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 September 30, 2022

☐
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

SANUWAVE Health, Inc.
(Exact name of registrant as specified in its charter)

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

11495 Valley View Road
Eden Prairie, MN
  
55344
(Address of principal executive offices)
  
(Zip Code)

(770) 419-7525
(Registrant’s telephone number, including area code)

3360 Martin Farm Road, Suite 100
Suwanee, GA, 30024
(Former name, former address and former fiscal year, if changes since last report)

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.    ☒  Yes  ☐ 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).    ☒ Yes  ☐  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 ☐
Accelerated filer ☐
 
Non-accelerated filer ☒
Smaller reporting company  ☒
   
Emerging growth company  ☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes   ☐     No  ☒  

As of November 10, 2022 there were issued and outstanding 548,737,651 shares of the registrant’s common stock, $0.001 par value per share.

 SANUWAVE Health, Inc.
 
Table of Contents
 
 
Page
PART I – FINANCIAL INFORMATION
   
Item 1.
 4
     
  4
     
  5
     
  6
     
  8
     
  9
     
Item 2.
 17
     
Item 3.
 21
     
Item 4.
 21
     
PART II – OTHER INFORMATION
     
Item 1.
 22
     
Item 1A.
 22
     
Item 2.
 22
     
Item 3.
 22
     
Item 4.
 22
     
Item 5.
 22
     
Item 6.
 23
     
  25
 
2
Special Note Regarding Forward-Looking Statements
 
This Quarterly Report on Form 10-Q of SANUWAVE Health, Inc. and its subsidiaries (“SANUWAVE” or the “Company”) 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: the potential impact of the COVID-19 pandemic on our business, results of operations, liquidity, and operations, including the effect of governmental lockdowns, 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®, dermaPACE® and our product candidates; 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 cost of our products; timing of clinical studies and eventual U.S. Food and Drug Administration (“FDA”) approval of our 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, 2021, filed on May 13, 2022. Other risks and uncertainties are and will be disclosed in the Company’s subsequent SEC filings. 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, 2021, filed on May 13, 2022.
 
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)

   
September 30, 2022
    
December 31, 2021
  
ASSETS
            
Current Assets:
            
Cash
  
$
1,112
    
$
619
  
Accounts receivable, net of allowance for doubtful accounts of $0.8 million, respectively
    
2,403
      
2,415
  
Inventory
    
1,413
      
1,040
  
Prepaid expenses and other current assets
    
1,935
      
326
  
Total Current Assets
    
6,863
      
4,400
  
Property, Equipment and Other, net
    
673
      
1,118
  
Other Intangible Assets, net
    
5,313
      
5,841
  
Goodwill
    
7,260
      
7,260
  
Total Assets
  
$
20,109
    
$
18,619
  
                 
LIABILITIES
                
Current Liabilities:
                
Senior secured promissory note payable, in default
  
$
12,773
    
$
11,586
  
Convertible promissory notes payable, in default
    
4,000
      
11,601
  
Convertible promissory notes, related parties, in default
    
1,373
      
1,596
  
Convertible promissory notes payable
     9,174       -  
Convertible promissory notes payable, related parties
     4,485       -  
Advances on future cash receipts
     194       446  
Accounts payable
    
5,055
      
7,644
  
Accrued expenses
    
4,100
      
4,394
  
Accrued employee compensation
    
3,792
      
4,247
  
Due under factoring ageement
     1,510       1,737  
Warrant liability
    
1,196
      
9,614
  
Current portion of SBA loans
    
-
      
158
  
Accrued interest
    
3,988
      
2,521
  
Accrued interest, related parties
    
546
      
289
  
Current portion of lease and contract liabilities
    
249
      
316
  
Other
    
30
      
114
  
Total Current Liabilities
    
52,465
      
56,263
  
Non-current Liabilities
                
SBA loans
    
-
      
875
  
Lease liabilities
    
263
      
118
  
Contract liabilities
    
205
      
293
  
Deferred tax liability
    
28
      
28
  
Total Non-current Liabilities
    
496
      
1,314
  
Total Liabilities
    
52,961
      
57,577
  
                 
Commitments and Contingencies (Footnote 11)
    
     
 
                 
STOCKHOLDERS’ DEFICIT
                
                 
Preferred Stock, par value $0.001, 5,000,000 shares authorized; 6,175 shares Series A, 293 shares Series B, 90 shares Series C and 8 shares Series D no shares issued and outstanding at September 30, 2022 and December 31, 2021
    
-
      
-
  
Common Stock, par value $0.001, 800,000,000 shares authorized; 548,737,651 and 481,619,621 issued and outstanding at September 30, 2022 December 31, 2021, respectively
    
549
      
482
  
Additional Paid-in Capital
    
152,750
      
144,582
  
Accumulated Deficit
    
(186,084
)
    
(183,949
)
Accumulated Other Comprehensive Loss
    
(67
)
    
(73
)
Total Stockholders’ Deficit
    
(32,852
)
    
(38,958
)
Total Liabilities and Stockholders’ Deficit
  
$
20,109
    
$
18,619
  

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 INCOME (LOSS)
(UNAUDITED)
(In thousands, except share data)
 
   
Three Months Ended September 30,
    
Nine Months Ended September 30,
  
   
2022
    
2021
    
2022
    
2021
  
Revenues:
                        
Accessory and parts revenue
  
$
3,012
    
$
2,067
    
$
7,866
    
$
5,645
  
Product
   
902
      
1,299
      
2,408
      
2,066
  
Rental Income
     247       333       935       864  
License fees and other
    
5
      
26
      
33
      
175
  
Total Revenue
    
4,166
      
3,725
      
11,242
      
8,750
  
                                 
Cost of Revenues
    
606
      
1,555
      
2,590
      
3,658
  
                                 
Gross Margin
    
3,560
      
2,170
      
8,652
      
5,092
  
                                 
Operating Expenses:
                                
General and administrative
     3,404       2,864       8,482       8,909  
Selling and marketing
     1,650       2,150       5,037       6,450  
Research and development
    
157
      
297
      
494
      
923
  
Gain on disposal of assets
     -       -       (690 )     -  
Depreciation and amortization
     189       194       575       585  
Total Operating Expenses
    
5,400
      
5,505
      
13,898
      
16,867
  
                                 
Operating Loss
    
(1,840
)
    
(3,335
)
    
(5,246
)
    
(11,775
)
                                 
Other Income (Expense):
                                
Interest expense
    
(3,301
)
    
(1,781
)
    
(9,203
)
    
(4,340
)
Interest expense, related party
     (439 )     (55 )     (551 )     (150 )
Change in fair value of derivative liabilities
    
5,252
      
1,555
      
16,597
      
1,599
  
Loss on issuance of debt
    
-
      
(1,088
)
    
(3,434
)
    
(3,572
)
Gain / (loss) on extinguishment of debt
     (86 )     460       (297 )     460  
Gain / (loss) on foreign currency exchange
    
1
      
(2
)
    
(1
)
    
2
  
Other Income (Expense), net
    
1,427
      
(911
)
    
3,111
      
(6,001
)
                                 
Net Loss before Income Taxes
    
(413
)
    
(4,246
)
    
(2,135
)
    
(17,776
)
                                 
Provision for Income Taxes
    
-
      
6
      
-
      
28
  
                                 
Net Loss
    
(413
)
    
(4,252
)
    
(2,135
)
    
(17,804
)

