SANUWAVE Health, Inc.

December 31, 2025 and 2024

1. Nature of the Business and Basis of Presentation

SANUWAVE Health, Inc. and subsidiaries (“Sanuwave” or the “Company”) is focused on the commercialization of its patented regenerative medicine utilizing noninvasive ultrasound or shockwaves to produce a biological response promoting the repair and regeneration of tissue, musculoskeletal, and vascular structures. Sanuwave was founded in 2004 and is headquartered in Eden Prairie, Minnesota.

Basis of Presentation -The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and with the instructions to Form 10-K and Regulation S-X. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Amounts reported in thousands within this annual report are computed based on the amounts in thousands, and therefore, the sum of the components may not equal the total amount reported in thousands due to rounding.

Use of Estimates -The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation -The functional currencies of the Company’s foreign operations are their local currencies. The financial statements of the Company’s foreign subsidiary have been translated into United States dollars. All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. Income statement amounts have been translated using the average exchange rate for the year. Translation adjustments are reported in other comprehensive income (loss) in the consolidated statements of comprehensive income (loss) and as cumulative translation adjustments in accumulated other comprehensive loss in the consolidated balance sheets.

Reverse Stock Split -All share numbers, including the number of shares underlying warrants, options, and convertible debt, and per share amounts presented in these consolidated financial statements, including these footnotes, reflect a one-for-three hundred seventy five (1:375) reverse stock split of the outstanding shares of the Company's common stock effected on October 18, 2024 (the "Reverse Stock Split"). The Company's authorized shares of common and preferred stock along with the par value did not change as a result of the Reverse Stock Split, and no fractional shares were issued as a result of the Reverse Stock Split. Any fractional shares that would have resulted from the Reverse Stock Split were settled in cash. The Reverse Stock Split affected all common stockholders uniformly and did not alter any stockholder's percentage interest in the Company's common stock, except to the extent that the Reverse Stock Split resulted in certain stockholders experiencing an adjustment of a fractional share as described above.

Reclassification - Certain accounts in the prior period consolidated balance sheets and statement of cash flows have been reclassified to conform to the presentation of the current year consolidated financial statements. These reclassifications had no effect on the previously reported operating results.

2. Restatement of Previously Issued Financial Statements

In connection with the preparation of the Company’s consolidated financial statements for the year ended December 31, 2025, the Company engaged a specialist to conduct a sales and use tax nexus study. Management concluded that the Company had a historical state sales and use tax liability related to prior periods. The Company is required and subject to collect and remit sales and use tax in state and local jurisdictions where it has economic and physical nexus. During the year ended December 31, 2025, the Company determined that a sales tax liability existed and estimated a liability for sales transactions processed in jurisdictions where it had not previously reported.

The liability includes an estimate for each state, to account for any penalties and interest that is due on the base tax amount owed. The error resulted in an understatement of accrued expenses for state and local sales tax, including related interest and penalties, in the previously issued consolidated financial statements as of and for the year ended December 31, 2024 (refer to Note 24 for quarterly 2024 and 2025 impacts). As a result of correcting this liability, general and administrative expenses and interest expense were increased in the affected periods, resulting in a one-time, non-recurring increase in reported expenses for the year ended December 31, 2024. This adjustment reflects the cumulative impact of previously unrecorded sales tax, interest, and penalties. The Company does not expect similar expense impacts to recur in future periods, as the underlying sales tax obligations have now been appropriately recognized and remediated.

Consolidated Financial Statements - Restatement Reconciliation Tables

In accordance with Accounting Standards Codification ("ASC") 250, Accounting Changes and Error Corrections, the Company has corrected this error by restating the prior period financial statements. The cumulative effect of the correction as of January 1, 2024, was a$1.4 million increase to accumulated deficit, as reflected in the consolidated statement of stockholders’ equity (deficit). The impact of the correction on the Company’s previously issued consolidated financial statements is summarized as follows:

Consolidated Balance Sheet - January 1, 2024 (opening):

The $1.4 million adjustment to accumulated deficit as of January 1, 2024, represents the cumulative effect of understated general and administrative expenses of $1.3 million and understated interest expense of $46 thousand recorded during prior years.

Consolidated Balance Sheet - December 31, 2024:

The amounts in the "As Restated" columns are the updated amounts including the impacts from the restatement. Financial statement line items and subtotals that were not impacted by the restatement adjustments have been omitted for enhanced clarity.

A description of the restatement adjustments in the consolidated balance sheets is as follows:

(i) The $3.1 million increase in accrued expenses as of December 31, 2024 is related to the accrued sales tax, and the related interest and penalties on outstanding sales tax balances through December 31, 2024.

Consolidated Statement of Comprehensive Loss - Year Ended December 31, 2024:

A description of the restatement adjustments in the consolidated statement of comprehensive loss is as follows:

(i) The $1.6 million increase in general and administrative expenses is related to the adjustment for estimated state and local sales tax expense and for the related penalties on outstanding sales tax balances for the year ended December 31, 2024.

(ii) The $142 thousand increase in interest expense is related to the adjustment for estimated interest on outstanding state and local sales tax balances for the year ended December 31, 2024.

Consolidated Statements of Changes in Stockholders' Equity (Deficit):

The Consolidated Statement of Changes in Stockholders' Equity (Deficit) for 2024 in the accompanying consolidated financial statements has been restated to reflect the correction of prior period errors described above. The cumulative effect of errors originating in fiscal years prior to 2024 are presented as a discrete adjustment to the opening accumulated deficit balance as of January 1, 2024, rather than being allocated back to those individual years.

The line item "Correction of prior period error" presented in the Consolidated Statement of Changes in Stockholders' Equity (Deficit) represents the aggregate understatement of general and administrative expenses of $1.3 million and interest expense of $46 thousand originating in prior fiscal years, resulting in a cumulative increase to accumulated deficit of $1.4 million as of January 1, 2024 with no income tax effect due to the Company's full valuation allowance against its net deferred tax assets.

The accumulated deficit balance as of December 31, 2024, as restated, reflects both the cumulative opening adjustment of $1.4 million described above and the additional restatement adjustments of $1.7 million attributable to the understatement of general and administrative expenses and interest expense within fiscal year 2024. The combined effect of all restatement adjustments increased the Company's accumulated deficit by $3.1 million in the aggregate across all affected periods.

No other components of stockholders' equity (deficit), including common stock, additional paid-in capital, or other comprehensive income (loss), were affected by this restatement.

Consolidated Statement of Cash Flows - Year Ended December 31, 2024

The correction of these errors had no effect on the total cash flows from operations, investing, or financing of the Company.

Description of the restatement adjustments in the consolidated statement of cash flows is as follows:

(i) The $1.7 million increase in accrued expenses for the year ended December 31, 2024 is related to the accrued sales tax, and the related interest and penalties on outstanding sales tax balances.

Income Tax Effects

The Company maintains a full valuation allowance against its net deferred tax assets. Accordingly, the restatement adjustments resulted in no net income tax benefit or expense for any period presented, and the effective tax rate is unchanged.

