SANUWAVE Health Inc(SNWV) - 2024 Q1 - Quarterly Report

Financial Performance - Revenue for Q1 2024 was $5,786,000, representing a 53$3,775,000 in Q1 2023[16] - Gross margin improved to $4,202,000 in Q1 2024, compared to$2,513,000 in Q1 2023, indicating a significant enhancement in profitability[16] - Operating loss decreased to $1,050,000 in Q1 2024 from$1,978,000 in Q1 2023, reflecting improved operational efficiency[16] - Net loss for Q1 2024 was $4,528,000, a reduction from$13,080,000 in Q1 2023, showing progress in financial performance[16] - Revenue for the three months ended March 31, 2024, totaled $5.8 million, an increase of 53$3.8 million for the same period in 2023[70] - Net loss for the three months ended March 31, 2024, was $4.5 million, or$0.00 per basic and diluted share, compared to a net loss of $13.1 million, or$0.02 per basic and diluted share, for the same period in 2023[71] - Operating loss for the three months ended March 31, 2024, totaled $1.1 million, an improvement of$0.9 million compared to 2023[71] - Gross margin as a percentage of revenue improved to 73% for the three months ended March 31, 2024, compared to 67% for the same period in 2023, reflecting a 600 basis points increase[82] - The company reported a net loss of $4.5 million for the three months ended March 31, 2024, a 65$13.1 million in the same period of 2023[81] Assets and Liabilities - Total current assets increased to $10,831,000 as of March 31, 2024, up from$9,784,000 at the end of 2023[12] - Total liabilities rose to $70,919,000 as of March 31, 2024, compared to$65,594,000 at the end of 2023, indicating increased financial obligations[12] - Cash and cash equivalents at the end of Q1 2024 were $2,936,000, up from$1,797,000 at the end of 2023, reflecting improved liquidity[20] - As of March 31, 2024, the Company had $21.7 million in senior secured debt, with a carrying value of$18.9 million after accounting for discounts[49] - The Company has accrued expenses totaling $6.8 million as of March 31, 2024, compared to$6.0 million at the end of 2023[48] - Total Convertible Promissory Notes Payable as of March 31, 2024, amounted to $10.004 million, with a remaining debt discount of$3.042 million[55] Capital and Financing - The company plans to raise additional capital in 2024 primarily through a merger, which is critical for ongoing operations[29] - Management highlighted the need for substantial resources for the commercialization of UltraMIST and PACE systems, necessitating further capital[28] - The Company deferred $1.6 million in merger costs until the closing of the merger, which is part of the recapitalization under the Merger Agreement[36] - The Merger Agreement, entered into on August 23, 2023, will result in SEPA acquiring 100$0.9 million or 33% for the three months ended March 31, 2024, primarily due to severance costs and non-recurring legal settlements[83] - Research and development expenses increased by 24% for the three months ended March 31, 2024, while remaining flat at 3% of revenue[86] - Interest expense on the Senior Secured Note was $1.9 million for the three months ended March 31, 2024, compared to$1.6 million for the same period in 2023[54] - Interest expense for the three months ended March 31, 2024, totaled $1.6 million, compared to$2.3 million for the same period in 2023[55] - Other expense, net decreased by $7.6 million to$3.5 million for the three months ended March 31, 2024, primarily due to a decrease in the change in fair value of derivatives expense[87] Internal Controls and Compliance - The company has identified three material weaknesses in internal control over financial reporting, which could lead to material misstatements in financial statements[101] - As of March 31, 2024, the company's disclosure controls and procedures were not operating effectively, as concluded by the Chief Executive Officer and Chief Financial Officer[100] - Management is committed to remediating the identified material weaknesses and has engaged a third-party consultant to assist in designing and documenting internal controls[103] - The company plans to implement internal controls for high-risk processes throughout 2024, including hiring additional resources to segregate duties and mitigate risks[103] - The company lacks the expertise and resources to properly apply U.S. GAAP to complex transactions, which has contributed to the identified material weaknesses[106] - There have been no changes in internal control over financial reporting during the quarter ended March 31, 2024, that materially affect internal controls[107] - The company is working with an outside vendor to improve IT general controls over its enterprise resource planning system[104] - The existence of material weaknesses requires significant time and expense for remediation, which could adversely affect the company's financial reporting and stock price[105] Market and Economic Conditions - Inflation has increased expenses related to employee compensation, office space leasing, and research and development, potentially impacting the company's financial condition[97] - The company may discover additional material weaknesses that require further time and resources to remediate[103] Shareholder Impact - The company reported a significant increase in weighted average shares outstanding, rising to 1,162,250,687 in Q1 2024 from 575,028,811 in Q1 2023, indicating potential dilution for existing shareholders[16] - The Company reported a diluted net loss per share of $0.12 for the three months ended March 31, 2024, compared to a loss of$0.10 for the same period in 2023[45] - The weighted average number of shares outstanding increased to 1,162,251 thousand shares for the three months ended March 31, 2024, up from 575,029 thousand shares in the prior year[45]