SANUWAVE Health, Inc 10-Q for FY2020 Q2

SANUWAVE Health, Inc. (SNWV)

10-Q 2020-08-14 For: 2020-06-30

Added on April 10, 2026

About this 10-Q

SANUWAVE Health, Inc filed this 10-Q on August 14, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $83.3K; down 73.7% from $316.98K a year earlier
Net loss: $3.63M; compared with a net loss of $2.73M 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)	4
	Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	4
	Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2020 and 2019	5
	Condensed Consolidated Statements of Stockholders’ Deficit for the three and six months ended June 30, 2020 and 2019	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4.	Controls and Procedures	24

	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	27

SIGNATURES		28

	June 30,	December 31,
	2020	2019
ASSETS	(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$430,606	$1,760,455
Accounts receivable, net of allowance for doubtful accounts
of $255,503 in 2020 and $72,376 in 2019	110,501	75,543
Inventory	651,344	542,955
Prepaid expenses and other current assets	227,086	125,405
TOTAL CURRENT ASSETS	1,419,537	2,504,358

PROPERTY AND EQUIPMENT, net	591,064	512,042

RIGHT OF USE ASSETS, net	243,251	323,661

DEPOSITS	1,110,000	-

OTHER ASSETS	43,096	41,931
TOTAL ASSETS	$3,406,948	$3,381,992
LIABILITIES
CURRENT LIABILITIES
Accounts payable	$1,799,630	$1,439,413
Accrued expenses	1,221,214	1,111,109
Accrued employee compensation	2,010,610	1,452,910
Contract liabilities	551,755	66,577
Operating lease liability	179,524	173,270
Finance lease liability	181,371	121,634
Convertible promissory notes, net	705,980	-
SBA Loans	142,514	-
Line of credit, related parties	222,164	212,388
Short term notes payable	210,000	587,233
Advances from related parties	-	18,098
Notes payable, related parties, net	5,372,743	5,372,743
Accrued interest, related parties	2,229,713	1,859,977
TOTAL CURRENT LIABILITIES	14,827,218	12,415,352

NON-CURRENT LIABILITIES
Contract liabilities	53,782	573,224
SBA loans	471,821	-
Operating lease liability	92,889	185,777
Finance lease liability	333,771	271,240
TOTAL NON-CURRENT LIABILITIES	952,263	1,030,241
TOTAL LIABILITIES	15,779,481	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	-

REDEEMABLE PREFERRED STOCK, SERIES D CONVERTIBLE, par value $0.001,
8 designated; 8 shares issued and outstanding in 2020	200,000	-


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

COMMON STOCK, par value $0.001, 600,000,000 shares authorized (See Note 18);
302,119,428 and 293,780,400 issued and outstanding in 2020 and
2019, respectively	302,119	293,781

ADDITIONAL PAID-IN CAPITAL	117,326,629	115,457,808

ACCUMULATED DEFICIT	(132,387,124)	(125,752,956)

ACCUMULATED OTHER COMPREHENSIVE LOSS	(64,157)	(62,234)
TOTAL STOCKHOLDERS' DEFICIT	(14,822,533)	(10,063,601)
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT	$3,406,948	$3,381,992

	Three Months Ended	Three Months Ended	Six Months Ended	Six Months Ended
	June 30,	June 30,	June 30,	June 30,
	2020	2019	2020	2019

REVENUES
Product	$69,341	$220,667	$143,900	$285,232
License fees	-	66,808	10,000	173,058
Other revenue	13,960	29,501	77,993	36,649
TOTAL REVENUES	83,301	316,976	231,893	494,939

COST OF REVENUES
Product	24,825	178,458	103,740	243,570
Other	1,522	7,423	11,484	36,164
TOTAL COST OF REVENUES	26,347	185,881	115,224	279,734

GROSS MARGIN	56,954	131,095	116,669	215,205

OPERATING EXPENSES
Research and development	264,907	307,273	551,661	567,922
Selling and marketing	433,151	407,477	1,041,001	565,559
General and administrative	2,566,793	1,426,405	4,474,710	2,943,860
Depreciation	64,766	9,455	117,789	17,812
TOTAL OPERATING EXPENSES	3,329,617	2,150,610	6,185,161	4,095,153

OPERATING LOSS	(3,272,663)	(2,019,515)	(6,068,492)	(3,879,948)

OTHER INCOME (EXPENSE)
Gain on warrant valuation adjustment	-	195,310	-	227,669
Interest expense	(168,941)	(790,178)	(187,673)	(938,439)
Interest expense, related party	(187,172)	(112,984)	(369,736)	(332,671)
Loss on foreign currency exchange	(4,244)	(7,064)	(8,267)	(8,359)
TOTAL OTHER INCOME (EXPENSE), NET	(360,357)	(714,916)	(565,676)	(1,051,800)

