What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-08 · 86 added, 72 removed, 84 unchanged (65% of the section changed)

2 unchanged sentences

Executive Summary

We continued to realize significant revenue growth during the three months ended March 31, 2025, as compared to the same period in 2024 .

Revenue for the three months ended March 31, 2025, totaled $9.3 million , an increase of 61% , as compared to $5.8 million for the same period of 2024 .

Net loss for the three months ended March 31, 2025, was $5.7 million compared to a net loss of $4.5 million for the same period in 2024 .

The increase in our net loss for the three months ended March 31, 2025, was primarily related to an increase in change of fair value of derivative liabilities.

For the three months ended March 31, 2025, our operating income totaled $1.0 million , which is an improvement of $2.0 million compared to the same period of 2024 .

Recent Developments

On March 7, 2025, our common stock began trading on The Nasdaq Global Market under the ticker symbol “SNWV.”

We continued to realize significant revenue growth during the three months ended June 30, 2025, as compared to the same period in 2024 .

Revenue for the three months ended June 30, 2025, totaled $10.2 million , an increase of 42% , as compared to $7.2 million for the same period of 2024 .

Revenue for the six months ended June 30, 2025, totaled $19.5 million , an increase of 51% , as compared to $12.9 million for the same period of 2024 .

Net income for the three months ended June 30, 2025, was $1.1 million compared to net income of $6.6 million for the same period in 2024 .

The decrease in our net income for the three months ended June 30, 2025, was primarily related to the a gain on extinguishment of debt for the three months ended June 30, 2024 that did not recur during the three months ended June 30, 2025 and the change in fair value of derivative liabilities .

For the three months ended June 30, 2025, our operating income totaled $1.9 million , which is flat compared to the same period of 2024 .

Net loss for the six months ended June 30, 2025, was $4.6 million compared to a net income of $2.0 million for the same period in 2024 .

The change from net income for the six months ended June 30, 2025 to net loss for the six months ended June 30, 2024, was primarily related to a gain on extinguishment of debt for the six months ended June 30, 2024 that did not recur during the six months ended June 30, 2025 and the change of fair value of derivative liabilities.

For the six months ended June 30, 2025, our operating income totaled $2.9 million , which is an improvement of $1.9 million compared to the same period of 2024 .

The increase in operating income was mainly driven by an increase in revenue and gross margin for the six months ended June 30, 2025.

Non-GAAP Financial Measures

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As presented in the U.S.

GAAP to Non-GAAP Reconciliations section below, our non-GAAP financial measure excludes the impact of certain charges that contribute to our net loss.

Three Months Ended March 31,

GAAP to Non-GAAP Reconciliations section below, our non-GAAP financial measure excludes the impact of certain charges that contribute to our net income (loss).

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2025 2024 2025 2024

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

Net Income (Loss) $ 1,055 $ 6,561 $ (4,621) $ 2,033

Non-GAAP Adjustments:

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Stock-based compensation 1,132 - 2,116 -

Loss on extinguishment of debt - 105

Gain on extinguishment of debt - (5,310) - (5,205)

Severance agreement and legal settlement - - - 585

Release of historical accrued expenses - (579) - (579)

License and option agreement - - - (2,500)

Prepaid legal fees expensed from termination of Merger Agreement $ - $ 457 $ - $ 457

Adjusted EBITDA $ 3,370 $ 1,457 $ 5,705 $ 1,398

Results of Operations

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

(in thousands) 2025 2024 $ % 2025 2024 $ %

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Depreciation and amortization 174 180 (6) -3 % 366 362 4 1 %

Operating income (loss) 986 (1,050) 2,036 194 %

Other expense, net (6,662) (3,478) (3,184) -92 %

Net loss $ (5,676) $ (4,528) $ (1,148) -25 %

Revenues for the t hree months ended March 31, 2025, were $9.3 million , compared to $5.8 million for the same period of 2024 , an increase of $3.6 million or 61% .

Operating income 1,877 1,992 (115) -6 % 2,863 942 1,921 204 %

Other income (expense) (822) 4,569 (5,391) -118 % (7,484) 1,091 (8,575) -786 %

Net income (loss) $ 1,055 $ 6,561 $ (5,506) -84 % $ (4,621) $ 2,033 $ (6,654) -327 %

Revenues for the t hree months ended June 30, 2025, were $10.2 million , compared to $7.2 million for the same period of 2024 , an increase of $3.0 million or 42% .

The increase in net sales was primarily driven by the growth in quantity of UltraMIST ® disposables and systems sold as well as a strategic focus on price discipline.

The quantity of UltraMIST ® disposables sold increased by 32% in the t hree months ended March 31, 2025, as compared to the same period of 2024 .