                               
Other Comprehensive Loss
                               
Foreign currency translation adjustments
    
-
      
-
      
-
      
(12
)
Total Comprehensive Loss
  
$
(413
)
  
$
(4,252
)
  
$
(2,135
)
  
$
(17,816
)
                                 
Loss per Share:
                                
 Basic and Diluted
   $ (0.00 )  
 $ (0.01 )   $ (0.00 )   $ (0.03 )
                                 
Weighted average shares outstanding, basic and diluted
                               
Basic and Diluted
     561,069,625       518,310,781       542,484,779       518,370,156  

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 September 30, 2022
  
   
Preferred Stock
    
Common Stock
                          
   
Number of
          
Number of
                      
Accumulated
        
    Shares          
Shares
                       Other        
   
Issued and
          
Issued and
          
Additional Paid-
    
Accumulated
     Comprehensive        
    Outstanding    
Par Value
    
Outstanding
    
Par Value
    
in Capital
     Deficit     Loss     Total
  
                                                 
Balances as of June 30, 2022
    
-
    
$
-
      
529,293,205
    
$
529
    
$
151,409
    
$
(185,671
)
  
$
(67
)
  
$
(33,800
)
Shares issued for settlement of debt and warrants
    
-
      
-
      
19,444,446
      
20
      
1,341
                      
1,361
  
Net loss
    
-
      
-
      
-
      
-
      
-
      
(413
)
    
-
      
(413
)
Balances as of September 30, 2022
    
-
    
$
-
      
548,737,651
    
$
549
    
$
152,750
    
$
(186,084
)
  
$
(67
)
  
$
(32,852
)

Three Months Ended September 30, 2021
  
   
Preferred Stock
    
Common Stock
                          
   
Number of
          
Number of
                      
Accumulated
        
    Shares           Shares                       Other        
   
Issued and
          
Issued and
          
Additional Paid-
    
Accumulated
     Comprehensive        
    Outstanding    
Par Value
     Outstanding    
Par Value
    
in Capital
     Deficit     Loss     Total  
                                                 
Balances as of June 30, 2021
    
-
    
$
-
      
481,619,621
    
$
482
    
$
144,582
    
$
(170,242
)
  
$
(74
)
  
$
(25,252
)
Net loss
    
-
      
-
      
-
      
-
      
-
      
(4,252
)
    
-
      
(4,252
)
Balances as of September 30, 2021
    
-
    
$
-
      
481,619,621
    
$
482
    
$
144,582
    
$
(174,494
)
  
$
(74
)
  
$
(29,504
)

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)
 
Nine Months Ended September 30, 2022
  
 
  
Preferred Stock
    
Common Stock
                          
    Number of           Number of                       Accumulated        
    Shares           Shares                       Other        
    Issued and           Issued and           Additional Paid-     Accumulated    
Comprehensive
        
    Outstanding     Par Value
    Outstanding
    Par Value
    in Capital     Deficit     Loss     Total
 
 
                                                
Balances as of December 31, 2021
    
-
    
$
-
      
481,619,621
    
$
482
    
$
144,582
    
$
(183,949
)
  
$
(73
)
  
$
(38,958
)
Cashless warrant exercise
            
-
      
14,000,000
      
14
      
2,152
      
-
      
-
      
2,166
  
Warrant exercise
    
-
      
-
      
909,091
      
1
      
99
      
-
      
-
      
100
  
Shares issued in conjuction with Note Payable
    
-
      
-
      
20,666,993
      
20
      
3,700
      
-
      
-
      
3,720
  
Shared issed for settlement of debt and warrants
     -       -       19,444,446       20       1,341       -       -       1,361  
Shares issued for services
                    
12,097,500
      
12
      
876
      
-
      
-
      
888
  
Net loss
    
-
      
-
      
-
      
-
      
-
      
(2,135
)
    
-
      
(2,135
)
Foreign currency translation adjustment
    
-
      
-
      
-
      
-
      
-
      
-
      
6
      
6
  
 
                                                                
Balances as of September 30, 2022
    
-
    
$
-
      
548,737,651
    
$
549
    
$
152,750
    
$
(186,084
)
  
$
(67
)
  
$
(32,852
)

Nine Months Ended September 30, 2021
  
 
  
Preferred Stock
    
Common Stock
                          
    Number of           Number of                       Accumulated        
    Shares           Shares                       Other        
    Issued and           Issued and           Additional Paid-     Accumulated     Comprehensive        
     Outstanding      Par Value      Outstanding      Par Value      in Capital      Deficit      Loss      Total  
 
                                                
Balances as of December 31, 2020
    
-
    
$
-
      
470,694,621
    
$
471
    
$
142,563
    
$
(156,690
)
  
$
(62
)
  
$
(13,718
)
Cashless warrant exercise
    
-
      
-
      
10,925,000
      
11
      
(11
)
    
-
      
-
      
-
  
Reclassification of warrant liability due to cashless warrant exercise
    
-
      
-
      
-
      
-
      
2,030
      
-
      
-
      
2,030
  
Net loss
    
-
      
-
      
-
      
-
      
-
      
(17,804
)
    
-
      
(17,804
)
Foreign currency translation adjustment
    
-
      
-
      
-
      
-
      
-
      
-
      
(12
)
    
(12
)
 
                                                                
Balances as of September 30, 2021
    
-
    
$
-
      
481,619,621
    
$
482
    
$
144,582
    
$
(174,494
)
  
$
(74
)
  
$
(29,504
)

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)

   
Nine Months Ended September 30,
  
   
2022
    
2021
  
Cash Flows - Operating Acivities:
            
Net loss
  
$
(2,135
)
  
$
(17,804
)
Adjustments to reconcile net loss to net cash used by operating activities
                
Depreciation and Amortization
    
681
      
970
  
Bad debt expense
    
62
      
307
  
Income tax expense
    
-
       28
  
Shares issued for service     888       -  
Loss (Gain) on extinguishment of debt     297       (460 )
Gain on sale of property and equipment, net
     (690 )     -
  
Change in fair value of derivative liabilities
     (16,597 )    
(1,599
)
Loss on issuance of debt
     3,434       3,572  
Amortization of debt issuance costs and original issue discount
    
2,998
      
1,418
  
Accrued interest
    
1,618
      
929
  
Interest payable, related parties
    
168
      
150
  
Changes in operating assets and liabilities
                
Accounts receivable - trade
    
69
      
(345
)
Inventory
    
(373
)
    
1,430
  
Prepaid expenses and other assets
    
(1,437
)
    
(355
)
Accounts payable
    
(1,863
)
    
2,656
  
Accrued expenses
    
271
      
1,652
  
Accrued employee compensation
    
(473
)
    
885
  
Contract liabilties
    
(94
)
    
60
  
Net Cash Used in Operating Activities
    
(13,176
)
    
(6,506
)
                 
Cash Flows - Investing Activities
                
Proceeds from sale of property and equipment
    
1,022
      
-
  
Purchase of property and equipment
     -       (441 )
Net Cash Flows Provided by (Used in) Investing Activities
    
1,022
      
(441
)
                 
Cash Flows - Financing Activities
                
Proceeds from senior promissory notes
     2,940       940  
Proceeds from short term notes
    
640
      
125
  
Proceeds from factoring, net
     (227 )     1,244  
Proceeds from SBA loan
     -       1,033  
Proceeds from warrant exercises
    
