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Item 1. Financial Statements

2025-05-08 compared with 2024-11-07 · 341 added, 289 removed, 199 unchanged (76% of the section changed)

4 unchanged sentences

(In thousands, except share data)

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Current Assets:

Cash and cash equivalent $ 3,259 $ 1,797

Accounts receivable, net of allowance of $ 1,056 and $ 1,237 , as of September 30, 2024 and December 31, 2023, respectively

Cash and cash equivalents $ 8,501 $ 10,237

Accounts receivable, net of allowance of $ 1,180 and $ 1,147 , respectively

Inventory 5,457 4,149

1 unchanged sentence

Total Current Assets 18,831 18,397

Property, equipment and other, net 774 938

Non-Current Assets:

Property and equipment, net 449 303

Right of use assets, net 761 429

Intangible assets, net 3,554 3,730

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Current Liabilities:

Senior secured debt, in default $ 24,426 $ 18,278

Convertible promissory notes payable 4,817 5,404

Convertible promissory notes payable, related parties 2,838 1,705

Asset-backed secured promissory notes payable - 3,117

Asset-backed secured promissory notes, related parties - 1,458

Promissory note payable, related party 500 -

Senior secured debt $ 26,037 $ 25,305

Accounts payable 4,151 3,728

Accrued expenses 3,581 4,678

Factoring liabilities 1,938 1,490

Warrant liability 13,008 8,107

Accrued interest 643 5,444

Accrued interest, related parties 952 669

Current portion of lease liabilities 262 301

Current portion of contract liabilities 193 193

Other 375 947

Total Current Liabilities 47,268 42,345

Non-current Liabilities:

Lease liabilities, less current portion 236 492

Lease liabilities, less current portion, net of incentives 568 191

Contract liabilities, less current portion 311 300

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Total Liabilities $ 48,147 $ 42,836

Commitments and Contingencies (Note 14)

Commitments and Contingencies (Footnote 17)

STOCKHOLDERS’ DEFICIT

Preferred Stock, par value $ 0.001 , 5,000,000 shares authorized;

6,175 shares Series A, 293 shares Series B, 90 shares Series C and 8 shares Series D authorized;

no shares issued and outstanding at September 30, 2024 and December 31, 2023

6,175 shares Series A, 293 shares Series B, 90 shares Series C and 8 shares Series D designated, respectively;

no shares issued and outstanding at March 31, 2025 and December 31, 2024

Common stock, par value $ 0.001 , 2,500,000,000 shares authorized;

3,150,062 and 3,041,492 issued and outstanding at September 30, 2024 and December 31, 2023, respectively *

8,548,473 and 8,543,686 issued and outstanding at March 31, 2025 and December 31, 2024, respectively *

Additional paid-in capital 239,786 238,685

Accumulated deficit ( 257,097 ) ( 251,421 )

Accumulated other comprehensive income (loss) 10 ( 111 )

Accumulated other comprehensive loss 10 10

Total Stockholders’ Deficit ( 17,292 ) ( 12,717 )

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except share and per share data)

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

(In thousands, except share data)

Three Months Ended March 31,

Revenue $ 9,342 $ 5,786

11 unchanged sentences

Interest expense, related party - ( 323 )

Gain on extinguishment of debt - - 5,205 -

Loss on extinguishment of debt - ( 105 )

Change in fair value of derivative liabilities ( 4,901 ) ( 2,501 )

5 unchanged sentences

Total Comprehensive Loss $ ( 5,676 ) $ ( 4,417 )

Net Loss per share:

Loss per Share:

Basic and Diluted * $ ( 0.66 ) $ ( 1.46 )

1 unchanged sentence

Basic and Diluted * 8,547,675 3,099,335

* R eflects a one-for-three hundred seventy-five (1:375) reverse stock split of the outstanding shares of the Company's common stock effected on October 18, 2024

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

SANUWAVE HEALTH, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(In thousands, except share data)

Three Months Ended September 30, 2024

Number of Shares

Issued and Outstanding Par Value Additional Paid-

in Capital Accumulated

Deficit Accumulated Other Comprehensive

Balances as of June 30, 2024 3,150,062 $ 3 $ 178,397 $ ( 218,016 ) $ 10 $ ( 39,606 )

- - - ( 20,657 ) - ( 20,657 )

Balances as of September 30, 2024 3,150,062 $ 3 $ 178,397 $ ( 238,673 ) $ 10 $ ( 60,263 )

Three Months Ended September 30, 2023

Number of Shares

Issued and Outstanding Par Value Additional Paid-

in Capital Accumulated Deficit Accumulated Other Comprehensive

Balances as of June 30, 2023 1,497,700 $ 2 $ 153,824 $ ( 214,584 ) $ ( 80 ) $ ( 60,838 )

Shares issued for settlement of debt 1,238,509 1 18,576 - - 18,577

Foreign currency translation adjustment - - - - 7 7

Net loss - - - ( 23,700 ) - ( 23,700 )

Balances as of September 30, 2023 2,736,209 $ 3 $ 172,400 $ ( 238,284 ) $ ( 73 ) $ ( 65,954 )

* Reflects a one-for-three hundred seventy-five (1:375) reverse stock split of the outstanding shares of the Company's common stock effected on October 18, 2024 .

4 unchanged sentences

(In thousands, except share data)

Nine Months Ended September 30,

Number of Shares

Issued and Outstanding Par Value Additional Paid-

Three Months Ended March 31, 2025

Outstanding Par Value Additional Paid-

in Capital Accumulated

Deficit Accumulated Other Comprehensive

Deficit Accumulated

Comprehensive

Balances as of December 31, 2024 8,543,686 $ 9 $ 238,685 $ ( 251,421 ) $ 10 $ ( 12,717 )

Shares issued for settlement of warrants 14,440 - 6 - - 6

Shares issued for settlement of debt 94,130 - 1,412 - - 1,412

Foreign currency translation adjustment - - - - 121 121

Stock-based compensation 4,787 - 1,101 - - 1,101

- - - ( 5,676 ) - ( 5,676 )

Balances as of September 30, 2024 3,150,062 $ 3 $ 178,397 $ ( 238,673 ) $ 10 $ ( 60,263 )

Nine Months Ended September 30, 2023

Number of Shares

Issued and Outstanding Par Value Additional Paid-

in Capital Accumulated Deficit Accumulated Other Comprehensive

Balances as of March 31, 2025 8,548,473 $ 9 $ 239,786 $ ( 257,097 ) $ 10 $ ( 17,292 )

Three Months Ended March 31, 2024

Outstanding Par Value Additional Paid-

in Capital Accumulated

Deficit Accumulated

Comprehensive

Balances as of December 31, 2023 3,041,492 $ 3 $ 176,979 $ ( 220,049 ) $ ( 111 ) $ ( 43,178 )

Shares issued for services 34,400 1 526 - - 527

Shares issued for settlement of debt 1,238,509 1 18,576 - - 18,577

Foreign currency translation adjustment - - - - 111 111

Net loss - - - ( 4,528 ) - ( 4,528 )

Balances as of September 30, 2023 2,736,209 $ 3 $ 172,400 $ ( 238,284 ) $ ( 73 ) $ ( 65,954 )

Balances as of March 31, 2024 3,041,492 $ 3 $ 176,979 $ ( 224,577 ) $ - $ ( 47,595 )

* Reflects a one-for-three hundred seventy-five (1:375) reverse stock split of the outstanding shares of the Company's common stock effected on October 18, 2024 .

