Good day, everyone, and welcome to SANUWAVE announces highest quarterly revenue in company history Q2 2024 results. At this time, all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note that this call may be recorded and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Morgan Frank, CEO.

Hi. Thank you and good morning. Welcome to SANUWAVE's second quarter 2024 earnings call. As many of you probably noticed, our Form 10-Q was filed with the SEC Monday night. Our earnings release was issued this morning and our updated presentation is made available on the website in our Investors section. Please refer to that during this presentation. Joining me on the call is Peter Sorensen, our CFO. And after the call, we will open up for Q&A. So before we get going, let me go through the obligatory forward-looking statements disclaimer. This call may contain forward-looking statements such as statements regarding to future financial results, production expectations and constraints, plans for future business development activities. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are beyond the company's ability to control. Description of these risks and uncertainties and other factors that could affect our financial results is included in the SEC filings. Actual results may differ materially from those projected in the forward-looking statements and the company undertakes no obligation to update any forward-looking statements. As a reminder, our discussion today will include non-GAAP numbers. Reconciliations between our GAAP and non-GAAP results can be found in our recently filed 10-Q for the quarter ended June 30th, 2024. Okay. That said. So last conference call, we spoke about the higher growth rates in Q1 being sustainable going forward. And we believe that we can get our gross margins stabilize in mid-70s in the near-term. We are obviously very pleased to have hit both of these targets once more putting up revenue growth figures north of 50%, 53% to be precise for Q2 2024 and margins of -- gross margins of 73% despite some costs associated with standing…

Thank you, Morgan. And indeed, it was an exciting quarter for SANUWAVE as we achieved all-time record high quarterly revenues. We added over $8 million to our stockholders' equity through increasing our bottom line and paying off long-standing debt liabilities and we continue to execute on our goal of rapid profitable growth. Revenue for the three months ended June 30th, 2024, totaled $7.2 million, an increase of 53% as compared to $4.7 million for the same period of 2023. This growth is within our previous guidance range of 45% to 55% as previously discussed by Morgan. Gross margin as a percentage of revenue amounted to 73% for the three months ended June 30th, 2024, versus 74% for the same period last year. For the three months ended June 30th, 2024, operating income totaled $2 million, which is an improvement of $1.1 million compared to the same period last year, which aligns with our continued initiative to drive towards profitable growth and manage spend effectively. Operating expenses for the three months ended June 30th, 2024, amounted to $3.2 million compared to $2.5 million for the three months ended June 30th, 2023, an increase of $706,000. However, operating expenses as a percentage of revenue dropped to 62% in Q2 2024 versus 73% in Q2 2023 as well as there is a onetime adjustment in Q2 2023 to release historical accruals for $1.3 million. Net income for the three months ended June 30th, 2024, was $6.6 million compared to a net loss of $7.3 million for the same period in 2023. The increase in net income was primarily due to a change in the fair value of derivative liabilities, a gain on extinguishment of debt and an increase in operating income. Adjusted EBITDA for the three months ended June 30th, 2024, was $1.5 million versus $171,000 for the same period last year, an improvement of $1.3 million. SANUWAVE continues to execute its financial strategy to improve operational profitability and manage operating expenses. Total current assets amounted to $8.7 million as of June 30th, 2024, versus $9.8 million as of December 31st, 2023. Cash and cash equivalents totaled $2.5 million as of June 30th, 2024. We thank you for the continued support of SANUWAVE and I'll now transfer the call back to Morgan.

Okay. Thanks, Peter. So on to other matters. The company terminated its merger with SEPA during the quarter. We did this because there appeared to be no path to acquiring a National Securities Exchange listing for the post-merger entity. So the company deemed that it was no longer deal in the best interest to shareholders. The good news is that you know our economics and business model has improved a great deal over the last 12 months. And we now find ourselves in a position of having sufficient capital to run the business and move forward without the dilution or the complexity of leaseback merger. Since this termination, we've been taking steps to simplify and improve our capital structure. So we paid off a piece of noncompliant debt at a significant discount. We're also seeking to execute a reverse stock split to reduce our share count and we're going to use this reverse split as a trigger for a note warrant exchange similar to the one really identical to the one we were using that we had proposed under the SEPA merger and that will really simplify our cap stack and improve our shareholders' equity. At this time, we have received shareholder approval for the reverse split and we have agreed, we've received agreement on the exchange from 100% of outstanding note and warrant holders within the future promissory note classes issued between August of 2022 and present. So we're currently assessing the split ratios and the best timing on this plan, but I think it's reasonable to assume this will occur in the near future. I know that reverse splits have something of bad history, but this is generally because they tend to occur at companies' fundamentals are poor and deteriorating and that's simply not the case here. We have spoken in the past about being about 2024 being breakout year for SANUWAVE and having all the pieces in place that we need to execute. We are more convinced than ever that this can be so and that simplifying our cap structure, reducing our share count and getting our stock price up to a respectable integer is the next step in getting this company to a point where we can be valued for our business and not our cap structure. So I mean we're building for the long-term here and our growth is accelerating. This team is keen, hungry for more and really looking to go make it happen. So I just want to thank everyone at SANUWAVE for all of their hard work and for the blood, sweat and tears of getting us here and taking us forward. None of this happens by itself and it's been an amazing thing to be a part of. And by all indications, the best is yet to come. So, Bill, with that I think that's the end of our prepared comments. So why don't I turn this back over to the operator and we can queue up questions.

