UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K
 
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20212023

or

☐
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 Charter)
 
Nevada
 20-1176000
(State or Other Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)

3360 Martin Farm11495 Valley View Road Suite 100
Suwanee, GeorgiaEden Prairie, MN
 3002455344
(Address of Principal Executive Offices) (Zip Code)

(770) 419-7525(952) 656-1029
Registrant’s Telephone Number, Including Area Code

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
None
N/A
N/A

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.001

Title of each classTrading Symbol(s)
Name of each exchange on which
registered
None
N/A
N/A

Securities registered pursuant to Section 12(b) of the Act:
None per share
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ NO ☒

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 filefiles such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☐  NO ☒  NO ☐

IndicateIndicate 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 such shorter period that the registrant was required to submit such file).YES ☒  NO ☐


IndicateIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and emerging growth company in Rule 12b-2 of the Exchange Act. (Check one):

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants’ executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant (assuming, for purposes of this calculation only, that the registrant’s directors, executive officers and greater than 10% shareholdersstockholders are affiliates of the registrant), based upon the closing sale price of the registrant’s common stock on June 30, 2021,2023, the last business day of the registrant’s most recently completed second fiscal quarter, was $81.6$7.7 million.

As of May 10, 2022March 20, 2024, there were issued and outstanding 517,195,7051,140,559,527 shares of the registrant’s common stock.


SANUWAVE Health, Inc.
Table of Contents


PART I
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Item 1B.
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Item 1C.
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PART II
  

   

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PART III
  

   

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PART IV
  

   

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PART I

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K of SANUWAVE Health, Inc. and its subsidiaries (“SANUWAVE” or the “Company”) contains forward-looking statements. All statements in this Annual Report on Form 10-K, 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: any expected benefits of the Celularity Inc. asset acquisition and its impact on the Company; the impact of the COVID-19 pandemic on our proposed business combination with Sep Acquisition Corp., results of operations, liquidity, and operations, restrictions and new regulations on our operations and processes, including the execution of clinical trials; the Company’s future financial results, operating results, and projected costs; market acceptance of and demand for dermaPACEUltraMIST®and our product candidates;PACE®, success of future business development and acquisition activities; management’s plans and objectives for future operations; industry trends; regulatory actions that could adversely affect the price of or demand for our approved products; our intellectual property portfolio; our business, marketing and manufacturing capacity and strategy; estimates regarding our capital requirements, the anticipated timing of the need for additional funds, and our expectations regarding future capital-raising transactions, including through investments by strategic partners for market opportunities, which may include strategic partnerships or licensing agreements, or raising capital through the conversion of outstanding warrants or issuances of securities; product liability claims; economic conditions that could adversely affect the level of demand for or the cost of our products; timing of clinical studies and any eventual FDAU.S. Food and Drug Administration (FDA) approval of new products and new uses of our current products; financial markets; the competitive environment; supplier and customer disputes; and our plans to remediate our material weaknesses in our disclosure controls and procedures and our internal control over financial reporting. These forward-looking statements are based on management’s estimates, projections and assumptions as of the date hereof and include the assumptions that underlie such statements. Forward-looking statements may contain words such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” and “continue,” the negative of these terms, or other comparable terminology. Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed in this report, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Other risks and uncertainties are and will be disclosed in the Company’s prior and futuresubsequent Securities and Exchange Commission (the “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.

Except as otherwise indicated by the context, references in this Annual Report on Form 10-K to “we,” “us” and “our” are to the consolidated business of the Company.

Item 1.BUSINESS

Overview

We are aThe Company is an ultrasound and shock wave technology company using a patented systemsystems of noninvasive, high-energy, acoustic shock waves or low intensity and non-contact ultrasound for regenerative medicine and other applications. Our initial focus is regenerative medicine utilizing noninvasive, acoustic shock waves or ultrasound 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 dermaPACEtwo primary systems are UltraMIST® device, used for treating diabetic foot ulcers, which was subject toand PACE®. UltraMIST and PACE are the only two double-blinded, randomized Phase III clinical studies. On December 28, 2017, the U.S. Food and Drug Administration (the “FDA”) granted(FDA) approved directed energy systems for wound healing.
The UltraMIST system provides, through a fluid mist, 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. The UltraMIST System is cleared for marketing in the U.S. by the FDA (K140782) but is not approved/cleared/licensed in any other jurisdiction.
The PACE systems use acoustic pressure shockwaves generated by the Company’s requestPulsed Acoustic Cellular Expression (PACE) technology to classify the dermaPACEconverge at precise selected targets to produce an extremely short duration compression burst.The precise targeting of tissue with PACE® technologyprovides healthcare professionals with a tool to positively influence cellular form and function, which can result in pain relief, improved circulation, and tissue regeneration. The PACE® system treatment must be administered by a healthcare professional. The PACE® line of products is marketed in various jurisdictions:
The dermaPACE® System aswas determined to be a Class II device viaby the de novo process.FDA under the generic name extracorporeal shock wave device for treatment of chronic wounds per De Novo filing/order DEN160037. As a result of this decision, the Company wasorder, we were immediately able to immediately market the product for the treatment of diabetic foot ulcersdermaPACE as described in the de novoDe Novo request subject to the general control provisions of the FD&CFederal Food, Drug, and Cosmetic Act and the special controls identified in thisthe order. Besides having permission to market in the U.S., dermaPACE is licensed for distribution and sale in the following jurisdictions: the European Union (CE Mark), Canada, Brazil, Egypt, Singapore and the United Arab Emirates.
Profile by SANUWAVE System is marketed only within the U.S. and is listed as a Class I device with the FDA (listing number D065463). Profile by SANUWAVE System is not approved/cleared/licensed in any other jurisdiction.
The orthoPACE® System is not marketed in the U.S. It is marketed in the European Union (CE Mark) and licensed for sale/distribution in South Korea and Taiwan.

Our portfolio of healthcare products and product candidates activate biologic signaling and angiogenic responses, including new vascularization and microcirculatory improvement, helping to restorewound treatment solutions provides patients with noninvasive technology that boosts the body’s normal healing processes and regeneration. We intend to apply our Pulsed Acoustic Cellular Expression (PACE®) technology in wound healing, orthopedic, plastic/cosmetic and cardiac conditions.tissue regeneration processes. The Company is marketing its dermaPACE® SystemUltraMIST and PACE systems for treatment usage primarily in the United States.
Regarding the non-contact and will continue to generate revenue fromnon-thermal low frequency ultrasound UltraMIST system, the Company is focused on the following:

Growth and expansion of sales across the United States
Improvement of the European Conformity Marking (CE Mark) devicesfunctionality and accessoriesease-of-use for both medical personnel and patients
Identifying and qualifying antibacterial and anti-biofilm solutions to replace the saline solution used to produce the mist used by this system to conduct the ultrasound toward its target, which, the Company believes would make the system more effective in Europe, Canada, Asia, Brazil, Mexico, and Asia/Pacific. treating bacterial infections associated with skin conditions
The design of new applicators capable of treating large skin conditions, for improved efficiency in such cases.

The Company generates revenue streams from dermaPACE® treatments, product sales, licensing transactions and other activities, and withits recent acquisition of the UltraMIST® assets, SANUWAVE now combines two highly complementary and market-cleared energy transfer technologies used in the dermaPACE® and UltraMIST® Systems and two human tissue biologic products (Biovance® and Interfyl®), creating a platform of scale with an end-to-end product offering in the advanced wound care market.
Our lead product candidate for the global wound care market, dermaPACE®, has received FDA clearance for commercial use to treat diabetic foot ulcers in the United States and the CE Mark allowing for commercial useis focused on acute and chronic defects of the skin and subcutaneous soft tissue. We believe we have demonstrated that our patented technology is safe and effective in stimulating healing in chronic conditions of the foot and the elbow through our United States FDA Class III Premarket Approvals (“PMAs”) approved OssaTron® device, and in the stimulation of bone and chronic tendonitis regeneration in the musculoskeletal environment through the utilization of our OssaTron, Evotron®, and orthoPACE® devices in Europe and Asia.
We are focused onfurther developing our PACE proprietary technology to activate healing in:


(1)•
Acute and chronic wound conditions, including diabetic foot ulcers, venous and arterial ulcers, pressure sores, burns and other skin eruption conditions;

(2)orthopedic applications, such as eliminating chronic pain in joints from trauma, arthritis or tendons/ligaments inflammation, speeding the healing of fractures (including nonunion or delayed-union conditions), improving bone density in osteoporosis, fusing bones in the extremities and spine, and other potential sports injury applications;

(3)plastic/cosmetic applications such as cellulite smoothing, graft and transplant acceptance, skin tightening, scarring and other potential aesthetic uses; and

(4)cardiac applications for removing plaque due to atherosclerosis improving heart muscle performance.conditions;

Orthopedic applications, such as eliminating chronic pain in joints from trauma, arthritis or tendons/ligaments inflammation or tendinopathies, speeding the healing of fractures (including nonunion or delayed-union conditions), improving bone density in osteoporosis, fusing bones in the extremities and spine, and other potential sports injury applications;
In addition to healthcare uses, our high-energy, acoustic pressure shock waves,Plastic/cosmetic applications such as cellulite smoothing, graft and transplant acceptance, skin tightening, scarring and other potential aesthetic uses; and
Cardiovascular applications for removing plaque due to their powerful pressure gradientsatherosclerosis, eliminating occlusions and localized cavitational effects, may have applications in secondaryblood clots, and tertiary oil exploitation, for cleaning industrial watersimproving heart muscle and food liquids and finally for maintenance of industrial installations by disrupting biofilms formation. Our business approach will be through licensing and/or partnership opportunities.cardiac valves performance.

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The worldwide spreadMerger Agreement with SEPA

On August 23, 2023, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among SEP Acquisition Corp., a Delaware corporation (“SEPA”), SEP Acquisition Holdings Inc., a Nevada corporation, and a wholly owned subsidiary of SEPA (“Merger Sub”). Pursuant to the terms of the COVID-19 virus resultedMerger Agreement, a business combination between the Company and SEPA (the “Merger”) will be affected. More specifically, and as described in greater detail below, at the effective time of the Merger (the “Effective Time”):

Merger Sub will merge with and into the Company, with the Company being the surviving company following the merger.
Each issued and outstanding share of the Company common stock will automatically be converted into Class A common stock of SEPA, par value $0.0001 per share, at the Conversion Ratio (as defined in the Merger Agreement); and
Outstanding Company convertible securities of the Company will be assumed by SEPA and will be converted into the right to receive Class A Common Stock of SEPA.

Pursuant to the terms of the Merger Agreement, the holders of (i) Company common stock, (ii) in the money options to purchase Company common stock, (iii) in the money warrants to purchase Company common stock, and (iv) convertible promissory notes, collectively will be entitled to receive 7,793,000 shares of Class A Common Stock of SEPA. Out-of-the-money options and out-of-the-money warrants will be assumed by SEPA and converted into options or warrants, respectively, exercisable for shares of Class A Common Stock based on the Conversion Ratio; however, such out-of-the-money options and out-of-the-money warrants shall not be reserved for issuance from the Merger Consideration.

The Merger Agreement contains certain conditions to Closing, including the following:


•
holders of 80% or more of the Company’s convertible notes with a maturity date occurring after the date of the Closing (the “Closing Date”), measured by number of shares of our common stock into which such convertible notes may be converted, agreeing to convert their convertible notes into shares of common stock immediately prior to the Effective Time.

holders of 80% or more of the Company’s warrants that would be outstanding on the Closing Date, measured by number of shares of our common stock subject to all such warrants in the aggregate, agreeing to convert their warrants into shares of common stock immediately prior to the Effective Time.

SEPA having at the Closing, at least $12,000,000 in cash and cash equivalents, including funds remaining in the trust account (after giving effect to the completion and payment of any redemptions) and the proceeds of any private placement in SEPA.

As of the date of this Annual Report on Form 10-K, the holders of approximately 95% of our outstanding warrants covered by the preceding covenant and 100% of our outstanding convertible notes covered by the preceding covenant have committed to exchange such warrants and convertible notes for an aggregate of 1,217,222,186 shares and 219,841,980 shares, respectively, of our common stock immediately prior to the Closing.

On February 21, 2024, we held a special meeting of holders of the Company’s common stock where the Merger Agreement and the transactions contemplated thereby (the “Business Combination”) was approved by a majority vote.

In February 2024, the Company amended the Merger Agreement to extend the date after which the Company or SEPA, in its discretion, can elect to terminate the Merger Agreement if any of the conditions to closing of the other party have not been met or waived, from February 28, 2024 to April 30, 2024.

UltraMIST - Ultrasound Healing Therapy

UltraMIST is an FDA approved powerful, non-contact, non-thermal ultrasound therapy system used to promote healing in a global slowdownwide range of economic activity whichwound types. The system never touches the wound surface making it pain free.  UltraMIST promotes wound healing below the skin surface by modulating cell membranes to drive increased blood flow and capillary formation. It also reduces and removes a wide range of bacteria, including biofilms, while preserving healthy structures. UltraMIST is likelyFDA approved to decrease 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 of time until the global supply chain can return to the  pre- disease status. Also, the pandemic may cause continued or additional actions by hospitals and clinicstreat malaises such as limiting elective proceduresdiabetic foot ulcers, pressure ulcers, venous leg ulcers, deep tissue pressure injuries, and treatments and limiting clinical trial activities and data monitoring. These factors have had and we expect that they will continue to have a negative impact on our sales and our results of operations, the size and duration of which we are currently unable to predict.surgical wounds.

Pulsed Acoustic Cellular Expression (PACE)PACE Technology for Regenerative Medicine

Our PACE productsystem candidates, including our lead product candidate, dermaPACE®, System, deliver high-energy acoustic pressure waves in the shock wave spectrumshockwaves to produce compressive and tensile stresses on cells and tissue structures. These mechanical stresses at the cellular level have been shown in pre-clinical work to promote angiogenic and positive modulated inflammatory responses, and quickly initiate the healing cascade. This has been shown in pre-clinical work to result in microcirculatory improvement, including increased perfusion and blood vessel widening, (arteriogenesis), the production of angiogenic growth factors, enhanced new blood vessel formation (angiogenesis) and the subsequent regeneration of tissue such as skin, musculoskeletal and vascular structures. PACE procedures trigger the initiation of an accelerated and modulated inflammatory response that speeds wounds into proliferation phases of healing and subsequently returns a chronic condition to an acute condition to help reinitiate the body’s own healing response. We believe thatThe Company believes our PACE technology is well suited for various applications due to its activation of a broad spectrum of cellular events critical for the initiation and progression of healing.
 
High-energy, acoustic pressure shock waves are the primary component of our previously developed product, OssaTron, which was approved by the FDA and marketed in the United States for use in chronic plantar fasciitis of the foot in 2000 and for elbow tendonitis in 2003. Previously, acoustic pressure shock waves have been used safely at much higher energy and pulse levels in the lithotripsy procedure (breaking up kidney stones) by urologists for over 25 years and has reached the care status of “golden standard” for the treatment of kidney stones.

We research, design, manufacture, market and service our products worldwide and believe we have already demonstrated that our technology is safe and effective in stimulating healing in chronic musculoskeletal conditions of the foot and the elbow through our United States FDA Class III PMA approved OssaTron device, and in the stimulation of bone and chronic tendonitis regeneration in the musculoskeletal environment through the utilization of our orthoPACE, Evotron and OssaTron devices in Europe, Asia and Asia/Pacific.

We believe our experience from our preclinical research and the clinical use of our predecessor legacy devices in Europe and Asia, as well as our OssaTron device in the United States, demonstrates the safety, clinical utility and efficacy of these products. In addition, we have preclinical programs focused on the development and better understanding of treatments specific to our target applications.
Currently, there are limited biological or mechanical therapies available to activate the healing and regeneration of skin, musculoskeletal tissue and vascular structures. As baby boomers age, the incidence of their targeted diseases and musculoskeletal injuries and ailments will be far more prevalent. We believe that our pre-clinical and clinical studies suggest that our PACE technology will be effective in targeted applications. We anticipate that future clinical studies should lead to regulatory approval of our regenerative product candidates in the Americas, Middle East and Africa. If approved by the appropriate regulatory authorities, we believe that our product candidates will offer new, effective and noninvasive (extracorporeal) treatment options in wound healing, orthopedic injuries, plastic/cosmetic uses and cardiovascular procedures, improving the quality of life for millions of patients suffering from injuries or deterioration of tissue, bones and vascular structures.

dermaPACE® – Our Lead Product Candidate

The FDA granted approval of our Investigational Device Exemption (IDE) to conduct two double-blinded, randomized clinical trials utilizing our lead device product for the global wound care market, the dermaPACE® device, in the treatment of diabetic foot ulcers.

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The dermaPACE® system was evaluated using two studies under IDE G070103. The studies were designed as prospective, randomized, double-blind, parallel-group, sham-controlled, multi-center 24-week studies at 39 centers. A total of 336 subjects were enrolled and treated with either dermaPACE® plus conventional therapy or conventional therapy (a.k.a. standard of care) alone. Conventional therapy included, but was not limited to, debridement, saline-moistened gauze, and pressure reducing footwear. The objective of the studies was to compare the safety and efficacy of the dermaPACE® device to sham-control application. The prospectively defined primary efficacy endpoint for the dermaPACE® studies was the incidence of complete wound closure at 12 weeks post-initial application of the dermaPACE® system (active or sham). Complete wound closure was defined as skin re-epithelialization without drainage or dressing requirements, confirmed over two consecutive visits within 12-weeks. If the wound was considered closed for the first time at the 12-week visit, then the next visit was used to confirm closure. Investigators continued to follow subjects and evaluate wound closure through 24 weeks.

Between the two studies there were over 336 patients evaluated, with 172 patients treated with dermaPACE® and 164 control group subjects with use of a non-functional device (sham). Both treatment groups received wound care consistent with the standard of care in addition to device application. Study subjects were enrolled using pre-determined inclusion/exclusion criteria in order to obtain a homogenous study population with chronic diabetes and a diabetic foot ulcer that has persisted a minimum of 30 days and its areaThe Company is between 1cm2 and 16cm2, inclusive. Subjects were enrolled at Visit 1 and followed for a run-in period of two weeks. At two weeks (Visit 2 – Day 0), the first treatment was applied (either dermaPACE® or Sham Control application). Applications with either dermaPACE® or Sham Control were then made at Day 3 (Visit 3), Day 6 (Visit 4), and Day 9 (Visit 5) with the potential for 4 additional treatments in Study 2. Subject progress including wound size was then observed on a bi-weekly basis for up to 24 weeks at a total of 12 visits (Weeks 2-24; Visits 6-17).

We retained Musculoskeletal Clinical Regulatory Advisers, LLC (MCRA) in January 2015 to lead the Company’s interactions and correspondence with the FDA for the dermaPACE®, which have already commenced. MCRA has successfully worked with the FDA on numerous Premarket Approvals (PMAs) for various musculoskeletal, restorative and general surgical devices since 2006.
Working with MCRA, we submitted to FDA a de novo petition on July 23, 2016. Due to the strong safety profile of our device and the efficacy of the data showing statistical significance for wound closure for dermaPACE® subjects at 20 weeks, we believe that the dermaPACE® device should be considered for classification into Class II as there is no legally marketed predicate device and there is not an existing Class III classification regulation or one or more approved PMAs (which would have required a reclassification under Section 513(e) or (f)(3) of the FD&C Act). On December 28, 2017, the FDA determined that the criteria at section 513(a)(1)(A) of (B) of the FD&C Act were met and granted the de novo clearance classifying dermaPACE® as Class II and available to be marketed immediately.
Finally, our dermaPACE® device has received the European CE Mark approval to treat acute and chronic defects of the skin and subcutaneous soft tissue, such as in the treatment of pressure ulcers, diabetic foot ulcers, burns, and traumatic and surgical wounds. The dermaPACE® is also licensed for sale in Canada, Australia, New Zealand and South Korea.Additionally, our joint venture partner in Brazil, Diversa SA, received approval from the Brazilian Agência Nacional de Vigilância Sanitária (“National Health Surveillance Agency” or “ANVISA”) to market dermaPACE® to treat diabetic foot ulcers in Brazil.
We are actively marketing the dermaPACE® to the European Community, Canada, Brazil, Mexico, and Asia/Pacific, utilizing distributors in select countries.
Clinical Studies
          
A post-market pilot study to evaluate the effects of high energy focused, acoustic shock wave therapy on local skin perfusion and healing of diabetic foot ulcers was changed to a 15-patient case study with the same primary objective of determining the effects of high-energy focused, acoustic shock wave therapy on oxygen saturation levels was completed. A near-infrared spectroscopy device was used to measure the oxygen saturation levels prior to treatment and after the full treatment regimen. Treatment with the dermaPACE® System resulted in all patients demonstrating a statistically significant increase in tissue oxygen saturation within the wound bed, a key component of wound healing. Additionally, the results showed all 15 wounds demonstrated a decrease in wound area and seven of the wounds healed. The results of this case study are another indication that treatment of Diabetic Foot Ulcers with the dermaPACE® System prepares the wound bed via oxygenation and neo-vascularization, facilitating accelerated wound resolution via the body’s natural healing process or preparing the wound to more readily respond to other advanced healing modalities.

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UltraMIST® - Ultra sound healing Therapy

UltraMIST® is an FDA approved powerful, non-contact and non-thermal ultrasound therapy device used to promote wound healing. UltraMIST® is FDA approved to treat malaises such as diabetic foot ulcers, pressure ulcers, venous leg ulcers, deep tissue pressure injuries, and surgical wounds. Currently, the Company’s dermaPACE® is only approved to treat diabetic foot ulcer.
UltraMIST® currently has over 900 customers in 46 states providing the Company with a robust product offering in the advanced wound care market and an end-to-end advanced wound care product portfolio that addresses the entire care pathway.
Biologic Products

BIOVANCE is a graft skin substitute product that provides a natural foundation for wound healing. The product is an allograft that is prepared from the amnion, the part of the amniotic sac closest to the developing embryo. Key cells and proteins move into the BIOVANCE material so that tissues can regenerate, and wounds can continue to heal. The product is adaptable and flexible, it can conform to irregular surfaces. It is also adaptable in that it can be sutured or glued if determined by the clinician to be a better option. The product also has a 5-year shelf life at room temperature conditions and is available in multiple sizes for application flexibility.
Interfyl is a liquid product that replaces damaged integumental soft tissue and augments / supplements inadequate connective tissues. Interfyl is comprised of allogenic decellularized particulate human placental connective tissue matrix that is placed on a wound. The product repairs small surgical defects resulting from either medical or surgical conditions, including patients with exposed vital structures such as bone, tendon, ligament, or nerves. Interfyl has the ability to fill irregular spaces or soft tissue deficits resulting from trauma or surgery. The filler also allows for cell adherence and growth during tissue repair and affords structural support and elasticity in the tissue. The product is offered in a 1.5mL flowable format in a 3-mL syringe. 50mg and 100mg particulates are in each vial.
Growth Opportunity in Wound Care Treatment

We are focused on the development of products that treat unmet medical needs in large market opportunities. Our FDA approval in the United States for our, lead product candidate, dermaPACE®,system is the first step in providing an option to a currently unmet need in the treatment of diabetic foot ulcers. Diabetes is common, disabling, and deadly. In the United States, diabetes has reached epidemic proportions. Based on our research, foot ulcerations are one of the leading causes of hospitalization in diabetic patients and lead to billions of dollars in health care expenditures annually. According to a 2020 report by the Centers for Disease Control and Prevention based on estimated 2018 data, approximately 34.1 million people aged 18 years or older (diagnosed and undiagnosed), roughly 13.0% of the United States population, have diabetes and1.5 million new cases of diabetes were diagnosed in people aged 18 years or older. In 2016, there were 7.8 million hospital discharges with diabetes as a listed diagnosis. The estimated total direct and indirect costs of diagnosed diabetes in the United States in 2017 was $327 billion. Between 2012 and 2017, medical costs per person associated with diabetes increased from $8,417 to $9,601. Approximately 2 - 7% of diabetics will develop a diabetic foot ulcer each year. Foot ulcers are a significant complication of diabetes mellitus and often precede lower-extremity amputation. The most frequent underlying etiologies are neuropathy, trauma, deformity, high plantar pressures, and peripheral arterial disease. Over 50% of Diabetic foot ulcers will become infected, resulting in high rates of hospitalization, increased morbidity and potential lower extremity amputation and up to 80% of Diabetic foot ulcers that have healed will re-ulcerate within 12 months. According to the International Diabetes Federation 2019 Global Fact Sheet, approximately 463 million people has diabetes and 10% of global health expenditure is spent on diabetes (approximately $760 billion).
A majority of challenging wounds are non-healing chronic wounds and in addition, chronic diabetic foot ulcers and pressure ulcers are often slow-to-heal wounds, which often fail to heal for many months, and sometimes, for several years. These wounds often involve physiologic, complex and multiple complications such as reduced blood supply, compromised lymphatic systems or immune deficiencies that interfere with the body’s normal wound healing processes. These wounds often develop due to a patient’s impaired vascular and tissue repair capabilities. Wounds that are difficult to treat do not always respond to traditional therapies, which include hydrocolloids, hydrogels and alginates, among other treatments. We believe that physicians and hospitals need a therapy that addresses the special needs of these chronic wounds with high levels of both clinical and cost effectiveness.

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We believe we are developing a safe and advanced technology in the wound healing and tissue regeneration market with PACE. dermaPACE® is noninvasive and does not require anesthesia, making it a cost-effective, time-efficient, and painless approach to wound care. Physicians and nurses look for therapies that can accelerate the healing process and overcome the obstacles of patients’ compromised conditions and prefer therapies that are easy to administer. In addition, since many of these patients are not confined to bed, healthcare providers want therapies that are minimally disruptive to the patient’s or the caregiver’s daily routines.The dermaPACE’s noninvasive treatments are designed to elicitproduce the body’s own healing response and followed by simple standard of care dressing changes, are designed to allow for limited disruption to the patients’ normal lives and have no effect on mobility while their wounds heal.

Developing Product Opportunities - Orthopedic

The orthoPACE System, whichdermaPACE has received the European CE Mark approval to treat acute and chronic defects of the skin and subcutaneous soft tissue, such as in the treatment of pressure ulcers, diabetic foot ulcers, burns, and traumatic and surgical wounds. The dermaPACE is intendedalso licensed for usesale in orthopedic, trauma and sports medicine indications, continues to be a viable and effective treatment solution in EuropeCanada, Australia, New Zealand and South Korea. The device features four types of applicators including a unique applicator that is less painful for some indications and may reduceAdditionally, our joint venture partner in Brazil, Diversa SA, received approval from the Brazilian Agência Nacional de Vigilância Sanitária (“National Health Surveillance Agency” or completely eliminate anesthesia for some patients. In the orthopedic setting, the orthoPACE System is being used“ANVISA”) to market dermaPACE to treat tendinopathies and acute and nonunion fractures, including the soft tissue surrounding the fracture to accelerate healing and prevent secondary complications and their associated treatment costsdiabetic foot ulcers in Brazil.

We believe there are significant opportunities in the worldwide orthopedic market, driven by aging baby boomers and their desire for active lifestyles well into retirement and the growth in the incidence of osteoporosis, osteoarthritis, obesity, diabetes and other diseases that cause injury to musculoskeletal tissues and/or impair the ability of the body to heal injuries.Profile

We have experience in the sports medicine field (which generally refers to the non-surgical and surgical management of cartilage, ligament and tendon injuries) through our legacy devices, OssaTron and Evotron. Common examples of these injuries include extremity joint pain, torn rotator cuffs (shoulder), tennis elbow, Achilles’ tendon tears and torn meniscus cartilage in the knee. Injuries to these structures are very difficult to treat because the body has a limited natural ability to regenerate these kinds of tissues. Cartilage, ligament and tendons seldom return to a pre-injury state of function. Due to a lack of therapies that can activate healing and regenerate these tissues, many of these injuries will result in a degree of permanent impairment and chronic pain. Prior investigations and pre-clinical work indicate that PACE can positively affect the body’s inflammatory process and activate various cell types and may be an important adjunct to the management of sports medicine injuries. We plan to submit to U.S. FDA a 510(k) seeking clearance for general indications to address this growing field.

Additionally, we havethe Company has developed and introduced Profile by SANUWAVE as an immediately available solution for pain management in sports medicine and physical therapy in the U.S. market. Profile by SANUWAVE is a therapeutic massager intended for the relief of minor muscle aches and pains via SANUWAVE’s Diffused Acoustic Pressure (DAP®(DAP®) technology. DAP®DAP® delivers the beneficial, therapeutic field of the acoustic pressure waves without the impact and potential pain of a focused pulse. There is a significant need in the U.S. for pain management products and the Company believes the non-invasive delivery of therapeutic shockwaves for its treatment can help to serve this market.

Non-Medical Uses for Our Shockwave Technology

We believe there are significant license/partnership opportunities for our acoustic pressure shockwave technology in non-medical uses, including in the energy, water, food, and industrial markets.

Due to their powerful pressure gradients and localized cavitational effects, we believe that high-energy, acoustic pressure shockwaves can be used to clean, in an energy efficient manner, contaminated fluids from impurities, bacteria, viruses, and other harmful micro-organisms, which provides opportunities for our technology in cleaning industrial and domestic/municipal waters. Based on the same principles of action of the acoustic pressure shockwaves against bacteria, viruses, and harmful micro-organisms, we believe our technology can be applied for cleaning or sterilization of various foods such as milk, natural juices, and meats.

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In the energy sector, we believe that the acoustic pressure shockwaves can be used to improve oil recovery (IOR), as a supplement to or in conjunction with existing fracking technology, which utilizes high pressurized water/gases to crack the rocks that trapped oil in the underground reservoir. Through the use of our high-energy, acoustic pressure shockwaves the efficiency can be improved and at the same time the environmental impact of the fracking process can be reduced. Furthermore, we believe our technology can be used for enhanced oil recovery (EOR) based on the changes in oil flow characteristics resulting from acoustic pressure shockwave stimulation, as a tertiary method of oil recovery from older oil fields.

Additionally, we demonstrated through three studies performed at Montana State University that high-energy, acoustic pressure shockwaves are disrupting biofilms and thus can be used for surface cleaning monuments, ship hulls, and underwater structure cleaning, or to unclog pipes in the energy industry (shore or off-shore installations), food industry, and water management industry, which will reduce or eliminate down times with significant financial benefits for maintenance of existing infrastructure. Also, our technology should have a significant environmental impact by eliminating or reducing the use of harmful chemicals, which are the preferred biofilm cleaning method at this time.

Market Trends

We are focused on the development of regenerative medicine products that have the potential to address substantial unmet clinical needs across broad market indications. We believe there are limited therapeutic treatments currently available that directly and reproducibly activate healing processes in the areas in which we are focusing, particularly for wound care and repair of certain types of musculoskeletal conditions.

According to AdvaMed and Centers for Medicare & Medicaid Services data from 2006 and our internal projections, the United States advanced wound healing market for the dermaPACE® is estimated at $20 billion, which includes diabetic foot ulcers, pressure sores, burns and traumatic wounds, and chronic mixed leg ulcers. We also believe there are significant opportunities in the worldwide orthopedic and spine markets, driven by aging baby boomers and their desire for active lifestyles well into retirement and the growth in the incidence of osteoporosis, osteoarthritis, obesity, diabetes and other diseases that cause injury to orthopedic tissues and/or impair the ability of the body to heal injuries.

With the success of negative pressure wound therapy devices in the wound care market over the last decade and the recognition of the global epidemic associated with certain types of wounds, as well as deteriorating musculoskeletal conditions attributed to obesity, diabetes, vascular and heart disease, as well as sports injuries, we believe that Medicare and private insurers have become aware of the high costs and expenditures associated with the adjunctive therapies being utilized for wound healing and orthopedic conditions that have limited efficacies in full skin closure, or bone and tissue regeneration. We believe the wound healing and orthopedic markets are undergoing a transition, and market participants are interested in biological response activating devices that are applied noninvasively and seek to activate the body’s own capabilities for regeneration of tissue at injury sites in a cost-effective manner.

Strategy

Our strategy is focused on the research, development, and commercialization of our patented, non-invasive, and biological response-activating medical systems for the repair and regeneration of skin, musculoskeletal tissue, and vascular structures. Our end-to-end wound care portfolio of regenerative medicine products and product candidates help restore the body’sbody's normal healing processes. SANUWAVE applies and researches its patented energy transfer technologies in wound healing, orthopedic, plastic/cosmetic, and cardiac/endovascular conditions.

processes, by Through our August 2020 acquisition of the UltraMIST® System, we now combine two highly complementary and market-cleared energy transfer technologies used in the dermaPACE® and UltraMIST® medical device Systems, which creates a platform of scale in the advanced wound care market.

Our the dermaPACE® device for treating diabetic foot ulcers, which was subject to two double-blinded, randomized Phase III clinical studies. On December 28, 2017, the U.S. 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 diabetic foot ulcers as described in the de novo request, subject to the general control provisions of the FD&C Act and the special controls identified in this order.

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Our portfolio of healthcare products and product candidates activateactivating biologic signaling and angiogenic responses, including new vascularization and microcirculatory improvement, helping to restore the body’s normal healing processes and regeneration. We intend to apply our Pulsed Acoustic Cellular Expression (PACE) technology in wound healing, orthopedic, plastic/cosmetic and cardiac conditions.

Our immediate goal for our regenerative medicine technology involves leveraging the knowledge we gained from our existing human heel and elbow indications to enter the advanced wound care market with innovative treatments.responses.

The key elements of our strategy include the following:

•
Commercialize and support the domestic distribution of our dermaPACE® device to treat diabetic foot ulcers.
Commercialize and support the domestic distribution of our UltraMIST and PACE systems to treat wounds;

We initially focused on obtaining FDA approval in the United States for our lead product candidate, dermaPACE®, for the treatment of diabetic foot ulcers, which we believe represents a large, unmet need.
Reduce and normalize operating costs to support growth;

On December 28, 2017, the 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 diabetic foot ulcers as described in the de novo request, subject to the general control provisions of the FD&C Act and the special controls identified in this order.

We began the commercialization of dermaPACE® in the United States in 2018 through strategic partnership and have continued commercialization in 2019 through placement of devices in doctors’ offices, wound care centers and hospitals by our internal sales team. For example, in February 2018, we entered into an agreement with Premier Shockwave Wound Care, Inc. (“PSWC”) and Premier Shockwave, Inc. (“PS”) for the purchase by PSWC and PS of dermaPACE® Systems and related equipment sold by us and granting PSWC and PS limited but exclusive distribution rights to provide dermaPACE® Systems to certain government healthcare facilities in exchange for the payment of certain royalties to us. PSWC is a related party since it is owned by A. Michael Stolarski, a member of the Company’s board of directors and an existing shareholder of the Company.

Develop and commercialize our noninvasive biological response activating devices in the regenerative medicine area for the treatment of skin, musculoskeletal tissue, and vascular structures.

We intend to use our proprietary technologies and know-how in the use of high-energy, acoustic pressure shock waves to address unmet medical needs in wound care, orthopedic, plastic/cosmetic and cardiac indications, possibly through potential license and/or partnership arrangements.

•
License and seek partnership opportunities for our non-medical acoustic pressure shock wave technology platform, know-how and extensive patent portfolio.

We intend to use our acoustic pressure shock wave technology and know-how for non-medical uses, including energy, food, water cleaning and other industrial markets, through license/partnership opportunities.

Support the global distribution of our products.

Our portfolio of products, the dermaPACE® and orthoPACE, are CE Marked and sold through select distributors in certain countries in Europe, Canada, Asia and Asia/Pacific. Our revenues will continue from sales of the devices and related applicators in these markets. We intend to continue to add additional distribution partners in the Americas, Middle East, Africa, Europe and Asia/Pacific.

Scientific Advisors

We haveThe Company has established a network of scientific advisors that brings expertise in wound healing, orthopedics, cosmetics, clinical and scientific research, and FDA experience. We consultThe Company consults our scientific advisors on an as-needed basis on clinical and pre-clinical study design, product development, and clinical indications.

We payThe Company pays consulting fees to certain members of our scientific advisory board for the services they provide to us, in addition to reimbursing them for incurred expenses. The amounts vary depending on the nature of the services.

Sales, Marketing and Distribution
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The Company sells systems through a combination of direct sales representatives and independent distributors.  The systems are used in hospitals, clinics, and alternate care facilities.  Our primary sales are in the Unites States.

6
Sales, Marketing and Distribution

Following FDA approval in December 2017, we sought a development and/or commercialization partnership, or to commercialize the product ourselves domestically, including the commercialization of the assets obtained in the Asset Purchase Agreement with our internal sales force. Outside the United States, we retain distributors to represent our products in selective international markets. These distributors have been selected based on their existing business relationships and the ability of their sales force and distribution capabilities to effectively penetrate the market with our PACE product line. We rely on these distributors to manage physical distribution, customer service and billing services for our international customers.

For a period of approximately three months following the August 6, 2020 Asset Purchase Agreement, we utilized the seller to fulfill certain customer orders and to collect related accounts receivable payments from customer orders that originated from the acquired business after August 6, 2020. For the year ended December 31, 2020, orders fulfilled by the seller comprised approximately 41% of the Company’s 2020 full year revenues. As of December 31, 2020, accounts receivable balances that originated from these seller-fulfilled orders constituted approximately 46% of accounts receivable balances, all of which were either reserved as of December 31, 2020 or subsequently collected during 2021. For the year ended December 31, 2021, orders fulfilled by the seller comprised approximately 16% of the accounts receivable balances, and one other vendor comprised approximately 24% of the accounts receivable balances.

Manufacturing

We haveThe Company has developed a network of suppliers, manufacturers, and contract service providers to provide sufficient quantities of our products.

WeThe Company is party to a manufacturing supply agreement with Minnetronix Medical in St. Paul, MN, covering the generator and treatment wand components of our products. Our generators and treatment wands are manufactured in accordance with applicable quality standards and applicable industry and regulatory standards. In addition, the Company performs the final product testing for generators and treatment wands internally.

The Company is party to a manufacturing supply agreement with Dynamic Group in Ramsey, MN, covering the applicator component of our products. Our applicators are manufactured in accordance with applicable quality standards and applicable industry and regulatory standards. Dynamic Group produces the applicators and applicator kits for our products.

The Company is party to a manufacturing supply agreement with Swisstronics Contract Manufacturing AG in Switzerland, a division of Cicor Technologies Ltd., covering the generator box component of our products. Our generator boxes are manufactured in accordance with applicable quality standards (EN ISO 13485) and applicable industry and regulatory standards. We produceSwisstronics produces the applicators and applicator kits for our products. In addition, we programthe Company programs and loadloads software for both the generator boxes and applicators and performperforms the final product testing and certifications internally.

Our facility in Suwanee, Georgia consists of 10,177 square feet and provides office, research and development, quality control, production and warehouse space. It is a FDA registered facility and is ISO 13485:2016 and Medical Device Single Audit Program (“MDSAP”) certified (for meeting the requirements for a comprehensive management system for the design and manufacture of medical devices).

We are party to a manufacturing supply agreement with Minnetronix Medical in St. Paul, MN, covering the generator and treatment wand components of our products. Our generators and treatment wands are manufactured in accordance with applicable quality standards (EN ISO 13485) and applicable industry and regulatory standards. In addition, we perform the final product testing for generators and treatment wands internally. Please see further information regarding a dispute with this supplier in Note 25, Subsequent Events.

We are party to a manufacturing supply agreement with Dynamic Group in Ramsey, MN, covering the applicator component of our products. Our applicators are manufactured in accordance with applicable quality standards (EN ISO 13485) and applicable industry and regulatory standards. We produce the applicators and applicator kits for our products.

Our facility in Eden Prairie, MN consists of 8,199 square feet and provides office, product development, quality control, and warehouse space. It is an FDA registered facility and is ISOInternational Organization for Standardization (ISO) 13485:2016.2016 certified.

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Intellectual Property

Our success depends in part on our ability to obtain and maintain proprietary protection for our products, product candidates,  technology, and know-how, to operate without infringing on the proprietary rights of others and to prevent others from infringing upon our proprietary rights. We seekThe Company seeks to protect our proprietary position by, among other methods, filing United States and selected foreign patent applications and United States and selected foreign trademark applications related to our proprietary technology, inventions, products, and improvements that are important to the development of our business. Effective trademark, service mark, copyright, patent, and trade secret protection may not be available in every country in which our products are made available. The protection of our intellectual property may require the expenditure of significant financial and managerial resources.

Patents

We considerThe Company considers the protection afforded by patents important to our business. We intendThe Company intends to seek and maintain patent protection in the United States and select foreign countries, where deemed appropriate for products that we develop.the Company develops. In general, our patents are effective, ranging from 6 months to 16 years.  There are no assurances that any patents will result from our patent applications, or that any patents that may be issued will protect our intellectual property, or that any issued patents or pending applications will not be successfully challenged, including as to ownership and/or validity, by third parties. In addition, if we dothe Company does not avoid infringement of the intellectual property rights of others, wethe Company may have to seek a license to sell our products, defend an infringement action or challenge the validity of intellectual property in court. Any current or future challenges to our patent rights, or challenges by us to the patent rights of others, could be expensive and time consuming.

We derive our patent rights, including as to both issued patents and “patent pending” applications, from three sources: (1) assignee of patent rights in technology we developed; (2) assignee of patent rights purchased from HealthTronics, Inc. (“HealthTronics”); and (3) as licensee of certain patent rights assigned to HealthTronics. In August 2005, we purchased a significant number of patents and patent applications from HealthTronics, to whom we granted back perpetual and royalty-free field-of-use license rights in the purchased patent portfolio primarily for urological uses. We believeThe Company believes that our owned and licensed patent rights provide a competitive advantage with respect to others that might seek to utilize certain of our apparatuses and methods incorporating extracorporeal acoustic pressure shockwave technologies that we havethe Company has patented. However, we dothe Company does not hold patent rights that cover all of our products, product components, or methods that utilize our products. WeThe Company also havehas not conducted a competitive analysis or valuation with respect to our issued and pending patent portfolio in relation to our current products and/or competitor products.

On the shockwave technology,In August 2005, we are the assigneeentered into a license agreement with HealthTronics Inc. (“HealthTronics”) in connection with our acquisition of thirty-four (34) issued United States patentscertain assets and forty-seven (47) issued foreign patents that are not expired, which on average have remaining useful lives of ten years with the longest useful life extending to 2039. On the ultrasound technology, we are the assignee of seventeen (17) issued United States patents and twenty-three (23) issued foreign patents that are not expired, which on average have remaining useful life extending to 2028.  Our current issued United States and foreign patents include patent claims directed to particular electrode configurations for shockwave devices, piezoelectric fiber shockwave devices, chemical components for shockwave generation, reflector geometries for focused shockwaves, general medical systems general construction, non-contact and low-frequency ultrasound device construction, disposable applicator for ultrasound devices, ultrasonic catheter for drug delivery, ultrasonic method for wound treatment, combination of ultrasound and laser in wound care, and software architecture for licensing processes. Our United States patents also include patent claims directed to methods and devices such as our products for using acoustic pressure shockwaves or non-contact and low frequency ultrasound to treat ischemic conditions, spinal cord scar tissue and spinal injuries, bone fractures and osteoporosis, blood sterilization, stem cell stimulation, tissue cleaning, and within particular treatment parameters using personalized medical treatments for diabetic foot ulcers or pressure sores or venous ulcers or arterial ulcers or acute skin conditions. Also, we have a significant number of US and international patents related to the extracorporeal or intracorporeal use of shockwaves or pressure waves for cardiovascular field (plaque removal, elimination of occlusions, treatment of heart tissue ischemia, to name a few). While such patented method and device claims may provide patent protection against certain indirect infringing promotion and sales activities of competing manufacturers and distributors, certain medical methods performed by medical practitioners or related health care entities or methods executed by industrial operators may be subject to exemption from potential infringement claims under 35 U.S.C. § 287(c) and, therefore, may limit enforcement of claims of our medical and non-medical method patents as compared to device construction patents.

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We also currently maintain for shockwave technology twelve (12) United States patent applications and nineteen (19) foreign patent applications. Our patent-pending rights include inventions directed to certain shockwave devices and systems, ancillary products, and components for acoustic pressure shockwave treatment devices, and various methods of using acoustic pressure shockwaves in both medical and non-medical applications. The medical patent-pending methods include, for example, using acoustic pressure shockwaves to treat soft tissue disorders, bones, joints, wounds, skin, blood vessels, lymphatic disorders, cardiac tissue, fat and cellulite, lung tissue, or to facilitate vaccination, or to disinfect reusable devices as ventilators and endoscopes, and for the use of shockwaves in combination with other energy medical technologies. In the non-medical field, the use of acoustic pressure shockwaves for blood and fluids sterilization, to facilitate oil extraction and processing, to destroy different pathogens from installation and different devices, to process fluids, meat and dairy products, to achieve desalination and decontamination of radio-active waters, and to clean transport pipes.
For the ultrasound technology, we currently maintain two (2) United States patent applications and eight (8) foreign patent applications.  Our patent-pending rights include inventions directed to non-contact and low-frequency ultrasound systems and methods for delivering cellular and biological materials to tissues and new designs used to deliver ultrasonic therapies to wound care.
All our United States and foreign pending applications either have yet to be examined or require response to an examiner’s office action rejections and, therefore, remain subject to further prosecution, the possibility of further rejections and appeals, and/or the possibility we may elect to abandon prosecution, without assurance that a patent may issue from any pending application.

Under our license to HealthTronics, we reserve exclusive rights in our purchased portfolio asintellectual property relating to orthopedic, tendonopathy,tendinopathy, skin wounds, cardiac, dental, neural medical conditions and to all conditions in animals (Ortho Field).(the “Ortho Field”) from HealthTronics. The majority of the intellectual property licensed from HealthTronics receiveswas associated with the construction of shockwave devices, indications for orthopedic treatments, and wound care. These patents and patent applications have either expired or were not pursued in our portfolio.

Under our license to HealthTronics, Inc., we reserved exclusive rights in our purchased portfolio as to the Ortho Field. HealthTronics received field-exclusive and sublicensable rights under the purchased portfolio as to (1) certain HealthTronics lithotripsy devices in all fields other than the Ortho Field, and (2) all products in the treatment of renal, ureteral, gall stones and other urological conditions (Litho Field)(the “Litho Field”). HealthTronics also receivesreceived non-exclusive and non-sublicensable rights in the purchased portfolio as to any products in all fields other than the Ortho Field and Litho Field. Refer to section “Contractual Obligations” for information on the default

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Pursuant to mutual amendment and other assignment-back rights under the patent license agreement with HealthTronics, we are also a licensee of certain patents and patent applications that have been assigned to HealthTronics. We received a perpetual, non-exclusive and royalty-free license to nine issued foreign patents. Our non-exclusive license is subject to HealthTronics’ sole discretion to further maintain any of the patents and pending applications assigned back to HealthTronics.

As partIn August 2020, we entered into an asset purchase agreement with Celularity Inc. (“Celularity”), pursuant to which we acquired all of Celularity’s assets related to the MIST Therapy System and UltraMIST System, including all intellectual property and trademarks related to MIST and UltraMIST. These assets are for use in low frequency and non-contact ultrasound to treat wounds.

In August 2020, we entered into a License and Marketing Agreement with Celularity, pursuant to which we were granted an exclusive, royalty-bearing license to commercialize Biovance, a minimally processed human amniotic membrane, and Interfyl, a human connective tissue matrix, for the care and treatment of acute and chronic wounds performed in an operating room setting for worldwide commercialization, excluding the Asia Pacific region.

Under the terms of the saleagreement, Celularity was to provide Biovance and Interfyl product to us for commercialization in exchange for a quarterly license fee payment. In May 2021, we received notification of non-compliance with the terms of the veterinary business in June 2009,agreement due to alleged non-payment of the quarterly license fee. Pursuant to the notification, we ceased commercialization of the licensed products and have also granted certain exclusive and non-exclusive patent license rights to Pulse Veterinary Technologies, LLC for most of our medical patent portfolio issued before 2009 to utilize acoustic pressure shockwave technologies in the field of non-human mammals.not resumed commercialization.

Given our internationalThe Company operates in an industry characterized by extensive patent portfolio, there are growing risks of challenges to our existing and future patent rights. Such challenges may result in invalidation or modification of some or all of our patent rights in a particular patent territory and reduce our competitive advantage with respect to third party products and services. Such challenges may also requirelitigation. If the expenditure of significant financial and managerial resources.

If we becomeCompany becomes involved in future litigation or any other adverse intellectual property proceeding, for example, as a result of an alleged infringement, or a third party alleging an earlier date of invention, wethe Company may have to spend significant amounts of money and time and, in the event of an adverse ruling, wethe Company could be subject to liability for damages, including treble damages, invalidation of our intellectual property and injunctive relief that could prevent us from using technologies or developing products, any of which could have a significant adverse effect on our business, financial condition and results of operation. In addition, any claims relating to the infringement of third-party proprietary rights, or earlier date of invention, even if not meritorious, could result in costly litigation or lengthy governmental proceedings and could divert management’s attention and resources and require us to enter into royalty or license agreements which are not advantageous, if available at all.

Our patents directed to our material technologies and products are detailed in the tables below:
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Shockwave Patent Portfolio – Devices Section

Patent #/
Application #
Title
​
Expiration Date
​
Jurisdiction
US 7,867,178Apparatus for generating shock waves with piezoelectric fibers integrated in a composite
​
Sep 29, 2027
​
USA
US 8,088,073Device for the application of acoustic shock waves
​
Jun 23, 2025
​
USA
US 8,092,401Method and apparatus for producing shock waves for medical applications
​
Feb 21, 2027
​
USA
US 8,556,813Extracorporeal pressure shock wave device
​
Sept 12, 2031
​
USA
US 8,961,441
Medical treatment system including an ancillary
medical treatment apparatus with an associated
data storage medium
​
March 13, 2032
​
USA
US 9,161,768Extracorporeal pressure shock wave devices with reversed applicators and methods for using these devices
​
Aug 16, 2030
​
USA

Patent #/
Application #
​
TitleExpiration Date
​
Jurisdiction
US 9,198,825
​
Increase electrode life in devices used for extracorporeal shockwave therapy (ESWT)Aug 24, 2033
​
USA
US 9,522,011
​
Shock wave applicator with movable electrodeJuly 8, 2030
​
USA
US 9,566,209
​
Shock wave electrodes with fluid holesJune 21, 2033
​
USA
US 10,058,340
​
Extracorporeal pressure shock wave devices with multiple reflectors and methods for using these devicesNov 9, 2033
​
USA

8
US 10,769,249
​
Distributor product programming system
​
Feb 24, 2038
​
USA
US 11,666,348
​
Intracorporeal expandable shock wave reflector
​
July 8, 2030
​
USA
US 11,925,366Catheter with multiple shock wave generatorsJuly 8, 2030USA
EP 2451422
​
Usage of extracorporeal and intracorporeal
pressure shock waves in medicine
​
July 8, 2030
​
Great Britain, France, Germany, Italy and Spain
KR 10-2255975
​
Distributor product programming system
​
May 25, 2038 (app.)
​
South Korea

Shockwave Patent Portfolio – Indications for Medical Section

Patent #/
Application #
​
Title
​
Expiration Date
​
Jurisdiction
US 8,343,420
​
Methods and devices for cleaning and sterilization
with shock waves
​
July 2, 2031
​
USA
US 8,728,809
​
Use of pressure waves for stimulation, proliferation, differentiation and post-implantation viability
of stem cells
​
August 25, 2031
​
USA
US 9,119,888
​
Methods for cleaning and sterilization of implant tissue ex vivo with shock waves
​
Sept 17, 2030
​
USA
US 10,238,405
​
Blood vessel treatment with intracorporeal
pressure shock waves
​
Jan 19, 2032
​
USA
US 10,569,106
​
Tissue disinfection with acoustic pressure shock waves
​
Sep 28, 2038
​
USA
US 10,639,051
​
Occlusion and clot treatment with intracorporeal pressure shock waves
​
Sep 29, 2031
​
USA
US 10,888,715
​
Acoustic pressure shock waves used for personalized medical treatment of tissue conditions
​
May 12, 2039
​
USA
US 11,684,806
​
Infected Prosthesis and Implant Treatment with Acoustic Pressure Shock Waves
​
July 22, 2037
​
USA
US 11,771,781
​
Reprocessing of contaminated reusable devices with direct contact of pressure waves
​
May 6, 2041
​
USA
EP 3117784
​
Usage of intracorporeal pressure shock waves in medicine
​
July 8, 2030
​
Great Britain, France, Germany, Italy, Spain, Finland, Belgium, Denmark, Ireland, the Netherlands, Norway, and Sweden
AU 2016250668
​
Tissue disinfection with acoustic pressure shock waves
​
March 22, 2036
​
Australia
EP 3461438
​
Combined intracorporeal and extracorporeal shock wave treatment system
​
July 8, 2030
​
Great Britain, France, Germany, and the Netherlands
Patent #/
Application #
​
Title
​
Expiration Date
​
Jurisdiction
EP 3285661
​
Tissue disinfection with acoustic
pressure shock waves
​
April 22, 2036
​
Great Britain, France, Germany, Ireland, and the Netherlands

9
AU 2017387130
​
Acoustic pressure shock waves used for personalized medical treatment of tissue conditions
​
Dec 29, 2037
​
Australia
IL 267661
​
Acoustic pressure shock waves used for personalized medical treatment of tissue conditions
​
Dec 29, 2037 (app.)
​
Israel
BR 112017022768
​
Tissue disinfection with acoustic
pressure shock waves
​
April 22, 2036
​
Brazil

Ultrasound Patents – UltraMIST Patent Portfolio

Patent #/
Application #
​
Title
​
Expiration Date
​
Jurisdiction
US 7,713,218
​
Removable applicator nozzle for ultrasound wound therapy device
​
May 6, 2028
​
USA
US 7,785,277
​
Removable applicator nozzle for ultrasound wound therapy device
​
Jun 27, 2025
​
USA
US 7,914,470
​
Ultrasonic method and device for wound treatment
​
June 27, 2023
​
USA
US 8,491,521
​
Removable multi-channel applicator nozzle
​
May 3, 2028
​
USA
US 11,224,767
​
Systems and methods for producing and delivering ultrasonic therapies for wound treatment and healing
​
Nov 18, 2034
​
USA
US 11,331,520
​
Systems and methods for producing and delivering ultrasonic therapies for wound treatment and healing
​
Sept 7, 2035
​
USA
US D733,319
​
Ultrasonic treatment wand (Design patent)
​
June 30, 2029
​
USA
US D733,321
​
Ultrasonic treatment device (Design patent)
​
June 30, 2029
​
USA
IN 228689
​
Ultrasonic method and device for wound treatment
​
April 5, 2024
​
India
HK 1119926
​
Removable applicator nozzle for ultrasound wound therapy device
​
June 23, 2026
​
Hong Kong
CA 2,463,600
​
Device and method for ultrasound wound debridement
​
Aug 4, 2023
​
Canada
CA 2,521,117
​
Ultrasonic method and device for wound treatment
​
April 5, 2024
​
Canada
CA 2,931,612
​
Systems and methods for producing and delivering ultrasonic therapies for wound treatment and healing
​
Nov 18, 2034
​
Canada
EP 1893104
​
Removable applicator nozzle for ultrasound wound therapy device
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July 8, 2026
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Belgium, France, Germany, Ireland, and Great Britain
AU 2021201720
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Systems and methods for producing and delivering ultrasonic therapies for wound treatment and healing
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Nov 18, 2034
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Australia

Trademarks

Since other products on the market compete with our products, we believethe Company believes that our product brand names are an important factor in establishing and maintaining brand recognition.

