Nuwellis (NUWE) Risk Analysis

Our common stock is listed on the Nasdaq Capital Market under the symbol "NUWE. In order to maintain that listing, we must satisfy minimum financial and other requirements including, without limitation, the minimum stockholders' equity requirement and the minimum bid price requirement, both of which are requirements where we have been deficient in recent years. There can be no assurances that we will be successful in maintaining, or if we fall out of compliance, in regaining compliance with the continued listing requirements and maintaining the listing of our common stock on the Nasdaq Capital Market. On June 10, 2025, the Company closed an offering of 61,444 shares of its common stock and pre-funded warrants to purchase 335,381 shares of common stock, in each case with accompanying Series A Warrants to purchase up to 1,190,480 shares of common stock ("Series A Warrants") and Series B Warrants to purchase up to 396,829 shares of common stock ("Series B Warrants", collectively, the "June 2025 Offering". The public offering price per share of common stock and accompanying warrants is $12.60 per share and accompanying warrants, and the public offering price per pre-funded warrant and accompanying warrants is $12.5958 per pre-funded warrant and accompanying warrants. The Series B Warrants had an exercise price of $12.60 and are exercisable for a period of five years following the receipt of stockholder approval, which we obtained on August 4, 2025. The Series A Warrants contained a one-time reset of the exercise price in the event that the Company implemented the 2025 Reverse Stock Split (as defined below) equal to the greater of: (i) 20% of the combined public offering price per share of common stock and accompanying warrants in the offering and (ii) the lowest daily volume-weighted-average price for the five trading days immediately following the date of the implementation of the 2025 Reverse Stock Split. As a result of specific terms included in the Series A Warrants and the Series B Warrants, it was determined that outstanding Series A Warrants and the Series B Warrants should be classified as a liability on the Company's balance sheet until (i) in the case of the Series A Warrants, the price reset is triggered in connection with the reverse split or (ii) the warrants are exercised for shares of common stock. On July 3, 2025, the Company consummated a one-for-forty-two reverse stock split of the Company's issued and outstanding shares of common stock (the "2025 Reverse Split"). As a result of this reverse stock split, the price reset provision of the Series A Warrants was triggered, resulting in the exercise price being reduced to $7.00 per share, and the transition of any outstanding Series A Warrants from being classified as a liability on the Company's balance sheet into equity. On August 4, 2025 at a special meeting our stockholders approved, among other things, the exercise of the Series A and Series B Warrants in accordance with Nasdaq Listing Rule 5635(d). Following this special meeting, the holders of the Series B Warrants exercised a majority of the outstanding warrants, resulting in the removal of a majority of the liability associated with the outstanding Series B Warrants from the Company's balance sheet. As a result of the above, the Company's stockholders' equity as of June 30, 2025, as reported in the interim financial statements included in the Company's Quarterly Report on Form 10-Q, was below the amount required to be in compliance with the minimum stockholders' equity requirement for continued listing on Nasdaq, under Listing Rule 5550(b)(1) (the "Stockholder's Equity Requirement"). However, as of the date of the filing of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, the liability associated with the Series A Warrants was reclassified as equity and a majority of the liability associated with the Series B Warrants was removed, resulting in a pro forma stockholders' equity of $4,507 (in thousands) as of June 30, 2025, and therefore the Company believes it continues to be compliance with the minimum Stockholders' Equity Requirement. On June 18, 2025, the Company received a Deficiency Notice from the Listing Qualifications Department of Nasdaq informing the Company that because the closing bid price for the Company's common stock listed on Nasdaq was below $1.00 for 30 consecutive trading days, the Company was not in compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Marketplace Rule 5550(a)(2) (the "Minimum Bid Price Requirement"). The Deficiency Notice also indicated that the Company was not eligible for any compliance period specified in Nasdaq Listing Rule 5810(c)(3)(A) because the Company effected a reverse stock split over the prior one-year period or has effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one; accordingly, the Company was informed that its securities were subject to delisting from Nasdaq unless the Company timely requested a hearing before the Nasdaq Hearings Panel (the "Panel"). As previously disclosed, the Company effected the 2024 Reverse Stock Split on June 27, 2024. The Company timely requested a hearing before the Panel, which was scheduled for August 12, 2025. At its annual meeting held on May 20, 2025, the Company's stockholders approved a proposal allowing the board of directors of the Company to effect a reverse split in the range of 1-for-5 to 1-for-70. The Company's board of directors authorized the 2025 Reverse Stock Split to regain compliance with the Minimum Bid Price Requirement. On July 22, 2025, the Company received formal notice from Nasdaq stating that it has resolved the previously disclosed bid price deficiency. As a result, the hearing previously scheduled with the Nasdaq Hearings Panel for August 12, 2025 was cancelled, and shares of the Company's Common Stock continue to be listed and traded on the Nasdaq Capital Market under the ticker "NUWE." If our Common Stock is delisted from Nasdaq, our ability to raise capital through public offerings of our securities and to finance our operations could be adversely affected. We also believe that delisting would likely result in decreased liquidity and/or increased volatility in our Common Stock and could harm our business and future prospects. In addition, we believe that, if our Common Stock is delisted, our stockholders would likely find it more difficult to obtain accurate quotations as to the price of the Common Stock and it may be more difficult for stockholders to buy or sell our Common Stock at competitive market prices, or at all. If our Common Stock is delisted, 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, transactions could be delayed, and we could face significant material adverse consequences, including: a limited availability of market quotations for our securities; reduced liquidity with respect to our securities; a determination that our shares are a "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; a reduced amount of news and analyst coverage for us; and 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 Stock is delisted from Nasdaq 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. If our Common 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 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. We continue to actively monitor our performance with respect to the listing standards and will consider available options to resolve any deficiency and maintain compliance with the Nasdaq rules. There can be no assurance that we will be able to maintain compliance or, if we fall out of compliance, regain compliance with any deficiency, or if we implement an option that regains our compliance, maintain compliance thereafter.

