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 stock is delisted from NASDAQNasdaq and it trades on the over-the-counter market, the application of the “penny stock” rules could adversely affect the market price of our common stock and increase the transaction costs to sell those shares. The SEC has adopted regulations which generally define a “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 October 31, 2017 was $6.99. If our common stock is delisted from NASDAQNasdaq and it trades on the over-the-counter market at a price of less than $5.00 per share, our common stock would be considered a penny stock. The SEC’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’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’s agreement to the transaction. If applicable in the future, these rules may restrict the ability of brokers-dealers to sell our common stock and may affect the ability of investors to sell their shares, until our common stock no longer is considered a penny stock.

The number of shares of common stock underlying our outstanding warrants and outstanding preferred stock is significant in relation to our currently outstanding common stock. Further, if the effective price per share of common stock and theirin this offering is less than the current conversion price of our Series F Preferred Stock, we will be required to issue additional shares of common stock to the holders of such preferred stock upon conversion thereof. Conversion or exercise and sale wouldof such outstanding convertible securities will cause dilution to the existing holders of our our common stock, and toincluding investors in this offering, and could cause downward pressure on the market price for our common stock.

As of October 31, 2017, we have warrants to purchase 496,468 shares of common stock outstanding, with exercise prices ranging from $22.00 to $3,132.00, with a weighted-average exercise price of $26.10. 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 stock currently outstanding.

As of February 15, 2019, we have warrants to purchase 599,293 shares of common stock outstanding, with exercise prices ranging from $29.68 to $43,848 with a weighted-average exercise price of $50.23.

Through February 15, 2019, shares of our Series F Preferred Stock have been converted into 279,526 shares of our common stock. As of February 15, 2019 there were 535 shares of Series F Preferred Stock outstanding, convertible into an aggregate of 18,190 shares of common stock. The certificate of designation for our Series F Preferred Stock contains an anti-dilution provision, which provision requires the lowering of the applicable conversion price, as then in effect, to the purchase price per share of common stock or common stock equivalents issued in the future. As a result of this obligation, if the public offering price of our common stock in this offering is less than $29.68, the current conversion price of our Series F Preferred Stock, the conversion price shall be reduced to the effective price per share of common stock in this offering. This reduction in the conversion price will result in a greater number of shares of common stock being issuable upon conversion of the Series F Preferred Stock for no additional consideration, causing greater dilution to our stockholders and investors in this offering. In addition, should we issue any securities following this offering at an effective common stock purchase price that is less than the then effective conversion price of our Series F Preferred Stock, we will be required to further reduce the conversion price of our Series F Preferred Stock, which will result in a greater dilutive effect on our stockholders.

If any security holder 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.

In addition, the fact that our stockholders, option holders and warrant holders can sell substantial amounts of our common stock in the public market, whether or not sales have occurred or are occurring, could make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate, or at all.

The rights of holders of our capital stock will be subject to, and could be adversely affected by, the rights anyof holders of our outstanding preferred stock and 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 previously approved, pursuant to this authority, the issuance of preferred stock, and we have 535 shares of Series F Preferred Stock outstanding as of February 15, 2019. The rights, preferences and privileges of theour Series F Preferred Stock to be issued in this offering are described under “Description of Securities—Description of Capital Stock—Preferred Stock—Outstanding Series F Convertible Preferred Stock” herein.. As described therein, upon liquidation, dissolution or winding-up of the Company, the holders of our Series F Preferred Stock have the right to receive, out of the assets, whether capital or surplus, of the Company an amount equal to the par value, plus any accrued and unpaid dividends thereon, for each share of such 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 holders are entitled to participate on an as-converted-to-commonreceive the same amount that a holder of common stock basiswould receive if such preferred stock was fully converted, pari passu with all the holders of the common stock in any distribution of assets of the Company.stock.

Our board of directors may issue additional series of preferred stock in the future pursuant to this authority.stock. 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-20At a special meeting of our stockholders on December 28, 2018, our stockholders approved a reverse split of our outstanding common stock at a ratio in the range of 1-for-2 to 1-for-14. Following such special meeting, our board of directors approved a 1-for-14 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.pm Eastern Time on October 12, 2017,January 2, 2019, and our common stock began trading on a split-adjusted basis on The Nasdaq Capital Market on October 13, 2017.

January 3, 2019. Because the number of authorized shares of our common stock waswill not be reduced proportionately, the reverse stock split increasedwill increase our board of directors’ ability to issue authorized and unissued shares without further stockholder action. As of the date of this prospectus,February 15, 2019, our certificate of incorporation provides for 100,000,000 shares of authorized common stock and 40,000,000 shares of authorized preferred stock. Asstock, 30,000 of October 31, 2017,which are designated Series A Junior Participating Preferred Stock and 535 of which are designated Series F Preferred Stock and we had 625,791have 513,445 shares of common stock outstanding, 533,633754,990 shares reserved for issuance upon the conversion, exercise or vesting of outstanding preferred stock, warrants, options and restricted stock units, and 57,28443,651 shares of common stock reserved for future grant under the Company’s equity incentive plans.

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 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 stock may fluctuate significantly, and this may make it difficult for you to resell the common stock you want or at prices you find attractive.

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

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.

As of December 31, 2016,2018, 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. This is because one test for carrying forward tax losses in Australia 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 stock in the foreseeable future.

We have never declared or paid any cash dividends on our 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 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’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

in our financial reports, and the value of our common stock may be harmed, if our internal controls over financial reporting are found not to be effective by management or by anour 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’ 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”), 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’ 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’ meeting; prohibiting stockholders from calling a special meeting of stockholders; requiring a 66²/ 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.

Risks Relating to this Offering

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 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 FG 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 FG Preferred Stock or the warrants, and we do not expect a market to develop. In addition, neither the Series FG Preferred Stock nor the warrants are listed, and we do not intend to apply for listing of the Series FG Preferred Stock or the warrants on any securities exchange or trading system. Without an active market, the liquidity of the Series FG Preferred Stock and the warrants is limited, and investors may be unable to liquidate their investments in the Series FG Preferred Stock or the warrants.

The value of our Series F convertible preferred stockG Preferred Stock is directly tied to the value of our common stock, and any change in change in the value of our common stock will be reflected in the value of our Series F convertible preferred stock.G Preferred Stock.