100
      
-
  
Proceeds from convertible promissory notes
     12,366       1,928  
Payments of principal on finance leases
    
(174
)
    
(143
)
Payments of principal on convertible promissory notes, related parties, convertible promissory notes and SBA loans     (2,981 )     (237 )
Net Cash Flows Provided by Financing Activities
    
12,664
      
4,890
  
                 
Effect of Exchange Rates on Cash
    
(17
)
    
(53
)
                 
Net Change in Cash During Period
    
493
      
(2,110
)
                 
Cash at Beginning of Period
    
619
      
2,437
  
Cash at End of Period
  
$
1,112
    
$
327
  
                 
Supplemental Information:
                
Cash paid for interest
  
$
3,345
    
$
1,993
  
                 
Non-cash Investing and Financing Activities:
                
Reclassification of warrant liability due to cashless warrant exercise
  
$
2,166
    
$
2,030
  
Settlement of debt and warrants with stock
     1,361     $ -  
Warrants issued in conjunction with senior secured promissory note payable
    2,654       -  
Common shares issued in conjunction with senior secured promissory note payable
    3,720       -  
Embedded conversion option with issuances of convertible debt     2,309       2,740  
 Working capital balances refinanced into Convertible notes payable     2,273       -  
Warrant issuance in conjunction with convertible debt     1,463       758  

 The accompanying notes to condensed consolidated financial statements are an integral part of these financial statements.

8
SANUWAVE HEALTH, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022

1.
Nature of the Business and Basis of Presentation

SANUWAVE Health, Inc. and Subsidiaries (“SANUWAVE” or the “Company”) is focused on the research, development, and commercialization of its patented noninvasive and biological response activating medical systems for the repair and regeneration of skin, musculoskeletal tissue, and vascular structures. The Company’s lead regenerative product in the United States is the dermaPACE® device used for treating diabetic foot ulcers.

Through the Company’s acquisition, on August 6, 2020, of the UltraMIST® assets from Celularity, Inc. (“Celularity”), SANUWAVE now combines two highly complementary and market-cleared energy transfer technologies and two human tissue biologic products, which creates a platform of scale with an end-to-end product offering in the advanced wound care market.

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. Certain accounts in the prior period condensed consolidated financial statements have been reclassified to conform to the presentation of the current period condensed consolidated financial statements. These reclassifications had no effect on the previously reported operating results. The financial information as of September 30, 2022, and for the three and nine months ended September 30, 2022, and 2021 is unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2022, are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2022.
 
The condensed consolidated balance sheet on December 31, 2021, 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, 2021, Annual Report on Form 10-K filed with the SEC on May 13, 2022 (the “2021 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 financings 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 the dermaPACE device and will continue to research and develop the non-medical uses of the PACE technology, both of which will require additional capital resources.
 
Management’s plans are to obtain additional capital in 2022 through investments by strategic partners for market opportunities, which may include strategic partnerships or licensing arrangements, or raise 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 shareholders. 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.

9
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. Our 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 we be unable to continue as a going concern.

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 to the consolidated financial statements in our 2021 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 doubtful accounts, the net realizable value of inventory, useful lives of long-lived assets, fair value of goodwill and other intangible assets, the determination of the valuation allowances for deferred taxes, estimated fair value of stock-based compensation, and the estimated fair value of financial instruments, including warrants and embedded conversion options.

4.
Loss per Share

The net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of shares outstanding for the three and nine months ended September 30, 2022, and 2021. In accordance with Accounting Standards codification (“ASC”) Topic 260-10-45-13, Earnings Per Share, the weighted average of number of shares outstanding includes outstanding common stock and shares issuable for nominal consideration. Accordingly, warrants issued with a $0.01 per share exercise price, are included in weighted average shares outstanding as follows (shares in thousands):


  
Three Months Ended
     Nine Months Ended  
   
September 30, 2022
    
September 30, 2021
     September 30, 2022    
September 30, 2021
  
Weighted average shares outstanding
                        
Common shares
    
540,584
      
481,620
       519,127       481,620  
Common shares issuable assuming exercise of nominally priced warrants
    
20,486
      
36,691
       23,358       36,751  
Weighted average shares outstanding
    
561,070
      
518,311
       542,485       518,370  

Diluted net loss per share would be computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding. To the extent that securities are “anti-dilutive,” they are excluded from the calculation of diluted net loss per share. As a result of the net loss for the three and nine months ended September 30, 2022, and 2021, all potentially dilutive shares were anti-dilutive and therefore excluded from the computation of diluted net loss per share. Anti-dilutive equity securities consist of the following for the nine months ended September 30, 2022, and 2021, respectively (in thousands):

    Nine Months Ended  
   
September 30, 2022
    
September 30, 2021
  
Common stock options
    
21,246
      
31,760
  
Common stock purchase warrants
    
984,799
      
159,858
  
Convertible notes payable
    
483,588
      
98,675
  
     
1,489,633
      
290,293
 
5.
Accrued Expenses

Accrued expenses consist of the following on September 30, 2022, and December 31, 2021 (in thousands):

 
  
2022
    
2021
  
Registration penalties
  
$
1,593
    
$
1,950
  
License fees
    
893
      
893
  
Board of director’s fees
    
663
      
507
  
Other
    
951
      
1,044
  
 
  
$
4,100
    
$
4,394
  

There was no activity in the warranty reserve during the nine months ended September 30, 2022.

6.
Concentration of Credit Risk and Limited Suppliers

Major customers are defined as customers whose accounts receivable, or sales individually consist of more than ten percent of total trade receivables or total sales, respectively. The percentage of accounts receivable from major customers of the Company for the periods indicated were as follows:

   
September 30, 2022
    
December 31, 2021
  
Accounts Receivable:
            
Customer A
    
12
%
    
24
%
Customer B
     10 %     16 %

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 our production. The percentage of purchases from major vendors of the Company that exceeded ten percent of total purchases for the three and nine months ended September 30, 2022, and 2021 were as follows:

    Three Months Ended     Nine Months Ended  
   
September 30, 2022
    
September 30, 2021
    
September 30, 2022
    
September 30, 2021
  
Purchases:
                        
Vendor A
    
18
%
    
52
%
     18 %     46 %
Vendor B
    
n/a
      
n/a
       n/a       15 %

11
7.
Notes Payable

 

The following two tables summarize outstanding notes payable as of September 30, 2022, and December 31, 2021 (dollars in thousands):

 
As of 09/30/2022 (dollars in thousands)
Maturity Date
  
Interest Rate
    
Conversion Price
    
Principal
    
Remaining Debt Discount
    
Remaining Embedded Conversion Option
    
Carrying Value
  
Senior secured promissory note payable
In default
    
20.5
%
    
n/a
     $
18,000
     $
(5,227
)
   $
-
     $
12,773
  
2021 Convertible promissory notes payable
In default
    
17.0
%
   $
0.0538
      
4,000
      
-
      
-
      
4,000
  
Convertible promissory notes payable, related parties
In default
    
14.0
%
   $
0.10
      
1,373
      
-
      
-
      
1,373
  
Convertible notes payable
August 5, 2023
    
15.0
%
   $
0.04
      
10,849
      
(2,966
)
    
1,291
      
9,174
  
Convertible notes payable, related parties
August 5, 2023
    
15.0
%
   $
0.04
      
5,305
      
(1,451
)
    
631
      
4,485
  
Advances on future cash receipts
In default
    
n/a
      
n/a
      
296
      
(102
)
    
