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~~cardiac~~Cardiovascular applications for removing plaque due to atherosclerosis, eliminating occlusions and blood clots, and improving heart muscle and cardiac valves performance.

Merger Agreement with SEPA

~~In addition to healthcare uses, our high-energy, acoustic pressure shock waves, due to their powerful pressure gradients~~

On August 23, 2023, we entered into an Agreement and ~~localized cavitational effects, may have applications in secondary~~Plan of Merger (the “Merger Agreement”) by and tertiary oil exploitation, for cleaning industrial waters and food liquids and finally for maintenance of industrial installations by disrupting biofilms formation. Our business approach will be through licensing and/or partnership opportunities.

~~We were formed as~~among SEP Acquisition Corp., a Delaware corporation (“SEPA”), SEP Acquisition Holdings Inc., a Nevada corporation, and a wholly owned subsidiary of SEPA (“Merger Sub”). Pursuant to the terms of the Merger Agreement, a business combination between the Company and SEPA (the “Merger”) will be affected. More specifically, and as described in ~~2004.~~
greater detail below, at the effective time of the Merger (the “Effective Time”):

Merger Sub will merge with and into the Company, with the Company being the surviving company following the merger.

Each issued and outstanding share of the Company common stock will automatically be converted into Class A common stock of SEPA, par value $0.0001 per share, at the Conversion Ratio (as defined in the Merger Agreement); and

Outstanding Company convertible securities of the Company will be assumed by SEPA and will be converted into the right to receive Class A Common Stock of SEPA.

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

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

•

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

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

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

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

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

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

UltraMIST - Ultrasound Healing Therapy

UltraMIST is an FDA approved powerful, non-contact, non-thermal ultrasound therapy system used to promote healing in a wide range of wound types. The system never touches the wound surface making it pain free. UltraMIST promotes wound healing below the skin surface by modulating cell membranes to drive increased blood flow and capillary formation. It also reduces and removes a wide range of bacteria, including biofilms, while preserving healthy structures. UltraMIST is FDA approved to treat malaises such as diabetic foot ulcers, pressure ulcers, venous leg ulcers, deep tissue pressure injuries, and surgical wounds.

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

Our PACE ~~product~~system candidates, including our ~~lead product candidate,~~ dermaPACE System, deliver high-energy acoustic pressure ~~waves in the shock wave spectrum~~shockwaves to produce compressive and tensile stresses on cells and tissue structures. These mechanical stresses at the cellular level have been shown in pre-clinical work to promote angiogenic and positive modulated inflammatory responses, and quickly initiate the healing cascade. This has been shown in pre-clinical work to result in microcirculatory improvement, including increased perfusion and blood vessel widening, ~~(arteriogenesis),~~ the production of angiogenic growth factors, enhanced new blood vessel formation (angiogenesis) and the subsequent regeneration of tissue such as skin, musculoskeletal and vascular structures. PACE procedures trigger the initiation of an accelerated and modulated inflammatory response that speeds wounds into proliferation phases of healing and subsequently returns a chronic condition to an acute condition to help reinitiate the body’s own healing response. ~~We believe that~~The Company believes our PACE technology is well suited for various applications due to its activation of a broad spectrum of cellular events critical for the initiation and progression of healing.

~~High-energy, acoustic pressure shock waves are~~

Table of Contents

dermaPACE

The Company is focused on the ~~primary component~~development of ~~our previously developed product, OssaTron~~®~~, which was approved by the~~products that treat unmet medical needs in large market opportunities. Our FDA ~~and marketed~~approval in the United States for ~~use~~our, dermaPACEsystem is the first step in chronic plantar fasciitis of the foot in 2000 and for elbow tendonitis in 2003. Previously, acoustic pressure shock waves have been used safely at much higher energy and pulse levels in the lithotripsy procedure (breaking up kidney stones) by urologists for over 25 years and has reached the care status of “golden standard” for the treatment of kidney stones.

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

We believe our experience from our preclinical research and the clinical use of our predecessor legacy devices in Europe and Asia, as well as our OssaTron device in the United States, demonstrates the safety, clinical utility and efficacy of these products. In addition, we have preclinical programs focused on the development and better understanding of treatments specificproviding an option to ~~our target applications.~~

Currently, there are limited biological or mechanical therapies available to activate the healing and regeneration of skin, musculoskeletal tissue and vascular structures. As baby boomers age, the incidence of their targeted diseases and musculoskeletal injuries and ailments will be far more prevalent. We believe that our pre-clinical and clinical studies suggest that our PACE technology will be effective in targeted applications. We anticipate that future clinical studies should lead to regulatory approval of our regenerative product candidates in the Americas, Middle East and Africa. If approved by the appropriate regulatory authorities, we believe that our product candidates will offer new, effective and noninvasive (extracorporeal) treatment options in wound healing, orthopedic injuries, plastic/cosmetic uses and cardiovascular procedures, improving the quality of life for millions of patients suffering from injuries or deterioration of tissue, bones and vascular structures.

~~dermaPACE – Our Lead Product Candidate~~

The FDA granted approval of our Investigational Device Exemption (IDE) to conduct two double-blinded, randomized clinical trials utilizing our lead device product for the global wound care market, the dermaPACE device,a currently unmet need in the treatment of diabetic foot ulcers.Diabetes is common, disabling, and deadly. In the United States, diabetes has reached epidemic proportions. Based on our research, foot ulcerations are one of the leading causes of hospitalization in diabetic patients and lead to billions of dollars in health care expenditures annually. dermaPACE is noninvasive and does not require anesthesia, making it a cost-effective, time-efficient, and painless approach to wound care. The dermaPACE’s noninvasive treatments are designed to produce the body’s own healing response and followed by simple standard of care dressing changes, are designed to allow for limited disruption to the patients’ normal lives and have no effect on mobility while their wounds heal.

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

The dermaPACE device completed its initial Phase III, IDE clinical trial in the United States for the treatment of diabetic foot ulcers in 2011 and a PMA application was filed with the FDA in July 2011. The patient enrollment for the second, supplemental clinical trial began in June 2013. We completed enrollment for the 130 patients in this second trial in November 2014 and suspended further enrollment at that time.

The only significant difference between the two studies was the number of applications of the dermaPACE device. Study one (DERM01; n=206) prescribed four (4) device applications/treatments over a two-week period, whereas, study two (DERM02; n=130) prescribed up to eight (8) device applications (4 within the first two weeks of randomization, and 1 treatment every two weeks thereafter up to a total of 8 treatments over a 10-week period). If the wound was determined closed by the PI during the treatment regimen, any further planned applications were not performed.

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

A total of 336 patients were enrolled in the dermaPACE studies at 37 sites. The patients in the studies were followed for a total of 24 weeks. The studies’ primary endpoint, wound closure, was defined as “successful” if the skin was 100% re-epithelialized at 12 weeks without drainage or dressing requirements confirmed at two consecutive study visits.

~~A summary of the key study findings were as follows:~~

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Patients treated with dermaPACE showed a strong positive trend in the primary endpoint of 100% wound closure. Treatment with dermaPACE increased the proportion of diabetic foot ulcers that closed within 12 weeks, although the rate of complete wound closure between dermaPACE and sham-control at 12 weeks in the intention-to-treat (ITT) population was not statistically significant at the 95% confidence level used throughout the study (p=0.320). There were 39 out of 172 (22.67%) dermaPACE subjects who achieved complete wound closure at 12 weeks compared with 30 out of 164 (18.29%) sham-control subjects.

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In addition to the originally proposed 12-week efficacy analysis, and in conjunction with the FDA agreement to analyze the efficacy analysis carried over the full 24 weeks of the study, we conducted a series of secondary analyses of the primary endpoint of complete wound closure at 12 weeks and at each subsequent study visit out to 24 weeks. The primary efficacy endpoint of complete wound closure reached statistical significance at 20 weeks in the ITT population with 61 (35.47%) dermaPACE subjects achieving complete wound closure compared with 40 (24.39%) of sham-control subjects (p=0.027). At the 24 week endpoint, the rate of wound closure in the dermaPACE® cohort was 37.8% compared to 26.2% for the control group, resulting in a p-value of 0.023.

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Within 6 weeks following the initial dermaPACE treatment, and consistently throughout the 24-week period, dermaPACE significantly reduced the size of the target ulcer compared with subjects randomized to receive sham-control (p<0.05).

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The proportion of patients with wound closure indicate a statistically significant difference between the dermaPACE and the control group in the proportion of subjects with the target-ulcer not closed over the course of the study (p-value=0.0346). Approximately 25% of dermaPACE® subjects reached wound closure per the study definition by day 84 (week 12). The same percentage in the control group (25%) did not reach wound closure until day 112 (week 16). These data indicate that in addition to the proportion of subjects reaching wound closure being higher in the dermaPACE® group, subjects are also reaching wound closure at a faster rate when dermaPACE is applied.

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dermaPACE demonstrated superior results in the prevention of wound expansion (≥ 10% increase in wound size), when compared to the control, over the course of the study at 12 weeks (18.0% versus 31.1%; p=0.005, respectively).

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At 12 and 24 weeks, the dermaPACE group had a higher percentage of subjects with a 50% wound reduction compared to the control (p=0.0554 and p=0.0899, respectively). Both time points demonstrate a trend towards statistical significance.

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The mean wound reduction for dermaPACE subjects at 24 weeks was 2.10cm2 compared to 0.83cm2 in the control group. There was a statistically significant difference between the wound area reductions of the two cohorts from the 6 week follow-up visit through the end of the study.

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~~Of the subjects who achieved complete wound closure at 12 weeks, the recurrence rate at 24 weeks was only 7.7% in the dermaPACE group compared with 11.6% in the sham-control group.~~

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Importantly, there were no meaningful statistical differences in the adverse event rates between the dermaPACE treated patients and the sham-control group. There were no issues regarding the tolerability of the treatment which suggests that a second course of treatment, if needed, is a clinically viable option.

We retained Musculoskeletal Clinical Regulatory Advisers, LLC (MCRA) in January 2015 to lead the Company’s interactions and correspondence with the FDA for the dermaPACE, which have already commenced. MCRA has successfully worked with the FDA on numerous Premarket Approvals (PMAs) for various musculoskeletal, restorative and general surgical devices since 2006.

~~Working with MCRA, we submitted to FDA a~~ ~~de novo~~ petition on July 23, 2016. Due to the strong safety profile of our device and the efficacy of the data showing statistical significance for wound closure for dermaPACE subjects at 20 weeks, we believe that the dermaPACE device should be considered for classification into Class II as there is no legally marketed predicate device and there is not an existing Class III classification regulation or one or more approved PMAs (which would have required a reclassification under Section 513(e) or (f)(3) of the FD&C Act). On December 28, 2017, the FDA determined that the criteria at section 513(a)(1)(A) of (B) of the FD&C Act were met and granted the ~~de novo~~ ~~clearance classifying dermaPACE as Class II and available to be marketed immediately.~~

~~Finally, our dermaPACE device~~ has received the European CE Mark approval to treat acute and chronic defects of the skin and subcutaneous soft tissue, such as in the treatment of pressure ulcers, diabetic foot ulcers, burns, and traumatic and surgical wounds. The dermaPACE is also licensed for sale in Canada, Australia, New Zealand and South Korea.

~~We are actively marketing~~Additionally, our joint venture partner in Brazil, Diversa SA, received approval from the Brazilian Agência Nacional de Vigilância Sanitária (“National Health Surveillance Agency” or “ANVISA”) to market dermaPACE to ~~the European Community, Canada and Asia/Pacific, utilizing distributors in select countries.~~

~~Growth Opportunity in Wound Care Treatment~~

~~We are focused on the development of products that~~ treat unmet medical needs in large market opportunities. Our FDA approval in the United States for our lead product candidate, dermaPACE, is the first step in providing an option to a currently unmet need in the treatment of diabetic foot ulcers. Diabetes is common, disabling and deadly. In the United States, diabetes has reached epidemic proportions. Based on our research, foot ulcerations are one of the leading causes of hospitalization in diabetic patients and lead to billions of dollars in health care expenditures annually. According to a 2015 report by the Centers for Disease Control and Prevention, approximately 30.3 million people (diagnosed and undiagnosed), roughly 9.4% of the United States population, have diabetes and 1.5 million new cases of diabetes were diagnosed in people aged 18 years or older in 2015. ~~According to the same study, approximately 25% of diabetics will develop a diabetic foot ulceration ("DFU") during their lifetime.~~ Foot ulcers are a significant complication of diabetes mellitus and often precede lower-extremity amputation. The most frequent underlying etiologies are neuropathy, trauma, deformity, high plantar pressures, and peripheral arterial disease. Over 50% of DFUs will become infected, resulting in high rates of hospitalization, increased morbidity and potential lower extremity amputation. Diabetic foot infections ("DFI") are one of the most common diabetes related cause of hospitalization in the United States, accounting for 20% of all hospital admissions. Readmission rates for DFI patients are approximately 40% and nearly one in six patients die within 1 year of their infection. In a large prospective study of patients with DFU, the presence of infection increased the risk of a minor amputation by 50% compared to ulcer patients without infection. DFUs account for more than half of the non-traumatic lower-extremity amputations in the world. The Advanced Medical Technology Association (“AdvaMed”) estimates that chronic leg wounds (ulcers) account for the loss of many workdays per year, at a cost of approximately $20.8 billion in lost productivity. Advanced, cost-effective treatment modalities for diabetes and its comorbidities, including diabetic foot ulcers ~~are~~ in great need globally, yet in short supply. According to the International Diabetes Federation, 1 in 11 adults has diabetes (approximately 425 million people) and 12% of global health expenditure is spent on diabetes (approximately $727 billion).Brazil.

A majority of challenging wounds are non-healing chronic wounds and in addition, chronic diabetic foot ulcers and pressure ulcers are often slow-to-heal wounds, which often fail to heal for many months, and sometimes, for several years. These wounds often involve physiologic, complex and multiple complications such as reduced blood supply, compromised lymphatic systems or immune deficiencies that interfere with the body’s normal wound healing processes. These wounds often develop due to a patient’s impaired vascular and tissue repair capabilities. Wounds that are difficult to treat do not always respond to traditional therapies, which include hydrocolloids, hydrogels and alginates, among other treatments. We believe that physicians and hospitals need a therapy that addresses the special needs of these chronic wounds with high levels of both clinical and cost effectiveness.Profile

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

~~Developing Product Opportunities - Orthopedic~~

~~We launched the orthoPACE device in Europe, which is~~therapeutic massager intended for ~~use in orthopedic, trauma~~the relief of minor muscle aches and sports medicine indications, following CE Marking approval in 2010. The device features four types of applicators including a unique applicator that is less painful for some indications and may reduce or completely eliminate anesthesia for some patients. Inpains via SANUWAVE’s Diffused Acoustic Pressure (DAP^®) technology. DAP^® delivers the orthopedic setting, the orthoPACE is being used to treat tendinopathies and acute and nonunion fractures, including the soft tissue surrounding the fracture to accelerate healing and prevent secondary complications and their associated treatment costs. In 2013, we obtained approval from South Korea’s Ministry of Food and Drug Safety to market orthoPACE in that country.

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

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

~~Trauma injuries are acute and result from any physical damage to the body caused by violence or accident or fracture~~.Surgical treatment of traumatic fractures often involves fixation with metallic plates, screws and rods (internal fixation) and include off-loading to prevent motion, permitting the body to initiate a healing response. In the United States, six million traumatic fractures are treated each year, and over one million internal fixation procedures are performed annually. The prevalence of non-union among these fractures is between 2.5% and 10.0% depending on the fracture typeand risk factors such as diabetes and smoking history or other systemic diseases. At the time of surgery, adjunctive agents (such as autograft, cadaver bone and synthetic filling materials) are often implanted along with internal fixation to fill bony gaps or facilitate the healing process to avoid delayed union or non-union (incomplete fracture healing) results. Both pre-clinical and clinical investigations have shown positive results, suggesting our technology could potentially be developed as an adjunct to these surgeries or primary treatment protocol for delayed or non-union events.

~~Non-Medical Uses For Our Shock wave Technology~~

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

Due to their powerful pressure gradients and localized cavitational effects, we believe that high-energy, acoustic pressure shock waves can be used to clean, in an energy efficient manner, contaminated fluids from impurities, bacteria, viruses, and other harmful micro-organisms, which provides opportunities for our technology in cleaning industrial and domestic/municipal waters. Based on the same principles of action of the acoustic pressure ~~shock~~ waves ~~against bacteria, viruses,~~without the impact and ~~harmful micro-organisms, we believe our technology can be applied for cleaning or sterilization~~potential pain of ~~various foods such as milk, natural juices, and meats.~~

~~In the energy sector, we believe that the acoustic pressure shock waves can be used to improve oil recovery (IOR), as~~ a ~~supplement to or in conjunction with existing fracking technology, which utilizes high pressurized water/gases to crack the rocks that trapped oil~~focused pulse. There is a significant need in the ~~underground reservoir. Through~~U.S. for pain management products and the ~~use~~Company believes the non-invasive delivery of ~~our high-energy, acoustic pressure shock waves the efficiency~~therapeutic shockwaves for its treatment can be improved and in the same time the environmental impact of the fracking process can be reduced. Furthermore, we believe our technology can be used for enhanced oil recovery (EOR) based on the changes in oil flow characteristics resulting from acoustic pressure shock wave stimulation, as a tertiary method of oil recovery from older oil fields.help to serve this market.

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

~~Market Trends~~

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

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

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

~~Strategy~~

~~Our primary objective is to be a leader in the development and~~ commercialization of our ~~acoustic pressure shock wave technology~~patented, non-invasive, and biological response-activating medical systems for regenerative medicine and other applications. Our initial focus is regenerative medicine – utilizing noninvasive (extracorporeal), acoustic pressure shock waves to produce a biological response resulting in the body healing itself through the repair and regeneration of skin, musculoskeletal tissue, and vascular structures. Our ~~lead regenerative product in the United States is the dermaPACE device for treating diabetic foot ulcers, which was subject to two double-blinded, randomized Phase III clinical studies~~ ~~and cleared by the FDA on December 28, 2017.~~

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

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

The key elements of our strategy include the following:

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Commercialize and support the domestic distribution of our ~~dermaPACE device~~UltraMIST and PACE systems to treat ~~diabetic foot ulcers.~~

wounds;

Reduce and normalize operating costs to support growth;

We initially focused on obtaining FDA approval in the United States for our lead product candidate, dermaPACE, for the treatment of diabetic foot ulcers, which we believe represents a large, unmet need. On December 28, 2017, the FDA notified the Company to permit the marketing of the dermaPACE System for the treatment of diabetic foot ulcers in the United States. We plan to begin the commercialization of dermaPACE in the United States in 2018 through strategic partnerships or commercialize the product ourselves. For example, in February 2018, we entered into an agreement with Premier Shockwave Wound Care, Inc. ("PSWC") and Premier Shockwave, Inc. ("PS") for the purchase by PSWC and PS of dermaPACE Systems and related equipment sold by us, including a minimun purchase of 100 units over 3 years, and granting PSWC and PS limited but exclusive distribution rights to provide dermaPACE Systems to certain government healthcare facilities in exchange for the payment of certain royalties to us.

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

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

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

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

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~~Support the global distribution of our products.~~

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

Scientific Advisors

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

~~We pay~~The Company pays consulting fees to certain members of our scientific advisory board for the services they provide to us, in addition to reimbursing them for incurred expenses. The amounts vary depending on the nature of the services. We paid our advisors aggregate consulting fees through the issuance of stock options and warrants in 2017 and 2016 and recorded stock-based compensation expense of $39,127 and $30,421 for the years ended December 31, 2017 and 2016, respectively.

Sales, Marketing and Distribution

~~Following FDA approval~~The Company sells systems through a combination of direct sales representatives and independent distributors. The systems are used in ~~December 2017, we intend to seek a development and/or commercialization partnership or commercialize~~hospitals, clinics, and alternate care facilities. Our primary sales are in the ~~product ourselves.~~ Outside the United States, we retain distributors to represent our products in selective international markets. These distributors have been selected based on their existing business relationships and the abilityUnites States.

Table of their sales force and distribution capabilities to effectively penetrate the market with our PACE product line. We rely on these distributors to manage physical distribution, customer service and billing services for our international customers. Two distributors accounted for 38% and 8% of revenues for the year ended December 31, 2017, and 17% and 69% of accounts receivable at December 31, 2017.Contents

Manufacturing

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

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

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

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

Our facility in ~~Suwanee, Georgia~~Eden Prairie, MN consists of ~~7,500~~8,199 square feet and provides office, ~~research and~~product development, quality control, ~~production~~ and warehouse space. It is aan FDA registered facility and is ~~ISO 13485 certified (for meeting the requirements~~International Organization for ~~a comprehensive management system for the design and manufacture of medical devices).~~Standardization (ISO) 13485:2016 certified.

Intellectual Property

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

Patents

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

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

~~We are the assignee~~In August 2005, we entered into a license agreement with HealthTronics Inc. (“HealthTronics”) in connection with our acquisition of ~~twenty-eight issued United States patents~~certain assets and eighteen issued foreign patents, which on average have remaining useful lives of ten years with the longest useful life extending to 2036. Our current issued United States and foreign patents include patent claims directed to particular electrode configurations, piezoelectric fiber shock wave devices, chemical components for shock wave generation, reflector geometries, medical systems general construction, and detachable therapy heads with data storage devices. Our United States patents also include patent claims directed to methods of using acoustic pressure shock waves, including devices such as our products, to treat ischemic conditions, spinal cord scar tissue and spinal injuries, bone fractures and osteoporosis, blood sterilization, stem cell stimulation, tissue cleaning, and, within particular treatment parameters, diabetic foot ulcers and pressure sores. While such patented method claims may provide patent protection against certain indirect infringing promotion and sales activities of competing manufacturers and distributors, certain medical methods performed by medical practitioners or related health care entities may be subject to exemption from potential infringement claims under 35 U.S.C. § 287(c) and, therefore, may limit enforcement of claims of our method patents as compared to device and non-medical method patents.

We also currently maintain eleven United States non-provisional patent applications and seven foreign patent applications. Our patent-pending rights include inventions directed to certain shock wave devices and systems, ancillary products, and components for acoustic pressure shock wave treatment devices, and various methods of using acoustic pressure shock waves. Such patent-pending methods include, for example, using acoustic pressure shock waves to treat soft tissue disorders, bones, joints, wounds, skin, blood vessels and circulatory disorders, lymphatic disorders, cardiac tissue, fat and cellulite, cancer, blood and fluids sterilization, to destroy pathogens, to process fluids, meat and dairy products, to destroy blood vessels occlusions and plaques, and to perform personalized medical treatments. All of our United States and foreign pending applications either have yet to be examined or require response to an examiner’s office action rejections and, therefore, remain subject to further prosecution, the possibility of further rejections and appeals, and/or the possibility we may elect to abandon prosecution, without assurance that a patent may issue from any pending application.

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

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

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

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

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

Under the terms of the ~~sale~~agreement, Celularity was to provide Biovance and Interfyl product to us for commercialization in exchange for a quarterly license fee payment. In May 2021, we received notification of non-compliance with the terms of the ~~veterinary business in June 2009,~~agreement due to alleged non-payment of the quarterly license fee. Pursuant to the notification, we ~~have also granted certain exclusive and non-exclusive patent license rights to Pulse Veterinary Technologies, LLC for most~~ceased commercialization of ~~our patent portfolio issued before 2009 to utilize acoustic pressure shock wave technologies in~~ the ~~field of non-human mammals.~~

Given our international patent portfolio, there are growing risks of challenges to our existing and future patent rights. Such challenges may result in invalidation or modification of some or all of our patent rights in a particular patent territory and reduce our competitive advantage with respect to third partylicensed products and ~~services. Such challenges may also require~~have not resumed commercialization.

The Company operates in an industry characterized by extensive patent litigation. If the ~~expenditure of significant financial and managerial resources.~~

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

Our patents directed to our material technologies and products are detailed in the tables below:

Shockwave Patent Portfolio – Devices Section

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

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

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

Shockwave Patent Portfolio – Indications for Medical Section

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

Patent #/ Application #	Title	Expiration Date	Jurisdiction
EP 3285661	Tissue disinfection with acoustic pressure shock waves	April 22, 2036	Great Britain, France, Germany, Ireland, and the Netherlands

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

Ultrasound Patents – UltraMIST Patent Portfolio

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

Trademarks

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

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

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

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

~~Potential Intellectual Property Issues~~

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

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

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

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

Competition

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

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

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

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

Regulatory Matters

FDA Regulation

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

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

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

FDA Approval or Clearance of Medical Devices

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

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Class I: general controls, such as labeling and adherence to quality system regulations;

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Class II: special controls, pre-market notification (510(k)), specific controls such as performance standards, patient registries, and post market surveillance, and additional controls such as labeling and adherence to quality system regulations; and

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Class III: special controls and approval of a pre-market approval (PMA) application.

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

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

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

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

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

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

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

~~Clinical Trials of Medical Devices~~

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

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

Post-Approval Regulation of Medical Devices

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

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

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labeling and claims regulations, which prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling;

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the Medical Device Reporting regulation, which requires reporting to the FDA of certain adverse experiences associated with use of the product; and

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post market surveillance, including documentation of clinical experience and ~~also~~ follow-on, confirmatory studies.

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

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

Manufacturing Certifications

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

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

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

Manufacturing cGMP Requirements

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

International Regulation

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

~~The primary regulatory environment in Europe is the European Union, which consists~~

Table of 28 member states encompassing most of the major countries in Europe. In the European Union, the European Medicines Agency (EMA) and the European Union Commission have determined that dermaPACE, orthoPACE, OssaTron and Evotron will be regulated as medical device products. These devices have been determined to be Class IIb devices. These devices are CE Marked and as such can be marketed and distributed within the European Economic Area.Contents

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

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

~~European Good Manufacturing Practices~~

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

United States Anti-Kickback and False Claims Laws

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

Third Party Reimbursement

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

The CPT code for UltraMIST is 97610. This Category 1 code describes a system used in wound care that uses low frequency ultrasonic energy to atomize a liquid and deliver continuous low frequency ultrasound to the wound bed. The CPT codes for the dermaPACE System using extracorporeal shock wave technology to treat diabetic foot ulcers are 0512T and 0513T. The codes 0512T and 0513T are for extracorporeal shock wave for integumentary wound healing, including topical application and dressing and high energy extracorporeal shockwave therapy for integumentary wound healing. While these are Category 3 codes because the dermaPACE System is considered experimental by the Centers for Medicare & Medicaid Services, this designation does not preclude billing and obtaining payment. Instead, claims are reviewed on an individual basis.

In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific product lines and procedures. There can be no assurance that procedures using our products will be considered medically reasonable and necessary for a specific indication, that our products will be considered cost-effective by third party payers, that an adequate level of reimbursement will be available or that the ~~third party~~third-party payers’ reimbursement policies will not adversely affect our ability to sell our products profitably.

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

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

The initial phase of establishing a professional billing code for a medical service typically includes applying for a CPT Category III code for both hospital and in-office procedures. This is a tracking code without relative value assigned that allows third party payers to identify and monitor the service as well as establish value if deemed medically necessary. The process includes CPT application submission, clinical discussion with Medical Professional Society CPT advisors as well as American Medical Association (AMA) CPT Editorial Panel review. A new CPT Category III code will be assigned if the AMA CPT Editorial Panel committee deems it meets the applicable criteria and is appropriate. In 2018, we applied for two, new CPT Category III codes for extracorporeal shock wave therapy (ESWT) in wound healing. It is anticipated these codes will be published by AMA/CPT for use beginning in 2020.

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

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

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

Confidentiality and Security of Personal Health Information

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

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

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

Environmental and Occupational Safety and Health Regulations

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

~~Research and Development~~

For the years ended December 31, 2017 and 2016, we spent $1,292,531 and $1,128,640, respectively, on research and development activities which consists of fixes to the dermaPACE device software per FDA request, responses to FDA questions and research costs from partnering universities for non-medical uses of the PACE technology.

Employees

As of ~~March 20, 2018,~~December 31, 2023, we had a total of ~~eight~~31 full time employees in the United States. Of these, five were engaged in research and development which includes clinical, regulatory, and quality. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We believe our relationship with our employees is good.

Corporate Information

We were formed as a Nevada corporation in 2004. Our corporate headquarters address 11495 Valleyview Road, Eden Prairie, MN 55344, and our main telephone number is (800) 545-8810 or (952) 656-1029.

Available Information

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

Item 1A.

RISK FACTORS

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

Risks Related to the Business Combination

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

Unless waived by the parties to the Merger Agreement, and subject to applicable law, the consummation of the Business Combination is subject to several conditions set forth in the Merger Agreement. For more information about conditions for the consummation of the Business Combination, see Part II Item ~~1A.RISK FACTORS~~5 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Factors affecting the trading price of the securities of the Combined Company after the Closing may include:

the Combined Company may be required to raise additional funds to finance operations and the Combined Company may not be able to do so, and/or the terms of any financings may not be advantageous to the Combined Company;

The Company has a history of losses, and the Combined Company may continue to incur losses and may not achieve or maintain profitability;

the medical device/therapeutic product industries are highly competitive and subject to rapid technological change, so if the Combined Company’s competitors are better able to develop and market products that are safer and more effective than any products the Combined Company may develop, the Combined Company’s commercial opportunities will be reduced or eliminated;

if the Combined Company’s products and product candidates do not gain market acceptance among physicians, patients and the medical community, the Combined Company may be unable to generate significant revenues, if any;

any product candidates of the Combined Company may not be developed or commercialized successfully;

the Combined Company may not successfully establish and maintain licensing and/or partnership arrangements for technology for non-medical uses, which could adversely affect the Combined Company’s ability to develop and commercialize non-medical technology;

The Company’s product component materials are only produced by a single supplier for such product component. If the Combined Company is unable to obtain product component materials and other products from our suppliers that the Combined Company will depend on for operations, or find suitable replacement suppliers, the Combined Company’s ability to deliver products to market will likely be impeded, which could have a material adverse effect on the Combined Company;

we currently sell products through distributors and partners whose sales account for the majority of revenues and accounts receivable. The Combined Company’s business and results of operations could be adversely affected by any business disruptions or credit, or other financial difficulties experienced by such distributors or partners;

the Combined Company faces an inherent risk of liability if the use or misuse of product candidates results in personal injury or death;

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actual or anticipated fluctuations in the Combined Company’s quarterly financial results or the quarterly financial results of companies perceived to be similar to the Combined Company may negatively impact the trading price of the Combined Company’s securities;

the Combined Company will be dependent on information technology and the Combined Company’s systems and infrastructure face certain risks, including from cybersecurity breaches and data leakage;

the Combined Company will generate a portion of revenue internationally and the Combined Company will be subject to various risks relating to international activities which could adversely affect operating results;

results of Combined Company clinical trials may be insufficient to obtain regulatory approval for any new product candidates;

the Combined Company will be subject to extensive governmental regulation, including the requirement of FDA approval or clearance, before any new product candidates may be marketed;

regulatory approval of the Combined Company’s product candidates may be withdrawn at any time;

federal regulatory reforms may adversely affect the Combined Company’s ability to sell products profitably;

failure to obtain regulatory approval in foreign jurisdictions may prevent the Combined Company from marketing products abroad;

if the Combined Company fails to obtain an adequate level of reimbursement for approved products by third party payers, there may be no commercially viable markets for approved products, or the markets may be much smaller than expected;

uncertainty surrounding and future changes to healthcare law in the United States may have a material adverse effect on the Combined Company;

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

if the Combined Company fails to comply with the HIPAA Privacy, Security and Breach Notification Regulations, as such rules become applicable to the Combined Company’s business, it may increase operational costs;

the Combined Company will face periodic reviews and billing audits from governmental and private payors and these audits could have adverse results that may negatively impact the business;

product quality or performance issues may be discovered through ongoing regulation by the FDA and by comparable international agencies, as well as through the Combined Company’s internal standard quality process;

the use of hazardous materials in Combined Company operation may subject the Combined Company to environmental claims or liability;

the protection of the Combined Company’s intellectual property will be critical to the Combined Company’s success and any failure on the Combined Company’s part to adequately protect those rights could materially adversely affect the business;

patent applications owned by or licensed to the Combined Company may not result in issued patents, and competitors may commercialize discoveries the Combined Company attempts to patent;

the Combined Company’s patents may not be valid or enforceable and may be challenged by third parties;

issued patents and patent licenses may not provide the Combined Company with any competitive advantage or provide meaningful protection against competitors;

the ability to market the products the Combined Company develops is subject to the intellectual property rights of third parties;

changes in the market’s expectations about the Combined Company’s operating results;

success of competitors of the Combined Company;

the Combined Company’s operating results failing to meet the expectation of securities analysts or investors in a particular period;

changes in financial estimates and recommendations by any securities analysts that may cover the Combined Company or the industries in which the Combined Company operates in general;

operating and stock price performance of other companies that investors deem comparable to the Combined Company;

changes in laws and regulations affecting the Combined Company’s business;

commencement of, or involvement in, litigation involving the Combined Company;

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changes in the Combined Company’s capital structure, such as future issuances of securities or the incurrence of additional debt;

the volume of shares of Class A Common Stock available for public sale by the Combined Company;

any major change in the post-Closing board of directors or management of the Combined Company;

sales of substantial amounts of Common Stock by directors, executive officers or significant stockholders of the Combined Company, or the perception that such sales could occur; and

general economic and political conditions such as recessions, pandemics, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.

Broad market and industry factors may materially harm the market price of securities, irrespective of a company’s operating performance. The stock market in general, and Nasdaq in particular, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of the Combined Company’s securities, may not be predictable. A loss of investor confidence in the market for the stock of other companies that investors perceive to be similar to the Combined Company could depress the Combined Company’s stock price regardless of its business, prospects, financial conditions, or results of operations. A decline in the market price of the Combined Company’s securities also could adversely affect the Combined Company’s ability to issue additional securities and to obtain additional financing in the future.

Risks Related to our Business

Our recurring losses from operations and dependency upon future issuances of equity or other financing to fund ongoing operations have raised substantial ~~doubts~~doubt as to our ability to continue as a going concern.We will be required to raise additional funds to finance our operations and remain a going concern; we may not be able to do so, and/or the terms of any financings may not be advantageous to us.

The continuation of our business is dependent upon raising additional capital.We expect to devote substantial resources for the commercialization of ~~the dermaPACE~~UltraMIST and ~~will continue to research and develop the non-medical uses of the~~ PACE ~~technology, both of~~ which will require additional capital resources. We incurred a net loss of ~~$5,537,936~~$25.8 million and ~~$6,439,040~~$10.3 million for the years ended December 31, ~~2017~~2023, and ~~2016,~~2022, respectively. ~~These~~The operating losses ~~create uncertainty~~and the events of default on the Company’s notes payable indicate substantial doubt about ~~our~~the Company’s ability to continue as a going ~~concern.~~concern for a period of at least twelve months from the filing of this Annual Report Form 10-K.

~~At December 31, 2017, we had cash~~The Company is currently in default under the Senior Secured Note Payable issued to NH Expansion Credit Fund Holdings L.P. (“North Haven Expansion”) in August 2020 in the total principal amount of $15.0 million (the “Senior Secured Note”), the Convertible Promissory Note issued to Celularity Inc. (“Celularity”) in August 2020 in the total principal amount of $4.0 million (the “Celularity Note”), and ~~cash equivalents totaling $730,184~~the Convertible Promissory Note issued to HealthTronics, Inc. (“HealthTronics”) in August 2020 in the total principal amount of $1.4 million (the “HealthTronics Note”) and, ~~negative working capital~~as a result, is accruing interest at the default interest rate of ~~$9,955,113. For~~an incremental 5% on the ~~years ended December 31, 2017~~Senior Secured Note and ~~2016, our net cash used by operating activities was $1,528,971~~the Celularity Note and ~~$3,199,453, respectively. Management expects~~an incremental 2% on the ~~cash used in operations for~~HealthTronics Note. The existing defaults under the Celularity Note and the HealthTronics Note relate to SANUWAVE’s failure to make required payments, and the existing defaults under the Senior Secured Note relate to (i) SANUWAVE’s failure to maintain minimum liquidity of $5.0 million and (ii) SANUWAVE’s defaults under the Celularity Note and HealthTronics Note.

While the Celularity Note and the HealthTronics Note have already matured, and thus all amounts thereunder are already due and payable, if the Company does not regain compliance with the terms of the Senior Secured Note by April 30, 2024, North Haven Expansion will have the right to declare all obligations under the Senior Secured Note to be ~~approximately $225,000~~immediately due and payable. We expect to ~~$300,000 per month~~regain compliance with the terms of the Senior Secured Note upon the Closing of the Merger.

On October 31, 2023, the Company entered into a letter agreement with HealthTronics, pursuant to which we agreed to pay HealthTronics the remaining unpaid principal amount of $1.4 million under the HealthTronics Note by the earlier of the Closing or March 31, 2024 in exchange for HealthTronics’ agreement to release all claims against the ~~first quarter of 2018 and $275,000 to $350,000 per month for the second quarter of 2018 as~~ ~~resources are devoted~~Company related to the expansion of our international business, preparations for commercialization of the dermaPACE product including hiring of new employees and continued research and development of non-medical uses of our technology.HealthTronics Note.

~~The continuation of our business is dependent upon raising additional capital during the second quarter of 2018 and potentially into 2019 to fund operations.~~ Management’s plans are to obtain additional capital in ~~2018~~early 2024, primarily through ~~investments by strategic partners for market opportunities, which may include strategic partnerships or licensing arrangements, or raise~~closing the Merger Agreement. The Company could also obtain additional capital through the conversion of outstanding warrants, ~~the~~ issuance of common or preferred stock, securities convertible into common stock, or secured or unsecured debt. However, because of our private placements in May 2023, December 2023 and January 2024 of Future Advance Convertible Promissory Notes and Common Stock Purchase Warrants, we are currently prohibited from incurring or guaranteeing most kinds of debt issued by public or private investors. These possibilities, to the extent available, may be on terms that result in significant dilution to ~~our~~the Company’s existing ~~shareholders.~~ ~~Although~~stockholders. In addition, there can be no assurances ~~can~~that the Company’s plans to obtain additional capital will be ~~given, management believes that potential additional issuances of equity~~successful on the terms or ~~other potential financing transactions as discussed above should provide the necessary funding for us.~~ timeline it expects, or at all. If these efforts are unsuccessful, wethe Company may be ~~forced~~required to ~~seek relief~~significantly curtail or discontinue operations or, if available, obtain funds through financing transactions with unfavorable terms.

