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Reverse Stock Split

At a special meeting of our stockholders on January 9, 2017, our stockholders approved, among other things, a reverse stock split, and following such special meeting, our Board of Directors approved a 1-for-30 reverse split of our issued and outstanding shares of common stock. We filed with the Secretary of State of the State of Delaware a Certificate of Amendment to our Fourth Amended and Restated Certificate of Incorporation to effect the reverse stock split. The reverse stock split was effective as of 5:00 p.m. Eastern Time on January 12, 2017, and our common stock began trading on a split-adjusted basis on The Nasdaq Capital Market on January 13, 2017. The reverse stock split did not change the par value of our stock or the authorized number of common or preferred shares. All share and per share amounts in this prospectus and the registration statement of which it forms a part have been retroactively adjusted to reflect the reverse stock split for all periods presented.  The financial statements incorporated by reference herein have not been adjusted to reflect the reverse stock split.

Outstanding Preferred Stock

ThroughAs of March 14,23, 2017, 2,555.1all of our previously-outstanding shares of ourSeries B-1 Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D Convertible Preferred Stock have been converted into 501,000in full and no shares of our common stock. As of March 14, 2017, 344.9 shares of our Series C Convertible Preferred Stockeach such series remain outstanding and are currently convertible into 96,611 shares of our common stock, and 900 shares of our Series D Convertible Preferred Stock remain outstanding and are convertible into 252,101 shares of our common stock. If the effective price per share in a future offering is lower than the then price of conversion of the Series C Convertible Preferred Stock or the Series D Convertible Preferred Stock, then the price of conversion of such preferred stock shall be reduced to equal to such lower price and such preferred stock shall be issuable for additional shares of common stock in connection with such conversion price reduction.  See “— Description of Warrant Exercise Agreement” below for a description of our agreement to issue additional warrants to certain holders of our outstanding warrants upon future exercise thereof.  Furthermore, each holder of our Series C Convertible Preferred Stock has the right to exchange all or some of the Series C Preferred Stock for securities issued in a future offering on a $1.00 for $1.00 basis based on the outstanding stated value of the Series C Convertible Preferred Stock, along with any accrued but unpaid liquidated damages and other amounts owing thereon, and the effective price in the offering.  With respect to our Series D Convertible Preferred Stock, on or after May 3, 2017, the conversion price on our Series D Convertible Preferred Stock shall become an adjustable rate equal to 80% of the average of the daily volume weighted average price of our common stock for the ten trading days immediately prior to the conversion date, but shall not be reduced below $1.26. To the extent the outstanding shares of Series C Convertible Preferred Stock or Series D Convertible Preferred Stock become exercisable for additional shares of common stock pursuant to the foregoing provisions, holders of our common stock and investors in this offering will experience further dilution.outstanding.

Warrant Exercise Agreement

On February 15, 2017, we entered into a letter agreement with the Selling Stockholders,institutional investors (the "Investors") that hold the majority of our outstanding warrants (such warrants held by the Investors, the "Original Warrants"), to incent the cash exercise of thethese warrants they hold (including the Warrants) on or before March 31, 2017. See “— Description of the Warrant Exercise Agreement” below.

The Offering

Except as otherwise indicated, all information in this prospectus is based on 1,742,745 shares of Common Stock outstanding as of March 14, 2017 and excludes the shares of Common Stock being offered by this prospectus and issuable upon conversion of the Series D Preferred Stock or exercise of the Warrants and also excludes the following:

·              348,712 shares of Common Stock currently* issuable upon the conversion of outstanding shares of our Series C Convertible Preferred Stock and Series D Preferred Stock;

·              63,787 shares of Common Stock issuable upon the exercise of outstanding stock options, having a weighted average exercise price of $115.13  per share and 11,640 shares of common stock issuable upon the vesting of restricted stock units;

·             926,884 shares of our Common Stock issuable upon the exercise of outstanding warrants (other than the Warrants) with a weighted-average exercise price of $6.96 per share; and

·              86,371 shares of our Common Stock reserved for future issuance under our equity incentive plans.

*The conversion prices of the Series C Convertible Preferred Stock and Series D Preferred Stock are subject to adjustment as set forth in the certificate of designation for such series, including as described above under “—Recent Developments—Outstanding Preferred Stock” and below under “—Description of Warrant Exercise Agreement.”

Description of the July Sabby Purchase Agreement

On July 20, 2016, we entered into the July Sabby Purchase Agreement with the Selling Stockholders, which provided for the issuance of 3,468 shares of Series B Convertible Preferred Stock at $1,000 per share and warrants to purchase an aggregate of 122,979 shares of Common Stock, par value $0.0001 per share.  We received net proceeds of $3.2 million in connection with the closing of the July Sabby Purchase Agreement after deducting fees owned to the placement agent and other fees applicable to the offering.  For a detailed description of the transactions contemplated by the July Sabby Purchase Agreement and a description of the securities issued pursuant thereto, including the July Warrants, please see “Sale of Securities to Sabby” in this prospectus.

Description of the October Sabby Purchase Agreement

On October 30, 2016, we entered into the October Sabby Purchase Agreement with the Selling Stockholders, which provides that, upon the terms and subject to the conditions and limitations set forth therein, the closing of each of the transactions contemplated by the October Sabby Purchase Agreement were to occur in two stages.  At the initial closing, which took place on November 3, 2016, we sold 2,900 shares of Series C Convertible Preferred Stock, 700 shares of Series D Preferred Stock, and 705,882warrants to purchase common stock to Sabby.  At the second closing, which took place January 11, 2017, we sold 200 shares of Series D Preferred Stock and 39,216 January Warrants to purchase shares of common stock to Sabby.  We received net proceeds of $3.3 million in connection with the first closing on November 3, 2016, after deducting fees owed to the placement agent and other fees applicable to the offering.  We received net proceeds of $0.2 million in connection with the second closing on January 11, 2017, after deducting fees owed to the placement agent and other fees applicable to the offering. We intend to use the net proceeds for working capital needs for our recently-acquired Aquadex product line and for general corporate purposes. For a detailed description of the transactions contemplated by the October Sabby Purchase Agreement and a description of the securities issued pursuant thereto, including the Series D Preferred Stock and the January Warrants, please see “Sale of Securities to Sabby” in this prospectus.

We filed the registration statement on Form S-1, of which this prospectus forms a part, to fulfill our contractual obligations under October Purchase Agreement and the Registration Rights Agreement entered into concurrently therewith to provide for the resale by the Selling Stockholders of the shares of Common Stock offered hereby and issuable upon conversion of outstanding shares of our Series D Preferred Stock or exercise of the outstanding January Warrants.  We agreed to use our best efforts to cause such registration statement to be declared effective by the 90th calendar day following the issuance of the Series D Preferred Stock and the January Warrants (or the 120th day in the event of a “full review” by the SEC) and to use best efforts to keep such registration statement continuously effective until the shares of Common Stock being offered by this prospectus have been sold hereunder or pursuant to Rule 144 or may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144.

Description of the Warrant Exercise Agreement

On February 15, 2017, we entered into a letter agreement with the Selling Stockholders, to incent the cash exercise of the warrants they hold (including the Warrants) on or before March 31, 2017 (the “Exercise Period”"Exercise Period"). In exchange for any such exercise, we agreed to provide the Selling StockholdersInvestors a replacement warrant (the “Replacement Warrants”"Replacement Warrants") to purchase the same number of shares of common stock as were issued upon exercise of the exercised warrants,Original Warrants, with an exercise price equal to the consolidated closing bid price of our common stock on the date of issuance. The agreement also (i) amends the definition of “Beneficial"Beneficial Ownership Limitation”Limitation" in the existing warrantsOriginal Warrants to mean, solely for purposes of any exercises of warrantsOriginal Warrants that occur during the Exercise Period, “9.99%”"9.99%" and (ii) amends the Initial Exercise Date of the existing warrantsOriginal Warrants issued on November 3, 2016 and January 11, 2017 so that such warrantsOriginal Warrants are exercisable on or after the receipt of stockholder approval. Since such stockholder approval was received on January 9, 2017, such warrantsOriginal Warrants were immediately exercisable as of the date of the agreement. The Replacement Warrants will beare in the same form as the exercised warrantsOriginal Warrants except the exercise price will not be subject to reduction for subsequent equity issuances and (ii) the Replacement Warrants will not allow the Selling StockholdersInvestor to demand that we purchase the Replacement Warrants in the event of a fundamental transaction involving the Company. Concurrent with the signing of the agreement, the Selling StockholdersInvestors exercised warrantsOriginal Warrants to purchase 104,419 shares of common stock for cash proceeds of approximately $564,000, and we issued such Investors Replacement Warrants to purchase 104,419 shares of common stock at an exercise price of $4.99 per share. OnFrom March 10, 2017 to March 28, 2017, the Selling StockholdersInvestors exercised warrantsOriginal Warrants to purchase 500763,498 shares of common stock for cash proceeds of approximately $2,495,$1,427,000, and we issued such Selling StockholdersInvestors Replacement Warrants to purchase 500763,498 shares of common stock at anwith exercise prices equal to the closing consolidated bid price of our common stock available on the date of issuance (ranging from $1.73 to $3.77 per share.  On March 13, 2017, the Selling Stockholders exercised warrants to purchase 500 shares of common stock for cash proceeds of approximately $1,885, and we issued such Selling Stockholders Replacement Warrants to purchase 500 shares of common stock at an exercise price of $3.57 per share.  As a result of such issuances of Replacement Warrants, pursuant to the existing terms of our Series C Convertible Preferred Stock, Series D Convertible Preferred Stock and the warrants held by the Selling Stockholders (other than the Replacement Warrants), which provide that the exercise price is subject to reduction as a result of subsequent equity issuances at a lower effective price per share, the conversion price of the Company’s outstanding preferred stock and the exercise price of the warrants held by the Selling Stockholders were reset to the exercise price of the Replacement Warrants.  As additional Replacement Warrants are issued under the letter agreement with the Selling Stockholders, if issued at a lower price, the conversion price of the Company’s outstanding preferred stock and the exercise price of the warrants held by the Selling Stockholders will further decrease to the exercise price of any such additional Replacement Warrants.share). The Company entered into the letter agreement with the Selling StockholdersInvestors to incent the exercise of the warrantsOriginal Warrants in order to receive the cash proceeds from the exercise of the warrantsOriginal Warrants and because the exercise of the warrants in fullOriginal Warrants would allow the Company to remove the warrant liability from its balance sheet.sheet and avoid future fair value adjustments and associated volatility in its financial statements. As of March 28, 2017, we have no Original Warrants held by the Investors remaining and all Replacement Warrants under the letter agreement have been issued.

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RISK FACTORS

An investment in our securities has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below and the other information in this prospectus. Any of the risks and uncertainties set forth herein could materially and adversely affect our business, results of operations and financial condition, which in turn could materially and adversely affect the trading price or value of our securities. Additional risks not currently known to us or which we consider immaterial based on information currently available to us may also materially adversely affect us. As a result, you could lose all or part of your investment.

Risks Related to Our Business

We have limited history of operations and limited experience in sales and marketing, and we might be unsuccessful in increasing our sales and cannot assure you that we will ever generate substantial revenue or be profitable.

Prior to our acquisition of the Aquadex FlexFlow 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. On September 29, 2016, we announced a strategic refocus of our near-term strategy that includes halting all clinical evaluations to fully focus our resources on our recently acquired Aquadex FlexFlow, taking actions to reduce our cash burn in connection with such strategic refocus and reviewing potential strategic alliances and financing alternatives. Our business strategy 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 all of which we may be unable to do. We have no prior experience with respect to manufacturing, sales and marketing. If we are unsuccessful at manufacturing, marketing and selling our Aquadex FlexFlow, our operations and potential revenues will be materially adversely affected.

We have incurred operating losses since our inception and anticipate that we will continue to incur operating losses in the near-term. The report of our independent registered public accounting firm issued in connection with its audit of our financial statements for the fiscal year ended December 31, 2016 expresses substantial doubt about our ability to continue as a going concern. We will need additional funding to continue operations, which may not be available to us on favorable terms or at all.

We are an early-stage company with a history of incurring net losses. We have incurred net losses since our inception, including net losses of $15.8 million and $26.6 million for the years ended December 31, 2016 and 2015, respectively. As of December 31, 2016, our accumulated deficit was $169.0 million.

The report of our independent registered public accounting firm issued in connection with its audit of our financial statements for the fiscal year ended December 31, 2016 expresses substantial doubt about our ability to continue as a going concern. Prior to August 2016, we did not have any products approved for commercialization, generated only limited revenue from our clinical studies and had significant operating losses as we incurred costs associated with the conduct of clinical studies and our research and development programs for our C-Pulse System. We became a revenue generating company only a few months ago 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 listed on NASDAQ. To become and remain profitable, we must succeed in expanding the adoption and market acceptance of the Aquadex FlexFlow. This will require us to succeed in a range of challenging activities, including training personnel at hospitals and effectively and efficiently manufacturing, marketing and distributing the Aquadex FlexFlow and related components. There can be no assurance that we will succeed in

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·halt use of our Aquadex Business;

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attempt to obtain a license to sell or use the relevant technology or substitute technology, which license may not be available on reasonable terms or at all; or

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redesign our system.

In the event a claim against us were successful and we could not obtain a license to the relevant technology on acceptable terms or license a substitute technology or redesign our system to avoid infringement, our business, results of operations and financial condition would be significantly harmed.

If we were unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and system could be adversely affected.

In addition to patented technology, we rely on our unpatented proprietary technology, trade secrets, processes and know-how. We generally seek to protect this information by confidentiality agreements with our employees, consultants, scientific advisors and third parties. These agreements may be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently developed by competitors. To the extent that our employees, consultants or contractors use intellectual property

owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Our products could infringe patent rights of others, which may require costly litigation and, if we are not successful, could cause us to pay substantial damages or limit our ability to commercialize our products.

Our commercial success depends on our ability to increase adoption of the Aquadex Business without infringing the patents and other proprietary rights of third parties. As our industry expands and more patents are issued, the risk increases that there may be patents issued to third parties that relate to our system and technologies of which we are not aware or that we must challenge to continue our operations as currently contemplated. Our system may infringe or may be alleged to infringe these patents.

In addition, some patent applications in the United States may be maintained in secrecy until the patents are issued because patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing, and because publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our issued patents or our pending applications or that we were the first to invent the technology. Another party may have filed, and may in the future file, patent applications covering our system or technology similar to ours. Any such patent application may have priority over our patent applications or patents, which could further require us to obtain rights to issued patents covering such technologies. If another party has filed a U.S. patent application on inventions similar to ours, we may have to participate in an interference or deviationderivation proceeding declared by the U.S. Patent and Trademark Office to determine priority of invention in the United States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful if the other party had independently arrived at the same or similar invention prior to our own invention, resulting in a loss of our U.S. patent position with respect to such inventions.

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We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

As is common in our industry, we employ individuals who were previously employed at other medical device companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees, or we, have used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.

In the ordinary course of our business, we collect and store sensitive data, including legally protected health information, personally identifiable information, intellectual property and proprietary business information owned or controlled by ourselves or others. At times we may have access to limited amounts of protected health information as part of other healthcare providers’providers' provision of treatment to patients with our medical devices. We manage and maintain our applications and data utilizing on-site systems. These applications and data encompass a wide variety of business-critical information including research and development information, commercial information, and business and financial information. We face four primary risks relative to protecting this critical information, including: loss of access risk; inappropriate disclosure risk; inappropriate modification risk; and the risk of our being unable to adequately monitor our controls over the first three risks.

The secure processing, storage, maintenance, and transmission of this critical information is vital to our operations and business strategy. Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers or viruses or breached due to employee error, malfeasance, or other disruptions. Any such breach or interruption could compromise our networks and the information stored there could be accessed by unauthorized parties, publicly disclosed, lost, or stolen. Any such access, disclosure or other loss of information could result in legal claims or

proceedings, liability under laws and regulations that protect the privacy of personal information and regulatory penalties. To the extent that we may engage in activities regulated by the Health Insurance Portability and Accountability Act (HIPAA) and the Health Information Technology for Clinical and Economic Health Act (HITECH) we may have additional regulatory and reporting obligations. Although we believe we have implemented adequate security measures, there is no guarantee we can continue to protect our systems and data from unauthorized access, loss or dissemination that could also disrupt our operations, including our ability to conduct our analyses, conduct research and development activities, collect, process, and prepare company financial information, provide information about our products and other patient and physician education and outreach efforts through our website, manage the administrative aspects of our business, and damage our reputation, any of which could adversely affect our business.