There is no established public trading market for the Series F convertible preferred stock,G Preferred Stock, and we do not expect a market to develop. In addition, we do not intend to apply for listing of the Series F convertible preferred stockG Preferred Stock on any national securities exchange or other nationally recognized trading system. As a result, because each share of Series F convertible preferred stockG Preferred Stock is initially convertible into a number of shares of our common stock equal to $1,000the stated value ($      ) divided by the conversion price ($      ), subject to certain beneficial ownership limitations, we expect the value of the Series F convertible preferred stockG Preferred Stock to have a value directly tied to the value of our common stock. Accordingly, any change in the trading price of our common stock will be reflected in the value of our Series F convertible preferred stock,G Preferred Stock, and the price of our common stock may be volatile as described above.

The conversion of shares of our Series F convertible preferred stock into common stock, or the perception that such conversions may occur, could cause the market price of our common stock to decline.

Each share of our Series F convertible preferred stock is initially convertible into a number of shares of our common stock equal to $1,000 divided by the conversion price at any time at the option of the holder, subject to certain limitations. See “Description of Securities.” The conversion of substantial amounts of our Series F convertible preferred stock would result in the issuance by us of a substantial number of additional shares of our common stock, which, subject to certain limitations, could be traded publicly. Such conversions, or the perception that such conversions may occur, could cause the market price of our common stock to decline.

The warrants may not have any value.

The Series 1 warrants will be exercisable for one year from the closing date at an initial exercise price of $[      ] per share. The Series 2 warrants will be exercisable for sevenfive years from the closing date at an initial exercise price of $[      ]$       per share, and the Series 2 warrants will be exercisable beginning on the closing date until the earlier of (1) the eighteen-month anniversary of the closing date and (2) the 30^th trading day following our public announcement of Pediatric Approval 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.

Purchasers in this offering may experience additional dilution of their investment in the future.

Subject to lock-up provisions described under “Underwriting,” we are generally not restricted from issuing additional securities, including shares of common stock, securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or substantially similar securities. The issuance of securities may cause further dilution to our stockholders, including investors in this offering. In order to raise additional capital, such securities may be at prices that are not the same as the price per share in this offering. We cannot assure you that we will be able to sell shares or other securities in any other offering at a price per share that is equal to or greater than

the price per share paid by investors in this offering, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders, including investors who purchase securities in this offering. The price per share at which we sell additional shares of our common stock or securities convertible into common stock in future transactions may be higher or lower than the price per share in this offering. The exercise of outstanding stock options or warrants and the vesting of outstanding restricted stock units may also result in further dilution of your investment.

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 believes,” “we believe,” “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 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 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.

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

Pending such uses,the application of the net proceeds as described above, we intend to investwill hold the net proceeds from this offering in short-term, interest-bearing, securities.

We believe that the net proceeds of this offering, in directtogether with cash on hand, will be sufficient to fund our operations through 2019, and guaranteed obligations of the United States, interest-bearing, investment-grade instruments or certificates of deposit.

Wewe believe that we will need to raise additional capital to fund our operations in 2018.thereafter if warrant exercises for cash do not materialize. Additional capital may not be available on terms favorable to us, or at all. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Debt financing, if available, may involve restrictive covenants or additional security interests in our assets. Any additional debt or equity financing that we complete may contain terms that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or products, or grant licenses on terms that are not favorable to us. If we are unable to raise adequate funds, we may have to delay, reduce the scope of, or eliminate some or all of, our development programs or liquidate some or all of our assets.

SELECTED FINANCIAL DATA

The following selected financial data as of December 31, 2016 and 2015 and for the fiscal years ended December 31, 2016 and 2015 are derived from, and should be read together with, our consolidated financial statements incorporated herein from our Annual Report on Form 10-K for the year ended December 31, 2016. The following selected financial data as of December 31, 2014, 2013 and 2012 and for the fiscal years ended December 31, 2014, 2013 and 2012 are derived from consolidated financial statements not included or incorporated herein. The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Consolidated Financial Statements and Notes thereto and other financial information included elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2016.

CAPITALIZATION

The following table sets forth our actual cash and cash equivalents and our capitalization as of September 30, 2017December 31, 2018 and on an adjusted basis to give effect to 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 financial statements and related notes appearing in our QuarterlyAnnual Report on Form 10-Q10-K for the quarterly periodyear ended September 30, 2017,December 31, 2018, which is incorporated by reference intoin this prospectus. The information provided below has been adjusted to reflect our 1-for-201-for-14 reverse stock split that was effected after trading on October 12, 2017.January 2, 2019.

The as adjusted column above reflects our sale of Series F convertible preferred stocksecurities in this offering.offering at an assumed public offering price of $8.90, the closing price of our common stock on February 22, 2019, per Unit and assumes no conversion or exercise of the Series G Preferred Stock or warrants offered hereby. The above discussion and table are based on 625,844513,445 shares of common stock outstanding as of September 30, 2017 and:December 31, 2018 and excludes:

MANAGEMENT

Directors and Executive Officers

The Affordable Care Act includes a Hospital Readmission Reduction programfollowing table sets forth certain information regarding our directors and is designed to reduce payments to hospitals with excess heart failure readmissions, among other conditions. The penalty to hospitals can be significant,executive officers as much as 3% of total Medicare reimbursement. The Aquadex FlexFlow system 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 system:December 31, 2018:

Our target customersboard of directors is currently composed of six members. Our directors are elected for three-year staggered terms. The two Class III directors will hold office until the 2019 annual meeting of stockholders. The two Class I directors will hold office until the 2020 annual meeting of stockholders. The two Class II directors will hold office until the 2021 annual meeting of stockholders.

Our executive officers are elected by our board of directors and hold office until removed by the board of directors, and until their successors have been duly elected and qualified or until their earlier resignation, retirement, removal, or death.

Background and Qualifications

John L. Erb has served as chief executive officer and president of the Company since November 2015, as a director of the Company since September 2012 and as Chairman of our board of directors since October 2012. Previously, Mr. Erb served as chief executive officer (from 2007 to 2018) of NuAx, Inc. (formerly Cardia Access, Inc.), a medical device company involved in developing new devices for the Aquadex FlexFlow system 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 left ventricle assist device, known as LVAD, programs.

Our Strategy

Our mission is to improve the quality of life for people suffering from fluid overload. We provide healthcare professionals with a sophisticated, yet easy to use, mechanical pump and filter system to remove excess fluid in fluid overloaded congestive heart failure patients and patients with related conditions. We believe that our technology will provide a competitive advantage in the fluid management market by providing improved clinical benefits and reducing the cost of care relative to other treatment alternatives.