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

(in thousands)

Nine Months Ended September 30,

Cash Flows - Operating Activities:

1 unchanged sentence

Adjustments to reconcile net loss to net cash used by operating activities

Stock-based compensation 975 -

Depreciation and amortization 209 136

Bad debt expense 16 547

Shares issued for services - 224

Gain on extinguishment of debt ( 5,205 ) -

Amortization of right to use leases 65 82

Reserve for credit losses 33 147

Loss on extinguishment of debt - 105

Change in fair value of derivative liabilities 4,901 2,501

Amortization of debt issuance costs and original issue discount 4,792 5,656

Accrued interest 2,749 5,529

Amortization of debt issuance and debt discounts 530 1,553

Accrued interest and accrued interest, related party - 955

Changes in operating assets and liabilities

3 unchanged sentences

Accounts payable 423 ( 643 )

Accrued expenses 763 ( 1,326 )

Contract liabilities

Net Cash Provided by (Used in) Operating Activities 1,714 ( 3,253 )

Accrued expenses and contract liabilities ( 774 ) ( 42 )

Net Cash Flows (Used in) Provided by Operating Activities ( 1,517 ) 1,100

Cash Flows - Investing Activities

Proceeds from sale of property and equipment - 13

Purchase of property and equipment

2 unchanged sentences

Cash Flows - Financing Activities

Proceeds from convertible promissory notes - 1,202

Payment of note payable ( 2,175 ) -

Proceeds from convertible notes payable 1,300 -

Proceeds from promissory note payable, related party 500 -

Proceeds from bridge notes advance - 2,994

Proceeds (Payments) from factoring, net 449 ( 710 )

Proceeds from factoring, net - 71

Payments of principal on finance leases ( 57 ) ( 29 )

Net Cash Flow (Used in) Provided by Financing Activities ( 119 ) 3,356

Net Cash Flows (Used in) Provided by Financing Activities ( 57 ) 42

Effect of Exchange Rates on Cash - 111

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Non-cash Investing and Financing Activities:

Shares issued for settlement of debt 1,412 -

Write off deferred merger costs 1,226 -

Capitalize interest into senior secured debt 202 -

Stock options granted in lieu of cash bonus 117 -

Leased assets obtained in exchange for lease liabilities 430 -

Warrants issued in conjunction with convertible promissory notes - 2,784

Conversion of convertible notes payable to common stock - 18,577

Capitalize default interest into senior secured debt 3,850 -

Conversion of asset-based secured promissory notes to convertible promissory notes 4,584 -

Embedded conversion feature on convertible promissory notes payable - ( 520 )

Common shares issued for advisory shares - 302

Conversion of asset-backed secured promissory notes to convertible promissory notes - 4,584

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

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

March 31, 2025

Nature of the Business and Basis of Presentation

SANUWAVE Health, Inc.

and subsidiaries (“SANUWAVE” or the “Company”) is focused on the commercialization of its patented noninvasive and biological response activating medical systems for the repair and regeneration of skin, musculoskeletal tissue, and vascular structures.

and subsidiaries (“SANUWAVE” or the “Company”) is focused on the commercialization of its patented regenerative medicine utilizing noninvasive ultrasound or shockwaves to produce a biological response promoting the repair and regeneration of tissue, musculoskeletal, and vascular structures.

Basis of Presentation - The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

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GAAP for comprehensive financial statements.

The financial information as of September 30, 2024, and for the three and nine months ended September 30, 2024, and 2023 is unaudited;

The financial information as of March 31, 2025, and for the three months ended March 31, 2025, and 2024 is unaudited;

however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included.

Operating results for the three and nine months ended September 30, 2024, are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2024.

Operating results for the three months ended March 31, 2025, are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2025.

The condensed consolidated balance sheet on December 31, 2024, has been derived from the audited consolidated financial statements at that date but does not include all the information and disclosures required by U.S.

GAAP for comprehensive financial statements.

These financial statements should be read in conjunction with the Company’s December 31, 2023, Annual Report on Form 10-K filed with the SEC on March 21, 2024 (the “2023 Annual Report”).

Reverse Stock Split - All share numbers, including the number of shares underlying warrants, options and convertible debt, and per share amounts presented in these financial statements, including these footnotes reflect a one-for-three hundred seventy five (1:375) reverse stock split of the outstanding shares of the Company's common stock effected on October 18, 2024 (the "Reverse Stock Split").

These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 20, 2025 (the “2024 Annual Report”).

Reverse Stock Split - All share numbers, including the number of shares underlying warrants, options and convertible debt, and per share amounts presented in these condensed consolidated financial statements, including these footnotes, reflect a one-for-three hundred seventy five (1:375) reverse stock split of the outstanding shares of the Company's common stock effected on October 18, 2024 (the "Reverse Stock Split").

The Company's authorized shares of common and preferred stock along with the par value did not change.

No fractional shares will be issued as a result of the reverse stock split.

Any fractional shares that would have resulted from the reverse stock split will be settled in cash.

The reverse stock split will affect all common stockholders uniformly and will not alter any stockholder's percentage interest in the Company's common stock, except to the extent that the reverse stock split results in some stockholders experiencing an adjustment of a fractional share as described above.

No fractional shares were issued as a result of the Reverse Stock Split.

Any fractional shares that would have resulted from the Reverse Stock Split were settled in cash.

The Reverse Stock Split affected all common stockholders uniformly and did not alter any stockholder's percentage interest in the Company's common stock, except to the extent that the Reverse Stock Split resulted in some stockholders experiencing an adjustment of a fractional share as described above.

Reclassification - Certain accounts in the prior period condensed consolidated balance sheets and statement of cash flows have been reclassified to conform to the presentation of the current period condensed consolidated financial statements.

These reclassifications had no effect on the previously reported operating results.

Going Concern

The events of default on the Company’s senior secured debt as of September 30, 2024 and the working capital deficit have raised substantial doubt as to our ability to continue as a going concern for a period of at least twelve months from the filing of this Form 10-Q.

We may be required to raise additional funds to finance our operations and remain a going concern;

we may not be able to do so, and/or the terms of any financing may not be advantageous to us.

The continuation of our business is dependent upon raising additional capital.

We expect to devote substantial resources for the commercialization of UltraMIST and PACE systems which will require additional capital resources to remain a going concern.

Management’s plans may include obtaining additional capital in 2024.

The Company could obtain additional capital through the conversion of outstanding warrants, issuance of common or preferred stock, securities convertible into common stock, or secured or unsecured debt.