We haveThe Company has the following trademark registrations: SANUWAVE® (United States, European Community, Canada, Japan, Switzerland, United Kingdom, Taiwan and under the Madrid Protocol), dermaPACE® (United States, European Community, Japan, South Korea, Switzerland, Taiwan, Canada, China, Brazil, Mexico, and under the Madrid Protocol), angioPACE® (European Community and United Kingdom), PACE® - Pulsed Acoustic Cellular Expression (United States, European Community, China, Hong Kong, Singapore, Switzerland, Taiwan, and Canada), orthoPACE® (United States, United Kingdom, and European Community), DAP® - Diffused Acoustic Pressure (United States and European Community), and Profile® (United States, European Community, and United Kingdom). Our newest trademark is Energy First® (United States), Healing Today, Curing Tomorrow® (United States), and UltraMIST® (United States).

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Through the acquisition of UltraMIST®/MIST assets from Celularity now SANUWAVEInc., the Company is the owner of the Celleration® (United States, Australia, Europe Community, and Japan), Proven Healing® (Madrid Protocol, European Community, and United Kingdom), MIST Ultrasound Healing Therapy & Design® (United States), MIST® (United States), MIST Therapy® (United States), and MIST & Design® (United States) registered trademarks.

WeThe Company also maintainmaintains trademark registrations for: OssaTron® (United States), OSWT® (Switzerland) Evotron® (United States, Germany and Switzerland), Evotrode® (United States, Germany and Switzerland), Orthotripsy® (United States). WeThe Company phased out the OssaTrode® (United States, Germany and Switzerland), Equitron® (United States and Switzerland). Reflectron® (Germany and Switzerland) and Reflectrode® (Germany and Switzerland), evoPACE® (Canada, Australia, European Community and Switzerland) trademarks, due to the fact that OssaTrode®, Equitron®, Reflectron® and Reflectrode® products are no longer available for sale in any market and evoPACE® is a product that was never commercialized.

Potential Intellectual Property Issues

Although we believe that the patents and patent applications, including those that we license, provide a competitive advantage, the patent positions of biotechnology and medical device companies are highly complex and uncertain. The medical device industry is characterized by the existence of a large number of patents and frequent litigation based on allegations of patent infringement. Our success will depend in part on us not infringing on patents issued to others, including our competitors and potential competitors, as well as our ability to enforce our patent rights. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position.

Despite any measures taken to protect our intellectual property, unauthorized parties may attempt to copy aspects of our products and product candidates, or to obtain and use information that we regard as proprietary. In enforcement proceedings in Switzerland, we assisted HealthTronics as an informer of misappropriation by a Swiss company called SwiTech and related third parties of intellectual property rights in legacy proprietary software and devices relating to assets we purchased from HealthTronics in August 2005. As a result of this action, SwiTech was forced into bankruptcy. We also pursued the alleged misappropriation by another Swiss company called SwiTalis and related third parties of intellectual property rights in legacy proprietary software and devices relating to assets we purchased from HealthTronics in August 2005. In 2016, SwiTalis claimed copyright rights on the High Voltage Modules that were used in our devices and the old line of Pulse Vet devices during the manufacturing process at Swisstronics in Switzerland. At this time, however, no such court action against Swisstronics is pending in Switzerland and we believe that it is unlikely that SwiTalis will pursue their earlier allegations against Swisstronics and, indirectly, us. In 2017, we abandoned our action against SwiTalis. There can be no assurance, however, that future claims or lawsuits against us may not be brought, and such present or future actions against violations of our intellectual property rights may result in us incurring material expense and divert the attention of management.

Third parties that license our proprietary rights, such as trademarks, patented technology or copyrighted material, may also take actions that diminish the value of our proprietary rights or reputation. In addition, the steps we take to protect our proprietary rights may not be adequate and third parties may infringe or misappropriate our copyrights, trademarks, trade dress, patents, and similar proprietary rights.

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We collaborate with other persons and entities on research, development, and commercialization activities and expect to do so in the future. Disputes may arise about inventorship and corresponding rights in know-how and inventions resulting from the joint creation or use of intellectual property by us and our collaborators, researchers, licensors, licensees and consultants. In addition, other parties may circumvent any proprietary protection that we do have. As a result, we may not be able to maintain our proprietary position.

Competition

We believeThe Company believes the advanced wound care market can benefit from our technology which up-regulates the biological factors that promote wound healing. Current medical technologies developed by Acelity L.P. Inc, (formerly Kinetic Concepts, Inc.), now owned by 3M, Organogenesis, Inc., Smith & Nephew plc, Derma Sciences, Inc., MiMedx Group, Inc., Osiris Therapeutics, Inc., Molnlycke Health Care, and Systagenix Wound Management (US), Inc. (now owned by Acelity) and Softwave Tissue Regeneration Technologies, manage wounds, but, in our opinion, do not provide the value proposition to the patients and care givers like our PACE technology has the potential to do. The leading medical device serving this market is the Vacuum Assisted Closure (“V.A.C.”) System marketed by KCI. The V.A.C. is a negative pressure wound therapy device that applies suction to debride and manage wounds.

There are also several companies that market extracorporeal shockwave device products targeting lithotripsy and orthopedic markets, including Dornier MedTech, Storz Medical AG, Electro Medical Systems (EMS) S.A., Softwave Tissue Regneration Technologies, and CellSonic Medical which could ultimately pursue the wound care market. Nevertheless, we believethe Company believes that the dermaPACE® System hasPACE systems have a competitive advantage over all of these existing technologies by achieving wound closure by means of a minimally invasive process through innate biological response to PACE technology.

Regarding the companies that use low frequency ultrasound that creates a pressure wave producing micro-strains due to mechanical forces that deform cell membrane and therefore promote healing, there are technologies developed by Arobella Medical LLC, NanoVibronix, Chattanooga, and EDAP TMS to manage wound care.  However, these treatment devices or medical systems are different in design and mode of application of the ultrasound when compared to SANUWAVE’s UltraMIST.  The Company believes that UltraMIST has a competitive advantage over all of these existing technologies, due to broad medical indications, simplicity of use, wound healing results and the tolerability of the treatment by the patients, especially for painful wounds.

Developing and commercializing new products is highly competitive. The market is characterized by extensive research and clinical efforts and rapid technological change. We faceThe Company faces intense competition worldwide from medical device, biomedical technology and medical products and combination products companies, including major pharmaceutical companies. WeThe Company may be unable to respond to technological advances through the development and introduction of new products. Most of our existing and potential competitors have substantially greater financial, marketing, sales, distribution, manufacturing and technological resources. These competitors may also be in the process of seeking FDA or other regulatory approvals, or patent protection, for new products. Our competitors may commercialize new products in advance of our products. Our products also face competition from numerous existing products and procedures, which currently are considered part of the standard of care. In order toTo compete effectively, our products will have to achieve widespread market acceptance.

Regulatory Matters

FDA Regulation

Each of our products must be approved or cleared by the FDA before it is marketed in the United States. Before and after approval or clearance in the United States, our product candidatesproducts are subject to extensive regulation by the FDA under the Federal Food, Drug, and Cosmetic Act and/or the Public Health Service Act, as well as by other regulatory bodies. FDA regulations govern, among other things, the development, testing, manufacturing, labeling, safety, storage, record-keeping, market clearance or approval, advertising and promotion, import and export, marketing and sales, and distribution of medical devices and pharmaceutical products.

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In the United States, the FDA subjects medical products to rigorous review. If we dothe Company does not comply with applicable requirements, wethe Company may be fined, the government may refuse to approve our marketing applications or to allow us to manufacture or market our products, and wethe Company may be criminally prosecuted. Failure to comply with the law could result in, among other things, warning letters, civil penalties, delays in approving or refusal to approve a product candidate, product recall, product seizure, interruption of production, operating restrictions, suspension or withdrawal of product approval, injunctions, or criminal prosecution.

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The FDA has determined that our technology and product candidatesproducts constitute “medical devices.” The FDA determines what center or centers within the FDA will review the product and its indication for use and also determines under what legal authority the product will be reviewed. For the current indications, our products are being reviewed by the Center for Devices and Radiological Health. However, wethe Company cannot be sure that the FDA will not select a different center and/or legal authority for one or more of our other product candidates, in which case the governmental review requirements could vary in some respects.

FDA Approval or Clearance of Medical Devices

In the United States, medical devices are subject to varying degrees of regulatory control and are classified in one of three classes depending on the extent of controls the FDA determines are necessary to reasonably ensure their safety and efficacy:

Class I: general controls, such as labeling and adherence to quality system regulations;
Class II: special controls, pre-market notification (510(k)), specific controls such as performance standards, patient registries, and post market surveillance, and additional controls such as labeling and adherence to quality system regulations; and
Class III: special controls and approval of a pre-market approval (PMA) application.

Each of our product candidatesproducts require FDA authorization prior to marketing, by means of either a 510(k) clearance or a PMA approval.

To request marketing authorization by means of a 510(k) clearance, wethe Company must submit a pre-market notification demonstrating that the proposed device is substantially equivalent to another legally marketed medical device, has the same intended use, and is as safe and effective as a legally marketed device and does not raise different questions of safety and effectiveness than does a legally marketed device. 510(k) submissions generally include, among other things, a description of the device and its manufacturing, device labeling, medical devices to which the device is substantially equivalent, safety and biocompatibility information, and the results of performance testing. In some cases, a 510(k) submission must include data from human clinical studies. Marketing may commence only when the FDA issues a clearance letter finding substantial equivalence. After a device receives 510(k) clearance, any product modification that could significantly affect the safety or effectiveness of the product, or that would constitute a significant change in intended use, requires a new 510(k) clearance or, if the device would no longer be substantially equivalent, would require a PMA. If the FDA determines that the product does not qualify for 510(k) clearance, then a company must submit, and the FDA must approve, a PMA before marketing can begin.

In the past, the 510(k) pathway for product marketing required only the proof of significant equivalence in technology for a given indication with a previously cleared device. Currently, there has been a trend of the FDA requiring additional clinical work to prove efficacy in addition to technological equivalence. Thus, no matter which regulatory pathway we may take in the future towards marketing products in the United States, we will be required to provide clinical proof of device effectiveness.

Within the past few years, the FDA has released guidelines for the FDA’s reviewers to use during a product’s submission review process. This guidance provides the FDA reviewers with a uniform method of evaluating the benefits verses the risks of a device when used for a proposed specific indication. Such a benefit/risk evaluation is very useful when applied to a novel device or to a novel indication and provides the FDA with a consistent tool to document their decision process. While intended as a guide for internal FDA use, the public availability of this guidance allows medical device manufacturers to use the review matrix to develop sound scientific and clinical backup to support proposed clinical claims and to help guide the FDA, through the decision process, to look at the relevant data. We intend to use this benefit/risk tool in our FDA submissions.

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A PMA application must provide a demonstration of safety and effectiveness, which generally requires extensive pre-clinical and clinical trial data. Information about the device and its components, device design, manufacturing, and labeling, among other information, must also be included in the PMA. As part of the PMA review, the FDA will inspect the manufacturer’s facilities for compliance with Quality System Regulationquality system regulation requirements, which govern testing, control, documentation, and other aspects of quality assurance with respect to manufacturing. If the FDA determines the application or manufacturing facilities are not acceptable, the FDA may outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. During the review period, an FDA advisory committee, typically a panel of clinicians and statisticians, is likely to be convened to review the application and recommend to the FDA whether, or upon what conditions, the device should be approved. The FDA is not bound by the advisory panel decision. While the FDA often follows the panel’s recommendation, there have been instances where the FDA has not. If the FDA finds the information satisfactory, it will approve the PMA. The PMA approval can include post-approval conditions, including, among other things, restrictions on labeling, promotion, sale and distribution, or requirements to do additional clinical studies post-approval. Even after approval of a PMA, a new PMA or PMA supplement is required to authorize certain modifications to the device, its labeling, or its manufacturing process. Supplements to a PMA often require the submission of the same type of information required for an original PMA, except that the supplement is generally limited to that information needed to support the proposed change from the product covered by the original PMA.

During the review of either a PMA application or 510(k) submission, the FDA may request more information or additional studies and may decide that the indications for which we seek approval or clearance should be limited. We cannot be sure that our product candidates will be approved or cleared in a timely fashion or at all. In addition, laws and regulations and the interpretation of those laws and regulations by the FDA may change in the future. We cannot foresee what effect, if any, such changes may have on us.

Obtaining medical device clearance, approval, or licensing in the United States or abroad can be an expensive process. The fees for submitting an original PMA to the FDA for consideration of device approval are substantial. Fees for supplement PMA’s are less costly but still can be substantial. International fee structures vary from minimal to substantial, depending on the country. In addition, we arethe Company is subject to annual establishment registration fees in the United States and abroad. Device licenses require periodic renewal with associated fees as well. In the United States, there is an annual requirement for submitting device reports for Class III/PMA devices, along with an associated fee. Currently, we arethe Company is registered as a Small Business Manufacturer with the FDA and as such are subject to reduced fees. If, in the future, our revenues exceed a certain annual threshold limit, wethe Company may not qualify for the Small Business Manufacturer reduced fee amounts and will be required to pay full fee amounts.

Clinical Trials of Medical Devices

One or more clinical trials are almost always required to support a PMA application and more recently are becoming necessary to support a 510(k) submission. Clinical studies of unapproved or un-cleared medical devices or devices being studied for uses for which they are not approved or cleared (investigational devices) must be conducted in compliance with FDA requirements. If an investigational device could pose a significant risk to patients, the sponsor company must submit an IDE application to the FDA prior to initiation of the clinical study. An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device on humans and that the testing protocol is scientifically sound. The IDE will automatically become effective 30 days after receipt by the FDA unless the FDA notifies the company that the investigation may not begin. Clinical studies of investigational devices may not begin until an institutional review board (IRB) has approved the study.

During the study, the sponsor must comply with the FDA’s IDE requirements. These requirements include investigator selection, trial monitoring, adverse event reporting, and record keeping. The investigators must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of investigational devices, and comply with reporting and record keeping requirements. We, the FDA, or the IRB at each institution at which a clinical trial is being conducted, may suspend a clinical trial at any time for various reasons, including a belief that the subjects are being exposed to an unacceptable risk. During the approval or clearance process, the FDA typically inspects the records relating to the conduct of one or more investigational sites participating in the study supporting the application.

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However, the COVID-19 pandemic has impacted our ability to enroll and treat patients in clinical trials and to monitor data at our clinical trial sites.

Post-Approval Regulation of Medical Devices

After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply. These include:

the FDA Quality Systems Regulation (QSR),quality systems regulation, which governs, among other things, how manufacturers design, test, manufacture, exercise quality control over, and document manufacturing of their products;

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labeling and claims regulations, which prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling;
the Medical Device Reporting regulation, which requires reporting to the FDA of certain adverse experiences associated with use of the product; and
post market surveillance, including documentation of clinical experience and also follow-on, confirmatory studies.

We continueThe Company continues to be subject to inspection by the FDA to determine our compliance with regulatory requirements, as are our suppliers, contract manufacturers, and contract testing laboratories.

International sales of medical devices manufactured in the United States that are not approved or cleared by the FDA are subject to FDA export requirements. Exported devices are subject to the regulatory requirements of each country to which the device is exported. Exported devices may also fall under the jurisdiction of the United States Department of Commerce/Bureau of Industry and Security and compliance with export regulations may be required for certain countries.

Manufacturing Certifications

The Medical Device Single Audit Program (MDSAP)– allows a single regulatory audit of a medical device manufacturer’s quality management system to satisfy the requirements of multiple regulatory authorities (RAs). Five RAs: The Australian Therapeutic Goods Administration (TGA), Brazil’s Agência Nacional de Vigilância Sanitária (ANVISA), Health Canada, MHLW/PMDA (Japan), and the FDA participated in a three-year MDSAP Pilot which concluded in December 2016. These RAs will continue to participate in MDSAP as the program moved into its operational phase starting January 2017, with Health Canada making a full transition from the Canadian Medical Devices Conformity Assessment System (CMDCAS) to MDSAP.

MDSAP uses recognized third-party auditors – auditing organizations (AOs) – to conduct a single quality management system audit that satisfies the requirements of multiple regulatory authorities. Manufacturers only needed to comply with the regulations from the jurisdictions where they sell their products. The MDSAP certificate indicates that a manufacturer complies with the regulatory requirements for the markets defined in the certificate. The certificate does not represent marketing authorization, nor does it require any regulatory authority to issue a marketing authorization or endorsement to the device manufacturer.

The Company has been certified to the MDSAP requirements for all five participating countries, most recently successfully completing a MDSAP recertification audit in September 2022.  This certificate is valid for three years.  Annual surveillance audits are required to maintain this certification.

Manufacturing cGMP Requirements

Manufacturers of medical devices are required to comply with FDA manufacturing requirements contained in the FDA’s current Good Manufacturing Practices (cGMP) set forth in the quality system regulations promulgated under section 520 of the Federal Food, Drug and Cosmetic Act. cGMP regulations require, among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation. The manufacturing facility for our products must meet cGMP requirements to the satisfaction of the FDA pursuant to a pre-PMA approval inspection before wethe Company can use it. WeThe Company and some of our third-party service providers are also subject to periodic inspections of facilities by the FDA and other authorities, including procedures and operations used in the testing and manufacture of our products to assess our compliance with applicable regulations. Failure to comply with statutory and regulatory requirements subjects a manufacturer to possible legal or regulatory action, including the seizure or recall of products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing operations, and civil and criminal penalties. Adverse experiences with the product must be reported to the FDA and could result in the imposition of marketing restrictions through labeling changes or in product withdrawal. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the product occur following the approval.

International Regulation

We are subject to regulations and product registration requirements in many foreign countries in which we may sell our products, including in the areas of product standards, packaging requirements, labeling requirements, import and export restrictions and tariff regulations, duties and tax requirements. The time required to obtain clearance required by foreign countries may be longer or shorter than that required for FDA clearance, and requirements for licensing a product in a foreign country may differ significantly from FDA requirements.

The primary regulatory environment in Europe is the European Union, which consists of 27 member states encompassing most of the major countries in Europe. In the European Union, the European Medicines Agency (EMA) and the European Union Commission have determined that dermaPACE®, orthoPACE, OssaTron and Evotron will be regulated as medical device products. These devices have been determined to be Class IIb devices. These devices are CE Marked and as such can be marketed and distributed within the European Economic Area.

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The primary regulatory body in Canada is Health Canada. In addition to needing appropriate data to obtain market licensing in Canada, we must have an ISO 13485 certification, as well as meet additional requirements of Canadian laws. We currently maintain this certification. We maintain a device license for dermaPACE® with Health Canada for the indication of “devices for application of shock waves (pulsed acoustic waves) on acute and chronic defects of the skin and subcutaneous soft tissue”.

The primary regulatory bodies and paths in Asia and Australia are determined by the requisite country authority. In most cases, establishment registration and device licensing are applied for at the applicable Ministry of Health through a local intermediary. The requirements placed on the manufacturer are typically the same as those contained in ISO 9001 or ISO 13485.

The primary regulatory body in Brazil is ANVISA, all medical devices imported into or distributed within Brazil must first undergo registration with ANVISA. Once ANVISA makes its final decision on registration applications, the result is published in Brazil’s Official Diary, in addition to ANVISA, our products require additional certification via INMETRO. We currently hold a Class II device licenses in BRAZIL for dermaPACE® and is in the process of registering our UltraMIST® product line

European Good Manufacturing Practices

In the European Union, the manufacture of medical devices is subject to current good manufacturing practice (cGMP), as set forth in the relevant laws and guidelines of the European Union and its member states. Compliance with cGMP is generally assessed by the competent regulatory authorities. Typically, quality system evaluation is performed by a Notified Body, which also recommends to the relevant competent authority for the European Community CE Marking of a device. The Competent Authority may conduct inspections of relevant facilities, and review manufacturing procedures, operating systems and personnel qualifications. In addition to obtaining approval for each product, in many cases each device manufacturing facility must be audited on a periodic basis by the Notified Body. Further inspections may occur over the life of the product.

United States Anti-Kickback and False Claims Laws

In the United States, there are Federal and state anti-kickback laws that prohibit the payment or receipt of kickbacks, bribes or other remuneration intended to induce the purchase or recommendation of healthcare products and services. Violations of these laws can lead to civil and criminal penalties, including exclusion from participation in Federal healthcare programs. These laws are potentially applicable to manufacturers of products regulated by the FDA as medical devices, such as us, and hospitals, physicians, and other potential purchasers of such products. Other provisions of Federal and state laws provide civil and criminal penalties for presenting, or causing to be presented, to third-party payers for reimbursement, claims that are false or fraudulent, or which are for items or services that were not provided as claimed. In addition, certain states have implemented regulations requiring medical device and pharmaceutical companies to report all gifts and payments over $50 to medical practitioners. This does not apply to instances involving clinical trials. Although we intend to structure our future business relationships with clinical investigators and purchasers of our products to comply with these and other applicable laws, it is possible that some of our business practices in the future could be subject to scrutiny and challenge by Federal or state enforcement officials under these laws.

Third Party Reimbursement

We anticipate that sales volumes and prices of the products we commercialize will depend in large part on the availability of coverage and reimbursement from third party payers. Third party payers include governmental programs such as Medicare and Medicaid, private insurance plans, and workers’ compensation plans. These third-party payers may deny coverage and reimbursement for a product or therapy, in whole or in part, if they determine that the product or therapy was not medically appropriate or necessary. The third-party payers also may place limitations on the types of physicians or clinicians that can perform specific types of procedures. In addition, third party payers are increasingly challenging the prices charged for medical products and services. Some third-party payers must also pre-approve coverage for new or innovative devices or therapies before they will reimburse healthcare providers who use the products or therapies. Even though a new product may have been approved or cleared by the FDA for commercial distribution, we may find limited demand for the device until adequate history of reimbursement has been obtained from governmental and private third-party payers.

19The CPT code for UltraMIST is 97610. This Category 1 code describes a system used in wound care that uses low frequency ultrasonic energy to atomize a liquid and deliver continuous low frequency ultrasound to the wound bed. The CPT codes for the dermaPACE System using extracorporeal shock wave technology to treat diabetic foot ulcers are 0512T and 0513T. The codes 0512T and 0513T are for extracorporeal shock wave for integumentary wound healing, including topical application and dressing and high energy extracorporeal shockwave therapy for integumentary wound healing. While these are Category 3 codes because the dermaPACE System is considered experimental by the Centers for Medicare & Medicaid Services, this designation does not preclude billing and obtaining payment. Instead, claims are reviewed on an individual basis.
In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific product lines and procedures. There can be no assurance that procedures using our products will be considered medically reasonable and necessary for a specific indication, that our products will be considered cost-effective by third party payers, that an adequate level of reimbursement will be available or that the third-party payers’ reimbursement policies will not adversely affect our ability to sell our products profitably.

In the United States, some insured individuals are receiving their medical care through managed care programs, which monitor and often require pre-approval of the services that a member will receive. Some managed care programs are paying their providers on a per capita basis, which puts the providers at financial risk for the services provided to their patients by paying these providers a predetermined payment per member per month, and consequently, may limit the willingness of these providers to use products, including ours.

One of the components in the reimbursement decision by most private insurers and governmental payers, including the Centers for Medicare & Medicaid Services, which administers Medicare, is the assignment of a billing code. Billing codes are used to identify the procedures performed when providers submit claims to third party payers for reimbursement for medical services. They also generally form the basis for payment amounts. We will seek new billing codes for the wound care indications of our products as part of our efforts to commercialize such products.

The initial phase of establishing a professional billing code for a medical service typically includes applying for a CPT Category III code for both hospital and in-office procedures. This is a tracking code without relative value assigned that allows third party payers to identify and monitor the service as well as establish value if deemed medically necessary. The process includes CPT application submission, clinical discussion with Medical Professional Society CPT advisors as well as American Medical Association (AMA) CPT Editorial Panel review. A new CPT Category III code will be assigned if the AMA CPT Editorial Panel committee deems it meets the applicable criteria and is appropriate. In 2017, we applied for two, new CPT Category III codes for extracorporeal shock wave therapy (ESWT) in wound healing. These codes were published by AMA/CPT for use beginning January 1, 2019.

The secondary phase in the CPT billing code process includes the establishment of a permanent CPT Category I code in which relative value is analyzed and established by the AMA. The approval of this code is based on, among other criteria, widespread usage and established clinical efficacy of the medical service.

There are also billing codes that facilities, rather than health care professionals, utilize for the reimbursement of operating costs for a particular medical service. For the hospital outpatient setting, the Centers for Medicare & Medicaid Services automatically classified the new ESWT wound healing CPT Category III codes into interim APC groups. The APC groups are services grouped together based on clinical characteristics and similar costs. An APC classification does not guarantee payment.

We believe that the overall escalating costs of medical products and services has led to, and will continue to lead to, increased pressures on the healthcare industry to reduce the costs of products and services. In addition, recent healthcare reform measures, as well as legislative and regulatory initiatives at the Federal and state levels, create significant additional uncertainties. There can be no assurance that third party coverage and reimbursement will be available or adequate, or that future legislation, regulation, or reimbursement policies of third-party payers will not adversely affect the demand for our products or our ability to sell these products on a profitable basis. The unavailability or inadequacy of third-party payer coverage or reimbursement would have a material adverse effect on our business, operating results and financial condition.

Confidentiality and Security of Personal Health Information

The Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”)(HIPAA), contains provisions that protect individually identifiable health information from unauthorized use or disclosure by covered entities and their business associates. The Office for Civil Rights of HHS,the U.S. Department of Health and Human Services (HHS), the agency responsible for enforcing HIPAA, has published regulations to address the privacy (the “Privacy Rule”) and security (the “Security Rule”) of protected health information (“PHI”)(PHI). HIPAA also requires that all providers who transmit claims for health care goods or services electronically utilize standard transaction and data sets and to standardize national provider identification codes. In addition, the American Recovery and Reinvestment Act (“ARRA”) enacted the HITECH Act, which extends the scope of HIPAA to permit enforcement against business associates for a violation, establishes new requirements to notify the Office for Civil Rights of HHS of a breach of HIPAA, and allows the Attorneys General of the states to bring actions to enforce violations of HIPAA. Rules implementing various aspects of HIPAA are continuing to be promulgated.

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We anticipate that, as we expand our dermaPACE®PACE business, we willmay in the future be a covered entity under HIPAA. We intend to adopthave adopted policies and procedures to comply with the Privacy Rule, the Security Rule and the HIPAA statute as such regulations become applicable to our business and as such regulations are in effect at such time.business.  We currently don’t capture patient data through our PACE system.

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In addition to the HIPAA Privacy Rule and Security Rule described above, we may become subject to state laws regarding the handling and disclosure of patient records and patient health information. These laws vary widely. Penalties for violation include sanctions against a laboratory’s licensure as well as civil or criminal penalties. Additionally, private individuals may have a right of action against us for a violation of a state’s privacy laws. We intend to adopt policies and procedures to ensure material compliance with state laws regarding the confidentiality of health information as such laws become applicable to us and to monitor and comply with new or changing state laws on an ongoing basis.

Environmental and Occupational Safety and Health Regulations

Our operations are subject to extensive Federal, state, provincial and municipal environmental statutes, regulations and policies, including those promulgated by the Occupational Safety and Health Administration, the United States Environmental Protection Agency, Environment Canada, Alberta Environment, the Department of Health Services, and the Air Quality Management District, that govern activities and operations that may have adverse environmental effects such as discharges into air and water, as well as handling and disposal practices for solid and hazardous wastes. Some of these statutes and regulations impose strict liability for the costs of cleaning up, and for damages resulting from, sites of spills, disposals, or other releases of contaminants, hazardous substances and other materials and for the investigation and remediation of environmental contamination at properties leased or operated by us and at off-site locations where we have arranged for the disposal of hazardous substances. In addition, we may be subject to claims and lawsuits brought by private parties seeking damages and other remedies with respect to similar matters. We have not to date needed to make material expenditures to comply with current environmental statutes, regulations and policies. However, we cannot predict the impact and costs those possible future statutes, regulations and policies will have on our business.

Employees

As of December 31, 2021,2023, we had a total of 4031 full time employees in the United States. Of these, eightfive were engaged in research and development which includes clinical, regulatory, and quality. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We believe our relationship with our employees is good.

Corporate Information

We were formed as a Nevada corporation in 2004. Our corporate headquarters address is 3360 Martin Farm11495 Valleyview Road, Suite 100 Suwanee, Georgia 30024,Eden Prairie, MN 55344, and our main telephone number is (770) 419-7525.(800) 545-8810 or (952) 656-1029.

Available Information

We maintain a website at www.sanuwave.com. We make available on our website, free of charge, through our website - www.sanuwave.com - our periodic reports and registration statements filed with the United States Securities and Exchange Commission (the “SEC”),SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We make these reports available through our website as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to the SEC.  Our internet site and the information contained on or connected to that site are not incorporated by reference into this Annual Report on Form 10-K. The SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC.

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Item 1A.RISK FACTORS

Investing in our Common Stockcommon stock involves a high degree of risk. You should carefully consider the following risk factors and all other information contained in this formAnnual Report on Form 10-K, including the consolidated financial statements and the related notes, before purchasing our Common Stock.common stock. If any of the following risks actually occur, they may materially harm our business and our financial condition and results of operations. In any such event, the market price of our Common Stockcommon stock could decline, and you could lose all or part of your investment.

Below is a summary of the Risk Factors that are reported in this 10-K for reference. The full report of Risk Factors follows the summary.

Risks Related to ourthe Business Combination

The Business Combination is subject to conditions, including certain conditions that may not be satisfied on a timely basis, if at all.

Unless waived by the parties to the Merger Agreement, and subject to applicable law, the consummation of the Business Combination is subject to several conditions set forth in the Merger Agreement. For more information about conditions for the consummation of the Business Combination, see Part II Item 5 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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The Merger Agreement includes a Minimum Cash Condition as a condition to the consummation of the Merger, which may make it more difficult for SEP Acquisition Corp.(“SEPA”) and the Company to complete the Business Combination as contemplated.

The Merger Agreement provides that the Company’s obligation to consummate the Business Combination is conditioned on, among other things, that as of the Closing, SEPA has at least $12,000,000 (“Minimum Cash Condition Amount”) resulting from operations(i) proceeds that have not been redeemed in the Redemption and dependency upon(ii) proceeds of the private placement in SEPA (the “PIPE Investment").

Because SEPA Stockholders elected to redeem  495,067 shares of Class A Common Stock, in connection with the Business Combination, then SEPA will need to obtain  PIPE Investment in order to satisfy the Minimum Cash Condition.

As of the date of this filing, no commitments have been given for the proposed financing from the PIPE Investment, and there is no assurance that SEPA will enter into subscriptions for the PIPE Investment. The actual amount that SEPA raises in the PIPE Investment, if any, will depend on market conditions and other factors.

This condition is for the sole benefit of the Company. If such condition is not met, and such condition is not or cannot be waived under the terms of the Merger Agreement, then the Merger Agreement could terminate, and the proposed Business Combination may not be consummated.

If such condition is waived and the Business Combination is consummated with less than the Minimum Cash Condition Amount in the Trust Account, the cash held by the Combined Company (including the Company) in the aggregate, after the Closing may not be sufficient to allow the Combined Company to operate and pay Combined Company bills as they become due. Any such event in the future issuances of equity or other financing to fund ongoing operations have raised substantial doubt as to ourmay negatively impact the analysis regarding the Combined Company’s ability to continue as a going concern. concern at such time.

There can be no assurance that the shares of the Combined Company’s Class A Common Stock that will be issued in connection with the Business Combination will be approved for listing on Nasdaq, or another U.S national exchange, following the Closing, or that the Combined Company will be able to comply with the continued listing rules of Nasdaq, or another U.S. national exchange.

In connection with the Business Combination and as a condition to the Company’s obligations to complete the Business Combination, the Combined Company will be required to demonstrate compliance with Nasdaq’s initial listing requirements. The Company and SEPA cannot assure you that the Combined Company will be able to meet those initial listing requirements or qualify to list on another national securities exchange. Even if the Combined Company’s Class A Common Stock is approved for listing on Nasdaq, the Combined Company may not meet the Nasdaq continued listing requirements following the Business Combination.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because SEPA’s Units, Class A Common Stock, and warrants are listed on Nasdaq, SEPA’s Units, Class A Common Stock and warrants qualify as covered securities under the statute. Although the states are preempted from regulating the sale of SEPA’s securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if SEPA was no longer listed on Nasdaq, SEPA’s securities would not qualify as covered securities under the statute and SEPA would be subject to regulation in each state in which SEPA offers its securities.

The announcement of the proposed Business Combination could disrupt the Company’s relationships with its customers, suppliers, business partners and others, as well as its operating results and business generally.

Whether or not the Business Combination and related transactions are ultimately consummated, as a result of uncertainty related to the proposed transactions, risks relating to the impact of the announcement of the Business Combination on the Company’s business include the following:

its employees may experience uncertainty about their future roles, which might adversely affect the Combined Company’s ability to retain and hire key personnel and other employees;

customers, suppliers, business partners and other parties with which we maintain business relationships may experience uncertainty about its future and seek alternative relationships with third parties, seek to alter their business relationships with us or fail to extend an existing relationship with the Company; and

The Company has expended and will continue to expend significant costs, fees and expenses for professional services and transaction costs in connection with the proposed Business Combination.

If any of the aforementioned risks were to materialize, they could lead to significant costs which may impact the Company and, in the future, the Combined Company’s results of operations and cash available to fund its business.

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We will be subject to contractual restrictions while the Business Combination is pending.

The Merger Agreement restricts the Company from making certain expenditures and taking other specified actions without the consent of SEPA until the Business Combination occurs. These restrictions may prevent the Company from pursuing attractive business opportunities that may arise prior to the completion of the Business Combination.

The Company and SEPA will incur significant transaction and transition costs in connection with the Business Combination.

The Company and SEPA have both incurred and expect to incur significant, non-recurring costs in connection with consummating the Business Combination and following the consummation of the Business Combination. The Company and SEPA may also incur additional costs to retain key employees. Certain transaction costs incurred in connection with the Merger Agreement (including the Business Combination), including all legal, accounting, consulting, investment banking and other fees, expenses, and costs, will be paid by the Combined Company following the Closing.

If the Business Combination does not meet the expectations of investors or securities analysts, the market price of SEPA’s securities (prior to the Closing), or the market price of the Combined Company’s Class A Common Stock after the Closing, may decline.

If the Business Combination does not meet the expectations of investors or securities analysts, the market price of SEPA’s securities prior to the Closing may decline. The market values of SEPA’s securities at the time of the Business Combination may vary significantly from their prices on the date the Merger Agreement was executed, or the date the Company’s Stockholders voted on the Business Combination. Because the number of shares to be issued pursuant to the Merger Agreement will not be adjusted to reflect any changes in the market price of SEPA’s Class A Common Stock, the market value of Class A Common Stock issued in connection with the Business Combination may be higher or lower than the values of these shares on earlier dates.

In addition, following the Business Combination, fluctuations in the price of securities of the Combined Company could contribute to the loss of all or part of your investment. The valuation ascribed to the Company in the Business Combination may not be indicative of the price that will prevail in the trading market following the Business Combination. If an active market for SEPA’s securities develops and continues, the trading price of the securities of the Combined Company following the Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond the Combined Company’s control. Any of the factors listed below could have a material adverse effect on your investment in the Combined Company’s securities and the Combined Company’s securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of the Combined Company’s securities may not recover and may experience a further decline.

Factors affecting the trading price of the securities of the Combined Company after the Closing may include:
the Combined Company may be required to raise additional funds to finance our operations and remain a going concern; wethe Combined Company may not be able to do so, and/or the terms of any financings may not be advantageous to us.
the Combined Company;
We haveThe Company has a history of losses, and wethe Combined Company may continue to incur losses and may not achieve or maintain profitability.
profitability;
If we are unable to successfully raise additional capital, our viability may be threatened; however, if we do raise additional capital, your percentage ownership as a stockholder could decrease and constraints could be placed on the operations of our business.
The coronavirus, or COVID-19, pandemic has materially and adversely affected our clinical trial operations and may materially and adversely affect our financial results.
Our product candidates may not be developed or commercialized successfully.
Thethe medical device/therapeutic product industries are highly competitive and subject to rapid technological change. If ourchange, so if the Combined Company’s competitors are better able to develop and market products that are safer and more effective than any products wethe Combined Company may develop, ourthe Combined Company’s commercial opportunities will be reduced or eliminated.
eliminated;
If ourif the Combined Company’s products and product candidates do not gain market acceptance among physicians, patients and the medical community, wethe Combined Company may be unable to generate significant revenues, if any.
any;
Weany product candidates of the Combined Company may not be developed or commercialized successfully;
the Combined Company may not successfully establish and maintain licensing and/or partnership arrangements for our technology for non-medical uses, which could adversely affect ourthe Combined Company’s ability to develop and commercialize our non-medical technology.
technology;
Many of ourThe Company’s product component materials are only produced by a single supplier for such product component. If we arethe Combined Company is unable to obtain product component materials and other products from our suppliers that wethe Combined Company will depend on for our operations, or find suitable replacement suppliers, ourthe Combined Company’s ability to deliver our products to market will likely be impeded, which could have a material adverse effect on us.
the Combined Company;
Wewe currently sell our products through distributors and partners. Ourpartners whose sales account for the majority of revenues and accounts receivable. The Combined Company’s business and results of operations could be adversely affected by any business disruptions or credit, or other financial difficulties experienced by such distributors or partners.
partners;
We have entered into an agreement with companies owned by a current board member and stockholder that could delay or prevent an acquisition of our company and could result in the dilution of our stockholders in the event of our change of control.
The loss of our key management would likely hinder our ability to execute our business plan.
We faceCombined Company faces an inherent risk of liability in the event thatif the use or misuse of our product candidates results in personal injury or death.death;
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actual or anticipated fluctuations in the Combined Company’s quarterly financial results or the quarterly financial results of companies perceived to be similar to the Combined Company may negatively impact the trading price of the Combined Company’s securities;
We are
the Combined Company will be dependent on information technology and ourthe Combined Company’s systems and infrastructure face certain risks, including from cybersecurity breaches and data leakage.
leakage;
Wethe Combined Company will generate a portion of our revenue internationally and arethe Combined Company will be subject to various risks relating to our international activities which could adversely affect our operating results.
results;
Provisions in our Articles of Incorporation, Bylaws and Nevada law might decrease the chances of an acquisition.

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Regulatory Risks

The results of ourCombined Company clinical trials may be insufficient to obtain regulatory approval for ourany new product candidates.
candidates;
We arethe Combined Company will be subject to extensive governmental regulation, including the requirement of FDA approval or clearance, before ourany new product candidates may be marketed.
marketed;
Patients may discontinue their participation in our clinical studies, which may negatively impact the results of these studies and extend the timeline for completion of our development programs.
We rely on third parties to conduct our clinical trials, and their failure to perform their obligations in a timely or competent manner may delay development and commercialization of our device.
We may be required to suspend or discontinue clinical trials due to unexpected side effects or other safety risks that could precluderegulatory approval of our product candidates.
Regulatory approval of ourthe Combined Company’s product candidates may be withdrawn at any time.
time;
Federalfederal regulatory reforms may adversely affect ourthe Combined Company’s ability to sell our products profitably.
profitably;
Failurefailure to obtain regulatory approval in foreign jurisdictions willmay prevent usthe Combined Company from marketing our products abroad.
abroad;
If we failif the Combined Company fails to obtain an adequate level of reimbursement for our approved products by third party payers, there may be no commercially viable markets for our approved products, or the markets may be much smaller than expected.
expected;
Uncertaintyuncertainty surrounding and future changes to healthcare law in the United States may have a material adverse effect on us.
the Combined Company;
If we failif the Combined Company fails to comply with the United States Federal Anti-Kickback Statute, False Claims Act and similar state laws, wethe Combined Company could be subject to criminal and civil penalties and exclusion from the Medicare and Medicaid programs, which would have a material adverse effect on ourthe business and results of operations.
operations;
Failureif the Combined Company fails to comply with the HIPAA Privacy, Security and Breach Notification Regulations, as such rules become applicable to ourthe Combined Company’s business, it may increase our operational costs.
costs;
Wethe Combined Company will face periodic reviews and billing audits from governmental and private payors and these audits could have adverse results that may negatively impact our business.
the business;
Productproduct quality or performance issues may be discovered through ongoing regulation by the FDA and by comparable international agencies, as well as through ourthe Combined Company’s internal standard quality process.
process;
Thethe use of hazardous materials in our operationsCombined Company operation may subject usthe Combined Company to environmental claims or liability.
liability;

Risks Related to Intellectual Property

Thethe protection of ourthe Combined Company’s intellectual property iswill be critical to ourthe Combined Company’s success and any failure on ourthe Combined Company’s part to adequately protect those rights could materially adversely affect our business.
the business;
Patentpatent applications owned by us or licensed to usthe Combined Company may not result in issued patents, and our competitors may commercialize discoveries the discoveries we attemptCombined Company attempts to patent.
patent;
Ourthe Combined Company’s patents may not be valid or enforceable and may be challenged by third parties.
parties;
Issuedissued patents and patent licenses may not provide usthe Combined Company with any competitive advantage or provide meaningful protection against competitors.
competitors;
Thethe ability to market the products we developthe Combined Company develops is subject to the intellectual property rights of third parties.
parties;

Risks Relatedchanges in the market’s expectations about the Combined Company’s operating results;
success of competitors of the Combined Company;
the Combined Company’s operating results failing to our Common Stockmeet the expectation of securities analysts or investors in a particular period;
changes in financial estimates and recommendations by any securities analysts that may cover the Combined Company or the industries in which the Combined Company operates in general;

Ouroperating and stock price is volatile.
There is currently a limited trading market for our common stock and we cannot predict how liquid the market might become.
Trading for our common stock is limited under the SEC’s penny stock regulations, which has an adverse effect on the liquidityperformance of our common stock.
As an issuer of “penny stock”, the protection provided by the federal securities laws relating to forward looking statements does not apply to us.
We have not paid dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limitedother companies that investors deem comparable to the valueCombined Company;
changes in laws and regulations affecting the Combined Company’s business;
commencement of, our common stock.
The rights ofor involvement in, litigation involving the holders of common stock may be impaired by the potential issuance of preferred stock.
Combined Company;

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changes in the Combined Company’s capital structure, such as future issuances of securities or the incurrence of additional debt;
We
the volume of shares of Class A Common Stock available for public sale by the Combined Company;
any major change in the post-Closing board of directors or management of the Combined Company;
sales of substantial amounts of Common Stock by directors, executive officers or significant stockholders of the Combined Company, or the perception that such sales could occur; and
general economic and political conditions such as recessions, pandemics, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.

Broad market and industry factors may materially harm the market price of securities, irrespective of a company’s operating performance. The stock market in general, and Nasdaq in particular, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of the Combined Company’s securities, may not sought an advisory stockholder votebe predictable. A loss of investor confidence in the market for the stock of other companies that investors perceive to approvebe similar to the compensation of our named executive officers.
Because we did not comply with our SEC filing obligations, our stock may become subject to limitations or reduction inCombined Company could depress the Combined Company’s stock price liquidity,regardless of its business, prospects, financial conditions, or volume.
We will needresults of operations. A decline in the market price of the Combined Company’s securities also could adversely affect the Combined Company’s ability to improve our internal controlsissue additional securities and proceduresto obtain additional financing in order to remain current with our securities-related requirements.
the future.

Risks Related to our Business

Our recurring losses from operations 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. 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®UltraMIST and will continue to research and develop the non-medical uses of the PACE technology, both of which will require additional capital resources. We incurred a net loss of $27.3$25.8 million and $30.9$10.3 million for the years ended December 31, 20212023, and 2020,2022, respectively. The operating losses and the events of default on the Company’s notes payable indicate substantial doubt about the Company’s ability to continue as a going concern for a period of at least twelve months from the filing of this Annual Report Form 10-K.

AsThe Company is currently in default under the Senior Secured Note Payable issued to NH Expansion Credit Fund Holdings L.P. (“North Haven Expansion”) in August 2020 in the total principal amount of December 31, 2021, we had$15.0 million (the “Senior Secured Note”), the Convertible Promissory Note issued to Celularity Inc. (“Celularity”) in August 2020 in the total principal amount of $4.0 million (the “Celularity Note”), and the Convertible Promissory Note issued to HealthTronics, Inc. (“HealthTronics”) in August 2020 in the total principal amount of $1.4 million (the “HealthTronics Note”) and, as a result, is accruing interest at the default interest rate of an accumulated deficitincremental 5% on the Senior Secured Note and the Celularity Note and an incremental 2% on the HealthTronics Note. The existing defaults under the Celularity Note and the HealthTronics Note relate to SANUWAVE’s failure to make required payments, and the existing defaults under the Senior Secured Note relate to (i) SANUWAVE’s failure to maintain minimum liquidity of $183.9$5.0 million and cash(ii) SANUWAVE’s defaults under the Celularity Note and cash equivalents of $619 thousand. For the years ended December 31, 2021 and 2020, the net cash used by operating activities was $6.7 million and $12.7 million, respectively. Cash used in operations averaged $1.1 million per month in the first quarter of 2021, approximately $700 thousand for the second quarter, approximately $400 thousand for the third quarter and approximately $50 thousand for the fourth quarter.
HealthTronics Note.

The continuationWhile the Celularity Note and the HealthTronics Note have already matured, and thus all amounts thereunder are already due and payable, if the Company does not regain compliance with the terms of our business is dependentthe Senior Secured Note by April 30, 2024, North Haven Expansion will have the right to declare all obligations under the Senior Secured Note to be immediately due and payable. We expect to regain compliance with the terms of the Senior Secured Note upon raising additional capitalthe Closing of the Merger.

On October 31, 2023, the Company entered into a letter agreement with HealthTronics, pursuant to fund operations. which we agreed to pay HealthTronics the remaining unpaid principal amount of $1.4 million under the HealthTronics Note by the earlier of the Closing or March 31, 2024 in exchange for HealthTronics’ agreement to release all claims against the Company related to the HealthTronics Note.

Management’s plans are to obtain additional capital in 2022early 2024, primarily through investments by strategic partners for market opportunities, which may include strategic partnerships or licensing arrangements, or raiseclosing the Merger Agreement. The Company could also obtain additional capital through the conversion of outstanding warrants, issuance of common or preferred stock, securities convertible into common stock, or secured or unsecured debt. However, because of our private placements in May 2023, December 2023 and January 2024 of Future Advance Convertible Promissory Notes and Common Stock Purchase Warrants, we are currently prohibited from incurring or guaranteeing most kinds of debt issued by public or private investors. These possibilities, to the extent available, may be on terms that result in significant dilution to ourthe Company’s existing shareholders.stockholders. In addition, there can be no assurances that ourthe Company’s plans to obtain additional capital will be successful on the terms or timeline we expect,it expects, or at all.Although no assurances can be given, management believes that potential additional issuances of equity or other potential financing transactions as discussed above should provide the necessary funding for us. If these efforts are unsuccessful, wethe Company may be required to significantly curtail or discontinue operations or, if available, obtain funds through financing transactions with unfavorable terms.

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The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America,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 consolidated financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. Our The Company’s 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 wethe Company be unable to continue as a going concern.

We have a historyidentified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting or disclosure controls and procedures, it may result in material misstatements of losses,our consolidated financial statements or cause us to fail to meet our periodic reporting obligations, which may adversely affect our business, financial condition, and we may continue to incur losses and may not achieve or maintain profitability.results of operations.

ForWe have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the year ended December 31, 2020,annual or interim financial statements will not be prevented or detected on a timely basis. These material weaknesses are as follows:

Expertise and resources to analyze and properly apply U.S. GAAP to complex and non-routine transactions such as complex financial instruments and derivatives and complex sales distributing agreements with select vendors.
A lack of 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 accounting and IT processes and procedures and, as such, we believe that all its accounting and IT processes need to be re-designed and tested for operating effectiveness.

We are taking certain measures to remediate these material weaknesses described above as described in Part II, Item 9A of this Annual Report on Form 10-K; however, such material weaknesses had a net loss of $27.3 million and used $6.7 million of cash in operations. Asnot been remediated as of December 31, 2021,2023. In addition, due to the material weaknesses in internal control over financial reporting, we had an accumulated deficithave also determined that our disclosure controls and procedures were ineffective as of $183.9 million and a total stockholders’ deficit of $39.0 million. For the year ended December 31, 2020,2023. The material weaknesses will not be considered remediated until management completes the design and implementation of the measures described above and the controls operate for a sufficient period of time and management has concluded, through testing, that these controls are effective.

There can be no assurance as to when the material weaknesses will be remediated. At this time, we hadcannot provide an accumulated deficitestimate of $156.7 millioncosts expected to be incurred in connection with implementing this remediation plan; however, these remediation measures will be time consuming, will result in us incurring significant costs, and a total stockholders’ deficit of $13.7 million. As a resultwill place significant demands on our financial and operational resources.

We cannot assure that the measures we have taken to date and may take in the future will be sufficient to remediate the control deficiencies that led to our material weaknesses in internal control over financial reporting or that they will prevent or avoid potential future material weaknesses to be identified in the future. The effectiveness of our significant research, clinical development, regulatory complianceinternal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the possibility of human error and generalthe risk of fraud. Any failure to design, implement and administrative expenses, we expect to incur losses as we continue to incur expenses related to commercialization of the dermaPACE® Systemmaintain effective internal control over financial reporting and researcheffective disclosure controls and development of the non-medical uses of the PACE technology. Even if we succeed in developing and commercializing the dermaPACE® Systemprocedures, or any other product candidates, wedifficulties encountered in their implementation or improvement, may not be ableresult in additional material misstatements of our consolidated financial statements, or cause us to generate sufficient revenuesfail to meet our periodic reporting obligations, which may adversely affect our business, financial condition and we may never achieve or be able to maintain profitability.results of operations.

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If we are unable to successfully raise additional capital, our viability may be threatened; however, if we do raise additional capital, your percentage ownership as a stockholder could decrease and constraints could be placed on the operations of our business.

We have experienced negative operating cash flows since our inception and have funded our operations primarily from proceeds received from sales of our capital stock, the issuance of promissory notes and convertible promissory notes, the issuance of notes payable to related parties, the issuance of promissory notes, the sale of our veterinary division in June 2009 and product sales. We will seek to obtain additional funds in the future either through equity or debt financings or through strategic alliances with third parties, either alone or in combination with equity financings. These financings could result in substantial dilution to the holders of our common stock or require contractual or other restrictions on our operations or on alternativesalternative business opportunities that may be available to us. In addition, because of our private placements in May 2023, December 2023, and January 2024, we are currently prohibited from incurring or guaranteeing most kinds of debt issued by public or private investors, which further constrains our options to raise capital. If we can raise additional funds by issuing debt securities, these debt securities could impose significant additional restrictions on our operations. Any such required financing may not be available in amounts or on terms acceptable to us, and the failure to procure such required financing could have a material adverse effect on our business, financial condition, and results of operations, or threaten our ability to continue as a going concern.