Our strategic focus is to demonstrate a strong business model by driving revenue growth. Growing revenue is the key metric employees, shareholders and potential investors will use to judge our performance. In addition to revenues’ contribution to funding operations, revenue growth demonstrates a workable business model and proves a successful business turn-around. Management has identified five critical actions to drive revenue: (i) commercial execution; (ii) enhance product offerings; (iii) demonstrate health economic advantages; (iv) provide important new clinical evidence; and (v) increase partnerships with key opinion leading physicians.

Commercial Execution Strategy – We have allocated, and plan to continue to allocate, resources to aggressively build sales and marketing strength and grow the worldwide market for the Aquadex FlexFlow system. In the third quarter of 2017, we increased our direct sales force by six employees and plan to further expand our direct sales force in 2018. Our trained sales team will focus on sales penetration in large hospital accounts. The Aquadex FlexFlow system can be used in large hospital in multiple areas, including: the emergency department, the heart failure telemetry floor, the intensive care unit, and the coronary care unit. In addition to expending our direct sales force, we are implementing high quality customer service support systems and technical servicing to increase support to customers. We have also initiated international distribution and support of our products by entering into a distribution and service provider agreement with APC Cardiovascular Ltd., a distributor based in the United Kingdom.

Enhance Product Offering Strategy – We intend to develop products and product enhancements to improve performance and customer satisfaction. We have several projects currently underway to enhance product performance. We plan to introduce a new peripheral access catheter and enhance the functionalitydisease; he was executive chairman of the hematocrit sensor that is partboard (during 2007) and chief executive officer (from 2001 to 2006) of the previous owner of the Aquadex FlexFlow system console. WeSystem, which was also are workingknown as CHF Solutions, Inc., a medical device company involved in the development, manufacturing and distribution of devices to identify or developtreat congestive heart failure; as president and chief executive officer of IntraTherapeutics, Inc., a diagnostic tool for physiciansmedical device company involved in the development, manufacturing and distribution of peripheral vascular stents, from 1997 to use during an Aquapheresis therapy2001; and in various positions, including as vice president of worldwide operations at Schneider, a division of Pfizer, Inc., from 1991 to more precisely determine1997. Mr. Erb’s prior board experience includes service as a director of SenoRx, Inc., (a NASDAQ listed company), from December 2001 to July 2010; service as a director of CryoCath Technologies Inc., a publicly traded Canadian company, from October 2000 to December 2008; and service as chairman of the amountboard of excess fluid to be removed,Vascular Solutions, Inc., (a NASDAQ listed company), where he also served as chairman of the ratecompensation and nominating and corporate governance committees). Mr. Erb currently serves as chairman of ultrafiltration, and when to stop therapy as dry weight is approached.

Health Economics Strategy – We plan to develop clinical trial evidence regarding the impactboard of ultrafiltration on hospital lengths of stay and rehospitalizations of patients with fluid overload. We plan to publish informationOsprey Medical, Inc., (listed on the budgetary impactsAustralian Securities Exchange), where he also serves as a member of the compensation committee and a member of the audit committee, and as a director of Micromatrix. Mr. Erb received a B.A. in business administration, with a concentration in finance from California State University, Fullerton.

With over 40 years of experience in the medical device industry, including 20 years of experience serving as chief executive officer of medical device companies, Mr. Erb brings to hospitals that adoptour board of directors valuable business, management and leadership experience, as well as a deep understanding of the Aquadex FlexFlow system into their continuumchallenges presented in growing a medical device company. In addition, his role on the boards of care when treating critical heart failure patientsOsprey Medical, Vascular Solutions, SenoRx and CryoCath Technologies has provided him with fluid overloadother public company board experience. Having managed significant operations of a multi-national medical device company, Mr. Erb also contributes valuable private company operational experience.

Steve Brandt has served as a director of the Company since February 2017. Mr. Brandt is a senior executive with over 35 years of experience in whom diuretic therapy has failed.

New Clinical Evidence Strategy – We planthe healthcare industry. Mr. Brandt was employed by Thoratec Corporation, a medical device company, from November 2004 to expand the body of clinical evidence for AquapheresisOctober 2015, serving as vice president global sales and the Aquadex FlexFlow system to drive adoption and support reimbursement. We plan to initiate an ultrafiltration mechanism of action clinical study to provide scientific evidence on how ultrafiltration provides safe clinical resultsmarketing, vice

without causing clinically significant harmpresident of global sales and vice president international sales. Prior to Thoratec, Mr. Brandt was vice president sales & marketing for the kidneys. We also plan to initiate a registry to build individual account evidence sets, identify use patterns, and attain customer feedback to support marketing claims regarding clinical efficacy demonstrating weight reduction, reduced length of hospital stays, and reduced readmission rates.

Key Opinion Leaders Strategy – We plan to partner with key opinion leaders to advance medical understanding of the ultrafiltration as a therapy for treating fluid overload. We have recruited a scientific advisory board comprised of six key opinion leading physicians to help us develop and implement both the mechanistic clinical study and the registry. We are partnering with the Cardio Renal Society of America in a leadership role and increasing our involvement with the Heart Failure Society of America. In addition, we are working with several physicians that are implementing hospital observation unit useprevious owner of the Aquadex FlexFlow systemSystem, which was also known as CHF Solutions, Inc. from October 2002 to provide outpatient careNovember 2004 and vice president global marketing, Cardiovascular Surgery Division for patients that are fluid overloaded but may not require hospitalization.St. Jude Medical from November 2000 to October 2002. Mr. Brandt received a B.S. from Franklin Pierce College.

Sales and Marketing

AsMr. Brandt’s qualifications to serve on our board of October 31, 2017, we had 15 full-time employeesdirectors include his extensive experience in sales and marketing. During the third quartermanagement of 2017, we hired and trained six sales personnel with extensive medical device sales experience. Our sales force includes therapy development managerscompanies.

