Full Press Release Details
SANUWAVE, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2008 and 2007
SANUWAVE, INC. AND SUBSIDIARIES
| Pages | ||||
| Report of Independent Registered Accounting Firm | 1 | |||
| Consolidated Financial Statements | ||||
| Balance Sheets | 2 | |||
| Statements of Income and Comprehensive Loss | 3 | |||
| Statements of Stockholders Equity (Deficit) | 4 | |||
| Statements of Cash Flows | 5 | |||
| Notes to Consolidated Financial Statements | 6-27 |
REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM
To the Board of Directors and Stockholders of
SANUWAVE, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of
SANUWAVE, INC. AND SUBSIDIARIES
as of December 31, 2008 and 2007, and the related consolidated statements of income and
comprehensive loss, stockholders equity (deficit), and cash flows for the years then ended. 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
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). 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. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating
the overall consolidated financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The Company is not required to have, nor were we engaged to perform an audit of internal
controls over financial reporting. Our audit included consideration of internal controls over
financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company s internal controls over financial reporting. Accordingly, we express no such opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of SANUWAVE, Inc. and Subsidiaries as of December 31,
2008 and 2007, and the results of their operations and their cash flows for the years then ended,
in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the consolidated financial statements, the
Company incurred a net loss of approximately $9,409,000 and $12,074,000 during the years ended
December 31, 2008 and 2007, respectively, and, as of those dates, had a working capital deficiency
of approximately $418,000 and $500,000, respectively. As described more fully in Note (14) to the
consolidated financial statements, the Company is economically dependent upon future capital
contributions or financing to fund ongoing operations. This condition raises substantial doubt
about the Company s ability to continue as a going concern. The consolidated financial statements
do not include any adjustments that might result from the outcome of the uncertainty.
/s/ HLB Gross Collins, P.C.
April 6, 2009, except as to
Note 1, 2, 3, 4, 12, 14, and 16, as to
which the date is August 25, 2009
SANUWAVE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2008 and 2007
| 2008 | 2007 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | 543,626 | $ | 693,033 | ||||
| Accounts receivable trade, net of allowance for doubtful accounts of $64,490 in 2008 and $90,353 in 2007 (Note 1) | 52,414 | 110,402 | ||||||
| Inventory (Note 3) | 684,750 | 691,857 | ||||||
| Prepaid expenses | 106,617 | 328,969 | ||||||
| Current assets related to discontinued operations (Note 2) | 1,285,017 | 2,207,794 | ||||||
| TOTAL CURRENT ASSETS | 2,672,424 | 4,032,055 | ||||||
| PROPERTY AND EQUIPMENT, at cost, less accumulated depreciation (Note 4) | 279,791 | 439,556 | ||||||
| OTHER ASSETS | 81,017 | 141,769 | ||||||
| INTANGIBLE ASSETS, at cost, less accumulated amortization (Note 5) | 2,454,051 | 2,760,807 | ||||||
| NON-CURRENT ASSETS RELATED TO DISCONTINUED OPERATIONS (Note 2 and 4) | 1,011,734 | 2,565,147 | ||||||
| TOTAL ASSETS | $ | 6,499,017 | $ | 9,939,334 | ||||
| LIABILITIES | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | 975,811 | $ | 1,059,460 | ||||
| Payroll and related | 820,397 | 635,122 | ||||||
| Accrued expenses (Note 6) | 448,242 | 469,839 | ||||||
| Liabilities related to discontinued operations (Note 2) | 845,593 | 2,367,216 | ||||||
| TOTAL CURRENT LIABILITIES | 3,090,043 | 4,531,637 | ||||||
| NOTES PAYABLE, RELATED PARTIES (Note 9) | 6,006,815 | 4,624,800 | ||||||
| TOTAL LIABILITIES | 9,096,858 | 9,156,437 | ||||||
| COMMITMENTS AND CONTINGENCIES (Note 12) | ||||||||
| STOCKHOLDERS EQUITY (DEFICIT) | ||||||||
| CONVERTIBLE PARTICIPATING PREFERRED STOCK, par value $.01 per share, entitled to $100 per share in liquidation, 750,000 shares authorized, 283,250 and 226,500 shares issued and outstanding at December 31, 2008 and 2007, respectively | 2,833 | 2,265 | ||||||