3. Summary of Significant Accounting Policies

The significant accounting policies followed by the Company are summarized below:

Estimates - These consolidated financial statements have been prepared in accordance with U.S. GAAP. Because a precise determination of assets and liabilities, and correspondingly revenues and expenses, depend on future events, the preparation of consolidated financial statements for any period necessarily involves the use of estimates and assumptions. Actual amounts may differ from these estimates. These consolidated financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the accounting policies summarized herein.

Significant estimates include the recording of allowances for credit losses, the net realizable value of inventory, fair value of goodwill and other intangible assets, the determination of the valuation allowances for deferred taxes, litigation contingencies, stock-based compensation, incremental borrowing rate, the estimated fair value of financial instruments, including warrants, and the accrual of state and local sales tax liabilities.

Cash and cash equivalents -Cash and cash equivalents consist of cash on hand and demand deposits. The demand deposits are highly liquid and readily convertible to known amounts of cash with insignificant risk of changes in value. They are considered to be cash equivalents as they have an original maturity of three months or less from the date of acquisition. The Company classifies all such highly liquid instruments that are not restricted as cash equivalents. Cash equivalents are stated at cost, which approximates fair value due to their short-term nature. For purposes of the statement of cash flows, the Company considers cash and cash equivalents to include cash on hand and demand deposits.

Accounts receivable - Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company maintains an allowance for credit losses to provide for the estimated amount of receivables that will not be fully collected. Management routinely assesses the financial strength of its customers and, consequently, believes accounts receivable are stated at the net realizable value and credit risk exposure is limited.

Allowance for credit losses -The Company maintains an allowance for credit losses to cover estimated losses on accounts receivable. The allowance is based on the Company's assessment of various factors, including historical loss experience, the age of receivables, current economic conditions, and the creditworthiness of customers. The allowance for credit losses is reviewed and adjusted as necessary at each reporting date.

Inventory - Inventory consists of purchased medical equipment and parts and is stated at the lower of first in, first out (“FIFO”) method, or net realizable value less allowance for selling and distribution expenses. The Company analyzes its inventory levels and for adjustments to inventory that has, or is expected to, become obsolete.

Property, plant, and equipment (PPE) -PPE is initially recorded at cost, which includes all expenditures directly attributable to bringing the asset into working condition for its intended use. Subsequent to initial recognition, PPE is carried at cost less accumulated depreciation and any impairment losses. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, with no residual value for most assets. The estimated useful lives and residual values of assets are reviewed periodically and adjusted if necessary. Major improvements and enhancements that extend the useful life of PPE are capitalized, while routine repairs and maintenance are expensed as incurred. Upon disposal or retirement of an asset, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in the period of disposal.

Goodwill - Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed. The Company accounts for goodwill under ASC Topic 350, Intangibles-Goodwill and Other. The Company tests goodwill for impairment annually, or more frequently whenever events or circumstances indicate impairment may exist. Goodwill is stated at cost less impairment losses. The Company completes its goodwill impairment test annually in thefourth quarter. The Company performed a qualitative evaluation at the reporting unit level and determined there wasno goodwill impairment as of December 31, 2025, and 2024.

Intangible assets -Intangible assets arising from the Company’s acquisition are amortized on a straight‑line basis over the estimated useful life of each asset. Customer relationships have a useful life ofseven years. Patents and tradenames have a useful life ofnineteen years.

Impairment of long-lived assets - The Company annually reviews long-lived assets for impairment whenever facts and circumstances indicate that the carrying amounts of the assets may not be recoverable. An impairment loss is recognized only if the carrying amount of the asset is not recoverable and exceeds its fair value. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the asset’s carrying value is not recoverable, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds its fair value. The Company determines fair value by using a combination of comparable market values and discounted cash flows, as appropriate.

Leases -The Company accounts for leases in accordance with ASC Topic 842, Leases. At the commencement date of a lease, the Company recognizes a right-of-use (“ROU”) asset and a lease liability for all leases with a term greater than 12 months. Short-term leases (those with an original term of 12 months or less) are not recorded on the balance sheets; lease expense for these leases is recognized on a straight-line basis over the lease term.

Lease liabilities are measured at the present value of future lease payments using the Company’s incremental borrowing rate unless the implicit rate is readily determinable. ROU assets are measured at the initial lease liability, adjusted for lease incentives, initial direct costs, and any prepaid or accrued lease payments.

Leases are classified as either operating or finance leases at the commencement date. The Company does not have any finance leases as of December 31, 2025. Operating lease ROU assets and liabilities are presented separately on the consolidated balance sheets.

Lease incentives received from lessors, such as rent-free periods or reimbursement for leasehold improvements, are recognized as a reduction to the ROU asset at lease commencement. These incentives are amortized on a straight-line basis over the lease term, consistent with the amortization of the ROU asset. Incentives that are paid directly to the Company or on its behalf are included in the measurement of the ROU asset and reduce the total lease cost recognized over the lease term.

The Company’s lease agreements do not contain variable lease payments; all lease payments are fixed and included in the measurement of lease liabilities.

Fair value of financial instruments - The carrying values of accounts payable, and other short-term obligations approximate their fair values, because of the short-term maturities of these instruments.

The Company utilizes the guidance of ASC Topic 820-10, Fair Value Measurements (“ASC 820-10”), which defines fair value, establishes a framework for measuring fair value and requires disclosures about fair value measurements. The framework that is set forth in this standard is applicable to the fair value measurements where it is permitted or required under other accounting pronouncements.

The ASC 820-10 hierarchy ranks the quality and reliability of inputs, or assumptions, used in the determination of fair value and requires financial assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:

Level 1 – Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets and liabilities;

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3 – Unobservable inputs that are not corroborated by market data, therefore requiring the Company to develop its own assumptions.

Convertible promissory notes – The Company evaluates its convertible instruments to determine if those contracts, or embedded components of those contracts, qualify as derivative financial instruments to be separately accounted for in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”). The accounting treatment of derivative financial instruments requires that the Company record embedded conversion options and any related freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. Conversion options are recorded as a discount to the host instrument and are amortized as amortization of debt discount on the consolidated statements of comprehensive loss over the life of the underlying instrument. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes because of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

Debt discount –The Company records a debt discount related to warrants issued with debt at fair value and recognizes the cost using the straight-line method, which approximates the effective interest method, over the term of the related debt as interest expense, which is reported in the Other Income (Expense) section in our consolidated statements of comprehensive income (loss). This debt discount is reported as a reduction of the related debt liability.

Contract liabilities – The Company offers a separately priced extended warranty. Because the extended multi-year warranty represents a separate performance obligation, revenue is deferred as a contract liability and recognized over the time that the Company satisfies its performance obligations, which is the warranty term.

