Financial Performance - Total revenue for Q1 2023 was $3,775,000, representing a 18.1% increase from $3,195,000 in Q1 2022[17] - Gross margin for Q1 2023 was $2,513,000, compared to $2,306,000 in Q1 2022, indicating a growth of 9%[17] - Operating loss for Q1 2023 was $1,978,000, slightly higher than the loss of $1,956,000 in Q1 2022[17] - Net loss for Q1 2023 was $13,080,000, which is a significant increase from the net loss of $5,101,000 in Q1 2022[17] - The company reported a comprehensive loss of $13,084,000 for Q1 2023, compared to a comprehensive loss of $5,101,000 in Q1 2022[17] - Net loss for the three months ended March 31, 2023, was $13.1 million, or ($0.02) per share, compared to a net loss of $5.1 million, or ($0.01) per share, for the same period in 2022[68] Assets and Liabilities - Total current assets decreased to $4,517,000 as of March 31, 2023, down from $6,620,000 at the end of 2022, a decline of 31.6%[13] - Total liabilities increased to $71,288,000 as of March 31, 2023, compared to $60,883,000 at the end of 2022, reflecting a rise of 16.5%[13] - Cash at the end of Q1 2023 was $106,000, a decrease of 90.8% from $1,153,000 at the end of 2022[13] - The accumulated deficit increased to $207,322,000 as of March 31, 2023, from $194,242,000 at the end of 2022, an increase of 6.5%[14] Shareholder Information - Weighted average shares outstanding for Q1 2023 were 575,028,811, up from 525,414,534 in Q1 2022, an increase of 9.4%[17] - The company reported a net loss per share of $1.06 for the three months ended March 31, 2023, compared to a net loss per share of $0.76 for the same period in 2022[42] - The weighted average shares outstanding increased to 575,029 thousand for the three months ended March 31, 2023, from 525,415 thousand in the same period of 2022[44] Debt and Financing - As of March 31, 2023, the company had senior secured debt of $19,355 thousand, with a carrying value of $14,996 thousand after accounting for debt discount[46] - The company is in default of the minimum liquidity provisions in the Senior Secured Note, accruing interest at a default rate of 5%[50] - The total outstanding convertible promissory notes payable amounted to $25,548 thousand as of March 31, 2023, with a carrying value of $24,567 thousand[52] - Interest expense for the three months ended March 31, 2023, totaled $2.3 million, including $0.8 million in contractual interest and $1.5 million in amortization of debt discount and issuance costs[52] - The company expects to obtain additional capital in 2023 through various financing options, which may result in significant dilution to existing stockholders[32] Operational Expenses - General and administrative expenses increased by $554 thousand, or 25%, for the three months ended March 31, 2023, primarily due to higher professional fees[72] - Selling and marketing expenses decreased by $303 thousand, or 18%, for the three months ended March 31, 2023, due to a reduction in sales headcount[73] - Research and development expenses decreased by $35 thousand, or 21%, for the three months ended March 31, 2023, as a result of improved cost management[74] Cash Flow - Cash used in operating activities during the three months ended March 31, 2023, totaled $0.4 million, an improvement from $3.1 million in the previous period, indicating a shift towards profitable growth[78] - Cash used by financing activities was $0.8 million for the three months ended March 31, 2023, primarily due to a factoring arrangement, compared to $2.9 million provided by financing activities in the same period of 2022[79] Future Outlook - The company plans to devote substantial resources to the commercialization of UltraMIST and PACE systems, requiring additional capital resources[31] - The company has raised substantial doubt about its ability to continue as a going concern for at least twelve months from the filing of the Form 10-Q[31] - The company plans to obtain additional capital in 2023 through the conversion of outstanding warrants and issuance of common or preferred stock, which may result in significant dilution to existing stockholders[77] - The company is focusing on the commercialization of UltraMIST and PACE systems, which will require substantial additional capital resources[76] Legal and Compliance - The company has identified material weaknesses in its internal control over financial reporting as of March 31, 2023, and is working on a remediation plan with an external vendor[92][94] - The company is subject to various legal actions and claims, but believes that pending claims, if adversely decided, would not have a material adverse effect on its business[101] Notes and Securities - The Company issued Notes to Purchasers totaling $1.2 million with a conversion price of $0.04 per share[110] - The interest rate on the outstanding principal of the Notes is set at 15% per annum[110] - A Security Agreement was established to secure the Company's obligations under the Notes[111] - The rights of Purchasers under the Notes are subordinate to the rights of North Haven Expansion as per a subordination agreement[112] - The Company will file a registration statement with the SEC within 60 days to register shares issuable upon conversion of the Notes[113] - The registration statement is expected to become effective within 180 days following the closing date[113]

