Business Context and Reporting Period
Company: SANUWAVE Health, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: August 30, 2010
Event: Entry into a Material Definitive Agreement involving a related party.
Key Financial Metrics
This filing does not report revenue, profit, cash flow, margins, or general liquidity metrics. It discloses a specific new financial obligation:
- New Debt Instrument: Convertible Promissory Note.
- Principal Amount: $250,000.
- Lender: Kevin and Margaret Richardson (Kevin Richardson is a Board Member).
- Interest Rate: 5% per annum (increases to 10% per annum if not paid within three business days of maturity).
- Maturity Date: 90 days from issuance (approximately November 28, 2010).
- Security Status: Unsecured.
Material Changes and Terms
The Company entered into a new debt agreement with a director. Key terms include:
- Default Penalty: If unpaid by the Maturity Date, the holder receives a warrant to purchase common stock at $4.00 per share. The number of shares is calculated by dividing the total principal and interest by 20.
- Qualified Financing Conversion: If the Company consummates a private placement of at least $3,000,000 (a "Qualified Financing"), the Note converts into common stock, warrants, and other securities on the same terms as the new investors.
- Collection Costs: The Company agreed to pay all collection costs, including 15% of the principal and interest as attorney's fees in the event of collection proceedings.
Guidance, Outlook, and Risks
Management Commentary: The filing contains no forward-looking guidance or general management commentary beyond the terms of the note.
Risks and Contingencies:
- Liquidity Risk: The Company must repay $250,000 plus interest within 90 days or face dilution via warrant issuance or conversion.
- Related Party Transaction: The debt is owed to a Board member, which may present governance considerations.
- Financing Dependency: The favorable conversion terms are contingent on raising a minimum of $3,000,000 in a qualified financing.
Investor Verification Checklist
- Verify the Company's current cash position to assess ability to repay the $250,000 note by the November 2010 maturity date.
- Confirm the status of any ongoing efforts to secure the $3,000,000 "Qualified Financing" required for favorable conversion terms.
- Review the Company's capitalization table to understand the potential dilution impact if the warrant (at $4.00/share) is issued or if the note converts.
- Check for any subsequent filings regarding the repayment or conversion of this specific note.