In addition, the interpretation and application of consumer, health-related, and data protection laws in the United States, Europe and elsewhere are often uncertain, contradictory, and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices. If so, this could result in government-imposed fines or orders requiring that we change our practices, which could adversely affect our business. In addition, these privacy regulations may differ from country to country, and may vary based on whether testing is performed in the United States or in the local country. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business.

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Risks Related to Our Common Stock

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

On September 21, 2016, we received notice from the Staff of Nasdaq indicating that the Staff had determined to delist our securities from The Nasdaq Capital Market due to our then continued non-compliance with the minimum bid price requirement. We timely requested a hearing before the Panel, which occurred on November 10, 2016. On November 11, 2016, we received notice from the Staff that we no longer satisfied Nasdaq Listing Rule 5550(b) insofar as we did not expect to report stockholders’stockholders' equity of at least $2.5 million upon the filing of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 and that the deficiency could serve as an additional basis for the delisting of the Company’sCompany's common stock from The Nasdaq Capital Market. On November 21, 2016, Nasdaq informed us that the Panel had granted us continued listing on The Nasdaq Capital Market while we implement our plan to regain compliance with the minimum bid price and minimum stockholders’stockholders' equity requirements. The Panel granted us until January 30, 2017 to evidence a closing bid price of $1.00 or more for a minimum of ten prior consecutive trading days and until March 20, 2017 to evidence compliance with the $2.5 million stockholder’sstockholder's equity requirement. We have requested an extension of this March 20, 2017 deadline from Nasdaq; however, we cannot assure you that Nasdaq will grant our extension request.

        On December 9, 2016, we provided notice of our intention to call a special meeting of our stockholders on January 9, 2017 to, among other things, obtain stockholder approval for a reverse stock split. At a special meeting of our stockholders on January 9, 2017, our stockholders approved, among other things, a reverse stock split, and following such special meeting, our Board of Directors approved a 1-for-30 reverse split of the Company’sCompany's issued and outstanding shares of common stock. The reverse stock split became effective as of 5:00 p.m. Eastern Time on January 12, 2017, and the Company’sCompany's common stock began trading on a split-adjusted basis on The Nasdaq Capital Market on January 13, 2017. We received confirmation from Nasdaq on February 9, 2017 that we have regained compliance with the minimum bid price rule. On March 28, 2017, Nasdaq granted our request to extend the deadline to comply with the $2.5 million stockholders' equity requirement to May 10, 2017.

DespiteWe believe that the proceeds from this offering will be sufficient to evidence compliance with the minimum stocholders' equity requirements of Nasdaq; however, despite our efforts, we cannot assure you that we will be able to meet the minimum stockholders’stockholders' equity or other listing requirements. If it appears to the Nasdaq staff that we will not meet the minimum stockholders’stockholders' equity or any other listing standard, our common stock may be subject to delisting. If our common stock is delisted, Baxter, pursuant to the asset purchase agreement for the Aquadex Business, has the right to require us to repurchase, in cash, all or part of the common stock held by Baxter at a price equal to their fair market value, as determined by a third party appraiser. In addition, our common stock would likely then trade only in the over-the-counter market. If our common stock were to trade on the over-the-counter market, selling our common stock could be more difficult because smaller quantities of shares would likely be bought and sold and transactions could be delayed, and we could face significant material adverse consequences, including:

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reduced liquidity with respect to our securities;

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a determination that our shares are a “penny"penny stock,”" which will require brokers trading in our securities to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our securities;

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a reduced amount of news and analyst coverage for our Company; and

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a decreased ability to issue additional securities or obtain additional financing in the future.

These factors could result in lower prices and larger spreads in the bid and ask prices for our common stock and would substantially impair our ability to raise additional funds and could result in a loss of institutional investor interest and fewer development opportunities for us.

In addition to the foregoing, if our Common Stockcommon stock is delisted from NASDAQ and it trades on the over-the-counter market, the application of the “penny stock”"penny stock" rules could adversely affect the market price of our Common Stockcommon stock and increase the transaction costs to sell those shares. The SEC has adopted regulations which generally define a “penny stock”"penny stock" as an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The closing price of our common stock on March 14,27, 2017 was $3.54.$1.74. If our Common Stockcommon stock is delisted from NASDAQ and it trades on the over-the-counter market at a price of less than $5.00 per share, our Common Stockcommon stock would be considered a penny stock. The SEC’sSEC's penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and the salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’scustomer's account. In addition, the penny stock rules generally require that before a transaction in a penny stock occurs, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’spurchaser's agreement to the transaction. If applicable in the future, these rules may restrict the ability of brokers-dealers to sell our Common Stockcommon stock and may affect the ability of investors to sell their shares, until our Common Stockcommon stock no longer is considered a penny stock.

The reverse split of our Common Stockcommon stock could decrease our total market capitalization and increase the volatility of our stock price.

We effected 1-for-30 reverse split of our issued and outstanding shares of common stock as of 5:00 p.m. Eastern Time on January 12, 2017, and our common stock began trading on a split-adjusted basis on The Nasdaq Capital Market on January 13, 2017. There can be no assurance that the total market capitalization of our common stock after the reverse stock split will be equal to or greater than the total market capitalization before the proposed reverse stock split or that the per share market price of our Common Stockcommon stock following the reverse stock split will increase in proportion to the reduction in the number of shares of Common Stockcommon stock outstanding before the reverse stock split. Furthermore, a decline in the market price of our Common Stockcommon stock after the reverse stock split may result in a greater percentage decline than would occur in the absence of a reverse stock split, and the liquidity of our common stock could be adversely affected following such a reverse stock split.

The number of shares of Common Stockcommon stock underlying our outstanding preferred stock and outstanding warrants is significant in relation to our currently outstanding Common Stockcommon stock and could cause downward pressure on the market price for our Common Stockcommon stock and conversion of such outstanding convertible securities will cause dilution to the existing holders of our common stock.stock and to investors in this offering.

The number of shares of common stock issuable upon conversion of our outstanding preferred stock and exercise of outstanding warrants is significant in relation to the number of shares of our Common Stockcommon stock currently outstanding. If any security holder including the Selling Stockholders, determines to sell a substantial number of shares into the market at any given time, there may not be sufficient demand in the market to purchase the shares without a decline in the market price for our common stock. Moreover, continuous sales into the market of a number of shares in excess of the typical trading volume for our common stock, or even the availability of such a large number of shares, could depress the trading market for our common stock over an extended period of time.

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Through March 14, 2017, shares of our Series C Convertible Preferred Stock have been converted into 501,000 shares of our common stock.        As of March 14,28, 2017, 344.9we have warrants to purchase 926,723 shares of our Series C Convertible Preferred Stock

remain outstanding and are currently convertible into 96,611 shares of our common stock and 900 shares of our Series D Convertible Preferred Stock remain outstanding and are convertible into 252,101 shares of our common stock.outstanding.

        If the effective price per share in a futurethis offering is lower than the then exercise price of conversioncertain of the Series C Convertible Preferred Stockour outstanding warrants or the Series D Convertible Preferred Stock,if we issue equity securities at a lower price, then the exercise price of conversion of such preferred stockwarrants shall be reduced to equal to such lower price and such preferred stock shall be issuableprice. See "Prospectus Summary—Recent Devlopments—Warrant Exercise Agreement" herein for additional sharesa description of common stock in connection with such conversion price reduction.  See below regarding our agreement to issue additional warrants to certain investors.  Furthermore, each holderholders of our Series C Convertible Preferred Stock has the right to exchange all or some of the Series C Preferred Stock for securities issued in aoutstanding warrants upon future offering on a $1.00 for $1.00 basis based on the outstanding stated value of the Series C Convertible Preferred Stock, along with any accrued but unpaid liquidated damagesexercise thereof through March 31, 2017 and other amounts owing thereon, and the effective priceresulting reduction in the offering.  With respect to our Series D Convertible Preferred Stock, on or after May 3, 2017, the conversion price on our Series D Convertible Preferred Stock shall become an adjustable rate equal to 80% of the average of the daily volume weighted averageexercise price of our common stock for the ten trading days immediately prior to the conversion date, but shall not be reduced below $1.26.certain outstanding warrants that could occur as a result thereof. To the extent theour outstanding shares of Series C Convertible Preferred Stock or Series D Convertible Preferred Stock become exercisablewarrants are exercised for additional shares of common stock, holders of our common stock and investors in this offering will experience further dilution.

As of March 14, 2017, we have warrants to purchase 926,884 shares of common stock outstanding.  Pursuant to a letter agreement dated February 15, 2017 with the Selling Stockholders, we agreed in consideration for the Selling Stockholders exercising their warrants (including the Warrants) during the period beginning on February 15, 2017 to and including March 31, 2017 (the “Exercise Period”), that we would issue, promptly upon receipt of the cash exercise price, a common stock purchase warrant to the Selling Stockholders (the “New Warrants”) pursuant to Section 4(a)(2) of the Securities Act, to purchase up to a number of shares of our common stock equal to 100% of the number of shares issued pursuant to such Selling Stockholders exercise of warrants under the letter agreement, which New Warrants shall have a term of five years from the date of issuance and an exercise price equal to consolidated closing bid price of our common stock as quoted on The Nasdaq Capital Market on the date each New Warrant is issued. The letter agreement also (i) amends the definition of “Beneficial Ownership Limitation” in the warrants to mean, solely for purposes of any exercises of such warrants that occurs during the Exercise Period, “9.99%” and (ii) amends the initial exercise date of the warrants issued on November 3, 2016 and January 11, 2017 so that such warrants are exercisable on or after the receipt of stockholder approval of such warrants.  Since such stockholder approval was received on January 9, 2017, such warrants became immediately exercisable on the date of the letter agreement. On February 15, 2017, following the execution of the letter agreement, the Selling Stockholders exercised warrants to purchase shares of our common stock so that, after such exercise, such holders owned, in the aggregate, 9.9% of our common stock.  We received gross proceeds of $563,863 in connection with such exercise and issued the Selling Stockholders New Warrants to purchase an aggregate of 104,419 shares of our common stock with a per share exercise price of $4.99.  On March 10, 2017, the Selling Stockholders exercised warrants to purchase 500 shares of common stock for cash proceeds of approximately $2,495, and we issued such Selling Stockholders Replacement Warrants to purchase 500 shares of common stock at an exercise price of $3.77 per share.  On March 13, 2017, the Selling Stockholders exercised warrants to purchase 500 shares of common stock for cash proceeds of approximately $1,885, and we issued such Selling Stockholders Replacement Warrants to purchase 500 shares of common stock at an exercise price of $3.57 per share.  As a result of such issuances of Replacement Warrants, pursuant to the existing terms of our Series C Convertible Preferred Stock, Series D Convertible Preferred Stock and the warrants held by the Selling Stockholders (other than the Replacement Warrants), which provide that the exercise price is subject to reduction as a result of subsequent equity issuances at a lower effective price per share, the conversion price of the Company’s outstanding preferred stock and the exercise price of the warrants held by the Selling Stockholders were reset to the exercise price of the Replacement Warrants.  As additional Replacement Warrants are issued under the letter agreement with the Selling Stockholders, if issued at a lower price, the conversion price of the Company’s outstanding preferred stock and the exercise price of the warrants held by the Selling Stockholders will further decrease to the exercise price of any such additional Replacement Warrants.  The Company entered into the letter agreement with the Selling Stockholders to incent the exercise of the warrants in order to receive the cash proceeds from the exercise of the warrants and because the exercise of the warrants in full would allow the Company to remove the warrant liability from its balance sheet.  To the extent additional warrants are exercised during the Exercise Period and we issue additional New Warrants, holders of our common stock will be further diluted and sales of any shares of common stock underlying such warrants or the New Warrants could cause downward pressure on the market price for our common stock.

The rights of holders of our capital stock will be subject to, and could be adversely affected by, the rights of holders of our outstanding preferred stock any stock that may be issued in the future.

Our board of directors has authority, without further stockholder approval, to issue additional shares of preferred stock with such rights, preferences and privileges as our board may determine. These rights, preferences and privileges may include dividend rights, conversion rights, voting rights and liquidation rights that may be greater than the rights of our common stock.

Our board of directors has approved, pursuant to this authority, the issuance of preferred stock, and we have 344.9 shares of Series C Convertible Preferred Stock and 900 shares of Series D Preferred Stock outstanding as of March 14, 2017.  The rights, preferences and privileges of ourthe Series C ConvertibleE Preferred Stock and Series D Preferred Stockto be issued in this offering are described in our Current Report on Form 8-K filed with the SEC on October 31, 2016.under "Description of Securities—Description of Capital Stock—Preferred Stock—Series E Preferred Stock" herein. As described therein, upon liquidation, dissolution or winding-up of the Company, holders of our Series C Convertible Preferred Stock and Series D Preferred Stock have the right to receive, out of the assets, whether capital or surplus, of the Company, (i) for the Series C Convertible Preferred Stock, an amount equal to the par value, plus any accrued and unpaid dividends thereon, and (ii) for the Series D Preferred Stock, an amount equal to the stated value, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon, in each case, for each such share of preferred stock held by such holder before any distribution or payment shall be made to the holders of our common stock, and, following such payment, such holdersSeries E Preferred Stock are entitled to receiveparticipate on an as-converted-to-common stock basis with holders of the same amount that a holder of common stock would receive if such preferred stock was fully converted, pari passu with allin any distribution of assets of the holders of common stock.Company.

Our board of directors may issue additional series of preferred stock in the future pursuant to this authority. As a result, the rights of holders of our capital stock will be subject to, and could be adversely affected by, the rights of holders of any stock that may be issued in the future.

We have a large number of authorized but unissued shares of stock, which could negatively impact a potential investor if they purchased our common stock.

We effected 1-for-30 reverse split of our issued and outstanding shares of common stock as of 5:00 p.m. Eastern Time on January 12, 2017, and our common stock began trading on a split-adjusted basis on The Nasdaq Capital Market on January 13, 2017.

Because the number of authorized shares of our common stock was not reduced proportionately, the reverse stock split increased our board of directors’directors' ability to issue authorized and unissued shares without further stockholder action. As of the date of this prospectus, our certificate of incorporation provides for 100,000,000 shares of authorized common stock and 40,000,000 shares of authorized preferred stock. As of March 14,28, 2017, we had 1,742,7453,118,492 shares of common stock outstanding, 1,351,023994,290 shares reserved for issuance upon conversion,the exercise or vesting of outstanding preferred stock, warrants, options and restricted stock units, and 86,371363,501 shares of common stock reserved pursuant to

outstanding convertible preferred stock, warrants, options or restricted stock units orfor future issuance under the Company’sCompany's equity incentive plans. We expect to request stockholder approval at our 2017 Annual Meeting of a new equity incentive plan, which will include an additional share reserve of 534,857.

With respect to authorized but unissued and unreserved shares, we could also use such shares to oppose a hostile takeover attempt or delay or prevent changes in control or changes in or removal of management. The issuance of additional shares of common stock or securities convertible into common stock may have a dilutive effect on earnings per share and relative voting power and may cause a decline in the trading price of our common stock. We could use the shares that are available for future issuance in dilutive equity financing transactions, or to oppose a hostile takeover attempt or delay or prevent changes in control or changes in or removal of management, including transactions that are

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favored by a majority of the stockholders or in which the stockholders might otherwise receive a premium for their shares over then-current market prices or benefit in some other manner.

The price of our Common Stockcommon stock may fluctuate significantly, and this may make it difficult for you to resell the Common Stockcommon stock you want or at prices you find attractive.

The price of our Common Stockcommon stock constantly changes. The price of our Common Stockcommon stock could fluctuate significantly for many reasons, including the following:

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·future announcements concerning us, including our clinical and product development strategy, or our competitors;

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•

regulatory developments, disclosure regarding completed, ongoing or future clinical studies and enforcement actions bearing on advertising, marketing or sales;

·



•

reports and recommendations of analysts and whether or not we meet the milestones and metrics set forth in such reports;

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•

introduction of new products;

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•

acquisition or loss of significant manufacturers, distributors or suppliers or an inability to obtain sufficient quantities of materials needed to manufacture our system;

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•

quarterly variations in operating results, which we have experienced in the past and expect to experience in the future;

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•

business acquisitions or divestitures;

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•

changes in governmental or third-party reimbursement practices;

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•

fluctuations of investor interest in the medical device sector; and

·



•

fluctuations in the economy, world political events or general market conditions.

