SANUWAVE Health, Inc. (SNWV)

CIK: 0001417663. SIC: 3841 Surgical & Medical Instruments & Apparatus. Latest 10-K as of: 2026-03-26.

SIC breadcrumb: Manufacturing > SIC Major Group 38 > SIC 3841 Surgical & Medical Instruments & Apparatus

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1417663. Latest filing source: 0001628280-26-021443.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-26. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001417663.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-12. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001417663.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001628280-26-034145.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-05-12. Report date: 2026-03-31.

Item 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes appearing elsewhere in this report, and together with our audited consolidated financial statements, related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as of and for the year ended December 31, 2025, included in our Annual Report on Form 10-K, filed with the SEC on March 26, 2026 (the “2025 Annual Report”).

Executive Summary

We realized modest revenue growth during the three months ended March 31, 2026, as compared to the same period in 2025. Revenue for the three months ended March 31, 2026, totaled $9.6 million, an increase of 3%, as compared to $9.3 million for the same period of 2025.

Net loss for the three months ended March 31, 2026, was $1.4 million compared to a net loss of $6.1 million for the same period in 2025. The decrease in our net loss for the three months ended March 31, 2026, was primarily attributable to the $4.9 million non-cash loss on the change in fair value of derivative liabilities recognized in the prior year period that did not recur during the three months ended March 31, 2026. For the three months ended March 31, 2026, our operating loss totaled $1.1 million, which is a change of $1.7 million compared to operating income of $0.6 million for the same period of 2025.

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 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 infrequent 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 U.S. GAAP, and they should not be construed as an inference that our future results will be unaffected by unusual or infrequent 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 U.S. 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 U.S. GAAP measures.

EBITDA and Adjusted EBITDA have 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 U.S. GAAP. Some of these limitations are that EBITDA and Adjusted EBITDA:

•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.

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

Three Months Ended March 31,

(in thousands)

2026

2025

(As Restated)

Net Loss

$

(1,439)

$

(6,118)

Non-GAAP Adjustments:

Interest expense

546 

1,909 

Depreciation and amortization 1

294 

209 

EBITDA

(599)

(4,000)

Non-GAAP Adjustments for Adjusted EBITDA:

Change in fair value of derivative liabilities

- 

4,901 

Other non-cash or infrequent charges:

Stock-based compensation

1,472 

975 

State & local sales tax 2

339 

376 

Sale of excess inventory

(220)

- 

Shares issued for services

97 

- 

Adjusted EBITDA

$

1,089 

$

2,252 

1 Depreciation and amortization excludes amortization of right-of-use (ROU) leases. Prior period amounts have been retroactively revised to conform to this presentation. This change had no effect on previously reported GAAP results.

2 The charges represent a non-recurring state and local sales tax expense related to the restatement of prior period financial statements.

Results of Operations

Three Months Ended March 31,

Change

(in thousands)

2026

2025

(As Restated)

$

%

Revenue

$

9,619 

$

9,333 

$

286 

3

%

Cost of revenue

2,188 

1,958 

230 

12

%

Gross margin

7,431 

7,375 

56 

1

%

Gross margin %

77

%

79

%

Operating expenses:

General and administrative

5,250 

4,843 

407 

8

%

Selling and marketing

2,399 

1,531 

868 

57

%

Research and development

660 

208 

452 

217

%

Depreciation and amortization

246 

192 

54 

28

%

Operating (loss) income

(1,124)

601 

(1,725)

287

%

Other expense, net

(315)

(6,719)

6,404 

95

%

Net loss

$

(1,439)

$

(6,118)

$

4,679 

76

%

Revenue

Revenues for the three months ended March 31, 2026, were $9.6 million, compared to $9.3 million for the same period of 2025, an increase of $0.3 million or 3%. The increase in net sales was primarily driven by the growth in quantity of

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UltraMIST® disposables, which increased by 22% in the three months ended March 31, 2026, as compared to the same period of 2025. The quantity of UltraMIST® systems sold decreased by 1% in the three months ended March 31, 2026, as compared to the same period of 2025. Pricing of the UltraMIST® system and disposables declined in the three months ended March 31, 2026, as compared to the same period of 2025; the average selling price of disposables decreased 6% in the three months ended March 31, 2026, and the average selling price of systems decreased 11% in the three months ended March 31, 2026. Revenue from UltraMIST® totaled 100% of total revenue in the three months ended March 31, 2026, and 99% in the same period of 2025.