These possibilities, to the extent available, may be on terms that result in significant dilution to the Company’s existing stockholders.

In addition, there can be no assurances that any plans to obtain additional capital will be successful on the terms or timeline the Company expects, or at all.

If these efforts are unsuccessful, the Company may be required to significantly curtail or discontinue operations or, if available, obtain funds through financing transactions with unfavorable terms.

The accompanying condensed consolidated financial statements have been prepared in conformity with U.S.

GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in

the normal course of business.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company has incurred recurring operating losses in prior years, has negative working capital, and its Senior Secured Note becomes due in September 2025, which raises substantial doubt as to its ability to continue as a going concern for a period of 12 months from the filing of this Form 10-Q.

During the three months ended March 31, 2025, and prior fiscal year ended December 31, 2024, the Company achieved operating income, reflecting a significant improvement in its financial performance.

This turnaround is attributable to several strategic initiatives, primarily revenue growth initiatives and a capital raise from a private placement in October 2024, which have positively impacted the Company's operations.

Despite the positive operating income in the current year, the Company continues to monitor its financial position closely.

In addition to the operational improvements, the Company is addressing its financial obligations, including the significant portion of debt that is coming due in September 2025.

Management is actively engaged in discussions with lenders and

financial institutions to refinance this debt, which would extend the maturity of the debt and provide additional liquidity to support ongoing operations and strategic initiatives.

Management acknowledges that it must continue to execute its strategic initiatives effectively to ensure long-term financial stability.

The carrying amounts of assets and liabilities presented in the condensed consolidated financial statements do not necessarily purport to represent realizable or settlement values.

The condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

The Company’s condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

Our condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.

Summary of Significant Accounting Policies

4 unchanged sentences

These condensed consolidated financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the accounting policies summarized herein.

Significant estimates include the recording of allowances for credit losses, the net realizable value of inventory, fair value of goodwill and other intangible assets, the determination of the valuation allowances for deferred taxes, litigation contingencies, and the estimated fair value of financial instruments, including warrants and embedded conversion options.

Significant estimates include the recording of allowances for credit losses, the net realizable value of inventory, fair value of goodwill and other intangible assets, the determination of the valuation allowances for deferred taxes, litigation contingencies, stock-based compensation, incremental borrowing rate, and the estimated fair value of financial instruments, including warrants.

Revenue Recognition - The core principle of Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers” (“ASC 606”) requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

The Company allocates the transaction price to all contractual performance obligations included in the contract.

If a contract has more than one performance obligation, we allocate the transaction price to each performance obligation based on stand-alone selling price, which depicts the amount of consideration we expect to be entitled in exchange for satisfying each performance obligation.

If a contract has more than one performance obligation, we allocate the transaction price to each performance obligation based on standalone selling price, which depicts the amount of consideration we expect to be entitled in exchange for satisfying each performance obligation.

The Company recognizes revenue primarily from the following types of contracts:

1 unchanged sentence

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.

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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.

Deferred Offering Costs - Deferred stock offering costs represent amounts paid for legal, consulting, and other offering expenses directly attributable to the offering of securities in conjunction with the recapitalization under the Merger Agreement (as defined in Note 4), as defined and further described in Note 4, and are deferred and charged against the gross proceeds of the offering.

In the event of a significant delay or cancellation of a planned offering of securities, all the costs would be expensed.

In June 2024, the Company terminated the Merger Agreement and the deferred offering costs of $ 0.5 million were expensed.

Recent Accounting Pronouncements - In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) No.

2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures which will require companies to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”).

The pronouncement is effective for annual filings for the year ended December 31, 2024.

The Company is still assessing the impact of the adoption of this standard but does not expect it to have a material impact on its results of operations, financial position or cash flows.

Stock-based compensation - The Company accounts for stock-based compensation in accordance with ASC Topic 718, “Compensation—Stock Compensation”.

Stock-based compensation expense is recognized for all share-based payment awards based on the grant-date fair value.

The Company grants the following types of equity awards:

Time-based or service awards , which vest based on continued service over a specified period.

These awards are valued using the Black-Scholes option pricing model (for stock options) or the grant-date fair value of the underlying common stock (for restricted stock units).

Performance-based awards , which vest upon the achievement of pre-established internal performance targets.

These awards are valued using the Black-Scholes option pricing model.

Market-based awards , which vest upon the attainment of defined market conditions, such as stock price milestones.

These awards are valued using a Monte Carlo simulation model.

The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period for time-based awards, on a straight-line basis over the requisite service period for performance-based awards when it is probable that the associated performance condition will be satisfied, and on a straight-line basis over the requisite service period for market-based awards irrespective of likelihood that the associated market condition will be satisfied.

Forfeitures are recognized as they occur.

Compensation expense is included in the same functional expense categories as the related employee payroll costs.

The Company accounts for leases in accordance with ASC Topic 842, "Leases".

At the commencement date of a lease, the Company recognizes a right-of-use (“ROU”) asset and a lease liability for all leases with a term greater than 12 months.

Short-term leases (those with an original term of 12 months or less) are not recorded on the balance sheet;

lease expense for these is recognized on a straight-line basis over the lease term.

Lease liabilities are measured at the present value of future lease payments using the Company’s incremental borrowing rate unless the implicit rate is readily determinable.

ROU assets are measured at the initial lease liability, adjusted for lease incentives, initial direct costs, and any prepaid or accrued lease payments.

Lease Incentives

Lease incentives received from lessors, such as rent-free periods or reimbursement for leasehold improvements, are recognized as a reduction to the ROU asset at lease commencement.

These incentives are amortized on a straight-line basis over the lease term, consistent with the amortization of the ROU asset.

Incentives that are paid directly to the Company or on its behalf are included in the measurement of the ROU asset and reduce the total lease cost recognized over the lease term.

New accounting pronouncements

ASU 2024-03, Disaggregation of Income Statement Expenses

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement - Reporting Comprehensive Income (Topic 220):

Expense Disaggregation Disclosures to improve the disclosures about a public entity’s expenses and provide more detailed information about the types of expenses in commonly presented expense captions such as inventory purchases, employee compensation, depreciation and intangible asset amortization.

The disclosure requirements must be applied retrospectively to all prior periods presented in the financial statements.

The effective date for the standard is for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the effects adoption of this guidance will have on the consolidated financial statements.

Recently adopted accounting pronouncements

ASU 2023-09, Improvements to Income Tax Disclosures

In December 2023 , the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

2023-09 aims to enhance the transparency and decision usefulness of income tax disclosures.

2023-09 modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state, and foreign).

Update 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes.

2023-09 is effective for fiscal years beginning after December 15, 2024.

We expect to adopt Update No.

2023-09 prospectively.

We are currently evaluating the potential impact of adopting this new guidance on our condensed consolidated financial statements and related disclosures.

ASU 2023-09 aims to enhance the transparency and decision usefulness of income tax disclosures.

ASU 2023-09 modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state, and foreign).

also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 .

The Company adopted ASU 2023-09 prospectively in the first quarter of 2025.