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The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a ~~filing under~~going concern and the ~~U.S. Bankruptcy Code. Our~~realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. The Company’s consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should wethe Company be unable to continue as a going concern.

We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting or disclosure controls and procedures, it may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations, which may adversely affect our business, financial condition, and results of operations.

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

Expertise and resources to analyze and properly apply U.S. GAAP to complex and non-routine transactions such as complex financial instruments and derivatives and complex sales distributing agreements with select vendors.

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

The Company has failed to design and implement controls around all accounting and IT processes and procedures and, as such, we ~~may continue~~believe that all its accounting and IT processes need to ~~incur losses~~be re-designed and ~~may~~tested for operating effectiveness.

We are taking certain measures to remediate these material weaknesses described above as described in Part II, Item 9A of this Annual Report on Form 10-K; however, such material weaknesses had not ~~achieve or maintain profitability.~~

For the year ended December 31, 2017, we had a net loss of $5,537,936 and used $1,528,971 of cash in operations. For the year ended December 31, 2016, we had a net loss of $6,439,040 and used $3,199,453 of cash in operations. Asbeen remediated as of December 31, ~~2017,~~2023. In addition, due to the material weaknesses in internal control over financial reporting, we ~~had~~have also determined that our disclosure controls and procedures were ineffective as of December 31, 2023. The material weaknesses will not be considered remediated until management completes the design and implementation of the measures described above and the controls operate for a sufficient period of time and management has concluded, through testing, that these controls are effective.

There can be no assurance as to when the material weaknesses will be remediated. At this time, we cannot provide an ~~accumulated deficit~~estimate of ~~$104,971,384~~costs expected to be incurred in connection with implementing this remediation plan; however, these remediation measures will be time consuming, will result in us incurring significant costs, and ~~a total stockholders' deficit of $9,880,827. As a result~~will place significant demands on our financial and operational resources.

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

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

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

Table of principal to HealthTronics, Inc. on the notes payable, related parties equal to 20% of the proceeds received through the issuance or sale of any equity securities in cash or through the licensing of our patents or other intellectual property rights.Contents

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

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unanticipated expenditures in research and development or manufacturing activities;

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~~delayed market acceptance of any approved product;~~

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unanticipated expenditures in the acquisition and defense of intellectual property rights;

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the failure to develop strategic alliances for the marketing of some of our ~~product candidates;~~

products;

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~~additional inventory builds to adequately support the launch of new products;~~

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unforeseen changes in healthcare reimbursement for procedures using any of our approved products;

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inability to train a sufficient number of physicians to create a demand for any of our approved products;

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lack of financial resources to adequately support our operations;

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difficulties in maintaining commercial scale manufacturing capacity and capability;

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unforeseen problems with our ~~third party~~third-party manufacturers, service providers or specialty suppliers of certain raw materials;

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unanticipated difficulties in operating in international markets;

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unanticipated financial resources needed to respond to technological changes and increased competition;

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unforeseen problems in attracting and retaining qualified personnel;

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~~the impact of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively the PPACA) on our operations;~~

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the impact of changes in U.S. health care law and policy on our operations;

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enactment of new legislation or administrative regulations;

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the application to our business of new court decisions and regulatory interpretations;

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claims that might be brought in excess of our insurance coverage;

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delays in timing of receipt of required regulatory approvals;

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the failure to comply with regulatory guidelines; and

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the uncertainty in industry demand and patient wellness behavior.

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

~~Our product candidates may not be developed or commercialized successfully.~~

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

~~We are subject to risks that:~~

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~~the FDA or a foreign regulatory authority finds our product candidates ineffective or unsafe;~~

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~~we do not receive necessary regulatory approvals;~~

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~~the regulatory review and approval process may take much longer than anticipated, requiring additional time, effort and expense to respond to regulatory comments and/or directives;~~

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~~the reimbursement for our products is difficult to obtain or is too low, which can hinder the introduction and acceptance of our products in the market;~~

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~~we are unable to get our product candidates in commercial quantities at reasonable costs; and~~

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~~the patient and physician community does not accept our product candidates.~~

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

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~~adverse or ambiguous results;~~

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~~undesirable side effects that delay or extend the trials;~~

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~~the inability to locate, recruit, qualify and retain a sufficient number of clinical investigators or patients for our trials; and~~

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~~regulatory delays or other regulatory actions.~~

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

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

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

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

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

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

We may not successfully establish and maintain licensing and/or partnership arrangements for our technology for non-medical uses, which could adversely affect our ability to develop and commercialize our non-medical technology.

Our strategy for the development, testing, manufacturing, and commercialization of our technology for non-medical uses generally relies on establishing and maintaining collaborations with licensors and other third parties. We may not be able to obtain, maintain or expand these or other licenses and collaborations or establish additional licensing and collaboration arrangements necessary to develop and commercialize our product candidates. Even if we are able to obtain, maintain or establish licensing or collaboration arrangements, these arrangements may not be on favorable terms and may contain provisions that will restrict our ability to develop, test and market our product candidates. Any failure to obtain, maintain or establish licensing or collaboration arrangements on favorable terms could adversely affect our business prospects, financial condition or ability to develop and commercialize our technology for non-medical uses.

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

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

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

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

~~We currently sell our products through two distributors whose sales account for the majority~~

Table of our revenues and accounts receivable. Our business and results of operations could be adversely affected by any business disruptions or credit or other financial difficulties experienced by such distributors.Contents

A majority of our revenues, and a majority of our accounts receivable, are from two distributors. Three distributors accounted for 8%, 38% and 24% of revenues for the year ended December 31, 2017, and 69%, 17% and 0% of accounts receivable at December 31, 2017. Two distributors accounted for 50% and 32% of revenues for the year ended December 31, 2016, and 87% and 10% of accounts receivable at December 31, 2016. At December 31, 2017, the Company’s distributor in South Korea accounted for 69% of the total outstanding accounts receivable. Due to the political climate and uncertainty in South Korea, this distributor has not been able to finalize the expected sales in late 2016 and 2017 and therefore has been unable to pay the Company in a timely manner. The Company has accounted for 38% of the total outstanding accounts receivable balance as a bad debt reserve as of December 31, 2017. The Companycontinues to work with the distributor representing 69% of the total accounts receivable on a payment plan to get their account current by April 30, 2018. To the extent that our two distributors experience any business disruptions or credit or other financial difficulties, our revenues and the collectability of our accounts receivable could be negatively impacted. If we are unable to establish, on a timely basis, relationships with new distributors, our business and results of operations could be negatively impacted.

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

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

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

As a small company with ~~seven~~less than 40 employees, our success depends on the continuing contributions of our management team and qualified personnel. Turnover, transitions or other disruptions in our management team and personnel could make it more difficult to successfully operate our business and achieve our business goals and could adversely affect our results of operation and financial condition. Our success depends in large part on our ability to attract and retain highly qualified personnel. We face intense competition in our hiring efforts from other pharmaceutical, biotechnology and medical device companies, as well as from universities and nonprofit research organizations, and we may have to pay higher salaries to attract and retain qualified personnel. The loss of one or more of these individuals, or our inability to attract additional qualified personnel, could substantially impair our ability to implement our business plan.

We face an inherent risk of liability ~~in the event that~~if the use or misuse of our ~~product candidates~~products results in personal injury or death.

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

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

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

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

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

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

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required compliance with existing and changing foreign healthcare and other regulatory requirements and laws, such as those relating to patient privacy or handling of bio-hazardous ~~waste.~~

waste;

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required compliance with anti-bribery laws, data privacy requirements, labor laws and anti-competition ~~regulations.~~

regulations;

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export or import ~~restrictions.~~

restrictions;

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~~various reimbursement and insurance regimes.~~

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~~laws and business practices favoring local companies.~~

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political and economic ~~instability.~~

instability,

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~~potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements and other trade barriers.~~

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foreign exchange ~~controls.~~controls; and

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difficulties protecting or procuring intellectual property rights.

~~As we expand internationally,~~With respect to our international operations, our results of operations and cash flows ~~will become increasingly~~are subject to fluctuations due to changes in foreign currency exchange rates. Our expenses are generally denominated in the currencies in which our operations are located, which is in the United States. If the value of the U.S. dollar increases relative to foreign currencies in the future, in the absence of a corresponding change in local currency prices, our future revenue could be adversely affected as we convert future revenue from local currencies to U.S. dollars.

Provisions in our Articles of Incorporation, Bylaws and Nevada law might decrease the chances of an acquisition.

Provisions of our Articles of Incorporation and Bylaws and applicable provisions of Nevada law may delay or discourage transactions involving an actual or potential change in control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Some of the following provisions in our Articles of Incorporation ~~and~~or Bylaws that ~~implement these~~may decrease our attractiveness to be acquired are:

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~~stockholders may not vote by written consent;~~

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advance notice of business to be brought is required for a meeting of ~~the Company’s~~our stockholders;

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no cumulative voting rights for the holders of common stock in the election of directors; and

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vacancies in the board of directors may be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum.

In addition, Section 78.438 of the Nevada Revised Statutes prohibits a publicly-held Nevada corporation from engaging in a business combination with an interested stockholder (generally defined as a person which together with its affiliates owns, or within the last three years has owned, 10% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder) unless the business combination is approved in a prescribed manner. The existence of the foregoing provisions and other potential anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our Company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

Regulatory Risks

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

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

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~~the product candidate may not prove to be safe or effective;~~

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~~the product candidate’s benefits may not outweigh its risks;~~

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~~the results from advanced clinical trials may not confirm the positive results from pre-clinical studies and early clinical trials;~~

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~~the FDA or comparable foreign regulatory authorities may interpret data from pre-clinical and clinical testing in different ways than us; and~~

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~~the FDA or other regulatory agencies may require additional or expanded trials and data.~~

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

The process of obtaining FDA approval is lengthy, expensive and uncertain, and we cannot be sure that our product candidates will be approved in a timely fashion, or at all. If the FDA does not approve or clear our product candidates in a timely fashion, or at all, our business and financial condition would likely be adversely affected. The FDA has determined that our technology and product candidates constitute “medical devices”, and are thus subject to review by the Center for Devices and Radiological Health. However, we cannot be sure that the FDA will not select a different center and/or legal authority for one or more of our other product candidates, in which case applicable governmental review requirements could vary in some respects and be more lengthy and costly.

~~Both before and after approval or clearance of our product candidates, we~~We and our ~~product candidates,~~products, our suppliers, and our contract manufacturers are subject to extensive regulation by governmental authorities in the United States and other countries. Failure to comply with applicable requirements could result in, among other things, any of the following actions:

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warning ~~letters;~~

letters

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fines and other monetary ~~penalties;~~

penalties

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unanticipated ~~expenditures;~~

expenditures

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~~delays in FDA approval and clearance, or FDA refusal to approve or clear a product candidate;~~

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product recall or ~~seizure;~~

seizure

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interruption of manufacturing ~~or clinical trials;~~

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operating ~~restrictions;~~

restrictions

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~~injunctions;~~injunctions, and

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criminal prosecutions.

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

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~~testing;~~

testing

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~~manufacturing;~~

manufacturing

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quality ~~control;~~

control

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~~labeling;~~

labeling

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~~advertising;~~

advertising

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~~promotion;~~

promotion

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~~distribution;~~

distribution

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~~export;~~

export

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reporting to the FDA certain adverse experiences associated with the use of the products; and

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obtaining additional approvals or clearances for certain modifications to the products or their labeling or claims.

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

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

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

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

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

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~~the size of the patient population;~~

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~~the nature of the clinical protocol requirements;~~

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~~the availability of other treatments or marketed therapies (whether approved or experimental);~~

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~~our ability to recruit and manage clinical centers and associated trials;~~

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~~the proximity of patients to clinical sites; and~~

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~~the patient eligibility criteria for the study.~~

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

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

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

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

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

Regulatory approval of our ~~product candidates~~products may be withdrawn at any time.

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

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

~~Federal regulatory reforms may adversely affect our ability to sell our products profitably.~~

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

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

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

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

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

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

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

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

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

Uncertainty surrounding and future changes to ~~reform~~ healthcare law in the United States may have a material adverse effect on us.

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

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~~a 2.3% excise tax on any entity that manufactures or imports medical devices offered for sale~~introduced in the United States ~~with limited exceptions, began in 2013 but a two year moratorium has been issued for sales during 2016~~Congress that could significantly change the statutory provisions governing the clearance or approval, manufacture, marketing, and ~~2017,~~pricing of medical devices. In addition, FDA regulations and ~~new legislation was passed in January 2018 such that the tax will be delayed until January 1, 2020;~~

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~~a new Patient-Centered Outcomes Research Institute to oversee, identify priorities and conduct comparative clinical effectiveness research;~~

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payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models;

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~~an independent payment advisory board that will submit recommendations to reduce Medicare spending if projected Medicare spending exceeds a specified growth rate; and~~

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~~a new abbreviated pathway for the licensure of biological products that~~guidance are ~~demonstrated to be biosimilar~~often revised or ~~interchangeable with a licensed biological product.~~

However, some of the provisions of the PPACA have yet to be fully implemented and certain provisions have been subject to judicial and Congressional challenges. Furthermore, President Trump has vowed to repeal the PPACA, and it is uncertain whether new legislation will be enacted to replace the PPACA. On January 20, 2017, President Trump signed an executive order stating that the administration intended to seek prompt repeal of teh healthcare reform law, and, pending repeal, directed the U.S. Department of Health and Human Services and other executive departments and agencies to take all steps necessary to limit any fiscal or regulatory burdens of the healthcare reform law. On October 12, 2017, President Trump signed another executive order directing certain federal agencies to propose regulations or guidelines to permit small businesses to form association health plans, expand the availability of short-term, limited duration insurance, and expand the use of health reimbursement arrangements, which may circumvent some of the requirements for health insurance mandatedreinterpreted by the ~~healthcare reform law. The U.S. Congress has also made several attempts to repeal or modify healthcare reform law. In the coming years, there~~agency in ways that may continue to be additional proposals relating to the reform of the United States healthcare system. Certain of these proposals could limit the prices we are able to charge for our products or the amounts of reimbursement available for our products, and could limit the acceptance and availability of our products. The adoption of some or all of these proposals could have a material adverse effect onsignificantly affect our business ~~results of operations~~ and ~~financial condition.~~

Additionally, initiatives sponsored by government agencies, legislative bodies and the private sector to limit the growth of healthcare costs, including price regulation and competitive pricing, are ongoing in the United States and other markets.our products. We could experience an adverse impact on our operating results due to such changes, including increased pricing pressure in these markets. Governments, hospitals, and other ~~third party~~third-party payors also could reduce the amount of approved reimbursement for our products or deny coverage altogether. Reductions in reimbursement levels or coverage or other cost-containment measures could adversely affect our future operating results.

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

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

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

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

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

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

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

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

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

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

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required refunding or retroactive adjustment of amounts we have been paid by governmental or private ~~payors.~~

payors;

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state or Federal agencies imposing fines, penalties and other sanctions on ~~us.~~

us;

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loss of our right to participate in the Medicare program, state programs, or one or more private payor ~~networks.~~networks; or

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damage to our business and reputation in various markets.

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

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

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

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

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

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Risks Related to Intellectual Property

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

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

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obtain and/or maintain protection for our ~~product candidates~~products under the patent laws of the United States and other countries;

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defend and enforce our patents once obtained;

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obtain and/or maintain appropriate licenses to patents, patent applications or other proprietary rights held by others with respect to our technology, both in the United States and other countries;

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maintain trade secrets and other intellectual property rights relating to our ~~product candidates;~~products; and

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operate without infringing upon the patents, trademarks, copyrights, and proprietary rights of third parties.

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

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

~~In particular, we cannot assure you that:~~

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we or the owners or other inventors of the patents that we own or that have been licensed to us, or that may be issued or licensed to us in the future, were the first to file patent applications or to invent the subject matter claimed in patent applications relating to the technologies upon which we rely;

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~~others will not independently develop similar or alternative technologies or duplicate any of our technologies;~~

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~~any of our patent applications will result in issued patents;~~

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the patents and patent applications that we own or that have been licensed to us, or that may be issued or licensed to us in the future, will provide a basis for commercially viable products or will provide us with any competitive advantages, or will not be challenged by third parties;

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~~the patents and patent applications that have been licensed to us are valid and enforceable;~~

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~~we will develop additional proprietary technologies that are patentable;~~

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~~we will be successful in enforcing the patents that we own or license and any patents that may be issued or licensed to us in the future against third parties;~~

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~~the patents of third parties will not have an adverse effect on our ability to do business; or~~

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~~our trade secrets and proprietary rights will remain confidential.~~

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Risks Related to our Common Stock

Our stock price is volatile.

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

●

our ability to obtain additional financing and, if available, the terms and conditions of the financing;

●

~~changes in the timing of on-going clinical trial enrollment, the results of our clinical trials and regulatory approvals for our product candidates or failure to obtain such regulatory approvals;~~

●

changes in our industry;

●

additions or departures of key personnel;

●

sales of our common stock;

●

our ability to execute our business plan;

●

operating results that fall below expectations;

●

period-to-period fluctuations in our operating results;

●

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new regulatory requirements and changes in the existing regulatory environment; and

●

general economic conditions and other external factors.

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

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

To date, there has been a limited trading market for our common stock, and we cannot predict how liquid the market for our common stock might become. ~~Our~~Until January 30, 2023, our common stock iswas quoted on the ~~Over-the-Counter market (OTCQB),~~OTC Pink, which is an inter-dealer market that provides significantly less liquidity than the New York Stock Exchange or the ~~NASDAQ~~Nasdaq Stock Market. We are currently listed on the OTCQB.

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

●

investors may have difficulty buying and selling, or obtaining market quotations for our common stock;

●

market visibility for our common stock may be limited; and

●

a lack of visibility for our common stock may have a depressive effect on the market for our common stock.

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

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

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

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

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

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

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

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

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

On January 12, 2016, the Company filed a Certificate of Designation of Preferences, Right and Limitations of Series B Convertible Preferred Stock of the Company with the Nevada Secretary of State which amended our Articles of Incorporation to designate 293 shares of our preferred stock as Series B Convertible Preferred Stock. The holders of Series B Convertible Preferred Stock will participate on an equal basis per-share with holders of our common stock in any distribution upon winding up, dissolution, or liquidation. Holders of Series B Convertible Preferred Stock are entitled to convert each share of Series B Preferred Stock into 2,000 shares of common stock. Holders of the Series B Preferred Stock are entitled to vote on all matters affecting the holders of the common stock of the Company on an “as converted” basis, provided that the holder of such Series B Preferred Stock does not hold in excess of 9.99% of our common stock at the time of measurement.

~~Although we have no present intention to issue any additional shares of preferred stock or to create any additional series of preferred stock, we may issue such shares in the future.~~

~~We have never held an annual meeting for the election of directors.~~

Pursuant to the provisions of the Nevada Revised Statutes (the “NRS”), directors are to be elected at the annual meeting of the stockholders. Pursuant to the NRS and our bylaws, our board of directors is granted the authority to fix the date, time and place for annual stockholder meetings. No date, time or place has yet been fixed by our board for the holding of an annual stockholder meeting. Pursuant to the NRS and our bylaws, each of our directors holds office after the expiration of his term until a successor is elected and qualified, or until the director resigns or is removed. Under the provisions of the NRS, if an election of our directors has not been made by our stockholders within 18 months of the last such election, then an application may be made to the Nevada district court by stockholders holding a minimum of 15% of our outstanding stockholder voting power for an order for the election of directors in the manner provided in the NRS.

We have not sought an advisory stockholder vote to approve the compensation of our named executive officers.

Rule 14a-21 under the Exchange Act requires us to seek a separate stockholder advisory vote at our annual meeting at which directors are elected to approve the compensation of our named executive officers, not less frequently than once every three years (say-on-pay vote), and, at least once every six years, to seek a separate stockholder advisory vote on the frequency with which we will submit advisory say-on-pay votes to our stockholders (say-on-frequency vote). ~~In 2013, the year in which Rule 14a-21 became applicable to smaller reporting companies, and in 2014, we did~~We have not ~~submit~~submitted to our stockholders a say-on-pay vote to approve an advisory resolution regarding our compensation program for our named executive officers, or a say-on-frequency vote. Consequently, the board of directors has not considered the outcome of our say-on-pay vote results when determining future compensation policies and pay levels for our named executive officers.

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If the Company fails to comply with our SEC filing obligations, our stock may become subject to limitations or reduction in stock price, liquidity, or volume.

Rule 15c2-11 under the Exchange Act (the “Rule”) governs the publication of quotations in over-the-counter (“OTC”) markets. On September 16, 2020, the SEC adopted amendments to the Rule which prohibits broker-dealers from publishing or submitting for publication a quote for an issuer’s securities unless they are based on current publicly available information about the issuer. The amended Rule also limits the Rule’s “piggyback” exception, which allows broker-dealers to publish quotations for a security in reliance on the quotations of a broker-dealer that initially performed the information review required by the Rule, to issuers with current publicly available information or issuers that are up to date in their Exchange Act reports.

The practical impact of these changes requires us to maintain a level of periodic disclosure. However, we did not timely file with the SEC our Annual Report on Form 10-K for the year ended December 31, 2020, or our Quarterly Report on Form 10-Q for the quarters ended March 31, 2021 or June 30, 2021. As a result, our stock was removed from the OTC Bulletin Board on September 28, 2021, which limited the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. Upon filing the Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, we were allowed to return to the OTC Pink and subsequently uplisted to the OTCQB. While trading on the OTCQB, and especially if we are removed from the OTCQB in the future, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

~~Item 1B.~~

Item 1B.

UNRESOLVED STAFF COMMENTS

None.

Item 1C.

CYBERSECURITY

Our management and Board of Directors (the “Board”) recognize the importance of maintaining the security and resiliency of our cybersecurity environment to deliver on the expectations of our customers, business partners, employees, and investors. The Board is involved in our risk management practices. Overall, the purpose of our information security program is to protect the confidentiality, integrity and availability of our systems and data, along with the safe operation of our systems.

Technical safeguards

~~None.~~We deploy technical safeguards that are designed to protect our systems from cybersecurity threats, including firewalls, anti-malware software, and authentication and authorization controls.

Security awareness and training

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

Governance of Cybersecurity Risks

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

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

Material Impact of Cybersecurity Risks

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

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~~Item 2. PROPERTIES~~

Item 2.

PROPERTIES

Our primary corporate and operations ~~production and research and development~~ office is in a leased facility in ~~Suwanee, Georgia,~~Eden Prairie, Minnesota, consisting of ~~7,500~~8,199 square feet of space under a lease which expires on ~~December~~August 31, ~~2021.~~2025. Under the terms of the lease, we pay monthly rent, ~~of $10,844,~~ subject to a 3%2.5% adjustment on an annual basis.

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

~~Item 3.~~

Item 3.

LEGAL PROCEEDINGS

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

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

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

Acquisition Dispute - In May 2021, the Company received notification alleging that it is not in compliance with the license agreement with Celularity entered into in connection with the acquisition of the UltraMIST assets. The Company has responded and asserted that the Company is not in breach and that the supplier has breached various agreements. Any potential impact to the Company cannot be fully determined at this time.

~~Item 4. MINE SAFETY DISCLOSURE~~

Item 4.

MINE SAFETY DISCLOSURE

Not applicable.

PART II

Item 5.

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

~~Item 5.~~

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

Market Information

The Company’s common stock is quoted on the OTCQB under the symbol “SNWV”. The ~~following table sets forth, for the periods indicated, the high and low sales prices per share of our common stock, as reported on the OTCQB. The~~ quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commissions, and may not necessarily represent actual ~~transactions:~~transactions.

Price Range

High

Low

2017

First Quarter
$0.19
$0.11
Second Quarter
$0.14
$0.08
Third Quarter
$0.18
$0.09
Fourth Quarter
$0.28
$0.10

Price Range

High

Low

2016

First Quarter
$0.09
$0.05
Second Quarter
$0.06
$0.04
Third Quarter
$0.16
$0.03
Fourth Quarter
$0.20
$0.12

Holders of Common Stock

As of ~~March 2, 2018,~~December 31, 2023, there were ~~135~~1,140,559,527 shares of common stock outstanding and approximately 238 holders of record of the Company’s common stock.

Dividends

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

Item 6.

[Reserved]

Not applicable.

Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations provides information management believes to be relevant to understanding the financial condition and results of operations of the Company. The discussion focuses on our financial results of operations for the years ended December 31, 2023, and 2022. You should read this discussion and analysis in conjunction with our consolidated financial statements and related notes thereto on December 31, 2023, and 2022, and for years 2023, and 2022, which are presented within Part II Item 8. “Financial Statements and Supplementary Data" in this Annual Report on Form 10-K. 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.

~~Securities Authorized~~

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Executive Summary

We realized significant revenue growth during the year ended December 31, 2023, with a 22% growth in revenue to $20.4 million for ~~Issuance under Equity Compensation Plans~~

Plan Category

Number of securities to be issued upon exercise of outstanding options and rights

Weighted-average exercise price of outstanding options and rights

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

(a)

(b)

(c)

Equity compensation plans approved by security holders
  -
$0.00
  -
Equity compensation plans not approved by security holders
  21,593,385
$0.31
  2,238,281
Total
  21,593,385
$0.31
  2,238,281

~~Stock Incentive Plans~~

~~During 2006,~~the year ended December 31, 2023, as compared to $16.7 million in 2022. Gross margins also decreased to 70% from 74% in 2022. As the Company ~~adopted~~continues to focus on profitable growth, we have also reduced our operating loss by 94% to $0.5 million for the ~~2006 Stock Incentive~~year ended December 31, 2023.

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

Merger Agreement with SEPA

On August 23, 2023, we entered into an Agreement and Plan of ~~SANUWAVE,~~Merger (the “Merger Agreement”) by and among SEP Acquisition Corp., a Delaware corporation (“SEPA”), SEP Acquisition Holdings Inc., a Nevada corporation, and ~~certain non-statutory stock option agreements with key employees outside~~a wholly owned subsidiary of SEPA (“Merger Sub”). Pursuant to the terms of the ~~2006~~Merger Agreement, a business combination between the Company and SEPA (the “Merger”) will be affected. More specifically, and as described in greater detail below, at the effective time of the Merger (the “Effective Time”):

Merger Sub will merge with and into the Company, with the Company being the surviving company following the merger.

Outstanding Company convertible securities of the Company will be assumed by SEPA and will be converted into the right to receive Class A Common Stock ~~Incentive Plan.~~ of SEPA.

Non-GAAP Financial Measures

Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we present certain financial measures that facilitate management’s review of the operational performance of the Company and as a basis for strategic planning; however, such financial measures are not presented in our financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S.) (U.S. GAAP). These financial measures are considered “non-GAAP financial measures” and are intended to supplement, and should not be considered as superior to, or a replacement for, financial measures presented in accordance with U.S. GAAP.

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

EBITDA and Adjusted EBITDA have ~~terms substantially~~their limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are that EBITDA and Adjusted EBITDA:

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Do not reflect every expenditure, future requirements for capital expenditures or contractual commitments.

Do not reflect all changes in our working capital needs.

Do not reflect interest expense, or the amount necessary to service our outstanding debt.

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

(in thousands)	For the year ended
	2023			2022

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

Results of Operations

The following table sets forth our consolidated statement of operations:

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

Revenue

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

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Cost of Revenue

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

General and Administrative

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

Selling and Marketing

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

Research and Development

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

Other Income (Expense), net

Other expense, net consists of the following:

	For the years ended December 31,						Change
	2023			2022			$				%

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

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

Liquidity and Capital Resources

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

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

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Pursuant to the Notes, the Company promised to pay in cash and/or in shares of common stock, at a conversion price of $0.04 (the “Conversion Price”), the principal amount and interest at a rate of 15% per annum on any outstanding principal. The Conversion Price of the Notes is subject to adjustment, including if the Company issues or sells shares of common stock for a price per share less than the Conversion Price of the Notes or if the Company lists its shares of common stock on The Nasdaq Capital Market and the average volume weighted average price of such common stock for the five trading days preceding such listing is less than $0.04 per share; provided, however, that the Conversion Price shall never by less than $0.01. The Notes contain customary events of default and covenants, including limitations on incurrences of indebtedness and liens.

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

In July 2023, we issued Asset-Backed Secured Promissory Notes in an aggregate principal amount of $4.6 million to certain accredited investors at an original issue discount of 33.33%. These notes bear an interest rate of 0% per annum and matured on January 21, 2024. We received total proceeds of approximately $3.0 million. We also entered into a side letter, pursuant to which, we issued Future Advance Convertible Promissory Notes, on January 21, 2024, with the same principal amount as the ~~2006~~principal amount of such Notes, plus any accrued and unpaid interest and two Common Stock ~~Incentive Plan.~~ Purchase Warrants, substantially in the forms of the Notes and Common Stock Purchase Warrants disclosed in the previous paragraphs.

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

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

The ~~stock options granted under~~following table presents summarized cash flow information:

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

Cash Flows from Operating Activities

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

Cash Flows Provided by Financing Activities

Cash flows provided by financing activities decreased primarily due to the improvement of operating cash flows which ~~vest over~~reduced our required cash to fund our growth and operations. For the year ended December 31, 2023, we received proceeds of $6.0 million from the issuance of the convertible promissory notes and asset backed secured promissory notes discussed above in this section, Liquidity and Capital Resources, as compared to $16.2 million for the year ended December 31, 2022.

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Going Concern

The continuation of our business is dependent upon raising additional capital to fund operations. This, as well as the events of default on various notes payable, raise substantial doubt about our ability to continue as a going concern for a period of upat least twelve months. Management plans to ~~four~~obtain additional capital in 2024 through the completion of the Merger Agreement. We could also obtain additional capital through the conversion of outstanding warrants, issuance of common or preferred stock, securities convertible into common stock, or secured or unsecured debt. These possibilities, to the extent available, may be on terms that result in significant dilution to our existing stockholders. Although no assurances can be given that our plans to obtain additional capital will be successful or on the terms or timeline we expect, or at all, management believes that potential additional issuances of equity or other potential financing transactions, as discussed above, should provide the necessary funding for us over the next 12 months. If these efforts are unsuccessful, we may be required to significantly curtail or discontinue operations or obtain funds through financing transactions with unfavorable terms.

See Note 2 to the consolidated financial statements in Part II Item 8. “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional information on our ability to continue as a going concern.

Critical Accounting Policies and Estimates

We have used various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. Our significant accounting policies are disclosed in Note 3 to the consolidated financial statements in Part II Item 8. “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

The preparation of the consolidated financial statements, in conformity with U.S. GAAP, requires us to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates reflect our best judgment about economic and market conditions and the potential effects on the valuation and/or carrying value of assets and liabilities based upon relevant information available. We base our estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

The following accounting estimates are deemed critical:

Litigation Contingencies

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

Derivative Liabilities from Embedded Conversion Options and Warrants

The Company classified certain convertible instruments as having embedded conversion options which qualified as derivative financial instruments to be separately accounted for. The Company also determined that certain warrants also qualified as derivative financial instruments. Various valuation models were used to estimate the fair value of these derivative financial instruments that are classified as derivative liabilities on the consolidated balance sheets. The models include subjective input assumptions that can materially affect the fair value estimates and as such are subject to uncertainty. Our significant input assumptions are discussed in Note 13 to the consolidated financial statements in Part II Item 8. “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

Recently Issued Accounting Standards

Information regarding new accounting pronouncements is included in Note 3 to the consolidated financial statements in Part II Item 8. “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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Item 8

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	Page
Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID: 688)	F-1

Consolidated Balance Sheets as of December 31, 2023 and 2022	F-3

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2023 and 2022	F-4

Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2023 and 2022	F-5

Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022	F-6

Notes to Consolidated Financial Statements	F-7

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

SANUWAVE Health, Inc.

Opinion on the Financial Statements

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

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has incurred recurring losses and needs to raise additional funds to meet its obligations, sustain its operations, and to resolve the events of default on the Company’s debt. 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 consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. 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. 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. 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 (Embedded Conversion Options and Warrant Liability)

Critical Audit Matter Description

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

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

How the Critical Audit Matter was Addressed in the Audit

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

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

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

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

Assessing the reasonableness of the significant valuation inputs, including the probability weighted expected value considering the merger agreement with SEPA Acquisition Corp. (“SEPA”), the risk adjusted expected exchange ratio, the value of SEPA’s Class A common stock, the expected timing of the closing of the merger, and the probability of the merger closing;

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

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

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

/s/ Marcum llp

Marcum LLP

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

New York, NY

March 21, 2024

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PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

SANUWAVE HEALTH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2023 and 2022

(In thousands, except share data)	2023			2022
ASSETS
Current Assets:
Cash	$	1,797		$	1,153
Accounts receivable, net of allowance of $1,237 and $1,037, respectively		3,314			4,029
Inventory		2,951			868
Prepaid expenses and other current assets		1,722			570
Total Current Assets		9,784			6,620
Non-Current Assets:
Property, equipment and right of use assets, net		938			856
Intangible assets, net		4,434			5,137
Goodwill		7,260			7,260
Total Non-Current Assets		12,632			13,253

Total Assets	$	22,416		$	19,873

LIABILITIES
Current Liabilities:
Senior secured debt, in default	$	18,278		$	14,416
Convertible promissory notes payable		5,404			16,713
Convertible promissory notes payable, related parties		1,705			7,409
Asset-backed secured promissory notes payable		3,117			-
Asset-backed secured promissory notes payable, related parties		1,458			-
Accounts payable		5,705			4,400
Accrued expenses		5,999			8,512
Factoring liabilities		1,490			2,130
Warrant liability		14,447			1,416
Accrued interest		5,444			4,052
Accrued interest, related parties		669			788
Current portion of contract liabilities		92			60
Other		947			319
Total Current Liabilities		64,755			60,215
Non-Current Liabilities:
Lease liabilities		492			438
Contract liabilities		347			230
Total Non-Current Liabilities		839			668
Total Liabilities	$	65,594		$	60,883

Commitments and Contingencies (Footnote 21)

STOCKHOLDERS’ 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 2023 and 2022	$	-		$	-
Common stock, par value $0.001, 2,500,000,000 shares authorized, 1,140,559,527 and 548,737,651 issued and outstanding at 2023 and 2022, respectively		1,140			549
Additional paid-in capital		175,842			152,750
Accumulated deficit		(220,049	)		(194,242	)
Accumulated other comprehensive loss		(111	)		(67	)
Total Stockholders’ Deficit		(43,178	)		(41,010	)
Total Liabilities and Stockholders’ Deficit	$	22,416		$	19,873

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

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SAUWAVE HEALTH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Years ended December 31, 2023 and 2022

(In thousands, except share and per share data)	2023			2022
Revenue	$	20,398		$	16,742
Cost of revenues		6,035			4,331
Gross Margin		14,363			12,411

Operating Expenses:
General and administrative		8,674			12,556
Selling and marketing		4,898			7,474
Research and development		579			567
Depreciation and amortization		752			766
Total Operating Expenses		14,903			21,363

Operating Loss		(540	)		(8,952	)

Other Income (Expense)
Interest expense		(12,946	)		(12,771	)
Interest expense, related party		(2,677	)		(1,361	)
Change in fair value of derivative liabilities		(9,621	)		16,654
Loss on issuance of debt		-			(3,434	)
Loss on extinguishment of debt		-			(418	)
Other expense		(19	)		(9	)
Total Other Expense		(25,263	)		(1,339	)

Net Loss Before Income Taxes		(25,803	)		(10,291	)

Income tax expense		4			2

Net Loss	$	(25,807	)	$	(10,293	)

Other Comprehensive Loss
Foreign currency translation adjustments		(44	)		6
Total Comprehensive Loss	$	(25,851	)	$	(10,287	)

Loss per Share:
Net loss per share, basic and diluted	$	(0.03	)	$	(0.02	)
Weighted average shares outstanding, basic and diluted		793,850,994			549,470,787

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

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SANUWAVE HEALTH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(In thousands, except share data)

	Common Stock
	Shares Issued and Outstanding		Par Value		Additional Paid- in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
Balances as of December 31, 2021		481,619,621	$	482	$	144,582	$	(183,949	)	$	(73	)	$	(38,958	)
Cashless warrant exercise		14,000,000		14		2,152		-			-			2,166
Warrant exercise		909,091		1		99		-			-			100
Shares issued in conjunction with senior note		20,666,993		20		3,700		-			-			3,720
Shares issued for settlement of debt and warrants		19,444,446		20		1,341		-			-			1,361
Shares issued for services		12,097,500		12		876		-			-			888
Net loss		-		-		-		(10,293	)		-			(10,293	)
Foreign currency translation adjustment		-		-		-		-			6			6
Balances as of December 31, 2022		548,737,651	$	549	$	152,750	$	(194,242	)	$	(67	)	$	(41,010	)
Shares issued for services		12,900,000	$	13	$	514	$	-		$	-		$	527
Shares issued for settlement of August 2022 debt		464,440,813		464		18,113		-			-			18,577
Shares issued for settlement of November 2022 debt		114,481,063		114		4,465		-			-			4,579
Net loss		-		-		-		(25,807	)		-			(25,807	)
Foreign currency translation adjustment		-		-		-		-			(44	)		(44	)
Balance as of December 31, 2023		1,140,559,527	$	1,140	$	175,842	$	(220,049	)	$	(111	)	$	(43,178	)

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

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SANUWAVE HEALTH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2023 and 2022

(In thousands)	2023			2022
Cash Flows - Operating Activities:
Net loss	$	(25,807	)	$	(10,293	)
Adjustments to reconcile net loss to net cash used by operating activities
Depreciation and amortization		1,028			952
Bad debt expense		781			253
Shares issued for services		224			888
Gain/loss on extinguishment of debt		-			418
Income tax expense		4			2
Change in fair value of derivative liabilities		9,621			(16,654	)
Loss on issuance of debt		-			3,434
Amortization of debt issuance and debt discounts		6,911			4,950
Changes in operating assets and liabilities
Accounts receivable		(53	)		(1,748	)
Inventory, prepaid expenses and other assets		(3,006	)		(72	)
Accounts payable		1,546			(2,550	)
Accrued interest and accrued interest, related parties		6,306			3,182
Accrued expenses and contract liabilities		(2,093	)		69
Net Cash Used by Operating Activities		(4,538	)		(17,169	)

Cash Flows - Investing Activities
Proceeds from sale of property and equipment		21			332
Net Cash Flows Provided by Investing Activities		21			332

Cash Flows - Financing Activities
Proceeds from convertible promissory notes		3,026			16,227
Proceeds from asset-backed secured promissory notes payable		2,994			-
Proceeds from senior secured promissory note		-			2,940
(Payments)/Proceeds from factoring		(639	)		695
Proceeds from warrant exercises		-			100
Proceeds from short term borrowings		-			640
Repayments of debt principal		-			(2,981	)
Principal payments on finance leases		(170	)		(237	)
Net Cash Flows Provided by Financing Activities		5,211			17,384

Effect of Exchange Rates on Cash		(50	)		(13	)

Net Change in Cash During Period		644			534

Cash at Beginning of Period		1,153			619
Cash at End of Period	$	1,797		$	1,153

Supplemental Information:
Cash paid for interest	$	1,958		$	3,712
Non-Cash Investing and Financing Activities:
Warrants issued in conjunction with senior secured promissory note payable and convertible promissory notes payable	$	1,682		$	4,177
Conversion of convertible notes payable and accrued interest to common stock		23,156			-
Embedded conversion feature on convertible debt		835			2,760
Common shares issued for advisory shares		302			-
Settlement of debt and warrants with stock		-			1,361
Common shares issued in conjunction with senior secured debt		-			3,720
Warrant issuance in conjunction with convertible notes		-			1,708
Reclassification of warrant liabilities to equity due to cashless warrant exercise		-			2,166
Working capital balances refinanced into convertible notes payable		-			2,363

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

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SANUWAVE HEALTH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023 and 2022

1.	Nature of the Business and Basis of Presentation

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

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. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

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

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

Reclassification-Certain accounts in the prior period consolidated financial statements 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.

