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Item 8. Financial Statements and Supplementary Data

2026-03-26 compared with 2025-03-20 · 775 added, 453 removed, 411 unchanged (75% of the section changed)

2 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 202 5 and 2024

Consolidated Statements of Comprehensive Loss for the years ended December 31, 202 4 and 20 23

Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 202 4 and 20 23

Consolidated Statements of Comprehensive Income ( Loss ) for the years ended December 31, 202 5 and 202 4

Consolidated Statements of Stockholders’ Equity ( Deficit ) for the years ended December 31, 202 5 and 2024

Consolidated Statements of Cash Flows for the years ended December 31, 202 5 and 202 4

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Report of Independent Registered Public Accounting Firm

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

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of SANUWAVE Health, Inc.

(the “Company”) as of December 31, 2025, the related consolidated statements of comprehensive income (loss), stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2025, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Baker Tilly US, LLP

Minneapolis, Minnesota

March 26, 2026

We have served as the Company’s auditor since 2025.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of SANUWAVE Health, Inc.

(the “Company”) and Subsidiaries as of December 31, 2024 and 2023, the related consolidated statements of comprehensive loss, stockholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheet of SANUWAVE Health, Inc.

(the “Company”) and Subsidiaries as of December 31, 2024, the related consolidated statements of comprehensive income (loss), stockholders’ equity (deficit), and cash flows for the year ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, based on our audit, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Restatement of December 31, 2024 Financial Statements

As discussed in Note 2 to the financial statements, the accompanying financial statements as of and for the year ended December 31, 2024, have been restated to correct misstatements regarding accounting for state sales and use tax liability.

Explanatory Paragraph – Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 2, the Company has incurred recurring losses, has negative working capital, and needs to refinance its debt to meet its obligations and sustain its operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 2.

The 2024 financial statements were prepared assuming that the Company would continue as a going concern.

As of the date of the issuance of the 2024 financial statements, the Company had incurred recurring losses, had negative working capital, and needed to refinance its debt to meet its obligations and sustain its operations.

These conditions raised substantial doubt about the Company's ability to continue as a going concern as of the date of the issuance of the 2024 financial statements.

The 2024 financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements,

taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Financial Instruments (Warrant Liability)

Critical Audit Matter Description

As described in Note 13 to the consolidated financial statements, the Company has entered into warrant agreements accounted for as a liability and recorded at fair value.

The fair value of the warrant liability was valued using valuation techniques and key inputs as described in the footnotes.

The principal considerations for our determination that the valuation of the warrant liability is a critical audit matter were the significant judgments made by management in determining the fair value of the warrant liability.

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions.

The audit also involved the use of professionals with specialized skill and knowledge.

How the Critical Audit Matter was Addressed in the Audit

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

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

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

Evaluating the appropriateness of the valuation models and techniques used in determining the fair value;

Assessing the reasonableness of the significant valuation inputs, including the probability weighted expected value considering the merger agreement with SEPA Acquisition Corp.

(“SEPA”), the risk adjusted expected exchange ratio, the value of SEPA’s Class A common stock, the expected timing of the closing of the merger, and the probability of the merger closing;

Assessing the reasonableness of the significant valuation inputs, including the probability weighted expected value considering the reverse stock split of the Company’s common stock (the “Reverse Stock Split”), the expected exchange ratio, the value of the Company’s common stock, the expected timing of the effectuating of the Reverse Stock Split, and the probability of the Reverse Stock Split occurring;

Assessing that the significant valuation assumption inputs in the Black Scholes valuation model of the implied volatility are consistent with those that would be used by market participants through the testing of source information;

Checking the mathematical accuracy of the calculation, developing independent estimates, and comparing to those selected by management, where applicable, and recalculating management’s fair value, verifying it was reasonable.

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

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Marcum LLP

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

March 20, 2025

We served as the Company’s auditor from 2018 to 2025.

March 20, 2025, except for the effects of the restatement as discussed in Note 2 to the consolidated financial statements, as to which the date is March 26, 2026

SANUWAVE HEALTH, INC.

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(In thousands, except share data) 2025 2024

(As Restated)

Current Assets:

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Non-Current Assets:

Property, equipment and right of use assets, net 732 938

Property and equipment, net 1,972 303

Right of use assets, net 390 429

Intangible assets, net 3,026 3,730

Goodwill 7,260 7,260

Secured revolving credit facility debt issuance costs, net 68 -

Total Non-Current Assets 12,716 11,722

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Current Liabilities:

Current portion of secured term loan $ 5,638 $ -

Senior secured debt - 25,305

Convertible promissory notes payable - 5,404

Convertible promissory notes payable, related parties - 1,705

Asset-backed secured promissory notes payable - 3,117

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

Accounts payable 3,251 3,728

Accrued expenses 8,382 7,756

Factoring liabilities - 1,490

Warrant liability - 8,107

Accrued interest - 5,444

Accrued interest, related parties - 669

Current portion of operating lease liabilities 157 126

Current portion of finance lease liabilities - 175

Current portion of contract liabilities 388 193

Other 334 947

Accrued interest 24 -

Total Current Liabilities 17,847 45,423

Non-Current Liabilities:

Lease liabilities, less current portion 191 492

Secured term loan, net of current portion and debt issuance costs 15,667 -

Secured revolving credit facility

Operating lease liabilities, less current portion 854 125

Finance lease liabilities, less current portion - 66

Contract liabilities, less current portion 701 300

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Total Liabilities 35,724 45,914

Commitments and Contingencies (Footnote 21)

STOCKHOLDERS’ DEFICIT

Commitments and Contingencies (Note 21)

STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred stock, par value $ 0.001 , 5,000,000 shares authorized, 6,175 Series A, 293 Series B, 90 Series C, and 8 Series D designated shares, respectively;

no shares issues and outstanding at 2024 and 2023

Common stock, par value $ 0.001 , 2,500,000,000 shares authorized, 8,543,686 and 3,041,492 issued and outstanding at 2024 and 2023, respectively *

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

Common stock, par value $ 0.001 , 2,500,000,000 shares authorized, 8,588,876 and 8,543,686 issued and outstanding at December 31, 2025 and 2024, respectively

Additional paid-in capital 244,285 238,685

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Accumulated other comprehensive loss 10 10

Total Stockholders’ Deficit ( 12,717 ) ( 43,178 )

Total Liabilities and Stockholders’ Deficit $ 30,119 $ 22,416

* 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.

Total Stockholders’ Equity (Deficit) 1,619 ( 15,795 )

Total Liabilities and Stockholders’ Equity (Deficit) $ 37,343 $ 30,119

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

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Years ended December 31, 2025 and 2024

(In thousands, except share and per share data) 2025 2024

(As Restated)

Revenue $ 44,051 $ 32,634

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Total Operating Expenses 29,024 20,702

Operating Income (Loss) 5,417 ( 540 )

Operating Income 4,945 3,848

Other Income (Expense)

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Interest expense, related party - ( 1,214 )

(Loss) Gain on extinguishment of debt ( 477 ) 6,326

Change in fair value of derivative liabilities 8,107 ( 31,413 )

Gain on extinguishment of debt 6,326 -

Loss on impairment of assets ( 196 ) -

Other expense ( 42 ) ( 893 )

Other income 2,855 -

Total Other Expense ( 36,762 ) ( 25,263 )

Net Loss Before Income Taxes ( 31,345 ) ( 25,803 )

Other income (See Note 20) 5,808 2,855

Total Other Income (Expense) 6,954 ( 36,904 )

Net Income (Loss) Before Income Taxes 11,899 ( 33,056 )

Income tax expense 86 27

Net Loss $ ( 31,372 ) $ ( 25,807 )

Other Comprehensive Loss

Net Income (Loss) $ 11,813 $ ( 33,083 )

Other Comprehensive Income (Loss)

Foreign currency translation adjustments - 121

Total Comprehensive Loss $ ( 31,251 ) $ ( 25,851 )

Net Loss per share:

Basic and Diluted * $ ( 7.03 ) $ ( 12.19 )

Total Comprehensive Income (Loss) $ 11,813 $ ( 32,962 )

Earnings (Loss) per Share:

Basic $ 1.38 $ ( 7.41 )

Diluted $ 0.41 $ ( 7.41 )

Weighted average shares outstanding:

Basic and Diluted * 4,462,883 2,116,936

* 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.

Basic 8,563,510 4,462,883

Diluted 9,082,510 4,462,883

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

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share data)

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Comprehensive

Balances as of December 31, 2022 1,463,300 $ 1 $ 153,298 $ ( 194,242 ) $ ( 67 ) $ ( 41,010 )

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

Shares issued for settlement of debt 1,543,792 1 23,155 - - 23,156

Foreign currency translation adjustment - - - - ( 44 ) ( 44 )

Net loss - - - ( 25,807 ) - ( 25,807 )

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

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

Correction of prior period error (See Note 2) - - - ( 1,367 ) - ( 1,367 )

Balance as of January 1, 2024 (as restated) 3,041,492 $ 3 $ 176,979 $ ( 221,416 ) $ ( 111 ) $ ( 44,545 )

Sale of common stock 1,248,489 1 10,299 - - 10,300

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Foreign currency translation adjustment - - 121 121

Net loss - - - ( 31,372 ) - ( 31,372 )

Net loss (as restated) - - ( 33,083 ) - ( 33,083 )

Balance as of December 31, 2024 (as restated) 8,543,686 $ 9 $ 238,685 $ ( 254,499 ) $ 10 $ ( 15,795 )

Stock-based compensation 4,787 - 4,968 - - 4,968

Stock options exercised 37,879 - 555 - - 555

Shares granted in lieu of board of director fees 2,524 - 77 - - 77

Net income - - - 11,813 - 11,813

Balance as of December 31, 2025 8,588,876 $ 9 $ 244,285 $ ( 242,685 ) $ 10 $ 1,619

* 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.

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

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(In thousands) 2025 2024

Cash Flows - Operating Activities:

Net loss $ ( 31,372 ) $ ( 25,807 )

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

(As Restated)

Operating Activities

Net income (loss) $ 11,813 $ ( 33,083 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities

Stock-based compensation 4,850 1,514

Depreciation and amortization 974 788

Reserve for credit losses 77 781

Shares issued for services - 224

Gain on extinguishment of debt ( 6,326 ) -

Income tax expense - 4

Amortization of right-of-use assets 309 357

Provision for credit losses 202 77

Loss on disposal and impairment of assets 210 -

Loss (gain) on extinguishment of debt 477 ( 6,326 )

Change in fair value of derivative liabilities ( 8,107 ) 31,413

Gain on sale of patents ( 5,375 ) -

Amortization of debt issuance and debt discounts 1,461 5,520

Write-off of inventory related to PACE disposal 498 -

Gain on lease modification ( 7 ) -

Accrued interest and accrued interest, related parties - 3,387

Proceeds from tenant improvement funds 586 -

Changes in operating assets and liabilities

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Accrued expenses and contract liabilities 1,965 1,993

Net Cash Provided by (Used in) Operating Activities 2,455 ( 4,538 )

Cash Flows - Investing Activities

Proceeds from sale of property and equipment - 21

Operating leases ( 156 ) -

Net Cash Provided by Operating Activities 3,876 2,455

Investing Activities

Purchases of property and equipment ( 1,942 ) ( 490 )

Net Cash Flows (Used in) Provided by Investing Activities ( 490 ) 21

Cash Flows - Financing Activities

Proceeds from convertible promissory notes 1,300 3,026

Proceeds from sale of patents

Net Cash Provided by (Used in) Investing Activities 3,433 ( 490 )

Financing Activities

Repayment of principal secured term loan ( 1,438 ) -

Proceeds from secured term loan 23,000 -

Proceeds from secured revolving credit facility 655 -

Payment of debt issuance costs ( 371 ) -

Proceeds from exercises of stock options 556 -

Payment of note payable ( 27,747 ) ( 3,548 )

Proceeds from asset-backed secured promissory notes payable - 2,994

Proceeds from convertible promissory notes - 1,300

Proceeds from secured promissory notes payable, related party - 500

Payments to secured promissory notes payable, related party - ( 500 )

Payments to factoring ( 1,490 ) ( 639 )

Proceeds from sale of common stock - 10,300

Payments to factoring - ( 1,490 )

Principal payments on finance leases ( 242 ) ( 208 )

Net Cash Flows Provided by Financing Activities 6,354 5,211

Effect of Exchange Rates on Cash 121 ( 50 )

Net Change in Cash During Period 8,440 644

Cash at Beginning of Period 1,797 1,153

Cash at End of Period $ 10,237 $ 1,797

Net Cash (Used in) Provided by Financing Activities ( 5,587 ) 6,354

Effect of Exchange Rates on Cash and Cash Equivalents - 121

Net Change in Cash and Cash Equivalents During Period 1,722 8,440

Cash and Cash Equivalents at Beginning of Period 10,237 1,797

Cash and Cash Equivalents at End of Period $ 11,959 $ 10,237

Supplemental Information:

Cash paid for interest $ 3,744 $ 4,311

Cash paid for state income taxes 27 4

Non-Cash Investing and Financing Activities:

Capitalize default interest into senior secured debt $ 549 $ 3,850

Shares granted in lieu of board of director fees 77 -

Stock options granted in lieu of cash bonus 117 -

Right-of-use assets obtained in exchange for lease liabilities 430 -

Lease liabilities reduced upon lease modification 99 -

Purchases of property and equipment in accounts payable 45 -

RSUs granted in exchange for services 10 -

Shares issued for settlement of debt - 8,513

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Conversion of warrants to common stock - 41,380

Conversion of convertible notes payable and accrued interest to common stock - 23,156

Embedded conversion feature on convertible debt - 835

Common shares issued for advisory shares - 302

Capitalize default interest into senior secured debt 3,850 -

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

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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.

Sanuwave was founded in 2004 and is headquartered in Eden Prairie, Minnesota.

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

GAAP”) and with the instructions to for 10-K and Regulation S-X.

GAAP”) and with the instructions to Form 10-K and Regulation S-X.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

All significant intercompany accounts and transactions have been eliminated.

The functional currencies of the Company’s foreign operations are their local currencies.

Amounts reported in thousands within this annual report are computed based on the amounts in thousands, and therefore, the sum of the components may not equal the total amount reported in thousands due to rounding.

Use of Estimates - The preparation of consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Foreign Currency Translation - The functional currencies of the Company’s foreign operations are their local currencies.

The financial statements of the Company’s foreign subsidiary have been translated into United States dollars.

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Income statement amounts have been translated using the average exchange rate for the year.

Translation adjustments are reported in other comprehensive loss in the consolidated statements of comprehensive loss and as cumulative translation adjustments in accumulated other comprehensive loss in the consolidated balance sheets.

Translation adjustments are reported in other comprehensive income (loss) in the consolidated statements of comprehensive income (loss) and as cumulative translation adjustments in accumulated other comprehensive loss in the consolidated balance sheets.

Reverse Stock Split - All share numbers, including the number of shares underlying warrants, options, and convertible debt, and per share amounts presented in these 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 were issued as a result of the reverse stock split.

The Company's authorized shares of common and preferred stock along with the par value did not change as a result of the Reverse Stock Split, and 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 consolidated statement of cash flows have been reclassified to conform to the presentation of the current year consolidated financial statements.

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 certain stockholders experiencing an adjustment of a fractional share as described above.

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

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

Going Concern

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 the Form 10-K.

During the current fiscal year, the Company has achieved operating income for the year ended 2024 , 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 the Private Placement, 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 will 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 consolidated financial statements do not necessarily purport to represent realizable or settlement values.

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

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

Restatement of Previously Issued Financial Statements

In connection with the preparation of the Company’s consolidated financial statements for the year ended December 31, 2025, the Company engaged a specialist to conduct a sales and use tax nexus study.

Management concluded that the Company had a historical state sales and use tax liability related to prior periods.

The Company is required and subject to collect and remit sales and use tax in state and local jurisdictions where it has economic and physical nexus.

During the year ended December 31, 2025, the Company determined that a sales tax liability existed and estimated a liability for sales transactions processed in jurisdictions where it had not previously reported.

The liability includes an estimate for each state, to account for any penalties and interest that is due on the base tax amount owed.

The error resulted in an understatement of accrued expenses for state and local sales tax, including related interest and penalties, in the previously issued consolidated financial statements as of and for the year ended December 31, 2024 (refer to Note 24 for quarterly 2024 and 2025 impacts).

As a result of correcting this liability, general and administrative expenses and interest expense were increased in the affected periods, resulting in a one-time, non-recurring increase in reported expenses for the year ended December 31, 2024.

This adjustment reflects the cumulative impact of previously

unrecorded sales tax, interest, and penalties.

The Company does not expect similar expense impacts to recur in future periods, as the underlying sales tax obligations have now been appropriately recognized and remediated.

Consolidated Financial Statements - Restatement Reconciliation Tables

In accordance with Accounting Standards Codification ("ASC") 250, Accounting Changes and Error Corrections , the Company has corrected this error by restating the prior period financial statements.

The cumulative effect of the correction as of January 1, 2024, was a $ 1.4 million increase to accumulated deficit, as reflected in the consolidated statement of stockholders’ equity (deficit).

The impact of the correction on the Company’s previously issued consolidated financial statements is summarized as follows:

Consolidated Balance Sheet - January 1, 2024 (opening):

(in thousands) As of January 1, 2024

Consolidated Balance Sheet As Previously Reported Adjustment As Restated

Accrued expenses $ 5,999 $ 1,367 $ 7,366

Total Liabilities 65,594 1,367 66,961

Accumulated Deficit ( 220,049 ) ( 1,367 ) ( 221,416 )

Total Stockholders' Deficit $ ( 43,178 ) $ ( 1,367 ) $ ( 44,545 )

The $ 1.4 million adjustment to accumulated deficit as of January 1, 2024, represents the cumulative effect of understated general and administrative expenses of $ 1.3 million and understated interest expense of $ 46 thousand recorded during prior years.

Consolidated Balance Sheet - December 31, 2024:

The amounts in the "As Restated" columns are the updated amounts including the impacts from the restatement.

Financial statement line items and subtotals that were not impacted by the restatement adjustments have been omitted for enhanced clarity.

(in thousands) As of December 31, 2024

Consolidated Balance Sheet Notes As Previously Reported Adjustment As Restated

Accrued expenses (i) $ 4,678 $ 3,078 $ 7,756

Total Current Liabilities 42,345 3,078 45,423

Total Liabilities 42,836 3,078 45,914

Accumulated Deficit ( 251,421 ) ( 3,078 ) ( 254,499 )

Total Stockholders' Deficit $ ( 12,717 ) $ ( 3,078 ) $ ( 15,795 )

A description of the restatement adjustments in the consolidated balance sheets is as follows:

(i) The $ 3.1 million increase in accrued expenses as of December 31, 2024 is related to the accrued sales tax, and the related interest and penalties on outstanding sales tax balances through December 31, 2024.

Consolidated Statement of Comprehensive Loss - Year Ended December 31, 2024:

(in thousands, except per share data) For the year ended December 31, 2024

Consolidated Statement of Comprehensive Loss Notes As Previously Reported Adjustment As Restated

General and administrative (i) $ 11,348 $ 1,569 $ 12,917

Total Operating Expenses 19,133 1,569 20,702

Operating Income 5,417 ( 1,569 ) 3,848

Interest expense (ii) ( 12,423 ) ( 142 ) ( 12,565 )

Total Other Expense ( 36,762 ) ( 142 ) ( 36,904 )

Net Loss Before Income Taxes ( 31,345 ) ( 1,711 ) ( 33,056 )

Net Loss ( 31,372 ) ( 1,711 ) ( 33,083 )

Total Comprehensive Loss ( 31,251 ) ( 1,711 ) ( 32,962 )

Net Loss per share:

basic and diluted $ ( 7.03 ) $ ( 0.38 ) $ ( 7.41 )

A description of the restatement adjustments in the consolidated statement of comprehensive loss is as follows:

(i) The $ 1.6 million increase in general and administrative expenses is related to the adjustment for estimated state and local sales tax expense and for the related penalties on outstanding sales tax balances for the year ended December 31, 2024.

(ii) The $ 142 thousand increase in interest expense is related to the adjustment for estimated interest on outstanding state and local sales tax balances for the year ended December 31, 2024.

Consolidated Statements of Changes in Stockholders' Equity (Deficit):

The Consolidated Statement of Changes in Stockholders' Equity (Deficit) for 2024 in the accompanying consolidated financial statements has been restated to reflect the correction of prior period errors described above.

The cumulative effect of errors originating in fiscal years prior to 2024 are presented as a discrete adjustment to the opening accumulated deficit balance as of January 1, 2024, rather than being allocated back to those individual years.

The line item "Correction of prior period error" presented in the Consolidated Statement of Changes in Stockholders' Equity (Deficit) represents the aggregate understatement of general and administrative expenses of $ 1.3 million and interest expense of $ 46 thousand originating in prior fiscal years, resulting in a cumulative increase to accumulated deficit of $ 1.4 million as of January 1, 2024 with no income tax effect due to the Company's full valuation allowance against its net deferred tax assets.

The accumulated deficit balance as of December 31, 2024, as restated, reflects both the cumulative opening adjustment of $ 1.4 million described above and the additional restatement adjustments of $ 1.7 million attributable to the understatement of general and administrative expenses and interest expense within fiscal year 2024.

The combined effect of all restatement adjustments increased the Company's accumulated deficit by $ 3.1 million in the aggregate across all affected periods.

No other components of stockholders' equity (deficit), including common stock, additional paid-in capital, or other comprehensive income (loss), were affected by this restatement.

Consolidated Statement of Cash Flows - Year Ended December 31, 2024

The correction of these errors had no effect on the total cash flows from operations, investing, or financing of the Company.

(in thousands) For the year ended December 31, 2024

Consolidated Statement of Cash Flows Notes As Previously Reported Adjustment As Restated

Net Loss $ ( 31,372 ) $ ( 1,711 ) $ ( 33,083 )

Accrued expenses and contract liabilities (i) 282 1,711 1,993

Net Cash Provided by Operating Activities $ 2,455 $ - $ 2,455

Description of the restatement adjustments in the consolidated statement of cash flows is as follows:

(i) The $ 1.7 million increase in accrued expenses for the year ended December 31, 2024 is related to the accrued sales tax, and the related interest and penalties on outstanding sales tax balances.

Income Tax Effects

The Company maintains a full valuation allowance against its net deferred tax assets.

Accordingly, the restatement adjustments resulted in no net income tax benefit or expense for any period presented, and the effective tax rate is unchanged.

Summary of Significant Accounting Policies

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

Significant estimates include the recording of allowances for 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, estimated fair value of stock-based compensation, and the estimated fair value of embedded 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, the estimated fair value of financial instruments, including warrants, and the accrual of state and local sales tax liabilities.

Cash and cash equivalents - Cash and cash equivalents consist of cash on hand and demand deposits.

These investments are highly liquid and readily convertible to known amounts of cash with insignificant risk of changes in value.

The demand deposits are highly liquid and readily convertible to known amounts of cash with insignificant risk of changes in value.

They are considered to be cash equivalents as they have an original maturity of three months or less from the date of acquisition.

The Company classifies all such highly liquid instruments that are not restricted as cash equivalents.

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The Company maintains an allowance for credit losses to provide for the estimated amount of receivables that will not be fully collected.

The allowance is based on the assessment of the following factors:

customer creditworthiness;

historical payment experience;

age of outstanding receivables.

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

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

(in millions) 2024 2023

Allowance for credit losses, January 1 $ 1.2 $ 1.0

Provision for credit losses 0.3 0.8

Write-offs ( 0.4 ) ( 0.6 )

Allowance for credit losses, December 31 $ 1.1 $ 1.2

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.

Inventory - Inventory consists of purchased medical equipment and parts and is stated at the lower of first in, first out (“FIFO”) method, or net realizable value less allowance for selling and distribution expenses.

The Company analyzes its inventory levels and for adjustments to inventory that has, or is expected to, become obsolete.

Property, plant, and equipment (PPE) - PPE is initially recorded at cost, which includes all expenditures directly attributable to bringing the asset into working condition for its intended use.

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Major improvements and enhancements that extend the useful life of PPE are capitalized, while routine repairs and maintenance are expensed as incurred.

Inventory - Inventory consists of purchased medical equipment and parts and is stated at the lower of average cost, which is valued using the first in, first out (“FIFO”) method, or net realizable value less allowance for selling and distribution expenses.

The Company analyzes its inventory levels and writes down inventory that has, or is expected to, become obsolete.

Upon disposal or retirement of an asset, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in the period of disposal.

Goodwill - Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed.

The Company accounts for goodwill under Accounting Standards Codification (ASC) Topic 350, Intangibles-

Goodwill and Other .

The Company accounts for goodwill under ASC Topic 350, Intangibles-Goodwill and Other .

The Company tests goodwill for impairment annually, or more frequently whenever events or circumstances indicate impairment may exist.

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The Company determines fair value by using a combination of comparable market values and discounted cash flows, as appropriate.

There were no impairments in 2024 and 2023.

Leases - The Company determines whether an arrangement is a lease at inception.

When lease arrangements include lease and non-lease components, the Company accounts for lease and non-lease components (e.g.

common area maintenance) separately based on their relative standalone prices.

For leases where the Company is the lessee, Right of Use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

As the Company’s leases did not provide an implicit interest rate, the Company used the equivalent borrowing rate for a secured financing with the term of equal to the remaining life of the lease at inception.

Any lease arrangements with an initial term of 12 months or less are not recorded on our consolidated balance sheets, and the Company recognizes lease costs for these lease arrangements on a straight-line basis over the lease term.

In the event a lease arrangement would provide us with options to exercise one or more renewal terms or to terminate the lease arrangement, we would include these options when we are reasonably certain to exercise them in the lease term used to establish ROU assets and lease liabilities.

None of our lease agreements include an option to purchase the leased asset, residual value guarantees, or material restrictive covenants.

The Company has other lease arrangements that are adjusted periodically based on an inflation index or rate.

The future variability of these payments and adjustments are unknown, and therefore they are not included as minimum lease payments used to determine ROU assets and lease liabilities.

Variable rental payments are recognized in the period in which the obligation is incurred.

Leases - 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 sheets;

lease expense for these leases 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.

Leases are classified as either operating or finance leases at the commencement date.

The Company does not have any finance leases as of December 31, 2025 .

Operating lease ROU assets and liabilities are presented separately on the consolidated balance sheets.

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.

The Company’s lease agreements do not contain variable lease payments;

all lease payments are fixed and included in the measurement of lease liabilities.

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

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If the classification changes because of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

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

This debt discount is reported as a reduction of the related debt liability.

Contract liabilities – Device product sales are bundled with an initial one-year warranty and the Company offers a separately priced multi-year warranty.

Because the warranty represents an obligation, revenue is deferred as a contract liability and recognized over the time that the Company satisfies its performance obligations, which is generally the warranty term.

Contract liabilities – The Company offers a separately priced extended warranty.

Because the extended multi-year warranty represents a separate performance obligation, revenue is deferred as a contract liability and recognized over the time that the Company satisfies its performance obligations, which is the warranty term.

Estimated Sales Tax Liability - The Company is evaluating a state sales tax liability analysis for states in which it has economic nexus, and collecting exemption documentation from its customers.

The Company will be subject to sales tax liabilities plus interest and penalties relating to historical activity in certain states.

The estimated liability for sales tax plus interest and penalties is recorded in accrued expenses in the consolidated balance sheets.

The liability may change from the original estimate recorded due to the Company remitting cash to the proper state tax authorities for historical sales tax and interest, inquiries from collecting jurisdictions, and settlement of outstanding amounts through programs offered through those jurisdictions.

Due to the estimates involved in the analysis, the Company expects that the estimated liability will change in the future, and may exceed the current estimate.

The Company also may be subject to examination by the relevant state tax authorities, which could affect the amount the Company ultimately pays under the accrual.

The Company recognized sales tax not collected from its customers along with penalties as general and administrative expense on the consolidated statements of comprehensive income (loss).

The Company recognized interest expense on past due amounts not remitted as interest expense on the consolidated statements of comprehensive income (loss).

Segment reporting - The Company operates as a single reporting entity and has determined that it has one reportable segment.

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The Company is engaged in the business of designing and selling medical devices.

The products and services offered by the Company are integrated and interrelated, and the Company does not have discrete financial information for different business lines that would qualify as separate operating segments.

All significant accounting policies, including those related to revenue recognition, inventory valuation, property, plant, and equipment, and other key areas, are applied consistently across the entire organization.

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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:

System Sales, Consumables and Part Sales - System sales, accessory and part sales include devices and applicators (new and refurbished).

The Company's revenue is primarily generated from the following activities:

System Sales, Consumables, Parts, and Accessories Sales - Systems, consumables, parts, and accessories sales include devices (new and refurbished), applicators, parts for the system, and accessories.

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.

The Company provides a one-year standard warranty on its systems that are assurance-type warranties under ASC 606.

Assurance-type warranties do not represent a separate performance obligation and thus the estimated costs associated with these warranties are recognized as a liability at the time the related revenue is recognized.

Extended Warranty - The Company allocates the transaction price to the extended warranty based on standalone selling price.

Warranty revenue is recognized over the time that the Company satisfies its performance obligations, which is the warranty term.

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.

The Company allocates the device sales price to the product and the embedded warranty by reference to the stand-alone extended warranty price.

Warranty revenue is recognized over the time that the Company satisfies its performance obligations, which is generally the warranty term.

Other Revenue - Other revenue primarily includes rentals, repairs, and billed freight.

The Company recognizes rental revenue ratably over the rental term, reflecting the period during which the customer has access to the system.

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.

The Company’s products are sold with standard return rights that are customary in the industry.

Historically, product returns have not been significant and have not had a material impact on the Company’s financial statements.

The Company monitors return activity on an ongoing basis and evaluates the need for a returns reserve at each reporting period.

Based on historical experience and current trends, management believes that the risk of material returns is remote.

As such, no material reserve for product returns has been recorded in the accompanying consolidated financial statements.

Shipping and handling costs - Shipping charges billed to customers are included in revenues.

Shipping and handling costs incurred have been recorded in cost of goods sold totaling $ 482 thousand and $ 484 thousand for the years ended December 31, 2024 , and 2023 , respectively.

Shipping and handling costs incurred have been recorded in cost of revenues totaling $ 590 thousand and $ 482 thousand for the years ended December 31, 2025 , and 2024 , respectively.

Research and development - Research and development costs are expensed as incurred.

Research and development costs include costs of research, engineering, and technical activities to develop a new product, researching an expanded product use or making significant improvements to existing products, including the costs of clinical development.

Stock-based compensation - The Company uses the fair value method of accounting for its employee stock option program.

Stock-based compensation expense for all stock-based payment awards is based on the estimated fair value of the award measured on the grant date.

The Company recognizes the estimated fair value of the award as compensation cost on a straight-line basis over the requisite service period of the award, which is generally the option vesting term.

The Company generally issues new shares of common stock to satisfy option and warrant exercises.

The expected life of options granted represents the period of time that options granted are expected to be outstanding and are derived from the contractual terms of the options granted calculated under the simplified method.

The risk-free rate for periods within the contractual life of the option is based on the United States Treasury yield curve in effect at the time of the grant.

The expected volatility is based on the average volatility of the common stock of the Company’s peer group.

The expected dividend yield is based on our historical dividend experience, however, since our inception, we have not declared dividends.

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 option 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 issues new shares of common stock upon the exercise of stock options, warrants, and the vesting of restricted stock units.

Comprehensive income (loss) - Comprehensive income (loss) results from the translation of the Company’s foreign entity’s financial statements from their functional currency to U.S.

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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.

The Company is currently evaluating the effects adoption of this standard will have on the financial statement disclosures.

Recently adopted accounting pronouncements

ASU 2023-09, Improvements to Income Tax Disclosures

In December 2023 , the FASB issued ASC Update No.

In December 2023, the FASB issued ASU No.

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).

ASU 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 consolidated financial statements and related disclosures.

Recently adopted accounting pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, requiring public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis.

The Company adopted ASU 2023-07 during the year ended December 31, 2024 and was retroactively applied to December 31, 2023.

See Note 22 for further detail.

Merger Agreement

On August 23, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with SEP Acquisition Corp., a Delaware corporation (“SEPA”), and SEP Acquisition Holdings Inc., a Nevada corporation and a wholly owned subsidiary of SEPA.

Pursuant to the terms of the Merger Agreement, a business combination between the Company and SEPA was to be effected.

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

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 years ended December 31, 2024 , and 2023 .

The weighted average of number of shares outstanding includes outstanding common stock and shares issuable for nominal consideration as follows:

(in thousands) December 31, 2024 December 31, 2023

Common shares 4,463 2,059

Common shares issuable assuming exercise of nominally priced warrants and options - 58

Weighted Average Shares Outstanding 4,463 2,117

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 the years ended December 31, 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.

Anti-dilutive equity securities consist of the following:

(in thousands) December 31, 2024 December 31, 2023

Common stock options 1,137 44

Restricted stock units- unvested 5 -

Common stock purchase warrants 53 3,200

Convertible notes payable, including interest - 431

This ASU primarily requires disaggregated annual information about a company's effective tax rate reconciliation and income taxes paid.

The Company adopted this ASU prospectively beginning with 2025 and the additional disclosure is included in Note 18.

Prior period disclosures have not been restated to conform to the current period presentation.

Allowance for Credit Losses

The rollforward of the allowance for credit losses is as follows:

(in thousands) Year Ended December 31, 2025 Year Ended December 31, 2024

Allowance for credit losses, December 31 $ 1,147 $ 1,237

Provision for credit losses 202 171

Recoveries - 2

Write-offs ( 84 ) ( 263 )

Allowance for credit losses, December 31 $ 1,265 $ 1,147

Inventory consisted of the following:

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Parts and accessories 135 3,763

Inventory reserve ( 213 ) $ ( 369 )

Total Inventory $ 5,934 $ 4,149

During the year ended December 31, 2025, the Company sold its PACE product line, as part of a strategic realignment to focus on core business offerings.

As a result, management conducted a review of inventory associated with this product line and determined that a significant portion was no longer saleable or recoverable.

Accordingly, the Company recorded a non-cash inventory write-off of $ 0.5 million, which is included in cost of revenues for the year ended December 31, 2025.

The write-off reflects management’s estimate of the net realizable value of the affected inventory, in accordance with the Company’s policy to state inventory at the lower of cost or net realizable value.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and impairment losses.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from 3 to 5 years.

The following table summarizes the components of property and equipment, net, and their estimated useful lives as of December 31, 2025 and 2024:

(in thousands) December 31, 2025 December 31, 2024 Estimated Useful Life (Years)

Furniture and fixtures $ 265 $ 90 3 - 5

Computer Equipment 22 - 3

Machinery and Equipment 1,020 642 3 - 5

Leasehold Improvements 1,023 31 Shorter of lease term or useful life (typically 5 )

Property and equipment 2,330 763

Accumulated depreciation ( 358 ) ( 460 )

Property and equipment, net $ 1,972 $ 303

Depreciation expense related to property and equipment for the years ended December 31, 2025 and 2024 was approximately $ 392 thousand and $ 305 thousand , respectively.

For the years ended December 31, 2025 and 2024, depreciation recognized within cost of revenues was $ 216 thousand and $ 220 thousand, respectively, and depreciation recognized within d epreciation and amortization was $ 176 thousand and $ 85 thousand, respectively, within the consolidated statements of income (loss).

Additions, Disposals, and Impairments

During 2025, the Company invested in new equipment to support increased production capacity and relocated its headquarters, resulting in additional machinery and equipment and leasehold improvements.

There were no material disposals of property and equipment during the year.

The Company recognized a $ 196 thousand loss on impairment of assets during the year ended December 31, 2025, related to the buyout of a finance lease agreement and subsequent impairment and disposal of the related assets.

There were no impairments in 2024.

Operating lease assets are excluded from property and equipment, refer to Note 7.

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 through August 30, 2030.

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.

The initial 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 received reimbursement payments from the lessor as a lease incentive.

These payments, totaling $ 0.6 million, were intended to offset certain costs associated with leasehold improvements.

Lease expense - For the year ended December 31, 2025 , the Company recognized lease expense of $ 123 thousand, related to this operating lease, which is included in general and administrative expenses in the consolidated statements of comprehensive income (loss).

As of December 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

Total Lease Payments 1,308

Imputed interest ( 297 )

Present value of lease liabilities $ 1,011

The weighted-average useful life of operating leases at December 31, 2025 , i s 4.67 years .

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

Intangible Assets

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Customer relationships $ 3,820 $ ( 2,945 ) $ 3,820 $ ( 2,400 ) 0.5

Patent 2,312 ( 535 ) 2,312 ( 413 ) 14.7

Patents 2,312 ( 657 ) 2,312 ( 535 ) 2.2

Tradenames 693 ( 197 ) 693 ( 160 ) 7.5

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Thereafter $ 1,361

Accrued Expenses

Accrued expenses consisted of the following:

Long Term Debt, Revolving Credit Facility and Senior Secured Debt

The following table summarizes outstanding debt at December 31, 2025 and December 31, 2024 :

December 31, 2025 December 31, 2024

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

Secured term loan

$ 21,562 $ ( 257 ) $ 21,305 $ - $ - $ -

Secured revolving credit facility

655 ( 68 ) 587 - - -

Senior secured debt $ - $ - $ - $ 26,898 $ ( 1,593 ) $ 25,305

Revolving Credit Facility and Senior Secured Debt - On September 25, 2025, the Company entered into a new credit agreement (the “JPM Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders.

The JPM Credit Agreement provides for a $ 23.0 million secured term loan (the “Term Loan”) with term payments through September 25, 2029, and a $ 5.0 million secured revolving credit facility (the “Revolver”) maturing September 25, 2027.

Loans under the JPM Credit Agreement accrue interest at a rate per annum equal to, at the Company’s option, either a term rate based on the secured overnight financing rate (“SOFR”) plus a margin of 3.50 %, or the CB Floating Rate (“CBFR”) plus a margin of 2.50 %.

Interest is payable in arrears, either at the end of the applicable interest period for SOFR-based loans or quarterly for CBFR-based loans.

Debt issuance costs incurred in connection with obtaining new debt facilities are capitalized and amortized over the term of the related debt.

For the term loan, these costs are presented as a direct reduction of the carrying amount of the debt.

For the revolving credit facility, such costs are presented as an asset.

Amortization of debt issuance costs is included in interest expense in the consolidated statements of comprehensive income (loss).

Principal payments on the term loan commenced on December 31, 2025, and will be made in quarterly installments of $ 1.4 million on the last day of each fiscal quarter.

The Company may prepay outstanding loans at any time without premium or penalty, subject to customary breakage costs for SOFR-based borrowings.

Retirement of Senior Secured Debt - Concurrently, on September 25, 2025, in connection with the funding of the term loan and the initial draw of $ 0.7 million under the revolver, the Company paid all amounts due under and terminated in full all commitments under the Note and Warrant Purchase and Security Agreement, dated August 6, 2020, with NH Expansion Credit Fund Holdings LP and the related senior secured debt (collectively, the “Prior Debt”).

The payoff and termination of the Prior Debt resulted in the release of all associated liens and security interests.

The full repayment of the Prior Debt was accounted for as a debt extinguishment under ASC 470-50.

The Company recognized a $ 0.5 million loss on extinguishment of debt, which included the write-off of unamortized debt issuance costs and debt discounts.

Debt Covenants and Restrictions - The JPM Credit Agreement contains customary covenants, including requirements to maintain certain financial ratios and restrictions on additional indebtedness, asset sales, and dividend payments.

As of December 31, 2025, the Company was in compliance with all covenants under the JPM Credit Agreement.

Collateral and Security - The Company’s obligations under the JPM Credit Agreement are secured by a first-priority lien on substantially all of the Company’s tangible and intangible assets, including the Company’s equity interests in subsidiaries.

Maturity Analysis - Future principal payments on the term loan and revolver are due as follows:

(in thousands) Principal Payments

2027 (including the revolver) 6,405

Total Principal Payments 22,217

Debt Issuance Costs ( 325 )

Less current maturities ( 5,750 )

Long term debt, net of current maturities and debt issuance costs $ 16,142

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

(in millions) December 31, 2025 December 31, 2024

Amortization of debt issuance costs and debt discount, included in interest expense $ 1.6 $ 2.1

Interest expense $ 5.5 $ 8.1

Accounts Payable and Accrued Expenses

Accounts payable consisted of the following:

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

Trade Accounts Payable 3,219 3,684

Total Accounts Payable $ 3,251 $ 3,728

Accrued expenses consisted of the following:

(in thousands) December 31, 2025 December 31, 2024 (As Restated)

Registration penalties $ 1,583 $ 1,583

License fees - 892

State & Local Sales Tax 3,885 2,512

State & Local Sales Tax Penalties 571 378

State & Local Sales Tax Interest 464 188

Board of directors fees 172 249

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Total Accrued Expenses $ 8,382 $ 7,756

Factoring Liabilities

In June 2021 , the Company entered into a factoring agreement with an unrelated third party, pursuant to which the Company may sell certain of its accounts receivables for 86.25 % of the value of the receivable.

Advances available under the facility are capped at the lesser of $ 3.0 million or a formula amount, as defined in the agreement.

Interest on advances is assessed at a fixed amount upon funding, which is equivalent to an annualized rate of 15.0 % for the first 30 days, and daily thereafter at an annualized rate of 14.4 %.

The agreement’s term is one month and automatically renews for additional one-month periods, unless either party provides 30 days’ notice of termination.

The accounts receivable is sold with recourse back to the Company, therefore, the Company accounts for the arrangement as traditional financing.

The factoring asset is shown within Accounts receivable on the Company's consolidated balance sheets.

(In thousands) December 31, 2024 December 31, 2023

Receivables transferred $ 16 $ ( 1,794 )

Reserve amount held 220 304

Factoring asset (liability) $ 236 $ ( 1,490 )

Senior Secured Debt

The following table summarizes outstanding senior secured debt:

December 31, 2024 December 31, 2023

(In thousands) Principal Debt

Discount Carrying

Value Principal Debt

Discount Carrying

Senior secured debt $ 26,898 $ ( 1,593 ) $ 25,305 $ 21,562 $ ( 3,284 ) $ 18,278

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 into 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.

(Celularity) among other transactions.

In February 2022 , the Company entered into a Second Amendment to Note and Warrant Purchase and Security Agreement (the “Second NWPSA”) for $ 3.0 million, for a total of $ 18.0 million outstanding.

Along with the issuance of the note, the Company also issued warrants to purchase 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 %, paid quarterly .

The principal increases at a rate of 3 % of the outstanding principal balance (PIK interest) on each quarterly interest payment date.

The original maturity date of the Senior Secured Note is September 20, 2025, and it can be prepaid.

In June 2022, the Company entered into the Third Amendment to the Note and Warrant Purchase and Security Agreement (the “Third NWPSA”).

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

In June 2023 , the Company entered into a Fourth Amendment to the NWPSA, which provides the Company an extension of the holder forbearing from exercising the remedies arising from the existing defaults to the earlier of the occurrence of an event of default and December 31, 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.

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

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

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.

The Sixth Amendment added, as of June 30, 2024, a consent fee of $ 0.7 million to the principal amount of the Senior Secured Note issued pursuant to the NWPSA.

On and after April 1, 2024, for each fiscal quarter during which any interest is payable in cash, deferred interest and default interest shall be calculated based on the principal amount of the Senior Secured Note as of the beginning of the quarter and shall include any default interest accrued to date.

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 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) 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 December 31, 2024 , the Company is no longer in default and is in compliance with all covenants in the Senior Secured Note.

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.

Twelve Months Ended

(In millions) December 31, 2024 December 31, 2023

Amortization of debt issuance costs and debt discount, included in interest expense $ 2.1 $ 1.5

Interest expense $ 8.1 $ 6.9

Accrued interest related to the Senior Secured Note was $ 0.0 million and $ 3.2 million on December 31, 2024 , and December 31, 2023 , respectively.

Interest expense on the Senior Secured Note totaled $ 8.1 million and $ 6.9 million for the years ended December 31, 2024 , and 2023 , respectively.

Promissory Notes Payable

December 31, 2023

(In thousands, except conversion price) Conversion

Price Principal Debt

Discount Conversion

Option Carrying

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

Convertible promissory note payable, related parties, in default $ 37.50 1,373 - - 1,373

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

2022 Convertible notes payable, related parties $ 15.00 450 ( 118 ) - 332

Total Convertible Promissory Notes $ 8,462 $ ( 1,353 ) $ - $ 7,109

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 (described in Note 12), 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 years ended December 31, 2024 and 2023 , totaled $ 5.0 million and $ 6.4 million, respectively.

Pursuant to the Notes, the Company promised to pay in cash and/or in shares of common stock, at a conversion price of $ 15 (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 per share;

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

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

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

In August 2023 and November 2023 , the Company utilized its election to convert the August and November issued Notes into shares of common stock upon the Notes’ maturity.

The August Notes totaling $ 16.2 million in principal and $ 2.4 million in interest were converted to 1,238,508 shares of common stock.

The November Notes totaling $ 4.0 million in principal and $ 0.6 million in interest were converted to 305,282 shares of common stock.

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 0.1 million 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 , and 2023 , the Seller Note had outstanding accrued interest of $ 0 and $ 1.5 million, respectively.

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

See Note 21 for additional disclosures regarding the settlement of the Seller Note.

The Company evaluated embedded conversion features within the convertible promissory note and determined that the conversion feature does not require to be bifurcated.

Upon adoption of ASU 2020-06 effective January 1, 2021, the convertible promissory note is accounted for as a single liability due to the elimination of the beneficial conversion feature accounting model.

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 was in default.

As of December 31, 2024 , and 2023 , the note had outstanding accrued interest of $ 0 and $ 444 thousand, respectively.

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.

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 10.

Interest expense for the year ended December 31, 2024 , totaled $ 0.1 million.

The Company and the Purchasers also entered into a side letter pursuant to which the parties agreed that upon the Maturity Date, or upon a fundamental transaction as defined by the ABS Promissory Notes, the Company will issue each Purchaser a Future Advance Convertible Promissory Note with the same principal amount as the principal amount of such Purchasers’ ABS Promissory Notes, plus any accrued and unpaid interest and two Common Stock Purchase Warrants, substantially in the forms of the Notes and Common Stock Purchase Warrants disclosed in Note 11.

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 11.

The Company recorded a net loss on extinguishment of debt totaling $ 0.1 million for the twelve months ended December 31, 2024.

December 31, 2023

(In thousands) Principal Debt

Discount Embedded

Derivative Carrying

ABS promissory notes $ 3,122 $ ( 53 ) $ 48 $ 3,117

ABS promissory notes, related parties 1,462 ( 49 ) 45 1,458

Total ABS Promissory Notes $ 4,584 $ ( 102 ) $ 93 $ 4,575

Fair Value Measurements

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

As of December 31, 2025 , the fair value of the warrant liability was not significant.

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

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Total Fair Value $ 8,107 $ - $ - $ 8,107

Fair value measurement at December 31, 2023

(in thousands) Fair value Quoted

(Level 1) Significant

(Level 2) Significant

Warrant liability $ 14,447 - - $ 14,447

Conversion option 93 - - 93

Total Fair Value $ 14,540 $ - $ - $ 14,540

There were no transfers between Level 1, 2, or 3, during the years ended December 31, 2025 , and 2024 .

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Warrant Liability

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

The Company’s initial valuation of warrant liability from the June 2024 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 would 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 then-current probability of the Merger closing.

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

The Company’s initial valuation of warrant liability from the June 2024 financing was valued using a probability weighted expected value considering the proposed reverse stock split of the Company's common stock (the "Reverse Stock Split") that would 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).

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

December 31, 2024

December 31, 2025 December 31, 2024

Weighted average expected life in years 0.68 0.85

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Issuance of warrants classified as liabilities 781 4.55 3,557

Exercised ( 107 ) 5.73 ( 613 )

Converted to equity ( 3,883 ) 10.50 ( 40,772 )

Forfeited or expired 5 - -

Change in fair value - - 31,488

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

Expired ( 388 )

Change in fair value - ( 8,107 )

Balance December 31, 2025 2 $ 0.26 $ -

A summary of the warrant activity is as follows:

(in thousands, except per share data) Warrants

Outstanding Weighted Average Exercise Price Weighted Average Remaining Life (years)

Warrants Outstanding at December 31, 2023 3,594 $ 22.50 4.01

Issuance of warrants classified as liabilities 781 20.06

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Converted to equity ( 3,883 ) 20.06

Forfeited or expired 5 -

Change in fair value -

Balance December 31, 2024 53 $ 152.96 $ 8,107

Warrants Outstanding at December 31, 2024 390 4.05 0.86

Expired ( 388 )

Change in fair value -

Warrants Outstanding at December 31, 2025 2 74.25 0.68

Embedded Conversion Option

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Significant inputs under the Note and Warrant Exchange included 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).

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 (estimated by February 29, 2024), and the probability of the then-current Merger closing ( 90 % probability).

In October 2024, the Company exchanged all outstanding convertible notes for Common Stock as part of the Note and Warrant Exchange, see Note 13.

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Issuance of Convertible Notes 8

Change in fair value ( 1,728 )

Balance December 31, 2023 $ 93

Issuance of Convertible Notes 8

Settlement of convertible notes ( 26 )

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Total Contract Liabilities $ 1,089 $ 493

Common Stock Purchase Warrants

A summary of the warrant activity is as follows:

(in thousands, except per share data) Warrants Weighted

Exercise Price Weighted

Warrants at December 31, 2022 3,221 $ 26.25 3.55

Issuances 412 22.50

Forfeited or expired ( 376 ) -

Outstanding at December 31, 2023 3,257 $ 22.50 4.01

Issuances 781 20.06

Exercised ( 107 ) 29.45

Converted ( 3,883 ) 20.06

Forfeited or expired 5 -

Outstanding at December 31, 2024 53 $ 4.05 0.86

As of December 31, 2025, the Company expects to recognize revenue from its contract liabilities as follows:

(in thousands) Amount

2028 and thereafter 206

Total Contract Liabilities $ 1,089

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 years ended December 31, 2025 and 2024 totaled $ 0 and $ 5.0 million, respectively.

Pursuant to the Notes, the Company promised to pay in cash and/or in shares of common stock, at a conversion price of $ 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 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 94,130 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.

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 .

In December 2022 , the Company’s stockholders approved an amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of common stock from 800,000,000 to 2,500,000,000 .

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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 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.

Concentration of Credit Risk and Limited Suppliers

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

There were no accounts receivable concentrations on December 31, 2024 , or 2023 .

Cash equivalents are financial instruments that potentially subject the Company to concentration of credit risk.

As of December 31, 2024, the Company's cash equivalent securities were largely comprised of money market funds.

Company’s cash accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per financial institution in the United States.

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

The percentage of purchases from major vendors of the Company that exceeded ten percent of total purchases were as follows:

Year ended December 31,

Vendor A 26 % 19 %

Vendor B 0 % 19 %

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

The disaggregation of revenue is based on type.

The following table presents revenue from contracts with customers:

Year ended December 31, 2024 Year ended December 31, 2023

United States International Total United States International Total

Consumables and parts revenue $ 21,024 $ 112 $ 21,136 $ 13,143 $ 79 $ 13,222

(in thousands) Year ended December 31, 2025 Year ended December 31, 2024

Consumables, parts, and accessories revenue $ 25,804 $ 21,116

System revenue 17,849 11,072

License fees and other - 40 40 41 35 76

Product Revenue $ 32,096 $ 235 $ 32,331 $ 19,025 $ 230 $ 19,255

Rental Income 303 - 303 1,143 - 1,143

Extended warranty 172 95

License fees 20 45

Other 206 306

Total Revenue $ 44,051 $ 32,634

Stock-Based Compensation

On October 22, 2024, the Company granted stock options under the Company’s 2024 Equity Incentive Plan (the “2024 Plan”).

The 2024 Plan authorizes the issuance of 1,376,556 shares.

Stock options issued under the 2024 Plan generally vest over a three-year period, expire 10 years after the grant date, and are forfeited upon separation from the Company.

Shares vest over a 3 year period.

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.

On August 19, 2025, at our annual meeting of stockholders, an amendment to the 2024 Plan was approved, authorizing an additional 500,000 shares of common stock authorized for issuance under the 2024 Plan.

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 generally 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 2024 Plan and the individual award agreements.

During the fiscal year ended December 31, 2025 , the Company granted performance- and market-based option awards to three employees which provide for the vesting of up to 65,500 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), (d) the refinancing or repayment of certain debt obligations ( 10,000 shares), and (e) various operations related milestones ( 10,000 shares).

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

During the fiscal year ended December 31, 2025 , 5,500 shares subject to performance conditions ( 2,750 shares under criterion (a) and 2,750 shares under criterion (b)) were forfeited due to the termination of one of the employees and 5,000 shares under criterion (e) were forfeited due to the milestone deadline not being achieved.

As a result, the maximum number of shares eligible to vest under these awards was reduced to 55,000 shares as of December 31, 2025 .

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

The debt refinancing condition, the listing on Nasdaq and half of the various operations related milestones were achieved during the fiscal year ended December 31, 2025 , and the related compensation expense was recognized in the year.

The market condition has not been met as of December 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.

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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 year ended December 31, 2024.

Total unrecognized compensation cost related to equity awards as of December 31, 2024 was $ 8.3 million and is expected to be recognized over the next 3 years.

The following table presents stock compensation expense recognized by the Company for the fiscal years ended December 31, 2025 and 2024.

Total unrecognized compensation cost related to equity awards as of December 31, 2025 was $ 10.3 million and is expected to be recognized over a weighted average period of 2.25 years.

Total unrecognized compensation cost related to equity awards as of December 31, 2024 was $ 8.3 million and was expected to be recognized over a period of 3 years.

All stock compensation expense from the Stock Incentive Plan was recognized prior to 2024.

The first grants from the 2024 Plan were issued in the three months ended December 31, 2024.

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

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(in thousands) 2025 2024

Cost of revenues $ 52 $ -

General and administrative 3,929 1,514

Selling and marketing 826 -

Research and development 43 -

Total expense $ 4,850 $ 1,514

The following table presents a summary of stock options award activity during the year ended December 31, 2024:

The following table presents a summary of stock option activity:

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

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Granted 1,119 - 9.8 9,253

Exercised - - – -

Forfeited ( 25 ) - – -

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Exercisable, December 31, 2024 117 $ 28.71 6.8 $ 641

Granted 541 31.07 7.7 617

Exercised ( 38 ) 14.67 - 575

Forfeited ( 268 ) 18.42 - -

Outstanding, December 31, 2025 1,372 $ 21.46 8.4 $ 13,351

Exercisable, December 31, 2025 493 $ 20.08 7.9 $ 5,581

Valuation Information for Stock-Based Compensation

The fair value of each stock option award during the year ended December 31, 2024 was based on the closing price of the Company's common stock on the date of the grant.

The fair value of each stock option award during the fiscal year ended December 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.

Treasury zero-coupon

issue with the remaining term equal to the expected term.

The expected holding period was calculated using the simplified method.

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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 year ended December 31, 2024 are summarized in the table below:

The weighted average assumptions used in the Black-Scholes option pricing model in valuing stock options granted in the years ended December 31, 2025 and December 31, 2024 are summarized in the table below:

Year Ended December 31,

Fair value at grant date 31.13 14.54

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Risk-free interest rate 4.0 % 4.1 %

Expected holding period, in years 6.05

Expected holding period, in years 5.2 years 6.1 years

Dividend yield - -

The following table presents a summary of restricted stock unit activity during the year ended December 31, 2024:

Number of Options (in thousands) Weighted Average Grant Date Fair Price

Unvested 5 $ 13.03

Vested 9 13.03

Total December 31, 2024 14 $ 13.03

Net Income (Loss) per Share

Basic net income (loss) per share is computed based on the weighted average number of shares outstanding during the applicable period, including nominally priced warrants.

Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding.

Diluted net income (loss) per share is calculated based on the weighted average of shares of common stock outstanding and the number of additional shares that would have been outstanding if the potentially dilutive securities had been issued.

The Company uses the treasury stock method to calculate the number of shares for the nominally priced warrants.

(in thousands, except per share data)

December 31, 2025 December 31, 2024 (As Restated)

Basic net income (loss) available to stockholders $ 11,813 $ ( 33,083 )

Change in fair value of warrants ( 8,107 ) -

Diluted net income (loss) available to stockholders 3,706 ( 33,083 )

Weighted average common shares outstanding - Basic 8,564 4,463

Dilutive effect of stock options 298 -

Dilutive effect of warrants 221 -

Weighted average common shares outstanding - Diluted 9,083 4,463

Net income (loss) per share:

Basic $ 1.38 $ ( 7.41 )

Diluted $ 0.41 $ ( 7.41 )

To the extent that securities are “anti-dilutive,” they are excluded from the calculation of diluted net loss per share.

As a result of the net loss

for the year ended December 31, 2024 , all potentially dilutive shares in the period were anti-dilutive and therefore excluded from the computation of diluted net loss per share.

Anti-dilutive equity securities consist of the following:

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

Common stock options $ 340 $ 1,137

Restricted stock units- unvested - 5

Common stock purchase warrants 2 390

$ 342 $ 1,532

The Company files income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions.

The Company is subject to United States federal and state income tax examinations by tax authorities for any years that have net operating losses open until the net operating losses are used.

The components of the net loss before income taxes are as follows:

The components of the net income (loss) before income taxes are as follows:

Year ended December 31,

(In thousands) 2025 2024

(As restated)

Domestic $ 11,899 $ ( 33,030 )

Foreign - ( 26 )

Net loss before income taxes $ ( 31,345 ) $ ( 25,803 )

Net income (loss) before income taxes $ 11,899 $ ( 33,056 )

In accordance with ASC Topic 740, Income Taxes (“ASC 740”), the Company accounts for income taxes utilizing the asset and liability method.

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(In thousands) December 31, 2025 December 31, 2024

(As restated)

Federal $ 40 $ -

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Federal $ - $ -

State ( 328 ) ( 459 )

Foreign ( 10 ) ( 3 )

Change in valuation allowance 1,495 4,026

Deferred Tax Provision $ - $ -

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The Company does not anticipate any impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”) and as such, the Company has not recorded any impact associated with either GILTI or BEAT.

The income tax provision (benefit) amounts differ from the amounts computed by applying the United States Federal statutory income tax rate of 21% for the years ended December 31, 2024 , and 2023 .

Adjustments to determine income tax expense are as follow:

(In thousands) Years ended December 31,

A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S.

federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:

(In thousands) For the year ended December 31, 2025

Amount Percent

Tax at United States statutory rate $ 2,499 21.0 %

State and local income taxes 1

Changes in valuation allowance ( 10,888 ) ( 91.5 )

Nontaxable and nondeductible items:

Stock-based compensation 722 6.9

Warrant revaluation ( 1,702 ) ( 14.3 )

Net operating losses limited under section 382 9,282 77.9

Other 137 0.4

Effective Tax Rate $ 86 0.7 %

1 The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include Texas.

A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S.

federal income tax rate to income before income taxes for the year prior to adoption of ASU 2023-09 is as follows:

(In thousands) For the year ended December 31, 2024

(As restated)

Tax benefit at statutory rate $ ( 6,942 )

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Change in valuation allowance ( 1,177 )

Registration penalties - -

Accrual to Return 1,264 -

Other 215 ( 332 )

Income Tax Expense $ 27 $ 4

Warrant revaluation 1,264

Effective Tax Rate $ 27

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

(In thousands) December 31, 2025 December 31, 2024

(As restated)

Deferred Tax Assets

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Accrued employee compensation 167 212

Capitalized equity costs - 235

Capitalized research and development 4 340

Sales tax accrual 942 600

Net change in reserve accounts 771 819

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Deferred Tax Liabilities

Accrued miscellaneous ( 2 ) -

Right-of-use asset ( 84 ) ( 95 )

Depreciation ( 431 ) -

Reserve for credit losses - ( 20 )

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Total $ - $ -

The Tax Cuts and Jobs Act (“TCJA”) requires taxpayers to capitalize and amortize research and development (“R&D”) expenditures under section 174 for tax years beginning after December 31, 2021 .

This rule became effective for the Company during 2022 and resulted in capitalized R&D costs of $ 2.2 million as of December 31, 2024 .

The Company will amortize these costs for tax purposes over five years for R&D performed in the U.S.

and over 15 years for R&D performed outside the U.S.

In 2024 , all R&D was performed in the U.S.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

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ASC 740 requires that a valuation allowance be established when it is “more likely than not” that all, or a portion of, deferred tax assets will not be realized.

A review of all available positive and negative evidence needs to be considered,

including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies.

A review of all available positive and negative evidence needs to be considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies.

After consideration of all the information available, management believes that uncertainty exists with respect to future realization of its deferred tax assets and has, therefore, established a full valuation allowance as of December 31, 2025, and 2024.

The Company’s ability to use its net operating loss carryforwards could be limited and subject to annual limitations.

Since a full analysis under Section 382 of the Internal Revenue Code has not been performed, the Company may realize a “more than 50% change in ownership” which could limit its ability to use its net operating loss carryforwards accumulated to date to reduce future taxable income and tax liabilities.

Additionally, because United States tax laws limit the time during which net operating loss carryforwards may be applied against future taxable income and tax liabilities, the Company may not be able to take advantage of all or portions of its net operating loss carryforwards for Federal income tax purposes.

The Federal net operating loss carryforwards of approximately $ 77.9 million from years ended December 31, 2005, through December 31, 2017 , will begin to expire in 2025 .

Federal and state tax laws impose significant restrictions on the utilization of net operating loss carryforwards in the event of a change in ownership of the Company, as defined by Internal Revenue Code Section 382 (“Section 382”).

The Company has completed a formal Section 382 analysis and determined a change in control occurred on October 18, 2024.

The Company is subject to a federal Section 382 annual limitation of $ 4 million annually for the five years after the change in control, and a $ 1.3 million annual limitation thereafter.

Deferred tax assets totaling $ 44.2 million are expected to expire unutilized and have been adjusted.

The Federal net operating loss carryforwards of approximately $ 27.6 million incurred from the years ended December 31, 2005, through December 31, 2017, will begin to expire in 2026.

The Federal net operating loss carryforward for the years ended December 31, 2018, through 2025 of approximately $ 94.8 million will not expire.

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For the years ended December 31, 2025, and 2024, the Company did not have any amounts recorded for interest and penalties.

The Company is subject to taxation in the United States, various state jurisdictions and Switzerland.

The Company is subject to income tax examination by U.S.

and state tax authorities for the year ended December 31, 2021 and forward and foreign tax authorities for the year ended December 31, 2020 and forward.

However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the net operating losses utilized in open tax years.

The amount of cash income taxes paid by the Company were as follows:

(In thousands) For the year ended December 31, 2025

State and local

All other states 2

The total cash income taxes paid by the Company during the year ended December 31, 2024 was $ 4 thousand.

Concentration of Credit Risk and Limited Suppliers

Major customers are those whose accounts receivable or sales individually comprise ten percent or more of the Company’s total trade receivables or total sales, respectively.

As of December 31, 2025 , the Company had the following concentrations

of accounts receivable attributable to individual customers.

There were no sales concentrations as of December 31, 2025, and there were no sales or trade receivable concentrations as of December 31, 2024 .

(in thousands) December 31, 2025 % of Total AR

Customer A $ 829 12 %

As of December 31, 2025, one customer accounted for more than 10% of total accounts receivable.

The Company does not believe that the loss of this customer would have a material adverse effect on its financial position, results of operations, or cash flows.

Cash and Cash Equivalents

Cash equivalents are financial instruments that potentially subject the Company to concentration of credit risk.

As of December 31, 2025, the Company's cash equivalent securities were largely comprised of money market funds.

The Company’s cash accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per financial institution in the United States.

Limited Suppliers

The Company currently purchases most of its product component materials from single suppliers and all of its finished product is assembled by a single supplier.

The loss of any of these suppliers could result in a disruption in our production.

The percentage of purchases from major vendors of the Company that represented ten percent or more of total purchases were as follows:

Year ended December 31,

Vendor A 26 % 26 %

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 fiscal year ended December 31, 2024.

The Company granted the Licensee an exclusive license to the patents and an option to acquire the patents for a period of 3 years following the effective date of the Agreement.

Upon acquisition of the patents, the Licensee will distribute any resulting proceeds to the Company, including but not limited to any royalties, license fees, settlement payments, or other proceeds generated from the licensing or assertion of the patents, in accordance with a revenue sharing agreement.

On July 23, 2025, the Licensee exercised the acquisition option.

In connection with such exercise, the Licensee and the Company executed a patent purchase agreement, and the Licensee made a $ 5.0 million cash payment to Sanuwave, Inc.

on August 21, 2025.

At the time of the Patent License and through the Licensee's exercise of the acquisition option, the Company did not have any amounts capitalized related to the underlying portfolio of patents, nor was any write-down of assets recorded upon executing the Patent License or acquisition option.

Accordingly, the Company recognized a $ 5.0 million gain on sale of patents within o ther income (expense) on the consolidated statements of comprehensive income (loss) for the fiscal year ended December 31, 2025 .

The Company does not have any ongoing obligations associated with the patent license.

Additional proceeds may be provided to the Company under certain conditions of the agreement with the Licensee.

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.

Commitments and Contingencies

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However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties.

The Companies expenses legal fees in the period in which they are occurred.

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

In August 2023, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with SEP Acquisition Corp., a Delaware corporation ("SEPA"), and SEP Acquisition Holdings, Inc., a Nevada corporation and a whole owned subsidiary of SEPA.

Pursuant to the terms of the Merger Agreement, a business combination between the Company and SEPA was to be effected.

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 closure of the Merger as disclosed in Note 4.

The Company agreed to a contingent payment of $ 0.7 million upon the closure of the Merger.

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

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In May 2022, the Company received notification alleging that it is not in compliance with the license agreement with Celularity entered in connection with the acquisition of the UltraMIST assets.

The Company has settled this dispute in June 2024 for a cash payment 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.

Lease Commitments

As of December 31, 2024 , the maturities of the Company’s operating and financing leases, which have initial or remaining lease terms more than one year, consist of the following:

(In thousands) Operating

Leases Finance

Year ended December 31,

2025 $ 122 $ 179

Total Lease Payments $ 248 $ 223

The Company settled this dispute in June 2024 for a cash payment 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.

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

The CODM assesses performance for the reportable segment and decides how to allocate resources primarily based on net income (loss) that is also reported on the consolidated statements of comprehensive income (loss).

The measure of segment assets is reported on the 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.

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

The CODM also uses net income (loss) 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.

Management has determined that Morgan Frank, Chief Executive Officer, is the CODM.

The following table sets forth our consolidated statement of operations used by the CODM:

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(in thousands) 2025 2024

(As Restated)

Revenue $ 44,051 $ 32,634

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Depreciation and amortization 880 789

Operating income (loss) 5,417 ( 540 )

Other expense, net ( 36,762 ) ( 25,263 )

Operating Income 4,945 3,848

Total Other Income (Expense) 6,954 ( 36,904 )

Income tax expense 86 27

Net Income (Loss) $ 11,813 $ ( 33,083 )

Going Concern

The accompanying consolidated 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.

In prior periods, the Company experienced recurring net losses, accumulated deficits, negative working capital, and significant debt maturities, which raised substantial doubt about its ability to continue as a going concern.

During the third quarter of fiscal year 2025, management executed a comprehensive debt refinancing with a new lender, which extended the maturity of the Company’s principal debt obligations from the secured term loan and provided the option for additional liquidity to support ongoing operations through a s ecured revolving credit facility .

In addition, the Company achieved positive operating income for the fiscal years ended December 31, 2025 , and 2024, reflecting the impact of strategic initiatives focused on revenue growth and operational efficiency.

As a result of these actions, management has evaluated the Company’s financial condition and cash flow requirements for the twelve months following the issuance of these consolidated financial statements.

Based on the debt refinancing, achievement of operating income, and expected cash inflows from forecasted operations for at least the next 12 months, management believes the Company has sufficient resources to meet its obligations as they become due and to continue its operations for the foreseeable future.

Accordingly, when considering all conditions and factors, management concluded that the substantial doubt about the Company's ability to continue as a going concern was alleviated as of the third quarter of fiscal year 2025.

Management will continue to monitor the Company’s financial position, operating results, and compliance with debt covenants.

Restatement of 2025 and 2024 Quarterly Financial Information (Unaudited):

In connection with the restatement described herein, the Company's previously issued unaudited condensed consolidated financial statements included in the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2025, June 30, 2025, and September 30, 2025, and for the quarters ended March 31,2024, June 30, 2024, and September 30, 2024, should no longer be relied upon.

The following tables present the effects of the restatement on the Company's previously reported:

unaudited condensed consolidated statements of comprehensive income (loss) for the three months ended March 31, 2025 and 2024, the three and six months ended June 30, 2025 and 2024, the three and nine months ended September 30, 2025 and 2024;

and the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2025 and 2024, the six months ended June 30, 2025 and 2024, and the nine months ended September 30, 2025 and 2024.

The restatement impacts net income (loss) and accumulated other comprehensive loss in the Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) in the periods presented.

In addition to the errors noted in Note 2 related to sales tax liabilities, the Company identified that revenue was overstated and contract liabilities were understated for the three months ended March 31, 2025, the three and six months ended June 30, 2025 and three and nine months ended September 30, 2025.

The errors related to the Company's accounting for extended warranty contracts sold at a discount in conjunction with its products.

When extended warranties were sold at a discounted price, the Company did not allocate the discount proportionally across all performance obligations in the contract in accordance with ASC 606, Revenue from Contracts with Customers .

Specifically, ASC 606 requires that a discount present in a contract be allocated proportionally across all performance obligations based on their relative standalone selling prices, unless specific criteria are met to allocate the discount entirely to one or more performance obligations.

The Company incorrectly absorbed the entire discount within the extended warranty performance obligation rather than allocating a proportionate share of the discount to the other performance obligations in the contract.

This caused the transaction price allocated to the extended warranty to be understated and the transaction price allocated to the other performance obligations to be overstated, resulting in revenue being recognized on the other performance obligations in excess of the amounts that should have been allocated to them.

Consequently, revenue was overstated and contract liabilities associated with the extended warranty was understated for the three months ended March 31, 2025, the three and six months ended June 30, 2025 and three and nine months ended September 30, 2025

Restated 2025 Quarterly Financial Information (Unaudited) - Reconciliation Tables

The following tables presents the impact of the restatement on the Company’s previously issued Unaudited Condensed Consolidated Balance Sheets as of March 31, 2025, June 30, 2025, and September 30, 2025.

(in thousands) As of March 31, 2025

Unaudited Condensed Consolidated Balance Sheet Notes As Previously Reported Adjustment As Restated

Accrued expenses (i) $ 3,581 $ 3,511 $ 7,092

Current portion of contract liabilities (ii) 193 1 194

Total Current Liabilities 47,268 3,512 50,780

Contract liabilities, less current portion (iii) 311 8 319

Total Liabilities 48,147 3,520 51,667

Accumulated Deficit ( 257,097 ) ( 3,520 ) ( 260,617 )

Total Stockholders' Deficit $ ( 17,292 ) $ ( 3,520 ) $ ( 20,812 )

As of June 30, 2025

Unaudited Condensed Consolidated Balance Sheet Notes As Previously Reported Adjustment As Restated

Accrued expenses (i) $ 3,289 $ 3,905 $ 7,194

Current portion of contract liabilities (ii) 221 10 231

Total Current Liabilities 46,501 3,915 50,416

Contract liabilities, less current portion (iii) 301 109 410

Total Liabilities 47,821 4,024 51,845

Accumulated Deficit ( 256,042 ) ( 4,024 ) ( 260,066 )

Total Stockholders' Deficit $ ( 14,775 ) $ ( 4,024 ) $ ( 18,799 )

As of September 30, 2025

Unaudited Condensed Consolidated Balance Sheet Notes As Previously Reported Adjustment As Restated

Accrued expenses (i) $ 3,586 $ 4,361 $ 7,947

Current portion of contract liabilities (ii) 252 47 299

Total Current Liabilities 19,577 4,408 23,985

Contract liabilities, less current portion (iii) 322 253 575

Total Liabilities 38,530 4,661 43,191

Accumulated Deficit ( 245,717 ) ( 4,661 ) ( 250,378 )

Total Stockholders' Deficit $ ( 2,931 ) $ ( 4,661 ) $ ( 7,592 )

A description of the restatement adjustments in the consolidated balance sheets is as follows:

(i) The $ 3.5 million, $ 3.9 million, and $ 4.4 million increases in accrued expenses as of March 31, 2025, June 30, 2025, and September 30, 2025, respectively, are related to the accrued sales tax, and the related interest and penalties on outstanding sales tax balances through each reporting date.

(ii) The $ 1 thousand, $ 10 thousand, and $ 47 thousand increases in the current portion of contract liabilities as of March 31, 2025, June 30, 2025, and September 30, 2025, respectively, are related to the adjustment to contract liabilities balances at each reporting date.

(iii) The $ 8 thousand, $ 109 thousand, and $ 253 thousand increases in the non-current portion of contract liabilities as of March 31, 2025, June 30, 2025, and September 30, 2025, respectively, are related to the adjustments to contract liabilities associated with extended warranties.

The following table presents the impact of the restatement on the Company’s previously issued Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2025, the three and six months ended June 30, 2025, and the three and nine months ended September 30, 2025.

(in thousands, except per share data) For the three months ended March 31, 2025

Unaudited Condensed Consolidated Statement of Comprehensive Loss Notes As Previously Reported Adjustment As Restated

Revenue (i) $ 9,342 $ ( 9 ) $ 9,333

Gross Margin 7,384 ( 9 ) 7,375

General and administrative (ii) 4,467 376 4,843

Total Operating Expenses 6,398 376 6,774

Operating Income (Loss) 986 ( 385 ) 601

Interest expense (iii) ( 1,852 ) ( 57 ) ( 1,909 )

Total Other Expense ( 6,662 ) ( 57 ) ( 6,719 )

Net Loss ( 5,676 ) ( 442 ) ( 6,118 )

License and Option Agreement

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 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.

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 - 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.

Subsequent Event

On March 3, 2025, the Company received a letter from the Listing Qualifications Staff of the Nasdaq Stock Market LLC ('Nasdaq") approving the uplisting of the Company's common stock.

Trading of the Company's common stock on Nasdaq commenced on March 7, 2025 under the ticker symbol "SNWV".

Total Comprehensive Loss ( 5,676 ) ( 442 ) ( 6,118 )

Net Loss per share:

basic and diluted $ ( 0.66 ) $ ( 0.05 ) $ ( 0.72 )

(in thousands, except per share data) For the three months ended June 30, 2025 For the six months ended June 30, 2025

Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss) Notes As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Revenue (i) $ 10,164 $ ( 110 ) $ 10,054 $ 19,506 $ ( 119 ) $ 19,387

Gross Margin 7,958 ( 110 ) 7,848 15,342 ( 119 ) 15,223

General and administrative (ii) 4,039 329 4,368 8,506 705 9,211

Total Operating Expenses 6,081 329 6,410 12,479 705 13,184

Operating Income 1,877 ( 439 ) 1,438 2,863 ( 824 ) 2,039

Interest expense (iii) ( 1,874 ) ( 65 ) ( 1,939 ) ( 3,726 ) ( 122 ) ( 3,848 )

Total Other Expense ( 822 ) ( 65 ) ( 887 ) ( 7,484 ) ( 122 ) ( 7,606 )

Net Income (Loss) 1,055 ( 504 ) 551 ( 4,621 ) ( 946 ) ( 5,567 )

Total Comprehensive Income (Loss) 1,055 ( 504 ) 551 ( 4,621 ) ( 946 ) ( 5,567 )

Net Income (Loss) per share:

basic $ 0.12 $ ( 0.06 ) $ 0.06 $ ( 0.54 ) $ ( 0.11 ) $ ( 0.65 )

Net Income (Loss) per share:

diluted $ 0.01 $ ( 0.05 ) $ ( 0.04 ) $ ( 0.54 ) $ ( 0.11 ) $ ( 0.65 )

(in thousands, except per share data) For the three months ended September 30, 2025 For the nine months ended September 30, 2025

Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss) Notes As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Revenue (i) $ 11,451 $ ( 181 ) $ 11,270 $ 30,957 $ ( 300 ) $ 30,657

Gross Margin 8,925 ( 181 ) 8,744 24,267 ( 300 ) 23,967

General and administrative (ii) 4,810 383 5,193 13,316 1,088 14,404

Total Operating Expenses 7,458 383 7,841 19,937 1,088 21,025

Operating Income (Loss) 1,467 ( 564 ) 903 4,330 ( 1,388 ) 2,942

Interest expense (iii) ( 1,722 ) ( 73 ) ( 1,795 ) ( 5,448 ) ( 195 ) ( 5,643 )

Total Other Expense 8,858 ( 73 ) 8,785 1,374 ( 195 ) 1,179

Net Income (Loss) 10,325 ( 637 ) 9,688 5,704 ( 1,583 ) 4,121

Total Comprehensive Income (Loss) 10,325 ( 637 ) 9,688 5,704 ( 1,583 ) 4,121

Net Income (Loss) per share:

basic $ 1.20 $ ( 0.07 ) $ 1.13 $ 0.67 $ ( 0.18 ) $ 0.48

Net Income (Loss) per share:

diluted $ 0.46 $ ( 0.07 ) $ 0.39 $ 0.38 $ ( 0.17 ) $ 0.21

A description of the restatement adjustments in the consolidated statements of comprehensive income (loss) is as follows:

(i) The $ 9 thousand decrease in revenue for the three months ended March 31, 2025, the $ 110 thousand decrease for the three months ended June 30, 2025, the $ 119 thousand decrease for the six months ended June 30, 2025, the $ 181 thousand decrease for the three months ended September 30, 2025, and the $ 300 thousand decrease for the nine months ended September 30, 2025, are related to the adjustment to revenue associated with extended warranties.

(ii) The $ 0.4 million increase in general and administrative expenses for the three months ended March 31, 2025, the $ 0.3 million increase for the three months ended June 30, 2025, the $ 0.7 million increase for the six months ended June 30, 2025, the $ 0.4 million increase for the three months ended September 30, 2025, and the $ 1.1 million increase for the nine months ended September 30, 2025, are related to the adjustment for estimated state and local sales tax expense and for the related penalties on outstanding sales tax balances.

(iii) The $ 57 thousand increase in interest expense for the three months ended March 31, 2025, the $ 65 thousand increase for the three months ended June 30, 2025, the $ 122 thousand increase for the six months ended June 30, 2025, the $ 73 thousand increase for the three months ended September 30, 2025, and the $ 195 thousand increase for the nine months ended September 30, 2025, are related to the adjustment for estimated interest on outstanding state and local sales tax balances.

The tables below present the previously reported and restated cash flow data for the three months ended March 31, 2025, the six months ended June 30, 2025, and the nine months ended September 30, 2025.

The restated amounts reflect the correction of the error described above.

(in thousands) For the three months ended March 31, 2025

Unaudited Condensed Consolidated Statement of Cash Flows Notes As Previously Reported Adjustment As Restated

Net Loss $ ( 5,676 ) $ ( 442 ) $ ( 6,118 )

Accrued expenses and Contract liabilities (i) ( 774 ) 442 ( 332 )

Net Cash Used in Operating Activities $ ( 1,517 ) $ - $ ( 1,517 )

For the six months ended June 30, 2025

Unaudited Condensed Consolidated Statement of Cash Flows Notes As Previously Reported Adjustment As Restated

Net Loss $ ( 4,621 ) $ ( 946 ) $ ( 5,567 )

Accrued expenses and Contract liabilities (i) ( 746 ) 946 200

Net Cash Used in Operating Activities $ ( 524 ) $ - $ ( 524 )

For the nine months ended September 30, 2025

Unaudited Condensed Consolidated Statement of Cash Flows Notes As Previously Reported Adjustment As Restated

Net Income (Loss) $ 5,704 $ ( 1,583 ) $ 4,121

Accrued expenses and Contract liabilities (i) ( 294 ) 1,583 1,289

Net Cash Provided by Operating Activities $ 557 $ - $ 557

A description of the restatement adjustments in the consolidated statements of cash flows is as follows:

(i) The $ 0.4 million, $ 0.9 million, and $ 1.6 million increases in accrued expenses for the three months ended March 31, 2025, the six months ended June 30, 2025, and the nine months ended September 30, 2025, respectively, are related to accrued sales tax, and the related interest and penalties on outstanding sales tax balances, and the adjustments to contract liabilities associated with extended warranties.

Restated 2024 Quarterly Financial Information (Unaudited) - Reconciliation Tables

The following table presents the impact of the restatement on the Company’s previously issued Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2024, the three and six months ended June 30, 2024, and the three and nine months ended September 30, 2024.

(in thousands, except per share data) For the three months ended March 31, 2024

Unaudited Condensed Consolidated Statement of Comprehensive Loss Notes As Previously Reported Adjustment As Restated

General and administrative (i) $ 3,675 $ 244 $ 3,919

Total Operating Expenses 5,252 244 5,496

Operating Loss ( 1,050 ) ( 244 ) ( 1,294 )

Interest expense (ii) ( 3,237 ) ( 26 ) ( 3,263 )

Total Other Expense ( 3,478 ) ( 26 ) ( 3,504 )

Net Loss ( 4,528 ) ( 270 ) ( 4,798 )

Total Comprehensive Loss ( 4,417 ) ( 270 ) ( 4,687 )

Net Loss per share:

basic and diluted $ - $ - $ -

For the three months ended June 30, 2024 For the six months ended June 30, 2024

Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss) Notes As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

General and administrative (i) $ 1,839 $ 345 $ 2,184 $ 5,514 $ 589 $ 6,103

Total Operating Expenses 3,248 345 3,593 8,500 589 9,089

Operating Income (Loss) 1,992 ( 345 ) 1,647 942 ( 589 ) 353

Interest expense (ii) ( 3,396 ) ( 30 ) ( 3,426 ) ( 6,633 ) ( 56 ) ( 6,689 )

Total Other Expense 4,569 ( 30 ) 4,539 1,091 ( 56 ) 1,035

Net Income (Loss) 6,561 ( 375 ) 6,186 2,033 ( 645 ) 1,388

Total Comprehensive Income (Loss) 6,571 ( 375 ) 6,196 2,154 ( 645 ) 1,509

Net Income per share:

basic $ 0.01 $ - $ 0.01 $ - $ - $ -

Net Income per share:

diluted $ - $ - $ - $ - $ - $ -

For the three months ended September 30, 2024 For the nine months ended September 30, 2024

Unaudited Condensed Consolidated Statement of Comprehensive Loss Notes As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

General and administrative (i) $ 2,545 $ 470 $ 3,015 $ 8,059 $ 1,059 $ 9,118

Total Operating Expenses 5,114 470 5,584 13,614 1,059 14,673

Operating Income (Loss) 1,953 ( 470 ) 1,483 2,895 ( 1,059 ) 1,836

Interest expense (ii) ( 3,315 ) ( 38 ) ( 3,353 ) ( 9,948 ) ( 94 ) ( 10,042 )

Total Other Expense ( 22,610 ) ( 38 ) ( 22,648 ) ( 21,519 ) ( 94 ) ( 21,613 )

Net Loss ( 20,657 ) ( 508 ) ( 21,165 ) ( 18,624 ) ( 1,153 ) ( 19,777 )

Total Comprehensive Loss ( 20,657 ) ( 508 ) ( 21,165 ) ( 18,503 ) ( 1,153 ) ( 19,656 )

Net Loss per share:

basic and diluted $ ( 6.49 ) $ ( 0.16 ) $ ( 6.65 ) $ ( 5.92 ) $ ( 0.37 ) $ ( 6.29 )

A Description of the restatement adjustments in the consolidated statements of comprehensive income (loss) is as follows:

(i) The $ 0.2 million increase in general and administrative expenses for the three months ended March 31, 2024, the $ 0.3 million increase for the three months ended June 30, 2024, the $ 0.6 million increase for the six months ended June 30, 2024, the $ 0.5 million increase for the three months ended September 30, 2024, and the $ 1.1 million increase for the

nine months ended September 30, 2024, are related to the adjustment for estimated state and local sales tax expense and for the related penalties on outstanding sales tax balances.

(ii) The $ 26 thousand increase in interest expense for the three months ended March 31, 2024, the $ 30 thousand increase for the three months ended June 30, 2024, the $ 56 thousand increase for the six months ended June 30, 2024, the $ 38 thousand increase for the three months ended September 30, 2024, and the $ 94 thousand increase for the nine months ended September 30, 2024, are related to the adjustment for estimated interest on outstanding state and local sales tax balances.

The tables below present the previously reported and restated cash flow data for the three months ended March 31, 2024, the six months ended June 30, 2024, and the nine months ended September 30, 2024.

The restated amounts reflect the correction of the error described above.

Contract liabilities are included in the interim tables below for clarity as the restated Condensed Consolidated Statement of Cash Flows for the year ended December 31, 2024, shows accrued expenses netted with contract liabilities.

(in thousands) For the three months ended March 31, 2024

Unaudited Condensed Consolidated Statement of Cash Flows Notes As Previously Reported Adjustment As Restated

Net Loss $ ( 4,528 ) $ ( 270 ) $ ( 4,798 )

Accrued expenses (i) ( 20 ) 270 250

Contract liabilities ( 22 ) - ( 22 )

Net Cash Provided by Operating Activities $ 1,100 $ - $ 1,100

For the six months ended June 30, 2024

Unaudited Condensed Consolidated Statement of Cash Flows Notes As Previously Reported Adjustment As Restated

Net Income (Loss) $ 2,033 $ ( 645 ) $ 1,388

Accrued expenses (i) 328 645 973

Contract liabilities 41 - 41

Net Cash Provided by Operating Activities $ 432 $ - $ 432

For the nine months ended September 30, 2024

Unaudited Condensed Consolidated Statement of Cash Flows Notes As Previously Reported Adjustment As Restated

Net Loss $ ( 18,624 ) $ ( 1,153 ) $ ( 19,777 )

Accrued expenses (i) 763 1,153 1,916

Contract liabilities 56 - 56

Net Cash Provided by Operating Activities $ 1,714 $ - $ 1,714

A description of the restatement adjustments in the consolidated statements of cash flows is as follows:

(i) The $ 0.3 million, $ 0.6 million, and $ 1.2 million increases in accrued expenses for the three months ended March 31, 2024, the six months ended June 30, 2024, and the nine months ended September 30, 2024, respectively, are related to accrued sales tax, and the related interest and penalties on outstanding sales tax balances.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 8. Financial Statements and Supplementary Data