-
      
194
  
                                                   
Total short-term debt as of September 30, 2022, including notes in default
                     $
39,823
     $
(9,746
)
   $
1,922
     $
31,999
  

 
As of 12/31/2021 (dollars in thousands)
Maturity Date
  
Interest Rate
    
Conversion Price
    
Principal
    
Remaining Debt Discount
    
Remaining Embedded Conversion Option
    
Carrying Value
  
Senior secured promissory note payable
In default
    
20.25
%
    
n/a
    
$
15,000
    
$
(3,414
)
  
$
-
    
$
11,586
  
2021 Convertible promissory notes payable
In default
    
15.40
%
  
$
0.1071
      
6,445
      
(1,099
)
    
6,255
      
11,601
  
Convertible promissory notes payable, related parties
In default
    
14.0
%
  
$
0.10
      
1,596
      
-
      
-
      
1,596
  
SBA loan #2
February 20, 2026
    
1.00
%
    
n/a
      
1,033
      
-
      
-
      
1,033
  
Advances on future cash receipts
March 11, 2022
    
n/a
      
n/a
      
1,500
      
(1,054
)
    
-
      
446
  
                                                 
Total debt outstanding, including amounts in default
                      
25,574
      
(5,567
)
    
6,255
      
26,262
  
                                                 
Less: current maturities, including notes in default
                      
(24,699
)
    
5,567
      
(6,255
)
    
(25,387
)
                                                 
Total long-term debt as of December 31, 2021
                    
$
875
    
$
-
    
$
-
    
$
875
  

 

Senior secured promissory note payable, in default - In August 2020, the Company entered into a Note and Warrant Purchase and Security Agreement (the “NWPSA”) with NH Expansion Credit Fund Holdings LP, as noteholder and agent. The Company issued a $15 million Senior Secured Promissory Note Payable and a warrant exercisable into shares of the Company’s common stock (the “NH Expansion Warrant”) in exchange for cash to support operations, repay outstanding debt and close on the acquisition of the UltraMIST® assets from Celularity, among other transactions.



In February 2022, the Company entered into the 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, at an interest rate of 20.5% and maturity dates of September 30, 2025. Because the combined fair value of the applicable warrants and common stock issued as part of this note exceeded the face value of the note, the additional amount beyond the face value is recorded as a loss on issuance of $3.4 million.

 

In June 2022, the Company entered into the Third Amendment to the Note and Warrant Purchase and Security Agreement (the “Third NWPSA”). The Third NWPSA provides for (i) the extension of the agent’s and holder’s forbearance of exercising its remedies arising from Existing Defaults (as defined in the NWPSA) to the earlier of (x) the occurrence of an Event of Default (as defined in the NWPSA) or (y) August 30, 2022, and (ii) the extension to file a registration statement with the Securities and Exchange Commission to register the resale of the Advisor Shares (as defined in the NWPSA) no later than August 30, 2022.

Convertible Notes Payable and Convertible Notes Payable, Related Parties - On August 5, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”), for our sale in a private placement (the “Private Placement”) of (i) Future Advance Convertible Promissory Notes (the “Notes”) in an aggregate principal amount of $16.2 million, consisting of $12.3 million in newly raised capital and $3.8 million in refinanced accrued expenses, bridge notes payable, convertible promissory notes, related parties, and fees, (ii) Common Stock Purchase Warrants (the “First Warrants”) to purchase an additional 404.8 million shares of common stock with an exercise price of $0.067 per share and (iii)Common Stock Purchase Warrants (the “Second Warrants”) to purchase an additional 404.8 million shares of common stock with an exercise price of $0.04 per share. The Notes will be convertible and the First and Second Warrants exercisable at such time as the Company’s authorized and unissued shares of common stock are at a number sufficient to permit the exercise or conversion of all outstanding securities exercisable for, or convertible into, common stock. The Company paid issuance costs totaling approximately $1.4 million.

 

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 five trading days preceding such listing is less than $0.04 per share; provided, however, that the Conversion Price shall never by less than $0.01. The Notes contain customary events of default and covenants, including limitations on incurrences of indebtedness and liens.  As well as, the Company failing to reduce its outstanding shares via a reverse stock split to provide the number of authorized an unissued shares of common stock sufficient to permit the conversion of these notes on or before December 31, 2022.

 

May 2022 Advance on Future Receipts Financing – On May 19, 2022, the Company paid off the remaining balance of $400 thousand from the December 22, 2021, advance and received $545 thousand in cash proceeds related to its entry into a non-recourse agreement for the sale of $1.0 million of future receipts to GCF Resources LLC (“GCF”). In conjunction with the 24-week agreement, the Company is obligated to remit to GCF a minimum of $59 thousand of receipts each week for the twenty-four weeks. The Company began making the required minimum weekly payments May 23, 2022, and is obligated to continue through October 31, 2022. Because the combined fair value of the applicable warrants issued as part of this note exceeded the original payoff value of the note, the additional amount beyond the face value is recorded as a loss on extinguishment of $211 thousand in the statement of operations for the nine-months ended September 30, 2022.

 

2021 Convertible Promissory Notes Payable – Previously, the Company entered into a Securities Purchase Agreement (the “Leviston Purchase Agreement”), with Leviston Resources, LLC, an accredited investor (“Leviston”) for the sale by the Company in a private placement (the “Leviston Private Placement”) of (i) the Company’s future advance convertible promissory note in an aggregate principal amount of up to $3.4 million, later amended to $4.2 million (the “Leviston Note”) and (ii) a warrant to purchase up to an additional 16,666,667 shares of common stock of the Company (the “Leviston Warrants”). The Leviston Warrants had an exercise price of $0.18 per share and a four-year term.  Advances on the Leviston Notes totaled $1.9 million and warrants to purchase 9.3 million shares were outstanding prior to the settlement discussed below.



In addition, the Company issues notes to five institutional investors totaling approximately $0.5 million (the “Five Institutions’ Notes”), which were subject to substantially the same terms and conditions as the Leviston Purchase Agreement. Warrants to purchase 2.8 million shares of common stock with an exercise price of $0.18 per share were issued and outstanding prior to the settlement discussed below.



Upon the closing of the Private Placement in August 2022, the Leviston Notes and Five Institutions’ Notes were paid and settled in full using proceeds from the Private Placement. The settlement payment included cash totaling $3.9 million, which included accrued interest and penalties, and the issuance of Company shares of common stock totaling 19.4 million shares. The lenders surrendered the warrants to the Company. The Company recognized a $0.9 million loss on extinguishment of debt for the three month-period ended September 30, 2022.

 

SBA Loan #2 – In July 2022, the Company received confirmation that the loan forgiveness application had been approved, therefore, during the three-months ended September 30, 2022, the Company recognized a gain on loan extinguishment totaling $1.0 million.

13
Embedded Conversion Option Liability

 
The fair value of Conversion Option liability assumptions for the periods ended below:

 
  
At 09/30/2022
    
At 12/31/2021
  
Conversion Price(1)
  
$
0.04
    
$
0.11
  
 
                
Interest Rate (annual) (2)
    
3.93
%
    
0.18
%
 
                
Volatility (annual) (3)
    
393.20
%
    
289.65
%
 
                
Time to Maturity (Years)
    
0.85
      
0.50
  

(1) Based on the terms provided in the debt agreement to purchase common stock of the Company as of September 30, 2022, and December 31, 2021.
(2) Interest rate for U.S. Treasury Bonds, as of each presented period ending date, as published by the U.S. Federal Reserve.
(3) Based on the historical daily volatility of the Company as of December 31, 2021.  Based on the historical weekly volatility of the Company with an applied discount rate of 7.5% as of September 30, 2022.