2.	Going Concern

Our recurring losses from operations, the events of default on the Company’s notes payable, and dependency upon future issuances of equity or other financing to fund ongoing operations have raised substantial doubt as to our ability to continue as a going concern for a period of 12 months from the filing of the Form 10-K. We will be required to raise additional funds to finance our operations and remain a going concern; we may not be able to do so, and/or the terms of any financings may not be advantageous to us.

The continuation of our business is dependent upon raising additional capital. We expect to devote substantial resources for the expansion and continued commercialization of our UltraMIST and PACE systems which will require additional capital resources. The operating losses and the events of default on the Company’s notes payable indicate substantial doubt about the Company’s ability to continue as a going concern for a period of at least twelve months from the filing of this Annual Report on Form 10-K.

Management’s plans are to obtain additional capital in 2024 primarily through the closure of the Merger Agreement, as described in Note 4. The Company could also obtain funding through the conversion of outstanding warrants, issuance of common or preferred stock, securities convertible into common stock, or secured or unsecured debt. These possibilities, to the extent available, may be on terms that result in significant dilution to our existing stockholders. Although no assurances can be given, management believes that potential additional issuances of equity or other potential financing transactions if obtained as discussed above should provide the necessary funding for us. If these efforts are unsuccessful, we may be required to significantly curtail or discontinue operations or obtain funds through financing transactions with unfavorable terms.

The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. Our consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.

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3.	Summary of Significant Accounting Policies

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

Estimates – These consolidated financial statements have been prepared in accordance with U.S. GAAP. Because a precise determination of assets and liabilities, and correspondingly revenues and expenses, depend on future events, the preparation of consolidated financial statements for any period necessarily involves the use of estimates and assumptions. Actual amounts may differ from these estimates. These consolidated financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the accounting policies summarized herein.

Significant estimates include the recording of allowances for credit losses, the net realizable value of inventory, fair value of goodwill and 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.

Accounts receivable — Accounts receivable are stated at the amount management expects to collect from outstanding balances. 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.

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.

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 tests goodwill for impairment annually, or more frequently whenever events or circumstances indicate impairment may exist. Goodwill is stated at cost less accumulated impairment losses. The Company completes its goodwill impairment test annually in the fourth quarter. The Company performed a qualitative evaluation at the reporting unit level and determined there was no goodwill impairment as of December 31, 2023, and 2022.

Intangible Assets — Intangible assets arising from the Company’s acquisition are amortized on a straight‑line basis over the estimated useful life of each asset. Customer relationships have a ~~ten year~~useful life of seven years. Patents and tradenames have a useful life of nineteen years.

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

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. ~~The options were granted at~~As the Company’s leases did not provide an ~~exercise price~~implicit interest rate, the Company used the equivalent borrowing rate for a secured financing with the term of equal to the ~~fair market~~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.

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

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

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

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

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

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

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

Convertible promissory notes – The Company evaluates its convertible instruments to determine if those contracts, or embedded components of those contracts, qualify as derivative financial instruments to be separately accounted for in accordance with ASC Topic 815 “Derivatives and Hedging” (“ASC 815”). The accounting treatment of derivative financial instruments requires that the Company record embedded conversion options and any related freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. Conversion options are recorded as a discount to the host instrument and are amortized as amortization of debt discount on the consolidated statements of comprehensive loss over the life of the underlying instrument. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes 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.

Revenue Recognition - The core principle of ASC Topic 606 “Revenue from Contracts with Customers” (“ASC 606”) requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company allocates the transaction price to all contractual performance obligations included in the contract. If a contract has more than one performance obligation, we allocate the transaction price to each performance obligation based on 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). Performance obligations are satisfied at the point in time when the customer obtains control of the goods, which is generally at the point in time that the product is shipped.

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

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

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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 $484 thousand and $324 thousand for the years ended December 31, 2023, and 2022, respectively.

Research and development - Research and development costs are expensed as incurred. Research and development costs include 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 Company’s common stock. The expected dividend yield is based on our historical dividend experience, however, since our inception, we have not declared dividends. Forfeitures are recognized as they occur.

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

New accounting pronouncements - In December 2023, the FASB issued ASC Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Update No. 2023-09 aims to enhance the transparency and decision usefulness of income tax disclosures. Update No. 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. Update No. 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.

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which was ~~approved~~subsequently revised by ASU 2018-19. The ASU introduces a new model for assessing impairment of most financial assets. Entities are required to use a forward-looking expected loss model, which replaces the current incurred loss model, resulting in earlier recognition of allowance for losses. The Company adopted this ASU in January 2023, and there was no material impact on the consolidated financial statements.

4.	Merger Agreement

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

Merger Sub will merge with and into the Company, with the Company being the surviving company following the merger.

Each issued and outstanding share of the Company’s common stock, will automatically be converted into Class A common stock of SEPA, par value $0.0001 per share (the “Class A Common Stock”), at the Conversion Ratio (as defined in the Merger Agreement); and

Outstanding convertible securities of the Company will be assumed by SEPA and will be converted into the right to receive Class A Common Stock of SEPA.

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

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

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

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

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

5.	Loss per Share

The net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of shares outstanding for the years ended December 31, 2023, and 2022. In accordance with ASC Topic 260-10-45-13, Earnings Per Share, the weighted average of number of shares outstanding includes outstanding common stock and shares issuable for nominal consideration. Accordingly, warrants issued with a $0.01 per share exercise price, are included in weighted average shares outstanding as follows:

(in thousands)	December 31, 2023		December 31, 2022
Common shares		772,160		526,530
Common shares issuable assuming exercise of nominally priced warrants		21,691		22,941
Weighted Average Shares Outstanding		793,851		549,471

Diluted net loss per share 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, 2023, and 2022, all potentially dilutive shares were anti-dilutive and therefore excluded from the computation of diluted net loss per share. Anti-dilutive equity securities consist of the following:

(in thousands)	December 31, 2023		December 31, 2022
Common stock options		16,287		21,246
Common stock purchase warrants		1,199,882		1,186,522
Convertible notes payable, including interest		161,773		603,425
		1,377,942		1,811,193

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Inventory

Inventory consisted of the following:

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

7.	Intangible Assets

Carrying value of intangible assets consisted of the following:

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

Amortization expense for each of the years ended December 31, 2023, and 2022 totaled $704 thousand. Future amortization expense is expected to be the following (dollars in thousands):

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

8.	Accrued Expenses

Accrued expenses consisted of the following:

(in thousands)	December 31, 2023		December 31, 2022
Registration penalties	$	1,583	$	1,583
License fees		892		892
Board of directors fees		942		415
Employee compensation		2,298		4,585
Other		284		1,037
Total Accrued Expenses	$	5,999	$	8,512

9.	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.

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

10.	Senior Secured Debt, in Default

The following table summarizes outstanding senior secured debt:

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

Senior secured promissory note payable, in default (“Senior Secured Note”) – In August 2020, the Company entered into a Note and Warrant Purchase and Security Agreement (the “NWPSA”). 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 16.2 million shares of common stock with an exercise price of $0.18 and 20.6 million shares of common stock. Since the combined fair value of the warrants and common stock issued as part of the Second NWPSA exceeded the face value of the note, the additional amount beyond the face value was recorded as a loss on issuance totaling $3.4 million.

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

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

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

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

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

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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. Accrued interest related to the Senior Secured Note was $3.2 million and $1.9 million on December 31, 2023, and December 31, 2022, respectively. Interest expense on the Senior Secured Note totaled $6.9 million and $5.9 million for the years ended December 31, 2023, and 2022, respectively.

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

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

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

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

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, 2023, and 2022, the Seller Notes had outstanding accrued interest of $2.2 million and $1.5 million, respectively.

The Company evaluated embedded conversion features within the convertible promissory note and determined that the conversion feature does not require to be bifurcated. Upon adoption of ASC 2020-06 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.

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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 is currently in default. As of December 31, 2023, and 2022, the note had outstanding accrued interest of $636 thousand and $444 thousand, respectively.

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

12.	Asset-Backed Secured Promissory Notes

In July 2023, the Company issued Asset-Backed Secured Promissory Notes (the “ABS Promissory Notes”) in an aggregate principal amount of $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, 2023, totaled $812 thousand.

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.

In evaluating the accounting for the ABS Promissory Notes and Side Letter (the “Side Letter”), pursuant to relevant guidance, the Side Letter was determined to not represent a freestanding financial instrument as it is not legally detachable and separately exercisable. The redemption features under the Side Letter are considered embedded derivatives, including a right for contingent redemption upon an event of default, automatic redemption upon maturity of the ABS Promissory Notes, and redemption is triggered upon a fundamental transaction. As a result, the Company determined these features met the criteria of an embedded derivative.

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

13.	Fair Value Measurements

The Company uses various inputs to measure the outstanding warrants and certain embedded conversion features associated with convertible debt on a recurring basis to determine the fair value of the liabilities. The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy:

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

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

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

Warrant Liability

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

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

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

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

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

Embedded Conversion Option

Certain convertible notes include a conversion option that meets the definition of a derivative liability and, accordingly, is required to be bifurcated. The fair value for the embedded derivative liability at issuance for the ABS Promissory Notes was estimated as the difference in fair value of the ABS Promissory Notes, including the conversion obligation under the Side Letter and the value of the ABS Promissory Notes in the absence of the conversion obligation. The value of the ABS Promissory Notes without the conversion obligation was estimated using a discounted cash flow analysis with an estimated market yield.

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

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

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

(1)

Based on the terms provided in the convertible promissory note agreements to convert to common stock of the Company

(2)

Interest rate for U.S. Treasury Bonds, as of each presented period ending date, as published by the U.S. Federal Reserve.

(3)

Based on the historical daily volatility of the Company as of each presented period ending date. As of December 31, 2022, the Company applied a discount rate to the historical volatility.

A summary of the conversion option liability activity is as follows:

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

14.	Contract Liabilities

The Company has contract liabilities from contracts with customers as follows:

During the years ended December 31, 2023, and 2022, the Company recognized revenue related to these contract liabilities of $60 thousand and $253 thousand, respectively, that were included in the beginning contract liability balances for each of those periods.

The following table summarizes the changes in contract liabilities:

	Year Ended December 31,
(in thousands)	2023			2022
Beginning balance	$	290		$	341
New service agreements		209			202
Revenue recognized		(60	)		(253	)
Total Contract Liabilities	$	439		$	290

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15.	Common Stock Purchase Warrants

A summary of the warrant activity is as follows:

(in thousands, except per share data)	Warrants			Weighted Average Exercise Price		Weighted Average Remaining Life (years)
Warrants at December 31, 2021		204,883		$	0.20		2.54
Issuances		1,031,276			0.06
Exercised		(27,943	)		0.09
Forfeited or expired		-			-
Outstanding at December 31, 2022		1,208,216		$	0.07		3.55
Issuances		154,451			0.06
Exercised		-			-
Forfeited or expired		(141,095	)		-
Outstanding at December 31, 2023		1,221,572		$	0.06		4.01

16.	Common Stock

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. In January 2023, the Company filed the amendment to the Articles of Incorporation with the state of Nevada to affect the increase in authorized shares.

17.	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, 2023, or 2022.

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,
	2023			2022
Purchases:
Vendor A		19	%		19	%
Vendor B		19	%		0	%

18.

Revenue

The disaggregation of revenue is based on type and geographical region. The following table presents revenue from contracts with customers:

	Year ended December 31, 2023						Year ended December 31, 2022
	United States		International		Total		United States		International		Total
Consumables and parts revenue	$	13,143	$	79	$	13,222	$	9,790	$	72	$	9,862
System revenue		5,841		116		5,957		5,179		149		5,328
License fees and other		41		35		76		283		38		321
Product Revenue	$	19,025	$	230	$	19,255	$	15,252	$	259	$	15,511
Rental Income		1,143		-		1,143		1,231		-		1,231
Total Revenue	$	20,168	$	230	$	20,398	$	16,483	$	259	$	16,742

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19.	Stock-Based Compensation

On November 1, 2010, the Company approved the Amended and Restated 2006 Stock Incentive Plan of SANUWAVE Health, Inc. effective as of January 1, 2010 (the “Stock Incentive Plan”). The Stock Incentive Plan permits grants of awards to selected employees, directors, and advisors of the Company in the form of restricted stock or options to purchase shares of common stock. Options granted may include non-statutory options as well as qualified incentive stock options. The Stock Incentive Plan is ~~currently~~ administered by the board of directors of the Company. The Stock Incentive Plan gives broad powers to the board of directors of the Company to administer and interpret the ~~particular~~ form and conditions of each option. The stock options granted under the Stock Incentive Plan are generally non-statutory options which generally vest over a period of up to three years and have a ~~ten year~~ten-year term. The options are granted at an exercise price ~~equal~~determined by the board of directors of the Company to be the fair market value of the common stock on the date of the grant. As of December 31, 2023, and 2022, the Stock Incentive Plan reserved a total of 35,000,000 shares of common stock for grant. On December 31, 2023, there were 5,598,216 shares of common stock available for grant ~~which is approved by~~under the ~~board of directors of the Company.~~Stock Incentive Plan.

~~Item 6.~~

20.	Income Taxes

~~SELECTED FINANCIAL DATA~~

~~Not required under Regulation S-K for “smaller reporting companies”.~~

~~Item 7.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~Overview~~

We are a shock wave technology company using a patented system of noninvasive, high-energy, acoustic shock waves for regenerative medicine and other applications. Our initial focus is regenerative medicine – utilizing noninvasive, acoustic shock waves to produce a biological response resulting in the body healing itself through the repair and regeneration of tissue, musculoskeletal and vascular structures. Our lead regenerative productThe Company files income tax returns in the United States Federal jurisdiction and various state and foreign jurisdictions. The Company is ~~the dermaPACE~~® ~~device, used for treating diabetic foot ulcers, which was~~ subject to ~~two double-blinded, randomized Phase III clinical studies and cleared by the U.S. Food and Drug Administration (FDA) on December 28, 2017.~~

Our portfolio of healthcare products and product candidates activate biologic signaling and angiogenic responses, including new vascularization and microcirculatory improvement, helping to restore the body’s normal healing processes and regeneration. We intend to apply our Pulsed Acoustic Cellular Expression (PACE®~~) technology in wound healing, orthopedic, plastic/cosmetic and cardiac conditions. In 2018, we plan to begin marketing our dermaPACE System for sale in the~~ United States Federal and ~~will continue to generate revenue from sales~~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 ~~European Conformity Marking (CE Mark) devices and accessories in Europe, Canada, Asia and Asia/Pacific.~~

We believe we have demonstrated that our patented technology is safe and effective in stimulating healing in chronic conditions of the foot and the elbow through our United States FDA Class III PMA approved OssaTron® ~~device, and in the stimulation of bone and chronic tendonitis regeneration in the musculoskeletal environment through the utilization of our OssaTron, Evotron~~®~~, and orthoPACE~~® devices in Europe and Asia. Our lead product candidate for the global wound care market, dermaPACE, has received the CE Mark allowing for commercial use on acute and chronic defects of the skin and subcutaneous soft tissue.

Wenet loss before income taxes are ~~focused on developing our Pulsed Acoustic Cellular Expression (PACE) technology to activate healing in:~~

●

~~wound conditions, including diabetic foot ulcers, venous and arterial ulcers, pressure sores, burns and other skin eruption conditions;~~

●

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

●

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

●

~~cardiac applications for removing plaque due to atherosclerosis improving heart muscle performance.~~

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

~~Recent Developments~~

On December 28, 2017, the U.S. Food and Drug Administration (the "FDA"), notified the Company to permit the marketing of teh dermaPACE System for the treatment of diabetic foot ulcers in teh United States.

On September 27, 2017, we entered into a binding term sheet with MundiMed Distribuidora Hospitalar LTDA ("MundiMed"), effective as of September 25, 2017, for a joint venture for the manufacture, sale and distribution of our dermaPACE device. Under the binding term sheet, MundiMed will pay the Company an initial upfront distribution fee with monthly upfront distribtuion fees payable thereafter over the following eighteen months. Profts from the joint venture are distributed as follows: 45% to the Company, 45% to MundiMed and 5% each to LHS Latina Health Solutions Gestao Empresarial Ltda. and Universus Global Advisors LLC, who acted as advisors in the transaction. The initial upfront distritbution fee was received on October 6, 2017.

On February 13, 2018, the Company entered into an Agreement for Purchase and Sale, Limited Exclusive Distribution and Royalties, and Servicing and Repairs with Premier Shockwave Wound Care, Inc., a Georgia Corporation ("PSWC") adn Premier Shockwave, Inc., a Georgia Corporation ("PS"). The agreement provides for the purchase by PSWC and PS of dermaPACE System and related equipment sold by the Company and includes a minimum purchase of 100 units over 3 years. The agreement grants PSWC and PS limited but exclusive distribution rights to provide dermaPACE Systems to certain governmental healthcare facilities in exchange for the payment of certain royalties to the Company. Under the agreement, the Company is responsible for the servicing and repairs of such dermaPACE Systems and equipment. The agreement also contains provisions whereby in the event of a change of control of the Company (as defined in the agreement), the stockholders of PSWC have the right and option to cause the Company to purchase all of the stock of PSWC, and whereby the Company has the right and option to purchase all issued and outstanding shares of PSWC, in each case based on certain defined purchase price provisions and other terms. The agreement also contains certain transfer restrictions on the sotck of PSWC. Each of PC and PSWC is owned by A. Michael Stolarski, a member of the Company's board of directors and an existing shareholder of the Company.

~~Clinical Trials and Marketing~~

~~A summary of the key study findings were~~ as follows:

	Year ended December 31,
(In thousands)	2023			2022
Domestic	$	(25,783	)	$	(10,279	)
Foreign		(20	)		(12	)
Net loss before income taxes	$	(25,803	)	$	(10,291	)

●

~~Of the subjects who achieved complete wound closure at 12 weeks, the recurrence rate at 24 weeks was only 7.7% in the dermaPACE group compared with 11.6% in the sham-control group.~~

●

Finally, our dermaPACE device has received the European CE Mark approval to treat acute and chronic defects of the skin and subcutaneous soft tissue, such as in the treatement of pressure ulcers, diabetic foot ulcers, burns, and traumatic and surgical wounds. The dermaPACE is also licensed for sale in Canada, Australia, New Zealand and South Korea.

~~We are actively marketing the dermaPACE to the European Community, Canada and Asia/Pacific utilizing distributors in select countries.~~

~~Financial Overview~~

Since inception in 2005, our operations have primarily been funded from the sale of capital stock and convertible debt securities. We expect to devote substantial resources for the commercialization of the dermaPACE System and will continue to research and develop the non-medical uses of the PACE technology, both of which will require additional capital resources. We incurred a net loss of $5,537,936 and $6,439,040 for the years ended December 31, 2017 and 2016, respectively. These operating losses create uncertainty about our ability to continue as a going concern.

The continuation of our business is dependent upon raising additional capital during the second quarter of 2018 to fund operations. Management’s plans are to obtain additional capital in 2018 through investments by strategic partners for market opportunities, which may include strategic partnerships or licensing arrangements, or raise capital through the conversion of outstanding warrants, the issuance of common or preferred stock, securities convertible into common stock, or secured or unsecured debt. These possibilities, to the extent available, may be on terms that result in significant dilution to our existing shareholders. Although no assurances can be given, management believes that potential additional issuances of equity or other potential financing transactions as discussed above should provide the necessary funding for us. If these efforts are unsuccessful, we may be forced to seek relief through a filing under the U.S. Bankruptcy Code. 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.

Since our inception, we have incurred losses from operations each year. As of December 31, 2017, we had an accumulated deficit of $104,971,384. Although the size and timing of our future operating losses are subject to significant uncertainty, we expect that operating losses may continue over the next few years as we prepare for the commercialization of the dermaPACE System for the treatment of diabetic foot ulcers but if we are able to successfully commercialize, market and distribute the dermaPACE System, then we hope to partially or completely offset these losses within the next few years. Although no assurances can be given, we believe that potential additional issuances of equity, debt or other potential financing, as discussed above, will provide the necessary funding for us to continue as a going concern for the next year.

We cannot reasonably estimate the nature, timing and costs of the efforts necessary to complete the development and approval of, or the period in which material net cash flows are expected to be generated from, any of our products, due to the numerous risks and uncertainties associated with developing products, including the uncertainty of:

●

~~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;~~

●

~~the cost and timing associated with establishing reimbursement for our products;~~

●

~~the effects of competing technologies and market developments; and~~

●

~~the industry demand and patient wellness behavior.~~

Any failure to complete the development of our product candidates in a timely manner, or any failure to successfully market and commercialize our product candidates, would have a material adverse effect on our operations, financial position and liquidity. A discussion of the risks and uncertainties associated with us and our business are set forth under the section entitled “Risk Factors – Risks Related to Our Business”.

~~Critical Accounting Policies and Estimates~~

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.

On an ongoing basis, we evaluate our estimates and judgments, including those related to the recording of the allowances for doubtful accounts, estimated reserves for inventory, estimated useful life of property and equipment, the determination of the valuation allowance for deferred taxes, the estimated fair value of warrants and warrant liability, and the estimated fair value of stock-based compensation. We base our estimates on authoritative literature and pronouncements, historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that arenot readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions. The results of our operations for any historical period are not necessarily indicative of the results of our operations for any future period.

While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements filed with this Annual Report on Form 10-K, we believe that the following accounting policies relating to revenue recognition, research and development costs, inventory valuation, liabilities related to warrants issued, stock-based compensation and income taxes are significant and; therefore, they are important to aid you in fully understanding and evaluating our reported financial results.

~~Revenue Recognition~~

Sales of medical devices, including related applicators and applicator kits, are recognized when shipped to the customer. Shipments under agreements with distributors are invoiced at a fixed price, are not subject to return, and payment for these shipments is not contingent on sales by the distributor. We recognize revenues on shipments to distributors in the same manner as with other customers. We recognize fees from services performed when the service is performed. Fees for upfront distribution license agreements will be recognized as identified performance obligations are satisfied.

~~Research and Development Costs~~

We expense costs associated with research and development activities as incurred. We evaluate payments made to suppliers, research collaborators and other vendors and determine the appropriate accounting treatment based on the nature of the services provided, the contractual terms, and the timing of the obligation. Research and development costs include payments to third parties that specifically relate to our products in clinical development, such as payments to contract research organizations and collaborators, clinical investigators, clinical monitors, clinical related consultants and insurance premiums for clinical studies. In addition, employee costs (salaries, payroll taxes, benefits and travel) for employees of the regulatory affairs, clinical affairs, quality assurance, and research and development departments are classified as research and development costs.

~~Inventory Valuation~~

Inventory is carried at the lower of cost or market, which is valued using the first in, first out (FIFO) method, and consists primarily of devices and the component material for assembly of finished products, less reserves for obsolescence.We regularly review existing inventory quantities and expiration dates of existing inventory to evaluate a provision for excess, expired, obsolete and scrapped inventory based primarily on our historical usage and anticipated future usage. Although we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated change in demand or technological developments could have an impact on the value of our inventory and our reported operating results.

~~Intangible Assets~~

~~Intangible assets subject to amortization consist of patents which are recorded at cost. Patents are amortized on a straight-line basis over 11.4 years.~~ We regularly review intangible assets to determine if facts and circumstances indicate that the useful life is shorter than we originally estimated or that the carrying amount of the assets may not be recoverable. If such facts and circumstances exist, we assess the recoverability of the intangible assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. If recognition of an impairment charge is necessary, it is measured as the amount by which the carrying amount of the intangible asset exceeds the fair value of the intangible asset.

~~Liabilities Related to Warrants Issued~~

We record certain common stock warrants we issued at fair value and recognize the change in the fair value of such warrants as a gain or loss, which we report in the Other Income (Expense) section in our Consolidated Statements of Comprehensive Loss. We report these warrants at fair value and classified as liabilities because they contain certain down-round provisions allowing for reduction of their exercise price. We estimate the fair value of these warrants using a binomial options pricing model.

~~Warrants Related to Debt Issued~~

We record a warrant discount related to warrants issued with debt at fair value and recognize the cost using the straight-line method over the term of the related debt as interest expense, which we report in the Other Income (Expense) section in our Consolidated Statements of Comprehensive Loss. We report this warrant discount as a reduction of the related debt liability.

~~Beneficial Conversion Feature on Convertible Debt~~

We record a beneficial conversion feature related convertible debt at fair value and recognize the cost using the straight-line method over the term of the related debt as interest expense, which we report in the Other Income (Expense) section in our Consolidated Statements of Comprehensive Loss. We report this beneficial conversion feature as a reduction of the related debt liability.

~~Stock-based Compensation~~

The Stock Incentive Plan provides that stock options, and other equity interests or equity-based incentives, may be granted to key personnel, directors and advisors at the fair value of the common stock at the time the option is granted, which is approved by our board of directors. The maximum term of any option granted pursuant to the Stock Incentive Plan is ten years from the date of grant.

In accordance with ASC ~~718,Compensation – Stock Compensation~~,~~Accounting for Stock-Based Compensation~~Topic 740, Income Taxes (“ASC 740”), the fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. The expected terms of options granted represent the period of time that options granted are estimated to be outstanding and are derived from the contractual terms of the options granted. We amortize the fair value of each option over each option’s vesting period.

~~Income Taxes~~

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

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

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

As of December 31, 2023, and 2022, the Company did not have any undistributed earnings of our foreign subsidiaries. As a result, no additional income or withholding taxes have been provided for. The Company does not anticipate any impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”) and as such, the Company has not recorded any impact associated with either GILTI or BEAT.

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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, 2023, and 2022. Adjustments to determine income tax expense are as follow:

(In thousands)	Years ended December 31,
	2023			2022
Tax benefit at statutory rate	$	(5,485	)	$	(2,161	)
Increase (reduction) in income taxes resulting from:
State income tax benefits, net of federal benefit		(307	)		(473	)
Non-deductible gain on warrant adjustment valuation		2,102			(3,270	)
Change in valuation allowance		4,026			4,905
Registration penalties		-			67
Other		(332	)		934
Income Tax Expense	$	4		$	2

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

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

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

The Tax Cuts and 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 $1.3 million as of December 31, 2023. 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 2023, all R&D was performed in the U.S.

~~We account~~Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for ~~uncertain~~financial reporting purposes and the amounts used for income tax ~~positions~~purposes. In assessing the realization of deferred tax assets, management considers, whether it is “more likely than not”, that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in ~~accordance~~which temporary differences representing net future deductible amounts become deductible.

ASC 740 requires that a valuation allowance be established when it is “more likely than not” that all, or a portion of, deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. After consideration of all the information available, management believes that uncertainty exists with respect to future realization of its deferred tax assets and has, therefore, established a full valuation allowance as of December 31, 2023, and 2022.

F-21

Table of Contents

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 ~~related provisions~~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 ending December 31, 2005, through December 31, 2017, will begin to expire in 2025. The Federal net operating loss carryforward for the years ended December 31, 2018, through 2023 of approximately $99.9 million will not expire. The state net operating loss carryforwards of approximately $75.1 million from years ending December 31, 2005, through December 31, 2023, will expire at various dates through 2043. The foreign net operating loss carryforward on December 31, 2023, of $0.1 million will begin to expire in 2024.

A provision of ASC 740 ~~Income Taxes, Accounting for Uncertainty in Income Taxes (FIN 48). ASC 740~~ specifies ~~the way public~~that companies are to account for uncertainties in income tax reporting, and prescribes a methodology for recognizing, reversing, and measuring the tax benefits of a tax position taken, or expected to be taken, in a tax return. ASC 740 requires the evaluation of tax positions taken or expected to be taken inwhile preparing the ~~course of preparing our~~Company’s tax returns to determine whether the tax positions would “more-likely-than-not” be sustained if challenged by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year.

~~Results of Operations for the Years ended December 31, 2017~~ Management has evaluated and ~~2016~~

~~Revenues and Cost of Revenues~~

~~Revenues for the year ended December 31, 2017~~concluded that there were $738,527, compared to $1,376,063 for the same period in 2016, a decrease of $637,536, or 46%. Revenue resulted primarily from sales in Europe, Asia, and Asia/Pacific of our orthoPACE devices and related applicators and upfront distribution fee from our Brazilian distribution agreement with MundiMed. The decrease in revenue for 2017 is primarily due to a decrease in sales of orthoPACE devices in Asia/Pacific and the European Community, as compared to the prior year, as well as lower sales of new and refurbished applicators.

Cost of revenues for the year ended December 31, 2017 were $241,970, compared to $565,129 for the same period in 2016. Gross profit as a percentage of revenues was 67% for the year ended December 31, 2017, compared to 59% for the same period in 2016. The increase in gross profit as a percentage of revenues in 2017 was primarily due to higher revenue for refurbishment license and upfront distribution fee which have little or no related cost, as compared to 2016. Gross profit as a percentage of revenues excluding refurbishment license and upfront distribution fee revenue decreased for the year ended December 31, 2017, compared to the same period in 2016 due to reduced pricing to customers for refurbishments and higher shipping costs.

~~Research and Development Expenses~~

Research and development expenses for the year ended December 31, 2017 were $1,292,531, compared to $1,128,640 for the same period in 2016, an increase of $163,891, or 15%. Research and development expenses include the costs associated with the dermaPACE submission to the FDA, which incurred costs related to responses to questions from the FDA including the hiring of an independent consultant to perform software updates. In addition, a medical device and separate technical audit was performed related to our ISO certification in 2017.

~~General and Administrative Expenses~~

General and administrative expenses for the year ended December 31, 2017 were $3,004,803, as compared to $2,673,773 for the same period in 2016, an increase of $331,030, or 12%. The increase in general and administrative expenses in 2017, as compared to 2016, was due to an increase in board of director’s fees related to adding a member to the board, costs associated with symposium hosted in December 2017, increased costs associated with investor relations consultants, and increased non-cash stock based compensation related to stock option and stock warrants issued in 2017.

~~Depreciation and Amortization~~

Depreciation for the year ended December 31, 2017 was $24,069, compared to $19,858 for the same period in 2016, an increase of $4,211, or 21%. The increase was due to the full year of depreciation related to devices added to fixed assetsmaterial uncertain tax positions requiring recognition in the ~~prior year.~~

~~Amortization for the years ended December 31, 2017 and 2016 was $0 and $306,756, respectively. The decrease is due to the intangible assets being fully amortized~~Company’s consolidated financial statements as of December 31, ~~2016.~~

~~Other Income (Expense)~~

~~Other income (expense) was a net expense of $1,713,490 for the year ended December 31, 2017 as compared to a net expense of $3,122,541 for the same period in 2016, a decrease of $1,409,051~~2023, and 2022. The Company does not expect any significant changes in the ~~net expense.~~ unrecognized tax benefits within twelve months of the reporting date.

The ~~net expense~~Company will recognize in 2017 included a non-cash loss of $568,729 for a valuation adjustment on outstanding warrants, as compared to a net expense in 2016 included a non-cash loss of $2,223,718 for a valuation adjustment on outstanding warrants and conversion of Series A Warrants. The is partially offset by increased interest expense, beneficial conversion discount and debt discount in 2017, as compared to 2016, mainly due to convertible promissory notes issued in the fourth quarter of 2017.

~~Provision for Income Taxes~~

At December 31, 2017, we had federal net operating loss carryforwards of $78,455,234 that will begin to expire in 2025. Our ability to use these net operating loss carryforwards to reduce our future federal income tax ~~liabilities could be subject~~expense, interest and penalties related to annual limitations. In connection with possible future equity offerings, we may realize a “more than 50% change in ownership” which could further limit our ability to use our 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, we may not be able to take advantage of our net operating loss carryforwards for federal income tax ~~purposes.~~

~~Net Loss~~

Net loss for the year ended December 31, 2017 was $5,537,936, or ($0.04) per basic and diluted share, compared to a net loss of $6,439,040, or ($0.06) per basic and diluted share, for the same period in 2016, a decrease in the net loss of $901,104, or 14%. The decrease in the net loss was primarily a result of decreased loss on warrant valuation that is partially offset by increase in operating expenses.

We anticipate that our operating losses will continue over the next few years as we prepare for the commercialization of the dermaPACE System for the treatment of diabetic foot ulcers in the United States but if we are able to successfully commercialize, market and distribute the dermaPACE System, then we hope to partially or completely offset these losses within the next few years.

~~Liquidity and Capital Resources~~

We expect to devote substantial resources for the commercialization of the dermaPACE System and will continue to research and develop the non-medical uses of the PACE technology, both of which will require additional capital resources. We incurred a net loss of $5,537,936 and $6,439,040 for the years ended December 31, 2017 and 2016, respectively. These operating losses create uncertainty about our ability to continue as a going concern.

At December 31, 2017, the Company's distributor in South Korea accounted for 69% of the total oustanding accounts receivable. Due to the political climate and uncertainty in South Korea, this distributor has not been able to finalize its expected sales in late 2016 and 2017 and therefore has been unable to pay the Company in a timely manner. The Company has accounted for 38% of their outstanding balance as bad debt reserve as of December 31, 2017 and continues to work with the distributor on a payment plan to get the distributor's account current by April 30, 2018.

The continuation of our business is dependent upon raising additional capital during or before the second quarter of 2018 to fund operations. Management expects the cash used in operations for the Company will be approximately $225,000 to $300,000 per month for the first quarter of 2018 and $275,000 to $350,000 per month for the second quarter of 2018 as resources are devoted to the expansion of our international business, preparations for commercialization of the dermaPACE product including hiring of new employees and continued research and development of non-medical uses of our technology. Management’s plans are to obtain additional capital in 2018 through investments by strategic partners for market opportunities, which may include strategic partnerships or licensing arrangements, or raise capital through the conversion of outstanding warrants, issuance of common or preferred stock, securities convertible into common stock, or secured or unsecured debt. These possibilities, to the extent available, may be on terms that result in significant dilution to our existing shareholders. Although no assurances can be given, management believes that potential additional issuances of equity or other potential financing transactions as discussed above should provide the necessary funding for us. If these efforts are unsuccessful, we may be forced to seek relief through a filing under the U.S. Bankruptcy Code. 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.

On December 29, 2017, the Company entered into a line of credit agreement with A. Michael Stolarski, a member of the Company's board of directors and an existing shareholder of the Company. The agreement established a line of credit in the amount of $370,000 with an annualized interest rate of 6%. The line of credit may be called for payment upon demand. On January 26, 2018, the Company entered into a Master Equipment Lease with NFS Leasing Inc. to provide financing for equipment purchases to enable the Company to begin placing the dermaPACE System in the marketplace. This agreement provides for a lease line of up to $1,000,000 with a lease term of 36 months, and grants NFS a security interest in the Company's accounts receivable, personal property and money and deposit accounts of the Company.

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

matters. For the years ended December 31, ~~2017~~2023, and ~~2016, net cash used by operating activities was $1,528,971~~2022, the Company did not have any amounts recorded for interest and $3,199,453, respectively, primarily consisting of compensation costs, research and development activities and general corporate operations. The decrease in the use of cash for operating activities for the year ended December 31, 2017, as compared to the same period for 2016, of $1,670,482, or 52%, was primarily due to the increase in accounts receivable of $250,678 and in accounts payable and accrued expenses of $1,082,071. Net cash used by investing activities in 2017 was $0 as compared to net cash provided by investing activities in 2016 of $8,770 from the purchase of property and equipment. Net cash provided by financing activities for the year ended December 31, 2017 was $2,117,298, which primarily consisted of the net proceeds from convertible promissory notes of $1,384,232, proceeds from related party line of credit of $370,000, proceeds from advances from related parties of $310,000 and proceeds from warrant exercises of $93,066. Net cash provided by financing activities for the year ended December 31, 2016 was $3,207,771, which primarily consisted of the net proceeds from 2016 Public Offering of $1,596,855, 2016 Private Placement of $1,528,200, and proceeds from warrant exercises of $67,466. Cash and cash equivalents increased by $596,613 for the year ended December 31, 2017 and cash and cash equivalents decreased by $19,359 for the year ended December 31, 2016.penalties.

~~Contractual Obligations~~

21.	Commitments and Contingencies

Our major outstanding contractual obligations relate to our operating lease for our facility, purchase and supplier obligations for product component materials and equipment, and our notes payable, related parties.Litigation

In ~~August 2016, we~~the ordinary course of business, the Company from time to time becomes involved in various legal proceedings involving a variety of matters. The Company does not believe there are any pending legal proceedings that will have a material adverse effect on the Company’s business, consolidated financial position, results of operations, or cash flows. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties. The Companies expenses legal fees in the period in which they are occurred.

In February 2024, the Company entered into a ~~lease~~termination agreement ~~for 7,500 square feet~~with an advisor to agree on termination fees owed with respect to a previous engagement agreement. The company agreed to a contingent payment of ~~office space for office, research and development, quality control, production and warehouse space which expires on December 31, 2021. Under~~$670 thousand upon the ~~terms~~closure of the ~~lease, we pay monthly rent of $10,844, subject to a 3% adjustment on an annual basis.~~Merger disclosed in note 4.

