SNWV: Q3 Results. Financing Update
By Brian Marckx, CFA
Q3 RESULTS / FINANCING UPDATE
On November 14, 2012
SANUWAVE (
SNWV
)
announced financial results for the third quarter ending
September 30th. Revenue was generally in-line although
slightly lower than our estimate. More importantly, given
that SNWV is focused on conserving capital as they ready for the
start of the supplemental trial, is that operating expenses and
cash burn continue to come down and were lower than what we had
expected. The other positive news is that SNWV is near
closing on additional financing which, along with the cash
balance, should get them through to the beginning of 2013 at
which point trial enrollment is expected to commence and another,
larger cash raise is expected to be
consummated.
Q3 revenue came in at $178k compared to our $255k
estimate. Operating expenses continue to fall sequentially,
coming in at $1.5 million, down , which dipped $457k or 25% from
Q1 2012, reflect management's tight control on costs and
cash.
Management continues to manage expenses and cash well with
operating expenses flat from Q2 at $1.5 million and below our
$1.6 million estimate. As a reminder, following the
December 2011 FDA major deficiency letter, when it was evident
that dermaPACE would not make it to the market in the near-term,
management announced that they were implementing cost-cutting
initiatives to preserve capital. These initiatives started
bearing fruit immediately, with op expenses falling $1.9 million
through the first 9 months of 2012 compared to the same period in
2011. Part of these efforts included slashing headcount,
which fell from 29 to 18 from Q3 2011 to Q3
2012.
Q3 net income and EPS were ($1.5) million and ($0.07) compared
to our ($1.5) million and ($0.06) estimates - the difference in
EPS a result of us overestimating the outstanding share count -
as a reminder, as we noted in a previous update we used a
placeholder assumption that financing would come in the form of
equity. We have now removed this assumption as financing
will likely come in the form of convertible debt (which we assume
is eventually converted to equity in later
periods).
Cash
Cash used in operations was $1.04 million in Q3, roughly flat
from $1.01 million in Q2, and down from $1.49 million in
Q1. SANUWAVE exited Q3 with $361k in cash and equivalents,
down from $1.4 million at the end of Q2.
We think management has done a commendable job minimizing cash
burn and cutting expenses where possible. Nonetheless the
company will need to raise additional capital and indicated in
the Q3 earnings release and 10-Q that they expect to sell $1.25MM
in convertible debt in the very near-term and hope to close on a
bigger capital raise by the end of Q1 2013.
Please visit Brian Marckx's coverage page at
scr.zacks.com
to access a free copy of the full research report.
SANUWAVE HEALTH (SNWV): Free Stock Analysis
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