Our common stock is listed for trading on Nasdaq. We must satisfy Nasdaq's continued listing requirements, including, among other things, a minimum closing bid price requirement of $1.00 per share for thirty consecutive business days. On January 13, 2026, Nasdaq filed a rule proposal with the SEC to adopt a new continued listing requirement that would require all companies listed on Nasdaq to maintain a minimum market value of listed securities of $5 million. Under the proposed rule, if a company's market value of listed securities falls below this threshold for 30 consecutive trading days, Nasdaq may immediately suspend trading and initiate delisting proceedings without affording the company a compliance cure period. This proposed rule, if adopted, would be in addition to Nasdaq's existing continued listing requirements. If the proposed rule is adopted and the market value of our common stock were to fall below the proposed $5 million threshold or we otherwise fail to satisfy Nasdaq's continued listing standards, we could face delisting proceedings on an accelerated basis. The delisting of our common stock from Nasdaq could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer business development opportunities. The comment period for the proposed rule closed on February 19, 2026. The effective date of the proposed rule is not known, if approved and adopted.

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 December 31, 2025, we had warrants to purchase 1,334,937 shares of common stock outstanding, with exercise prices ranging from $7.00 to $36,750 with a weighted-average exercise price of $16.08. As of December 31, 2025, there were 27 shares of Series F Convertible Redeemable Preferred Stock, par value $0.0001 per share (the "Series F Convertible Preferred Stock") outstanding, convertible into 10,719 shares of common stock. The Series F convertible preferred stock has full ratchet price-based anti-dilution protection, subject to customary carve-outs, in the event of a down-round financing at a price per share below the conversion price of the Series F convertible preferred stock (which protection will expire if, during any 20 of 30 consecutive trading days, the volume weighted average price of the Company's Common Stock exceeds 300% of the then-effective conversion price of the Series F convertible preferred stock and the daily dollar trading volume for each trading day during such period exceeds $7,000,000). Effective for every stock offering or reverse stock split, when applicable, the conversion price of the Series F convertible preferred stock has been recalculated based on the offering price. As of July 7, 2025 (the effective date of the most recent reverse stock split), the conversion price of the Series F convertible preferred stock was recalculated to $397.00. On June 6, 2025, the Company filed the Certificate of Designation of Preferences, Rights and Limitations of Series F-1 Convertible Preferred Stock with the State of Delaware. At that time, 100 shares of Series F Preferred Stock were outstanding and owned by the Company's Chief Executive Officer, John L. Erb. Such 100 shares of Series F Preferred Stock were exchanged for Series F-1 Preferred Shares pursuant to a Securities Exchange Agreement between John L. Erb and the Company, dated June 9, 2025. On June 9, 2025, 66 shares of the Series F-1 Preferred shares were converted into 26,191 shares of the Company's Common Stock. The conversion rate for the 66 Series F-1 Preferred Shares was $397.00 per share. As of December 31, 2025, 66 of the series F-1 Preferred shares had been converted to Common Stock and 34 shares remained outstanding, convertible into 13,498 shares of common stock. As of December 31, 2025, there were 137 shares of Series J Convertible Preferred Stock (as defined below) outstanding, convertible into 81 shares of common stock and 582 Series J Convertible Preferred Stock issuable upon the exercise of 47 warrants issued in the October 2023 Offering (as defined below). 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 could depress the trading market for our common stock over an extended period of time. Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur could significantly reduce the market price of our common stock and impair our ability to raise adequate capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our common stock. As of December 31, 2025, we have outstanding warrants to purchase an aggregate of approximately 1,334,937 shares of our common stock, and options to purchase an aggregate of approximately 4,452 shares of our common stock, which, if exercised, may further increase the number of shares of our common stock outstanding and the number of shares eligible for resale in the public market.

