Business Context and Reporting Period
Company: SANUWAVE Health, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: March 28, 2023
Subject: Item 4.02 Non-Reliance on Previously Issued Financial Statements.
The Audit Committee of the Board of Directors concluded that the interim financial statements contained in the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022, June 30, 2022, and September 30, 2022, should no longer be relied upon.
Key Financial Metrics
This filing does not provide specific revenue, profit, cash flow, margin, debt, or liquidity figures. It serves as a notification of accounting errors requiring restatement rather than a report of current financial performance.
Material Changes and Accounting Misstatements
In connection with preparing financial statements for the year ended December 31, 2022, the Company identified several accounting misstatements necessitating a restatement of the aforementioned 10-Q filings. The specific errors include:
- Inventory Conversion Error: Occurred during the quarter ended September 30, 2022.
- Failure to Recognize Expenses and Liabilities:
- Professional fee invoices for the quarters ended March 31, June 30, and September 30, 2022.
- Advisory shares for the quarter ended June 30, 2022.
- Interest expense on the Senior Secured Promissory Note Payable issued to NH Expansion Credit Fund Holdings LP for the quarters ended March 31, June 30, and September 30, 2022.
- Improper Lease Recording: A financing lease arrangement was improperly recorded during the quarters ended March 31, 2022, and June 30, 2022.
Outlook, Management Commentary, and Risks
Restatement Plan: The Company and its advisors have completed the annual review. Restated financial statements for the affected periods will be filed in the Annual Report on Form 10-K for the year ending December 31, 2022.
External Review: The Audit Committee and management have discussed these matters with the independent registered public accounting firm, Marcum LLP.
Risk: Investors should not rely on the previously issued 10-Q filings for the periods mentioned above as they contain material misstatements.
Investor Verification Checklist
- Verify the upcoming Form 10-K filing for the year ended December 31, 2022, to review the restated financial figures.
- Confirm the impact of the inventory conversion error and unrecorded interest expense on the Company's historical profitability and debt obligations.
- Monitor communications from the independent auditor, Marcum LLP, regarding the restatement process.
- Review the Company's internal controls over financial reporting to understand the root cause of the misstatements.