Cost of Revenues

Cost of revenues for the three months ended March 31, 2026, was $2.2 million, compared to $2.0 million for the same period of 2025. Gross profit as a percentage of revenues was 77% for the three months ended March 31, 2026, compared to 79% for the same period in 2025. This decrease in gross margin was largely driven by a decrease in pricing on our UltraMIST® systems and applicators due to a higher reseller mix.

General and Administrative

General and administrative expenses for the three months ended March 31, 2026, were $5.3 million as compared to $4.8 million for the same period of 2025, an increase of $0.4 million, or 8%. The increase in the three months ended March 31, 2026, as compared to the same period of 2025, was primarily due to an increase in payroll and related expenses of $0.4 million, software expenses of $0.2 million, and audit and tax fees of $0.2 million, partially offset by a decrease in Nasdaq listing costs of $0.3 million and regulatory costs of $0.1 million.

Selling and Marketing

Selling and marketing expenses for the three months ended March 31, 2026, were $2.4 million as compared to $1.5 million for the same period of 2025, an increase of $0.9 million, or 57%. The year-over-year increase in sales and marketing expenses in the three months ended March 31, 2026, was largely driven by increased consulting expenses of $0.5 million and payroll and related expenses of $0.4 million.

Research and Development

Research and development expenses for the three months ended March 31, 2026, were $0.7 million as compared to $0.2 million for the same period of 2025, an increase of $0.5 million. The year-over-year increase in research and development expenses in the three months ended March 31, 2026, was largely driven by consulting expenses of $0.2 million, non-cash charges for stock-based compensation totaling $0.1 million, and software and patents expenses of $0.1 million.

Other Expense, net

Other expense, net consists of the following:

Three Months Ended March 31,

Change

2026

2025

(As Restated)

$

%

Interest expense

$

(546)

$

(1,909)

$

1,363 

71

%

Change in fair value of derivative liabilities

— 

(4,901)

4,901 

100

%

Other expense

(60)

(1)

(59)

(5900

%)

Other income

291 

92 

199 

216

%

Other expense, net

$

(315)

$

(6,719)

$

6,404 

95

%

Other expense, net totaled $0.3 million for the three months ended March 31, 2026, as compared to $6.7 million for the same period of 2025, a decrease of $6.4 million. The decrease was primarily driven by the change in the fair value of derivative liabilities of $4.9 million and decreased interest expense of $1.4 million. The change in fair value of derivative liabilities relates to valuation of warrants previously issued by the Company; these warrants expired during 2025. The reduction in interest expense reflects the September 2025 repayment of our Prior Debt and the closing of our Term Loan

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under the JPM Credit Agreement, which carries a lower interest rate, as described in Note 8 to the condensed consolidated financial statements.

Liquidity and Capital Resources

From inception through the year ended December 31, 2024, we incurred losses from operations each year, before achieving net income for the year ended December 31, 2025. As of March 31, 2026, we had an accumulated deficit of $244.1 million.

Historically, our operations have primarily been funded from the sale of capital stock, issuances of notes payable, and convertible debt securities. During the third quarter of 2025, we entered into the JPM Credit Agreement, which provided a $23.0 million Term Loan and a $5.0 million Revolver, the proceeds of which were used to repay and terminate the Prior Debt, as described in Note 8 to the condensed consolidated financial statements. The JPM Credit Agreement extended the maturity of our debt obligations and provided additional liquidity through the Revolver. Together with the positive cash flow from operations generated in 2025 and the $5.0 million received in connection with the patent purchase agreement described in Note 14 of the condensed consolidated financial statements, these actions strengthened our liquidity position and capital structure.