Estimated Sales Tax Liability- The Company is evaluating a state sales tax liability analysis for states in which it has economic nexus, and collecting exemption documentation from its customers. The Company will be subject to sales tax liabilities plus interest and penalties relating to historical activity in certain states. The estimated liability for sales tax plus interest and penalties is recorded inaccrued expenses in the consolidated balance sheets. The liability may change from the original estimate recorded due to the Company remitting cash to the proper state tax authorities for historical sales tax and interest, inquiries from collecting jurisdictions, and settlement of outstanding amounts through programs offered through those jurisdictions. Due to the estimates involved in the analysis, the Company expects that the estimated liability will change in the future, and may exceed the current estimate. The Company also may be subject to examination by the relevant state tax authorities, which could affect the amount the Company ultimately pays under the accrual. The Company recognized sales tax not collected from its customers along with penalties asgeneral and administrative expense on the consolidated statements of comprehensive income (loss). The Company recognized interest expense on past due amounts not remitted asinterest expense on the consolidated statements of comprehensive income (loss).

Segment reporting -The Company operates as a single reporting entity and has determined that it hasone reportable segment. This conclusion is based on the fact that the Company's chief operating decision maker (“CODM”), who is the Chief Executive Officer (“CEO”), reviews the financial information and makes decisions about resource allocation and performance assessment on a consolidated basis. The Company's operations are managed and evaluated as a single business unit, and the nature of the products and services, production processes, and customer base are similar across the entire organization.

The Company is engaged in the business of designing and selling medical devices. The products and services offered by the Company are integrated and interrelated, and the Company does not have discrete financial information for different business lines that would qualify as separate reportable segments.

All significant accounting policies, including those related to revenue recognition, inventory valuation, property, plant, and equipment, and other key areas, are applied consistently across the entire organization.

Revenue recognition- The core principle of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company allocates the transaction price to all contractual performance obligations included in the contract. If a contract has more than one performance obligation, we allocate the transaction price to each performance obligation based on standalone selling price, which depicts the amount of consideration we expect to be entitled in exchange for satisfying each performance obligation. The Company's revenue is primarily generated from the following activities:

System Sales, Consumables, Parts, and Accessories Sales -Systems, consumables, parts, and accessories sales include devices (new and refurbished), applicators, parts for the system, and accessories. Performance obligations are satisfied at the point in time when the customer obtains control of the goods, which is generally at the point in time that the product is shipped. The Company provides a one-year standard warranty on its systems that are assurance-type warranties under ASC 606. Assurance-type warranties do not represent a separate performance obligation and thus the estimated costs associated with these warranties are recognized as a liability at the time the related revenue is recognized.

Extended Warranty -The Company allocates the transaction price to the extended warranty based on standalone selling price. Warranty revenue is recognized over the time that the Company satisfies its performance obligations, which is the warranty term.

Licensing Fees - Licensing transactions include distribution licenses and intellectual property licenses. Licensing revenue is recognized as the Company satisfies its performance obligations, which may vary with the terms of the licensing agreement.

Other Revenue -Other revenue primarily includes rentals, repairs, and billed freight. The Company recognizes rental revenue ratably over the rental term, reflecting the period during which the customer has access to the system. Repairs (parts and labor) and billed freight revenue are recognized at the point in time that the service is performed, or the product is shipped, respectively.

The Company’s products are sold with standard return rights that are customary in the industry. Historically, product returns have not been significant and have not had a material impact on the Company’s financial statements. The Company monitors return activity on an ongoing basis and evaluates the need for a returns reserve at each reporting period. Based on historical experience and current trends, management believes that the risk of material returns is remote. As such, no material reserve for product returns has been recorded in the accompanying consolidated financial statements.

Shipping and handling costs - Shipping charges billed to customers are included in revenues. Shipping and handling costs incurred have been recorded incost of revenues totaling$590 thousand and $482 thousand for the years ended December 31, 2025, and 2024, respectively.

Research and development - Research and development costs are expensed as incurred. Research and development costs include costs of research, engineering, and technical activities to develop a new product, researching an expanded product use or making significant improvements to existing products, including the costs of clinical development.

Stock-based compensation -The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation—Stock Compensation. Stock-based compensation expense is recognized for all share-based payment awards based on the grant-date fair value. The Company grants the following types of equity awards:

Time-based or service awards, which vest based on continued service over a specified period. These awards are valued using the Black-Scholes option pricing model (for stock options) or the grant-date fair value of the underlying common stock (for restricted stock units).

Performance-based awards, which vest upon the achievement of pre-established internal performance targets. These option awards are valued using the Black-Scholes option pricing model.

Market-based awards, which vest upon the attainment of defined market conditions, such as stock price milestones. These awards are valued using a Monte Carlo simulation model.

The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period for time-based awards, on a straight-line basis over the requisite service period for performance-based awards when it is probable that the associated performance condition will be satisfied, and on a straight-line basis over the requisite service period for market-based awards irrespective of likelihood that the associated market condition will be satisfied. Forfeitures are recognized as they occur. Compensation expense is included in the same functional expense categories as the related employee payroll costs.

The Company issues new shares of common stock upon the exercise of stock options, warrants, and the vesting of restricted stock units.

Comprehensive income (loss) -Comprehensive income (loss) results from the translation of the Company’s foreign entity’s financial statements from their functional currency to U.S. dollars for consolidation in the accompanying consolidated financial statements.

Deferred offering costs - Deferred stock offering costs represent amounts paid for legal, consulting, and other offering expenses directly attributable to the offering of securities in conjunction with the recapitalization under the Merger Agreement (as defined in Note 21), and are deferred and charged against the gross proceeds of the offering. In the event of a significant delay or cancellation of a planned offering of securities, all the costs would be expensed. In June 2024, the Company terminated the Merger Agreement and the deferred offering costs of $0.5 million were expensed.

New accounting pronouncements

ASU 2024-03, Disaggregation of Income Statement Expenses

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement - Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures to improve the disclosures about a public entity’s expenses and provide more detailed information about the types of expenses in commonly presented expense captions such as inventory purchases, employee compensation, depreciation and intangible asset amortization. The effective date for the standard is for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the effects adoption of this standard will have on the financial statement disclosures.

Recently adopted accounting pronouncements

ASU 2023-09, Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU primarily requires disaggregated annual information about a company's effective tax rate reconciliation and income taxes paid. The Company adopted this ASU prospectively beginning with 2025 and the additional disclosure is included in Note 18. Prior period disclosures have not been restated to conform to the current period presentation.

4. Allowance for Credit Losses

The rollforward of the allowance for credit losses is as follows:

5. Inventory

Inventory consisted of the following:

During the year ended December 31, 2025, the Company sold its PACE product line, as part of a strategic realignment to focus on core business offerings. As a result, management conducted a review of inventory associated with this product line and determined that a significant portion was no longer saleable or recoverable. Accordingly, the Company recorded a non-cash inventory write-off of $0.5 million, which is included incost of revenues for the year ended December 31, 2025.

The write-off reflects management’s estimate of the net realizable value of the affected inventory, in accordance with the Company’s policy to state inventory at the lower of cost or net realizable value.

6. Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and impairment losses. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from 3 to 5 years.