In addition, stock markets in general, and the market for shares of health care stocks in particular, have experienced extreme price and volume fluctuations in recent years, fluctuations that frequently have been unrelated to the operating performance of the affected companies. These broad market fluctuations may adversely affect the market price of our Common Stock.common stock. The market price of our Common Stockcommon stock could decline below its current price and the market price of our shares may fluctuate significantly in the future. These fluctuations may be unrelated to our performance. We expect that the market price of our Common Stockcommon stock will continue to fluctuate.

Our ability to use U.S. net operating loss carryforwards or Australian tax losses might be limited.

As of December 31, 2016, we had U.S. net operating loss (“NOL”("NOL") carryforwards of approximately $110.6 million for U.S. income tax purposes, which expire from 2024 through 2034. To the extent these NOL carryforwards are available, we intend to use them to reduce any corporate income tax liability associated with our operations that we might have in the future. Section 382 of the U.S. Internal Revenue Code of 1986, as amended, generally imposes an annual limitation on the amount of NOL carryforwards that might be used to offset taxable income when a corporation has undergone significant changes in stock ownership. As a result, prior or future changes in ownership, including due to this offering, could put limitations on the availability of our NOL carryforwards. In addition, our ability to utilize the current NOL carryforwards might be further limited by future issuances of our Common Stock.common stock.

As of December 31, 2016, we had tax losses in the Commonwealth of Australia of approximately AU$49.0 million. Continuing utilization of carryforward tax losses in Australia may also be affected by the issuance of our Common Stock.common stock. This is because one test for carrying forward tax losses in Australia

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from year to year requires continuity of

ultimate ownership (subject to the relevant tests in Australian tax law) of more than 50% between the loss year and the income year in which the loss is claimed.

To the extent use of our NOL carryforwards or tax losses is limited, our income could be subject to corporate income tax earlier than it would if we were able to use NOL carryforwards and tax losses, which could result in lower profits.

We do not intend to pay cash dividends on our Common Stockcommon stock in the foreseeable future.

We have never declared or paid any cash dividends on our Common Stock,common stock, and we currently do not anticipate paying any cash dividends in the foreseeable future. We intend to retain any earnings to finance the development and expansion of our products and business. Accordingly, our stockholders will not realize a return on their investments unless the trading price of our Common Stockcommon stock appreciates.

We will continue to incur increased costs as a result of being a U.S. reporting company.

In connection with the effectiveness of our registration statement on Form 10, as of February 14, 2012, we became subject to the periodic reporting requirements of the Exchange Act. Although we were previously listed on the Australian Securities Exchange and had been required to file financial information and make certain other filings with the Australian Securities Exchange, our status as a U.S. reporting company under the Exchange Act has caused us, and will continue to cause us, to incur additional legal, accounting and other expenses that we did not previously incur, including costs related to compliance with the requirements of SOX and the listing requirements of The Nasdaq Capital Market. We expect these rules and regulations will continue to increase our legal and financial compliance costs and make some activities more time-consuming and costly, and these activities may increase general and administrative expenses and divert management’smanagement's time and attention away from revenue-generating activities. Furthermore, now that we are a revenue-generating company following the acquisition of the Aquadex Business in August 2016, our costs to comply with regulations applicable to U.S. reporting companies may further increase. We also expect these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers.

Investors could lose confidence in our financial reports, and the value of our Common Stockcommon stock may be adversely affected, if our internal controls over financial reporting are found not to be effective by management or by an independent registered public accounting firm or if we make disclosure of existing or potential material weaknesses in those controls.

In connection with becoming a company required to file reports with the SEC, we are required to comply with the internal control evaluation and certification requirements of Section 404 of SOX. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of SOX until the date we are no longer an “emerging"emerging growth company”company" as defined in the JOBS Act or a “smaller"smaller reporting company”company" as defined by applicable SEC rules. We will no longer qualify as an “emerging"emerging growth company”company" on or before December 31, 2017, although we will remain a “smaller"smaller reporting company”company" as long as our public float remains less than $75 million as of the last business day of our most recently-completed second fiscal quarter.

We continue to evaluate our existing internal controls over financial reporting against the standards adopted by the Public Company Accounting Oversight Board. During the course of our ongoing evaluation of the internal controls, we may identify areas requiring improvement, and may have to design enhanced processes and controls to address issues identified through this review.

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Remediating any deficiencies, significant deficiencies or material weaknesses that we or our independent registered public accounting firm may identify may require us to incur significant costs and expend significant time and management resources. We cannot assure you that any of the measures we implement to remedy any such deficiencies will effectively mitigate or remedy such deficiencies. The existence of one or more material weaknesses could affect the accuracy and timing of our financial reporting. It may be more difficult for us to manage our internal control over financial reporting following our acquisition of the Aquadex Business now that we are a revenue generating company. Investors could lose confidence in our financial reports,

and the value of our Common Stockcommon stock may be harmed, if our internal controls over financial reporting are found not to be effective by management or by an independent registered public accounting firm or if we make disclosure of existing or potential material weaknesses in those controls.

Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’stockholders' ability to obtain a favorable judicial forum for disputes with the Company.

Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, as amended (the “DGCL”"DGCL"), or (iv) any other action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions described above. This forum selection provision may limit our stockholders’stockholders' ability to obtain a judicial forum that they find favorable for disputes with us or our directors, officers or other employees.

Our certificate of incorporation and bylaws, as well as certain provisions of the DGCL, may delay or deter a change in control transaction.

Certain provisions of our certificate of incorporation and bylaws may have the effect of deterring takeovers, such as those provisions authorizing our board of directors to issue, from time to time, any series of preferred stock and fix the designation, powers, preferences and rights of the shares of such series of preferred stock; prohibiting stockholders from acting by written consent in lieu of a meeting; requiring advance notice of stockholder intention to put forth director nominees or bring up other business at a stockholders’stockholders' meeting; prohibiting stockholders from calling a special meeting of stockholders; requiring a 66 2/3%²/3% majority stockholder approval in order for stockholders to amend certain provisions of our certificate of incorporation or bylaws or adopt new bylaws; providing that, subject to the rights of preferred shares, the directors will be divided into three classes and the number of directors is to be fixed exclusively by our board of directors; and providing that none of our directors may be removed without cause. Section 203 of the DGCL, from which we did not elect to opt out, provides that if a holder acquires 15% or more of our stock without prior approval of our board of directors, that holder will be subject to certain restrictions on its ability to acquire us within three years. These provisions may delay or deter a change in control of us, and could limit the price that investors might be willing to pay in the future for shares of our Common Stock.common stock.

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We are an “emerging"emerging growth company”company" and a “smaller"smaller reporting company”company" under federal securities laws and we cannot be certain if the reduced reporting requirements applicable to such companies will make our Common Stockcommon stock less attractive to investors.

We are an “emerging"emerging growth company”company" and a “smaller"smaller reporting company”.company" under federal securities laws. For as long as we continue to be an emerging growth company or a smaller reporting company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies, or a smaller reporting company, including not being required to comply with the external auditor attestation requirements of Section 404 of SOX, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and, for emerging growth companies, exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. The JOBS Act also permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to U.S. public companies. We will be an emerging growth company until December 31, 2017, although we will remain a smaller reporting company so long as our public float remains less than $75 million as of the last business day of our most recently-completed second fiscal quarter. We cannot predict if investors will find our Common Stockcommon stock less attractive because we may rely on these exemptions. If some investors find our Common Stockcommon stock less attractive as a result, there may be a less active trading market for our Common Stockcommon stock and our stock price may decline or be more volatile.

As explained above, Section 102(b)(1) of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. An emerging growth company can delay the adoption of new or revised

accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period, and as a result of this election, our financial statements may not be comparable to those of companies that comply with public company effective dates for new or revised accounting standards for U.S. public companies. We will be an emerging growth company until December 31, 2017 and after such date can no longer take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act.

Risks Relating to this Offering

If you purchase Units in this offering, you will incur immediate and substantial dilution in the net tangible book value of your shares.

        The assumed public offering price of the Units is substantially higher than the net tangible book value per share of our common stock. Investors purchasing Units in this offering will pay a price per share of common stock that substantially exceeds the pro forma book value of our tangible assets after subtracting our liabilities. As a result, investors purchasing Units in this offering will incur immediate dilution of $0.61 per share of common stock, based on an assumed public offering price of $1.74 per Class A Unit. See "Dilution."

        As a result of the dilution to investors purchasing shares in this offering, investors may receive significantly less than the purchase price paid in this offering, if anything, in the event of a liquidation of our company.

Because our management will have broad discretion and flexibility in how the net proceeds from this offering are used, our management may use the net proceeds in ways with which you disagree or which may not prove effective.

        We currently intend to use the net proceeds from this offering as discussed under "Use of Proceeds" in this prospectus. We have not allocated specific amounts of the net proceeds from this

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offering for any of the foregoing purposes. Accordingly, our management will have significant discretion and flexibility in applying the net proceeds of this offering. You will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the net proceeds are being used appropriately. It is possible that the net proceeds will be invested in a way that does not yield a favorable, or any, return for us. The failure of our management to use such funds effectively could have a material adverse effect on our business, financial condition, operating results and cash flow.

The Series E Preferred Stock and the warrants are unlisted securities and there is no public market for them.

        There is no established public trading market for the Series E Preferred Stock or the warrants, and we do not expect a market to develop. In addition, neither the Series E Preferred Stock nor the warrants are listed, and we do not intend to apply for listing of the Series E Preferred Stock or the warrants on any securities exchange or trading system. Without an active market, the liquidity of the Series E Preferred Stock and the warrants is limited, and investors may be unable to liquidate their investments in the Series E Preferred Stock or the warrants.

The warrants may not have any value.

        The warrants will be exercisable for five years from the closing date at an initial exercise price of $        per share. In the event that the price of a share of our common stock does not exceed the exercise price of the warrants during the period when the warrants are exercisable, the warrants may not have any value.

The warrants purchased in this offering do not entitle the holder to any rights as common stockholders until the holder exercises the warrant for shares of our common stock.

        Until you acquire shares of our common stock upon exercise of your warrants purchased in this offering, such warrants will not provide you any rights as a common stockholder, except as set forth in the warrants. Upon exercise of your warrants purchased in this offering, you will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs on or after the exercise date.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the documents that we incorporate by reference, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but are not always, made through the use of words or phrases such as “anticipates,” “estimates,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “management"anticipates," "estimates," "plans," "projects," "continuing," "ongoing," "expects," "management believes,” “we" "we believe,” “we intend”" "we intend" and similar words or phrases. Accordingly, these statements involve estimates, assumptions and uncertainties which could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this prospectus, and in particular those factors included in the section entitled “Risk"Risk Factors.”"

Because the factors referred to in the preceding paragraph could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements we make, you should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

You should carefully read this prospectus and any related free writing prospectus, together with the information incorporated herein or therein by reference as described under the section titled “Information"Information Incorporated By Reference,”" and with the understanding that our actual future results may materially differ from what we expect.

Except as required by law, forward-looking statements speak only as of the date they are made, and we assume no obligation to update any forward-looking statements publicly, or to update the reasons why actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available.

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SALEUSE OF SECURITIES TO SABBYPROCEEDS

GeneralWe estimate that the net proceeds to us from the sale of the securities offered by this prospectus in this offering will be approximately $7.1 million after deducting commissions and estimated offering expenses payable by us.

On July 20, 2016, we entered into the July Sabby Purchase AgreementThe purpose of this offering is to provide us with cash to fund our operations and grow our business, and to evidence compliance with the Selling Stockholders under which we agreedminimum stockholders' equity requirement of The Nasdaq Capital Market. We believe that the proceeds from this offering will be sufficient to issue and sell (i) 3,468 shares of Series B Convertible Preferred Stock pursuant to our shelf registration statement on Form S-3 (File No. 333-194731) filedevidence compliance with the SEC, declared effective on May 5, 2014 and a prospectus supplement relating to the offering filed with the SEC on July 22, 2016 and (ii) warrants to purchase an aggregate of 122,979 shares of Common Stock, pursuant to an exemption from the registrationminimum stockholders' equity requirements of Nasdaq; however, despite our efforts, we cannot assure you that Nasdaq will agree that we have regained compliance. We intend to use the Securities Act provided in Section 4(a)(2) thereof and/or Rule 506net proceeds from this offering for working capital needs for our recently-acquired Aquadex product and for general corporate purposes. We purchased the assets of Regulation D promulgated thereunder.  We receivedAquadex™ FlexFlow product on August 5, 2016. The Aquadex FlexFlow product is a medical device that can be used to treat heart failure patients with fluid overload.

        The allocation of the net proceeds of $3.2 million at the closingoffering set forth above represents our estimates based upon our current plans and assumptions regarding industry and general economic conditions, our future revenues and expenditures.

        The amounts and timing of our actual expenditures will depend upon numerous factors, including market conditions, cash generated by our operations, business developments and related rate of growth. We may find it necessary or advisable to use portions of the proceeds from this offering for other purposes.

        Circumstances that may give rise to a change in the use of proceeds and the alternate purposes for which the proceeds may be used include:

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the existence of other opportunities or the need to take advantage of changes in timing of our existing activities;



•

the need or desire on July 26, 2016, after deducting fees owedour part to the placement agentaccelerate, increase or eliminate existing initiatives due to, among other things, changing market conditions and competitive developments; and/or



•

if strategic opportunities present themselves (including acquisitions, joint ventures, licensing and other fees applicablesimilar transactions).

        From time to time, we evaluate these and other factors and we anticipate continuing to make such evaluations to determine if the offering.existing allocation of resources, including the proceeds of this offering, is being optimized.

On October 30, 2016,Pending such uses, we entered intointend to invest the October Sabby Purchase Agreement with the Selling Stockholders under which we agreed to issue and sell (i) 2,900 shares of Series C Convertible Preferred Stock pursuant to our shelf registration statement on Form S-3 (File No. 333-194731) filed with the SEC, declared effective on May 5, 2014 and a prospectus supplement relating to the offering filed with the SEC on October 31, 2016 (the “October Registered Direct Offering”) and (ii) 900 shares of Series D Preferred Stock and warrants to purchase an aggregate of 745,097 shares of Common Stock, pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) thereof and/or Rule 506 of Regulation D promulgated thereunder (such sale of warrants, together with the sale of Series D Preferred Stock, the “Private Placement”).  The October Sabby Purchase Agreement provides that, upon the terms and subject to the conditions and limitations set forth therein, the closing of each of the October Registered Direct Offering and the Private Placement would occur in two stages.  At the initial closing, which occurred on November 3, 2016, we sold 2,900 shares of Series C Convertible Preferred Stock, 700 shares of Series D Preferred Stock and 705,882warrants to purchase Common Stock to Sabby.  At the second closing, which occurred January 11, 2017, we sold 200 shares of Series D Preferred Stock and 39,216 January Warrants to Sabby.  We received net proceeds of $3.3 millionthis offering in connection withdirect and guaranteed obligations of the first closing on November 3, 2016, after deducting fees owed toUnited States, interest-bearing, investment-grade instruments or certificates of deposit.

        We believe that the placement agent and other fees applicable to the offering.  We received net proceeds of $0.2 million at the second closing on January 11, 2017, after deducting fees owedthis offering will be sufficient to the placement agent and other fees applicable to the offering. The shares of Series C Convertible Preferred Stock and Series D Preferred Stock have a stated value of $1,000 and convert into Common Stock at a conversion price of $3.57 per share (as adjusted) as of March 14,fund our operations through 2017, and would convert into an aggregate of 348,712 shares of Common Stock.  The number of shares of Common Stock issuable upon conversionwe will need to raise additional capital to fund our operations thereafter. Additional capital may not be available on terms favorable to us, or exercise of the Series C Convertible Preferred Stock, Series D Preferred Stock or the warrants sold pursuant to the October Sabby Purchase Agreement is subject to further adjustment pursuant to the terms of the certificates of designation for such series and the warrants.  Pursuant to the October Sabby Purchase Agreement,at all. If we are required to reserve for future issuance pursuant to the Series C Convertible Preferred Stock and Series D Preferred Stock and the warrants sold thereunder the greater of (i) 100% (300% following the receipt of stockholder approval) of the maximum aggregate number of shares of Common Stock issuable upon conversion in full of all shares of the Series C Convertible Preferred Stock and Series D Preferred Stock and upon exercise in full of all warrants and (ii) 19.9% of our then issued and outstanding shares of Common Stock.