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A variety of factors could impact our need to raise additional capital, the timing of any required financingsfinancing and the amount of such financings. Factors that may cause our future capital requirements to be greater than anticipated or could accelerate our need for funds include, without limitation:

unanticipated expenditures in research and development or manufacturing activities;
delayed market acceptance of any approved product;
unanticipated expenditures in the acquisition and defense of intellectual property rights;
the failure to develop strategic alliances for the marketing of some of our product candidates;
additional inventory builds to adequately support the launch of new products;
unforeseen changes in healthcare reimbursement for procedures using any of our approved products;
inability to train a sufficient number of physicians to create a demand for any of our approved products;
lack of financial resources to adequately support our operations;
difficulties in maintaining commercial scale manufacturing capacity and capability;
unforeseen problems with our third-party manufacturers, service providers or specialty suppliers of certain raw materials;
unanticipated difficulties in operating in international markets;
unanticipated financial resources needed to respond to technological changes and increased competition;
unforeseen problems in attracting and retaining qualified personnel;
the impact of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively the PPACA) on our operations;
the impact of changes in U.S. health care law and policy on our operations;
enactment of new legislation or administrative regulations;
the application to our business of new court decisions and regulatory interpretations;
claims that might be brought in excess of our insurance coverage;
delays in timing of receipt of required regulatory approvals;
the failure to comply with regulatory guidelines; and
the uncertainty in industry demand and patient wellness behavior.

In addition, although we have no present commitments or understandings to do so, we may seek to expand our operations and product line through acquisitions. Any acquisition would likely increase our capital requirements.

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The coronavirus, or COVID-19, pandemic has materially and adversely affected our clinical trial operations and may materially and adversely affect our financial results.

The COVID-19 pandemic has affected many countries, including the United States and several European countries, where we are currently conducting clinical trials. In response to the pandemic, hospitals participating in the trials in affected countries have taken a number of actions, including restricting elective and other procedures that are not deemed to be life-threatening, suspending clinical trial activities and limiting access to data monitoring. As a result, patients enrolled in our clinical trials have had the start of their treatments postponed and ongoing treatment regimens may be delayed. In addition, we do not have sufficient access to monitor trial data on a timely basis. These restrictions have had a materially adverse impact on our clinical operations. The extent to which the COVID-19 pandemic may impact our clinical trial operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the spread and severity of COVID-19, and the effectiveness of governmental actions in response to the pandemic. Furthermore, the spread of COVID-19 may materially impact our ability to recruit and retain patients.

These consequences of the COVID-19 pandemic will delay and could adversely affect our ability to obtain regulatory approval for and to commercialize our products, increase our operating expenses, and could have a material adverse effect on our financial results.

Our product candidates may not be developed or commercialized successfully.

Our product candidates are based on a technology that has not been used previously in the manner we propose and must compete with more established treatments currently accepted as the standards of care. Market acceptance of our products will largely depend on our ability to demonstrate their relative safety, efficacy, cost-effectiveness and ease of use.

We are subject to risks that:

the FDA or a foreign regulatory authority finds our product candidates ineffective or unsafe;
we do not receive necessary regulatory approvals;
the regulatory review and approval process may take much longer than anticipated, requiring additional time, effort and expense to respond to regulatory comments and/or directives;
the reimbursement for our products is difficult to obtain or is too low, which can hinder the introduction and acceptance of our products in the market;
we are unable to get our product candidates in commercial quantities at reasonable costs; and
the patient and physician community does not accept our product candidates.

In addition, our product development program may be curtailed, redirected, eliminated or delayed at any time for many reasons, including:

adverse or ambiguous results;
undesirable side effects that delay or extend the trials;
the inability to locate, recruit, qualify and retain a sufficient number of clinical investigators or patients for our trials; and
regulatory delays or other regulatory actions.

We cannot predict whether we will successfully develop and commercialize our product candidates. If we fail to do so, we will not be able to generate substantial revenues, if any.

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The medical device/therapeutic product industries are highly competitive and subject to rapid technological change. If our competitors are better able to develop and market products that are safer and more effective than any products we may develop, our commercial opportunities will be reduced or eliminated.

Our success depends, in part, upon our ability to maintain a competitive position in the development of technologies and products. We face competition from established medical device, pharmaceutical and biotechnology companies, as well as from academic institutions, government agencies, and private and public research institutions in the United States and abroad. Many of our principal competitors have significantly greater financial resources and expertise than we do in research and development, manufacturing, pre-clinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements, or mergers with, or acquisitions by, large and established companies, or through the development of novel products and technologies.

In 2019, Tissue Regeneration Technologies, LLC obtained clearance from the FDA for treatment of diabetic foot ulcers using non-focused shockwaves, as a 510(k) submission based on our dermaPACE® System de novo clearance. We take issue with the FDA’s decision regarding substantial equivalence of the unfocused shockwave technology with the focused shockwave technology that we are marketing. The so-called unfocused shockwaves, which in reality are pressure waves and not shockwaves, produce much lower energy compared to focused shockwaves, which makes the two technologies non-equivalent in energy output in the treatment zone.

The industry in which we operate has undergone, and we expect it to continue to undergo rapid and significant technological change, and we expect competition to intensify as technological advances are made. Our competitors may develop and commercialize pharmaceutical, biotechnology or medical devices that are safer or more effective, have fewer side effects or are less expensive than any products that we may develop. We also compete with our competitors in recruiting and retaining qualified scientific and management personnel, in establishing clinical trial sites and patient registration for clinical trials, and in acquiring technologies complementary to our programs or advantageous to our business.

If our products and product candidates do not gain market acceptance among physicians, patients and the medical community, we may be unable to generate significant revenues, if any.

Even if we obtain regulatory approval for our product candidates, they may not gain market acceptance among physicians, healthcare payers, patients and the medical community. Market acceptance will depend on our ability to demonstrate the benefits of our approved products in terms of safety, efficacy, convenience, ease of administration and cost effectiveness. In addition, we believe market acceptance depends on the effectiveness of our marketing strategy, the pricing of our approved products and the reimbursement policies of government and third-party payers. Physicians may not utilize our approved products for a variety of reasons and patients may determine for any reason that our product is not useful to them. If any of our approved products fail to achieve market acceptance, our ability to generate revenues will be limited.

In addition, a significant health epidemic could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect the market for our products, which could have a material adverse effect on our business, operating results and financial condition.
We may not successfully establish and maintain licensing and/or partnership arrangements for our technology for non-medical uses, which could adversely affect our ability to develop and commercialize our non-medical technology.

Our strategy for the development, testing, manufacturing, and commercialization of our technology for non-medical uses generally relies on establishing and maintaining collaborations with licensors and other third parties. We may not be able to obtain, maintain or expand these or other licenses and collaborations or establish additional licensing and collaboration arrangements necessary to develop and commercialize our product candidates. Even if we are able to obtain, maintain or establish licensing or collaboration arrangements, these arrangements may not be on favorable terms and may contain provisions that will restrict our ability to develop, test and market our product candidates. Furthermore, our licensing and collaboration agreements are subject to counterparty risk, and to the extent the licensors or other third parties that we enter into licensing, joint venture or other collaboration arrangements with face operational, regulatory or financial difficulties, and to the extent we are unable to find suitable alternative counterparties in a timely manner, if at all, our business and results of operations could be materially adversely affected. Any failure to obtain, maintain or establish licensing or collaboration arrangements on favorable terms could adversely affect our business prospects, financial condition or ability to develop and commercialize our technology for non-medical uses.

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We expect to rely at least in part on third party collaborators to perform a number of activities relating to the development and commercialization of our technology for non-medical uses, including possibly the design and manufacture of product materials, potentially the obtaining of regulatory or environmental approvals and the marketing and distribution of any successfully developed products. Our collaborators also may have or acquire rights to control aspects of our product development programs. As a result, we may not be able to conduct these programs in the manner or on the time schedule we may contemplate. In addition, if any of these collaborators withdraw support for our programs or product candidates or otherwise impair their development, our business could be negatively affected. To the extent we undertake any of these activities internally, our expenses may increase.

Many of our product component materials are only produced by a single supplier for such product component. If we are unable to obtain product component materials and other products from our suppliers that we depend on for our operations, or find suitable replacement suppliers, our ability to deliver our products to market will likely be impeded, which could have a material adverse effect on us.

We depend on suppliers for product component materials and other components that are subject to stringent regulatory requirements. Many of our product component materials are only produced by a single supplier for such product component,components. While we believe that alternative manufacturers and suppliers offering similar components are available on an as-needed basis and could be engaged in a reasonable period of time, there can be no assurance that the loss of any of these suppliers couldwill not result in a disruption into our production. If this were to occur, it may be difficult to arrange a replacement supplier because certain of these materials may only be available from one or a limited number of sources. Our suppliers may encounter problems during manufacturing due to a variety of reasons, including failure to follow specific protocols and procedures, failure to comply with applicable regulations, equipment malfunction and environmental factors. In addition, some of our suppliers have been and will continue to be effectaffected by supply chain problems resulting from the pandemic. DueCertain of our suppliers must be approved by regulatory authorities, which could delay our efforts to these disruptions, we have experienced a few small backorder situations on our UltraMIST® applicators. Establishingestablish additional or replacement suppliers for these materials may take a substantial period of time, as certain of these suppliers must be approved by regulatory authorities.materials.

If we are unable to secure, on a timely basis, sufficient quantities of the materials we depend on to manufacture our products, if we encounter delays or contractual or other difficulties in our relationships with these suppliers, or if we cannot find replacement suppliers at an acceptable cost, then the manufacturing of our products may be disrupted, which could increase our costs and have a material adverse effect on our business and results of operations.

We currently sell our products through distributors and partners. Our business and results of operations could be adversely affected by any business disruptions or credit or other financial difficulties experienced by such distributors or partners.

For a period of approximately three months following the August 6, 2020 Asset Purchase Agreement, we utilized the seller to fulfill certain customer orders and to collect related accounts receivable payments from customer orders that originated from the acquired business after August 6, 2020. For the year ended December 31, 2020, orders fulfilled by the seller comprised approximately 49% of the Company’s 2020 full year revenues. As of December 31, 2020, accounts receivable balances that originated from these seller-fulfilled orders constituted approximately 46% of accounts receivable balances, all of which were either reserved as of December 31, 2020 or subsequently collected during 2021. For the year ended December 31, 2021, orders fulfilled by the seller comprised approximately 16% of the accounts receivable balances, and one other vendor comprised approximately 24% of the accounts receivable balances.

To the extent that our distributors or partners experience any business disruptions or credit or other financial difficulties, our revenues and the collectability of our accounts receivable could be negatively impacted. If we are unable to establish, on a timely basis, relationships with new distributors or partners, our business and results of operations could be negatively impacted.

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We have entered into an agreement with companies owned by a current board member and stockholder that could delay or prevent an acquisition of our companyCompany and could result in the dilution of our stockholders in the event of our change of control.

On February 13, 2018, the Companywe entered into an Agreement for Purchase and Sale, Limited Exclusive Distribution and Royalties, and Servicing and Repairs with Premier Shockwave Wound Care, Inc. (“PSWC”) and Premier Shockwave, Inc. (“PS”), each of which is owned by A. Michael Stolarski, a member of the Company’s board of directors and an existing stockholder of the Company. Among other terms, the agreement contains provisions whereby in the event of a change of control of the Company (as defined in the agreement), the stockholders of PSWC have the right and option to cause the Company to purchase all of the stock of PSWC, and whereby the Company has the right and option to purchase all issued and outstanding shares of PSWC, in each case based upon certain defined purchase price provisions and other terms. SuchWhile the agreement was amended effective November 1, 2023, to specify that the Business Combination does not constitute a change of control, such provision may have the effect of delaying or deterring aany other change in control of us,the Company, and as a result could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock. In addition, in the event we do experience a change of control (other than the Business Combination), such provision may cause dilution of our existing stockholder in the event thatstockholders if PSWC exercises its option to require the Company to purchase all issued and outstanding shares of PSWC and the Company finances some or all of such purchase price through equity issuances.

The loss of our key management would likely hinder our ability to execute our business plan.

As a small company with less than 5040 employees, our success depends on the continuing contributions of our management team and qualified personnel. Turnover, transitions or other disruptions in our management team and personnel could make it more difficult to successfully operate our business and achieve our business goals and could adversely affect our results of operation and financial condition. Our success depends in large part on our ability to attract and retain highly qualified personnel. We face intense competition in our hiring efforts from other pharmaceutical, biotechnology and medical device companies, as well as from universities and nonprofit research organizations, and we may have to pay higher salaries to attract and retain qualified personnel. The loss of one or more of these individuals, or our inability to attract additional qualified personnel, could substantially impair our ability to implement our business plan.

We face an inherent risk of liability in the event thatif the use or misuse of our product candidatesproducts results in personal injury or death.

The use of our product candidates in clinical trials and the sale of any approved products may expose us to product liability claims which could result in financial loss. Our clinical and commercial product liability insurance coverage may not be sufficient to cover claims that may be made against us. In addition, we may not be able to maintain insurance coverage at a reasonable cost, or in sufficient amounts or scope, to protect us against losses. Any claims against us, regardless of their merit, could severely harm our financial condition, strain our management team and other resources, and adversely impact or eliminate the prospects for commercialization of the product candidate, or sale of the product, whichthat is the subject of any such claim. Although we do not promote any off-label use, off-label uses of products are common, and the FDA does not regulate a physician’s choice of treatment. Off-label uses of any product for which we obtain approvalof our products may subject us to additional liability.

We are dependent on information technology and our systems and infrastructure face certain risks, including from cybersecurity breaches and data leakage.

We rely to a large extent upon sophisticated information technology systems to operate our businesses, some of which are managed, hosted, provided and/or used by third parties or their vendors. We collect, store, and transmit large amounts of confidential information, and we deploy and operate an array of technical and procedural controls to maintain the confidentiality and integrity of such confidential information. A significant breakdown, invasion, corruption, destruction or interruption of critical information technology systems or infrastructure, by our workforce, others with authorized access to our systems or unauthorized persons could negatively impact our operations. The ever-increasing use and evolution of technology, including cloud-based computing, creates opportunities for the unintentional dissemination or intentional destruction of confidential information stored in our or our third-party providers’ systems, portable media, or storage devices. We could also experience, and in some cases have experienced in the past, a business interruption, theft of confidential information, financial theft, or reputational damage from industrial espionage attacks, malware, spoofing or other cyber-attacks, which may compromise our system infrastructure, lead to data leakage, either internally or at our third-party providers, or materially adversely impact our financial condition.

We have previously disclosed that we have experienced cybersecurity breaches from email spoofing. While we have invested in the protection of data and information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches. Any such interruption or breach of our systems could adversely affect our business operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business, and reputational harm to us.

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We generate a portion of our revenue internationally and are subject to various risks relating to our international activities, which could adversely affect our operating results.

A portionOn an annual basis, less than five percent of our revenue comes from international sources, andsources. While we anticipate thathave no current plan to materially expand our international operations, there can be no assurance we will continue to expand our overseas operations.not pursue such an expansion in the future. Engaging in international business involves a number ofseveral difficulties and risks, including:including, but not limited to, the following:

required compliance with existing and changing foreign healthcare and other regulatory requirements and laws, such as those relating to patient privacy or handling of bio-hazardous waste;
required compliance with anti-bribery laws, data privacy requirements, labor laws and anti-competition regulations;
export or import restrictions;
various reimbursement and insurance regimes;
laws and business practices favoring local companies;
political and economic instability;
potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements and other trade barriers;instability,
foreign exchange controls; and
difficulties protecting or procuring intellectual property rights.

As we expand internationally,With respect to our international operations, our results of operations and cash flows will become increasinglyare subject to fluctuations due to changes in foreign currency exchange rates. Our expenses are generally denominated in the currencies in which our operations are located, which is in the United States. If the value of the U.S. dollar increases relative to foreign currencies in the future, in the absence of a corresponding change in local currency prices, our future revenue could be adversely affected as we convert future revenue from local currencies to U.S. dollars.
 
Provisions in our Articles of Incorporation, Bylaws and Nevada law might decrease the chances of an acquisition.
 
Provisions of our Articles of Incorporation and Bylaws and applicable provisions of Nevada law may delay or discourage transactions involving an actual or potential change in control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Some of the following provisions in our Articles of Incorporation andor Bylaws that implement thesemay decrease our attractiveness to be acquired are:

stockholders may not vote by written consent;
advance notice of business to be brought is required for a meeting of the Company’sour stockholders;
no cumulative voting rights for the holders of common stock in the election of directors; and
vacancies in the board of directors may be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum.
 
In addition, Section 78.438 of the Nevada Revised Statutes prohibits a publicly-held Nevada corporation from engaging in a business combination with an interested stockholder (generally defined as a person which together with its affiliates owns, or within the last three years has owned, 10% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder) unless the business combination is approved in a prescribed manner. The existence of the foregoing provisions and other potential anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our Company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

Regulatory Risks

The results of our clinical trials may be insufficient to obtain regulatory approval for our product candidates.

We will only receive regulatory approval to commercialize a product candidate if we can demonstrate to the satisfaction of the FDA or the applicable foreign regulatory agency, in well designed and conducted clinical trials, that the product candidate is safe and effective. If we are unable to demonstrate that a product candidate is safe and effective in advanced clinical trials involving large numbers of patients, we will be unable to submit the necessary application to receive regulatory approval to commercialize the product candidate. We face risks that:

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the product candidate may not prove to be safe or effective;
the product candidate’s benefits may not outweigh its risks;
the results from advanced clinical trials may not confirm the positive results from pre-clinical studies and early clinical trials;
the FDA or comparable foreign regulatory authorities may interpret data from pre-clinical and clinical testing in different ways than us; and
the FDA or other regulatory agencies may require additional or expanded trials and data.

We are subject to extensive governmental regulation, including the requirement of FDA approval or clearance, before our product candidates may be marketed.FDA.

The process of obtaining FDA approval is lengthy, expensive and uncertain, and we cannot be sure that our product candidates will be approved in a timely fashion, or at all. If the FDA does not approve or clear our product candidates in a timely fashion, or at all, our business and financial condition would likely be adversely affected. The FDA has determined that our technology and product candidates constitute “medical devices” and are thus subject to review by the Center for Devices and Radiological Health. However, we cannot be sure that the FDA will not select a different center and/or legal authority for one or more of our other product candidates, in which case applicable governmental review requirements could vary in some respects and be more lengthy and costly.
Both before and after approval or clearance of our product candidates, weWe and our product candidates,products, our suppliers, and our contract manufacturers are subject to extensive regulation by governmental authorities in the United States and other countries. Failure to comply with applicable requirements could result in, among other things, any of the following actions:

warning letters;letters
fines and other monetary penalties;penalties
unanticipated expenditures;
delays in FDA approval and clearance, or FDA refusal to approve or clear a product candidate;expenditures
product recall or seizure;seizure
interruption of manufacturing or clinical trials;
operating restrictions;restrictions
injunctions;injunctions, and
criminal prosecutions.

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In addition to the approval and clearance requirements, numerous other regulatory requirements apply both before and after approval or clearance, to us and our products, and product candidates, our suppliers and contract manufacturers. These include requirements related to the following:

testing;testing
manufacturing;manufacturing
quality control;control
labeling;labeling
advertising;advertising
promotion;promotion
distribution;distribution
export;export
reporting to the FDA certain adverse experiences associated with the use of the products; and
obtaining additional approvals or clearances for certain modifications to the products or their labeling or claims.

We are also subject to inspection by the FDA and other international regulatory bodies to determine our compliance with regulatory requirements, as are our suppliers and contract manufacturers, and we cannot be sure that the FDA and other international regulatory bodies will not identify compliance issues that may disrupt production or distribution or require substantial resources to correct.

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The FDA’s requirements and international regulatory body requirements may change, and additional regulations may be promulgated that could affect us, our product candidates,products, and our suppliers and contract manufacturers. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action. There can be no assurance that we will not be required to incur significant costs to comply with such laws and regulations in the future, or that such laws or regulations will not have a material adverse effect upon our business.

Patients may discontinue their participation in our clinical studies, which may negatively impact the results of these studies and extend the timeline for completion of our development programs.

Clinical trials for our product candidates require sufficient patient enrollment. We may not be able to enroll a sufficient number of patients in a timely or cost-effective manner. Patients enrolled in our clinical studies may discontinue their participation at any time during the study as a result of a number of factors, including withdrawing their consent or experiencing adverse clinical events, which may or may not be judged to be related to our product candidates under evaluation. If a large number of patients in a study discontinue their participation in the study, the results from that study may not be positive or may not support a filing for regulatory approval of the product candidate.

In addition, the time required to complete clinical trials is dependent upon, among other factors, the rate of patient enrollment. Patient enrollment is a function of many factors, including the following:

the size of the patient population;
the nature of the clinical protocol requirements;
the availability of other treatments or marketed therapies (whether approved or experimental);
our ability to recruit and manage clinical centers and associated trials;
the proximity of patients to clinical sites; and
the patient eligibility criteria for the study.

We rely on third parties to conduct our clinical trials, and their failure to perform their obligations in a timely or competent manner may delay development and commercialization of our device.

We engage a clinical research organization (CRO) and other third-party vendors to assist in the conduct of our clinical trials. There are numerous sources that are capable of providing these services. However, we may face delays outside of our control if these parties do not perform their obligations in a timely or competent fashion or if we are forced to change service providers. Any third party that we hire to conduct clinical trials may also provide services to our competitors, which could compromise the performance of their obligations to us. If we experience significant delays in the progress of our clinical trials, the commercial prospects for the product could be harmed and our ability to generate product revenues would be delayed or prevented. Any failure of the CRO and other third-party vendors to successfully accomplish clinical trial monitoring, data collection, safety monitoring and data management and the other services they provide for us in a timely manner and in compliance with regulatory requirements could have a material adverse effect on our ability to complete clinical development of our product and obtain regulatory approval. Problems with the timeliness or quality of the work of the CRO may lead us to seek to terminate the relationship and use an alternate service provider. However, making such changes may be costly and may delay our clinical trials, and contractual restrictions may make such a change difficult or impossible. Additionally, it may be difficult to find a replacement organization that can conduct our trials in an acceptable manner and at an acceptable cost.

We may be required to suspend or discontinue clinical trials due to unexpected side effects or other safety risks that could preclude approval of our product candidates.

Our clinical trials may be suspended at any time for several reasons. For example, we may voluntarily suspend or terminate our clinical trials if at any time we believe that they present an unacceptable risk to the clinical trial patients. In addition, the FDA or other regulatory agencies may order the temporary or permanent discontinuation of our clinical trials at any time if they believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety risk to the clinical trial patients.

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Administering any product candidate to humans may produce undesirable side effects. These side effects could interrupt, delay or halt clinical trials of our product candidates and could result in the FDA or other regulatory authorities denying further development or approval of our product candidates for any or all targeted indications. Ultimately, some or all of our product candidates may prove to be unsafe for human use. Moreover, we could be subject to significant liability if any patient suffers, or appears to suffer, adverse health effects as a result of participating in our clinical trials.

Regulatory approval of our product candidatesproducts may be withdrawn at any time.

After regulatory approval has been obtained for medical device products, the product and the manufacturer are subject to continual review, including the review of adverse experiences and clinical results that are reported after our products are made available to patients, and there can be no assurance that such approval will not be withdrawn or restricted. Regulators may also subject approvals to restrictions or conditions or impose post-approval obligations on the holders of these approvals, and the regulatory status of such products may be jeopardized if such obligations are not fulfilled. If post-approval studies are required, such studies may involve significant time and expense.

The manufacturing facilities we use to make any of our products will also be subject to periodic review and inspection by the FDA or other regulatory authorities, as applicable. The discovery of any new or previously unknown problems with the product or facility may result in restrictions on the product or facility, including withdrawal of the product from the market. We will continue to be subject to the FDA or other regulatory authority requirements, as applicable, governing the labeling, packaging, storage, advertising, promotion, recordkeeping, and submission of safety and other post-market information for all of our product candidates,products, even those that the FDA or other regulatory authority, as applicable, had approved. If we fail to comply with applicable continuing regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approval, product recalls and seizures, operating restrictions and other adverse consequences.

Federal regulatory reformsIf we fail to obtain an adequate level of reimbursement for our approved products by third party payers, there may be no commercially viable markets for our approved products, or the markets may be much smaller than expected.

The availability and levels of reimbursement by governmental and other third-party payers affect the market for our approved products. The efficacy, safety, performance, and cost-effectiveness of our products, and of any competing products will determine the availability and level of reimbursement. Reimbursement and healthcare payment systems in international markets vary significantly by country and include both government sponsored healthcare and private insurance. To obtain reimbursement or pricing approval in some countries, we may be required to produce clinical data, which may involve one or more clinical trials, that compares the cost-effectiveness of our approved products to other available therapies. We may not obtain international reimbursement or pricing approvals in a timely manner, if at all. Our failure to receive international reimbursement or pricing approvals would negatively impact market acceptance of our approved products in the international markets in which those pricing approvals are sought.

We believe that, in the future, reimbursement for any of our products may be subject to increased restrictions both in the United States and in international markets. Future legislation, regulation or reimbursement policies of third-party payers may adversely affect the demand for our products currently under development and limit our ability to sell our products profitably.on a profitable basis. In addition, third-party payers continually attempt to contain or reduce the costs of healthcare by challenging the prices charged for healthcare products and services. If reimbursement for our approved products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, market acceptance of our approved products would be impaired and our future revenues, if any, would be adversely affected.

From time to time, legislation is drafted and introduced in the United States Congress that could significantly change the statutory provisions governing the clearance or approval, manufacture and marketing
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Table of a medical device. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether legislative changes will be enacted, or FDA regulations, guidance or interpretations changed, and what the impact of such changes on us, if any, may be.Contents

Failure to obtain regulatory approval in foreign jurisdictions will prevent us from marketing our products abroad.

International sales of our products and any of our product candidates that we commercialize are subject to the regulatory requirements of each country in which the products are sold. Accordingly, the introduction of our product candidatesproducts in markets outside the United States will be subject to regulatory approvals in those jurisdictions. The regulatory review process varies from country to country. Many countries impose product standards, packaging, and labeling requirements, and import restrictions on medical devices. In addition, each country has its own tariff regulations, duties, and tax requirements. The approval by foreign government authorities is unpredictable and uncertain and can be expensive. Our ability to market our approved products could be substantially limited due to delays in receipt of, or failure to receive, the necessary approvals or clearances.

Prior to marketing our products in any country outside the United States, we must obtain marketing approval in that country. Approval and other regulatory requirements vary by jurisdiction and differ from the United States’ requirements. We may be required to perform additional pre-clinical or clinical studies even if FDA approval has been obtained.

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If we fail to obtain an adequate level of reimbursement for our approved products by third party payers, there may be no commercially viable markets for our approved products or the markets may be much smaller than expected.

The availability and levels of reimbursement by governmental and other third-party payers affect the market for our approved products. The efficacy, safety, performance and cost-effectiveness of our product and product candidates, and of any competing products, will determine the availability and level of reimbursement. Reimbursement and healthcare payment systems in international markets vary significantly by country and include both government sponsored healthcare and private insurance. To obtain reimbursement or pricing approval in some countries, we may be required to produce clinical data, which may involve one or more clinical trials, that compares the cost-effectiveness of our approved products to other available therapies. We may not obtain international reimbursement or pricing approvals in a timely manner, if at all. Our failure to receive international reimbursement or pricing approvals would negatively impact market acceptance of our approved products in the international markets in which those pricing approvals are sought.

We believe that, in the future, reimbursement for any of our products or product candidates may be subject to increased restrictions both in the United States and in international markets. Future legislation, regulation or reimbursement policies of third-party payers may adversely affect the demand for our products currently under development and limit our ability to sell our products on a profitable basis. In addition, third party payers continually attempt to contain or reduce the costs of healthcare by challenging the prices charged for healthcare products and services. If reimbursement for our approved products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, market acceptance of our approved products would be impaired and our future revenues, if any, would be adversely affected.

Uncertainty surrounding and future changes to healthcare law in the United States may have a material adverse effect on us.
 
The healthcare regulatory environment in the United States is currently subject to significant uncertainty and the industry may in the future continue to experience fundamental change as a resultbecause of regulatory reform. In March 2010, the former U.S. President signed into law the Patient ProtectionFrom time to time, legislation is drafted and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively the PPACA), which substantially changes the way healthcare is financed by both governmental and private insurers, encourages improvements in the quality of healthcare items and services, and significantly impacts the biotechnology and medical device industries. The PPACA, as amended, includes, among other things, the following measures:

a new Patient-Centered Outcomes Research Institute to oversee, identify priorities and conduct comparative clinical effectiveness research;
payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models;
an independent payment advisory board that will submit recommendations to reduce Medicare spending if projected Medicare spending exceeds a specified growth rate; and
a new abbreviated pathway for the licensure of biological products that are demonstrated to be biosimilar or interchangeable with a licensed biological product.
However, some of the provisions of the PPACA have yet to be fully implemented and certain provisions have been subject to judicial, Presidential and Congressional challenges. In addition, the U.S. Congress has also made several attempts to repeal or modify the healthcare reform law. In the coming years, there may continue to be additional proposals relating to the reform of the United States healthcare system. Certain of these proposals could limit the prices we are able to charge for our products or the amounts of reimbursement available for our products and could limit the acceptance and availability of our products. The adoption of some or all of these proposals could have a material adverse effect on our business, results of operations and financial condition.
Additionally, initiatives sponsored by government agencies, legislative bodies and the private sector to limit the growth of healthcare costs, including price regulation and competitive pricing, are ongoingintroduced in the United States Congress that could significantly change the statutory provisions governing the clearance or approval, manufacture, marketing, and other markets.pricing of medical devices. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. We could experience an adverse impact on our operating results due to such changes, including increased pricing pressure in these markets. Governments, hospitals, and other third-party payors also could reduce the amount of approved reimbursement for our products or deny coverage altogether. Reductions in reimbursement levels or coverage or other cost-containment measures could adversely affect our future operating results.

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If we fail to comply with the United States Federal Anti-Kickback Statute, False Claims Act, and similar state laws, we could be subject to criminal and civil penalties and exclusion from the Medicare and Medicaid programs, which would have a material adverse effect on our business and results of operations.

A provision of the Social Security Act, commonly referred to as the Federal Anti-Kickback Statute, prohibits the offer, payment, solicitation, or receipt of any form of remuneration in return for referring, ordering, leasing, purchasing or arranging for, or recommending the ordering, purchasing or leasing of, items or services payable by Medicare, Medicaid or any other Federal healthcare program. The Federal Anti-Kickback Statute is very broad in scope and many of its provisions have not been uniformly or definitively interpreted by existing case law or regulations. In addition, most of the states have adopted laws similar tolike the Federal Anti-Kickback Statute, and some of these laws are even broader than the Federal Anti-Kickback Statute in that their prohibitions are not limited to items or services paid for by Federal healthcare programs, but instead apply regardless of the source of payment. Violations of the Federal Anti-Kickback Statute may result in substantial civil or criminal penalties and exclusion from participation in Federal healthcare programs.

Our operations may also implicate the False Claims Act. If we fail to comply with federalFederal and state documentation, coding, and billing rules, we could be subject to liability under the federalFederal False Claims Act, including criminal and/or civil penalties, loss of licenses and exclusion from the Medicare and Medicaid programs. The False Claims Act prohibits individuals and companies from knowingly submitting false claims for payments to, or improperly retaining overpayments from, the government.

All of ourOur financial relationships with healthcare providers and others who provide products or services to Federal healthcare program beneficiaries are potentially governed by the Federal Anti-Kickback Statute, False Claims Act, and similar state laws. We believe our operations are in compliance with the Federal Anti-Kickback Statute, False Claims Act and similar state laws. However, we cannot be certain that we will not be subject to investigations or litigation alleging violations of these laws, which could be time-consuming and costly to us and could divert management’s attention from operating our business, which in turn could have a material adverse effect on our business. In addition, if our arrangements were found to violate the Federal Anti-Kickback Statute, False Claims Act or similar state laws, the consequences of such violations would likely have a material adverse effect on our business, results of operations and financial condition.

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Failure to comply with the HIPAA Privacy, Security and Breach Notification Regulations, as such rules become applicable to our business, may increase our operational costs.

The HIPAA privacy and security regulations establish comprehensive federalFederal standards with respect to the uses and disclosures of PHI by certain entities, including health plans and health care providers, and set standards to protect the confidentiality, integrity, and availability of electronic PHI. The regulations establish a complex regulatory framework on a variety of subjects, including, for example: the circumstances under which uses and disclosures of PHI are permitted or required without a specific authorization by the patient; a patient’s right to access, amend and receive an accounting of certain disclosures of PHI; the content of notices of privacy practices describing how PHI is used and disclosed and individuals’ rights with respect to their PHI; and implementation of administrative, technical and physical safeguards to protect privacy and security of PHI. We anticipate that, as we expand our dermaPACE®PACE business, we will in the future be a covered entity under HIPAA. We intend to adopt policies and procedures to comply with the Privacy Rule, the Security Rule and the HIPAA statute as such regulations become applicable to our business and as such regulations are in effect at such time; however, thereThere can be no assurance that our policies and procedures will be adequate or will prevent all incidents of non-compliance with such regulations.

The privacy regulations establish a uniform federal standard but do not supersede state laws that may be more stringent. Therefore, as we expand our dermaPACE® business, we may also be required to comply with both federal privacyHealth Information Technology for Economic and security regulations and varying state privacy and security laws and regulations. The federal privacy regulations restrict the ability to use or disclose certain individually identifiable patient health information, without patient authorization, for purposes other than payment, treatment or health care operations (as defined by HIPAA), except for disclosures for various public policy purposes and other permitted purposes outlined in the privacy regulations.

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The HITECHClinical Health (“HITECH") Act and its implementing regulations also require healthcare providers to notify affected individuals, the Secretary of the U.S. Department of Health and Human Services, and in some cases, the media, when PHI has been breached as defined under and following the requirements of HIPAA. Many states have similar breach notification laws. In the event of a breach, to the extent such regulations are applicable to our business, we could incur operational and financial costs related to remediation as well as preparation and delivery of the notices, which costs could be substantial. Additionally, HIPAA, the HITECH Act, and their implementing regulations provide for significant civil fines, criminal penalties, and other sanctions for failure to comply with the privacy, security, and breach notification rules, including for wrongful or impermissible use or disclosure of PHI. Although the HIPAA statute and regulations do not expressly provide for a private right of action for damages, private parties may also seek damages under state laws for the wrongful or impermissible use or disclosure of confidential health information or other private personal information. Additionally, amendments to HIPAA provide that the state Attorneys Generalattorneys general may bring an action against a covered entity for a violation of HIPAA. As we expand our business such that federal and stateFederal laws regarding PHI and privacy apply to our operations, any noncompliance with such regulations could have a material adverse effect on our business, results of operations and financial condition.

We face periodic reviews and billing audits from governmental and private payors, and these audits could have adverse results that may negatively impact our business.

As a result of our participation in the Medicare and Medicaid programs, we are subject to various governmental reviews and audits to verify our compliance with these programs and applicable laws and regulations. We also are subject to audits under various government programs in which third-party firms engaged by the Centers for Medicare & Medicaid Services conduct extensive reviews of claims data and medical and other records to identify potential improper payments under the Medicare program. Private pay sources also reserve the right to conduct audits. If billing errors are identified in the sample of reviewed claims, the billing error can be extrapolated to all claims filed, which could result in a larger overpayment than originally identified in the sample of reviewed claims. Our costs to respond to and defend reviews and audits may be significant and could have a material adverse effect on our business, financial condition, results of operations and cash flows. Moreover, an adverse review or audit could result in:

required refunding or retroactive adjustment of amounts we have been paid by governmental or private payors;
state or Federal agencies imposing fines, penalties and other sanctions on us;
loss of our right to participate in the Medicare program, state programs, or one or more private payor networks; or
damage to our business and reputation in various markets.

Any one of these results could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Product quality or performance issues may be discovered through ongoing regulation by the FDA and by comparable international agencies, as well as through our internal standard quality process.

The medical device industry is subject to substantial regulation by the FDA and by comparable international agencies. In addition to requiring clearance or approval to market new or improved devices, we are subject to ongoing regulation as a device manufacturer. Governmental regulations cover many aspects of our operations, including quality systems, marketing and device reporting. As a result, we continually collect and analyze information about our product quality and product performance through field observations, customer feedback and other quality metrics. If we fail to comply with applicable regulations or if post market safety issues arise, we could be subject to enforcement sanctions, our promotional practices may be restricted, and our marketed products could be subject to recall or otherwise impacted. Each of these potential actions could result in a material adverse effect on our business, operating results and financial condition.

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The use of hazardous materials in our operations may subject us to environmental claims or liability.

We conduct research and development and manufacturing operations in our facility. Our research and development process may, at times, involve the controlled use of hazardous materials and chemicals. We may conduct experiments in which we may use small quantities of chemicals, including those that are corrosive, toxic, and flammable. The risk of accidental injury or contamination from these materials cannot be eliminated. We do not maintain a separate insurance policy for these types of risks. In the event of an accident or environmental discharge or contamination, we may be held liable for any resulting damages, and any liability could exceed our resources. We are subject to Federal, state, and local laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. The cost of compliance with these laws and regulations could be significant.

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Risks Related to Intellectual Property

The protection of our intellectual property is critical to our success, and any failure on our part to adequately protect those rights could materially adversely affect our business.

Our commercial success depends to a significant degree on our ability to:

obtain and/or maintain protection for our product candidatesproducts under the patent laws of the United States and other countries;
defend and enforce our patents once obtained;
obtain and/or maintain appropriate licenses to patents, patent applications or other proprietary rights held by others with respect to our technology, both in the United States and other countries;
maintain trade secrets and other intellectual property rights relating to our product candidates;products; and
operate without infringing upon the patents, trademarks, copyrights, and proprietary rights of third parties.

The degree of intellectual property protection for our technology is uncertain, and only limited intellectual property protection may be available for our product candidates,products, which may prevent us from gaining or keeping any competitive advantage against our competitors. Although we believe the patents that we own or license, and the patent applications that we own, generally provide us a competitive advantage, the patent positions of biotechnology, biopharmaceutical and medical device companies are generally highly uncertain, involve complex legal and factual questions and have been the subject of much litigation. Neither the United States Patent & Trademark Office nor the courts have a consistent policy regarding the breadth of claims allowed or the degree of protection afforded under many biotechnology patents. Even if issued, patents may be challenged, narrowed, invalidated, or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length of term of patent protection we may have for our products. Further, a court or other government agency could interpret our patents in a way such that the patents do not adequately cover our current or future product candidates.products. Changes in either patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection.

We also rely upon trade secrets and unpatented proprietary know-how and continuing technological innovation in developing our products, especially where we do not believe patent protection is appropriate or obtainable. We seek to protect this intellectual property, in part, by generally requiring our employees, consultants, and current and prospective business partners to enter into confidentiality agreements in connection with their employment, consulting or advisory relationships with us, where appropriate. We also require our employees, consultants, researchers, and advisors who we expect to work on our products and product candidates to agree to disclose and assign to us all inventions conceived during the workday, developed using our property or which relate to our business. We may lack the financial or other resources to successfully monitor and detect, or to enforce our rights in respect of, infringement of our rights or breaches of these confidentiality agreements. In the case of any such undetected or unchallenged infringements or breaches, these confidentiality agreements may not provide us with meaningful protection of our trade secrets and unpatented proprietary know-how or adequate remedies. In addition, others may independently develop technology that is similar or equivalent to our trade secrets or know-how. If any of our trade secrets, unpatented know-how or other confidential or proprietary information is divulged to third parties, including our competitors, our competitive position in the marketplace could be harmed and our ability to sell our products successfully could be severely compromised. Enforcing a claim that a party illegally obtained and is using trade secrets that have been licensed to us or that we own is also difficult, expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. Costly and time-consuming litigation could be necessary to seek to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could have a material adverse effect on our business. Moreover, some of our academic institution licensees, evaluators, collaborators, and scientific advisors have rights to publish data and information to which we have rights. If we cannot maintain the confidentiality of our technologies and other confidential information in connection with our collaborations, our ability to protect our proprietary information or obtain patent protection in the future may be impaired, which could have a material adverse effect on our business.

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In particular, we cannot assure you that:

we or the owners or other inventors of the patents that we own or that have been licensed to us, or that may be issued or licensed to us in the future, were the first to file patent applications or to invent the subject matter claimed in patent applications relating to the technologies upon which we rely;
others will not independently develop similar or alternative technologies or duplicate any of our technologies;
any of our patent applications will result in issued patents;
the patents and patent applications that we own or that have been licensed to us, or that may be issued or licensed to us in the future, will provide a basis for commercially viable products or will provide us with any competitive advantages, or will not be challenged by third parties;
the patents and patent applications that have been licensed to us are valid and enforceable;
we will develop additional proprietary technologies that are patentable;
we will be successful in enforcing the patents that we own or license and any patents that may be issued or licensed to us in the future against third parties;
the patents of third parties will not have an adverse effect on our ability to do business; or
our trade secrets and proprietary rights will remain confidential.

Accordingly, we may fail to secure meaningful patent protection relating to any of our existing or future product candidatesproducts or discoveries despite the expenditure of considerable resources. Further, there may be widespread patent infringement in countries in which we may seek patent protection, including countries in Europe and Asia, which may instigate expensive and time-consuming litigation that could adversely affect the scope of our patent protection. In addition, others may attempt to commercialize products similar to our product candidatesproducts in countries where we do not have adequate patent protection. Failure to obtain adequate patent protection for our product candidates,products, or the failure by particular countries to enforce patent laws or allow prosecution for alleged patent infringement, may impair our ability to be competitive. The availability of infringing products in markets where we have patent protection, or the availability of competing products in markets where we do not have adequate patent protection, could erode the market for our product candidates,products, negatively impact the prices we can charge for our product candidates,products, and harm our reputation if infringing or competing products are manufactured to inferior standards.

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Patent applications owned by us or licensed to us may not result in issued patents, and our competitors may commercialize the discoveries we attempt to patent.

The patent applications that we own and that have been licensed to us, and any future patent applications that we may own or that may be licensed to us, may not result in the issuance of any patents. The standards that the United States Patent & Trademark Office and foreign patent agencies use to grant patents are not always applied predictably or uniformly and can change. Consequently, we cannot be certain as to the type and scope of patent claims to which we may in the future be entitled under our license agreements or that may be issued to us in the future.us. These applications may not be sufficient to meet the statutory requirements for patentability and, therefore, may not result in enforceable patents covering the product candidatesproducts we want to commercialize. Further, patent applications in the United States that are not filed in other countries may not be published or generally are not published until at least 18 months after they are first filed, and patent applications in certain foreign countries generally are not published until many months after they are filed. Scientific and patent publication often occurs long after the date of the scientific developments disclosed in those publications. As a result, we cannot be certain that we will be the first creator of inventions covered by our patents or applications, or the first to file such patent applications. As a result, our issued patents and our patent applications could become subject to challenge by third parties that created such inventions or filed patent applications before us or our licensors, resulting in, among other things, interference proceedings in the United States Patent & Trademark Office to determine priority of discovery or invention. Interference proceedings, if resolved adversely to us, could result in the loss of or significant limitations on patent protection for our products or technologies. Even in the absence of interference proceedings, patent applications now pending or in the future filed by third parties may prevail over the patent applications that may be owned by us or licensed to us or that we may file in the future, or may result in patents that issue alongside patents issued to us or our licensors or that may be issued or licensed to us in the future, leading to uncertainty over the scope of the patents owned by us or licensed to us or that may in the future be owned by us or impede our freedom to practice the claimed inventions.

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Our patents may not be valid or enforceable and may be challenged by third parties.

We cannot assure you that the patents that have been issued or licensed to us would be held valid by a court or administrative body or that we would be able to successfully enforce our patents against infringers, including our competitors. The issuance of a patent is not conclusive as to its validity or enforceability, and the validity and enforceability of a patent is susceptible to challenge on numerous legal grounds, including the possibility of reexamination proceedings brought by third parties in the United States Patent & Trademark Office against issued patents and similar validity challenges under foreign patent laws. Challenges raised in patent infringement litigation brought by us or against us may result in determinations that patents that have been issued to us or licensed to us or any patents that may be issued to us or our licensors in the future are invalid, unenforceable or otherwise subject to limitations. In the event of any such determinations, third parties may be able to use the discoveries or technologies claimed in these patents without paying licensing fees or royalties to us, which could significantly diminish the value of our intellectual property and our competitive advantage. Even if our patents are held to be enforceable, others may be able to design around our patents or develop products similar to our products that are not within the scope of any of our patents.

In addition, enforcing the patents that we own or license and any patents that may be issued to us in the future against third parties may require significant expenditures regardless of the outcome of such efforts. Our inability to enforce our patents against infringers and competitors may impair our ability to be competitive and could have a material adverse effect on our business.

Issued patents and patent licenses may not provide us with any competitive advantage or provide meaningful protection against competitors.

The discoveries or technologies covered by issued patents we own or license may not have any value or provide us with a competitive advantage, and many of these discoveries or technologies may not be applicable to our product candidatesproducts at all. We have devoted limited resources to identifying competing technologies that may have a competitive advantage relative to ours, especially those competing technologies that are not perceived as infringing on our intellectual property rights. In addition, the standards that courts use to interpret and enforce patent rights are not always applied predictably or uniformly and can change, particularly as new technologies develop. Consequently, we cannot be certain as to how much protection, if any, will be afforded by these patents with respect to our products if we, our licensees or our licensors attempt to enforce these patent rights and those rights are challenged in court.

The existence of third-party patent applications and patents could significantly limit our ability to obtain meaningful patent protection. If patents containing competitive or conflicting claims are issued to third parties, we may be enjoined from pursuing research, development or commercialization of product candidates or may be required to obtain licenses, if available, to these patents or to develop or obtain alternative technology. If another party controls patents or patent applications covering our product candidates, we may not be able to obtain the rights we need to those patents or patent applications in order to commercialize our product candidates or we may be required to pay royalties, which could be substantial, to obtain licenses to use those patents or patent applications.

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In addition, issued patents may not provide commercially meaningful protection against competitors. Other parties may seek and/or be able to duplicate, design around or independently develop products having effects similar or identical to our patented product candidatesproducts that are not within the scope of our patents.

Limitations on patent protection in some countries outside the United States, and the differences in what constitutes patentable subject matter in these countries, may limit the protection we have under patents issued outside of the United States. We do not have patent protection for our product candidates in a numberseveral of our target markets. The failure to obtain adequate patent protection for our product candidatesproducts in any country would impair our ability to be commercially competitive in that country.

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The ability to market the products we develop is subject to the intellectual property rights of third parties.

The biotechnology, biopharmaceutical and medical device industries are characterized by a large number ofmany patents and patent filings and frequent litigation based on allegations of patent infringement. Competitors may have filed patent applications or have been issued patents and may obtain additional patents and proprietary rights related to products or processes that compete with or are similar to ours. We may not be aware of all of the patents potentially adverse to our interests that may have been issued to others. Because patent applications can take many years to issue, there may be currently pending applications, unknown to us, which may later result in issued patents that our product candidatesproducts or proprietary technologies may infringe. Third parties may claim that our products or related technologies infringe their patents or may claim that the products of our suppliers, manufacturers or contract service providers that produce our devices infringe on their intellectual property. Further, we, our licensees, or our licensors, may need to participate in interference, opposition, protest, reexamination or other potentially adverse proceedings in the United States Patent & Trademark Office or in similar agencies of foreign governments with regards to our patents, patent applications, and intellectual property rights. In addition, we, our licensees, or our licensors may need to initiate suits to protect our intellectual property rights.

Litigation or any other proceeding relating to intellectual property rights, even if resolved in our favor, may cause us to incur significant expenses, divert the attention of our management and key personnel from other business concerns and, in certain cases, result in substantial additional expenses to license technologies from third parties. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. An unfavorable outcome in any patent infringement suit or other adverse intellectual property proceeding could require us to pay substantial damages, including possible treble damages and attorneys’ fees, cease using our technology or developing or marketing our products, or require us to seek licenses, if available, of the disputed rights from other parties and potentially make significant payments to those parties. There is no guarantee that any prevailing party would offer us a license or that we could acquire any license made available to us on commercially acceptable terms. Even if we are able tocan obtain rights to a third party’s patented intellectual property, those rights may be nonexclusive and, therefore, our competitors may obtain access to the same intellectual property. Ultimately, we may be unable to commercialize our product candidatesproducts or may have to cease some of our business operations as a resultbecause of patent infringement claims, which could materially harm our business. We cannot guarantee that our products or technologies will not conflict with the intellectual property rights of others.

If we need to redesign our products to avoid third party patents, we may suffer significant regulatory delays associated with conducting additional clinical studies or submitting technical, clinical, manufacturing, or other information related to any redesigned product and, ultimately, in obtaining regulatory approval. Further, any such redesigns may result in less effective and/or less commercially desirable products if the redesigns are possible at all.

Additionally, any involvement in litigation in which we, or our licensees or our licensors, are accused of infringement may result in negative publicity about us or our products, injure our relations with any then-current or prospective customers and marketing partners, and cause delays in the commercialization of our products.

Risks Related to our Common Stock

Our stock price is volatile.

The market price of our common stock is volatile and could fluctuate widely in response to various factors, many of which are beyond our control, including the following:

our ability to obtain additional financing and, if available, the terms and conditions of the financing;
changes in the timing of on-going clinical trial enrollment, the results of our clinical trials and regulatory approvals for our product candidates or failure to obtain such regulatory approvals;
changes in our industry;
additions or departures of key personnel;
sales of our common stock;

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our ability to execute our business plan;
operating results that fall below expectations;
period-to-period fluctuations in our operating results;

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new regulatory requirements and changes in the existing regulatory environment; and
general economic conditions and other external factors.

In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

There is currently a limited trading market for our common stock, and we cannot predict how liquid the market might become.

To date, there has been a limited trading market for our common stock, and we cannot predict how liquid the market for our common stock might become. Until September 28, 2021,January 30, 2023, our common stock was quoted on the OTC Pink, Sheets, which is an inter-dealer market that provides significantly less liquidity than the New York Stock Exchange or the Nasdaq Stock Market. The Company was againWe are currently listed on the OTC Pink Sheet after the filing our Form 10-Q for the quarter ended September 30, 2021. OTCQB.

The quotation of our common stock on the OTC Pink SheetsOTCQB does not assure that a meaningful, consistent, and liquid trading market exists. The market price for our common stock is subject to volatility and holders of our common stock may be unable to resell their shares at or near their original purchase price, or at any price. In the absence of an active trading market:

investors may have difficulty buying and selling, or obtaining market quotations for our common stock;
market visibility for our common stock may be limited; and
a lack of visibility for our common stock may have a depressive effect on the market for our common stock.

Trading for our common stock is limited under the SEC’s penny stock regulations, which has an adverse effect on the liquidity of our common stock.

The trading price of our common stock is less than $5.00 per share and, as a result, our common stock is considered a “penny stock,” and trading in our common stock is subject to the requirements of Rule 15g-9 under the Securities Exchange Act of 1934, as amended (the Exchange Act). Under this rule, broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. Generally, the broker-dealer must make an individualized written suitability determination for the purchaser and receive the purchaser’s written consent prior to the transaction.

Regulations of the SEC also require additional disclosure in connection with any trades involving a “penny stock,” including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and its associated risks. These requirements severely limit the liquidity of securities in the secondary market because only a few brokers or dealers are likely to undertake these compliance activities. Compliance with these requirements may make it more difficult for holders of our Common Stock to resell their shares to third parties or to otherwise dispose of them in the market.

As an issuer of “penny stock”, the protection provided by the federalFederal securities laws relating to forward lookingforward-looking statements does not apply to us.

Although federalFederal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federalFederal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, we will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading. Such an action could hurt our financial condition.

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We have not paid dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock.

We have never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future.  The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates.

The rights of the holders of common stock may be impaired by the potential issuance of preferred stock.

Our board of directors has the right, without stockholder approval, to issue preferred stock with voting, dividend, conversion, liquidation, or other rights which could adversely affect the voting power and equity interest of the holders of common stock, which could be issued with the right to more than one vote per share, and could be utilized as a method of discouraging, delaying or preventing a change of control. The possible negative impact on takeover attempts could adversely affect the price of our common stock.

On January 31, 2020, the Company filed a Certificate of Designation of Preferences, Right and Limitations of Series C Convertible Preferred Stock of the Company with the Nevada Secretary of State which amended our Articles of Incorporation to designate 90 shares of our preferred stock as Series C Convertible Preferred Stock. Although we have no other shares of preferred stock currently outstanding and no present intention to issue any additional shares of preferred stock or to create any additional series of preferred stock, we may issue such shares in the future.

On January 12, 2016, the Company filed a Certificate of Designation of Preferences, Right and Limitations of Series B Convertible Preferred Stock of the Company with the Nevada Secretary of State which amended our Articles of Incorporation to designate 293 shares of our preferred stock as Series B Convertible Preferred Stock.
 
We have not sought an advisory stockholder vote to approve the compensation of our named executive officers.
 
