UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SD
Specialized Disclosure Report
CHF SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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001-35312
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No. 68-0533453
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(I.R.S. Employer Identification Number)
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12988 Valley View Road, Eden Prairie, MN 55344
(Address of principal executive offices)(Zip code)
Claudia Drayton (952) 345-4200
(Name and telephone number, including area code, of person to contact in connection with this report)
Check the appropriate box to indicate the rule pursuant to which this form is being filed, and provide the period to which the information in this form applies:
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☒
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Rule 13p-1 under the Securities Exchange Act (17 CFR 240.13p-1) for the reporting period from January 1 to December 31, 2017.
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Section 1 - Conflict Minerals Disclosure
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Conflict Minerals Disclosure and Report
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This Form SD of CHF Solutions, Inc. (f/k/a Sunshine Heart, Inc.) (the “Company”) is filed pursuant to Rule 13p-1 promulgated under the Securities Exchange Act of 1934, as amended, for the reporting period January 1, 2017 to December 31, 2017.
A copy of the Company’s Conflict Minerals Report is provided as Exhibit 1.01 to this Form SD, and is publicly available in the Investor section of the Company’s website at www.chf-solutions.com, by selecting Financials and Filings under the Investors tab.
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Exhibit
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A copy of the Company’s Conflict Minerals Report is provided as Exhibit 1.01 to this Form SD and incorporated herein by reference.
Section 2 - Exhibits
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Exhibits
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The following exhibit is filed as part of this report.
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Exhibit
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Description
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Conflict Minerals Report of CHF Solutions, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the duly authorized undersigned.
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CHF SOLUTIONS, INC.
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By:
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/s/ Claudia Drayton
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May 30, 2018
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Claudia Drayton
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(Date)
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Chief Financial Officer
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EXHIBIT 1.01
CHF SOLUTIONS, INC.
Conflict Minerals Report
For the reporting period from January 1, 2017 to December 31, 2017
Background
This Conflict Minerals Report (the “Report”) of CHF Solutions, Inc. (f/k/a Sunshine Heart, Inc.) (“we”, “us” or the “Company”) has been prepared pursuant to Rule 13p-1 and Form SD (the “Rule”) promulgated under the Securities Exchange Act of 1934, as amended, for the reporting period January 1, 2017 to December 31, 2017.
The Rule imposes certain reporting obligations on companies who manufacture or contract to manufacture products containing certain specified minerals that are necessary to the functionality or production of the Company’s products. The specified minerals, which we collectively refer to in this Report as the “Conflict Minerals,” are gold, columbite-tantalite (coltan), cassiterite and wolframite, including their derivatives, which are limited to tantalum, tin and tungsten (“3T”). The “Covered Countries” for the purposes of the Rule and this Report are the Democratic Republic of the Congo, the Republic of the Congo, the Central African Republic, South Sudan, Uganda, Rwanda, Burundi, Tanzania, Zambia and Angola.
This Report relates to the process undertaken by the Company for the Company’s products that contain Conflict Minerals and were manufactured, or contracted to be manufactured, during calendar year 2017.
Company Overview
We are a medical device company focused on commercializing the Aquadex FlexFlow® System (the “Aquadex System”). The Aquadex System is indicated for temporary (up to eight hours) ultrafiltration treatment of patients with fluid overload who have failed diuretic therapy, and extended (longer than 8 hours) ultrafiltration treatment of patients with fluid overload who have failed diuretic therapy and require hospitalization. In August 2016, we acquired the Aquadex business from a subsidiary of Baxter International, Inc., a global leader in the hospital products and dialysis markets (“Baxter”). The Aquadex FlexFlow consists of: (i) a console, a piece of capital equipment containing electromechanical pumps and an LCD screen (the “Console”), (ii) a one-time disposable blood set (the “Aquadex Blood Set”), an integrated collection of tubing, filter, sensors, and connectors that contain and deliver the blood from and back to the patient, and (iii) a disposable catheter (the “Aquadex Catheter”), a small, dual-lumen catheter designed to access the peripheral venous system of the patient and to simultaneously withdraw blood and return filtered blood to the patient. Conflict Minerals are necessary to the functionality or production of certain critical components of the Aquadex System (the “Covered Products”) that were manufactured, or contracted to be manufactured, by the Company during calendar year 2017.
Manufacturing of the Console, Aquadex Blood Set and Aquadex Catheter during 2017
We were party to a commercial manufacturing and supply agreement with Baxter which required Baxter to manufacture Aquadex Consoles, Aquadex Blood Sets and Aquadex Catheters 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 effective 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 began manufacturing Aquadex FlexFlow products in-house in our Eden Prairie, Minnesota facility in the third quarter of 2017. Following such transfer of manufacturing, we continued to purchase raw materials and finished goods from an indirect subsidiary of Baxter until February 1, 2018 and contracted directly with two other outside suppliers in 2017 for the manufacture of critical components of the Aquadex System.