The adoption of ASU 2023-09 did not have a material impact on the Company’s financial position or results of operations.

Merger Agreement

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On June 25, 2024, the Company delivered a notice to SEPA terminating the Merger Agreement.

Net Loss per Share

Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of shares outstanding for the three and nine months ended September 30, 2024 and 2023.

The weighted average 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:

Three Months Ended Nine Months Ended

(in thousands) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Weighted average shares outstanding

Common shares 3,150 2,323 3,103 1,765

Common shares issuable assuming exercise of nominally priced warrants 35 58 43 58

Weighted average shares outstanding 3,185 2,381 3,146 1,823

Diluted net loss per share is 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 each the three and nine months ended September 30, 2024 and 2023, all potentially dilutive shares in such periods were anti-dilutive and therefore excluded from the computation of diluted net loss per share.

Nine Months Ended

(in thousands) September 30, 2024 September 30, 2023

Common stock options 42 51

Common stock purchase warrants 3,963 2,951

Convertible notes payable, including interest

Accrued Expenses

Accrued expenses consist of the following:

Allowance for Credit Losses

The Company maintains an allowance for credit losses to cover estimated losses on accounts receivable.

The allowance is based on the Company's assessment of various factors, including historical loss experience, the age of receivables, current economic conditions, and the creditworthiness of customers.

The allowance for credit losses is reviewed and adjusted as necessary at each reporting date.

The roll-forward of the allowance for credit losses is as follows:

(in thousands) Three Months Ended March 31, 2025

Allowance for credit losses, December 31, 2024 $ 1,147

Provision for credit losses 33

Allowance for credit losses, March 31, 2025 $ 1,180

Inventory consisted of the following:

(in thousands) March 31, 2025 December 31, 2024

Finished goods $ 382 $ 386

Parts and accessories 5,075 3,763

Total Inventory $ 5,457 $ 4,149

Operating lease commitments - On March 27, 2025, the Company entered into a new operating lease agreement for its new headquarters in Eden Prairie, Minnesota.

The lease term commenced on March 28, 2025, and extends for a period of 5.5 years, expiring on August 30, 2030.

The lease includes an option to renew for an additional 5 years at the Company's discretion.

Lease payments - Under the terms of the lease, the Company is obligated to make monthly lease payments starting September 1, 2025, with an annual escalation of 3.5 % starting on September 1, 2026.

The total minimum lease payments over the initial lease term amount to approximately $ 1.4 million.

Right-of-use asset and lease liability - In accordance with ASC 842, "Leases," the Company recognized a right-of-use asset and a corresponding lease liability on the condensed consolidated balance sheets as of March 28, 2025.

measurement of the right-of-use asset and lease liability was $ 0.4 million, which represents the present value of the lease payments over the lease term, discounted at the Company's incremental borrowing rate of 11.5 %.

Lease-incentive - As part of a new office lease agreement, the Company is entitled to receive reimbursement payments from the lessor as a lease incentive.

These payments, totaling $ 586 thousand, are intended to offset certain costs associated with leasehold improvements.

Under ASC 842, lease incentives are accounted for as a reduction of the right-of-use asset and recognized over the lease term.

As of March 31, 2025, the Company recorded a short-term lease liability debit balance of $ 0.5 million for the new office lease, reflecting future reimbursements from the lessor.

This balance is classified net with long-term lease liabilities on the condensed consolidated balance sheet and will be amortized as a reduction to lease expense over the remaining lease term.

Estimated future reimbursement payments and timing used in recording the new office lease are as follows:

Date Reimbursement payment

(in thousands)

September 30, 2024 December 31, 2023

Registration penalties $ 1,583 $ 1,583

License fees - 892

Board of directors fees 1,192 942

Employee compensation 2,098 2,298

Other 368 284

5/15/2025 $ 228

Senior Secured Debt, In Default

The following table summarizes outstanding senior secured debt, in default:

September 30, 2024 December 31, 2023

(in thousands) Principal Debt Discount Carrying Value Accrued Interest Principal Debt Discount Carrying Value Accrued Interest

6/15/2025 228

7/15/2025 130

Lease expense - For the three months ended March 31, 2025, the Company recognized lease expense of $ 21 thousand related to this operating lease, which is included in general and administrative expenses in the condensed consolidated statements of comprehensive loss.

As of March 31, 2025, the maturities of the Company’s operating leases, which have initial or remaining lease terms more than one year, consist of the following:

(in thousands) Operating

2025 $ ( 399 )

Thereafter 199

Total Lease Payments 1,047

Imputed interest ( 401 )

Present value of lease liabilities $ 646

The weighted-average useful life of operating leases at March 31, 2025, i s 4.3 years .

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Senior Secured Debt

Senior secured promissory note payable, in default (“Senior Secured Note”) – In August 2020, the Company entered into a Note and Warrant Purchase and Security Agreement (the “NWPSA”).

The following table summarizes outstanding senior secured debt:

March 31, 2025 December 31, 2024

(in thousands) Principal Debt Discount Carrying Value Principal Debt Discount Carrying Value

Senior secured debt $ 27,100 $ ( 1,063 ) $ 26,037 $ 26,898 $ ( 1,593 ) $ 25,305

Senior secured promissory note payable (“Senior Secured Note”) – In August 2020 , the Company entered into a Note and Warrant Purchase and Security Agreement (the “NWPSA”).

In accordance with the NWPSA, the Company issued a $ 15 million Senior Secured Promissory Note Payable (the “Senior Secured Note”) and a warrant exercisable for shares of the Company’s common stock in exchange for cash to support operations, repay outstanding debt and close on the acquisition of the UltraMIST assets from Celularity Inc.

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Along with the issuance of the note, the Company also issued warrants to purchase 43,200 shares of common stock with an exercise price of $ 67.50 and 54,933 shares of common stock.

Interest is charged at the greater of the prime rate or 3 % plus 9 %.

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 March 2024, the Company entered into a Consent, Limited Waiver and Fifth Amendment to Note and Warrant Purchase and Security Agreement (the “Fifth Amendment”).

The Fifth Amendment provides (i) consent to enter into a License and Option Agreement and consummation of a License and Option Transaction a waiver of any event of default that may occur under the NWPSA, because of the License and Option Agreement or License and Option Transaction and (iii) amended the NWPSA to release certain patents from the collateral.

The Fifth Amendment also provides for a forbearance of exercising remedies in connection with certain existing events of default under the NWPSA until the earlier of (x) the occurrence of another event of default under the NWPSA or (y) April 30, 2024.

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, 2024 .

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 (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.

During the forbearance period, the outstanding obligations under the NWPSA continue to accrue interest at the default rate.

As of September 30, 2024, the Company is in default on the minimum liquidity provisions in the Senior Secured Note and, as a result, it is classified in current liabilities in the accompanying condensed consolidated balance sheets.

As of September 30, 2024 , the Company was accruing interest at the default interest rate of an incremental 5 %.

The debt issuance costs, and debt discount related to the Senior Secured Note were capitalized as a reduction in the principal amount and are being amortized to interest expense over the life of the Senior Secured Note.

