QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which
registered
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OTC Expert |
Large accelerated filer ☐
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Accelerated filer ☐
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Smaller reporting company
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Emerging growth company
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Page
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PART I – FINANCIAL INFORMATION
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Item 1.
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4
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5
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6
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7 |
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8 | ||
9 | ||
Item 2.
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26 | |
Item 3.
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30 | |
Item 4.
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30 | |
PART II – OTHER INFORMATION
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Item 1.
|
32 | |
Item 1A.
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32 | |
Item 2.
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32 | |
Item 3.
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32 | |
Item 4.
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32 | |
Item 5.
|
32 | |
Item 6.
|
33 | |
35 |
ITEM 1. |
FINANCIAL STATEMENTS
|
September 30, 2021
|
December 31, 2020
|
|||||||
ASSETS
|
||||||||
Current Assets:
|
||||||||
Cash
|
$
|
|
$
|
|
||||
Accounts receivable, net of allowance for doubtful accounts of $
|
|
|
||||||
Inventory
|
|
|
||||||
Prepaid expenses and other current assets
|
|
|
||||||
Total Current Assets
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|
|
||||||
Property and Equipment, net
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|
|
||||||
Right of Use Assets, net
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|
|
||||||
Other Intangible Assets, net
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|
|
||||||
Goodwill
|
|
|
||||||
Other Assets
|
|
|
||||||
Total Assets
|
$
|
|
$
|
|
||||
LIABILITIES
|
||||||||
Current Liabilities:
|
||||||||
Senior secured promissory note payable, in default
|
$
|
|
$
|
|
||||
Convertible promissory notes payable, in default
|
|
|
||||||
Convertible promissory notes, related parties, in default
|
|
|
||||||
Advances on future cash receipts
|
||||||||
Accounts payable
|
|
|
||||||
Accrued expenses
|
|
|
||||||
Accrued employee compensation
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|
|
||||||
Due under factoring agreement
|
||||||||
Warrant liability
|
|
|
||||||
Current portion of SBA loans
|
|
|
||||||
Accrued interest
|
|
|
||||||
Accrued interest, related parties
|
|
|
||||||
Current portion of lease liabilities
|
|
|
||||||
Current portion of contract liabilities
|
|
|
||||||
Other
|
|
|
||||||
Total Current Liabilities
|
|
|
||||||
Non-current Liabilities
|
||||||||
SBA loans
|
|
|
||||||
Lease liabilities
|
|
|
||||||
Contract liabilities
|
|
|
||||||
Deferred tax liability
|
|
|
||||||
Total Non-current Liabilities
|
|
|
||||||
Total Liabilities
|
|
|
||||||
Contingencies
|
||||||||
STOCKHOLDERS’ DEFICIT
|
||||||||
Preferred Stock, par value $
|
|
|
||||||
Common Stock, par value $
|
|
|
||||||
Additional Paid-in Capital
|
|
|
||||||
Accumulated Deficit
|
(
|
)
|
(
|
)
|
||||
Accumulated Other Comprehensive Loss
|
(
|
)
|
(
|
)
|
||||
Total Stockholders’ Deficit
|
(
|
)
|
(
|
)
|
||||
Total Liabilities and Stockholders’ Deficit
|
$
|
|
$
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
Revenues:
|
||||||||||||||||
Accessory and parts revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Product
|
|
|
|
|
||||||||||||
License fees and other
|
|
|
|
|
||||||||||||
Total Revenue
|
|
|
|
|
||||||||||||
Cost of Revenues
|
|
|
|
|
||||||||||||
Gross Margin
|
|
|
|
|
||||||||||||
Operating Expenses:
|
||||||||||||||||
General and administrative
|
||||||||||||||||
Selling and marketing
|
||||||||||||||||
Research and development
|
|
|
|
|
||||||||||||
Total Operating Expenses
|
|
|
|
|
||||||||||||
Operating Loss
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Other Income (Expense):
|
||||||||||||||||
Interest expense
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Change in fair value of derivative liabilities