On October 30, 2016, we entered into a Securities Exchange Agreement with the Selling Stockholders pursuant to which we agreed to issue 2,227.2 shares of Series B-1 Convertible Preferred Stock in exchange for the cancellation of the 2,227.2 shares of Series B Convertible Preferred Stock that remained outstanding at the time.  All such shares of Series B-1 Convertible Preferred Stock have since been converted to Common Stock.

On February 15, 2017, we entered into a letter agreement with the Selling Stockholders to incent the cash exercise of the warrants they hold (including the Warrants) during the Exercise Period,raise additional funds by agreeing to issue Replacement Warrants and making certain amendments. See “—Warrant Exercise Agreement” below.

October Securities Purchase Agreement

The October Sabby Purchase Agreement also required us, on or before the 20th day following the first closing, to file a proxy statement with the SEC for the purposes of holding a special meeting ofissuing equity securities, our stockholders to vote on a proposal to approve the issuance of the shares of Common Stock underlying the preferred stock and warrants issuedmay experience dilution. Debt financing, if available, may involve restrictive covenants or issuableadditional security interests in connection with the transactions contemplated by the October Sabby Purchase Agreement pursuant to the requirements of Nasdaq Listing Rule 5635(d).  We further agreed to hold such meeting within 120 days of the first closing for the purpose of obtaining stockholder approval and to use reasonable best efforts to obtain such

Contents

viii.               any breach of the agreements delivered to the Selling Stockholders at the closing pursuant to Section 2.2(a)(v) of the Sabby Purchase Agreement;

ix.                     we redeem more than a de minimis number of junior securities;

x.                        a change of control occurs (which shall not include a transaction the primary purpose of which is financing the Company);

xi.                     a bankruptcy event occurs; or

xii.                  the electronic transfer by the Company of shares of Common Stock through the Depository Trust Company or another established clearing corporation is no longer available or is subject to a “chill”.

Failure to Deliver Conversion Shares

If we fail to timely deliver shares of Common Stock upon conversion of the Series D Preferred Stock within three trading days after delivery of the notice of conversion, then the Company is obligated to pay to the holder, as liquidated damages, an amount equal to $50 per business day (increasing to $100 per business day after the third business day and increasing to $200 per business day after the sixth business day) for each $5,000 of stated value of the Series D Preferred Stock for which the Series D Preferred Stock is converted which is not timely delivered.  If the Company fails to timely deliver shares of Common Stock upon conversion of the Series D Preferred Stock to the holder, and if after the required delivery date the holder is required by its broker to purchase (in an open market transaction or otherwise) or the holder or its brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the holder of the Common Stock which the holder anticipated receiving upon such conversion (a “Buy-In”), then the Company is obligated to (A) pay in cash to the holder the amount, if any, by which (x) the holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased, minus any amounts paid to the holder by the Company as liquidated damages for late delivery of such shares, exceeds (y) the amount obtained by multiplying (1) the number of shares of Common Stock that the Company was required to deliver at the time of conversion of the Series D Preferred Stock times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the holder, either reinstate the portion of the Series D Preferred Stock and equivalent number of shares of Common Stock for which such conversion was not honored (in which case such conversion shall be deemed rescinded) or deliver to the holder the number of shares of Common Stock that would have been issued had the Company timely complied with its delivery obligations.

The July Warrants

Each July Warrant became exercisable on January 26, 2017 (the “July Warrant Initial Exercise Date”).  The current exercise price, as adjusted, is $3.57 per share, subject to further adjustment as provided therein, and terminates thirty-six (36) months after the July Warrant Initial Exercise Date.  Under the July Securities Purchase Agreement, we agreed that so long as a Selling Stockholder holds any of the July Warrants, we will not effect a “Variable Rate Transaction” as defined in the July Securities Purchase Agreement.  A holder of July Warrants will not have the right to exercise any portion of its July Warrants if the holder, together with its affiliates, would beneficially own over 4.99%; provided, however, that upon prior notice to us, the holder may increase its ownership, provided that in no event will the ownership exceed 9.99% and provided further that such ownership limitation shall be 9.99% for any exercise of the July warrants through March 31, 2017. The exercise price and number of the shares of our Common Stock issuable upon exercising the July Warrants will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described therein. In addition, the July Warrants are subject to reduction of the exercise price if we subsequently issue Common Stock or equivalents at an effective price less than the current exercise price of such July Warrants.

The January Warrants

Each January Warrant is exercisable beginning on the date of stockholder approval (the “Initial Exercise Date”).  The current exercise price, as adjusted, is $3.57 per share, subject to adjustment as provided therein, and terminate five years after the Initial Exercise Date. In the event that the shares underlying the January Warrants are not subject to a registration statement at the time of exercise, the Warrants may be exercised on a cashless basis.  Subject to limited exceptions, a holder of January Warrants will not have the right to exercise any portion of its Warrants if the holder, together with its affiliates, would beneficially own over 4.99%; provided, however, that upon prior notice to us, the holder may increase its ownership, provided that in no event will the ownership exceed 9.99% and provided further that such ownership limitation shall be 9.99% for any exercise of the July warrants through March 31, 2017. The exercise price and number of the shares of our Common Stock issuable upon exercising the January Warrants will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described therein. In addition, the January Warrants are subject to reduction of the exercise price if we subsequently issue Common Stock or equivalents at an effective price less than the current exercise price of such January Warrants.

Warrant Exercise Agreement

On February 15, 2017, we entered into a letter agreement with the Selling Stockholders, to incent the cash exercise of the warrants they hold (including the Warrants) during the Exercise Period. In exchange for any such exercise, we agreed to provide the Selling Stockholders the Replacement Warrants to purchase the same number of shares of common stock as were issued upon exercise of the exercised warrants, with an exercise price equal to the consolidated closing bid price of our common stock on the date of issuance. The agreement also (i) amends the definition of “Beneficial Ownership Limitation” in the existing warrants to mean, solely for purposes of any exercises of warrants that occur during the Exercise Period, “9.99%” and (ii) amends the Initial Exercise Date of the existing warrants issued on November 3, 2016 and January 11, 2017 so that such warrants are exercisable on or after the receipt of stockholder approval.  Since such stockholder approval was received on January 9, 2017, such warrants were immediately exercisable as of the date of the agreement. The Replacement Warrants will be in the same form as the exercised warrants except the exercise price will not be subject to reduction for subsequent equity and (ii) the Replacement Warrants will not allow the Selling Stockholders to demand that we purchase the Replacement Warrants in the event of a fundamental transaction involving the Company. Concurrent with the signing of the agreement, the Selling Stockholders exercised warrants to purchase 104,419 shares of common stock for cash proceeds of approximately $564,000, and we issued Replacement Warrants to purchase 104,419 shares of common stock at an exercise price of $4.99 per share.  On March 10, 2017, the Selling Stockholders exercised warrants to purchase 500 shares of common stock for cash proceeds of approximately $2,495, and we issued such Selling Stockholders Replacement Warrants to purchase 500 shares of common stock at an exercise price of $3.77 per share.  On March 13, 2017, the Selling Stockholders exercised warrants to purchase 500 shares of common stock for cash proceeds of approximately $1,885, and we issued such Selling Stockholders Replacement Warrants to purchase 500 shares of common stock at an exercise price of $3.57 per share.  As a result of such issuances of Replacement Warrants, pursuant to the existing terms of our Series C Convertible Preferred Stock, Series D Convertible Preferred Stock and the warrants held by the Selling Stockholders (other than the Replacement Warrants), which provide that the exercise price is subject to reduction as a result of subsequent equity issuances at a lower effective price per share, the conversion price of the Company’s outstanding preferred stock and the exercise price of the warrants held by the Selling Stockholders were reset to the exercise price of the Replacement Warrants.  As additional Replacement Warrants are issued under the letter agreement with the Selling Stockholders, if issued at a lower price, the conversion price of the Company’s outstanding preferred stock and the exercise price of the warrants held by the Selling Stockholders will further decrease to the exercise price of any such additional Replacement Warrants.  The Company entered into the letter agreement with the Selling Stockholders to incent the exercise of the warrants in order to receive the cash proceeds from the exercise of the warrants and because the exercise of the warrants in full would allow the Company to remove the warrant liability from its balance sheet.

Registration Rights Agreement with Sabby

Concurrent with the closing of the October Sabby Purchase Agreement, we entered into a Registration Rights Agreement with Sabby (the “Registration Rights Agreement”), whereby we agreed to prepare and file a registration statement covering the resale of shares of Common Stock issuable upon conversion of the Series D Preferred Stock and the January Warrants within 45 days of each closing. We agreed to use our best efforts to cause such registration Statement to be declared effective by the 90
th calendar day following each closing date (or the 120th day in the event of a “full review” by the SEC) and to use best efforts to keep such registration statement continuously effective until the shares of Common Stock being offered thereby have been sold under the registration statement or pursuant to Rule 144 or may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144.

Before all registrable securities under the Registration Rights Agreement have been sold or may be sold under Rule 144 without volume or manner-of-sale restrictions and without the current public information requirement, if there is not an effective registration statement covering all of the registrable securities and we determine to prepare and file with the SEC a registration statement relating to an offering of our equity securities for our own account or the account of others under the Securities Act (other than on Form S-4 or Form S-8), then each holder will be entitled to certain “piggyback” registration rights allowing them to include their shares in such registration, provided, however, that we shall not be required to register any registrable securities that are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the SEC pursuant to the Securities Act or that are the subject of a then effective registration statement that is available for resales or other dispositions by such holder.

We are responsible for all fees and expenses incident to the performance of or compliance with the Registration Rights Agreement borne by us whether or not any registrable securities are sold pursuant to a registration statement. The Registration Rights Agreement also contains customary indemnification provisions.

We have filed the registration statement of which this prospectus forms a part pursuant to the requirements in the Registration Rights Agreement to register for resale the shares of Common Stock issuable upon conversion of the Series D Preferred Stock and the January Warrants that were issued at the second closing.

USE OF PROCEEDS

We are not selling any securities under this prospectus and will not receive any proceeds from the sale of shares of Common Stock offered by this prospectus by the Selling Stockholders.  However, we may receive proceeds from the cash exercise of the Warrants, which, if exercised in cash at the current exercise price with respect to all 162,195 shares of Common Stock, would result in gross proceeds of $579,036.  We sold 3,468 shares of Series B Convertible Preferred and July Warrants to Sabby under the July Sabby Purchase Agreement on July 26, 2016 for gross proceeds of $3.2 million.  Furthermore, we sold Series C Convertible Preferred Stock, Series D Convertible Preferred Stock and warrants to Sabby on November 3, 2016 for gross proceeds of $3.6 million, and sold 200 shares of Series D Preferred Stock and the January Warrants to Sabby for gross proceeds of $0.2 million on January 11, 2017, in each case, under the October Sabby Purchase Agreement.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Our Common Stockcommon stock is currently listed on The Nasdaq Capital Market under the symbol “SSH.”"SSH." See “Description"Prospectus Summary—Recent Developments" in this prospectus for important information about the listing of our common stock on The Nasdaq Capital Stock — Common Stock — Listing” for information regarding recent delisting notices received from Nasdaq.  OurMarket. Neither the Series C ConvertibleE Preferred Stock and Series D Preferred Stock and Warrants are not andnor the warrants will not be traded on a national securities exchange. The following table contains, for the periods indicated, the intraday high and low sale prices per share of our Common Stock.common stock. These prices have been adjusted to reflect the 1-for-30 reverse split of our common stock that was effected after trading on January 12, 2017.

As of March 14,27, 2017, the last reported sale price of our common stock on The Nasdaq Capital Market was $3.54.$1.74.

As of March 1,13, 2017, there were approximately 226 stockholders of record for our common stock. A substantially greater number of stockholders may be “street name”"street name" or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.

We have never declared or paid any cash dividends on our Common Stock,common stock, and we currently do not anticipate paying any cash dividends in the foreseeable future. We intend to retain any earnings to finance the development and expansion of our products and business.

Our transfer agent is American Stock Transfer & Trust Company LLC, 6201 15th Avenue, Brooklyn, New York 11219; Telephone: 800-937-5449.

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CAPITALIZATION

        The following table sets forth our actual cash and cash equivalents and our capitalization as of December 31, 2016 on a pro forma as adjusted basis to give effect to the transactions described below, the sale of the securities offered hereby and the use of proceeds, as described in the section entitled "Use of Proceeds."

        You should read this information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated audited financial statements and related notes appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which is incorporated by reference into this prospectus. The information provided below has been adjusted to reflect our 1-for-30 reverse stock split that was effected after trading on January 12, 2017.

        The pro forma as adjusted column above reflects (i) the full conversion of all outstanding shares of our Series B-1 Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D Convertible Preferred Stock (including those issued on January 11, 2017) into 1,471,983 shares of common stock subsequent to December 31, 2016, (ii) the exercise of the Original Warrants to purchase 867,917 shares of common stock, receipt of $2.0 million reflecting the aggregate cash exercise price thereof and issuance of such underlying shares subsequent to December 31, 2016 and (iii) our sale of Units in this offering. The 867,917 Original Warrants exercised subsequent to December 31, 2016 represented all of our warrants reflected under "common stock warrant liability" and, as a result, we have reclassified the warrant liability balance to Additional Paid in Capital in the pro forma projections.

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BUSINESSFinal valuation of the Original Warrants may require a fair value adjustment through our Statement of Operations, and therefore there may be offsetting differences in the accounting of this reclassification between Additional Paid in Capital and Accumulated Deficit, with no impact to Total Stockholders' Equity.

        In connection with the exercise of the 867,917 Original Warrants, we issued Replacement Warrants for 867,917 shares of common stock under the letter agreement described under "Prospectus Summary—Recent Developments—Warrant Exercise Agreement". We have not reflected the fair value of the Replacement Warrants in the pro forma projections as we have not finalized the valuation of these Replacement Warrants. We believe that the Replacement Warrants will be classified as equity and will have a positive impact to Total Stockholders' Equity. The above discussion and table are based on 777,238 shares of common stock outstanding (actual) as of December 31, 2016 and:

•

assume no exercise of outstanding options or warrants;



•

exclude 87,870 shares of common stock issuable upon the exercise of stock options, having a weighted average exercise price of $115.14 per share and 10,332 shares of common stock issuable upon the vesting of restricted stock units, in each case outstanding as of December 31, 2016;



•

except as noted in the pro forma adjustments above, exclude 885,601 shares of our common stock issuable upon the exercise of warrants with a weighted-average exercise price of $7.05 per share outstanding as of December 31, 2016;



•

exclude 69,129 shares of our common stock reserved for future issuance under our equity incentive plans; and



•

exclude 4,597,701 shares of our common stock initially issuable upon the exercise of the warrants to be sold in this offering.

        We expect to request stockholder approval at our 2017 Annual Meeting of a new equity incentive plan, which will include an additional share reserve of 534,857.

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DILUTION

        A purchaser of our securities in this offering will be diluted to the extent of the difference between the price per share of our common stock in this offering and the net tangible book value per share of our common stock after this offering. As of December 31, 2016, our pro forma net tangible book value was ($1.6 million), or $(0.51) per share of common stock. Our net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities, divided by the total number of shares of our common stock. Pro forma net tangible book value per share gives effect to (i) the full conversion of our Series B-1 Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D Convertible Preferred Stock into 1,471,983 shares of common stock subsequent to December 31, 2016, (ii) the exercise of Original Warrants to purchase 867,917 shares of common stock, receipt of $2.0 million, reflecting the aggregate cash exercise price thereof and the issuance of such underlying shares subsequent to December 31, 2016 and (iii) the 1-for-30 reverse stock split that was effected after trading on January 12, 2017.