We have developed a network of suppliers, manufacturers, and contract service providers to provide sufficient quantities of product component materials for our products through the development, clinical testing and commercialization phases. ~~We have a manufacturing supply agreement with Swisstronics Contract Manufacturing AG in Switzerland, a division of Cicor Technologies Ltd., covering the generator box component of our devices.~~

Acquisition Dispute

In ~~August 2005, as part of~~May 2022, the purchase of the orthopedic division assets of HealthTronics, Inc., we issued two notes to HealthTronics, Inc. for $2,000,000 each. The notes bear interest at 6% annually. Quarterly interest through June 30, 2010 was accrued and added to the principal balance. InterestCompany received notification alleging that it is ~~paid quarterly~~not in arrears beginning September 30, 2010. All remaining unpaid accrued interest and principal was due August 1, 2015. Accrued interest on the notes which matured in August 2015 totaled $1,372,743 at December 31, 2017 and 2016.

~~On June 15, 2015, we entered into an amendment (the “Note Amendment”) with HealthTronics, Inc. to amend certain provisions of the notes payable, related parties.~~ ~~The Note Amendment provides for the extension of the due date to January 31, 2017. In connection~~compliance with the ~~Note Amendment, we entered into a security~~license agreement with HealthTronics, Inc. to provide a first security interest in the assets of the Company. The notes payable, related parties will bear interest at 8% per annum effective August 1, 2015 and during any period when an Event of Default occurs, the applicable interest rate shall increase by 2% per annum. Events of Default under the notes payable, related parties have occurred and are continuing on account of the failure of SANUWAVE, Inc., a wholly owned subsidiary of the Company and the borrower under the notes payable, related parties, to make the required payments of interest which were due on December 31, 2016, March 31, 2017, June 30, 2017, September 30, 2017, and December 31, 2017 (collectively, the "Defaults"). As a result of the Defaults, the notes payable, related parties have been accruing interest at the rate of 10% per annum since January 2, 2017 and continue to accrue at such rate. The Company will be required to make mandatory prepayments of principal on the notes payable, related parties equal to 20% of the proceeds received by the Company through the issuance or sale of any equity securities in cash or through the licensing of the Company’s patents or other intellectual property rights.

~~In addition,~~Celularity entered in connection with the ~~Note Amendment, we issued~~acquisition of the UltraMIST assets. The Company has responded and asserted that the Company is not in breach and that the supplier has breached various agreements. It is too early to ~~HealthTronics, Inc. on June 15, 2015, an aggregate total~~determine the outcome of ~~3,310,000 warrants (the “Class K Warrants”)~~this matter. Any potential impact to ~~purchase shares~~the Company cannot be fully determined at this time.

F-22

Table of Contents

Lease Commitments

As of December 31, 2023, the maturities of the Company’s ~~common stock, $0.001 par value (the “Common Stock”), at an exercise price~~operating and financing leases, which have initial or remaining lease terms more than one year, consist of ~~$0.55 per share, subject to certain anti-dilution protection. Each Class K Warrant represents~~ the ~~right to purchase one share of Common Stock. The warrants vested upon issuance and expire after ten years.~~following:

(In thousands)	Operating Leases		Finance Leases
Year ended December 31,
2024	$	141	$	189
2025		122		216
2026		67		44
2027		59		-
2028		-		-
Total Lease Payments		389		449

22.	Subsequent Event

~~On June 28, 2016,~~
In March 2024, the Company ~~and HealthTronics, Inc.~~ entered into an exclusive license and option agreement (the “License and Option Agreement”) with a ~~second amendment~~third party licensee (the ~~“Second Amendment”~~“Licensee”) ~~to amend certain provisions of the notes payable, related parties. The Second Amendment provides for the extension of the due date to January 31, 2018.~~

~~In addition, the Company,~~ in connection with a portfolio of Sanuwave, Inc. patents related to the ~~Second Amendment, issued~~field of intravascular shockwave applications (the “Patents”). In exchange for a one-time payment of $2.5 million, Sanuwave, Inc. granted the Licensee an exclusive license to ~~HealthTronics, Inc. on June 28, 2016,~~the Patents and an option to acquire the Patents for an additional ~~1,890,000 Class K Warrants~~one-time payment in the single-digit millions of dollars. If the Licensee does not exercise its option to ~~purchase shares~~acquire the Patents during a specified option period, the license terminates and all rights revert back to Sanuwave, Inc.

F-23

Table of the Company’s Common Stock at an exercise price of $0.08 per share, subject to certain anti-dilution protection. The exercise price of the 3,310,000 Class K Warrants issued on June 15, 2015 was decreased to $0.08 per share.Contents

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On August 3, 2017, the Company and HealthTronics, Inc. entered into a third amendment (the “Third Amendment”) to amend certain provisions of the notes payable, related parties. The Third Amendment provides for the extension of the due date to December 31, 2018, revision of the mandatory prepayment provisions and the future issuance of additional warrants to HealthTronics upon certain conditions.None

Item 9A.

CONTROLS AND PROCEDURES

In addition, the Company, in connection with the Third Amendment, issued to HealthTronics, Inc. on August 3, 2017, an additional 2,000,000 Class K Warrants to purchase shares of the Company’s Common Stock at an exercise price of $0.11 per share, subject to certain anti-dilution protection. Each Class K Warrant represents the right to purchase one share of Common Stock. The warrants vested upon issuance and expire after ten years.

~~Recently Issued Accounting Standards~~

New accounting pronouncements are issued by the Financial Standards Board (“FASB”) or other standards setting bodies that the Company adopts according to the various timetables the FASB specifies. The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

~~In May 2014, the FASB issued Accounting Standards Update No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective method, which requires the standard to be applied to each prior period presented, or (ii) a modified retrospective method, which requires the cumulative effect of adoption to be recognized as an adjustment to the opening retained earnings in the period of adoption. In July 2015, the FASB confirmed a one-year delay in the effective date of ASU 2014-09, making the effective date for the Company the first quarter of fiscal 2018 instead of the current effective date, which was the first quarter of fiscal 2017. This one year deferral was issued by the FASB in ASU 2015-14, ~~Revenue from Contracts with Customers (Topic 606)~~. The Company can elect to adopt the provisions of ASU 2014-09 for annual periods beginning after December 31, 2017, including interim periods within that reporting period. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. The Company will adopt the standard effective January 1, 2018 and currently anticipates using the modified retrospective approach with a cumulative effect adjustment to opening retained earnings. The evaluation of our contracts is substantially complete and, based upon the results of our evaluation, we do not expect the application of the new standard to these contracts to have a material impact to our consolidated statements of comprehensive loss, balance sheets, or cash flows either at initial implementation or on an ongoing basis. We will be finalizing our assessment in advance of the filing of our first quarter 2018 Form 10-Q. The disclosures related to revenue recognition will be significantly expanded under the standard, specifically around the quantitative and qualitative information about performance obligations and disaggregation of revenue. The expanded disclosure requirements will be included in our first quarter 2018 Form 10-Q.

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~, which requires lessees to recognize most leases on the balance sheet. The provisions of this guidance are effective for the annual periods beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. Management is evaluating the requirements of this guidance and has not yet determined the impact of the adoption on the Company’s financial position or results of operations.

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (Topic 230)~~. This ASU will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The ASU will be effective for fiscal years beginning after December 15, 2017. This standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The new standard will be adopted during the first quarter of 2018 using a retrospective transition method. The adoption of this guidance will not have significant impact on our financial statements.

~~In July 2017, the FASB issued ASU No. 2017-11,~~ Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480): Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this ASU addresses the complexity and reporting burden associated with the accounting for freestanding and embedded instruments with down round features as liabilities subject to fair value measurement. Part II of this ASU addresses the difficulty of navigating Topic 480. Part I of this ASU will be effective for fiscal years beginning after December 15, 2018. Early adoption is permitted for an entity in an interim or annual period. Management is evaluating the requirements of this guidance and has not yet determined the impact of the pending adoption on the Company’s financial position or results of operations.

~~In February 2018, the FASB issued ASU 2018-02,Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~. This ASU requires reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The amount of the reclassification is the difference between the historical 35% corporate income tax rate and the newly enacted 21% corporate income tax rate. Because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws of rates be included in income from continuing operations is not affected. This ASU is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. We have elected early adoption of this ASU. The impact of the newly enacted 21% corporate income tax rate of teh Tax Cuts and Jobs Act was a $11.1 million adjustment to the gross deferred tax assets which was offset by the same adjustment to the valuation adjustment at December 31, 2017.

~~Off-Balance Sheet Arrangements~~

~~Since inception, we have not engaged in any off-balance sheet activities, including the use of structured finance, special purpose entities or variable interest entities.~~

~~Effects of Inflation~~

Due to the fact that our assets are, to an extent, liquid in nature, they are not significantly affected by inflation. However, the rate of inflation affects such expenses as employee compensation, office space leasing costs and research and development charges, which may not be readily recoverable during the period of time that we are bringing the product candidates to market. To the extent inflation results in rising interest rates and has other adverse effects on the market, it may adversely affect our consolidated financial condition and results of operations.

~~Item 7A.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

~~Not required under Regulation S-K for “smaller reporting companies”.~~

~~Item 8.~~

~~FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA~~

~~The consolidated financial statements required by this item and an index thereto are contained in Part IV, Item 15 of this Annual Report on Form 10-K.~~

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

~~None.~~

~~Item 9A. CONTROLS AND PROCEDURES~~

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

We carried out an evaluation under the supervision and with the participation of our management, including our ~~Acting~~ Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, ~~2017.~~2023. Based on this evaluation, the ~~Acting~~ Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not operating effectively as of December 31, 2017. Our disclosure controls and procedures were not effective because of the “material weakness” described below under “Management’s Annual Report on Internal Control over Financial Reporting.”2023.

Management’s Annual Report on Internal Control over Financial Reporting

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

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

Management, with the participation of the ~~Acting~~ Chief Executive Officer (principal executive officer) and the Chief Financial Officer (principal financial and accounting officer), evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2017.~~2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013).

~~A “material weakness” is defined under SEC rules as a deficiency, or a combination~~As of ~~deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a~~December 31, 2023, the Company identified the following material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls. As a result of its review, management concluded that we had three material weaknesses in our internal control over financial reporting process. The first material weakness is due to the lack of internal expertise and resources to analyze and properly apply generally accepted accounting principles to complex and non-routine transactions such as complex financial instruments and derivatives and complex sales distribution agreements. The second material weakness is due to the lack of internal resources to analyze and properly apply generally accepted accounting principle to accounting for equity components of service agreements with select vendors. The third material weakness is due to the lack of internal expertise and resources to ensure that generally accepted accounting principle disclosures are complete and accurate. weaknesses:

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

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

As a result, management concluded that ~~our~~its internal control over financial reporting was not effective as of December 31, ~~2017.~~2023.

~~Management believes~~

Table of Contents

Remediation Plan

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

We are also working with an outside vendor to improve our IT general controls over our ERP system and set up a proper framework for IT general controls to be executed with the objective to remediate the weaknesses regarding internal controls and provide the framework for testing going forward.

While the above actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal control over a sustained period, we are committed to continuous improvement and will continue to diligently review our internal control over financial reporting. The material weaknesses ~~identified above were due to~~will not be considered remediated until management completes the ~~complex~~design and ~~non-routine nature~~implementation of the ~~Company’s complex financial instruments~~measures described above, until the controls operate for a sufficient period of time, and ~~derivatives and complexity of new sales distribution agreements, as well as lack of internal resources and expertise.~~until management has concluded, through testing, that the controls are effective.

~~Management’s Plan to Remediate Material Weaknesses~~

~~Management will develop an updated remediation plan to address~~There is no assurance that the material weaknesses related to its processes and procedures surrounding the accounting for complex financial instruments and derivatives, accounting for complex sales distribution agreements, accounting for equity component of service agreements and ensuring that generally accepted accounting principle disclosures are complete and accurate. The updated remediation plan could consist of, among other things, redesigning the procedures to enhance their identification, capture, review, approval and recording of terms and components of complex financial instruments and derivatives, complex sales distribution agreements, and any equity components of service agreements as well as identify necessary disclosures. Management will research where to obtain additional interpretive guidance on identifying and accounting for these identified areas of material weakness as well as engage, as necessary, an outside consultant to assist in the application of United States GAAP to these areas. The updated remediation planmeasures described above will be ~~reviewed by~~sufficient to remediate the ~~Board of Director’s and be implemented upon the board’s approval. These measures are intended both to address the~~previously identified material weaknesses and ~~to enhance our overall internal control environment.~~significant deficiencies.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the ~~period covered by this report~~quarter ended December 31, 2023, that materially affect, or are reasonably likely to materially affect, our internal control over financial ~~reporting. Management is~~reporting, except as disclosed above.

Item 9B.

OTHER INFORMATION

During the three months ended December 31, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the ~~process~~Exchange Act) adopted or terminated any contract, instruction, or written plan for the purchase or sale of ~~designing updated changes~~our securities that was intended to ~~its controls as discussed above~~satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any non-Rule 10b5-1 trading arrangement (as defined in ~~“Management’s Plan to Remediate Material Weaknesses.”~~Item 408(c) of Regulation S-K)

~~Item 9B. OTHER INFORMATION~~

Item 9C.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

~~None.~~

Not applicable.

PART III

~~Item 10.~~

Item 10.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

MANAGEMENT

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

Name	Age	Position Held
~~Kevin A. Richardson, II~~Morgan Frank	4952	~~Director, Chairman and Acting~~ Chief Executive Officer, Chairman of the Board
~~Lisa E. Sundstrom~~Toni Rinow	4859	Chief Financial Officer
Peter Stegagno	5864	~~Vice President, Operations~~Chief Operating Officer
Iulian Cioanta, PhD	5561	~~Vice President, Research~~Chief Science and ~~Development~~Technology Officer
~~John F. Nemelka~~Andrew Walko	5239	~~Director~~President
~~Alan L. Rubino~~Tim Hendricks	6349	~~Director~~Executive Vice President of Sales
A. Michael Stolarski	4753	Director
~~Maj-Britt Kaltoft~~Jeff Blizard	5455	Director
Ian Miller	48	Director
James Tyler	66	Director
Kevin A. Richardson, II	55	Director, Chief Strategy Officer

~~Kevin A. Richardson, II~~

Table of Contents

Morgan Frank joined the ~~Company~~board as ~~chairman of the board of directors in October of 2009 and~~ ~~joined SANUWAVE, Inc. as chairman of the board of directors~~Chairman in August ~~of 2005. In November 2012, upon the resignation of the Company’s former President~~2022 and ~~Chief Executive Officer, Christopher M. Cashman, Mr. Richardson assumed the role of Active~~was appointed Chief Executive Officer in ~~addition to remaining Chairman~~May 2023. Mr. Frank is a founder and principal at Manchester Explorer Fund (18 years) and at Manchester Explorer Ltd (Cayman), two life science focused public equity hedge funds specializing in hands-on microcap growth and development companies. He has 30 years of experience in investing, capital markets, corporate strategy, corporate finance, corporate restarts, and intellectual property. Formerly a principal at First Principles Group, a firm focused on corporate restarts and a portfolio manager for technology and venture capital at Hollis capital, a San Francisco Hedge Fund. He also sits on the ~~Board, through the hiring~~board of Modular medical (MODD) a development stage company focused on next generation insulin delivery. Mr. ~~Chiarelli~~Frank has degrees in ~~February 2013. In April 2014, Mr. Richardson assumed the role of Co-Chief Executive Officer. When Mr. Chiarelli departed~~economics and political science from Brown University.

Dr. Toni Rinowjoined the Company in ~~2014, Mr. Richardson again assumed the role~~August 2022.Dr. Toni Rinow is a highly effective CFO with expertise in publicly held and private equity funded companies. Toni serves as ~~Acting Chief Executive Officer. Mr. Richardson brings~~an independent board member and audit committee member for a global IT service provider Converge technology (TSX:CTS) with over $3 billion in revenue. Toni develops high-functioning, performance driven teams to ~~our board of directors a broad array of~~advance transformational change. Her global experience spans healthcare, consumer product goods, and technology delivering accelerated growth. She has expertise in investor and public relations, capital markets, ESG and capital expansion through M&A, financial ~~knowledge for healthcare~~transactions and ~~other industries. Since 2004, Mr. Richardson served as managing partner of Prides Capital LLC, an investment management firm, until its liquidation in September 2015.~~

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

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

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

~~John F. Nemelka~~Andrew Walko joined the ~~Company~~company as ~~a member~~ of July 2023 as the ~~board~~Company’s President. Mr. Walko brings deep experience in contract manufacturing, supply chain management, medical device production, and logistics from his previous roles as President at Biomerics, LLC (medical device contract manufacturing) from August 2021 to April 2023; at Minnetronix, Inc. (medical device design and manufacturing), including as Director of ~~directors in October of 2009~~Manufacturing (Operations) from March 2020 to July 2021 and ~~joined SANUWAVE, Inc. as a member of the board of directors in August of 2005. Mr. Nemelka founded NightWatch Capital Group, LLC, an investment management business,~~Senior Manager, Manufacturing (Operations) from June 2018 to February 2020; and at Integer Holdings Corporation. Prior to this, he served as ~~its Managing Principal since its incorporation in July 2001 until its liquidation in December 2015. From 1997 to 2000, he was a Principal~~Operations and Logistics Manager for the U.S. Army both at ~~Graham Partners, a private investment firm~~home and affiliate of the privately-held Graham Group. From 2000 to 2001, Mr. Nemelka was a Consultant to the Graham Group. Mr. Nemelka brings to our board of directors a diverse background with both financial and operations experience.overseas. He ~~holds a B.S. degree in Business Administration~~earned his MBA from ~~Brigham Young University and an M.B.A. degree from the Wharton School at~~ the University of ~~Pennsylvania.~~Minnesota and Bachelor of science from West Virginia University.

~~Alan L. Rubino~~Tim Hendricksjoined Sanuwave in February of 2023 as the ~~Company~~Executive V.P. of Sales for the U.S. Wound business. Across his 20 years of industry experience, Hendricks has taken on progressive roles in sales leadership, training & development, and professional education with responsibilities both internationally and in the U.S. Tim has led sales and sales leadership teams in medical devices, biologics, specialty pharmaceuticals, and durable medical equipment. His passion for collaboration and growth has allowed him to thrive at start-ups and Fortune 500 companies such as ~~a member~~Boston Scientific (formerly Advanced Bionics), Smith & Nephew (formerly Osiris Therapeutics), and most recently Byram Healthcare as the Vice President of Sales. He earned his Bachelor of the ~~board of directors~~Arts in September of 2013. Mr. Rubino has served as President and Chief Executive Officer of Emisphere Technologies, Inc. since September, 2012. Previously, Mr. Rubino served as the CEO and President of New American Therapeutics, Inc., CEO and President of Akrimax Pharmaceuticals, LLC., and President and COO of Pharmos Corporation. Mr. Rubino has continued to expand upon a highly successful and distinguished career that included Hoffmann-La Roche Inc. where he was a member of the U.S. Executive and Operating Committees and a Securities and Exchange Commission (SEC) corporate officer. During his Roche tenure, he held key executive positions in marketing, sales, business operations, supply chain and human resource management, and was assigned executive committee roles in marketing, project management, and globalization. Mr. Rubino also held senior executive positions at PDI, Inc. and Cardinal Health. He holds a BA in economicsAdvertising from Rutgers University with a minor in biology/chemistry and completed post-graduate educational programs at the University of Lausanne and Harvard Business School. Mr. Rubino serves on the boards of Aastrom Biosciences, Inc. and Genisphere, LLC and is also on the Rutgers University Business School Board of Advisors.Southern Methodist University.

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

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

Table of Contents

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

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

Kevin A. Richardson, IIjoined the Company as ~~a member~~chairman of the board of directors in ~~June 2017. Since January 2017, Dr. Kaltoft heads the business development~~October of 2009 and patent functions at the Danish State Serum Institute, an institution under the Danish Ministry of Health. From 2011 to 2016, she was the Vice President - Corporate Alliance Management, Licensing Director and Business Development with Nov Nordisk headquartered in Bagsvaerd, Denmark. She has obtained outstanding results in the areas of business development, licensing and alliance management in the pharmaceutical and biotech industry at Lundbeck, Nycomed, and EffRx. Dr. Kaltoft brings 20 years of international specialization in development and successful execution of business development strategies, contractual structures and alliance management within all sectorsjoined SANUWAVE, Inc. as chairman of the ~~life science industry.~~
board of directors in August of 2005. In November 2012, upon the resignation of the Company’s former President and Chief Executive Officer, Christopher M. Cashman, Mr. Richardson assumed the role of Acting Chief Executive Officer, in addition to remaining Chairman of the Board, through the hiring of Mr. Chiarelli in February 2013. In April 2014, Mr. Richardson assumed the role of Co-Chief Executive Officer. When Mr. Chiarelli departed the Company in 2014, Mr. Richardson again assumed the role as Acting Chief Executive Officer. In November 2018, Mr. Richardson was appointed as Chief Executive Officer. Mr. Richardson stepped down as Chief Executive Officer in May 2023 to serve as the Company’s Chief Strategy Officer, the position he currently holds. Mr. Richardson brings to our board of directors a broad array of financial knowledge for healthcare and other industries. Since 2004, Mr. Richardson served as managing partner of Prides Capital LLC, an investment management firm, until its liquidation in September 2015

CORPORATE GOVERNANCE AND BOARD MATTERS

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

The Board of Directors

~~Recent Developments~~

The Company’s current board of directors consists of ~~five~~six members, ~~two~~four of whom have been determined by the board to be “independent” as defined under the rules of the ~~NASDAQ~~OTC stock market. The ~~Company expects to add additional~~board of directors has determined that Messrs. Frank and Richardson are not independent ~~directors in 2018.~~under the applicable marketplace rules of the OTC stock market. During 2023, the Board held seven meetings. Each incumbent director attended at least 75% of the aggregate of the total number of meetings of the Board held during the period for which he has been a director and the total number of meetings held by all committees of the Board on which he served during the periods that he or she served.

Board’s Leadership Structure

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

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

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

Table of directors consists of five members, two of whom has been determined by the board to be “independent” as defined under the rules of the NASDAQ stock market. The board of directors has determined that Mr. Richardson, Mr. Nemelka and Mr. Stolarski are not independent under the applicable marketplace rules of the NASDAQ stock market and Rule 10A-3 under the Exchange Act. The Company expects to add additional independent directors in 2018.Contents

Board’s Role in Risk Oversight

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

Audit Committee

The current members of the Company’s audit committee are John F. Nemelka (Chairperson), Kevin A. Richardson, II, and A. Michael Stolarski. Mr. Nemelka, who chairs the committee, has been determined by the board of directors to be an audit committee financial expert as defined pursuant to the rules of the SEC. Pursuant to the Company’s Audit Committee Charter, the audit committee is required to consist of at least two independent directors. The Company expects to add additional independent directors to the board of directors in 2018.

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

~~Compensation Committee~~

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

Compensation Committee

The current chair of the Company’s compensation committee is Jeff Blizard, who is an independent director, pursuant to the rules of the OTC stock market. The other current members of the compensation committee are A. Michael Stolarski, Ian Miller, and Jim Tyler, who are also independent directors pursuant to the rules of the OTC stock market. The primary purpose of the compensation committee is to discharge the responsibilities of the board of directors relating to compensation of the Company’s executive officers. Pursuant to the Company’s Compensation Committee Charter, the compensation committee is required to consist of at least two independent directors. ~~The Company expects to add additional independent directors to the board of directors in 2018.~~

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

Nominating and Corporate Governance Committee

The current ~~members~~chair of the Company’s nominating and corporate governance committee is Jim Tyler, who is an independent director, pursuant to the rules of the OTC stock market. The other current members of the committee are ~~Maj-Britt Kaltoft (Chairperson), Kevin~~Ian Miller, A. ~~Richardson, II, John F. Nemelka,~~Michael Stolarski, and ~~Alan L. Rubino.~~Jeff Blizard, who are also independent directors pursuant to the rules of the OTC stock market. Pursuant to the Company’s Nominating and Corporate Governance Committee Charter, the nominating and corporate governance committee is required to consist of at least two independent directors. ~~The Company expects to add additional independent directors to the board of directors in 2018.~~

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

Strategy and Finance Committee

The nominating and corporate governance committee’s charter outlines how the nominating and corporate governance committee fulfills its responsibilities for assessing the qualifications and effectivenesscurrent chair of the Company’s strategy and finance committee is A. Michael Stolarski. The other current ~~board members, assessing the needs for future board members, identifying individuals qualified to become~~ members of the ~~board~~committee are James Tyler and ~~its committees,~~Ian Miller. The strategy and ~~recommending candidates for~~finance committee operates under a written charter adopted by the board of ~~director’s selection as director nominees for election~~directors which is available on the Company’s website at ~~the next annual or other properly convened meeting of shareholders.~~

The nominating and corporate governance committee considers director candidates recommended by shareholders for nomination for election to the board of directors. The committee applies the same standards in considering director candidates recommended by the shareholders as it applies to other candidates. Any shareholder entitled to vote for the election of directors may recommend a person or persons for consideration by the committee for nomination for election to the board of directors. The Company must receive written notice of such shareholder’s recommended nominees(s) no later than January 31stwww.sanuwave.com. Specific responsibilities of the ~~year in which~~strategy and finance committee include identifying financial strategies to improve the Company’s balance sheet position and shareholder ~~wishes such recommendation to be considered by the committee in connection with the next meeting~~value.

Table of shareholders at which the election of directors will be held. To submit a recommendation, a shareholder must give timely notice thereof in writing to the Secretary of the Company. A shareholder’s notice to the Secretary shall set forth: (i) the name and record address of the shareholder making such recommendation and any other shareholders known by such shareholder to be supporting such recommendation; (ii) the class and number of shares of the Company which are beneficially owned by the shareholder and by any other shareholders known by such shareholder to be supporting such recommendation; (iii) the name, age and five year employment history of such recommended nominee; (iv) the reasons why the shareholder believes the recommended nominee meets the qualifications to serve as a director of the Company; and (v) any material or financial interest of the shareholder and, if known, the recommended nominee in the Company.Contents

~~Shareholder~~Stockholder Communications with the Board of Directors

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

Code of Conduct and Ethics

It is the Company’s policy to conduct its affairs in accordance with all applicable laws, rules and regulations of the jurisdictions in which it does business. The Company has adopted a code of business conduct and ethics with policies and procedures that apply to all associates (all employees are encompassed by this term, including associates who are officers) and directors, including the chief executive officer, chief financial officer, controller, and persons performing similar functions.

The Company has made the code of business conduct and ethics available on its website atwww.sanuwave.com.If any substantive amendments to the code of business conduct and ethics are made or any waivers are granted, including any implicit waiver, the Company will disclose the nature of such amendment or waiver on its website or in a ~~report~~Current Report on Form 8-K.

No Family Relationships Among Directors and Officers

There are no family relationships between any director or executive officer of the Company and any other director or executive officer of the Company.

~~Director Independence~~

~~Our board of directors has determined that Alan L. Rubino and Dr. Maj-Britt Kaltoft qualify as independent directors based on the NASDAQ Stock Market definition of “independent director.”~~

Limitation of Directors Liability and Indemnification

The Nevada Revised Statutes authorize corporations to limit or eliminate, subject to certain conditions, the personal liability of directors to corporations and their stockholders for monetary damages for breach of their fiduciary duties. Our certificate of incorporation limits the liability of our directors to the fullest extent permitted by Nevada law.

We have director and officer liability insurance to cover liabilities our directors and officers may incur in connection with their services to us, including matters arising under the Securities Act of 1933, as amended. Our certificate of incorporation and bylaws also provide that we will indemnify our directors and officers who, by reason of the fact that he or she is one of our officers or directors, is involved in a legal proceeding of any nature.

There is no pending litigation or proceeding involving any of our directors, officers, employees, or agents in which indemnification will be required or permitted. We are not aware of any threatened litigation or proceeding that may result in a claim for such indemnification.

DELINQUENT SECTION 16(a) ~~BENEFICIAL OWNERSHIP REPORTING COMPLIANCE~~REPORTS

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our equity securities which are registered pursuant to Section 12 of the Exchange Act, to file with the SEC initial reports of ownership and reports of changes in ownership of our equity securities. ~~Officers, directors and greater than 10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.~~

~~Based~~Except as set forth herein, based solely upon a review of the Forms 3, 4 and 5 (and amendments thereto) furnished to us for our fiscal year ended December 31, ~~2017,~~2023, we have determined that our directors, officers and greater than 10% beneficial owners complied with all applicable Section 16 filing requirements.

Item 11.

EXECUTIVE COMPENSATION

~~Item 11. EXECUTIVE COMPENSATION~~This section discusses the material components of the executive compensation program offered to our executives, and in particular to our named executive officers for 2023, who were:

Morgan Frank, Chief Executive Officer

Toni Rinow, Chief Financial Officer

Tim Hendricks, Executive Vice President of Sales

Kevin A. Richardson, II, Chief Strategy Officer and former Chief Executive Officer

Table of Contents

Summary Compensation Table ~~for Fiscal Years 2017 and 2016~~

The following table provides certain information concerning compensation earned for services rendered in all capacities by our named executive officers during the fiscal years ended December 31, ~~2017~~2023, and ~~2016.~~2022.

Name and Position	Year	Salary		Bonus ⁽²⁾		All other compensation ⁽¹⁾		Total
Morgan Frank, Chief Executive Officer	2023		1		-		100,000		100,001
Toni Rinow, Chief Financial Officer	2023		335,000		-		-		335,000
Tim Hendricks, Executive Vice President of Sales	2023		244,391		30,000		49,067		323,458
Kevin Richardson II, Former Chief Executive Officer	2023		350,000		-		60,000		410,000
	2022		430,583		-		175,000		605,583

Name and Principal Position Year

Salary ($)

Bonus ($)

Stock Awards ($)

Option Awards ($)

Non Equity Incentive Plan Compensation ($)

Nonqualified Deferred Compensation Earnings ($)

All Other Compensation ($)(3)

Total ($)

(a) (b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

Kevin A. Richardson, II 2017
$120,000(1)
  -
$130882(2)
  -
  -
  -
  -
$250,882
Chairman of the Board and Acting Chief Executive Officer (principal executive officer) 2016
$120,000(1)
  -
$114,021(2)
  -
  -
  -
  -
$234,021









Lisa E. Sundstrom 2017
$115,000
  -
$88,352(2)
  -
  -
  -
$12,652
$216,004
Chief Financial Officer (principal financial officer) 2016
$115,000
  -
$81,444(2)
  -
  -
  -
$13,284
$209,728









Peter Stegano 2017
$200,000
  -
$88,352(2)
  -
  -
  -
$13,498
$301,850
Vice President, Operations 2016
$200,000
  -
$81,444(2)
  -
  -
  -
$13,339
$294,783









Iulian Cioanta 2017
$200,000
  -
$88,352(2)
  -
  -
  -
$19,583
$307,935
Vice President, Research and Development 2016
$200,000
  -
$81,444(2)
  -
  -
  -
$19,892
$301,336

	(1) Mr. Richardson has been the Company's Chairman of the Board since the Company's inception. Since 2014, Mr. Richardson has also been our Acting Chief Executive Officer. We continue to compensate Mr. Richardson as a director as described in "Discussion of Director Compensation" below, however we pay him an additional $10,000 per month in recognition of his additional role as Acting Chief Executive Officer.
(2) This dollar amount reflects the full fair value of the grant at the date of issuance and is recognized for financial statement reporting purposes with respect to each fiscal year over the vesting terms in accordance with ASC 718-10.
~~(3)~~ Includes board fees, health, dental, life and disability insurance premiums and 401(k) matching contributions.

(2)

The bonus paid to Mr. Hendricks in 2023 was a signing bonus.

2023 Named Executive Officer Compensation Plan

Base salary

Our salaries reflect the responsibilities of each Named Executive Officer (NEO) and the competitive market for comparable professionals in our industry. Base salaries and benefits packages are fixed components of our NEO’s compensation and do not vary with Company performance.

Short term Cash Incentives

The performance-based compensation plan reflects our pay-for-performance philosophy and directly ties short-term incentives to short-term business performance. These awards are linked to specific annual financial goals and key business initiatives for the overall Company. Annual employee bonus incentives are paid to reward the achievement of critical short-term operating, financial, and strategic goals. The annual employee bonus is calculated based on a percentage of the each NEO’s salary, 50% is paid on individual performance goals, as assigned by leadership and the Board of Directors, and the remainder is paid based on Company performance measures.

Stock Incentive Plan

On October 24, 2006, SANUWAVE, Inc.’s board of directors adopted the 2006 Stock Incentive Plan of SANUWAVE, Inc. (the “2006 Plan”).On November 1, 2010, the Company approved the Amended and Restated 2006 Stock Incentive Plan of SANUWAVE Health, Inc. effective as of January 1, 2010 (previously defined as the “Stock Incentive Plan”). The Stock Incentive Plan permits grants of awards to selected employees, directors, and advisors of the Company in the form of restricted stock or options to purchase shares of common stock. Options granted may include ~~nonstatutory~~non-statutory options as well as qualified incentive stock options. The Stock Incentive Plan is ~~currently~~ administered by the board of directors of the Company. The Stock Incentive Plan gives broad powers to the board of directors of the Company to administer and interpret the ~~particular~~ form and conditions of each option. The stock options granted under the Stock Incentive Plan are ~~nonstatutory~~non-statutory options which vest over a period of up to three years and have a maximum ~~ten year~~ten-year term. The options are granted at an exercise price equal to the fair market value of the common stock on the date of the ~~grant which is approved by the board of directors of the Company. The Stock Incentive Plan had 22,500,000 shares of common stock reserved for grant at December 31, 2017 and 2016.~~grant.

The terms of the options granted under the Stock Incentive Plan expire as determined by individual option agreements (or on the tenth anniversary of the grant date), unless terminated earlier, on the first to occur of the following: (1) the date on which the participant’s service with the Company is terminated by the Company for cause; (2) 60 days after the participant’s death; or (3) 60 days after the termination of the participant’s service with the Company for any reason other than cause or the participant’s death; provided that, if during any part of such 60 day period the option is not exercisable solely because of specified securities law restrictions, the option will not expire until the earlier of the expiration date or until it has been exercisable for an aggregate period of 60 days after the termination of the participant’s service with the Company. The options vest as provided for in each ~~individual’s~~ option agreement and the exercise prices for the options are determined by the board of directors at the time the option is ~~granted;~~granted, provided that the exercise price shall in no event be less than the fair market value per share of the Company’s common stock on the grant date. In the event of any change in the common stock underlying the options, by reason of any merger or exchange of shares of common stock, the board of directors shall make such substitution or adjustment as it deems to be equitable to (1) the class and number of shares underlying such option, (2) the exercise price applicable to such option, or (3) any other affected terms of such option.

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In the event of a change of control, unless specifically modified by an individual option agreement: (1) all options outstanding as of the date of such change of control will become fully vested; and (2) notwithstanding (1) above, in the event of a merger or share exchange, the board of directors may, in its sole discretion, determine that any or all options granted pursuant to the Stock Incentive Plan will not vest on an accelerated basis if the board of directors, the surviving corporation or the acquiring corporation, as the case may be, has taken such action that in the opinion of the board of directors is equitable or appropriate to protect the rights and interests of the participants under the Stock Incentive Plan.

~~On December 31, 2017, there~~No equity awards were ~~2,238,281 shares of common stock available for grant under the Stock Incentive Plan. For~~issued during the years ended December 31, ~~2017~~2023, and ~~2016, there were 2,700,000~~2022.

Transition and ~~4,067,800~~Separation Agreement with Mr. Richardson

On May 23, 2023, SANUWAVE and Mr. Richardson entered into a Transition and Separation Agreement (the “Transition Agreement”), pursuant to which Mr. Richardson agreed to serve as SANUWAVE’s Chief Strategy Officer for an anticipated period of 12 months or alternatively a consulting agreement for a period of two years. Mr. Richardson will continue to receive his current salary or an equivalent consulting fee, remain eligible for SANUWAVE’s group health benefit plans and programs, unless he earlier becomes eligible for health insurance benefits through a subsequent employer or exceeds the legal eligibility period for continued coverage, and will remain eligible to receive a pro-rated annual bonus, one-third of which will be based upon SANUWAVE achieving each of the following metrics during calendar year 2023: (i) sales of $30 million, (ii) adjusted EBITDA of $3 million and (iii) listing on The Nasdaq Stock Market or the New York Stock Exchange. Mr. Richardson also is entitled to receive options ~~respectively, granted~~exercisable for 25 million shares of SANUWAVE Common Stock, one-half of which will vest immediately and one-half of which will vest on April 15, 2024. During any period of continued service with SANUWAVE, Mr. Richardson’s options will continue to vest. If no mutually agreed upon employment agreement or consulting agreement is entered into, or if Mr. Richardson is terminated without cause prior to the ~~Company’s executive officers~~end of the anticipated transition period, Mr. Richardson will receive a severance payment equal to 20 weeks of his most recent base salary, subject to Mr. Richardson executing a release of claims in favor of SANUWAVE and his continued compliance with the Transition Agreement and any post-employment obligations under any employee agreements between SANUWAVE and Mr. Richardson. The Transition Agreement also included a release of claims in favor of SANUWAVE and customary confidentiality and non-disparagement provisions.

Employment Agreement with Mr. Frank

Effective May 23, 2023, the ~~Stock Incentive Plan.~~SANUWAVE board appointed Morgan Frank, as SANUWAVE’s interim Chief Executive Officer. In connection with this appointment, SANUWAVE and Mr. Frank entered into an Executive Employment Agreement, effective May 23, 2023 (the “Frank Employment Agreement”). Pursuant to the Frank Employment Agreement, Mr. Frank is paid a de minimis base salary of $1.00 per year, may be eligible to receive an incentive bonus opportunity in accordance with any criteria determined by the SANUWAVE board, and will be entitled to participate in SANUWAVE’s employee benefit plans and programs. Mr. Frank’s employment will be terminated upon (i) written notice of termination or resignation by either SANUWAVE or Mr. Frank, respectively, for any reason, provided that Mr. Frank must provide at least 60 days’ prior notice of his resignation, or (ii) Mr. Frank’s death or disability. Moreover, during the term of his employment and for a period of one year thereafter, Mr. Frank agreed (i) not to perform services for or have any interest in any competitive business and (ii) not to solicit (a) SANUWAVE’s current or former employees or independent contractors or (b) actual or prospective customers, clients, vendors, service providers, suppliers or contractors. Finally, the Frank Employment Agreement also includes customary confidentiality and non-disparagement provisions.

