SANUWAVE Health, Inc 10-Q for FY2020 Q1

SANUWAVE Health, Inc. (SNWV)

10-Q 2020-05-15 For: 2020-03-31

Added on April 10, 2026

About this 10-Q

SANUWAVE Health, Inc filed this 10-Q on May 15, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $148.59K; down 16.5% from $177.96K a year earlier
Net loss: $3M; compared with a net loss of $2.2M a year earlier

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Nevada	20-1176000
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3360 Martin Farm Road, Suite 100 Suwanee, GA	30024
(Address of principal executive offices)	(Zip Code)

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001	SNWV	OTCQB

	PART I – FINANCIAL INFORMATION	Page

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	3

	Condensed Consolidated Statements of Comprehensive Loss for the threemonths ended March 31, 2020 and 2019	4

	Condensed Consolidated Statements of Stockholders’ Deficit for the threemonths ended March 31, 2020 and 2019	5

	Condensed Consolidated Statements of Cash Flows for the three months endedMarch 31, 2020 and 2019	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	25

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	26

Item 1A.	Risk Factors	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3.	Defaults Upon Senior Securities	26

Item 4.	Mine Safety Disclosures	26

Item 5.	Other Information	26

Item 6.	Exhibits	26

SIGNATURES		27

	March 31,	December 31,
	2020	2019
ASSETS	(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$1,346,892	$1,760,455
Accounts receivable, net of allowance for doubtful accounts
of $15,682 in 2020 and $72,376 in 2019	103,611	75,543
Inventory	518,767	542,955
Prepaid expenses and other current assets	229,519	125,405
TOTAL CURRENT ASSETS	2,198,789	2,504,358

PROPERTY AND EQUIPMENT, net	591,485	512,042

RIGHT OF USE ASSETS, net	283,456	323,661

OTHER ASSETS	43,096	41,931
TOTAL ASSETS	$3,116,826	$3,381,992

LIABILITIES
CURRENT LIABILITIES
Accounts payable	$1,116,372	$1,439,413
Accrued expenses	1,176,235	1,111,109
Accrued employee compensation	1,741,816	1,452,910
Contract liabilities	555,208	66,577
Operating lease liability	176,397	173,270
Finance lease liability	159,789	121,634
Advances from related parties	16,000	18,098
Line of credit, related parties	214,505	212,388
Accrued interest, related parties	2,042,541	1,859,977
Short term notes payable	323,249	587,233
Notes payable, related parties, net	5,372,743	5,372,743
TOTAL CURRENT LIABILITIES	12,894,855	12,415,352

NON-CURRENT LIABILITIES
Contract liabilities	61,938	573,224
Operating lease liability	139,333	185,777
Finance lease liability	332,641	271,240
TOTAL NON-CURRENT LIABILITIES	533,912	1,030,241
TOTAL LIABILITIES	13,428,767	13,445,593

COMMITMENTS AND CONTINGENCIES

REDEEMABLE PREFERRED STOCK, SERIES C CONVERTIBLE, par value $0.001,
90 designated; 90 shares issued and outstanding in 2020	2,250,000	-


STOCKHOLDERS' DEFICIT
PREFERRED STOCK, par value $0.001, 5,000,000
shares authorized; 6,175 and 293 shares designated Series A and	-	-
Series B, respectively; none issued and outstanding in 2020 and
2019, respectively

COMMON STOCK, par value $0.001, 350,000,000 shares authorized;
297,663,672 and 293,780,400 issued and outstanding in 2020 and
2019, respectively	297,664	293,781

ADDITIONAL PAID-IN CAPITAL	115,951,907	115,457,808

ACCUMULATED DEFICIT	(128,754,104)	(125,752,956)

ACCUMULATED OTHER COMPREHENSIVE LOSS	(57,408)	(62,234)
TOTAL STOCKHOLDERS' DEFICIT	(12,561,941)	(10,063,601)
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT	$3,116,826	$3,381,992

SANUWAVE HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)

	Three Months Ended	Three Months Ended
	March 31,	March 31,
	2020	2019

REVENUES
Product	$74,559	$64,565
License fees	10,000	106,250
Other revenue	64,033	7,148
TOTAL REVENUES	148,592	177,963