|
|
(
|
)
|
|
(
|
)
|
||||||||||
Interest expense, related party
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Partnership fee income
|
||||||||||||||||
Loss on issuance of debt
|
(
|
)
|
|
(
|
)
|
|
||||||||||
Gain / (loss) on extinguishment of debt
|
( |
) | ( |
) | ||||||||||||
Gain / (loss) on foreign currency exchange
|
(
|
)
|
(
|
)
|
|
(
|
)
|
|||||||||
Other Income (Expense), net
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Net Loss before Income Taxes
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Provision for Income Taxes
|
|
|
|
|
||||||||||||
Net Loss
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Other Comprehensive Loss
|
||||||||||||||||
Foreign currency translation adjustments
|
|
|
(
|
)
|
|
|||||||||||
Total Comprehensive Loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Loss per Share:
|
||||||||||||||||
Net loss per share, basic and diluted
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Weighted average shares outstanding, basic and diluted
|
|
|
|
|
|
Three Months Ended September 30, 2021
|
|||||||||||||||||||||||||||||||
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
|
Loss
|
Total
|
|||||||||||||||||||||||||
Balances as of June 30, 2021
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||||||||||
Net loss
|
-
|
$ |
|
-
|
$ |
|
$ |
|
$ |
(
|
)
|
$ |
|
$ |
(
|
)
|
||||||||||||||||
Balances as of September 30, 2021
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|
Three Months Ended September 30, 2020
|
|||||||||||||||||||||||||||||||
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
|
Loss
|
Total
|
||||||||||||||||||||||||
Balances as of June 30, 2020
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||||||||||
Net loss
|
-
|
|
-
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||
Proceeds from PIPE offering, net of offering costs
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
LGH Warrant Liability
|
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
Series C Preferred Conversion
|
||||||||||||||||||||||||||||||||
Series D Preferred Conversion
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Shares issued for services
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Inducement shares issued
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Conversion of short-term notes and settlements
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Conversion of notes payable, related parties
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
-
|
|
|
|
|
|
||||||||||||||||||||||||
Balances as of September 30, 2020
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
Nine Months Ended September 30, 2021
|
||||||||||||||||||||||||||||||||
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
|
Loss
|
Total
|
||||||||||||||||||||||||
Balances as of December 31, 2020
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||||||||||
Cashless warrant exercise
|
|
|
|
|
(
|
)
|
|
|
|
|||||||||||||||||||||||
Reclassification of warrant liability due to cashless warrant exercise
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Net loss
|
-
|
|
-
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
-
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||
Balances as of September 30, 2021
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|
Nine Months Ended September
30, 2021
|
|||||||||||||||||||||||||||||||
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
|
Loss
|
Total
|
||||||||||||||||||||||||
Balances as of December 31, 2019
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||||||||||
Proceeds from warrant exercise
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Conversion of short term notes and convertible notes payable
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Conversion of notes payable, related parties
|
||||||||||||||||||||||||||||||||
Conversion of advances from related parties
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Series C Preferred Conversion
|
||||||||||||||||||||||||||||||||
Series D Preferred Conversion
|
||||||||||||||||||||||||||||||||
Shares issued for services
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Inducement shares issued
|
||||||||||||||||||||||||||||||||
Proceeds from PIPE offering, net of offering costs
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
LGH Warrant Liability
|
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
