SANUWAVE Health, Inc 10-Q for FY2024 Q2
SANUWAVE Health, Inc. (SNWV)
10-Q
2024-08-12
For: 2024-06-30
View Original
Added on
April 10, 2026
About this 10-Q
SANUWAVE Health, Inc filed this 10-Q on August 12, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).
Headline figures
Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $7.16M
- up 53.2% from $4.68M a year earlier
- Net income
- $6.56M
- compared with a net loss of $7.26M a year earlier
- Diluted EPS
- $0.00
- compared with -$0.01 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2024
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from ________ to
Commission File Number 000-52985
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (Address of principal executive offices) | (Zip Code) | ||||
(952 ) 656-1029
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| None | N/A | N/A | ||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer o | Accelerated filer o | |||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of August 8, 2024 there were issued and outstanding 1,181,272,961 shares of the registrant’s common stock, $0.001 par value per share.
SANUWAVE Health, Inc.
Table of Contents
| Page | ||||||||
2
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q of SANUWAVE Health, Inc. and its subsidiaries (“SANUWAVE,” the “Company,” “we,” “us,” and “our”) contains forward-looking statements. All statements in this Quarterly Report on Form 10-Q, including those made by the management of the Company, other than statements of historical fact, are forward-looking statements. Examples of forward-looking statements include statements regarding: our results of operations, liquidity, and operations, restrictions and new regulations on our operations and processes, including the execution of clinical trials; the Company’s future financial results, operating results, and projected costs; market acceptance of and demand for UltraMIST and PACE®; success of future business development and acquisition activities; management’s plans and objectives for future operations; industry trends; regulatory actions that could adversely affect the price of or demand for our approved products; our intellectual property portfolio; our business, marketing and manufacturing capacity and strategy; estimates regarding our capital requirements, the anticipated timing of the need for additional funds, and our expectations regarding future capital-raising transactions, including through investments by strategic partners for market opportunities, which may include strategic partnerships or licensing agreements, or raising capital through the conversion of outstanding warrants or issuances of securities; product liability claims; economic conditions that could adversely affect the level of demand for or the cost of our products; timing of clinical studies and any eventual U.S. Food and Drug Administration (“FDA”) approval of new products and new uses of our current products; financial markets; the competitive environment; supplier and customer disputes; and our plans to remediate our material weaknesses in our disclosure controls and procedures and our internal control over financial reporting. These forward-looking statements are based on management’s estimates, projections, and assumptions as of the date hereof and include the assumptions that underlie such statements. Forward-looking statements may contain words such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” and “continue,” the negative of these terms, or other comparable terminology. Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed in the reports we file with the Securities and Exchange Commission (the “SEC”), specifically the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed on March 21, 2024. Other risks and uncertainties are and will be disclosed in the Company’s subsequent SEC filings, including this Quarterly Report on Form 10-Q. These and many other factors could affect the Company’s future financial condition and operating results and could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by the Company or on its behalf. The Company undertakes no obligation to revise or update any forward-looking statements. The following information should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed on March 21, 2024.
Except as otherwise indicated by the context, references in this Quarterly Report on Form 10-Q to “we,” “us” and “our” are to the consolidated business of the Company.
3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SANUWAVE HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except share data)
| June 30, 2024 | December 31, 2023 | ||||||||||
ASSETS | |||||||||||
Current Assets: | |||||||||||
Cash and cash equivalent | $ | $ | |||||||||
Accounts receivable, net of allowance of $ | |||||||||||
Inventory | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total Current Assets | |||||||||||
Property, equipment and other, net | |||||||||||
Intangible assets, net | |||||||||||
Goodwill | |||||||||||
Total Non-current Assets | |||||||||||
Total Assets | $ | $ | |||||||||
LIABILITIES | |||||||||||
Current Liabilities: | |||||||||||
Senior secured debt, in default | $ | $ | |||||||||
Convertible promissory notes payable | |||||||||||
Convertible promissory notes payable, related parties | |||||||||||
Asset-backed secured promissory notes | |||||||||||
Asset-backed secured promissory notes, related parties | |||||||||||
Promissory note payable, related party | |||||||||||
Accounts payable | |||||||||||
Accrued expenses | |||||||||||
Factoring liabilities | |||||||||||
Warrant liability | |||||||||||
Accrued interest | |||||||||||
Accrued interest, related parties | |||||||||||
Current portion of contract liabilities | |||||||||||
Other | |||||||||||
Total Current Liabilities | |||||||||||
Non-current Liabilities | |||||||||||
Lease liabilities | |||||||||||
Contract liabilities | |||||||||||
Total Non-current Liabilities | |||||||||||
Total Liabilities | $ | $ | |||||||||
Commitments and Contingencies (Footnote 14) | |||||||||||
STOCKHOLDERS’ DEFICIT | |||||||||||
Preferred Stock, par value $ | $ | $ | |||||||||
Common stock, par value $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Accumulated other comprehensive income (loss) | ( | ||||||||||
Total Stockholders’ Deficit | ( | ( | |||||||||
Total Liabilities and Stockholders’ Deficit | $ | $ | |||||||||
The accompanying notes to condensed consolidated financial statements are an integral part of these financial statements.
4
SANUWAVE HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(In thousands, except share and per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||||||||||
Cost of Revenues | |||||||||||||||||||||||
Gross Margin | |||||||||||||||||||||||
Operating Expenses: | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Selling and marketing | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Total Operating Expenses | |||||||||||||||||||||||
Operating Income (Loss) | ( | ||||||||||||||||||||||
Other (Expense)/Income: | |||||||||||||||||||||||
Interest expense | ( | ( | ( | ( | |||||||||||||||||||
Interest expense, related party | ( | ( | ( | ( | |||||||||||||||||||
Gain on extinguishment of debt | |||||||||||||||||||||||
Change in fair value of derivative liabilities | ( | ( | |||||||||||||||||||||
Other expense | ( | ( | ( | ||||||||||||||||||||
Other income | - | ||||||||||||||||||||||
Total Other Income (Expense) | ( | ( | |||||||||||||||||||||
Net Income (Loss) | ( | ( | |||||||||||||||||||||
Other Comprehensive Loss | |||||||||||||||||||||||
Foreign currency translation adjustments | ( | ( | |||||||||||||||||||||
Total Comprehensive Income (Loss) | $ | $ | ( | $ | $ | ( | |||||||||||||||||
Net income (loss) per share: | |||||||||||||||||||||||
Basic | $ | $ | ( | $ | $ | ( | |||||||||||||||||
Diluted | $ | $ | ( | $ | $ | ( | |||||||||||||||||
Number of shares used in per share calculation: | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted | |||||||||||||||||||||||
The accompanying notes to condensed consolidated financial statements are an integral part of these financial statements.
5
SANUWAVE HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(UNAUDITED)
(In thousands, except share data)
| Three Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||||||||
Number of Shares Issued and Outstanding | Par Value | Additional Paid- in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total | |||||||||||||||||||||||||||||||||
| Balances as of March 31, 2024 | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||
| Shares issued for settlement of warrants | - | - | - | |||||||||||||||||||||||||||||||||||
| Shares issued for settlement of debt | - | - | ||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | ||||||||||||||||||||||||||||||||||
Net income | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Balances as of June 30, 2024 | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||||||||
Number of Shares Issued and Outstanding | Par Value | Additional Paid- in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total | |||||||||||||||||||||||||||||||||
| Balances as of March 31, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||
Shares issued for services | - | - | ||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | ( | ( | ||||||||||||||||||||||||||||||||
Net loss | - | - | - | ( | - | ( | ||||||||||||||||||||||||||||||||
| Balances as of June 30, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||
The accompanying notes to condensed consolidated financial statements are an integral part of these financial statements.