Outstanding Equity Awards at ~~2017~~2023 Fiscal Year End

The following table provides certain information concerning the outstanding equity awards for each named executive officer as of December 31, ~~2017.~~2023:

	~~Option Awards~~					~~Stock Awards~~
~~Name~~	~~Number of Securities Underlying Unexercised Options/ Warrants (#) Exercisable~~	~~Number of Securities Underlying Unexercised Options/ Warrants (#) Unexercisable~~	~~Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)~~	~~Option/ Warrant Exercise Price ($)~~	~~Option/ Warrant Expiration Date~~	~~Number of Shares or Units of Stock That Have Not Vested (#)~~	~~Market Value of Shares or Units of Stock That Have Not Vested ($)~~	~~Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)~~	~~Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)~~
~~(a)~~	~~(b)~~	~~(c)~~	~~(d)~~	~~(e)~~	~~(f)~~	~~(g)~~	~~(h)~~	~~(i)~~	~~(j)~~
~~Kevin A. Richardson, II~~	~~115,000(1)~~	-	-	~~$0.35~~	~~02/21/2023~~	-	-	-	-
~~Chairman of the Board and Co-Chief Executive Officer (principal executive officer)~~	~~452,381(3)~~	-	-	~~$0.11~~	~~10/1/25~~	-	-	-	-
	~~297,619(3)~~	-	-	~~$0.06~~	~~10/1/25~~	-	-	-	-
	~~700,000(4)~~	-	-	~~$0.04~~	~~6/16/26~~	-	-	-	-
	~~594,300(5)~~	-	-	~~$0.18~~	~~11/9/26~~	-	-	-	-
	~~900,000(6)~~	-	-	~~$0.11~~	~~6/14/27~~	-	-	-	-
	~~640,000(7)~~	-	-	~~$0.11~~	~~3/17/19~~	-	-	-	-
~~Lisa Sundstrom~~	~~65,000(1)~~	-	-	~~$0.35~~	~~02/21/2023~~	-	-	-	-
~~Chief Finanical Officer (principal financial officer)~~	~~25,000(2)~~	-	-	~~$0.55~~	~~5/7/24~~	-	-	-	-
	~~301,587(3)~~	-	-	~~$0.11~~	~~10/1/25~~	-	-	-	-
	~~198,413(3)~~	-	-	~~$0.06~~	~~10/1/25~~	-	-	-	-
	~~500,000(4)~~	-	-	~~$0.04~~	~~6/16/26~~	-	-	-	-
	~~424,500(5)~~	-	-	~~$0.18~~	~~11/9/26~~	-	-	-	-
	~~600,000(6)~~	-	-	~~$0.11~~	~~6/14/27~~	-	-	-	-
	~~440,000(7)~~	-	-	~~$0.11~~	~~3/17/19~~	-	-	-	-
~~Peter Stegano~~	~~333,644(1)~~	-	-	~~$0.35~~	~~02/21/2023~~	-	-	-	-
~~Vice President, Operations~~	~~50,000(2)~~	-	-	~~$0.55~~	~~5/7/24~~	-	-	-	-
	~~301,587(3)~~	-	-	~~$0.11~~	~~10/1/25~~	-	-	-	-
	~~198,413(3)~~	-	-	~~$0.06~~	~~10/1/25~~	-	-	-	-
	~~500,000(4)~~	-	-	~~$0.04~~	~~6/16/26~~	-	-	-	-
	~~424,500(5)~~	-	-	~~$0.18~~	~~11/9/26~~	-	-	-	-
	~~600,000(6)~~	-	-	~~$0.11~~	~~6/14/27~~	-	-	-	-
	~~440,000(7)~~	-	-	~~$0.11~~	~~3/17/19~~	-	-	-	-
~~Iulian Cioanta~~	~~296,241(1)~~	-	-	~~$0.35~~	~~02/21/2023~~	-	-	-	-
~~Vice President, Research and Development~~	~~50,000(2)~~	-	-	~~$0.55~~	~~5/7/24~~	-	-	-	-
	~~301,587(3)~~	-	-	~~$0.11~~	~~10/1/25~~	-	-	-	-
	~~198,413(3)~~	-	-	~~$0.06~~	~~10/1/25~~	-	-	-	-
	~~500,000(4)~~	-	-	~~$0.04~~	~~6/16/26~~	-	-	-	-
	~~424,500(5)~~	-	-	~~$0.18~~	~~11/9/26~~	-	-	-	-
	~~600,000(6)~~	-	-	~~$0.11~~	~~6/14/27~~	-	-	-	-
	~~440,000(7)~~	-	-	~~$0.11~~	~~3/17/19~~	-	-	-	-

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Name	Number of securities underlying unexercised options exercisable		Number of securities underlying options unexercisable		Equity incentive plan awards number of securities underlying unexercised unearned options		Exercise price ($)		Expiration Date
Kevin A. Richardson, Former Chief Executive Officer		452,381		-		-	$	0.11	10/1/2025
		297,619		-		-	$	0.06	10/1/2025
		700,000		-		-	$	0.04	6/16/2026
		594,300		-		-	$	0.18	11/9/2026
		900,000		-		-	$	0.11	6/14/2027
		1,100,000		-		-	$	0.21	9/20/2028
		50,000		-		-	$	0.15	8/26/2029

(1) On February 21, 2013, the Company, by mutual agreement with all active employees and directors of the Company, cancelled options granted to the active employees and directors in the year ended December 31, 2011 and prior. In exchange for these options, the active employees and directors received new options to purchase shares of common stock at an exercise price of $0.35 per share. The Company cancelled all options which were previously granted to Mr. Richardson, Ms. Sundstrom, Mr. Stegagno and Mr. Cioanta. The Company granted Mr. Richardson 115,000 options, Ms. Sundstrom 65,000 options, Mr. Stegagno 333,644 options and Mr. Cioanta 296,241 options on February 21, 2013 which vests one-third at grant date, one-third on February 21, 2014 and one-third on February 21, 2015.
(2) The Company granted Ms. Sundstrom 25,000 options, Mr. Stegagno 50,000 options and Mr. Cioanta 50,000 options on May 7, 2014 which vests one-third at grant date, one-third on May 7, 2015 and one-third on May 7, 2016.
~~(3) The Company granted Mr. Richardson 750,000 options, Ms. Sundstrom 500,000 options, Mr. Stegagno 500,000 options and Mr. Cioanta 500,000 options on October 1, 2015 which vests at grant date.~~
~~(4) The Company granted Mr. Richardson 700,000 options, Ms. Sundstrom 500,000 options, Mr. Stegagno 500,000 options and Mr. Cioanta 500,000 options on June 16, 2016 which vests at grant date.~~
~~(5) The Company granted Mr. Richardson 594,300 options, Ms. Sundstrom 424,500 options, Mr. Stegagno 424,500 options and Mr. Cioanta 424,500 options on November 9, 2016 which vests at grant date.~~
~~(6) The Company granted Mr. Richardson 900,000 options, Ms. Sundstrom 600,000 options, Mr. Stegagno 600,000 options and Mr. Cioanta 600,000 options on June 15, 2017 which vests at grant date.~~
~~(7) The Company granted Mr. Richardson 640,000 warrants, Ms. Sundstrom 440,000 warrants, Mr. Stegagno 440,000 warrants and Mr. Cioanta 440,000 warrants on Deccember 11, 2017 which vests at grant date.~~

Director Compensation Table for Fiscal ~~2017~~Year 2023

The ~~following table~~Company provides ~~certain information concerning compensation~~a base retainer for each director ~~during~~ with higher base retainers for service by the ~~fiscal year~~ ~~ended December 31, 2017.~~Board Chair. The Company provides an additional retainer for committee leadership of the Audit Committee, Compensation Committee, and Strategy and Finance Committee. The Compensation Committee believes the structure aligns compensation according to the level of service contributions by each director.

Director	Fee Earned or paid in cash (in thousands)
Morgan Frank	$	100
A. Michael Stolarski	$	97
Jeff Blizzard	$	90
Ian Miller	$	90
James Tyler	$	90
Kevin Richardson	$	60

Name

Fees Earned or Paid in Cash ($)

Stock Awards ($)

Option Awards ($)

Non Equity Incentive Plan Compensation ($)

Nonqualified Deferred Compensation Earnings ($)

All Other Compensation ($)

Total ($)

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

Kevin A. Richardson, II (1)
$24,000
  -
$130,882
  -
  -
  -
$154,882
















John F. Nemelka
$24,000
  -
$42,530
  -
  -
  -
$66,530
















Alan L. Rubino
$24,000
  -
$42,530
  -
  -
  -
$66,530
















A. Michael Stolarski
$24,000
  -
$42,530
  -
  -
  -
$66,530
















Maj-Britt Kaltoft
$13,000
  -
$42,530
  -
  -
  -
$55,530

(1) Mr. Richardson has been the Company's Chairman of the Board since the Company's inception. Since 2014, Mr. Richardson has also been our Acting Chief Executive Officer. We continue to compensate Mr. Richardson as a director as described in "Discussion of Director Compensation" below, however we pay him an additional $10,000 per month in recognition of his additional role as Acting Chief Executive Officer.Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following are the aggregate number of option awards outstanding that have been granted to each of our non-employee directors as of December 31, 2017: Kevin A. Richardson, II – 3,059,300, John F. Nemelka – 1,034,800, Alan L. Rubino – 1,019,800, A. Michael Stolarski – 669,800 and Maj-Britt Kaltoft – 300,000.

~~Discussion of Director Compensation~~

~~Effective January 1, 2017, the Company began to compensate its directors at an annual rate of $24,000 each.~~ On June 15, 2017, the Company issued 900,000 options to purchase the Company’s common stock at $0.11 per share to non-employee director Kevin A. Richardson II and the Company issued 300,000 to purchase the Company’s common stock at $0.11 per share to non-employee directors John F. Nemelka, Alan L. Rubino, A. Michael Stolarski and Maj-Britt Kaltoft. On November 9, 2016, the Company issued 594,300 options to purchase the Company’s common stock at $0.18 per share to director Kevin A. Richardson, II and the Company issued 169,800 options to purchase the Company’s common stock at $0.18 per share to directors John F. Nemelka, Alan L. Rubino and A. Michael Stolarski. On June 16, 2016, the Company issued 700,000 options to purchase the Company’s common stock at $0.04 per share to director Kevin A. Richardson, II and the Company issued 200,000 options to purchase the Company’s common stock at $0.04 per share to directors John F. Nemelka, Alan L. Rubino and A. Michael Stolarski. On October 1, 2015, the Company issued 452,381 options to purchase the Company’s common stock at $0.11 per share and 297,619 options to purchase the Company’s common stock at $0.50 per share to director Kevin A. Richardson, II and the Company issued 150,795 options to purchase the Company’s common stock at $0.11 per share and 99,205 options to purchase the Company’s common stock at $0.50 per share to directors John F. Nemelka and Alan L. Rubino. The options above issued at $0.50 per share were re-priced to $0.06 per share in March 2016 as the result of the public offering. On September 3, 2013, the Company issued 100,000 options to purchase the Company’s common stock at $0.65 per share to director Alan L. Rubino. On February 21, 2013, the Company, by mutual agreement with all the active employees and directors of the Company, cancelled options granted to the active employees and directors in the year ended December 31, 2011 and prior. In exchange for these options, the active employees and directors received new options to purchase shares of common stock at an exercise price of $0.35 per share. Kevin A. Richardson, II, and John F. Nemelka, each cancelled 15,000 options and were each issued 115,000 options at an exercise price of $0.35 per share.

~~Item 12.~~

~~SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS~~

The following table sets forth certain information, as of March ~~2, 2018,~~15, 2024, with respect to the beneficial ownership of the Company’s outstanding common stock by (i) any holder of more than five percent, (ii) each of the Company’s named executive officers and directors, and (iii) the Company’s directors and executive officers as a group.

Number of Shares

Percent of

Beneficially

Shares

Name of Beneficial Owner (1)

Owned

Outstanding (2)

A. Michael Stolarski (3)
  16,439,333
  10.7%
Kevin A. Richardson, II (4)
  12,549,870
  8.4%
Peter Stegano (5)
  3,511,780

  2.4%
Iulian Cioanta (6)
  2,826,146
  2.0%
Lisa E. Sundstrom (7)
  2,554,500
  1.8%
John F. Nemelka (8)
  1,246,055
  0.9%
Alan Rubino (9)
  1,219,800
  0.9%
Maj-Britt Kaltoft (10)
  500,000
  0.4%
All directors and executive officers as a group (8 persons)
  40,847,484
  27.5%
5% Beneficial Owner:


Jerome Gildner (11)
  13,333,334
  9.1%
John McDermott (11)
  12,575,756
  8.6%
James McGraw (11)
  11,610,694
  7.9%

~~(1) Unless otherwise noted, each beneficial owner has the same address as us.~~

(2) Applicable percentage ownership is based on 140,357,120 shares of common stock outstanding as of March 15, 2018, “Beneficial ownership” includes shares for which an individual, directly or indirectly, has or shares voting or investment power, or both, and also includes options that are exercisable within 60 days of March 15, 2018. Unless otherwise indicated, all of the listed persons have sole voting and investment power over the shares listed opposite their names. Beneficial ownership as reported in the above table has been determined in accordance with Rule 13d-3 of the Exchange Act.

(3) Includes options to purchase up to 669,800 shares of common stock, warrants to purchase up to 7,499,452 shares of common stock and 4,545,455 common shares available upon conversion of convertible promissory note.

(4) Includes options to purchase up to 3,059,300 shares of common stock, warrants to purchase up to 3,222,583 shares of common stock and 2,363,636 common shares available upon conversion of convertible promissory note. In addition, this amount includes 1,599,791 shares of common stock owned directly by Prides Capital Fund I, L.P. Prides Capital Partners LLC is the general partner of Prides Capital Fund I, L.P. and Mr. Richardson is the controlling shareholder of Prides Capital Partners LLC; therefore, under certain provisions of the Exchange Act, he may be deemed to be the beneficial owner of such securities. Mr. Richardson has also been deputized by Prides Capital Partners LLC to serve on the board of directors of the Company. Mr. Richardson disclaims beneficial ownership of all such securities except to the extent of any indirect pecuniary interest (within the meaning of Rule 16a-1 of the Exchange Act) therein.

(5) Consists of options to purchase up to 2,408,144 shares of common stock, warrants to purchase up to 771,818 shares of common stock and 331,818 common shares available upon conversion of convertible promissory note.

~~(6) Consists of options to purchase up to 2,370,741 shares of common stock and warrants to purchase up to 440,000 shares of common stock.~~

~~(7) Consists of options to purchase up to 2,114,500 shares of common stock and warrants to purchase up to 440,000 shares of common stock.~~

~~(8) Includes options to purchase up to 1,034,800 shares of common stock and warrants to purchase up to 200,000 shares of common stock.~~

~~(9) Includes options to purchase up to 1,019,800 shares of common stock and warrants to purchase up to 200,000 shares of common stock.~~

~~(10) Includes options to purchase up to 300,000 shares of common stock and warrants to purchase up to 200,000 shares of common stock.~~

~~(11) Based on records of the Company.~~

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Name of Beneficial Owner ⁽¹⁾	Number of Share Beneficially Owned		Percent of Shares Outstanding ⁽²⁾
Morgan Frank ⁽⁴⁾		347,483,770		25.6	%
Toni Rinow		-		*
Timothy Hendricks		-		*
Kevin A. Richardson, II⁽³⁾		35,459,229		3.1	%
A. Michael Stolarski		132,990,790		10.9	%
James Tyler		3,262,500		*
Ian Miller		17,364,814		1.5	%
Jeff Blizard		-		*
All Directors and Executives as a group (11 persons)		543,085,371		37.2	%
Greater than 5% Holders:
Opaleye LP		207,514,881		19.8	%
Manchester Management PR, LLC
Manchester Management Company, LLC
Manchester Explorer, L.P.
James E. Besser		362,858,770		26.7	%

* Denotes less than 1% beneficial ownership

(1) Unless otherwise noted, each beneficial owner has the same address as the Company. Jeff Blizzard does not hold any stock in the Company.

(2) Applicable percentage ownership is based on 1,140,559,227 shares of common stock outstanding as of March 15, 2024. “Beneficial ownership” includes shares for which an individual, directly or indirectly, has or shares voting or investment power, or both, and includes options, warrants and convertible promissory notes, that are exercisable within 60 days of March 15, 2024. Unless otherwise indicated, all the listed persons have sole voting and investment power over the shares listed opposite their names. Beneficial ownership as reported in the above table has been determined in accordance with Rule 13d-3 of the Exchange Act.

(3) In addition, this amount includes 4,876,409 shares of common stock owned directly by Prides Capital Fund I, L.P. Prides Capital Partners LLC is the general partner of Prides Capital Fund I, L.P. and Mr. Richardson is the controlling shareholder of Prides Capital Partners LLC; therefore, under certain provisions of the Exchange Act, he may be deemed to be the beneficial owner of such securities. Mr. Richardson has also been deputized by Prides Capital Partners LLC to serve on the board of directors of the Company. Mr. Richardson disclaims beneficial ownership of all such securities except to the extent of any indirect pecuniary interest (within the meaning of Rule 16a-1 of the Exchange Act) therein.

(4) Manchester Management PR, LLC (“Manchester”) and Manchester Management Company, LLC (“GP”) may be deemed to be the owner of 108,460,646 shares of Common Stock. Manchester and GP have the sole power to vote or direct the vote of 0 shares of Common Stock, have the shared power to vote or direct the vote of 108,460,646 shares of Common Stock

Manchester Explorer, L.P. (“Explorer”) may be deemed to be the beneficial owner of 362,858,770 shares of Common Stock. Explorer has the sole power to vote or direct the vote of 0 shares of Common Stock, has the shared power to vote or direct the vote of 309,636,770 shares of Common Stock

Mr. Besser has the sole power to vote or direct the vote of 2,250,000 shares of Common Stock, has the shared power to vote or direct the vote of 131,268,146 shares of Common Stock and 216,215624 shares for warrants and convertible debt.

Mr. Frank has the sole power to vote or direct the vote for 8,807,500 shares of Common Stock and 10,937,500 Common Stock warrants. Mr. Frank has the shared power to vote or direct the vote of 131,268,146 shares of Common Stock and 216,215,624 shares for warrants and convertible debt.

Mr. Besser is the managing member of Manchester and GP and Mr. Frank serves as a portfolio manager and as a consultant for Explorer. Manchester is the investment manager of Explorer and GP is the general partner of Explorer. The principal business address for each of Manchester, GP, Explorer and Messrs. Besser and Frank is 2 Calle Candina, #1701, San Juan, Puerto Rico, 00907.

(5) Opaleye Management Inc. (the “Opaleye”) serves as investment manager to Opaleye, L.P. and as a portfolio manager for a separate managed account (the “Managed Account”) and may be deemed to indirectly beneficially own securities owned by the Managed Account. Opaleye disclaims beneficial ownership of the shares held by the Managed Account. Mr. James Silverman is the President of Opaleye. The address of Opaleye is One Boston Place, 26^th Floor, Boston, MA 02108

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Securities Authorized for Issuance Under Equity Compensation Plans

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants, and rights (a)		Weighted- average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (c)
Equity compensation plans approved by security holders		-	$	-		-
Equity compensation plans not approved by security holders		16,286,650		0.28		5,598,216
Total		16,286,650	$	0.28		5,598,216

~~Information on securities authorized for issuance under the Company's equity compensation plans can be found in Item 5 under the same caption in this Annual Report on Form 10-K.~~Stock Incentive Plans

~~Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE~~

~~Related Party Transactions~~

~~Other than as described below, since January 1, 2017, there have been no transactions with related persons required to be disclosed in this report.~~

On February 13, 2018, the Company entered into an Agreement for Purchase and Sale, Limited Exclusive Distribution and Royalties, and Servicing and Repairs with Premier Shockwave Wound Care, Inc., a Georgia Corporation (“PSWC”), and Premier Shockwave, Inc., a Georgia Corporation (“PS”). Each of PS and PSWC is owned by A. Michael Stolarski, a member of the Company’s board of directors and an existing shareholder of the Company. The agreement provides for the purchase by PSWC and PS of dermaPACE System and related equipment sold by the Company and includes a minimum purchase of 100 units over 3 years. The agreement grants PSWC and PS limited but exclusive distribution rights to provide dermaPACE Systems to certain governmental healthcare facilities in exchange for the payment of certain royalties to the Company. Under the agreement, the Company is responsible for the servicing and repairs of such dermaPACE Systems and equipment. The agreement also contains provisions whereby in the event of a change of control of the Company(as defined in the agreement), the stockholders of PSWC have the right and option to cause the Company to purchase all of the stock of PSWC, and whereby the Company has the right and option to purchase all issued and outstanding shares of PSWC, in each case based upon certain defined purchase price provisions and other terms. The agreement also contains certain transfer restrictions on the stock of PSWC.

~~On December 29, 2017, the Company entered into a line of credit agreement with~~ ~~A. Michael Stolarski, a member of the Company’s board of directors and an existing shareholder of the Company~~. The agreement established a line of credit in the amount of $370,000 with an annualized interest rate of 6%. The line of credit may be called for payment upon demand. The outstanding balance as of December 31, 2017 with accrued interest was $370,179 and $0 interest was paid for the period ending December 31, 2017.

~~On March 27, 2017, the Company~~ ~~began offering subscriptions for 10% convertible promissory notes (the “10% Convertible Promissory Notes”) to selected accredited investors.~~ The Company intends to use the proceeds from the 10% Convertible Promissory Notes for working capital and general corporate purposes. The initial offering closed on August 15, 2017, at which time $55,000 aggregate principal amount of 10% Convertible Promissory Notes were issued and the funds paid to the Company. Subsequent offerings were closed on November 3, 2017, November 30, 2017, and December 21, 2017, at which times $1,069,440, $259,310 and $150,000, respectively, aggregate principal amounts of 10% Convertible Promissory Notes were issued and the funds paid to the Company. The 10% Convertible Promissory Notes include a warrant agreement (the “Class N Warrant Agreement”) to purchase Common Stock equal to the amount obtained by dividing the (i) sum of the principal amount, by (ii) $0.11. The Class N Warrant Agreement expires March 17, 2019. On November 3, 2017, the Company issued 10,222,180 Class N Warrants in connection with the initial and second closings of 10% Convertible Promissory Notes. On November 30, 2017, and December 21, 2017, the Company issued 2,357,364 and 1,363,636, respectively, Class N Warrants in connection with the closings of 10% Convertible Promissory Notes. ~~A. Michael Stolarski, a member of the Company’s board of directors and an existing shareholder of the Company, was a purchaser in the~~ ~~10% Convertible Promissory Notes in the amount~~ of $330,000. A. Michael Stolarski and Kevin A. Richardson II, both members of the Company’s board of directors and existing shareholders of the Company, had subscribed $130,000 and $140,000, respectively, to the Company as advances from related parties to be used to purchase 10% Convertible Promissory Notes. The 10% Convertible Promissory Notes associated with these subscriptions were issued in January 2018.

~~Director Independence~~

Our board of directors has determined that Alan L. Rubino and Maj-Britt Kaltoft qualify as independent directors based on the NASDAQ stock market definition of “independent director.” Our board of directors has determined that our other three directors, Kevin A. Richardson, II, John F. Nemelka and A. Michael Stolarski, do not qualify as independent directors based on the NASDAQ stock market definition of “independent director.” There are no family relationships among any of the directors or executive officers of the Company.

~~Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES~~

The following table summarizes the fees that we have paid or accrued for audit and other services provided by our principal independent registered public accounting firm, Cherry Bekaert LLP, for the years ended December 31, 2017 and 2016:

Fee Category

2017

2016

Audit fees
$199,620
$80,000
Tax fees
  21,600
  20,000
Audit related fees
  -
  -
All other fees
  -
  -
Total fees
$221,220
$100,000

~~For purposes of the preceding table:~~

●

~~Audit fees~~consist of fees for the annual audit of our consolidated financial statements, the review of the interim financial statements included in our quarterly reports on Form 10-Q, and other professional services provided in connection with statutory and regulatory filings and consents related to capital markets transactions and engagements for those fiscal years.

●

~~Tax feesconsist of fees for tax compliance, tax advice and tax planning services for those fiscal years.~~

●

~~Audit related feesconsist of fees for assurance and related services that are reasonably related to the performance of the audit or review.~~

●

~~All other feesconsist of fees for all other products and services.~~

The board of directors must pre-approve all audits and permitted non-audit services to be provided by our principal independent registered public accounting firm unless an exception to such pre-approval exists under the Exchange Act or the rules of the SEC. Each year, the board of directors approves the retention of the independent auditor to audit our consolidated financial statements, including the associated fee. At this time, the board of directors evaluates other known potential engagements of the independent auditor, including the scope of audit-related services, tax services and other services proposed to be performed and the proposed fees, and approves or rejects each service, taking into account whether the services are permissible under applicable law and the possible impact of each non-audit service on the independent auditor’s independence from management.

~~Audit Committee Report~~

The audit committee oversees the accounting and financial reporting processes of the Company on behalf of the board of directors. Management has primary responsibility for the Company’s financial statements, financial reporting process and internal controls over financial reporting. The independent auditors are responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). The audit committee's responsibility is to select the independent auditors and monitor and oversee the accounting and financial reporting processes of the Company, including the Company’s internal controls over financial reporting, and the audits of the consolidated financial statements of the Company.

During the course of 2017 and the first quarter of 2018, the audit committee met and held discussions with management and the independent auditors. In the discussions related to the Company’s consolidated financial statements for fiscal year 2017, management represented to the audit committee that such consolidated financial statements were prepared in accordance with United States generally accepted accounting principles. The audit committee reviewed and discussed with management and the independent auditors the audited consolidated financial statements for fiscal year 2017.

~~In fulfilling its responsibilities, the audit committee discussed with the independent auditors the matters that are required to be discussed by PCAOB Auditing Standards No. 1301,Communication with Audit Committees~~. In addition, the audit committee received from the independent auditors the written disclosures and letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor's communications with the audit committee concerning independence, and the audit committee discussed with the independent auditors that firm’s independence. In connection with this discussion, the audit committee also considered whether the provision of services by the independent auditors not related to the audit of the Company’s financial statements for fiscal year 2017 were compatible with maintaining the independent auditors’ independence. The audit committee’s policy requires that the audit committee approve any audit or permitted non-audit service proposed to be performed by its independent auditors in advance of the performance of such service.

Based upon the audit committee’s discussions with management and the independent auditors and the audit committee's review of the representations of management and the written disclosures and letter of the independent auditors provided to the audit committee, the audit committee recommended to the board of directors that the audited consolidated financial statements for the year ended December 31, 2017 be included in the Company’s Annual Report on Form 10-K, for filing with the SEC.

~~The Audit Committee~~

~~John F. Nemelka (Chair)~~

~~Kevin A. Richardson II~~

~~A. Michael Stolarski~~

~~March 29, 2018~~

~~PART IV~~

~~Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES~~

~~1. All financial statements~~

~~The following financial statements are included in this Annual Report on Form 10-K and incorporated herein by reference:~~

	~~Page~~
~~Consolidated Financial Statements~~

~~Report of Independent Registered Public Accounting Firm~~		~~F-1~~

~~Consolidated Balance Sheets as of December 31, 2017 and 2016~~		~~F-3~~

~~Consolidated Statements of Comprehensive Loss for the years ended December 31, 2017 and 2016~~		~~F-4~~

~~Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2017 and 2016~~		~~F-5~~

~~Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016~~		~~F-5~~

~~Notes to Consolidated Financial Statements~~		~~F-7~~

~~2. Financial statement schedules~~

No schedules are required because either the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto.

~~3. Exhibits~~

~~The exhibits below are furnished or filed and, as applicable, are incorporated by reference herein as part of this Annual Report on Form 10-K.~~

~~Exhibit No.~~

~~Description~~

~~2.1~~

Agreement and Plan of Merger, dated as of September 25, 2009, by and between Rub Music Enterprises, Inc., RME Delaware Merger Sub, Inc. and SANUWAVE, Inc. (Incorporated by reference to Form 8-K filed with the SEC on September 30, 2009).

~~3.1~~

~~Articles of Incorporation (Incorporated by reference to the Form 10-SB filed with the SEC on December 18, 2007).~~

~~3.2~~

~~Certificate of Amendment to the Articles of Incorporation (Incorporated by reference to Appendix A to the Definitive Schedule 14C filed with the SEC on October 16, 2009).~~

~~3.3~~

~~Certificate of Amendment to the Articles of Incorporation (Incorporated by reference to Appendix A to the Definitive Schedule 14C filed with the SEC on April 16, 2012).~~

~~3.4~~

~~Bylaws (Incorporated by reference to the Form 10-SB filed with the SEC on December 18, 2007).~~

~~3.5~~

Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock of the Company dated March 14, 2014 (Incorporated by reference to the Form 8-K filed with the SEC on March 18, 2014).

~~3.6~~

~~Certificate of Amendment to the Articles of Incorporation, dated September 8, 2015 (Incorporated by reference to the Form 10-K filed with the SEC on March 30, 2016).~~

~~3.7~~

Certificate of Designation of Preferences, Rights and Limitations of Series B ConvertiblePreferred Stock of the Company dated January 12, 2016 (Incorporated by reference to the Form 8-K filed with the SEC on January 19, 2016).

~~4.1~~

~~Form of Class A Warrant Agreement (Incorporated by reference to Form 8-K filed with the SEC on September 30, 2009).~~

~~4.2~~

~~Form of Class B Warrant Agreement (Incorporated by reference to Form 8-K filed with the SEC on September 30, 2009).~~

~~4.3~~

~~Form of Class D Warrant Agreement (Incorporated by reference to Form 8-K filed with the SEC on October 14, 2010).~~

~~4.4~~

~~Form of Class E Warrant Agreement (Incorporated by reference to Form 8-K filed with the SEC on April 7, 2011).~~

~~4.5~~

~~Form of Series A Warrant (Incorporated by reference to the Form 8-K filed with the SEC on March 18, 2014).~~

~~4.6~~

~~Form of Series B Warrant (Incorporated by reference to the Form 8-K filed with the SEC on March 18, 2014).~~

~~4.7~~

~~Form of 18% Senior Secured Convertible Promissory Note issued by the Company to select accredited investors (Incorporated by reference to Form 8-K filed with the SEC on February 27, 2013).~~

~~4.8~~

~~Form of Convertible Promissory Note between the Company and accredited investors party thereto (Incorporated by reference to the Form 8-K filed with the SEC on March 18, 2014).~~

~~4.9~~

~~Amendment No. 1 to the Convertible Note Agreement between the Company and accredited investors party thereto (Incorporated by reference to the Form 8-K filed with the SEC on March 18, 2014).~~

~~4.10~~

~~Class K Warrant Agreement by and between the Company and HealthTronics, Inc., dated June 15, 2015 (Incorporated by reference to the Form 8-K filed with the SEC on June 18, 2015).~~

~~4.11~~

~~Amendment No. 1 to Class K Warrant Agreement by and between the Company and HealthTronics, Inc., dated June 28, 2016 (Incorporated by reference to the Form 10-Q filed with the SEC on August 15, 2016).~~

~~4.12~~

~~Form of Class L Warrant Common Stock Purchase Warrant (Incorporated by reference to the Form 8-K filed with the SEC on March 17, 2016).~~

~~4.13~~

~~Second Form of Class L Warrant Common Stock Purchase Warrant (Incorporated by reference to the Form 8-K filed with the SEC on August 24, 2016).~~

~~4.14~~

~~Registration Rights Agreement dated January 13, 2016 among the Company and the investors listed therein (Incorporated by reference to the Form 8-K filed with the SEC on January 19, 2016).~~

~~4.15~~

~~Class K Warrant Agreement dated as of August 3, 2017, between the Company andHealthTronics, Inc. (Incorporated by reference to Form 8-K filed with the SEC on August 4, 2017).~~

~~4.16~~

~~Form of Class N Warrant. (Incorporated by reference to Form 8-K filed with the SEC on November 9, 2017).~~

~~10.1~~∞

~~Amended and Restated 2006 Stock Option Incentive Plan of SANUWAVE Health, Inc. (Incorporated by reference to Form 8-K filed with the SEC on November 3, 2010).~~

~~10.2~~

Form of Securities Purchase Agreement, by and among the Company and the accredited investors party thereto, dated March 17, 2014 (Incorporated by reference to the Form 8-K filed with the SEC on March 18, 2014).

~~10.3~~

~~Form of Registration Rights Agreement, by and among the Company and the holders party thereto, dated March 17, 2014 (Incorporated by reference to the Form 8-K filed with the SEC on March 18, 2014).~~

~~10.4~~

Form of Subscription Agreement for the 18% Convertible Promissory Notes between theCompany and the accredited investors a party thereto (Incorporated by reference to the Form 8-K filed with the SEC on March 18, 2014).

~~10.5~~

Amendment to certain Promissory Notes that were dated August 1, 2005, by and among the Company, SANUWAVE, Inc. and HealthTronics, Inc., dated June 15, 2015 (Incorporated by reference to the Form 8-K filed with the SEC on June 18, 2015.)

~~10.6~~

~~Security Agreement, by and between the Company and HealthTronics, Inc., dated June 15, 2015 (Incorporated by reference to the Form 8-K filed with the SEC on June 18, 2015).~~

~~10.7~~

~~Exchange Agreement dated January 13, 2016 among the Company and the investors listed therein (Incorporated by reference to the Form 8-K filed with the SEC on January 19, 2016).~~

~~10.8~~

Escrow Deposit Agreement dated January 25, 2016 among the Company, Newport Coast Securities, Inc. and Signature Bank (Incorporated by reference to the Form S-1/A filed with the SEC on February 3, 2016).

~~10.9~~

Second Amendment to Certain Promissory Notes entered into as of June 28, 2016 by and among the Company, SANUWAVE, Inc. and HealthTronics, Inc. (Incorporated by reference to the Form 10-Q filed with the SEC on August 15, 2016).

~~10.10~~

Form of Securities Purchase Agreement, by and among the Company and the accredited investors a party thereto, dated March 11, 2016 (Incorporated by reference to the Form 8-K filed with the SEC on March 17, 2016).

~~10.11~~

Form of Securities Purchase Agreement, by and between the Company and the accredited investors a party thereto, dated August 24, 2016 (Incorporated by reference to the Form 8-K filed with the SEC on August 25, 2016).

~~10.12~~

Form of Registration Rights Agreement, by and between the Company and the holders a party thereto, dated August 24, 2016 (Incorporated by reference to the Form 8-K filed with the SEC on August 25, 2016).

~~10.13~~

Third Amendment to promissory notes entered into as of August 3, 2017 by and among the Company, SANUWAVE, Inc. and HealthTronics, Inc. (Incorporated by reference to Form 8-K filed with the SEC on August 4, 2017).

~~10.14#~~

Binding Term Sheet for Joint Venture Agreement between the Company and MundiMed Distribuidora Hospitalar LTDA effective as of September 25, 2017 (Incorporated by reference to Form 10-Q filed with the SEC on November 15, 2017).

~~10.15~~

~~Form of 10% Convertible Promissory Note, by and among the Company and the accredited investors a party thereto. (Incorporated by reference to Form 8-K filed with the SEC on November 9, 2017).~~

~~10.16~~

~~Form of Registration Rights Agreement, by and among the Company and the accredited investors a party thereto (Incorporated by reference to Form 8-K filed with the SEC on November 9, 2017).~~

~~10.17~~*#

Agreement for Purchase and Sale, Limited Exclusive Distribution and Royalties, and Servicing and Repairs of dermaPACE Systems and Equipment among the Company, and Premier Shockwave Wound Care, Inc. and Premier Shockwave, Inc. dated as of February 13, 2018.

~~14.1~~

~~Code of Business Conduct and Ethics of SANUWAVE Health, Inc. (Incorporated by reference to the Form 10-K filed with the SEC on March 30, 2016).~~

~~21.1~~*

~~List of subsidiaries~~

23.1*

~~Consent of Cherry Bekaert LLP, independent registered public accountants.~~

~~31.1~~*

~~Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.~~

~~31.2~~*

~~Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.~~

~~32.1~~*

~~Section 1350 Certification of the Chief Executive Officer.~~

~~32.2~~*

~~Section 1350 Certification of the Chief Financial Officer.~~

~~101.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~~

~~∞ Indicates management contract or compensatory plan or arrangement.~~

* Filed herewith

~~# Confidential treatment has been requested as to certain portions of this exhibit, which portions have been omitted and submitted separately to the Securities and Exchange Commission.~~

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Exchange Act and otherwise is not subject to liability under these sections.

~~Item 16. Form 10-K Summary~~

~~The Company has elected not to include summary information.~~

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned hereunto duly authorized.

	~~SANUWAVE HEALTH, INC.~~

~~Dated: March 29, 2018~~	~~By:~~	~~/s/Kevin A. Richardson, II~~
	~~Name:~~	~~Kevin A. Richardson, II~~
	~~Title:~~	~~Acting Chief Executive Officer~~

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

~~Signatures~~	~~Capacity~~	~~Date~~

~~By: /s/Kevin A. Richardson, II~~	~~Acting Chief Executive Officer and Chairman of the Board of Directors~~	~~March 29, 2018~~
~~Name: Kevin A. Richardson, II~~	~~(principal executive officer)~~

~~By: /s/Lisa E. Sundstrom~~	~~Chief Financial Officer (principal financial and accounting officer)~~	~~March 29, 2018~~
~~Name:~~ ~~Lisa E. Sundstrom~~

~~By: /s/John F. Nemelka~~	~~Director~~	~~March 29, 2018~~
~~Name: John F. Nemelka~~

~~By: /s/Alan L. Rubino~~	~~Director~~	~~March 29, 2018~~
~~Name: Alan L. Rubino~~

~~By:/s/ A. Michael Stolarski~~	~~Director~~	~~March 2, 2018~~
~~Name: A. Michael Stolarski~~

~~By:/s/ Maj-Britt Kaltoft~~	~~Director~~	~~March 29, 2018~~
~~Name: Maj-Britt Kaltoft~~

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~To the Board of Directors and~~

~~Stockholders of SANUWAVE Health, Inc. and Subsidiaries~~

~~Opinion on the Financial Statements~~

We have audited the accompanying consolidated balance sheets of SANUWAVE Health, Inc. and Subsidiaries (the “Company”) as of December 31, 2017 and 2016 and the related consolidated statements of comprehensive loss, stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

~~Substantial Doubt about the Company's Ability to Continue as a Going Concern~~

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note (1) to the consolidated finacial statements, the Company has suffered recurring losses from operations and is dependent upon future issuances of equity or other financing to fund ongoing operations, both of which raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in Note (1). The conolidated financial statements do not include any adjustments that might result for the outcome of this uncertainty.

