SNWV

Business Context and Reporting Period

Company: SANUWAVE Health, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: March 14, 2014 (Event Date: March 17, 2014)
Context: The Company reported the closing of a private placement offering of securities and the conversion of outstanding convertible promissory notes. The transaction involved the issuance of common stock, preferred stock, and warrants to accredited investors.

Key Financial Metrics and Transaction Details

Capital Raised: $9,280,000 aggregate purchase price from the primary Offering.
Debt Conversion: $822,168 (principal and interest) of 18% Convertible Promissory Notes were converted into equity.
Securities Issued (Primary Offering):

• 6,210,000 shares of Common Stock
• 6,175 shares of Series A Convertible Preferred Stock (Stated value: $1,000/share; Convertible at 2,000:1 ratio)
• 23,200,000 Series A Warrants (Exercise price: $0.50; 5-year term)
• 13,920,000 Series B Warrants (Exercise price: $1.50; 1-year term)

Securities Issued (Note Conversion):

• 1,644,337 shares of Common Stock
• 2,055,421 Series A Warrants
• 1,233,252 Series B Warrants

Total Unregistered Issuance: 7,854,377 shares of Common Stock, 6,175 shares of Series A Preferred Stock, 25,255,421 Series A Warrants, and 15,153,252 Series B Warrants.
Use of Proceeds: Working capital and general corporate purposes.
Financial Performance: The filing does not provide revenue, profit, cash flow, or margin data.

Material Changes and Corporate Actions

Entry into Material Definitive Agreements: The Company entered into Securities Purchase Agreements and Registration Rights Agreements with purchasers. The Registration Rights Agreement requires the Company to file a registration statement for the resale of securities, with monetary penalties for missed deadlines.
Conversion of Debt: Outstanding 18% Convertible Promissory Notes (issued Jan 24 - Mar 7, 2014) were automatically converted into common stock and warrants upon the closing of the qualified financing.
Amendment to Articles of Incorporation: The Company filed a Certificate of Designation creating the Series A Convertible Preferred Stock. Holders have liquidation preferences equal to common stock and voting rights on an "as converted" basis (capped at 9.99% of common stock).

Guidance, Risks, and Related Party Transactions

Forward-Looking Statements: The filing contains standard cautionary language regarding risks that may cause actual results to differ from projections, including projected growth and future revenue.
Related Party Transactions:

• Kevin A. Richardson, II (Chairman), Joseph Chiarelli (CEO), and Michael N. Nemelka (brother of a board member) participated as purchasers in the Offering.
• Michael N. Nemelka also participated in the prior Note Offering.

Risks and Contingencies:

• Failure to meet registration statement deadlines may result in monetary penalties.
• Significant dilution potential due to the issuance of warrants and convertible preferred stock.
• Reliance on forward-looking statements regarding future performance.

Unusual Items: The transaction was executed under Section 4(a)(2) of the Securities Act and Regulation D exemptions, with no general solicitation.

Investor Verification Checklist

• Verify the total number of outstanding shares post-transaction to assess dilution impact.
• Confirm the Company's ability to file the required registration statement to avoid penalties under the Registration Rights Agreement.
• Review the terms of the Series A Convertible Preferred Stock regarding liquidation preferences and voting rights.
• Assess the impact of the 18% interest rate on the converted notes prior to conversion.
• Confirm the use of proceeds aligns with the Company's stated working capital needs.