[Operator Instructions] We'll take our first question from Adam Gazzola, Private Investor. Please go ahead.

Hi. Good morning. Thank you for all your hard work.

Good morning.

I have a number of questions. My first, if I can politely ask, as we chat percentages, that's all quite interesting. Can we talk actual number and acquisition units or new customers? And what each unit per se say at the UltraMIST or the separation of SANUWAVE and how each of those units directly impact the bottom line, cost to acquisition, cost to implement and then perhaps chat how these mechanisms are now returning back to the company? That's my first question. Please and thank you.

So I mean in terms of the -- so I guess to start off with, as we sell a system, we have not been releasing the exact ASPs we're getting on a quarterly basis. The list price on UltraMIST system is about $35,000. So then we're not capturing full list price, but we're capturing a great deal more of it than, we once did. We ultimately view this as sort of a razor-razorblade model, where the goal is to get the system out of the hands of the customer and generate revenue from individual applicator sales associated with each procedure that's performed. We track this internally and refer to it as tax rate, which is how many 12, how many cases of 12 applicators does a system use per week in the field. In terms of systems, so that's a number that, obviously, we manage to very closely, but also haven't shared with The Street. I mean, what we can -- obviously what we can share is that the amount of consumables revenue has been going up very significantly across quarters and has been sort of leading the -- it's the leading source of the company's revenue and has been leading a lot of the company's growth. So in terms of what does it cost to get a system out into the field, it's -- we have two separate -- we have two different -- we have two different sales channels, right? We use or I guess really three. We have direct sales force, right? And we had I mean we began this year at only about two reps. We've ramped that up to more like nine right about now. We also use a series of distributors on a 1099 basis. These distributors are not compensated unless they place units and if so are paid commissions on the systems that they sell. And the last channel being our internal sort of noncommissioned commercial sales operation that works both like sort of a business development and an internal sales force. So when you break it all down, I don't know that I have a percentage for you on what we're spending on that customer cost of acquisition across everything. Peter, do you have a thought on that.

Yes, I think, it really varies across channels. So I don't have an exact estimate per channel.

But I think something in the 10% to 15% range is probably of overall sales is probably a pretty reasonable. It's probably a pretty reasonable range to consider.

Yes, for sure.

Okay. Thank you. And I understand --

I'm sorry you had several questions. Was there anything I didn't get to?

Yes. So that you began to touch on one of the points and I won't be intrusive or hold you accountable to unit numbers if that's something you haven't shared with The Street yet. So you mentioned sales and sales force. And one of the things that I happen to notice trafficking on your website myself is that I believe your website is not fully optimized, where if someone is going to your website and clicking about us, you can track and monitor your data. And I'm not talking through Google, I'm talking through your own website, you can find out who and pretty much right down to a location, an IP address, and even potentially a business address and generate a sales lead. That's something that is very prevalent in today's society. And I noticed I don't know how you're obtaining your customers. I do know it's a captive audience. There are only so many people involved in wound care. I know that you guys market and go to all the events. I've tried to make it few when Mr. Richardson was hosting them. I wasn't able to make them. I believe in the company. How is it that you're generating more sales in this environment? I noticed that a publicist sometimes in the right direction can help generate the needed attention. And given its venue where the stock trades, there is very little attention given to the story. If there was even an ounce of attention paid to the story, we wouldn't be trading at a penny and a half. Can you comment on that?

Well, I think this is part of the reason why we're interested in cleaning up the cap structure, right? I think that -- we've been seeking first to get the company's fundamentals together. Now that we have them together and have a story, the fundamentals will ultimately out so long if you can get it yourself into a position where the company is being valued for its business rather than its cap structure. With the current note and warrant structure, it becomes difficult to even assess what the company's share count is and to realize what it's -- you realize how low its market cap actually is. There are also far fewer investors, I think, that will look at a stock value in this range and it's part of why we want to get our stock price up to something that looks like a respectable integer. I mean, as you probably know, I have 25 years of or I guess really now 30 years of cap markets experience. So I have some thoughts on this matter. And I think you're going to be seeing a lot more outreach towards The Street once we have a stock that more people would be comfortable looking at.

Right about $5 because the longs are restricted a number of accounts, retail, so many -- there are so many restrictions to access a pink sheet bulletin board or now QQQ. So, yes, agreed. Okay. Thank you for your time gentlemen.

Thank you.

[Operator Instructions] We show no further questions at this time. I will turn the call back to management for closing or additional remarks.

Great. Thank you very much, and thank you, everyone, for joining us and we will speak to you next quarter.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.