~~Basis for Opinion~~

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. 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 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 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 consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

~~CHERRY BEKAERT LLP~~

~~We have served as the Company’s auditor since 2016.~~

~~Atlanta, Georgia~~

~~March 29, 2018~~

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED BALANCE SHEETS~~

~~December 31, 2017 and 2016~~

2017

2016

ASSETS

CURRENT ASSETS

Cash and cash equivalents
$730,184
$133,571
Accounts receivable, net of allowance for doubtful accounts


of $92,797 in 2017 and $35,196 in 2016
  152,520
  460,799
Inventory, net (Note 3)
  231,532
  231,953
Prepaid expenses
  90,288
  87,823
TOTAL CURRENT ASSETS
  1,204,524
  914,146



PROPERTY AND EQUIPMENT, net (Note 4)
  60,369
  76,938



OTHER ASSETS
  13,917
  13,786
TOTAL ASSETS
$1,278,810
$1,004,870



LIABILITIES


CURRENT LIABILITIES


Accounts payable
$1,496,523
$712,964
Accrued expenses (Note 6)
  673,600
  375,088
Accrued employee compensation
  1,680
  64,860
Advances from related and unrelated parties (Note 7)
  310,000
  -
Line of credit, related parties (Note 8)
  370,179
  -
Convertible promissory notes, net (Note 9)
  455,606
  -
Interest payable, related parties (Note 10)
  685,907
  109,426
Short term loan, net (Note 11)
  -
  47,440
Warrant liability (Note 15)
  1,943,883
  1,242,120
Notes payable, related parties, net (Note 10)
  5,222,259
  5,364,572
TOTAL CURRENT LIABILITIES
  11,159,637
  7,916,470



TOTAL LIABILITIES
  11,159,637
  7,916,470



COMMITMENTS AND CONTINGENCIES (Note 16)





STOCKHOLDERS' DEFICIT


PREFERRED STOCK, SERIES A CONVERTIBLE, par value $0.001,


6,175 authorized; 6,175 shares issued and 0 shares outstanding


in 2017 and 2016 (Note 14)
  -
  -



PREFERRED STOCK, SERIES B CONVERTIBLE, par value $0.001,


293 authorized; 293 shares issued and 0 shares outstanding


in 2017 and 2016, respectively (Note 14)
  -
  -



PREFERRED STOCK - UNDESIGNATED, par value $0.001, 4,993,532


shares authorized; no shares issued and outstanding (Note 14)
  -
  -



COMMON STOCK, par value $0.001, 350,000,000 shares authorized;


139,300,122 and 137,219,968 issued and outstanding in 2017 and


2016, respectively (Note 13)
  139,300
  137,220



ADDITIONAL PAID-IN CAPITAL
  94,995,040
  92,436,697



ACCUMULATED DEFICIT
  (104,971,384)
  (99,433,448)



ACCUMULATED OTHER COMPREHENSIVE LOSS
  (43,783)
  (52,069)
TOTAL STOCKHOLDERS' DEFICIT
  (9,880,827)
  (6,911,600)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
$1,278,810
$1,004,870

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

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~
~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS~~
~~Years Ended December 31, 2017 and 2016~~

2017

2016

REVENUES
$738,527
$1,376,063



COST OF REVENUES (exclusive of depreciation and amortization shown below)
  241,970
  565,129



OPERATING EXPENSES


Research and development
  1,292,531
  1,128,640
General and administrative
  3,004,403
  2,673,773
Depreciation
  24,069
  19,858
Amortization
  -
  306,756
Gain of sale of assets, property and equipment
  -
  (1,594)
TOTAL OPERATING EXPENSES
  4,321,003
  4,127,433



OPERATING LOSS
  (3,824,446)
  (3,316,499)



OTHER INCOME (EXPENSE)


Loss on warrant valuation adjustment and conversion
  (568,729)
  (2,223,718)
Interest expense, net
  (1,139,711)
  (854,980)
Loss on foreign currency exchange
  (5,050)
  (12,329)
TOTAL OTHER INCOME (EXPENSE), NET
  (1,713,490)
  (3,122,541)



NET LOSS
  (5,537,936)
  (6,439,040)



OTHER COMPREHENSIVE INCOME (LOSS)


Foreign currency translation adjustments
  8,286
  (18,907)
TOTAL COMPREHENSIVE LOSS
$(5,529,650)
$(6,457,947)



LOSS PER SHARE:


Net loss - basic and diluted
$(0.04)
$(0.06)



Weighted average shares outstanding - basic and diluted
  138,838,602
  107,619,869

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

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT~~

~~Years Ended December 31, 2017 and 2016~~

Preferred Stock

Common Stock

Number of

Number of

Accumulated

Shares

Shares

Other

Issued and

Issued and

Additional Paid-

Accumulated

Comprehensive

Outstanding

Par Value

Outstanding

Par Value

in Capital

Deficit

Income (Loss)

Total

Balances as of December 31, 2015
  -
$-
  63,056,519
$63,057
$87,086,677
$(92,994,408)
$(33,162)
$(5,877,836)
Net loss
  -
  -
  -
  -
  -
  (6,439,040)
  -
  (6,439,040)
Series A Warrant conversion to stock
  293
  -
  7,447,954
  7,447
  880,971
  -
  -
  888,418
Equity Offering
  -
  -
  30,016,670
  30,017
  1,566,838
  -
  -
  1,596,855
Preferred stock conversion
  (293)
  -
  3,657,278
  3,657
  (3,657)
  -
  -
  -
Peak One - Convertible Debenture
  -
  -
  835,000
  835
  49,265
  -
  -
  50,100
PIPE Offering
  -
  -
  28,300,001
  28,300
  1,499,900
  -
  -
  1,528,200
Warrant exercise
  -
  -
  843,333
  843
  66,623
  -
  -
  67,466
Cashless warrant conversion
  -
  -
  2,627,821
  2,628
  263,093
  -
  -
  265,721
Shares issued for services
  -
  -
  435,392
  436
  43,104
  -
  -
  43,540
Stock-based compensation - options
  -
  -
  -
  -
  547,842
  -
  -
  547,842
Beneficial conversion feature on debt
  -
  -
  -
  -
  191,231
  -
  -
  191,231
Warrants issued for services
  -
  -
  -
  -
  186,410
  -
  -
  186,410
Warrants issued with short term loan
  -
  -
  -
  -
  58,400
  -
  -
  58,400
Foreign currency translation adjustment
  -
  -
  -
  -
  -
  -
  (18,907)
  (18,907)









Balances as of December 31, 2016
  -
  -
  137,219,968
  137,220
  92,436,697
  (99,433,448)
  (52,069)
  (6,911,600)
Net loss
  -
  -
  -
  -
  -
  (5,537,936)
  -
  (5,537,936)
Warrant exercise
  -
  -
  1,163,333
  1,163
  91,903
  -
  -
  93,066
Cashless warrant exercise
  -
  -
  866,625
  867
  66,100
  -
  -
  66,967
Shares issued for services
  -
  -
  50,196
  50
  7,950
  -
  -
  8,000
Warrants issued for services
  -
  -
  -
  -
  182,856
  -
  -
  182,856
Stock-based compensation - options and warrants
  -
  -
  -
  -
  768,105
  -
  -
  768,105
Warrants issued with convertible promissory note
  -
  -
  -
  -
  620,748
  -
  -
  620,748
Beneficial conversion feature on debt
  -
  -
  -
  -
  820,681
  -
  -
  820,681
Foreign currency translation adjustment
  -
  -
  -
  -
  -
  -
  8,286
  8,286









Balances as of December 31, 2017
  -
$-
  139,300,122
$139,300
$94,995,040
$(104,971,384)
$(43,783)
$(9,880,827)

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

	~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~
	~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~
	~~Years Ended December 31, 2017 and 2016~~

2017

2016

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss
$(5,537,936)
$(6,439,040)
Adjustments to reconcile loss from continuing operations


    to net cash used by operating activities


Amortization
  -
  306,756
Depreciation
  24,069
  19,858
Change in allowance for doubtful accounts
  57,601
  26,233
Stock-based compensation - employees, directors and advisors
  768,105
  547,842
Loss on warrant valuation adjustment
  568,729
  2,223,718
Amortization of debt issuance costs
  431,087
  225,786
Warrants issued for services
  182,856
  186,410
Amortization of debt discount
  110,247
  31,514
Stock issued for consulting services
  8,000
  43,540
Loss on conversion option of promissory notes payable
  -
  75,422
Stock issued with convertible debenture
  -
  50,100
Gain on sale of asset, property and equipment
  -
  (1,594)
Changes in assets - (increase)/decrease


     Accounts receivable - trade
  250,678
  (412,578)
     Inventory
  (7,079)
  (29,249)
     Prepaid expenses
  (2,465)
  36,165
     Other
  (131)
  (2,689)
Changes in liabilities - increase/(decrease)


     Accounts payable
  783,559
  203,698
     Accrued expenses
  298,512
  15,714
     Accrued employee compensation
  (63,180)
  (176,682)
     Accrued interest
  21,896
  -
     Interest payable, related parties
  576,481
  (130,377)
NET CASH USED BY OPERATING ACTIVITIES
  (1,528,971)
  (3,199,453)



CASH FLOWS FROM INVESTING ACTIVITIES


Proceeds from sale of property and equipment
  -
  1,594
Purchases of property and equipment
  -
  (10,364)
NET CASH USED BY INVESTING ACTIVITIES
  -
  (8,770)



CASH FLOWS FROM FINANCING ACTIVITIES


Proceeds from convertible promissory notes, net
  1,384,232
  106,000
Proceeds from line of credit, related party
  370,000
  -
Advances from related parties
  310,000
  -
Proceeds from warrant exercise
  93,066
  67,466
Proceeds from 2016 Public Offering, net
  -
  1,596,855
Proceeds from 2016 Private Offering, net
  -
  1,528,200
Proceeds from convertible debenture, net
  -
  175,000
Proceeds from short term loan
  -
  100,000
Payment of short term loan
  (40,000)
  -
Payment of convertible promissory notes
  -
  (155,750)
Payment of convertible debenture
  -
  (210,000)
NET CASH PROVIDED BY FINANCING ACTIVITIES
  2,117,298
  3,207,771



EFFECT OF EXCHANGE RATES ON CASH
  8,286
  (18,907)



NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
  596,613
  (19,359)



CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
  133,571
  152,930
CASH AND CASH EQUIVALENTS, END OF PERIOD
$730,184
$133,571



SUPPLEMENTAL INFORMATION


Cash paid for interest, related parties
$-
$630,549



NONCASH INVESTING AND FINANCING ACTIVITIES


Stock issued with convertible debenture
$-
$50,100



Stock issued for services
$8,000
$43,540



Loss on warrant conversion to stock
$-
$888,418



Beneficial conversion feature on convertible promissory notes
  820,681
  66,331
Beneficial conversion feature on convertible debenture
  -
  124,900
Beneficial conversion feature on convertible debt
$820,681
$191,231



Warrants issued for services
$182,856
$186,410



Warrants issued with convertible promissory note
$620,748
$-
Warrants issued for short tem loan
  -
  58,400
Warrants issued for debt
$620,748
$58,400

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

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~Going Concern~~

As shown in the accompanying consolidated financial statements, SANUWAVE Health, Inc. and Subsidiaries (the “Company”) incurred a net loss of $5,537,936 and $6,439,040 during the years ended December 31, 2017 and 2016, respectively, and the ~~net cash used by operating activities was $1,528,971 and $3,199,453, respectively. As of December 31, 2017, the Company had a net working capital deficit of $9,955,113, total stockholders’ deficit of $9,880,827 and~~ ~~cash and cash equivalents of $730,184. These factors create an uncertainty about the Company’s ability to continue as a going concern.~~

The Company does not currently generate significant recurring revenue and will require additional capital during the second quarter of 2018. Although no assurances can be given, management of the Company believes that existing capital resources should enable the Company to fund operations into the second quarter of 2018.

The continuation of the Company’s business is dependent upon raising additional capital during the second quarter of 2018 and potentially into 2019 to fund operations. Management’s plans are to obtain additional capital in 2018 through investments by strategic partners for market opportunities, which may include strategic partnerships or licensing arrangements, or raise capital through the conversion of outstanding warrants, the issuance of common or preferred stock, securities convertible into common stock, or secured or unsecured debt. These possibilities, to the extent available, may be on terms that result in significant dilution to the Company’s existing shareholders. Although no assurances can be given, management of the Company believes that potential additional issuances of equity or other potential financing transactions as discussed above should provide the necessary funding for the Company to continue as a going concern. ~~If these efforts are unsuccessful, the Company may be forced to seek relief through a filing under the U.S. Bankruptcy Code.~~ ~~The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.~~

~~Summary of significant accounting policies~~

~~Description of the business~~ ~~– The Company is~~ a shock wave technology company using a patented system of noninvasive, high-energy, acoustic shock waves for regenerative medicine and other applications. The Company’s initial focus is regenerative medicine – utilizing noninvasive, acoustic shock waves to produce a biological response resulting in the body healing itself through the repair and regeneration of tissue, musculoskeletal and vascular structures. The Company’s lead regenerative product in the United States is the dermaPACE®device, used for treating diabetic foot ulcers, which was subject to two double-blinded, randomized Phase III clinical studies. On December 28, 2018, the U.S. Food and Drug Administration (the "FDA") notified the Companyto permit the marketing of the dermaPACE System for the treatment of diabetic foot ulcers in the United States. In 2018, the Company plans to begin marketing its dermaPACE System for sale in the United States and will continue to ~~generate revenue from sales of the European Conformity Marking (CE Mark) devices and accessories in Europe, Canada, Asia, and Asia/Pacific.~~

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

~~Foreign currency translation~~ - The functional currencies of the Company’s foreign operations are the local currencies. The financial statements of the Company’s foreign subsidiary have been translated into United States dollars in accordance with ASC 830, ~~Foreign Currency Matters~~, Foreign Currency Translation. All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. Income statement amounts have been translated using the average exchange rate for the year. Translation adjustments are reported in other comprehensive loss in the consolidated statements of comprehensive loss and as cumulative translation adjustments in accumulated other comprehensive income (loss) in the consolidated statements of stockholders’ deficit.

~~Principles of consolidation~~ ~~- The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.~~

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~Summary of significant accounting policies (continued)~~

~~Estimates~~ – These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. Because a precise determination of assets and liabilities, and correspondingly revenues and expenses, depend on future events, the preparation of consolidated financial statements for any period necessarily involves the use of estimates and assumptions. Actual amounts may differ from these estimates. These consolidated financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the accounting policies summarized herein. Significant estimates include the recording of allowances for doubtful accounts, estimated reserves for inventory, valuation of derivatives, accrued expenses, the determination of the valuation allowances for deferred taxes, estimated fair value of stock-based compensation, and estimated fair value of warrants and warrant liabilities.

~~Cash and cash equivalents~~ - For purposes of the consolidated financial statements, liquid instruments with an original maturity of 90 days or less when purchased are considered cash and cash equivalents. The Company maintains its cash in bank accounts which may exceed federally insured limits.

~~Concentration of credit risk and limited suppliers~~ - Management routinely assesses the financial strength of its customers and, as a consequence, believes accounts receivable are stated at the net realizable value and credit risk exposure is limited. Three distributors accounted for 8%, 38% and 24% of revenues for the year ended December 31, 2017, and 69%, 17% and 0% of accounts receivable at December 31, 2017. Two distributors accounted for 50% and 32% of revenues for the year ended December 31, 2016, and 87% and 10% of accounts receivable at December 31, 2016.

We depend on suppliers for product component materials and other components that are subject to stringent regulatory requirements. We currently purchase most of our product component materials from single suppliers and the loss of any of these suppliers could result in a disruption in our production. If this were to occur, it may be difficult to arrange a replacement supplier because certain of these materials may only be available from one or a limited number of sources. In addition, establishing additional or replacement suppliers for these materials may take a substantial period of time, as certain of these suppliers must be approved by regulatory authorities.

~~Accounts receivable~~ - Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings based on its assessment of the current status of individual accounts. Receivables are generally considered past due if greater than 60 days old. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts.

~~Inventory~~ - Inventory consists of finished medical equipment and parts and is stated at the lower of cost or market, which is valued using the first in, first out (“FIFO”) method. Market is based upon 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.

~~Depreciation of property and equipment~~ - The straight-line method of depreciation is used for computing depreciation on property and equipment. Depreciation is based on estimated useful lives as follows: machines and equipment, 3 years; old or used devices, 5 years; new devices, 15 years; office and computer equipment, 3 years; furniture and fixtures, 3 years; and software, 2 years.

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~Summary of significant accounting policies (continued)~~

~~Intangible assets~~ ~~- Intangible assets subject to amortization consist of patents which are recorded at cost. Patents are amortized on a straight-line basis over 11.4 years.~~ The Company regularly reviews intangible assets to determine if facts and circumstances indicate that the useful life is shorter than the Company originally estimated or that the carrying amount of the assets may not be recoverable. Factors the Company considers important and could trigger an impairment review include the following:

●

~~Significant changes in the manner in which the Company uses its assets or significant changes in the Company’s overall business strategy; and~~

●

~~Significant underperformance of the Company’s assets relative to future operating results.~~

If such facts and circumstances exist, the Company assesses the recoverability of the intangible assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. If recognition of an impairment charge is necessary, it is measured as the amount by which the carrying amount of the intangible asset exceeds its fair value.

~~Fair value of financial instruments~~ ~~- The book values of accounts receivable, accounts payable, and other financial instruments approximate their fair values, principally because of the short-term maturities of these instruments.~~

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

~~Level 1 - Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets and liabilities;~~

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

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

~~The Company accounts for derivative instruments under ASC 815,~~ ~~Accounting for Derivative Instruments and Hedging Activities~~, as amended and interpreted. ASC 815 requires that the Company recognize all derivatives on the balance sheet at fair value. The fair value of the warrant liability is determined based on a lattice solution, binomial approach pricing model, and includes the use of unobservable inputs such as the expected term, anticipated volatility and risk-free interest rate, and therefore is classified within level 3 of the fair value hierarchy.

~~The following table sets forth a summary of changes in the fair value of the derivative liability for the year ended December 31, 2017:~~

	~~Warrant~~
	~~Liability~~
~~Balance at December 31, 2016~~	$~~1,242,120~~
~~New issuances~~	~~200,000~~
~~Redemptions~~	~~(66,966~~)
~~Change in fair value~~	~~568,729~~
~~Balance at December 31, 2017~~	$~~1,943,883~~

The Company’s notes payable, related parties had an aggregate outstanding principal balance of $5,222,259, net of $150,484 debt discount at December 31, 2017 and $5,364,572, net of $8,171 debt discount at December 31, 2016, respectively. Interest accrues on the notes at a rate of ten percent per annum, effective January 2, 2017 due to interest payments being in default. The fair value was determined using estimated future cash flows discounted at current rates, which is a Level 3 measurement. The estimated fair value of the Company’s notes payable, related parties was $5,488,720 and $4,923,723 at December 31, 2017 and 2016, respectively.

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~Summary of significant accounting policies (continued)~~

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

~~Revenue recognition~~ - Sales of medical devices, including related applicators, are recognized when shipped to the customer. Shipments under agreements with distributors are invoiced at a fixed price, are not subject to return, and payment for these shipments is not contingent on sales by the distributor. The Company recognizes revenues on shipments to distributors in the same manner as with other customers. Fees from services performed are recognized when the service is performed. Fees for upfront distribution license agreements will be recognized as identified performance obligations are satisfied.

~~Shipping and handling costs~~ ~~- Shipping charges billed to customers are included in revenues. Shipping and handling costs incurred have been recorded in cost of revenues.~~

~~Income taxes~~ ~~- Income taxes are accounted for utilizing the asset and liability method prescribed by the provisions of~~ ~~ASC 740,Income Taxes, Accounting for Income Taxes~~. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided for the deferred tax assets, including loss carryforwards, when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

~~A provision of ASC 740,~~ ~~Income Taxes~~, Accounting for Uncertainty in Income Taxes (FIN 48) specifies the way public companies are to account for uncertainties in income tax reporting, and prescribes a methodology for recognizing, reversing, and measuring the tax benefits of a tax position taken, or expected to be taken, in a tax return. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions would “more-likely-than-not” be sustained if challenged by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year.

The Company will recognize in income tax expense interest and penalties related to income tax matters. For the years ended December 31, 2017 and 2016, the Company did not have any amounts recorded for interest and penalties.

~~Loss per share~~ - ~~The Company calculates net income (loss) per share in accordance with ASC 260,Earnings Per Share~~. Under the provisions of ASC 260, basic net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders for the period by the weighted average number of shares of common stock outstanding for the period. 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 then outstanding. To the extent that securities are “anti-dilutive,” they are excluded from the calculation of diluted net income (loss) per share. As a result of the net loss for the years ended December 31, 2017 and 2016, respectively, all potentially dilutive shares were anti-dilutive and therefore excluded from the computation of diluted net loss per share. Anti-dilutive equity securities consists of the following at December 31, 2017 and 2016, respectively:

2017

2016

Stock Options
  21,593,385
  16,203,385
Warrants
  97,977,851
  78,086,749
Warrants
  14,641,190
  -
Anti-dilutive equity securities
  134,212,426
  94,290,134

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~Summary of significant accounting policies (continued)~~

~~Comprehensive income~~ ~~– ASC 220,~~ ~~Comprehensive Income~~, Reporting Comprehensive Income establishes standards for reporting comprehensive income (loss) and its components in a financial statement. Comprehensive income (loss) as defined includes all changes in equity (net assets) during a period from non-owner sources. The only source of other comprehensive income (loss) for the Company, which is excluded from net income (loss), is foreign currency translation adjustments.

~~Stock-based compensation~~ ~~- The Company uses the fair value method of accounting prescribed by ASC 718,~~ ~~Compensation – Stock Compensation~~, Accounting for Stock-Based Compensation for its employee stock option program. Under ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the applicable vesting period of the stock award.

~~Research and development~~ - Research and development costs are expensed as incurred. Research and development costs include payments to third parties that specifically relate to the Company’s products in clinical development, such as payments to contract research organizations, consulting fees for FDA submissions, universities performing non-medical related research and insurance premiums for clinical studies and non-medical research. In addition, employee costs (salaries, payroll taxes, benefits and travel) for employees of the regulatory affairs, clinical affairs, quality assurance, and research and development departments are classified as research and development costs.

~~Liabilites related to warrants issued~~ - The Company records certain common stock warrants issued at fair value and recognizes the change in the fair value of such warrants as a gain or loss, which is reported in the Other Income (Expense) section of the Consolidated Statements of Comprehensive Loss. The Company reports these warrants at fair value and classified as liabilities because they contain certain down-round provisions allowing for reduction of their exercise price. The fair value of these warrants is estimated using a binomial options pricing model.

~~Warrants related to debt issued~~ - The Company records a warrant discount related to warrants issued with debt at fair value and recognizes the cost using the straight-line method over the term of the related debt as interest expense, which is reported in the Other Income (Expense) section of our Consolidated Statements of Comprehensive Loss. This warrant discount is reported as a reduction of the related debt liability.

~~Beneficial conversion feature on convertible debt~~ - The Company records a beneficial conversion feature related to convertible debt at fair value and recognizes the cost using the straight-line method over the term of the related debt as interest expense, which is reported in the Other Income (Expense) section of our Consolidated Statements of Comprehensive Loss. The beneficial conversion feature is reported as a reduction of the related debt liability.

~~Recent pronouncements~~ – New accounting pronouncements are issued by the Financial Standards Board (“FASB”) or other standards setting bodies that the Company adopts according to the various timetables the FASB specifies.

~~In May 2014, the FASB issued Accounting Standards Update No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective method, which requires the standard to be applied to each prior period presented, or (ii) a modified retrospective method, which requires the cumulative effect of adoption to be recognized as an adjustment to the opening retained earnings in the period of adoption. In July 2015, the FASB confirmed a one-year delay in the effective date of ASU 2014-09, making the effective date for the Company the first quarter of fiscal 2018 instead of the previous effective date, which was the first quarter of fiscal 2017. This one year deferral was issued by the FASB in ASU 2015-14, ~~Revenue from Contracts with Customers (Topic 606)~~. The Company can elect to adopt the provisions of ASU 2014-09 for annual periods beginning after December 31, 2017, including interim periods within that reporting period. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. The Company will adopt the standard effective January 1, 2018 and currently anticipates using the modified retrospective approach with a cumulative effect adjustment to opening retained earnings. The evaluation of our contracts is substantially complete and, based upon the results of our evaluation, we do not expect the application of the new standard to these contracts to have a material impact to our consolidated statements of comprehensive loss, balance sheets, or cash flows either at initial implementation or on an ongoing basis. We will be finalizing our assessment in advance of the filing of our first quarter 2018 Form 10-Q. The disclosures related to revenue recognition will be significantly expanded under the standard, specifically around the quantitative and qualitative information about performance obligations and disaggregation of revenue. The expanded disclosure requirements will be included in our first quarter 2018 Form 10-Q.

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~Summary of significant accounting policies (continued)~~

~~In February 2018, the FASB issued ASU 2018-02,Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~. This ASU requires reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The amount of the reclassification is the difference between the historical 35%~~corporate income tax rate and the newly enacted 21%~~corporate income tax rate. Because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws of rates be included in income from continuing operations is notaffected. This ASU is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. We have elected early adoption of this ASU. The impact of the newly enacted 21% corporate income tax rate of the Tax Cuts and Jobs Act was~~a $11.1 million adjustment to the gross deferred tax assets which was offset by the same adjustment to the valuation allowanceat December 31, 2017.~~

~~Inventory~~

~~Inventory consists of the following at December 31, 2017 and 2016:~~

2017

2016

Inventory - finished goods
$136,534
$218,592
Inventory - parts
  167,613
  89,621
Gross inventory
  304,147
  308,213
Provision for losses and obsolescence
  (72,615)
  (76,260)
Net inventory
$231,532
$231,953

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~Property and equipment~~

~~Property and equipment consists of the following at December 31, 2017 and 2016:~~

2017

2016

Machines and equipment
$240,295
$240,295
Office and computer equipment
  156,860
  156,860
Devices
  89,704
  82,204
Software
  34,528
  34,528
Furniture and fixtures
  16,019
  16,019
Other assets
  2,259
  2,259
    Total
  539,665
  532,165
Accumulated depreciation
  (479,296)
  (455,227)
    Net property and equipment
$60,369
$76,938

~~Depreciation expense was $24,069 and $19,858 for the years ended December 31, 2017 and 2016, respectively. The depreciation policies followed by the Company are described in Note 2.~~

~~Intangible assets~~

~~Intangible assets consist of the following at December 31, 2017 and 2016:~~

2017

2016

Patents, at cost
$3,502,135
$3,502,135
Less accumulated amortization
  (3,502,135)
  (3,502,135)
    Net intangible assets
$-
$-

~~Amortization expense was $0 and $306,756 for the years ended December 31, 2017 and 2016, respectively. The amortization policies followed by the Company are described in Note 2.~~

~~Accrued expenses~~

~~Accrued expenses consist of the following at December 31, 2017 and 2016:~~

2017

2016

Accrued outside services
$165,427
$31,533
Accrued board of director's fees
  125,000
  16,000
Accrued executive severance
  118,000
  100,000
Accrued audit and tax preparation
  73,800
  100,000
Accrued legal professional fees
  61,890
  45,000
Deferred rent
  51,191
  41,341
Accrued travel
  39,926
  -
Accrued clinical study expenses
  13,650
  13,650
Deferred revenue
  13,317
  18,810
Accrued other
  11,399
  8,754

$673,600
$375,088

On November 6, 2012, the Company entered into a Severance and Advisory Agreement (the “Severance Agreement”) with Christopher M. Cashman in connection with his resignation as President and Chief Executive Officer, and a director of the Company. Pursuant to the Severance Agreement, Mr. Cashman will receive, as severance along with other non-cash items, six months of his base salary payable over the following six month period and bonus payments of $100,000 upon each of four bonus payment events tied to the Company’s clinical trial plan for the dermaPACE device, or December 31, 2016, whichever occurs first. The Company achieved three of the four bonus payment events in 2014 and paid $300,000 in accrued executive severance during the year ended December 31, 2014. The accrued executive severance at December 31, 2017 represents the unpaid portion of the bonus payments plus accrued interest due to late payment and the accrued executive severance at December 31, 2016 represents the unpaid portion of the bonus payments.

On May 1, 2017, the Company entered into an agreement with an investment company to provide business advisory and consulting services. The compensation for those services was to be paid in a combination of cash and Company common stock. At December 31, 2017, the Company accrued $120,000 of expense for the services provided. The common stock was issued in March 2018 in the amount of 467,423 shares.

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~Advances from related and unrelated parties~~

The Company has received cash advances from related parties and accredited investors to help fund the Company’s operations. These advances are a part of an agreement that the Company is offering to issue convertible promissory notes. As of December 31, 2017, the Company had received $310,000 from related parties and accredited investors. A. Michael Stolarski and Kevin A. Richardson II, both members of the Company’s board of directors and existing shareholders of the Company, had subscribed $130,000 and $140,000, respectively, to the Company as advances from related parties to be used to purchase 10% Convertible Promissory Notes. ~~The convertible promissory notes for this balance were issued on January 10, 2018 (see Note 20).~~

~~Line of credit, related parties~~

The Company entered into a line of credit agreement with a related party at December 29, 2017. The agreement established a line of credit in the amount of $370,000 with an annualized interest rate of 6%. The line of credit may be called for payment upon demand.

~~Interest expense on line of credit, related parties totaled $179 and $0 for the years ended December 31, 2017 and 2016, respectively.~~

~~Convertible promissory notes~~

~~The 10% Convertible Promissory Notes have a six month term from the subscription date and the note holders can convert the 10% Convertible Promissory Notes at any time during the term to~~ ~~the number of shares of~~ ~~Company common stock, $0.001 par value (the “Common Stock”),~~ ~~equal to the amount obtained by dividing (i) the amount of the unpaid principal and interest on the note by (ii) $0.11.~~

The 10% Convertible Promissory Notes include a warrant agreement (the “Class N Warrant Agreement”) to purchase Common Stock equal to the amount obtained by dividing the (i) sum of the principal amount, by (ii) $0.11. The Class N Warrant Agreement expires March 17, 2019. On November 3, 2017, the Company issued 10,222,180 Class N Warrants in connection with the initial and second closings of 10% Convertible Promissory Notes. On November 30, 2017, and December 21, 2017, the Company issued 2,357,364 and 1,363,636, respectively, Class N Warrants in connection with the closings of 10% Convertible Promissory Notes.

Pursuant to the terms of a Registration Rights Agreement (the “Registration Rights Agreement”) that the Company entered with the accredited investors in connection with the 10% Convertible Promissory Notes, the Company is required to file a registration statement that covers the shares of Common Stock issuable upon conversion of the 10% Convertible Promissory Notes or upon exercise of the Class N Warrants. The failure on the part of the Company to satisfy certain deadlines described in the Registration Rights Agreement may subject the Company to payment of certain monetary penalties.

The Company recorded $820,681 debt discount for the beneficial conversion feature of the promissory notes, $620,748 in debt discount for the discount on the Class N Warrant agreement and $89,518 in debt issuance costs to be amortized over the lives of the 10% Convertible Promissory Notes. Additional debt issuance costs will be incurred and amortized over the remaining lives of the 10% Convertible Promissory Notes when Class N Warrants are issued per the engagement letter with West Park Capital.

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~Convertible promissory notes (continued)~~

The 10% Convertible Promissory Notes had an aggregate outstanding principal balance of $455,606, net of $1,099,861 beneficial conversion feature, warrant discount and debt issuance costs at December 31, 2017.

~~Interest expense on the 10% Convertible Promissory Notes totaled $452,804 for the year ended December 31, 2017.~~

~~A. Michael Stolarski, a member of the Company’s board of directors and an existing shareholder of the Company, was a purchaser in the~~ ~~10% Convertible Promissory Notes in the amount~~ ~~of $330,000 and was issued 3,000,000 Class N Warrants.~~

~~10.~~

~~Notes payable, related parties~~

The notes payable, related parties were issued in conjunction with the Company’s purchase of the orthopedic division of HealthTronics, Inc. on August 1, 2005. The notes payable, related parties bear interest at 6% per annum. Quarterly interest through June 30, 2010, was accrued and added to the principal balance. Interest was paid quarterly in arrears beginning September 30, 2010. All remaining unpaid accrued interest and principal was due August 1, 2015.

~~On June 15, 2015, the Company and HealthTronics, Inc. entered into an amendment (the “Note Amendment”) to amend certain provisions of the notes payable, related parties.~~ ~~The Note Amendment provides for the extension of the due date to January 31, 2017. I~~n connection with the Note Amendment, the Company entered into a security agreement with HealthTronics, Inc. to provide a first security interest in the assets of the Company. The notes payable, related parties bear interest at 8% per annum effective August 1, 2015 and during any period when an Event of Default occurs, the applicable interest rate shall increase by 2% per annum. Events of Default under the notes payable, related parties have occurred and are continuing on account of the failure of SANUWAVE, Inc., a Delaware corporation, a wholly owned subsidiary of the Company and the borrower under the notes payable, related parties, to make the required payments of interest which were due on December 31, 2016, March 31, 2017, June 30, 2017, September 30, 2017, and December 31, 2017 (collectively, the “Defaults”). As a result of the Defaults, the notes payable, related parties have been accruing interest at the rate of 10% per annum since January 2, 2017 and continue to accrue interest at such rate. The Company will be required to make mandatory prepayments of principal on the notes payable, related parties equal to 20% of the proceeds received by the Company through the issuance or sale of any equity securities in cash or through the licensing of the Company’s patents or other intellectual property rights.

On June 28, 2016, the Company and HealthTronics, Inc. entered into a second amendment (the "Second Amendment") to amend certain provisions of the notes payable, related parties. The Second Amendment provides for the extension of the due date to January 31, 2018.

On August 3, 2017, the Company and HealthTronics, Inc. entered into a third amendment (the "Third Amendment") to amend certain provisions of the notes payable, related parties. The Third Amendment provides for the extension of the due date to December 31, 2018, revision of the mandatory prepayment provisions and the future issuance of additional warrants to HealthTronics upon certain conditions.

The notes payable, related parties had an aggregate outstanding principal balance of $5,222,259, net of $150,484 debt discount at December 31, 2017 and $5,364,572, net of $8,171 debt discount at December 31, 2016, respectively.

In addition, the Company, in connection with the Note Amendment, issued to HealthTronics, Inc. on June 15, 2015, a total of 3,310,000 warrants (the “Class K Warrants”) to purchase shares of Common Stock, at an exercise price of $0.55 per share, subject to certain anti-dilution protection. Each Class K Warrant represents the right to purchase one share of Common Stock. The warrants vested upon issuance and expire after ten years. ~~The fair value of these warrants on the date of issuance was $0.0112 and $36,989 was recorded as a debt discount to be amortized over the life of the amendment.~~

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~10.~~

~~Notes payable, related parties (continued)~~

In addition, the Company, in connection with the Second Amendment, issued to HealthTronics, Inc. on June 28, 2016, an additional 1,890,000 Class K Warrants to purchase shares of the Company’s Common Stock at an exercise price of $0.08 per share, subject to certain anti-dilution protection. The exercise price of the 3,310,000 Class K Warrants issued on June 15, 2015 was decreased to $0.08 per share. ~~The fair value of these warrants on the date of issuance was $0.005 and $9,214 was recorded as a debt discount to be amortized over the life of the amendment.~~

In addition, the Company, in connection with the Third Amendment, issued to HealthTronics, Inc. on August 3, 2017, an additional 2,000,000 Class K Warrants to purchase shares of the Company’s Common Stock at an exercise price of $0.11 per share, subject to certain anti-dilution protection. ~~The fair value of these warrants on the date of issuance was $0.10 per warrant and $200,000 was recorded as a debt discount to be amortized over the life of the amendment.~~

~~Accrued interest currently payable totaled $685,907 and $109,426 at December 31, 2017 and 2016, respectively.~~

~~As of January 1, 2017, we are in default with our interest payment and the note is callable by HealthTronics, Inc. The notes payable, related parties are shown as a current liability.~~

~~Maturities on notes payable, related parties are as follows:~~

Years ending December 31,

Amount

2018
$5,372,743
Total
$5,372,743

~~Interest expense on notes payable, related parties totaled $634,169 and $541,982 for the years ended December 31, 2017 and 2016, respectively.~~

~~11.~~

~~Short term loan~~

On December 21, 2016, the Company entered into a short term loan with Millennium Park Capital LLC (the “Holder”) in the principal amount of $100,000. The principal amount shall be due and payable on March 31, 2017, the date that money is obtained from the Company’s Korean distributor, or the date that money is obtained from a new distributor.

In addition, the Company will issue to the Holder 500,000 warrants to purchase shares of Common Stock, at an exercise price of $0.17. Each warrant will represent the right to purchase one share of Common Stock. The warrants will vest upon issuance and have an expiration date of March 17, 2019. ~~The fair value of these warrants on the date of issuance $0.1168, using~~ ~~the Black-Scholes option pricing model,~~ and $58,400 was recorded as a debt discount to be amortized over the life of the short term loan. The Company issued the Holder 500,000 warrants to purchase shares of the Company’s common stock at an exercise price of $0.11 on November 30, 2017. ~~The warrants will vest upon issuance and have an expiration date of March 17, 2019.~~ ~~The estimated fair value of these warrants on the date of issuance at the new exercise price was $10,662 and was recorded as an increase to additional paid-in capital.~~

~~On November 30, 2017, the outstanding balance of $60,000 was converted into the~~ ~~10% Convertible Promissory Notes (see Note 9).~~

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~12.~~

~~Income taxes~~

The Company files income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. The Company is no longer subject to United States federal and state and non-United States income tax examinations by tax authorities for years before 2014.

Deferred income taxes are provided for temporary differences between the carrying amounts and tax basis of assets and liabilities. Deferred taxes are classified as current or noncurrent based on the financial statement classification of the related asset or liability giving rise to the temporary difference. For those deferred tax assets or liabilities (such as the tax effect of the net operating loss carryforwards) which do not relate to a financial statement asset or liability, the classification is based on the expected reversal date of the temporary difference.