Rule 14a-21 under the Exchange Act requires us to seek a separate stockholder advisory vote at our annual meeting at which directors are elected to approve the compensation of our named executive officers, not less frequently than once every three years (say-on-pay vote), and, at least once every six years, to seek a separate stockholder advisory vote on the frequency with which we will submit advisory say-on-pay votes to our stockholders (say-on-frequency vote). We have not submitted to our stockholders a say-on-pay vote to approve an advisory resolution regarding our compensation program for our named executive officers, or a say-on-frequency vote. Consequently, the board of directors has not considered the outcome of our say-on-pay vote results when determining future compensation policies and pay levels for our named executive officers.

Because we did not
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If the Company fails to comply with our SEC filing obligations, our stock may become subject to limitations or reduction in stock price, liquidity, or volume.
 
Rule 15c2-11 under the Exchange Act (the “Rule”) governs the publication of quotations in over-the-counter (”(“OTC”) markets. On September 16, 2020, the SEC adopted amendments to the Rule which prohibits broker-dealers from publishing or submitting for publication a quote for an issuer’s securities unless they are based on current publicly available information about the issuer. The amended Rule also limits the Rule’s “piggyback” exception, which allows broker-dealers to publish quotations for a security in reliance on the quotations of a broker-dealer that initially performed the information review required by the Rule, to issuers with current publicly available information or issuers that are up-to-dateup to date in their Exchange Act Reports.reports.
 
The practical impact of these changes requires us to maintain a level of periodic disclosure. However, we did not timely file with the SEC our Annual Report on Form 10-K for the year ended December 31, 2020, or our Quarterly Report on Form 10-Q for the quarters ended March 31, 2021 or June 30, 2021. As a result, our stock was removed from the OTC Bulletin Board on September 28, 2021, which limited the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. The company upon fillingUpon filing the Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, waswe were allowed to return to the OTC Pink Sheets. Withand subsequently uplisted to the OTCQB. While trading on the Pink SheetsOTCQB, and especially if we are removed from the OTCQB in the future, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.
 
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Additionally, as a result of our failure to comply with the SEC filing obligations, as noted above, our stock was delisted from the OTC Pink Market to the OTC Expert Market. The OTC Expert Market is an even more limited market where the stocks are more volatile and poses a greater risk to investors. Since our stock is downgraded, it may be designated with a “stop sign” indicating that current public information about our company is not available due to “delinquent SEC reporting.”
We will need to improve our internal controls and procedures in order to remain current with our securities-related requirements.
We are submitting this Annual Report 10-K for the year ended December 31, 2021 after the required SEC filing deadlineAs a result, our failure to maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could negatively impact the trading price of our stock.
Item 1B.UNRESOLVED STAFF COMMENTS

          None.
 
Item 1C.CYBERSECURITY
Our management and Board of Directors (the “Board”) recognize the importance of maintaining the security and resiliency of our cybersecurity environment to deliver on the expectations of our customers, business partners, employees, and investors. The Board is involved in our risk management practices. Overall, the purpose of our information security program is to protect the confidentiality, integrity and availability of our systems and data, along with the safe operation of our systems.

Technical safeguards
We deploy technical safeguards that are designed to protect our systems from cybersecurity threats, including firewalls, anti-malware software, and authentication and authorization controls.

Security awareness and training
We provide ongoing security awareness and training to educate internal users on how to identify and report potential issues. Phishing emails are discussed on a regular basis with employees to ensure proper protocols are followed. We also provide periodic updates to employees on emerging cybersecurity trends and ways to protect themselves and our company.

Governance of Cybersecurity Risks

The Audit Committee of the Board has the primary responsibility for oversight and review of guidelines and policies with respect to risk assessment and risk management, including cybersecurity. The Company’s Chief Executive Officer, President, and Chief Financial Officer are responsible for assessing and managing cybersecurity risks. The Company’s management periodically reports on cybersecurity issues and presents information to our Audit Committee as well as our full Board, as appropriate, on cybersecurity matters.

Upon verifying that a cybersecurity incident has occurred or is occurring, the Chief Executive Officer, President and Chief Financial Officer will promptly conduct a preliminary assessment of the severity level of the cybersecurity incident. Following this assessment, the Chief Executive Officer will determine whether to report the cybersecurity incident to the Audit Committee, who will then report such cybersecurity incident to the Board as the chair deems appropriate.

Material Impact of Cybersecurity Risks

We have not experienced a material information security breach incident, and we are not aware of any cybersecurity risks that are reasonably likely to materially affect our business. However, future incidents could have a material impact on our business strategy, results of operations or financial condition. For additional discussion of the risks posed by cybersecurity threats, see “Item 1A. Risk Factors— Risks to our Business— We are dependent on information technology and our systems and infrastructure face certain risks, including from cybersecurity breaches and data leakage.”

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Item 2.PROPERTIES

We have anOur primary corporate and operations production and research and development office in a leased facility in Suwanee, Georgia, consisting of 10,177 square feet of space under a lease which expired on December 31, 2021, and is now being utilized on a month-by-month basis. Under the terms of the lease, we paid monthly rent of $14,651, subject to a 3% adjustment on an annual basis.

We have another operations and research and development office in a leased facility in Eden Prairie, Minnesota, consisting of 8,199 square feet of space under a lease which expires on August 31, 2023.2025. Under the terms of the lease, we pay monthly rent, of $6,388, subject to a 2.45%2.5% adjustment on an annual basis.

We also have a research and development office in a leased facility in Alpharetta, Georgia, consisting of 4,332 square feet of space under a lease that expires in July 2027.
 
Item 3.LEGAL PROCEEDINGS

We are engaged in various legal actions, claims and proceedings arising inIn the ordinary course of business, including claims relatedthe Company from time to breachtime becomes involved in various legal proceedings involving a variety of contracts and intellectual property matters resulting frommatters. We do not believe there are any pending legal proceedings that will have a material adverse effect on our business, activities. As with most actionsconsolidated financial position, results of operations, or cash flows. However, the outcome of such as these, an estimation of any possible and/or ultimate liability cannot always be determined.legal matters is inherently unpredictable and subject to significant uncertainties. The Company expenses legal fees in the period in which they are incurred.

There are no material proceedings known to us to be contemplated by any governmental authority.

There are no material proceedings known to us, pending, or contemplated, in which any of our directors, officers or affiliates or any of our principal security holders, or any associate of any of the foregoing, is a party or has an interest adverse to us.

Acquisition Dispute - In May 2021, the Company received notification alleging that it is not in compliance with the Biovance portionlicense agreement with Celularity entered into in connection with the acquisition of the License Agreement with Celularity as discussed in Note 5.UltraMIST assets. The Company has responded and asserted that the Company is not in breach and that the Suppliersupplier 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.

Item 4.MINE SAFETY DISCLOSURE
 
Not applicable.

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PART II

Item 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

The Company’s common stock is quoted on the OTC Expert MarketOTCQB under the symbol “SNWV”. The quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commissions, and may not necessarily represent actual transactions.

Holders of Common Stock

As of December 31, 2021,2023, there were 481,619,6211,140,559,527 shares of Common Stockcommon stock outstanding and approximately 198238 holders of record of the Company’s common stock.

Dividends

The Company has never declareddid not pay a cash dividend in 2023 or paid any cash dividends on its common stock.2022. The Company intends to retain future earnings, if any, to finance the expansion of its business. As a result, theThe Company does not anticipate paying any cash dividends in the foreseeable future.

Securities Authorized for Issuance under Equity Compensation Plans

Plan Category 
Number of
securities to be
issued upon
exercise of
outstanding options,
warrants and rights
  
Weighted-average
exercise price of
outstanding options,
warrants and rights
  
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column
(a))
 
  (a)  (b)  (c) 
Equity compensation plans approved by security holders  
-
  
$
0.00
   
-
 
Equity compensation plans not approved by security holders  31,409,385
  
$
0.28
   
3,240,615
 
Total  
31,409,385
  
$
0.28
   
3,240,615
 

Stock Incentive Plans

On November 1, 2010, the Company approved the Amended and Restated 2006 Stock Incentive Plan of SANUWAVE Health, Inc. effective as of January 1, 2010 (the “Stock Incentive Plan”). The Stock Incentive Plan permits grants of awards to selected employees, directors and advisors of the Company in the form of restricted stock or options to purchase shares of common stock. Options granted may include non-statutory options as well as qualified incentive stock options. The Stock Incentive Plan is currently administered by the board of directors of the Company. The Stock Incentive Plan gives broad powers to the board of directors of the Company to administer and interpret the particular form and conditions of each option. The stock options granted under the Stock Incentive Plan are non-statutory options which vest over a period of up to three years and have a ten-year term. The options are granted at an exercise price equal to the fair market value of the common stock on the date of the grant which is approved by the board of directors of the Company.

HealthTronics

Please see Item 7, “Management Discussion and Analysis-Liquidity and Capital Resources-Convertible Notes Payable” for discussion of the transactions with HealthTronics, including the issuance of a convertible note and other various securities of the Company.

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Leviston

Please see Item 7, “Management Discussion and Analysis-Liquidity and Capital Resources-Convertible Notes Payable” for discussion of the transactions with Leviston, including the issuance of a convertible note and other various securities of the Company.

Item 6.[Reserved]

Not applicable.

Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements regardingprovides information management believes to be relevant to understanding the financial condition and results of operations of the Company. The discussion focuses on our business development plans, clinical trials, regulatory reviews, timing, strategies, expectations, anticipated expenses levels, projected profits, business prospectsfinancial results of operations for the years ended December 31, 2023, and positioning with respect to market, demographic2022. You should read this discussion and pricing trends, business outlook, technology spending and various other matters (including contingent liabilities and obligations and changes in accounting policies, standards and interpretations) and express our current intentions, beliefs, expectations, strategies or predictions. These forward-looking statements are based on a number of assumptions and currently available information and are subject to a number of risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” and elsewhere in this Annual Report on Form 10-K. The following discussion should be readanalysis in conjunction with our consolidated financial statements and related notes thereto included elsewhereon December 31, 2023, and 2022, and for years 2023, and 2022, which are presented within Part II Item 8. “Financial Statements and Supplementary Data" in this Annual Report on Form 10-K.

Overview

We Amounts reported in thousands within this annual report are a shock wave technology company using a patented systemcomputed based on the amounts in thousands, and therefore, the sum of noninvasive, high-energy, acoustic shock waves for regenerative medicine and other applications. Our initial focus is regenerative medicine utilizing noninvasive, acoustic shock wavesthe components may not equal the total amount reported in thousands due to produce a biological response resulting in the body healing itself through the repair and regeneration of tissue, musculoskeletal, and vascular structures.rounding.
 
Our lead regenerative product in the United States is the dermaPACE® device, used for treating diabetic foot ulcers, which was subject to two double-blinded, randomized Phase III clinical studies. On December 28, 2017, the 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 diabetic foot ulcers as described in the de novo request, subject to the general control provisions of the FD&C 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 U.S. Food and Drug Administration (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 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 that it is not in compliance with the Biovance portion of the License Agreement with Celularity.

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Our portfolioExecutive Summary

We realized significant revenue growth during the year ended December 31, 2023, with a 22% growth in revenue to $20.4 million for the year ended December 31, 2023, as compared to $16.7 million in 2022.  Gross margins also decreased to 70% from 74% in 2022.  As the Company continues to focus on profitable growth, we have also reduced our operating loss by 94% to $0.5 million for the year ended December 31, 2023.

Net loss for the year ended December 31, 2023, was $25.8 million, or ($0.03) per basic and diluted share, compared to a net loss of healthcare products$10.3 million, or ($0.02) per basic and product candidates activate biologic signalingdiluted share, for the year ended December 31, 2022, a variance of $15.5 million, which was largely driven by a non-cash change in the fair value of derivatives. Operating loss for the year ended December 31, 2023, was $540 thousand, compared to $9.0 million for the year ended December 31, 2022. We continue to focus on profitable growth and angiogenic responses, including new vascularizationreduction in operating expenses.  We believe these improvements sets the stage for additional growth as we head into 2024.

Merger Agreement with SEPA

On August 23, 2023, we entered into an Agreement and microcirculatory improvement, helpingPlan of Merger (the “Merger Agreement”) by and among SEP Acquisition Corp., a Delaware corporation (“SEPA”), SEP Acquisition Holdings Inc., a Nevada corporation, and a wholly owned subsidiary of SEPA (“Merger Sub”). Pursuant to restore the body’s normal healing processesterms of the Merger Agreement, a business combination between the Company and regeneration. We intendSEPA (the “Merger”) will be affected. More specifically, and as described in greater detail below, at the effective time of the Merger (the “Effective Time”):

Merger Sub will merge with and into the Company, with the Company being the surviving company following the merger.
Each issued and outstanding share of the Company common stock will automatically be converted into Class A common stock of SEPA, par value $0.0001 per share, at the Conversion Ratio (as defined in the Merger Agreement); and
Outstanding Company convertible securities of the Company will be assumed by SEPA and will be converted into the right to applyreceive Class A Common Stock of SEPA.

Pursuant to the terms of the Merger Agreement, the holders of (i) Company common stock, (ii) in the money options to purchase Company common stock, (iii) in the money warrants to purchase Company common stock, and (iv) convertible promissory notes, collectively will be entitled to receive 7,793,000 shares of Class A Common Stock of SEPA. Out-of-the-money options and out-of-the-money warrants will be assumed by SEPA and converted into options or warrants, respectively, exercisable for shares of Class A Common Stock based on the Conversion Ratio; however, such out-of-the-money options and out-of-the-money warrants shall not be reserved for issuance from the Merger Consideration.

Non-GAAP Financial Measures

Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we present certain financial measures that facilitate management’s review of the operational performance of the Company and as a basis for strategic planning; however, such financial measures are not presented in our Pulsed Acoustic Cellular Expression (PACE®) technologyfinancial statements prepared in wound healing, orthopedic, plastic/cosmetic and cardiac conditions. The Company is marketing its dermaPACE® System for treatment usageaccordance with accounting principles generally accepted in the United States (U.S.) (U.S. GAAP). These financial measures are considered “non-GAAP financial measures” and will continueare intended to generate revenue from sales of the European Conformity Marking (CE Mark) devices supplement, and accessoriesshould not be considered as superior to, or a replacement for, financial measures presented in Europe, Canada, Asia, and Asia/Pacific. The Company generates revenue streams from product sales, licensing transactions, dermaPACE® treatments and other activities, andaccordance with its recent acquisition of the UltraMIST® assets, SANUWAVE now combines two highly complementary and market-cleared energy transfer technologies used in the dermaPACE® and UltraMIST® Systems and two human tissue biologic products (Biovance® and Interfyl®), which creates a platform of scale with an end-to-end product offering in the advanced wound care market.
Our lead product candidate for the global wound care market, dermaPACE®, has received FDA clearance for commercial use to treat diabetic foot ulcers in the United States and the CE Mark allowing for commercial use on acute and chronic defects of the skin and subcutaneous soft tissue. We believe we have demonstrated that our patented technology is safe and effective in stimulating healing in chronic conditions of the foot and the elbow through our United States FDA Class III Premarket Approvals (“PMAs”) approved OssaTron® device, and in the stimulation of bone and chronic tendonitis regeneration in the musculoskeletal environment through the utilization of our OssaTron, Evotron®, and orthoPACE® devices in Europe and Asia.

We are focused on developing our Pulsed Acoustic Cellular Expression (PACE) technology to activate healing in:

wound conditions, including diabetic foot ulcers, venous and arterial ulcers, pressure sores, burns and other skin eruption conditions;
orthopedic applications, such as eliminating chronic pain in joints from trauma, arthritis or tendons/ligaments inflammation, speeding the healing of fractures (including nonunion or delayed-union conditions), improving bone density in osteoporosis, fusing bones in the extremities and spine, and other potential sports injury applications;
plastic/cosmetic applications such as cellulite smoothing, graft and transplant acceptance, skin tightening, scarring and other potential aesthetic uses; and
cardiac applications for removing plaque due to atherosclerosis improving heart muscle performance.

In addition to healthcare uses, our high-energy, acoustic pressure shock waves, due to their powerful pressure gradients and localized cavitational effects, may have applications in secondary and tertiary oil exploitation, for cleaning industrial waters, for sterilizing food liquids and finally for maintenance of industrial installations by disrupting biofilms formation. Our business approach will be through licensing and/or partnership opportunities.U.S. GAAP.

The worldwide spreadCompany uses Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA to assess its operating performance. Adjusted EBITDA is Earnings before Interest, Taxes, Depreciation and Amortization adjusted for the change in fair value of the COVID-19 virus is expectedderivatives and any significant non-cash or non-recurring one-time charges.  EBITDA and Adjusted EBITDA should not be considered as alternatives to resultnet loss as a measure of financial performance or any other performance measure derived in accordance with GAAP, and they should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. These non-GAAP financial measures are presented in a global slowdownconsistent manner for each period, unless otherwise disclosed. The Company uses these measures for the purpose of economic activity which is likelyevaluating its historical and prospective financial performance, as well as its performance relative to decrease demandcompetitors. These measures also help the Company to make operational and strategic decisions. The Company believes that providing this information to investors, in addition to GAAP measures, allows them to see the Company’s results through the eyes of Management, and to better understand its historical and future financial performance. These non-GAAP financial measures are also frequently used by analysts, investors, and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures.

EBITDA and Adjusted EBITDA have their limitations as analytical tools, and you should not consider them in isolation or as a substitute for a broad variety of products, including from our customers. We have experienced a disruptionanalysis of our supply channels which will continue for an unknown periodresults as reported under GAAP. Some of time until the global supply chain can return to the pre- disease status. Also, the pandemic may cause continued or additional actions by hospitalsthese limitations are that EBITDA and clinics such as limiting elective procedures and treatments and limiting clinical trial activities and data monitoring. These factors have had and we expect that they will continue to have a negative impact on our sales and our results of operations, the size and duration of which we are currently unable to predict.
Adjusted EBITDA:
Clinical Trials and Marketing

The FDA granted approval of our Investigational Device Exemption (IDE) to conduct two double-blinded, randomized clinical trials utilizing our lead device product for the global wound care market, the dermaPACE® device, in the treatment of diabetic foot ulcers. On December 28, 2017, the FDA determined that the criteria at section 513(a)(1)(A) of (B) of the FD&C Act were met and granted the de novo clearance classifying dermaPACE® as Class II and available to be marketed immediately.

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Also,Do not reflect every expenditure, future requirements for capital expenditures or contractual commitments.
Do not reflect all changes in our dermaPACE® device has receivedworking capital needs.
Do not reflect interest expense, or the European CE Mark approvalamount necessary to treat acute and chronic defects of the skin and subcutaneous soft tissue, such as in the treatment of pressure ulcers, diabetic foot ulcers, burns, and traumatic and surgical wounds. The dermaPACE® is also licensed for sale in Canada, Australia, New Zealand, Brazil, Mexico, and South Korea.service our outstanding debt.

We are actively marketingAs presented in the dermaPACE®GAAP to Non-GAAP Reconciliations section below, our non-GAAP financial measure excludes the European Community, Canada, Brazil, Mexico, and Asia/Pacific, utilizing distributors in select countries.impact of certain charges that contribute to our net loss (Non-GAAP Adjustments).

(in thousands) For the year ended 
  2023  2022 
       
Net loss $(25,807) $(10,293)
Non-GAAP Adjustments:        
Interest expense  15,623   14,132 
Depreciation and amortization  1,028   952 
EBITDA $(9,156) $4,791 
Non-GAAP Adjustments for Adjusted EBITDA:        
Change in fair value of derivative liabilities  9,621   (16,654)
Other non-cash or non-recurring charges:        
Release of historical accrued expenses  (1,866)  - 
Shares issued for services  224   888 
Loss on issuance of debt  -   3,434 
Loss on extinguishment of debt  -   418 
Adjusted EBITDA $(1,177) $(7,123)

Results of Operations

Financial OverviewThe following table sets forth our consolidated statement of operations:

  For the Years Ended December 31,  Change 
(in thousands) 2023  2022  $  
% 
Revenue  20,398  $16,742  $3,656   22%
Cost of revenue  6,035   4,331   1,704   39%
Gross margin  14,363   12,411   1,952   16%
Gross margin %  70%  74%        
Operating expenses:                
General and administrative  8,674   12,556   (3,882)  -31%
Selling and marketing  4,898   7,474   (2,576)  -34%
Research and development  579   567   12   2%
Depreciation and amortization  752   766   (14)  -2%
Operating loss  (540)  (8,952)  8,412   -94%
Other expense, net  (25,263)  (1,339)  (23,924) nm 
Income tax expense  4   2   2   100%
Net loss $(25,807) $(10,293) $(15,514)  151%

Revenue

Revenues for the year ended December 31, 2023, were $20.4 million, compared to $16.7 million for the same period in 2022, an increase of $3.7 million or 22%. The increase in net sales was primarily driven by the growth in quantity of disposables sold, which increased by 9% in 2023 as compared to 2022.   Pricing of the UltraMIST® system and disposables also showed growth in 2023 as compared to 2022, disposables average selling price increased over 10% in 2023, and system revenue increased 28% in 2023.   Revenue from UltraMIST totaled 90% of total revenue in 2023 and 2022.

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Cost of Revenue

Cost of revenues for the year ended December 31, 2023, was $6.0 million, compared to $4.3 million for the same period in 2022. Gross profit as a percentage of revenues was 70% for the year ended December 31, 2023, compared to 74% for the same period in 2022.  This decrease in gross margin was largely driven by increased one time inventory write offs and costs to support our growth and alleviate our inventory constraint in 2023.

General and Administrative

General and administrative expenses for the year ended December 31, 2023, were $8.7 million as compared to $12.6 million for the same period in 2022, a decrease of $3.9 million, or 31%. The decrease in 2023 as compared to 2022 was primarily due to the higher legal costs related to patent work and securities work incurred in 2022.

Selling and Marketing

Selling and marketing expenses for the year ended December 31, 2023, were $4.9 million as compared to $7.4 million for the same period in 2022, a decrease of $2.6 million, or 34%. The year-over-year decrease in sales and marketing expenses in 2023 was a result of cost saving initiatives taken by management.

Research and Development

Research and development expenses for the year ended December 31, 2023, were $0.6 million, compared to $0.6 million for the same period in 2022. The research and development costs in 2023 remained consistent with the costs in 2022.

Other Income (Expense), net

Other expense, net consists of the following:

  For the years ended December 31,  Change 
  2023  2022  $  
% 
              
Interest expense $(15,623) $(14,132) $(1,491)  11%
Change in fair value of derivatives  (9,621)  16,654   (26,275) nm 
Loss on issuance of debt  -   (3,434)  3,434   -100%
Gain/(loss) on extinguishment of debt  -   (418)  418  nm 
Other expense  (19)  (9)  (10) nm 
Other expense, net $(25,263) $(1,339) $(23,924) nm 
nm - not meaningful                

Other expenses totaled $25.2 million for the year ended December 31, 2023, as compared $1.3 million for the same period in 2022, an increase of $23.9 million. The increase was primarily driven by an increased loss from the change in the fair value of derivative liability of $26.3 million, offset by a decrease in loss on issuance of debt along with the loss on extinguishment of debt. The increased interest expense of $1.5 million was the result of higher levels of debt outstanding during 2023, due to new issuances of convertible debt, compared with 2022.   The change in fair value of the derivative liability relates to warrants issued during 2023 and 2022 with the convertible debt.

Liquidity and Capital Resources

Since inception, in 2005,we  have incurred losses from operations each year. As of December 31, 2023, we had an accumulated deficit of $220.0 million. Historically, our operations have primarily been funded from the sale of capital stock, notes payable, and convertible debt securities. We expect to devote substantial resources

In August 2022,November 2022, May 2023 and December 2023, we entered into a Securities Purchase Agreements (the “Purchase Agreements”), for the commercializationsale in a private placement of (i) Future Advance Convertible Promissory Notes (the “Notes”) in an aggregate principal amount of $16.2 million in August 2022,$4.0 million in November 2022, $1.2 million in May 2023, and $1.9 million in December 2023 (ii) Common Stock Purchase Warrants to purchase an additional 581.6 million shares of common stock with an exercise price of $0.067 per share and (iii) Common Stock Purchase Warrants to purchase an additional 581.6million shares of common stock with an exercise price of $0.04 per share.

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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 dermaPACE® System and will continueNotes is subject to research and developadjustment, including if the non-medical usesCompany issues or sells shares of common stock for a price per share less than the Conversion Price of the PACE technology, bothNotes 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.

In August 2023 and November 2023, the Company utilized its election to convert the August and November issued 2022 Convertible Notes Payable into shares of common stock upon the Notes’ maturity.  The August notes totaling $16.2 million in principal and $2.4 million in interest were converted to 464,440,813 shares of common stock. The November notes totaling $4.0 million in principal and $0.6 million in interest were converted to 114,481,063 shares of common stock.

In July 2023, we issued Asset-Backed Secured Promissory Notes in an aggregate principal amount of $4.6 million to certain accredited investors at an original issue discount of 33.33%. These notes bear an interest rate of 0% per annum and matured on January 21, 2024.  We received total proceeds of approximately $3.0 million. We also entered into a side letter, pursuant to which, will require additional capital resources. We incurredwe issued Future Advance Convertible Promissory Notes, on January 21, 2024, with the same principal amount as the principal amount of such Notes, plus any accrued and unpaid interest and two Common Stock Purchase Warrants, substantially in the forms of the Notes and Common Stock Purchase Warrants disclosed in the previous paragraphs.

In August 2020, the Company issued a net lossSenior Secured Promissory Note Payable (the “Senior Secured Note”) to NH Expansion Credit Fund Holdings L.P. pursuant to which the Company had outstanding debt of $27.3$21.5 million as of December 31, 2023. Interest is charged at the greater of the prime rate or 3% plus 9%, paid quarterly.  As of December 31, 2023, the Company is in default of the minimum liquidity provisions on the Senior Secured Note and, as a result, is accruing interest at the default interest rate of an incremental 5%. Interest expense on the Senior Secured Note totaled $6.9 million and $30.9$5.9 million for the years ended December 31, 20212023, and 2020,2022, respectively. These factors

See Notes 10, 11 and 12 to the consolidated financial statements in Part II Item 8. “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional information regarding additional debt commitments, the convertible notes and accompanying warrants issued in May and December 2023, $4.5 million in asset-backed secured promissory notes, and the eventsSenior Secured Note.

The following table presents summarized cash flow information:

  For the period ended December 31, 
(in thousands) 2023  2022 
Cash flows used by operating activities $(4,538) $(17,169)
Cash flows provided by investing activities $21  $332 
Cash flows provided by financing activities $5,211  $17,384 

Cash Flows from Operating Activities

We have improved our cash flow from operations in 2023 as compared to 2022, which was driven by increased emphasis on improved cash management and operating expense management.  We also invested in our inventory in 2023, increasing our inventory levels by $2 million for the year ended December 31, 2023.  Additional volatility in adjustments of defaultcash flows from operations is the change in fair value of derivative liabilities connected to our convertible debt and warrants issued with the August and November 2022, and May and December 2023 financings.  The Company recognized a loss on these liabilities of $9.6 million for the notes payable create substantial doubt aboutyear ended December 31, 2023, as compared to a gain of $16.7 million for the Company’s abilityyear ended December 31, 2022.

Cash Flows Provided by Financing Activities

Cash flows provided by financing activities decreased primarily due to continue as a going concern for a periodthe improvement of at least twelve monthsoperating cash flows which reduced our required cash to fund our growth and operations.   For the year ended December 31, 2023, we received proceeds of $6.0 million from the financial statement issuance date.
Our operating losses create substantial doubt about our abilityof the convertible promissory notes and asset backed secured promissory notes discussed above in this section, Liquidity and Capital Resources, as compared to continue as a going concern. 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$16.2 million for the next year. See “Liquidity and Capital Resources” for further information regarding our financial condition.year ended December 31, 2022.

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Going Concern

The continuation of our business is dependent upon raising additional capital to fund operations. Management’sThis, as well as the events of default on various notes payable, raise substantial doubt about our ability to continue as a going concern for a period of at least twelve months.  Management plans are to obtain additional capital in 2022 and 20232024 through investments by strategic partners for market opportunities, which may include strategic partnerships or licensing arrangements, or raisethe completion of the Merger Agreement.  We could also obtain additional 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, therestockholders. Although no assurances can be no assurancesgiven that our plans to obtain additional capital will be successful or on the terms or timeline we expect, or at all. Although no assurances can be given,all, management believes that potential additional issuances of equity or other potential financing transactions, as discussed above, should provide the necessary funding for us.us over the next 12 months. If these efforts are unsuccessful, we may be required to significantly curtail or discontinue operations or obtain funds through financing transactions with unfavorable terms.The accompanying

See Note 2 to the consolidated financial statements have been prepared in conformity with accounting principles generally acceptedPart II Item 8. “Financial Statements and Supplementary Data” in the United States of America, 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 financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. Our 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 unableAnnual Report on Form 10-K for additional information on our ability to continue as a going concern.

Since our inception, we have incurred losses from operations each year. As of December 31, 2021, we had an accumulated deficit of $183.9 million. Although the size and timing of our future operating losses are subject to significant uncertainty, we anticipate that our operating losses will continue over the next few years as we incur expenses related to commercialization of our dermaPACE® system for the treatment of diabetic foot ulcers in the United States. If we are able to successfully commercialize, market and distribute the dermaPACE® system, then we hope to partially or completely offset these losses in the future. Although no assurances can be given, we believe that potential additional issuances of equity, debt or other potential financing, as discussed above, may provide the necessary funding for us to continue as a going concern for the next year.

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:

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the scope, rate of progress and cost of our clinical trials;
future clinical trial results;
the cost and timing of regulatory approvals;
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
the industry demand and patient wellness behavior.
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 us and our business are set forth under the section entitled “Risk Factors – Risks Related to Our Business”.

The worldwide spread of the COVID-19 virus is expected to result in a global slowdown of economic activity which is likely to decrease demand for a broad variety of products, including from our customers, while also disrupting supply channels and marketing activities for an unknown period of time until the disease is contained. 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. We expect all of these factors to have a negative impact on our sales and our results of operations, the size and duration of which we are currently unable to predict.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on ourWe have used various accounting policies to prepare the consolidated financial statements which have been prepared in accordance with United States generally acceptedU.S. GAAP. Our significant accounting principles. policies are disclosed in Note 3 to the consolidated financial statements in Part II Item 8. “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

The preparation of ourthe consolidated financial statements, in conformity with U.S. GAAP, requires us to makeuse judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses.

On an ongoing basis, we evaluate These estimates reflect our estimatesbest judgment about economic and judgments, including those related tomarket conditions and the estimate ofpotential effects on the fairvaluation and/or carrying value of embedded conversion optionsassets and warrants.liabilities based upon relevant information available. We base our estimates on authoritative literature and pronouncements, historical experience and on various other assumptions that we believe are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying valuevalues 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.

The following accounting policiesestimates are deemed critical.critical:

Litigation Contingencies
Revenue RecognitionWe may be involved in legal actions involving product liability, intellectual property and commercial disputes, tax disputes, and governmental proceedings and investigations. The outcomes of these legal actions are not completely within our control and may not be known for prolonged periods of time. In some actions, the enforcement agencies or private claimants seek damages that could require significant expenditures or result in lost revenues or limit our ability to conduct business in the applicable jurisdictions. Estimating probable losses from our litigation and governmental proceedings is inherently difficult, particularly when the matters are in early procedural stages, with incomplete scientific facts or legal discovery; involve unsubstantiated or indeterminate claims for damages; potentially involve penalties, fines, or punitive damages; or could result in a change in business practice. The Company records a liability in the consolidated financial statements for loss contingencies when a loss is known or considered probable, and the amount may be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and may be reasonably estimated, the estimated loss or range of loss is disclosed. Our significant legal proceedings are discussed in Note 21 to the consolidated financial statements in Part II Item 8. “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

We recognize revenue in accordance with two different Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) standards: 1) Topic 606 and 2) Topic 842. In accordance with ASC 606, we apply the following the five-step model: (1) identify the contract(s) with a customer, (2) identify the performance obligation(s) in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the Company satisfies a performance obligation. We recognize revenue primarily from the following types of contracts under ASC 606: (1) sales of products, accessories and parts, (2) licensing fees, (3) other revenue, (4) shipping and handling costs. The company also recognizes rental revenue under ASC 842 where we have determined that these are operating leases and we recognize the revenue in the period where it is billed to the customer. However, under the pay per use agreement, the Company will earn revenues based on the number of times the device is used. Under the guidance Lease payments based on usage of the device are variable lease payments and should be recorded in the period in which the obligation for the payment is incurred.

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Derivative Liability’sLiabilities from Embedded Conversion Options and Warrants– Under ASC Topic 815 the company
The Company classified certain convertible instruments as having embedded conversion options which qualified as derivative financial instruments to be separately accounted for. The companyCompany also under ASC Topic 815 determined that certain warrants also qualified as derivative financial instruments.  Various valuationsvaluation models were used to estimate the fair value of these derivative financial instruments that are classified as derivative liabilities on the consolidated balance sheets. The models include subjective input assumptions that can materially affect the fair value estimates and as such are subject to uncertainty. The materialOur significant input assumptions for the selected subjective inputs have not changed for the reporting period, except for the expected volatility, which is estimated based on the actual volatility during the most recent historical period of time equalare discussed in Note 13 to the remaining life of the instruments.

Results of Operations for the Years ended December 31, 2021consolidated financial statements in Part II Item 8. “Financial Statements and 2020

The following table sets forth our consolidated statement of operations for the fiscal years ended December 31, 2021 and 2020, and the change between the two years (dollarsSupplementary Data” in thousands):

  For the Years Ended       
  December 31,  Change 
  2021  2020  $
  
% 
Revenues:             
Total Revenue $13,010  $4,057  $8,953   221%
Cost of Revenues  4,986   1,162   3,824   329%
Gross Margin  8,024   2,895   5,129   177%
Operating Expenses:                
General and administrative  11,690   13,723   (2,033)  -15%
Selling and marketing  8,591   5,160   3,431   66%
Research and development  1,101   1,246   (145)  -12%
Impairment of intangible assets  -   7,185   (7,185)  -100%
Depreciation and amortization  784   781   3   0%
Operating Loss  (14,142)  (25,200)  11,058   -44%
Other Income (Expense), net  (13,089)  (5,737)  (7,352)  128%
Income tax expense
  28
   -
   28
   -
 
Net Loss $(27,259) $(30,937)  3,678
   -12%
Revenues and Cost of Revenues

Revenues for the year ended December 31, 2021 were $13.0 million, compared to $4.1 million for the same period in 2020, an increase of $8.9 million or 221%. Revenue resulted primarily from sales in Europe and Asia/Pacific of our orthoPACE devices and related applicators and sales in the United States and Asia/Pacific of our dermaPACE® devices and related applicators as well as UltraMIST® product sales after the August 6, 2020 Acquisition. The primary driver for the revenue increase were a full year of sales of the UltraMIST® product for the year ended December 31, 2021, as compared to approximately five months of sales totaling $3.7 million for the year ended December 31, 2020.

Cost of revenues for the year ended December 31, 2021 were $5.0 million, compared to $1.2 million for the same period in 2020. The increase in cost of revenues was primarily driven by sales of the UltraMIST® product subsequent to the August 6, 2020 Acquisition. Gross profit as a percentage of revenues was 62% for the year ended December 31, 2021, compared to 71% for the same period in 2020. The decrease in gross profit as a percentage of revenues in 2021 was primarily due the increase in higher margin sales in the third and fourth quarter of 2020 offset by the minimum purchase fee related to the acquisition that was recorded in the first and second quarters of 2021 with no associated revenue.

Research and Development Expenses

Research and development expenses for the year ended December 31, 2021 were $1.1 million, compared to $1.2 million for the same period in 2020, a nominal decrease. The decrease in research and development expenses in 2021, as compared to 2020, was due to contracting expenses for temporary services, increased services related to the dosage study in Poland and increased expenses related to electrical testing for the device as well as the acquisition of additional of employee to support the UltraMIST® products that occurred during the year ended December 31, 2020.

Selling and Marketing Expenses

Selling and marketing expenses for the year ended December 31, 2021 were $8.6 million as compared to $5.2 million for the same period in 2020, an increase of $3.4 million, or 66%. The year-over-year increase in sales and marketing expenses in 2021 was a result of a full year of sales and marketing expenses related to operating the UltraMIST® business compared to approximately five months of UltraMIST® operations as a result of the August 6, 2020 Acquisition.

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2021 were $11.7 million as compared to $13.7 million for the same period in 2020, a decrease of $2.0 million, or 15%. The decrease in 2021 as compared to 2020, was primarily due to the higher costs in 2020 resulting from the acquisition-related transaction expenses, share-based compensation for services, higher lease and payroll-related to costs subsequent to the August 6, 2020 Acquisition, as well as increased consulting and IT costs associated with the integration of the Acquisition.

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Impairment of Intangible Assets

During the fourth quarter of 2020, the Company determined that the intangible asset for customer relationships related to the biological products was impaired due to significant shortfalls in sales of the products during that period compared with the sales projections used to determine the fair value the intangible asset as of the August 6, 2020 acquisition date. The Company does not expect sales of biological products to sufficiently recover. At December 31, 2020, the Company recorded a $7.2 million impairment charge for this intangible asset. The Company has determined that there is no impairment charge for the year ended December 31, 2021.

Depreciation and Amortization Expenses

Depreciation and amortization operating expenses were $784 thousand for the year ended December 31, 2021 versus $781 thousand for the same period of 2020.

Other Income (Expense)

Other income (expense) was a net expense of $13.1 million for the year ended December 31, 2021, as compared to a net expense of $5.7 million for the same period in 2020, a net expense increase of $7.4 million. The change was driven by increased interest expense of $4.7 million, and a lossAnnual Report on the issuance of debt of $3.6 million, partially offset by the decrease of the change in the fair value of derivative liability of $1.2 million. The increased interest expense was the result of higher levels of debt outstanding during 2021 compared with 2020 and the change in fair value of the derivative liability relates to warrants issued during 2021.

Net Loss

Net loss for the year ended December 31, 2021 was $27.3 million, or ($0.05) per basic and diluted share, compared to a net loss of $30.9 million, or ($0.08) per basic and diluted share, for the same period in 2020. The decrease in the net loss was primarily a result of higher 2021 operating and other expenses, partially offset by increases in revenues/gross margin as noted above.

Liquidity and Capital Resources
As of December 31, 2021, our cash, cash equivalents and marketable securities totaled $.6 million.

We have incurred a net loss of $27.3 million and $30.9 million for the years ended

December 31, 2021 and 2020, respectively and cash used for operating and capital investment in the business was $6.9M We expect to continue to incur substantial negative cash flows from operations for the first half of 2022

Our expected cash requirements for the next 12 months and beyond are largely based on the commercial success of our products and the level of targeted investment in our commercial strategies. These conditions as well as the events of default on various notes payable raise substantial doubt about our ability to continue as a going concern.
We have historically funded our operations from the sale of our common stock, issuance of notes payable, and the exercise of warrants. During the year ended December 31, 2021, we received net proceeds of approximately $5.1 million net from such activities, and as of December 31, 2021, our cash, cash equivalents and marketable securities totaled $.6 million.
The company has material cash requirement in 2022 including past due payables, contract obligations to our critical vendors, notes in default, registration and other penalties related to  notes payable, warrants, and registration right agreements.Management’s plans to address the short-term and liquidity needs are to obtain additional capital in 2022 and 2023 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. Although no assurances can be given, management believes that potential additional issuances of equity or other potential financing transactions as discussed above should provide the necessary funding for us. If these efforts are unsuccessful, we may be required to significantly curtail or discontinue operations or obtain funds through financing transactions with unfavorable terms.

Beyond the next 12 months, we expect to devote substantial resources for the commercialization of the dermaPACE® System and will 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. We also plan to devote resources to the continued commercialization of the dermaPACE and UltraMIST® product including hiring of new employees, expansion of our international business and continued research and development of next generation of our technology as well as non-medical uses of our technology

Our existing resources are unlikely to allow us to conduct all the activities that we believe could be beneficial for our future growth. As a result, we will need to seek additional funds in the future or curtail or forgo some or all such activities. If we seek to and are unable to raise funds on favorable terms, or at all, we may not be able to support our commercialization efforts or increase our research and development activities and the growth of our business may be negatively impacted. As a result, we may be unable to compete effectively. Changes, including those relating to the payer and competitive landscape, our commercialization strategy, our development activities and regulatory matters, may occur beyond our control that would cause us to consume our available capital more quickly.

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Master Equipment Lease

On January 26, 2018, the Company entered into a Master Equipment Lease with NFS Leasing Inc. (“NFS”) to provide financing for equipment purchases to enable the Company to begin placing the dermaPACE® System in the marketplace. This agreement provides for a lease line of up to $1,000,000 with a term of 36 months, and grants NFS a security interest in the Company’s accounts receivable, tangible and intangible personal property and cash and deposit accounts of the Company. In 2020 and 2021, the Company entered into additional equipment leases under the Master Equipment Lease and they are included in property, plant and equipment as a right of use asset with a related finance lease liability in our consolidated balance sheets.

Series C convertible preferred stock certificate of designation

On January 31, 2020, the Company filed a Certificate of Designation of Preferences, Right and Limitations of Series C Convertible Preferred Stock of the Company with the Nevada Secretary of State which amended our Articles of Incorporation to designate 90 shares of our preferred stock as Series C Convertible Preferred Stock. Although we have no other shares of preferred stock currently outstanding and no present intention to issue any additional shares of preferred stock or to create any additional series of preferred stock, we may issue such shares in the future.

Convertible notes payable

On August 6, 2020, the Company entered into a letter agreement (the “HealthTronics Agreement”) with HealthTronics pursuant to which the Company paid off all outstanding debt due and owed to HealthTronics, including the notes payable. Pursuant to the HealthTronics Agreement, as consideration for the extinguishment of the debt due to HealthTronics, (i) the Company paid to HealthTronics an amount in cash equal to $4.0 million, (ii) HealthTronics exercised all of its outstanding Class K Warrants to purchase 7,200,000 shares of common stock, (iii) the Company issued to HealthTronics a convertible note payable in the amount of $1.4 million, and (iv) the Company and HealthTronics entered into a Securities Purchase Agreement dated August 6, 2020 pursuant to which the Company issued to HealthTronics an aggregate of 8,275,235 shares of common stock and an accompanying Class E warrant to purchase up to an additional 8,275,235 shares of common stock. The warrant has an exercise price of $0.25 per share and a three-year term.

The convertible promissory note, with principal amount of $1.4 million, matured on August 6, 2021 and has not been repaid. The Company’s failure to pay the outstanding principal balance when due constituted an event of default under the terms of the convertible note payable and, accordingly, it began accruing interest of 2% in addition to the 12% initial rate as of the date of the default.

In the event that the Seller Note has not been repaid prior to January 1, 2021, HealthTronics may elect to convert the outstanding principal amount plus any accrued but unpaid interest thereon into shares of the Company’s common stock, at a conversion price of $0.10 per share. As this conversion option is contingent, the conversion option has not been bifurcated from the host instrument as of December 31, 2020. The convertible promissory note is expressly subordinate to the NWPSA “Senior Secured Notes” described in Note 13. The Company may prepay the outstanding principal balance, together with any accrued but unpaid interest without premium or penalty.

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SBA loans

On May 28, 2020, the Company received proceeds from a loan in the amount of $454 thousand (the “PPP Loan”) from Truist Bank, as lender, pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan matures on May 28, 2022 and bears interest at a rate of 1% per annum. Commencing December 12, 2020, the Company is required to pay the lender equal monthly payments of principal and interest. The PPP Loan is evidenced by a promissory note dated May 28, 2020 (the “Note”), which contains customary events of default relating to, among other things, payment defaults and breaches of representations, warranties and covenants. The PPP Loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

All or a portion of the PPP Loan may be forgiven by the U.S. Small Business Administration (“SBA”) upon application by the Company beginning 60 days but not later than 120 days after loan approval and upon documentation of expenditures in accordance with the SBA requirements. The ultimate forgiveness of the PPP Loan is also predicated upon regulatory authorities concurring with management’s good faith assessment that the current economic uncertainty made the loan request necessary to support ongoing operations. If, despite the Company’s good-faith belief that given the circumstances the Company satisfied all eligibility requirements for the PPP Loan, the Company is later determined to have violated any applicable laws or regulations or it is otherwise determined that the Company was ineligible to receive the PPP Loan, the Company may be required to repay the PPP Loan in its entirety and/or be subject to additional penalties. In the event the PPP Loan, or any portion thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal. Under the terms of the PPP Loan, the Company may be eligible for full or partial loan forgiveness in the third quarter of 2020. The Company completed the application for loan forgiveness during the third quarter of 2021. The Company received a letter from the SBA dated August 27, 2021 forgiving $454 thousand of the PPP Loan principal and $6 thousand of interest.

On June 10, 2020, the Company secured a loan offered by the U.S. Small Business Administration (“SBA”) under its Economic Injury Disaster Loan assistance program (“EIDL”) in light of the impact of COVID-19 pandemic on the Company’s business. The principal amount of this loan was $150 thousand and interest accrued at the rate of 3.75% per annum. This loan was repaid in full on August 5, 2020 with proceeds from the NWPSA Senior Notes as part of the conditions of that agreement.

Senior Secured promissory notes

On August 6, 2020, the Company entered into a Note and Warrant Purchase and Security Agreement (the “NWPSA”), with the noteholder party thereto and NH Expansion Credit Fund Holdings LP, as agent. As a result, the Company issued a $15,000,000 Secured Promissory Note (the “Senior Notes”) and Warrant exercisable into shares of the Company’s common stock (the “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. The Company received net proceeds from issuing the Notes and NH Warrant of $13.3 million. The NWPSA provides for (i) the sale and purchase of secured notes in an aggregate original principal amount of $15 million and (ii) the issuance of 13,091,160 warrants equal to 2.0% of the fully-diluted common stock of the Company as of the issue date. The warrant has an exercise price of $0.01 per share and a 10-year term. The warrant agreement contains a put option. Upon payment in full of the Note, the holder has the ability to require the Company to purchase the warrants from the holder for cash. Accordingly, the warrant has been classified as a derivative liability. The holder has the option to exercise the put any time between the payment of the Note and the expiration of the warrants. The Note has a maturity date of September 30, 2025 and accrues interest at a rate that is the sum of: (a) the greater of the quarter end prime rate or 3% plus (b) 9%, due in quarterly arrears. The Senior Notes are secured by substantially all assets of the Company including in the event of default placing bank accounts under a control agreement, copyrights, trademarks, patents, applications, registered and unregistered, licenses, designs, held or acquired after August 6, 2020 by the Company.

The Company was in default of the minimum liquidity provisions of the Senior Secured Promissory Notes beginning in October 2020 and, accordingly, the Senior Promissory Notes began accruing interest of 5.0% in addition to the stated rate as of the date of default.

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Convertible promissory notes – 2020

On August 6, 2020, the Company entered into an asset purchase agreement with Celularity, pursuant to which the Company acquired Celularity’s UltraMIST® assets. A portion of the aggregate consideration of $24.0 million paid for the assets included the issuance of a promissory note to Celularity in the principal amount of $4.0 million. The Seller Note had a maturity date of August 6, 2021 and was not repaid. The Company’s failure to pay the outstanding principal balance when due constituted an event of default under the terms of the Seller Note and, accordingly, it began accruing additional interest of 5.0% in addition to the 12.0% initial rate, as of the date of default.

In the event that the Seller Note had not been repaid prior to January 1, 2021, Celularity may elect to convert the outstanding principal amount plus any accrued but unpaid interest thereon into shares of the Company’s common stock, at a conversion price of $0.10 per share. As this conversion option is contingent on a future event, the conversion option has not been bifurcated from the host instrument as of December 31, 2020. The Seller Note is expressly subordinate to the NWPSA Senior Notes described above under “Senior Secured Promissory Notes.” The Company may prepay the outstanding principal balance, together with any accrued but unpaid interest without premium or penalty.

On June 5, 2020, the Company entered into a Securities Purchase Agreement with investor LGH Investments LLC (the “Investor”) for (i) a Promissory Note (the “Convertible Promissory Note”) in the original principal amount of $1.2 million, convertible into shares of common stock, (ii) warrants entitling the Investor to acquire 1,075,000 shares of common stock (the “Warrants”) and (iii) 200,000 restricted common shares in the Company as an inducement grant (the “Inducement Shares”). Such note contained certain default provisions, as defined, resulting in net proceeds of $1.1 million. As part of the Securities Purchase Agreement, the Company established a reserve of shares of its authorized but unissued and unreserved common stock in the amount of 11,000,000 shares for purposes of exercise of the Warrant or conversion of the Convertible Promissory Note. The Convertible Promissory Note matures on February 5, 2021 and includes a one-time interest charge of 8% to be applied on the issuance date to the original principal amount. The Investor can convert the Convertible Promissory Note and interest at any time prior to maturity to the number of shares of common stock, equal to the amount obtained by dividing (i) the amount of the unpaid principal and interest on the note by (ii) $0.25. The Warrants have an exercise price of $0.35 per share and have a term of five years and recorded as a liability by the Company. With respect to the Inducement Shares, in the event the Company’s share price has declined on the date on which the Investor seeks to have the restricted legend removed on such shares, the Company agrees to issue the Investor additional shares such that the aggregate value of the Inducement Shares equals the aggregate value of the Inducement Shares as of June 5, 2020. The Inducement Shares were issued on September 11, 2020 and included in common stock and additional paid in capital.

We may also attempt to raise additional capital if there are favorable market conditions or other strategic considerations even if we have sufficient funds for planned operations. To the extent that we raise additional funds by issuance of equity securities, our shareholders will experience dilution and we may be required to use some or all of the net proceeds to repay our indebtedness, and debt financings, if available, may involve restrictive covenants or may otherwise constrain our financial flexibility. To the extent that we raise additional funds through collaborative arrangements, it may be necessary to relinquish some rights to our intellectual property or grant licenses on terms that are not favorable to us. In addition, payments made by potential collaborators or licensors generally will depend upon our achievement of negotiated development and regulatory milestones. Failure to achieve these milestones would harm our future capital position.

April 2021 Securities Purchase Agreement and Warrants

On April 20, 2021, 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 “Private Placement”) of (i) the Company’s future advance convertible promissory note in an aggregate principal amount of up to $3.4 million (the “Leviston Note”) and (ii) a warrant to purchase an additional 16,666,667 shares of common stock of the Company (the “Leviston Warrant”). The Leviston Warrant has an exercise price of $0.18 per share and a four-year term. The closing of the Private Placement occurred on April 20, 2021 (the “Leviston Closing Date”).

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As noted above, on April 20, 2021, the Company issued the Leviston Note to the Purchaser in an aggregate principal amount of up to $3.4 million (the “Aggregate Amount”), which shall be advanced in disbursements by the Purchaser (“Leviston Disbursements”), as set forth in the Leviston Note. On May 14, 2021, the Leviston Note was amended to increase the Aggregate Amount to $4.2 million. On April 21, 2021, the Purchaser advanced a Leviston Disbursement of $750 thousand, which is net of an original issue discount of 8%. On May 14, 2021, the Purchaser advanced a second Leviston Disbursement of $750 thousand, also net of an original issue discount of 8%. A $250 thousand Leviston Disbursement was made on September 3, 2021, which was subject to the same terms and conditions of the April and May Leviston Disbursements. In addition, a $500 thousand disbursement was made on September 3, 2021 in accordance with notes issued to five institutional investors (the “Five Institutions’ Notes”), which were subject to substantially the same terms and conditions as the Leviston Disbursements.

Cash flows (uses) from operating, investing and financing activities - For the years ended December 31, 2021 and 2020, net cash used by operating activities was $6.4 million and $12.7 million, respectively, primarily consisting of compensation costs, research and development activities and general corporate operations. The decrease in the use of cash for operating activities for the year ended December 31, 2021, as compared to the same period for 2020, of $6.1 million, or 47%, was primarily due to the decrease in the net loss, a decrease in accounts receivable, as well as decreases in accrued interest, and interest payable, related parties, partially offset by increases in certain non-cash expenses, such as depreciation and amortization, bad debt expense, amortization of debt issuance costs and original issue discount, and change in fair value of derivative liability and increases in accounts payable and accrued expenses.

Net cash used by investing activities in 2021 was $529 thousand as compared to net cash used by investing activities of $20.1 million in 2020. The decrease is primarily due to the $20,000,000 Acquisition of UltraMIST® on August 6, 2020.

Net cash provided by financing activities for the year ended December 31, 2021 was $5.1 million, which consisted of proceeds from convertible promissory notes of $1.9 million, cash received from accounts receivable factoring of $1.7 million, proceeds from notes payable of $940 thousand, less principal payments of $436 thousand on debt and finance lease obligations. Net cash provided by financing activities for the year ended December 31, 2020 was $33.4 million, which consisted of proceeds from PIPE offerings of $21.4 million, proceeds from notes payable of $13.3 million, advances from related parties of $23 thousand, net proceeds from sales of convertible preferred stock and convertible promissory notes totaling $3.6 million, proceeds from SBA loans of $614 thousand, and proceeds from exercises of stock options and warrants totaling $48 thousand, less principal payments totaling $5.6 million on debt and finance lease obligations.

Cash and cash equivalents decreased by $1.8 million for the year ended December 31, 2021 and cash and cash equivalents increased by about $676 thousand for the year ended December 31, 2020.

Contractual Obligations

Our major outstanding contractual obligations relate to operating leases for our two facilities and office equipment, as well purchase and supplier obligations for product component materials and equipment, and our notes payable, related parties.

