Business Context and Reporting Period
Company: SANUWAVE Health, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: May 12, 2010
Event: Entry into a Material Definitive Agreement involving the issuance of a convertible promissory note to a board member.
Key Financial Metrics
This filing does not report revenue, profit, cash flow, margins, or general liquidity metrics. It discloses a specific new financial obligation:
- Principal Amount: $300,000
- 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 August 10, 2010)
- Security Status: Unsecured
- Counterparty: Kevin and Margaret Richardson (Kevin Richardson is a member of the Board of Directors)
Material Changes and Terms
The Company entered into a new debt instrument with the following material terms:
- Warrant Feature: If the note is not paid or converted 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 accrued interest by 20.
- Qualified Financing Conversion: If a "Qualified Financing" (private placement of at least $3,000,000) occurs before maturity, the Company may convert the note into common stock, warrants, or other securities issued in that financing at the same price/terms as the new investors.
- Default Penalties: Upon default (failure to pay within three business days of maturity), interest accrues at 10% per annum. The Company must also pay collection costs, including 15% of the principal and interest as attorney's fees.
Guidance, Outlook, and Risks
Management Commentary: The filing contains no forward-looking guidance or management commentary regarding future operations or financial performance.
Risks and Contingencies:
- Liquidity Risk: The Company must generate $300,000 in cash or secure a qualified financing within 90 days to avoid default penalties and warrant issuance.
- Dilution Risk: Failure to repay or convert could result in the issuance of warrants or shares, potentially diluting existing shareholders.
- Related Party Transaction: The debt is owed to a board member, requiring adherence to related party transaction protocols.
Investor Verification Checklist
- Verify the Company's current cash position to assess ability to repay the $300,000 note by the August 2010 maturity date.
- Confirm whether a "Qualified Financing" of $3,000,000 is currently in progress or planned.
- Review the Company's capitalization table to understand the potential dilution impact of the warrant feature (principal + interest divided by 20).
- Check for any subsequent filings regarding the repayment, conversion, or default of this specific note.