Financial Data and Key Metrics Changes - Q4 2022 revenues amounted to $5,500,000, representing a 29% increase year-over-year [13] - Total revenues for the twelve months ending 12/31/2022 reached $16,700,000, an increase of 28.7% year-over-year [13] - Gross margins improved to 75% for 2022 compared to 62% for 2021, with Q4 gross margins reaching 78% [13] - Operating expenses for 2022 decreased by 4% year-over-year, while Q4 operating expenses increased by 9% [14] Business Line Data and Key Metrics Changes - The company achieved record levels in units shipped and treatments, driven by the adoption of Ultramist [6] - Operating expenses decreased year-over-year due to automation and reduced headcount [6] Market Data and Key Metrics Changes - The chronic wound care market is valued at $45 billion, with SANUWAVE positioned favorably due to strong clinical evidence and reimbursement support [5] - The biological skin substitute market is experiencing turmoil, with reimbursement cuts expected to reach 80-90% by next year [18] Company Strategy and Development Direction - The company aims for sustainable, profitable growth in 2023, focusing on leveraging existing infrastructure [8] - Plans to enhance investor relations and marketing strategies to increase awareness and adoption of products [17] - Participation in industry trade shows to promote products and educate potential customers [19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the supply chain but expressed optimism about achieving record revenue growth and profitability in 2023 [21] - Anticipated first-quarter revenue growth of 14-20% year-over-year, with expectations for acceleration in Q2 [22] Other Important Information - The company successfully relisted on the OTCQB on January 30, 2023, after addressing accounting issues [8] - Key additions to the management team were made to drive profitable growth [10] Q&A Session Summary Question: What might peak production look like in the next couple of quarters? - The company is currently at a pace of 40 new products per month, scheduled to ramp to 100 by the end of the year [29] - The applicator side is running 20% ahead of demand, with plans to increase production by 70-80% by year-end [31]

Product and Technology - The Company’s UltraMIST and PACE systems are the only two FDA-approved directed energy systems for wound healing [18] - The UltraMIST system promotes healing by reducing inflammation and bacteria while increasing blood vessel growth [19] - The PACE system targets tissue to produce compression bursts, aiding in pain relief and tissue regeneration [20] - The dermaPACE system addresses the unmet need for diabetic foot ulcer treatment, a significant healthcare expenditure in the U.S. [27] - The orthoPACE system is effective for treating orthopedic conditions and is being used for various injuries, including tendinopathies and fractures [29] - The Company plans to submit a 510(k) application to the FDA for general indications related to orthopedic treatments [29] - The Company is focused on expanding its market presence in the U.S. and developing non-invasive biological response-activating devices [39] Regulatory and Compliance - The FDA requires that all products must be approved or cleared before marketing in the United States, subjecting them to extensive regulation [59] - The Company is registered as a Small Business Manufacturer with the FDA, which allows for reduced fees, but may lose this status if revenues exceed a certain threshold [65] - The Company has been certified to the Medical Device Single Audit Program (MDSAP) for compliance with regulatory requirements in five countries, with the certification valid for three years [70] - The Company must comply with FDA's current Good Manufacturing Practices (cGMP) to ensure quality control and assurance in manufacturing [72] - The time required for product clearance in foreign countries may differ significantly from FDA requirements, impacting international sales [73] - The company may become subject to state laws regarding the handling and disclosure of patient records, which vary widely and could result in penalties [80] - The company has adopted policies to comply with HIPAA regulations as it expands its PACE business, although it currently does not capture patient data through its PACE system [79] - The company faces significant uncertainties due to escalating healthcare costs and recent healthcare reform measures, which may affect demand for its products [77] - The company is subject to extensive governmental regulation, including FDA oversight, which could impact production and distribution if compliance issues are identified [126] - Regulatory approval for product candidates may be withdrawn at any time, and post-approval studies could involve significant time and expense [129] - Non-compliance with the Federal Anti-Kickback Statute and False Claims Act could result in substantial penalties and exclusion from federal healthcare programs [137] - The company may incur significant operational costs related to HIPAA compliance as it expands its business [140] - Periodic reviews and audits from governmental and private payors could lead to adverse results impacting financial condition and operations [142] - Product quality issues discovered through ongoing regulation could result in enforcement sanctions and recalls, adversely affecting business [145] - The company faces potential environmental liability due to the use of hazardous materials in research and development [146] Financial Performance - The company incurred a net loss of $10.3 million for the year ended December 31, 2022, compared to a net loss of $27.3 million for 2021, indicating a reduction in losses [90] - Revenue for the year ended December 31, 2022, was $16.7 million, a 29% increase from $13.0 million in 2021 [188] - Gross margin improved to 74% in 2022, up from 62% in 2021, primarily