6
SANUWAVE HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(UNAUDITED)
(In thousands, except share data)
| Six Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||||||||
Number of Shares Issued and Outstanding | Par Value | Additional Paid- in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total | |||||||||||||||||||||||||||||||||
| Balances as of December 31, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||
| Shares issued for settlement of warrants | - | - | - | |||||||||||||||||||||||||||||||||||
Shares issued for settlement of debt | - | - | ||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | ||||||||||||||||||||||||||||||||||
Net income | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Balances as of June 30, 2024 | $ | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||||||||
Number of Shares Issued and Outstanding | Par Value | Additional Paid- in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total | |||||||||||||||||||||||||||||||||
| Balances as of December 31, 2022 | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||
Shares issued for services | - | - | ||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | ( | ( | ||||||||||||||||||||||||||||||||
Net loss | - | - | - | ( | - | ( | ||||||||||||||||||||||||||||||||
| Balances as of June 30, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||
The accompanying notes to condensed consolidated financial statements are an integral part of these financial statements.
7
SANUWAVE HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
The accompanying notes to condensed consolidated financial statements are an integral part of these financial statements.
| Six Months Ended June 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
Cash Flows - Operating Activities: | ||||||||||||||
Net Income (Loss) | $ | $ | ( | |||||||||||
Adjustments to reconcile net loss to net cash used by operating activities | ||||||||||||||
Depreciation and amortization | ||||||||||||||
Bad debt expense | ||||||||||||||
Shares issued for services | ||||||||||||||
Gain on extinguishment of debt | ( | |||||||||||||
Change in fair value of derivative liabilities | ( | |||||||||||||
Amortization of debt issuance costs and original issue discount | ||||||||||||||
Accrued interest | ||||||||||||||
Changes in operating assets and liabilities | ||||||||||||||
Accounts receivable | ( | |||||||||||||
Inventory | ( | |||||||||||||
Prepaid expenses and other assets | ( | |||||||||||||
Accounts payable | ( | |||||||||||||
Accrued expenses | ( | |||||||||||||
Contract liabilities | ( | |||||||||||||
Net Cash Provided by/(Used) in Operating Activities | ( | |||||||||||||
Cash Flows - Investing Activities | ||||||||||||||
Purchase of property and equipment | ( | ( | ||||||||||||
Net Cash Flows Used in Investing Activities | ( | ( | ||||||||||||
Cash Flows - Financing Activities | ||||||||||||||
Proceeds from convertible promissory notes | - | |||||||||||||
Payment of note payable | ( | |||||||||||||
Proceeds from convertible notes payable | - | |||||||||||||
Proceeds from promissory note payable, related party | ||||||||||||||
Proceeds from bridge notes advance | ||||||||||||||
Proceeds/(Payments) from factoring, net | ( | |||||||||||||
Payments of principal on finance leases | ( | ( | ||||||||||||
Net Cash Flow Provided by Financing Activities | ||||||||||||||
Effect of Exchange Rates on Cash | ( | |||||||||||||
Net Change in Cash During Period | ||||||||||||||
Cash at Beginning of Period | ||||||||||||||
Cash at End of Period | $ | $ | ||||||||||||
Supplemental Information: | ||||||||||||||
Cash paid for interest | $ | $ | ||||||||||||
Non-cash Investing and Financing Activities: | ||||||||||||||
Shares issued for settlement of debt | ||||||||||||||
Write off deferred merger costs | ||||||||||||||
Warrants issued in conjunction with convertible promissory notes | ||||||||||||||
Capitalize default interest into Senior secured debt | ||||||||||||||
Conversion of asset-based secured promissory notes to convertible promissory notes | ||||||||||||||
Embedded conversion feature on convertible promissory notes payable | ||||||||||||||
Common shares issued for advisory shares | ||||||||||||||
8
SANUWAVE HEALTH, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
1. Nature of the Business and Basis of Presentation
SANUWAVE Health, Inc. and subsidiaries (“SANUWAVE” or the “Company”) is focused on the commercialization of its patented noninvasive and biological response activating medical systems for the repair and regeneration of skin, musculoskeletal tissue, and vascular structures.
Basis of Presentation - The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all the information and disclosures required by U.S. GAAP for comprehensive financial statements.
The financial information as of June 30, 2024, and for the three and six months ended June 30, 2024, and 2023 is unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included. Operating results for the three and six months ended June 30, 2024, are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2024.
The condensed consolidated balance sheet on December 31, 2023, has been derived from the audited consolidated financial statements at that date but does not include all the information and disclosures required by U.S. GAAP for comprehensive financial statements. These financial statements should be read in conjunction with the Company’s December 31, 2023, Annual Report on Form 10-K filed with the SEC on March 21, 2024 (the “2023 Annual Report”).
2. Going Concern
Our recurring losses from operations, the events of default on the Company’s notes payable, and dependency upon future issuances of equity or other financing to fund ongoing operations have raised substantial doubt as to our ability to continue as a going concern for a period of at least twelve months from the filing of this Form 10-Q. We will be required to raise additional funds to finance our operations and remain a going concern; we may not be able to do so, and/or the terms of any financing may not be advantageous to us.
The continuation of our business is dependent upon raising additional capital. We expect to devote substantial resources for the commercialization of UltraMIST and PACE systems which will require additional capital resources to remain a going concern.
Management’s plans may include obtaining additional capital in 2024. The Company could obtain additional capital through the conversion of outstanding warrants, issuance of common or preferred stock, securities convertible into common stock, or secured or unsecured debt. These possibilities, to the extent available, may be on terms that result in significant dilution to the Company’s existing stockholders. In addition, there can be no assurances that the Company’s plans to obtain additional capital will be successful on the terms or timeline it expects, or at all. If these efforts are unsuccessful, the Company may be required to significantly curtail or discontinue operations or, if available, obtain funds through financing transactions with unfavorable terms.
The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the condensed consolidated financial statements do not necessarily purport to represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. The Company’s condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
9
3. Summary of Significant Accounting Policies
Significant accounting policies followed by the Company are summarized below and should be read in conjunction with those described in Note 3 of the consolidated financial statements in our 2023 Annual Report.
Estimates - These condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. Because a precise determination of assets and liabilities, and correspondingly revenues and expenses, depend on future events, the preparation of condensed consolidated financial statements for any period necessarily involves the use of estimates and assumptions. Actual amounts may differ from these estimates. These condensed consolidated financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the accounting policies summarized herein.
Significant estimates include the recording of allowances for credit losses, the net realizable value of inventory, fair value of goodwill and other intangible assets, the determination of the valuation allowances for deferred taxes, litigation contingencies, and the estimated fair value of financial instruments, including warrants and embedded conversion options.
Revenue Recognition - The core principle of Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers” (“ASC 606”) requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company allocates the transaction price to all contractual performance obligations included in the contract. If a contract has more than one performance obligation, we allocate the transaction price to each performance obligation based on standalone selling price, which depicts the amount of consideration we expect to be entitled in exchange for satisfying each performance obligation. The Company recognizes revenue primarily from the following types of contracts:
System Sales, Consumables and Part Sales - System sales, consumables and part sales include devices and applicators (new and refurbished). Performance obligations are satisfied at the point in time when the customer obtains control of the goods, which is generally at the point in time that the product is shipped.
Other Revenue - Other revenue primarily includes warranties, repairs, and billed freight. The Company allocates the device sales price to the product and the embedded warranty by reference to the stand-alone extended warranty price. Warranty revenue is recognized over the time that the Company satisfies its performance obligations, which is generally the warranty term. Repairs (parts and labor) and billed freight revenue are recognized at the point in time that the service is performed, or the product is shipped, respectively.
Recent Accounting Pronouncements - In December 2023, the Financial Accounting Standards Board issued ASC Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Update No. 2023-09 aims to enhance the transparency and decision usefulness of income tax disclosures. Update No. 2023-09 modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state, and foreign). Update 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. Update No. 2023-09 is effective for fiscal years beginning after December 15, 2024. We expect to adopt Update No. 2023-09 prospectively. We are currently evaluating the potential impact of adopting this new guidance on our condensed consolidated financial statements and related disclosures.
4. Merger Agreement
On August 23, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among SEP Acquisition Corp., a Delaware corporation (“SEPA”), SEP Acquisition Holdings Inc., a Nevada corporation
10
and a wholly owned subsidiary of SEPA. Pursuant to the terms of the Merger Agreement, a business combination between the Company and SEPA was to be effected.
On June 25, 2024, the Company delivered a notice to SEPA terminating the Merger Agreement.
5. Net Income (Loss) per Share
Basic net income (loss) per share is computed based on the weighted average number of shares outstanding including nominally priced warrants. Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding. Diluted net income (loss) per share is calculated based on the weighted average of ordinary shares outstanding and the number of additional shares that would have been outstanding if the potentially dilutive securities had been issued. The Company uses the treasury stock method to calculate the number of shares for the nominally priced warrants, and the as-converted method to calculate the number of shares for the convertible promissory notes.
The following table sets forth the computation of basic and diluted net income (loss) per share attributable to the shareholders of the Company:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| (in Thousands, except per share data) | June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | |||||||||||||||||||
Numerator: | |||||||||||||||||||||||
Net Income (Loss) | $ | $ | ( | $ | $ | ( | |||||||||||||||||
Number of shares used in per share calculation: | |||||||||||||||||||||||
| Common shares | |||||||||||||||||||||||
| Common shares issuable assuming exercise of nominally priced warrants | |||||||||||||||||||||||
Total shares used for calculating basic income (loss) per share | |||||||||||||||||||||||
Weighted-average effect of dilutive securities: | |||||||||||||||||||||||
Common shares issuable on convertible promissory notes including interest | |||||||||||||||||||||||
Total shares for purposes of calculating diluted net income (loss) per share | |||||||||||||||||||||||
Net income (loss) per share: | |||||||||||||||||||||||
| Basic | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| Diluted | $ | $ | ( | $ | $ | ( | |||||||||||||||||
To the extent that securities are “anti-dilutive,” they are excluded from the calculation of diluted net income (loss) per share. As a result of the net loss for the six months ended June 30, 2023, all potentially dilutive shares in such periods were anti-dilutive and therefore excluded from the computation of diluted net loss per share.
| Six Months Ended | |||||||||||
(in thousands) | June 30, 2024 | June 30, 2023 | |||||||||
Common stock options | |||||||||||
Common stock purchase warrants | |||||||||||
Convertible notes payable, including interest | |||||||||||
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6. Accrued Expenses
Accrued expenses consist of the following:
(in thousands) | June 30, 2024 | December 31, 2023 | |||||||||
| Registration penalties | $ | $ | |||||||||
| License fees | |||||||||||
Board of directors fees | |||||||||||
Employee compensation | |||||||||||
| Other | |||||||||||
| $ | $ | ||||||||||
7. Senior Secured Debt, In Default
The following table summarizes outstanding senior secured debt, in default:
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Principal | Debt Discount | Carrying Value | Accrued Interest | Principal | Debt Discount | Carrying Value | Accrued Interest | |||||||||||||||||||||||||||||||||||||||
Senior secured debt | $ | $ | ( | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||
Senior secured promissory note payable, in default (“Senior Secured Note”) –In August 2020, the Company entered into a Note and Warrant Purchase and Security Agreement (the “NWPSA”). In accordance with the NWPSA, the Company issued a $15 million Senior Secured Promissory Note Payable (the “Senior Secured Note”) and a warrant exercisable for shares of the Company’s common stock in exchange for cash to support operations, repay outstanding debt and close on the acquisition of the UltraMIST assets from Celularity Inc. (Celularity) among other transactions.
In February 2022, the Company entered into a Second Amendment to Note and Warrant Purchase and Security Agreement (the “Second NWPSA”) for $3.0 million, for a total of $18.0 million outstanding. Along with the issuance of the note, the Company also issued warrants to purchase 16.2 million shares of common stock with an exercise price of $0.18 and 20.6 million shares of common stock.
Interest is charged at the greater of the prime rate or 3 % plus 9 %. The principal increases at a rate of 3 % of the outstanding principal balance (PIK interest) on each quarterly interest payment date. The original maturity date of the Senior Secured Note is September 20, 2025, and it can be prepaid.
In March 2024, the Company entered into a Consent, Limited Waiver and Fifth Amendment to Note and Warrant Purchase and Security Agreement (the “Fifth Amendment”). The Fifth Amendment provides (i) consent to enter into a License and Option Agreement and consummation of a License and Option Transaction a waiver of any event of default that may occur under the NWPSA, because of the License and Option Agreement or License and Option Transaction and (iii) amended the NWPSA to release certain patents from the collateral. The Fifth Amendment also provides for a forbearance of exercising remedies in connection with certain existing events of default under the NWPSA until the earlier of (x) the occurrence of another event of default under the NWPSA and (y) April 30, 2024. During the forbearance period, the outstanding obligations under the NWPSA continue to accrue interest at the default rate.
As of June 30, 2024, the Company is in default on the minimum liquidity provisions in the Senior Secured Note and, as a result, it is classified in current liabilities in the accompanying condensed consolidated balance sheets. The Company is accruing interest at the default interest rate of an incremental 5 %.
The debt issuance costs, and debt discount related to the Senior Secured Note were capitalized as a reduction in the principal amount and are being amortized to interest expense over the life of the Senior Secured Note. The amortization of the debt issuance costs and debt discount, included in interest expense, for the three and six months ended June 30, 2024, totaled $2.1 million and $4.0 million, respectively. Interest expense on the Senior Secured Note totaled $1.7 million and $3.3 million for the three and six months ended June 30, 2023, respectively.
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On July 15, 2024, the Company entered into the Sixth Amendment to Note and Warrant Purchase and Security Agreement (the “Sixth Amendment”), which was a modification of debt. The Sixth Amendment added, as of June 30, 2024, a consent fee of $0.7 million to the principal amount of the Senior Secured Note issued pursuant to the NWPSA. On and after April 1, 2024, for each fiscal quarter during which any interest is payable in cash, deferred interest and default interest shall be calculated based on the principal amount of the Senior Secured Note as of the beginning of the quarter and shall include any default interest accrued to date. The Sixth Amendment also provides for a forbearance of exercising remedies in connection with certain existing events of default under the NWPSA until the earlier of (x) the occurence of another event of default under the NWPSA and (y) December 31, 2024. During the forbearance period, the outstanding obligations under the NWPSA continue to accrue interest at the default rate.
8. Promissory Notes Payable
The following two tables summarize outstanding notes payable as of June 30, 2024, and December 31, 2023:
| As of June 30, 2024 | ||||||||||||||||||||||||||
(In thousands, except conversion price) | Conversion Price | Principal | Remaining Debt Discount | Carrying Value | ||||||||||||||||||||||
Historical convertible promissory notes payable, related parties, in default | $ | |||||||||||||||||||||||||
Convertible notes payable | $ | ( | ||||||||||||||||||||||||
Convertible notes payable, related parties | $ | ( | ||||||||||||||||||||||||
Total Convertible Promissory Notes Payable | $ | $ | ( | $ | ||||||||||||||||||||||
| As of December 31, 2023 | |||||||||||||||||||||||||||||
(In thousands, except conversion price) | Conversion Price | Principal | Remaining Debt Discount | Carrying Value | |||||||||||||||||||||||||
Acquisition convertible promissory note, in default | $ | ||||||||||||||||||||||||||||
Historical convertible promissory note, related party, in default | $ | ||||||||||||||||||||||||||||
Convertible notes payable | $ | ( | |||||||||||||||||||||||||||
Convertible notes payable, related parties | $ | ( | |||||||||||||||||||||||||||
Total Convertible Promissory Notes Payable | $ | $ | ( | $ | |||||||||||||||||||||||||
Convertible Notes Payable and Convertible Notes Payable, Related Parties –In August 2022, November 2022, May 2023, December 2023, January 2024, and June 2024, the Company entered into Securities Purchase Agreements (the “Purchase Agreements”), for the sale in a private placement of (i) Future Advance Convertible Promissory Notes (the “Notes”) in an aggregate principal amount of approximately $16.2 million in August, approximately $4.0 million in November, $1.2 million in May, $1.9 million in December 2023, $4.6 million in January 2024 related to the conversion of the Asset-Backed Secured Promissory Notes (described in Note 9) and $1.3 million in June 2024 (ii) Common Stock Purchase Warrants to purchase an additional 728.1 million shares of common stock with an exercise price of $0.067 per share and (iii) Common Stock Purchase Warrants to purchase an additional 728.1 million shares of common stock with an exercise price of $0.04 per share. Interest expense for the three and six months ended June 30, 2024, totaled $1.2 million and $2.8 million, respectively. Interest expense for the three and six months ended June 30, 2023, totaled $2.4 million and $4.6 million, respectively.
The Notes have a term of 12 months from the date of issue. Pursuant to the Notes, the Company promised to pay in cash and/or in shares of common stock, at a conversion price of $0.04 (the “Conversion Price”), the principal amount and interest at a rate of 15 % per annum on any outstanding principal. The Conversion Price of the Notes is subject to adjustment, including if the Company issues or sells shares of common stock for a price per share less than the Conversion Price of the Notes or if the Company lists its shares of common stock on The Nasdaq Capital Market and the average volume weighted average price of such common stock for the trading days preceding such listing is less than $0.04 per
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share; provided, however, that the Conversion Price shall never be less than $0.01 . The Notes contain customary events of default and covenants, including limitations on incurrences of indebtedness and liens.
In May 2024 the Company utilized its election to convert the May issued Convertible Notes Payable into shares of common stock upon the Notes' maturity. The May notes totaling $1.2 million in principal and $0.2 million interest were converted to 35,298,619 shares of common stock.
9. Asset-Backed Secured Promissory Notes
In July 2023, the Company issued Asset-Backed Secured Promissory Notes (the “ABS Promissory Notes”) in an aggregate principal amount of $4.6 million to certain accredited investors (the “Purchasers”) at an original issue discount of 33.33 %. The ABS Promissory Notes bear an interest rate of 0 % per annum and mature on January 21, 2024 (the “Maturity Date”). The Company received total proceeds of approximately $3.0 million. The Company entered into a Security Agreement providing for a continuing and unconditional security interest in any and all property of the Company. This security interest is subordinate to the Senior Secured Debt described in Note 7. Interest expense for the six months ended June 30, 2024, totaled $0.1 million prior to conversion at the Maturity Date.
On January 21, 2024, pursuant to the side letter, which the parties agreed that upon the Maturity Date, the Company will issue each Purchaser a Convertible Note Payable with the same principal amount as the principal amount of such Purchasers’ ABS Promissory Notes. Pursuance to this side letter the ABS Promissory Notes converted to convertible promissory notes, as described in Note 8. The Company recorded a net loss on extinguishment of debt totaling $0.1 million for the six months ended June 30, 2024.
10. Fair Value Measurements
The Company uses various inputs to measure the outstanding warrants and certain embedded conversion features associated with a convertible debt on a recurring basis to determine the fair value of the liabilities.
The following tables classify the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy:
| Fair value measured at June 30, 2024 | |||||||||||||||||||||||
(in thousands) | Fair value at June 30, 2024 | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||||||||
Warrant liability | $ | $ | $ | $ | |||||||||||||||||||
| Fair value measured at December 31, 2023 | |||||||||||||||||||||||
(in thousands) | Fair value at December 31, 2023 | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||||||||
Warrant liability | $ | $ | $ | $ | |||||||||||||||||||
Embedded conversion option | |||||||||||||||||||||||
Total fair value | $ | $ | $ | $ | |||||||||||||||||||
There were no transfers among Levels 1, 2 or 3 during the three and six months ended June 30, 2024, and 2023. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include
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changes in fair value that were attributable to both observable (e.g. changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.
Warrant Liability
The Company’s liability classified warrants as of June 30, 2024, and the value of initial warrant liability from the June financing, were valued using a probability weighted expected value considering the proposed reverse stock split of the Company's common stock (the "Reverse Stock Split") that will effectuate the exchange of Notes and Common Stock Purchase Warrants for shares of the Company's common stock (the "Note and Warrant Exchange"), and the previous Black Scholes valuation model, with significant value stemming from the Note and Warrant Exchange. Significant inputs under the Note and Warrant Exchange included the expected exchange ratio of 0.90 for $0.04 warrants and 0.85 for $0.067 warrants, the value of the Company’s common stock, the expected timing of the closing of the proxy vote for the Reverse Stock Split of a 500 :1 to 300 :1 reverse split (estimated by August 15, 2024), and the probability of the Note and Warrant Exchange occurring (85 % probability).
The Company’s liability classified warrants as of December 31, 2023 and the value of initial warrant liability from the conversion of the ABS Promissory Notes, were valued using a probability weighted expected value considering the Merger Agreement and the previous Black Scholes valuation model, with significant value stemming from the Merger Agreement. Significant inputs under the Merger Agreement valuation included the expected exchange ratio 0.003 , the value of SEPA’s Class A Common Stock, the expected timing of the closing of the Merger, and the probability of the Merger closing.
A summary of the warrant liability activity for the six months ended June 30, 2024, is as follows:
(in thousands, except per share data) | Warrants Outstanding | Fair Value per Share | Fair Value (in thousands) | ||||||||||||||
| Balance at December 31, 2023 | $ | $ | |||||||||||||||
Issuance | |||||||||||||||||
Exercised warrants | ( | $ | |||||||||||||||
Gain on remeasurement of warrant liability | ( | ||||||||||||||||
| Balance at June 30, 2024 | $ | $ | |||||||||||||||
11. Revenue
The disaggregation of revenue is based on type and geographical region. The following table presents revenue from contracts with customers:
| Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||
United States | International | Total | United States | International | Total | ||||||||||||||||||||||||||||||
Consumables and parts revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
System revenue | |||||||||||||||||||||||||||||||||||
License fees and other | |||||||||||||||||||||||||||||||||||
Product Revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Rental Income | |||||||||||||||||||||||||||||||||||
Total Revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
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| Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||
United States | International | Total | United States | International | Total | ||||||||||||||||||||||||||||||
Consumables and parts revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
System revenue | |||||||||||||||||||||||||||||||||||
License fees and other | |||||||||||||||||||||||||||||||||||
Product Revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Rental Income | |||||||||||||||||||||||||||||||||||
Total Revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
12. Concentration of Credit Risk and Limited Suppliers
The Company currently purchases most of its product component materials from single suppliers and the loss of any of these suppliers could result in a disruption in the Company’s production. The percentage of purchases from major vendors of the Company that exceeded ten percent of total purchases for the three and six months ended June 30, 2024, and 2023 were as follows:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | ||||||||||||||||||||
Purchases: | |||||||||||||||||||||||
Vendor A | % | % | % | % | |||||||||||||||||||
Vendor B | n/a | % | n/a | % | |||||||||||||||||||
13. License and Option Agreement
In March 2024, the Company entered into an exclusive license and option agreement with a third-party licensee in connection with a portfolio of Sanuwave, Inc. patents related to the field of intravascular shockwave applications. The Company received a one-time payment of $2.5 million related to this patent license, which was recorded in other income during the six months ended June 30, 2024. Sanuwave, Inc. granted the Licensee an exclusive license to the Patents and an option to acquire the Patents for an additional one-time payment in the single-digit millions of dollars. If the Licensee does not exercise its option to acquire the Patents during a specified option period, the license terminates and all rights revert back to Sanuwave, Inc.
14. Commitments and Contingencies
In the ordinary course of business, the Company from time to time becomes involved in various legal proceedings involving a variety of matters. The Company does not believe there are any pending legal proceedings that will have a material adverse effect on the Company’s business, consolidated financial position, results of operations, or cash flows. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties. The Company expenses legal fees in the period in which they are incurred.
Termination Agreement – In February 2024, the Company entered into a termination agreement with an advisor to agree on termination fees owed with respect to a previous engagement agreement. The Company agreed to a contingent payment of $0.7 million upon the closing of the Merger disclosed in Note 4. Upon the Company's termination of the Merger Agreement in June 2024, the related contingent consideration liability was derecognized.
Acquisition dispute – In May 2021, the Company received notification alleging that it is not in compliance with the license agreement with Celularity entered into in connection with the acquisition of the UltraMIST assets. The Company has settled this dispute in June 2024 for a settlement amount of $2.2 million, which resulted in the removal of $4.0 million in convertible promissory note payable, $2.4 million in accrued interest, $0.9 million of accrued expenses, $0.5 million of other liabilities, and $0.4 million in accounts receivable, which resulted in the recognition of a gain on extinguishment of debt of $5.3 million.
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15. Subsequent Event
On July 18, 2024, the Company commenced the Consent Solicitation from its stockholders with respect to the following proposals which were approved on August 7, 2024:
Proposal 1: To approve an amendment to the Company's Articles of Incorporation to effect a reverse stock split of the Company's outstanding Common Stock at a reverse stock split ratio ranging from any whole number between 1-for-300 and 1-for-500, subject to and as determined by the Board.
Proposal 2: To approve the SANUWAVE Health, Inc. 2024 Equity Incentive Plan.
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes appearing elsewhere in this report, and together with our audited consolidated financial statements, related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as of and for the year ended December 31, 2023 included in our Annual Report on Form 10-K, filed with the SEC on March 21, 2024 (the “2023 Annual Report”).
Executive Summary
We continued to realize significant revenue growth during the three months ended June 30, 2024, as compared to the same period in 2023. Revenue for the three months ended June 30, 2024, totaled $7.2 million, an increase of 53%, as compared to $4.7 million for the same period of 2023. Revenue for the six months ended June 30, 2024, totaled $12.9 million, an increase of 53%, as compared to $8.5 million for the same period of 2023.
Net income for the three months ended June 30, 2024, was $6.6 million, or $0.01 per basic and diluted share, compared to a net loss of $7.3 million, or $0.01 per basic and diluted share, for the same period in 2023. The increase in our net income for the three months ended June 30, 2024, was primarily related to an increase in operating income, a decrease in change of fair value of derivative liabilities, and a gain on the extinguishment of debt. For the three months ended June 30, 2024, our operating income totaled $2.0 million, which is an improvement of $1.1 million compared to the same period of 2023.
Net income for the six months ended June 30, 2024, was $2.0 million, or $0.00 per basic and diluted share, compared to a net loss of $20.4 million, or $0.04 per basic and diluted share, for the same period in 2023. The increase in our net income for the six months ended June 30, 2024, was primarily related to an increase in operating income, a decrease in change of fair value of derivative liabilities, a gain on the extinguishment of debt, and a one-time receipt related to a patent license. For the six months ended June 30, 2024, our operating income totaled $0.9 million, which is an improvement of $2.0 million compared to the same period of 2023.
Merger Agreement with SEPA
On August 23, 2023, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among SEP Acquisition Corp., a Delaware corporation (“SEPA”), SEP Acquisition Holdings Inc., a Nevada corporation and a wholly owned subsidiary of SEPA. Pursuant to the terms of the Merger Agreement, a business combination between the Company and SEPA was to be effected.
On June 25, 2024, we delivered a notice to SEPA terminating the Merger Agreement. We are exploring alternative options to seek an uplisting to a national exchange, strengthen our financial position, and allow us to achieve a market valuation that we believe is commensurate to the fundamentals of the business.
Non-GAAP Financial Measures
Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we present certain financial measures that facilitate management's review of the operational performance of the Company and as a basis for strategic planning; however, such financial measures are not presented in our financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S.) (U.S. GAAP). These financial measures are considered "non-GAAP financial measures" and are intended to supplement, and should not be considered as superior to, or a replacement for, financial measures presented in accordance with U.S. GAAP.
The Company uses Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA to assess its operating performance. Adjusted EBITDA is Earnings before Interest, Taxes, Depreciation and Amortization adjusted for the change in fair value of derivatives and any significant non-cash or non-recurring one-time charges. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income as a measure of financial performance or any other performance measure derived in accordance with U.S. GAAP, and they should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. These non-GAAP financial measures are presented in a consistent manner for each period, unless otherwise disclosed. The Company uses these measures for the purpose of evaluating its historical and prospective financial performance, as well as its performance relative to competitors. These measures also help the Company to make operational and strategic decisions. The Company
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believes that providing this information to investors, in addition to GAAP measures, allows them to see the Company’s results through the eyes of management, and to better understand its historical and future financial performance. These non-GAAP financial measures are also frequently used by analysts, investors, and other interested parties to evaluate companies in our industry, when considered alongside other U.S. GAAP measures.
EBITDA and Adjusted EBITDA have their limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are that EBITDA and Adjusted EBITDA:
•Do not reflect every expenditure, future requirements for capital expenditures or contractual commitments.
•Do not reflect all changes in our working capital needs.
•Do not reflect interest expense, or the amount necessary to service our outstanding debt.
As presented in the U.S. GAAP to Non-GAAP Reconciliations section below, our non-GAAP financial measure excludes the impact of certain charges that contribute to our net loss (Non-GAAP Adjustments).
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
(in thousands) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
Net Income/(Loss) | $ | 6,561 | $ | (7,262) | $ | 2,033 | $ | (20,342) | |||||||||||||||
Non-GAAP Adjustments: | |||||||||||||||||||||||
Interest expense | 3,783 | 4,381 | 7,343 | 8,659 | |||||||||||||||||||
Depreciation and amortization | 262 | 257 | 480 | 515 | |||||||||||||||||||
EBITDA | 10,606 | (2,624) | 9,856 | (11,168) | |||||||||||||||||||
Non-GAAP Adjustments for Adjusted EBITDA: | |||||||||||||||||||||||
Change in fair value of derivative liabilities | (3,717) | 3,821 | (1,216) | 10,618 | |||||||||||||||||||
Other non-cash or non-recurring charges: | |||||||||||||||||||||||
Gain on extinguishment of debt | (5,310) | - | (5,205) | - | |||||||||||||||||||
Severance agreement and legal settlement | - | - | 585 | - | |||||||||||||||||||
Release of historical accrued expenses | (579) | (1,250) | (579) | (1,250) | |||||||||||||||||||
Shares for services | - | 224 | - | 224 | |||||||||||||||||||
License and option agreement | - | - | (2,500) | - | |||||||||||||||||||
Prepaid legal fees expensed from termination of Merger Agreement | 457 | $ | - | $ | 457 | $ | - | ||||||||||||||||
Adjusted EBITDA | $ | 1,457 | $ | 171 | $ | 1,398 | $ | (1,576) | |||||||||||||||
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Results of Operations
| For the Three Months Ended | For the Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| June 30, | Change | June 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
(in Thousands) | 2024 | 2023 | $ | % | 2024 | 2023 | $ | % | |||||||||||||||||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||||||||||||||||||
Total Revenue | $ | 7,162 | $ | 4,675 | $ | 2,487 | 53 | % | $ | 12,948 | $ | 8,450 | $ | 4,498 | 53 | % | |||||||||||||||||||||||||||||||
Cost of Revenues | 1,922 | 1,202 | 720 | 60 | % | 3,506 | 2,464 | 1,042 | 42 | % | |||||||||||||||||||||||||||||||||||||
Gross Margin | 5,240 | 3,473 | 1,767 | 51 | % | 9,442 | 5,986 | 3,456 | 58 | % | |||||||||||||||||||||||||||||||||||||
Gross Margin % | 73 | % | 74 | % | (112) | bps | 73 | % | 71 | % | 208 | bps | |||||||||||||||||||||||||||||||||||
Operating Expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
General and administrative | 1,839 | 1,238 | 601 | 49 | % | 5,514 | 3,997 | 1,517 | 38 | % | |||||||||||||||||||||||||||||||||||||
Selling and marketing | 1,034 | 978 | 56 | 6 | % | 2,266 | 2,390 | (124) | -5 | % | |||||||||||||||||||||||||||||||||||||
Research and Development | 195 | 139 | 56 | 40 | % | 358 | 270 | 88 | 33 | % | |||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 180 | 187 | (7) | -4 | % | 362 | 376 | (14) | -4 | % | |||||||||||||||||||||||||||||||||||||
Operating Income (Loss) | 1,992 | 931 | 1,061 | 114 | % | 942 | (1,047) | 1,989 | 190 | % | |||||||||||||||||||||||||||||||||||||
Other Income (Expense) | 4,569 | (8,193) | 12,762 | 156 | % | 1,091 | (19,295) | 20,386 | 106 | % | |||||||||||||||||||||||||||||||||||||
Net Income (Loss) | $ | 6,561 | $ | (7,262) | $ | 13,823 | 190 | % | $ | 2,033 | $ | (20,342) | $ | 22,375 | 110 | % | |||||||||||||||||||||||||||||||
Revenues and Gross Margin
Revenues for the three month-period ended June 30, 2024, were $7.2 million compared to $4.7 million for the same period of 2023, an increase of $2.5 million, or 53%. The increase was primarily driven by the continued increased sales of our UltraMIST® system. The increase in revenues was due to an increase in the average selling price of our consumables and parts revenue of 26% year over year, and the remainder of the growth was related to an increase in the number of consumables and systems sold year over year. Gross margin as a percentage of revenue decreased to 73% during the three months ended June 30, 2024, from 74% in the same period of 2023.
Revenues for the six month-period ended June 30, 2024, were $12.9 million compared to $8.5 million for the same period of 2023, an increase of $4.5 million, or 53%. The increase was primarily driven by the continued increased sales of our UltraMIST® system. The increase in revenues was due to an increase in the average selling price of our consumables and parts revenue year over year, and the remainder of the growth was related to an increase in the number of consumables and systems sold year over year. Gross margin as a percentage of revenue increased to 73% during the six months ended June 30, 2024, from 71% in the same period of 2023.
General and Administrative Expenses
General and administrative expenses increased $0.6 million or 49% for the three months ended June 30, 2024, compared with the same period of 2023. The increase for the three months ended June 30, 2024, was primarily due to increased headcount expenses. General and administrative expenses increased $1.5 million, or 38%, for the six months ended June 30, 2024, compared with the same period of 2023. The increase for the six months ended June 30, 2024, was primarily due to severance costs, a non-recurring legal settlement, and increased headcount expenses.
Selling and Marketing Expenses
Selling and marketing expenses increased by $0.1 million, or 6%, for the three months ended June 30, 2024, as compared with the same period of 2023. The increase was primarily due to increased travel expenses as the sales team and activity grew in comparison to the same period of 2023. Selling and marketing expenses decreased by $0.1 million, or 5%, for the six months ended June 30, 2024, as compared with the same period of 2023. The decrease was primarily due to severance payments in the six months ended June 30, 2023, that did not recur during the same period of 2024.
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Research and Development Expenses
Research and development expenses increased $0.1 million, or 40%, for the three months ended June 30, 2024, as compared with the same period of 2023. Research and development expenses as a percentage of revenue stayed flat at 3% during the three months ended June 30, 2024, and for the same period in 2023. Research and development expenses increased $0.1 million, or 33%, for the six months ended June 30, 2024, as compared with the same period of 2023. Research and development expenses as a percentage of revenue stayed flat at 3% during the six months ended June 30, 2024, and for the same period in 2023.
Other (Expense)/Income, net
| Three months ended June 30, | Change | Six months ended June 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | $ | % | 2024 | 2023 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| Interest expense | $ | (3,783) | $ | (4,381) | $ | 598 | 14 | % | $ | (7,343) | $ | (8,659) | $ | 1,316 | 15 | % | |||||||||||||||||||||||||||||||
| Gain on extinguishment of debt | 5,310 | - | 5,310 | nm | 5,205 | - | 5,205 | nm | |||||||||||||||||||||||||||||||||||||||
| Change in fair value of derivatives | 3,717 | (3,821) | 7,538 | 197 | % | 1,216 | (10,618) | 11,834 | 111 | % | |||||||||||||||||||||||||||||||||||||
| Other income (expense) | (675) | 9 | (684) | nm | 2,013 | (18) | 2,031 | nm | |||||||||||||||||||||||||||||||||||||||
| Other income (expense), net | $ | 4,569 | $ | (8,193) | $ | 12,762 | 156 | % | $ | 1,091 | $ | (19,295) | $ | 20,386 | 106 | % | |||||||||||||||||||||||||||||||
nm - not meaningful
Other income (expense), net increased by $12.8 million to $4.6 million for the three months ended June 30, 2024, as compared to the same period for 2023. The change was primarily due to a decrease in change in fair value of derivatives expense of $7.5 million, recognition of a non-recurring gain on extinguishment of debt of $5.3 million, and partially offset by $0.5 million of deferred offering costs expense associated with the Merger Agreement and the termination thereof.
Other income (expense), net increased by $20.4 million to $1.1 million for the six months ended June 30, 2024, as compared to the same period for 2023. The increase was primarily due to a decrease in change in fair value of derivatives expense of $11.8 million, recognition of a non-recurring gain on extinguishment of debt of $5.3 million and the receipt of $2.5 million from a third-party license and option agreement.
Liquidity and Capital Resources
Since inception, we have incurred losses from operations each year. As of June 30, 2024, we had an accumulated deficit of $218 million. Historically, our operations have primarily been funded from the sale of capital stock, notes payable, and convertible debt securities. The recurring losses from operations, the events of default on our notes payable, and dependency upon future issuances of equity or other financing to fund ongoing operations have raised substantial doubt as to our ability to continue as a going concern for a period of at least twelve months from the filing of this Form 10-Q. We expect to devote substantial resources for the commercialization of UltraMIST and PACE systems which will require additional capital resources to remain a going concern.
Management’s plans may include obtaining additional capital in 2024. We could obtain additional capital through the conversion of outstanding warrants, issuance of common or preferred stock, securities convertible into common stock, or secured or unsecured debt. These possibilities, to the extent available, may be on terms that result in significant dilution to our existing stockholders. In addition, there can be no assurances that our plans to obtain additional capital will be successful on the terms or timeline we expect, or at all. If these efforts are unsuccessful, we may be required to significantly curtail or discontinue operations or, if available, obtain funds through financing transactions with unfavorable terms.
21
Statement of Cash Flows
| For the six months ended June 30, | |||||||||||
(in thousands) | 2024 | 2023 | |||||||||
Cash flows provided by (used in) operating activities | $ | 432 | $ | (1,215) | |||||||
Cash flows used in investing activities | $ | (206) | $ | (169) | |||||||
Cash flows provided by financing activities | $ | 316 | $ | 1,426 | |||||||
Cash provided by operating activities during the six months ended June 30, 2024, totaled $0.4 million as compared to cash used by operating activities of $1.2 million in the previous year period. This improvement in cash provided by operations was primarily driven by the receipt of $2.5 million related to a license agreement and option agreement.
Critical Accounting Estimates
We have used various accounting policies to prepare the condensed consolidated financial statements in accordance with U.S. GAAP. Our significant accounting policies are disclosed in Note 3 to the consolidated financial statements in Part II Item 8. “Financial Statements and Supplementary Data” in our Annual Report on Form 10-K filed with the SEC on March 21, 2024.
The preparation of the condensed consolidated financial statements, in conformity with U.S. GAAP, requires us to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates reflect our best judgment about economic and market conditions and the potential effects on the valuation and/or carrying value of assets and liabilities based upon relevant information available. We base our estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
The following accounting estimates are deemed critical:
Litigation Contingencies
We may be involved in legal actions involving product liability, intellectual property and commercial disputes, tax disputes, and governmental proceedings and investigations. The outcomes of these legal actions are not completely within our control and may not be known for prolonged periods of time. In some actions, the enforcement agencies or private claimants seek damages that could require significant expenditures or result in lost revenues or limit our ability to conduct business in the applicable jurisdictions. Estimating probable losses from our litigation and governmental proceedings is inherently difficult, particularly when the matters are in early procedural stages, with incomplete scientific facts or legal discovery; involve unsubstantiated or indeterminate claims for damages; potentially involve penalties, fines, or punitive damages; or could result in a change in business practice. The Company records a liability in the condensed consolidated financial statements for loss contingencies when a loss is known or considered probable, and the amount may be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and may be reasonably estimated, the estimated loss or range of loss is disclosed. Our significant legal proceedings are discussed in Note 13 to the condensed consolidated financial statements.
Derivative Liabilities from Embedded Conversion Options and Warrants
The Company classified certain convertible instruments as having embedded conversion options which qualified as derivative financial instruments to be separately accounted for. The Company also determined that certain warrants also qualified as derivative financial instruments. Various valuation models were used to estimate the fair value of these derivative financial instruments that are classified as derivative liabilities on the consolidated balance sheets. The models include subjective input assumptions that can materially affect the fair value estimates and as such are subject to uncertainty. Our significant input assumptions are discussed in Note 10 to the condensed consolidated financial statements.
22
Segment and Geographic Information
We have determined that we have one operating segment. Our revenues are generated from sales primarily in the United States. International sales include sales in Europe, Canada, the Middle East, Central America, South America, Asia, and Asia/Pacific. All significant expenses are generated in the United States and all significant assets are in the United States.
Effects of Inflation
Our assets are, to an extent, liquid in nature, so they are not significantly affected by inflation. However, the rate of inflation, which has increased, affects expenses such as employee compensation, office space leasing costs and research and development charges, which may not be readily recoverable. To the extent inflation results in rising interest rates and has other adverse effects on the market, it may adversely affect our consolidated financial condition and results of operations.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide the information required under this item.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
We carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2024. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not operating effectively as of June 30, 2024. Our disclosure controls and procedures were not effective because of the “material weakness” described below.
We have identified three existing material weaknesses in internal control over financial reporting from prior periods. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Because the items described below could have resulted in material misstatement of our annual or interim financial statements, we determined this constitutes a material weakness.
As of June 30, 2024, the Company has still identified the following material weaknesses:
1.The Company lacked expertise and resources to analyze and properly apply U.S. GAAP to complex and non-routine transactions such as complex financial instruments and derivatives and complex sales distributing agreements with select vendors.
2.The Company lacked internal resources to analyze and properly apply U.S. GAAP to accounting for financial instruments included in service agreements with select vendors.
3.The Company has failed to design and implement controls around all accounting and IT processes and procedures and, as such, we believe that all its accounting and IT processes and procedures need to be re-designed and tested for operating effectiveness.
As a result, management concluded that its internal control over reporting was not effective as of June 30, 2024.
23
Remediation Plan
Our management is committed to remediating these material weaknesses and has implemented several steps to enhance our internal controls and ensure appropriate resourcing with the required knowledge and expertise to conduct our business activities. Management hired a third-party consultant to help us design and document internal controls and perform a risk assessment of our processes over financial reporting. The risk assessment performed resulted in a qualitative and quantitative view of all processes that will help inform remediation efforts and prioritize high risk processes for remediation. The third-party consultant has also provided recommendations to standardize, automate and implement effectively designed internal controls over financial reporting. We intend to remediate and implement internal controls for high-risk processes over the course of 2024. We also intend to hire and segregate certain duties so that control activities are appropriate and fully mitigate risk. The material weaknesses will not be considered remediated until a sustained period of time has passed to allow management to test the design and operational effectiveness of the corrective actions. Until the material weaknesses are remediated, we plan to continue to perform additional analyses and other procedures to ensure that our consolidated financial statements are prepared in accordance with U.S GAAP. In addition, we may discover additional material weaknesses that require additional time and resources to remediate and we may decide to take additional measures to address the material weaknesses or modify the remediation steps described above.
We are also working with an outside vendor to improve our IT general controls over our enterprise resource planning system and set up a proper framework for IT general controls to be executed with the objective to remediate the weaknesses regarding internal controls and provide the framework for testing going forward.
The existence of any material weakness or significant deficiency requires management to devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiencies and management may not be able to remediate any such material weaknesses or significant deficiencies in a timely manner. The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause shareholders to lose confidence in our reported financial information, all of which could materially and adversely affect our business and stock price.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2024, that materially affect, or are reasonably likely to materially affect, our internal control over financial reporting, except as disclosed in “Remediation Plan” above.
PART II — OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
For information regarding legal proceedings at June 30, 2024, see Note 14 to the condensed consolidated financial statements, which information is incorporated herein by reference.
Item 1A. RISK FACTORS.
There have been no material changes from our risk factors as previously reported in Part I, Item 1A “Risk Factors” in our 2023 Annual Report.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES ANDUSE OF PROCEEDS.
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
Item 4. MINE SAFETY DISCLOSURES.
Not applicable.
24
Item 5. OTHER INFORMATION.
During the three months ended June 30, 2024, none
Item 6. EXHIBITS
2.1 | Agreement and Plan of Merger, dated as of August 23, 2023, by and among SEP Acquisition Corp., SEP Acquisition Holdings Inc., and SANUWAVE Health, Inc. (Incorporated by reference to Exhibit 2.1 to the Form 8-K filed with the SEC on August 23, 2023). | ||||||||||||||||||||||
| Amendment Number one to Agreement and Plan of Merger, dated February 27, 2024, by and between SEP Acquisition Corp. and Sanuwave Health, Inc. (Incorporated by reference to Exhibit 2.1 to the Form 8-K filed with the SEC on February 28, 2024). | |||||||||||||||||||||||
| Amendment Number Two to Agreement and Plan of Merger, dated as of April 25, 2024, by and between SEP Acquisition Corp. and Sanuwave Health, Inc. (Incorporated by reference to Exhibit 2.1 to the Form 8-K filed with the SEC on April 26, 2024). | |||||||||||||||||||||||
| Amendment Number Three to Agreement and Plan of Merger, dated as of May 28, 2024, by and between SEP Acquisition Corp. and Sanuwave Health, Inc. (Incorporated by reference to Exhibit 2.1 to the Form 8-K filed with the SEC on May 28, 2024). | |||||||||||||||||||||||
| Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Form 10-SB filed with the SEC on December 18, 2007). | |||||||||||||||||||||||
| Certificate of Amendment to the Articles of Incorporation (Incorporated by reference to Appendix A to the Definitive Schedule 14C filed with the SEC on October 16, 2009). | |||||||||||||||||||||||
| Certificate of Amendment to the Articles of Incorporation (Incorporated by reference to Exhibit A to the Definitive Schedule 14C filed with the SEC on April 16, 2012). | |||||||||||||||||||||||
| Bylaws (Incorporated by reference to Exhibit 3.02 to the Form 10-SB filed with the SEC on December 18, 2007). | |||||||||||||||||||||||
| Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock of the Company dated March 14, 2014 (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on March 18, 2014). | |||||||||||||||||||||||
| Certificate of Amendment to the Articles of Incorporation, dated September 8, 2015 (Incorporated by reference to Exhibit 3.6 to the Form 10-K filed with the SEC on March 30, 2016). | |||||||||||||||||||||||
| Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock of the Company dated January 12, 2016 (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on January 19, 2016). | |||||||||||||||||||||||
| Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock of the Company dated January 31, 2020 (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on February 6, 2020). | |||||||||||||||||||||||
| Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock of the Company dated January 31, 2020 (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on February 6, 2020). | |||||||||||||||||||||||
25
| Certificate of Designation of Series D Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on May 20, 2020). | |||||||||||||||||||||||
| Certificate of Amendment of the Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on January 5, 2021). | |||||||||||||||||||||||
| Certificate of Amendment of the Articles of Incorporation, dated January 31, 2023 (Incorporated by reference to Exhibit 3.12 to the Form S-1/A filed with the SEC on January 31, 2023). | |||||||||||||||||||||||
| Form of Future Advance Convertible Promissory Note issued to certain purchasers, dated January 21, 2024 (Incorporated by reference to Exhibit 4.1 to the Form 8-K filed with the SEC on January 25, 2024). | |||||||||||||||||||||||
| Forms of Common Stock Purchase Warrants issued to certain purchasers, dated January 21, 2024 (Incorporated by reference to Exhibit 4.2 to the Form 8-K filed with the SEC on January 25, 2024). | |||||||||||||||||||||||
| Securities Purchase Agreement, dated January 21, 2024, by and among the Company and the purchasers identified on the signature pages thereto (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on January 25, 2024). | |||||||||||||||||||||||
| Security Agreement, dated January 21, 2024, by and among the Company and certain lenders (Incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the SEC on January 25, 2024). | |||||||||||||||||||||||
| Subordination Agreement, dated January 21, 2024, by and among the Company, NH Expansion Credit Fund Holdings LP and certain creditors (Incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on January 25, 2024). | |||||||||||||||||||||||
| Registration Rights Agreement, dated January 21, 2024, by and among the Company and certain lenders (Incorporated by reference to Exhibit 10.4 to the Form 8-K filed with the SEC on January 25, 2024). | |||||||||||||||||||||||
| Form of waiver letter with purchasers in January 2024 offering (Incorporated by reference to Exhibit 10.5 to the Form 8-K filed with the SEC on January 25, 2024). | |||||||||||||||||||||||
| Form of letter agreement with purchasers in January 2024 offering (Incorporated by reference to Exhibit 10.6 to the Form 8-K filed with the SEC on January 25, 2024). | |||||||||||||||||||||||
| Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer. | |||||||||||||||||||||||
| Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer. | |||||||||||||||||||||||
| Section 1350 Certification of the Principal Executive Officer. | |||||||||||||||||||||||
| 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. | ||||||||||||||||||||||
26
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | ||||||||||||||||||||||
*Filed herewith.
27
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 undersigned thereunto duly authorized.
| SANUWAVE HEALTH, INC. | |||||||||||
Dated: August 12, 2024 | By: | /s/ Morgan Frank | |||||||||
| Morgan Frank | |||||||||||
Chief Executive Officer (Duly Authorized Officer and Principal Executive Officer) | |||||||||||
Dated: August 12, 2024 | By: | /s/ Peter Sorensen | |||||||||
| Peter Sorensen | |||||||||||
Chief Financial Officer (Principal Financial and Accounting Officer) | |||||||||||
28
EXHIBIT 31.1
Certification of Principal Executive Officer
Pursuant to Rule 13a-14(a) or Rule 15d-14(a)
Under the Securities Exchange Act of 1934
I, Morgan Frank, certify that:
1.I have reviewed this quarterly report on Form 10-Q of SANUWAVE Health, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 12, 2024 | ||
/s/ Morgan Frank | ||
| Morgan Frank | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
EXHIBIT 31.2
Certification of Chief Financial Officer
Pursuant to Rule 13a-14(a) or Rule 15d-14(a)
Under the Securities Exchange Act of 1934
I, Peter Sorensen, certify that:
1.I have reviewed this quarterly report on Form 10-Q of SANUWAVE Health, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 12, 2024 | ||
/s/ Peter Sorensen | ||
| Peter Sorensen | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) | ||
EXHIBIT 32.1
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the quarterly report of SANUWAVE Health, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2024 as filed with the Securities and Exchange Commission (the “Report”), I, Morgan Frank, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
Date: August 12, 2024 | ||
/s/ Morgan Frank | ||
| Morgan Frank | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
EXHIBIT 32.2
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the quarterly report of SANUWAVE Health, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2024 as filed with the Securities and Exchange Commission (the “Report”), I, Peter Sorensen, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
Date: August 12, 2024 | ||
/s/ Peter Sorensen | ||
| Peter Sorensen | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) | ||