The following table summarizes the components of property and equipment, net, and their estimated useful lives as of December 31, 2025 and 2024:

Depreciation expense related to property and equipment for the years ended December 31, 2025 and 2024 was approximately$392 thousand and$305 thousand, respectively. For the years ended December 31, 2025 and 2024, depreciation recognized within cost of revenues was$216 thousand and$220 thousand, respectively, and depreciation recognized within depreciation and amortization was$176 thousand and $85 thousand, respectively, within the consolidated statements of income (loss).

Additions, Disposals, and Impairments

During 2025, the Company invested in new equipment to support increased production capacity and relocated its headquarters, resulting in additional machinery and equipment and leasehold improvements. There were no material disposals of property and equipment during the year. The Company recognized a$196 thousand loss on impairment of assets during the year ended December 31, 2025, related to the buyout of a finance lease agreement and subsequent impairment and disposal of the related assets. There wereno impairments in 2024.

Operating lease assets are excluded from property and equipment, refer to Note 7.

7. Leases

Operating lease commitments - On March 27, 2025, the Company entered into a new operating lease agreement for its new headquarters in Eden Prairie, Minnesota. The lease term commenced on March 28, 2025, and extends for a period of 5.5 years, expiring on August 30, 2030. The lease includes an option to renew for an additional 5 years at the Company's discretion.

Lease payments -Under the terms of the lease, the Company is obligated to make monthly lease payments starting September 1, 2025, with an annual escalation of 3.5% starting on September 1, 2026 through August 30, 2030. The total minimum lease payments over the initial lease term amount to approximately $1.4 million.

Right-of-use asset and lease liability -In accordance with ASC 842, Leases, the Company recognized a right-of-use asset and a corresponding lease liability on the condensed consolidated balance sheets as of March 28, 2025. The initial measurement of the right-of-use asset and lease liability was $0.4 million, which represents the present value of the lease payments over the lease term, discounted at the Company's incremental borrowing rate of 11.5%.

Lease incentive -As part of a new office lease agreement, the Company received reimbursement payments from the lessor as a lease incentive. These payments, totaling $0.6 million, were intended to offset certain costs associated with leasehold improvements.

Lease expense -For the year ended December 31, 2025, the Company recognized lease expense of $123 thousand, related to this operating lease, which is included ingeneral and administrative expenses in the consolidated statements of comprehensive income (loss).

As of December 31, 2025, the maturities of the Company’s operating leases, which have initial or remaining lease terms more than one year, consist of the following:

The weighted-average useful life of operating leases at December 31, 2025, is 4.67 years.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

8. Intangible Assets

Carrying value of intangible assets consisted of the following:

Amortization expense for each of the years ended December 31, 2025, and 2024 totaled $704 thousand. Future amortization expense is expected to be the following (dollars in thousands):

9. Long Term Debt, Revolving Credit Facility and Senior Secured Debt

The following table summarizes outstanding debt at December 31, 2025 and December 31, 2024:

Revolving Credit Facility and Senior Secured Debt -On September 25, 2025, the Company entered into a new credit agreement (the “JPM Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders. The JPM Credit Agreement provides for a$23.0 million secured term loan (the “Term Loan”) with term payments through September 25, 2029, and a$5.0 million secured revolving credit facility (the “Revolver”) maturing September 25, 2027. Loans under the JPM Credit Agreement accrue interest at a rate per annum equal to, at the Company’s option, either a term rate based on the secured overnight financing rate (“SOFR”) plus a margin of 3.50%, or the CB Floating Rate (“CBFR”) plus a margin of 2.50%. Interest is payable in arrears, either at the end of the applicable interest period for SOFR-based loans or quarterly for CBFR-based loans.

Debt issuance costs incurred in connection with obtaining new debt facilities are capitalized and amortized over the term of the related debt. For the term loan, these costs are presented as a direct reduction of the carrying amount of the debt. For the revolving credit facility, such costs are presented as an asset. Amortization of debt issuance costs is included in interest expense in the consolidated statements of comprehensive income (loss).

Principal payments on the term loan commenced on December 31, 2025, and will be made in quarterly installments of$1.4 million on the last day of each fiscal quarter. The Company may prepay outstanding loans at any time without premium or penalty, subject to customary breakage costs for SOFR-based borrowings.

Retirement of Senior Secured Debt -Concurrently, on September 25, 2025, in connection with the funding of the term loan and the initial draw of$0.7 million under the revolver, the Company paid all amounts due under and terminated in full all commitments under the Note and Warrant Purchase and Security Agreement, dated August 6, 2020, with NH Expansion Credit Fund Holdings LP and the related senior secured debt (collectively, the “Prior Debt”). The payoff and termination of the Prior Debt resulted in the release of all associated liens and security interests.

The full repayment of the Prior Debt was accounted for as a debt extinguishment under ASC 470-50. The Company recognized a$0.5 million loss on extinguishment of debt, which included the write-off of unamortized debt issuance costs and debt discounts.

Debt Covenants and Restrictions -The JPM Credit Agreement contains customary covenants, including requirements to maintain certain financial ratios and restrictions on additional indebtedness, asset sales, and dividend payments.

As of December 31, 2025, the Company was in compliance with all covenants under the JPM Credit Agreement.

Collateral and Security -The Company’s obligations under the JPM Credit Agreement are secured by a first-priority lien on substantially all of the Company’s tangible and intangible assets, including the Company’s equity interests in subsidiaries.

Maturity Analysis -Future principal payments on the term loan and revolver are due as follows:

Prior to full repayment, the debt issuance costs and debt discount related to the Senior Secured Note were capitalized as a reduction in the principal amount and were amortized to interest expense over the life of the Senior Secured Note.

10. Accounts Payable and Accrued Expenses

Accounts payable consisted of the following:

Accrued expenses consisted of the following:

11. Fair Value Measurements

The Company uses various inputs to measure the outstanding warrants and certain embedded conversion features associated with convertible debt on a recurring basis to determine the fair value of the liabilities. As of December 31, 2025, the fair value of the warrant liability was not significant. The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy:

There were no transfers between Level 1, 2, or 3, during the years ended December 31, 2025, and 2024. Both observable and unobservable inputs were used to determine fair value of the positions that the Company classified within the Level 3 category. Unrealized gains and losses associated with the liabilities within the Level 3 category include changes in fair value that were attributable to both observable and unobservable inputs.

Warrant Liability

The Company's liability classified warrants as of December 31, 2025, and 2024, were valued using the Black-Scholes valuation model.

The Company’s initial valuation of warrant liability from the June 2024 financing was valued using a probability weighted expected value considering the proposed reverse stock split of the Company's common stock (the "Reverse Stock Split") that would effectuate the exchange of Notes and Common Stock Purchase Warrants for shares of the Company's common stock (the "Note and Warrant Exchange"), and the previous Black-Scholes valuation model, with significant value stemming from the Note and Warrant Exchange. Significant inputs under the Note and Warrant Exchange included the expected exchange ratio of 0.90 for $15.00 warrants and 0.85 for $25.13 warrants, the value of the Company’s common stock, the expected timing of the Reverse Stock Split effectuating, and the probability of the Note and Warrant Exchange occurring (90% probability).