In August 2016, we entered into a lease agreement for 7,500 square feet of office space for office, research and development, quality control, production and warehouse space which expired on December 31, 2021. On February 1, 2018, we entered into an amendment to the lease agreement for an additional 380 square feet of office space for storage which expired on December 31, 2021. On January 2, 2019, we entered into a second amendment to the lease agreement for an additional 2,297 square feet of office space for office space which expired on December 31, 2021. Under the terms of the lease, we pay monthly rent of $14,651, subject to a 3% adjustment on an annual basis.

As part of its August 6, 2020 Acquisition, we became party to a lease agreement for 8,199 square feet of office space for office, research and development, quality control, and warehouse space which expires on August 31, 2023. Under the terms of the lease, the Company pays monthly rent of $7,051, with escalation of approximately 2% on May 1 of each lease year.

Also on August 6, 2020, the Company became party to a lease for office equipment that requires monthly payments of $669 through May 31, 2025.

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We have developed a network of suppliers, manufacturers, and contract service providers to provide sufficient quantities of product component materials for our products through the development, clinical testing and commercialization phases. We have a manufacturing supply agreement with Swisstronics Contract Manufacturing AG in Switzerland, a division of Cicor Technologies Ltd., covering the generator box component of our PACE devices. We have a manufacturing supply agreement with Minnetronix for the UltraMIST® devices and the Dynamic Group for UltraMIST® applicators. Celularity is our current supplier of the Biovance and Interfyl product lines. See Note 25, Subsequent Events, for information regarding disputes with Celularity and Minnetronix.

On August 6, 2020 the Company assumed obligations for a purchase order for UltraMIST® devices from Celularity related to purchases of UltraMIST® devices from Minnetronix. This purchase order had a remaining purchase commitment of $1,058,170. This purchase agreement also calls for production delay fees of 1.25% of the committed inventory if the Company delays production. There is also a cancelation clause of 20% of the remaining balance in the event that the Company delays production for more than six months. For additional details, see “Contingencies” in Note 20 of the Notes to Consolidated Financial Statements.Form 10-K.

Recently Issued Accounting Standards

NewInformation regarding new accounting pronouncements are issued by the Financial Standards Board (“FASB”) or other standards setting bodies that the Company adopts according to the various timetables the FASB specifies. The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow. Seeis included in Note 3 to the accompanying consolidated financial statements.statements in Part II Item 8. “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

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 affects such expenses 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.

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

NotAs a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide the information required under Regulation S-K for “smaller reporting companies”.this item.

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Item 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

5538

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the ShareholdersStockholders and Board of Directors of
SANUWAVE Health, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of SANUWAVE Health, Inc.(the (the “Company”) as of December 31, 20212023 and 2020,2022, the related consolidated statements of comprehensiveloss, stockholders’ deficit, and cash flows for each of the two years in the period endedDecember 31, 2021,2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20212023 and 2020,2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021,2023, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has  incurred significantrecurring losses and needs to raise additional funds to meet its obligations, and sustain its operations, and the occurrence ofto resolve the events of default on the Company’s debt. These conditions raise substantial doubt about the Company’sCompany's ability to continue as a going concern. Management’sManagement's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion

These financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company’sCompany's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’sCompany's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

CriticalThe critical audit matters are mattersmatter communicated below is a matter arising from the current period audit of the financial statements that werewas communicated or required to be communicated to the audit committee and that: (1) relaterelates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are noThe communication of critical audit matters.matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Financial Instruments (Embedded Conversion Options and Warrant Liability)

Critical Audit Matter Description

As described in Notes 11, 12, and 13 to the consolidated financial statements, the Company has entered into Securities Purchase Agreements and Asset-Backed Secured Promissory Notes (the “Transactions”). The Company determined certain embedded conversion features associated with the Transactions were required to be bifurcated and recorded at fair value. The warrants issued in connection with the Transactions were also recorded at fair value. The fair value of the embedded conversion options and the warrant liability were valued using valuation techniques and key inputs as described in the footnotes.


F-1

The principal considerations for our determination that the valuation of the embedded conversion options and warrant liability is a critical audit matter were the significant judgments made by management in determining the fair value of the embedded conversion options and warrant liability. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions. The audit also involved the use of professionals with specialized skill and knowledge. 

How the Critical Audit Matter was Addressed in the Audit

Our audit procedures related to the valuation of the financial instruments included the following, among others:

◾We obtained an understanding of the design of the Company's controls over valuation of financial instruments, including controls over management's review of the valuation models, and the significant assumptions used in determining the fair value of the financial instruments.

◾With assistance of our valuation specialists, we audited the fair value of the embedded conversion options and warrant liability, valuation methodology, and key assumptions used in determining the fair value of the embedded conversion options and warrant liability by:

a.Evaluating the appropriateness of the valuation models and techniques used in determining the fair value;
b.Assessing the reasonableness of the significant valuation inputs, including the probability weighted expected value considering the merger agreement with SEPA Acquisition Corp. (“SEPA”), the risk adjusted expected exchange ratio, the value of SEPA’s Class A common stock, the expected timing of the closing of the merger, and the probability of the merger closing;
c.Assessing that the significant valuation assumption inputs, in the Black Scholes valuation model, of the discounted stock price and implied volatility are consistent with those that would be used by market participants through the testing of source information; and
d.Checking the mathematical accuracy of the calculation, developing independent estimates and comparing to those selected by management, where applicable, and recalculating management’s fair value, verifying it was reasonable.

◾We audited the completeness and accuracy of the underlying data supporting the significant valuation assumption inputs.

/s/ Marcum LLPllp

Marcum LLP

We have served as the Company’s auditor since 2018.

New York, NY
May 13, 2022
March 21, 2024

F-1F-2
PART I --- FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS
 
SANUWAVE HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 20212023 and 2020
(In thousands except share data)2022

 2021
  2020
 
(In thousands, except share data) 2023
  2022
 
ASSETS            
Current Assets:            
Cash 
$
619
  
$
2,437
  
$
1,797
  
$
1,153
 
Accounts receivable, net of allowance for doubtful accounts of $785 in 2021 and $343 in 2020
  
2,415
   
2,356
 
Accounts receivable, net of allowance of $1,237 and $1,037, respectively
  
3,314
   
4,029
 
Inventory  
1,040
   
2,956
   
2,951
   
868
 
Prepaid expenses and other current assets  
326
   
179
   
1,722
   
570
 
Total Current Assets  
4,400
   
7,928
   
9,784
   
6,620
 
Property and Equipment, net  
668
   
471
 
Right of Use Assets, net  
344
   
795
 
Other Intangible Assets, net  
5,841
   
6,545
 
Non-Current Assets:        
Property, equipment and right of use assets, net
  
938
   
856
 
Intangible assets, net
  
4,434
   
5,137
 
Goodwill  
7,260
   
7,260
   
7,260
   
7,260
 
Other Assets  
106
   
28
 
Total Non-Current Assets  12,632   13,253 
        
Total Assets 
$
18,619
  
$
23,027
  
$
22,416
  
$
19,873
 
                
LIABILITIES                
Current Liabilities:                
Senior secured promissory note payable, in default 
$
11,586
  
$
10,676
 
Convertible promissory notes payable, in default  
11,601
   
4,000
 
Convertible promissory notes, related parties, in default  
1,596
   
1,596
 
Advances on future cash receipts  
446
   
0
 
Senior secured debt, in default
 
$
18,278
  
$
14,416
 
Convertible promissory notes payable
  
5,404
   
16,713
 
Convertible promissory notes payable, related parties
  
1,705
   
7,409
 
Asset-backed secured promissory notes payable
  3,117   -
 
Asset-backed secured promissory notes payable, related parties
  1,458
   - 
Accounts payable  
7,644
   
4,454
   5,705   4,400 
Accrued expenses  
4,394
   
2,127
   
5,999
   
8,512
 
Accrued employee compensation  
4,247
   
2,541
 
Due under factoring agreement  
1,737
   
0
 
Factoring liabilities  
1,490
   
2,130
 
Warrant liability  
9,614
   
8,855
   
14,447
   
1,416
 
Current portion of SBA loans  
158
   
321
 
Accrued interest  
2,521
   
1,021
   
5,444
   
4,052
 
Accrued interest, related parties  
289
   
77
   
669
   
788
 
Current portion of lease liabilities  
268
   
451
 
Current portion of contract liabilities  
48
   
32
   
92
   
60
 
Other  
114
   
23
   
947
   
319
 
Total Current Liabilities  
56,263
   
36,174
   
64,755
   
60,215
 
Non-current Liabilities        
SBA loans  
875
   
143
 
Non-Current Liabilities:
        
Lease liabilities  
118
   
391
   
492
   
438
 
Contract liabilities  
293
   
37
   347   230 
Deferred tax liability  
28
   
0
 
Total Non-current Liabilities  
1,314
   
571
 
Total Non-Current Liabilities
  
839
   
668
 
Total Liabilities  
57,577
   
36,745
  
$
65,594
  
$
60,883
 
                
Commitments and Contingencies (Footnote 19)
  0   0 
Commitments and Contingencies (Footnote 21)
      
                
STOCKHOLDERS’ DEFICIT                
Preferred Stock, par value $0.001, 5,000,000 shares authorized; 6,175, 293, 90 and 8 shares designated Series A, Series B, Series C and Series D, respectively; 0 shares issued and outstanding at December 31, 2021 and 2020
  0
   
0
 
Common Stock, par value $0.001, 800,000,000 shares authorized; 481,619,621 and 470,694,621 issued and outstanding at December 31, 2021 and 2020, respectively
  
482
   
471
 
Additional Paid-in Capital  
144,582
   
142,563
 
Accumulated Deficit  
(183,949
)
  
(156,690
)
Accumulated Other Comprehensive Loss  
(73
)
  
(62
)
Preferred stock, par value $0.001, 5,000,000 shares authorized, 6,175 Series A, 293 Series B, 90 Series C, and 8 Series D designated shares, respectively; no shares issues and outstanding at 2023 and 2022
 $-  
$
-
 
Common stock, par value $0.001, 2,500,000,000 shares authorized, 1,140,559,527 and 548,737,651 issued and outstanding at 2023 and 2022, respectively
  
1,140
   
549
 
Additional paid-in capital  
175,842
   
152,750
 
Accumulated deficit  
(220,049
)
  
(194,242
)
Accumulated other comprehensive loss  
(111
)
  
(67
)
Total Stockholders’ Deficit  
(38,958
)
  
(13,718
)
  
(43,178
)
  
(41,010
)
Total Liabilities and Stockholders’ Deficit 
$
18,619
  
$
23,027
  
$
22,416
  
$
19,873
 

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

F-3
SAUWAVE HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Years ended December 31, 2023 and 2022

(In thousands, except share and per share data) 2023
  2022
 
Revenue 
$
20,398
  
$
16,742
 
Cost of revenues  
6,035
   
4,331
 
Gross Margin  
14,363
   
12,411
 
         
Operating Expenses:        
General and administrative  
8,674
   
12,556
 
Selling and marketing  
4,898
   
7,474
 
Research and development  
579
   
567
 
Depreciation and amortization  
752
   
766
 
Total Operating Expenses  
14,903
   
21,363
 
         
Operating Loss  
(540
)
  
(8,952
)
         
Other Income (Expense)
        
Interest expense  
(12,946
)
  
(12,771
)
Interest expense, related party  
(2,677
)
  
(1,361
)
Change in fair value of derivative liabilities  
(9,621
)
  
16,654
 
Loss on issuance of debt  
-
   
(3,434
)
Loss on extinguishment of debt
  
-
   
(418
)
Other expense
  (19)  (9)
Total Other Expense
  
(25,263
)
  
(1,339
)
         
Net Loss Before Income Taxes  
(25,803
)
  
(10,291
)
         
Income tax expense
  
4
   
2
 
         
Net Loss 
$
(25,807
)
 
$
(10,293
)
         
Other Comprehensive Loss        
Foreign currency translation adjustments  
(44
)
  
6
 
Total Comprehensive Loss 
$
(25,851
)
 
$
(10,287
)
         
Loss per Share:        
Net loss per share, basic and diluted 
$
(0.03
)
 
$
(0.02
)
Weighted average shares outstanding, basic and diluted  
793,850,994
   
549,470,787
 

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

F-4
SANUWAVE HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICITCOMPREHENSIVE LOSS
Years Ended December 31, 2021 and 2020

(In thousands, except share data)
 Common Stock           
 
    		 
Shares Issued and
Outstanding		  
Par Value
  
Additional Paid-
in Capital
  
Accumulated
Deficit
  
Accumulated Other Comprehensive
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 conjunction with senior note
  20,666,993   20   3,700   -   -   3,720 
Shares issued 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  
-
   
-
   
-
   
(10,293
)
  
-
   
(10,293
)
Foreign currency translation adjustment
  
-
   
-
   
-
   
-
   
6
   
6
 
Balances as of December 31, 2022  
548,737,651
  
$
549
  
$
152,750
  
$
(194,242
)
 
$
(67
)
 
$
(41,010
)
Shares issued for services  12,900,000  $13  $514  $-  $-  $527 
Shares issued for settlement of August 2022 debt  464,440,813   464   18,113   -   -   18,577 
Shares issued for settlement of November 2022 debt
  114,481,063   114   4,465   -   -   4,579 
Net loss  
-
   
-
   
-
   
(25,807
)
  
-
   
(25,807
)
Foreign currency translation adjustment  
-
   
-
   
-
   
-
   
(44
)
  
(44
)
Balance as of December 31, 2023
  
1,140,559,527
  $
1,140
  $
175,842
  $
(220,049
)
 $
(111
)
 $
(43,178
)

  2021
  2020
 
Revenues:      
Accessory and parts revenue 
$
8,072
  
$
1,209
 
Product  
3,116
   
2,267
 
Rental income
  1,627   429 
License fees and other  
195
   
152
 
Total Revenue  
13,010
   
4,057
 
         
Cost of Revenues  
4,986
   
1,162
 
         
Gross Margin  
8,024
   
2,895
 
         
Operating Expenses:        
General and administrative  
11,690
   
13,723
 
Selling and marketing  
8,591
   
5,160
 
Research and development  
1,101
   
1,246
 
Impairment of intangible assets  
0
   
7,185
 
Depreciation and amortization  
784
   
781
 
Total Operating Expenses  
22,166
   
28,095
 
         
Operating Loss  
(14,142
)
  
(25,200
)
         
Other Income (Expense):        
Interest expense  
(6,883
)
  
(2,025
)
Interest expense, related party  
(212
)
  
(516
)
Partnership fee income  
0
   
600
 
Change in fair value of derivative liabilities  
(2,622
)
  
(3,193
)
Loss on issuance of debt  
(3,572
)
  
0
 
Gain / (loss) on extinguishment of debt  
204
   
(565
)
Gain / (loss) on foreign currency exchange  
(4
)
  
(38
)
Other Income (Expense), net  
(13,089
)
  
(5,737
)
         
Net Loss before Income Taxes  
(27,231
)
  
(30,937
)
         
Income tax expense
  
28
   
0
 
         
Net Loss  
(27,259
)
  
(30,937
)
         
Other Comprehensive Loss        
Foreign currency translation adjustments  
(11
)
  
0
 
         
Total Comprehensive Loss 
$
(27,270
)
 
$
(30,937
)
         
Loss per Share:        
Net loss per share, basic and diluted 
$
(0.05
)
 
$
(0.08
)
         
Weighted average shares outstanding, basic and diluted  
518,355,642
   
378,128,645
 

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

F-3F-5
SANUWAVE HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS’ DEFICIT
(UNAUDITED)
(In thousands except share data)
Years ended December 31, 2023 and 2022

 
 Preferred Stock  Common Stock            
 
 
 
 
 
Number of
Shares
Issued and
Outstanding
  Par Value  
Number of
Shares
Issued and
Outstanding
  Par Value  
Additional Paid-
in Capital
  
Accumulated
Deficit
  
Accumulated
Other
Comprehensive
Loss
  Total 
                         
Balances as of December 31, 2019
  
0
  
$
0
   
293,780,400
  
$
294
  
$
115,458
  
$
(125,753
)
 
$
(62
)
 
$
(10,063
)
Net loss  
-
   
0
   
-
   
0
   
0
   
(30,937
)
  
0
   
(30,937
)
Proceeds from warrant exercise  
0
   
0
   
1,000,000
   
1
   
9
   
0
   
0
   
10
 
Conversion of short term notes and convertible notes payable  
0
   
0
   
4,829,789
   
5
   
560
   
0
   
0
   
565
 
Reclassification of warrant liability to equity  
-
   
0
   
-
   
0
   
6,293
   
0
   
0
   
6,293
 
Conversion of advances from related parties  
0
   
0
   
262,811
   
0
   
18
   
0
   
0
   
18
 
Conversion of notes payable, related parties  
0
   
0
   
15,475,235
   
15
   
2,276
   
0
   
0
   
2,291
 
Shares issued for services  
0
   
0
   
12,700,000
   
13
   
2,533
   
0
   
0
   
2,546
 
Proceeds from PIPE offering, net of offering costs  
0
   
0
   
124,621,428
   
125
   
12,558
   
0
   
0
   
12,683
 
Stock-based compensation  
-
   
0
   
-
   
0
   
22
   
0
   
0
   
22
 
Proceeds from stock option exercise  
0
   
0
   
325,000
   
0
   
48
   
0
   
0
   
48
 
Beneficial conversion feature on convertible debt  
-
   
0
   
-
   0   
561
   
0
   
0
   
561
 
LGH warrant liability  
-
   
0
   
-
   
0
   
(249
)
  
0
   
0
   
(249
)
Series C and Series D preferred stock converted to common stock  
0
   
0
   
17,499,958
   
18
   
2,432
   
0
   
0
   
2,450
 
Inducement shares issued  
0
   
0
   
200,000
   
0
   
44
   
0
   
0
   
44
 
Foreign currency translation adjustment  
-
   
0
   
-
   
0
   
0
   
0
   
0
   
0
 
                                 
Balances as of December 31, 2020
  
0
  
$
0
   
470,694,621
  
$
471
  
$
142,563
  
$
(156,690
)
 
$
(62
)
 
$
(13,718
)
                                 
Cashless warrant exercise  
0
   
0
   
10,925,000
   
11
   
(11
)
  
0
   
0
   
0
 
Reclassification of warrant liability due to cashless warrant exercise  
0
   
0
   
0
   
0
   
2,030
   
0
   
0
   
2,030
 
Net loss  
-
   
0
   
-
   
0
   
0
   
(27,259
)
  
0
   
(27,259
)
Foreign currency translation adjustment  
-
   
0
   
-
   
0
   
0
   
0
   
(11
)
  
(11
)
                                 
Balances as of December 31, 2021
  
0
  
$
0
   
481,619,621
  
$
482
  
$
144,582
  
$
(183,949
)
 
$
(73
)
 
$
(38,958
)

The accompanying notes to consolidated financial statements are an integral part of these statements.
F-4
Table of Contents
SANUWAVE HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2021 and 2020
(In thousands)

  2021
  2020
 
Cash Flows - Operating Activities:      
Net loss 
$
(27,259
)
 
$
(30,937
)
Adjustments to reconcile net loss to net cash used by operating activities        
Amortization of intangibles  
704
   
713
 
Depreciation  
532
   
299
 
Bad debt expense  
442
   
302
 
Impairment of intangible assets  
0
   
7,185
 
Stock-based compensation  
0
   
22
 
Shares issued for services  
0
   
2,546
 
Shares issued for inducement  
0
   
45
 
Gain/loss on extinguishment of debt  
(204)
   
565
 
Income tax expense
  
28
   
0
 
Change in fair value of derivative liabilities  
2,622
   
3,193
 
Loss on issuance of debt  
3,572
   0 
Amortization of debt issuance costs and original issue discount  
3,226
   
484
 
Accrued interest  
1,506
   
1,098
 
Interest payable, related parties  
212
   
401
 
Changes in operating assets and liabilities        
Accounts receivable - trade  
(395
)
  
(2,582
)
Inventory  
1,916
   
(553
)
Prepaid expenses  
(118
)
  
(54
)
Other assets  
(111
)
  
13
 
Operating leases  0   
(6
)
Accounts payable  
3,181
   
3,015
 
Accrued expenses  
1,818
   
1,169
 
Accrued employee compensation  
1,837
   
934
 
Contract liabilties  
82
   
(570
)
Net Cash Used by Operating Activities  
(6,409
)
  
(12,718
)
         
Cash Flows - Investing Activities        
Acquisition of UltraMIST, net of $4,000,000 note payable to seller
  
0
   
(20,000
)
Purchases of property and equipment  
(529
)
  
(53
)
Net Cash Flows Used by Investing  Activities  
(529
)
  
(20,053
)
         
Cash Flows - Financing Activities        
Proceeds from sale of convertible preferred stock  
0
   
2,450
 
Proceeds from convertible promissory notes  
1,928
   
1,100
 
Proceeds from SBA loan  
1,033
   
614
 
Proceeds from PIPE offering, net of offering costs  
0
   
21,456
 
Proceeds from senior secured promissory notes  
940
   
13,347
 
Proceeds from stock option exercises  
0
   
48
 
Proceeds from factoring  
1,737
   0 
Proceeds from warrant exercises  
0
   
10
 
Advances from related parties  
175
   
23
 
Repayments of debt principal on convertible promissory notes, related parties, convertible promissory notes and SBA loans  
(493
)
  
(5,458
)
Payments of principal on finance leases  
(199
)
  
(143
)
Net Cash Flows Provided by Financing Activities  
5,121
   
33,447
 
         
Effect of Exchange Rates on Cash  
(1
)
  
0
 
         
Net Change in Cash During Period  
(1,818
)
  
676
 
         
Cash at Beginning of Period  
2,437
   
1,761
 
Cash at End of Period
 
$
619
  
$
2,437
 
         
Supplemental Information:        
Cash paid for interest 
$
2,580
  
$
436
 
         
Non-cash Investing and Financing Activities:        
Reclassification of warrant liabilities to equity 
$
2,030
  
$
6,293
 
Embedded conversion feature on convertible debt  
4,138
   
561
 
Warrant issuance in conjunction with advances on future cash receipts
  1,227   0 
Warrant issuance in conjunction with convertible notes  
1,055
   
0
 
Acquisition of UltraMIST partially financed with convertible promissory note  
0
   
4,000
 
Conversion of notes payable, related parties  
0
   
2,291
 
Series C and Series D preferred stock converted to common stock  
0
   
2,450
 
Exchange line of credit and notes payable, related parties, for convertible promissory notes, related partes  
0
   
1,596
 
Conversion of short-term notes payable to equity  
0
   
565
 
Conversion of advance from related parties  
0
   
18
 
(In thousands)
 2023
  2022
 
Cash Flows - Operating Activities:      
Net loss 
$
(25,807
)
 
$
(10,293
)
Adjustments to reconcile net loss to net cash used by operating activities        
Depreciation and amortization
  
1,028
   
952
 
Bad debt expense  
781
   
253
 
Shares issued for services  
224
   
888
 
Gain/loss on extinguishment of debt  
-
   
418
 
Income tax expense
  
4
   
2
 
Change in fair value of derivative liabilities
  
9,621
   
(16,654
)
Loss on issuance of debt  
-
   3,434 
Amortization of debt issuance and debt discounts
  
6,911
   
4,950
 
Changes in operating assets and liabilities
        
Accounts receivable
  
(53
)
  
(1,748
)
Inventory, prepaid expenses and other assets  (3,006)  (72)
Accounts payable  
1,546
   
(2,550
)
Accrued interest and accrued interest, related parties  6,306   3,182 
Accrued expenses and contract liabilities  (2,093)  69 
Net Cash Used by Operating Activities  
(4,538
)
  
(17,169
)
         
Cash Flows - Investing Activities        
Proceeds from sale of property and equipment
  
21
   
332
 
Net Cash Flows Provided by Investing Activities  
21
   
332
 
         
Cash Flows - Financing Activities        
Proceeds from convertible promissory notes  
3,026
   
16,227
 
Proceeds from asset-backed secured promissory notes payable  
2,994
   - 
Proceeds from senior secured promissory note  
-
   
2,940
 
(Payments)/Proceeds from factoring  
(639
)
  695 
Proceeds from warrant exercises  
-
   
100
 
Proceeds from short term borrowings  -   640 
Repayments of debt principal
  
-
   
(2,981
)
Principal payments on finance leases  (170)  (237)
Net Cash Flows Provided by Financing Activities  
5,211
   
17,384
 
         
Effect of Exchange Rates on Cash  
(50
)
  
(13
)
         
Net Change in Cash During Period  
644
   
534
 
         
Cash at Beginning of Period  
1,153
   
619
 
Cash at End of Period
 
$
1,797
  
$
1,153
 
         
Supplemental Information:        
Cash paid for interest 
$
1,958
  
$
3,712
 
Non-Cash Investing and Financing Activities:        
Warrants issued in conjunction with senior secured promissory note payable and convertible promissory notes payable $
1,682  $
4,177 
Conversion of convertible notes payable and accrued interest to common stock  
23,156
   
-
 
Embedded conversion feature on convertible debt
  835   2,760 
Common shares issued for advisory shares  
302
   
-
 
Settlement of debt and warrants with stock
  -   1,361 
Common shares issued in conjunction with senior secured debt
  -   3,720 
Warrant issuance in conjunction with convertible notes
  -   1,708 
Reclassification of warrant liabilities to equity due to cashless warrant exercise
  -   2,166 
Working capital balances refinanced into convertible notes payable
  -   2,363 

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

F-5F-6
SANUWAVE HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20212023 and 20202022

1.          
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 2 highly complementary and market-cleared energy transfer technologies and 2 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-Presentation - The accompanying 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”). and with the instructions to for 10-K and Regulation S-X. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

The functional currencies of the Company’s foreign operations are their local currencies. The financial statements of the Company’s foreign subsidiary have been translated into United States dollars. All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. Income statement amounts have been translated using the average exchange rate for the year. Translation adjustments are reported in other comprehensive loss in the consolidated statements of comprehensive loss and as cumulative translation adjustments in accumulated other comprehensive loss in the consolidated balance sheets.

Segment information -We have determined that we have one operating segment. Our revenues are primarily generated from sales in the United States. All significant expenses are generated, and all significant assets are located in the United States.

Reclassification –- Certain accounts in the prior period Consolidated Financial Statementsconsolidated financial statements have been reclassified to conform to the presentation of the current year consolidated financial statements. Accrued executive severance at December 31, 2020 of $154 thousand was reclassified from accrued expenses to accrued employee compensation. This reclassificationThese reclassifications had no effect on the previously reported operating results.

COVID-19 – The worldwide spread of the COVID-19 virus resulted in a global slowdown of economic activity which is likely to decrease 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 of time until the global supply chain can return to the 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 and we expect that they will continue to have a negative impact on our sales and our results of operations, the size and duration of which we are currently unable to predict.

2.          
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.concern for a period of 12 months from the filing of the Form 10-K. 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 expansion and continued commercialization of the dermaPACEour UltraMIST and will continue to research and develop the non-medical uses of the PACE technology, both ofsystems which will require additional capital resources. The operating losses and the events of default on the Company’s notes payable indicate substantial doubt about the Company’s ability to continue as a going concern for a period of at least twelve months from the filing of this Annual Report on Form 10-K.

F-6
Table of Contents
The continuation of our business is dependent upon raising additional capital to fund operations. Management’s plans are to obtain additional capital in 20222024 primarily through investments by strategic partners for market opportunities, which may include strategic partnerships or licensing arrangements, or raise capitalthe closure of the Merger Agreement, as described in Note 4. The Company could also obtain funding 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.stockholders. Although no assurances can be given, management believes that potential additional issuances of equity or other potential financing transactions if obtained as discussed above should provide the necessary funding for us. If these efforts are unsuccessful, we may be required to significantly curtail or discontinue operations or obtain funds through financing transactions with unfavorable terms.



The accompanying 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 consolidated financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. Our 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.

F-7
3.
3.          Summary of Significant Accounting Policies

The significant accounting policies followed by the Company are summarized below:

Estimates – These 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 consolidated financial statements for any period necessarily involves the use of estimates and assumptions. Actual amounts may differ from these estimates. These 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,credit losses, 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, litigation contingencies, estimated fair value of stock-based compensation, and the estimated fair value of embedded derivatives,financial instruments, including warrants and embedded conversion options.

Cash - The Company maintains its cash in bank accounts which may exceed federally insured limits.

Accounts receivable -— Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management providesThe Company maintains an allowance for probable uncollectible amounts through a chargecredit losses to earningsprovide for the estimated amount of receivables that will not be fully collected. The allowance is based on itsthe assessment of the current statusfollowing factors: customer creditworthiness; historical payment experience; age of individual accounts. Receivables are generally considered past due if greater than 60 days old. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts.

Concentration of credit risk -receivables. Management routinely assesses the financial strength of its customers and, as a consequence,consequently, believes accounts receivable are stated at the net realizable value and credit risk exposure is limited.

Inventory - Inventory consists of purchased medical equipment and parts and is stated at the lower of average cost, which is valued using the first in, first out (“FIFO”) method, or net realizable value less allowance for selling and distribution expenses. The Company analyzes its inventory levels and writes down inventory that has, or is expected to, become obsolete.

F-7
Property and equipment – Property and equipment is recorded at cost, net of accumulated depreciation. The costs of additions and betterments are capitalized and expenditures for repairs and maintenance, which do not extend the economic useful life of the related assets, are expensed. The straight-line method of depreciation is used for computing depreciation on property and equipment over the following estimated useful lives:


Estimated
Useful Life
Machines and equipment
3 years
Office and computer equipment
3 years
Medical devices on rent
5 - 15 years
Software
2years
Furniture and fixtures
3 years

Goodwill and Other Intangible Assets — Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed. The Company accounts for goodwill under ASCAccounting Standards Codification (ASC) Topic 350, Intangibles-Goodwill and Other. The Company tests goodwill for impairment annually, or more frequently whenever events or circumstances indicate impairment may exist. Goodwill is stated at cost less accumulated impairment losses. The Company completes its goodwill impairment test annually in the fourth quarter. The Company performed a qualitative evaluation at the reporting unit level and determined there was 0 Goodwillno goodwill impairment for the year endedas of December 31, 2021. 2023, and 2022.

Intangible Assets — Intangible assets arising from the Company’s acquisition are amortized on a straight‑line basis over the estimated useful life of each asset. Customer relationships have a useful life of seven years. Patents and tradenames have a useful life of nineteen years. At December 31, 2020, the Company determined that intangible assets related to certain customer relationships was impaired. See Note 8 for additional discussion of this impairment. The Company has determined that there were 0 impairment to goodwill or intangible assets for the year ended December 31, 2021.

Impairment of long-lived assets – The Company reviews long-lived assets for impairment whenever facts and circumstances indicate that the carrying amounts of the assets may not be recoverable. An impairment loss is recognized only if the carrying amount of the asset is not recoverable and exceeds its fair value. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the asset’s carrying value is not recoverable, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds its fair value. The Company determines fair value by using a combination of comparable market values and discounted cash flows, as appropriate. Except for the impairment of the intangible assets discussed above, the Company determined that 0 impairment of long-lived assets was indicated at December 31, 2021.

Leases – We determineThe Company determines whether an arrangement is a lease at inception. When our lease arrangements include lease and non-lease components, we accountthe Company accounts for lease and non-lease components (e.g. common area maintenance) separately based on their relative standalone prices.

For leases where the Company is the lessee, Right of Use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the Company’s leases did not provide an implicit interest rate, the Company used the equivalent borrowing rate for a secured financing with the term of equal to the remaining life of the lease at inception.

Any lease arrangements with an initial term of 12 months or less are not recorded on our consolidated balance sheet,sheets, and we recognizethe Company recognizes lease costs for these lease arrangements on a straight-line basis over the lease term. In the event a lease arrangement would provide us with options to exercise one or more renewal terms or to terminate the lease arrangement, we would include these options when we are reasonably certain to exercise them in the lease term used to establish our right of useROU assets and lease liabilities. None of our lease agreements include an option to purchase the leased asset, residual value guarantees, or material restrictive covenants.

The Company has other lease arrangements that are adjusted periodically based on an inflation index or rate. The future variability of these payments and adjustments are unknown, and therefore they are not included as minimum lease payments used to determine ROU assets and lease liabilities. Variable rental payments are recognized in the period in which the obligation is incurred.

F-8
Fair value of financial instruments - The carrying values of accounts payable, and other short-term obligations approximate their fair values, because of the short-term maturities of these instruments.

The Company utilizes the guidance of ASC Topic 820-10, Fair Value Measurements (“ASC 820-10”), which defines fair value, establishes a framework for measuring fair value and requires disclosures about fair value measurements. The framework that is set forth in this standard is applicable to the fair value measurements where it is permitted or required under other accounting pronouncements.

The ASC 820-10 hierarchy ranks the quality and reliability of inputs, or assumptions, used in the determination of fair value and requires financial assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:


Level 1 – Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets and liabilities:


Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly: and

Level 3 – Unobservable inputs that are not corroborated by market data, therefore requiring the Company to develop its own assumptions.

Preferred stock – The Company evaluates preferred stock issuances for liability or equity classification in accordance with the provisions of ASC Topic 480, Distinguishing Liabilities from Equity, and determines appropriate equity or liability accounting treatment. Additionally, the Company determines, if classified as equity, whether it would be recorded as permanent or temporary equity.

Sequencing policy – The Company follows a sequencing policy for which in the event partial reclassifications of contracts subject to ASC Topic 815-40-25, Derivatives and Hedging, is necessary, due to the Company’s inability to demonstrate it has sufficient authorized shares, shares will be allocated based on the basis of earliest issuance date of potentially dilutive instruments with the earliest grants receiving first allocation of shares.

Convertible instruments and liabilities related to warrants issuedpromissory notes – The Company evaluates its convertible instruments to determine if those contracts, or embedded components of those contracts, qualify as derivative financial instruments to be separately accounted for in accordance with ASC Topic 815 “Derivatives and Hedging” (“ASC 815”). The accounting treatment of derivative financial instruments requires that the Company record embedded conversion options (“ECOs”) and any related freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. Conversion options are recorded as a discount to the host instrument and are amortized as amortization of debt discount on the consolidated statements of comprehensive loss over the life of the underlying instrument. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a resultbecause of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. A binomial model was used to estimate the fair value of the ECOs of warrants that are classified as derivative liabilities on the consolidated balance sheets. The models include subjective input assumptions that can materially affect the fair value estimates. The expected volatility is estimated based on the actual volatility during the most recent historical period of time equal to the weighted average life of the instruments.

F-9
Table of Contents
Warrants related to debt issuedDebt discount – The Company records a warrantdebt discount related to warrants issued with debt at fair value and recognizes the cost using the straight-line method, which approximates the effective interest method, over the term of the related debt as interest expense, which is reported in the Other Income (Expense) section in our consolidated statements of comprehensive loss. This warrantdebt discount is reported as a reduction of the related debt liability.

Beneficial conversion feature on convertible debt - Contract LiabilitiesThe – Device product sales are bundled with an initial one-year warranty and the Company recordsoffers a beneficial conversion feature related convertible debt at fair valueseparately priced multi-year warranty. Because the warranty represents an obligation, revenue is deferred as a contract liability and recognizes the cost using the straight-line method, which approximates the effective interest method,recognized over the term oftime that the related debt as interest expense inCompany satisfies its performance obligations, which is generally the accompanying Consolidated Statements of Comprehensive Loss. This beneficial conversion feature is reported as a reduction of the related debt liability in the accompanying Consolidated Balance Sheet.

warranty term.
Segment information - We have determined that we have 1 operating segment. Our revenues are generated from sales in United States, Europe, Canada, Asia and Asia/Pacific. All significant expenses are generated in the United States and all significant assets are located in the United States.

Revenue Recognition – We recognize revenue in accordance with two different Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) standards: 1) Topic 606 and 2) Topic 842.-

Topic 606
The core principle of ASC Topic 606 “Revenue from Contracts with Customers” (“ASC 606”) requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under previous U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include inThe Company allocates the transaction price and allocatingto all contractual performance obligations included in the contract. If a contract has more than one performance obligation, we allocate the transaction price to each separateperformance obligation based on standalone selling price, which depicts the amount of consideration we expect to be entitled in exchange for satisfying each performance obligation. In accordance with ASC 606, we apply the following the five-step model:

1.Identify the contract(s) with a customer. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.
2.Identify the performance obligation(s) in the contract. If a contract promises to transfer more than one good or service to a customer, each good or service constitutes a separate performance obligation if the good or service is distinct or capable of being distinct.
3.Determine the transaction price. The transaction price is the amount of consideration to which we expect to be entitled in exchanging the promised goods or services to the customer.
4.Allocate the transaction price to the performance obligations in the contract. For a contract that has more than one performance obligation, we allocate the transaction price to each performance obligation in an amount that depicts the amount of consideration to which we expect to be entitled in exchange for satisfying each performance obligation.
5.Recognize revenue when (or as) the Company satisfies a performance obligation. For each performance obligation, we determine whether we satisfy the performance obligation at a point in time or over time. Appropriate methods of measuring progress include output methods and input methods.
F-10
Table of Contents
The Company recognizes revenue primarily from the following types of contracts under ASC 606:contracts:

ProductSystem Sales, and AccessoryConsumables and Part Sales -SystemProduct sales, and accessory and part sales include devices and applicators (new and refurbished). Performance obligations are satisfied at the point in time when the customer obtains control of the goods, which is generally at the point in time that the product is shipped.

Licensing Fees - Licensing transactions include distribution licenses and intellectual property licenses. Licensing revenue is recognized as the Company satisfies its performance obligations, which may vary with the terms of the licensing agreement.

Other Revenue - Other revenue primarily includes warranties, repairs, and billed freight. Device product sales are bundled with an initial one-year warranty and the Company offers a separately priced second-year warranty. The Company allocates the device sales price to the product and the embedded warranty by reference to the stand-alone extended warranty price. Because the warranty represents a stand-ready obligation,Warranty revenue is recognized over the time period that the Company satisfies its performance obligations, which is generally the warranty term. Repairs (parts and labor) and billed freight revenue are recognized at the point in time that the service is performed, or the product is shipped, respectively.

F-9
Topic 842
The Company recognizes revenue primarily from the following typesTable of contracts under ASC 842:
Contents
Rental and Pay per Use Income - Rental revenue represents revenues earned from renting equipment either on a monthly basis or on a pay per use. We account for these rental contracts as operating leases and revenue will be recognized on a straight-line basis in the period billed to the customer. However, under the pay per use agreement, the Company will earn revenues based on the number of times the device is used.
The lease terms are included in our contracts, and the determination of whether our contracts contain leases generally does not require significant assumptions or judgments. In some cases, a rental contract may contain a rental purchase option, whereby the customer has an option to purchase the rented equipment at the end of the term for a specified price. Revenues related to the rental contract will be accounted for as an operating lease as the option to purchase is not reasonably certain to be exercised. Lessees do not provide residual value guarantees on rented equipment.

Shipping and handling costs - Shipping charges billed to customers are included in revenues. Shipping and handling costs incurred have been recorded in cost of revenues.goods sold totaling $484 thousand and $324 thousand for the years ended December 31, 2023, and 2022, respectively.

Research and development - Research and development costs are expensed as incurred. Research and development costs include paymentscosts of research, engineering, and technical activities to third partiesdevelop a new product, researching an expanded product use or making significant improvements to existing products, including the costs of clinical development.


Stock-based compensation - The Company uses the fair value method of accounting for its employee stock option program. Stock-based compensation expense for all stock-based payment awards is based on the estimated fair value of the award measured on the grant date. The Company recognizes the estimated fair value of the award as compensation cost on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. The Company generally issues new shares of common stock to satisfy option and warrant exercises.



The expected life of options granted represents the period of time that specifically relateoptions granted are expected to be outstanding and are derived from the contractual terms of the options granted calculated under the simplified method. The risk-free rate for periods within the contractual life of the option is based on the United States Treasury yield curve in effect at the time of the grant. The expected volatility is based on the average volatility of the Company’s products in clinical development, suchcommon stock. The expected dividend yield is based on our historical dividend experience, however, since our inception, we have not declared dividends.  Forfeitures are recognized as payments to contract research organizations, consulting fees for FDA submissions, universities performing non-medical related research and insurance premiums for clinical studies and non-medical research. In addition, employee costs (salaries, payroll taxes, benefits and travel) for employees of the clinical affairs, and research and development departments are classified as research and development costs.they occur.

Comprehensive income (loss) – Comprehensive income (loss) results from the translation of the Company’s foreign entity’s financial statements from their functional currency to U.S. dollars for consolidation in the accompanying consolidated financial statements.

Recent Accounting Pronouncements –

In August 2020, Financial Accounting Standards Board (“FASB”) issued Accounting Standardsincome tax disclosures. Update (“ASU”) 2020-06, Debt—Debt with ConversionNo. 2023-09 modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and Other Options (Subtopic 470-20)foreign) and Derivatives(3) income tax expense or benefit from continuing operations (separated by federal, state, and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instrumentsforeign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature and simplifies the guidance for determining whether a conversion feature is a derivative. As a result, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost. These changes will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that was bifurcated according to previously existing rules. In addition, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The new guidancelocal jurisdictions, among other changes. Update No. 2023-09 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. Effective January 1, 2021,2024. We expect to adopt Update No. 2023-09 prospectively. We are currently evaluating the Company elected to early adopt ASU 2020-06 using the modified retrospective method. The adoptionpotential impact of ASU 2020-06 had no impactadopting this new guidance on the Company’s previously reportedour consolidated financial position or operating results.statements and related disclosures.

In June 2016, the FASBFinancial Accounting Standards Board (FASB) issued ASUAccounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments,, which was subsequently revised by ASU 2018-19. The ASU introduces a new model for assessing impairment of most financial assets. Entities will beare required to use a forward-looking expected loss model, which will replacereplaces the current incurred loss model, which will resultresulting in earlier recognition of allowance for losses. The Company adopted this ASU is effective for annual reporting periods beginning afterin January 2023, with early adoption permitted. The Company is currently evaluatingand there was no material impact on the impact of ASU 2016-13 on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes in several areas including calculating taxes in an interim period, clarifying how to account for taxes that are partially based on income and requiring an entity to reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. This amendment is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted ASU 2019-12 effective January 1, 2021 with no impact on previously reported financial position or operating results.
4.
Merger Agreement

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment. The amendments in ASU 2017-04 modified the testing that an entity should perform for its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. This amendment is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2017-04 effective January 1, 2021. The adoption of this guidance did not impact our results of operations or financial position.

In May 2021,On August 23, 2023, the FASB issued Accounting Standards Update (“Company entered into an Agreement and Plan of Merger (the “Merger AgreementASU”) 2021-04, Earnings Per Share (Topic 260)by and among SEP Acquisition Corp., Debt—Modificationsa Delaware corporation (“SEPA”), SEP Acquisition Holdings Inc., a Nevada corporation and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU reduces diversity in an issuer’s accounting for modifications or exchangesa wholly owned subsidiary of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. This ASU provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not withinSEPA (“Merger Sub”). Pursuant to the scope of another Topic. It specifically addresses: (1) how an entity should treat a modificationterms of the terms or conditions or an exchange ofMerger Agreement, a freestanding equity-classified written call option that remains equity classified after modification or exchange; (2) how an entity should measurebusiness combination between the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange;Company and (3) how an entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. This ASUSEPA (the “Merger”) will be effective for us on January 1, 2022. An entity should apply the amendments prospectively to modifications or exchanges occurring on or afteraffected. More specifically, and as described in greater detail below, at the effective datetime of the amendments. Early adoption is permitted, including adoption in an interim period. Merger (the “Effective TimeThe Company is currently evaluating the effect the adoption of this ASU will have on our consolidated financial statements.
”):


F-12Merger Sub will merge with and into the Company, with the Company being the surviving company following the merger.
Each issued and outstanding share of the Company’s common stock, will automatically be converted into Class A common stock of SEPA, par value $0.0001 per share (the “Class A Common Stock”), at the Conversion Ratio (as defined in the Merger Agreement); and
Outstanding convertible securities of the Company will be assumed by SEPA and will be converted into the right to receive Class A Common Stock of SEPA.



If the Merger Agreement is consummated SEPA will acquire 100% of the Company’s issued and outstanding equity securities.  The proposed merger will be accounted for as a “reverse recapitalization” in accordance with US GAAP.  Under the reverse recapitalization model, the transaction will be treated as the Company issuing equity for the net assets of SEPA, with no goodwill or intangible assets recorded.  Under this method of accounting, SEPA will be treated as the acquired company for financial reporting purposes.  This determination is primarily based on the fact that following the merger, the Company’s stockholders are expected to have a majority voting power of the combined company, approximately 69 – 70%, the Company will comprise all of the ongoing operations of the combined company, Company representatives will comprise a majority of the governing body of the combined company, and the Company’s senior management will comprise all of the senior management of the combined company.  As a result of the merger, SEPA will be renamed Sanuwave Health, Inc.

F-10

Merger Consideration -The consideration to be delivered to the Company’s securityholders by SEPA in connection with the consummation of the Merger (the “Closing”) will consist solely of 7,793,000 shares of Class A Common Stock and, in the case of certain Securityholders, of securities convertible into or exercisable for new shares of Class A Common Stock reserved for issuance from the merger consideration (the “Merger Consideration”). The Merger Consideration deliverable to the Company’s stockholders will be allocated pro rata based on their ownership after giving effect to the required conversion or exercise, as applicable, of all the outstanding convertible notes, in-the-money options, and in-the-money warrants immediately prior to the Closing.



Out-of-the-money options and out-of-the-money warrants will be assumed by SEPA and converted into options or warrants, respectively, exercisable for shares of Class A Common Stock based on the Conversion Ratio; however, such out-of-the-money options and warrants shall not be reserved for issuance from the Merger Consideration.



Conditions to Closing -The Merger Agreement contains customary conditions to Closing, including the following mutual conditions of the parties (unless waived): (i) approval of the stockholders of the Company and SEPA; (ii) approvals of any required governmental authorities; (iii) no law or order preventing the Transactions; (iv) the filing of the Charter Amendments; (v) the appointment of SEPA’s post-closing board of directors; (vi) the Registration Statement having been declared effective by the SEC; (vii) approval of the Class A Common Stock of SEPA for listing on Nasdaq; (viii) holders of 80% or more of the Company’s convertible notes with a maturity date occurring after the date of the Closing (the “Closing Date”), measured by number of shares into which such convertible notes may be converted, agreeing to convert their convertible notes into shares common stock immediately prior to the Effective Time; and (ix) holders of 80% or more of the Company’s warrants that would be outstanding on the Closing Date, measured by number of shares subject to all such warrants in the aggregate, agreeing to convert their warrants into shares of common stock immediately prior to the Effective Time.



In addition, unless waived by the Company, the obligations of the Company to consummate the business combination are subject to the satisfaction of the following additional Closing conditions, in addition to the delivery by SEPA of customary certificates and other Closing deliverables: (ii) SEPA having performed in all material respects its obligations and complied in all material respects with its covenants and agreements under the Merger Agreement required to be performed or complied with by it on or prior to the Closing Date; (iii) SEPA having delivered a fairness opinion of the Purchaser Financial Advisor (as defined in the Merger Agreement), in form and substance reasonably satisfactory to the Company; (iv) SEPA having, at the Closing, at least $12,000,000 in cash and cash equivalents, including funds remaining in the trust account (after giving effect to the completion and payment of any redemptions) and the proceeds of any PIPE Investment; and other customary conditions to Closing as defined in the Merger Agreement.


In February 2024, the Company amended the Merger Agreement to extend the date after which the Company or SEPA, in its discretion, can elect to terminate the Merger Agreement if any of the conditions to closing of the other party have not been met or waived, from February 28, 2024 to April 30, 2024.

4.          Loss per share
5.
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 years ended December 31, 20212023, and 2020.2022. In accordance with 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:

  2021
  2020
 
Weighted average shares outstanding      
Common shares  
481,619,621
   
359,880,132
 
Common shares issuable assuming excercise of nominally priced warrants  
36,736,021
   
18,248,513
 
Weighted average shares outstanding  
518,355,642
   
378,128,645
 
 (in thousands)
 December 31, 2023
  December 31, 2022
 
Common shares  
772,160
   
526,530
 
Common shares issuable assuming exercise of nominally priced warrants  
21,691
   
22,941
 
Weighted Average Shares Outstanding  
793,851
   
549,471
 

Diluted net loss per share would beis 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 years ended December 31, 20212023, and 2020,2022, 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 at December 31, 2021 and 2020, respectively (dollars in thousands):following:

 2021
 2020
 
(in thousands)
 December 31, 2023
 December 31, 2022
 
Common stock options 
31,760
 
31,938
  
16,287
 
21,246
 
Common stock purchase warrants 
168,192
 
142,266
  
1,199,882
 
1,186,522
 
Convertible notes payable  
90,380
  
58,657
 
Convertible notes payable, including interest
  
161,773
  
603,425
 
  
290,332
  
232,861
   
1,377,942
  
1,811,193
 

5.          Asset Purchase Agreement

On August 6, 2020, the Company completed an asset purchase agreement (the “Asset Purchase Agreement”) with Celularity pursuant to which the Company acquired (the “Transaction”) Celularity’s UltraMIST® assets (“UltraMIST®”, or the “Assets”). The acquisition provides the Company with a robust product offering in the advanced wound care market and gives the Company an end-to-end advanced wound care product portfolio that addresses the entire care pathway. The aggregate consideration paid for the Assets was $24.0 million, which consisted of (i) a cash payment of $18.9 million, (ii) the issuance of a convertible promissory note to Celularity in the principal amount of $4.0 million (the “Seller Note”), and (iii) a credit of $1.1 million for the previous payment made by the Company to Celularity pursuant to that certain letter of intent between the Company and Celularity dated June 7, 2020.

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, 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 provides written notice at least 180 days prior to the expiration of the current term. The license agreement calls for prepaid minimum quarterly upfront royalty of $446 thousand of payments for Biovance which are credited against sales in that quarter. At December 31, 2021 and 2020 the Company had accrued $893 thousand and $336 thousand of license fees, respectively. Royalties are based on a transfer price for each Biovance product and sales are reported on a quarterly basis to Celularity. In the event of sales in excess of the quarterly minimums, any additional royalties are due at that time.

F-13
Table of Contents
The Company evaluated the transaction and has accounted for it as a business combination and applied the related accounting guidance as required, using the acquisition method and a fair value model.

The tables below present the consideration paid to Celularity and the fair value of the Assets acquired on August 6, 2020 (dollars in thousands):

Purchase Consideration   
Cash paid at closing 
$
18.9
 
Cash paid pursuant to letter of intent  
1.1
 
Note payable to seller  
4.0
 
Total Consideration 
$
24.0
 

Fair Value of Net Assets Acquired   
Inventory 
$
1.9
 
Property and equipment  
0.4
 
Intangible assets (1)  
14.4
 
Goodwill (2)  
7.3
 
Total fair value of net assets acquired 
$
24.0
 

1.
Intangible assets, as summarized below, are recorded at their estimated fair value. The estimated fair value of the acquired customer relationships is determined using the multi-period excess earnings method. At December 31, 2020, the Company determined that intangible assets related to certain customer relationships was impaired. See Note 8 for additional discussion of this impairment. The estimated fair value of the acquired patent and trade names is based on a relief from royalty method. The estimated useful lives for intangible assets were determined based on the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows.

2.Goodwill represents the excess of the total purchase consideration over fair value of the assets recognized and represents the future economic benefits that we believe will result from combining the operations of SANUWAVE and UltraMIST®, including expected future synergies and operating efficiencies. Goodwill resulting from the Transaction has been assigned to the Company’s lone operating segment. Goodwill is not subject to amortization and is tested for impairment annually and whenever events or changes in circumstances indicate that impairment may have occurred.  The goodwill recognized is expected to be deductible for income tax purposes (dollars in thousands).


 
Intantible Assets
   Fair Value    
Useful Life
(Years)
  
Customer relationships - UltraMIST® 
$
3.8
   
7
 
Customer relationahips - Biologics  
7.6
   
7
 
Patent  
2.3
   
19
 
Trade names  
0.7
   
19
 
Total intangible assets 
$
14.4
     

Acquisition and related costs -During the year ended December 31, 2020, acquisition costs of $1.1 million were expensed as incurred and included in general and administrative expenses in the consolidated statements of comprehensive loss. Such costs include professional fees of advisors and integration and synergy costs related to the combination of UltraMIST® and SANUWAVE.

Table of Contents
Pro forma impact of acquisition –The table below shows summarized unaudited pro forma combined operating results of the Company for the year ended December 31, 2020 as if the UltraMIST® business acquisition had occurred on the same terms as of January 1, 2020. Pro forma adjustments have been made related to amortization of intangibles, interest expense, and income tax expense for the year ended December 31, 2020. The pro forma financial information does not reflect revenue opportunities and cost savings which the Company expected to realize as a result of the acquisition or estimates of charges related to the integration activity.

 
 
 
Year Ended December 31
(unaudited)
 
 
 2020
 
Total revenues
 
$
7.8
 
Net Loss
  
(35.6
)

The unaudited pro forma combined results of operations were prepared using the acquisition method of accounting and are based on the historical financial operating results of the Company and UltraMIST®. Except to the extent realized in the year ended December 31, 2020, the unaudited pro forma information does not reflect any cost savings, operating synergies and other benefits that the Company may achieve as a result of the acquisition, or the expenses to be incurred to achieve these savings, operating synergies and other benefits. In addition, except to the extent recognized in the years ended December 31, 2020, the unaudited pro forma information does not reflect the costs to integrate the operations of UltraMIST® within the Company.

The acquired Assets were consolidated into our financial statements starting on the acquisition date. The total revenues and operating income of UltraMIST® consolidated into our financial statements since the date of acquisition through December 31, 2020 were $3.6 million and $467 thousand.

6.          Inventory

Inventory consists of the following at December 31, 2021 and 2020 (dollars in thousands):

 
 2021
  2020
 
Inventory - finished goods 
$
335
  
$
1,146
 
Inventory - parts and accessories  
705
   
1,810
 
Total inventory 
$
1,040
  
$
2,956
 

7.          Property and Equipment

Property and equipment consists of the following at December 31, 2021 and 2020 (dollars in thousands):

  2021
  2020
 
Machines and equipment 
$
190
  
$
278
 
Office and computer equipment  
316
   
245
 
Medical devices on rent  
806
   
513
 
Software  
38
   
38
 
Furniture and fixtures  
27
   
23
 
Other assets  
102
   
3
 
Total  
1,479
   
1,100
 
Accumulated depreciation  
(811
)
  
(629
)
Net property and equipment 
$
668
  
$
471
 

Depreciation expense was $182 thousand and $98 thousand for the years ended December 31, 2021 and 2020, respectively.

F-15F-11
8.          Goodwill and Other Intangible Assets
6.
Inventory

Changes inInventory consisted of the carryingfollowing:

(in thousands)
 December 31, 2023
  December 31, 2022
 
Finished goods 
$
416
  
$
570
 
Parts and accessories  
2,882
   
641
 
Reserve for slow moving inventory
  (347)  (343)
Total Inventory 
$
2,951
  
$
868
 


7.
Intangible Assets



Carrying value of goodwill and other intangible assets duringconsisted of the yearfollowing:


  December 31, 2023  December 31, 2022  
Weighted-
Average Useful
Life (in years)
  
(in thousands) Gross  
Accumulated
Amortization
  Gross  
Accumulated
Amortization
  
Definite-lived Intangibles               
Customer relationships $3,820  $(1,854) $3,820  $(1,308)  2.9 
Patent  2,312   (413)  2,312   (292)  6.4 
Tradenames  693   (124)  693   (88)  1.9 
Intangible Assets $6,825  $(2,391) $6,825  $(1,688)  3.8 



Amortization expense for each of the years ended December 31, 2021 consist of the following activity:

 
 December 31, 2020  Amortization  Impairment  December 31, 2021  
Weighted
average useful
life (in years)
 
Goodwill 
$
7,260
  
$
-
  
$
0
  
$
7,260
   
-
 
                     
Intangible assets subject to amortization                    
Customer relationships - UltraMIST 
$
3,603
  
$
(546
)
 
$
0
  
$
3,057
   
2.9
 
Patent  
2,263
   
(121
)
  
0
   
2,142
   
6.4
 
Trade names  
679
   
(37
)
  
0
   
642
   
1.9
 
Other intangible assets 
$
6,545
  
$
(704
)
 
$
0
  
$
5,841
   
3.8
 

2023, and 2022 totaled $704 thousand.  Future amortization expense is expected to be the following (dollars in thousands):


Year ended December 31, Amortization 
2024  704 
2025  704 
2026  704 
2027  487 
2028  158 
Thereafter
  1,677 

8.
Accrued Expenses

Accrued expenses consisted of the following:

Year ending December 31,
 Amortization 
2022  
704
 
2023  
704
 
2024  
704
 
2025  
704
 
2026  
704
 
Thereafter  
2,321
 
 
 
$
5,841
 

Impairment – During the fourth quarter of 2020, the Company determined that the intangible asset for customer relationships related to the biological products was impaired due to significant shortfalls in sales of the products during that period compared with the sales projections used to determine the fair value the intangible asset as of the August 6, 2020 acquisition date. The Company does not expect sales of biological products to sufficiently recover. The estimated fair value of the customer relationships at the acquisition date and at December 31, 2020 were determined using the multi-period excess earnings method. At December 31, 2020, the Company recorded a $7.2 million impairment charge for this intangible asset in the consolidated statements of comprehensive loss.
 (in thousands)
 December 31, 2023
  December 31, 2022
 
Registration penalties
 
$
1,583
  
$
1,583
 
License fees  
892
   
892
 
Board of directors fees  
942
   
415
 
Employee compensation  
2,298
   
4,585
 
Other  
284
   
1,037
 
 Total Accrued Expenses
 
$
5,999
  
$
8,512
 

9.Accrued expenses

Accrued expenses consist of the following at December 31, 2021 and 2020:

 
 2021
  2020
 
Registration penalties
 
$
1,950
  
$
264
 
License fees  
893
   
336
 
Board of director’s fees  
507
   
320
 
Legal and professional fees
  
221
   
196
 
Other  
823
   
1,011
 
 
 
$
4,394
  
$
2,127
 

F-16
Table of Contents
10.          Revenue

Disaggregation of Revenue - The disaggregation of revenue is based on geographical region. The following table presents revenue from contracts with customers for the years ended December 31, 2021 and 2020 (dollars in thousands):

 
 Year ended December 31, 2021  Year ended December 31, 2020 
 
 United States  International  Total  United States  International  Total 
Accessory and parts revenue 
$
7,770
  
$
302
  
$
8,072
  
$
1,121
  
$
88
  
$
1,209
 
Product  
2,766
   
350
   
3,116
   
2,179
   
88
   
2,267
 
License fees and other  
135
   
60
   
195
   
0
   
152
   
152
 
Topic 606 Revenue
 
$
10,671
  
$
712
  
$
11,383
  
$
3,300
  
$
328
  
$
3,628
 
                         
Rental income
  1,627   0   1,627   429   0   429 
Topic 842 Revenue
 $
1,627  $
0  $
1,627  $
429  $
0  $
429 
                         
Total Revenue
 $
12,298  $
712  $
13,010  $
3,729  $
328  $
4,057 

Contract liabilities -As of December 31, 2021 and 2020, the Company has contract liabilities from contracts with customers as follows (dollars in thousands):

 
 
 
December 31,
2021
  
December 31,
2020
 
Service agreements 
$
137
  
$
69
 
Deposit on future equipment purchases  
204
   
0
 
Total contract liabilities  
341
   
69
 
Less: current portion  
(48
)
  
(32
)
Non-current contract liabilities 
$
293
  
$
37
 

During the years ended December 31, 2021 and 2020, the Company recognized revenue related to these contract liabilities of $32 thousand and $61 thousand, respectively, that were included in the beginning contract liability balances for each of those periods.

The following table summarizes the changes in contract liabilities during the year ended December 31, 2021 and 2020 (dollars in thousands):

   
Year ended
December 31, 2021
  
Year ended
December 31, 2020
 
Beginning balance 
$
69
  $128 
New service agreement additions  
100
   2 
Deposit on future equipment purchases  
204
   0 
Revenue recognized  
(32
)
  (61)
Total contract liabilities  
341
   69 
Less current portion  
(48
)
  (32)
Non-current contract liabilities 
$
293
  $37 

11.          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 ended December 31, 2021 and 2020 were as follows:

  December 31, 2021  December 31, 2020 
Accounts Receivable:      
Customer A  
24
%
  
n/a
 
Customer B  
16
%
  
46
%

F-17
Table of Contents
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 years ended December 31, 2021 and 2020 were as follows:

December 31, 2021December 31, 2020
Purchases:
Vendor A9.
50
Factoring Liabilities
%
n/a
Vendor B
21
%
n/a
Vendor C
n/a
35
%
Vendor D
n/a
22
%
Vendor E
n/a
11
%

12.          Accounts Receivable Factoring

Receivable amount transferred at 12/31/2021
2,026
Reserve amount held
(289)
Funds due to factoring at 12/31/2021
1,737

OnIn June 17, 2021, the Company entered into a factoring agreement with Goodman Capital Finance (“Goodman”), an unrelated third party, pursuant to which the Company may sell certain of its accounts receivables for 86.25% of the value of the receivable. Advances available under the facility are capped at the lesser of $3.0 million or a formula amount, as defined in the agreement. Interest on advances is assessed at a fixed amount upon funding, which is equivalent to an annualized rate of 15.0% for the first 30 days, and daily thereafter at an annualized rate of 14.4%. The agreement’s term is one month and automatically renews for additional one-month periods, unless either party provides 30 days’ notice of termination. The accounts receivable areis sold with recourse back to the Company, therefore, the Company accounts for the arrangement as traditional financing.

F-18F-12
(In thousands) December 31, 2023  December 31, 2022 
Receivables transferred $1,794  $2,564 
Reserve amount held  (304)  (434)
Factoring liability $1,490  $2,130 

13.          Notes payable
10.Senior Secured Debt, in Default


The following two tables summarizetable summarizes outstanding notes payable as of December 31, 2021 and December 31, 2020 (in thousands):senior secured debt:


 Maturity Date Interest Rate  Conversion Price  Principal  
Remaining
Debt
Discount
  Remaining Embedded Conversion Option  Carrying Value 
Senior secured promissory note payable, in defaultIn default
  20.25%  n/a  $15,000   (3,414)  0
  $11,586 
Convertible promisory notes payable, in defaultIn default
  15.4% $0.1071   6,445
   (1,099)  6,255
   11,601
 
                          
Convertible promisory notes payable, related parties, in defaultIn default
  14.0% $0.10   1,596
   0
   0
   1,596
 
                          
SBA loan #2February 20, 2026
  1.00%  n/a   1,033
   0   0
   1,033
 
                          
Advances on future cash receiptsMarch 11, 2022
  n/a   n/a   1,500
   (1,054)  0
   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  $0  $0  $875 

 December 31, 2023 December 31, 2022 
(In thousands)Principal 
Debt
Discount
 
Carrying
Value
 Principal 
Debt
Discount
 
Carrying
Value
 
Senior secured debt $21,562  $(3,284) $18,278  $19,211  $(4,795) $14,416 


F-19
Table of Contents

Maturity Date 
Stated
Interest
Rate
  Conversion Price  Principal  
Remaining
Debt
Discount
  Carrying Value 
Senior secured promissory note payable, in defaultIn default  
20.25
%
  
n/a
  
$
15,000
   
(4,324
)
 
$
10,676
 
Convertible promissory notes payable, in default:                     
Seller Note
In default  
17.00
%
 
$
0.10
   
4,000
   
0
   
4,000
 
                      
Convertible promissory notes payable, related parties, in default:                     
Convertible promissory notes (HealthTronics), related partiesIn default  
14.0
%
 
$
0.10
   
1,596
   
0
   
1,596
 
                      
SBA loan #1May 28, 2022  
1.00
%
  
n/a
   
464
   
0
   
464
 
                      
Total debt outstanding, including amounts in default           
21,060
   
(4,324
)
  
16,736
 
                      
Less:  current maturities, including notes in default           
(20,917
)
  
4,324
   
(16,593
)
                      
Total long-term debt as of December 31, 2020
          
$
143
  
$
0
  
$
143
 

Senior secured promissory note payable, in default (“Senior Secured Note”) -– OnIn August 6, 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.. In accordance with the NWPSA, the Company issued a $15 million Senior Secured Promissory Note Payable (the “Senior Secured Note”) 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®UltraMIST assets from Celularity Inc. (Celularity) among other transactions.

In February 2022, the Company entered into a Second Amendment to Note and Warrant Purchase and Security Agreement (the “Second NWPSA”) for $3.0 million, for a total of $18.0 million outstanding. Along with the issuance of the note, the Company also issued warrants to purchase 16.2 million shares of common stock with an exercise price of $0.18 and 20.6 million shares of common stock.  Since the combined fair value of the warrants and common stock issued as part of the Second NWPSA exceeded the face value of the note, the additional amount beyond the face value was recorded as a loss on issuance totaling $3.4 million.

Interest is charged at the greater of the prime rate or 3% plus 9%, paid quarterly.  The principal increases at a rate of 3% of the outstanding principal balance (PIK interest) on each quarterly interest payment date.  The original maturity date of the Senior Secured Note is September 20, 2025, and it can be prepaid.

In 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.

In June 2023, the Company entered into a Fourth Amendment to the NWPSA, which provides the Company an extension of the holder forbearing from exercising the remedies arising from the existing defaults to the earlier of the occurrence of an event of default and December 31, 2023. The amendment also added a consent fee of 2% of the original principal amount of the NWPSA, payable in cash at maturity, accounted for as additional debt issuance costs. The amendment also defers interest that would otherwise have been due on June 30, 2023, and September 30, 2023. The interest will instead be compounded and added to the principal amount of the notes and bear interest at a rate of 20.25% per annum. The amendment also requires the Company to complete an equity financing that results in gross cash proceeds of at least $2.5 million by July 15, 2023. This financing successfully closed on July 21, 2023.

In March 2024, the Company entered into a Consent, Limited Waiver and Fifth Amendment to Note and Warrant Purchase Agreement (the “Fifth Amendment”). The Fifth Amendment provides (i) consent to enter into a License and Option Agreement and consummation of the License and Option Transaction (as disclosed in Note 22) (ii) a waiver of any event of default that may occur under the NWPSA, because of the License and Option Agreement or License and Option Transaction and (iii) amended the NWPSA to release certain patents from the collateral. The Fifth Amendment also provides for a forbearance of exercising remedies in connection with certain existing events of default under the NWPSA until the earlier of (x) the occurrence of another event of default under the NWPSA and (y) April 30, 2024. During the forbearance period, the outstanding obligations under the NWPSA continue to accrue interest at the default rate.



As of December 31, 2020,2023, the Company wasis in default ofon the minimum liquidity provisions on the Senior Secured Note. As of December 31, 2021, the Company remains in default of the minimum liquidity provisions on the Senior Secured Note and, as a result, it is classified in current liabilities in the accompanying consolidated balance sheets. As a result of the default, theThe Company is accruing interest at the default interest noterate of an incremental 5%.

F-13

The debt issuance costs, and debt discount related to the Senior Secured Note were capitalized as a reduction in the principal amount and are being amortized to interest expense over the life of the Senior Secured Note. The amortization of the debt issuance costs and debt discount for the twelve months ended December 31, 2021 was $910 thousand and is included in interest expense. Accrued interest related to the Senior Secured Note was $1.6$3.2 million and $642 thousand at$1.9 million on December 31, 20212023, and December 31, 2020,2022, respectively. Interest expense on the Senior Secured Note was $3.1totaled $6.9 million and $1.5$5.9 million for the years ended December 31, 20212023, and 2020,2022, respectively.

11.Convertible Promissory Notes and Convertible Promissory Notes, Related Parties


 December 31, 2023 
(In thousands, except conversion price) 
Conversion
Price
  Principal  
Debt
Discount
  
Conversion
Option
  
Carrying
Value
 
Acquisition convertible promissory note, in default $0.10  $4,000  $-  $-  $4,000 
Convertible promissory note, related party, in default $0.10   1,373   -   -   1,373 
2022 Convertible notes payable $0.04   2,639   (1,235)  -   1,404 
2022 Convertible notes payable, related parties $0.04   450   (118)  -   332 
Total Convertible promissory notes     $8,462  $(1,353) $-  $7,109 


  December 31, 2022 
(In thousands, except conversion price) 
Conversion
Price
  Principal  
Debt
Discount
  
Conversion
Option
  
Carrying
Value
 
Acquistion convertible promissory note, in default $0.10  $4,000   -  
-  $4,000 
Convertible promissory note payable, related parties, in default $0.10   1,373   -   -   1,373 
2022 Convertible notes payable $0.04   13,660   (2,532)  1,585   12,713 
2022 Convertible notes payable, related parties
 $
0.04   6,515   (1,234)  755   6,036 
Total Convertible Promissory Notes     $25,548  $(3,766) $2,340  $24,122 


2022 Convertible Notes Payable and 2022 Convertible Notes Payable, Related Parties - In August 2022, November 2022, May 2023 and December 2023, the Company entered into a Securities Purchase Agreements (the “Purchase Agreements”), for the sale in a private placement of (i) Future Advance Convertible Promissory Notes (the “Notes”) in an aggregate principal amount of $16.2 million in August 2022,$4.0 million in November 2022, $1.2 million in May 2023, and $1.9 million in December 2023 (ii) Common Stock Purchase Warrants to purchase an additional 581.6 million shares of common stock with an exercise price of $0.067 per share and (iii) Common Stock Purchase Warrants to purchase an additional 581.6 million shares of common stock with an exercise price of $0.04 per share. Interest expense for the years ended December 31, 2023 and 2022, totaled $6.4 million and $4.4 million, respectively.
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.

In August 2023 and November 2023, the Company utilized its election to convert the August and November issued 2022 Convertible Notes Payable into shares of common stock upon the Notes’ maturity.  The August notes totaling $16.2 million in principal and $2.4 million in interest were converted to 464,440,813 shares of common stock. The November notes totaling $4.0 million in principal and $0.6 million in interest were converted to 114,481,063 shares of common stock.



Acquisition Convertible promissory notes payable in default (“Seller Note”) - On In August 6, 2020, the Company entered into an asset purchase agreement with Celularity to acquire Celularity’s UltraMIST®UltraMIST assets. A portion of the aggregate consideration of $24 million paid for the assets included the issuance of a promissory note to Celularity in the principal amount of $4 million (the “Seller Note”). The Seller Note matured on August 6, 2021, and was not repaid. The Company’s failure to pay the outstanding principal balance when due constituted an event of default under the terms of the Seller Note and, accordingly, it began accruing additional interest of 5.0% in addition to the 12.0% initial rate, as of the date of the default. As of December 31, 20212023, and December 31, 2020,2022, the Seller Notes had outstanding accrued interest of $761 thousand$2.2 million and $192 thousand,$1.5 million, respectively.

F-20
Table of Contents
The Company evaluated embedded conversion features within the convertible promissory note and determined that the conversion feature does not require to be bifurcated. Upon adoption of ASC 2020-62020-06 effective January 1, 2021, the convertible promissory note is accounted for as a single liability due to the elimination of the beneficial conversion feature accounting model.

F-14

Convertible promissory notes payable, related party -On April 20, 2021, In August 2020, the Company entered intoissued 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 “Private Placement”) of (i) the Company’s future advance convertible promissory note payable in the amount of $1.4 million. The note matured on August 6, 2021, and was not repaid and is currently in default. As of December 31, 2023, and 2022, the note had outstanding accrued interest of $636 thousand and $444 thousand, respectively.

In October 2023, the Company signed a settlement letter agreement for the payment of $1.4 million principal to settle this convertible note.  Payment is due on the earlier of March 31, 2024, or the closing of the Merger described in Note 4.  If the Company fails to make payment, the lender retains all rights with respect to the convertible promissory note.


12.Asset-Backed Secured Promissory Notes

In July 2023, the Company issued Asset-Backed Secured Promissory Notes (the “ABS Promissory Notes”) in an aggregate principal amount of up$4.6 million to $3.4 millioncertain accredited investors (the “Leviston Note”“Purchasers”) and (ii) a warrant to purchase an additional 16,666,667 shares of common stock of the Company (the “Leviston Warrant”). The Leviston Warrant has an exercise price of $0.18 per share and a four-year term. The closing of the Private Placement occurred on April 20, 2021 (the “Leviston Closing Date”).

As noted above, on April 20, 2021, the Company issued the Leviston Note to the Purchaser in an aggregate principal amount of up to $3.4 million (the “Aggregate Amount”), which shall be advanced in disbursements by the Purchaser (“Leviston Disbursements”), as set forth in the Leviston Note. On May 14, 2021, the Leviston Note was amended to increase the Aggregate Amount to $4.2 million. On April 21, 2021, the Purchaser advanced a Leviston Disbursement of $750 thousand, which is net ofat an original issue discount of 8%33.33%. On May 14, 2021,The ABS Promissory Notes bear an interest rate of 0% per annum and mature on January 21, 2024 (the “Maturity Date”).  The Company received total proceeds of approximately $3.0 million. The Company entered into a Security Agreement providing for a continuing and unconditional security interest in any and all property of the Purchaser advanced a second Leviston Disbursement of $750 thousand, also net of an original issue discount of 8%. A $250 thousand Leviston Disbursement was made on September 3, 2021, which was subjectCompany.  This security interest is subordinate to the same terms and conditions of the April and May Leviston Disbursements. In addition, a $500 thousand disbursement was made on September 3, 2021Senior Secured Debt described in accordance with notes issued to 5 institutional investors (the “Five Institutions’ Notes”), which were subject to substantially the same terms and conditions as the Leviston Disbursements. Accrued interest related to the Securities Purchase Agreement and Warrants was $169 thousand at December 31, 2021.Note 10. Interest expense on the Securities Purchase Agreement and Warrants was $169 thousand for the year ended December 31, 2021.2023, totaled $812 thousand.

December 2021 Advance on Future Receipts Financing - On December 22, 2021,
The Company and the Company paid off the remaining balance of $650 thousand from the September 27, 2021 advance and received $758 thousand in cash proceeds related to its entryPurchasers also entered into a non-recourse agreement forside letter pursuant to which the sale of $1.5 million of future receipts to GCF. In conjunction withparties agreed that upon the 24-week agreement,Maturity Date, or upon a fundamental transaction as defined by the Company is obligated to remit to GCF a minimum of $59 thousand of receipts each week for the first 6 weeks and receipts of $98 thousand for the remaining 18 weeks. After considering the payments made at closing,ABS Promissory Notes, the Company will record an initial liability of $1.5 million andissue each Purchaser a debt discount of approximately $90 thousand, which represents the original issue discount and the fees paid in conjunctionFuture Advance Convertible Promissory Note with the financing. The debt discount will be amortized tosame principal amount as the principal amount of such Purchasers’ ABS Promissory Notes, plus any accrued and unpaid interest expense overand two Common Stock Purchase Warrants, substantially in the lifeforms of the agreement. Notes and Common Stock Purchase Warrants disclosed in Note 11.


In evaluating the accounting for the ABS Promissory Notes and Side Letter (the “Side Letter”), pursuant to relevant guidance, the Side Letter was determined to not represent a freestanding financial instrument as it is not legally detachable and separately exercisable.  The Company will begin makingredemption features under the required minimum weekly payments January 3, 2022 and is obligated to continue through June 13, 2022. At closing, the Company also issued warrants to purchase 8,333,334 sharesSide Letter are considered embedded derivatives, including a right for contingent redemption upon an event of default, automatic redemption upon maturity of the Company’s common stock to affiliates of GCF. The warrants have an exercise price of $0.18 per shareABS Promissory Notes, and expire four years after issuance. The Company has evaluated the terms of the warrants and after review has determined that these warrants meet the definition ofredemption is triggered upon a derivative liability and accordingly, were recorded as additional discount against the debt at issuance.

Warrant issuances to Leviston and Five Institutions’ in April, May and September 2021
On April 20, 2021, May 14, 2021 and September 3, 2021, respectively, Leviston was issued 3,968,254, 3,968,254 and 1,322,751, warrants for shares of common stock. On September 3, 2021, the Company also issuedfundamental transaction. As a total of 2,777,779 warrants for shares of common stock to Five Institutions. After evaluating the terms of the warrantsresult, the Company determined that these features met the criteria of an embedded derivative.


  December 31, 2023 
(In thousands) Principal  
Debt
Discount
  
Embedded
Derivative
  
Carrying
Value
 
ABS promissory notes 
$
3,122
  
$
(53
)
 
$
48
  
$
3,117
 
ABS promissory notes, related parties  
1,462
   
(49
)
  
45
   
1,458
 
Total ABS Promissory Notes $4,584  $(102) $93  $4,575 

13.Fair Value Measurements

The Company uses various inputs to measure the outstanding warrants meetand certain embedded conversion features associated with convertible debt on a recurring basis to determine the definition of a derivative liability and accordingly, were recorded as additional discount against the debt at issuance. See detailsfair value of the associated warrant issuancesliabilities. The following table classifies the Company’s liabilities measured at Note 15 – Warrant Liabilities.fair value on a recurring basis into the fair value hierarchy:

  Fair value measurement at December 31, 2023 
(in thousands)
 Fair value  
Quoted
prices in
active
markets
(Level 1)
  
Significant
other
observable
inputs
(Level 2)
  
Significant
unobservable
inputs
(Level 3)
 
Warrant liability 
$
14,447
   
-
   
-
  
$
14,447
 
Conversion option  
93
   
-
   
-
   
93
 
Total Fair Value 
$
14,540
  
$
-
  
$
-
  
$
14,540
 

F-15
  Fair value measurement at December 31, 2022 
(in thousands)
 Fair value  
Quoted
prices in
active
markets
(Level 1)
  
Significant
other
observable
inputs
(Level 2)
  
Significant
unobservable
inputs
(Level 3)
 
Warrant liability 
$
1,416
   
-
   
-
  
$
1,416
 
Conversion option  
2,340
   
-
   
-
   
2,340
 
Total Fair Value 
$
3,756
  
$
-
  
$
-
  
$
3,756
 

There were no transfers between Level 1, 2, or 3, during the years ended December 31, 2023, and 2022. Both observable and unobservable inputs were used to determine fair value of the positions that the Company classified within the Level 3 category.  Unrealized gains and losses associated with the liabilities within the Level 3 category include changes in fair value that were attributable to both observable and unobservable inputs.

Warrant Liability

The Company’s liability classified warrants as of December 31, 2023, and initial valuation of December 2023 warrants, were valued using a probability weighted expected value considering the Merger Agreement and the previous Black Scholes valuation model, with significant value stemming from the Merger Agreement.  Significant inputs under the Merger Agreement valuation included the risk adjusted expected exchange ratio (0.003), the value of SEPA’s Class A Common Stock, the expected timing of the closing of the Merger (estimated by February 29, 2024), and the probability of the Merger closing (90% probability).

Significant Black Scholes valuation model inputs related to the Company’s warrants are listed below:

  
Initial Valuation
May 2023 Issuance
  December 31, 2022 
Weighted average expected life in years
  
5.00
   
4.68
 
Weighted average volatility  
84
%
  
92
%
Value of underlying shares $0.019  $0.005 
Weighted average risk free interest rate  
3.50
%
  
4.00
%
Expected dividend yield  
-
   
-
 

A summary of the Level 3 warrant activity is as follows:

(in thousands, except per share data)
 
Warrants
Outstanding
  
Fair Value
per Share
  
Warrant Liability
Fair Value
 
Balance December 31, 2021
  62,617  $0.15  $9,614 
Cashless exercise
  (27,037)  0.09   (3,130)
Issuance of warrants classified as liablities
  1,031,276   0.06   4,873 
Change in fair value  -   -   (9,941)
Balance December 31, 2022  1,066,856  $0.06  $1,416 
Warrants exercised  -   -   - 
Issuance of warrants classified as liablities  154,452   0.01   1,655 
Change in fair value  -   -   11,376 
Balance December 31, 2023
  1,221,308  $0.01  $14,447 

Embedded Conversion Option Liability

The disbursements made in April, May and September 2021 under the Leviston Notes and the Five Institutions’ Notes included
Certain convertible notes include a Conversion Optionconversion option that meets the definition of a derivative liability and, accordingly, is required to be bifurcated. The fair value for the embedded derivative liability at issuance for the ABS Promissory Notes was estimated as the difference in fair value of Conversion Option liabilitythe ABS Promissory Notes, including the conversion obligation under the Side Letter and the value of the ABS Promissory Notes in the absence of the conversion obligation.  The value of the ABS Promissory Notes without the conversion obligation was determined byestimated using a binomial pricingdiscounted cash flow analysis with an estimated market yield.

F-16
The Company’s embedded conversion liability  for the initial valuation of the December 2023 financing, and as of December 31, 2023, was valued using a probability weighted expected value considering the Merger Agreement and the previous Black Scholes model, (dollars in thousands):with significant value being assigned to the Merger Agreement assumptions. Significant inputs included the risk adjusted expected exchange ratio (0.003), value of SEPA class A common stock, expected timing of the closing of the merger (estimated by February 29, 2024), and probability of the merger transaction closing (90% probability).

The fair value of conversion option liability assumptions for initial valuation of May 2023, and December 31, 2022, under the Black Scholes model are listed below:

  
Initial Valuation
May 2023 Issuance
  December 31, 2022
 
Conversion price (1)
 $0.04  $0.04 
Value of underlying shares $0.019  $0.005 
Interest Rate (annual) (2)
  4.70%  4.64%
Volatility (annual) (3)
  114%  503%
Time to maturity
  1.00   0.60 
Valuation at December 31, 2021
 


Principal
  

Conversion
Price(1)
  

Interest Rate
(annual) (2)
  

Volatility
(annual) (3)
  

Time to Maturity
(Years)
  
Fair Value of
Conversion
Option
 
Leviston Issuances $1,902   0.109   0.16%  303.20%  0.4  $5,204 
Five Institution Issuances  544   0.109   0.26%  249.00%  0.7   1,051 
  $2,446                  $6,255 


(1)Based on the terms provided in the warrant agreementconvertible promissory note agreements to purchaseconvert to common stock of the Company as of 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 each presented period ending date.

Valuation at issue dates
 


Principal
  

Conversion
Price(1)
  

Interest Rate
(annual) (2)
  

Volatility
(annual) (3)
  

Time to Maturity
(Years)
  
Fair Value of
Conversion
Option
 
Leviston Issuances $1,902   0.18   0.07%  73.10%  1.0  $3,206 
Five Institution Issuances  544   0.18   0.08%  80.10%  1.0   932 
  $2,446                  $4,138 


(1)Based on the terms provided in the warrant agreement to purchase common stock As of December 31, 2022, the Company on the stated issuance dates.

(2)Interestapplied a discount rate for U.S. Treasury Bonds, as of each presented period ending date, as published by the U.S. Federal Reserve.

(3)Based onto the historical daily volatility of the Company as of each presented period ending date.volatility.


F-21
Table of Contents
Interest rates on Leviston and Five Institutions’ Notes, Conversion Option, and Loss on Issuance
The Leviston Disbursements and Five Institutions’ Disbursements in April, May and September 2021, bear interest at the rate of 5% per annum and the default rate of 15%. The Leviston Note and Five Institutions’ Notes contains a conversion option (“Conversion Option”) and because they are in default, the Leviston and Five Institutions’ Notes are convertible into common shares of the Company at a conversion price of 75% of the lowest VWAP during the 10 trading days ending on the conversion date. For the Five Institutions’ Note this conversion rate shall be no lower than $0.01. The Conversion Option within the Leviston and Five Institutions’ Notes are required to be bifurcated at fair value, which was approximately $1.4 million on the April disbursement and $1.4 million on the May disbursement and $1.4 million on the September disbursements, which resulted in additional debt discounts being recorded at each disbursement date. Because the combined fair value of the applicable warrants and conversion option exceeded the face value of the note, the additional amount beyond the face value is recorded as a loss on issuance of $1.4 million on the April disbursement and $1.1 million on the May disbursement and $1.1 million on the September disbursement. The remaining disbursements up to the Aggregate Amount are subject to the satisfaction of certain terms and conditions set forth in the applicable notes. The disbursements bear an interest at a rate of five percent (5%) per annum and have a maturity date of twelve (12) months from the date of issuance. The Leviston and Five Institutions’ Notes are convertible at the option of the holder into shares of the common stock of the Company at a conversion price per share equal to the lesser of (i) $0.18, and (ii) ninety percent (90%) of the closing price for a share of common stock reported on the OTCQB on the effective date of the Registration Statement (as defined below).

The Leviston and Five Institutions’ Note contains customary events of default and covenants, including limitations on incurrences of indebtedness and liens.

Pursuant to the Leviston Purchase Agreement and purchase agreements with the Five Institutions (the “Five Institutions’ Purchase Agreements”), the Company has agreed, within a reasonable period of time following the applicable closing date, and in any event prior to any Leviston Disbursement under the Leviston Note subsequent to the initial Leviston Disbursement, to enter into a security agreement in favor of the Leviston or the Five Institutions, as applicable, securing the Company’s obligations under the applicable notes.

The rights of Leviston and the Five Institutions to receive payments under the applicable notes are subordinate to the rights of North Haven Expansion pursuant to the subordination agreements that the Company and Leviston, and the Company and the Five Institutions entered into with North Haven Expansion on April 20, 2021 and September 3, 2021, respectively, in connection with the Private Placement (the “Subordination Agreement”).

In connection with the Leviston Purchase Agreement, the Company entered into a registration rights agreement with the Leviston on April 20, 2021 (the “Leviston Registration Rights Agreement”) pursuant to which the Company agreed to file a registration statement (the “Registration Statement”) with the SEC no later than thirty days following the Leviston Closing Date for the registration of 100% of the maximum number of the shares issuable upon conversion of the Leviston Note and exercise of the Leviston Warrants issued pursuant to the Leviston Purchase Agreement (the “Leviston Registrable Securities”). 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 Leviston 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 Company has yet to file the Registration Statement and, under the terms of the Leviston Registration Rights Agreement, it is obligated to pay in cash a one-time aggregate amount of $250 thousand to the holders of the Leviston Notes, plus 1% of the outstanding principal for each 30-day period during which the Company continues not to have in-place an effective Registration Statement.

On August 31, 2021, Leviston notified the Company that it was in default of the Leviston Purchase Agreement effective June 11, 2021, for failure to timely file a Registration Statement. From the date of the default, interest on the amounts due to Leviston is calculated at the default interest rate of 15% in addition to the registration penalties stated above.

The Company also entered into registration rights agreements with each of the Five Institutions on September 3, 2021.  The terms and conditions of the Five Institutions’ registration rights agreements are substantially similar to the Leviston Registration Rights Agreement, with two exceptions: (1) the Five Institutions may be entitled to a pro-rata share of the $250 thousand one-time aggregate amount (approximately $56 thousand) and (2) the 1% of outstanding principal payment amount for each 30-day period is capped at 5% of outstanding principal.

F-22
Table of Contents
Convertible promissory notes payable (HealthTronics), in default - On August 6, 2020, the Company issued to HealthTronics, Inc. a convertible note payable in the amount of $1.4 million (the “HealthTronics Note”). The HealthTronics Note matured on August 6, 2021 and was not repaid. The Company’s failure to pay the outstanding principal balance when due constituted an event of default under the terms of the HealthTronics Note and, accordingly, it began accruing additional interest of 2.0% in addition to the 12.0% stated interest rate, as of the date of the default. The convertible promissory note is expressly subordinate to the Senior Secured Notes. The Company may prepay the outstanding principal balance, together with any accrued but unpaid interest without premium or penalty. On December 31, 2021 and December 31, 2020, accrued interest of $241 thousand and $66 thousand, respectively, remained outstanding on the HealthTronics Note.

As the Seller Note was not repaid prior to January 1, 2021, HealthTronics may elect to convert the outstanding principal amount plus any accrued but unpaid interest thereon into shares of the Company’s common stock, at a conversion price of $0.10 per share. The Company evaluated embedded conversion features within the convertible promissory note and determined that the conversion feature does not require to be bifurcated. Upon adoption of ASC 2020-6 effective January 1, 2021, the convertible promissory note is accounted for as a single liability due to the elimination of the beneficial conversion feature accounting model.

Convertible promissory notes payable (Stolarski), in default - On August 6, 2020, the Company issued to A. Michael Stolarski, a member of the board of directors and an existing shareholder, a convertible promissory note in the principal amount of $223 thousand (the “Stolarski Note”). The Stolarski Note matured on August 6, 2021 and was not repaid. The Company’s failure to pay the outstanding principal balance when due constituted an event of default under the terms of the Stolarski Note and, accordingly, it began accruing additional interest of 2.0% in addition to the 12.0% initial rate, as of the date of the default. On December 31, 2021 and December 31, 2020 accrued interest of $41 thousand and $11 thousand, respectively, remained outstanding on the Stolarski Note. The Stolarski Note is expressly subordinate to the Senior Secured Notes. The Company may prepay the outstanding principal balance, together with any accrued but unpaid interest without premium or penalty.

As the Stolarski Note was not repaid prior to January 1, 2021, the holder may elect to convert the outstanding principal amount plus any accrued but unpaid interest thereon into shares of common stock at a conversion price of $0.10 per share. The Company evaluated embedded conversion features within the convertible promissory note and determined that the conversion feature does not require to be bifurcated. Upon adoption of ASC 2020-6 effective January 1, 2021, the convertible promissory note is accounted for as a single liability due to the elimination of the beneficial conversion feature accounting model.

September 2021 Advances on Future Receipts Financing – On September 27, 2021, the Company received $703 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, with the sum of the first 4 payments occurring at closing, which was September 27, 2021.  After taking into account the payments made at closing, the Company recorded an initial liability of $763 thousand and a debt discount of approximately $60 thousand, which represents the original issue discount and the fees paid in conjunction with the financing.  The debt discount will be amortized to interest expense over the life of the agreement.  The Company began making the required minimum weekly payments October 25, 2021.  At closing, the Company also issued warrants to purchase 5,555,556 shares of the Company’s common stock to affiliates of GCF.  The warrants have an exercise price of $0.18 per share and expire four years after issuance. The Company determined that these warrants meet the definition of a derivative liability and accordingly, were recorded as additional discount against the debt at issuance.

SBA Loan #1 - The Company received a letter from the Small Business Administration (“SBA”) dated August 27, 2021 forgiving approximately $454 thousand of the SBA Loan #1 principal and $6 thousand of interest, which resulted in the Company recognizing a gain on extinguishment of debt of $460 thousand during the third quarter of 2021.

SBA Loan #2 – On February 20, 2021, the Company received proceeds from a second SBA loan (“SBA Loan #2”) in the amount of $1.03 million from Northeast Bank, as lender, pursuant to the Paycheck Protection Program (“PPP”) under the CARES Act. SBA Loan #2 is evidenced by a promissory note that matures on February 20, 2026 and bears interest of 1% per annum. Equal monthly payments of principal and interest commence in June 2022, after both a 24-week “covered period” and a 10-month “deferment period,” as defined in the promissory note and current SBA regulations. The SBA Loan #2 contains customary events of default relating to, among other things, payment defaults and breaches of representations, warranties and covenants. The SBA Loan #2 may be prepaid by the Company at any time prior to maturity with no penalties.

F-23
Table of Contents
All or a portion of SBA Loan #2 may be fully or partially forgiven by the SBA upon application by the Company not later than June 2022 in accordance with SBA regulations. The ultimate forgiveness of SBA Loan #2 is also contingent upon regulatory authorities concurring with management’s good faith assessment that the current economic uncertainty made the loan request necessary to support ongoing operations. If, despite the Company’s good-faith belief that given the circumstances the Company satisfied all eligibility requirements for SBA Loan #2, the Company is later determined to have violated any applicable laws or regulations or it is otherwise determined that the Company was ineligible to receive SBA Loan #2, the Company may be required to repay SBA Loan #2 in its entirety and/or be subject to additional penalties. In the event SBA Loan #2, or any portion thereof, is forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal. As of December 31, 2021, $158 thousand is included in current liabilities and the remainder of the $875 thousand loan balance is included in non-current liabilities in the accompanying consolidated balance sheets.

14.          Common Stock Purchase Warrants

A summary of the warrantconversion option liability activity during the years December 31, 2021 and 2020 is as follows:

(in thousands) 
Conversion
Liability
 
Balance December 31, 2021 $6,255 
Issuance of Convertible Notes  2,760 
Settlement of convertible notes
  (218)
Change in fair value  (6,457)
Balance December 31, 2022 $2,340 
Issuance of Convertible Notes  (519)
Change in fair value  (1,728)
Balance December 31, 2023 $93 
  



Warrants
  
Weighted
Average
Exercise Price
per share
  
Weighted Average
Remaining
Contractual Life
(years)
 
Warrants at December 31, 2019  9,474,091  $0.11   5.03 
Issuances  189,182,645   0.19     
Exercised  (8,200,000)  0.10     
Forfeited or expired  (100,000)  0.20     
Outstanding at December 31, 2020  190,356,736  $0.19   3.43 
Issuances  25,925,928   0.18     
Exercised  (11,400,000)  0.01     
Forfeited or expired  0   0     
Outstanding at December 31, 2021  204,882,664  $0.20   2.54 

14.Contract Liabilities
The Company has contract liabilities from contracts with customers as follows:

On February 3, 2021,
During the years ended December 31, 2023, and 2022, the Company issued 10,925,000 sharesrecognized revenue related to these contract liabilities of its commons stock to LGH upon$60 thousand and $253 thousand, respectively, that were included in the cashless exercisebeginning contract liability balances for each of 11,400,000 of the LGH Warrants under the terms of the warrant agreement. After this cashless exercise, 23,600,000 of LGH Warrants remain outstanding.those periods.

F-24The following table summarizes the changes in contract liabilities:

  Year Ended December 31, 
(in thousands) 2023
  2022
 
Beginning balance $290  $341 
New service agreements  209   202 
Revenue recognized  (60)  (253)
Total Contract Liabilities $439  $290 
15.Fair Value Measurements
15.Common Stock Purchase Warrants

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.

The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of December 31, 2021 and 2020 (in thousands):

  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
  
$
0
  
$
0
  
$
9,614
 
Embedded conversion option  
6,255
   
0
   
0
   
6,255
 
Total fair value  
15,869
   
0
   
0
   
15,869
 

  Fair value measured at December 31, 2020 
      Quoted prices in  Significant other  Significant 
  Fair value at  active markets  observable inputs  unobservable inputs 
  December 31, 2020  (Level 1)  (Level 2)  (Level 3) 
Warrant liability 
$
8,855
   
0
   
0
   
8,855
 
Embedded conversion option  
0
   
0
   
0
   
0
 
Total fair value  
8,855
   
0
   
0
   
8,855
 

There were 0 transfers between Level 1, 2 or three during the years ended December 31, 2021 and 2020.

The following table presents changes in Level 3 liabilities measured at fair value for the years ended December 31, 2021 and 2020. 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 (in thousands):

  
Warrant
Liability
  
Embedded
Conversion
Feature
  Total 
Balance December 31, 2019 $0
  $0  $0 
Warrants classified as liabilities  11,955   0   11,955 
Warrants reclassified as equity  (6,293)  0   (6,293)
Change in fair value  3,193   0   3,193 
Balance December 31, 2020 $8,855  $0  $8,855 
Cashless exercise  (2,030)  0   (2,030)
Warrants classified as liabilities  2,282   0   2,282 
Transfer to convertible feature  0   4,139   4,139 
Change in fair value  507   2,116   2,623 
Balance December, 2021 $9,614  $6,255  $15,869 

A summary of the warrant liability activity for the year ended December 31, 2021 is as follows:

  
Warrants
Outstanding
  
Fair Value
per Share
  
Fair
Value
 
Balance December 31, 2019  0  $0  $0 
Warrants classified as liabilities  112,210,902   0.11   11,955,454 
Warrants reclassified as Equity  (64,119,742)  0.10   (6,292,695)
Gain on remeasurement of warrant liability  0       3,192,620 
Balance December 31, 2020  48,091,160  $0.18  $8,855,379 
Cashless exercise of LGH Warrants  (11,400,000)  0.18   (2,030,052)
Warrants classified as liabilities  25,926,028   0.10   2,282,262 
Gain on remeasurement of warrant liability  0       506,545 
Balance December, 2021  62,617,188  $0.15  $9,614,134 

Significant Black Scholes valuation model inputs related to the Company’s different Warrants at December 31, 2021 and 2020 are listed below.

  2021  2020 
Weighted average expected life in years
  
4.67
   
7.00
 
Weighted average volatility  
116
%
  
121
%
Weighted average risk free interest rate  
1.2
%
  
0.5
%
Expected dividend yield  
0.00
%
  
0.00
%

16.          Leases

The following is a summary of the Company’s right of use assets and lease liabilities at December, 2021 and 2020 (in thousands):

 December 31, 2021  December 31, 2020 
 
 
 
 
Operating
Leases
  
Financing
Leases
  Total  
Operating
Leases
  
Financing
Leases
  Total 
Right of use assets 
$
725
  
$
626
  
$
1,351
  
$
725
  
$
644
  
$
1,369
 
Less: Accumulated amortization  
(574
)
  
(433
)
  
(1,007
)
  
(339
)
  
(235
)
  
(574
)
Right of use assets, net
 
$
151
  
$
193
  
$
344
  
$
386
  
$
409
  
$
795
 
                         
Lease liabilities
 
$
157
  
$
229
  
$
386
  
$
415
  
$
427
  
$
842
 
Less: current portion
  
(83
)
  
(185
)
  
(268
)
  
(257
)
  
(194
)
  
(451
)
Lease Liabilities
 
$
74
  
$
44
  
$
118
  
$
158
  
$
233
  
$
391
 

Total lease costs for the years ended December 31, 2021 and 2020 are as follows (in thousands):

  2021
  2020
 
Finance lease costs:      
Amortization of right-of-use assets 
$
217
  
$
94
 
Interest on lease liabilities  
41
   
33
 
Operating lease costs  
350
   
118
 
Total lease costs 
$
608
  
$
245
 

F-26
Table of Contents
The following summarizes cash paid for amounts included in the measurement of lease liabilities as well as the related right-of-use assets obtained for the years ended December 31, 2021 and 2020 (in thousands):

  2021
  2020
 
Cash paid for amounts included in measurement of lease liabilities:      
Operating cash flows from finance leases 
$
(234
)
 
$
(103
)
Operating cash flows from operating leases 
$
(350
)
 
$
(118
)

(in thousands, except per share data) 



Warrants
  
Weighted
Average
Exercise Price
  
Weighted
Average
Remaining
Life
(years)
 
Warrants at December 31, 2021  204,883  $0.20   2.54 
Issuances  1,031,276   0.06     
Exercised  (27,943)  0.09     
Forfeited or expired  -   -     
Outstanding at December 31, 2022  1,208,216  $0.07   3.55 
Issuances  154,451   0.06     
Exercised  -   -     
Forfeited or expired  (141,095)  -     
Outstanding at December 31, 2023  1,221,572  $0.06   4.01 
Operating Leases - As of December 31, 2021, the maturities of the Company’s operating lease liability, which have initial or remaining lease terms in excess of one year, consist of the following (in thousands):

 
 Amount 
Year ending December 31,   
2022 
$
96
 
2023  
68
 
2024  
11
 
Total lease payments  
175
 
Less: Present value adjustment  
(18
)
Lease liability 
$
157
 

As of December 31, 2021, the Company’s operating leases had a weighted average remaining lease term of 1.1 years and a weighted average discount rate of 12.0%.

Rent expense for the years ended December 31, 2021 and 2020 was $362 thousand and $297 thousand, respectively.

Financing Lease - As of December 31, 2021, the maturities of the Company’s financing lease liability, which have initial or remaining lease terms in excess of one year, consist of the following (in thousands):

  Amount 
Year ending December 31,   
2022 
$
200
 
2023  
18
 
Total lease payments  
218
 
Present value adjustment  
11
 
Lease liability 
$
229
 

As of December 31, 2021, the Company’s financing leases had a weighted average remaining lease term of 1.0 years based on annualized base payments expiring through 2023 and a weighted average discount rate of 13.2%.

As of December 31, 2021, the Company did not have additional operating or financing leases that have yet commenced.

17.          
16.Common Stock

On July 23, 2020, in connection with the Company’s 2020 Annual Meeting of Stockholders,
In December 2022, the Company’s stockholders approved among other matters, an amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of common stock from 355,000,000800,000,000 to 600,000,000.

Also on July 23, 2020, the Company’s stockholders approved2,500,000,000.  In January 2023, the Company filed the amendment to amend the Company’s Articles of Incorporation to effect a reverse split of the Company’s outstanding common stock at a ratio of between 1-for-10 and 1-for-50, with the exact ratio to be determined by the board of directors of the Company in its sole discretion. The Company has not yet effected a reverse split of its stock.

F-27
Table of Contents
On December 30, 2020, the Company held a special meeting of stockholders (the “Special Meeting”). At the Special Meeting, the Company’s stockholders approved an amendment to the Company’s Articles of Incorporation, as amended, to increase the number of authorized shares of its common stock, par value $0.001 per share, to 800,000,000, and the Company filed a Certificate of Amendment to its Articles of Incorporation, as amended with the Secretary of State of the Statestate of Nevada on December 30, 2020 to reflect this amendment, which became effective on December 30, 2020.affect the increase in authorized shares.

18.          Preferred Stock
17.Concentration of Credit Risk and Limited Suppliers

On JanuaryMajor customers are defined as customers whose accounts receivable, or sales individually consist of more than ten percent of total trade receivable or total sales, respectively. There were no accounts receivable concentrations on December 31, 2020,2023, or 2022.

The Company currently purchases most of its product component materials from single suppliers and the Company filedloss of any of these suppliers could result in a Certificatedisruption in our production. The percentage of Designation of Preferences, Right and Limitations of Series C Convertible Preferred Stockpurchases from major vendors of the Company with the Nevada Secretarythat exceeded ten percent of State which amended our Articles of Incorporation to designate 90 shares of our preferred stocktotal purchases were as Series C Convertible Preferred Stock.follows:

  Year ended December 31, 
  2023  2022 
Purchases:      
Vendor A  
19
%
  
19
%
Vendor B  
19
%
  
0
%
On February 6, 2020, the Company entered into a Series C Preferred Stock Purchase Agreement (the “Series C Purchase Agreement”)
18.Revenue

The disaggregation of revenue is based on type and geographical region. The following table presents revenue from contracts with certain accredited investors for the sale by the Company in a private placement of an aggregate of 90 shares of the Company’s Series C Convertible Preferred Stock, par value $0.001 per share at a stated value equal to $25 thousand per share, for an aggregate total purchase price of $2.3 million.customers:

 
 Year ended December 31, 2023  Year ended December 31, 2022 
 
 United States  International  Total  United States  International  Total 
Consumables and parts revenue 
$
13,143
  
$
79
  
$
13,222
  
$
9,790
  
$
72
  
$
9,862
 
System revenue  
5,841
   
116
   
5,957
   
5,179
   
149
   
5,328
 
License fees and other  
41
   
35
   
76
   
283
   
38
   
321
 
Product Revenue 
$
19,025
  
$
230
  
$
19,255
  
$
15,252
  
$
259
  
$
15,511
 
Rental Income
  1,143   -   1,143   1,231   -   1,231 
Total Revenue
 $
20,168  $
230  $
20,398

$
16,483


$
259


$
16,742

On May 14, 2020, the Company filed a Certificate of Designation of Preferences, Right and Limitations of Series D Convertible Preferred Stock of the Company with the Nevada Secretary of State which amended our Articles of Incorporation to designate 8 shares of our preferred stock as Series D Convertible Preferred Stock.

On May 14, 2020, the Company entered into a Series D Preferred Stock Purchase Agreement (the “Series D Purchase Agreement”) with certain accredited investors for the sale by the Company in a private placement of an aggregate of 8 shares of the Company’s Series D Convertible Preferred Stock, par value $0.001 per share at a stated value equal to $25 thousand per share (the “Series D Preferred Stock”), for an aggregate total purchase price of $200 thousand.

Subject to the terms of the Certificates of Designation, each share of Series C Preferred Stock and Series D Preferred Stock is convertible into shares of common stock of the Company at a rate equal to the stated value of such share of Series C Preferred Stock and Series D Preferred Stock of $25 thousand, divided by the conversion price of $0.14 per share (subject to adjustment from time to time upon the occurrence of certain events as described in the Certificate of Designation). The Certificates of Designation became effective upon filing with the Secretary of State of the State of Nevada. If all outstanding shares of Series C Preferred Stock and Series D Preferred Stock were converted into common stock at the original conversion rate, such shares would convert into an aggregate of 17,500,000 shares of common stock.

On September 20, 2020, the Series C and D holders converted their preferred shares into 17,499,958 shares of common stock.

F-28F-18
19.          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 timeand there is no guarantee that the dispute will be resolved in a manner beneficial to the Company or at all.

20.          Related party transactions

February 2018 dermaPACE® Purchase - On February 13, 2018, the Company entered into an Agreement for Purchase and Sale, Limited Exclusive Distribution and Royalties, and Servicing and Repairs with Premier Shockwave Wound Care, Inc., a Georgia Corporation (“PSWC”), and Premier Shockwave, Inc., a Georgia Corporation (“PS”). Each of PS and PSWC is owned by A. Michael Stolarski, a member of the Company’s board of directors and a shareholder of the Company. The agreement provides for the purchase by PSWC and PS of dermaPACE® System and related equipment sold by the Company along with limited but exclusive distribution rights to provide dermaPACE® Systems to certain governmental healthcare facilities in exchange for the payment of certain royalties to the Company. The agreement also contains provisions whereby in the event of a change of control of the Company (as defined in the agreement), the stockholders of PSWC have the right and option to cause the Company to purchase all of the stock of PSWC, and whereby the Company has the right and option to purchase all issued and outstanding shares of PSWC, in each case based upon certain defined purchase price provisions. The purchase price for this agreement is 5.5 times the annualized EBITDA for the six months trailing the change of control plus the book value of the equipment and working capital.

During the years ended December 31, 2021 and 2020, respectively, the Company recorded $32 thousand and $45 thousand in revenue from this entity. In addition, contract liabilities include a balance of $38 thousand at December 31, 2021 and $70 thousand at December 31, 2020 from this related party.

March 2021 Future Purchase of Equipment - In March 2021, PSWC paid the Company $125 thousand as a deposit for future purchase of new medical equipment.

July 2021 dermaPACE® Purchase - On July 1, 2021, the Company purchased unused DermaPace equipment and applicator inventory from PSWC for $127 thousand. As of December 31, 2021, $127 thousand is included in accounts payable on the consolidated balance sheets related to this transaction.

July 2021 Rental Equipment Agreement - Also, effective July 1, 2021, the Company entered into a short-term equipment rental agreement with PSWC, whereby the Company obtained DermaPace equipment from PSWC for $3,600 per month.

October 2021 Advance from Director – On October 27, 2021 the Company received $25 thousand from A. Michael Stolarski (the “Stolarski Advance”). In exchange for the Stolarski Advance, as well as the $125 thousand deposit received in March 2021, the Company issued to Mr. Stolarski a promissory note in the principal amount of $150 thousand (“Stolarski Note #2”). The Stolarski Note #2 matures on June 30, 2022 and accrues interest at a rate equal to 15.0% per annum.

April 2022 Advance from Director - On April 1, 2022 the Company entered into an Advance Agreement with a related party, A. Michael Stolarski, also a shareholder and member of the Company’s board of directors, in the amount of $250 thousand (“Stolarski Advance”).

F-29
Table of Contents
The Stolarski Advance has 18 UltraMIST® systems used as collateral (the “Collateral”) and the Company has agreed to repurchase the Collateral at $256 thousand.

21.          Stock-based compensation
19.Stock-Based Compensation

On November 1, 2010, the Company approved the Amended and Restated 2006 Stock Incentive Plan of SANUWAVE Health, Inc. effective as of January 1, 2010 (the “Stock Incentive Plan”). The Stock Incentive Plan permits grants of awards to selected employees, directors, and advisors of the Company in the form of restricted stock or options to purchase shares of common stock. Options granted may include non-statutory options as well as qualified incentive stock options. The Stock Incentive Plan is currently administered by the board of directors of the Company. The Stock Incentive Plan gives broad powers to the board of directors of the Company to administer and interpret the particular form and conditions of each option. The stock options granted under the Stock Incentive Plan are generally non-statutory options which generally vest over a period of up to three years and have a ten-year term. The options are granted at an exercise price determined by the board of directors of the Company to be the fair market value of the common stock on the date of the grant. As of December 31, 20212023, and 2020,2022, the Stock Incentive Plan reserved a total of 35,000,000 and 35,000,000, respectively, shares of common stock for grant.

The following is a summary of the activity of the Stock Incentive Plan for the years ended December 31, 2021 and 2020:

 
 
 
 
 Options  
Weighted
Average
Exercise Price
per share
  
Weighted Average
Remaining
Contractual Life
(years)
  
Aggregate
Intrinsic Value
 
Outstanding at December 31, 2019  
34,303,385
  
$
0.28
   
6.62
  
$
981,088
 
Granted  
100,000
   
0.26
         
Exercised  
(325,000
)
  
0.15
         
Forfeited or expired  
(2,140,000
)
  
0.71
         
Outstanding at December 31, 2020  
31,938,385
   
0.26
   
5.94
  
$
1,372,116
 
Granted  
0
   
0
         
Exercised  
0
   
0
         
Forfeited or expired  
(179,000
)
  
0.18
         
Outstanding at December 31, 2021  
31,759,385
   
0.26
   
4.92
  
$
1,056,236
 
                 
Vested and exercisable at December 31, 2021  
31,409,385
  
$
0.26
   
4.92
  
$
1,056,236
 

On December 31, 2021,2023, there were 3,240,6155,598,216 shares of common stock available for grant under the Stock Incentive Plan.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model using the following weighted average assumptions for the year ended December 31, 2020 is shown below:

F-30
Table of Contents
2020
Weighted average expected life in years
5.00
Weighted average volatility
124
%
Weighted average risk free interest rate
1.6
%
Expected dividend yield
0.00
%

For the years ended December 31, 2021 and 2020, the Company recognized $0 thousand and $22 thousand, respectively, as compensation cost related to options granted. The compensation cost is included in operating expenses in the accompanying consolidated statements of comprehensive loss. As of December 31, 2021 and 2020, there are 0 unamortized compensation costs related to options granted.

22.          Joint ventures
20.Income Taxes
On December 13, 2019, the Company entered into a joint venture agreement (the “Agreement”) with Universus Global Advisors LLC, a limited liability company organized under the laws of the State of Delaware (“Universus”), Versani Health Consulting Consultoria em Gestão de Negócios EIRELI, an empresa individual de responsabilidade limitada organized under the laws of Brazil (“Versani”), Curacus Limited, a private limited company organized under the laws of England and Wales (“Curacus”), and certain individual citizens of Brazil and the Czech Republic (the individuals together with Curacus, the “IDIC Group”). The principal purpose of the joint venture company will be to manufacture, import, use, sell, and distribute, on an exclusive basis in Brazil, dermaPACE devices and wound kits consisting of a standard ultrasound gel and custom size sterile sleeves used for the treatment of various acute and chronic wounds using extracorporeal shockwave therapy technology. The joint venture company will also provide treatments related to the dermaPACE devices. The IDIC Group has agreed to pay to the Company a partnership fee in the total amount of $600,000 for the granting of exclusive territorial rights to the joint venture company to distribute the dermaPACE devices and wound kits in Brazil. The $600,000 partnership fee was received and recognized as nonoperating income during the year ended December 31, 2020. The IDIC Group will also have the right to receive prioritized dividends until full reimbursement of the partnership fee and expenses incurred in the formation of the joint venture company, which are required to be paid by the IDIC Group.
F-31
Table of Contents
23.Income taxes
The Company files income tax returns in the United States federalFederal jurisdiction and various state and foreign jurisdictions. The Company is subject to United States federalFederal and state income tax examinations by tax authorities for any years that have net operating losses open until the net operating losses are used.

The components of the net loss before income taxes for the years ended December 31, 2021 and 2020 are as follows (dollars in thousands):follows:
 
 2021
  2020
  Year ended December 31,
 
(In thousands) 2023
  2022
 
Domestic 
$
(27,208
)
 
$
(30,945
)
 
$
(25,783
)
 
$
(10,279
)
Foreign  
(23
)
  
8
   
(20
)
  
(12
)
Net loss before income taxes $
(27,231
)
 $
(30,937
)
 
$
(25,803
)
 
$
(10,291
)

In accordance with ASC Topic 740, Income Taxes (“ASC 740”), the Company accounts for income taxes utilizing the asset and liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided for the deferred tax assets, including loss carryforwards, when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

On March 27, 2020, the CARES Act was enacted in response to COVID-19 pandemic. Under ASC 740, the effects of changes in tax rates and laws are recognized in the period which the new legislation is enacted. The CARES Act made various tax law changes including among other things (i) increasing the limitation under Section 163(j) of the Internal Revenue Code of 1986, as amended (the “IRC”) for 2019 and 2020 to permit additional expensing of interest (ii) enacting a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k), (iii) making modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes and (iv) enhancing the recoverability of alternative minimum tax credits. The CARES Act did not have a material impact on the Company.

The income tax provision (benefit) from continuing operations consists of the following atfollowing:

(In thousands) December 31, 2023
  December 31, 2022
 
Current:      
Federal 
$
-
  
$
-
 
State  
4
   
2
 
Foreign  
-
   
-
 
Current Tax Provision
 
$
4
  
$
2
 
Deferred:        
Federal 
$
(3,564
)
 
$
(5,657
)
State  
(459
)
  
753
 
Foreign  
(3
)
  
(1
)
Change in valuation allowance  
4,026
   
4,905
 
Deferred Tax Provision
 
$
-
  
$
-
 

As of December 31, 20212023, and 2020 (dollars in thousands):
Current: 2021
  2020
 
Federal 
$
0
  
$
0
 
State  
28
   
0
 
Foreign  
0
   
0
 
   
28
   
0
 
Deferred:        
Federal  
(5,038
)
  
(5,420
)
State  
(869
)
  
(964
)
Foreign  
4
   
1
 
Change in valuation allowance  
5,903
   
6,383
 
  
$
28
  
$
0
 

At December 31, 2021 and 2020,2022, the Company did 0tnot have any undistributed earnings of our foreign subsidiaries. As a result, no additional income or withholding taxes have been provided for. The Company does not anticipate any impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”) and as such, the Company has not recorded any impact associated with either GILTI or BEAT.
 
F-19
The income tax provision (benefit) amounts differ from the amounts computed by applying the United States federalFederal statutory income tax rate of 21% for the years ended December 31, 20212023, and 20202022. Adjustments to pretax loss from operationsdetermine income tax expense are as a result of the following for the years ended December 31, 2021 and 2020 (dollars in thousands):follow:
 
(In thousands) Years ended December 31,
 
  2023
  2022
 
Tax benefit at statutory rate 
$
(5,485
)
 
$
(2,161
)
Increase (reduction) in income taxes resulting from:        
State income tax benefits, net of federal benefit  
(307
)
  
(473
)
Non-deductible gain on warrant adjustment valuation  
2,102
   
(3,270
)
Change in valuation allowance  
4,026
   
4,905
 
Registration penalties  -   67 
Other  
(332
)
  
934
 
Income Tax Expense 
$
4
  
$
2
 
F-32
F-20
  2021
  2020
 
Tax expense (benefit) at statutory rate 
$
(5,718
)
 
$
(6,498
)
Increase (reduction) in income taxes resulting from:        
State income taxes (benefits), net of federal benefit  
(837
)
  
(913
)
Non-deductible gain on warrant adjustment valuation  
417
   
670
 
Income from foreign subsidiaries  
0
  
2
 
Change in valuation allowance  
5,903
   
6,383
 
Registration penalties
  354   0 
Other  
(91)
   
356
 
Income tax expense (benefit) 
$
28
  
$
0
 

The tax effects of temporary differences that give rise to the deferred tax assets atare as follows:

(In thousands)
 December 31, 2023
  December 31, 2022
 
Deferred Tax Assets      
Net operating loss carryforwards 
$
42,484
  
$
38,323
 
Net operating loss carryforwards - foreign  
27
   
24
 
Excess of tax basis over book value of property and equipment  
70
   
9
 
Excess of tax basis over book value of intangible assets  
1,162
   
1,325
 
Lease liability  192   150 
Stock-based compensation  
1,495
   
1,487
 
Accrued employee compensation  
338
   
750
 
Capitalized equity costs  
235
   
-
 
Capitalized research and development  1,273   116 
Net change in reserve accounts  
-
   
1,031
 
Gross deferred tax asset  
47,276
   
43,215
 
Valuation Allowance  
(47,096
)
  
(43,070
)
Net Deferred Tax Asset
  
180
   
145
 
Deferred Tax Liabilities        
Right-of-use asset  (180)  (145)
Gross deferred tax liability  (180)  (145)
TOTAL $-  $- 

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) into law. The Inflation Reduction Act imposes an excise tax of 1% on the fair market value of net stock repurchases made after December 31, 20212022. The impact of this provision will be dependent on the extent of share repurchases made in future periods. We continue to analyze the impacts of the Inflation Reduction Act; however, it is not expected to have a material impact on our financial statements. Additionally, the Inflation Reduction Act includes a new corporate alternative minimum tax which is not currently applicable to the Company.

The Tax Cuts and 2020 areJobs Act (“TCJA”) requires taxpayers to capitalize and amortize research and development (“R&D”) expenditures under section 174 for tax years beginning after December 31, 2021. This rule became effective for the Company during 2022 and resulted in capitalized R&D costs of $1.3 million as follows (dollarsof December 31, 2023. The Company will amortize these costs for tax purposes over five years for R&D performed in thousands):the U.S. and over 15 years for R&D performed outside the U.S. In 2023, all R&D was performed in the U.S.
 
  2021
  2020
 
Deferred tax assets:      
Net operating loss carryforwards 
$
33,238
  
$
28,048
 
Net operating loss carryforwards - foreign  
23
   
19
 
Excess of tax basis over book value of property and equipment  
14
   
8
 
Excess of tax basis over book value of intangible assets  
1,632
   
1,811
 
Stock-based compensation  
1,613
   
1,613
 
Accrued employee compensation  
698
   
427
 
Capitalized equity costs  
49
   
49
 
Net change in reserve accounts  
898
   
287
 
   
38,165
   
32,262
 
Valuation allowance  
(38,165
)
  
(32,262
)
Net deferred tax asset 
$
0
  
$
0
 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In assessing the realization of deferred tax assets, management considers, whether it is “more likely than not”, that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible.
 
ASC 740 requires that a valuation allowance be established when it is “more likely than not” that all, or a portion of, deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. After consideration of all the information available, management believes that uncertainty exists with respect to future realization of its deferred tax assets and has, therefore, established a full valuation allowance as of December 31, 20212023, and 2020.2022.
 
F-21
The Company’s ability to use its net operating loss carryforwards could be limited and subject to annual limitations. Since a full analysis under Section 382 of the Internal Revenue Code has not been performed, the Company may realize a “more than 50% change in ownership” which could limit its ability to use its net operating loss carryforwards accumulated to date to reduce future taxable income and tax liabilities. Additionally, because United States tax laws limit the time during which net operating loss carryforwards may be applied against future taxable income and tax liabilities, the Company may not be able to take advantage of all or portions of its net operating loss carryforwards for federalFederal income tax purposes.
 
The federal and stateFederal net operating loss carryforwards of approximately $77.9 million from years ending December 31, 2005, through December 31, 2017, will begin to expire in 2025. The federal and stateFederal net operating loss carryforward for the years ended December 31, 2018, through 20212023 of approximately $56.5$99.9 million will not expire. The state net operating loss carryforwards of approximately $75.1 million from years ending December 31, 2005, through December 31, 2023, will expire at various dates through 2043. The foreign net operating loss carryforward aton December 31, 20192023, of $0.1 million will begin to expire in 2024.
 
F-33
Table of Contents
A provision of ASC 740 specifies that companies are to account for uncertainties in income tax reporting, and prescribes a methodology for recognizing, reversing, and measuring the tax benefits of a tax position taken, or expected to be taken, in a tax return. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course ofwhile preparing the Company’s tax returns to determine whether the tax positions would “more-likely-than-not” be sustained if challenged by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s consolidated financial statements as of December 31, 20212023, and 2020.2022. The Company does not expect any significant changes in the unrecognized tax benefits within twelve months of the reporting date.

The Company will recognize in income tax expense, interest and penalties related to income tax matters. For the years ended December 31, 20212023, and 2020,2022, the Company did 0tnot have any amounts recorded for interest and penalties.

24.          Subsequent events
21.Commitments and Contingencies

Warrant Exercises – Litigation
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.

In February 2024, the Company entered into a termination agreement with an advisor to agree on termination fees owed with respect to a previous engagement agreement. The company agreed to a contingent payment of $670 thousand upon the closure of the Merger disclosed in note 4.

Acquisition Dispute
In May 2022, the Company received $0.1 millionnotification alleging that it is not in proceedscompliance with the license agreement with Celularity entered 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.
F-22
Lease Commitments

As of December 31, 2023, the maturities of the Company’s operating and financing leases, which have initial or remaining lease terms more than one year, consist of the following:
(In thousands) Operating
Leases		  
Finance
Leases
 
Year ended December 31,      
2024 $141  $189 
2025  122   216 
2026  67   44 
2027  59   - 
2028  -   - 
Total Lease Payments  389   449 

22.Subsequent Event

In March 2024, the Company entered into an exclusive license and option agreement (the “License and Option Agreement”) with a third party licensee (the “Licensee”) in connection with a portfolio of Sanuwave, Inc. patents related to the exercisefield of 15.9intravascular shockwave applications (the “Patents”).  In exchange for a one-time payment of $2.5 million, warrants (cash and cashless) and issued 14.9 million shares.

Second Amendment to Note and Warrant Purchase and Security Agreement - The Company received $3.0 million in proceeds relatedSanuwave, Inc. granted the Licensee an exclusive license to the issuancePatents and an option to acquire the Patents for an additional one-time payment in the single-digit millions of dollars.  If the Licensee does not exercise its option to acquire the Patents during a $3.0 million dollar note, 20.7 million Advisor shares,specified option period, the license terminates and 15.5 million warrants with an exercise price of $0.18 and a 10 year term.all rights revert back to Sanuwave, Inc.

F-34F-23

Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

Item 9A.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 December 31, 2021.2023. 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 December 31, 2021.2023.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) for the Company. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

Management, with the participation of the Chief Executive Officer (principal executive officer) and the Chief Financial Officer (principal financial and accounting officer), evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021.2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013).

We previously reported three material weaknesses in our internal control over financial reporting process resulting from a lack of internal expertise and resources to analyze and properly apply generally accepted accounting principles to complex and non-routine transactions such as complex financial instruments and derivatives and complex sales distribution agreements, a lack of internal resources to analyze and properly apply generally accepted accounting principles to accounting for equity components of service agreements with select vendors and cybersecurity breaches from email spoofing in 2019. The company has remedied the cybersecurity breaches and email spoofing in 2020.

As of 2021December 31, 2023, the company still hasCompany identified the following material weaknessesweaknesses:


1.
Expertise and resources to analyze and properly apply generally accepted accounting principlesU.S. GAAP to complex and non-routine transactions such as complex financial instruments and derivatives and complex sales distribution agreements.
distributing agreements with select vendors.

56

2.
A lack of internal resources to analyze and properly apply generally accepted accounting principlesU.S. GAAP to accounting for financial instruments included in service agreements with select vendors.


3.
The Company has failed to design and implement controls around all of its accounting and IT processes and procedures and, as such, it believeswe believe that all of its accounting and IT processes and procedures need to be re-designed implemented, and tested for operating effectiveness.

As a result, management concluded that its internal control over financial reporting was not effective as of December 31, 2021.2023.

39
Remediation Plan

During 2021, we engagedWe are working with an external consultantsvendor to properly document our current internal control policies and procedures to provide the framework for increased effectiveness to test internal controls going forward. We are also adding automated and manual controls into and over the Company’s enterprise resource planning (“ERP”) system to ensure that controls are implemented to mitigate the risk in customer creation, pricing, and accuracy of billing.  We will continue to work with appropriate experience applying GAAP technical accounting guidance,our external vendor to remediate the weaknesses noted above.

We are also working with an outside vendor to improve our IT general controls over our ERP system and we have hired additional accounting personnel both internal and external. We engaged external consultantsset up a proper framework for IT general controls to review revenue recognition for new products, lease agreements,be executed with the objective to remediate the weaknesses regarding internal controls and related proceduresprovide the framework for testing going forward.

While the above actions and reviewplanned actions are subject to ongoing management evaluation and will require validation and testing of documentationthe design and operating effectiveness of internal controls in additioncontrol over a sustained period, we are committed to new equitycontinuous improvement and debt financing arrangements. Accounting memos were produced for all technical issues during 2020 and reviewed with management. The Company will continue to implementdiligently review our internal control over financial reporting. The material weaknesses will not be considered remediated until management completes the design and review newimplementation of the measures described above, until the controls to address these issues.

We have also implemented cybersecurity trainingoperate for all employeesa sufficient period of time, and redesign of proceduresuntil management has concluded, through testing, 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 relatedthe controls around information technology infrastructure. In addition, an additional employee was hired to assist with the management of IT controls and enhance internal IT resources. Going forward, this employee will monitor our third-party IT vendor’s testing and monitoring efforts and where necessary implement new controls as the Company grows. These internal controls have been documented and procedures implemented.are effective.

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

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 December 31, 20212023, that materially affect, or are reasonably likely to materially affect, our internal control over financial reporting, except as disclosed in “Remediation of Material Weaknesses” above.

Item 9B.OTHER INFORMATION

NoneDuring the three months ended December 31, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated any contract, instruction, or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K)

Item 9C.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.
 
57
PART III
 
Item 10.DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

MANAGEMENT

Below are the names and certain information regarding the Company’s executive officers and directors:

Name
Age
Position Held
Kevin A. Richardson, II
Morgan Frank
5352
Director, Chairman and Chief Executive Officer,
Chairman of the Board
Lisa E. Sundstrom
Toni Rinow
5259
Chief Financial Officer and Chief Talent Officer
Peter Stegagno
6264
Chief Operating Officer
Iulian Cioanta, PhD
5961
Chief Science and Technology Officer
John Schlechtweg
Andrew Walko
4239
Chief Revenue Officer
President
Tim Hendricks
49Executive Vice President of Sales
A. Michael Stolarski
51
Director
Jeff Blizard
53
Director
Ian Miller
Jeff Blizard
46
55
Director
JimIan Miller
48Director
James Tyler
65
66
Director
Kevin A. Richardson, II55Director, Chief Strategy Officer

40
Morgan Frank joined the board as Chairman in August 2022 and was appointed Chief Executive Officer in May 2023.  Mr. Frank is a founder and principal at Manchester Explorer Fund (18 years) and at Manchester Explorer Ltd (Cayman), two life science focused public equity hedge funds specializing in hands-on microcap growth and development companies.  He has 30 years of experience in investing, capital markets, corporate strategy, corporate finance, corporate restarts, and intellectual property.  Formerly a principal at First Principles Group, a firm focused on corporate restarts and a portfolio manager for technology and venture capital at Hollis capital, a San Francisco Hedge Fund.  He also sits on the board of Modular medical (MODD) a development stage company focused on next generation insulin delivery.  Mr. Frank has degrees in economics and political science from Brown University.

Dr. Toni Rinow joined the Company as chairman of the board of directors in October of 2009 and joined SANUWAVE, Inc. as chairman of the board of directors in August of 2005. In November 2012, upon the resignation of the Company’s former President2022.Dr. Toni Rinow is a highly effective CFO with expertise in publicly held and Chief Executive Officer, Christopher M. Cashman, Mr. Richardson assumed the role of Acting Chief Executive Officer,private equity funded companies. Toni serves as an independent board member and audit committee member for a global IT service provider Converge technology (TSX:CTS) with over $3 billion in additionrevenue. Toni develops high-functioning, performance driven teams to remaining Chairman of the Board,advance transformational change. Her global experience spans healthcare, consumer product goods, and technology delivering accelerated growth. She has expertise in investor and public relations, capital markets, ESG and capital expansion through the hiring of Mr. Chiarelli in February 2013. In April 2014, Mr. Richardson assumed the role of Co-Chief Executive Officer. When Mr. Chiarelli departed the Company in 2014, Mr. Richardson again assumed the role as Acting Chief Executive Officer. In November 2018, Mr. Richardson was appointed as Chief Executive Officer. Mr. Richardson brings to our board of directors a broad array ofM&A, financial knowledge for healthcaretransactions and other industries. Since 2004, Mr. Richardson served as managing partner of Prides Capital LLC, an investment management firm, until its liquidation in September 2015.

Lisa E. Sundstrom joined the Company as Controller in October of 2006, and in August of 2015, assumed the responsibilities of Interim Chief Financial Officer. In December 2015, Ms. Sundstrom was promoted to Chief Financial Officer. Ms. Sundstrom has extensive financial accounting experience with Automatic Data Processing (ADP) and Mitsubishi Consumer Electronics. During 2021 she also assumed the role of Chief Talent Officer. Ms. Sundstrom began her career with a small public accounting firm, Carnevale & Co., P.C., was Senior Accountant at Mitsubishi Consumer Electronics responsible for the close process and was Accounting Manager for the Benefit Services division of ADP and assisted in the documentation of internal controls for Sarbanes-Oxley compliance. Ms. Sundstromlistings. She holds a BachelorMaster of ScienceBusiness Administration and a Masters in Accounting from the StateMcGill University, was appointed a Chemical Engineer from ERASMUS European Higher Institute of Chemistry in Strasbourg, France and holds a PhD in Biophysics and Chemistry from the University of New YorkMontreal, Canada. Toni is trained in Artificial Intelligence at Geneseo.MIT.

Peter Stegagno joined the Company as Vice President, Operations in March 2006. Mr. Stegagno brings to the Company sixteen years ofsignificant experience in the medical device market encompassing manufacturing, design and development, quality assurance and international and domestic regulatory affairs. He most recently served as Vice President of Quality and Regulatory Affairs for Elekta, and other medical device companies including Genzyme Biosurgery. Before focusing on the medical field, Mr. Stegagno enjoyed successful career encompassing production roles in the space industry, including avionics guidance systems for military applications and control computers for the space shuttle. Mr. Stegagno graduated from Tufts University with a Bachelor of Science degree in Chemical Engineering.

58
Iulian Cioanta, PhD joined the Company in June 2007 as Vice President of Research and Development.Development and was named Chief Science and Technology Officer in 2018. Dr. Cioanta most recently served as Business Unit Manager with Cordis Endovascular, a Johnson & Johnson company. Prior to that, Dr. Cioanta worked as Director of Development Engineering with Kensey Nash Corporation, Research Manager at ArgoMed Inc. and Project Manager and Scientist with the Institute for the Design of Research Apparatus. Dr. Cioanta also worked in academia at Polytechnic University of Bucharest in Romania, Leicester University in the United Kingdom and Duke University in the United States. Dr. Cioanta received a Master of Science degree in Mechanical Engineering and Technology form the Polytechnic University of Bucharest and he earned his PhD degree in Biomedical Engineering from Duke University in the field of extracorporeal shock wave lithotripsy.

John SchlechtwegAndrew Walko joined the Companycompany as Chief Revenue Officer in August 2020.of July 2023 as the Company’s President. Mr. SchlechtwegWalko brings to the Company over fifteen years ofdeep experience in the biotech, pharmaceutical andcontract manufacturing, supply chain management, medical device salesproduction, and marketing. He most recentlylogistics from his previous roles as President at Biomerics, LLC (medical device contract manufacturing) from August 2021 to April 2023; at Minnetronix, Inc. (medical device design and manufacturing), including as Director of Manufacturing (Operations) from March 2020 to July 2021 and Senior Manager, Manufacturing (Operations) from June 2018 to February 2020; and at Integer Holdings Corporation.  Prior to this, he served as Senior DirectorOperations and Logistics Manager for the U.S. Army both at home and overseas.  He earned his MBA from the University of Minnesota and Bachelor of science from West Virginia University.

Tim Hendricks joined Sanuwave in February of 2023 as the Executive V.P. of Sales for Celularity,the U.S. Wound business. Across his 20 years of industry experience, Hendricks has taken on progressive roles in sales leadership, training & development, and other medical companies including Alliqua, Shire Regenerative Medicine, Accelecare, Organogenesis, Inc.,professional education with responsibilities both internationally and Merck Scherng-Plough. Mr. Schlechtweg graduated from Southern Connecticut State University with a Masters of Business Administration and from Utica College of Syracuse University with a Bachelor of Arts.

Jeff Blizard is the Senior Director of Sales at AbioMED, where he led sales of Impella in the surgical market bringing it from 16 million to 150 million in 6 years. Mr.Blizard brings a strong knowledge of capital equipmentU.S. Tim has led sales and sales leadership specificteams in medical devices, biologics, specialty pharmaceuticals, and durable medical equipment. His passion for collaboration and growth has allowed him to thrive at start-ups and Fortune 500 companies such as Boston Scientific (formerly Advanced Bionics), Smith & Nephew (formerly Osiris Therapeutics), and most recently Byram Healthcare as the medical industry. ThroughoutVice President of Sales. He earned his career, Mr. Blizard has shown strengthBachelor of the Arts in business and market development.Advertising from Southern Methodist University.

Ian Milleris the Commercial Vice President of Hoogwegt US where he manages a team of traders generating more than $500 Million in annual revenue by purchasing and selling in excess of 250,000 metric tons of commodities which are distributed around the globe. Mr. Miller has a Master of Business Administration from Drake University and brings over 20 years of sales leadership knowledge that will help SANUWAVE develop its non-medical verticals and growth strategies. Throughout his career, Mr. Miller has built a successful track record for business development and strategic implementation that have helped companies grow both their top and bottom lines.

Jim Tyler is an advisory partner to Morgan Stanley Expansion Capital. Mr. Tyler brings over 40 years of operations and financial leadership in various healthcare delivery models. Mr. Tyler built a successful track record for operation excellence, specifically in the wound care industry, as COO with National Healing which later became Healogics, the nation’s leading provider of advanced wound care.

John F. Nemelka joined the Company as a member of the board of directors in October of 2009 and joined SANUWAVE, Inc. as a member of the board of directors in August of 2005. Mr. Nemelka founded NightWatch Capital Group, LLC, an investment management business, and served as its Managing Principal since its incorporation in July 2001 until its liquidation in December 2015. From 1997 to 2000, he was a Principal at Graham Partners, a private investment firm and affiliate of the privately-held Graham Group. From 2000 to 2001, Mr. Nemelka was a Consultant to the Graham Group. Mr. Nemelka brings to our board of directors a diverse background with both financial and operations experience. He holds a B.S. degree in Business Administration from Brigham Young University and an M.B.A. degree from the Wharton School at the University of Pennsylvania. Mr. Nemelka resigned from the Company’s board of directors effective April 10, 2022.

A. Michael Stolarskijoined the Company as a member of the board of directors in April 2016. Mr. Stolarski founded Premier Shockwave, Inc. in October 2008 and has since served as its President & CEO. From 2005 to 2008, Mr. Stolarski was the Vice President of Business Development and, previously, Acting CFO of SANUWAVE, Inc. From 2001 to 2005, he was the President – Orthopedic Division and Vice President of Finance for HealthTronics Surgical Services, Inc. From 1994 to 2001, he was the CFO and Controller of the Lithotripsy Division, Internal Auditor, and Paralegal of Integrated Health Services, Inc. Mr. Stolarski brings to our board an in-depth understanding of the orthopedic and podiatric shock wave market. In addition to being a Certified Public Accountant in the state of Maryland (inactive), he holds a M.S. in Finance from Loyola College, Baltimore a B.S. in Accounting and a B.S. in Finance from the University of Maryland, College Park.

Jeff Blizard joined the Board as a Director in April 2022.  Mr. Blizard is the Senior Director of Sales at AbioMED, where he led sales of Impella in the surgical market bringing it from 16 million to $150 million in 6 years. Mr.Blizard brings a strong knowledge of capital equipment and sales leadership specific to the medical industry. Throughout his career, Mr. Blizard has shown strength in business and market development.

41
Ian Miller joined the Board as a Director in April 2022.  Mr. Miller is the Commercial Vice President of Hoogwegt US where he manages a team of traders generating more than $500 million in annual revenue by purchasing and selling in excess of 250,000 metric tons of commodities which are distributed around the globe. Mr. Miller has a Master of Business Administration from Drake University and brings over 20 years of sales leadership knowledge that will help SANUWAVE develop its non-medical verticals and growth strategies. Throughout his career, Mr. Miller has built a successful track record for business development and strategic implementation that have helped companies grow both their top and bottom lines.

James Tyler joined the Board as a Director in April 2021.  Mr. Tyler is an advisory partner to Morgan Stanley Expansion Capital. Mr. Tyler has over 40 years of operations and financial leadership in various healthcare delivery models. Mr. Tyler built a successful track record for operational excellence, specifically in the wound care industry, as COO with National Healing which later became Healogics, the nation’s leading provider of advanced wound care.

Kevin A. Richardson, IIjoined the Company as chairman of the board of directors in October of 2009 and joined SANUWAVE, Inc. as chairman of the board of directors in August of 2005. In November 2012, upon the resignation of the Company’s former President and Chief Executive Officer, Christopher M. Cashman, Mr. Richardson assumed the role of Acting Chief Executive Officer, in addition to remaining Chairman of the Board, through the hiring of Mr. Chiarelli in February 2013. In April 2014, Mr. Richardson assumed the role of Co-Chief Executive Officer. When Mr. Chiarelli departed the Company in 2014, Mr. Richardson again assumed the role as Acting Chief Executive Officer. In November 2018, Mr. Richardson was appointed as Chief Executive Officer. Mr. Richardson stepped down as Chief Executive Officer in May 2023 to serve as the Company’s Chief Strategy Officer, the position he currently holds. Mr. Richardson brings to our board of directors a broad array of financial knowledge for healthcare and other industries. Since 2004, Mr. Richardson served as managing partner of Prides Capital LLC, an investment management firm, until its liquidation in September 2015
 
CORPORATE GOVERNANCE AND BOARD MATTERS

The Company adopted a formal Corporate Governance policy in January 2012 which included establishing formal board committees and a code of conduct for the board of directors and the Company.

The Board of Directors

Recent Developments

The Company’s current board of directors consists of fivesix members, four of whom have been determined by the board to be “independent” as defined under the rules of the OTC stock market.The board of directors has determined that Messrs. Frank and Richardson are not independent under the applicable marketplace rules of the OTC stock market. During 2023, the Board held seven meetings. Each incumbent director attended at least 75% of the aggregate of the total number of meetings of the Board held during the period for which he has been a director and the total number of meetings held by all committees of the Board on which he served during the periods that he or she served.

59
Board’s Leadership Structure

The Company’s board of directors elects the Company’s chief executive officer and its chairman, and each of these positions may be held by the same person or may be held by two persons. The chairman’s primary responsibilities are to manage the board and serve as the primary liaison between the board of directors and the chief executive officer, while the primary responsibility of the chief executive officer is to manage the day-to-day affairs of the Company, taking into accountconsidering the policies and directions of the board of directors. Such an arrangement promotes more open and robust communication among the board and provides an efficient decision-making process with proper independent oversight. The Company’s board of directors, hasas of May 2023, with the appointment of Morgan Frank as Chief Executive Officer,, determined that it is currently in the best interest of the Company and its shareholders to combine the roles of chairman of the board and chief executive officer.

The Company believes, however, that there is no single leadership structure that is always the best and most effective in all circumstances and at all times.circumstances. Accordingly, the board of directors retains the authority to later combineseparate these roles if doing so would be in the best interests of the Company and its shareholders.

The Company’s board of directors is authorized to have an audit committee, a compensation committee, and a nominating and corporate governance committee, to assist the Company’s board of directors in discharging its responsibilities. The Company’s current board

42

Board’s Role in Risk Oversight

While the Company’s management is responsible for the day-to-day management of risk to the Company, the board of directors has broad oversight responsibility for the Company’s risk management programs. The various committees of the board of directors assist the board of directors in fulfilling its oversight responsibilities in certain areas of risk. In particular, the audit committee focuses on financial and enterprise risk exposures, including internal controls, and discusses with management and the Company’s independent registered public accountants the Company’s policies with respect to risk assessment and risk management. The compensation committee is responsible for considering those risks that may be implicated by the Company’s compensation programs and reviews those risks with the Company’s board of directors and chief executive officer.

Audit Committee

The current members of the Company’s audit committee are A. Michael Stolarski (Acting Chairperson), Ian Miller and Jeff Blizard. Mr. Stolarski, Mr. Miller and Mr. Blizard are determined to be independent directors, pursuant to the rules of the OTC stock market. Mr. Stolarski, who is acting as the chair of the committee, has been determined by the board of directors to be an audit committee financial expert as defined pursuant to the rules of the SEC.

The audit committee operates under a written charter adopted by the board of directors which is available on the Company’s website at www.sanuwave.com. The primary responsibility of the audit committee is to oversee the Company’s financial reporting process on behalf of the board of directors. The Audit Committee reviews and discusses with management and the independent registered public accounting firm the annual audited and quarterly financial statements (including the related disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the annual report on Form 10-K and the quarterly reports on Form 10-Q), reviews the integrity of the financial reporting processes, both internal and external, reviews the qualifications, performance, and independence of the registered public accounting firm. Among other things, the audit committee is also responsible for overseeing the Company’s accounting and financial reporting processes and audits of the Company’s financial statements, reviewing and discussing with the independent auditors the critical accounting policies and practices for the Company, engaging in discussions with management and the independent auditors to assess risk for the Company and management thereof, and reviewing with management the effectiveness of the Company’s internal controls and disclosure controls and procedures. The audit committee is directly responsible for the appointment, compensation, retention, and oversight of the work of the Company’s independent auditors, currently Marcum LLP, including the resolution of disagreements, if any, between management and the auditors regarding financial reporting. In addition, the audit committee is responsible for reviewing and approving any related party transaction that is required to be disclosed pursuant to Item 404 of Regulation S-K promulgated under the Exchange Act.

60The current members of the Company’s audit committee are Ian Miller (Acting Chairperson), A. Michael Stolarski, and Jeff Blizard. Mr. Stolarski, Mr. Miller, and Mr. Blizard are determined to be independent directors, pursuant to the rules of the OTC stock market. Mr. Miller, who is acting as the chair of the committee, has been determined by the board of directors to be an audit committee financial expert as defined pursuant to the rules of the SEC.
Compensation Committee

The current chair of the Company’s compensation committee is Jeff Blizard, who is an independent director, pursuant to the rules of the OTC stock market. The other current members of the compensation committee are A. Michael Stolarski, Ian Miller, and Jim Tyler, who are also independent directors pursuant to the rules of the OTC stock market. The primary purpose of the compensation committee is to discharge the responsibilities of the board of directors relating to compensation of the Company’s executive officers. Pursuant to the Company’s Compensation Committee Charter, the compensation committee is required to consist of at least two independent directors.

The compensation committee operates under a written charter adopted by the board of directors which is available on the Company’s website at www.sanuwave.com. Specific responsibilities of the compensation committee include reviewing and recommending approval of compensation of the Company’s named executive officers, administering the Company’s stock incentive plan, and reviewing and making recommendations to the Company’s board of directors with respect to incentive compensation and equity plans.

Nominating and Corporate Governance Committee

The current chair of the Company’s nominating and corporate governance committee is Jim Tyler, who is an independent director, pursuant to the rules of the OTC stock market. The other current members of the nominating and governance committee are Ian Miller, A. Michael Stolarski, and Jeff Blizard, who are also independent directors pursuant to the rules of the OTC stock market. Pursuant to the Company’s Nominating and Corporate Governance Committee Charter, the nominating and corporate governance committee is required to consist of at least two independent directors.

The nominating and corporate governance committee operates under a written charter adopted by the board of directors which is available on the Company’s website at www.sanuwave.com. Specific responsibilities of the nominating and corporate governance committee include:include identifying and recommending nominees for election to the Company’s board of directors; developing and recommending to the board of directors the Company’s corporate governance principles; overseeing the evaluation of the board of directors; and reviewing and approving compensation for non-employee members of the board of directors.

Strategy and Finance Committee

The nominating and corporate governance committee’s charter outlines how the nominating and corporate governance committee fulfills its responsibilities for assessing the qualifications and effectivenesscurrent chair of the Company’s strategy and finance committee is A. Michael Stolarski. The other current board members, assessing the needs for future board members, identifying individuals qualified to become members of the boardcommittee are James Tyler and its committees,Ian Miller. The strategy and recommending candidates forfinance committee operates under a written charter adopted by the board of director’s selection as director nominees for electiondirectors which is available on the Company’s website at www.sanuwave.com. Specific responsibilities of the next annual or other properly convened meeting of shareholders.strategy and finance committee include identifying financial strategies to improve the Company’s balance sheet position and shareholder value.

The nominating and corporate governance committee considers director candidates recommended by shareholders for nomination for election to the board
43
Table of directors. The committee applies the same standards in considering director candidates recommended by the shareholders as it applies to other candidates. Any shareholder entitled to vote for the election of directors may recommend a person or persons for consideration by the committee for nomination for election to the board of directors. The Company must receive written notice of such shareholder’s recommended nominees(s) no later than January 31st of the year in which the shareholder wishes such recommendation to be considered by the committee in connection with the next meeting of shareholders at which the election of directors will be held. To submit a recommendation, a shareholder must give timely notice thereof in writing to the Secretary of the Company. A shareholder’s notice to the Secretary shall set forth: (i) the name and record address of the shareholder making such recommendation and any other shareholders known by such shareholder to be supporting such recommendation; (ii) the class and number of shares of the Company which are beneficially owned by the shareholder and by any other shareholders known by such shareholder to be supporting such recommendation; (iii) the name, age and five year employment history of such recommended nominee; (iv) the reasons why the shareholder believes the recommended nominee meets the qualifications to serve as a director of the Company; and (v) any material or financial interest of the shareholder and, if known, the recommended nominee in the Company.Contents

ShareholderStockholder Communications with the Board of Directors

The board of directors has implemented a process for shareholdersstockholders to send communications to the board of directors. ShareholdersStockholders who wish to communicate directly with the board of directors or any particular director should deliver any such communications in writing to the Secretary of the Company. The Secretary will compile any communications they receive from shareholdersstockholders and deliver them periodically to the board of directors or the specific directors requested. The Secretary of the Company will not screen or edit such communications but will deliver them in the form received from the shareholder.stockholder.

61
Code of Conduct and Ethics

It is the Company’s policy to conduct its affairs in accordance with all applicable laws, rules and regulations of the jurisdictions in which it does business. The Company has adopted a code of business conduct and ethics with policies and procedures that apply to all associates (all employees are encompassed by this term, including associates who are officers) and directors, including the chief executive officer, chief financial officer, controller, and persons performing similar functions.

The Company has made the code of business conduct and ethics available on its website at www.sanuwave.com. If any substantive amendments to the code of business conduct and ethics are made or any waivers are granted, including any implicit waiver, the Company will disclose the nature of such amendment or waiver on its website or in a reportCurrent Report on Form 8-K.

No Family Relationships Among Directors and Officers

There are no family relationships between any director or executive officer of the Company and any other director or executive officer of the Company.

Limitation of Directors Liability and Indemnification

The Nevada Revised Statutes authorize corporations to limit or eliminate, subject to certain conditions, the personal liability of directors to corporations and their stockholders for monetary damages for breach of their fiduciary duties. Our certificate of incorporation limits the liability of our directors to the fullest extent permitted by Nevada law.

We have director and officer liability insurance to cover liabilities our directors and officers may incur in connection with their services to us, including matters arising under the Securities Act of 1933, as amended. Our certificate of incorporation and bylaws also provide that we will indemnify our directors and officers who, by reason of the fact that he or she is one of our officers or directors, is involved in a legal proceeding of any nature.

There is no pending litigation or proceeding involving any of our directors, officers, employees, or agents in which indemnification will be required or permitted. We are not aware of any threatened litigation or proceeding that may result in a claim for such indemnification.

DELINQUENT SECTION 16(a) REPORTS

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our equity securities which are registered pursuant to Section 12 of the Exchange Act, to file with the SEC initial reports of ownership and reports of changes in ownership of our equity securities. Officers, directors and greater than 10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.

Except as set forth herein, based solely upon a review of the Forms 3, 4 and 5 (and amendments thereto) furnished to us for our fiscal year ended December 31, 2021,2023, we have determined that our directors, officers and greater than 10% beneficial owners complied with all applicable Section 16 filing requirements.
 
Item 11.EXECUTIVE COMPENSATION

This section discusses the material components of the executive compensation program offered to our executives, and in particular to our named executive officers for 2023, who were:

Morgan Frank, Chief Executive Officer
Toni Rinow, Chief Financial Officer
Tim Hendricks, Executive Vice President of Sales
Kevin A. Richardson, II, Chief Strategy Officer and former Chief Executive Officer

44
Summary Compensation Table for Fiscal Years 2021 and 2020

The following table provides certain information concerning compensation earned for services rendered in all capacities by our named executive officers during the fiscal years ended December 31, 20212023, and 2020.2022.

Name and Principal PositionYear Salary ($)  
Option Awards ($)
(2)
  
All Other Compensation ($)(3)
  Total ($) 
Kevin A. Richardson, II2021 $350,000
  -  $49,310  $399,310 
Chairman of the Board and Chief Executive Officer (principal executive officer)
2020 
$
335,417
(1) 
  
-
  
$
37,180
  
$
372,596
 
 
                 
Shri P. Parikh (4)
2021 
$
-
   
-
  
$
-
  
$
-
 
President, Healthcare2020 $305,301   -  $23,699  $329,000 
 
 
                
Peter Stegagno2021 $200,000   -  $47,833  $247,833 
Chief Operating Officer
2020 
$
188,333
   
-
  
$
28,905
  
$
217,239
 
 
                 
Lisa E. Sundstrom
2021 
$
200,000
   
-
  
$
52,023
  
$
251,023
 
Chief Financial Officer (principal financial officer)2020 $191,667   -  $23,347  $215,014 
 
 
                
Name and PositionYear Salary  
Bonus (2)
  
All other
compensation (1)
  Total 
Morgan Frank, Chief Executive Officer2023  1   -   100,000   100,001 
Toni Rinow, Chief Financial Officer2023  335,000   -   -   335,000 
Tim Hendricks, Executive Vice President of Sales2023  244,391   30,000   49,067   323,458 
Kevin Richardson II, Former Chief Executive Officer2023  350,000   -   60,000   410,000 

 2022  430,583   -   175,000   605,583 

(1)Includes board fees, health, dental, life and disability insurance premiums and 401(k) matching contributions.

(2)The bonus paid to Mr. Hendricks in 2023 was a signing bonus.

(1) Amounts reflect (i) the salary guaranteed by Mr. Richardson’s employment agreement with the Company and (ii) an aggregate amount of $60,000 for fees earned or paid in cash for Mr. Richardson’s service as a director in fiscal 2020 (which aggregate amount is also reflected in the Director2023 Named Executive Officer Compensation Table, below).Plan

(2) Amounts shownBase salary

Our salaries reflect the responsibilities of each Named Executive Officer (NEO) and the competitive market for comparable professionals in this columnour industry.  Base salaries and benefits packages are fixed components of our NEO’s compensation and do not reflect the dollar amounts actually received byvary with Company performance.

Short term Cash Incentives

The performance-based compensation plan reflects our NEOs. Instead, these amounts reflect the aggregate grant date fair value of each stock or option award in the respective fiscal year, computed in accordance with the provisions of FASB ASC Topic 718. Assumptions used in the calculation of these amountspay-for-performance philosophy and directly ties short-term incentives to short-term business performance.  These awards are included in Note 18linked to our consolidatedspecific annual financial statements included in our Annual Report on Form 10-Kgoals and key business initiatives for the fiscal year ended December 31, 2019.

(3) Includes health, dental, lifeoverall Company. Annual employee bonus incentives are paid to reward the achievement of critical short-term operating, financial, and disability insurance premiums and 401(k) matching contributions.

(4) Mr. Parikh was named President, Healthcarestrategic goals.  The annual employee bonus is calculated based on a percentage of the each NEO’s salary, 50% is paid on individual performance goals, as assigned by leadership and the Board of Directors, and the remainder is paid based on Company effective May 31, 2018. On May 14, 2020, Mr. Parikh notified the Company of his decision to resign effective June 30, 2020.performance measures.

Stock Incentive Plan

On October 24, 2006, SANUWAVE, Inc.’s board of directors adopted the 2006 Stock Incentive Plan of SANUWAVE, Inc. (the “2006 Plan”). On November 1, 2010, the Company approved the Amended and Restated 2006 Stock Incentive Plan of SANUWAVE Health, Inc. effective as of January 1, 2010 (previously defined as the “Stock Incentive Plan”). The Stock Incentive Plan permits grants of awards to selected employees, directors, and advisors of the Company in the form of restricted stock or options to purchase shares of common stock. Options granted may include nonstatutorynon-statutory options as well as qualified incentive stock options. The Stock Incentive Plan is currently administered by the board of directors of the Company. The Stock Incentive Plan gives broad powers to the board of directors of the Company to administer and interpret the particular form and conditions of each option. The stock options granted under the Stock Incentive Plan are nonstatutorynon-statutory options which vest over a period of up to three years and have a maximum ten-year term. The options are granted at an exercise price equal to the fair market value of the common stock on the date of the grant which is approved by the board of directors of the Company. The Stock Incentive Plan had 35,000,000 shares of common stock reserved for grant at December 31, 2020 and 2019, respectively.grant.

63
The terms of the options granted under the Stock Incentive Plan expire as determined by individual option agreements (or on the tenth anniversary of the grant date), unless terminated earlier, on the first to occur of the following: (1) the date on which the participant’s service with the Company is terminated by the Company for cause; (2) 60 days after the participant’s death; or (3) 60 days after the termination of the participant’s service with the Company for any reason other than cause or the participant’s death; provided that, if during any part of such 60 day period the option is not exercisable solely because of specified securities law restrictions, the option will not expire until the earlier of the expiration date or until it has been exercisable for an aggregate period of 60 days after the termination of the participant’s service with the Company. The options vest as provided for in each individual’s option agreement and the exercise prices for the options are determined by the board of directors at the time the option is granted;granted, provided that the exercise price shall in no event be less than the fair market value per share of the Company’s common stock on the grant date. In the event of any change in the common stock underlying the options, by reason of any merger or exchange of shares of common stock, the board of directors shall make such substitution or adjustment as it deems to be equitable to (1) the class and number of shares underlying such option, (2) the exercise price applicable to such option, or (3) any other affected terms of such option.

45
In the event of a change of control, unless specifically modified by an individual option agreement: (1) all options outstanding as of the date of such change of control will become fully vested; and (2) notwithstanding (1) above, in the event of a merger or share exchange, the board of directors may, in its sole discretion, determine that any or all options granted pursuant to the Stock Incentive Plan will not vest on an accelerated basis if the board of directors, the surviving corporation or the acquiring corporation, as the case may be, has taken such action that in the opinion of the board of directors is equitable or appropriate to protect the rights and interests of the participants under the Stock Incentive Plan.

On December 31, 2021, thereNo equity awards were 2,568,281 shares of common stock available for grant under the Stock Incentive Plan. Forissued during the years ended December 31, 20212023, and 2020, there were 02022.

Transition and 0Separation Agreement with Mr. Richardson

On May 23, 2023, SANUWAVE and Mr. Richardson entered into a Transition and Separation Agreement (the “Transition Agreement”), pursuant to which Mr. Richardson agreed to serve as SANUWAVE’s Chief Strategy Officer for an anticipated period of 12 months or alternatively a consulting agreement for a period of two years. Mr. Richardson will continue to receive his current salary or an equivalent consulting fee, remain eligible for SANUWAVE’s group health benefit plans and programs, unless he earlier becomes eligible for health insurance benefits through a subsequent employer or exceeds the legal eligibility period for continued coverage, and will remain eligible to receive a pro-rated annual bonus, one-third of which will be based upon SANUWAVE achieving each of the following metrics during calendar year 2023: (i) sales of $30 million, (ii) adjusted EBITDA of $3 million and (iii) listing on The Nasdaq Stock Market or the New York Stock Exchange. Mr. Richardson also is entitled to receive options respectively, grantedexercisable for 25 million shares of SANUWAVE Common Stock, one-half of which will vest immediately and one-half of which will vest on April 15, 2024. During any period of continued service with SANUWAVE, Mr. Richardson’s options will continue to vest. If no mutually agreed upon employment agreement or consulting agreement is entered into, or if Mr. Richardson is terminated without cause prior to the Company’s executive officersend of the anticipated transition period, Mr. Richardson will receive a severance payment equal to 20 weeks of his most recent base salary, subject to Mr. Richardson executing a release of claims in favor of SANUWAVE and his continued compliance with the Transition Agreement and any post-employment obligations under any employee agreements between SANUWAVE and Mr. Richardson. The Transition Agreement also included a release of claims in favor of SANUWAVE and customary confidentiality and non-disparagement provisions.

Employment Agreement with Mr. Frank

Effective May 23, 2023, the Stock Incentive Plan.SANUWAVE board appointed Morgan Frank, as SANUWAVE’s interim Chief Executive Officer. In connection with this appointment, SANUWAVE and Mr. Frank entered into an Executive Employment Agreement, effective May 23, 2023 (the “Frank Employment Agreement”). Pursuant to the Frank Employment Agreement, Mr. Frank is paid a de minimis base salary of $1.00 per year, may be eligible to receive an incentive bonus opportunity in accordance with any criteria determined by the SANUWAVE board, and will be entitled to participate in SANUWAVE’s employee benefit plans and programs. Mr. Frank’s employment will be terminated upon (i) written notice of termination or resignation by either SANUWAVE or Mr. Frank, respectively, for any reason, provided that Mr. Frank must provide at least 60 days’ prior notice of his resignation, or (ii) Mr. Frank’s death or disability. Moreover, during the term of his employment and for a period of one year thereafter, Mr. Frank agreed (i) not to perform services for or have any interest in any competitive business and (ii) not to solicit (a) SANUWAVE’s current or former employees or independent contractors or (b) actual or prospective customers, clients, vendors, service providers, suppliers or contractors. Finally, the Frank Employment Agreement also includes customary confidentiality and non-disparagement provisions.