The quantity of UltraMIST ® systems sold increased by 128% in the t hree months ended March 31, 2025, as compared to the same period of 2024.

Pricing of the UltraMIST ® system and disposables also showed growth in the t hree months ended March 31, 2025, as compared to the same period of 2024;

the average selling price of disposables increased 8% in the t hree months ended March 31, 2025, and the average selling price of systems increased 8% in the t hree months ended March 31,

Revenue from UltraMIST ® totaled 99% of total revenue in the t hree months ended March 31, 2025, and over 90% in the same period of 2024 .

Cost of Revenue

Cost of revenues for the t hree months ended March 31, 2025, was $2.0 million , compared to $1.6 million for the same period of 2024 .

Gross profit as a percentage of revenues was 79% for the t hree months ended March 31, 2025, compared to 73% for the same period in 2024 .

The quantity of UltraMIST ® disposables sold increased by 29% in the t hree months ended June 30, 2025, as compared to the same period of 2024 .

The quantity of UltraMIST ® systems sold increased by 61% in the t hree months ended June 30, 2025, as compared to the same period of 2024.

Pricing of the UltraMIST ® system and disposables also showed growth in the t hree months ended June 30, 2025, as compared to the same period of 2024;

the average selling price of disposables increased 6% in the t hree months ended June 30, 2025, and the average selling price of systems increased 1% in the t hree months ended June 30, 2025.

Revenue from UltraMIST ® totaled 99% of total revenue in the t hree months ended June 30, 2025, and over 95% in the same period of 2024 .

Revenues for the six months ended June 30, 2025, were $19.5 million , compared to $12.9 million for the same period of 2024 , an increase of $6.6 million or 51% .

The increase in net sales was primarily driven by the growth in quantity of UltraMIST ® disposables and systems sold as well as a strategic focus on price discipline.

The quantity of UltraMIST ® disposables sold increased by 31% in the six months ended June 30, 2025, as compared to the same period of 2024 .

The quantity of UltraMIST ® systems sold increased by 86% in the six months ended June 30, 2025, as compared to the same period of 2024.

Pricing of the UltraMIST ® system and disposables also showed growth in the six months ended June 30, 2025, as compared to the same period of 2024;

the average selling price of disposables increased 7% in the six months ended June 30, 2025, and the average selling price of systems increased 4% in the six months ended June 30, 2025.

Revenue from UltraMIST ® totaled 99% of total revenue in the six months ended June 30, 2025, and over 94% in the same period of 2024 .

Cost of Revenues

Cost of revenues for the t hree months ended June 30, 2025, was $2.2 million , compared to $1.9 million for the same period of 2024 .

Gross profit as a percentage of revenues was 78% for the t hree months ended June 30, 2025, compared to 73% for the same period in 2024 .

This increase in gross margin was largely driven by improved pricing initiatives on our UltraMIST ® systems and applicators.

Cost of revenues for the six months ended June 30, 2025, was $4.2 million , compared to $3.5 million for the same period of 2024 .

Gross profit as a percentage of revenues was 79% for the six months ended June 30, 2025, compared to 73% for

the same period in 2024 .

This increase in gross margin was largely driven by improved pricing initiatives on our UltraMIST ® systems and applicators.

General and Administrative

General and administrative expenses for the three months ended March 31, 2025, were $4.5 million as compared to $3.7 million for the same period of 2024, an increase of $0.8 million, or 22%.

The increase in the three months ended March 31, 2025, as compared to the same period of 2024, was primarily due to non-cash charges for stock-based compensation expense totaling $0.8 million.

General and administrative expenses for the three months ended June 30, 2025, were $4.0 million as compared to $1.8 million for the same period of 2024, an increase of $2.2 million, or 120%.

The increase in the three months ended June 30, 2025, as compared to the same period of 2024, was primarily due to increased headcount expenses of $1.1 million and non-cash charges for stock-based compensation expense totaling $0.9 million.

There was a release of historical accrued expenses relating to headcount expenses for the three months ended June 30, 2024 of $0.6 million which did not recur in the three months ended June 30, 2025.

General and administrative expenses for the six months ended June 30, 2025, were $8.5 million as compared to $5.5 million for the same period of 2024, an increase of $3.0 million, or 54%.

The increase in the six months ended June 30, 2025, as compared to the same period of 2024, was primarily due to non-cash charges for stock-based compensation expense totaling $1.7 million and increased headcount expenses of $1.2 million.

There was a release of historical accrued expenses relating to headcount expenses for the six months ended June 30, 2024 of $0.6 million which did not recur in the three months ended June 30, 2025.