| COMMON STOCK, par value $.01, 750,000 shares authorized,8,863.25 and 7,972.75 shares issued and outstanding at December 31, 2008 and 2007, respectively | 89 | 80 | ||||||
| ADDITIONAL PAID-IN CAPITAL | 30,103,124 | 23,804,866 | ||||||
| ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | (196,646 | ) | 74,009 | |||||
| RETAINED EARNINGS (DEFICIT) | (32,507,241 | ) | (23,098,323 | ) | ||||
| TOTAL STOCKHOLDERS EQUITY (DEFICIT) | (2,597,841 | ) | 782,897 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) | $ | 6,499,017 | $ | 9,939,334 |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
SANUWAVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE LOSS
Years Ended December 31, 2008 and 2007
| 2008 | 2007 | |||||||
| REVENUE | $ | 1,045,858 | $ | 1,199,779 | ||||
| COST OF REVENUES | 352,723 | 256,188 | ||||||
| GROSS PROFIT | 693,135 | 943,591 | ||||||
| OPERATING EXPENSES | ||||||||
| Research and development | 3,675,631 | 1,965,432 | ||||||
| General and administrative | 7,801,416 | 9,827,927 | ||||||
| Depreciation | 276,724 | 161,352 | ||||||
| Amortization | 306,756 | 319,165 | ||||||
| TOTAL OPERATING EXPENSES | 12,060,527 | 12,273,876 | ||||||
| OPERATING LOSS | (11,367,392 | ) | (11,330,285 | ) | ||||
| OTHER EXPENSE | ||||||||
| Interest expense | (306,843 | ) | (270,315 | ) | ||||
| Loss on foreign currency exchange | (52,528 | ) | (17,694 | ) | ||||
| TOTAL OTHER EXPENSE | (359,371 | ) | (288,009 | ) | ||||
| LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | (11,726,763 | ) | (11,618,294 | ) | ||||
| INCOME TAX BENEFIT (Note 7) | 333,718 | |||||||
| LOSS FROM CONTINUING OPERATIONS | (11,393,045 | ) | (11,618,294 | ) | ||||
| NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of income tax (Note 2) | 1,984,127 | (455,367 | ) | |||||
| NET LOSS | (9,408,918 | ) | (12,073,661 | ) | ||||
| OTHER COMPREHENSIVE INCOME (LOSS), net of tax | ||||||||
| Foreign currency translation adjustments | (270,655 | ) | 62,793 | |||||
| TOTAL COMPREHENSIVE LOSS | $ | (9,679,573 | ) | $ | (12,010,868 | ) | ||
| EARNINGS (LOSS) PER SHARE: | ||||||||
| Net loss from continuing operations basic | $ | (1,402.74 | ) | $ | (1,460.69 | ) | ||
| Net loss from continuing operations diluted | $ | (1,402.74 | ) | $ | (1,460.69 | ) | ||
| Net income (loss) from discontinued operations basic | $ | 244.29 | $ | (57.25 | ) | |||
| Net income (loss) from discontinued operations diluted | $ | 244.29 | $ | (57.25 | ) | |||
| Net loss basic | $ | (1,158.45 | ) | $ | (1,517.94 | ) | ||
| Net loss diluted | $ | (1,158.45 | ) | $ | (1,517.94 | ) | ||
| Basic weighted-average common shares outstanding | 8,122 | 7,954 | ||||||
| Diluted weighted-average common shares outstanding | 8,122 | 7,954 |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
SANUWAVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
Years Ended December 31, 2008 and 2007
| Accumulated | ||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Other | ||||||||||||||||||||||||||||||
| Number of | Number of | Additional Paid- | Retained Earnings | Comprehensive | ||||||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | in Capital | (Deficit) | Income (Loss) | Total | |||||||||||||||||||||||||
| Balances as of December 31, 2006 | 115,000 | $ | 1,150 | 7,765.25 | $ | 78 | $ | 12,470,750 | $ | (11,024,662 | ) | $ | 11,216 | $ | 1,458,532 | |||||||||||||||||
| Net loss | (12,073,661 | ) | (12,073,661 | ) | ||||||||||||||||||||||||||||
| Stock-based compensation | 164,483 | 164,483 | ||||||||||||||||||||||||||||||
| Shares issued | 111,500 | 1,115 | 207.50 | 2 | 11,169,633 | 11,170,750 | ||||||||||||||||||||||||||
| Foreign currency translation adjustments | 62,793 | 62,793 | ||||||||||||||||||||||||||||||
| Balances as of December 31, 2007 | 226,500 | 2,265 | 7,972.75 | 80 | 23,804,866 | (23,098,323 | ) | 74,009 | 782,897 | |||||||||||||||||||||||
| Net loss | (9,408,918 | ) | (9,408,918 | ) | ||||||||||||||||||||||||||||
| Stock-based compensation | 534,785 | 534,785 | ||||||||||||||||||||||||||||||
| Shares issued | 56,750 | 568 | 890.50 | 9 | 5,763,473 | 5,764,050 | ||||||||||||||||||||||||||
| Foreign currency translation adjustments | (270,655 | ) | (270,655 | ) | ||||||||||||||||||||||||||||
| Balances as of December 31, 2008 | 283,250 | $ | 2,833 | 8,863.25 | $ | 89 | $ | 30,103,124 | $ | (32,507,241 | ) | $ | (196,646 | ) | $ | (2,597,841 | ) |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
SANUWAVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2008 and 2007
| 2008 | 2007 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss from continuing operations | $ | (11,393,045 | ) | $ | (11,618,294 | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities | ||||||||
| Amortization | 306,756 | 319,165 | ||||||
| Accrued interest | 307,015 | 269,306 | ||||||
| Depreciation | 276,724 | 161,352 | ||||||
| Bad debt recovery | (31,861 | ) | 10,748 | |||||
| Stock-based compensation | 534,785 | 164,483 | ||||||
| Change in assets (increase) / decrease | ||||||||
| Accounts receivable trade | 89,851 | (7,613 | ) | |||||
| Inventory | 7,107 | (520,703 | ) | |||||
| Prepaid expenses | 222,352 | (129,570 | ) | |||||
| Other assets | 60,752 | (14,910 | ) | |||||
| Change in liabilities increase / (decrease) | ||||||||
| Accounts payable and accrued expenses | 80,030 | (1,239,913 | ) | |||||
| NET CASH USED BY CONTINUING OPERATIONS | (9,539,534 | ) | (12,605,949 | ) | ||||
| NET CASH PROVIDED BY DISCONTINUED OPERATIONS | 2,530,132 | 2,138,531 | ||||||
| NET CASH USED BY OPERATING ACTIVITIES | (7,009,402 | ) | (10,467,418 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Continuing operations | ||||||||
| Purchase of property and equipment | (116,962 | ) | (335,247 | ) | ||||
| NET CASH USED BY CONTINUING OPERATIONS | (116,962 | ) | (335,247 | ) | ||||
| NET CASH PROVIDED BY DISCONTINUED OPERATIONS | 408,562 | 74,059 | ||||||
| NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES | 291,600 | (261,188 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Continuing operations | ||||||||
| Proceeds from notes payable, related parties | 1,075,000 | |||||||
| Proceeds from sale of common stock | 89,050 | 20,750 | ||||||
| Proceeds from sale of preferred stock | 5,675,000 | 11,150,000 | ||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 6,839,050 | 11,170,750 | ||||||
| FOREIGN CURRENCY TRANSLATION ADJUSTMENTS | (270,655 | ) | 62,793 | |||||
| NET INCREASE (DECREASE) IN CASH | (149,407 | ) | 504,937 | |||||
| CASH, BEGINNING OF YEAR | 693,033 | 188,096 | ||||||
| CASH, END OF YEAR | $ | 543,626 | $ | 693,033 | ||||
| SUPPLEMENTAL DISLOSURE OF CASH FLOWS INFORMATION: | ||||||||
| Interest paid | $ | 398 | $ | 865 |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
SANUWAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2008 and 2007
Description of the business SANUWAVE, Inc. and Subsidiaries (the Company ) is a
global medical technology company focused on the development and utilization of Pulsed
Acoustic Cellular Expression (PACE) technology for advanced wound care, orthopedic\spine,
plastic\cosmetic, and cardiac conditions. Headquartered in Alpharetta, Georgia with
international offices in Lengwil, Switzerland and Tokyo, Japan, the Company designs,
manufactures, markets, and services the Company s industry leading products worldwide.
Operations outside of the United States are subject to risk inherent in operating under
different legal systems and various political and economic environments. Among the risks
are changes in existing tax laws, possible limitations on foreign investments and income
repatriation, government price or foreign exchange controls, and restrictions on currency
exchange. The Company does not engage in hedging activities to mitigate its exposure to
fluctuations in foreign currency exchange rates. During the year ended December 31, 2008
and 2007, the Company reported approximately $1,011,000 and $178,000, respectively, in net
losses from foreign subsidiaries. Total assets of foreign operations were approximately
$1,533,000 and $2,405,000 at December 31, 2008 and 2007, respectively.
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
subsidiaries have been translated into United States dollars in accordance with Statement of
Financial Accounting Standards ( SFAS ) No. 52, 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 as cumulative translation adjustments and are
shown as a separate component of accumulated other comprehensive income (loss) in the
consolidated statements of stockholders equity. Transactions in currencies other than the
United States dollar during the year are converted into the United States dollar at exchange
rates on the transaction date. Transaction gains and losses are recognized in the current
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.
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,