Matthew E. Likens has served as well as field clinical engineers who provide training, technical and other support services to our customers. Since the acquisitiona director of the Aquadex BusinessCompany since February 2017. Mr. Likens is a principal at Likens Healthcare and Management Consulting, LLC. Since October 1st, 2017, he also has served as president and chief executive officer of GT Medical Technologies, an Arizona-based start-up company with an innovative medical device for the treatment of brain tumors. He has been a director of Luma Therapeutics , a start-up medical device company developing a treatment for psoriasis, since September, 2016. He was the president and chief executive officer of Ulthera, Inc., a privately held company that sells an ultrasound device used for non-invasive brow lifts, from 2006 to 2016. Prior to Ulthera, Mr. Likens was employed at GMP Companies, Inc. as president of GMP Wireless Medicine from 2001 to 2006 and executive vice president, operations from 2001 to 2004. Mr. Likens previously served in various capacities at Baxter Healthcare Corporation from 1978 to 2001, and was president of Baxter’s Renal U.S. business upon his departure in August 2016,January, 2001. Mr. Likens received a B.B.A. in marketing from Kent State University.

Mr. Likens’ qualifications to serve on our direct sales forceboard of directors include his years of management experience, including his experiences as president and chief executive officer of Ulthera, Inc. At Ulthera and at Baxter Healthcare Corporation, Mr. Likens was responsible for medical device businesses that combined capital equipment with disposables products.

Jon W. Salveson has served as a director of the Company since March 2013. Mr. Salveson is vice chairman, investment banking and chairman of the healthcare investment banking group at Piper Jaffray Companies. He also serves on the board of CryoLife, Inc. a leading medical device company focused on reengaging hospital accounts that ordered Aquadex Blood Setscardiac and vascular surgery.

Mr. Salveson joined Piper Jaffray in prior1993 as an associate, was elected managing director in 1999, and was named group head of Piper Jaffray’s international healthcare investment banking group in 2001. Mr. Salveson was appointed global head of investment banking and a member of the executive committee of Piper Jaffray in 2004 and has served in his present position as vice chairman, investment banking since July 2010. Mr. Salveson started his career as a market manager at Bio-Metrics Systems (now part of Surmodics, Inc.), an innovator in medical device surface modification, where he gained experience working in cardiology and interventional medicine. Mr. Salveson received his undergraduate degree from St. Olaf College and an M.M.M. in finance from the Kellogg Graduate School of Management at Northwestern University.

Mr. Salveson’s qualifications to serve on our board of directors include his 20-plus years re-educating customersof experience in healthcare investment banking, advising clients on hundreds of merger and acquisition and financing transactions.

Gregory D. Waller has served as a director of the Company since August 2011. Mr. Waller also serves on the therapyboards of directors of Endologix Corporation and assessing each hospital’s useArcadia Bioscience, Inc., both publicly traded companies (and as chairman of the Aquadex FlexFlow systemaudit committee and a member of the nominating and governance committee for both companies). Until April 2015 Mr. Waller was chief financial officer of Ulthera Corporation, a privately held company that sells an ultrasound device used for non-invasive brow lifts, which was sold to gain additional opportunity for increased utilization. We planMerz North America in July 2014. From March 2006 to grow the salesApril 2011, Mr. Waller was chief financial officer of Universal Building Products, Inc., a manufacturer of concrete construction accessories. Mr. Waller served as vice president of finance, chief financial officer, and marketing organizationtreasurer of Sybron Dental Specialties, Inc., a manufacturer and marketer of consumable dental products, from August 1993 until his retirement in May 2005, and was formerly vice president and treasurer of Kerr, Ormco Corporation, and Metrex. Mr. Waller joined Ormco in December 1980 as necessaryvice president and controller and served as vice president of Kerr European Operations from July 1989 to support future growth.

Our sales representatives implement consumer marketing programs and provide physicians and nursesAugust 1993. Mr. Waller received an M.B.A. with patient educational materials. We also market to potential referral source cliniciansa concentration in order to build awareness.

Clinical Experience

Several large-scale, multi-center, randomized, controlled trials have evaluated the use of ultrafiltration using the Aquadex FlexFlow system patients 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 the Aquadex FlexFlow system.

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 interpretedaccounting from California State University, Fullerton. His prior board service includes service as a sign of potential worsening renal function indirector for 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,following companies: Alsius Corporation, a recent analysispublicly traded company (chairman of the DOSE trial to explore the putative link between short-term changes in creatinine levelaudit committee 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 initiationmember of the AVOID trial. AVOIDcompensation committee), from June 2007 until its acquisition by Zoll Medical Corporation in September 2009; Biolase Technology, Inc., a publicly traded company (chairman of the audit committee), from October 2009 to August 2010; Cardiogenesis Corporation, a publicly traded company (chairman of the audit committee), from April, 2007 until its acquisition by Cryolife, in May 2011; Clarient, Inc., a publicly traded company which was designed to prospectively addressacquired by General Electric Company in December 2010 (chairman of 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 wereaudit

observed in creatinine level between the groups, althoughcommittee and 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.

We anticipate conducting additional clinical studies to provide further evidencemember of the safetycompensation and effectivenesscorporate governance committees), from December 2006 to December 2010; and SenoRx, a publicly traded company which was acquired by C.R. Bard, Inc. in July 2010 (chairman of the Aquadex FlexFlow systemaudit committee), from May 2006 to July 2010.

Mr. Waller’s qualifications to serve on our board of directors include his 45 years of financial and management experience, including his experiences as chief financial officer of Universal Building Products, Sybron Dental Specialties, and Ulthera Inc. as well as his familiarity with public company board functions from his service on the boards of other public companies.

As described above, Mr. Waller served as chief financial officer of Universal Building Products from 2006 to support obtaining2011. Universal Building Products filed a specific reimbursement codevoluntary petition for Aquapheresis therapy.bankruptcy on August 4, 2010. Except as described in the preceding sentence, no other event has occurred during the past 10 years requiring disclosure pursuant to Item 401(f) of Regulation S-K.

Other usesWarren S. Watson has served as a director of ultrafiltrationthe Company since January 2013. Mr. Watson is an executive with over 40 years of experience in the field of medical devices. Since 2010, Mr. Watson has served on the board of directors for Gillette Children’s Specialty Healthcare including as chair of the board (2015-2017). From 1982 to 2014, Mr. Watson served on the board of directors of Citizens Independent Bank of St. Louis Park, Minnesota, a community bank with four branches and $300 million in assets. From 2010 to 2012, he served as executive chairman of Cameron Health Inc., a medical technology company focused on subcutaneous implantable cardioverter and defibrillator devices. From 2004 to 2009, Mr. Watson served as a director for CardioMems, Inc., a start-up company focused on pulmonary artery pressure monitoring for patients with heart failure. From 2002 to 2009, Mr. Watson served as vice president of Cardiac Rhythm Management Research and Development, an organization leading over 1,800 professionals worldwide; he also served as chair of the Medtronic Corporate Research and Development Council during his tenure with that organization. From 2002 to 2007, Mr. Watson served as vice president and general manager of the San Jose-based CardioRhythm cardiac ablation business.