Selling and Marketing

Selling and marketing expenses for the t hree months ended March 31, 2025, were $1.5 million as compared to $1.2 million for the same period of 2024 , an increase of $0.3 million , or 24% .

The year-over-year increase in sales and marketing expenses in the t hree months ended March 31, 2025, was largely driven by increased headcount and non-cash charges for stock-based compensation.

Selling and marketing expenses for the t hree months ended June 30, 2025, were $1.7 million as compared to $1.0 million for the same period of 2024 , an increase of $0.6 million , or 62% .

The year-over-year increase in sales and marketing expenses in the t hree months ended June 30, 2025, was primarily due to increased headcount expenses of $0.4 million, including commissions as revenues increased, and non-cash charges for stock-based compensation of $0.2 million.

Selling and marketing expenses for the six months ended June 30, 2025, were $3.2 million as compared to $2.3 million for the same period of 2024 , an increase of $0.9 million , or 41% .

The year-over-year increase in sales and marketing expenses the six months ended June 30, 2025, was primarily due to increased headcount expenses of $0.7 million and non-cash charges for stock-based compensation of $0.4 million;

partially offset by decreases in Travel & Entertainment expenses of $0.1 million and Service Contracts of $0.1 million .

Research and Development

Research and development expenses for each of the t hree months ended March 31, 2025, and March 31, 2024, were $0.2 million.

The research and development costs in the t hree months ended March 31, 2025, remained approximately consistent with the costs in the same period of 2024 .

Other Income (Expense), net

Other expense, net consists of the following:

Three Months Ended March 31, Change

Research and development expenses for each of the t hree months ended June 30, 2025, and June 30, 2024, were $0.2 million.

The research and development costs in the t hree months ended June 30, 2025, remained approximately consistent with the costs in the same period of 2024 .

Research and development expenses for each of the six months ended June 30, 2025, and June 30, 2024, were $0.4 million.

The research and development costs in the six months ended June 30, 2025, remained approximately consistent with the costs in the same period of 2024 .

Other (Expense) Income, net

Other (expense) income, net consists of the following:

Three Months Ended June 30, Change Six Months Ended June 30, Change

2025 2024 $ % 2025 2024 $ %

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Change in fair value of derivative liabilities 990 3,717 (2,727) 73 % (3,911) 1,216 (5,127) 422 %

Loss on extinguishment of debt - (105) 105 nm

Gain on extinguishment of debt - 5,310 (5,310) - % - 5,205 (5,205) - %

Other expense (27) (685) 658 96 % (28) (787) 759 96 %

Other income 89 10 79 790 % 181 2,800 (2,619) (94 %)

Other expense, net $ (6,662) $ (3,478) $ (3,184) (92 %)

nm - not meaningful

Other expenses totaled $6.7 million for the t hree months ended March 31, 2025, as compared to $3.5 million for the same period of 2024 , an increase of $3.2 million .

The increase was primarily driven by a decrease in other income of $2.7 million and an increased loss from the change in the fair value of derivative liabilities of $2.4 million , partially offset by a decrease in interest expense of $1.7 million.

The change in fair value of derivative liability relates to valuation of warrants previously issued by the Company.

Other income for the three months ended March 31, 2024 mainly consists of the one-time payment of $2.5 million related to the Patent License as described in Note 16.

Other (expense) income, net $ (822) $ 4,569 $ (5,391) 118 % $ (7,484) $ 1,091 $ (8,575) 786 %

Other (expense) income, net decreased by $5.4 million to other expense of $0.8 million for the t hree months ended June 30, 2025, as compared to other income of $4.6 million for the same period of 2024 .

The decrease was primarily driven by a decrease in gain on extinguishment of debt of $5.3 million and a decrease from the change in the fair value of derivative liabilities of $2.7 million , partially offset by a decrease in interest expense of $1.9 million .

The change in fair value of derivative liability relates to the valuation of warrants previously issued by the Company.

Other (expense) income, net decreased by $8.6 million to an expense of $7.5 million for the six months ended June 30, 2025, as compared to other income of $1.1 million for the same period of 2024 .

The decrease was primarily driven by a decrease in gain on extinguishment of debt of $5.2 million and a decrease from the change in the fair value of derivative liabilities of $5.1 million , partially offset by a decrease in interest expense of $3.6 million .

The change in fair value of derivative liability relates to the valuation of warrants previously issued by the Company.

Other income for the six months ended June 30, 2024 mainly consists of the one-time payment of $2.5 million related to the Patent and License Agreement as described in Note 16.

Liquidity and Capital Resources

Since inception, we have incurred losses from operations each year.

As of March 31, 2025, we had an accumulated deficit of $257.1 million .

From inception through the year ended December 31, 2023, we incurred losses from operations each year.