COST OF REVENUES
Product	78,915	65,112
Other	9,962	28,741
TOTAL COST OF REVENUES	88,877	93,853

GROSS MARGIN	59,715	84,110

OPERATING EXPENSES
Research and development	286,754	261,002
Selling and marketing	607,850	158,083
General and administrative	1,907,917	1,517,100
Depreciation	53,023	8,357
TOTAL OPERATING EXPENSES	2,855,544	1,944,542

OPERATING LOSS	(2,795,829)	(1,860,432)

OTHER INCOME (EXPENSE)
Gain on warrant valuation adjustment	-	32,359
Interest expense	(18,732)	(148,261)
Interest expense, related party	(182,564)	(219,687)
Loss on foreign currency exchange	(4,023)	(1,296)
TOTAL OTHER INCOME (EXPENSE), NET	(205,319)	(336,885)

NET LOSS	(3,001,148)	(2,197,317)

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments	4,628	(2,398)
TOTAL COMPREHENSIVE LOSS	$(2,996,520)	$(2,199,715)

LOSS PER SHARE:
Net loss - basic and diluted	$(0.01)	$(0.01)

Weighted average shares outstanding - basic and diluted	296,061,866	157,112,875

	Outstanding				Outstanding
	as of				as of
	December 31,				March 31,
Warrant class	2019	Issued	Exercised	Expired	2020

Class K Warrants	7,200,000	-	-	-	7,200,000
Class O Warrants	909,091	-	-	-	909,091
Class P Warrants	1,365,000	-	(1,000,000)	(100,000)	265,000
	9,474,091	-	(1,000,000)	(100,000)	8,374,091

	Exercise	Expiration
	price/share	date

Class K Warrants	$0.08	June 2025
Class K Warrants	$0.11	August 2027
Class O Warrants	$0.11	January 2022
Class P Warrants	$0.20	June 2024

	March 31,
	2020

Lease liability - right of use
Current portion	$176,397
Long term portion	139,333
	$315,730

Year ending December 31,	Amount
2020 (remainder)	$144,377
2021	197,462
Total lease payments	341,839
Less: Present value adjustment	(26,109)
Lease liability - right of use	$315,730

	Three months ended March 31, 2020
	United States	International	Total

Product	$33,655	$40,904	$74,559
License fees	-	10,000	10,000
Other Revenue	541	63,492	64,033
	$34,196	$114,396	$148,592

Three months ended March 31, 2019
United States	International	Total

$17,678	$46,887	$64,565
6,250	100,000	106,250
-	7,148	7,148
$23,928	$154,035	$177,963

Exhibit No.	Description
3.1	Certificate of Designation of Preferences, Rights and Limitations of Series C ConvertiblePreferred Stock of the Company dated January 31, 2020 (Incorporated by reference to the Form 8-K filed with the SEC on February 6, 2020).

10.1	Series C Preferred Stock Purchase Agreement, by and among the Company and the accredited investors party thereto, dated February 6, 2020 (Incorporated by reference to the Form 8-K filed with the SEC on February 6, 2020).

31.1*	Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer.

31.2*	Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.

32.1**	Section 1350 Certification of the Principal Executive Officer.

32.2**	Section 1350 Certification of the Chief Financial Officer.

101.INS*†	XBRL Instance.

101.SCH*†	XBRL Taxonomy Extension Schema.

101.CAL*†	XBRL Taxonomy Extension Calculation.

101.DEF*†	XBRL Taxonomy Extension Definition.

101.LAB*†	XBRL Taxonomy Extension Labels.

101.PRE*†	XBRL Taxonomy Extension Presentation.

	SANUWAVE HEALTH, INC.

