The fair value of the market-based warrants described in Note 4 was calculated using a Monte Carlo valuation model and was classified as Level 3 in the fair value hierarchy.  These warrants are classified as permanent equity and as a result, were measured at the grant date and are not required to be remeasured to fair value at each reporting period end.

All cash equivalents are considered Level 1 measurements for all periods presented. The Company does not have any financial instruments classified as Level 2 or any other classified as Level 3 and there were no movements between these categories during the periods ended Septemberas of June 30, 20192020 and December 31, 2018.2019. The Company believes that the carrying amounts of all remaining financial instruments approximate their fair value due to their relatively short maturities.

The Company provides for a valuation allowance when it is more likely than not that it will not realize a portion of the deferred tax assets. The Company has established a full valuation allowance for 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 SeptemberJune 30, 2019,2020, 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, 2018.2019.

Employee Retirement Plan: The Company has a 401(k)-profit sharing plan that provides retirement benefit to substantially all full-time U.S. employees. Eligible employees may contribute a percentage of their annual compensation, subject to Internal Revenue Service (“IRS”) limitations, with the Company matching a portion of the employee’s contributions at the discretion of the Company.

Unless otherwise specified or indicated by the context, CHFthe terms “CHF Solutions, Company, we, us” the “Company,” “we,” “us,” and our,“our”, refer to CHF Solutions, Inc. and its subsidiaries.

We are a medical device company focused on developing, manufacturing and commercializing the Aquadex FlexFlow® and Aquadex SmartFlow™ systems (herein referred to as the “Aquadex System”) for ultrafiltration therapy.  The Aquadex SmartFlow system for aquapheresis therapy.delivers clinically proven therapy using a simple, flexible and smart method of removing excess fluid from patients suffering from hypervolemia (fluid overload). The Aquadex FlexFlowSmartFlow system is indicated for temporary (up to eight8 hours) ultrafiltration treatment of patients with fluid overload who have failed diuretic therapy andor extended (longer than 8 hours) ultrafiltration treatment ofhours in patients withwho require hospitalization) use in adult and pediatric patients weighing 20 kg or more whose fluid overload who have failed diuretic therapy and require hospitalization. In the United States, we hold 510(k) clearance from the FDAis unresponsive to market and sell the Aquadex FlexFlow system to adults. We have submitted an application to the FDA requesting for 510(k) clearance of the Aquadex FlexFlow system to include pediatric patients who weigh 20kg or more, which we expect to receive in Q1 2020. In the European Union (“EU”), we are required to hold a CE Mark to import our product into the EU.  The CE Mark for the Aquadex FlexFlow system had previously expired.  We received renewal for the Aquadex FlexFlow circuit in the second quarter of 2019 and expect to receive renewal for the Aquadex FlexFlow console in the fourth quarter of 2019, which would allow us to import additional console inventory into the EU.  We believe that we currently have sufficient inventory of consoles already available for sale in the EU market and the timing of the receipt of the CE Mark for the console will not have a material impact on our revenue.medical management, including diuretics.

Previously, the Company was focused on developing the C-Pulse® Heart Assist System for treatment of Class III and ambulatory Class IV heart failure. In August 2016, the Company acquired the business associated with the Aquadex FlexFlow system (herein referred to as the “Aquadex Business”) from a subsidiary of Baxter International, Inc. (“Baxter”) and refocused its strategy to fully devote its resources onto the Aquadex Business.

On October 25, 2019,May 5, 2020, we closed on a registered direct offering of 575,8303,597,880 shares of common stock at a price to the public of $1.15$0.4725 per share, for gross proceeds of approximately $660,000,$1.7 million, prior to deductingdeduction of commissions and expensesoffering related to the transaction. In a concurrent private placement, we agreed to issue to the investors in the registered direct offering unregistered warrants to purchase up to 575,8301,798,940 shares of the Company’s common stock. The warrants have an exercise price of $0.41 per share, are exercisable immediately, and will expire five and a half years from the date of issuance. On May 29, 2020, we filed a registration statement to register the shares of common stock issuable upon exercise of the warrants. The registration statement was declared effective by the SEC on June 8, 2020.