Significant Black-Scholes valuation model inputs related to the Company’s warrants are listed below:

A summary of the Level 3 warrant activity is as follows:

A summary of the warrant activity is as follows:

Embedded Conversion Option

Certain convertible notes include a conversion option that meets the definition of a derivative liability and, accordingly, is required to be bifurcated. The fair value for the conversion option liability of the June 2024 transaction was valued using a probability weighted expected value considering the proposed Reverse Stock Split of the Company's common stock that would effectuate the Note and Warrant Exchange, and the previous Black-Scholes valuation model, with significant value stemming from the Note and Warrant Exchange. Significant inputs under the Note and Warrant Exchange included the value of the Company’s common stock, the expected timing of the Reverse Stock Split effectuating, and the probability of the Note and Warrant Exchange occurring (90% probability).

In October 2024, the Company exchanged all outstanding convertible notes for Common Stock as part of the Note and Warrant Exchange, see Note 13.

A summary of the conversion option liability activity is as follows:

12. Contract Liabilities

During the years ended December 31, 2025, and 2024, the Company recognized revenue related to these contract liabilities of $172 thousand and $95 thousand, respectively, that were included in the beginning contract liability balances for each of those periods.

The following table summarizes the changes in contract liabilities:

As of December 31, 2025, the Company expects to recognize revenue from its contract liabilities as follows:

13. Promissory Notes Payable

Convertible Notes Payable and Convertible Notes Payable, Related Parties- In August 2022, November 2022, May 2023, December 2023, January 2024, and June 2024, the Company entered into Securities Purchase Agreements (the “Purchase Agreements”) for the sale in a private placement of (i) Future Advance Convertible Promissory Notes (the “Notes”) in an aggregate principal amount of $16.2 million in August 2022, $4.0 million in November 2022, $1.2 million in May 2023, $1.9 million in December 2023, $4.6 million in January 2024 related to the conversion of the Asset-Backed Secured Promissory Notes, and $1.3 million in June 2024 (ii) Common Stock Purchase Warrants to purchase an additional 1.9 million shares of common stock with an exercise price of $25.13 per share and (iii) Common Stock Purchase Warrants to purchase an additional 1.9 million shares of common stock with an exercise price of $15.00 per share. Interest expense for the years ended December 31, 2025 and 2024 totaled $0 and $5.0 million, respectively.

Pursuant to the Notes, the Company promised to pay in cash and/or in shares of common stock, at a conversion price of $15.00 (the “Conversion Price”), the principal amount and interest at a rate of 15% per annum on any outstanding principal. The Conversion Price of the Notes was subject to adjustment, including if the Company issued or sold shares of common stock for a price per share less than the Conversion Price of the Notes or if the Company listed its shares of common stock on The Nasdaq Capital Market and the average volume weighted average price of such common stock for thefive trading days preceding such listing was less than $15.00 per share; provided, however, that the Conversion Price was never less than $3.75. The Notes contained customary events of default and covenants, including limitations on incurrences of indebtedness and liens. The Notes had a term of 12 months from the date of issue.

In May 2024, the Company utilized its election to convert the May Notes into shares of common stock upon the Notes' maturity. The May Notes totaling $1.2 million in principal and $0.2 million interest were converted to 94,130 shares of common stock.

All remaining outstanding convertible notes payable and convertible notes payable related party converted on October 18, 2024 to 591,802 shares of common stock. The outstanding principal and interest converted totaled $8.9 million. The Company recognized a $0.3 million gain on conversion of the Notes.

Promissory note payable, related parties- In June 2024 the Company entered into a $0.5 million promissory note with a related party. Interest was accrued at 12% with an original maturity date of December 3, 2024. The Note was paid in full with accrued interest in October 2024.

Acquisition Convertible promissory notes payable - In August 2020, the Company entered into an asset purchase agreement with Celularity to acquire Celularity’s UltraMIST assets. A portion of the aggregate consideration of $24 million paid for the assets included the issuance of a promissory note to Celularity in the principal amount of $4 million (the “Seller Note”). The Seller Note matured on August 6, 2021, and was not repaid. The Company’s failure to pay the outstanding principal balance when due constituted an event of default under the terms of the Seller Note and, accordingly, it began accruing additional interest of 5.0% in addition to the 12.0% initial rate, as of the date of the default. As of December 31, 2024, the Seller Note had outstanding accrued interest of $0. This Seller Note was settled in 2024 for a cash payment of $2.2 million.

Convertible promissory notes payable, related party - In August 2020, the Company issued a convertible promissory note payable in the amount of $1.4 million. The note matured on August 6, 2021, and was not repaid and thus was in default. As of December 31, 2024, the note had outstanding accrued interest of $0.

The convertible promissory note was settled in 2024 for a cash payment of $1.4 million, which resulted in a gain on the extinguishment of debt of $0.8 million and a reduction in accrued interest of $0.8 million.

14. Common Stock

In December 2022, the Company’s stockholders approved an amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of common stock from 800,000,000 to 2,500,000,000. In January 2023, the Company filed the amendment to the Articles of Incorporation with the state of Nevada to affect the increase in authorized shares.

Private Investment in Public Equity (PIPE) Transaction

On October 16, 2024, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with the purchasers (the “Purchasers”), for the private placement (the “Private Placement”) of approximately 1.3 million shares (the “Shares”) of common stock at a purchase price of $8.25 per share, in each case, after adjustment to reflect the Reverse Stock Split. The Private Placement closed on October 18, 2024, and aggregate gross proceeds were approximately $10.3 million, before deducting $0.1 million offering expenses.

The Company used the net proceeds from the Private Placement to pay all amounts owed pursuant to the Consent and Limited Waiver and that certain letter agreement, dated as of August 8, 2024, between the Company and HealthTronics with respect to the HealthTronics Note, and intends to use the remaining net proceeds for working capital and general corporate purposes, which may include the repayment of other indebtedness.

In addition, on October 16, 2024, the Company and the Purchasers entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which the Company agreed to file the registration statement with the SEC on or before December 17, 2024 (subject to certain exceptions) for purposes of registering the resale of the Shares, to use its commercially reasonable efforts to have such registration statement declared effective within the time period set forth in the Registration Rights Agreement, and to keep the registration statement effective until the date that all Placement Shares have been sold, thereunder or pursuant to Rule 144.

15. Revenue

The disaggregation of revenue is based on type. The following table presents revenue from contracts with customers:

16. Stock-Based Compensation

On August 7, 2024, the stockholders of the Company approved the 2024 Equity Incentive Plan (the “2024 Plan”). The 2024 Plan authorizes the issuance of up to 1,376,556 shares of common stock. On August 19, 2025, at our annual meeting of stockholders, an amendment to the 2024 Plan was approved, authorizing an additional 500,000 shares of common stock authorized for issuance under the 2024 Plan. Stock options granted under the 2024 Plan include service-based, performance-based, and market-based awards. Service-based stock options generally vest over athree-year period, expire 10 years from the date of grant, and are forfeited upon separation from the Company. Performance-based stock options vest upon the achievement of pre-established financial or operational performance criteria, as determined by the Company’s Board of Directors or Compensation Committee. These awards generally expire five years from the date of grant and are subject to forfeiture if the performance goals are not achieved within the specified performance period. Market-based stock options vest upon the attainment of certain market conditions, such as specified stock price targets, and also expire five years after the grant date. The fair value of market-based awards is estimated using a Monte Carlo simulation model.