        After giving effect to our sale in this offering of 4,597,701 shares of common stock, inclusive of the 3,678,161 shares of common stock that the Series E Preferred Stock to be issued is convertible into, at an assumed public offering price of $1.74 per Unit, excluding shares that may be issued upon exercise of the underwriter's overallotment option and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value as of December 31, 2016 would have been $8.7 million, or $1.13 per share of our common stock. This amount represents an immediate increase of net tangible book value to our existing stockholders of $1.00 per share and an immediate dilution of $0.61 per share to the new investors purchasing securities in this offering. The following table illustrates this per share dilution:

        The above is based on 777,238 shares of common stock outstanding (actual) as of December 31, 2016 and:

•

assumes no exercise of outstanding options or warrants (other than the pro forma adjustments noted above);



•

excludes 87,870 shares of common stock issuable upon the exercise of stock options, having a weighted average exercise price of $115.41 per share and 10,332 shares of common stock issuable upon the vesting of restricted stock units, in each case outstanding as of December 31, 2016;



•

except as noted in the pro forma adjustments above, excludes 885,601 shares of our common stock issuable upon the exercise of warrants with a weighted-average exercise price of $7.05 per share outstanding as of December 31, 2016;



•

excludes 69,129 shares of our common stock reserved for future issuance under our equity incentive plans; and



•

excludes 4,597,701 shares of our common stock initially issuable upon the exercise of the warrants to be sold in this offering.

        We expect to request stockholder approval at our 2017 Annual Meeting of a new equity incentive plan, which will include an additional share reserve of 534,857.

        In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of additional equity, the issuance of these shares could result in further dilution to our stockholders.

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BUSINESS

Overview

We are an early-stage medical device company focused on commercializing our Aquadex FlexFlow® System. Our commercial product, the Aquadex FlexFlow® System, is indicated for temporary (up to eight hours) ultrafiltration treatment of patients with fluid overload who have failed diuretic therapy, and extended (longer than 8 hours) ultrafiltration treatment of patients with fluid overload who have failed diuretic therapy and require hospitalization.

Company History

Prior to July 2016, we were focused on developing the C-Pulse®C-Pulse® Heart Assist System for treatment of Class III and ambulatory Class IV heart failure. The C-Pulse System utilized the known concept of counterpulsation applied to the aorta. In March 2016, we announced that we were no longer enrolling patients into our two clinical studies for the C-Pulse System and that we planned to pursue a new strategic direction. In July 2016, we announced that we were moving forward with a therapeutic strategy utilizing neuromodulation rather than counterpulsation.

In August 2016, we acquired the Aquadex Business from Baxter, a global leader in the hospital products and dialysis markets.

On September 29, 2016, we announced a strategic refocus of our near-term strategy that includes halting clinical evaluations of our neuromodulation technology to fully focus our resources on our recently acquired Aquadex Business, taking actions to reduce our cash burn in connection with such strategic refocus, and reviewing potential strategic alliances and financing alternatives.

The Aquadex FlexFlow System

The Aquadex FlexFlow is designed to simply, safely, and precisely remove excess fluid (primarily excess salt and water) from patients suffering from fluid overload who have failed diuretic therapy. With the Aquadex FlexFlow, medical practitioners can specify and control the amount of fluid to be extracted at a safe, predictable, and effective rate. The Aquadex FlexFlow has been shown to have no clinically significant impact on electrolyte balance, blood pressure or heart rate.(1)

The Aquadex FlexFlow is indicated for temporary (up to 8 hours) ultrafiltration treatment of patients with fluid overload who have failed diuretic therapy; and extended (longer than 8 hours) ultrafiltration treatment of patients with fluid overload who have failed diuretic therapy and require hospitalization. All treatments must be administered by a healthcare provider, under physician prescription, both of whom have received training in extracorporeal therapies.

Benefits of the Aquadex FlexFlow

The Aquadex FlexFlow ultrafiltration system offers a safe approach to treating fluid overload and:

•

·Provides complete control over rate and total volume of fluid removed by allowing a medical practitioner to specify the amount of fluid to be removed from each individual patient

·



•

Aquapheresis therapy can be performed via peripheral or central venous access

·



•

Removes isotonic fluid (extracts sodium while sparing potassium and magnesium)(2)

·                  Following ultrafiltration, neurohormonal activation is reset toward a more physiological condition and diuretic efficacy is restored(3)

·                  Provides highly automated operation with only one setting required to begin

·                  Utilizes a single-use, disposable auto-loading blood filter circuit that facilitates easy set-up

(1)

SAFE Trial: Jaski BE, et al. J Card Fail. 2003 Jun; 9(3): 227-231; RAPID Trial: Bart BA, et al. J Am Coll Cardiol. 2005 Dec 6; 46(11): 2043-2046.

(2)

Ali SS, et al. Congest Heart Fail. 2009; 15(1):1-4.

(3)  Marenzi G, et al. J Am Coll Cardiol. 2001 Oct; 38(4): 963-968.

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•

Following ultrafiltration, neurohormonal activation is reset toward a more physiological condition and diuretic efficacy is restored(3)



•

Provides highly automated operation with only one setting required to begin



•

Utilizes a single-use, disposable auto-loading blood filter circuit that facilitates easy set-up



•

The console guides medical practitioner through the setup and operational process

·



•

Decreased hospital length of stay and readmissions(4)

The Aquadex FlexFlow consists of:

•

·A console, a piece of capital equipment containing electromechanical pumps and an LCD screen

·



•

A one-time disposable blood set (the “Aquadex"Aquadex Blood Set”Set"), an integrated collection of tubing, filter, sensors, and connectors that contain and deliver the blood from and back to the patient, and

·



•

A disposable catheter (the “Aquadex Catheter”"Aquadex Catheter"), a small, dual-lumen catheter designed to access the peripheral venous system of the patient and to simultaneously withdraw blood and return filtered blood to the patient. The Aquadex Blood Set is proprietary and the Aquadex FlexFlow can only be used with the Aquadex Blood Set. The Aquadex Catheter is often used in conjunction with the Aquadex FlexFlow, although it is one of many potential catheter options available to the provider.

Our Market Opportunity

Heart failure is one of the leading causes of death in the United States and other developed countries. The American Heart Association estimates that 5.7 million people in the United States age 20 and over are affected by heart failure, with an estimated 870,000 new cases diagnosed each year and 670,000 emergency department visits. Congestive heart failure is the highest U.S. chronic health care expense category(5).

Heart failure is a progressive disease caused by impairment of the left heart’sheart's ability to pump blood to the various organs of the body. Patients with heart failure commonly experience shortness of breath, fatigue, difficulty exercising and swelling of the legs. The heart becomes weak or stiff and enlarges over time, making it harder for the left heart to pump the blood needed for the body to function properly. The severity of heart failure depends on how well a person’sperson's heart is able to pump blood throughout the body.

Heart failure is the leading cause of fluid overload, a condition where patients become decompensated resulting in lengthy and costly hospitalizations. In fact, 90% of heart failure patients present symptoms of fluid overload.(6) Our system is indicated for temporary (up to eight hours) ultrafiltration treatment of patients with fluid overload who have failed diuretic therapy, and extended (longer than 8 hours) ultrafiltration treatment of patients with fluid overload who have failed diuretic therapy and require hospitalization.

(3)

Marenzi G, et al. J Am Coll Cardiol. 2001 Oct; 38(4): 963-968.

(4)

Costanzo MR, et al. J Am Coll Cardiol. 2005 Dec 6; 46(11): 2047-2051.

(5)

Mozzafarian D, Benjamin EJ, Go AS, et al. on behalf of the American Heart Association Statistics Committee and Stroke Statistics Subcommittee. Heart disease and stroke statistics—2016 update: a report from the American Heart Association. Circulation. 2016;133:e38-e360.

(6)

Costanzo MR, et al.J Am Coll Cardiol. 2007 Feb 13; 49(6): 675-683.

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According to a nationwide study of over 140,000 patients suffering from acute decompensated heart failure, over 38% of patients discharged were still symptomatic and about half of the patients were discharged with less than five pounds lost.(7) This clinical evidence from the ADHERE Registry clearly shows patients are discharged too early while still showing evidence of fluid overload. By not truly addressing the fluid overload problem, patients are being readmitted to the hospital too frequently with 30 day readmissions of 22% and 6-month readmissions of 44%, with 78% of patients admitted directly to the Emergency Department as the first point of care.(8)(9)

The Affordable Care Act includes a Hospital Readmission Reduction program and is designed to reduce payments to hospitals with excess heart failure readmissions, among other conditions. The penalty to hospitals can be significant, as much as 3% of total Medicare reimbursement. The Aquadex FlexFlow is positioned to assist hospitals with the Affordable Care Act and may offer hospitals an economic benefit for using the device on a regular basis for in-patient or out-patient usage.

There are two market segments for treating fluid overload with the Aquadex FlexFlow:

(4)  Costanzo MR, et al. J Am Coll Cardiol. 2005 Dec 6; 46(11): 2047-2051.

(5)  Mozzafarian D, Benjamin EJ, Go AS, et al. on behalf of the American Heart Association Statistics Committee and Stroke Statistics Subcommittee. Heart disease and stroke statistics—2016 update: a report from the American Heart Association. Circulation. 2016;133:e38-e360.

1)

(6)  Costanzo MR, et al. J Am Coll Cardiol. 2007 Feb 13; 49(6): 675-683.

(7)  ADHERE Scientific Advisory Committee. ADHERE Final Cumulative National Benchmark Report. Mountain View, CA: Scios Inc.; 2006

(8)  Centers for Medicare & Medicaid Services. Hospital Compare datasets. National Rate (READM_30_HF); 3Q2011 — 2Q2014. https://data.medicare.gov/data/hospital-compare. Accessed June 10, 2016.2. Chen J, et al. J Am Coll Cardiol. 2013 Mar 12; 61(10): 1078-1088.

(9)  Krumholtz HM et. al. Arch Intern Med. 1997 Jan 13;157(1): 99-104 — Ross JS, et al. Circ Heart Fail. 2010 Jan; 3(1): 97-103.

1)Inpatient Care — Care—Given to a patient admitted to a hospital, extended care facility, nursing home or other facility. Long term care is the range of services typically provided at skilled nursing, intermediate-care, personal care or eldercare facilities.





2)

2)Outpatient Care — Care—Any health care service provided to a patient who is not admitted to a facility. Outpatient care can be provided in a doctor’sdoctor's office, clinic, or hospital outpatient department.

Our target customers for the Aquadex FlexFlow include large academic hospitals specializing in advanced treatment of chronic heart failure, other large hospitals with heart failure related admissions and clinical practices with transplant or LVAD programs.

Our Strategy

Our goal is to become a leader in the treatment of moderate to severe heart failure and related conditions. We believe that our technology will provide us with a competitive advantage in the market for treating specific segments of heart failure patients.

On September 29, 2016, we announced a strategic refocus of our near-term strategy that includes halting clinical evaluations of our neuromodulation technology to fully focus our resources on our recently acquired Aquadex Business, taking actions to reduce our cash burn in connection with such strategic refocus and reviewing potential strategic alliances and financing alternatives.

There is currently a large installed base of over 500 Aquadex FlexFlow consoles in U.S. hospitals that, once reactivated and reengaged, should enable increased utilization of the already installed console with ongoing purchases of the Aquadex Blood Sets. In order to grow our Aquadex Business, we intend to focus our efforts in providing superior service to our customers through our direct field organization, our in-house customer service team, our technical service team, and our clinical education efforts. We are actively focused on strengthening our capabilities in all of these areas.

(7)

ADHERE Scientific Advisory Committee. ADHERE Final Cumulative National Benchmark Report. Mountain View, CA: Scios Inc.; 2006.

(8)

Centers for Medicare & Medicaid Services. Hospital Compare datasets. National Rate (READM_30_HF); 3Q2011—2Q2014.

(9)

Krumholtz HM et. al. Arch Intern Med. 1997 Jan 13;157(1): 99-104—Ross JS, et al. Circ Heart Fail. 2010 Jan; 3(1): 97-103.

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We are executing on our growth strategy in deliberate stages by:

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·Initially, focusing on the top 55 hospital accounts that generated eighty percent of the revenue for the Aquadex Business in 2015 through customer support and therapy development and by diagnosing each hospital’shospital's use of the Aquadex FlexFlow to gain additional opportunity for increased utilization.

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Expanding our efforts to re-engage the additional 110 hospital accounts that also purchased Aquadex Blood Sets in 2015.

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Re-educating customers to help increase the utilization of the Aquadex FlexFlow owned by an additional 200 hospital accounts prior to 2015.

Aquadex FlexFlow Growth Drivers

The Aquadex Business will benefit from re-engaging clients, targeting new customers and markets as well as positive industry dynamics favoring technologies that reduce hospital readmission rates. We plan to reach these customers and markets by:

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·Established Customer Base — Base—Continuing to service the top 55 accounts producing 80% of the business with customer support and therapy development and diagnosing each hospital’shospital's use of Aquadex FlexFlow to gain additional opportunity for increased utilization.

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Enhancing the Outpatient Market — Market—Continue supporting outpatient usage and expanding to include a registry and possible collaboration with payer/providers to allow greater opportunity in the future.

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International Opportunity — Opportunity—Currently, there is limited activity in Europe. Investigate use of distributors to expand usage of the Aquadex FlexFlow outside the United States.

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Differentiated Technology & Product Development — Development—Work to enhance the current product to provide a better performance for our customers and patients.

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Alignment with Market Dynamics — Dynamics—Utilize existing and new data to demonstrate to hospital administrators that Aquadex FlexFlow can be a solution for 30-day readmissions and challenges with length of stay. Therefore, every Aquadex FlexFlow usage is economically advantageous driving increased demand.

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Reimbursement Opportunity — Opportunity—Work to build acceptance through clinical evidence and a registry to gain reimbursement coding for Aquapheresis therapy.

Sales and Marketing

As of March 1,14, 2017, we had 8 full-time employees in sales and marketing. During 2016, we trained our existing field personnel and hired additional sales personnel with prior experience with the Aquadex Business. Our sales force includes therapy development managers as well as field clinical engineers who provide training, technical and other support services to our customers. Since the acquisition of the Aquadex Business from Baxter in August 2016, our direct sales force has focused on reengaging hospital accounts that ordered Aquadex Blood Sets in prior years, re-educating customers on the therapy and diagnosing each hospital’shospital's use of the Aquadex FlexFlow to gain additional opportunity for increased utilization. WeWe plan to grow the sales and marketing organization as necessary to support future growth.

Our sales representatives implement consumer marketing programs and provide physicians and nurses with educational patient materials. We also market to potential referral source clinicians in order to build awareness.

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Clinical Experience

Several large-scale, multi-center, randomized, controlled trials have evaluated the use of ultrafiltration using the Aquadex FlexFlow in patients with acute decompensated heart failure compared to standard-of-care treatment with intravenous diuretics. These trials followed early-stage studies which primarily focused on safety of ultrafiltration treatment with Aquadex FlexFlow.

The UNLOAD trial enrolled 200 patients and showed that average weight and fluid loss were greater in the ultrafiltration group 48 hours following randomization. No differences were noted in symptoms of dyspnea between the groups. In addition, through 90 days of follow-up, the ultrafiltration group experienced fewer re-hospitalizations for heart failure, while renal function assessed by serum creatinine level was not significantly different between the groups.

The CARESS trial studied 188 randomized acute decompensated heart failure patients over the course of 96 hours and found no difference in weight loss and an increase in creatinine level relative to the control group treated with intravenous diuretics. The creatinine increase was interpreted as a sign of potential worsening renal function in the ultrafiltration group. Results of CARESS have been criticized on several grounds, particularly that trial results were impacted by centers unfamiliar with the use of ultrafiltration therapy and that the diuretic regimen employed was not representative of standard-of-care. In addition, a recent analysis of the DOSE trial to explore the putative link between short-term changes in creatinine level and outcome in acute decompensated heart failure has found that the intragroup difference observed in CARESS does not fall into a range associated with adverse long-term outcomes including death, re-hospitalization or visits to the emergency department. Such events were examined in CARESS over 60 days and no differences were detected between the groups.

Disparate results between UNLOAD and CARESS led to initiation of the AVOID trial. AVOID was designed to prospectively address the question of patient outcomes when treated with ultrafiltration versus intravenous diuretics for acute decompensated heart failure. Trial design assumptions indicated that 810 patients would need to be randomized to achieve adequate statistical power. However, the study was terminated at 224 patients for business reasons by Baxter. Despite being underpowered, the results of AVOID indicated distinct trends toward reduced composite heart-failure events in the ultrafiltration group over 90 days. In addition, pre-specified secondary endpoints demonstrated significant reductions in heart failure re-hospitalization at 30 days. No significant differences were observed in creatinine level between the groups, although a trend toward increase may have been present at 48 hours. In totality, AVOID recapitulated the results of both UNLOAD and CARESS while providing

evidence that had AVOID been followed to completion it would likely have met its primary endpoint of improved outcome in acute decompensated heart failure patients.