~~The income tax provision (benefit) from continuing operations consists of the following at December 31, 2017 and 2016:~~

2017

2016

Current:

Federal
$-
$-
State
  -
  -
Foreign
  -
  -

  -
  -
Deferred:


Federal
  8,371,516
  (1,367,488)
State
  1,489,172

  (150,246)
Foreign
  (19,224)
  7,128
Change in valuation allowance
  (9,841,464)
  1,510,606

$-
$-

On December 22, 2017, H.R. 1, commonly known as the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act reduced the Company’s corporate federal tax rate from 35% to 21% effective January 1, 2018 and changed certain other provisions. As a result, the Company is required to re-measure the deferred tax assets and liabilities using the enacted rate at which they expect them to be recovered or settled. The effect of this re-measurement is recorded to income tax expense in the year the tax law is enacted. For 2017, the re-measurement of our net deferred tax asset resulted in a $11.1 million adjustment to the income tax provision (benefit) at December 31, 2017.

The income tax provision (benefit) amounts differ from the amounts computed by applying the United States federal statutory income tax rate of 35% for the years ended December 31, 2017 and 2016 to pretax income (loss) from continuing operations as a result of the following for the years ended December 31, 2017 and 2016:

2017

2016

Tax benefit at statutory rate
$(1,938,278)
$(2,253,664)
Increase (reduction) in income taxes resulting from:


State income benefit, net of federal benefit
  (136,538)
  (160,335)
Non-deductible loss on warrant valuation adjustment
  199,055
  665,719
Income (loss) from foreign subsidiaries
  (34,552)
  17,077
Change in valuation allowance - United States
  (9,841,464)
  1,510,606
Tax reform rate adjustment
  11,827,143

  -
Other
  (75,366)
  220,597
      Income tax expense (benefit)
$-
$-

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~12.~~

~~Income taxes (continued)~~

~~The tax effects of temporary differences that give rise to the deferred tax assets at December 31, 2017 and 2016 are as follows:~~

2017

2016

Deferred tax assets:

Net operating loss carryforwards
$19,406,373
$27,839,703
Net operating loss carryforwards - foreign
  139,675
  120,451
Excess of tax basis over book value of


property and equipment
  6,978
  13,933
Excess of tax basis over book value


     of intangible assets
  220,180
  447,626
Stock-based compensation
  906,526
  2,038,638
Accrued employee compensation
  -
  24,030
Captialized equity costs
  49,471
  75,471
Inventory reserve
  17,962
  28,777

  20,747,165
  30,588,629
Valuation allowance
  (20,747,165)
  (30,588,629)
      Net deferred tax assets
$-
$-

The Company’s ability to use its net operating loss carryforwards could be limited and subject to annual limitations. In connection with future offerings, the Company may realize a “more than 50% change in ownership” which could further 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 at December 31, 2017 will begin to expire in 2025.~~

~~13.~~

~~Equity Transactions~~

~~Warrant Exercise~~

For the year ended December 31, 2017, the Company issued 1,163,333 shares of common stock upon the exercise of 1,163,333 Class L Warrants to purchase shares of stock for $0.08 per share under the terms of the Class L Warrant agreement.

For the year ended December 31, 2016, the Company issued 843,333 shares of common stock upon the exercise of 843,333 Class L Warrants to purchase shares of stock for $0.08 per share under the terms of the Class L Warrant agreement.

~~Cashless Warrant Exercise~~

For the year ended December 31, 2017, the Company issued 447,118 shares of common stock upon the cashless exercise of 883,499 Class L Warrants to purchase shares of stock for $0.08 per share based on the current market value per share as of the date of conversion as determined under the terms of the Class L Warrant agreement.

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~13.~~

~~Equity Transactions (continued)~~

For the year ended December 31, 2017, the Company issued 419,507 shares of common stock upon the cashless exercise of 545,246 Series A Warrants to purchase shares of stock for $0.0334 per share based on the current market value per share as of the date of conversion as determined under the terms of the Series A Warrant agreement.

For the year ended December 31, 2016, the Company issued 117,510 shares of common stock upon the cashless exercise of 143,400 Series A Warrants to purchase shares of stock for $0.0334 per share based on the current market value per share as of the date of conversion as determined under the terms of the Series A Warrant agreement.

For the year ended December 31, 2016, the Company issued 869,722 shares of common stock upon the cashless exercise of 1,943,334 Class M Warrants to purchase shares of stock for $0.06 per share based on the current market value per share as of the date of conversion as determined under the terms of the Class M Warrant agreement.

For the year ended December 31, 2016, the Company issued 1,640,589 shares of common stock upon the cashless exercise of 4,641,667 Class J Warrants to purchase shares of stock for $0.06 per share based on a current market value per share as of the date of conversion as determined under the terms of the Class J Warrant agreement.

~~2016 Private Placement~~

On August 11, 2016, the Company began a private placement of securities (the “2016 Private Placement”) with select accredited investors in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), an Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act. The 2016 Private Placement offered Units (the “Units”) at a purchase price of $0.06 per Unit, with each Unit consisting of (i) one (1) share of our Common Stock and, (ii) one (1) detachable warrant (the “Warrants”) to purchase one (1) share of our Common Stock at an exercise price of $0.08 per share.

On August 25, 2016 and September 27, 2016 in conjunction with the 2016 Private Placement, the Company issued an aggregate of 22,766,667 and 5,533,334, respectively, shares of common stock for an aggregate purchase price of $1,366,000 and $332,000, respectively.

The Company, in connection with the 2016 Private Placement, issued to the investors an aggregate of 28,300,001 warrants (the “Class L Warrants”) to purchase shares of common stock at an exercise price of $0.08 per share. Each Class L Warrant represents the right to purchase one share of Common Stock. The warrants vested upon issuance and expire on March 17, 2019.

Pursuant to the terms of a Registration Rights Agreement that the Company entered with the accredited investors in connection with the 2016 Private Placement, the Company is required to file a registration statement that covers the shares of Common Stock and the shares of common stock issuable upon exercise of the Warrants. The failure on the part of the Company to satisfy certain deadlines described in the Registration Rights Agreement may subject the Company to payment of certain monetary penalties.

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~13.~~

~~Equity Transactions (continued)~~

~~Michael N. Nemelka, the brother of a member of the Company’s board of directors and an existing shareholder of the Company, was a purchaser in the~~ ~~2016 Private Placement~~ ~~of $75,000. A. Michael Stolarski, a member of the Company’s board of directors and an existing shareholder of the Company, was a purchaser in the~~ ~~2016 Private Placement~~ ~~of $60,000.~~

At the closing of the 2016 Private Placement, the Company paid West Park Capital, Inc., the placement agent for the equity offering, cash compensation of $169,800 based on the gross proceeds of the private placement and 2,830,000 Class L Warrants.

~~Consulting Agreement~~

In November 2017, the Company entered into a three month consulting agreement for which a portion of the fee for the services was to be paid with Common Stock. The number of shares to be paid with Common Stock was calculated by dividing the amount of the fee to be paid with Common Stock of $4,000 by the Company stock price at the close of business on the eighth business day of each month. The Company issued 26,667 and 23,529 shares, respectively in each of the first two months of the agreement. The $4,000 was recorded as a non-cash general and administrative expense for each of the first two months of the agreement.

In August 2016, the Company entered into a consulting agreement for which the fee for the services performed was paid with Common Stock. The Company issued 435,392 shares of Common Stock to Vigere Capital LP under this agreement. The fair value of the Common Stock issued to the consultant, based upon the closing market price of the Common Stock at the date the Common Stock was issued, was recorded as a non-cash general and administrative expense for the year ended December 31, 2016.

~~Convertible Debenture and Restricted Stock~~

On July 29, 2016, the Company entered into a financing transaction for the sale of a Convertible Debenture (the “Debenture”) in the principal amount of $200,000, with proceeds of $175,000 to the Company after payment of a 10% original issue discount. The offering was conducted pursuant to the exemption from registration provided by Section 4(a)(2) of the Act and Rule 506 of Regulation D thereunder. The Company did not utilize any form of general solicitation or general advertising in connection with the offering. The Debenture was offered and sold to one accredited investor (the “Investor”).

The Investor is entitled to, at any time or from time to time, commencing on the date that is one hundred fifty one (151) days from the issuance date set forth above convert the conversion amount into conversion shares, at a conversion price for each share of common stock equal to either (i) if the Company is Deposit/Withdrawal at Custodian (“DWAC”) operational at the time of conversion, seventy percent (70%) of the lowest closing bid price (as reported by Bloomberg LP) of common stock for the twenty (20) trading days immediately preceding the date of the date of conversion of the Debentures, or (ii) if either the Company is not DWAC operational or the common stock is traded on the bottom tier over-the-counter Pink (or, “pink sheets”) at the time of conversion, sixty five percent (65%) of the lowest closing bid price (as reported by Bloomberg LP) of the common stock for the twenty (20) trading days immediately preceding the date of conversion of the Debentures, subject in each case to equitable adjustments resulting from any stock splits, stock dividends, recapitalizations or similar events.

~~The Company recorded $124,900 in interest expense for the beneficial conversion feature of the debenture in December 2016.~~

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~13.~~

~~Equity Transactions (continued)~~

The Debenture is secured by the accounts receivable of the Company and, unless earlier redeemed, matures on the third anniversary date of issuance. The Company paid a commitment fee of of $2,500 and issued 835,000 shares of restricted stock. ~~The fair value of the restricted stock on the date of issuance was $0.06 per share and $50,100 was recorded as interest expense in July 2016.~~

In September 2016, the Company repaid the Debenture in full which totaled $210,000 with a Redemption Price of 105% of the sum of the Principal Amount per the agreement. The premium of $10,000 paid upon redemption was recorded as interest expense in September 2016.

~~2016 Equity Offering~~

On March 11, 2016, April 6, 2016, and April 15, 2016 in conjunction with an equity offering of securities (the “2016 Equity Offering”) with select accredited investors, the Company issued an aggregate of 25,495,835, 3,083,334 and 1,437,501, respectively, shares of common stock for an aggregate purchase price of $1,529,750, $185,000, and $86,200, respectively. The mandatory prepayment of principal on the Notes payable, related parties equal to 20% of the proceeds received by the Company required by the Note Amendment on June 15, 2015 was waived by HealthTronics, Inc. for this 2016 Equity Offering.

The Company, in connection with the 2016 Equity Offering, issued to the investors an aggregate of 30,016,670 warrants (the “Class L Warrants”) to purchase shares of common stock at an exercise price of $0.08 per share. Each Class L Warrant represents the right to purchase one share of Common Stock. The warrants vested upon issuance and expire on March 17, 2019.

Pursuant to the terms of a Registration Rights Agreement that the Company entered into with the investors in connection with the 2016 Equity Offering, the Company is required to file a registration statement that covers the shares of common stock and the shares of common stock issuable upon exercise of the Class L Warrants. The registration statement was declared effective by the SEC on February 16, 2016.

Michael N. Nemelka, the brother of a member of the Company’s board of directors and an existing shareholder of the Company, was a purchaser in the 2016 Equity Offering of $100,000. A. Michael Stolarski, a member of the Company’s board of directors and an existing shareholder of the Company, was a purchaser in the 2016 Equity Offering of $75,000.

~~At the closing of the~~ ~~2016 Equity Offering~~, the Company paid Newport Coast Securities, Inc., the placement agent for the equity offering, cash compensation of $180,095 based on the gross proceeds of the private placement and 3,001,667 Class L Warrants. In addition, the Company paid an escrow fee of $4,000 and an attorney fee of $20,000 from the gross proceeds.

~~Series A Warrant Conversion~~

On January 13, 2016, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with certain beneficial owners (the “Investors”) of Series A warrants (the “Warrants”) to purchase shares of Common Stock, pursuant to which the Investors exchanged (the “Exchange”) all of their respective Warrants for either (i) shares of Common Stock or (ii) shares of Common Stock and shares of the Company’s Series B Convertible Preferred Stock, $0.001 par value (the “Preferred Stock”).

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~13.~~

~~Equity Transactions (continued)~~

The Exchange was based on the following exchange ratio (the “Exchange Ratio”): 1 Series A Warrant = 0.4685 shares of capital stock. Investors who, as a result of the Exchange, owned in excess of 9.99% (the “Ownership Threshold”) of the outstanding Common Stock, received a mixture of Common Stock and shares of Preferred Stock. They received Common Stock up to the Ownership Threshold, and received shares of Preferred Stock beyond the Ownership Threshold (but the total shares of Common Stock and Preferred Stock issued to such holders was still based on the same Exchange Ratio). The relative rights, preferences, privileges and limitations of the Preferred Stock are as set forth in the Company’s Certificate of Designation of Series B Convertible Preferred Stock, which was filed with the Secretary of State of the State of Nevada on January 12, 2016 (the “Series B Certificate of Designation”).

In the Exchange an aggregate number of 23,701,428 Warrants were exchanged for 7,447,954 shares of Common Stock and 293 shares of Preferred Stock. Pursuant to the Series B Certificate of Designation, each of the Preferred Stock shares is convertible into shares of Common Stock at an initial rate of 1 Preferred Stock share for 12,500 Common Stock shares, which conversion rate is subject to further adjustment as set forth in the Series B Certificate of Designation. Pursuant to the terms of the Series B Certificate of Designation, the holders of the Preferred Stock shares will generally be entitled to that number of votes as is equal to the number of shares of Common Stock into which the Preferred Stock may be converted as of the record date of such vote or consent, subject to the Beneficial Ownership Limitation.

In connection with entering into the Exchange Agreement, the Company also entered into a Registration Rights Agreement, dated January 13, 2016, with the Investors. The Registration Rights Agreement requires that the Company file with the SEC a registration statement to register for resale the shares of the Common Stock issued in connection with the Exchange and the Common Stock issuable upon conversion of the Preferred Stock shares (the “Preferred Stock Conversion Shares”). The registration statement was declared effective by the SEC on February 16, 2016.

~~14.~~

~~Preferred Stock~~

The Company’s Articles of Incorporation authorize the issuance of up to 5,000,000 shares of “blank check” preferred stock with designations, rights and preferences as may be determined from time to time by the board of directors. On January 12, 2016, the Company filed a Certificate of Designation of Preferences, Rights and Limitations for Series B Convertible Preferred Stock of the Company (the “Certificate of Designation”) with the Nevada Secretary of State. The Certificate of Designation amends the Company’s Articles of Incorporation to designate 293 shares of preferred stock, par value $0.001 per share, as Series B Convertible Preferred Stock. The Series B Convertible Preferred Stock has a stated value of $1,000 per share. On January 13, 2016, in connection with the Series A Warrant Conversion, the Company issued 293 shares of Series B Convertible Preferred Stock (for a more detailed discussion regarding the Series A Warrant Conversion, see Note 13).

Under the Certificate of Designation, holders of Series B Convertible Preferred Stock are entitled to receive dividends equal (on an as-if-converted-to-common-stock basis) to and in the same form as dividends (other than dividends in the form of common stock) actually paid on shares of the common stock when, as and if such dividends are paid. Such holders will participate on an equal basis per-share with holders of common stock in any distribution upon winding up, dissolution, or liquidation of the Company. Holders of Series B Convertible Preferred Stock are entitled to convert each share of Series A Convertible Preferred Stock into 2,000 shares of common stock, provided that after giving effect to such conversion, such holder, together with its affiliates, shall not beneficially own in excess of 9.99% of the number of shares of common stock outstanding (the “Beneficial Ownership Limitation”). Holders of the Series B Convertible Preferred Stock are entitled to vote on all matters affecting the holders of the common stock on an “as converted” basis, provided that such holder shall only vote such shares of Series B Convertible Preferred Stock eligible for conversion without exceeding the Beneficial Ownership Limitation.

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~14.~~

~~Preferred Stock (continued)~~

On April 29, 2016, the holders of Series B Convertible Preferred Stock converted the outstanding 293 shares of Series B Convertible Preferred Stock into 3,657,278 shares of common stock. As of April 29, 2016, there were no outstanding shares of Series B Convertible Preferred Stock.

On March 14, 2014, the Company filed a Certificate of Designation of Preferences, Rights and Limitations for Series A Convertible Preferred Stock of the Company (the “Certificate of Designation”) with the Nevada Secretary of State. The Certificate of Designation amends the Company’s Articles of Incorporation to designate 6,175 shares of preferred stock, par value $0.001 per share, as Series A Convertible Preferred Stock. The Series A Convertible Preferred Stock has a stated value of $1,000 per share. On March 17, 2014, in connection with a Private Placement, the Company issued 6,175 shares of Series A Convertible Preferred Stock. As of January 6, 2015 there were no outstanding shares of Series A Convertible Preferred Stock.

~~15.~~

~~Warrants~~

~~A summary of warrants as of December 31, 2017 and 2016, and the changes during the years ended December 31, 2017 and 2016, is presented as follows:~~

Outstanding

Outstanding

Outstanding

as of

as of

as of

December 31,

December 31,

December 31,

Warrant class

2015

Issued

Exercised

Converted

Expired

2016

Issued

Exercised

2017

Class E Warrants
  3,576,737
  -
  -
  -
  (3,576,737)
  -
  -
  -
  -
Class F Warrants
  300,000
  -
  -
  -
  -
  300,000
  -
  -
  300,000
Class G Warrants
  1,503,409
  -
  -
  -
  -
  1,503,409
  -
  -
  1,503,409
Class H Warrants
  1,988,095
  -
  -
  -
  -
  1,988,095
  -
  -
  1,988,095
Class I Warrants
  1,043,646
  -
  -
  -
  -
  1,043,646
  -
  -
  1,043,646
Class J Warrants
  629,378
  4,012,289
  (4,641,667)
  -
  -
  -
  -
  -
  -
Class K Warrants
  3,310,000
  1,890,000
  -
  -
  -
  5,200,000
  2,000,000
  -
  7,200,000
Class L Warrants
  -
  66,788,338
  (843,333)
  -
  -
  65,945,005
  -
  (2,046,832)
  63,898,173
Class M Warrants
  -
  1,943,333
  (1,943,333)
  -
  -
  -
  -
  -
  -
Class N Warrants
  -
  -
  -
  -
  -
  -
  13,943,180
  -
  13,943,180
Class O Warrants
  -
  -
  -
  -
  -
  -
  6,540,000
  -
  6,540,000
Series A Warrants
  25,951,421
  -
  (143,400)
  (23,701,427)
  -
  2,106,594
  -
  (545,246)
  1,561,348

  38,302,686
  74,633,960
  (7,571,733)
  (23,701,427)
  (3,576,737)
  78,086,749
  22,483,180
  (2,592,078)
  97,977,851

~~A summary of the warrant exercise price per share and expiration date is presented as follows:~~

	~~Exercise~~	~~Expiration~~
	~~price/share~~	~~date~~

~~Class F Warrants~~	$~~0.35~~	~~February 2018~~
~~Class G Warrants~~	$~~0.80~~	~~July 2018~~
~~Class H Warrants~~	$~~0.80~~	~~July 2018~~
~~Class I Warrants~~	$~~0.85~~	~~September 2018~~
~~Class K Warrants~~	$~~0.08~~	~~June 2025~~
~~Class K Warrants~~	$~~0.11~~	~~August 2027~~
~~Class L Warrants~~	$~~0.08~~	~~March 2019~~
~~Class N Warrants~~	$~~0.11~~	~~March 2019~~
~~Class O Warrants~~	$~~0.11~~	~~March 2019~~
~~Series A Warrants~~	$~~0.03~~	~~March 2019~~

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~15.~~

~~Warrants (continued)~~

The exercise price and the number of shares covered by the warrants will be adjusted if the Company has a stock split, if there is a recapitalization of the Company’s common stock, or if the Company consolidates with or merges into another company.

The exercise price of the Class K Warrants and the Series A Warrants are subject to a “down-round” anti-dilution adjustment if the Company issues or is deemed to have issued securities at a price lower than the then applicable exercise price of the warrants. The Class K Warrants may be exercised on a physical settlement or on a cashless basis. The Series A Warrants may be exercised on a physical settlement basis if a registration statement underlying the warrants if effective. If a registration statement is not effective (or the prospectus contained therein is not available for use) for the resale by the holder of the Series A Warrants, then the holder may exercise the warrants on a cashless basis.

In June 2015, the Company, in connection with the Note Amendment (Note 10), issued to HealthTronics, Inc. an aggregate total of 3,310,000 Class K Warrants to purchase shares of the Company’s common stock, $0.001 par value, at an exercise price of $0.55 per share, subject to certain anti-dilution protection. Each Class K Warrant represents the right to purchase one share of Common Stock. The warrants vested upon issuance and expire after ten years.

In June 2016, the Company, in connection with the Second Amendment (Note 10), issued to HealthTronics, Inc., an additional 1,890,000 Class K Warrants to purchase shares of the Company’s Common Stock at an exercise price of $0.08 per share, subject to certain anti-dilution protection. The exercise price of the 3,310,000 Class K Warrants issued on June 15, 2015 was decreased to $0.08 per share. The warrants vested upon issuance and expire after ten years.

In August 2017, the Company, in connection with the Third Amendment (Note 10), issued to HealthTronics, Inc., an additional 2,000,000 Class K Warrants to purchase shares of the Company’s Common Stock at an exercise price of $0.11 per share, subject to certain anti-dilution protection. The warrants vested upon issuance and expire after ten years.

~~On November 30, 2017, the Company issued Class O Warrant Agreements to a vendor to purchase 2,500,000 shares of common stock at an exercise price of $0.11 per share.~~ Each Class O Warrant represents the right to purchase one share of Common Stock. The estimated fair value of the Class O Warrants at the grant date was $174,731 and was recorded as general and administrative expense and an increase to additional paid-in capital. The warrants vested upon issuance and expire on March 17, 2019.

~~On December 6, 2017, the Company issued Class O Warrant Agreements to a vendor to purchase 100,000 shares of common stock at an exercise price of $0.11 per share.~~ Each Class O Warrant represents the right to purchase one share of Common Stock. The estimated fair value of the Class O Warrants at the grant date was $8,125 and was recorded as general and administrative expense and an increase to additional paid-in capital. The warrants vested upon issuance and expire on March 17, 2019.

On December 11, 2017, the Company issued Class O Warrant Agreements to active employees, independent contractors, members of the board of directors and members of the medical advisory boards to purchase 3,940,000 shares of common stock at an exercise price of $0.11 per share. Each Class O Warrant represents the right to purchase one share of Common Stock. The estimated fair value of the Class O Warrants at the grant date was $285,810 and was recorded as research and development expense in the amount of $98,655 and general and administrative expense in the amout of $187,155 and an increase to additional paid-in capital for the full amount of $285,810. The warrants vested upon issuance and expire on March 17, 2019. Kevin A. Richardson II and A. Michael Stolarski, both members of the Company’s board of directors and existing shareholders of the Company, were issued 640,000 and 200,000 warrants, respectively. John Nemelka, Alan Rubino and Maj-Britt Kaltoft, members of the Company’s board of directors, were each issued 200,000 warrants. Lisa E. Sundstrom, an officer of the Company was issued 440,000 warrants.

The fair value of each Class O Warrant Agreement grant is estimated on the date of grant using the BlackScholes option pricing model using the following assumptions for the year ended December 31, 2017:

	~~2017~~
~~Expected life in years~~	~~1.26 - 1.29~~
~~Risk free interest rate~~	~~1.70% - 1.76~~%
~~Volatility~~	~~88.06% - 90.00~~%
~~Forfeiture rate~~	~~0.0~~%
~~Expected dividend yield~~	~~0.0~~%

The Class K Warrants, the Series A Warrants and the Series B Warrants are classified as derivative financial instruments. The estimated fair values of the Class K Warrants at the dates of grant were $36,989 on June 15, 2015, $9,214 on June 28, 2016, and $200,000 on August 3, 2017. These amounts were recorded as debt discount, which is accreted to interest expense through the amended maturity dates of the related notes payable, related parties. The estimated fair values of the Series A Warrants and the Series B Warrants at the date of grant were $557,733 for the warrants issued in conjunction with the 2014 Private Placement and $47,974 for the warrants issued in conjunction with the 18% Convertible Promissory Notes. The fair value of the Series A Warrants and Series B Warrants were recorded as equity issuance costs in 2014, a reduction of additional paid-in capital. The Series B Warrants expired unexercised in March 2015.

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~15.~~

~~Warrants (continued)~~

The estimated fair values of the derivative classified warrants were determined using a binomial option pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect estimated fair value at each period end, with any decrease or increase in the estimated fair value being recorded in other income or expense accordingly, as adjustments to the fair value of derivative liabilities. Various factors are considered in the pricing models the Company uses to value the warrants, including the Company’s current common stock price, the remaining life of the warrants, the volatility of the Company’s common stock price, and the risk-free interest rate. In addition, as of the valuation dates, management assessed the probabilities of future financing and other re-pricing events in the binominal valuation models.

~~The fair value of the derivative classified warrants is estimated using the binomial option pricing model using the following assumptions for the year endeds December 31, 2017 and 2016:~~

2017

2016

Expected life in years
  1.21 - 9.60
  2.20 - 8.50
Risk free interest rate
  1.79% - 2.39%
  1.25% - 2.35%
Volatility
  109.00% - 133.00%
  150.00%
Forfeiture rate
  0.0%
  0.0%
Expected dividend yield
  0.0%
  0.0%

~~A summary of the changes in the warrant liability as of December 31, 2017 and December 31, 2016, and the changes during the years ended December 31, 2017 and 2016, is presented as follows:~~

Class J

Class K

Class M

Series A

Warrants

Warrants

Warrants

Warrants

Total

Warrant liability as of December 31, 2015
$2,900
$22,700
$-
$112,500
$138,100
Issued
  -
  25,350
  9,091
  -
  34,441
Redeemed
  (153,175)
  -
  (114,492
  (886,472)
  (1,154,139)
Change in fair value
  150,275
  835,950
  105,401
  1,132,092
  2,223,718
Warrant liability as of December 31, 2016
$-
$884,000
$-
$358,120
$1,242,120
Issued
  -
  200,000
  -
  -
  200,000
Redeemed
  -
  -
  -

  (66,966)
  (66,966)
Change in fair value
  -
  532,000
  -
  36,729
  568,729
Warrant liability as of December 31, 2017
$-
$1,616,000
$-
$327,883
$1,943,883

~~16.~~

~~Commitments and contingencies~~

~~Operating Leases~~

The Company leases office and storage space. Rent expense for the years ended December 31, 2017 and 2016, was $159,583 and $178,073, respectively. Minimum future lease payments under the operating lease consist of the following:

Year ending December 31,

Amount

2018
$138,861
2019
  143,318
2020
  147,617
2021
  152,046
Total
$581,842

~~Litigation~~

The Company is involved in various legal matters that have arisen in the ordinary course of business. While the ultimate outcome of these matters is not presently determinable, it is the opinion of management that the resolution will not have a material adverse effect on the financial position or results of operations of the Company.

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~17.~~

~~Stock-based compensation~~

On November 1, 2010, the Company approved the ~~Amended and Restated 2006~~ Stock Incentive ~~Plan of SANUWAVE Health, Inc. effective as of January 1, 2010 (the “Stock Incentive Plan”).~~Plan. The Stock Incentive Plan permits grants of awards to selected employees, directors, and advisors of the Company in the form of restricted stock or options to purchase shares of common stock. Options granted may include non-statutory options as well as qualified incentive stock options. The Stock Incentive Plan is currently administered by the board of directors of the Company. The Stock Incentive Plan gives broad powers to the board of directors of the Company to administer and interpret the ~~particular~~ form and conditions of each option. The stock options granted under the Stock Incentive Plan are generally non-statutory options which ~~generally~~ vest over a period of up to three years and have a ~~ten year~~ten-year term. The options are granted at an exercise price ~~determined by the board of directors of the Company~~equal to be the fair market value of the common stock on the date of the ~~grant. At December 31, 2017 and 2016, the Stock Incentive Plan reserved a total of 22,500,000 shares of common stock for grant.~~

~~On June 15, 2017, the Company granted to the active employees, members of~~grant which is approved by the board of directors of the Company.

Item 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Director Independence

Our board of directors has determined that Jeff Blizard, Ian Miller, Jim Tyler and ~~three members~~A. Michael Stolarski qualify as independent directors based on the OTC stock market definition of “independent director.” Our board of directors has determined that our other directors, Morgan Frank and Kevin A. Richardson II, does not qualify as an independent director based on the OTC stock market definition of “independent director.” There are no family relationships among any of the directors or executive officers of the Company.

Related Party Transactions

On August 6, 2020, the Company issued to A. Michael Stolarski a convertible promissory note in the principal amount of $223 thousand. The Stolarski Note has a maturity date of August 6, 2021, and accrues interest at a rate equal to 12.0% per annum. On October 27, 2021, the Company issued to Mr. Stolarski a promissory note in the principal amount of $150 thousand (“Stolarski Note #2”). The Stolarski Note #2 matures on June 30, 2022, and accrues interest at a rate equal to 15.0% per annum. On April 1, 2022, the Company entered into a Reverse Repurchase Agreement with a related party, A. Michael Stolarski, also a shareholder and member of the Company’s ~~Medical Advisory Board options to purchase~~board of directors, in the amount of $250 thousand. In August 2022, all notes including interest were refinanced into the August 2022 convertible promissory notes totaling $730 thousand.

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In August 2022 and November 2022, the Company entered into Purchase Agreements for the sale of Notes and Common Stock Purchase Warrants in an aggregate ~~total~~principal amount of ~~5,550,000 shares~~$16.2 million in August and $4.0 million in November. In these transactions, James Besser, Morgan C. Frank, Chief Executive Officer and Chairman of the Board; Kevin A. Richardson, II, former Chairman of the Board and former Chief Executive Officer of the Company; A. Michael Stolarski; Manchester Explorer, L.P., and Opaleye, L.P., beneficial owners of more than five percent of the Company’s common stock, purchased Notes, which were accompanied by Common Stock Purchase Warrants, with an aggregate principal amount of $400,000, $250,000, $261,780, $1,434,966, $2,500,000 and $2,900,000, respectively. Messrs. Besser and Frank share voting and dispositive power with respect to the securities acquired by Manchester Explorer, L.P. The Notes issued to each of Messrs. Richardson and Stolarski included $90,000 in principal amount for which the consideration was accrued and unpaid director fees. Certain other directors received Notes with an aggregate principal amount of $527,000 for which the consideration was accrued and unpaid director fees. These notes along with interest were converted into common stock shares during 2023. Additional information regarding the Notes and accompanying Common Stock Purchase Warrants issued in August 2022 and November 2022 is disclosed in Note 11 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

In May 2023 and December 2023, the Company entered into Purchase Agreements for the sale of Notes and Common Stock Purchase Warrants in an aggregate principal amount of $1.2 million and $1.8 million, respectively. In these transactions, Manchester Explorer, L.P. purchased Notes, which were accompanied by Common Stock Purchase Warrants, with an aggregate principal amount of $300,000 in May 2023 and $100,000 in December 2023. Additional information regarding the Notes and accompanying Common Stock Purchase Warrants issued in May 2023 and December 2023 is disclosed in Note 11 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

In July 2023, the Company issued Asset-Backed Secured Promissory Notes (ABS Promissory Notes) in the aggregate principal amount of $4.6 million at an ~~exercise price~~original issue discount of ~~$0.11 per share~~33.33%. The Company and ~~vested upon issuance. Using~~ the Black-Scholes option pricing model, management has determined that the options had a fair value per share of $0.0869 per option resulting in compensation expense of $482,295. Compensation cost was recognized upon grant.

~~On November 9, 2016, the Company granted~~parties to the ~~active employees, members~~ABS Promissory Notes entered into a side letter pursuant to which the parties agreed that upon the maturity date, the company will issue each lender a convertible promissory note and warrants consistent with the form of the ~~board~~above-described Purchase Agreements for the sale of ~~directors~~Notes and ~~two members~~Common Stock Purchase Warrants. A. Michael Stolarski, Manchester Explorer and Opaleye, L.P purchased ABS Promissory Notes in an aggregate principal amount of $149,993, $862,457, and $299,985. In January 2024, these ABS Promissory Notes were converted to convertible notes consistent with the Notes described above. Additional information regarding the ABS Promissory Notes is disclosed in Note 12 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

Letter Agreements

Pursuant to the Letter Agreements, the related parties disclosed above have committed to exchange the outstanding warrants and convertible notes described above for shares of common stock immediately prior to the closing of the ~~Company’s Medical Advisory Board options~~Business Combination. Pursuant to ~~purchase 2,830,000 shares each~~the Letter Agreements, the holders of convertible notes will receive, in the ~~Company’s~~form of common stock at an ~~exercise price~~exchange ratio of ~~$0.18~~$0.04 per share, the full amount of principal and ~~vested upon issuance. Using the Black-Scholes option pricing model, management has determined~~interest that ~~the options had a fair value per share of $0.1524 per option resulting in compensation expense of $431,292. Compensation cost was recognized upon grant.~~

~~On June 16, 2016, the Company granted to the active employees, members~~would be due and payable on such notes as of the ~~board~~applicable maturity date. The holders of ~~directors and two members of the Company’s Medical Advisory Board options to purchase 3,300,000 shares each of the Company’s common stock at~~warrants with an exercise price of $0.04 per share ~~and vested upon issuance. Using the Black-Scholes option pricing model, management has determined that the options had a fair value~~will receive 0.9 shares of common stock per share that are subject to such warrants, and the holders of ~~$0.0335~~warrants with an exercise price of $0.067 per ~~option resulting~~share will receive 0.85 shares of common stock per share. The holders of these warrants and these convertible notes will pay no new consideration in ~~compensation expense of $110,550. Compensation cost was recognized upon grant.~~connection with these exchanges.

Voting Agreements

In connection with the Business Combination, the Company and SEPA have entered into voting agreements with certain stockholders, including James Besser; Iulian Cioanta, Chief Science and Technology Officer; Morgan C. Frank; Ian Miller; Kevin A. Richardson, II; Peter Stegagno, Chief Operating Officer; A. Michael Stolarski; James Tyler, a director; and Manchester Explorer, L.P.

Lock-Up Agreements

In connection with the Business Combination, SEPA has entered into Lock-Up Agreements with certain stockholders, including James Besser, Iulian Cioanta, Morgan C. Frank, Ian Miller, Kevin A. Richardson, II, Peter Stegagno, A. Michael Stolarski, James Tyler, and Manchester Explorer, L.P.

~~On October 1, 2015,~~

Item 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table summarizes the ~~Company granted~~fees that we have paid or accrued for audit and other services provided by our prior principal independent registered public accounting firm, Marcum LLP:

Table of Contents

(In thousands)	For the Year Ended December 31,
Fee Category	2023		2022

Audit fees	$	545	$	504
Tax fees		-		-
Audit related fees		-		-
All other fees		-		-
Total Fees	$	545	$	504

For purposes of the preceding table:

•

Audit fees consist of fees for the annual audit of our consolidated financial statements, the review of the interim financial statements included in our quarterly reports on Form 10-Q, and other professional services provided in connection with statutory and regulatory filings and consents related to capital markets transactions and engagements for those fiscal years.

•	Tax fees consist of fees for tax compliance, tax advice and tax planning services for those fiscal years.

•	Audit related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review.

•	All other fees consist of fees for all other products and services.

The audit committee must pre-approve all audits and permitted non-audit services to be provided by our principal independent registered public accounting firm unless an exception to such pre-approval exists under the ~~active employees and members~~Exchange Act or the rules of the SEC. Each year, the board of directors ~~options~~approves the retention of the independent auditor to ~~purchase 1,900,000 shares~~audit our consolidated financial statements, including the associated fee. At this time, the audit committee evaluates and approves other known potential engagements of ~~common stock at an exercise price~~the independent auditor, including the scope of ~~$0.11 per share~~audit-related services, tax services and ~~vested upon issuance. Using~~other services proposed to be performed and the ~~Black-Scholes option pricing model, management has determined that~~proposed fees, and approves or rejects each service, taking into account whether the ~~options had a fair value per share~~services are permissible under applicable law and the possible impact of ~~$0.11 resulting in compensation expense of $209,000. Compensation cost was recognized upon grant.~~each non-audit service on the independent auditor’s independence from management.

PART IV

~~On October 1, 2015,~~

Item 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

1. All financial statements

The following financial statements are included in this Annual Report on Form 10-K in Item 8 of Part II:

	Page
Consolidated financial statements

Report of Independent Registered Public Accounting Firm (PCAOB ID: 688)	F-1

Consolidated Balance Sheets as of December 31, 2023 and 2022	F-3

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2023 and 2022	F-4

Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2023 and 2022	F-5

Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022	F-5

Notes to Consolidated Financial Statements	F-7

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2. Financial statement schedules

No schedules are required because either the ~~Company granted~~required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto.

The exhibits below are furnished or filed and, as applicable, are incorporated by reference herein as part of this Annual Report on Form 10-K.

Exhibit No.	Description

2.1	Agreement and Plan of Merger, dated as of August 23, 2023, by and among SEP Acquisition Corp., SEP Acquisition Holdings Inc., and SANUWAVE Health, Inc. (Incorporated by reference to Exhibit 2.1 to the Form 8-K filed with the SEC on August 23, 2023).

2.2	Amendment Number one to Agreement and Plan of Merger, dated February 27, 2024, by and between SEP Acquisition Corp. and Sanuwave Health, Inc. (Incorporated by reference to Exhibit 2.1 to the Form 8-K filed with the SEC on February 27, 2024)

3.1	Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Form 10-SB filed with the SEC on December 18, 2007).

3.2	Certificate of Amendment to the Articles of Incorporation (Incorporated by reference to Appendix A to the Definitive Schedule 14C filed with the SEC on October 16, 2009).

3.3	Certificate of Amendment to the Articles of Incorporation (Incorporated by reference to Exhibit A to the Definitive Schedule 14C filed with the SEC on April 16, 2012).

3.4	Bylaws (Incorporated by reference to Exhibit 3.02 to the Form 10-SB filed with the SEC on December 18, 2007).

3.5	Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock of the Company dated March 14, 2014 (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on March 18, 2014).

3.6	Certificate of Amendment to the Articles of Incorporation, dated September 8, 2015 (Incorporated by reference to Exhibit 3.6 to the Form 10-K filed with the SEC on March 30, 2016).

3.7	Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock of the Company dated January 12, 2016 (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on January 19, 2016).

3.8	Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock of the Company dated January 31, 2020 (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on February 6, 2020).

3.9	Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock of the Company dated January 31, 2020 (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on February 6, 2020).

3.10	Certificate of Designation of Series D Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on May 20, 2020).

3.11	Certificate of Amendment of the Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on January 5, 2021).

3.12	Certificate of Amendment of the Articles of Incorporation, dated January 31, 2023 (Incorporated by reference to Exhibit 3.12 to the Form S-1/A filed with the SEC on January 31, 2023).

4.1	Description of Registrant’s Common Stock (Incorporated by reference to the Company’s Form 10-K for the year ended December 31, 2021).