Mr. Watson’s qualifications to serve on our board of directors include his executive leadership in the field of medical devices, his 40 years of experience in the medical technology field, his successful development of multiple emerging therapies and his general business experience due to his board service for other medical technology companies such as Bardy Diagnostics (since 2017), Mardil, Inc. (2013-2016), Cardialen, Inc. (since 2012), NuAx (2011-2016) and Closys (2013-2016).

Claudia Drayton has served as our chief financial officer and secretary since January 2015. Prior to joining the Company, Ms. Drayton spent 15 years at Medtronic, Inc., a $17 billion global leader in the medical device industry. During her tenure at Medtronic, Ms. Drayton held multiple senior managerial finance positions, culminating with an assignment in Europe serving as chief financial officer of the peripheral vascular business (2010-2012) and most recently, as chief financial person and senior finance director of the integrated health solutions business (2012-2014). In these capacities, her responsibilities and experiences included profitability management, strategic planning, mergers and acquisitions, planning and forecasting, and implementation of financial best practices. Before joining Medtronic, Ms. Drayton was an audit and business advisory manager at Arthur Andersen for seven years. Ms. Drayton received an M.B.A. from the University of Minnesota’s Carlson School of Management, a B.S. from the University of Mary Hardin-Baylor and is a Certified Public Accountant (inactive).

Director Independence

Our board of directors believes that there should be at least a majority of independent directors on our board of directors. Our board of directors undertakes a review of director independence in accordance with Nasdaq listing rules at least once annually. The independence rules include a series of objective tests, including that the director is not employed by us and has not engaged in various types of business dealings with us. In addition, our board of directors is required to make a subjective determination as to each independent director that no relationships exist which, in the opinion of the our board of directors, would interfere with the Aquadex FlexFlow system have not been studied extensively. Case studiesexercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our board of directors reviewed and case series demonstratingdiscussed information provided by the usedirectors and us with regard to each director’s business and personal activities as they may relate to us and our management. In particular, our board of ultrafiltrationdirectors considered (i) that Mr. Watson, 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 improvement to the Aquadex FlexFlow system and potential related products. The Aquadex FlexFlow system software will require periodic modifications for feature additions and performance improvements. We will make such design changeshis capacity as needed based on pro-active and reactive mechanisms. Research and development costs also include expenses related to clinical research. We may sponsor or conduct additional clinical research related to the Aquadex FlexFlow system to enhance understandingChairman of the productNominating and its use.

Manufacturers and Suppliers

In connection withCorporate Governance Committee, received $25,000 from the acquisition of the Aquadex Business, we entered into a commercial manufacturing and supply agreement with Baxter, which requires Baxter to manufacture Aquadex Blood Sets and Aquadex CathetersCompany in fiscal 2015 as compensation for a period of 18 months following our acquisition of the Aquadex Business. In May 2017, we notified Baxter that we intended to have it cease the manufacturing Aquadex product effectiveduties as of June 30, 2017. We completed the transfer of manufacturing equipment for the Aquadex Business that we purchased from Baxter to our manufacturing facility in July 2017. We expect to begin manufacturing Aquadex FlexFlow products in-house in the fourth quarter of 2017. We will continue to purchase raw materials and finished goods from an indirect subsidiary of Baxter until February 1, 2018.

Intellectual Property

We have established an intellectual property portfolio through which we seek to protect our system and technology. In connection with our acquisition of the Aquadex Business, we entered into a patent license agreement with Baxter pursuant to which we obtained, for no additional consideration, a world-wide license to 49 exclusively licensed and 9 non-exclusively licensed patents usedsuch committee chairman in connection with the Aquadex FlexFlow system to make, have made, use, sell, offer for saleamendment and import, the Aquadex FlexFlow system in the “field of use.” The “field of use” is defined as systemrestatement, implementation and apparatus only capable of performing isolated ultrafiltration for treatment of congestive heart failure, and methods to the extent used therein (excluding system, apparatus, or methods performing any kind of renal therapy or dialysis and/or any system capable of providing substitution fluid). The license is exclusive, with respect to some patents, and non-exclusive, with respect to other patents. Under the patent license agreement, Baxter has agreed to use commercially reasonable efforts to continue maintenance of seven “required maintenance patents,” and we have agreed to reimburse Baxter for all fees, costs, and expenses (internal or external) incurred by Baxter in connection with such continued maintenance. The rights granted to us under the patent license agreement will automatically revert to Baxter in the event we cease operationadministration of the AquadexCompany’s Code of Business or we file for, or have filed against us, or otherwise undertake any bankruptcy, reorganization, insolvency, moratorium, or other similar proceeding. For two years followingConduct and Ethics, (ii) that Mr. Salveson is an executive officer of Piper Jaffray Companies, the closing, the patent license agreement is not assignable by us (including in connection with a changeparent company of control) without Baxter’s prior written consent. We estimate that the patents licensed from Baxter will expire between approximately 2020 and 2025.

In addition, as of September 30, 2017, we owned 40 issued patents and 5 pending patent applications in the United States and in foreign jurisdictions related to our C-Pulse System and had 2 pending applications for neuromodulation. We estimate that most of our currently issued U.S. patents will expire between approximately 2021 and 2027. Given the strategic refocus away from C-Pulse and towards the Aquadex FlexFlow system, we have chosen to limit the maintenance of issued C-Pulse related patents to those innovations that are of the highest value. Further, we have elected to emphasize a few of the most critical jurisdictions rather than maintain the earlier approach thatPiper Jaffray & Co., which

involved multiple countries. Our pendingserved as joint book-running manager for the Company’s confidentially marketed public offering that closed on September 24, 2013 and future patent applications may not issue as patents or, if issued, may not issue in a form(iii) that will provide us any financial return. Even if issued, existing or future patents may be challenged, narrowed, invalidated or circumvented, which could limit our ability to obtain commercial benefits from them.