As of June 30, 2025, we had an accumulated deficit of $256.0 million .

Historically, our operations have primarily been funded from the sale of capital stock, issuances of notes payable, and convertible debt securities.

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

During the current and prior fiscal year, the Company has achieved operating income, reflecting a significant improvement in its financial performance.

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.

Although no assurances can be given that our plans to obtain refinancing will be successful or on the terms or timeline we expect, or at all, management believes that the actions taken to date, along with the planned initiatives, will enable the Company to meet its obligations as they become due and to continue as a going concern..

We have incurred recurring net losses in prior years, currently have a significant accumulated deficit, have negative working capital, and the Senior Secured Note (as defined in Note 8) becomes due in September 2025, which raises substantial doubt about our ability to continue as a going concern for a period of 12 months from the filing of this Form 10-Q.

During the three and six months ended June 30, 2025, and prior fiscal year ended December 31, 2024, we achieved operating income.

This is attributable to the implementation and execution of several strategic initiatives, primarily, revenue growth initiatives and a capital raise from a private placement in October 2024, which have positively impacted our operations.

Despite the positive operating income in the current year, we continue to monitor our financial position closely.

In addition to the operational improvements, we are addressing our financial obligations, including the significant portion of debt that matures in September 2025.

Management is actively engaged in discussions with lenders and financial institutions to refinance this debt, which could extend the maturity of the debt and provide additional liquidity to support ongoing operations and strategic initiatives.

Company to meet its obligations as they become due and to continue as a going concern..

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 following table presents summarized cash flow information:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2025 2024

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Cash flows (used in) investing activities $ (1,321) $ (206)

Cash flows (used in) provided by financing activities $ (57) $ 42

Cash used in operating activities for the three months ended March 31, 2025, totaled $1.5 million and consisted primarily of a net loss of $5.7 million and a decrease in net operating assets of $2.5 million, partially offset by non-cash charges of $4.9 million related to a change in the fair value of derivative liabilities, $1.0 million related to stock-based compensation expense, and $0.5 million related to amortization of debt issuance and debt discounts.

Net operating assets consisted primarily of inventory, accrued expenses, and accounts receivable to support the growth of our operations.

Cash provided by operating activities for the three months ended March 31, 2024 totaled $1.1 million and consisted primarily of a net loss of $4.5 million, partially offset by non-cash charges of $2.5 million related to a change in the fair value of derivative liabilities and $1.6 million related to amortization of debt issuance and debt discounts, as well as the receipt of $2.5 million related to the License and Option Agreement, as further discussed in Note 16 to the financial statements.

Cash flows provided by financing activities $ 104 $ 316

Cash used in operating activities for the six months ended June 30, 2025, totaled $0.5 million and consisted primarily of a net loss of $4.6 million and a decrease in net operating assets of $4.1 million, partially offset by non-cash charges of $3.9 million related to a change in the fair value of derivative liabilities, $2.1 million related to stock-based compensation expense, and $1.1 million related to amortization of debt issuance and debt discounts.

Net operating assets consisted primarily of inventory, accrued expenses, prepaid expenses and accounts receivable to support the growth of our operations.

In addition, we received $0.4 million in tenant improvement funds, as described in Note 7 to the financial statement, which partially offsets leasehold improvement investments.

The related leasehold improvements are included in purchases of property and equipment under investing activities.

Cash provided by operating activities for the six months ended June 30, 2024 totaled $0.4 million and consisted primarily of net income of $2.0 million, partially offset by non-cash charges of $1.2 million related to a change in the fair value of derivative liabilities and $3.3 million related to amortization of debt issuance and debt discounts, as well as the receipt of $2.5 million related to the License and Option Agreement, as further discussed in Note 16 to the financial statements.

Cash used in investing activities for the six months ended June 30, 2025, totaled $1.3 million and consisted primarily of purchases of property and equipment of $1.3 million, of which $0.9 million was related to leasehold improvements at our new headquarters.

Cash used in investing activities for the six months ended June 30, 2024 , totaled $0.2 million and primarily consisted of purchases of property and equipment related to manufacturing equipment.

Critical Accounting Estimates

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We base our estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

The following accounting estimates are deemed critical:

Litigation Contingencies

We 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 condensed 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 17 to the condensed consolidated financial statements.

Derivative Liabilities from Warrants

The Company determined that certain warrants qualified as derivative financial instruments.

Various valuation models were used to estimate the fair value of these derivative financial instruments that are classified as derivative liabilities on the condensed 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 Company's volatility is the most significant assumption and changes over time with the market.

Our significant input assumptions are discussed in Note 10 to the condensed consolidated financial statements.

Segment and Geographic Information

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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 2. Management’s Discussion and Analysis