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4.2	Form of Secured Promissory Note issued to NH Expansion Credit Fund Holdings LP, dated August 6, 2020 (Incorporated by reference to the Form 8-K filed with the SEC on August 12, 2020).

4.3	Warrant issued to NH Expansion Credit Fund Holdings LP, dated August 6, 2020 (Incorporated by reference to the Form 8-K filed with the SEC on August 12, 2020).

4.4	Second Amendment to the Note and Warrant Purchase and Security Agreement by and between the Company and NH Expansion Credit Fund Holdings L.P., dated February 25, 2022 (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on March 2, 2022).

4.5	Third Amendment to the Note and Warrant Purchase and Security Agreement by and between the Company and NH Expansion Credit Fund Holdings L.P., dated June 30, 2022 (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on July 7, 2022).

4.6	Fourth Amendment to the Note and Warrant Purchase and Security Agreement by and between the Company and NH Expansion Credit Fund Holdings L.P., dated June 23, 2023 (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on June 29, 203).

4.7	Fifth Amendment to the Note and Warrant Purchase and Security Agreement by and between the Company and NH Expansion Credit Fund Holdings L.P., dated March 6, 2024 (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on March 6, 2024).

4.8	Convertible Promissory Note issued to HealthTronics, Inc., dated August 6, 2020 (Incorporated by reference to Exhibit 10.7 to the Form 8-K filed with the SEC on August 12, 2020).

4.9	Amendment to certain Promissory Notes that were dated August 1, 2005, by and among the Company, SANUWAVE, Inc. and HealthTronics, Inc., dated June 15, 2015 (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on June 18, 2015.)

4.10	Second Amendment to Certain Promissory Notes entered into as of June 28, 2016, by and among the Company, SANUWAVE, Inc. and HealthTronics, Inc. (Incorporated by reference to Exhibit 10.1 to the Form 10-Q filed with the SEC on August 15, 2016).

4.11	Third Amendment to promissory notes entered into as of August 3, 2017, by and among the Company, SANUWAVE, Inc. and HealthTronics, Inc. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on August 4, 2017).

4.12	Securities Purchase Agreement by and between the Company and HealthTronics, Inc., dated August 6, 2020 (Incorporated by reference to Exhibit 10.8 to the Form 8-K filed with the SEC on August 12, 2020).

4.13	Convertible Promissory Note issued to Celularity Inc., dated August 6, 2020 (Incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on August 12, 2020).

4.14	Common Stock Purchase Warrant, dated as of June 5, 2020, issued by the Company to LGH Investments, LLC (Incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on June 11, 2020).

4.15	Form of Warrant Issued September 27, 2021, and December 22, 2021 (Incorporated by reference to Exhibit 10.7 filed with the Form 10-Q for the quarter ended September 30, 2021).

4.16	Form of Common Stock Purchase Warrant issued to certain purchasers, dated August 5, 2022 (Incorporated by reference to Exhibit 4.2 to the Form 8-K filed with the SEC on August 8, 2022).

4.17	Form of Common Stock Purchase Warrant issued to certain purchasers, dated November 14, 2022 (Incorporated by reference to Exhibit 4.4 to the Form S-1/A filed with the SEC on January 31, 2023).

4.18	Form of Future Advance convertible Promissory note issued to certain purchasers, date December 30, 2023 (Incorporated by reference to Exhibit 4.1 the Company’s Form 8-K filed with the SEC on January 3, 2024).

Table of Contents

4.19	Forms of Common Stock purchase Warrants issued to certain purchasers, dated December 30, 2023 (Incorporated by reference to Exhibit 4.2 the Company’s Form 8-K filed with the SEC on January 3, 2024)

4.20	Form of Asset-Backed Secured Promissory Notes issued to certain purchasers, dated July 21, 2023 (Incorporated by reference to Exhibit 4.1 the Company’s Form 8-K filed with the SEC on July 21, 2023)

4.21	Form of Future Advance Convertible Promissory Note issued to certain purchasers, dated January 21, 2024 (Incorporated by reference to Exhibit 4.1 the Company’s Form 8-K filed with the SEC on January 21, 2024)

4.22	Form of Common Stock Purchase Warrants issued to certain purchasers, dated January 21, 2024 (Incorporated by reference to Exhibit 4.2 the Company’s Form 8-K filed with the SEC on January 21, 2024)

10.1∞	Amended and Restated 2006 Stock Option Incentive Plan of SANUWAVE Health, Inc. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on November 3, 2010).

10.2	Security Agreement, by and between the Company and HealthTronics, Inc., dated June 15, 2015 (Incorporated by reference to Exhibit 4.1 to the Form 8-K filed with the SEC on June 18, 2015).

10.3	Letter Agreement by and between the Company and HealthTronics, Inc., dated August 6, 2020 (Incorporated by reference to Exhibit 10.6 to the Form 8-K filed with the SEC on August 12, 2020).

10.4#	Amendment to Agreement for Purchase and Sale, Limited Exclusive Distribution and Royalties, and Servicing and Repairs of dermaPACE®System and Equipment, effective as of November 1, 2023, by and between SANUWAVE and Premier Shockwave Wound Care, Inc.

10.5	Joint Venture Agreement, dated September 21, 2018, by and among the Company, Johnfk Medical Inc. and Holistic Health Institute Pte. Ltd. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on September 27, 2018).

10.6β	Joint Venture Agreement, dated December 13, 2019, by and among the Company, Universus Global Advisors LLC, Versani Health Consulting Consultoria Em Gestao De Negocios Eireli, and the IDIC Group as set forth therein (Incorporated by reference to the Form 8-K filed with the SEC on January 28, 2020).

10.7	Master Equipment and Contracts Purchase Agreement by and between the Company and ABF SANUWAVE, LLC dated February 17, 2022 (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on February 24, 2022).

10.8	Master Equipment Lease, dated January 26, 2018, by and among the Company and NFS Leasing, Inc. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on February 15, 2018).

10.9	Asset Purchase Agreement by and between the Company and Celularity Inc., dated August 6, 2020 (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on August 12, 2020).

10.10	License and Marketing Agreement by and between the Company and Celularity Inc., dated August 6, 2020 (Incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the SEC on August 12, 2020).

10.11∞	Executive Employment Agreement, effective May 23, 2023, by and between SANUWAVE and Morgan Frank (Incorporated by reference to Exhibit 10.1 to SANUWAVE’s Form 8-K filed with the SEC on May 30, 2023).

10.12∞	Transition and Separation Agreement, dated May 23, 2023, by and between SANUWAVE and Kevin A. Richardson, II (Incorporated by reference to Exhibit 10.2 to SANUWAVE’s Form 8-K filed with the SEC on May 30, 2023).

10.13∞	Offer Letter, dated April 7, 2022, by and between the Company and Dr. Toni Rinow (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on August 19, 2022).

10.14∞	Offer Letter, dated July 20, 2023, by and between the Company and Andrew Walko (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on July 31, 2023).

Table of Contents

10.15	Note and Warrant Purchase and Security Agreement by and among the Company, the noteholder party thereto and NH Expansion Credit Fund Holdings LP, as agent, dated August 6, 2020 (Incorporated by reference to Exhibit 10.5 to the Form 8-K filed with the SEC on August 12, 2020).

10.16	Security Agreement, dated May 9, 2023, by and among SANUWAVE and certain lenders (Incorporated by regarding to Exhibit 10.74 to SANUWAVE’s Form S-1 filed with the SEC on June 30, 2023)

10.17	Form of Securities Purchase Agreement, dated August 5, 2022, by and among the Company and the purchasers identified on the signature pages thereto (Incorporated by reference to Exhibit 10.1 the Form 8-K filed with the SEC on August 8, 2022).

10.18	Form of Registration Rights Agreement, dated August 5, 2022, by and among the Company and certain lenders (Incorporated by reference to Exhibit 10.4 to the Form 8-K filed with the SEC on August 8, 2022).

10.19	Securities Purchase Agreement, dated November 14, 2022, by and among the Company and the purchasers identified on the signature pages thereto (Incorporated by reference to Exhibit 10.67 to the Form S-1/A filed with the SEC on January 31, 2023).

10.20	Registration Rights Agreement, dated November 14, 2022, by and among the Company and certain lenders (Incorporated by reference to Exhibit 10.70 to the Form S-1/A filed with the SEC on January 31, 2023).

10.21	Security Agreement dated July 21, 2023, by and among the Company and certain lenders. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on July 21, 2023).

10.22	Subordination Agreement dated July 21, 2023, by and among the Company, NH Expansion Credit Fund Holdings LP and certain creditors. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on July 21, 2023).

10.23	Side Letter dated July 21, 2023, by and among the Company and certain purchasers. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on July 21, 2023).

10.24	Securities Purchase Agreement, dated January 21, 2024, by and among the Company and the purchasers identified on the signature pages thereto (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on January 21, 2024).

10.25	Security Agreement dated January 21, 2024, by and among the Company and certain lenders. (Incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the SEC on January 21, 2024).

10.26	Subordination Agreement dated January 21, 2024, by and among the Company, NH Expansion Credit Fund Holdings LP and certain creditors. (Incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on January 21, 2024).

10.27	Form of Registration Rights Agreement, dated January 21, 2024, by and among the Company and certain lenders (Incorporated by reference to Exhibit 10.4 to the Form 8-K filed with the SEC on January 21, 2024).

10.28	Form of Waiver Letter, dated January 21, 2024, by and among the Company and certain purchasers (Incorporated by reference to Exhibit 10.5 to the Form 8-K filed with the SEC on January 21, 2024).

10.29	Form of Letter Agreement, dated January 21, 2024, by and among the Company and certain lenders (Incorporated by reference to Exhibit 10.6 to the Form 8-K filed with the SEC on January 21, 2024).

10.30	Securities Purchase Agreement, dated December 30, 2023, by and among the Company and the purchasers identified on the signature pages thereto (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on January 3, 2024)

10.31	Security Agreement, dated December 30, 2023, by and among the Company and certain lenders (Incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the SEC on January 3, 2024)

10.32	Subordination Agreement, dated December 30, 2023, by and among the Company, NH Expansion Credit Fund Holdings LP and certain creditors (Incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on January 3, 2024)

Table of Contents

10.33	Registration Rights Agreement, dated December 30, 2023, by and among the Company and certain lenders (Incorporated by reference to Exhibit 10.4 to the Form 8-K filed with the SEC on January 3, 2024)

10.34	Form of waiver letter with purchasers in December 2023 offering (Incorporated by reference to Exhibit 10.5 to the Form 8-K filed with the SEC on January 3, 2024)

10.35	Form of letter agreement with purchasers in December 2023 offering (Incorporated by reference to Exhibit 10.6 to the Form 8-K filed with the SEC on January 3, 2024)

10.36	Form of Voting Agreement, dated as of August 23, 2023, by and among SEP Acquisition Corp., SANUWAVE Health, Inc., and the stockholder of SANUWAVE Health, Inc. party thereto (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on August 23, 2023).

10.37	Sponsor Voting Agreement, dated as of August 23, 2023, by and among Mercury Sponsor Group I LLC, SEP Acquisition Corp., and SANUWAVE Health, Inc. (Incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the SEC on August 23, 2023).

10.38	Form of Lock-Up Agreement, dated as of August 23, 2023, by and between SEP Acquisition Corp. and the stockholder of SANUWAVE Health, Inc. party thereto (Incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on August 23, 2023).

21.1*	List of subsidiaries

23.1*	Consent of Marcum LLP, independent registered public accountants.

24.1*	Power of Attorney (included on signature page).

31.1*	Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.

31.2*	Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.

32.1*	Section 1350 Certification of the Chief Executive Officer.

32.2*	Section 1350 Certification of the Chief Financial Officer.

101.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

104	Cover Page with Interactive Data File

∞ Indicates management contract or compensatory plan or arrangement.

* Filed herewith

# Confidential treatment has been requested as to certain portions of this exhibit, which portions have been omitted and submitted separately to the ~~active employees, members~~Securities and Exchange Commission.

β Confidential portions of the board of directors and members of the Medical Advisory Board options to purchase 1,450,000 shares of common stock an exercise price of $0.50 per share and vested upon issuance. Using the Black-Scholes option pricing model, management has determined that the options had a fair value per share of $0.10 resulting in compensation expense of $145,000. Compensation cost was recognized upon grant.this exhibit have been omitted as permitted by applicable regulations.

On August 13, 2015, Mr. Chiarelli and the Company entered into a confidential settlement agreement in response to an action filed against the Company by Mr. Chiarelli. The settlement agreement contains the entire understanding and complete agreement of the parties involved with respect to the circumstances, matters, events and transactions that were a subject of the action. A part of the settlement was the issuance of stock options. ~~Using the Black-Scholes option pricing model, management has determined that the options had a fair value resulting in compensation expense of $98,100. Compensation cost was recognized upon grant.~~

Item 16.

Form 10-K Summary

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~17.~~

~~Stock-based compensation (continued)~~

On April 28, 2015, the Company granted two members of the Company’s Medical Advisory Board each options to purchase 50,000 shares of the Company’s common stock at an exercise price of $0.55 per share in place of an annual cash consulting fee for calendar year 2015. Using the Black-Scholes option pricing model, management has determined that the options had a fair value per share of $0.11 resulting in compensation expense of $11,107. Compensation cost was recognized over the requisite service period in calendar year 2015.

On May 7, 2014, the Company granted to the active employees options to purchase 900,000 shares of common stock at an exercise price of $0.55 per share. Using the Black-Scholes option pricing model, management has determined that the options had a fair value per share of $0.48 resulting in total compensation expense of $429,001 that was recognized over the three year vesting period of the options. Compensation expense related to this grant was $6,000 and $30,000 for the years ended December 31, 2016 and 2015, respectively.

On February 21, 2013, the Company, granted the active employees and directors options to purchase 2,243,644 shares of common stock at an exercise price of $0.35 per share. Using the Black-Scholes option pricing model, management has determined that the options had an average fair value per share of $0.223 resulting in total compensation of $499,621. Compensation cost is being recognized over the requisite service period. Compensation expense related to this grant was $0 and $11,327 for the years ended December 31, 2016 and 2015, respectively.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model using the following weighted average assumptions for the years ended December 31, 2017 and 2016:

2017

2016

Weighted average expected life in years
  5.0
  5.0
Weighted average risk free interest rate
  1.76%
  1.28%
Weighted average volatility
  120.00%
  133.54%
Forfeiture rate
  0.0%
  0.0%
Expected dividend yield
  0.0%
  0.0%

The expected life of options granted represent the period of time that options granted are expected to be outstanding and are derived from the contractual terms of the options granted. The risk-free rate for periods within the contractual life of the option is based on the United States Treasury yield curve in effect at the time of the grant. The expected volatility is based on the average volatility of the Company and that of peer group companies similar in size and value to us. We estimate pre-vesting forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The expected dividend yield is based on our historical dividend experience, however, since our inception, we have not declared dividends. The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are ultimately expected to vest. Ultimately, the total expense recognized over the vesting period will equal the fair value of the awards that actually vest.

For the years ended December 31, 2017 and 2016, the Company recognized $482,295 and $547,842, respectively, as compensation cost related to options granted. As of December 31, 2017, there are no unamortized compensation costs related to options granted.

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~17.~~

~~Stock-based compensation (continued)~~

~~A summary of option activity as of December 31, 2017 and 2016, and the changes during the years ended December 31, 2017 and 2016, is presented as follows:~~

Weighted

Average

Exercise Price

Options

per share

Outstanding at December 31, 2015
  10,073,385
$0.62
Granted
  6,130,000
$0.10
Exercised
  -
$-
Forfeited or expired
  -
$-
Outstanding at December 31, 2016
  16,203,385
$0.38
Granted
  5,550,000
$0.11
Exercised
  -
$-
Forfeited or expired
  (160,000)
$0.22
Outstanding at December 31, 2017
  21,593,385
$0.31



Vested and exercisable at December 31, 2017
  21,593,382
$0.31

The range of exercise prices for options was $0.04 to $2.00 for options outstanding at December 31, 2017 and 2016, respectively. The aggregate intrinsic value for outstanding options was $2,073,641 and $702,500 at December 31, 2017 and 2016, respectively. The aggregate intrinsic value for all vested and exercisable options was $2,073,641 and $702,500 at December 31, 2017 and 2016, respectively.

~~The weighted average remaining contractual term for outstanding exercisable stock options is 7.37 years and 5.88 years as of December 31, 2017 and 2016, respectively.~~

~~A summary of the Company’s nonvested options as of December 31, 2017 and 2016, and changes during the years ended December 31, 2017 and 2016, is presented as follows:~~

Weighted

Average

Exercise Price

Options

per share

Outstanding at December 31, 2015
  175,002
$0.36
Granted
  6,130,000
$0.10
Vested
  (6,305,002)
$0.11
Forfeited or expired
  -
$-
Outstanding at December 31, 2016
  -
$-
Granted
  5,550,000
$0.11
Vested
  (5,550,000)
$0.11
Forfeited or expired
  -
$-
Outstanding at December 31, 2017
  -
$-

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~18.~~

~~Joint venture~~

On September 27, 2017, the Company entered into a binding term sheet with MundiMed Distribuidora Hospitalar LTDA (“MundiMed”), effective as of September 25, 2017, pursuant to which the Company and MundiMed will enter into a joint venture for the manufacture, sale and distribution of the Company’s dermaPACE device. The binding term sheet provides that the parties will work together to enter into a definitive agreement reflecting the binding term sheet terms, but that to the extent a definitive agreement has not been executed by the parties by September 30, 2017, the terms set forth in the binding term sheet shall be binding.

Under the binding term sheet, MundiMed will pay the Company an upfront distibution fee on September 30, 2017, which fee was received on October 6, 2017, with monthly upfront distibution fees payable thereafter over the following eighteen months. MundiMed bears the cost of any and all fees and expenses incurred in connection with the formation, organization and start-up of the joint venture, which fees and expenses are expected not to exceed $200,000. Profits from the joint venture are distributed as follows: 45% to the Company, 45% to MundiMed and 5% each to LHS Latina Health Solutions Gestão Empresarial Ltda. and Universus Global Advisors LLC, who acted as advisors in the transaction.

~~The binding term sheet terminates upon the earlier of (1) the date a definitive agreement evidencing the terms of the binding term sheet is executed by the parties and (2) May 30, 2019.~~

~~19.~~

~~Segment and geographic information~~

The Company has ~~one line~~elected not to include summary information.

Table of ~~business~~Contents

SIGNATURES

Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		SANUWAVE HEALTH, INC.

Dated: March 21, 2024	By:	/s/ Morgan Frank
		Name: Morgan Frank
		Title: Chief Executive Officer

POWER OF ATTORNEY

Know all persons by these presents, that each person whose signature appears below constitutes and appoints Morgan Frank and Toni Rinow, and each of them, as such person’s true and lawful attorneys-in-fact and agents, with ~~revenues being generated from sales~~full power of substitution and resubstitution, for such person and in ~~Europe, Canada, Asia~~such person’s name, place and ~~Asia/Pacific. All significant expenses are generated~~stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their or such person’s substitute or substitutes, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the ~~United States. All significant assets are located in the United States.~~

~~20.~~

~~Subsequent events~~

~~10% Convertible Promissory Notes~~

A subsequent offering of the 10% Convertible Promissory Notes was closed on January 10, 2018, at which time $1,496,000 aggregate principal amount of 10% Convertible Promissory Notes were issued with $1,066,000 of funds paid to the Company. The remaining $430,000 of principal came from advances from relatedcapacities and unrelated parties balance at December 31, 2017 of $310,000 (see Note 7) and conversion of $120,000 of unpaid executive compensation by related party, Kevin A. Richardson II. On January 10, 2018, the Company issued 13,599,999 Class N Warrants in connection with such subsequent closing.

The final offering of the 10% Convertible Promissory Notes was closed on February 2, 2018, at which time $100,000 aggregate principal amount of 10% Convertible Promissory Notes were issued and the funds paid to the Company. On February 2, 2018, the Company issued 909,091 Class N Warrants in connection with such final closing.

~~Convertible Promissory Note~~

~~On January 29, 2018, the Company~~ ~~entered into a convertible promissory note (the “Convertible Promissory Note”) with an accredited investor in the amount of $71,500.~~ The Company intends to use the proceeds from the Convertible Promissory Notes for payment of services to an investor relations company and the account of the attorney updating the Registration Statement on Form S-1 of the Company filed under the Securities Act of 1933, as amended, on January 3, 2017 (File No. 333-213774), which registration statement shall also register the shares issuable upon conversion of the Convertible Promissory Note and issuable upon the exercise of a Class N common stock purchase warrant issued concurrently with the issuance of this Convertible Promissory Note.

~~The Convertible Promissory Note has a six month term from the subscription date and the note holders can convert the Convertible Promissory Note at any time during the term to~~ ~~the number of shares of~~ ~~Company common stock,~~ ~~equal to the amount obtained by dividing (i) the amount of the unpaid principal and interest~~ on the ~~note by (ii) $0.11.~~dates indicated:

Signatures	Capacity	Date

By: /s/ Morgan Frank Name: Morgan Frank	Chief Executive Officer and Chairman of the Board of Directors (principal executive officer)	March 21, 2024

By: /s/ Toni Rinow Name: Toni Rinow	Chief Financial Officer (principal financial and accounting officer)	March 21, 2024

By: /s/ Kevin Richardson, II Name: Kevin Richardson, II	Director	March 21, 2024

By: /s/ A. Michael Stolarski Name: A. Michael Stolarski	Director	March 21, 2024

By: /s/ Jeff Blizard Name: Jeff Blizard	Director	March 21, 2024

By: /s/ Ian Miller Name: Ian Miller	Director	March 21, 2024

By: /s/ Jim Tyler Name: Jim Tyler	Director	March 21, 2024

~~F-28~~

~~SANUWAVE HEALTH, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2017 and 2016~~

~~20.~~

~~Subsequent events (continued)~~

The Convertible Promissory Note includes a warrant agreement (the “Class N Common Stock Purchase Warrant”) to purchase Common Stock equal to the amount obtained by dividing the (i) sum of the principal amount, by (ii) $0.11. The Class N Common Stock Purchase Warrant expires on March 17, 2019. ~~On January 29, 2018, the Company issued 650,000 Class N Common Stock Purchase Warrants in connection with this Convertible Promissory Note.~~

~~Warrant Exercise~~

On February 23, 2018, the Company issued 100,000 shares of common stock upon the exercise of 100,000 Class O Warrants to purchase shares of stock for $0.11 per share under the terms of the Class O Warrant agreement.

On March 28, 2018, the Company issued 75,666 shares of restricted common stock upon the exercise of 75,666 Series A Warrants to purchase shares of stock for $0.0334 per share under the terms of teh Series A Warrant agreement.

~~Cashless Warrant Exercise~~

On January 11, 2018, the Company issued 50,432 shares of common stock upon the cashless exercise of 59,000 Series A Warrants to purchase shares of stock for $0.0334 per share based on a current market value of $0.23 per share as determined under the terms of the Series A Warrant agreement.

On February 14, 2018, the Company issued 229,515 shares of common stock upon the cashless exercise of 400,000 Class L Warrants to purchase shares of stock for $0.08 per share based on a current market value of $0.1877 per share as determined under the terms of the Class L Warrant Private Offering agreement.

On March 2, 2018, the Company issued 407,461 shares of common stock upon the cashless exercise of 600,000 Class L Warrants to purchase shares of stock for $0.08 per share based on a current market value of $0.2493 per share as determined under the terms of the Class L Warrant Private Offering agreement.

On March 9, 2018, the Company issued 251,408 shares of common stock upon the cashless exercise of 271,000 Series A Warrants to purchase shares of stock for $0.0334 per share based on a current market value of $0.462 per share as determined under the terms of the Series A Warrant agreement.

~~Consulting Agreement~~

In November 2017, the Company entered into a three month consulting agreement for which a portion of the fee for the services was to be paid with Company common stock. The number of shares to be paid with Company common stock was calculated by dividing the amount of the fee to be paid with Company common stock of $4,000 by the Company stock price at the close of business on the eighth business day of each month. The Company issued 18,182 shares on January 9, 2018, for the third month of the agreement. The $4,000 was recorded as a non-cash general and administrative expense for each of the first two months of the agreement.

~~New Agreements~~

On January 26, 2018, the Company, entered into a Master Equipment Lease with NFS Leasing Inc. to provide financing for equipment purchases to enable the Company to begin placing the dermaPACE System in the marketplace. This agreement provides for a lease line of up to $1,000,000 with a lease term of 36 months, and grants NFS a security interest in the Company’s accounts receivable, personal property and money and deposit accounts of the Company.

On February 13, 2018, the Company, entered into an Agreement for Purchase and Sale, Limited Exclusive Distribution and Royalties, and Servicing and Repairs with Premier Shockwave Wound Care, Inc., a Georgia Corporation (“PSWC”), and Premier Shockwave, Inc., a Georgia Corporation (“PS”). The agreement provides for the purchase by PSWC and PS of dermaPACE System and related equipment sold by the Company and includes a minimum purchase of 100 units over 3 years. The agreement grants PSWC and PS limited but exclusive distribution rights to provide dermaPACE Systems to certain governmental healthcare facilities in exchange for the payment of certain royalties to the Company. Under the agreement, the Company is responsible for the servicing and repairs of such dermaPACE Systems and equipment. The agreement also contains provisions whereby in the event of a change of control of the Company (as defined in the agreement), the stockholders of PSWC have the right and option to cause the Company to purchase all of the stock of PSWC, and whereby the Company has the right and option to purchase all issued and outstanding shares of PSWC, in each case based upon certain defined purchase price provisions and other terms. The agreement also contains certain transfer restrictions on the stock of PSWC. Each of PS and PSWC is owned by Anthony Michael Stolarski, a member of the Company’s board of directors and an existing shareholder of the Company.

~~F-29~~

Nevada		20-1176000
(State or ~~other jurisdiction~~Other Jurisdiction of ~~incorporation or organization)~~ Incorporation)		(I.R.S. Employer Identification No.)

11495 Valley View Road Eden Prairie, MN

~~3360 Martin Farm Road, Suite 100~~ ~~Suwanee, GA~~	~~30024~~55344
(Address of ~~principal executive offices)~~Principal Executive Offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered

~~N/A~~	None	N/A	N/A

Large accelerated filer	☐	Accelerated filer ☐
	☐
Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~ ☒	Smaller reporting company	☒

	Emerging growth company	☐

	PART I			Page

~~PART I~~	Item 1.		Business	4

	Item 1A.		Risk Factors	15

	Item 1.	~~Business~~1B.		5 Unresolved Staff Comments	31

	Item ~~1A.~~	~~Risk Factors~~1C.		21 Cybersecurity	31

	Item ~~1B.~~	~~Unresolved Staff Comments~~2.		35 Properties	32

	Item 2.	~~Properties~~3.		36 Legal Proceedings	32

	Item 3.	~~Legal Proceedings~~4.		36 Mine Safety Disclosures	32

~~Item 4.~~	~~Mine Safety Disclosure~~ PART II		36

~~PART II~~	Item 5.

~~Item 5.~~	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		32
	~~Equity Securities~~		37

	Item 6.	~~Selected Financial Data~~		38 [Reserved]	32

	Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		3832

	Item 7A.		Quantitative and Qualitative Disclosures About Market Risk		4837

	Item 8.		Financial Statements and Supplementary Data		4838

	Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		4839

	Item 9A.		Controls and Procedures		4839

	Item 9B.	~~Other Information~~		49 Other Information	40

~~PART III~~	Item 9C.		Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	40

	PART III

	Item 10.		Directors, Executive Officers and Corporate Governance		50 40

	Item 11.	~~Executive Compensation~~		55 Executive Compensation	44

	Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		47
	~~Matters~~		59

	Item 13.		Certain Relationships and Related Transactions and Director Independence		60 49

	Item 14.		Principal Accountant Fees and Services		61 50

	PART IV

	Item 15.		Exhibits and Financial Statement Schedules	51

	Item ~~15.~~	~~Exhibits and Financial Statement Schedules~~16.		63

~~Item 16.~~	Form 10-K Summary		6356

	Price Range
	High	Low
2017
First Quarter	$0.19	$0.11
Second Quarter	$0.14	$0.08
Third Quarter	$0.18	$0.09
Fourth Quarter	$0.28	$0.10

	Price Range
	High	Low
2016
First Quarter	$0.09	$0.05
Second Quarter	$0.06	$0.04
Third Quarter	$0.16	$0.03
Fourth Quarter	$0.20	$0.12

Plan Category	Number of securities to be issued upon exercise of outstanding options and rights	Weighted-average exercise price of outstanding options and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders	-	$0.00	-
Equity compensation plans not approved by security holders	21,593,385	$0.31	2,238,281
Total	21,593,385	$0.31	2,238,281

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)(3)	Total ($)
(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)	(i)	(j)

Kevin A. Richardson, II	2017	$120,000(1)	-	$130882(2)	-	-	-	-	$250,882
Chairman of the Board and Acting Chief Executive Officer (principal executive officer)	2016	$120,000(1)	-	$114,021(2)	-	-	-	-	$234,021

Lisa E. Sundstrom	2017	$115,000	-	$88,352(2)	-	-	-	$12,652	$216,004
Chief Financial Officer (principal financial officer)	2016	$115,000	-	$81,444(2)	-	-	-	$13,284	$209,728

Peter Stegano	2017	$200,000	-	$88,352(2)	-	-	-	$13,498	$301,850
Vice President, Operations	2016	$200,000	-	$81,444(2)	-	-	-	$13,339	$294,783

Iulian Cioanta	2017	$200,000	-	$88,352(2)	-	-	-	$19,583	$307,935
Vice President, Research and Development	2016	$200,000	-	$81,444(2)	-	-	-	$19,892	$301,336

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	Non Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)

Kevin A. Richardson, II (1)	$24,000	-	$130,882	-	-	-	$154,882


John F. Nemelka	$24,000	-	$42,530	-	-	-	$66,530


Alan L. Rubino	$24,000	-	$42,530	-	-	-	$66,530


A. Michael Stolarski	$24,000	-	$42,530	-	-	-	$66,530


Maj-Britt Kaltoft	$13,000	-	$42,530	-	-	-	$55,530

	Number of Shares	Percent of
	Beneficially	Shares
Name of Beneficial Owner (1)	Owned	Outstanding (2)
A. Michael Stolarski (3)	16,439,333	10.7%
Kevin A. Richardson, II (4)	12,549,870	8.4%
Peter Stegano (5)	3,511,780	2.4%
Iulian Cioanta (6)	2,826,146	2.0%
Lisa E. Sundstrom (7)	2,554,500	1.8%
John F. Nemelka (8)	1,246,055	0.9%
Alan Rubino (9)	1,219,800	0.9%
Maj-Britt Kaltoft (10)	500,000	0.4%
All directors and executive officers as a group (8 persons)	40,847,484	27.5%
5% Beneficial Owner:
Jerome Gildner (11)	13,333,334	9.1%
John McDermott (11)	12,575,756	8.6%
James McGraw (11)	11,610,694	7.9%

	2017	2016

REVENUES	$738,527	$1,376,063

COST OF REVENUES (exclusive of depreciation and amortization shown below)	241,970	565,129

OPERATING EXPENSES
Research and development	1,292,531	1,128,640
General and administrative	3,004,403	2,673,773
Depreciation	24,069	19,858
Amortization	-	306,756
Gain of sale of assets, property and equipment	-	(1,594)
TOTAL OPERATING EXPENSES	4,321,003	4,127,433

OPERATING LOSS	(3,824,446)	(3,316,499)

OTHER INCOME (EXPENSE)
Loss on warrant valuation adjustment and conversion	(568,729)	(2,223,718)
Interest expense, net	(1,139,711)	(854,980)
Loss on foreign currency exchange	(5,050)	(12,329)
TOTAL OTHER INCOME (EXPENSE), NET	(1,713,490)	(3,122,541)

NET LOSS	(5,537,936)	(6,439,040)

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments	8,286	(18,907)
TOTAL COMPREHENSIVE LOSS	$(5,529,650)	$(6,457,947)

LOSS PER SHARE:
Net loss - basic and diluted	$(0.04)	$(0.06)

Weighted average shares outstanding - basic and diluted	138,838,602	107,619,869

	Preferred Stock		Common Stock
	Number of		Number of				Accumulated
	Shares		Shares				Other
	Issued and		Issued and		Additional Paid-	Accumulated	Comprehensive
	Outstanding	Par Value	Outstanding	Par Value	in Capital	Deficit	Income (Loss)	Total

Balances as of December 31, 2015	-	$-	63,056,519	$63,057	$87,086,677	$(92,994,408)	$(33,162)	$(5,877,836)
Net loss	-	-	-	-	-	(6,439,040)	-	(6,439,040)
Series A Warrant conversion to stock	293	-	7,447,954	7,447	880,971	-	-	888,418
Equity Offering	-	-	30,016,670	30,017	1,566,838	-	-	1,596,855
Preferred stock conversion	(293)	-	3,657,278	3,657	(3,657)	-	-	-
Peak One - Convertible Debenture	-	-	835,000	835	49,265	-	-	50,100
PIPE Offering	-	-	28,300,001	28,300	1,499,900	-	-	1,528,200
Warrant exercise	-	-	843,333	843	66,623	-	-	67,466
Cashless warrant conversion	-	-	2,627,821	2,628	263,093	-	-	265,721
Shares issued for services	-	-	435,392	436	43,104	-	-	43,540
Stock-based compensation - options	-	-	-	-	547,842	-	-	547,842
Beneficial conversion feature on debt	-	-	-	-	191,231	-	-	191,231
Warrants issued for services	-	-	-	-	186,410	-	-	186,410
Warrants issued with short term loan	-	-	-	-	58,400	-	-	58,400
Foreign currency translation adjustment	-	-	-	-	-	-	(18,907)	(18,907)

Balances as of December 31, 2016	-	-	137,219,968	137,220	92,436,697	(99,433,448)	(52,069)	(6,911,600)
Net loss	-	-	-	-	-	(5,537,936)	-	(5,537,936)
Warrant exercise	-	-	1,163,333	1,163	91,903	-	-	93,066
Cashless warrant exercise	-	-	866,625	867	66,100	-	-	66,967
Shares issued for services	-	-	50,196	50	7,950	-	-	8,000
Warrants issued for services	-	-	-	-	182,856	-	-	182,856
Stock-based compensation - options and warrants	-	-	-	-	768,105	-	-	768,105
Warrants issued with convertible promissory note	-	-	-	-	620,748	-	-	620,748
Beneficial conversion feature on debt	-	-	-	-	820,681	-	-	820,681
Foreign currency translation adjustment	-	-	-	-	-	-	8,286	8,286

Balances as of December 31, 2017	-	$-	139,300,122	$139,300	$94,995,040	$(104,971,384)	$(43,783)	$(9,880,827)

	2017	2016
Stock Options	21,593,385	16,203,385
Warrants	97,977,851	78,086,749
Warrants	14,641,190	-
Anti-dilutive equity securities	134,212,426	94,290,134

	2017	2016

Inventory - finished goods	$136,534	$218,592
Inventory - parts	167,613	89,621
Gross inventory	304,147	308,213
Provision for losses and obsolescence	(72,615)	(76,260)
Net inventory	$231,532	$231,953

	2017	2016

Machines and equipment	$240,295	$240,295
Office and computer equipment	156,860	156,860
Devices	89,704	82,204
Software	34,528	34,528
Furniture and fixtures	16,019	16,019
Other assets	2,259	2,259
Total	539,665	532,165
Accumulated depreciation	(479,296)	(455,227)
Net property and equipment	$60,369	$76,938

	2017	2016

Patents, at cost	$3,502,135	$3,502,135
Less accumulated amortization	(3,502,135)	(3,502,135)
Net intangible assets	$-	$-

	2017	2016

Accrued outside services	$165,427	$31,533
Accrued board of director's fees	125,000	16,000
Accrued executive severance	118,000	100,000
Accrued audit and tax preparation	73,800	100,000
Accrued legal professional fees	61,890	45,000
Deferred rent	51,191	41,341
Accrued travel	39,926	-
Accrued clinical study expenses	13,650	13,650
Deferred revenue	13,317	18,810
Accrued other	11,399	8,754
	$673,600	$375,088

Years ending December 31,	Amount

2018	$5,372,743
Total	$5,372,743

	2017	2016
Deferred tax assets:
Net operating loss carryforwards	$19,406,373	$27,839,703
Net operating loss carryforwards - foreign	139,675	120,451
Excess of tax basis over book value of
property and equipment	6,978	13,933
Excess of tax basis over book value
of intangible assets	220,180	447,626
Stock-based compensation	906,526	2,038,638
Accrued employee compensation	-	24,030
Captialized equity costs	49,471	75,471
Inventory reserve	17,962	28,777
	20,747,165	30,588,629
Valuation allowance	(20,747,165)	(30,588,629)
Net deferred tax assets	$-	$-

	2017	2016
Expected life in years	1.21 - 9.60	2.20 - 8.50
Risk free interest rate	1.79% - 2.39%	1.25% - 2.35%
Volatility	109.00% - 133.00%	150.00%
Forfeiture rate	0.0%	0.0%
Expected dividend yield	0.0%	0.0%

	Class J	Class K	Class M	Series A
	Warrants	Warrants	Warrants	Warrants	Total

Warrant liability as of December 31, 2015	$2,900	$22,700	$-	$112,500	$138,100
Issued	-	25,350	9,091	-	34,441
Redeemed	(153,175)	-	(114,492	(886,472)	(1,154,139)
Change in fair value	150,275	835,950	105,401	1,132,092	2,223,718
Warrant liability as of December 31, 2016	$-	$884,000	$-	$358,120	$1,242,120
Issued	-	200,000	-	-	200,000
Redeemed	-	-	-	(66,966)	(66,966)
Change in fair value	-	532,000	-	36,729	568,729
Warrant liability as of December 31, 2017	$-	$1,616,000	$-	$327,883	$1,943,883

Year ending December 31,	Amount

2018	$138,861
2019	143,318
2020	147,617
2021	152,046
Total	$581,842

		Weighted
		Average
		Exercise Price
	Options	per share
Outstanding at December 31, 2015	10,073,385	$0.62
Granted	6,130,000	$0.10
Exercised	-	$-
Forfeited or expired	-	$-
Outstanding at December 31, 2016	16,203,385	$0.38
Granted	5,550,000	$0.11
Exercised	-	$-
Forfeited or expired	(160,000)	$0.22
Outstanding at December 31, 2017	21,593,385	$0.31

Vested and exercisable at December 31, 2017	21,593,382	$0.31