As of March 31, 2026, we had cash and cash equivalents of $10.8 million, $20.1 million outstanding under our Term Loan, and $0.7 million drawn under our Revolver. We were in compliance with all financial and other covenants under the JPM Credit Agreement as of March 31, 2026.

Based on our current cash position, anticipated cash flows from operations, and availability under our Revolver, we believe we will have sufficient resources to meet our working capital needs, capital expenditures, and debt service obligations for at least the next twelve months from the date of issuance of these condensed consolidated financial statements. We contin

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high. Filing date: 2026-03-26. Report date: 2025-12-31.

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, 2025 and 2024. You should read this discussion and analysis in conjunction with our consolidated financial statements and related notes thereto for the years ended December 31, 2025, and 2024, which are presented within Part II, Item 8. "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K. This discussion has been updated to reflect the restatement of our previously issued financial statements for the quarters ended March 31, June 30, September 30, 2025, and the year ended 2024. All amounts and discussions herein are based on the restated financial information. Refer to Note 2 to the consolidated financial statements for further details regarding the nature and impact of the restatement. 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.

Executive Summary

We realized significant revenue growth during the year ended December 31, 2025, with a 35% growth in revenue to $44.1 million for the year ended December 31, 2025, as compared to $32.6 million in 2024. Gross margins also increased to 77% from 75% in 2024. As the Company continues to focus on profitable growth, we have also increased our operating income by 29% to $4.9 million for the year ended December 31, 2025, compared to $3.8 million for the year ended December 31, 2024.

Net income for the year ended December 31, 2025, was $11.8 million, or $1.38 per basic share and $0.41 per diluted share, compared to a net loss of $33.1 million, or $7.41 per basic and diluted share, for the year ended December 31, 2024, an increase of $44.9 million, which was largely driven by a non-cash change in the fair value of derivatives and improved operational performance. We believe these improvements set the stage for additional growth as we head into 2026.

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 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 infrequent charges. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income (loss) as a measure of financial performance or any other performance measure derived in accordance with U.S. GAAP, and they should not be construed as an inference that our future results will be unaffected by unusual or infrequent 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 U.S. 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 U.S. GAAP measures.

EBITDA and Adjusted EBITDA have 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 U.S. GAAP. Some of these limitations are that EBITDA and Adjusted EBITDA:

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

•Do not reflect all changes in our working capital needs.

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•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 measures exclude the impact of certain charges that contribute to our net income (loss).

For the Years Ended December 31,

(in thousands)

2025

2024

(As Restated)

Net Income (Loss)

$

11,813 

$

(33,083)

Non-GAAP Adjustments:

Interest expense

6,246 

13,779 

Depreciation and amortization

1,265 

1,145 

EBITDA

$

19,324 

$

(18,159)

Non-GAAP Adjustments for Adjusted EBITDA:

Change in fair value of derivative liabilities

(8,107)

31,413 

Other non-cash or infrequent charges:

Stock-based compensation

4,850 

1,514 

Loss (Gain) on extinguishment of debt

477 

(6,326)

Loss on impairment of assets

196 

- 

Severance agreement and legal settlement

202 

741 

Release of historical accrued expenses

- 

(1,547)

Gain on license and option agreement

(5,000)

(2,500)

Prepaid legal fees expensed from termination of Merger Agreement

- 

457 

State and local sales tax 1

1,567 

1,569 

Sale and disposal of PACE product line 2

123 

- 

Adjusted EBITDA

$

13,632 

$

7,162 

1 The charges represent a non-recurring state and local sales tax expense related to the restatement of prior period financial statements.

2 The charges represent the net amount of proceeds received of $0.4 million and inventory written down of $0.5 million, as part of the Company's sale and disposal of the PACE product line.