The fair value for the Conversion Option liability was determined using the Black Scholes method as of September 30, 2022. As of September 30, 2022, the value of the underlying shares used in the Black Scholes model was $0.005 per share stock price. A binomial pricing model was used to determine the fair value of the Conversion Option as of December 31, 2021. As of December 31, 2021, the stock price used in the binomial pricing model was $0.17 per share. This conversion liability was settled with the 2021 Convertible Promissory Notes payable in August 2022.

8.
Common Stock Purchase Warrants

A summary of the warrant activity as of September 30, 2022, is as follows (warrants in thousands):

          Weighted    
Weighted Average
  
          Average     Remaining  
         
Exercise Price
    
Contractual Life
  
   
Warrants
    
per share
    
(years)
  
Outstanding at December 31, 2021
    
204,883
    
$
0.20
      
2.54
  
Exercised
    
(27,946
)
    
0.01
          
Issued
    
829,554
      
0.05
          
Outstanding at September 30, 2022
    
1,006,491
    
$
0.08
      
5.00
  

On January 31, 2022, the Company issued 14 million shares of its common stock to LGH Investments LLC (“LGH”) upon the cashless exercise warrants exercisable for 15.0 million shares of common stock under the terms of the warrant agreement. After this cashless exercise, LGH owns warrants exercisable for 8.6 million shares of common stock. On February 28, 2022, the Company issued warrants exercisable for 16.1 million shares of common stock with an exercise price of $0.18 per share and an 8.6-year term as part of the Second NWPSA.
 
On August 5, 2022, as part of the Private Placement, the Company issued First Warrants to purchase an additional 404.8 million shares of common stock with an exercise price of $0.067 per share and Second Warrants to purchase an additional 404.8 million shares of common stock with an exercise price of $0.04 per share. The exercise price of the Warrants is subject to adjustment, including if we issue or sell shares of common stock or share equivalents (as defined in the Warrants) for an effective consideration price less than the exercise price of the Warrants 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 five trading days preceding such listing is less than $0.04 per share; provided, however, that the exercise price of the Warrants shall never be less than $0.01 per share. The Warrants have a five-year term, and use a $0.005 per share stock price in the Black Scholes model as of September 30, 2022.

9.
Fair Value Measurements

In accordance with ASC 820 (Fair Value Measurements and Disclosures), 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 liability.

14
The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of September 30, 2022, and December 31, 2021 (in thousands):

   
Fair value measured at September 30, 2022
  
         
Quoted prices in
    
Significant other
   
Significant
  
   
Fair value at
    
active markets
   
observable inputs
   
unobservable inputs
 
   
September 30, 2022
    
(Level 1)
    
(Level 2)
    
(Level 3)
  
Warrant liability
  
$
1,196
    
$
-
    
$
-
    
$
1,196
  
Embedded conversion option
    
1,922
      
-
      
-
      
1,922
  
Total fair value
   $
3,118
     $
-
     $
-
     $
3,118
  

   
Fair value measured at December 31, 2021
  
          Quoted prices in     Significant other     Significant  
    Fair value at     active markets     observable inputs    
unobservable inputs
  
   
December 31, 2021
    
(Level 1)
    
(Level 2)
    
(Level 3)
  
Warrant liability
  
$
9,614
    
$
-
    
$
-
    
$
9,614
  
Embedded conversion option
    
6,255
      
-
      
-
      
6,255
  
Total fair value
  
$
15,869
    
$
-
    
$
-
    
$
15,869
  

There were no transfers between Level 1, 2 or 3 during the three and nine months ended September 30, 2022, and 2021.

The following table presents changes in Level 3 liabilities measured at fair value for the nine months ended September 30, 2022. 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 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 (dollars in thousands):

    Warrant    
Conversion
        
   
Liability
    
Feature
    
Total
  
Balance at December 31, 2021
  
$
9,614
    
$
6,255
    
$
15,869
  
Issuance of Convertible Notes
     -       2,309       2,309  
Cashless exercise
    
(2,167
)
    
-
      
(2,167
)
Settlement of Convertible Notes
     (963 )     (218 )     (1,181 )
Warrants issued
    
4,885
      
-
      
4,885
  
Change in fair value
    
(10,173
)
    
(6,424
)
    
(16,597
)
Balance at September 30, 2022
  
$
1,196
    
$
1,922
    
$
3,118
  

A summary of the warrant liability activity for the nine months ended September 30, 2022, is as follows:

   
Warrants
    
Fair Value
     Fair Value
 
   
Outstanding
    
per Share
     (in thousands)  
Balance at December 31, 2021
    
62,617,188
    
$
0.15
    
$
9,614
  
Warrants exercised
    
(27,037,038
)
    
0.12
      
(3,130
)
Warrants issued
    
829,553,984
      
0.01
      
4,885
  
Gain on remeasurement of warrant liability
    
-
              
(10,173
)
Balance at September 30, 2022
    
865,134,134
    
$
0.00
    
$
1,196
  

15
Significant inputs related to the Company’s liability classified warrants are listed below.

    September 30,
    December 31,
    New Issuance
 
   
2022
    
2021
    
at Issue Date
  
Weighted average remaining life in years
    
4.89
      
4.67
      
5.00
  
Weighted average volatility
    
87
%
    
116
%
    
85
%
Weighted average risk free interest rate
    
4.0
%
    
1.2
%
    
2.9
%
Expected dividend yield
    
0.00
%
    
0.00
%
    
0.00
%

10.
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 Companies expenses legal fees in the period in which they are occurred.
 
Supplier disputes - 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 responded and asserted that the Company is not in breach and that the supplier has breached various agreements. It is too early to determine the outcome of this matter. Any potential impact to the Company cannot be fully determined at this time and there is no guarantee that the dispute will be resolved in a manner beneficial to the Company.

11.
Subsequent Events

On November 14, 2022, the Company issued (i) Notes in an aggregate principal amount of approximately $2 million, (ii) First Warrants to purchase approximately 45 million shares of common stock with an exercise price of $0.067 per share and (iii) Second Warrants to purchase approximately 45 million shares of common stock with an exercise price of $0.04 per share, in each case pursuant to the Purchase Agreement.
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, 2021 included in our Annual Report on Form 10-K, filed with the SEC on May 13, 2022 (the “2021 Annual Report”).

Overview

We are a shock wave technology company using a patented system of noninvasive, high-energy, acoustic shock waves for regenerative medicine and other applications. Our initial focus is regenerative medicine utilizing noninvasive, acoustic shock waves to produce a biological response resulting in the body healing itself through the repair and regeneration of tissue, musculoskeletal, and vascular structures.

Our lead regenerative product in the United States is the dermaPACE® device, used for treating diabetic foot ulcers (“DFU”), which was subject to two double-blinded, randomized Phase III clinical studies. On December 28, 2017, the U.S. Food and Drug Administration (“FDA”) granted the Company’s request to classify the dermaPACE® System as a Class II device via the de novo process. As a result of this decision, the Company was able to immediately market the product for the treatment of DFU as described in the de novo request, subject to the general control provisions of the Food, Drug and Cosmetic Act and the special controls identified in this order.