All awards under the 2024 Plan are subject to the terms and conditions of the 2024 Plan and the individual award agreements.

During the fiscal year ended December 31, 2025, the Company granted performance- and market-based option awards tothree employees which provide for the vesting of up to 65,500 shares of common stock. Vesting is contingent upon the achievement of specified performance or market conditions, with 100% of the related shares vesting upon satisfaction of each applicable condition.

The performance conditions include the achievement of (a) specific revenue recognized (12,750 shares), (b) specific adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) targets (12,750 shares), (c) listing on Nasdaq (10,000 shares), (d) the refinancing or repayment of certain debt obligations (10,000 shares), and (e) various operations related milestones (10,000 shares). The market condition relates to the attainment of a defined stock price target (10,000 shares).

During the fiscal year ended December 31, 2025,5,500 shares subject to performance conditions (2,750 shares under criterion (a) and 2,750 shares under criterion (b)) were forfeited due to the termination ofone of the employees and 5,000 shares under criterion (e) were forfeited due to the milestone deadline not being achieved. As a result, the maximum number of shares eligible to vest under these awards was reduced to 55,000 shares as of December 31, 2025.

As of December 31, 2025, the Company concluded that the performance conditions related to revenue and adjusted EBITDA were not probable of achievement, and accordingly, no compensation expense was recognized for those awards. The debt refinancing condition, the listing on Nasdaq and half of the various operations related milestones were achieved during the fiscal year ended December 31, 2025, and the related compensation expense was recognized in the year.

The market condition has not been met as of December 31, 2025; however, compensation expense for the market-based award is recognized on a straight-line basis over the requisite service period, regardless of whether the market condition is ultimately satisfied. If the condition is achieved prior to the end of the service period, any unrecognized expense will be recognized immediately.

On November 1, 2010, the Company approved the Amended and Restated 2006 Stock Incentive Plan of SANUWAVE Health, Inc. effective as of January 1, 2010 (the “Stock Incentive Plan”). Upon the approval of the 2024 Plan by the Company's stockholders, no further awards will be made under the Stock Incentive Plan.

The Stock Incentive Plan permitted grants of awards to selected employees, directors, and advisors of the Company in the form of restricted stock or options to purchase shares of common stock. Options granted may include non-statutory options as well as qualified incentive stock options. The Stock Incentive Plan is administered by the board of directors of the Company. The Stock Incentive Plan gives broad powers to the board of directors of the Company to administer and interpret the form and conditions of each option.

The following table presents stock compensation expense recognized by the Company for the fiscal years ended December 31, 2025 and 2024. Total unrecognized compensation cost related to equity awards as of December 31, 2025 was $10.3 million and is expected to be recognized over a weighted average period of 2.25 years. Total unrecognized compensation cost related to equity awards as of December 31, 2024 was $8.3 million and was expected to be recognized over a period of 3 years. All stock compensation expense from the Stock Incentive Plan was recognized prior to 2024. The first grants from the 2024 Plan were issued in the three months ended December 31, 2024. The Company recognizes compensation expense on a straight-line basis over the requisite service period, net of actual forfeitures.

The following table presents a summary of stock option activity:

Valuation Information for Stock-Based Compensation

The fair value of each stock option award during the fiscal year ended December 31, 2025 was based on the closing price of the Company's common stock on the date of the grant. Expected volatility was based on 100% of the historical realized volatilities of peer companies. The risk-free interest rate was based on the implied yield for U.S. Treasury zero-coupon issue with the remaining term equal to the expected term. The expected holding period was calculated using the simplified method. No dividend was assumed as the Company does not pay regular dividends on its common stock and does not anticipate paying any dividends in the foreseeable future. The Company's policy is to recognize forfeitures as they occur.

The weighted average assumptions used in the Black-Scholes option pricing model in valuing stock options granted in the years ended December 31, 2025 and December 31, 2024 are summarized in the table below:

17. Net Income (Loss) per Share

Basic net income (loss) per share is computed based on the weighted average number of shares outstanding during the applicable period, including nominally priced warrants. Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding. Diluted net income (loss) per share is calculated based on the weighted average of shares of common stock outstanding and the number of additional shares that would have been outstanding if the potentially dilutive securities had been issued. The Company uses the treasury stock method to calculate the number of shares for the nominally priced warrants.

Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding. To the extent that securities are “anti-dilutive,” they are excluded from the calculation of diluted net loss per share. As a result of the net loss for the year ended December 31, 2024, all potentially dilutive shares in the period were anti-dilutive and therefore excluded from the computation of diluted net loss per share. Anti-dilutive equity securities consist of the following:

18. Income Taxes

The Company files income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. The Company is subject to United States federal and state income tax examinations by tax authorities for any years that have net operating losses open until the net operating losses are used.

The components of the net income (loss) before income taxes are as follows:

In accordance with ASC Topic 740, Income Taxes(“ASC 740”), the Company accounts for income taxes utilizing the asset and liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided for the deferred tax assets, including loss carryforwards, when it is more likely than not that some portion or all a deferred tax asset will not be realized.

The income tax provision (benefit) from continuing operations consists of the following:

As of December 31, 2025, and 2024, the Company didnot have any undistributed earnings of our foreign subsidiaries. As a result, no additional income or withholding taxes have been provided for. The Company does not anticipate any impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”) and as such, the Company has not recorded any impact associated with either GILTI or BEAT.

A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:

1 The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include Texas.

A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes for the year prior to adoption of ASU 2023-09 is as follows:

The tax effects of temporary differences that give rise to the deferred tax assets are as follows:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In assessing the realization of deferred tax assets, management considers, whether it is “more likely than not”, that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible.

ASC 740 requires that a valuation allowance be established when it is “more likely than not” that all, or a portion of, deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. After consideration of all the information available, management believes that uncertainty exists with respect to future realization of its deferred tax assets and has, therefore, established a full valuation allowance as of December 31, 2025, and 2024.

Federal and state tax laws impose significant restrictions on the utilization of net operating loss carryforwards in the event of a change in ownership of the Company, as defined by Internal Revenue Code Section 382 (“Section 382”). The Company has completed a formal Section 382 analysis and determined a change in control occurred on October 18, 2024. The Company is subject to a federal Section 382 annual limitation of $4 million annually for thefive years after the change in control, and a $1.3 million annual limitation thereafter. Deferred tax assets totaling $44.2 million are expected to expire unutilized and have been adjusted.

The Federal net operating loss carryforwards of approximately $27.6 million incurred from the years ended December 31, 2005, through December 31, 2017, will begin to expire in 2026. The Federal net operating loss carryforward for the years ended December 31, 2018, through 2025 of approximately $94.8 million will not expire. The state net operating loss carryforwards of approximately $46.2 million from years ending December 31, 2005, through December 31, 2025, will expire at various dates through 2043.