Stock-based compensation
|
-
|
|
-
|
|
|
|
|
|
||||||||||||||||||||||||
Proceeds from stock option exercise
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Beneficial conversion feature on convertible debt
|
-
|
|
-
|
|
|
|
|
|
||||||||||||||||||||||||
Net loss
|
-
|
|
-
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
-
|
|
|
|
|
|
||||||||||||||||||||||||
Balances as of September 30, 2020
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
Nine Months Ended September 30,
|
||||||||
2021
|
2020
|
|||||||
Cash Flows - Operating Activities:
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Adjustments to reconcile net loss to net cash used by operating activities
|
||||||||
Amortization of intangibles
|
|
|
||||||
Depreciation
|
|
|
||||||
Bad debt expense
|
|
(
|
)
|
|||||
Shares issued for services
|
|
|
||||||
Shares issued for inducement
|
||||||||
Deferred taxes
|
|
|
||||||
Change in fair value of derivative liabilities
|
( |
) |
|
|||||
Loss on issuance of debt
|
||||||||
Loss (Gain) on extinguishment of debt | ( |
) | ||||||
Amortization of debt issuance costs
|
|
|
||||||
Amortization of debt discount |
||||||||
Accrued interest
|
|
|
||||||
Interest payable, related parties
|
|
|
||||||
Changes in operating assets and liabilities
|
||||||||
Accounts receivable - trade
|
(
|
)
|
(
|
)
|
||||
Inventory
|
|
(
|
)
|
|||||
Prepaid expenses
|
(
|
)
|
(
|
)
|
||||
Other assets
|
( |
) |
|
|||||
Operating leases
|
|
(
|
)
|
|||||
Financing leases
|
||||||||
Accounts payable
|
|
|
||||||
Accrued expenses
|
|
|
||||||
Accrued employee compensation
|
|
|
||||||
Contract liabilities
|
|
(
|
)
|
|||||
Net Cash Used by Operating Activities
|
(
|
)
|
(
|
)
|
||||
Cash Flows - Investing Activities
|
||||||||
Acquisition of UltraMIST, net of $
|
( |
) | ||||||
Purchases of property and equipment
|
(
|
)
|
(
|
)
|
||||
Net Cash Flows Used by Investing Activities
|
(
|
)
|
(
|
)
|
||||
Cash Flows - Financing Activities
|
||||||||
Proceeds from sale of convertible preferred stock
|
|
|
||||||
Proceeds from convertible promissory notes
|
||||||||
Proceeds from SBA loan
|
|
|
||||||
Proceeds from PIPE offering, net of offering costs
|
||||||||
Proceeds from senior promissory notes
|
||||||||
Proceeds from stock option exercises
|
||||||||
Proceeds from factoring
|
||||||||
Proceeds from warrant exercises
|
|
|
||||||
Proceeds from related party advances
|
|
|
||||||
Payments of principal on convertible promissory notes, related parties, convertible promissory notes and SBA loans
|
( |
) | ( |
) | ||||
Payments of principal on finance leases
|
(
|
)
|
(
|
)
|
||||
Net Cash Flows Provided by Financing Activities
|
|
|
||||||
Effect of Exchange Rates on Cash
|
(
|
)
|
|
|||||
Net Change in Cash During Period
|
(
|
)
|
|
|||||
Cash at Beginning of Period
|
|
|
||||||
Cash at End of Period
|
$
|
|
$
|
|
||||
Supplemental Information:
|
||||||||
Cash paid for interest
|
$
|
|
$
|
|
||||
Non-cash Investing and Financing Activities:
|
||||||||
Reclassification of warrant liability due to cashless warrant exercise
|
$
|
|
$
|
|
||||
Acquisition of UltraMIST partially financed with convertible promissory note
|
||||||||
Conversion of short-term notes payable to equity
|
|
|
||||||
Conversion of advances from related parties to equity
|
|
|
||||||
Additions to right of use assets from new finance lease liabilities
|
|
|
||||||
Embedded conversion feature on convertible debt
|
||||||||
Warrant issuance in conjunction with convertible notes
|
1.
|
Nature of the Business and Basis of Presentation
|
2. |
Going Concern
|
3. |
Summary of Significant Accounting Policies
|
•
|
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.
|
4. |
Loss per Share
|
Three Months Ended
|
||||||||
September 30, 2021
|
September 30, 2020
|
|||||||
Weighted average shares outstanding
|
||||||||
Common shares
|
|
|
||||||
Common shares issuable assuming exercise of nominally priced warrants
|
|
|
||||||
Weighted average shares outstanding
|
|
|
Nine Months Ended
|
||||||||
September 30, 2021 |
September 30, 2020
|
|||||||
Weighted average shares outstanding
|
||||||||
Common shares
|
|
|
||||||
Common shares issuable assuming exercise of nominally priced warrants
|
|
|
||||||
Weighted average shares outstanding
|
|
|
2021
|
2020
|
|||||||
Common stock options
|
|
|
||||||
Common stock purchase warrants
|
|
|
||||||
Convertible notes payable
|
|
|
||||||
|
|
5.
