Executive Summary

Q3 2015 revenue grew 28% YoY to $2.17M, but sequentially declined from Q2’s $2.90M; gross margin improved to 26% (from 21% YoY) while a $23.7M non‑cash impairment drove a GAAP net loss of $(13.8)M or $(0.11) per share .
Aurix momentum continued: Aurix revenue was ~ $0.19M, up 100% YoY and 75% QoQ; management highlighted accelerating VA demand and a major CMS ruling that raises 2016 HOPPS reimbursement to $1,411 per application from $430 in 2015, expanding hospital outpatient viability starting Jan 1, 2016 .
Liquidity and covenant stress escalated: AURX failed to pay ~$2.6M interest due Oct 1 and breached cash balance covenants; a short-term waiver reduced the cash floor to $1.75M until Dec 4; default interest rose to 15.75% while restructuring talks with Deerfield continue .
Strategic update: Arthrex to assume Angel manufacturing by Mar 31, 2016; Nuo received a $775K royalty prepayment for 2H15 and expects a royalty-only Angel P&L thereafter; workforce was reduced ~30% in August; Dean Tozer became CEO .

What Went Well and What Went Wrong

What Went Well
- CMS finalized a substantial 2016 HOPPS reimbursement for Aurix at $1,411/application, a material uplift that re-opens the hospital outpatient market starting 2016 .
- Aurix adoption: “As evidenced by our Aurix quarter over quarter sales growth, we continue to see growing demand for Aurix in all commercial channels, including the VA system” (Dean Tozer, CEO) .
- Angel economics: Amended Arthrex agreement shifts manufacturing/supply to Arthrex and provides ongoing royalties; $775K advance payment received against 2H15 royalties, with minimum annual royalties in 2018–2021 .
What Went Wrong
- Liquidity/covenants: Missed Oct 1 interest payment (~$2.6M) and non‑compliance with the Deerfield cash covenant; default interest (15.75%) and risk of acceleration or foreclosure without a successful restructuring .
- Large non‑cash charges: Q3 included ~$23.7M impairment (IPR&D and goodwill), reflecting lower market cap and liquidity situation, which overwhelmed operating progress .
- Sequential revenue decline: Q3 revenue fell to $2.17M from $2.90M in Q2, with operating loss ballooning due to the impairment; non‑operating derivative gains partly offset the loss .

Financial Results

Revenue, EPS, Gross Margin (oldest → newest)

Metric	Q1 2015	Q2 2015	Q3 2015
Total Revenue ($USD)	$4,837,127	$2,895,231	$2,169,204
Gross Margin (%)	42%	18%	26%
Net Income (Loss) ($USD)	$4,107,001	$(870,238)	$(13,828,987)
Diluted EPS ($)	$0.02	$(0.01)	$(0.11)

Year-over-Year (YoY) comparison

Metric	Q3 2014	Q3 2015
Total Revenue ($USD)	$1,692,027	$2,169,204
Gross Margin (%)	21%	26%
Net Income (Loss) ($USD)	$(4,785,583)	$(13,828,987)
Diluted EPS ($)	$(0.04)	$(0.11)

Operating P&L highlights (sequential)

Metric	Q1 2015	Q2 2015	Q3 2015
Operating Expenses ($USD)	$5,382,559	$4,950,451	$27,828,020
Impairment (incl. IPR&D, goodwill) ($USD)	—	—	$23,740,963
Change in Fair Value of Derivative Liabilities ($USD)	$8,365,878 gain	$4,483,129 gain	$14,399,884 gain

Revenue composition (reported categories)

Component	Q1 2015	Q2 2015	Q3 2015
Product Sales ($USD)	$1,305,765	$2,332,844	$1,633,464
License Fees ($USD)	$3,100,595	$100,594	$100,594
Royalties ($USD)	$430,767	$461,793	$435,146

Cash and liquidity

Metric	Q1 2015	Q2 2015	Q3 2015
Cash & Equivalents ($USD)	$11,818,891	$6,885,534	$4,053,733
Deerfield Debt Outstanding incl. accrued interest ($USD)	—	—	$37,600,000 at 9/30/15

Segment/KPI notes (Q3)

Aurix revenue: ~$188,000; +100% YoY and +75% QoQ .
Q3 Gross Margin: 26% (benefited from Aurix sales, Angel royalties, lower Angel warranty repair charges) .