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Results of Operations

The following table sets forth our consolidated statement of operations:

For the Years Ended December 31,

Change

(in thousands)

2025

2024

(As Restated)

$

%

Revenue

$

44,051 

$

32,634 

$

11,417 

35 

%

Cost of revenue

10,082 

8,084 

1,998 

25 

%

Gross margin

33,969 

24,550 

9,419 

38 

%

Gross margin %

77

%

75

%

Operating expenses:

General and administrative

19,372 

12,917 

6,455 

50 

%

Selling and marketing

7,419 

6,323 

1,096 

17 

%

Research and development

1,353 

673 

680 

101 

%

Depreciation and amortization

880 

789 

91 

12 

%

Operating Income

4,945 

3,848 

1,097 

29 

%

Total Other Income (Expense)

6,954 

(36,904)

43,858 

119 

%

Income tax expense

86 

27 

59 

219 

%

Net Income (Loss)

$

11,813 

$

(33,083)

$

44,896 

136 

%

Revenue

Revenues for the year ended December 31, 2025 were $44.1 million, compared to $32.6 million for 2024, an increase of $11.4 million or 35%. The increase in revenue was primarily driven by higher sales volumes of UltraMIST® consumables and systems. The quantity of UltraMIST® consumables sold increased 24%, and UltraMIST® systems sold increased by 67% in 2025 compared to 2024.

Pricing trends also contributed to year-over-year performance. The average selling price of UltraMIST® consumables increased 3% in 2025 compared to 2024. In contrast, the average selling price of UltraMIST® systems declined by 3%, primarily due to a higher proportion of sales through resellers. UltraMIST® systems sold through resellers comprised 34% of system sales in 2025 compared to no reseller system sales in 2024. Expanding reseller sales supports faster placement of systems into customer facilities and contributes to growth in our active system base.

Cost of Revenue

Cost of revenues for the year ended December 31, 2025 were $10.1 million, compared to $8.1 million for 2024. Gross profit as a percentage of revenues was 77% for the year ended December 31, 2025, compared to 75% for the same period in 2024. This increase in gross margin was largely driven by increased pricing on our UltraMIST® consumables and reductions in system cost of revenue, partially offset by a decrease in UltraMIST® system pricing, largely resulting from a higher reseller mix. The average gross profit of systems sold increased 0.1% in 2025 compared to 2024.

General and Administrative

General and administrative expenses for the year ended December 31, 2025 were $19.4 million as compared to $12.9 million for 2024, an increase of $6.5 million, or 50%. The increase in 2025 as compared to 2024 was primarily due to increased headcount expenses of $2.7 million, non-cash charges for stock-based compensation totaling $2.4 million, software expenses of $0.4 million, audit and tax professional expenses of $0.2 million, and public company costs of $0.2 million.

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Selling and Marketing

Selling and marketing expenses for the year ended December 31, 2025 were $7.4 million as compared to $6.3 million for 2024, an increase of $1.1 million, or 17%. The year-over-year increase in sales and marketing expenses in 2025, was primarily driven by increased headcount expenses of $1.9 million, non-cash charges for stock-based compensation totaling $0.8 million, and consulting expenses of $0.5 million, partially offset by a decrease in outside commission expense of $1.9 million as our focus shifted toward a higher mix of resellers versus distributors.

Research and Development

Research and development expenses for the year ended December 31, 2025 were $1.4 million, compared to $0.7 million for 2024. The increase in research and development costs in 2025 as compared to 2024, was largely driven by research and development (R&D) project expenses totaling $0.2 million, consulting expenses of $0.2 million, and patent legal fees of $0.2 million.

Other Income (Expense), net

Other income (expense), net consists of the following:

For the Years Ended December 31,

Change

2025

2024

(As Restated)

$

%

Interest expense

$

(6,246)

$

(13,779)

$

7,533 

(55%)

(Loss) Gain on extinguishment of debt

(477)

6,326 

(6,803)

(108%)

Change in fair value of derivative liabilities

8,107 

(31,413)

39,520 

126%

Loss on impairment of assets

(196)

- 

(196)

-%

Other expense

(42)

(893)

851 

(95%)

Other income

5,808 

2,855 

2,953 

103%

Total Other Income (Expense)

$

6,954 

$

(36,904)

$

43,858 

(119%)

Total other income for the year ended December 31, 2025 was $7.0 million, as compared to an expense of $36.9 million for 2024, an increase of $43.9 million. The increase was primarily driven by the change in fair value of derivative liabilities of $39.5 million, interest expense reduction of $7.5 million, and an other income increase of $3.0 million, partially offset by a change in the gain (loss) on extinguishment of debt of $6.8 million. The change in fair value of derivative liability relates to the valuation of warrants previously issued by the Company. The reduction in interest expense is due to the conversion of previously issued notes that were exchanged for common stock in October 2024 as described in Note 13 of our consolidated financial statements, as well as a reduction in interest rate from the repayment of our Senior Secured Debt and issuance of our Term Loan as described in Note 9 of our consolidated financial statements. Other income for 2025 mainly consists of the one-time payment of $5.0 million related to the patent purchase agreement as described in Note 20 of our consolidated financial statements. Other income for 2024 mainly consists of the one-time payment of $2.5 million related to the Patent License agreement as described in Note 20 of our consolidated financial statements.

Liquidity and Capital Resources

From inception through the year ended December 31, 2024, we incurred losses from operations each year. As of December 31, 2025, we had an accumulated deficit of $242.7 million. Historically, our operations have primarily been funded from the sale of capital stock, and issuances of notes payable, and convertible debt securities.

We have incurred recurring net losses in prior years, currently have a significant accumulated deficit, and have experienced negative working capital. Previously, the scheduled maturity of the Senior Secured debt in September 2025 raised substantial doubt about our ability to continue as a going concern for a period of 12 months from the filing of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2025.

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However, as described in Note 9 of our consolidated financial statements, we successfully refinanced our outstanding debt during 2025. The refinancing extended the maturity of our debt and provided the option for additional liquidity to support ongoing operations through the secured revolving credit facility. In addition, the operating income achieved in 2025, the receipt of $5.0 million from the patent purchase agreement as described in Note 20 of our consolidated financial statements, and the capital raised from a private placement in October 2024 as described in Note 14 of our consolidated financial statements, have all contributed to a significant improvement in our financial position.

Management has evaluated our ability to continue as a going concern in light of these developments. Based on the successful refinancing and other recent initiatives, management believes the Company has sufficient resources to meet its obligations as they become due and to continue as a going concern for at least the next 12 months. We continue to monitor our financial position, liquidity, and compliance with debt covenants on an ongoing basis.

Management remains focused on maintaining the Company’s improved financial position and operational momentum. While we continue to monitor our liquidity and capital resources closely, we believe that the successful refinancing of our debt, as described in Note 9 of our consolidated financial statements, together with our recent operating income and capital initiatives, have significantly strengthened our ability to meet our obligations as they come due. These actions have alleviated the substantial doubt about our ability to continue as a going concern. We will continue to evaluate opportunities to further enhance our capital structure and support our growth strategy. Although we cannot predict all future events or guarantee that unforeseen circumstances will not arise, we are confident that the steps taken to date position the Company well to support ongoing operations and execute on our strategic objectives.

The following table presents summarized cash flow information:

For the years ended December 31,

(in thousands)

2025

2024

(As Restated)

Cash flows provided by operating activities

$

3,876 

$

2,455 

Cash flows provided by (used in) investing activities

$

3,433 

$

(490)

Cash flows (used in) provided by financing activities

$

(5,587)

$

6,354 

Cash Flows from Operating Activities

Cash provided by operating activities for 2025 totaled $3.9 million. The primary source was net income of $11.8 million, adjusted for non-cash items including stock-based compensation expense of $4.9 million, amortization of debt issuance costs and debt discounts of $1.5 million, depreciation and amortization of $1.3 million, a $0.5 million inventory write-off related to the disposal of PACE, $0.6 million in tenant improvement allowances received, and $0.9 million of other non-cash items. These were partially offset by a non-cash gain of $8.1 million on the change in fair value of derivative liabilities, a $5.4 million non-cash gain on the sale of patents, and a $4.0 million net use of cash from changes in operating assets and liabilities, driven primarily by an increase in accounts receivable reflecting higher revenue activity and an increase in inventory due to a build up to support anticipated demand.

Cash provided by operating activities for 2024 totaled $2.5 million and consisted primarily of the change in fair value of derivative liabilities connected to our convertible debt and warrants issued. The Company recognized a loss on these liabilities of $31.4 million for the year ended December 31, 2024.

Cash Flows from Investing Activities

Cash provided by investing activities for 2025 totaled $3.4 million, consisting of $5.4 million in proceeds from the sale of patents, partially offset by $1.9 million in purchases of property and equipment.

Cash used in investing activities for 2024 totaled $0.5 million, consisting entirely of purchases of property and equipment.

Cash Flows Provided by Financing Activities

Cash used in financing activities for 2025 totaled $5.6 million, consisting primarily of $27.7 million in payments on notes payable, $1.4 million in repayment of principal on the secured term loan, $0.4 million in debt issuance costs, and $0.2 million in principal payments on finance leases, partially offset by $23.0 million in proceeds from a new secured term loan,

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$0.7 million in proceeds from the secured revolving credit facility, and $0.6 million in proceeds from exercises of stock options.

Cash provided by financing activities for 2024 totaled $6.4 million, consisting primarily of $10.3 million in proceeds from the sale of common stock, $1.3 million in proceeds from convertible promissory notes, and $0.5 million from secured promissory notes payable from a related party, partially offset by $3.5 million in payments on notes payable, $0.5 million in repayments of secured promissory notes payable to a related party, $1.5 million in payments to factoring, and $0.2 million in principal payments on finance leases.

Critical Accounting Estimates

We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors. In addition, there are other items within our consolidated financial statements that require estimation, but are not deemed critical as defined above. Changes in estimates used in these and other items could have a material impact on our consolidated financial statements.

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.

Sales Tax Nexus and Related Liabilities

During the fiscal year ended December 31, 2025, the Company completed its initial sales tax nexus study to evaluate its obligations to collect and remit sales tax across various state and local jurisdictions. Determining the extent of the Company's sales tax nexus requires significant judgment regarding the nature of the Company's business activities in each jurisdiction, the applicability of economic nexus thresholds, specific customers and their exempt status, the interpretation of

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state and local tax laws and regulations, which continue to evolve following South Dakota v. Wayfair, Inc. and subsequent legislative developments. This can cause changes in the widely acceptable administrative practices of jurisdictions.

The Company recorded a liability for estimated sales tax obligations, including potential interest and penalties, arising from both current and prior periods, when an exposure is considered probable and the amount can be reasonably estimated. Where the reasonable estimate of a probable liability is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. Reasonably possible exposures identified in the study that do not meet the threshold for accrual are disclosed when material. Given the inherent complexity of multistate tax compliance and the application of economic nexus rules, actual liabilities may differ materially from current estimates, depending on the outcome of ongoing or future reviews by state tax authorities. Such differences may have a material impact on the Company's financial condition, results of operations, or cash flows.

Segment and Geographic Information

We have determined that we have one reportable segment. Our revenues are generated from sales primarily in the United States. All significant expenses are generated in the United States and all significant assets are in the United States. For further information on the Company's reportable segment, refer to Note 22 to the consolidated financial statements.

Effects of Inflation

The rate of inflation, which remains elevated, affects expenses such as employee compensation, office space leasing costs, and research and development charges, which may not be readily recoverable. 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.

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.