Other uses of ultrafiltration with the Aquadex FlexFlow have not been studied extensively. Case studies and case series demonstrating the use of ultrafiltration in the maintenance of outpatient chronic heart failure have been published but there has been no prospective, systematic evaluation of ultrafiltration versus standard-of-care for this population. Other potential uses also largely remain to be formally evaluated.

Research and Development

Research and development costs include activities related to research, development, design, testing and manufacturing of prototypes of the Aquadex FlexFlow. The Aquadex FlexFlow software will require periodic modifications for feature additions and performance improvements. We will make such design changes as needed based on pro-active and reactive mechanisms.

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ManufacturesManufacturers and Suppliers

We are party to a commercial manufacturing and supply agreement with Baxter which requires Baxter to manufacture Aquadex Blood Sets and Aquadex Catheters for a period of 18 months following our acquisition of the Aquadex Business. There is no such agreement relating to the manufacturing of Consoles. As an initial focus, we plan to transfer Console manufacturing to Sunshine Heart or a qualified contract manufacturer by mid-year 2017. We plan to transfer the Aquadex Blood Set and Aquadex Catheter manufacturing activities from Baxter to Sunshine Heart or a qualified contract manufacturer by the end of 2017.

Intellectual Property

We have established an intellectual property portfolio through which we seek to protect our system and technology. As of December 31, 2016, our portfolio consisted of over 35 patents issued and 13 patents pending in the United States and abroad for our counterpulsation technology. In addition, our portfolio includes over 50 exclusively and non-exclusively licensed patents with respect to ultrafiltration and the Aquadex system. Finally, Sunshine Heart has two patents pending in the neuromodulation space. Our patents and patent applications cover various aspects of both the methodology as well as the design of our discontinued C-Pulse System device and related components, our discontinued neuromodulation technology, and the Aquadex FlexFlow.

We have developed technical knowledge that, although non-patentable, we consider to be significant in enabling us to compete. It is our policy to enter into confidentiality agreements with each of our employees and consultants prohibiting the disclosure of any confidential information or trade secrets. In addition, these agreements provide that any inventions or discoveries by employees and consultants relating to our business will be assigned to us and become our sole property.

Despite our patent rights and policies with regard to confidential information, trade secrets and inventions, we may be subject to challenges to the validity of our patents, claims that our system infringes the patent rights of others and the disclosure of our confidential information or trade secrets. These and other risks are described more fully under the heading “Risk"Risk Factors—Risks Relating to our Intellectual Property”Property".

At this time we are not a party to any material legal proceedings that relate to patents or proprietary rights.

Competition

Competition from medical device companies and medical device divisions of health care companies, pharmaceutical companies and gene- and cell-based therapies is intense and expected to increase. The vast majority of heart failure patients with fluid overload receive pharmacological treatment (diuretics) as a standard of care. There are no direct competitors in the U.S. other than diuretics. Other ultrafiltration systems, such as Baxter’sBaxter's Prismaflex,a filter-based device that is approved for continuous renal replacement therapy for patients weighing 20kg or more with acute renal failure and/or fluid overload, represent indirect competitors.

Our ability to compete effectively depends upon our ability to distinguish Aquadex FlexFlow from our competitors and their products. Factors affecting our competitive position include:

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·Financial resources;

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Product performance and design;

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Risk management;

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Product safety;

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Acceptance of our system in the marketplace;

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Sales, marketing and distribution capabilities;

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Manufacturing and assembly costs;

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Pricing of our system and of our competitors’competitors' products;

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The availability of reimbursement from government and private health insurers;

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Success and timing of new product development and introductions;

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Regulatory approvals; and

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Intellectual property protection.

Third-Party Reimbursement

In the United States, the Aquadex FlexFlow is purchased primarily by customers, such as hospitals or other health care providers. Customers bill various third-party payers for covered Aquadex FlexFlow services provided to patients. These payers, which include federal health care programs (e.g., Medicare and Medicaid), state health care programs, private health insurance companies and managed care organizations, would then reimburse our customers based on established payment formulas that take into account part or all of the cost associated with these devices and the related procedures performed.

While the agency responsible for administering the Medicare program, the Centers for Medicare and Medicaid Services has not issued a favorable national coverage determination under its Investigational Device Exception Studies Program for ultrafiltration using the Aquadex FlexFlow, a number of private insurers have approved reimbursement for Aquadex FlexFlow for specific indications and points of service. In addition, patients and providers may see insurance coverage on a case-by-case basis.

We are exploring the ability to increase the range of coverage for uses of Aquadex FlexFlow, such as use in the outpatient setting and use for decompensated heart failure and other indicated uses under its approved labeling.

Legislative proposals can substantially change the way health care is financed by both governmental and private insurers and may negatively impact payment rates for our system. Also, from time to time there are a number of legislative, regulatory and other proposals both at the federal and state levels; it remains uncertain whether there will be any future changes that will be proposed or finalized and what effect, if any, such legislation or regulations would have on our business. However, in the United States and international markets, we expect that both government and third-party payers will continue to attempt to contain or reduce the costs of health care by challenging the prices charged, or deny coverage, for health care products and services.

Government Regulations

Regulation by governmental authorities in the United States and foreign countries is a significant factor in the manufacture and marketing of our current system and any future products and in our ongoing research and development activities. In particular, medical devices are subject to rigorous pre-clinical testing as a condition of approval by the FDA and by similar authorities in foreign countries. Any proposed products will require regulatory approval prior to commercialization.

United States

The FDC Act and the FDA’sFDA's implementing regulations govern medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import,

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and post market surveillance. Medical devices

and their manufacturers are also subject to inspection by the FDA. The FDC Act, supplemented by other federal and state laws, also provides civil and criminal penalties for violations of its provisions. We manufacture and market medical devices that are regulated by the FDA, comparable state agencies and regulatory bodies in other countries.

Unless an exemption applies, each medical device we wish to commercially distribute in the U.S. will require marketing authorization from the FDA prior to distribution. The two primary types of FDA marketing authorization are premarket notification (also called 510(k) clearance) and premarket approval (PMA). The type of marketing authorization applicable to a device - device—510(k) clearance or PMA - PMA—is generally linked to classification of the device. The FDA classifies medical devices into one of three classes (Class I, II or III) based on the degree of risk the FDA determines to be associated with a device and the extent of control deemed necessary to ensure the device’sdevice's safety and effectiveness. Devices requiring fewer controls because they are deemed to pose lower risk are placed in Class I or II. Class I devices are deemed to pose the least risk and are subject only to general controls applicable to all devices, such as requirements for device labeling, premarket notification, and adherence to the FDA’sFDA's current good manufacturing practice requirements, as reflected in its Quality System Regulation (“QSR”("QSR"). Class II devices are intermediate risk devices that are subject to general controls and may also be subject to special controls such as performance standards, product-specific guidance documents, special labeling requirements, patient registries or post market surveillance. Class III devices are those for which insufficient information exists to assure safety and effectiveness solely through general or special controls, and include life-sustaining, life-supporting or implantable devices, and devices not “substantially equivalent”"substantially equivalent" to a device that is already legally marketed.

Most Class I devices and some Class II devices are exempted by regulation from the 510(k) clearance requirement and can be marketed without prior authorization from FDA. Class I and Class II devices that have not been exempted are eligible for marketing through the 510(k) clearance pathway. By contrast, devices placed in Class III generally require PMA prior to commercial marketing. The PMA process is generally more stringent, time-consuming and expensive than the 510(k) clearance process.

510(k) Clearance.    To obtain 510(k) clearance for a medical device, an applicant must submit a premarket notification to the FDA demonstrating that the device is “substantially equivalent”"substantially equivalent" to a predicate device legally marketed in the United States. A device is substantially equivalent if, with respect to the predicate device, it has the same intended use and has either (i) the same technological characteristics or (ii) different technological characteristics and the information submitted demonstrates that the device is as safe and effective as a legally marketed device and does not raise different questions of safety or effectiveness. A showing of substantial equivalence sometimes, but not always, requires clinical data. Generally, the 510(k) clearance process can exceed 90 days and may extend to a year or more.

After a device has received 510(k) clearance for a specific intended use, any modification that could significantly affect its safety or effectiveness, such as a significant change in the design, materials, method of manufacture or intended use, will require a new 510(k) clearance or PMA (if the device as modified is not substantially equivalent to a legally marketed predicate device). The determination as to whether new authorization is needed is initially left to the manufacturer; however, the FDA may review this determination to evaluate the regulatory status of the modified product at any time and may require the manufacturer to cease marketing the modified device until 510(k) clearance or PMA is obtained. The manufacturer may also be subject to significant regulatory fines or penalties.

The Aquadex FlexFlow was granted FDA 510(k) clearance for commercial use on June 3, 2002. Additional 510(k) clearances have been received for the Aquadex FlexFlow in subsequent years.

Clinical Trials.    To obtain FDA approval to market the C-Pulse System, clinical trials are required to support a PMA application. These trials generally require submission of an application for an IDE

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·warning letters or untitled letters;

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fines, injunctions and civil penalties;

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product recall or seizure;

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unanticipated expenditures;

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delays in clearing or approving or refusal to clear or approve products;

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withdrawal or suspension of FDA approval;

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orders for physician notification or device repair, replacement or refund;

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operating restrictions, partial suspension or total shutdown of production or clinical trials; or

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criminal prosecution.

We and our contract manufacturers and suppliers are also required to manufacture our products in compliance with Current Good Manufacturing Practice requirements set forth in the QSR.

The QSR requires a quality system for the design, manufacture, packaging, labeling, storage, installation and servicing of marketed devices, and includes extensive requirements with respect to quality management and organization, device design, buildings, equipment, purchase and handling of components, production and process controls, packaging and labeling controls, device evaluation, distribution, installation, complaint handling, servicing and record keeping. The FDA enforces the QSR through periodic announced and unannounced inspections that may include the manufacturing facilities of subcontractors. If the FDA believes that we or any of our contract manufacturers or regulated suppliers is not in compliance with these requirements, it can shut down our manufacturing operations,

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require recall of our products, refuse to clear or approve new marketing applications, institute legal proceedings to detain or seize products, enjoin future violations or assess civil and criminal penalties against us or our officers or other employees. Any such action by the FDA would have a material adverse effect on our business.

Employees

As of March 1,14, 2017, we had 29 full-time employees and no part-time employees. None of our employees are covered by a collective bargaining agreement. We consider relations with our employees to be good.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth information regarding the beneficial ownership (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the"Exchange Act")) of our common stock as of March 28, 2017 by (i) each of the directors and named executive officers, (ii) all of the directors and executive officers as a group, and (iii) to our knowledge, beneficial owners of more than 5% of our common stock. As of March 28, 2017, there were 3,118,492 shares of our common stock outstanding. Unless otherwise indicated and subject to applicable community property laws, each owner has sole voting and investment powers with respect to the securities listed below.

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DESCRIPTION OF CAPITAL STOCKSECURITIES

Description of Units

The following descriptionWe are offering up to 919,540 Class A Units, with each Class A Unit consisting of one share of common stock and a warrant to purchase one share of our common stock (together with the shares of common stock underlying such warrants) at a public offering price of $        per Class A Unit. Each warrant included in the Class A Units entitles its holder to purchase one share of Common Stock is at an exercise price of $        .

        We are also offering 6,400 Class B Units to purchasers who prefer not to beneficially own more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding common stock following the consummation of this offering with each Class B Unit consisting of one share of Series E Preferred Stock, par value $0.0001 per share, convertible into a summary onlynumber of shares of common stock equal to $1,000 divided by the conversion price of $        (the "Conversion Price") and is qualifiedwarrants to purchase a number of shares of common stock equal to $1,000 divided by the Conversion Price (together with the shares of common stock underlying such warrants) at an assumed public offering price of $1,000 per Class B Unit. Each warrant included in the Class B Units entitles its entirety by referenceholder to our certificatepurchase a number of incorporation and bylaws, bothshares of Common Stock equal to 100% of the shares of Common Stock issuable upon conversion of the Series E Preferred Stock included in such units at an exercise price of $        per share.

        The securities of which the units are exhibitscomposed (the "underlying securities") are being sold in this offering only as part of the units. However, the Class A Units and Class B Units will not be certificated and the underlying securities comprising such units are immediately separable. Each underlying security purchased in this offering will be issued independent of each other underlying security and not as part of a unit. Upon issuance, each underlying security may be transferred independent of any other underlying security, subject to applicable law and transfer restrictions.

Description of Warrants Included in the Units

        The material terms and provisions of the warrants being offered pursuant to this prospectus are summarized below. This summary of some provisions of the warrants is not complete. For the complete terms of the warrants, you should refer to the form of warrant filed as an exhibit to the registration statement of which this prospectus is a part.

GeneralPursuant to a warrant agency agreement between us and American Stock Transfer & Trust Company LLC, as warrant agent, the warrants will be issued in book-entry form and shall initially be represented only by one or more global warrants deposited with the warrant agent, as custodian on behalf of The Depository Trust Company, or DTC, and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.

        Each Class A Unit includes a warrant to purchase one share of our common stock at an exercise price of $        per share at any time for up to five years after the date of the closing of this offering. Each Class B Unit issued in this offering includes a warrant to purchase a number of shares of common stock equal to $1,000 divided by the Conversion Price at any time for up to five years after the date of the closing of this offering. The warrants issued in this offering will be governed by the terms of a global warrant held in book-entry form. The holder of a warrant will not be deemed a holder of our underlying common stock until the warrant is exercised, except as set forth in the warrants.

        Subject to limited exceptions, a holder of warrants will not have the right to exercise any portion of its warrants if the holder (together with such holder's affiliates, and any persons acting as a group together with such holder or any of such holder's affiliates) would beneficially own a number of shares of common stock in excess of 4.99% (or, at the election of the holder, 9.99%) of the shares of our common stock then outstanding after giving effect to such exercise (the "Beneficial Ownership

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Limitation"); provided, however, that upon notice to the Company, the holder may increase or decrease the Beneficial Ownership Limitation, provided that in no event shall the Beneficial Ownership Limitation exceed 9.99% and any increase in the Beneficial Ownership Limitation will not be effective until 61 days following notice of such increase from the holder to us.

        The exercise price and the number of shares issuable upon exercise of the warrants is subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting our common stock. The warrant holders must pay the exercise price in cash upon exercise of the warrants, unless such warrant holders are utilizing the cashless exercise provision of the warrants, which is only available in certain circumstances such as if the underlying shares are not registered with the SEC pursuant to an effective registration statement. We intend to use commercially reasonable efforts to have the registration statement of which this prospectus forms a part, effective when the warrants are exercised.

        In addition, in the event we consummate a merger or consolidation with or into another person or other reorganization event in which our common shares are converted or exchanged for securities, cash or other property, or we sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of our assets or we or another person acquire 50% or more of our outstanding shares of common stock, then following such event, the holders of the warrants will be entitled to receive upon exercise of the warrants the same kind and amount of securities, cash or property which the holders would have received had they exercised the warrants immediately prior to such fundamental transaction. Any successor to us or surviving entity shall assume the obligations under the warrants. Further, as more fully described in the warrants, in the event of certain fundamental transactions, the holders of the warrants will be entitled to receive consideration in an amount equal to the Black-Scholes value of the warrants as of the date of consummation of such transaction.

        Upon the holder's exercise of a warrant, we will issue the shares of common stock issuable upon exercise of the warrant within the earlier of three trading days following our receipt of a notice of exercise or the standard settlement period for the market on which the common stock is then listed, provided that payment of the exercise price has been made (unless exercised via the "cashless" exercise provision).

        Prior to the exercise of any warrants to purchase common stock, holders of the warrants will not have any of the rights of holders of the common stock purchasable upon exercise, including the right to vote, except as set forth therein.

        Warrant holders may exercise warrants only if the issuance of the shares of common stock upon exercise of the warrants is covered by an effective registration statement, or an exemption from registration is available under the Securities Act and the securities laws of the state in which the holder resides. We intend to use commercially reasonable efforts to have the registration statement of which this prospectus forms a part effective when the warrants are exercised. The warrant holders must pay the exercise price in cash upon exercise of the warrants unless there is not an effective registration statement or, if required, there is not an effective state law registration or exemption covering the issuance of the shares underlying the warrants (in which case, the warrants may only be exercised via a "cashless" exercise provision).