A provision of ASC 740 specifies that companies are to account for uncertainties in income tax reporting, and prescribes a methodology for recognizing, reversing, and measuring the tax benefits of a tax position taken, or expected to be taken, in a tax return. ASC 740 requires the evaluation of tax positions taken or expected to be taken while preparing the Company’s tax returns to determine whether the tax positions would “more-likely-than-not” be sustained if challenged by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s consolidated financial statements as of December 31, 2025, and 2024. The Company does not expect any significant changes in the unrecognized tax benefits within twelve months of the reporting date.

The Company will recognize in income tax expense, interest and penalties related to income tax matters. For the years ended December 31, 2025, and 2024, the Company didnot have any amounts recorded for interest and penalties.

The amount of cash income taxes paid by the Company were as follows:

The total cash income taxes paid by the Company during the year ended December 31, 2024 was $4 thousand.

19. Concentration of Credit Risk and Limited Suppliers

Major customers are those whose accounts receivable or sales individually comprise ten percent or more of the Company’s total trade receivables or total sales, respectively. As of December 31, 2025, the Company had the following concentrations of accounts receivable attributable to individual customers. There were no sales concentrations as of December 31, 2025, and there were no sales or trade receivable concentrations as of December 31, 2024.

As of December 31, 2025, one customer accounted for more than 10% of total accounts receivable. The Company does not believe that the loss of this customer would have a material adverse effect on its financial position, results of operations, or cash flows.

Cash and Cash Equivalents

Cash equivalents are financial instruments that potentially subject the Company to concentration of credit risk. As of December 31, 2025, the Company's cash equivalent securities were largely comprised of money market funds. The Company’s cash accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per financial institution in the United States.

Limited Suppliers

The Company currently purchases most of its product component materials from single suppliers and all of its finished product is assembled by a single supplier. The loss of any of these suppliers could result in a disruption in our production. The percentage of purchases from major vendors of the Company that represented ten percent or more of total purchases were as follows:

20. License and Option Agreement

In March 2024, the Company entered into an exclusive license and option agreement (the "Patent License") with a third party licensee in connection with a portfolio of patents related to the field of intravascular shockwave applications. The Company received a one-time payment of $2.5 million related to this Patent License, which was recorded inother income during the fiscal year ended December 31, 2024. The Company granted the Licensee an exclusive license to the patents and an option to acquire the patents for a period of 3 years following the effective date of the Agreement. Upon acquisition of the patents, the Licensee will distribute any resulting proceeds to the Company, including but not limited to any royalties, license fees, settlement payments, or other proceeds generated from the licensing or assertion of the patents, in accordance with a revenue sharing agreement.

On July 23, 2025, the Licensee exercised the acquisition option. In connection with such exercise, the Licensee and the Company executed a patent purchase agreement, and the Licensee made a $5.0 million cash payment to Sanuwave, Inc. on August 21, 2025. At the time of the Patent License and through the Licensee's exercise of the acquisition option, the Company did not have any amounts capitalized related to the underlying portfolio of patents, nor was any write-down of assets recorded upon executing the Patent License or acquisition option. Accordingly, the Company recognized a $5.0 million gain on sale of patents within other income (expense) on the consolidated statements of comprehensive income (loss) for the fiscal year ended December 31, 2025. The Company does not have any ongoing obligations associated with the patent license. Additional proceeds may be provided to the Company under certain conditions of the agreement with the Licensee.

Contingent Consideration - The Company considers such royalties, license fees, settlement payments, or other proceeds as variable or contingent consideration. The Company determined that the amount of variable consideration would be constrained until the period the uncertainty related to the consideration is relieved.

21. Commitments and Contingencies

Litigation

In the ordinary course of business, the Company from time to time becomes involved in various legal proceedings involving a variety of matters. The Company does not believe there are any pending legal proceedings that will have a material adverse effect on the Company’s business, consolidated financial position, results of operations, or cash flows. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties. The Companies expenses legal fees in the period in which they are incurred.

In August 2023, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with SEP Acquisition Corp., a Delaware corporation ("SEPA"), and SEP Acquisition Holdings, Inc., a Nevada corporation and a whole owned subsidiary of SEPA. Pursuant to the terms of the Merger Agreement, a business combination between the Company and SEPA was to be effected. In February 2024, the Company entered into a termination agreement with an advisor to agree on termination fees owed with respect to a previous engagement agreement. The Company agreed to a contingent payment of $0.7 million upon the closure of the Merger. Upon the Company's termination of the Merger Agreement in June 2024, the related contingent consideration liability was derecognized.

Acquisition Dispute

In May 2022, the Company received notification alleging that it is not in compliance with the license agreement with Celularity entered in connection with the acquisition of the UltraMIST assets. The Company settled this dispute in June 2024 for a cash payment of $2.2 million, which resulted in the removal of $4.0 million in convertible promissory note payable, $2.4 million in accrued interest, $0.9 million of accrued expenses, $0.5 million of other liabilities, and $0.4 million in accounts receivable, which resulted in the recognition of a gain on extinguishment of debt of $5.3 million.

22. Segment Information

The Company operates inone reportable segment engaged in the design and sale of medical devices.

The accounting policies of the reportable segment are the same as those described in the summary of significant accounting policies. The CODM assesses performance for the reportable segment and decides how to allocate resources primarily based on net income (loss) that is also reported on the consolidated statements of comprehensive income (loss). The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets.

Net income (loss) is used to monitor budget versus actual results. The CODM also uses net income (loss) in competitive analysis by benchmarking to competitors. The competitive analysis along with the monitoring of budgeted versus actual results are used in assessing performance of the segment and in establishing management’s compensation.

Management has determined that Morgan Frank, Chief Executive Officer, is the CODM.

The following table sets forth our consolidated statement of operations used by the CODM:

23. Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In prior periods, the Company experienced recurring net losses, accumulated deficits, negative working capital, and significant debt maturities, which raised substantial doubt about its ability to continue as a going concern.

During the third quarter of fiscal year 2025, management executed a comprehensive debt refinancing with a new lender, which extended the maturity of the Company’s principal debt obligations from the secured term loan and provided the option for additional liquidity to support ongoing operations through a secured revolving credit facility. In addition, the Company achieved positive operating income for the fiscal years ended December 31, 2025, and 2024, reflecting the impact of strategic initiatives focused on revenue growth and operational efficiency.

As a result of these actions, management has evaluated the Company’s financial condition and cash flow requirements for the twelve months following the issuance of these consolidated financial statements. Based on the debt refinancing, achievement of operating income, and expected cash inflows from forecasted operations for at least the next 12 months, management believes the Company has sufficient resources to meet its obligations as they become due and to continue its operations for the foreseeable future. Accordingly, when considering all conditions and factors, management concluded that the substantial doubt about the Company's ability to continue as a going concern was alleviated as of the third quarter of fiscal year 2025.

Management will continue to monitor the Company’s financial position, operating results, and compliance with debt covenants.