Guidance Changes

Metric	Period	Previous Guidance	Current Update	Change
Earnings Call Timing	Q3 2015	Call scheduled Nov 13, 2015	Conference call deferred to Dec 7, 2015	Deferred
Aurix HOPPS Reimbursement	CY2016	2015 national avg ~$430/treatment	Finalized at $1,411 per application effective Jan 1, 2016	Raised materially
Angel Manufacturing/Supply	By Mar 31, 2016	Nuo manufactured	Arthrex to assume manufacturing/supply; Nuo to receive royalties	Transition to royalty model
Angel Royalties (near-term)	2H 2015	N/A	$775K advance payment received vs discounted 2H15 royalties	New update
Deerfield Covenants/Interest	Nov–Dec 2015	Cash balance floor $5.0M; 5.75% rate	Temp. cash floor cut to $1.75M through Dec 4; default rate 15.75% while unpaid	Modified under stress

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2015)	Current Period (Q3 2015)	Trend
VA penetration for Aurix	7 VA hospitals + 1 AFB treating; expanding dedicated VA team (3→8); strong SCI unit traction	“Growing demand” across channels including VA; Aurix revenue +75% QoQ	Improving
CMS reimbursement (HOPPS)	Working with CMS; 2015 rate ~$430; final 2016 rule expected Nov	Final 2016 rate $1,411 per application (APC 5054), effective Jan 1, 2016	Strong positive
Arthrex/Angel strategy	Angel royalties growing; Q2 margin aided by Angel royalties	Amended agreement: Arthrex assumes manufacturing by Mar 31, 2016; royalty-only model; $775K advance	De‑risking ops; revenue mix shifts
Liquidity/Deerfield	Expected breach of $5M cash covenant; Oct 1 interest (~$2.6M) likely cash pay; engaging Deerfield	Missed interest; cash covenant breach; temp waiver; default rate 15.75%; restructuring discussions ongoing	Deteriorating
CED/Au Study execution	Transitioned to Clinical Affairs; Net Health/WoundExpert integration to streamline data	Not specifically updated; focus on VA demand and reimbursement backdrop	Neutral (awaiting update)

Management Commentary

“As evidenced by our Aurix quarter over quarter sales growth, we continue to see growing demand for Aurix in all commercial channels, including the VA system… [CMS’s] final ruling… allows us to fully and appropriately reconsider the commercial viability of the hospital outpatient market for Aurix” — Dean Tozer, CEO .
“The Company has failed to make an interest payment… and has failed to satisfy certain other covenants under its debt facility with Deerfield… If we cannot agree on modifications… we may be required to curtail or cease operations or… seek court supervised protection” .
On VA traction: “We now have seven VA hospitals and one Air Force Base treating patients with Aurix” — Dean Tozer (Q2 call) .
On VA pricing: “Aurix is reimbursed in the VA system at $340 price point at average selling price” — David Jorden (Acting CFO, Q&A) .

Q&A Highlights

CMS reimbursement process and timing: Management explained proposed (July) vs final (November) rule cadence; objective was to secure an “economically appropriate” 2016 rate (achieved with $1,411/application) .
VA economics and adoption: VA purchases via Federal Supply Schedule, avoiding private insurance hurdles; average VA price point ~$340; adoption driven by clinical trials at facilities, especially SCI units .
Au Study (CED) execution: Data collection transitioned to Clinical Affairs with WoundExpert integration; timelines to assess outpatient economic viability were set for later 2015 (no further Q3 update) .

Estimates Context

We attempted to retrieve S&P Global (Capital IQ) consensus for revenue and EPS for Q3 2015, Q2 2015, and Q1 2015; however, the request could not be fulfilled during this session. As a result, Wall Street consensus estimates for AURX were unavailable for inclusion, and no beat/miss assessment vs consensus is provided in this report. Values would be retrieved from S&P Global if available.

Key Takeaways for Investors

2016 CMS reimbursement is a catalyst: The jump to $1,411/application materially improves Aurix’s hospital outpatient TAM and unit economics starting Jan 1, 2016, potentially accelerating non‑VA adoption .
VA channel remains the near‑term growth driver: Evidence of sequential Aurix growth and expanding VA usage underpins a defensible revenue base independent of CMS outpatient rates .
Balance sheet risk is acute: Deerfield covenant breaches, default interest, and the possibility of acceleration/foreclosure create binary near‑term outcomes; watch for restructuring terms by early December .
Mix shift toward royalty model: Angel manufacturing transition to Arthrex should simplify operations and reduce working capital needs, with a recurring royalty stream (including minimum royalties 2018–2021) supporting gross margin stability .
Non‑cash noise vs underlying operations: Q3’s large impairment and derivative mark‑to‑market gains obscure the core trend; focus on revenue cadence (Aurix + VA), gross margin trajectory, and cash runway .
Execution priorities: Secure Deerfield restructuring, convert CMS reimbursement tailwind into outpatient placements, and continue VA expansion; these are the levers most likely to move the stock on news flow .

Additional Notes and Sources

Q3 2015 8-K earnings press release (Exhibit 99.1) including financial statements and CMS update .
Q3 2015 10-Q for detailed MD&A, impairment, liquidity, Arthrex amendment, CMS final rate .
Q2 2015 8-K press release and full financials .
Q2 2015 earnings call transcript for strategic and Q&A insights .
Q1 2015 8-K press release and financials .

No Q3 2015 earnings call transcript was held; management deferred the call to December 7, 2015 amid ongoing Deerfield discussions .

Nuo Therapeutics, Inc. (AURX)·Q3 2015 Earnings Summary