We have developed technical knowledge that, although non-patentable, we consider to be significant in enabling us to compete. ItMr Brandt 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 challengesproviding consulting services to the validityCompany on an interim basis pursuant to a consulting agreement beginning in January 2019. Our board of our patents, claimsdirectors determined that our system infringesMr. Watson continued to satisfy the patent rightsobjective independence tests and that his independence was not otherwise impaired under the subjective criteria, because, among other things, such payment was made to him in his capacity as Chairman of othersthe Nominating and Corporate Governance Committee for services related to such role and the disclosuredollar amounts at issue were immaterial. In prior years, our board of directors determined that Mr. Salveson was not an independent director, but in the first quarter of fiscal 2016, our confidential information or trade secrets. Theseboard of directors reassessed Mr. Salveson’s independence and other risks are described more fullydetermined that he satisfies the objective independence tests and that his independence was not otherwise impaired under the heading “Risk Factors—Risks Relatingsubjective criteria because, among other reasons, the fees paid to our Intellectual Property”.

At thisPiper Jaffray in connection with the confidentially marketed public offering were well below the threshold dollar amount for payments made to affiliated entities set forth in the objective independence tests and due to the amount of time we arethat has passed since such fees were paid. Our board of directors derermined that Mr. Brandt continued to satisfy the objective independence tests and that his independence was 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 therapiesotherwise impaired under the subjective criteria because Mr. Brandt is intense and expected to increase. The vast majority of heart failure patients with fluid overload receive pharmacological treatment (diuretics)serving as a standardconsultant only on a short-term, interim basis for a period of care. There are no direct competitors for the Aquadex FlexFlow system in the U.S., other than diuretics. Other ultrafiltration systems, such as Baxter’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.only six months and his total compensation shall not exceed $120,000.

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

Third-Party Reimbursement

In the United States, the Aquadex FlexFlow products are 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, then reimburse our customers based on established payment formulas that take into account part ordirectors has affirmatively determined, after considering all of the cost associatedrelevant facts and circumstances, that all of our directors are independent directors under the applicable rules of Nasdaq, except for Mr. Erb, our current Chief Executive Officer and President. Mr. Watson serves as our lead independent director. Each member of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee is independent under Nasdaq rules. In addition, our board of directors has affirmatively determined that the members of the Audit Committee and Compensation Committee qualify as independent in accordance with these devicesthe additional independence rules established by the SEC 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 for ultrafiltration using the Aquadex FlexFlow system, aNasdaq.

numberBOARD MATTERS

General

Our board of private insurersdirectors has general oversight responsibility for our affairs and, in exercising its fiduciary duties, our board of directors represents and acts on behalf of the stockholders. Although our board of directors does not have approved reimbursementresponsibility for Aquadex FlexFlow systemour day-to-day management, it stays regularly informed about our business and provides oversight and guidance to our management through periodic meetings and other communications. Our board of directors provides critical oversight in our strategic planning process, as well as other functions carried out through our board of directors’ committees as described below.

Board Leadership Structure

Mr. Erb, our Chief Executive Officer and President, serves as Chairman of the board of directors, and Mr. Watson, a non-employee independent director, serves as Lead Independent Director. Our board of directors believes that having the Chief Executive Officer also serve as Chairman of the board of directors provides efficiencies and permits a unified strategic vision and clear leadership for the Company as it transitions from a research and development entity to a commercial organization. Our board of directors further believes that the Lead Independent Director role provides independence from management in the operation and governance of the board of directors.

Board Involvement in Risk Oversight

It is the responsibility of management to identify, assess and manage our exposure to risks. Our board of directors plays an important role in overseeing management’s performance of these duties as well as the processes and systems we use to identify, prioritize, source, manage and monitor our critical risks. To this end, our board of directors receives regular reports from members of management regarding risks associated with our operations and strategic plans. These reports typically take the form of discussions incorporated into presentations made to our board of directors at regular and special meetings where risks are identified in the context of the matter being discussed. Additionally, at least annually, our board of directors reviews a report presented by management regarding the material risks faced by us, our risk management processes and systems and the adequacy of our policies and procedures designed to respond to and mitigate these risks.

Our board of directors has generally retained the primary risk oversight function and has an active role in overseeing management of our material risks. The oversight of risk is also conducted at the committee level. The Audit Committee oversees the management of financial and internal control risks as well as risks associated with litigation and related party transactions. The Compensation Committee oversees the management of risks relating to our executive compensation plans and arrangements. The Nominating and Corporate Governance Committee oversees the management of risks associated with the composition and independence of the board of directors, compliance with various regulatory and listing standards requirements and succession planning. While each committee is responsible for specific indicationsevaluating and pointsoverseeing the management of service. In addition, patientsrisks relevant to that particular committee, the full board of directors is regularly informed of the committees’ risk oversight activities through committee reports presented at board of directors’ meetings.

Meetings

Our board of directors and providers may seek insurance coverageits committees meet throughout the year on a case-by-case basis.

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

Legislative proposals can substantially change the way health care is financedalso hold special meetings and act by both governmental and private insurers and may negatively impact payment rates for our system. Also,written consent from time to time thereas appropriate. The non-employee directors hold regularly scheduled executive sessions to meet without management present. These executive sessions generally occur around regularly scheduled meetings of the board of directors.

All directors are a number of legislative, regulatory and other proposals both at the federal and state levels that may impact payment rates for our system. 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 continueexpected 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 marketingattend all meetings of our current systemboard of directors and any future products and in our ongoing research and development activities.of the board of directors’ committees on which they serve, as well as the annual meeting of stockholders. Our board of directors met seven times during 2018. In particular, medical devices are subject to rigorous pre-clinical testing as a condition2018, each director attended at least 75% 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 Actaggregate of all meetings of the board of directors and the FDA’s implementing regulations govern medical device designcommittees of which he was a member. All directors attended the 2018 annual meeting of stockholders.

Board Committees

Our board of directors has delegated various responsibilities and development, preclinicalauthority to our board of directors’ committees. Each committee has regularly scheduled meetings and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, 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 ofreports on 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—510(k) clearance or 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’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 adherenceactivities to the FDA’s current good manufacturing practice requirements, as reflected in its Quality System Regulation (“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 forfull board of directors. Each committee operates under a written charter approved by our board of directors, 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” to a device that is already legally marketed.

Most Class I devices and some Class II devices are exemptedreviewed annually 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” 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

characteristicsrespective committee and the information submitted demonstrates thatboard of directors. Each committee’s charter is posted on our website, www.chf-solutions.com, under the device“Investors – Corporate Governance” tab. The table below sets forth the current membership for the three board of directors’ committees and the number of meetings held for each in 2018.

Audit Committee

The primary purpose of the Audit Committee is as safe and effective as a legally marketed device and does not raise different questionsto act on behalf of safety or effectiveness. A showingthe board of substantial equivalence sometimes, but not always, requires clinical data. Generally,directors in fulfilling 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, methodboard 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 leftdirectors’ oversight responsibilities with respect to the manufacturer; however,Company’s corporate accounting and financial reporting processes; the FDA may reviewCompany’s systems of internal control over financial reporting, including financial disclosure controls and procedures; audits of the Company’s consolidated financial statements; the quality and integrity of the Company’s consolidated financial statements and reports provided to the Company’s stockholders, the SEC and other persons; and the qualifications, independence and performance of the Company’s independent registered public accounting firm. To implement this determination purpose, the committee is charged with the following responsibilities, among others:

The responsibilities and activities of the modified product at any timecommittee are described in greater detail in its charter.

Our board of directors has determined that each Audit Committee member has sufficient knowledge in reading and may requireunderstanding financial statements to serve on 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 system was granted FDA 510(k) clearance for commercial use on June 3, 2002. Additional 510(k) clearances have been received for the Aquadex FlexFlow system in subsequent years.

Clinical Trials. To obtain FDA approval to market the C-Pulse System, clinical trials would be required to support a PMA application. We have halted clinical trials related to the C-Pulse System. These trials generally require submissioncommittee. Our board of directors has further determined that Mr. Waller qualifies as an application for an IDE to the FDA. The IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. The IDE application must be approved in advance by the FDA for a specified number of patients, unless the product is deemed a non-significant risk device and eligible for more abbreviated IDE requirements. Generally, clinical trials for a significant risk device may begin once the IDE application is approved by the FDA and the study protocol and informed consent are approved by appropriate institutional review boards at the clinical trial sites.

FDA approval of an IDE allows clinical testing to go forward but does not bind the FDA to accept the results of the trial as sufficient to prove the product’s safety and efficacy, even if the trial meets its intended success criteria. With certain exceptions, changes made to an investigational plan after an IDE is approved must be submitted in an IDE supplement and approved by FDA (and by governing institutional review boards when appropriate) prior to implementation.

All clinical trials must be conducted“audit committee financial expert” in accordance with regulations and requirements collectively known as Good Clinical Practice. Good clinical practices include the FDA’s IDE regulations, which describe the conduct of clinical trials with medical devices, including the recordkeeping, reporting and monitoring responsibilities of sponsors and investigators, and labeling of investigational devices. They also prohibit promotion, test marketing or commercializationSEC rules. The designation of an investigational device“audit committee financial expert” does not impose upon such person any duties, obligations or liabilities that are greater than those which are generally imposed on him as a member of the committee and any representation thatthe board of directors, and such a device is safedesignation does not affect the duties, obligations or effective for the purposes being investigated. Good Clinical Practices also include the FDA’s regulations for institutional review board approval and for protection of human subjects (such as informed consent), as well as disclosure of financial interests by clinical investigators.

Required records and reports are subject to inspection by the FDA. The results of clinical testing may be unfavorable or, even if the intended safety and efficacy success criteria are achieved, may not be considered sufficient for the FDA to grant approval or clearance of a product. The commencement or completionliabilities of any clinical trials may be delayedother member of the committee or halted, or be inadequate to support approvalthe board of a PMA application or clearance of a premarket notification for numerous reasons, including, but not limited to, the following:directors.

In addition,review the FDA may require a companycomposition and performance of the board of directors and its committees and to conduct post market surveillance studies or order it oversee all aspects of our corporate governance functions. To implement this purpose, the committee is charged with the following responsibilities, among others:

manufacturing operations, require recallThe responsibilities and activities of the committee are described in greater detail in its charter.

The Nominating and Corporate Governance Committee reviews and makes recommendations to the board of directors, from time to time, regarding the appropriate skills and characteristics required of our products, refuse to clear or approve new marketing applications, institute legal proceedings to detain or seize products, enjoin future violations or assess civilboard of directors’ members in the context of the current make-up of the board of directors, the operations of the Company and criminal penalties against us or our officers or other employees. Any such action by the FDA wouldlong-term interests of stockholders. The committee does not have a material adverse effect onspecific diversity policy underlying its nomination process, although it seeks to ensure the board of directors includes directors with diverse backgrounds, qualifications, skills and experience relevant to our business.

EmployeesIn the case of an incumbent director whose term of office is set to expire, the Nominating and Corporate Governance Committee will generally re-nominate incumbent directors who continue to satisfy the committee’s criteria for membership on the board of directors, continue to make important contributions to the board of directors and consent to continue their service on the board of directors.

If a vacancy on the board of directors occurs or the board of directors increases in size, the Nominating and Corporate Governance Committee will actively seek individuals that satisfy the committee’s criteria for membership on the board of directors and the committee may rely on multiple sources for identifying and evaluating potential nominees, including referrals from our current directors and management. In 2018, the committee did not employ a search firm or pay fees to other third parties in connection with identifying or evaluating board of director nominee candidates.

The Nominating and Corporate Governance Committee will consider recommendations of director nominees by stockholders so long as such recommendations are sent on a timely basis and are otherwise in accordance with our Amended and Restated Bylaws and applicable law.

Director Compensation

Our non-employee directors receive a mix of cash and share-based compensation. The compensation mix is intended to encourage non-employee directors to continue board of director service, further align the interests of the board of directors and stockholders, and attract new non-employee directors with outstanding qualifications. Directors who are our employees or officers of do not receive any additional compensation for board of director service.

2018 Compensation Table

The table below sets forth the compensation of each non-employee director in 2018. As a named executive officer of the Company, compensation paid to Mr. Erb for the 2017 and 2018 fiscal years is fully reflected under “Named Executive Officer Compensation Tables—Summary Compensation Table for 2018”.

Our Non-Employee Director Compensation Policy provides for (i) an annual cash retainer of $55,000 payable in equal quarterly installments in arrears on the last day of each quarter in which the service occurs and (ii) an annual equity award with an aggregate value on the date of grant of $35,000, granted on the date of the annual meeting of stockholders, one-third in the form of a stock option and two-thirds in the form of restricted stock units, with 1/12th of the shares underlying the awards vesting monthly so that all of the underlying shares are vested on the one-year anniversary of the grant date. We do not provide any perquisites to directors.

During the fourth quarter of fiscal 2017, the Compensation Committee engaged Compensia to conduct an assessment of executive officer and non-employee director compensation for fiscal 2018. In connection with such engagement, Compensia evaluated our non-employee director compensation program including cash compensation and equity compensation, reporting directly to the Compensation Committee.

We did not make any changes to our Non-Employee Director Compensation Policy as a result of such assessment; however, in January 2018, considering the advice of Compensia, to restore a meaningful equity interest in the Company by our non-employee directors following the reverse stock splits and public offerings consummated in 2017 and following the increase in the number of shares reserved for issuance under the 2013 Directors’ Plan on January 1, 2018 pursuant to the “evergreen” provision in such plan, the board of directors made a one-time grant of an option to purchase shares of our common stock to each of our non-employee directors on January 17, 2018, reflected in the table above.

On the date of the 2018 annual meeting of stockholders, there were insufficient shares available under the 2013 Directors’ Plan to issue an equity award with an aggregate value on the date of grant of $35,000 to each of our non-employee directors. Therefore, each non-employee director received an option to purchase 714 shares of our common stock with a grant date fair value of $26,259 and a cash payment in the amount of $2,186 per quarter for the next twelve months, in lieu of the remaining equity award contemplated by our Non-Employee Director Compensation Policy. Our board of directors determined that the full equity award would be issued in the form of a stock option to simplify the grant in light of the limited number of shares available.

As of OctoberDecember 31, 2017, we2018, each non-employee director had 38 full-time employeesthe following number of shares underlying outstanding options (both vested and unvested): Mr. Brandt 3,102; Mr. Likens 3,102; Mr. Salveson 4,047; Mr. Waller 4,515 and Mr. Watson, 4,047. As of December 31, 2018, no part-time employees. NoneRSUs were held by the non-employee directors.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires that our executive officers and directors, and persons who own more than 10% of a registered class of our employeesequity securities, file reports of ownership and changes in ownership (Forms 3, 4, and 5) with the SEC. Executive officers, directors, and greater than 10% beneficial owners are covered byrequired to furnish us with copies of all of the forms that they file.

Based solely on our review of these reports or written representations from certain reporting persons, we believe that during the fiscal year ended December 31, 2018, our officers, directors, greater than 10% beneficial owners, and other persons subject to Section 16(a) of the Exchange Act filed on a collective bargaining agreement. We consider relationstimely basis all reports required of them under Section 16(a) so that there were no late filings of any Form 3 or Form 5 reports or late Form 4 filings with respect to transactions relating to our employees to be good.common stock.

EXECUTIVE COMPENSATION

Summary Compensation Table for 2018

The following table sets forth certain information, for the years ended December 31, 2018 and December 31, 2017, regarding compensation of our named executive officers.

Narrative Discussion of Summary Compensation Table for 2018

Employment Agreements and Other Arrangements. Mr. Erb has a written employment agreement. We signed offer letters with each of our other named executive officers upon the commencement of their employment with us. All of the named executive officers have change in control agreements, which entitle them to payments from the Company upon the happening of specified termination events. See “— Potential Payments Upon Termination or Change in Control”.

Base Salaries. The initial annual base salaries of our executive officers are negotiated in connection with their hiring. The Compensation Committee reviews the base salaries of the executive officers on an annual basis and generally grants salary increases following such reviews. Base salary increases are typically between 3-5% and represent a combination of a cost of living and inflation adjustment and a merit raise.

As discussed above under “Board Matters—Committees of the Board—Compensation Committee—Role of Compensation Consultant,” the Compensation Committee engaged Compensia in the fourth quarter of 2017 to conduct a comprehensive review of our executive compensation program and to consider year-end merit increases for our officers for fiscal 2018. Based on the advice and information from Compensia and taking into account information from publicly available industry surveys, the Compensation Committee approved base salary increases ranging from 2% to 4% for our officers and, specifically, a 3% increase for each of Mr. Erb, Ms. Drayton and Mr. Breidenstein.

Equity Compensation. Pursuant to the terms of his offer letter, Mr. Breidenstein was granted on June 2, 2017, an option to purchase 1,211 shares of our common stock with a grant date fair value of $128.66.

To restore a meaningful equity interest in the Company by our executive officers following the reverse stock splits and public offerings consummated in 2017, in January 2018, following the increase in the number of shares reserved for issuance under the 2017 Plan on January 1, 2018 pursuant to the “evergreen” provision in such plan, and considering the advice of Compensia, the board of directors and Compensation Committee granted options to purchase shares of our common stock to our named executive officers as follows:

Nonequity Incentive Plan Compensation. In 2018, the Compensation Committee made no change to the target bonuses, set forth as a percentage of annual base salary, for either Mr. Erb or Ms. Drayton, which were 50% and 35% of base salary, respectively. The earned bonus was based on the achievement of corporate performance objectives defined and weighted by the Compensation Committee, in consultation with our Chief Executive Officer, and primarily related to our 2018 revenue, performance of the Aquadex FlexFlow System, regulatory milestones, market adoption of Aquadex FlexFlow System and adoption of a new sales structure for new markets. The Compensation Committee assessed our achievement of the corporate objectives at 2018 year end, and calculated a total weighted average performance to corporate objectives of 75%. While Mr. Erb’s bonus was based solely on the achievement of corporate objectives, Ms. Drayton was also compensated based on the achievement of personal objectives, which accounted for 25% of her overall bonus. Because he departed the Company in July 2018, Mr. Breidenstein did not receive a bonus for 2018.

The following table sets forth target and earned non-equity incentive plan compensation for 2017 and 2018.

Pursuant to his offer letter, during 2017, Mr. Breidenstein was also entitled to receive 1.6% of the Company’s total net sales during each month of his employment. The Compensation Committee, taking into account the assessment of Compensia, who was engaged in the fourth quarter of 2017 to provide an assessment of executive officer and non-employee director compensation for 2018, elected to continue this payment for fiscal 2018, reflected as non-equity incentive compensation in the “Summary Compensation Table for 2018” above.

Retention Bonus. The Compensation Committee further awarded a retention bonus of $50,000 to Ms. Drayton in December 2016, payable on July 15, 2017, so long as Ms. Drayton remained with the Company through June 30, 2017 and we received a minimum of $5 million in equity financing by such date.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth certain information concerning equity awards held by our named executive officers that were outstanding as of December 31, 2018.