Business Context and Reporting Period
This Form 8-K Current Report was filed by SANUWAVE Health, Inc. on October 26, 2018. The filing discloses a change in the Company's principal independent registered public accounting firm. The Company is a Nevada corporation reporting as an emerging growth company.
Key Financial Metrics
The filing does not provide specific revenue, profit, cash flow, or debt figures for the current period. However, it references historical financial conditions:
- Going Concern Status: The prior auditor, Cherry Bekaert, LLP, issued reports for fiscal years 2016 and 2017 indicating substantial doubt about the Company's ability to continue as a going concern.
- Cause of Doubt: This status was attributed to substantial operating losses, working capital deficiencies, and a dependence on future capital contributions or financing to fund ongoing operations.
- Internal Controls: The Company disclosed a material weakness in internal control over financial reporting due to a lack of internal expertise and resources to analyze complex financial instruments and derivatives.
Material Changes
The primary material change reported is the replacement of the Company's external auditor:
- Dismissal: On October 26, 2018, the Audit Committee dismissed Cherry Bekaert, LLP as the principal independent registered public accounting firm.
- Appointment: On the same date, the Audit Committee appointed Marcum, LLP as the new principal independent registered public accounting firm.
- Scope of New Appointment: Marcum, LLP is tasked with reviewing financial statements for the three and nine months ended September 30, 2018, and auditing the fiscal year ending December 31, 2018.
- Disagreements: The Company reported no disagreements with the former auditor regarding accounting principles, practices, or auditing scope during the relevant period.
Guidance, Outlook, and Risks
The filing contains no forward-looking guidance, revenue outlook, or management commentary regarding future business strategy. Key risks and contingencies identified include:
- Financial Viability: Continued reliance on external financing due to historical operating losses and working capital deficiencies.
- Accounting Complexity: Ongoing challenges related to the proper application of accounting principles to complex financial instruments and derivatives, which previously resulted in a material weakness in internal controls.
Investor Verification Checklist
- Verify the specific reasons for the dismissal of Cherry Bekaert, LLP beyond the standard disclosure, as no disagreements were cited.
- Confirm the status of the Company's working capital and ability to secure future financing to address the "substantial doubt" regarding going concern status.
- Review the remediation plan for the material weakness in internal controls related to complex financial instruments.
- Monitor the upcoming audit and review reports from Marcum, LLP for the periods ending September 30, 2018, and December 31, 2018.