On August 6, 2020, we entered into an asset purchase agreement (the “Asset Purchase Agreement” or “Acquisition”) with Celularity Inc. (“Celularity”) pursuant to which we acquired Celularity’s UltraMIST® assets (“UltraMIST®” or the “Assets”). The UltraMIST® System provides through a fluid mist a low-frequency, non-contact, and pain free ultrasound energy deep inside the wound bed that promotes healing from within. The ultrasound acoustic waves promote healing by reducing inflammation and bacteria in the wound bed, while also increasing the growth of new blood vessels to the area. The UltraMIST® System treatment must be administered by a healthcare professional. This proprietary technology has been cleared by the FDA for the promotion of wound healing through wound cleansing and maintenance debridement combined with ultrasound energy deposited inside the wound that stimulated tissue regeneration.

In connection with the Asset Purchase Agreement, on August 6, 2020, we entered into a license and marketing agreement with Celularity pursuant to which Celularity granted to the Company a license to the Celularity wound care biologic products, Biovance® and Interfyl® (the “License Agreement”). The License Agreement provides the Company with an exclusive license to use, market, distribute and sell Biovance® in the “Field” and “Territory” (each as defined in the License Agreement), and a non-exclusive license to use, market, distribute and sell Interfyl® in the Field and in the Territory. The License Agreement has an initial five-year term, after which it automatically renews for additional one-year periods, unless either party gives written notice at least 180 days prior to the expiration of the current term. In May 2021, the Company received notification alleging that it is not in compliance the License Agreement with Celularity. See further discussion in Note 10 – Commitments and Contingencies in the accompanying condensed consolidated financial statements.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of our condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses.

On an ongoing basis, we evaluate our estimates and judgments, including those related to the estimate of the fair value of embedded conversion options and warrants. We base our estimates on authoritative literature and pronouncements, historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions. The results of our operations for any historical period are not necessarily indicative of the results of our operations for any future period.

In addition, there are other items within our financial statements that require estimation but are not deemed critical as defined above. Changes in these and other items could still have a material impact upon our financial statements.

Our significant accounting policies are more fully described in Note 3 to our consolidated financial statements filed with our 2021 Annual Report.

17
For a description of recent accounting policies and the impact on our financial statements, refer to Note 3 in the accompanying condensed consolidated financial statements.

Financial Overview

Since inception in 2005, our operations have primarily been funded from the sale of capital stock, notes payable, and convertible debt securities. We have devoted and expect to continue to devote substantial resources for the commercialization of the dermaPACE® System and intend to continue to research and develop the non-medical uses of the PACE technology, both of which will require additional capital resources. We also expect to require additional working capital as sales of our UltraMIST® product continue to grow.

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 create substantial doubt about the Company’s ability to continue as a going concern for a period of at least twelve months from the financial statement issuance date. Although no assurances can be given, we believe that potential additional issuances of equity, debt or other potential financing may provide the necessary funding for us to continue as a going concern for the next 12 months.

Management’s plans are to obtain additional capital in 2022 through investments by strategic partners for market opportunities, which may include strategic partnerships or licensing arrangements, or raise capital through the conversion of outstanding warrants, the 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 shareholders. 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.

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. Our 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 we be unable to continue as a going concern.

Since our inception, we have incurred losses from operations each year. As of September 30, 2022, we have an accumulated deficit of $186.1 million. We continue to incur expenses related to commercialization of our dermaPACE® system for the treatment of DFU in the United States. If we can successfully commercialize, market, and distribute the dermaPACE® system, then we believe we may be able to partially or completely offset these losses in the future with revenues from sales of our UltraMist® systems and applicators. Although no assurances can be given, we believe that potential additional issuances of equity, debt, or other potential financings, as discussed above, may provide the necessary funding for us to continue as a going concern for the next 12 months. We cannot reasonably estimate the nature, timing, and costs of the efforts necessary to complete the development and approval of, or the period in which material net cash flows are expected to be generated from, any of our products, due to the numerous risks and uncertainties associated with developing and marketing products, including the uncertainty of:

• the scope, rate of progress and cost of our clinical trials;

• future clinical trial results;

• the cost and timing of regulatory approvals;

• supplier and customer disputes;

• the establishment of successful marketing, sales and distribution channels and partnerships, including our efforts to expand our marketing, sales and distribution reach through joint ventures and other contractual arrangements;

• the cost and timing associated with establishing reimbursement for our products;

• the effects of competing technologies and market developments; and

• industry demand and patient wellness behavior.

18
Any failure to complete the development of our product candidates in a timely manner, or any failure to successfully market and commercialize our product candidates, would have a material adverse effect on our operations, financial position, and liquidity. A discussion of the risks and uncertainties associated with our business are set forth under the section entitled “Risk Factors – Risks Related to Our Business” in our 2021 Annual Report.

The worldwide spread of the COVID-19 virus has resulted in a global slowdown of economic activity which has decreased demand for a broad variety of products, including from our customers. We have experienced a disruption of our supply channels which will continue for an unknown period until the global supply chain can return to pre- disease status. Also, the pandemic may cause continued or additional actions by hospitals and clinics such as limiting elective procedures and treatments and limiting clinical trial activities and data monitoring. These factors have had a negative impact on our sales and our results of operations.

Results of Operations

   
For the Three Months Ended
    
For the Nine Months Ended
  
   
September 30,
    
Change
    
September 30,
    
Change
  
   
2022
    
2021
     $    

%
      
2022
      
2021
     $    
%
  
Revenues:
                                                        
Total Revenue
  
$
4,166
    
$
3,725
    
$
441
      
12
%
  
$
11,242
    
$
8,750
    
$
2,492
      
28
%
Cost of Revenues
    
606
      
1,555
      
(949
)
    
-61
%
    
2,590
      
3,658
      
(1,068
)
    
-29
%
Gross Margin
    
3,560
      
2,170
      
1,390
      
64
%
    
8,652
      
5,092
      
3,560
      
70
%
Operating Expenses:
                                                                
General and administrative
    
3,404
      
2,864
      
540
      
19
%
    
8,482
      
8,909
      
(427
)
    
-5
%
Selling and marketing
    
1,650
      
2,150
      
(500
)
    
-23
%
    
5,037
      
6,450
      
(1,413
)
    
-22
%
Research and development
    
157
      
297
      
(140
)
    
-47
%
    
494
      
923
      
(429
)
    
-46
%
Gain on disposal of assets
    
-
      
-
      
-
      
N/A
      
(690
)
    
-
      
(690
)
    
N/A
  
Depreciation and amortization
    
189
      
194
      
(5
)
    
-3
%
    
575
      
585
      
(10
)
    
-2
%
Operating Loss
    
(1,840
)
    
(3,335
)
    
1,495
      
-45
%
    
(5,246
)
    
(11,775
)
    
6,529
      
-55
%
Other Income (Expense), net
    
1,427
      
(911
)
    
2,338
      
-257
%
    
3,111
      
(6,001
)
    
9,112
      
-152
%
Income tax expense
    
-
      
(6
)
    
6
              
-
      
(28
)
    
28
          
Net Loss
  
$
(413
)
  
$
(4,252
)
    
3,839
      
-90
%
  
$
(2,135
)
  
$
(17,804
)
    
15,669
      
-88
%

Revenues and Gross Margin

Revenues for the three month-period ended September 30, 2022, were $4.2 million compared to $3.7 million for the same period of 2021, an increase of $0.4 million. Revenues for the nine months ended September 30, 2022, were $11.2 million compared to $8.7 million for the same period in 2021, an increase of $2.5 million. The increase for both periods was driven by the continued increased sales of UltraMIST® devices and single-use accessories.