Outstanding Equity Awards at 20212023 Fiscal Year End

The following table provides certain information concerning the outstanding equity awards for each named executive officer as of December 31, 2021:2023:

 
 Option Awards Stock Awards 
Name Number of Securities Underlying Unexercised Options/ Warrants (#) Exercisable  Number of Securities Underlying Unexercised Options/ Warrants (#) Unexercisable  
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
  
Option/ Warrant
Exercise Price
($)
 
Option/ Warrant
Expiration Date
 
Number of
Shares or Units
of Stock That
Have Not
Vested (#)
  
Market Value of
Shares or Units
of Stock That
Have Not
Vested ($)
  
Equity Incentive
Plan Awards:
 Number of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested (#)
  
Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested ($)
 
(a) (b)  (c)  (d)  (e) (f) (g)  (h)  (i)  (j) 
Kevin A. Richardson, II  
115,000
(1) 
  
-
   
-
  
$
0.35
 02/21/2023  
-
   
-
   
-
   
-
 
Chairman of the Board and Chief Executive Officer (principal executive officer)  
452,381
(3) 
  
-
   
-
  
$
0.11
 10/1/2025  
-
   
-
   
-
   
-
 
   
297,619
(3) 
  
-
   
-
  
$
0.06
 10/1/2025  
-
   
-
   
-
   
-
 
   
700,000
(4) 
  
-
   
-
  
$
0.04
 6/16/2026  
-
   
-
   
-
   
-
 
   
594,300
(5) 
  
-
   
-
  
$
0.18
 11/9/2026  
-
   
-
   
-
   
-
 
   
900,000
(6) 
  
-
   
-
  
$
0.11
 6/14/2027  
-
   
-
   
-
   
-
 
   
1,100,000
(7) 
  
-
   
-
  
$
0.21
 9/20/2028  
-
   
-
   
-
   
-
 
   
50,000
(9) 
  
-
   
-
  
$
0.15
 8/26/2029  
-
   
-
   
-
   
-
 
Lisa E. Sundstrom  
65,000
(1) 
  
-
   
-
  
$
0.35
 02/21/2023  
-
   
-
   
-
   
-
 
Chief Financial Officer (principal financial officer)  
25,000
(2) 
  
-
   
-
  
$
0.55
 5/7/2024  
-
   
-
   
-
   
-
 
   
301,587
(3) 
  
-
   
-
  
$
0.11
 10/1/2025  
-
   
-
   
-
   
-
 
   
198,413
(3) 
  
-
   
-
  
$
0.06
 10/1/2025  
-
   
-
   
-
   
-
 
   
500,000
(4) 
  
-
   
-
  
$
0.04
 6/16/2026  
-
   
-
   
-
   
-
 
   
424,500
(5) 
  
-
   
-
  
$
0.18
 11/9/2026  
-
   
-
   
-
   
-
 
   
600,000
(6) 
  
-
   
-
  
$
0.11
 6/14/2027  
-
   
-
   
-
   
-
 
   
750,000
(7) 
  
-
   
-
  
$
0.21
 9/20/2028  
-
   
-
   
-
   
-
 
   
50,000
(9) 
  
-
   
-
  
$
0.15
 8/26/2029  
-
   
-
   
-
   
-
 
Peter Stegano  
333,644
(1) 
  
-
   
-
  
$
0.35
 02/21/2023  
-
   
-
   
-
   
-
 
Chief Operating Officer  
50,000
(2) 
  
-
   
-
  
$
0.55
 5/7/2024  
-
   
-
   
-
   
-
 
   
301,587
(3) 
  
-
   
-
  
$
0.11
 10/1/2025  
-
   
-
   
-
   
-
 
   
198,413
(3) 
  
-
   
-
  
$
0.06
 10/1/2025  
-
   
-
   
-
   
-
 
   
500,000
(4) 
  
-
   
-
  
$
0.04
 6/16/2026  
-
   
-
   
-
   
-
 
   
424,500
(5) 
  
-
   
-
  
$
0.18
 11/9/2026  
-
   
-
   
-
   
-
 
   
600,000
(6) 
  
-
   
-
  
$
0.11
 6/14/2027  
-
   
-
   
-
   
-
 
   
750,000
(7) 
  
-
   
-
  
$
0.21
 9/20/2028  
-
   
-
   
-
   
-
 
   
50,000
(9) 
  
-
   
-
  
$
0.15
 8/26/2029  
-
   
-
   
-
   
-
 

6446

(1)On February 21, 2013, the company, by mutual agreement with all active employees and directors of the Company, cancelled options granted to the active employees and directors in the year ended December 31, 2011 and prior. In exchange for these options, the active employees and directors received new options to purchase shares of common stock at an exercise price of $0.35 per share. The Company cancelled all options which were previously granted to Mr. Richardson, Ms. Sundstrom and Mr. Stegagno. The Company granted Mr. Richardson 115,000 options, Ms. Sundstrom 65,000 options and Mr. Stegagno 334,644 options on February 21, 2013 which vest one-third at grant date, one-third on February 21, 2014 and one-third on February 21, 2015.


(2)The Company granted Ms. Sundstrom 25,000 and Mr Stegagno 50,000 options on May 7, 2014 which vests one-third at grant date, one-third on May 7, 2015 and one-third on May 7, 2016.


(3)The Company granted Mr. Richardson 750,000 options, Ms. Sundstrom 500,000 options and Mr. Stegagno 500,000 options on October 1, 2015 which vests at grant date.


(4)The Company granted Mr. Richardson 700,000 options, Ms. Sundstrom 500,000 options and Mr. Stegagno 500,000 options on June 16, 2016 which vests at grant date.


(5)The Company granted Mr. Richardson 594,300 options, Ms. Sundstrom 424,500 options and Mr. Stegagno 424,500 options on November 9, 2016 which vests at grant date.


(6)The Company granted Mr. Richardson 900,000 options, Ms. Sundstrom 600,000 options and Mr. Stegagno 600,000 options on June 15, 2017 which vests at grant date.


(7)The Company granted Mr. Richardson 1,100,000 options, Ms. Sundstrom 750,000 options and Mr. Stegagno 750,000 options on September 20, 2018 which vests at grant date.


(8)The Company granted 50,000 options each to Mr. Richardson, Ms. Sundstrom and Mr. Stegagno on August 26, 2019 which vests at grant date.
Name 
Number of
securities
underlying
unexercised
options
exercisable
  
Number of
securities
underlying options
unexercisable
  
Equity incentive
plan awards
number of
securities
underlying
unexercised
unearned options
  
Exercise
price ($)
 
Expiration
Date
Kevin A. Richardson, Former Chief Executive Officer  452,381   -   -  $0.11 10/1/2025
   297,619   -   -  $0.06 10/1/2025
   700,000   -   -  $0.04 6/16/2026
   594,300   -   -  $0.18 11/9/2026
   900,000   -   -  $0.11 6/14/2027
   1,100,000   -   -  $0.21 9/20/2028
   50,000   -   -  $0.15 8/26/2029

Director Compensation Table for Fiscal Year 20212023

No fees or awards were givenThe Company provides a base retainer for each director with higher base retainers for service by the Board Chair. The Company provides an additional retainer for committee leadership of the Audit Committee, Compensation Committee, and Strategy and Finance Committee. The Compensation Committee believes the structure aligns compensation according to directors for the year ended December 31, 2021level of service contributions by each director.

Discussion of Director Compensation
Director 
Fee Earned or
paid in cash
(in thousands)
 
Morgan Frank $100 
A. Michael Stolarski $97 
Jeff Blizzard $90 
Ian Miller $90 
James Tyler $90 
Kevin Richardson $60 

Effective January 1, 2018, the Company began to compensate its directors at an annual rate of $40,000 each. On August 26, 2019, the Company issued an option to purchase 50,000 shares of the Company’s common stock at $0.15 per share to employee director Kevin A. Richardson II and to non-employee directors John F. Nemelka, Alan L. Rubino, A. Michael Stolarski and Maj-Britt Kaltoft. On September 20, 2018, the Company issued an option to purchase 1,100,000 shares of the Company’s common stock at $0.21 per share to non-employee director Kevin A. Richardson II and the Company issued options to purchase 350,000 shares of the Company’s common stock at $0.21 per share to non-employee directors John F. Nemelka, Alan L. Rubino, A. Michael Stolarski and Maj-Britt Kaltoft. On June 15, 2017, the Company issued an option to purchase 900,000 shares of the Company’s common stock at $0.11 per share to non-employee director Kevin A. Richardson II and the Company issued options to purchase 300,000 shares of the Company’s common stock at $0.11 per share to non-employee directors John F. Nemelka, Alan L. Rubino, A. Michael Stolarski and Maj-Britt Kaltoft. On November 9, 2016, the Company issued an option to purchase 594,300 shares of the Company’s common stock at $0.18 per share to director Kevin A. Richardson, II and the Company issued options to purchase 169,800 shares of the Company’s common stock at $0.18 per share to directors John F. Nemelka, Alan L. Rubino and A. Michael Stolarski. On June 16, 2016, the Company issued an option to purchase 700,000 shares of the Company’s common stock at $0.04 per share to director Kevin A. Richardson, II and the Company issued options to purchase 200,000 shares of the Company’s common stock at $0.04 per share to directors John F. Nemelka, Alan L. Rubino and A. Michael Stolarski. On October 1, 2015, the Company issued an option to purchase 452,381 shares of the Company’s common stock at $0.11 per share and an option to purchase 297,619 shares of the Company’s common stock at $0.50 per share to director Kevin A. Richardson, II and the Company issued options to purchase 150,795 shares of the Company’s common stock at $0.11 per share and options to purchase 99,205 shares of the Company’s common stock at $0.50 per share to directors John F. Nemelka and Alan L. Rubino. The options above issued at $0.50 per share were re-priced to $0.06 per share in March 2016 as the result of the public offering. On September 3, 2013, the Company issued an option to purchase 100,000 shares of the Company’s common stock at $0.65 per share to director Alan L. Rubino. On February 21, 2013, the Company, by mutual agreement with all the active employees and directors of the Company, cancelled options granted to the active employees and directors in the year ended December 31, 2011 and prior. In exchange for these options, the active employees and directors received new options to purchase shares of common stock at an exercise price of $0.35 per share. Kevin A. Richardson, II, and John F. Nemelka, each cancelled options to purchase 15,000 shares of the Company’s Common Stock and were each issued options to purchase 115,000 shares of the Company’s Common Stock at an exercise price of $0.35 per share.

65
The following are the aggregate number of option awards outstanding that have been granted to each of our non-employee directors as of December 31, 2021:  Kevin A. Richardson, II – 4,209,300, John F. Nemelka – 1,434,800, Alan L. Rubino – 1,419,800, A. Michael Stolarski – 1,069,800 and Maj-Britt Kaltoft – 700,000

Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information, as of December 31, 2021,March 15, 2024, with respect to the beneficial ownership of the Company’s outstanding common stock by (i) any holder of more than five percent, (ii) each of the Company’s named executive officers and directors, and (iii) the Company’s directors and executive officers as a group.

 
 
Name of Beneficial Owner (1)
Number of Shares
Beneficially
Owned
 
 
 
Percent of
Shares
Outstanding (2)
A. Michael Stolarski (3)
18,331,290 3.8%
Kevin A. Richardson II (4)
16,795,993 3.5%
Peter Stegagno (5)
4,418,007 0.9%
Iulian Cioanta (6)
3,636,146 0.8%
Lisa E. Sundstrom (7)
3,364,500 0.7%
John F. Nemelka (8)
1,696,055 0.4%
Alan Rubino1,669,800 0.3%
Maj-Britt Kaltoft950,000 0.2%
Thomas Price450,000 0.1%
All directors and executive officers as a group (6 persons)51,311,791 10.7%
47
Name of Beneficial Owner (1)
 
Number of
Share
Beneficially
Owned
  
Percent of
Shares
Outstanding (2)
 
Morgan Frank (4)
  347,483,770   25.6%
Toni Rinow  -   * 
Timothy Hendricks  -   * 
Kevin A. Richardson, II (3)
  35,459,229   3.1%
A. Michael Stolarski  132,990,790   10.9%
James Tyler  3,262,500   * 
Ian Miller  17,364,814   1.5%
Jeff Blizard  -   * 
All Directors and Executives as a group (11 persons)  543,085,371   37.2%
Greater than 5% Holders:        
Opaleye LP  207,514,881   19.8%
Manchester Management PR, LLC        
Manchester Management Company, LLC        
Manchester Explorer, L.P.        
James E. Besser  362,858,770   26.7%

* Denotes less than 1% beneficial ownership

(1) Unless otherwise noted, each beneficial owner has the same address as us.the Company.  Jeff Blizzard does not hold any stock in the Company.

(2) Applicable percentage ownership is based on 481,619,6211,140,559,227 shares of common stock outstanding as of September 30, 2021,March 15, 2024.  “Beneficial ownership” includes shares for which an individual, directly or indirectly, has or shares voting or investment power, or both, and also includes options, warrants and convertible promissory notes, that are exercisable within 60 days of September 30, 2021.March 15, 2024. Unless otherwise indicated, all of the listed persons have sole voting and investment power over the shares listed opposite their names. Beneficial ownership as reported in the above table has been determined in accordance with Rule 13d-3 of the Exchange Act.

(3) Includes options to purchase up to 1,319,800 shares of common stock.

66
(4) Includes options to purchase up to 7,459,300 shares of common stock.  In addition, this amount includes 1,324,7234,876,409 shares of common stock owned directly by Prides Capital Fund I, L.P. Prides Capital Partners LLC is the general partner of Prides Capital Fund I, L.P. and Mr. Richardson is the controlling shareholder of Prides Capital Partners LLC; therefore, under certain provisions of the Exchange Act, he may be deemed to be the beneficial owner of such securities. Mr. Richardson has also been deputized by Prides Capital Partners LLC to serve on the board of directors of the Company. Mr. Richardson disclaims beneficial ownership of all such securities except to the extent of any indirect pecuniary interest (within the meaning of Rule 16a-1 of the Exchange Act) therein.

(5) Consists(4) Manchester Management PR, LLC (“Manchester”) and Manchester Management Company, LLC (“GP”) may be deemed to be the owner of options to purchase up to 3,658,144108,460,646 shares of common stock.Common Stock. Manchester and GP have the sole power to vote or direct the vote of 0 shares of Common Stock, have the shared power to vote or direct the vote of 108,460,646 shares of Common Stock

(6) ConsistsManchester Explorer, L.P. (“Explorer”) may be deemed to be the beneficial owner of options to purchase up to 3,620,741362,858,770 shares of common stock.Common Stock. Explorer has the sole power to vote or direct the vote of 0 shares of Common Stock, has the shared power to vote or direct the vote of 309,636,770 shares of Common Stock

(7) ConsistsMr. Besser has the sole power to vote or direct the vote of options to purchase up to 3,364,5002,250,000 shares of common stock.Common Stock, has the shared power to vote or direct the vote of 131,268,146 shares of Common Stock and 216,215624 shares for warrants and convertible debt.

(8) Includes optionsMr. Frank has the sole power to purchase up to 1,684,800vote or direct the vote for 8,807,500 shares of common stock.Common Stock and 10,937,500 Common Stock warrants.  Mr. Frank has the shared power to vote or direct the vote of 131,268,146 shares of Common Stock and 216,215,624 shares for warrants and convertible debt.

Mr. Besser is the managing member of Manchester and GP and Mr. Frank serves as a portfolio manager and as a consultant for Explorer. Manchester is the investment manager of Explorer and GP is the general partner of Explorer. The principal business address for each of Manchester, GP, Explorer and Messrs. Besser and Frank is 2 Calle Candina, #1701, San Juan, Puerto Rico, 00907.

(5) Opaleye Management Inc. (the “Opaleye”) serves as investment manager to Opaleye, L.P. and as a portfolio manager for a separate managed account (the “Managed Account”) and may be deemed to indirectly beneficially own securities owned by the Managed Account. Opaleye disclaims beneficial ownership of the shares held by the Managed Account. Mr. James Silverman is the President of Opaleye. The address of Opaleye is One Boston Place, 26th Floor, Boston, MA 02108

48
Securities Authorized for Issuance Under Equity Compensation Plans

Plan category 
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants,
and rights (a)
  
Weighted-
average
 exercise price
of outstanding
options,
warrants and
rights (b)
  
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (c)
 
Equity compensation plans approved by security holders  -  $-   - 
Equity compensation plans not approved by security holders  16,286,650   0.28   5,598,216 
Total  16,286,650  $0.28   5,598,216 
Information on securities authorized for issuance
Stock Incentive Plans

On November 1, 2010, the Company approved the Stock Incentive Plan. The Stock Incentive Plan permits grants of awards to selected employees, directors, and advisors of the Company in the form of restricted stock or options to purchase shares of common stock. Options granted may include non-statutory options as well as qualified incentive stock options. The Stock Incentive Plan is currently administered by the board of directors of the Company. The Stock Incentive Plan gives broad powers to the board of directors of the Company to administer and interpret the form and conditions of each option. The stock options granted under the Company’s equity compensation plans can be found in Item 5 underStock Incentive Plan are generally non-statutory options which vest over a period of up to three years and have a ten-year term. The options are granted at an exercise price equal to the same caption in this Annual Reportfair market value of the common stock on Form 10-K.the date of the grant which is approved by the board of directors of the Company.
 
Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Director Independence

Our board of directors has determined that Jeff Blizard, Ian Miller, Jim Tyler and A. Michael Stolarski qualify as independent directors based on the OTC stock market definition of “independent director.”  Our board of directors has determined that our other directors, Morgan Frank and Kevin A. Richardson II, does not qualify as an independent director based on the OTC stock market definition of “independent director.”  There are no family relationships among any of the directors or executive officers of the Company.

Related Party Transactions

Other than as described below, since January 1, 2021, there have been no transactions with related persons required to be disclosed in this report.

On August 6, 2020, the Company terminated that certain line of credit agreement with A. Michael Stolarski, a member of the Company’s board of directors, dated December 29, 2017 and as amended November 12, 2018, in the amount of $1,000,000. As consideration for the termination of the Stolarski Line of Credit, the Company issued to A. Michael Stolarski a convertible promissory note in the principal amount of $223,511.

$223 thousand. The Stolarski Note has a maturity date of August 6, 2021, and accrues interest at a rate equal to 12.0% per annum. In the event that the Stolarski Note has not been repaid prior to January 1, 2021, the holder may elect to convert the outstanding principal amount plus any accrued by unpaid interest thereon into shares of Common Stock at a conversion price of $0.10 per share.

67
In March 2021, PSWC paid the Company $125 thousand as a deposit for future purchase of new medical equipment.

On July 1, 2021, the Company purchased unused DermaPace equipment and applicator inventory from PSWC for $127 thousand. As of December 31, 2021, $127 thousand is included in accounts payable on the consolidated balance sheets related to this transaction.

Also, effective July 1, 2021, the Company entered into a short-term equipment rental agreement with PSWC, whereby the Company obtained DermaPace equipment from PSWC for $3,600 per month. The Company recorded $99 thousand in revenue from this arrangement.

October 2021 Advance from Director – On October 27, 2021 the Company received $25 thousand from A. Michael Stolarski (the “Stolarski Advance”). In exchange for the Stolarski Advance, as well as the $125 thousand deposit received in March 2021, the Company issued to Mr. Stolarski a promissory note in the principal amount of $150 thousand (“Stolarski Note #2”). The Stolarski Note #2 matures on June 30, 2022, and accrues interest at a rate equal to 15.0% per annum.

On April 1, 2022, the Company entered into a Reverse Repurchase Agreement with a related party, A. Michael Stolarski, also a shareholder and member of the Company’s board of directors, in the amount of $250 thousand.
In August 2022, all notes including interest were refinanced into the August 2022 convertible promissory notes totaling $730 thousand.

Director Independence
49
Our boardIn August 2022 and November 2022, the Company entered into Purchase Agreements for the sale of directors has determined that Jeff Blizard, Ian Miller, Jim TylerNotes and A. Michael Stolarski qualify as independent directors based onCommon Stock Purchase Warrants in an aggregate principal amount of $16.2 million in August and $4.0 million in November.  In these transactions, James Besser, Morgan C. Frank, Chief Executive Officer and Chairman of the OTC stock market definition of “independent director.”  Our board of directors has determined that our other director,Board; Kevin A. Richardson, II, does not qualify as an independent director based on the OTC stock market definition of “independent director.”  There are no family relationships among anyformer Chairman of the directors or executive officersBoard and former Chief Executive Officer of the Company.Company; A. Michael Stolarski; Manchester Explorer, L.P., and Opaleye, L.P., beneficial owners of more than five percent of the Company’s common stock, purchased Notes, which were accompanied by Common Stock Purchase Warrants, with an aggregate principal amount of $400,000, $250,000, $261,780, $1,434,966, $2,500,000 and $2,900,000, respectively. Messrs. Besser and Frank share voting and dispositive power with respect to the securities acquired by Manchester Explorer, L.P.  The Notes issued to each of Messrs. Richardson and Stolarski included $90,000 in principal amount for which the consideration was accrued and unpaid director fees.  Certain other directors received Notes with an aggregate principal amount of $527,000 for which the consideration was accrued and unpaid director fees.  These notes along with interest were converted into common stock shares during 2023. Additional information regarding the Notes and accompanying Common Stock Purchase Warrants issued in August 2022 and November 2022 is disclosed in Note 11 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

In May 2023 and December 2023, the Company entered into Purchase Agreements for the sale of Notes and Common Stock Purchase Warrants in an aggregate principal amount of $1.2 million and $1.8 million, respectively.  In these transactions, Manchester Explorer, L.P. purchased Notes, which were accompanied by Common Stock Purchase Warrants, with an aggregate principal amount of $300,000 in May 2023 and $100,000 in December 2023. Additional information regarding the Notes and accompanying Common Stock Purchase Warrants issued in May 2023 and December 2023 is disclosed in Note 11 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

In July 2023, the Company issued Asset-Backed Secured Promissory Notes (ABS Promissory Notes) in the aggregate principal amount of $4.6 million at an original issue discount of 33.33%.  The Company and the parties to the ABS Promissory Notes entered into a side letter pursuant to which the parties agreed that upon the maturity date, the company will issue each lender a convertible promissory note and warrants consistent with the form of the above-described Purchase Agreements for the sale of Notes and Common Stock Purchase Warrants. A. Michael Stolarski, Manchester Explorer and Opaleye, L.P purchased ABS Promissory Notes in an aggregate principal amount of $149,993, $862,457, and $299,985. In January 2024, these ABS Promissory Notes were converted to convertible notes consistent with the Notes described above. Additional information regarding the ABS Promissory Notes is disclosed in Note 12 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

Letter Agreements

Pursuant to the Letter Agreements, the related parties disclosed above have committed to exchange the outstanding warrants and convertible notes described above for shares of common stock immediately prior to the closing of the Business Combination. Pursuant to the Letter Agreements, the holders of convertible notes will receive, in the form of common stock at an exchange ratio of $0.04 per share, the full amount of principal and interest that would be due and payable on such notes as of the applicable maturity date. The holders of warrants with an exercise price of $0.04 per share will receive 0.9 shares of common stock per share that are subject to such warrants, and the holders of warrants with an exercise price of $0.067 per share will receive 0.85 shares of common stock per share. The holders of these warrants and these convertible notes will pay no new consideration in connection with these exchanges.

Voting Agreements

In connection with the Business Combination, the Company and SEPA have entered into voting agreements with certain stockholders, including James Besser; Iulian Cioanta, Chief Science and Technology Officer; Morgan C. Frank; Ian Miller; Kevin A. Richardson, II; Peter Stegagno, Chief Operating Officer; A. Michael Stolarski; James Tyler, a director; and Manchester Explorer, L.P.

Lock-Up Agreements

In connection with the Business Combination, SEPA has entered into Lock-Up Agreements with certain stockholders, including James Besser, Iulian Cioanta, Morgan C. Frank, Ian Miller, Kevin A. Richardson, II, Peter Stegagno, A. Michael Stolarski, James Tyler, and Manchester Explorer, L.P.
 
Item 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table summarizes the fees that we have paid or accrued for audit and other services provided by our prior principal independent registered public accounting firm, Marcum LLP for the years ended December 31, 2021 and December 31, 2020:LLP:
 
Fee Category 2021  2020 
Audit fees 
$
450,000
  
$
309,000
 
Tax fees  
25,000
   
11,000
 
Audit related fees  
-
   
-
 
All other fees  
-
   
-
 
Total fees 
$
475,000
  
$
320,000
 
50
(In thousands) For the Year Ended December 31, 
Fee Category 2023  2022 
       
Audit fees $545  $504 
Tax fees  -   - 
Audit related fees  -   - 
All other fees  -   - 
Total Fees $545  $504 

For purposes of the preceding table:

•
Audit fees consist of fees for the annual audit of our consolidated financial statements, the review of the interim financial statements included in our quarterly reports on Form 10-Q, and other professional services provided in connection with statutory and regulatory filings and consents related to capital markets transactions and engagements for those fiscal years.

•
Tax fees consist of fees for tax compliance, tax advice and tax planning services for those fiscal years.

•
Audit related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review.

•
All other fees consist of fees for all other products and services.

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The audit committee must pre-approve all audits and permitted non-audit services to be provided by our principal independent registered public accounting firm unless an exception to such pre-approval exists under the Exchange Act or the rules of the SEC. Each year, the board of directors approves the retention of the independent auditor to audit our consolidated financial statements, including the associated fee. At this time, the board of directorsaudit committee evaluates and approves other known potential engagements of the independent auditor, including the scope of audit-related services, tax services and other services proposed to be performed and the proposed fees, and approves or rejects each service, taking into account whether the services are permissible under applicable law and the possible impact of each non-audit service on the independent auditor’s independence from management.
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PART IV
 
Item 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
1. All financial statements

The following financial statements are included in this Annual Report on Form 10-K in Item 8 of Part II:

 Page
Consolidated Financial Statementsfinancial statements 
  
Report of Independent Registered Public Accounting Firm (PCAOB ID: 688)F-1
  
Consolidated Balance Sheets as of December 31, 20212023 and 20202022F-3
  
Consolidated Statements of Comprehensive Loss for the years ended December 31, 20212023 and 20202022F-4
  
Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 20212023 and 20202022F-5
  
Consolidated Statements of Cash Flows for the years ended December 31, 20212023 and 20202022F-5
  
Notes to Consolidated Financial StatementsF-7

51
2. Financial statement schedules
 
No schedules are required because either the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto.

70
3. Exhibits
The exhibits below are furnished or filed and, as applicable, are incorporated by reference herein as part of this Annual Report on Form 10-K.

Exhibit No.Description
  
2.1
Agreement and Plan of Merger, dated as of September 25, 2009,August 23, 2023, by and between Rub Music Enterprises,among SEP Acquisition Corp., SEP Acquisition Holdings Inc., RME Delaware Merger Sub, Inc. and SANUWAVE Health, Inc. (Incorporated by reference to Exhibit 2.1 to the Form 8-K filed with the SEC on September 30, 2009)August 23, 2023).
  
2.2
Amendment Number one to Agreement and Plan of Merger, dated February 27, 2024, by and between SEP Acquisition Corp. and Sanuwave Health, Inc. (Incorporated by reference to Exhibit 2.1 to the Form 8-K filed with the SEC on February 27, 2024)
3.1
Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Form 10-SB filed with the SEC on December 18, 2007).
  
3.2
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).
  
3.3
Certificate of Amendment to the Articles of Incorporation (Incorporated by reference to AppendixExhibit A to the Definitive Schedule 14C filed with the SEC on April 16, 2012).
  
3.4
Bylaws (Incorporated by reference to Exhibit 3.02 to the Form 10-SB filed with the SEC on December 18, 2007).
  
3.5
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).
  
3.6
Certificate of Amendment to the Articles of Incorporation, dated September 8, 2015 (Incorporated by reference to Exhibit 3.6 to the Form 10-K filed with the SEC on March 30, 2016).
  
3.7
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).
  
3.8
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).
  
3.9
Certificate of designationDesignation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock.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).
  
3.10
Certificate of Designation of Series D Convertible Preferred Stock.Stock (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on May 20, 2020).
  
3.11
Certificate of Amendment of the Articles of Incorporation.Incorporation (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on January 5, 2021).
  
4.13.12
FormCertificate of Class A Warrant AgreementAmendment of the Articles of Incorporation, dated January 31, 2023 (Incorporated by reference to Exhibit 3.12 to the Form 8-KS-1/A filed with the SEC on September 30, 2009)January 31, 2023).

4.24.1
FormDescription of Class B Warrant AgreementRegistrant’s Common Stock (Incorporated by reference to the Company’s Form 8-K filed with10-K for the SEC on September 30, 2009).
4.3
Form of Class D Warrant Agreement (Incorporated by reference to Form 8-K filed with the SEC on October 14, 2010)year ended December 31, 2021).

7152
4.44.2
Form of Class E Warrant Agreement (Incorporated by reference to Form 8-K filed with the SEC on April 7, 2011).
4.5
Form of Series A Warrant (Incorporated by reference to the Form 8-K filed with the SEC on March 18, 2014).
4.6
Form of Series B Warrant (Incorporated by reference to the Form 8-K filed with the SEC on March 18, 2014).
4.7
Form of 18% Senior Secured Convertible Promissory Note issued by the Company to select accredited investors (Incorporated by reference to Form 8-K filed with the SEC on February 27, 2013).
4.8
Form of Convertible Promissory Note between the Company and accredited investors party thereto (Incorporated by reference to the Form 8-K filed with the SEC on March 18, 2014).
4.9
Amendment No. 1 to the Convertible Note Agreement between the Company and accredited investors party thereto (Incorporated by reference to the Form 8-K filed with the SEC on March 18, 2014).
4.10
Class K Warrant Agreement by and between the Company and HealthTronics, Inc., dated June 15, 2015 (Incorporated by reference to the Form 8-K filed with the SEC on June 18, 2015).
4.11
Amendment No. 1 to Class K Warrant Agreement by and between the Company and HealthTronics, Inc., dated June 28, 2016 (Incorporated by reference to the Form 10-Q filed with the SEC on August 15, 2016).
4.12
Form of Class L Warrant Common Stock Purchase Warrant (Incorporated by reference to the Form 8-K filed with the SEC on March 17, 2016).
4.13
Second Form of Class L Warrant Common Stock Purchase Warrant (Incorporated by reference to the Form 8-K filed with the SEC on August 24, 2016).
4.14
Registration Rights Agreement dated January 13, 2016 among the Company and the investors listed therein (Incorporated by reference to the Form 8-K filed with the SEC on January 19, 2016).
4.15
Class K Warrant Agreement dated as of August 3, 2017, between the Company and
HealthTronics, Inc. (Incorporated by reference to Form 8-K filed with the SEC on August 4, 2017).
4.16
Form of Class N Warrant. (Incorporated by reference to Form 8-K filed with the SEC on November 9, 2017).
4.17
Letter to Series A Warrantholders, Class N Warrantholders and Class L Warrantholders, dated January 29, 2019. (Incorporated by reference to Form 8-K filed with the SEC on January 25, 2019).
4.18
Form of Class O Warrant. (Incorporated by reference to Form 8-K filed with the SEC on March 15, 2019).
4.19
Letter to Class N Warrantholders and Class O Warrantholders, dated March 14, 2019. (Incorporated by Reference to Form 8-K filed with the SEC on March 15, 2019).
4.20
Letter to Class N Warrant Holders, dated June 5, 2019 (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on June 7, 2019).

72
4.21
Letter to Class O Warrant Holders, dated June 5, 2019 (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on June 7, 2019).
4.22Description of Registrant’s Common Stock.
4.23
Form of Class E Warrant (Incorporated by reference to the Form 8-K filed with the SEC on August 12, 2020).
4.24
Form of Secured Promissory Note issued to NH Expansion Credit Fund Holdings LP, dated August 6, 2020 (Incorporated by reference to the Form 8-K filed with the SEC on August 12, 2020).
  
4.254.3
Warrant issued to NH Expansion Credit Fund Holdings LP, dated August 6, 2020 (Incorporated by reference to the Form 8-K filed with the SEC on August 12, 2020).
  
4.264.4
Second Amendment to the Note and Warrant Purchase and Security Agreement by and between the Company and NH Expansion Credit Fund Holdings L.P., dated February 25, 2022 (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on March 2, 2022).
4.5
Third Amendment to the Note and Warrant Purchase and Security Agreement by and between the Company and NH Expansion Credit Fund Holdings L.P., dated June 30, 2022 (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on July 7, 2022).
4.6
Fourth Amendment to the Note and Warrant Purchase and Security Agreement by and between the Company and NH Expansion Credit Fund Holdings L.P., dated June 23, 2023 (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on June 29, 203).
4.7
Fifth Amendment to the Note and Warrant Purchase and Security Agreement by and between the Company and NH Expansion Credit Fund Holdings L.P., dated March 6, 2024 (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on March 6, 2024).
4.8
Convertible Promissory Note issued to HealthTronics, Inc., dated August 6, 2020 (Incorporated by reference to Exhibit 10.7 to the Form 8-K filed with the SEC on August 12, 2020).
  
4.274.9
Warrant issued to Leviston Resources, LLC, dated April 20, 2021. (Incorporated by reference to the Form 8-K filed with the SEC on April 27, 2021).
4.28
Future Advance Convertible Promissory Note issued to Leviston Resources, LLC, dated April 2020, 2021. (Incorporated by reference to the Form 8-K filed with the SEC on April 27, 2021).
4.29
For of Warrant Issued September 3, 2021. (Incorporated by reference to the Form 8-K filed with the SEC on September 13, 2021).
4.30
Form of Future Advance Convertible Promissory Note Issued September 3, 2021. (Incorporated by reference to the Form 8-K filed with the SEC on September 13, 2021).
4.31
Secured Promissory Note issued to NH Expansion Credit Fund Holdings L.P., dated February 24, 2022. (Incorporated by reference to the Form 8-K filed with the SEC on March 2, 2022).
4.32
Amended and Restated Warrant issued to NH Expansion Credit Fund Holdings L.P., dated February 25, 2022. (Incorporated by reference to the Form 8-K filed with the SEC on March 2, 2022).
10.1∞
Amended and Restated 2006 Stock Option Incentive Plan of SANUWAVE Health, Inc. (Incorporated by reference to Form 8-K filed with the SEC on November 3, 2010).
10.2
Form of Securities Purchase Agreement, by and among the Company and the accredited investors party thereto, dated March 17, 2014 (Incorporated by reference to the Form 8-K filed with the SEC on March 18, 2014).
10.3
Form of Registration Rights Agreement, by and among the Company and the holders party thereto, dated March 17, 2014 (Incorporated by reference to the Form 8-K filed with the SEC on March 18, 2014).
10.4
Form of Subscription Agreement for the 18% Convertible Promissory Notes between the Company and the accredited investors a party thereto (Incorporated by reference to the Form 8-K filed with the SEC on March 18, 2014).
10.5
Amendment to certain Promissory Notes that were dated August 1, 2005, by and among the Company, SANUWAVE, Inc. and HealthTronics, Inc., dated June 15, 2015 (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on June 18, 2015.)
  
10.64.10
Security Agreement, by and between the Company and HealthTronics, Inc., dated June 15, 2015 (Incorporated by reference to the Form 8-K filed with the SEC on June 18, 2015).
10.7
Exchange Agreement dated January 13, 2016 among the Company and the investors listed therein (Incorporated by reference to the Form 8-K filed with the SEC on January 19, 2016).
10.8
Escrow Deposit Agreement dated January 25, 2016 among the Company, Newport Coast Securities, Inc. and Signature Bank (Incorporated by reference to the Form S-1/A filed with the SEC on February 3, 2016).
10.9
Second Amendment to Certain Promissory Notes entered into as of June 28, 2016, by and among the Company, SANUWAVE, Inc. and HealthTronics, Inc. (Incorporated by reference to Exhibit 10.1 to the Form 10-Q filed with the SEC on August 15, 2016).

73
10.10
Form of Securities Purchase Agreement, by and among the Company and the accredited investors a party thereto, dated March 11, 2016 (Incorporated by reference to the Form 8-K filed with the SEC on March 17, 2016).
  
10.114.11
Form of Securities Purchase Agreement, by and between the Company and the accredited investors a party thereto, dated August 24, 2016 (Incorporated by reference to the Form 8-K filed with the SEC on J August 25, 2016).
10.12
Form of Registration Rights Agreement, by and between the Company and the holders a party thereto, dated August 24, 2016 (Incorporated by reference to the Form 8-K filed with the SEC on August 25, 2016).
10.13
Third Amendment to promissory notes entered into as of August 3, 2017, by and among the Company, SANUWAVE, Inc. and HealthTronics, Inc. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on August 4, 2017).
  
10.144.12#
Binding Term Sheet for Joint VentureSecurities Purchase Agreement by and between the Company and MundiMed Distribuidora Hospitalar LTDA effective as of September 25, 2017HealthTronics, Inc., dated August 6, 2020 (Incorporated by reference to Exhibit 10.8 to the Form 10-Q8-K filed with the SEC on November 15, 2017)August 12, 2020).
  
4.13
Convertible Promissory Note issued to Celularity Inc., dated August 6, 2020 (Incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on August 12, 2020).
10.154.14
Common Stock Purchase Warrant, dated as of June 5, 2020, issued by the Company to LGH Investments, LLC (Incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on June 11, 2020).
4.15
Form of 10%Warrant Issued September 27, 2021, and December 22, 2021 (Incorporated by reference to Exhibit 10.7 filed with the Form 10-Q for the quarter ended September 30, 2021).
4.16
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).
4.17
Form of Common Stock Purchase Warrant issued to certain purchasers, dated November 14, 2022 (Incorporated by reference to Exhibit 4.4 to the Form S-1/A filed with the SEC on January 31, 2023).

4.18
Form of Future Advance convertible Promissory note issued to certain purchasers, date December 30, 2023 (Incorporated by reference to Exhibit 4.1 the Company’s Form 8-K filed with the SEC on January 3, 2024).

53
4.19
Forms of Common Stock purchase Warrants issued to certain purchasers, dated December 30, 2023 (Incorporated by reference to Exhibit 4.2 the Company’s Form 8-K filed with the SEC on January 3, 2024)
4.20
Form of Asset-Backed Secured Promissory Notes issued to certain purchasers, dated July 21, 2023 (Incorporated by reference to Exhibit 4.1 the Company’s Form 8-K filed with the SEC on July 21, 2023)
4.21
Form of Future Advance Convertible Promissory Note by and among the Company and the accredited investors a party thereto.issued to certain purchasers, dated January 21, 2024 (Incorporated by reference to Exhibit 4.1 the Company’s Form 8-K filed with the SEC on January 21, 2024)
4.22
Form of Common Stock Purchase Warrants issued to certain purchasers, dated January 21, 2024 (Incorporated by reference to Exhibit 4.2 the Company’s Form 8-K filed with the SEC on January 21, 2024)
10.1∞
Amended and Restated 2006 Stock Option Incentive Plan of SANUWAVE Health, Inc. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on November 9, 2017)3, 2010).
  
10.1610.2
Form of Registration RightsSecurity Agreement, by and amongbetween the Company and the accredited investors a party theretoHealthTronics, Inc., dated June 15, 2015 (Incorporated by reference to Exhibit 4.1 to the Form 8-K filed with the SEC on November 9, 2017)June 18, 2015).
  
10.1710.3#
Letter Agreement by and between the Company and HealthTronics, Inc., dated August 6, 2020 (Incorporated by reference to Exhibit 10.6 to the Form 8-K filed with the SEC on August 12, 2020).
10.4#
Amendment to Agreement for Purchase and Sale, Limited Exclusive Distribution and Royalties, and Servicing and Repairs of dermaPACE SystemsdermaPACE®System and Equipment, among the Company,effective as of November 1, 2023, by and between SANUWAVE and Premier Shockwave Wound Care, Inc. and Premier Shockwave, Inc. dated as of February 13, 2018. (Incorporated by reference to Form 10-K filed with the SEC on March 29, 2018).
  
10.1810.5
Agreement, dated June 14, 2018, by and among the Company and Johnfk Medical Inc. (Incorporated by reference to Form 8-K filed with the SEC on June 29, 2018).
10.19
Joint Venture Agreement, dated September 21, 2018, by and among the Company, Johnfk Medical Inc. and Holistic Health Institute Pte. Ltd. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on September 27, 2018).
  
10.20
Master Equipment Lease, dated January 26, 2018, by and among the Company and NFS Leasing, Inc. (Incorporated by reference to Form 8-K filed with the SEC on February 15, 2018).
10.21∞
Offer Letter, dated as of November 30, 2018, by and between SANUWAVE Health, Inc. and Kevin Richardson. (Incorporated by reference to Form 8-K filed with the SEC on December 4, 2018).
10.22∞
Offer Letter, dated as of April 15, 2018, by and between SANUWAVE Health, Inc,, and Shri Parikh. (Incorporated by reference to Form 8-K filed with the SEC on June 7, 2018).
10.23
Deed of Termination of Joint Venture Agreement, dated June 4, 2019, by and among the Company, Johnfk Medical Inc. and Holistic Wellness Alliance Pte. Ltd. (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on June 17, 2019).
10.24
Common Stock Purchase Agreement, by and among the Company and the accredited investors party thereto, dated December 11, 2019 (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on December 27, 2019).

74
10.25
Registration Rights Agreement, by and among the Company and the accredited investors party thereto, dated December 11, 2019 (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on December 27, 2019).
10.26*β10.6β
Joint Venture Agreement, dated December 13, 2019, by and among the Company, Universus Global Advisors LLC, Versani Health Consulting Consultoria Em Gestao De Negocios Eireli, and the IDIC Group as set forth therein.therein (Incorporated by reference to the Form 8-K filed with the SEC on January 28, 2020).
  
10.2710.7
SeparationMaster Equipment and Contracts Purchase Agreement and General Release, dated as of May 14, 2020 by and between the Company and ABF SANUWAVE, Health, Inc. and Shri P. Parikh.LLC dated February 17, 2022 (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on May 18, 2020)February 24, 2022).
  
10.2810.8
Series D Preferred Stock Purchase Agreement,Master Equipment Lease, dated January 26, 2018, by and among the Company and the accredited investors party thereto, dated May 14, 2020.NFS Leasing, Inc. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on May 20, 2020)February 15, 2018).
  
10.2910.9
Promissory Note by and between SANUWAVE Health, Inc. and Truist Bank, dated May 28, 2020. (Incorporated by reference to the Form 8-K filed with the SEC on June 1, 2020).
10.30
Securities Purchase Agreement, dated as of June 5, 2020, by and between the Company and LGH Investments, LLC. (Incorporated by reference to the Form 8-K filed with the SEC on June 11, 2020).
10.31
Convertible Promissory Note, dated as of June 5, 2020, issued by the Company to LGH Investments, LLC. (Incorporated by reference to the Form 8-K filed with the SEC on June 11, 2020).
10.32
Common Stock Purchase Warrant, dated as of June 5, 2020, issued by the Company to LGH Investments, LLC. (Incorporated by reference to the Form 8-K filed with the SEC on June 11, 2020).
10.33
Asset Purchase Agreement by and between the Company and Celularity Inc., dated August 6, 2020 (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on August 12, 2020).
  
10.3410.10
License and Marketing Agreement by and between the Company and Celularity Inc., dated August 6, 2020 (Incorporated by reference to the Form 8-K filed with the SEC on August 12, 2020).
10.35
Convertible Promissory Note issued to Celularity Inc., dated August 6, 2020 (Incorporated by referenceExhibit 10.2 to the Form 8-K filed with the SEC on August 12, 2020).
  
10.3610.11∞
Form of Securities PurchaseExecutive Employment Agreement, effective May 23, 2023, by and amongbetween SANUWAVE and Morgan Frank (Incorporated by reference to Exhibit 10.1 to SANUWAVE’s Form 8-K filed with the SEC on May 30, 2023).
10.12∞
Transition and Separation Agreement, dated May 23, 2023, by and between SANUWAVE and Kevin A. Richardson, II (Incorporated by reference to Exhibit 10.2 to SANUWAVE’s Form 8-K filed with the SEC on May 30, 2023).
10.13∞
Offer Letter, dated April 7, 2022, by and between the Company and the accredited investors a party thereto, dated August 6, 2020Dr. Toni Rinow (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on August 12, 2020)19, 2022).
  
10.14∞
Offer Letter, dated July 20, 2023, by and between the Company and Andrew Walko (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on July 31, 2023).

54
10.3710.15
Note and Warrant Purchase and Security Agreement by and among the Company, the noteholder party thereto and NH Expansion Credit Fund Holdings LP, as agent, dated August 6, 2020 (Incorporated by reference to the Form 8-K filed with the SEC on August 12, 2020).
10.38
Letter Agreement by and between the Company and HealthTronics, Inc., dated August 6, 2020 (Incorporated by referenceExhibit 10.5 to the Form 8-K filed with the SEC on August 12, 2020).
  
10.3910.16
Convertible Promissory Note issuedSecurity Agreement, dated May 9, 2023, by and among SANUWAVE and certain lenders (Incorporated by regarding to HealthTronics, Inc.,Exhibit 10.74 to SANUWAVE’s Form S-1 filed with the SEC on June 30, 2023)
10.17
Form of Securities Purchase Agreement, dated August 6, 20205, 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).
10.18
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 12, 2020)8, 2022).
  
10.4010.19
Securities Purchase Agreement, dated November 14, 2022, by and betweenamong the Company and HealthTronics, Inc., dated August 6, 2020the purchasers identified on the signature pages thereto (Incorporated by reference to Exhibit 10.67 to the Form S-1/A filed with the SEC on January 31, 2023).
10.20
Registration Rights Agreement, dated November 14, 2022, by and among the Company and certain lenders (Incorporated by reference to Exhibit 10.70 to the Form S-1/A filed with the SEC on January 31, 2023).
10.21
Security Agreement dated July 21, 2023, by and among the Company and certain lenders. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on August 12, 2020)July 21, 2023).
  
10.4110.22
Convertible Promissory Note issued to A. Michael Stolarski,Subordination Agreement dated August 6, 2020July 21, 2023, by and among the Company, NH Expansion Credit Fund Holdings LP and certain creditors. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on August 12, 2020)July 21, 2023).
  
10.4210.23
Securities Purchase agreementSide Letter dated July 21, 2023, by and betweenamong the Company and Leviston Resources, LLC, dated April 20, 2021.certain purchasers. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on April 27, 2021)July 21, 2023).
10.24
Securities Purchase Agreement, dated January 21, 2024, by and among the Company and the purchasers identified on the signature pages thereto (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on January 21, 2024).
10.25
Security Agreement dated January 21, 2024, by and among the Company and certain lenders. (Incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the SEC on January 21, 2024).
10.26
Subordination Agreement dated January 21, 2024, by and among the Company, NH Expansion Credit Fund Holdings LP and certain creditors. (Incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on January 21, 2024).
10.27
Form of Registration Rights Agreement, dated January 21, 2024, by and among the Company and certain lenders (Incorporated by reference to Exhibit 10.4 to the Form 8-K filed with the SEC on January 21, 2024).
10.28
Form of Waiver Letter, dated January 21, 2024, by and among the Company and certain purchasers (Incorporated by reference to Exhibit 10.5 to the Form 8-K filed with the SEC on January 21, 2024).
10.29
Form of Letter Agreement, dated January 21, 2024, by and among the Company and certain lenders (Incorporated by reference to Exhibit 10.6 to the Form 8-K filed with the SEC on January 21, 2024).
10.30
Securities Purchase Agreement, dated December 30, 2023, by and among the Company and the purchasers identified on the signature pages thereto (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on January 3, 2024)
10.31
Security Agreement, dated December 30, 2023, by and among the Company and certain lenders (Incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the SEC on January 3, 2024)
10.32
Subordination Agreement, dated December 30, 2023, by and among the Company, NH Expansion Credit Fund Holdings LP and certain creditors (Incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on January 3, 2024)

7555
10.4310.33
SubordinationRegistration Rights Agreement, dated December 30, 2023, by and among the Company Leviston Resources, LLC and NH Expansion Credit Fund Holdings LP, dated April 20, 2021.certain lenders (Incorporated by reference to Exhibit 10.4 to the Form 8-K filed with the SEC on April 27, 2021).
January 3, 2024)
  
10.4410.34
Registration Rights Agreement by and between the Company and Leviston Resources, LLC, dated April 20, 2021.Form of waiver letter with purchasers in December 2023 offering (Incorporated by reference to Exhibit 10.5 to the Form 8-K filed with the SEC on April 27, 2021).
January 3, 2024)
  
10.4510.35
Form of Securities Purchase Agreement Entered into September 3, 2021.letter agreement with purchasers in December 2023 offering (Incorporated by reference to Exhibit 10.6 to the Form 8-K filed with the SEC on September 13, 2021).January 3, 2024)
  
10.4610.36
Form of SubordinationVoting Agreement, Entered into September 3, 2021.dated as of August 23, 2023, by and among SEP Acquisition Corp., SANUWAVE Health, Inc., and the stockholder of SANUWAVE Health, Inc. party thereto (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on September13, 2021)August 23, 2023).
  
10.4710.37
FormSponsor Voting Agreement, dated as of Registration Rights Agreement Entered into September 3, 2021.August 23, 2023, by and among Mercury Sponsor Group I LLC, SEP Acquisition Corp., and SANUWAVE Health, Inc. (Incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the SEC on September 13, 2021)August 23, 2023).
  
10.4810.38
Form of Security Agreement.Lock-Up Agreement, dated as of August 23, 2023, by and between SEP Acquisition Corp. and the stockholder of SANUWAVE Health, Inc. party thereto (Incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on September 13, 2021)August 23, 2023).
  
10.49
Future Receivables Agreement by and between GCF Resources, LLC and SANUWAVE Health, Inc. dated September 27, 2021. (Incorporated by reference to Exhibit 10.3 filed with the Form 10-Q for the quarter ended March 31, 2021 filed with the SEC on December 13, 2021).
10.50
Form of Registration Rights Agreement entered into September 27, 2021. (Incorporated by reference to Exhibit 10.6 filed with the Form 10-Q for the quarter ended September 30, 2021).
10.51
Form of Warrant Issued September 27, 2021 and December 22, 2021. (Incorporated by reference to Exhibit 10.7 filed with the Form 10-Q for the quarter ended September 30, 2021).
10.52
Master Equipment and Contracts Purchase Agreement by and between the Company and ABF SANUWAVE, LLC dated February 17, 2022. (Incorporated by reference to the Form 8-K filed with the SEC on February 24, 2022).
10.53
Second Amendment to the Note and Warrant Purchase and Security Agreement by and between the Company and NH Expansion Credit Fund Holdings L.P., dated February 25, 2022. (Incorporated by reference to the Form 8-K filed with the SEC on March 2, 2022).
10.54
Form of Warrant Issued September 27, 2021 and December 22, 2021. (Incorporated by reference to Exhibit 10.7 filed with the Form 10-Q for the quarter ended September 30, 2021).
10.55*
Form of Refinance Agreement by and between GCF Resources, LLC and SANUWAVE Health, Inc. dated December 22, 2021.
10.56*
Future Receivables Agreement by and between GCF Resources, LLC and SANUWAVE Health, Inc. dated December 22, 2021.
10.57*
Form of Security Agreement and Guarantee by and between GCF Resources, LLC and SANUWAVE Health, Inc. dated December 22, 2021.
14.1
Code of Business Conduct and Ethics of SANUWAVE Health, Inc. (Incorporated by reference to the Form 10-K filed with the SEC on March 30, 2016).

21.1*
List of subsidiaries
  
23.1*
Consent of Marcum LLP, independent registered public accountants.
  
24.1*
Power of Attorney (included on signature page).
  
31.1*
Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.
  
31.2*
Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.
  
32.1*
Section 1350 Certification of the Chief Executive Officer.
  
32.2*
Section 1350 Certification of the Chief Financial Officer.
  
101.INSXBRL Instance
  
101.SCHXBRL Taxonomy Extension Schema
  
101.CALXBRL Taxonomy Extension Calculation
  
101.DEFXBRL Taxonomy Extension Definition
  
101.LABXBRL Taxonomy Extension Labels
  
101.PREXBRL Taxonomy Extension Presentation
  
104Cover Page with Interactive Data File

∞ Indicates management contract or compensatory plan or arrangement.
*   Filed herewith
# Confidential treatment has been requested as to certain portions of this exhibit, which portions have been omitted and submitted separately to the Securities and Exchange Commission.
β  Confidential portions of this exhibit have been omitted as permitted by applicable regulations.

Item 16.Form 10-K Summary

The Company has elected not to include summary information.

7656
SIGNATURES

Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this Annual Report on Form 10-Kreport to be signed on its behalf by the undersigned hereuntothereunto duly authorized.




SANUWAVE HEALTH, INC.

  
Dated: May 13, 2022By:March 21, 2024
By:
/s/ Kevin A. Richardson, IIMorgan Frank

 Name:Kevin A. Richardson, II Morgan Frank

 Title:Chief Executive Officer

POWER OF ATTORNEY
 
Know all persons by these presents, that each person whose signature appears below constitutes and appoints Kevin A. Richardson, IIMorgan Frank and Lisa E. Sundstrom,Toni Rinow, and each of them, as such person’s true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for such person and in such person’s name, place and stead, in any and all capacities, to sign any and all amendments to this annual reportAnnual Report on Form 10-K, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their or such person’s substitute or substitutes, may lawfully do or cause to be done by virtue thereof.
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signatures Capacity Date
     
By: /s/ Kevin A. Richardson, IIMorgan Frank
Name: Kevin A. Richardson, IIMorgan Frank
 
Chief Executive Officer and Chairman of the Board of Directors (principal
(principal executive officer)
 May 13, 2022March 21, 2024
     
By: /s/ Lisa E. SundstromToni Rinow
Name: Lisa E. SundstromToni Rinow
 
Chief Financial Officer (principal
(principal financial and accounting officer)
 
May 13, 2022
March 21, 2024

By: /s/ Kevin Richardson, II
Name: Kevin Richardson, II
DirectorMarch 21, 2024
By: /s/ A. Michael Stolarski
Name: A. Michael Stolarski
 Director 
May 13, 2022
March 21, 2024
     
By: /s/ Jeff Blizard
Name: Jeff Blizard
 Director 
May 13, 2022
March 21, 2024
     
By: /s/ Ian Miller
Name: Ian Miller
 Director 
May 13, 2022
March 21, 2024
     
By: /s/ Jim Tyler
Name: Jim Tyler
 Director 
May 13, 2022
March 21, 2024

77