Date: May 15, 2020	By:	/s/ Kevin A. Richardson, II
		Name: Kevin A. Richardson, II
		Title: Chief Executive Officer

Signatures	Capacity	Date

By: /s/ Kevin A. Richardson, II	Chief Executive Officer and Chairman of the Board of Director	May 15, 2020
Name: Kevin A. Richardson, II	(principal executive officer)

By: /s/ Lisa E. Sundstrom	Chief Financial Officer	May 15, 2020
Name: Lisa E. Sundstrom	(principal financial and accounting officer)

SANUWAVE HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(UNAUDITED)


	Preferred Stock		Common Stock
	Number of		Number of				Accumulated
	Shares		Shares				Other
	Issued and		Issued and		Additional Paid-	Accumulated	Comprehensive
	Outstanding	Par Value	Outstanding	Par Value	in Capital	Deficit	Loss	Total

Balances as of Janaury 1, 2019	-	$-	155,665,138	$155,665	$101,153,882	$(116,602,778)	$(62,868)	$(15,356,099)
Net loss	-	-	-	-	-	(2,197,317)	-	(2,197,317)
Cashless warrant exercises	-	-	704,108	704	(704)	-	-	-
Proceeds from warrant exercise	-	-	620,000	620	52,580	-	-	53,200
Conversion of short term notes and convertible notes payable	-	-	3,333,334	3,334	263,333	-	-	266,667
Reclassification of warrant liability to equity due to adoption of ASU 2017-11	-	-	-	-	262,339	1,279,661	-	1,542,000
Foreign currency translation adjustment	-	-	-	-	-	-	(2,398)	(2,398)

Balances as of March 31, 2019	-	$-	160,322,580	$160,323	$101,731,430	$(117,520,434)	$(65,266)	$(15,693,947)



Balances as of Janaury 1, 2020	-	$-	293,780,400	$293,781	$115,457,808	$(125,752,956)	$(62,234)	$(10,063,601)
Net loss	-	-	-	-	-	(3,001,148)	-	(3,001,148)
Proceeds from warrant exercise	-	-	1,000,000	1,000	9,000	-	-	10,000
Shares issued for services	-	-	1,000,000	1,000	199,000	-	-	200,000
Stock-based compensation	-	-	-	-	21,900	-	-	21,900
Conversion of short term notes	-	-	1,820,461	1,820	262,164	-	-	263,984
Conversion of advances from related partis	-	-	62,811	63	2,035	-	-	2,098
Foreign currency translation adjustment	-	-	-	-	-	-	4,826	4,826

Balances as of March 31, 2020	-	$-	297,663,672	$297,664	$115,951,907	$(128,754,104)	$(57,408)	$(12,561,941)

SANUWAVE HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Three Months Ended	Three Months Ended
	March 31,	March 31,
	2020	2019

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$(3,001,148)	$(2,197,317)
Adjustments to reconcile net loss
to net cash used by operating activities
Depreciation	53,023	8,357
Change in allowance for doubtful accounts	83,306	(8,645)
Share-based payment	221,900	-
Gain on warrant valuation adjustment	-	(32,359)
Amortization of operating leases	(3,112)	(1,735)
Accrued interest	2,117	147,028
Interest payable, related parties	182,564	219,687
Changes in operating assets and liabilities
Accounts receivable - trade	(111,374)	103,579
Inventory	24,188	29,436
Prepaid expenses	(104,114)	(71,450)
Due from related parties	-	(1,471)
Other assets	(1,165)	(7,013)
Operating leases	-	44,623
Accounts payable	(323,041)	187,465
Accrued expenses	65,126	64,114
Accrued employee compensation	288,906	236,807
Contract liabilties	(22,655)	(6,657)
NET CASH USED BY OPERATING ACTIVITIES	(2,645,479)	(1,285,551)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(4,855)	(22,054)
NET CASH USED BY INVESTING ACTIVITIES	(4,855)	(22,054)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of convertible preferred stock	2,250,000	-
Proceeds from warrant exercise	10,000	53,200
Proceeds from short term note	-	965,000

	March 31,	December 31,
	2020	2019

Accrued board of director's fees	$356,667	$400,000
Shares issuable	200,000	-
Accrued legal and professional fees	173,387	134,970
Accrued executive severance	158,500	154,000
Accrued travel	122,500	120,000
Accrued outside services	100,033	108,033
Accrued inventory	50,275	167,050
Accrued clinical study expenses	13,650	13,650
Accrued other	1,223	13,406
	$1,176,235	$1,111,109

	March 31,	December 31,
	2020	2019

Service agreement	$110,855	$133,510
License fees	500,000	500,000
Other	6,291	6,291
Total Contract liabilities	617,146	639,801
Non-Current	(61,938)	(573,224)
Total Current	$555,208	$66,577

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and