Gross margin as a percentage of revenue increased to 85.5% from 58.3% during the three-month period ended September 30, 2022, as compared with the same period of 2021, and to 77.0% from 58.2% during the nine-month period ended September 30, 2022, as compared with the same period of 2021. The increases in gross margin percentage for the three and nine-months ended September 30, 2022, were driven by higher sales of single-use accessories, which have a higher gross margin percentage, and by the discontinuation of Biologics sales in the first quarter of 2022, which had a lower gross margin percentage.

General and Administrative Expenses

General and administrative expenses increased $540 thousand or 19% for the three-month period ended September 30, 2022, compared with the same period of 2021. General and administrative expenses decreased $427 thousand or 5% for the nine-month period ended September 30, 2022, compared with the same period of 2021. The increase for the three-month were primarily due to increased accounting costs as we transition from contractors to permanent employees.  The decrease for the nine-month period ended September 30, 2022, were primarily due to a reduction in the registration penalties and legal and license fees that were incurred during the same period in 2021.

Selling and Marketing Expenses

Selling and marketing expenses decreased by $500 thousand or 23% for the three-month period ended September 30, 2022, as compared with the same period of 2021. Selling and marketing expenses decreased by $1.4 million or 22% for the nine-month period ended September 30, 2022, as compared with the same period of 2021. The decrease was primarily due to a reduction in sales and marketing headcount during 2022 and increased cost management activities.

19
Research and Development Expenses

Research and development expenses decreased 47% to $157 thousand from $297 thousand during the three-month period ended September 30, 2022, as compared with the same period of 2021. Research and development expense as a percentage of revenue decreased from 8% during the three-month period ended September 30, 2021, to 4% for the same period in 2022.  Expense decreased 46% to $494 thousand, or 4% of revenue, from $923 thousand, or 11% of revenue, during the nine-month period ended September 30, 2022, as compared with the same period of 2021. These decreases were primarily due to improved cost management in 2022.

Liquidity and Capital Resources

We expect to devote substantial resources for the commercialization of the dermaPACE® System and intend continue to research and develop the next generation of our technology as well as the non-medical uses of the PACE technology, both of which will require additional capital resources. 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 create substantial doubt about the Company’s ability to continue as a going concern for a period of at least twelve months from the financial issuance date. Historically, our operations have primarily been funded from the sale of capital stock, notes payable, and convertible debt securities. The continuation of our business is dependent upon raising additional capital to fund operations; we may not be able to do so, and/or the terms of any financings may not be advantageous to us.

On August 5, 2022, we entered into the Purchase Agreement for our sale in the Private Placement of (i) Notes in an aggregate principal amount of $16.2 million, consisting of $12.4 million in newly raised capital and $3.8 million in rolled forward accrued expenses, bridge notes payable, convertible promissory notes, related parties, and fees; (ii) First Warrants to purchase an additional 404.8 million shares of common stock with an exercise price of $0.067 per share and (iii) Second Warrants to purchase an additional 404.8 million shares of common stock with an exercise price of $0.04 per share. The Notes will be convertible and the Warrants exercisable at such time as our authorized and unissued shares of common stock are at a number sufficient to permit the exercise or conversion of all outstanding securities exercisable for, or convertible into, common stock.

During the nine months ended September 30, 2022, cash used by operating activities totaled approximately $13.2 million, which was largely by the change in the fair value of the derivative liabilities.

Cash provided by investing activities during the first nine months of 2022 consisted primarily of the proceeds received from the sale of property and equipment of $1.0 million.

Cash provided by financing activities for the period consisted primarily of $12.4 million from the Notes issued in August 2022, of which $3.0 million was used to settle old convertible debt, $2.9 million received in connection with the Second Amendment to Note and Warrant Purchase and Security Agreement in February 2022 and proceeds from short-term notes of $0.6 million.

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, 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.

Contractual Obligations

Our major outstanding contractual obligations relate to our financing leases for rental equipment, operating leases for our facilities and office equipment, purchase and supplier obligations for product component materials and equipment, and our outstanding debt. Please see our 2021 Annual Report for additional discussions of these obligations.

Off-Balance Sheet Arrangements

Since inception, we have not engaged in any off-balance sheet activities, including the use of structured finance, special purpose entities or variable interest entities.

Effects of Inflation

Due to the fact that our assets are, to an extent, liquid in nature, they are not significantly affected by inflation. However, the rate of inflation, which has been increasing, affects expenses such as employee compensation, office space leasing costs and research and development charges, which may not be readily recoverable during the period of time that we are bringing the product candidates to market. 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.

20
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 September 30, 2022. 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 September 30, 2022. Our disclosure controls and procedures were not effective because of the “material weakness” described below.

As of September 30, 2022, the Company has still identified the following material weaknesses:


 •
The Company lacks 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 distribution agreements.

•
The Company lacks internal resources to analyze and properly apply U.S. GAAP to accounting for financial instruments included in service agreements with select vendors.

•
The Company has failed to design and implement controls around all of its accounting and IT processes and procedures and, as such, it believes that all of its accounting and IT processes and procedures need to re-designed and tested for operating effectiveness.

As a result, management concluded that its internal control over reporting was not effective as of September 30, 2022.

Remediation Plan

During 2022, we engaged external consultants with appropriate experience applying U.S. GAAP technical accounting guidance, and we have hired additional accounting personnel both internal and external. We engaged external consultants and have begun hiring internal employees to review revenue recognition for new products, lease agreements, internal controls and related procedures and review of documentation of internal controls in addition to new equity and debt financing arrangements. Accounting memos were produced for all technical issues and reviewed with management. The Company will continue to implement and review new controls to address these issues.

We have also implemented cybersecurity training for all employees and redesign of procedures that cyber security breaches may impact and worked with our third-party IT vendor to develop a training plan for all existing and new employees related to cyber and implemented related controls around information technology infrastructure. Additional resources will be evaluated to assist with the management of IT controls and to monitor our third-party IT vendor’s testing and monitoring efforts and where necessary implement new controls.

There is no assurance that the measures described above will be sufficient to remediate the previously identified material weaknesses.

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 September 30, 2022, that materially affect, or are reasonably likely to materially affect, our internal control over financial reporting, except as disclosed in “Remediation Plan” above.

21
PART II — OTHER INFORMATION

Item 1.
LEGAL PROCEEDINGS.

From time to time, the Company is subject to various legal actions, claims and proceedings arising in the ordinary course of business, including claims related to breach of contracts and intellectual property matters resulting from our business activities. As with most actions such as these, an estimation of any possible and/or ultimate liability cannot always be determined. The Company believes that all pending claims, if adversely decided, would not have a material adverse effect on our business, financial position or results of operations.

Item 1A.
RISK FACTORS.

There have been no material changes from our risk factors as previously reported in the section entitled “Risk Factors – Risks Related to Our Business” in our 2021 Annual Report.

Item 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

Item 3.
DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

Item 4.
MINE SAFETY DISCLOSURES.

Not applicable.

Item 5.
OTHER INFORMATION.