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 27 shares of Series F Convertible Preferred Stock outstanding, 34 shares of Series F-1 Convertible Preferred Stock outstanding and 137 shares of Series J Convertible Preferred Stock outstanding as of December 31, 2025. Upon liquidation, dissolution or winding-up of the Company, holders of our Series F Convertible Preferred Stock and Series J Convertible 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 receive the same amount that a holder of common stock would receive if such preferred stock was fully converted, pari passu with all the holders of common stock. Our board of directors may issue additional series of preferred 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 are generally not restricted from issuing additional common stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock. The market price of our common stock could decline as a result of sales of common stock or securities that are convertible into or exchangeable for, or that represent the right to receive, common stock after this offering or the perception that such sales could occur.

On July 3, 2025, we effected a 1-for-42 reverse split of our outstanding common stock. This reverse stock split did not change the par value of our common stock or the number of common or preferred shares authorized by our Fourth Amended and Restated Certificate of Incorporation, as amended (our "Certificate of Incorporation"). Because the number of authorized shares of our common stock was not reduced proportionately, the reverse stock split increased our board of directors' ability to issue authorized and unissued shares without further stockholder action. As of December 31, 2025 our Certificate of Incorporation provides for 100,000,000 shares of authorized common stock and 40,000,000 shares of authorized preferred stock, 30,000 of which are designated Series A Junior Participating Preferred Stock, 18,000 of which are designated Series F and Series F-1 Convertible Preferred Stock, 600,000 of which are designated Series J Convertible Redeemable Preferred Stock and we have 1,685,817 shares of common stock outstanding, 1,334,937 shares reserved for issuance upon the conversion, exercise or vesting of outstanding preferred stock, warrants and options, 582 Series J Convertible Preferred Stock issuable upon the exercise of 47 warrants issued in the October 2023 Offering, and 35,124 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.

Historically, the market price of our common stock has fluctuated over a wide range. There has been relatively limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may not be sustained. Limited liquidity in the trading market for our common stock may adversely affect a stockholder's ability to sell its shares of common stock at the time it wishes to sell them or at a price that it considers acceptable. If a more active, liquid public trading market does not develop we may be limited in our ability to raise capital by selling shares of common stock and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there is a thin trading market or "float" for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a large float, our common stock would be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stock may be more volatile, and it would be harder for a stockholder to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant price and volume fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including: - our quarterly or annual operating results;- changes in our earnings estimates;- investment recommendations by securities analysts following our business or our industry;- additions or departures of key personnel;- changes in the business, earnings estimates or market perceptions of our competitors;- our failure to achieve operating results consistent with securities analysts' projections;- future announcements concerning us, including our clinical and product development strategy, or our competitors;- regulatory developments, disclosure regarding completed, ongoing or future clinical studies and enforcement actions bearing on advertising, marketing or sales;- acquisition or loss of significant manufacturers, distributors or suppliers or an inability to obtain sufficient quantities of materials needed to manufacture our system;- fluctuations of investor interest in the medical device sector;- changes in industry, general market or economic conditions; and - announcements of legislative or regulatory changes. Some companies that have experienced volatility in the market price of their stock, have been subject to securities class action litigation and we may continue to be a target in the future. Securities litigation against us could result in substantial costs and divert our management's attention from other business concerns, which could materially adversely affect our business, results of operations, and financial condition. Our stock could be the target of short sellers who may seek to drive down the price of shares by disseminating negative reports or information about us. Such negative publicity may lead to additional public scrutiny or may cause further volatility in our stock price, a decline in the value of a stockholder's investment in us or reputational harm. Volatility in our stock price also impacts the value of our equity compensation, which affects our ability to recruit and retain employees. Accordingly, substantial or sustained stock price declines could have a material adverse impact on stockholder confidence and employee recruiting and retention. The stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securities of many companies, including companies in the healthcare industry. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate based upon factors that have little or nothing to do with us and these fluctuations could materially reduce our stock price.

Delaware law and certain provisions of our Certificate of Incorporation and bylaws make it harder for a third party to acquire us, even if doing so might be beneficial to our stockholders. These provisions include, among other things: 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; 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; and requiring at least two-thirds of the voting power of our outstanding stock entitled to vote to amend or repeal certain provisions of our Certificate of Incorporation or bylaws. Section 203 of the Delaware General Corporation Law 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 they could limit the price that investors might be willing to pay in the future for shares of our common stock. Further, our Certificate of Incorporation establishes 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 exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law; or any action asserting a claim against us that is governed by the internal affairs doctrine. This choice of forum provision may limit a stockholder's ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees.