SANUWAVE Health Inc(SNWV) - 2023 Q3 - Quarterly Report

Financial Performance - Total revenue for Q3 2023 was $4,953,000, representing a 19$4,166,000 in Q3 2022[18] - Gross margin improved to $3,541,000 in Q3 2023, up from$3,009,000 in Q3 2022, indicating a stronger operational efficiency[18] - Operating loss decreased to $531,000 in Q3 2023 compared to$2,485,000 in Q3 2022, reflecting improved cost management[18] - Net loss for Q3 2023 was $23,700,000, significantly higher than the$1,139,000 loss in Q3 2022, primarily due to increased interest expenses and changes in fair value of derivative liabilities[18] - For the nine months ended September 30, 2023, the company reported a net loss of $44,042,000, compared to a net loss of$4,596,000 for the same period in 2022[27] - Net cash used in operating activities was $3,253,000, a significant improvement from$13,176,000 in the prior year[27] - The company reported a basic and diluted loss per share of $0.03 for Q3 2023, compared to a loss of$0.00 in Q3 2022[18] - EBITDA for the three months ended September 30, 2023, was $(19.589) million, compared to$2.917 million in the same period of 2022[96] - Adjusted EBITDA for the three months ended September 30, 2023, was $(0.264) million, compared to$(2.249) million in the same period of 2022[96] Assets and Liabilities - Total current assets increased to $7,394,000 as of September 30, 2023, compared to$6,620,000 at the end of 2022, driven by higher inventory levels[14] - Total liabilities rose to $86,296,000 as of September 30, 2023, up from$60,883,000 at the end of 2022, largely due to increased senior secured debt[14] - The company’s accumulated deficit increased to $238,284,000 as of September 30, 2023, compared to$194,242,000 at the end of 2022[16] - Cash balance decreased to $1,095,000 as of September 30, 2023, down from$1,153,000 at the end of 2022, indicating liquidity challenges[14] Shareholder Information - The number of shares outstanding increased to 1,026,078,464 as of September 30, 2023, from 548,737,651 at the end of 2022, reflecting shares issued for debt settlement[21] - The merger agreement involves SEPA acquiring 100% of the company's issued and outstanding equity securities, with the company's stockholders expected to hold approximately 69-70% of the combined company[47] - The merger consideration will consist of 7,793,000 shares of Class A Common Stock, allocated pro rata based on ownership after the conversion of outstanding convertible notes[48] Merger and Capital Resources - The company expects to devote substantial resources for the commercialization of UltraMIST and PACE systems, which will require additional capital resources[34] - The company plans to obtain additional capital primarily through closing a merger, which is expected to provide necessary funding[35] - The company has deferred $732,000 in merger costs until the closing of the merger[44] - Management plans to obtain additional capital primarily through the closure of the merger, which is expected to add approximately$12 million of additional capital[107] - The Merger Agreement includes a Minimum Cash Condition of $12 million, which must be satisfied for the Business Combination to be completed[130] Internal Controls and Compliance - The company has identified material weaknesses in its internal control over financial reporting as of September 30, 2023, which management is actively working to remediate[120] - The company is working with an external vendor to improve internal controls and ensure compliance with U.S. GAAP[121] - The company has not made any changes to its internal control over financial reporting that materially affect its operations during the quarter ended September 30, 2023[126] Risks and Uncertainties - The company faces risks related to the Business Combination, including conditions that may not be satisfied in a timely manner[129] - The company cannot assure that the shares of the Combined Company's Class A Common Stock will be approved for listing on Nasdaq following the Closing[137] - The Combined Company must maintain a minimum market capitalization of$50,000,000 and at least 300 public shareholders to continue listing on Nasdaq[138] - Significant transaction and transition costs are expected due to the Business Combination, including legal, accounting, and consulting fees, which will be paid by the Combined Company after closing[141] - Uncertainty surrounding the Business Combination may disrupt relationships with customers, suppliers, and business partners, potentially affecting future operations[139] - The Company is subject to contractual restrictions that may limit its ability to pursue business opportunities until the Business Combination is completed[140] - There is a risk that employees may experience uncertainty about their future roles, impacting the ability to retain and hire key personnel[143] Expenses and Financial Management - General and administrative expenses decreased by $0.8 million or 23$0.6 million or 37% for the three months ended September 30, 2023, compared to the same period in 2022[102] - Other expense, net increased by $24.5 million to$23.2 million for the three months ended September 30, 2023, compared to the same period for 2022[105] - Cash provided by financing activities was $3.4 million for the nine months ended September 30, 2023, primarily due to new bridge notes payable and convertible lending activities[109]