The following table summarizes the amortization and interest expense related to the Senior Secured Note:

Three Months Ended Nine Months Ended

(In millions) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Amortization of debt issuance costs and debt discount, included in interest expense $ 0.5 $ 0.5 $ 1.4 $ 1.4

Interest expense $ 2.1 $ 1.8 $ 6.1 $ 5.1

On July 15, 2024, the Company entered into the Sixth Amendment to Note and Warrant Purchase and Security Agreement (the “Sixth Amendment”), which was a modification of debt.

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The Sixth Amendment also provides for a forbearance of exercising remedies in connection with certain existing events of default under the NWPSA until the earlier of (x) the occurrence of another event of default under the NWPSA or (y) December 31, 2024.

During the forbearance period, the outstanding obligations under the NWPSA continue to accrue interest at the default rate.

Promissory Notes Payable

The following two tables summarize outstanding notes payable as of September 30, 2024, and December 31, 2023:

As of September 30, 2024

(In thousands, except conversion price) Conversion

Principal Remaining

Debt Discount

Carrying Value

Historical convertible promissory notes payable, related parties, in default $ 37.50 1,373 - - 1,373

Convertible notes payable $ 15.00 6,056 ( 1,401 ) 162 4,817

Convertible notes payable, related parties $ 15.00 1,662 ( 240 ) 43 1,465

Total Convertible Promissory Notes Payable $ 9,091 $ ( 1,641 ) $ 205 $ 7,655

As of December 31, 2023

(In thousands, except conversion price) Conversion

Principal Remaining

Debt Discount Carrying

Acquisition convertible promissory note, in default $ 37.50 4,000 - 4,000

Historical convertible promissory note, related party, in default $ 37.50 1,373 - 1,373

Convertible notes payable $ 15.00 2,639 ( 1,235 ) 1,404

Convertible notes payable, related parties $ 15.00 450 ( 118 ) 332

Total Convertible Promissory Notes Payable

During the forbearance period, the outstanding obligations under the NWPSA accrued interest at the default rate.

On October 17, 2024, the Company entered into a Consent and Limited Waiver to Note and Warrant Purchase and Security Agreement (the “Consent and Limited Waiver”) with the noteholders party thereto (the “Holders”) and NH Expansion

Credit Fund Holdings LP, as agent (the “Agent”).

The Agent and the Holders agreed to continue to forbear upon exercising remedies in connection with certain existing events of default under the NWPSA until the earlier of (x) the occurrence of an event of default and (y) December 31, 2024.

The Consent and Limited Waiver also consents to the repayment in full of amounts owed to HealthTronics, Inc.

(“HealthTronics”) pursuant to the Convertible Promissory Note, dated as of August 6, 2020, by and between the Company and HealthTronics, in the original principal amount of approximately $ 1.4 million;

gross proceeds from the sale of common stock of at least $ 9.0 million in a private placement (for further details on this private placement transaction, see Note 16 on the 2024 Annual Report) and the Reverse Stock Split if the Company has at least $ 5.0 million of liquidity following such transactions, which is required pursuant to the minimum liquidity covenant in the NWPSA.

The Agent and the Holders have also agreed that any existing event of default that exists due to the Company’s failure to meet the minimum liquidity covenant will be waived if the conditions set forth in the Consent and Limited Waiver, including at least $ 5.0 million of liquidity following such transactions, are met.

As a condition to the effectiveness of the Consent and Limited Waiver, the Agent exercised, on a cashless basis, all warrants issued by the Company to the Agent in exchange for the issuance of 146,302 shares of the Company’s common stock following the Reverse Stock Split.

As of March 31, 2025, the Company is in compliance with all covenants in the Senior Secured Note.

Three Months Ended

(In millions) March 31, 2025 March 31, 2024

Amortization of debt issuance costs and debt discount, included in interest expense $ 0.5 $ 0.5

Interest expense $ 1.8 $ 1.9

Accrued Expenses

Accrued expenses consisted of the following:

(in thousands)

March 31, 2025 December 31, 2024

Registration penalties $ 1,583 $ 1,583

Board of directors fees 351 249

Employee compensation 1,016 2,232

Other 631 614

$ 3,581 $ 4,678

Convertible Notes Payable and Convertible Notes Payable, Related Parties – In August 2022, November 2022, May 2023, December 2023, January 2024, and June 2024, the Company entered into Securities Purchase Agreements (the “Purchase Agreements”), for the sale in a private placement of (i) Future Advance Convertible Promissory Notes (the “Notes”) in an

aggregate principal amount of approximately $ 16.2 million in August 2022, approximately $ 4.0 million in November 2022, $ 1.2 million in May 2023, $ 1.9 million in December 2023, $ 4.6 million in January 2024 related to the conversion of the Asset-Backed Secured Promissory Notes (described in Note 9) and $ 1.3 million in June 2024 (ii) Common Stock Purchase Warrants to purchase an additional 1.9 million shares of common stock with an exercise price of $ 25.13 per share and (iii) Common Stock Purchase Warrants to purchase an additional 1.9 million shares of common stock with an exercise price of $ 15.00 per share.

Interest expense for the three and nine months ended September 30, 2024, totaled $ 1.5 million and $ 4.3 million, respectively.

Interest expense for the three and nine months ended September 30, 2023 , totaled $ 1.3 million and $ 6.0 million, respectively.

The Notes have a term of 12 months from the date of issue.

Pursuant to the Notes, the Company promised to pay in cash and/or in shares of common stock, at a conversion price of $ 15.00 (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 $ 15.00 per share;

provided, however, that the Conversion Price shall never be less than $ 3.75 .

The Notes contain customary events of default and covenants, including limitations on incurrence of indebtedness and liens.

In May 2024 the Company utilized its election to convert the May issued Notes into shares of common stock upon the Notes' maturity.

The May notes totaling $ 1.2 million in principal and $ 0.2 million interest were converted to 0.1 million shares of common stock.

Promissory Note Payable, Related Parties - In June 2024 the Company entered into a $ 0.5 million promissory note with a related party.

Interest is being accrued at 12 % and the note matures on December 3, 2024.

Asset-Backed Secured Promissory Notes

In July 2023, the Company issued Asset-Backed Secured Promissory Notes (the “ABS Promissory Notes”) in an aggregate principal amount of $ 4.6 million to certain accredited investors (the “Purchasers”) at an original issue discount of 33.33 %.

The ABS Promissory Notes bear an interest rate of 0 % per annum and mature on January 21, 2024 (the “Maturity Date”).

The Company received total proceeds of approximately $ 3.0 million.

The Company entered into a Security Agreement providing for a continuing and unconditional security interest in any and all property of the Company.

This security interest is subordinate to the Senior Secured Debt described in Note 7.

Interest expense for the nine months ended September 30, 2024, totaled $ 0.1 million prior to conversion at the Maturity Date.

On January 21, 2024, pursuant to the side letter, the Company issued each Purchaser a Convertible Note Payable with the same principal amount as the principal amount of such Purchasers’ ABS Promissory Notes.