On March 23, 2020, we closed on a registered direct offering of 4,161,392 shares of our common stock at an exercisea price to the public of $1.41$0.30 per share, which will be exercisable six months fromfor gross proceeds of approximately $1.2 million, prior to deduction of commissions and offering expenses associated with the datetransaction. In a concurrent private placement, we agreed to issue to the investors in the registered direct offering unregistered warrants to purchase up to 4,161,392 shares of issuance,the Company’s common stock. On April 29, 2020, we filed a registration statement to register the shares of common stock issuable upon exercise of the warrants that were issued on April 1, 2020 and will expire five years fromMarch 23, 2020. The registration statement was declared effective by the initial exercise date.SEC on May 8, 2020.

Our outstanding Series F preferred stock is subject to full-ratchet anti-dilution protection in the event we sell any common stock at a price lower than the then-conversion price of the Series F preferred stock. As a result of this offering,these offerings, effective October 25, 2019,January 28, 2020, the conversion price of the Series F convertible preferred stock was reduced from $5.25$0.9942 to $1.15$0.55, the per share price to the public of the Series H convertible preferred stock. Effective March 23, 2020, the conversion price of the Series F convertible preferred stock was reduced from $0.55 to $0.30, the per share price to the public in this transaction.the March 23, 2020 transaction, described above.

On November 6, 2019, we closed on a registered direct offeringAdditionally, the warrants issued in the January 28, 2020 transaction have price protection measures in the event of 1,219,076 sharessubsequent equity sales of common stock or securities convertible into common equivalents, at astock for an exercise price per share less than the exercise price per share of the warrants then in effect. Effective March 23, 2020, the exercise price of $1.12these warrants was reduced from $0.55 to $0.30, the per share for gross proceeds of approximately $1.36 million prior to deduction of commissions and offering expenses relatedprice to the transaction.  In a concurrent private placement, we agreed to issue to the investorspublic in the registered direct offering unregistered warrantsMarch 2020 transaction, described above.

On December 17, 2019, we received a letter (the “Notice”) from The Nasdaq Stock Market (“Nasdaq”) advising that for 30 consecutive trading days preceding the date of the Notice, the bid price of our common stock had closed below the $1.00 per share minimum required for continued listing on the Nasdaq Capital Market pursuant to purchase up to 1,219,076 sharesNasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). The Notice has no effect on the listing of our common stock at an exercise price of $0.9942 per share, which will be exercisable uponthis time, and our common stock continues to trade on the Nasdaq Capital Market under the symbol “CHFS.” Under Nasdaq Listing Rule 5810(c)(3)(A), if during the 180 calendar day period following the date of issuance, and will expire five years from the initial exercise date. Effective November 6, 2019,Notice (the “Compliance Period”), the conversionclosing bid price of our common stock is at or above $1.00 for a minimum of 10 consecutive business days, we will regain compliance with the Series F preferredMinimum Bid Price Requirement and our common stock was reduced from $1.15will continue to $0.9942,be eligible for listing on the exercise priceNasdaq Capital Market, absent noncompliance with any other requirement for continued listing. The Nasdaq letter further states that if compliance with the Minimum Bid Price Rule cannot be demonstrated by the end of the warrants issued180-day period, we may be eligible for a second 180-day period to regain compliance. To be eligible for the second 180 day compliance period, (i) we must meet the market value of publicly held shares requirement for continued listing and all other applicable standards for initial listing on The Nasdaq Capital Market set forth in connectionMarketplace Rule 5505 (except the bid price requirement), (ii) we must provide Nasdaq with this financing.

See Notes 4 and 10On April 17, 2020, Nasdaq notified us that the 180-day period to regain compliance with the Minimum Bid Price Rule has been extended due to the condensed consolidated financial statements included in Part I, Itemglobal market impact caused by COVID-19. More specifically, Nasdaq has stated that the compliance periods for any company previously notified about non-compliance are suspended effective April 16, 2020, until June 30, 2020.  On July 1, 2020, companies received the balance of any pending compliance period exception to regain compliance with the Minimum Bid Price Rule.  As a result of this Quarterly Report on Form 10-Q.extension, we now have until August 28, 2020 to regain compliance with the Minimum Bid Price Rule.

We have adopted various accounting policies to prepare the condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States. (U.S. GAAP)(“U.S. GAAP”). Our most significant accounting policies are disclosed in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.2019.

The preparation of the condensed consolidated financial statements, in conformity with U.S. GAAP, requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Our estimates and assumptions, including those related to stock-based compensation, valuation of equity and debt securities, and income tax reserves are updated as appropriate, which in most cases is quarterly. We base our estimates on historical experience, valuations, or various assumptions that are believed to be reasonable under the circumstances. There have been no material changes to our critical accounting policies and estimates from the information provided in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2018.2019.

Revenue Recognition:  We recognize revenue in accordance with Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers,, which we adopted effective January 1, 2018. Accordingly, we recognize revenue when our customers obtain control of its products or services, in an amount that reflects the consideration that we expect to receive in exchange for those goods and services. See Note 2 – Revenue Recognition, included in Part I, Item 1 of this Quarterly Report on Form 10-Q, for additional disclosures.

Accounts ReceivableReceivable:  :  Our accounts receivable have terms that require payment in 30 days.  We did not establish an allowance for doubtful accounts as of SeptemberJune 30, 20192020 as we have not experiencedhad any write offs or experienced a deterioration in the aging of our receivables, to date and do not expect to experience in the future.

InventoriesInventories:  :  Inventories consist of finished goods, raw materials and subassemblies and are recorded as the lower of cost or net realizable value using the first-in, first, in-first out method.

Stock-Based Compensation: We recognize all share-based payments to employees and directors, including grants of stock options, warrants and common stock awards in the consolidated statement of operations and comprehensive loss as an operating expense based on their fair values as established at the grant date. Equity instruments issued to non-employees include common stock awards or warrants to purchase shares of our common stock. These common stock awards or warrants are either fully-vested and exercisable at the date of grant or vest over a certain period during which services are provided. We expense the fair market value of fully vested awards at the time of grant, and of unvested awards over the period in which the related services are received.  In accordance with Accounting Standards Update 2018-07, unvested awards are no longer remeasured to fair value until vesting and rather the fair value is established at the grant date consistent with the treatment of employee director awards.

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

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

Loss per share: We compute basic loss per share based on the net loss allocable to common stockholders for each period divided by the weighted average number of common shares outstanding. The net loss allocable to common stockholders for the ninesix months ended SeptemberJune 30, 2020, reflects a $1.6 million increase for the net deemed dividend to preferred stockholders provided in connection with the close of the public offering of Series H Convertible Preferred Stock on January 28, 2020. The net loss allocable to common stockholders for the six months ended June 30, 2019, reflects a $4.5 million increase for the net deemed dividend to preferred stockholders provided in connection with the close of the March 2019 public offering, representing the intrinsic value of the preferred shares at the time of issuance.

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 warrants, stock options and other stock-based awards granted under stock-based compensation plans. These potentially dilutive shares were excluded from the computation of loss per share as their effect was antidilutive due to our net loss in each of those periods.

Going Concern:Our consolidated financial statements have been prepared and presented on a basis assuming we continue as a going concern. During the years ended December 31, 2019 and 2018, and 2017, and through SeptemberJune 30, 2019,2020, we incurred losses from operations and net cash outflows from operating activities as disclosed in the condensed consolidated statements of operations and cash flows, respectively. As of SeptemberJune 30, 2019,2020, we had an accumulated deficit of $213.1$226.0 million and we expect to incur losses for the immediate future. To date, we have been funded primarily by various debt and equity financings, and although we believe that we will be able to successfully fund our operations, there can be no assurance that we will be able to do so or that we will ever operate profitably. These factors raise substantial doubt about our ability to continue as a going concern through the next twelve months.

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

During 2017, 2018, 2019 and through November 6, 2019,May 5, 2020, we closed on registered direct and underwritten public equity offerings for net proceeds of approximately $41.4$30.3 million after deducting the underwriting discounts and commissions and other costs associated with the offering. We will be required to seek additional funding to grow our Aquadex Business,business, which may not be available on terms favorable to us, or at all. We may receive those funds from the proceeds from future warrant exercises, issuances of equity securities, or other financing transactions.  Should warrant exercises not materialize or future capital raising be unsuccessful, we may not be able to continue as a going concern. We have made no adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we not continue as a going concern.

Information regarding new accounting pronouncements, when applicable, is included in Note 1 to the condensed consolidated financial statements included in this Quarterly Report.Report on Form 10-Q.  There are no new accounting pronouncements not yet adopted that the Company believes will have a material impact on the financial statements of the Company.

We are a medical device company focused on developing, manufacturing and commercializing the Aquadex systemSystem for ultrafiltration treatment of patients with fluid overload who have failed diuretic therapy. Activities since inception have consisted principally of raising capital, performing research and development and conducting preclinical and clinical studies. During 2016, we acquired the Aquadex Business and announced that we were halting all clinical evaluations of our prior technology, the C-Pulse System. Since then, our activities have consisted mainly of expanding our sales and marketing capabilities and transferring manufacturing capabilities from Baxter to our facilities in Eden Prairie, Minnesota. As of SeptemberJune 30, 2019,2020, we had an accumulated deficit of $213.1$226.0 million and we expect to incur losses for the immediateforeseeable future. To date, we have been funded by public and private equity financings and debt. Although we believe that we will be able to successfully fund our operations, there can be no assurance that we will be able to do so or that we will ever operate profitably.

Revenue is generated mainly from the sale of disposable blood filters and catheters used in conjunction with the Aquadex FlexFlowsystem 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 decreaseincrease in net sales compared to the same period of 2018 is driven by a reorganizationexecution of our salesforce to best align experiencescommercialization strategy which includes continued expansion of our commercial footprint by the hiring of new sales representatives, clinical education specialists, and competencies with our go-to market strategy around cardiac surgery and eventually pediatrics.marketing personnel.

Our costs and expenses were as follows:

Cost of sales in 2018 reflects the agreed-upon price paid to Baxter for the manufacturing of the disposables and consoles, as well as startup costs associated with the transfer of manufacturing activities to our facilities in Eden Prairie, Minnesota. In the first quarter of 2019, we began selling our internally manufactured inventory, driving theafter successfully transitioning all manufacturing activities from Baxter during 2018. The improvement in gross margins in the second quarter of 2020, reflects the impact of increasing volumes and efficiencies achieved as we leverage our existing manufacturing infrastructure. While we may experience quarterly variations in gross margins. In future quarters,margin performance, we expect that our yearly gross margins will continue to improve as volumes increase and we achieve larger efficiencies of scale.

The increase in selling, general and administrative expense reflect primarily on-going investment in our commercial organization as we continue to expand our outreach in the field with incremental clinical specialists and marketing support. Our general and administrative costs have remained consistent with the prior year.

As we realign and grow our distribution footprint, we We expect that our selling expenses will increase modestly in future quarters as we annualize the impact of recent hires, and that general and administrative expenses will remain consistent to the current quarter.

The increasedecrease in research and development expenses relate to investments we are makingmade to improve the functionality of our Aquadex system, and to support our 510(k) submission for pediatric label modification, and to improve the functionality of our Aquadex system, including console software updates and catheter improvements.which were completed during 2019. We expect that ourfuture research and development expenditures will decrease modestly remain consistent to the current quarter.

Revenue is generated mainly from the sale of disposable blood filters and catheters used in conjunction with ourthe Aquadex FlexFlowsystem 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 changeincrease in net sales compared to the same period of 2018 is driven by the execution of our commercialization strategy which includes continued expansion of our commercial footprint by the hiring of new sales representatives, clinical education specialists, and marketing personnel. In the fourth quarter of 2019, we announced a reorganization of our sales force to best align experiences and competencies with our go-to market strategy around cardiac surgery and eventually pediatrics.

Our costs and expenses were as follows:

Cost of sales in 2018 reflects the agreed-upon price paid to Baxter for the manufacturing of the disposables and consoles, as well as startup costs associated with the transfer of manufacturing activities to our facilities in Eden Prairie, Minnesota. In the first quarter of 2019, we began selling our internally manufactured inventory, driving theafter successfully transitioning all manufacturing activities from Baxter during 2018. The improvement in gross margins in the first six months of 2020, reflects the impact of increasing volumes and efficiencies achieved as we leverage our existing manufacturing infrastructure. While we may experience quarterly variations in gross margins. In future quarters,margin performance, we expect that our yearly gross margins will continue to improve as volumes increase and we achieve larger efficiencies of scale.

The increase in selling, general and administrative expense reflect primarily on-going investment in our commercial organization as we continue to expand our outreach in the field with incremental sales specialists, clinical specialists and marketing support. Our general and administrative costs have remained consistent towith the prior year.

As we continue to increase our distribution footprint, we We expect that our selling expenses will continue to increase modestly in future quarters as we annualize the impact of recent hires, and that general and administrative expenses will remain consistent to the current quarter.

The increasedecrease in research and development expenses relate to investments we are makingmade to improve the functionality of our Aquadex system, and to support our 510(k) submission for pediatric label modification, and to improve the functionality of our Aquadex system, including console software updates and catheter improvements.which were completed during 2019. We expect that ourfuture research and development expenditures will decrease modestly in future quarters.remain consistent to the current quarter.

On July 3, 2018, we closed on an underwritten public offering of 181,941 shares of common stock, for gross proceeds of $5.4 million.  Net proceeds totaled approximately $4.6 million after deducting the underwriting discounts and commissions and other costs associated with the offering. See Note 43 – Stockholders’ Equity, to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

On March 12, 2019, we closed on an underwritten public offering for netnet proceeds totaling approximately $11.0 million after deducting the underwriting discounts and commissions and other costs associated with the offering, which included the full exercise of the underwriter’s over-allotment option to purchase additional shares and warrants. In connection with this offering, we issued a total of 455,178 shares of common stock, approximately 1.9 million shares of Series G convertible preferred stock and warrants to purchase approximately 4.7 million shares of common stock. See Note 43 – Stockholders’ Equity, to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

On October 25, 2019, we closed on a registered direct offering of common stock, for gross proceeds of approximately $660,000, prior to deducting commissions and expenses related to the transaction.  In a concurrent private placement, we agreed to issue to the investors in the registered direct offering unregistered warrants to purchase up to 575,830 shares of our common stock.  See Note 103 – Subsequent Events,Stockholders’ Equity, to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

On November 6, 2019, we closed on a registered direct offering of common stock, for gross proceeds of approximately $1.36 million, prior to deducting commissions and expenses related to the transaction.  In a concurrent private placement, we agreed to issue to the investors in the registered direct offering unregistered warrants to purchase up to 1,219,076 shares of our common stock. See Note 3 – Stockholders’ Equity, to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

On August 5, 2016,January 28, 2020, we entered into a loan agreement with Silicon Valley Bankclosed on an underwritten public offering of 6,046,367 shares of common stock, 11,517,269 shares of Series H Preferred Stock and warrants to purchase 17,563,636 shares of Common Stock, which included the full exercise of the underwriter’s over-allotment option, for gross proceeds of approximately $9.7 million. Net proceeds totaled approximately $8.6 million after deducting the underwriting discounts and commissions and other costs associated with the offering. See Note 3 – Stockholders’ Equity, to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

On March 23, 2020, we closed on a registered direct offering of 4,161,392 shares of common stock at a price to the public of $0.30 per share, for gross proceeds of approximately $1.2 million, prior to deduction of commissions and offering expenses related to the transaction. In a concurrent private placement, we agreed to issue to the investors in the registered direct offering unregistered warrants to purchase up to $5.04,161,392 shares of the Company’s common stock.  See Note 3 – Stockholders’ Equity, to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

On April 1, 2020 we closed on a registered direct offering of 5,130,228 shares of common stock at a price to the public of $0.434 per share, for gross proceeds of approximately $2.2 million, includingprior to deduction of commissions and offering expenses payable related to the transaction. In a $1.0 million revolving lineconcurrent private placement, we agreed to issue to the investors in the registered direct offering unregistered warrants to purchase up to 2,565,114 shares of creditthe Company’s common stock.  The warrants to purchase up to 2,565,114 shares of common stock have an exercise price of $0.3715 per share, are exercisable immediately, and expire five and a $4.0 million term loan. The term loan expired unusedhalf years from the date of issuance. On April 29, 2020, we filed a registration statement to register the shares of common stock issuable upon exercise of the warrants that were issued on November 30, 2016March 23, 2020 and April 1, 2020 and the registration statement was declared effective by the term loan is no longer availableSEC on May 8, 2020.   See Note 3 – Stockholders’ Equity, to be drawn. Under the revolving line,condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

On May 5, 2020, we may borrow the lesserclosed on a registered direct offering of $1 million or 80%3,597,880 shares of our eligible accounts (subject to customary exclusions), minus the outstanding principal balance of any advances under the revolving line.  Advances under the revolving line, if any, will accrue interestcommon stock at a floatingprice to the public of $0.4725 per annum rate equalshare, for gross proceeds of approximately $1.7 million, prior to 1.75% or 1.0% abovededuction of commissions and offering related to the prime rate, dependingtransaction. In a concurrent private placement, we agreed to issue to the investors in the registered direct offering unregistered warrants to purchase up to 1,798,940 shares of the Company’s common stock. The warrants have an exercise price of $0.41 per share, are exercisable immediately, and will expire five and a half years from the date of issuance. On May 29, 2020, we filed a registration statement to register the shares of common stock issuable upon exercise of the warrants that were issued on liquidity factors. The loan agreement contains customary representations, as well as customary affirmativein this transaction, and negative covenants. Our obligations underthe registration statement was declared effective by the new loan agreement are secured by a security interestSEC on June 8, 2020.  See Note 3 – Stockholders’ Equity, to the condensed consolidated financial statements included in our assets, excluding intellectual property and certain other exceptions. We are subjectPart I, Item 1 of this Quarterly Report on Form 10-Q.

During the first six months of 2020, investors exercised warrants to a negative pledge covenant with respect to our intellectual property. Advances under the revolving line are subject to various conditions precedent, including our compliance with financial covenants relating to net liquidity relative to monthlyacquire 7,736,275 shares of common stock for cash burn. The revolving line of credit expires on March 31, 2020. We had no borrowings outstanding under the Silicon Valley Bank facility as of September 30, 2019 or December 31, 2018.proceeds totaling $2.3 million.

As of SeptemberJune 30, 2019,2020, and December 31, 2018,2019, cash and cash equivalents were $3.6$7.8 million and $5.5$1.3 million, respectively. Prior to our acquisition of the Aquadex Business in August 2016, we did not have a product approved for commercial sale and focused our resources on developing, manufacturing, and commercializing our C-Pulse System.  Our business strategy and ability to fund our operations in the future depends in part on our ability to grow our Aquadex Business by establishing a sales force, selling our products to hospitals and other healthcare facilities and controlling costs. We believeWhile we expect to continue to receive proceeds from the exercise of warrants, we will likely need to seek additional financing in the future.future, which, to date, has been through offerings of our equity. The disruption created by COVID-19 in our operations, our sales outlook, and the capital markets where we would seek such financing, have created uncertainty about our ability to access the capital markets in future periods.

Net cash used in operating activities was $12.3 million$8.8 and $11.8$8.9 million for the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively. The net cash used in each of these periods primarily reflects the net loss for those periods, offset in part by stock-based compensation, depreciation and amortization, and the effects of changes in operating assets and liabilities.liabilities, mainly the reduction in outstanding payables and accrued expenses, as well as increases in raw materials and finished goods inventory.

Net cash used in investing activities was $464,000$69,000 and $177,000$158,000 for the ninesix months ended SeptemberJune 30, 20192020 and September 30, 2018,2019, respectively.  The majority of cash used in investing activities was primarily for internally manufactured equipment, and the purchase of manufacturing, laboratory and office equipment.

As described above, net cash provided by financing activities was $11.0 million$15.4 and $4.6$11.0 million for the ninesix months ended SeptemberJune 30, 20192020 and September 30, 2018,2019, respectively.

As of SeptemberJune 30, 2019,2020, we did not have any material commitments for capital expenditures.

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

Certain statements in this Quarterly Report on Form 10-Q are forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), that are based on management’s beliefs, assumptions and expectations and information currently available to management.  All statements that address future operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements, including without limitation, our expectations regarding the potential impacts of the COVID-19 pandemic on our business operations, cash flow, business development, and employees, our ability to execute on our strategic realignments, our post-market clinical data collection activities, benefits of our products to patients, our expectations with respect to product development and commercialization efforts, our ability to increase market and physician acceptance of our products, potentially competitive product offerings, the possibility that we may be unable to raise sufficient funds necessary for our anticipated operations, intellectual property protection, our ability to integrate acquired businesses, our expectations regarding anticipated synergies with and benefits from acquired businesses and other risks and uncertainties described in our filings with the SEC. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.words. Management believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on forward-looking statements because they speak only as of the date when made. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that might subsequently arise.  Forward-looking statements are subject to a number of risks and uncertainties that could cause actual events to adversely differ from the expectations indicated in these forward-looking statements, including without limitation, the risks and uncertainties described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019, and June 30, 2019, this Quarterly Report and in other reports filed thereafter with the SEC, which risk factors we may updateby updated from time to time.time, and in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2020. We operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for us to predict all risk factors and uncertainties. CHF Solutions may not actually achieve the plans, projections or expectations disclosed in forward-looking statements, and actual results, developments or events could differ materially from those disclosed in the forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, including without limitation, the possibility that regulatory authorities do not accept our application or approve the marketing of our products, the possibility we may be unable to raise the funds necessary for the development and commercialization of our products, and those described in our filings with the SEC.

Not applicable.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (together, the “Certifying“Certifying Officers”), as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

As of SeptemberJune 30, 2019,2020, the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of management, including the Certifying Officers, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).Act.  Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their stated objectives.  Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of SeptemberJune 30, 2019.2020.

There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.