NET LOSS	(3,633,020)	(2,734,431)	(6,634,168)	(4,931,748)

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments	(6,551)	1,489	(1,923)	(909)
TOTAL COMPREHENSIVE LOSS	$(3,639,571)	$(2,732,942)	$(6,636,091)	$(4,932,657)

LOSS PER SHARE:
Net loss - basic and diluted	$(0.01)	$(0.02)	$(0.02)	$(0.03)

Weighted average shares outstanding - basic and diluted	299,497,960	174,730,747	297,856,870	165,921,811

	Preferred Stock		Common Stock
	Number of Shares Issued and Outstanding	Par Value	Number of Shares Issued and Outstanding	Par Value	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive 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)
Net loss	-	-	-	-	-	(2,734,431)	-	(2,734,431)
Cashless warrant exercises	-	-	2,997,375	2,997	13,003	-	-	16,000
Proceeds from warrant exercise	-	-	17,051,769	17,052	1,333,005	-	-	1,350,057
Other warrant exercise	-	-	5,804,167	5,804	451,697			457,501
Conversion of short term notes and convertible notes payable	-	-	2,475,000	2,475	177,525	-	-	180,000
Stock-based compensation	-	-	-	-	31,758	-	-	31,758
Warrants issued for consulting services	-	-	-	-	36,067	-	-	36,067
Foreign currency translation adjustment	-	-	-	-	-	-	1,489	1,489

Balances as of June 30, 2019	-	$-	188,650,891	$188,651	$103,774,485	$(120,254,865)	$(63,777)	$(16,355,506)

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 parties	-	-	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)
Net loss	-	-	-	-	-	(3,633,020)	-	(3,633,020)
Proceeds from PIPE	-	-	1,071,428	1,071	148,929	-	-	150,000
Proceeds from stock option exercise	-	-	225,000	225	44,025	-	-	44,250
Beneficial conversion feature on convertible debt	-	-	-	-	560,682	-	-	560,682
Shares issued for services	-	-	2,200,000	2,200	515,300	-	-	517,500
Conversion of short term notes	-	-	759,328	759	89,986	-	-	90,745
Conversion of advances from related parties	-	-	200,000	200	15,800	-	-	16,000
Foreign currency translation adjustment	-	-	-	-	-	-	(6,749)	(6,749)

Balances as of June 30, 2020	-	$-	302,119,428	$302,119	$117,326,629	$(132,387,124)	$(64,157)	$(14,822,533)

	June 30, 2020	December 31, 2019

Accrued board of director's fees	$416,667	$400,000
Accrued legal and professional fees	200,000	134,970
Accrued executive severance	313,000	154,000
Accrued travel	120,000	120,000
Accrued outside services	106,233	108,033
Accrued inventory	50,275	167,050
Accrued clinical study expenses	13,650	13,650
Accrued other	1,389	13,406
	$1,221,214	$1,111,109

	June 30, 2020	December 31, 2019

Service agreement	$91,746	$133,510
License fees	500,000	500,000
Other	13,791	6,291
Total Contract liabilities	605,537	639,801
Non-Current	(551,755)	(573,224)
Total Current	$53,782	$66,577

Warrant class	Outstanding as of December 31, 2019	Issued	Exercised	Expired	Outstanding as of June 30, 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
Common Stock Purchase Warrants	-	1,000,000	-	-	1,000,000
	9,474,091	1,000,000	(1,000,000)	(100,000)	9,374,091

	Exercise price/share	Expiration date

Class K Warrants	$0.08	June 2025
Class K Warrants	$0.11	August 2027
Class O Warrants	$0.11	January2022
Class P Warrants	$0.20	June 2024
Common Stock Purchase Warrants	$0.35	June 2025

	June 30, 2020

Weighted average contractual terms in years	2.5
Weighted average risk free interest rate	0.47%
Weighted average volatility	107.12%

	June 30, 2020
Lease liability - right of use
Current portion	$173,270
Long term portion	99,142
	$272,412

Year ending December 31,	Amount
2020 (remainder)	$97,041
2021	197,462
Total lease payments	294,503
Less: Present value adjustment	(22,090)
Lease liability - right of use	$272,413

	Three months ended June 30, 2020			Three months ended June 30, 2019
	United States	International	Total	United States	International	Total