24. Restatement of 2025 and 2024 Quarterly Financial Information (Unaudited):

In connection with the restatement described herein, the Company's previously issued unaudited condensed consolidated financial statements included in the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2025, June 30, 2025, and September 30, 2025, and for the quarters ended March 31,2024, June 30, 2024, and September 30, 2024, should no longer be relied upon. The following tables present the effects of the restatement on the Company's previously reported: unaudited condensed consolidated statements of comprehensive income (loss) for the three months ended March 31, 2025 and 2024, the three and six months ended June 30, 2025 and 2024, the three and nine months ended September 30, 2025 and 2024; and the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2025 and 2024, the six months ended June 30, 2025 and 2024, and the nine months ended September 30, 2025 and 2024. The restatement impacts net income (loss) and accumulated other comprehensive loss in the Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) in the periods presented.

In addition to the errors noted in Note 2 related to sales tax liabilities, the Company identified that revenue was overstated and contract liabilities were understated for the three months ended March 31, 2025, the three and six months ended June 30, 2025 and three and nine months ended September 30, 2025. The errors related to the Company's accounting for extended warranty contracts sold at a discount in conjunction with its products. When extended warranties were sold at a discounted price, the Company did not allocate the discount proportionally across all performance obligations in the contract in accordance with ASC 606, Revenue from Contracts with Customers.

Specifically, ASC 606 requires that a discount present in a contract be allocated proportionally across all performance obligations based on their relative standalone selling prices, unless specific criteria are met to allocate the discount entirely to one or more performance obligations. The Company incorrectly absorbed the entire discount within the extended warranty performance obligation rather than allocating a proportionate share of the discount to the other performance obligations in the contract. This caused the transaction price allocated to the extended warranty to be understated and the transaction price allocated to the other performance obligations to be overstated, resulting in revenue being recognized on the other performance obligations in excess of the amounts that should have been allocated to them. Consequently, revenue was overstated and contract liabilities associated with the extended warranty was understated for the three months ended March 31, 2025, the three and six months ended June 30, 2025 and three and nine months ended September 30, 2025

Restated 2025 Quarterly Financial Information (Unaudited) - Reconciliation Tables

The following tables presents the impact of the restatement on the Company’s previously issued Unaudited Condensed Consolidated Balance Sheets as of March 31, 2025, June 30, 2025, and September 30, 2025.

A description of the restatement adjustments in the consolidated balance sheets is as follows:

(i) The $3.5 million, $3.9 million, and $4.4 million increases in accrued expenses as of March 31, 2025, June 30, 2025, and September 30, 2025, respectively, are related to the accrued sales tax, and the related interest and penalties on outstanding sales tax balances through each reporting date.

(ii) The $1 thousand, $10 thousand, and $47 thousand increases in the current portion of contract liabilities as of March 31, 2025, June 30, 2025, and September 30, 2025, respectively, are related to the adjustment tocontract liabilities balances at each reporting date.

(iii) The $8 thousand, $109 thousand, and $253 thousand increases in the non-current portion of contract liabilities as of March 31, 2025, June 30, 2025, and September 30, 2025, respectively, are related to the adjustments tocontract liabilities associated with extended warranties.

The following table presents the impact of the restatement on the Company’s previously issued Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)for the three months ended March 31, 2025, the three and six months ended June 30, 2025, and the three and nine months ended September 30, 2025.

A description of the restatement adjustments in the consolidated statements of comprehensive income (loss) is as follows:

(i) The $9 thousand decrease in revenue for the three months ended March 31, 2025, the $110 thousand decrease for the three months ended June 30, 2025, the $119 thousand decrease for the six months ended June 30, 2025, the $181 thousand decrease for the three months ended September 30, 2025, and the $300 thousand decrease for the nine months ended September 30, 2025, are related to the adjustment to revenue associated with extended warranties.

(ii) The $0.4 million increase in general and administrative expenses for the three months ended March 31, 2025, the $0.3 million increase for the three months ended June 30, 2025, the $0.7 million increase for the six months ended June 30, 2025, the $0.4 million increase for the three months ended September 30, 2025, and the $1.1 million increase for the nine months ended September 30, 2025, are related to the adjustment for estimated state and local sales tax expense and for the related penalties on outstanding sales tax balances.

(iii) The $57 thousand increase in interest expense for the three months ended March 31, 2025, the $65 thousand increase for the three months ended June 30, 2025, the $122 thousand increase for the six months ended June 30, 2025, the $73 thousand increase for the three months ended September 30, 2025, and the $195 thousand increase for the nine months ended September 30, 2025, are related to the adjustment for estimated interest on outstanding state and local sales tax balances.

The tables below present the previously reported and restated cash flow data for the three months ended March 31, 2025, the six months ended June 30, 2025, and the nine months ended September 30, 2025. The restated amounts reflect the correction of the error described above.

A description of the restatement adjustments in the consolidated statements of cash flows is as follows:

(i) The $0.4 million, $0.9 million, and $1.6 million increases in accrued expenses for the three months ended March 31, 2025, the six months ended June 30, 2025, and the nine months ended September 30, 2025, respectively, are related to accrued sales tax, and the related interest and penalties on outstanding sales tax balances, and the adjustments tocontract liabilities associated with extended warranties.

Restated 2024 Quarterly Financial Information (Unaudited) - Reconciliation Tables

The following table presents the impact of the restatement on the Company’s previously issued Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)for the three months ended March 31, 2024, the three and six months ended June 30, 2024, and the three and nine months ended September 30, 2024.

A Description of the restatement adjustments in the consolidated statements of comprehensive income (loss) is as follows:

(i) The $0.2 million increase in general and administrative expenses for the three months ended March 31, 2024, the $0.3 million increase for the three months ended June 30, 2024, the $0.6 million increase for the six months ended June 30, 2024, the $0.5 million increase for the three months ended September 30, 2024, and the $1.1 million increase for the nine months ended September 30, 2024, are related to the adjustment for estimated state and local sales tax expense and for the related penalties on outstanding sales tax balances.

(ii) The $26 thousand increase in interest expense for the three months ended March 31, 2024, the $30 thousand increase for the three months ended June 30, 2024, the $56 thousand increase for the six months ended June 30, 2024, the $38 thousand increase for the three months ended September 30, 2024, and the $94 thousand increase for the nine months ended September 30, 2024, are related to the adjustment for estimated interest on outstanding state and local sales tax balances.

The tables below present the previously reported and restated cash flow data for the three months ended March 31, 2024, the six months ended June 30, 2024, and the nine months ended September 30, 2024. The restated amounts reflect the correction of the error described above. Contract liabilities are included in the interim tables below for clarity as the restated Condensed Consolidated Statement of Cash Flows for the year ended December 31, 2024, shows accrued expenses netted with contract liabilities.

A description of the restatement adjustments in the consolidated statements of cash flows is as follows:

(i) The $0.3 million, $0.6 million, and $1.2 million increases in accrued expenses for the three months ended March 31, 2024, the six months ended June 30, 2024, and the nine months ended September 30, 2024, respectively, are related to accrued sales tax, and the related interest and penalties on outstanding sales tax balances.