Because we are filing this Quarterly Report on Form 10-Q within four business days after the triggering event, we are making the following disclosure under this Item 5 instead of filing a Current Report on Form 8-K under Item 1.01, Entry into a Material Definitive Agreement; Item 2.03, Creation of a Direct Financial Obligation, or an Obligation under an Off-Balance Sheet Arrangement of a Registrant; and Item 3.02, Unregistered Sales of Equity Securities:

Securities Purchase Agreement and Common Stock Warrant

On November 14, 2022, SANUWAVE Health, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”), with the purchasers identified on the signature pages thereto (the “Purchasers”) for the sale by the Company in a private placement (the “Private Placement”) of (i) the Company’s future advance convertible promissory notes in an aggregate principal amount of approximately $2 million (the “Notes”), and (ii) warrants to purchase an additional approximately 45 million shares of common stock of the Company with an exercise price of $0.067 per share (the “First Warrants”) and (iii) warrants to purchase an additional approximately 45 million shares of common stock of the Company with an exercise price of $0.04 per share (the “Second Warrants,” collectively with the First Warrants, the "Warrants"). The Notes will be convertible and the Warrants exercisable on the earlier to occur of (1) completion of a reverse stock split and (2) December 31, 2022. The exercise price of the Warrants is subject to adjustment, including if the Company issues or sells shares of common stock or Share Equivalents (as defined in the Warrants) for an effective consideration price less than the exercise price of the Warrants 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 five trading days preceding such listing is less than $0.04 per share; provided, however, that the exercise price of the Warrants shall never be less than $0.01 per share. The Warrants have a five-year term.

The foregoing descriptions of the Purchase Agreement and the Warrants do not purport to be complete and are qualified in their entirety by reference to the full text of the Purchase Agreement and the Warrants, which have materially consistent terms with Exhibit 4.1 and Exhibit 4.2, respectively, and are incorporated herein by reference.

Notes

As described above, on November 14, 2022, the Company issued Notes to the Purchasers in an aggregate principal amount of approximately $2 million. Pursuant to the Notes, the Company promised to pay each Purchaser, its designee or registered assigns (the “Holder”) in cash and/or in shares of common stock, at a conversion price of $0.04 (the "Conversion Price"), the principal amount (subject to reduction pursuant to the terms of the Note, the “Principal”) as may be advanced in disbursements (each, a “Disbursement” and together, the “Disbursements” with total principal of outstanding Disbursements equaling Principal), and to pay interest at a rate of fifteen percent (15%) per annum (“Interest”) on any outstanding Principal at the applicable Interest rate from the date of the Notes until the Notes are accelerated, converted, redeemed or otherwise. 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 five trading days preceding such listing is less than $0.04 per share; provided, however, that the Conversion Price shall never by less than $0.01.

The Notes contain customary events of default and covenants, including limitations on incurrences of indebtedness and liens. As well as the Company failing to reduce its outstanding shares via a reverse stock split to provide the number of authorized and unissued shares of common stock sufficient to permit the conversion of these notes on or before December 31, 2022.

In connection with the Private Placement, on November 14, 2022, the Company entered into a security agreement in favor of each Purchaser to secure the Company’s obligations under the Notes (the “Security Agreement”).

The rights of each Purchaser to receive payments under its Notes are subordinate to the rights of NH Expansion Credit Fund Holdings LP (“North Haven Expansion”) pursuant to a subordination agreement, which the Company and the Purchasers entered into with North Haven Expansion on November 14, 2022, in connection with the Private Placement (the “Subordination Agreement”).

The foregoing descriptions of the Notes, the Subordination Agreement and the Security Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Notes, the Subordination Agreement, and the Security Agreement, which have materially consistent terms as Exhibit 10.2, and is incorporated herein by reference.

22
Registration Rights Agreement

In connection with the Purchase Agreement, the Company entered into a registration rights agreement with the Purchasers on November 14, 2022 (the “Registration Rights Agreement”), pursuant to which the Company agreed to file a registration statement (the “Registration Statement”) with the Securities and Exchange Commission no later than sixty (60) days following the Closing Date to register the resale of the number of shares of common stock issuable upon conversion of the Notes and exercise of the Warrants issued pursuant to such Purchase Agreement (the “Registrable Securities”) and to cause the Registration Statement to become effective within one-hundred eighty (180) days following the Closing Date. The Company shall use its best efforts to keep the Registration Statement continuously effective under the Securities Act of 1933, as amended (the “Securities Act”), until all Registrable Securities have been sold, or may be sold without the requirement to be in compliance with Rule 144(c)(1) of the Securities Act and otherwise without restriction or limitation pursuant to Rule 144 of the Securities Act, as determined by the counsel to the Company.

The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Registration Rights Agreement, which have materially consistent terms as Exhibit 10.4, and is incorporated herein by reference.

Item 6.
EXHIBITS

Exhibit No.
  
Description
     
 
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 Appendix 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 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 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).
     
 
Form of Future Advance Convertible Promissory Note issued to certain purchasers, dated August 5, 2022 (Incorporated by reference to Exhibit 4.1 to the Form 8-K filed with the SEC on August 8, 2022).

23
 
Form of Common Stock Purchase Warrant issued to certain purchasers, dated August 5, 2022 (Incorporated by reference to Exhibit 4.2 to the Form 8-K filed with the SEC on August 8, 2022).
     
 
Form of Securities Purchase Agreement, dated August 5, 2022, by and among the Company and the purchasers identified on the signature pages thereto (Incorporated by reference to Exhibit 10.1 the Form 8-K filed with the SEC on August 8, 2022).
     
 
Form of Subordination Agreement, dated August 5, 2022, by and among the Company, NH Expansion Credit Fund Holdings LP and certain creditors (Incorporated by reference to Exhibit 10.2 the Form 8-K filed with the SEC on August 8, 2022).
     
 
Form of Security Agreement, dated August 5, 2022, by and among the Company and certain lenders (Incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on August 8, 2022).
     
 
Form of Registration Rights Agreement, dated August 5, 2022, 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 August 8, 2022).
     
 
Settlement Agreement, dated August 5, 2022, by and between the Company and Leviston Resources LLC (Incorporated by reference to Exhibit 10.5 to the Form 8-K filed with the SEC on August 8, 2022).
     
 
Offer Letter, dated April 7, 2022, by and between the Company and Dr. Toni Rinow (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on August 19, 2022).
     
 
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.
     
104
  
Cover Page with Interactive Data File

*Filed herewith.

24
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: November 14, 2022
By:
/s/ Kevin A. Richardson, II
   
Kevin A. Richardson, II

 
Chief Executive Officer
(Duly Authorized Officer and Principal Executive Officer)
     
Dated: November 14, 2022
By:
/s/ Toni Rinow
   
Toni Rinow
   
Chief Financial Officer
(Principal Financial and Accounting Officer)


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, Kevin A Richardson II, 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: November 14, 2022

/s/ Kevin A. Richardson II
Kevin A. Richardson II
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, Toni Rinow, 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: November 14, 2022

/s/ Toni Rinow
Toni Rinow
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 periodic report of SANUWAVE Health, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2022 as filed with the Securities and Exchange Commission (the “Report”), I, Kevin A. Richardson II, Chief Executive Officer (and principal 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: November 14, 2022

/s/ Kevin A. Richardson II
Kevin A. Richardson II
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 periodic report of SANUWAVE Health, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2022 as filed with the Securities and Exchange Commission (the “Report”), I, Toni Rinow, 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: November 14, 2022

/s/ Toni Rinow
Toni Rinow
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)