due to higher sales of the UltraMIST® system [192] - Operating loss decreased by 37% to $9.0 million for the year ended December 31, 2022, compared to $14.1 million in 2021 [188] - Net loss for 2022 was $10.3 million, or ($0.02) per share, significantly reduced from a net loss of $27.3 million, or ($0.05) per share, in 2021 [189] - General and administrative expenses rose to $12.6 million in 2022, a 7% increase from $11.7 million in 2021, mainly due to higher legal costs [193] - Selling and marketing expenses decreased by 13% to $7.4 million in 2022, down from $8.6 million in 2021, due to cost-saving initiatives [194] - Research and development expenses were reduced by 49% to $0.6 million in 2022, compared to $1.1 million in 2021, primarily due to a reduction in employees [195] - The company raised $20.2 million through convertible notes in August and November 2022, with a conversion price of $0.04 per share [197] - As of December 31, 2022, the company had an accumulated deficit of $194.2 million [197] - Cash flows used by operating activities for the year ended December 31, 2022, were $(17,169) thousand, compared to $(6,409) thousand in 2021, indicating a significant increase in cash outflows [201] - The company recognized a gain of $16.7 million on derivative liabilities related to convertible debt for the year ended December 31, 2022, compared to a loss of $2.6 million in 2021 [202] - Cash flows provided by financing activities increased to $17,384 thousand in 2022, primarily due to proceeds of $16.2 million from the issuance of convertible promissory notes [203] - The company aims to achieve positive operating cash flows in the first half of 2023 by focusing on revenue growth from UltraMIST and PACE systems while managing operating expenses [205] Market and Competition - The advanced wound care market is characterized by competition from companies like Acelity, Organogenesis, and Smith & Nephew, but the Company believes its PACE technology offers superior value [55] - The Company faces intense competition from major pharmaceutical companies and medical device firms, which may hinder its ability to respond to technological advances [58] - The company faces intense competition from established firms with greater financial resources and expertise in R&D and marketing [106] - The company anticipates that sales volumes and prices of its products will depend significantly on third-party payer coverage and reimbursement availability [75] - The company generates a portion of revenue internationally, exposing it to risks from foreign currency fluctuations [120] - International sales are contingent on obtaining regulatory approvals in each country, which can be unpredictable and expensive [134] Intellectual Property - The Company aims to protect its intellectual property through patents and trademarks, which are crucial for maintaining a competitive advantage [45] - The Company has exclusive rights in its purchased portfolio for orthopedic, tendinopathy, skin wounds, cardiac, dental, neural medical conditions, and all conditions in animals [48] - HealthTronics receives field-exclusive rights for certain lithotripsy devices and all products treating renal, ureteral, gall stones, and other urological conditions [48] - The Company has a perpetual, non-exclusive, and royalty-free license to nine issued foreign patents [49] - Intellectual property protection is critical, and failure to adequately protect these rights could materially affect competitive advantage [147] - The company may face significant expenses and challenges in enforcing its intellectual property rights against third parties, which could adversely affect its competitive position [155] - The company may fail to secure meaningful patent protection for its products despite considerable resource expenditure, impacting its competitiveness [151] - The existence of third-party patents may limit the company's ability to obtain meaningful patent protection and could require obtaining licenses [157] - The company may incur significant expenses and management distraction from litigation related to intellectual property rights, which could harm its business [161] - The company may not be able to commercialize its product candidates if it faces patent infringement claims, which could materially harm its business [170] - The company may experience regulatory delays and challenges if it needs to redesign products to avoid third-party patents [162] Operational Challenges - The Company has experienced supply chain disruptions due to COVID-19 and the war in Ukraine, negatively impacting sales [23] - The company has identified material weaknesses in its internal control over financial reporting, which could lead to material misstatements in financial statements [94] - The company faces substantial doubt about its ability to continue as a going concern without raising additional capital [204] - The company relies on third-party collaborators for development and commercialization, which may impact control over product development [112] - The company is dependent on single suppliers for many product components, risking production disruptions if suppliers fail [113] - Future capital requirements may exceed expectations due to factors such as unanticipated R&D expenditures and difficulties in maintaining manufacturing capacity [102] - The company may seek to expand operations and product lines through acquisitions, which would likely increase capital requirements [103] - The COVID-19 pandemic has materially affected financial results, disrupting supply channels and limiting clinical activities [121]