Product	$63,076	$6,265	$69,341	$120,488	$100,179	$220,667
License fees	-	-	-	6,250	60,558	66,808
Other Revenue	711	13,249	13,960	-	29,501	29,501
	$63,787	$19,514	$83,301	$126,738	$190,238	$316,976

	Six Months Ended	Six Months Ended
	June 30,	June 30,
	2020	2019

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$(6,634,168)	$(4,931,748)
Adjustments to reconcile net loss
to net cash used by operating activities
Depreciation	117,789	17,812
Bad debt expense	183,127	25,248
Share-based payment	739,400	67,825
Amortization of debt issuance costs	69,862	-
Accrued interest	84,072	936,658
Interest payable, related parties	369,736	332,671
Amortization of operating leases	(6,224)	(3,471)
Waived proceeds from warrant exercise	-	16,000
Gain on warrant valuation adjustment	-	(227,669)
Changes in operating assets and liabilities
Accounts receivable - trade	(218,085)	34,485
Inventory	(108,389)	(66,112)
Prepaid expenses	(101,681)	(126,505)
Due from related parties	-	1,228
Other assets	(1,165)	(7,070)
Operating leases	-	44,623
Accounts payable	360,217	(135,916)
Accrued expenses	110,105	106,178
Accrued employee compensation	557,700	525,487
Contract liabilties	(34,264)	3,642
NET CASH USED BY OPERATING ACTIVITIES	(4,511,968)	(3,386,634)

CASH FLOWS FROM INVESTING ACTIVITIES
	(1,110,000)	-
Purchases of property and equipment	(4,855)	(25,839)
NET CASH USED BY INVESTING ACTIVITIES	(1,114,855)	(25,839)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of convertible preferred stock	2,450,000	-
Proceeds from convertible promissory note	1,100,000	-
Proceeds from SBA loan	614,335	-
Proceeds from PIPE offering	150,000	-

Exhibit No.	Description
3.1	Certificate of Designation of Preferences, Rights and Limitations of Series D ConvertiblePreferred Stock of the Company dated May 14, 2020 (Incorporated by reference to the Form 8-K filed with the SEC on May 20, 2020).

4.1*	Convertible Promissory Note, dated as of June 5, 2020, issued by the Company to LGH Investments, LLC (Incorporated by reference to the Form 8-K filed with the SEC on June 11, 2020).

4.2*	Common Stock Purchase Warrant, dated as of June 5, 2020, issued by the Company to LGH Investments, LLC (Incorporated by reference to the Form 8-K filed with the SEC on June 11, 2020).

10.1	Series D Preferred Stock Purchase Agreement, by and among the Company and the accredited investors party thereto, dated May 14, 2020 (Incorporated by reference to the Form 8-K filed with the SEC on May 20, 2020).

10.2*	Shareholders Agreement by and between the Company and with Universus Global Advisors LLC, Versani Health Consulting Consultoria em Gestão de Negócios EIRELI, and IDIC Participações Ltda., dated April 17, 2020.

10.3Ꚙ	Separation Agreement and General Release, dated as of May 14, 2020 by and between the Company and Shri P. Parikh (Incorporated by reference to the Form 8-K filed with the SEC on May 18, 2020).

10.4	Promissory Note by and between the Company and Truist Bank, dated May 28, 2020 (Incorporated by reference to the Form 8-K filed with the SEC on June 1, 2020).

10.5*	Option Agreement by and between the Company and Celularity Inc., dated June 7, 2020.

10.6	Securities Purchase Agreement, dated as of June 5, 2020, by and between the Company and LGH Investments, LLC (Incorporated by reference to the Form 8-K filed with the SEC on June 11, 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: August 14, 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 Name: Kevin A. Richardson, II	Chief Executive Officer and Chairman of the Board of Directors (principal executive officer)	August 14, 2020

By: /s/ Lisa E. Sundstrom Name: Lisa E. Sundstrom	Chief Financial Officer (principal financial and accounting officer)	August 14, 2020

	Six months ended June 30, 2020			Six months ended June 30, 2019
	United States	International	Total	United States	International	Total

Product	$96,730	$47,170	$143,900	$138,167	$147,065	$285,232
License fees	10,000	-	10,000	12,500	160,558	173,058
Other Revenue	1,252	76,741	77,993	-	36,649	36,649
	$107,982	$123,911	$231,893	$150,667	$344,272	$494,939

	June 30, 2020	June 30, 2019

Stock options	34,168,385	32,183,385
Preferred stock conversion	17,500,000	-
Warrants	9,374,091	68,357,635
Convertible promissory notes	5,227,200	26,004,347
Short term notes payable	2,250,000	-
Anti-dilutive equity securities	68,519,676	126,545,367

	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