The Company’s Due Diligence Process
The Company formed a cross-functional team to address Conflict Minerals in the supply chain for the Aquadex System. This team included our Facilities Coordinator, Vice President, Operations and Engineering, and Chief Financial Officer. This team conducted a good faith reasonable country of origin inquiry (“RCOI”) to identify and trace Conflict Minerals in the Company’s supply chain, using procedures and tools recommended or provided by the Responsible Minerals Initiative (formerly the Conflict-Free Sourcing Initiative) and the Organisation for Economic Cooperation and Development Due Diligence Guidance for Responsible Supply Chain of Minerals from Conflict-Affected and High Risk Areas: Third Edition, including the related supplements on gold, tin, tantalum and tungsten (the “OECD Guidance”).
This RCOI was reasonably designed to determine whether any of the Conflict Minerals originated in the Covered Countries and whether any of the Conflict Minerals may be from recycled or scrap sources. The Company does not purchase Conflict Minerals directly from mines, smelters or refiners; rather the Company contracts to manufacture products from materials and compounds acquired from third parties. The supply chain for the Covered Products is complex, and there are many third parties in the supply chain between the ultimate manufacturer of the Covered Products and the original sources of Conflict Minerals. Therefore, the Company must rely, and has relied, on its suppliers to provide information in their responses to the Company’s inquiries regarding the existence of Conflict Minerals in any materials or products supplied to the Company and the source of such Conflict Minerals, if any. The Company’s direct suppliers are similarly reliant upon information provided by their suppliers. Our measures can provide only reasonable, not absolute, assurance regarding the source and chain of custody of the necessary Conflict Minerals.
The Company determined that three suppliers were within the scope of the Company’s RCOI during calendar year 2017 and contacted all three suppliers, requesting that such suppliers provide Conflict Minerals data by completing the Conflict Mineral Reporting Template, a supply chain survey tool provided by the Responsible Minerals Initiative. All such suppliers provided responses to the request for information. The Company’s cross-functional team reviewed the information received from such suppliers.
Results of Due Diligence Process
One supplier confirmed that no Conflict Minerals contained in the components supplied to the Company are sourced from a Covered Country.
The supplier of the Aquadex FlexFlow Data Key, responded (a) that 3T included in its product line are sourced from Covered Countries and (b) that it is not able to determine whether any of the gold in its product line originates from a Covered Country since (i) to its knowledge, no gold refiners were sourcing from a Covered Country but (ii) it did not receive responses from all of its suppliers.
Baxter responded (a) that 3T are sourced from Covered Countries and (b) that it is not able to determine whether any gold in its products originate from a Covered Country since (i) no publicly available, audit verified information confirms that any gold refinery sources from a Covered Country, but (ii) it did not receive responses from all of its suppliers. While Baxter reported that the smelters or refiners of the 3T identified by Baxter’s suppliers known to source from Covered Countries are conformant to the Responsible Minerals Initiative assessment protocol for conflict-free sourcing, Baxter did not receive responses from all of its suppliers and cannot confirm that all smelters and refiners that source 3T to its suppliers are so conformant.
The Company is unable to determine the facilities used to process or the country of origin of all of the necessary Conflict Minerals in the products provided by its suppliers. The Company does not believe it has significant leverage with its existing suppliers, given the minimal amount of purchases relative to the size of the suppliers, to have an impact on the purchasing and sourcing decisions of its suppliers.
Further Efforts
The Company has yet to adopt a formal policy relating to the Conflict Minerals that incorporates the standards set forth in the OECD Guidance, although it has implemented certain provisions in practice. The Company generally is committed to the responsible sourcing of materials of its products and supports greater transparency with regard to its supply chain but is taking a reasonable, measured approach in responding to the requirements of the Rule.
The Company expects to take the following steps, among others, to improve its due diligence measures and to further mitigate the risk that the necessary Conflict Minerals contained in the Company’s products finance or benefit armed groups in the Covered Countries: (i) continuing to identify any products that the Company manufactures or contracts to manufacture that contain Conflict Minerals; (ii) continuing to engage with suppliers to obtain current, accurate and complete information about the supply chain; and (iii) following up appropriately when information provided by suppliers appears to be incomplete or inaccurate. As noted above, the Company’s efforts and impact are limited due to its minimal purchasing relative to the size of its suppliers.