Pursuance to this side letter the ABS Promissory Notes converted to convertible promissory notes, as described in Note 8.

The Company recorded a net loss on extinguishment of debt totaling $ 0.1 million for the nine months ended September 30, 2024 .

Fair Value Measurements

The Company uses various inputs to measure the outstanding warrants and certain embedded conversion features associated with a convertible debt on a recurring basis to determine the fair value of the liabilities.

The Company uses various inputs to measure the outstanding warrants on a recurring basis to determine the fair value of the liabilities.

The following tables classify the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy:

Fair value measured at September 30, 2024

Fair value measured at March 31, 2025

(in thousands)

Fair value at

September 30, 2024 Quoted prices in

March 31, 2025 Quoted prices in

active markets

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Warrant liability $ 13,008 $ - $ - $ 13,008

Embedded conversion option

Total fair value $ 35,714 $ - $ - $ 35,714

Fair value measured at December 31, 2024

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Warrant liability $ 8,107 $ - $ - $ 8,107

Embedded conversion option

Total fair value $ 14,540 $ - $ - $ 14,540

There were no transfers among Levels 1, 2 or 3 during the three and nine months ended September 30, 2024, and 2023.

There were no transfers among Levels 1, 2 or 3 during the three months ended March 31, 2025, and 2024.

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.

Unrealized gains and losses associated with 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 September 30, 2024, and the value of the initial warrant liability from the June financing, were valued using a probability weighted expected value considering the proposed reverse stock split of the Company's common stock (the "Reverse Stock Split") that will effectuate the exchange of Notes and Common Stock Purchase Warrants for shares of the Company's common stock (the "Note and Warrant Exchange"), and the previous Black Scholes valuation model, with significant value stemming from the Note and Warrant Exchange.

Significant inputs under the Note and Warrant Exchange included the expected exchange ratio of 0.90 for $ 15.00 warrants and 0.85 for $ 25.13 warrants, the value of the Company’s common stock, the expected timing of the Reverse Stock Split effectuating, and the probability of the Note and Warrant Exchange occurring ( 90 % probability).

The Company’s liability classified warrants as of December 31, 2023 and the value of initial warrant liability from the conversion of the ABS Promissory Notes, were valued using a probability weighted expected value considering the Merger Agreement and the previous Black Scholes valuation model, with significant value stemming from the Merger Agreement.

Significant inputs under the Merger Agreement valuation included the expected exchange ratio 0.003 , the value of SEPA’s Class A Common Stock, the expected timing of the closing of the Merger, and the probability of the Merger closing.

A summary of the warrant liability activity for the nine months ended September 30, 2024, is as follows:

The Company's liability classified warrants as of March 31, 2025, and December 31, 2024, were valued using the Black Scholes valuation model.

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

March 31, 2025 December 31, 2024

Weighted average expected life in years 0.61 0.85

Weighted average volatility 80 % 91 %

Value of underlying shares $ 35.37 $ 22.76

Weighted average risk free interest rate 4.11 % 4.10 %

Expected dividend yield 0 % 0 %

A summary of the Level 3 warrant activity for the three months ended March 31, 2025, is as follows:

(in thousands, except per share data) Warrants

Outstanding Fair Value

per Share Fair Value

(in thousands)

Balance at December 31, 2023 3,257 $ 4.44 $ 14,447

Issuance 781 4.65 3,633

Exercised warrants ( 23 ) 3.75 -

Loss on remeasurement of warrant liability - 17,429

Balance at September 30, 2024 4,015 $ 8.84 $ 35,509

Embedded Conversion Option Liability

Certain convertible notes include a conversion option that meets the definition of a derivative liability and, accordingly, is required to be bifurcated.

The fair value for the conversion option liability was valued using a probability weighted expected value considering the proposed Reverse Stock Split of the Company's common stock that will effectuate the Note and Warrant Exchange, and the previous Black Scholes valuation model, with significant value stemming from the Note and Warrant Exchange.

A summary of the conversion option liability activity for the nine months ended September 30, 2024, is as follows:

(in thousands, except per share data) Conversion Options

per Share Warrant Liability

Balance at December 31, 2024 390 $ 20.79 $ 8,107

Loss on remeasurement of conversion liability 112

Balance at September 30, 2024 $ 205

Change in fair value - 4,901

Balance at March 31, 2025 390 $ 33.35 $ 13,008

Promissory Notes Payable

Convertible Notes Payable and Convertible Notes Payable, Related Parties - In August 2022 , November 2022 , May 2023, December 2023, January 2024, and June 2024, the Company entered into Securities Purchase Agreements (the “Purchase Agreements”) for the sale in a private placement of (i) Future Advance Convertible Promissory Notes (the “Notes”) in an aggregate principal amount of $ 16.2 million in August 2022 , $ 4.0 million in November 2022 , $ 1.2 million in May 2023 , $ 1.9 million in December 2023, $ 4.6 million in January 2024 related to the conversion of the Asset-Backed Secured Promissory Notes, and $ 1.3 million in June 2024 (ii) Common Stock Purchase Warrants to purchase an additional 1.9 million shares of common stock with an exercise price of $ 25.13 per share and (iii) Common Stock Purchase Warrants to purchase an additional 1.9 million shares of common stock with an exercise price of $ 15.00 per share.

Interest expense for the three months ended March 31, 2025, and March 31, 2024, totaled $ 0 and $ 1.6 million, respectively.

The Conversion Price of the Notes was subject to adjustment, including if the Company issued or sold shares of common stock for a price per share less than the Conversion Price of the Notes or if the Company listed 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 was less than $ 15.00 per share;

provided, however, that the Conversion Price

was never less than $ 3.75 .

The Notes contained customary events of default and covenants, including limitations on incurrences of indebtedness and liens.

The Notes had a term of 12 months from the date of issue.

In May 2024, the Company utilized its election to convert the May Notes into shares of common stock upon the Notes' maturity.

The May Notes totaling $ 1.2 million in principal and $ 0.2 million interest were converted to 94,126 shares of common stock.

All remaining outstanding convertible notes payable and convertible notes payable related party converted on October 18, 2024 to 591,802 shares of common stock.

The outstanding principal and interest converted totaled $ 8.9 million.

The Company recognized a $ 0.3 million gain on conversion of the Notes.

Promissory note payable, related parties - In June 2024 the Company entered into a $ 0.5 million promissory note with a related party.

Interest was accrued at 12 % with an original maturity date of December 3, 2024.

The Note was paid in full with accrued interest in October 2024.

Acquisition Convertible promissory notes payable - In August 2020 , the Company entered into an asset purchase agreement with Celularity to acquire Celularity’s 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, 2024 , the Seller Note had outstanding accrued interest of $ 0 .

This Seller Note was settled in 2024 for a cash payment of $ 2.2 million.

Convertible promissory notes payable, related party - In August 2020 , the Company issued a convertible promissory note payable in the amount of $ 1.4 million.

The note matured on August 6, 2021, and was not repaid and thus was in default.

As of December 31, 2024 , the note had outstanding accrued interest of $ 0 .

The convertible promissory note was settled in 2024 for a cash payment of $ 1.4 million, which resulted in a gain on the extinguishment of debt of $ 0.8 million and a reduction in accrued interest of $ 0.8 million.

The disaggregation of revenue is based on type and geographical region.

The following table presents revenue from contracts with customers:

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023

United States International Total United States International Total

Consumables and parts revenue $ 5,611 $ 9 $ 5,620 $ 3,133 $ 25 $ 3,158

System revenue 3,649 12 3,661 1,607 18 1,625

License fees and other - 10 10 38 - 38

Product Revenue $ 9,260 $ 31 $ 9,291 $ 4,778 $ 43 $ 4,821

Rental Income 69 - 69 132 - 132

Total Revenue $ 9,329 $ 31 $ 9,360 $ 4,910 $ 43 $ 4,953

Nine Months Ended September 30, Nine Months Ended September 30, 2023

Three Months Ended March 31, 2025 Three Months Ended March 31, 2024

United States International Total United States International Total

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Total Revenue $ 9,327 $ 15 $ 9,342 $ 5,644 $ 142 $ 5,786

Concentration of Credit Risks and Limited Suppliers

Major customers are defined as customers whose accounts receivable or sales individually consist of more than 10% of trade receivables or total sales, respectively.

The percentage of accounts receivable from major customers of the Company for the periods indicated were as follows:

Three Months Ended Nine Months Ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Customer A 15 % n/a n/a n/a

Stock-Based Compensation

On August 7, 2024, the stockholders of the Company approved the 2024 Equity Incentive Plan (the “2024 Plan”).

The 2024 Plan authorizes the issuance of up to 1,376,556 shares of common stock.

Stock options granted under the 2024 Plan include service-based, performance-based, and market-based awards.

Service-based stock options generally vest over a three-year period, expire 10 years from the date of grant, and are forfeited upon separation from the Company.

Performance-based stock options vest upon the achievement of pre-established financial or operational performance criteria, as determined by the Company’s Board of Directors or Compensation Committee.

These awards expire five years from the date of grant and are subject to forfeiture if the performance goals are not achieved within the specified performance period.

Market-based stock options vest upon the attainment of certain market conditions, such as specified

stock price targets, and also expire five years after the grant date.

The fair value of market-based awards is estimated using a Monte Carlo simulation model.

All awards under the 2024 Plan are subject to the terms and conditions of the Plan and the individual award agreements.

During the three months ended March 31, 2025, the Company granted performance- and market-based awards to two employees which provide for the vesting of up to 55,500 shares of common stock.

Vesting is contingent upon the achievement of specified performance or market conditions, with 100 % of the related shares vesting upon satisfaction of each applicable condition.

The performance conditions include the achievement of (a) specific revenue recognized ( 12,750 shares), (b) specific adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) targets ( 12,750 shares), (c) listing on NASDAQ ( 10,000 shares), and (d) the refinancing or repayment of certain debt obligations ( 10,000 shares).

The market condition relates to the attainment of a defined stock price target ( 10,000 shares).

As of March 31, 2025, the Company concluded that the performance conditions related to revenue, adjusted EBITDA, and debt repayment were not probable of achievement, and accordingly, no compensation expense was recognized for those awards.

The NASDAQ listing condition was achieved during the quarter, and the related compensation expense was recognized.

The market condition has not been met as of March 31, 2025, however, compensation expense for the market-based award is recognized on a straight-line basis over the requisite service period, regardless of whether the market condition is ultimately satisfied.

If the condition is achieved prior to the end of the service period, any unrecognized expense will be recognized immediately.

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”).

Upon the approval of the 2024 Plan by the Company's stockholders, no further awards will be made under the Stock Incentive Plan.

The Stock Incentive Plan permitted 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 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 following table presents stock compensation expense recognized by the Company for the three months ended March 31, 2025 .

Total unrecognized compensation cost related to equity awards as of March 31, 2025 was $ 8.9 million and is expected to be recognized over the next 2.75 years .

The Company recognizes compensation expense on a straight-line basis over the requisite service period, net of actual forfeitures.

Three Months Ended March 31,

(in thousands) 2025

Cost of sales 9

General and administrative 792

Selling and marketing 158

Research and development 16

Total expense $ 975

The following table presents a summary of stock options award activity during the three months ended March 31, 2025:

Number of Options (in thousands) Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in thousands)

Outstanding, December 31, 2024 1,137 $ 15.97 9.5 $ 9,305

Granted 176 27.42 7.8 1,393

Forfeited ( 80 ) 0.0 -

Outstanding, March 31, 2025 1,233 $ 17.37 9.1 $ 22,883

Exercisable, March 31, 2025 207 $ 21.82 7.5 $ 3,499

Valuation Information for Stock-Based Compensation

The fair value of each stock option award during the three months ended March 31, 2025 was based on the closing price of the Company's common stock on the date of the grant.

Expected volatility was based on 100% of the historical realized volatilities of peer companies.

The risk-free interest rate was based on the implied yield for U.S.

Treasury zero-coupon issue with the remaining term equal to the expected term.

The expected holding period was calculated using the simplified method.

No dividend was assumed as the Company does not pay regular dividends on its common stock and does not anticipate paying any dividends in the foreseeable future.

The Company's policy is to recognize forfeitures as they occur.

The weighted average assumptions used in the Black-Scholes option pricing model in valuing stock options granted in the three months ended March 31, 2025 are summarized in the table below:

Three Months Ended March 31,

Fair value at grant date $ 27.47

Expected volatility 62 %

Risk-free interest rate 4 %

Expected holding period, in years 5.45

Dividend yield 0 %

Loss per Share

Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of shares outstanding for the three months ended March 31, 2025, and 2024.

The weighted average 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:

Three Months Ended

(in thousands)

March 31, 2025 March 31, 2024

Weighted average shares outstanding

Common shares 8,548 3,041

Common shares issuable assuming exercise of nominally priced warrants - 58

Weighted average shares outstanding 8,548 3,099

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 each of the three months ended March 31, 2025, and March 31, 2024, all potentially dilutive shares in such periods were anti-dilutive and therefore excluded from the computation of diluted net loss per share.

Three Months Ended

(in thousands) March 31, 2025 March 31, 2024

Common stock options 1,233 43

Common stock purchase warrants 390 3,807

Convertible notes payable, including interest

Concentration of Credit Risk and Limited Suppliers

The Company currently purchases most of its product component materials from single suppliers and the loss of any of these suppliers could result in a disruption in the Company’s production.

The percentage of purchases from major vendors of the Company that exceeded ten percent of total purchases for the three and nine months ended September 30, 2024, and 2023 were as follows:

Three Months Ended Nine Months Ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

The percentage of purchases from major vendors

of the Company that exceeded ten percent of total purchases for the three months ended March 31, 2025, and 2024 were as follows:

Three Months Ended

March 31, 2025 March 31, 2024

Vendor A 25 % - %

Vendor B n/a 23 % n/a 16 %

Vendor C n/a 20 % n/a 10 %

Vendor B 13 % - %

License and Option Agreement

In March 2024, the Company entered into an exclusive license and option agreement (the "Patent License") with a third party licensee in connection with a portfolio of patents related to the field of intravascular shockwave applications.