|
Inventory
|
2021
|
2020
|
|||||||
Inventory - finished goods
|
$
|
|
$
|
|
||||
Inventory - parts and accessories
|
|
|
||||||
Total inventory
|
$
|
|
$
|
|
6. |
Accrued Expenses
|
2021
|
2020
|
|||||||
Outside services
|
$
|
|
$
|
|
||||
License fees
|
|
|
||||||
Board of director's fees
|
|
|
||||||
Registration penalties
|
|
|
||||||
Commissions
|
|
|
||||||
Legal and professional fees
|
|
|
||||||
Warranty reserve
|
|
|
||||||
Inventory purchases
|
|
|
||||||
Other
|
|
|
||||||
$
|
|
$
|
|
7. |
Revenue
|
Three Months Ended September 30, 2021
|
Three Months Ended September 30, 2020
|
|||||||||||||||||||||||
United States
|
International
|
Total
|
United States
|
International
|
Total
|
|||||||||||||||||||
Accessories and parts |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Product
|
|
|
|
|
(
|
)
|
|
|||||||||||||||||
License fees and other
|
|
|
|
|
|
|
||||||||||||||||||
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Nine Months Ended September 30, 2021
|
Nine Months Ended September 30, 2020
|
|||||||||||||||||||||||
United States
|
International
|
Total
|
United States
|
International
|
Total
|
|||||||||||||||||||
Accessories and parts |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Product
|
|
|
|
|
|
|
||||||||||||||||||
License fees and other
|
|
|
|
|
|
|
||||||||||||||||||
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
September 30,
2021
|
December 31,
2020
|
|||||||
Service agreements
|
$
|
|
$
|
|
||||
Deposit on future equipment purchases
|
|
|
||||||
Total contract liabilities
|
|
|
||||||
Less: current portion
|
(
|
)
|
(
|
)
|
||||
Non-current contract liabilities
|
$
|
|
$
|
|
Nine Months ended
September 30, 2021 |
||||
Beginning balance
|
$
|
|
||
New service agreement additions
|
|
|||
Deposit on future equipment purchases
|
|
|||
Revenue recognized
|
( |
) | ||
Total contract liabilities
|
|
|||
Less current portion
|
(
|
)
|
||
Non-current contract liabilities
|
$
|
|
8. |
Concentration of Credit Risk and Limited Suppliers
|
September 30, 2021
|
December 31, 2020
|
|||||||
Accounts Receivable:
|
||||||||
Customer A
|
|
%
|
|
%
|
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2021
|
September 30, 2020
|
September 30, 2021
|
September 30, 2020
|
|||||||||||||
Purchases:
|
||||||||||||||||
Vendor A
|
|
%
|
n/a
|
|
%
|
n/a
|
||||||||||
Vendor B
|
n/a
|
n/a
|
|
%
|
n/a
|
|||||||||||
Vendor C
|
n/a
|
|
%
|
n/a
|
|
%
|
||||||||||
Vendor D
|
n/a
|
|
%
|
n/a
|
|
%
|
9. |
Accounts Receivable Factoring
|
10. |
Notes payable
|
|
Maturity
Date
|
Stated
Interest
Rate
|
Incremental
Payment in
Kind Interest
|
Incremental
Default
Interest
|
Conversion
Price
|
Principal
|
Remaining
Debt
Discount
|
Remaining
Embedded
Conversion
Option
|
Carrying
Value
|
||||||||||||||||||||||||
Senior secured promissory note payable, in default
|
|
|
%
|
+
|
%
|
+
|
%
|
n/a
|
$
|
|
(
|
)
|
|
$
|
|
||||||||||||||||||
Convertible promissory notes payable, in default:
|
|||||||||||||||||||||||||||||||||
Seller Note issued 8/6/2020
|
|
|
%
|
n/a
|
+
|
%
|
$
|
|
|
|
|
|
|||||||||||||||||||||
Leviston Note issued 4/20/2021
|
|
|
%
|
n/a
|
+
|
%
|
$
|
|
|
(
|
)
|
|
|
|
|||||||||||||||||||
Leviston Note issued 5/14/2021
|
|
|
%
|
n/a
|
+
|
%
|
$
|
|
|
(
|
)
|
|
|
||||||||||||||||||||
Leviston Note issued 9/3/2022 |
% | n/a |
+ |
% | $ |
( |
) | ||||||||||||||||||||||||||
Five Institutions' Notes issued 9/3/2021 |
% | n/a | + |
% | $ |
( |
) | ||||||||||||||||||||||||||
Total convertible promissory notes payable, in default
|
|
(
|
)
|
|
|
||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||
Convertible promissory notes payable, related parties, in default:
|
|||||||||||||||||||||||||||||||||
Convertible promissory notes (HealthTronics), related parties
|
|
|
%
|
n/a
|
+
|
%
|
$
|
|
|
|
|
|
|||||||||||||||||||||
Convertible promissory notes (Stolarski), related parties
|
|
|
%
|
n/a
|
+
|
%
|
$
|
|
|
|
|
|
|||||||||||||||||||||
Total convertible promissory notes payable, related parties, in default
|
|
|
|
|
|||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||
SBA loan #2
|
|
|
%
|
n/a
|
n/a
|
n/a
|
|
|
|
|
|||||||||||||||||||||||
Advances on future cash receipts |
n/a | n/a | n/a | n/a | ( |
) | |||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||
Total debt outstanding, including amounts in default
|
|
(
|
)
|
|
|
||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||
Less: current maturities, including notes in default
|
(
|
)
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||
Total long-term debt as of September 30, 2021
|
$
|
|
$
|
|
$
|
|
$
|
|
|
Maturity
Date
|
Stated
Interest
Rate
|
Incremental
Payment in
Kind Interest
|
Incremental
Default
Interest
|
Conversion
Price
|
Principal
|
Remaining
Debt
Discount
|
Carrying
Value
|
|||||||||||||||||||||
Senior secured promissory note
payable, in default
|
|
|
%
|
+
|
%
|
+
|
%
|
n/a
|
$
|
|
(
|
)
|
$
|
|
|||||||||||||||
Convertible promissory notes payable, in default:
|
|||||||||||||||||||||||||||||
Seller Note issued 8/6/2020
|
|
|
%
|
n/a
|
+
|
%
|
$
|
|
|
|
|
||||||||||||||||||
|
|||||||||||||||||||||||||||||
Convertible promissory notes payable, related parties, in default:
|
|||||||||||||||||||||||||||||
Convertible promissory notes (HealthTronics), related parties
|
|
|
%
|
n/a
|
+
|
%
|
$
|
|
|
|
|
||||||||||||||||||
Convertible promissory notes (Stolarski), related parties
|
|
|
%
|
n/a
|
+
|
%
|
$
|
|
|
|
|
||||||||||||||||||
Total convertible promissory notes payable, related parties, in default
|
|
|
|
||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||
SBA loan #1
|
|
|
%
|
n/a
|
n/a
|
n/a
|
|
|
|
||||||||||||||||||||
|
|||||||||||||||||||||||||||||
Total debt outstanding, including amounts in default
|
|
(
|
)
|
|
|||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||
Less: current maturities, including notes in default
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||
Total long-term debt as of December 31, 2020
|
$
|
|
$
|
|
$
|
|
Issuance date (1)
|
Issuance date (1)
|
Issuance date (1) | Issuance date (1) | |||||||||||||||||
Binomial Assumptions
|
April 20, 2021
|
May 14, 2021
|
September 3, 2021 |
September 3, 2021 |
September 30, 2021
|
|||||||||||||||
Principal
|
$ |
$
|
|
$ | $ |
$
|
|
|||||||||||||
Conversion Price(1)
|
$ |
$
|
|
$ | $ |
$
|
|
|||||||||||||
Interest Rate (annual) (2)
|
% |
|
%
|
% | % |
|
%
|
|||||||||||||
Volatility (annual) (3)
|
% |
|
%
|
% | % |
|
%
|
|||||||||||||
Time to Maturity (Years)
|
|
|
||||||||||||||||||
Fair Value of Conversion Option
|
$ |
$
|
|
$ | $ |
$
|
|
11. |
Common Stock Purchase Warrants
|
Warrant class
|
Outstanding
December 31,
2020
|
Issuances |
Exercised
|
Outstanding
September 30,
2021
|
Exercise
price/share
|
Expiration
date
|
|||||||||||||||
Class E Warrants
|
|
|
|
$
|
|
|
|||||||||||||||
Class O Warrants
|
|
|
|
|
|
||||||||||||||||
Class P Warrants
|
|
|
|
|
|
||||||||||||||||
LGH Warrant
|
|
(
|
)
|
|
|
|
|||||||||||||||
NH Expansion Warrant
|
|
|
|
|
|
||||||||||||||||
Leviston Warrants - April 2021 |
|||||||||||||||||||||
Leviston Warrants - May 2021 | |||||||||||||||||||||
Leviston Warrants - September 2021 | |||||||||||||||||||||
Five Institutions Warrants - September 2021 |
|||||||||||||||||||||
GCF Warrants - September 2021 |
|||||||||||||||||||||
Total
|
|
(
|
)
|
|
12. |
Warrant Liabilities
|
Warrants
Outstanding
|
Fair Value
per Share
|
Fair Value
|
||||||||||
Balance December 31, 2020
|
|
$
|
|
$
|
|
|||||||
Cashless exercise of LGH Warrants
|
(
|
)
|
|
(
|
)
|
|||||||
Warrants reclassified as liabilities
|
||||||||||||
Gain on remeasurement of warrant liability
|
(
|
)
|
||||||||||
Balance September 30, 2021
|
|
$
|
|
$
|
|
Black Scholes option pricing model
|
September 30, 2021
|
December 31, 2020
|
||||||
Exercise Price(1)
|
$
|
|
$
|
|
||||
Interest Rate (annual) (2)
|
|
%
|
|
%
|
||||
Volatility (annual) (3)
|
% | % | ||||||
Time to Maturity (Years)
|
|
|
||||||
Calculated fair value per share
|
$ |
$
|
|
(1) |
|
(2) |
|
(3) |
|
Black Scholes option pricing model
|
September 30, 2021
|
December 31, 2020
|
||||||
Exercise Price(1)
|
$
|
|
$
|
|
||||
Interest Rate (annual) (2)
|
|
%
|
|
%
|
||||
Volatility (annual) (3)
|
|
%
|
% | |||||
Time to Maturity (Years)
|
|
|
||||||
Calculated fair value per share
|
$ | $ |
(1) |
|
(2) |
|
(3) |
|
Binomial Assumptions
|
Issuance date (1)
April 20, 2021
|
Issuance date (1)
May 14, 2021
|
Issuance date (1)
September 3, 2021
|
September 30, 2021
|
||||||||||||
Exercise Price(1)
|
$
|
|
$
|
|
|
|
||||||||||
Interest Rate (annual) (2)
|
|
%
|
|
%
|
|
%
|
|
%
|
||||||||
Volatility (annual) (3)
|
|
%
|
|
%
|
|
%
|
|
%
|
||||||||
Time to Maturity (Years)
|
|
|
|
|
||||||||||||
Calculated fair value per share
|
$
|
|
$
|
|
$
|
|
$
|
|
(1) |
|
(2) |
|
(3) |
|
Binomial Assumptions |
Issuance date (1)
September 3, 2021
|
September 30, 2021
|
||||||
Exercise Price(1)
|
$
|
|
$
|
|
||||
Interest Rate (annual) (2)
|
|
%
|
|
%
|
||||
Volatility (annual) (3)
|
|
%
|
|
%
|
||||
Time to Maturity (Years)
|
|
|
||||||
Calculated fair value per share
|
$
|
|
$
|
|
(1) |
|
(2) |
|
(3) |
|
Binomial Assumptions
|
Issuance date (1)
September 27, 2021
|
September 30, 2021 |
||||||
Exercise Price(1)
|
$ | $ | ||||||
Interest Rate (annual) (2)
|
|
%
|
% | |||||
Volatility (annual) (3)
|
|
%
|
% | |||||
Time to Maturity (Years)
|
|
|||||||
Calculated fair value per share
|
$
|
|
$ |
(1) |
|
(2) |
|
(3) |
|
13. |
Leases
|
September 30, 2021
|
December 31, 2020
|
|||||||||||||||||||||||
Operating
Leases
|
Financing
Leases
|
Total
|
Operating
Leases
|
Financing
Leases
|
Total
|
|||||||||||||||||||
Right of use assets
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
Less: Accumulated amortization
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
Right of use assets, net
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
Lease liabilities
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
Less: current portion
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
Lease Liabilities
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
2021
|
2020
|
|||||||
Finance lease costs:
|
||||||||
Amortization of right-of-use assets
|
$
|
|
$
|
|
||||
Interest on lease liabilities
|
|
|
||||||
Operating lease costs
|
|
|
||||||
Total lease costs
|
$
|
|
$
|
|
2021
|
2020
|
|||||||
Cash paid for amounts included in measurement of lease liabilities:
|
||||||||
Operating cash flows from finance leases
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Operating cash flows from operating leases
|
$
|
(
|
)
|
$
|
(
|
)
|
Amount
|
||||
Year ending December 31,
|
||||
2021 (remainder of year)
|
$
|
|
||
2022
|
|
|||
2023
|
|
|||
2024
|
|
|||
2025
|
|
|||
Total lease payments
|
|
|||
Less: Present value adjustment
|
(
|
)
|
||
Lease liability
|
$
|
|
Amount
|
||||
Year ending December 31,
|
||||
2021 (remainder of year)
|
$
|
|
||
2022
|
|
|||
2023
|
|
|||
Total lease payments
|
|
|||
Less: Present value adjustment
|
|
|||
Lease liability
|
$
|
|
14. |
Contingencies
|
15. |
Related Party Transactions
|
16. |
Income Taxes
|
17. |
Subsequent Events
|
Item 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Item 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Item 4. |
CONTROLS AND PROCEDURES
|
• |
The Company lacks 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
distribution agreements.
