimates product returns based on historical data and industry information. Returns have been minimal to date, and no material variable consideration adjustment was required in the current period. Shipping and handling costs are included in cost of goods sold, and sales taxes are excluded from revenue.

Note 3 – Stockholders’ Equity

Series F Convertible Preferred Stock: As of March 31, 2026 and December 31, 2025,27 shares and 127 shares of Series F convertible preferred stock remained outstanding, respectively (par value $0.0001 per share; authorized 18,000 shares). The conversion price was last adjusted to $397.00 following the 2025 reverse stock split. See Note 4 in our Annual Report on Form 10-K for the year ended December 31, 2025, for a description of the terms, anti-dilution provisions, and historical issuances.

Series F-1 Convertible Preferred Stock: As of March 31, 2026,34 shares of Series F-1 convertible preferred stock remained outstanding. These shares were issued in exchange for Series F shares held by our CEO in June 2025. See Note 4 in our Annual Report on Form 10-K for the year ended December 31, 2025, for further details.

Common Stock and Warrants: During the three months ended March 31, 2026, the Company completed a private placement and related warrant inducement transaction that raised aggregate gross proceeds of approximately $5.0 million before placement agent fees and offering expenses.

January 2026 Private Placement and Warrant Inducement Offer(“January 2026 Transaction”): On January 29, 2026, the Company entered into a securities purchase agreement with Armistice Capital Master Fund Ltd. (“Armistice”) for a private placement (the “Private Placement”) in which it issued (i)994,537 pre-funded common stock purchase warrants (“Pre-Funded Warrants”) to purchase up to 994,537 shares of common stock at an exercise price of $0.0001 per share and (ii)1,989,074 common stock purchase warrants (“Private Placement Common Warrants”) to purchase up to 1,989,074 shares of common stock at an exercise price of $2.84 per share, for a combined purchase price of $3.09 per Pre-Funded Warrant and accompanying warrants. The transaction generated approximately $3.1 million in gross proceeds.

Simultaneously, the Company entered into a warrant inducement offer letter with Armistice (the “Inducement Offer”) pursuant to which Armistice exercised its remaining outstanding Series A and Series B warrants (issued June 2025) and Series I and Series II warrants (issued November 2024) (collectively, the “Existing Warrants”) to purchase 623,585 shares of common stock at a reduced exercise price of $2.84 per share. In connection with the exercise, the Company issued new common stock purchase warrants (“Inducement Warrants”) to purchase up to 1,247,170 shares of common stock (200% of the shares issued upon exercise of the Existing Warrants) at an exercise price of $2.84 per share. The Inducement Offer generated approximately $2.0 million in gross proceeds.

As compensation to the exclusive placement agent, Ladenburg Thalmann & Co. Inc., the Company issued warrants to the placement agent (the “Agent Warrants”) to purchase up to 48,544 shares of common stock at an exercise price of $5.0985 per share. The Agent Warrants have substantially the same terms as the Private Placement Common Warrants and Inducement Warrants and expire on January 29, 2031.

All warrants issued in the January 2026 transactions (Pre-Funded Warrants, Private Placement Common Warrants, Inducement Warrants, and Agent Warrants) were determined to be freestanding financial instruments that qualify for equity classification under ASC 480 and ASC 815-40. Accordingly, they are recorded in stockholders’ equity. The Company allocated the net proceeds from the Private Placement on a relative fair value basis using the Black-Scholes option pricing model and recorded all direct and incremental issuance costs (including the 8.0% cash placement agent fee, expense reimbursement, and the fair value of the Agent Warrants) as a reduction of additional paid-in capital. The modification of the Existing Warrants was accounted for as an equity transaction, with any incremental fair value recognized as an equity issuance cost. No derivative liabilities were recorded, and no further remeasurement is required.

Key Black-Scholes valuation inputs (January 29, 2026):

●

Current stock price: $4.19

●

Expected volatility:148.1%

●

Expected term:5.0 years

●

Risk-free interest rate:3.80%

●

Expected dividend yield:0%

The following table summarizes the warrants issued in the January 2026 transactions that remain outstanding as of March 31, 2026:

Total shares potentially issuable upon exercise of January 2026 warrants: 4,104,084 (subject to applicable beneficial ownership limitations). The shares underlying these warrants have been registered for resale.

In addition to the January 2026 activity, as of March 31, 2026,6,268 Series B warrants remained unexercised with a fair value of approximately $6,583 (classified as warrant liabilities). See Note 5 – Fair Value of Financial Instruments for additional warrant valuation details.

Issuance of Common Stock and Stock Options in Connection with Rendiatech Acquisition: On March 17, 2026, the Company completed its asset acquisition of Rendiatech, Inc. (“Rendiatech”), an Israeli corporation formed to acquire certain assets of RenalSense Ltd. following its bankruptcy. As partial consideration for the acquisition, the Company issued 150,000 shares of its common stock to the sellers. These shares were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and were recorded at fair value based on the closing price of the Company’s common stock on the acquisition date. The issuance is reflected in the condensed consolidated statements of stockholders’ equity as an increase in common stock issued and outstanding and additional paid-in capital.

In addition, as part of the consideration, the Company granted stock options to purchase up to 30,000 shares of common stock to certain individuals associated with the sellers, with terms set forth in separate option agreements consistent with the Company’s 2021 Inducement Plan (or other applicable equity plan). These options are subject to vesting conditions as outlined in the Securities Purchase Agreement and will be accounted for as stock-based compensation expense over the respective service periods.

The equity securities issued in connection with the Rendiatech asset acquisition are subject to asix-month lock-up period from the closing date, during which the recipients may not offer, sell, or otherwise dispose of such securities, subject to certain customary exceptions. See Note 10 – Asset Acquisitions for additional information regarding the acquisition, including the total consideration transferred and the preliminary purchase price allocation.

At-The-Market Offering: We maintain an ATM agreement with Ladenburg Thalmann & Co. Inc. (entered September 3, 2025), under which we may sell common stock from time to time. As of March 31, 2026, we had sold 768,535 shares for net proceeds of approximately $2.9 million. No shares were sold under the ATM during the three months ended March 31, 2026. See Note 4 in our Annual Report on Form 10-K for the year ended December 31, 2025, for a description of the agreement terms.

Reverse Stock Split: All share and per-share amounts have been retroactively adjusted to reflect the 2025 one-for-42 reverse stock split effective July 3, 2025. See Note 4 in our Annual Report on Form 10-K for the year ended December 31, 2025, for details.

Note 4 - Stock-Based Compensation

Under the fair value recognition provisions of U.S. GAAP for accounting for stock-based compensation, the Company measures stock-based compensation expense at the grant date based on the fair value of the award and recognizes the compensation expense over the requisite service period, which is generally the vesting period.

The following table presents the classification of stock-based compensation expense recognized for the periods below:

During the three months ended March 31, 2026 and 2025, under the 2017 Equity Incentive Plan, and the 2021 Inducement Plan, the Company granted 0 stock options for both periods to its directors, officers and employees. Vesting generally occurs either immediately or up to a 48-month period based on a time-of-service condition. As the Company didnot issue any stock options during the three months ended March 31, 2026, there isno weighted-average grant date fair value of the stock options issued during the three months ended March 31, 2026. The weighted-average grant date fair value of the stock options issued during the three months ended March 31, 2026, and 2025 was $0 and $0 per share, respectively.

The total number of stock options outstanding as of March 31, 2026, and 2025 was 34,446 and 81, respectively.

During the three months ended March 31, 2026, and 2025,1,097 and 4 stock options vested, respectively, and 6 and 12 stock options expired or were forfeited during these periods, respectively. During the three months ended March 31, 2026, and 2025, no options were exercised.

Note 5—Fair Value

The Company’s financial instruments consist of cash and cash equivalents and warrants.

Pursuant to the requirements of Accounting Standards Codification (“ASC”) Topic 820 “Fair Value Measurement,” the Company’s financial assets and liabilities measured at fair value on a recurring basis are classified and disclosed in one of the following three categories:

●

Level 1 - Financial instruments with unadjusted quoted prices listed on active market exchanges.

●

Level 2 - Financial instruments lacking unadjusted, quoted prices from active market exchanges, including over-the-counter traded financial instruments. The prices for the financial instruments are determined using prices for recently traded financial instruments with similar underlying terms as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.

●

Level 3 - Financial instruments that are not actively traded on a market exchange. This category includes situations where there is little, if any, market activity for the financial instrument. The prices are determined using significant unobservable inputs or valuation techniques.

The fair value of the Company’s common and preferred stock warrant liabilities related to the warrants issued in the October 2022, October 2023, April 2024 and June 2025 public offerings were calculated using a Monte Carlo valuation model and were classified as Level 3 in the fair value hierarchy.

The deferred consideration liability related to the Rendiatech asset acquisition (additional cash payments due in 2026 and 2027) is also classified as Level 3. The liability was initially measured at its fair value of $313 thousand on the acquisition date of March 17, 2026, using a discount rate of 13.38% (Company’s estimated credit risk rate based on a CCC bond yield).

The carrying value of the deferred consideration liability approximates its fair value as of March 31, 2026.

The following is a roll-forward of the fair value of the Level 3 liabilities:

Note 6 – Income Taxes

The Company provides for a valuation allowance when it is more likely than not that it will not realize a portion of its deferred tax assets. The Company has established a full valuation allowance for its U.S. and foreign deferred tax assets due to the uncertainty that enough taxable income will be generated in those taxing jurisdictions to utilize the assets. Therefore, the Company has not reflected any benefit of such deferred tax assets in the accompanying condensed consolidated financial statements.

As of March 31, 2026, there were no material changes to what the Company disclosed regarding tax uncertainties or penalties in its Annual Report on Form 10-K for the year ended December 31, 2025.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted and the Company continues to evaluate the impact on its financial position. The OBBBA is not currently expected to materially impact the Company’s effective tax rate or cash flows in the current fiscal year.

Note 7—Operating Leases

The Company leases a 23,000 square foot facility located in Eden Prairie, Minnesota for office and manufacturing space under a non-cancelable operating lease that expires in March 2027. In November 2021, the Company entered into a fourth amendment to the lease, extending the term of the lease from March 31, 2022 to March 31, 2027. This facility serves as our corporate headquarters and houses substantially all our functional departments. Monthly rent and common area maintenance charges, including estimated property tax for our headquarters, total approximately $36 thousand. The lease contains provisions for annual inflationary adjustments. Rent expense is being recorded on a straight-line basis over the term of the lease. Beginning on April 1, 2022, the annual base rent was $10.50 per square foot, subject to future annual increases of $0.32 to $0.34 per square foot.

Note 8—Commitments and Contingencies

Employee Retirement Plan: The Company has a 401(k) retirement plan that provides retirement benefits to all eligible U.S. employees. Eligible employees may contribute a percentage of their annual compensation, subject to Internal Revenue Service limitations, with the Company matching a portion of the employees’ contributions at the discretion of the Company.

Note 9—Segment Reporting

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker (the “CODM”), or decision-making group, in deciding how to allocate resources in assessing performance. Nuwellis hasone reportable segment: fluid overload. The Company is a medical technology company focused on developing and commercializing the Aquadex System. The Company recognizes this medical device system asone reporting segment. The CODM is the chief executive officer.

The accounting policies of the fluid overload segment are the same as those described in the summary of significant accounting policies. The CODM assesses performance for the fluid overload segment based on net loss, which is reported on the statement of operations as consolidated net loss. The measure of segment assets is reported on the balance sheet as total consolidated assets. The Company does not have any intra-entity sales or transfers.

The CODM uses cash forecast models in deciding how to invest into the fluid overload segment. Such cash forecast models are reviewed to assess the entity-wide operating results and performance. Net income (loss) is used to monitor budget versus actual results. Monitoring budgeted versus actual results is used in assessing performance of the segment and in establishing management’s compensation.

The table below summarizes the significant expense categories regularly reviewed by the CODM for the three months ended March 31, 2026 and 2025:

Note 10—Asset Acquisition

On March 17, 2026, the Company completed the acquisition of Rendiatech Ltd. The transaction was accounted for as an asset acquisition under ASC 805-50 because the acquired set did not meet the definition of a business.

Consideration Transferred (in thousands):

Assets Acquired and Liabilities Assumed (in thousands):

The IPR&D asset had no alternative future use in its acquired form and was charged to research and development expense immediately ($757 thousand) in accordance with ASC 730-10-25-2. The non-compete agreements are being amortized over their three-year estimated useful lives.

There were no operations from the acquired Rendiatech assets between the acquisition date and March 31, 2026. The transaction was not material to the Company’s results of operations or cash flows.

The additional cash payments represent $125 thousand due on or prior to December 31, 2026 and $250 thousand due on the earlier of a defined commercial regulatory clearance date or December 31, 2027. The payments were discounted to fair value as of the acquisition date.

In connection with the asset acquisition, the Company is obligated to pay an earnout royalty payment equal to 9% of gross sales by the Company on the sale of the commercialized products, not to exceed $2 million. The Company determined the earnout was considered a post-acquisition cost and will recognize expense once a payment amount is considered probable and reasonably estimable.

As of March 31, 2026, the net carrying amount of acquired intangible assets from the Rendiatech transaction was $27 thousand (non-compete agreements, net of amortization). The Company’s separately capitalized website intangible is included in the total Intangible assets, net balance of $112 thousand.

Note 11—Subsequent Events

Subsequent to March 31, 2026, on April 24, 2026, the Company entered into a Settlement Agreement and Release with E.F. Hutton & Co. The Company agreed to pay a total of $204 thousand in full settlement of all claims, with neither party admitting any liability. The payment was due and paid within five days of the settlement date, and E.F. Hutton & Co. has agreed to dismiss the lawsuit with prejudice. The Company had accrued the full $204 thousand settlement amount as of March 31, 2026. This settlement resolves the matter in its entirety.

The Company has evaluated subsequent events through May 15, 2026, the date these condensed consolidated financial statements were available to be issued, and has determined that, other than the matters described above, there are no additional subsequent events requiring recognition or disclosure in the financial statements.

Item 2.