The Company received a one-time payment of $ 2.5 million related to this Patent License, which was recorded in other income during the nine months ended September 30, 2024.

The Company received a one-time payment of $ 2.5 million related to this Patent License, which was recorded in other income during the three months ended March 31, 2024.

The Company granted the Licensee an exclusive license to the patents and an option to acquire the patents for an additional one-time payment in the mid single-digit millions of dollars for a period of 3 years following the effective date of the Agreement.

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If the Licensee does not exercise its option to acquire the Patents during a specified option period of 3 years from the effective date of the Agreement, the license terminates, a supplement license fee is owed, and all rights revert back to the Company.

Contingent Consideration - T he Company considers such royalties, license fees, settlement payments, or other proceeds as variable or contingent consideration.

Contingent Consideration - The Company considers such royalties, license fees, settlement payments, or other proceeds as variable or contingent consideration.

The Company determined that the amount of variable consideration would be constrained until the period the uncertainty related to the consideration is relieved.

4 unchanged sentences

The Company expenses legal fees in the period in which they are incurred.

Termination Agreement – In February 2024, the Company entered into a termination agreement with an advisor to agree on termination fees owed with respect to a previous engagement agreement.

The Company agreed to a contingent payment of $ 0.7 million upon the closing of the Merger disclosed in Note 4.

Upon the Company's termination of the Merger Agreement in June 2024, the related contingent consideration liability was derecognized.

Acquisition dispute – In May 2021, the Company received notification alleging that it is not in compliance with the license agreement with Celularity entered into in connection with the acquisition of the UltraMIST assets.

The Company has settled this dispute in June 2024 for a settlement amount of $ 2.2 million, which resulted in the removal of $ 4.0 million in convertible promissory note payable, $ 2.4 million in accrued interest, $ 0.9 million of accrued expenses, $ 0.5 million of other liabilities, and $ 0.4 million in accounts receivable, which resulted in the recognition of a gain on extinguishment of debt of $ 5.3 million.

Subsequent Events

Consent and Limited Waiver

On October 17, 2024, the Company entered into a Consent and Limited Waiver to Note and Warrant Purchase and Security Agreement (the “Consent and Limited Waiver”) with respect to that certain NWPSA, with the noteholders party thereto (the “Holders”) and NH Expansion Credit Fund Holdings LP, as agent (the “Agent”).

The Consent and Limited Waiver also consents to the repayment in full of amounts owed to HealthTronics, Inc.

the Private Placement (as defined below) and the Reverse Stock Split if the Company has at least $ 5.0 million of liquidity following such transactions, which is required pursuant to the minimum liquidity covenant in the NWPSA.

As a condition to the effectiveness of the Consent and Limited Waiver, the Agent exercised, on a cashless basis, all warrants issued by the Company to the Agent in exchange for the issuance of 146,302 shares (the “NWPSA Shares”) of the Company’s common stock following the Reverse Stock Split.

Private Placement of Common Stock

On October 16, 2024, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with the purchasers (the “Purchasers”), for the private placement (the “Private Placement”) of approximately 1.3 million shares (the “Shares”) of common stock at a purchase price of $ 8.25 per share, in each case, after adjustment to reflect the Reverse Stock Split.

The Private Placement closed on October 18, 2024, and aggregate gross proceeds were approximately $ 10.3 million, before deducting offering expenses.

The Company used the net proceeds from the Private Placement to pay all amounts owed pursuant to the Consent and Limited Waiver and that certain letter agreement, dated as of August 8, 2024, between the Company and HealthTronics with respect to the HealthTronics Note, and intends to use the remaining net proceeds for working capital and general corporate purposes, which may include the repayment of other indebtedness.

In addition, on October 16, 2024, the Company and the Purchasers entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which the Company agreed to file the registration statement with the SEC on or before December 17, 2024 (subject to certain exceptions) for purposes of registering the resale of the Placement Shares, to use its commercially reasonable efforts to have such registration statement declared effective within the time period set forth in the Registration Rights Agreement, and to keep the registration statement effective until the date that all Placement Shares have been sold, thereunder or pursuant to Rule 144.

The HealthTronics Note was paid in full on October 22, 2024 and all related defaults were thus cured.

Note and Warrant Exchange

On October 18, 2024, effective upon the implementation of the Reverse Stock Split, the Company issued an aggregate of 3,989,456 shares of common stock in exchange for all outstanding Notes and Common Stock Purchase Warrants (“Warrants”) issued by the Company in private placements in August 2022, November 2022, May 2023, December 2023, January 2024 and June 2024.

Pursuant to the Note and Warrant Exchange, (i) each outstanding Note was fully accelerated to maturity (with 15 % interest paid on the outstanding principal) and then converted (per the terms of the Note) into shares of common stock at $ 15.00 per share, (ii) each Warrant with an exercise price of $ 15.00 per share was exchanged for 0.0024 shares of Common Stock per share subject to such Warrant, and (iii) each Warrant with an exercise price of $ 25.13 per share was exchanged for approximately 0.0023 shares of Common Stock per share subject to such Warrant.

2024 Equity Incentive Plan

On October 18, 2024, the Company registered approximately 1.4 million shares of common stock available for issuance under the 2024 Equity Incentive Plan.

Segment Information

The Company operates in one reportable segment engaged in the design and sale of medical devices.

The accounting policies of the one reportable segment are the same as those described in the summary of significant accounting policies.

The Chief Operating Decision Maker ( “ CODM ” ) assesses performance for the reportable segment and decides how to allocate resources primarily based on gross profit that is also reported on the consolidated statements of comprehensive loss.

The measure of segment assets is reported on the condensed consolidated balance sheets as total consolidated assets.

The CODM uses gross profit to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits or to apply them to other parts of the entity.

Net (loss) income is used to monitor budget versus actual results.

The CODM also uses net (loss) income in competitive analysis by benchmarking to competitors.

The competitive analysis along with the monitoring of budgeted versus actual results are used in assessing performance of the segment and in establishing management’s compensation.

Management has determined that Morgan Frank, CEO, is the CODM.

The following table sets forth our condensed consolidated statements of comprehensive loss used by the CODM:

Three Months Ended March 31,

(in thousands) 2025 2024

Revenue $ 9,342 $ 5,786

Cost of Revenues 1,958 1,584

Gross Margin 7,384 4,202

Operating Expenses:

General and administrative 4,467 3,675

Selling and marketing 1,531 1,232

Research and development 208 163

Depreciation and amortization 192 182

Total Operating Expenses 6,398 5,252

Total Other Expense ( 6,662 ) ( 3,478 )

Net Loss $ ( 5,676 ) $ ( 4,528 )

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements