☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Nevada
|
20-1176000
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
3360 Martin Farm Road, Suite 100
|
||
Suwanee, GA
|
30024
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
Non-accelerated filer ☒
|
Smaller reporting company ☒
|
Emerging growth company ☐
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock, par value $0.001
|
SNWV
|
OTCQB
|
PART I – FINANCIAL INFORMATION
|
Page
|
|
Item 1.
|
2 |
|
3
|
||
4
|
||
5
|
||
6
|
||
7
|
||
Item 2.
|
31
|
|
Item 3.
|
38
|
|
Item 4.
|
38
|
|
PART II – OTHER INFORMATION
|
||
Item 1.
|
40
|
|
Item 1A.
|
40
|
|
Item 2.
|
41
|
|
Item 3.
|
41
|
|
Item 4.
|
41
|
|
Item 5.
|
41
|
|
Item 6.
|
42
|
|
43
|
Item 1. |
September 30,
2020
|
December 31,
2019
|
|||||||
(As Restated)
|
||||||||
ASSETS
|
(Unaudited)
|
|||||||
CURRENT ASSETS
|
||||||||
Cash and cash equivalents
|
$
|
5,391,591
|
$
|
1,760,455
|
||||
Accounts receivable, net of allowance for doubtful accounts of $32,558 in 2020 and $72,376 in 2019
|
1,395,815
|
75,543
|
||||||
Inventory
|
2,539,475
|
542,955
|
||||||
Prepaid expenses and other current assets
|
627,751
|
125,405
|
||||||
TOTAL CURRENT ASSETS
|
9,954,632
|
2,504,358
|
||||||
PROPERTY AND EQUIPMENT, net
|
979,673
|
512,042
|
||||||
RIGHT OF USE ASSETS, net
|
442,197
|
323,661
|
||||||
OTHER INTANGIBLE ASSETS, net
|
7,259,795
|
-
|
||||||
GOODWILL
|
14,198,799
|
-
|
||||||
OTHER ASSETS
|
31,010
|
41,931
|
||||||
TOTAL ASSETS
|
$
|
32,866,106
|
$
|
3,381,992
|
||||
LIABILITIES
|
||||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable
|
$
|
2,322,192
|
$
|
1,439,413
|
||||
Accrued expenses
|
1,603,543
|
1,111,109
|
||||||
Accrued employee compensation
|
2,544,768
|
1,452,910
|
||||||
Warrant Liability
|
17,546,260
|
-
|
||||||
Convertible promissory notes payable
|
4,000,000
|
-
|
||||||
Convertible promissory notes, related parties
|
1,596,254
|
-
|
||||||
SBA loans
|
321,821
|
-
|
||||||
Accrued interest
|
354,062
|
-
|
||||||
Operating lease liability
|
251,372
|
173,270
|
||||||
Finance lease liability
|
187,416
|
121,634
|
||||||
Contract liabilities
|
65,037
|
66,577
|
||||||
Accrued interest, related parties
|
28,864
|
1,859,977
|
||||||
Notes payable, related parties, net
|
-
|
5,372,743
|
||||||
Short term notes payable
|
-
|
587,233
|
||||||
Line of credit, related parties
|
-
|
212,388
|
||||||
Advances from related parties
|
-
|
18,098
|
||||||
TOTAL CURRENT LIABILITIES
|
30,821,589
|
12,415,352
|
||||||
NON-CURRENT LIABILITIES
|
||||||||
Promissory note payable
|
10,448,039
|
-
|
||||||
SBA loans
|
142,514
|
-
|
||||||
Finance lease liability
|
284,588
|
271,240
|
||||||
Operating lease liability
|
222,815
|
185,777
|
||||||
Contract liabilities
|
45,519
|
573,224
|
||||||
TOTAL NON-CURRENT LIABILITIES
|
11,143,475
|
1,030,241
|
||||||
TOTAL LIABILITIES
|
41,965,064
|
13,445,593
|
||||||
COMMITMENTS AND CONTINGENCIES
|
||||||||
STOCKHOLDERS' DEFICIT
|
||||||||
PREFERRED STOCK, par value $0.001, 5,000,000 shares authorized; 6,175 and 293 shares designated Series A and Series B, respectively
|
-
|
-
|
||||||
|
||||||||
COMMON STOCK, par value $0.001, 600,000,000 (Note 18) shares authorized; 466,094,621 and 293,780,400 issued and
outstanding in 2020 and 2019, respectively
|
466,095
|
293,781
|
||||||
ADDITIONAL PAID-IN CAPITAL
|
135,521,907
|
115,457,808
|
||||||
ACCUMULATED DEFICIT
|
(145,025,761
|
)
|
(125,752,956
|
)
|
||||
ACCUMULATED OTHER COMPREHENSIVE LOSS
|
(61,199
|
)
|
(62,234
|
)
|
||||
TOTAL STOCKHOLDERS' DEFICIT
|
(9,098,958
|
)
|
(10,063,601
|
)
|
||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$
|
32,866,106
|
$
|
3,381,992
|
Three Months Ended
September 30,
2020
|
Three Months Ended
September 30,
2019
|
Nine Months Ended
September 30,
2020
|
Nine Months Ended
September 30,
2019
|
|||||||||||||
(As Restated)
|
(As Restated)
|
|||||||||||||||
REVENUES
|
||||||||||||||||
Product
|
$
|
1,321,248
|
$
|
158,855
|
$
|
1,465,147
|
$
|
444,087
|
||||||||
License fees
|
29,447
|
16,250
|
39,447
|
189,307
|
||||||||||||
Other revenue
|
616,201
|
22,535
|
694,194
|
59,185
|
||||||||||||
TOTAL REVENUES
|
1,966,896
|
197,640
|
2,198,788
|
692,579
|
||||||||||||
COST OF REVENUES
|
||||||||||||||||
Product
|
533,629
|
91,179
|
637,369
|
334,749
|
||||||||||||
Other
|
14,777
|
31,744
|
26,261
|
67,908
|
||||||||||||
TOTAL COST OF REVENUES
|
548,406
|
122,923
|
663,630
|
402,657
|
||||||||||||
GROSS MARGIN
|
1,418,490
|
74,717
|
1,535,158
|
289,922
|
||||||||||||
OPERATING EXPENSES
|
||||||||||||||||
Research and development
|
432,155
|
299,903
|
983,816
|
867,825
|
||||||||||||
Selling and marketing
|
1,373,476
|
335,472
|
2,414,477
|
901,031
|
||||||||||||
General and administrative
|
5,054,508
|
1,802,659
|
9,529,218
|
4,746,519
|
||||||||||||
Amortization
|
244,626
|
-
|
244,626
|
-
|
||||||||||||
Depreciation
|
82,493
|
22,338
|
200,282
|
40,150
|
||||||||||||
TOTAL OPERATING EXPENSES
|
7,187,258
|
2,460,372
|
13,372,419
|
6,555,525
|
||||||||||||
OPERATING LOSS
|
(5,768,768
|
)
|
(2,385,655
|
)
|
(11,837,261
|
)
|
(6,265,603
|
)
|
||||||||
OTHER INCOME (EXPENSE)
|
||||||||||||||||
Gain or (Loss) on warrant liability
|
(5,590,806
|
)
|
-
|
(5,590,806
|
)
|
227,669
|
||||||||||
Loss on extinguishment of debt
|
(503,234
|
)
|
-
|
(503,234
|
)
|
-
|
||||||||||
Interest expense
|
(690,659
|
)
|
(182,001
|
)
|
(878,331
|
)
|
(1,120,440
|
)
|
||||||||
Interest expense, related party
|
(61,334
|
)
|
(175,522
|
)
|
(431,070
|
)
|
(508,193
|
)
|
||||||||
Loss on foreign currency exchange
|
(23,836
|
)
|
(4,840
|
)
|
(32,103
|
)
|
(13,199
|
)
|
||||||||
TOTAL OTHER INCOME (EXPENSE), NET
|
(6,869,869
|
)
|
(362,363
|
)
|
(7,435,544
|
)
|
(1,414,163
|
)
|
||||||||
|
||||||||||||||||
NET LOSS
|
(12,638,637
|
)
|
(2,748,018
|
)
|
(19,272,805
|
)
|
(7,679,766
|
)
|
||||||||
OTHER COMPREHENSIVE INCOME (LOSS)
|
||||||||||||||||
Foreign currency translation adjustments
|
2,792
|
(14,061
|
)
|
869
|
13,152
|
|||||||||||
TOTAL COMPREHENSIVE LOSS
|
$
|
(12,635,845
|
)
|
$
|
(2,762,079
|
)
|
$
|
(19,271,936
|
)
|
$
|
(7,666,614
|
)
|
||||
LOSS PER SHARE:
|
||||||||||||||||
Net loss - basic and diluted
|
$
|
(0.03
|
)
|
$
|
(0.01
|
)
|
$
|
(0.06
|
)
|
$
|
(0.04
|
)
|
||||
|
||||||||||||||||
Weighted average shares outstanding - basic and diluted
|
384,502,450
|
211,423,362
|
326,405,397
|
181,088,995
|
Preferred Stock
|
Common Stock
|
|||||||||||||||||||||||||||||||
Number of
Shares
Issued and
Outstanding
|
Par Value
|
Number of
Shares
Issued and
Outstanding
|
Par Value
|
Additional Paid-
in Capital
|
Accumulated
Deficit
|
Accumulated
Other
Comprehensive
Loss
|
Total
|
|||||||||||||||||||||||||
Balances as of Janaury 1, 2019
|
-
|
$
|
-
|
155,665,138
|
$
|
155,665
|
$
|
101,153,882
|
$
|
(116,602,778
|
)
|
$
|
(62,868
|
)
|
$
|
(15,356,099
|
)
|
|||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
(2,197,317
|
)
|
-
|
(2,197,317
|
)
|
||||||||||||||||||||||
Cashless warrant exercises
|
-
|
-
|
704,108
|
704
|
(704
|
)
|
-
|
-
|
-
|
|||||||||||||||||||||||
Proceeds from warrant exercise
|
-
|
-
|
620,000
|
620
|
52,580
|
-
|
-
|
53,200
|
||||||||||||||||||||||||
Conversion of short term notes and
convertible notes payable
|
-
|
-
|
3,333,334
|
3,334
|
263,333
|
-
|
-
|
266,667
|
||||||||||||||||||||||||
Reclassification of warrant liability to equity
due to adoption of ASU 2017-11
|
-
|
-
|
-
|
-
|
262,339
|
1,279,661
|
-
|
1,542,000
|
||||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
(2,398
|
)
|
(2,398
|
)
|
||||||||||||||||||||||
Balances as of March 31, 2019
|
-
|
$
|
-
|
160,322,580
|
$
|
160,323
|
$
|
101,731,430
|
$
|
(117,520,434
|
)
|
$
|
(65,266
|
)
|
$
|
(15,693,947
|
)
|
|||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
(2,734,431
|
)
|
-
|
(2,734,431
|
)
|
||||||||||||||||||||||
Cashless warrant exercises
|
-
|
-
|
2,997,375
|
2,997
|
13,003
|
-
|
-
|
16,000
|
||||||||||||||||||||||||
Proceeds from warrant exercise
|
-
|
-
|
17,051,769
|
17,052
|
1,333,005
|
-
|
-
|
1,350,057
|
||||||||||||||||||||||||
Other warrant exercise
|
-
|
-
|
5,804,167
|
5,804
|
451,697
|
457,501
|
||||||||||||||||||||||||||
Conversion of short term notes and
convertible notes payable
|
-
|
-
|
2,475,000
|
2,475
|
177,525
|
-
|
-
|
180,000
|
||||||||||||||||||||||||
Stock-based compensation
|
-
|
-
|
-
|
-
|
31,758
|
-
|
-
|
31,758
|
||||||||||||||||||||||||
Warrants issued for consulting services
|
-
|
-
|
-
|
-
|
36,067
|
-
|
-
|
36,067
|
||||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
1,489
|
1,489
|
||||||||||||||||||||||||
Balances as of June 30, 2019
|
-
|
$
|
-
|
188,650,891
|
$
|
188,651
|
$
|
103,774,485
|
$
|
(120,254,865
|
)
|
$
|
(63,777
|
)
|
$
|
(16,355,506
|
)
|
|||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
(2,748,018
|
)
|
-
|
(2,748,018
|
)
|
||||||||||||||||||||||
Cashless warrant exercises
|
-
|
-
|
1,710,674
|
1,711
|
18,289
|
-
|
-
|
20,000
|
||||||||||||||||||||||||
Proceeds from warrant exercise
|
-
|
-
|
10,506,593
|
10,506
|
961,528
|
-
|
-
|
972,034
|
||||||||||||||||||||||||
Other warrant exercise
|
-
|
-
|
40,355,006
|
40,355
|
4,014,500
|
-
|
-
|
4,054,855
|
||||||||||||||||||||||||
Conversion of line of credit, related
parties to equity
|
-
|
-
|
4,545,455
|
4,545
|
495,455
|
-
|
-
|
500,000
|
||||||||||||||||||||||||
Stock-based compensation
|
-
|
-
|
-
|
-
|
224,400
|
-
|
-
|
224,400
|
||||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
14,061
|
14,061
|
||||||||||||||||||||||||
Balances as of September 30, 2019
|
-
|
$
|
-
|
245,768,619
|
$
|
245,768
|
$
|
109,488,657
|
$
|
(123,002,883
|
)
|
$
|
(49,716
|
)
|
$
|
(13,318,174
|
)
|
|||||||||||||||
As Restated
|
||||||||||||||||||||||||||||||||
Balances as of Janaury 1, 2020
|
-
|
$
|
-
|
293,780,400
|
$
|
293,781
|
$
|
115,457,808
|
$
|
(125,752,956
|
)
|
$
|
(62,234
|
)
|
$
|
(10,063,601
|
)
|
|||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
(3,001,148
|
)
|
-
|
(3,001,148
|
)
|
||||||||||||||||||||||
Proceeds from warrant exercise
|
-
|
-
|
1,000,000
|
1,000
|
9,000
|
-
|
-
|
10,000
|
||||||||||||||||||||||||
Shares issued for services
|
-
|
-
|
1,000,000
|
1,000
|
199,000
|
-
|
-
|
200,000
|
||||||||||||||||||||||||
Stock-based compensation
|
-
|
-
|
-
|
-
|
21,900
|
-
|
-
|
21,900
|
||||||||||||||||||||||||
Conversion of short term notes
|
-
|
-
|
1,820,461
|
1,820
|
262,164
|
-
|
-
|
263,984
|
||||||||||||||||||||||||
Conversion of advances from related parties
|
-
|
-
|
62,811
|
63
|
2,035
|
-
|
-
|
2,098
|
||||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
4,826
|
4,826
|
||||||||||||||||||||||||
Balances as of March 31, 2020
|
-
|
$
|
-
|
297,663,672
|
$
|
297,664
|
$
|
115,951,907
|
$
|
(128,754,104
|
)
|
$
|
(57,408
|
)
|
$
|
(12,561,941
|
)
|
|||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
(3,633,020
|
)
|
-
|
(3,633,020
|
)
|
||||||||||||||||||||||
Proceeds from PIPE
|
-
|
-
|
1,071,428
|
1,071
|
148,929
|
-
|
-
|
150,000
|
||||||||||||||||||||||||
Proceeds from stock option exercise
|
-
|
-
|
225,000
|
225
|
44,025
|
-
|
-
|
44,250
|
||||||||||||||||||||||||
Beneficial conversion feature on
convertible debt
|
-
|
-
|
-
|
-
|
560,682
|
-
|
-
|
560,682
|
||||||||||||||||||||||||
Shares issued for services
|
-
|
-
|
2,200,000
|
2,200
|
515,300
|
-
|
-
|
517,500
|
||||||||||||||||||||||||
Conversion of short term notes and settlements
|
-
|
-
|
759,328
|
759
|
89,986
|
-
|
-
|
90,745
|
||||||||||||||||||||||||
Conversion of advances from related parties
|
-
|
-
|
200,000
|
200
|
15,800
|
-
|
-
|
16,000
|
||||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
(6,749
|
)
|
(6,749
|
)
|
||||||||||||||||||||||
Balances as of June 30, 2020
|
-
|
$
|
-
|
302,119,428
|
$
|
302,119
|
$
|
117,326,629
|
$
|
(132,387,124
|
)
|
$
|
(64,157
|
)
|
$
|
(14,822,533
|
)
|
|||||||||||||||
Net loss (As Restated)
|
-
|
-
|
-
|
-
|
-
|
(12,638,637
|
)
|
-
|
(12,638,637
|
)
|
||||||||||||||||||||||
Proceeds from PIPE (As Restated)
|
-
|
-
|
123,550,000
|
123,550
|
12,408,966
|
-
|
-
|
12,532,516
|
||||||||||||||||||||||||
LGH Warrant Liability (As Restated)
|
(249,049
|
)
|
(249,049
|
)
|
||||||||||||||||||||||||||||
Series C Preferred Conversion
|
-
|
-
|
16,071,390
|
16,072
|
2,233,928
|
-
|
-
|
2,250,000
|
||||||||||||||||||||||||
Series D Preferred Conversion
|
-
|
-
|
1,428,568
|
1,429
|
198,571
|
-
|
-
|
200,000
|
||||||||||||||||||||||||
Shares issued for services
|
-
|
-
|
5,000,000
|
5,000
|
1,075,000
|
-
|
-
|
1,080,000
|
||||||||||||||||||||||||
Inducement shares issued
|
200,000
|
200
|
44,540
|
44,740
|
||||||||||||||||||||||||||||
Conversion of short term notes and settlements
|
-
|
-
|
2,250,000
|
2,250
|
207,750
|
-
|
-
|
210,000
|
||||||||||||||||||||||||
Conversion of notes payable, related
parties to equity
|
-
|
-
|
15,475,235
|
15,475
|
2,275,572
|
-
|
-
|
2,291,047
|
||||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
2,958
|
2,958
|
||||||||||||||||||||||||
Balances as of September
30, 2020 (As Restated)
|
-
|
$
|
-
|
466,094,621
|
$
|
466,095
|
$
|
135,521,907
|
$
|
(145,025,761
|
)
|
$
|
(61,199
|
)
|
$
|
(9,098,958
|
)
|
Nine Months Ended
September 30,
2020
(As Restated)
|
Nine Months Ended
September 30,
2019
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net loss
|
$
|
(19,272,805
|
)
|
$
|
(7,679,766
|
)
|
||
Adjustments to reconcile net loss to net cash used by operating activities
|
||||||||
Amortization of intangibles
|
244,626
|
-
|
||||||
Depreciation
|
200,282
|
40,150
|
||||||
Bad Debt Expense
|
(39,818
|
)
|
(18,835
|
)
|
||||
Share-based payment
|
21,900
|
256,158
|
||||||
Shares issued for services
|
1,797,500
|
-
|
||||||
Shares issued for inducement shares
|
44,740
|
-
|
||||||
Loss on extinguishment of debt
|
503,234
|
-
|
||||||
Warrants issued for consulting services
|
-
|
36,067
|
||||||
Gain or (Loss) on warrant liability
|
5,590,806
|
(227,669
|
)
|
|||||
Amortization of debt issuance costs
|
214,431
|
-
|
||||||
Accrued interest
|
191,031
|
1,139,904
|
||||||
Interest payable, related parties
|
696,208
|
508,193
|
||||||
Amortization of operating leases
|
(3,396
|
)
|
(14,634
|
)
|
||||
Waived proceeds from warrant exercise
|
-
|
36,000
|
||||||
Changes in operating assets and liabilities
|
||||||||
Accounts receivable - trade
|
(1,280,454
|
)
|
197,301
|
|||||
Inventory
|
(136,555
|
)
|
66,884
|
|||||
Prepaid expenses
|
(502,346
|
)
|
(83,007
|
)
|
||||
Due from related parties
|
-
|
1,228
|
||||||
Other assets
|
10,921
|
(13,567
|
)
|
|||||
Operating leases
|
-
|
9,513
|
||||||
Financing leases
|
1,980
|
|||||||
Accounts payable
|
882,779
|
118,908
|
||||||
Accrued expenses
|
492,434
|
127,586
|
||||||
Accrued employee compensation
|
1,091,858
|
863,400
|
||||||
Contract liabilties
|
(529,245
|
)
|
(48,425
|
)
|
||||
NET CASH USED BY OPERATING ACTIVITIES
|
(9,779,889
|
)
|
(4,684,611
|
)
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Acquisition of UltraMIST (Note 4)
|
(20,000,000
|
)
|
-
|
|||||
Purchases of property and equipment
|
(39,142
|
)
|
(28,990
|
)
|
||||
NET CASH USED BY INVESTING ACTIVITIES
|
(20,039,142
|
)
|
(28,990
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from sale of convertible preferred stock
|
2,450,000
|
-
|
||||||
Proceeds from convertible promissory note
|
1,100,000
|
-
|
||||||
Proceeds from SBA loan
|
614,335
|
-
|
||||||
Proceeds from PIPE offering
|
21,456,468
|
-
|
||||||
Proceeds from senior promissory notes
|
13,346,547
|
|||||||
Proceeds from stock option exercise
|
44,250
|
90,000
|
||||||
Proceeds from short term note
|
-
|
1,215,000
|
||||||
Proceeds from warrant exercise
|
10,000
|
1,378,142
|
||||||
Advances from related parties
|
-
|
2,055,414
|
||||||
Payments of debt
|
(5,457,663
|
)
|
||||||
Payments of principal on finance leases
|
(114,806
|
)
|
-
|
|||||
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
33,449,131
|
4,738,556
|
||||||
EFFECT OF EXCHANGE RATES ON CASH
|
1,036
|
13,152
|
||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
3,631,136
|
38,107
|
||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
1,760,455
|
364,549
|
||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
$
|
5,391,591
|
$
|
402,656
|
||||
NONCASH INVESTING AND FINANCING ACTIVITIES
|
||||||||
Acquisition of UltraMIST partially financed with convertible promissory note
|
$
|
4,000,000
|
-
|
|||||
Conversion of short term notes payable to equity
|
$
|
564,729
|
$
|
2,860,769
|
||||
Other warrant exercise
|
-
|
$
|
924,649
|
|||||
|
||||||||
Conversion of line of credit, related parties to equity
|
-
|
$
|
680,000
|
|||||
|
||||||||
Conversion of advances from related party to equity
|
$
|
18,098
|
-
|
|||||
|
||||||||
Additions to right of use assets from new finance lease liabilities
|
$
|
127,611
|
-
|
|||||
|
||||||||
Beneficial conversion feature on convertible debt
|
$
|
560,682
|
-
|
|||||
|
||||||||
Reclassification of warrant liability to equity
|
-
|
$
|
1,542,000
|
|||||
|
||||||||
Accounts payable and Accrued employee compensation converted to equity
|
-
|
$
|
36,500
|
|||||
|
||||||||
Conversion of convertible promissory notes to equity
|
-
|
$
|
1,918,254
|
1. |
Nature of the Business
|
1. |
Nature of the Business (continued)
|
2. |
Going Concern
|
3 |
Summary of Significant Accounting Policies
|
3 |
Summary of Significant Accounting Policies (continued)
|
3 |
Summary of Significant Accounting Policies (continued)
|
4. |
Asset Purchase Agreement
|
Purchase consideration
|
||||
August 6, 2020
|
||||
Cash paid at closing
|
$
|
18,890,000
|
||
Seller convertible note
|
4,000,000
|
|||
Previous cash deposit pursuant to letter of intent
|
1,110,000
|
|||
Total
|
$
|
24,000,000
|
Net assets acquired
|
Fair Value at
August 6,
2020
|
|||
Inventory
|
$
|
1,859,965
|
||
Property, plant and equipment
|
436,815
|
|||
Intangible assets (a)
|
14,443,425
|
|||
Goodwill (b)
|
7,259,795
|
|||
Total
|
$
|
24,000,000
|
4. |
Asset Purchase Agreement (continued)
|
(a) |
Intangible assets, as provided in the table below, are recorded at estimated fair value. The estimated fair value of the acquired customer relationships is based on a variation of the income valuation
approach and is determined using the multi-period excess earnings method. The estimated fair value of the acquired patent and trade names is based on a variation of the income valuation approach known as the relief from royalty method. The
estimated useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows.
|
Estimated Fair Value
|
Estimated
Weighted
Average
Life
(Years)
|
|||||||
Customer relationships - UltraMIST
|
$
|
3,820,000
|
7
|
|||||
Customer relationships - Biologics
|
7,618,100
|
7
|
||||||
Patent
|
2,311,825
|
19
|
||||||
Trade names
|
693,500
|
19
|
||||||
$
|
14,443,425
|
(b) |
Goodwill represents the excess of the total purchase consideration over fair value of the assets recognized and represents the future economic benefits that we believe will result from combining the
operations of Sanuwave and UltraMIST, including expected future synergies and operating efficiencies. Goodwill resulting from the Transaction has been assigned to the Company’s lone operating segment. None of the goodwill recognized is
expected to be deductible for income tax purposes.
|
4. |
Asset Purchase Agreement (continued)
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2020
|
September 30, 2019
|
September 30, 2020
|
September 30, 2019
|
|||||||||||||
(restated)
|
(restated)
|
|||||||||||||||
Total revenue
|
$
|
2,770,646
|
$
|
2,325,640
|
$
|
5,973,538
|
$
|
6,810,404
|
||||||||
Net loss
|
$
|
(12,549,181
|
)
|
$
|
(4,863,590
|
)
|
$
|
(23,869,495
|
)
|
$
|
(14,855,293
|
)
|
5. |
Accrued expenses
|
September
30,
2020
|
December
31,
2019
|
|||||||
Accrued outside services
|
$
|
615,547
|
$
|
108,033
|
||||
Accrued legal and professional fees
|
370,985
|
134,970
|
||||||
Accrued board of director’s fees
|
260,000
|
400,000
|
||||||
Accrued executive severance
|
167,500
|
154,000
|
||||||
Accrued travel
|
120,000
|
120,000
|
||||||
Accrued inventory
|
50,275
|
167,050
|
||||||
Accrued clinical study expenses
|
13,650
|
13,650
|
||||||
Accrued other
|
5,586
|
13,406
|
||||||
$
|
1,603,543
|
$
|
1,111,109
|
6. |
Contract liabilities
|
September
30,
2020
|
December
31,
2019
|
|||||||
Service agreement
|
$
|
77,538
|
$
|
133,510
|
||||
License fees
|
-
|
500,000
|
||||||
Devices
|
22,500
|
-
|
||||||
Other
|
10,518
|
6,291
|
||||||
Total Contract liabilities
|
110,556
|
639,801
|
||||||
Non-Current
|
(45,519
|
)
|
(573,224
|
)
|
||||
Total Current
|
$
|
65,037
|
$
|
66,577
|
7. |
Senior promissory notes
|
8. |
Convertible promissory notes (Restated)
|
8. |
Convertible promissory notes (Restated) (continued)
|
9. |
SBA Loans
|
9. |
SBA Loans (continued)
|
10. |
Convertible notes payable, related parties and Notes payable, related parties
|
10. |
Convertible notes payable, related parties and Notes payable, related parties (continued)
|
11. |
Warrant Liabilities (Restated)
|
11. |
Warrant Liabilities (continued)
|
Binomial Assumptions
|
Issuance date (1)
August 6, 2020
|
Period ended
September 30, 2020
|
||||||
Exercise Price(1)
|
$
|
0.25
|
$
|
0.25
|
||||
Warrant Expiration Date (1)
|
August 6, 2023
|
August 6, 2023
|
||||||
Stock Price (2)
|
$
|
0.24
|
$
|
0.22
|
||||
Interest Rate (annual) (3)
|
0.13
|
%
|
0.16
|
%
|
||||
Volatility (annual) (4)
|
91.49
|
%
|
88.96
|
%
|
||||
Time to Maturity (Years)
|
3
|
3
|
||||||
Calculated fair value per share
|
$
|
0.135
|
$
|
0.119
|
(1) |
Based on the terms provided in the warrant agreement to purchase common stock of the Company. dated August 6, 2020.
|
(2) |
Based on the trading value of common stock of the Company. as of August 6, 2020 and each presented period ending date.
|
(3) |
Interest rate for U.S. Treasury Bonds, as of August 6, 2020 and each presented period ending date, as published by the U.S. Federal Reserve.
|
(4) |
Based on the historical daily volatility of the Company as of August 6, 2020 and each presented period ending date.
|
Binomial Assumptions
|
Issuance date (1)
August 6, 2020
|
Period ended
September 30, 2020
|
||||||
Exercise Price(1)
|
$
|
0.01
|
$
|
0.01
|
||||
Warrant Expiration Date (1)
|
August 6, 2030
|
August 6, 2030
|
||||||
Stock Price (2)
|
$
|
0.24
|
$
|
0.22
|
||||
Interest Rate (annual) (3)
|
0.21
|
%
|
0.69
|
%
|
||||
Volatility (annual) (4)
|
102.09
|
%
|
184.77
|
%
|
||||
Time to Maturity (Years)
|
10
|
10
|
||||||
Calculated fair value per share
|
$
|
0.233
|
$
|
0.22
|
(1)
|
Based on the terms provided in the warrant agreement to purchase common stock of the Company dated August 6, 2020.
|
(2)
|
Based on the trading value of common stock of the Company as of August 6, 2020 and each presented period ending date.
|
(3)
|
Interest rate for U.S. Treasury Bonds, as of August 6, 2020 and each presented period ending date, as published by the U.S. Federal Reserve.
|
(4)
|
Based on the historical daily volatility of the Company as of August 6, 2020 and each presented period ending date.
|
LGH
|
||||||||||||||||
Binomial Assumptions
|
Issuance date (1)
5-Jun-20 |
Period ended
30-Jun-20 |
Ratchet Date (5)
6-Aug-20 |
Period ended
30-Sep-20 |
||||||||||||
Exercise Price(1)
|
$
|
0.35
|
$
|
0.35
|
$
|
0.01
|
$
|
0.01
|
||||||||
Warrant Expiration Date (1)
|
5-Jun-25
|
5-Jun-25
|
5-Jun-25
|
5-Jun-25
|
||||||||||||
Stock Price (2)
|
$
|
0.27
|
$
|
0.2625
|
$
|
0.2437
|
$
|
0.22
|
||||||||
Interest Rate (annual) (3)
|
0.29
|
%
|
0.29
|
%
|
0.20
|
%
|
0.26
|
%
|
||||||||
Volatility (annual) (4)
|
107
|
%
|
107
|
%
|
103
|
%
|
101
|
%
|
||||||||
Time to Maturity (Years)
|
5
|
4.93
|
4.83
|
4.68
|
||||||||||||
Calculated fair value per share
|
$
|
0.25
|
$
|
0.25
|
$
|
0.24
|
$
|
0.21
|
(1)
|
Based on the terms provided in the warrant agreement to purchase common stock of the Company dated June 5, 2020.
|
(2)
|
Based on the trading value of common stock of the Company as of June 5, 2020 and each presented period ending date.
|
(3)
|
Interest rate for U.S. Treasury Bonds, as of June 5, 2020, and each presented period ending date, as published by the U.S. Federal Reserve.
|
(4)
|
Based on the historical daily volatility of the Company as of June 6, 2020, and each presented period ending date.
|
(5)
|
Based on the terms provided in the warrant agreement to purchase common stock at date of the ratchet trigger August 6, 2020.
|
Warrant Liability
|
Warrants
Outstanding
|
Fair Value
per Share
|
Fair Value
|
|||||||||
Fair Value at remeasurement date of June 30, 2020
|
1,000,000
|
0.249
|
$
|
249,049
|
||||||||
Additional Warrants classified as Liabilities August 6, 2020
|
111,210,902
|
0.206
|
22,888,017
|
|||||||||
Fair Value at date of August 6, 2020
|
112,210,902
|
0.206
|
$
|
23,137,066
|
||||||||
Gain or (Loss) on warrant liability |
(5,590,806 |
) |
||||||||||
Fair Value as of period ended September 30, 2020 |
112,210,902 |
0.156 |
17,546,260 |
12. |
Preferred Stock
|
13. |
Equity transactions
|
13. |
Equity transactions (continued)
|
13. |
Equity transactions (continued)
|
14. |
Warrants (Restated)
|
Warrant class
|
Outstanding
as of
December
31, 2019
|
Issued
|
Exercised
|
Expired
|
Outstanding
as of
September
30,
2020
|
|||||||||||||||
Class E Warrants
|
-
|
141,091,485
|
-
|
-
|
141,091,485
|
|||||||||||||||
Class K Warrants
|
7,200,000
|
-
|
(7,200,000
|
)
|
-
|
-
|
||||||||||||||
Class O Warrants
|
909,091
|
-
|
-
|
-
|
909,091
|
|||||||||||||||
Class P Warrants
|
1,365,000
|
-
|
(1,000,000
|
)
|
(100,000
|
)
|
265,000
|
|||||||||||||
LGH Warrant
|
-
|
35,000,000
|
-
|
-
|
35,000,000
|
|||||||||||||||
NH Warrant
|
-
|
13,091,160
|
-
|
-
|
13,091,160
|
|||||||||||||||
9,474,091
|
189,182,645
|
(8,200,000
|
)
|
(100,000
|
)
|
190,356,736
|
Exercise
price/share
|
Expiration date
|
||||
Class E Warrants
|
$
|
0.25
|
August 2023
|
||
Class K Warrants
|
$
|
0.08
|
June 2025
|
||
Class K Warrants
|
$
|
0.11
|
August 2027
|
||
Class O Warrants
|
$
|
0.11
|
January 2022
|
||
Class P Warrants
|
$
|
0.20
|
June 2024
|
||
LGH Warrant
|
$
|
0.01
|
June 2025
|
||
NH Warrant
|
$
|
0.01
|
August 2030
|
Weighted average contractual terms in years
|
1.3
|
|||
Weighted average risk free interest rate
|
0.15
|
%
|
||
Weighted average volatility
|
92.76
|
%
|
15. |
Commitments and contingencies
|
15. |
Commitments and contingencies (continued)
|
September
30,
2020
|
||||
Right of use assets
|
$
|
442,197
|
September
30,
2020
|
||||
Lease liability - right of use
|
||||
Current portion
|
$
|
251,372
|
||
Long term portion
|
222,815
|
|||
$
|
474,187
|
Year ending December 31,
|
Amount
|
|||
2020 (remainder)
|
$
|
71,918
|
||
2021
|
290,552
|
|||
2022
|
96,195
|
|||
2023
|
68,017
|
|||
2024
|
8,028
|
|||
2025
|
3,345
|
|||
Total lease payments
|
538,055
|
|||
Less: Present value adjustment
|
(63,868
|
)
|
||
Lease liability - right of use
|
$
|
474,187
|
15. |
Commitments and contingencies (continued)
|
September
30,
2020
|
||||
Right of use assets
|
$
|
462,405
|
September
30,
2020
|
||||
Lease liability - right of use
|
||||
Current portion
|
$
|
187,416
|
||
Long term portion
|
284,588
|
|||
$
|
472,004
|
Year ending December 31,
|
Amount
|
|||
2020 (remainder)
|
$
|
58,648
|
||
2021
|
234,593
|
|||
2022
|
199,793
|
|||
2023
|
18,388
|
|||
Total
|
$
|
511,422
|
15. |
Commitments and contingencies (continued)
|
16. |
Revenue
|
Three Months Ended September 30,
2020
|
Three Months Ended September 30,
2019
|
|||||||||||||||||||||||
United States
|
International
|
Total
|
United States
|
International
|
Total
|
|||||||||||||||||||
Product
|
$
|
1,301,942
|
$
|
19,306
|
$
|
1,321,248
|
$
|
9,832
|
$
|
149,023
|
$
|
158,855
|
||||||||||||
License fees
|
-
|
29,447
|
29,447
|
6,250
|
10,000
|
16,250
|
||||||||||||||||||
Other Revenue
|
7,811
|
608,390
|
616,201
|
25
|
22,510
|
22,535
|
||||||||||||||||||
$
|
1,309,753
|
$
|
657,143
|
$
|
1,966,896
|
$
|
16,107
|
$
|
181,533
|
$
|
197,640
|
Nine Months Ended September 30,
2020
|
Nine Months Ended September 30,
2019
|
|||||||||||||||||||||||
United States
|
International
|
Total
|
United States
|
International
|
Total
|
|||||||||||||||||||
Product
|
$
|
1,398,672
|
$
|
66,475
|
$
|
1,465,147
|
$
|
147,999
|
$
|
296,088
|
$
|
444,087
|
||||||||||||
License fees
|
-
|
39,447
|
39,447
|
18,750
|
170,557
|
189,307
|
||||||||||||||||||
Other Revenue
|
7,486
|
686,708
|
694,194
|
25
|
59,160
|
59,185
|
||||||||||||||||||
$
|
1,406,158
|
$
|
792,630
|
$
|
2,198,788
|
$
|
166,774
|
$
|
525,805
|
$
|
692,579
|
17. |
Related party transactions
|
18. |
Stock-based compensation
|
19. |
Earnings (loss) per share
|
September 30,
2020
|
September 30,
2019
|
|||||||
Stock options
|
32,618,385
|
33,683,385
|
||||||
Warrants
|
190,356,736
|
12,854,091
|
||||||
Convertible promissory notes
|
56,988,540
|
9,204,160
|
||||||
Shares issuable
|
-
|
14,617,225
|
||||||
Anti-dilutive equity securities
|
279,963,661
|
70,358,861
|
20. |
Restatement of financial statements
|
20. |
Restatement of financial statements (continued)
|
As of September 30, 2020
|
Originally
Reported
|
Restatement
Adjustment
|
As
Restated
|
|||||||||
LIABILITIES
|
||||||||||||
CURRENT LIABILITIES
|
||||||||||||
Warrant Liability
|
6,440,249
|
11,106,011
|
17,546,260
|
|||||||||
TOTAL CURRENT LIABILITIES
|
19,715,578
|
11,106,011
|
30,821,589
|
|||||||||
NON - CURRENT LIABILITIES
|
||||||||||||
Warrant Liability
|
2,880,055
|
(2,880,055
|
)
|
-
|
||||||||
TOTAL NON-CURRENT LIABILITIES
|
14,023,530
|
(2,880,055
|
)
|
11,143,475
|
||||||||
TOTAL LIABILITIES
|
33,739,108
|
8,225,956
|
41,965,064
|
|||||||||
COMMITMENTS AND CONTINGENCIES
|
||||||||||||
STOCKHOLDERS' DEFICIT
|
||||||||||||
ADDITIONAL PAID-IN CAPITAL
|
137,120,956
|
(1,599,049
|
)
|
135,521,907
|
||||||||
ACCUMULATED DEFICIT
|
(138,398,688
|
)
|
(6,626,907
|
)
|
(145,025,761
|
)
|
||||||
TOTAL STOCKHOLDERS' DEFICIT
|
(873,002
|
)
|
(8,225,956
|
)
|
(9,098,958
|
)
|
||||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$
|
32,866,106
|
$
|
(0
|
)
|
$
|
32,866,106
|
Three Months Ended September 30, 2020
|
Originally
Reported
|
Restatement
Adjustment
|
As
Restated
|
|||||||||
OTHER INCOME (EXPENSES)
|
||||||||||||
Gain or (Loss) on warrant derivative liability
|
1,036,101
|
(6,626,907
|
)
|
(5,590,806
|
)
|
|||||||
TOTAL OTHER INCOME (EXPENSES)
|
(242,962
|
)
|
(6,626,907
|
)
|
(6,869,869
|
)
|
||||||
|
||||||||||||
NET LOSS
|
(6,011,730
|
)
|
(6,626,907
|
)
|
(12,638,637
|
)
|
||||||
|
||||||||||||
TOTAL COMPREHENSIVE LOSS
|
$
|
(6,008,938
|
)
|
$
|
(6,626,907
|
)
|
$
|
(12,635,845
|
)
|
|||
|
||||||||||||
|
||||||||||||
LOSS PER SHARE
|
||||||||||||
Net loss - basic and diluted
|
$
|
(0.02
|
)
|
$
|
(0.01
|
)
|
$
|
(0.03
|
)
|
|||
|
||||||||||||
Weighed average shares outstanding - basic and diluted
|
302,119,428
|
82,383,022
|
384,502,450
|
Nine Months Ended September 30, 2020
|
Originally
Reported
|
Restatement
Adjustment
|
As
Restated
|
|||||||||
OTHER INCOME (EXPENSES)
|
||||||||||||
Loss on warrant liability
|
1,036,101
|
(6,626,907
|
)
|
(5,590,806
|
)
|
|||||||
TOTAL OTHER INCOME (EXPENSES)
|
(808,637
|
)
|
(6,626,907
|
)
|
(7,435,544
|
)
|
||||||
|
||||||||||||
NET LOSS
|
(12,645,898
|
)
|
(6,626,907
|
)
|
(19,272,805
|
)
|
||||||
|
||||||||||||
TOTAL COMPREHENSIVE LOSS
|
$
|
(12,645,029
|
)
|
$
|
(6,626,907
|
)
|
$
|
(19,271,936
|
)
|
|||
|
||||||||||||
|
||||||||||||
LOSS PER SHARE
|
||||||||||||
Net loss - basic and diluted
|
$
|
(0.04
|
)
|
$
|
(0.02
|
)
|
$
|
(0.06
|
)
|
|||
|
||||||||||||
Weighed average shares outstanding - basic and diluted
|
323,730,859
|
2,674,538
|
326,405,397
|
Nine Months Ended September 30, 2020
|
Originally
Reported
|
Restatement
Adjustment
|
As
Restated
|
|||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net loss
|
(12,645,898
|
)
|
(6,626,907
|
)
|
(19,272,805
|
)
|
||||||
Gain or (Loss) on warrant liability
|
(1,036,101
|
)
|
6,626,907
|
5,590,806
|
||||||||
NET CASH USED BY OPERATING ACTVITIES
|
(9,779,889
|
)
|
-
|
(9,779,889
|
)
|
21. |
Subsequent events
|
22.
|
Supplier Dispute
|
Item 2 |
● |
wound conditions, including diabetic foot ulcers, venous and arterial ulcers, pressure sores, burns and other skin eruption conditions;
|
● |
orthopedic applications, such as eliminating chronic pain in joints from trauma, arthritis or tendons/ligaments inflammation, speeding the healing of fractures (including nonunion or delayed-union
conditions), improving bone density in osteoporosis, fusing bones in the extremities and spine, and other potential sports injury applications;
|
● |
plastic/cosmetic applications such as cellulite smoothing, graft and transplant acceptance, skin tightening, scarring and other potential aesthetic uses; and
|
● |
cardiac applications for removing plaque due to atherosclerosis improving heart muscle performance.
|
● |
the scope, rate of progress and cost of our clinical trials;
|
● |
future clinical trial results;
|
● |
the cost and timing of regulatory approvals;
|
● |
the establishment of successful marketing, sales and distribution channels and partnerships, including our efforts to expand our marketing, sales and distribution reach through joint ventures and other
contractual arrangements;
|
● |
the cost and timing associated with establishing reimbursement for our products;
|
● |
the effects of competing technologies and market developments; and
|
● |
the industry demand and patient wellness behavior.
|
Item 3. |
Item 4. |
Item 1. |
Item1A. |
• |
properly value prospective acquisitions, especially those with limited operating histories;
|
• |
successfully integrate the operations, as well as the accounting, financial controls, management information, technology, human resources and other administrative systems of acquired businesses with its
existing operations and systems;
|
• |
successfully identify and realize potential synergies among acquired and existing businesses and retain or hire senior management and other key personnel at acquired businesses; and
|
• |
successfully manage acquisition-related strain on its management, operations and financial resources.
|
Item 2. |
Item 3. |
Item 4. |
Item 5. |
Item 6. |
Exhibit No.
|
Description
|
|
Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer.
|
||
Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.
|
||
Section 1350 Certification of the Principal Executive Officer.
|
||
Section 1350 Certification of the Chief Financial Officer.
|
||
101.INS*†
|
XBRL Instance.
|
|
101.SCH*†
|
XBRL Taxonomy Extension Schema.
|
|
101.CAL*†
|
XBRL Taxonomy Extension Calculation.
|
|
101.DEF*†
|
XBRL Taxonomy Extension Definition.
|
|
101.LAB*†
|
XBRL Taxonomy Extension Labels.
|
|
101.PRE*†
|
XBRL Taxonomy Extension Presentation.
|
Ꚙ |
Indicates management contract or compensatory plan or arrangement.
|
* |
Filed herewith.
|
** |
Furnished herewith.
|
† |
XBRL-related documents are not deemed filed for purposes of section 11 of the Securities Act of 1933, as amended, section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject the
liabilities of these sections, and are not part of any registration statement to which they relate.
|
SANUWAVE HEALTH, INC.
|
|||
Date: July 1, 2021
|
By:
|
/s/ Kevin A. Richardson, II
|
|
Name: Kevin A. Richardson, II
|
|||
Title: Chief Executive Officer
|
Signatures
|
Capacity
|
Date
|
||
By: /s/ Kevin A. Richardson, II
|
||||
Name: Kevin A. Richardson, II
|
Chief Executive Officer and Chairman of the Board of Directors
|
July 1, 2021
|
||
(principal executive officer)
|
||||
By: /s/ Lisa E. Sundstrom
|
||||
Name: Lisa E. Sundstrom
|
Chief Financial Officer
|
July 1, 2021
|
||
(principal financial and accounting officer)
|