        The warrants are callable by us in certain circumstances. Subject to certain exceptions, in the event that the warrants are outstanding, following the date that is 180 days after the closing date, (i) the volume weighted average price of our common stock for each of 30 consecutive trading days (the "Measurement Period"), which Measurement Period commences after the date that is 180 days after the closing date, exceeds 300% of the initial exercise price (subject to adjustment for forward and reverse stock splits, recapitalizations, stock dividends and similar transactions), (ii) the average daily trading volume for such Measurement Period exceeds $500,000 per trading day and (iii) the holder is not in possession of any information that constitutes or might constitute, material non-public

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information which was provided by the Company, and subject to the Beneficial Ownership Limitation, then we may, within one trading day of the end of such Measurement Period, upon notice (a "Call Notice"), call for cancellation of all or any portion of the warrants for which a notice of exercise has not yet been delivered (a "Call") for consideration equal to $0.0001 per share. Any portion of a warrant subject to such Call Notice for which a notice of exercise shall not have been received by the Call Date (as hereinafter defined) will be canceled at 6:30 p.m. (New York City time) on the tenth trading day after the date the Call Notice is sent by the Company (such date and time, the "Call Date"). Our right to call the warrants shall be exercised ratably among the holders based on the outstanding warrants.

        We do not intend to apply for listing of the warrants on any securities exchange or other trading system.

Description of Capital Stock

Our authorized capital stock consists of 100,000,000 shares of Common Stock,common stock, par value $0.0001 per share, and 40,000,000 shares of preferred stock, par value $0.0001 per share, as of March 28, 2017, 30,000 of which are designated as Series A Junior Participating Preferred Stock, 344.9 of which are designated as Series C Convertible Preferred Stock and 900 of which are designated Series D Preferred Stock.  Once shares of Series C Convertible Preferred Stock or Series D Preferred Stock are converted, redeemed or reacquired by us, such shares shall resume the status of authorized but unissued shares of undesignated preferred stock.

As of March 14,28, 2017, we had (i) 1,742,7453,118,492 outstanding shares of Common Stock and (ii) 344.9 outstanding shares of Series C Convertible Preferred Stock and 900 outstanding shares of Series D Preferred Stock, which, at the conversion prices applicable to such series as of March 14, 2017, would currently convert into an aggregate of 348,712 shares of Common Stock.

If the effective price per share in a future offering is lower than the then price of conversion of the Series C Convertible Preferred Stock or the Series D Convertible Preferred Stock, then the price of conversion of such preferred stock shall be reduced to equal to such lower price and such preferred stock shall be issuable for additional shares of common stock, in connection with such conversion price reduction.  See “—Warrant Exercise Agreement” below for a description of our agreement(ii) outstanding options to issue additional warrants to certain holders of our outstanding warrants upon future exercise thereof.  Furthermore, each holder of our Series C Convertible Preferred Stock has the right to exchange all or some of the Series C Preferred Stock for securities issued in a future offering on a $1.00 for $1.00 basis based on the outstanding stated value of the Series C Convertible Preferred Stock, along with any accrued but unpaid liquidated damages and other amounts owing thereon, and the effective price in such offering.  With respect to our Series D Convertible Preferred Stock, on or after May 3, 2017, the conversion price on our Series D Convertible Preferred Stock shall become an adjustable rate equal to 80% of the average of the daily volume weighted average priceacquire 57,102 shares of our common stock, for the ten trading days immediately prior to the conversion date, but shall not be reduced below $1.26. To the extent the(iii) 10,465 outstanding shares of Series C Convertible Preferred Stock or Series D Convertible Preferred Stock become exercisable for additional shares of common stock pursuant to the foregoing provisions, holders of our common stock and investors in this offering will experience further dilution.

As of March 14, 2017 we also had outstanding 63,787 options to acquire shares of our Common Stock, 11,640 shares of Common Stock issuable upon the vesting of restricted stock units and a total of 926,884(iv) outstanding warrants outstanding to purchase Common Stock, including the Warrants.926,723 shares of our common stock.

        The following description summarizes the most important terms of our capital stock. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description you should refer to our certificate of incorporation and bylaws, copies of which have been incorporated by reference herein, and to the applicable provisions of the Delaware General Corporation Law.

Common Stock

Dividends

        Holders of our common stock are entitled to receive dividends when and as declared by our board of directors out of funds legally available.

Voting

        Holders of our common stock are entitled to one vote for each share on each matter properly submitted to our stockholders for their vote; provided however, that except as otherwise required by law, holders of our common stock will not be entitled to vote on any amendment to our certificate of incorporation (including any certificate of designation filed with respect to any series of preferred stock) that relates solely to the terms of a series of outstanding preferred stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon by law or pursuant to our certificate of incorporation (including any certificate of designation filed with respect to any series of preferred stock).

        Subject to the voting restrictions described above, holders of our common stock may adopt, amend or repeal our bylaws and/or alter certain provisions of our certificate of incorporation with the affirmative vote of the holders of at least 66²/3% of the voting power of all of the then-outstanding shares of our capital stock entitled to vote generally in the election of directors, voting together as a single class, in addition to any vote of the holders of a class or series of our stock required by law or

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our certificate of incorporation. Those provisions of our certificate of incorporation that may be altered only by the super-majority vote described above relate to:

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the number of directors on our board of directors, the classification of our board of directors and the terms of the members of our board of directors;



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the limitations on removal of any of our directors described below under "—Anti-Takeover Effects of Certain Provisions of Our Certificate of Incorporation and Bylaws and Delaware Law;"



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the ability of our directors to fill any vacancy on our board of directors by the affirmative vote of a majority of the directors then in office under certain circumstances;



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the ability of our board of directors to adopt, amend or repeal our bylaws and the super-majority vote of our stockholders required to adopt, amend or repeal our bylaws described above;



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the limitation on action of our stockholders by written action described below under "—Anti-Takeover Effects of Certain Provisions of Our Certificate of Incorporation and Bylaws and Delaware Law;"



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the choice of forum provision described below under "—Choice of Forum;"



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the limitations on director liability and indemnification described below under the heading "—Limitation on Liability of Directors and Indemnification;" and



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the super-majority voting requirement to amend our certificate of incorporation described above.

Conversion, Redemption and Preemptive Rights

        Holders of our common stock do not have any conversion, redemption or preemptive rights pursuant to our organizational documents.

Liquidation, Dissolution and Winding-up

        In the event of our liquidation, dissolution or winding up, holders of our common stock are entitled to share ratably in any assets remaining after the satisfaction in full of the prior rights of creditors and the aggregate of any liquidation preference pursuant to the terms of any certificate of designation filed with respect to any series of preferred stock.

Listing

        Our common stock is listed on The Nasdaq Capital Market under the symbol "SSH." See "Prospectus Summary—Recent Developments" in this prospectus for important information about the listing of our common stock on The Nasdaq Capital Market.

Preferred Stock

We may issue any class of preferred stock in any series. Our board of directors has the authority to establish and designate series, and to fix the number of shares included in each such series and to determine or alter for each such series, such voting powers, designation, preferences, and relative participating, optional, or other rights and such qualifications, limitations or restrictions thereof. Our board of directors is not restricted in repurchasing or redeeming such stock while there is any arrearage in the payment of dividends or sinking fund installments. Our board of directors is authorized to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. The number of authorized shares of preferred stock may be increased or decreased, but not below the number of shares thereof

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then outstanding, by the affirmative vote of the holders of a majority of the Common Stock,common stock, without a vote of the holders of the preferred stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any certificate of designation filed with respect to any series of preferred stock.

Prior to issuance of shares of any series of preferred stock, our board of directors is required by Delaware law to adopt resolutions and file a certificate of designation with the Secretary of State of the State of Delaware. The certificate of designation fixes for each class or series the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Any shares of preferred stock will, when issued, be fully paid and non-assessable.

For a description        Series E Preferred Stock.    Our board of the rights, preferences and privilegesdirectors has designated 6,400 shares of our preferred stock as Series CE Convertible Preferred Stock ("Series E Preferred Stock"), none of which are currently issued and outstanding. The preferences and rights of the Series DE Preferred Stock will be as set forth in a Certificate of Designation (the "Series E Certificate of Designation") filed as an exhibit to the registration statement of which are explicitly senior in liquidation preference to our Common Stock, please see our Current Report on Form 8-K filed with the SEC on October 31, 2016.this prospectus is a part.

CommonPursuant to a transfer agency agreement between us and American Stock Transfer & Trust Company LLC, as transfer agent, the Series E Preferred Stock will be issued in book-entry form and shall initially be represented only by one or more global certificates deposited with The Depository Trust Company, or DTC, and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.

Dividends

HoldersIn the event of our Commona liquidation, the holders of Series E Preferred Stock are entitled to receiveparticipate on an as-converted-to-Common Stock basis with holders of the Common Stock in any distribution of assets of the Company to the holders of the Common Stock. The Series E Certificate of Designation provides, among other things, that we shall not pay any dividends whenon shares of Common Stock (other than dividends in the form of Common Stock) unless and until such time as declaredwe pay dividends on each Series E Preferred Share on an as-converted basis. Other than as set forth in the previous sentence, the Series E Certificate of Designation provides that no other dividends shall be paid on Series E Preferred Shares and that we shall pay no dividends (other than dividends in the form of common stock) on shares of common stock unless we simultaneously comply with the previous sentence. The Series E Certificate of Designation does not provide for any restriction on the repurchase of Series E Preferred Shares by our boardus while there is any arrearage in the payment of directors out of funds legally available.dividends on the Series E Preferred Shares. There are no sinking fund provisions applicable to the Series E Preferred Shares.

Voting

HoldersIn addition, in the event we consummate a merger or consolidation with or into another person or other reorganization event in which our common shares are converted or exchanged for securities, cash or other property, or we sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of our Common Stock are entitled to one vote for each share on each matter properly submitted toassets or we or another person acquire 50% or more of our stockholders for their vote; provided however, that except as otherwise required by law,outstanding shares of common stock, then following such event, the holders of our Common Stockthe Series E Preferred Shares will not be entitled to vote on any amendment to our certificatereceive upon conversion of incorporation (including any certificatethe Series E Preferred Shares the same kind and amount of designation filed with respect to any series of preferred stock) that relates solely to the terms of a series of outstanding preferred stock ifsecurities, cash or property which the holders ofwould have received had they converted the Series E Preferred immediately prior to such affected series are entitled, either separatelyfundamental transaction. Any successor to us or together as a class withsurviving entity shall assume the holders of one or more other such series, to vote thereon by law or pursuant to our certificate of incorporation (including any certificate of designation filed with respect to any series of preferred stock).obligations under the Series E Preferred Shares.

Subject toWith certain exceptions, as described in the Series E Certificate of Designation, the Series E Preferred Shares have no voting restrictions described above, holdersrights. However, as long as any shares of our Common Stock may adopt, amend or repeal our bylaws and/or alter certain provisionsSeries E Preferred Shares remain outstanding, the Series E Certificate of our certificate of incorporation withDesignation provides that we shall not, without the affirmative vote of the holders of at least 66 2/3% of the voting power of all of the then-outstanding shares of our capital stock entitled to vote generally in the election of directors, voting together as a single class, in addition to any vote of the holders of a class or series of our stock required by law or our certificate of incorporation. Those provisions of our certificate of incorporation that may be altered only by the super-majority vote described above relate to:

·                  the number of directors on our board of directors, the classification of our board of directors and the terms of the members of our board of directors;

·                  the limitations on removal of any of our directors described below under “—Anti-Takeover Effects of Certain Provisions of Our Certificate of Incorporation and Bylaws and Delaware Law;”

·                  the ability of our directors to fill any vacancy on our board of directors by the affirmative vote of a majority of the directors then in office under certain circumstances;

·then-outstanding Series E Preferred Shares, (a) alter or change adversely the ability of our board of directorspowers, preferences or rights given to adopt,the Series E Preferred Shares or alter or amend or repeal our bylaws and the super-majority vote of our stockholders required to adopt, amend or repeal our bylaws described above;

·                  the limitation on action of our stockholders by written action described below under “—Anti-Takeover Effects of Certain Provisions of OurSeries E Certificate of Incorporation and Bylaws and Delaware Law;”

·Designation, (b) increase the choicenumber of forum provision described below under “—Choiceauthorized shares of Forum;”

·                  the limitations on director liability and indemnification described below under the heading “—Limitation on Liability of Directors and Indemnification;” and

·Table of Contents                  the super-majority voting requirement to

Series E Preferred Shares or (c) amend our certificate of incorporation described above.or other charter documents in any manner that adversely affects any rights of holders of Series E Preferred Shares.

Each Series E Preferred Share is convertible at any time at the holder's option into a number of shares of common stock equal to $1,000 divided by the Series E Conversion RedemptionPrice. The "Series E Conversion Price" is initially $[            ] and Preemptive Rights

Holdersis subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations. Notwithstanding the foregoing, the Series E Certificate of Designation further provides that we shall not affect any conversion of Series E Preferred Shares, with certain exceptions, to the extent that, after giving effect to an attempted conversion, the holder of Series E Preferred Shares (together with such holder's affiliates, and any persons acting as a group together with such holder or any of such holder's affiliates) would beneficially own a number of shares of Common Stock in excess of 4.99% (or, at the election of the holder, 9.99%) of the shares of our Common Stock dothen outstanding after giving effect to such exercise (the "Preferred Stock Beneficial Ownership Limitation"); provided, however, that upon notice to the Company, the holder may increase or decrease the Preferred Stock Beneficial Ownership Limitation, provided that in no event shall the Preferred Stock Beneficial Ownership Limitation exceed 9.99% and any increase in the Preferred Stock Beneficial Ownership Limitation will not have any conversion, redemption or preemptive rights pursuantbe effective until 61 days following notice of such increase from the holder to our organizational documents.us.

Liquidation, Dissolution and Winding-up

InAdditionally, subject to certain exceptions, at any time after the issuance of the Series E Preferred Stock, subject to the Preferred Stock Beneficial Ownership Limitation, we will have the right to cause each holder of the Series E Preferred Stock to convert all or part of such holder's Series E Preferred Stock in the event of our liquidation, dissolution or winding up, holders of our Common Stock are entitled to share ratably in any assets remaining afterthat (i) the satisfaction in full of the prior rights of creditors and the aggregate of any liquidation preference pursuant to the terms of any certificate of designation filed with respect to any series of preferred stock, including our Series C Convertible Preferred Stock and Series D Preferred Stock.

Listing

Our common stock is listed on The Nasdaq Capital Market under the symbol “SSH.”  See “Prospectus Summary—Recent Developments” in this prospectus for important information about the listingvolume weighted average price of our common stock on The Nasdaq Capital Market.for 30 consecutive trading days (the "Measurement Period") exceeds 300% of the conversion price of the Series E Preferred Stock (subject to adjustment for forward and reverse stock splits, recapitalizations, stock dividends and similar transactions), (ii) the average daily trading volume for such Measurement Period exceeds $500,000 per trading day and (iii) the holder is not in possession of any information that constitutes or might constitute, material non-public information which was provided by the Company and subject to the Preferred Stock Beneficial Ownership Limitation. Our right to cause each holder of the Series E Preferred Stock to convert all or part of such holder's Series E Preferred Stock shall be exercised ratably among the holders of the then outstanding preferred stock.

        We do not intend to apply for listing of the Series E Preferred Shares on any securities exchange or other trading system.

Description of Outstanding Warrants

As of March 14,28, 2017, there were warrants outstanding to purchase a total of 926,884926,723 shares of our common stock, which expire between 2017 and 2025. Each of these warrants entitles the holder to purchase one share of common stock at prices ranging from $3.57$1.73 to $210.00 per common share, with a weighted average exercise price of $6.96$4.05 per share. Certain of these warrants have a net exercise provision under which its holder may, in lieu of payment of the exercise price in cash, surrender the warrant and receive a net amount of shares based on the fair market value of our common stock at the time of exercise of the warrant after deduction of the aggregate exercise price. Each of these warrants also contains provisions for the adjustment of the exercise price and the aggregate number of shares issuable upon the exercise of the warrant in the event of dividends, share splits, reorganizations and reclassifications and consolidations. Certain of these warrants contain a provision requiring a reduction to the exercise price in the event we issue common stock, or securities convertible into or exercisable for common stock, at a price per share lower than the warrant exercise price.  Certain of these warrants provide that, subject to limited exceptions, a holder will not have the right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own over 4.99% of our then outstanding common stock following such exercise; provided, however, that upon prior notice to us, the warrant holder may increase its ownership, provided that in no event will the ownership exceed 9.99% and provided further that such ownership limitation shall be 9.99% for any exercise.

Table of the July warrants through March 31, 2017.Contents

Warrant Exercise Agreement

On February 15, 2017, we entered into a letter agreement with the Selling Stockholders,institutional investors (the "Investors") that hold the majority of our outstanding warrants (such warrants held by the Investors, the "Original Warrants"), to incent the cash exercise of the warrants they hold (including the Warrants) during the Exercise Period.these Original Warrants on or before March 31, 2017 (the "Exercise Period"). In exchange for any such exercise, we agreed to provide the Selling Stockholders the Replacement WarrantsInvestors a replacement warrant (the "Replacement Warrants") to purchase the same number of shares of common stock as were issued upon exercise of the exercised warrants,Original Warrants, with an exercise price equal to the consolidated closing bid price of our common stock on the date of issuance. The agreement also (i) amends the definition of “Beneficial"Beneficial Ownership Limitation”Limitation" in the existing warrantsOriginal Warrants to mean, solely for purposes of any exercises of warrantsOriginal Warrants that occur during the Exercise Period, “9.99%”"9.99%" and (ii) amends the Initial Exercise Date of the existing warrantsOriginal Warrants issued on November 3, 2016 and January 11, 2017 so that such warrantsOriginal Warrants are exercisable on or after the receipt of stockholder approval. Since such stockholder approval was received on January 9, 2017, such warrantsOriginal Warrants were immediately exercisable as of the date of the agreement. The Replacement Warrants will beare in the same form as the exercised warrantsOriginal Warrants except the exercise price will not be subject to reduction for subsequent equity issuances and (ii) the Replacement Warrants will not allow the Selling StockholdersInvestor to demand that we purchase the Replacement Warrants in the event of a fundamental transaction involving the Company. Concurrent with the signing of the agreement, the Selling StockholdersInvestors exercised warrantsOriginal Warrants to purchase 104,419 shares of common stock for cash proceeds of approximately $564,000, and we issued such Investors Replacement Warrants to purchase 104,419 shares of common stock at an exercise price of $4.99 per share. OnFrom March 10, 2017 to March 28, 2017, the Selling StockholdersInvestors exercised warrantsOriginal Warrants to purchase 500763,498 shares of common stock for cash proceeds of approximately $2,495,$1.4 million, and we issued such Selling StockholdersInvestors Replacement Warrants to purchase 500763,498 shares of common stock at anwith exercise prices equal to the closing consolidated bid price of our common stock available on the date of issuance (ranging from $1.73 to $3.77 per share.  On March 13, 2017, the Selling Stockholders exercised warrants to purchase 500 shares of common stock for cash proceeds of approximately $1,885, and we issued such Selling Stockholders Replacement Warrants to purchase 500 shares of common stock at an exercise price of $3.57 per share.  As a result of such issuances of Replacement Warrants, pursuant to the existing terms of our Series C Convertible Preferred Stock, Series D Convertible Preferred Stock and the warrants held by the Selling Stockholders (other than the Replacement Warrants), which provide that the exercise price is subject to reduction as a result of subsequent equity issuances at a lower effective price per share, the conversion price of the Company’s outstanding preferred stock and the exercise price of the warrants held by the Selling Stockholders were reset to the exercise price of the Replacement Warrants.  As additional Replacement Warrants are issued under the letter agreement with the Selling Stockholders, if issued at a lower price, the conversion price of the Company’s outstanding preferred stock and the exercise price of the warrants held by the Selling Stockholders will further decrease to the exercise price of any such additional Replacement Warrants.share). The Company entered into the letter agreement with the Selling StockholdersInvestors to incent the exercise of the warrantsOriginal Warrants in order to receive the cash proceeds from the exercise of the warrantsOriginal Warrants and because the exercise of the warrants in fullOriginal Warrants would allow the Company to remove the warrant liability from its balance sheet.sheet and avoid future fair value adjustments and associated volatility in its financial statements. As of March 28, 2017, we have no Original Warrants remaining outstanding and all Replacement Warrants under the letter agreement have been issued.

Anti-Takeover Effects of Certain Provisions of Our Certificate of Incorporation and Bylaws and Delaware Law

Certificate of Incorporation and Bylaws

Certain provisions of our certificate of incorporation and bylaws may be considered to have an anti-takeover effect, such as those provisions:

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·providing for our board of directors to be divided into three classes with staggered three-year terms, with only one class of directors being elected at each annual meeting of our stockholders and the other classes continuing for the remainder of their respective three-year terms;

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authorizing our board of directors to issue from time to time any series of preferred stock and fix the voting powers, designation, powers, preferences and rights of the shares of such series of preferred stock;

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prohibiting stockholders from acting by written consent in lieu of a meeting;

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requiring advance notice of stockholder intention to put forth director nominees or bring up other business at a stockholders’stockholders' meeting;

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prohibiting stockholders from calling a special meeting of stockholders;

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requiring a 66 2/3%²/3% super-majority stockholder approval in order for stockholders to alter, amend or repeal certain provisions of our certificate of incorporation;

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requiring a 66 2/3%²/3% super-majority stockholder approval in order for stockholders to adopt, amend or repeal our bylaws;

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providing that, subject to the rights of the holders of any series of preferred stock to elect additional directors under specified circumstances, neither the board of directors nor any individual director may be removed without cause;

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creating the possibility that our board of directors could prevent a coercive takeover of our Company due to the significant amount of authorized, but unissued shares of our Common Stockcommon stock and preferred stock;

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providing that, subject to the rights of the holders of any series of preferred stock, the number of directors shall be fixed from time to time exclusively by our board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors; and

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providing that any vacancies on our board of directors under certain circumstances will be filled only by a majority of our board of directors then in office, even if less than a quorum, and not by the stockholders.

Delaware Law

Delaware Law

We are also subject to Section 203 of the DGCL, which generally prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless:

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·prior to that date, our board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;

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•

upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by (i) persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

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•

on or subsequent to that date, the business combination is approved by our board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66  2/3%²/3% of the outstanding voting stock that is not owned by the interested stockholder.

In general, Section 203 of the DGCL defines an interested stockholder as an entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by any of these entities or persons.

The above-summarized provisions of our certificate of incorporation and bylaws and the above-summarized provisions of the DGCL could make it more difficult to acquire us by means of a tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. These provisions are expected to discourage certain types of coercive takeover practices and takeover bids that our board of directors may consider inadequate and to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us

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outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.

Choice of Forum

Our certificate of incorporation provides that, unless we consent in writing otherwise, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any (i) derivative action or proceeding brought on our behalf; (ii) action asserting a breach of fiduciary duty owed by any of our directors, officers or other employees to us or any of our stockholders; (iii) action asserting a claim pursuant to the DGCL; or (iv) action asserting a claim that is governed by the internal affairs doctrine.

Limitation on Liability of Directors and Indemnification

Our certificate of incorporation limits the liability of our directors to the fullest extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability for any:

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·breach of their duty of loyalty to us or our stockholders;

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•

act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

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unlawful payment of dividends or redemption of shares as provided in Section 174 of the DGCL; or

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transaction from which the directors derived an improper personal benefit.

These limitations of liability do not apply to liabilities arising under federal securities laws and do not affect the availability of equitable remedies such as injunctive relief or rescission.

Our bylaws provide that we will indemnify and advance expenses to our directors and officers to the fullest extent permitted by law or, if applicable, pursuant to indemnification agreements. They further provide that we may choose to indemnify our other employees or agents from time to time. Subject to certain exceptions and procedures, our bylaws also require us to advance to any person who was or is a party, or is threatened to be made a party, to any proceeding by reason of the person’sperson's service as one of our directors or officers all expenses incurred by the person in connection with such proceeding.

Section 145(g) of the DGCL and our bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in connection with their services to us, regardless of whether our bylaws permit indemnification. We maintain a directors’directors' and officers’officers' liability insurance policy.

We entered into indemnification agreements with each of our directors and executive officers that provide, in general, that we will indemnify them to the fullest extent permitted by law in connection with their service to us or on our behalf and, subject to certain exceptions and procedures, that we will advance to them all expenses that they incur in connection with any proceeding to which they are, or are threatened to be made, a party.

At present, there is no pending litigation or proceeding involving any of our directors or officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

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Registration Rights

Investor Replacement Warrants

Sabby

Concurrent with the closing of the October Sabby Purchase Agreement, we entered into a Registration Rights Agreement with Sabby, whereby we agreed to prepare and file a registration statement covering the resale of shares of Common Stock issuable upon conversion of the Series D Preferred Stock and the warrants sold thereunder within 45 days of each closing. We agreed to use our best efforts to cause such registration statement to be declared effective by the 90th calendar day following each closing date (or the 120th day in the event of a “full review” by the SEC) and to use best efforts to keep such registration statement continuously effective until the shares of Common Stock being offered thereby have been sold under the registration statement or pursuant to Rule 144 or may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144.

Before all registrable securities under the Registration Rights Agreement have been sold or may be sold under Rule 144 without volume or manner-of-sale restrictions and without the current public information requirement, if there is not an effective registration statement covering all of the registrable securities and we determine to prepare and file with the SEC a registration statement relating to an offering of our equity securities for our own account or the account of others under the Securities Act (other than on Form S-4 or Form S-8), then each holder will be entitled to certain “piggyback” registration rights allowing them to include their shares in such registration, provided, however, that we shall not be required to register any registrable securities that are eligible for resale pursuant to Rule 144 (without volume restrictions or current public information requirements) promulgated by the SEC pursuant to the Securities Act or that are the subject of a then effective registration statement that is available for resales or other dispositions by such holder.

We are responsible for all fees and expenses incident to the performance of or compliance with the Registration Rights Agreement borne by us whether or not any registrable securities are sold pursuant to a registration statement. The Registration Rights Agreement also contains customary indemnification provisions.

We have filed the registration statement of which this prospectus forms a part pursuant to the requirements in the Registration Rights Agreementintend to register for resale the shares of Common Stock issuable upon conversion ofcommon stock underlying the Series D Preferred Stock andReplacement Warrants issued to the January Warrants that were issued atInvestors under the second closing.Warrant exercise Agreement before they become exercisable.

Aquadex Acquisition

Aquadex Acquisition

On August 5, 2016, upon closing of the acquisition of the Aquadex Business, we entered into a registration rights agreement with Baxter, pursuant to which such Baxter or its affiliates has the right to request that we file a registration statement with the SEC to register all or part of the 33,333 shares of Common Stockcommon stock that Baxter received in connection with the acquisition. Upon receipt of any such request, we have agreed to use reasonable best efforts to prepare and file a registration statement as expeditiously as possible but in any event within 30 days of such request, to cause the registration statement to become effective in accordance with Baxter’sBaxter's intended method of distribution, and to pay the expenses incurred in connection with any such registration.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTParticipation and Repurchase Rights

The following table sets forth information regarding the beneficial ownership (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of our common stock as of March 14, 2017 by (i) each of the directors and named executive officers, (ii) all of the directors and executive officers as a group, and (iii) to our knowledge, beneficial owners of more than 5% of our common stock.  As of March 14, 2017, there were 1,742,745 shares of our common stock outstanding.  Unless otherwise indicated and subject to applicable community property laws, each owner has sole voting and investment powers with respect toIn the securities listed below.

*    Less than one percent.

(1)                   Except as otherwise described below, amounts reflect the number of shares that such holder could acquire through (i) the exercise of outstanding stock options, (ii) the vesting/settlement of outstanding RSUs and (iii) the exercise of outstanding warrants to purchase common stock, in each case within 60 days of March 14, 2017.

(2)                   Based on 1,742,745 shares outstanding as of March 14, 2017.

(3)                   Ms. Wade provided notice on March 2, 2017 that she is leaving the Company effective March 15, 2017.

(4)                   Includes (1) 251,286 shares of common stock issuable upon exercise of warrants to purchase shares of common stock held by Sabby Volatility Warrant Master Fund, Ltd., (2) 511,374 shares of common stock issuable upon exercise of warrants to purchase shares of common stock held by Sabby Healthcare Master Fund, Ltd., (3) 7,227 shares of Common Stock issuable upon conversion of outstanding shares of Series C Convertible Preferred Stock held by Sabby Volatility Warrant Master Fund, Ltd., (4) 89,384 shares of Common Stock issuable upon conversion of outstanding shares of Series C Convertible Preferred Stock held by Sabby Healthcare Master Fund, Ltd., (5) 82,913 shares of Common Stock issuable upon conversion of outstanding shares of Series D Convertible Preferred Stock held by Sabby Volatility Warrant Master Fund, Ltd. and (6) 169,188 shares of Common Stock issuable upon conversion of outstanding shares of Series D Convertible Preferred Stock held by Sabby Healthcare Master Fund, Ltd., that are, in each case,

convertible or exercisable within 60 days of March 14, 2017.  The conversion prices of our Series C Convertible Preferred Stock and Series D Convertible Preferred Stock are subject to adjustment as described under “Prospectus Summary—Recent Developments—Outstanding Preferred Stock”.

(5)                   The percentage in this table reflects that Sabby Management, LLC may not convert the preferred stock or exercise the warrants described in footnote (4) above to the extent such conversion or exercise would cause Sabby Management, LLC, togetheragreement dated July 20, 2016 with its affiliates, to beneficially own a number of shares of common stock that would exceed 4.99% of our then outstanding common stock following such exercise; provided, however, that upon prior notice to us, such holder may increase its ownership, provided that in no event will the ownership exceed 9.99%; provided further, that such ownership limitation shall be 9.99% for any exercise of warrants through March 31, 2017.

(6)      Based on the Schedule 13D filed by the reporting person on March 10, 2017.

PLAN OF DISTRIBUTION

Each Selling Stockholder of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on the principal trading market or any other stock exchange, market or trading facility on which the securities are traded or in private transactions.  These sales may be at fixed or at prices then prevailing or related to the then current market price or at negotiated prices. The offering price of the shares from time to time will be determined by the Selling Stockholders and, at the time of the determination, may be higher or lower than the market price of our Common Stock. A Selling Stockholder may use any one or more of the following methods when selling securities:

·                  ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

·                  block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;

·                  purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

·                  an exchange distribution in accordance with the rules of the applicable exchange;

·                  privately negotiated transactions;

·                  settlement of short sales;

·                  in transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such securities at a stipulated price per security;

·                  through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

·                  a combination of any such methods of sale; or

·                  any other method permitted pursuant to applicable law.

The Selling Stockholders may also sell securities under Rule 144 or any other exemption from registration under the Securities Act, if available, rather than under this prospectus.

Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales.  Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

In connection with the sale of the securities or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume.  The Selling Stockholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities.  The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

The Selling Stockholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales.  In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.  Each Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.

The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities.  The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

The Company agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the Selling Stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect.  The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the Common Stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution.  In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the Common Stock by the Selling Stockholders or any other person.  We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

We will not receive any proceeds from the sale of the shares by the Selling Stockholders.

SELLING STOCKHOLDERS

The shares of Common Stock being offered by the Selling Stockholders are those issuable to the Selling Stockholders upon conversion of the Series D Preferred Stock and exercise of the Warrants.  For additional information regarding the issuances of those shares of Series D Preferred Stock and Warrants, see “Sale of Securities to Sabby”.  We are registering the shares of Common Stock in order to permit the Selling Stockholders to offer the shares for resale from time to time.  Except for the ownership of shares of Common Stock, preferred stock and warrants, the Selling Stockholders have not had any material relationship with us within the past three years.

The table below lists the Selling Stockholders and other information regarding the beneficial ownership of the shares of Common Stock by each of the Selling Stockholders.  The following table sets forth the number of shares of our Common Stock beneficially owned by each Selling Stockholder as of March 14, 2017 and after giving effect to the sale of the shares of Common Stock offered by the Selling Stockholders pursuant to this prospectus, assuming all such shares are sold, except as otherwise referenced below.

The Selling Stockholders may sell all, some or none of the shares of Common Stock subject to this prospectus.  See “Plan of Distribution.”