|
• |
The Company lacks 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 of its accounting and IT processes and procedures and, as such, it believes that all of its accounting and IT processes and procedures
need to re-designed and tested for operating effectiveness.
|
Item 1. |
LEGAL PROCEEDINGS.
|
Item 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
|
Item 3. |
DEFAULTS UPON SENIOR SECURITIES.
|
Item 4. |
MINE SAFETY DISCLOSURES.
|
Item 5. |
OTHER INFORMATION.
|
Item 6. |
EXHIBITS
|
Exhibit No.
|
Description
|
Form of Warrant Issued September 3, 2021 (Incorporated by reference to the Form 8-K filed with the SEC on September 13, 2021).
|
|
Form of Future Advance Convertible Promissory Note Issued September 3, 2021 (Incorporated by reference to the Form 8-K filed with the SEC on September 13, 2021).
|
|
Form of Securities Purchase Agreement Entered into September 3, 2021 (Incorporated by reference to the Form 8-K filed with the SEC on September 13, 2021).
|
|
Form of Subordination Agreement Entered into September 3, 2021 (Incorporated by reference to the Form 8-K filed with the SEC on September 13, 2021).
|
|
Form of Registration Rights Agreement Entered into September 3, 2021 (Incorporated by reference to the Form 8-K filed with the SEC on September 13, 2021).
|
|
Form of Security Agreement (Incorporated by reference to the Form 8-K filed with the SEC on September 13, 2021).
|
|
Future Receivables Agreement by and between GCF Resources, LLC and SANUWAVE Health, Inc. dated September 27, 2021 (Incorporated by reference to Exhibit 10.3 filed with the Form 10-Q
for the quarter ended March 31, 2021 filed with the SEC on December 13, 2021).
|
|
Form of Registration Rights Agreement Entered into September 27, 2021.
|
|
Form of Warrant Issued September 27, 2021 and December 22, 2021.
|
|
Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer.
|
|
Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.
|
|
Section 1350 Certification of the Principal Executive Officer.
|
|
Section 1350 Certification of the Chief Financial Officer.
|
|
101.INS*
|
XBRL Instance.
|
101.SCH*
|
XBRL Taxonomy Extension Schema.
|
101.CAL*
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XBRL Taxonomy Extension Calculation.
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101.DEF*
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XBRL Taxonomy Extension Definition.
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101.LAB*
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XBRL Taxonomy Extension Labels.
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101.PRE*
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XBRL Taxonomy Extension Presentation.
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Exhibit No.
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Description
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10.1*
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Promissory Note by and between SANUWAVE Health, Inc. and Northeast Bank, dated February 20, 2021.
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10.2*
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Factoring Agreement by and between SANUWAVE Health, Inc. and Goodman Capital Finance dated June 17, 2021.
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10.3*
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Future Receivables Agreement by and between GCF Resources LLC and SANUWAVE Health, Inc. dated September 27, 2021.
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SANUWAVE HEALTH, INC.
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Dated: February 28, 2022 |
By:
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/s/ Kevin A. Richardson, II |
Name: Kevin A. Richardson, II
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Title: Chief Executive Officer
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Signatures
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Capacity
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Date
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By: /s/ Kevin A. Richardson, II
Name: Kevin A. Richardson, II
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Chief Executive Officer and Chairman of the Board of Directors
(principal executive officer)
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February 28, 2022
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By: /s/ Lisa E. Sundstrom
Name: Lisa E. Sundstrom
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Chief Financial Officer (principal financial and accounting officer)
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February 28, 2022
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