SANUWAVE third quarter revenues increase to $278,000

SANUWAVE Health, Inc. (OTCBB:SNWV), an emerging medical technology company focused on regenerative medicine, today reported financial results for the three and nine months ended September 30, 2010 and provided a business update.

“Pulsed Acoustic Cellular Treatment Induces Expression of Proangiogenic Factors and Chemokines in Muscle Flaps”

Christopher M. Cashman, President and CEO of SANUWAVE, said, "We are especially pleased with the progress we made in the third quarter as we advanced our strategic development plans in nearly every facet of our business. Most significantly, we completed patient follow-up in our U.S. pivotal Phase III clinical trial of dermaPACE™ to treat diabetic foot ulcers (DFU) and look forward to announcing top-line study results by the end of the year. We also launched the orthoPACE™ device in Europe for use in orthopedic, trauma and sports medicine indications. We continued to publish and present data in support of PACE™ technology in a number of clinical settings and in support of our underlying mechanism of action. These accomplishments keep us on track to advance the commercial goals for our devices in wound care, orthopedics and aesthetic medicine."

Operational highlights of the third quarter 2010 and recent weeks include the:

• Completion of patient follow-up in the U.S. pivotal Phase III, Investigational Device Exemption (IDE) clinical trial with dermaPACE™ for the treatment of diabetic foot ulcers.
• European launch of the orthoPACE™ device, which is intended for use in orthopedic, trauma and sports medicine indications.
• Introduction of Profile™, which incorporates innovative Diffused Acoustic Pressure (DAP™) technology, at the 20^th Biennial Congress of the International Society of Aesthetic Plastic Surgery. There the Company showcased early stage results from case studies conducted by Miles Graivier, M.D. demonstrating the use of Profile™ in postsurgical applications, body shaping and scar management. DAP™ technology utilizes an innovative form of acoustic pressure waves to promote the benefits of therapeutic massage through mechanical stimulation of tissue.
• Publication of a research study conducted by Maria Siemionow, M.D., Ph.D., DSc at Cleveland Clinic in the online edition of The Journal of Trauma in an article entitled, "Pulsed Acoustic Cellular Treatment Induces Expression of Proangiogenic Factors and Chemokines in Muscle Flaps," which showed how PACE™ treatment benefits ischemic conditions at the molecular, cellular and tissue levels.
• Publication of an article titled "Microvascular Response to Shock Wave Application in Striated Skin Muscle" in the online edition of the Journal of Surgical Research, which showed that treatment with PACE™ produces immediate and continuous benefits of microcirculation.
• Grant of European patent EP 1,452,141 entitled "Shock Wave Generating Device," which provides the Company exclusive rights in human and animal treatment devices that include the novel use of piezoelectric fibers to produce acoustic energy in the shock wave spectrum.

Regarding next steps in the Company's pivotal Phase III clinical trial investigating dermaPACE™ for the treatment of diabetic foot ulcers, Mr. Cashman said, "We continue to be on track to report top-line results in the fourth quarter of 2010, to file our Premarket Approval Application (PMA) with the FDA no later than the first quarter of 2011, and, pending a favorable response from the FDA, potentially launch dermaPACE™ in the United States in 2011. This action plan and timeline are consistent with our previous reports and demonstrate our commitment to making dermaPACE™ available as quickly as possible to the millions of people who could benefit from our innovative regenerative technology."

Third Quarter Financial Results

SANUWAVE's financial results for the third quarter of 2010 reflect the Company's ongoing research and development of PACE™ technology for the dermaPACE™ diabetic foot ulcer clinical trial, and development work for orthopedic and aesthetic uses.

Revenues for the three months ended September 30, 2010 were $278,000, compared with $135,000 in the corresponding 2009 quarter. The increase is primarily due to sales of orthoPACE™ devices and applicators following the device's June 2010 launch in Europe.

Research and development costs for the three months ended September 30, 2010 were $1.0 million, compared with $1.1 million for the same period in 2009. The decrease in 2010, compared with the same period in 2009, was due to lower clinical site costs for the dermaPACE™ diabetic foot ulcer clinical trial, as the number of active patients declined during the final follow-up phase in 2010.

General and administrative expenses for the three months ended September 30, 2010 were $1.4 million, compared with $1.5 million for the same period in 2009. The decrease in 2010, compared to the same period in 2009, was due to one-time accounting and legal fees incurred in September 2009 for the reverse merger transaction, offset somewhat by higher non-cash stock compensation expense in 2010, as compared with the same period in 2009, due to new grants of options and restricted stock in September 2009 and January 2010 which are being expensed over the applicable vesting term.

The net loss for the third quarter of 2010 was $2.7 million, or $0.21 per share, compared with a net loss of $2.7 million, or $0.24 per share, during the third quarter of 2009.

Nine Month Financial Results

Revenues for the nine months ended September 30, 2010 were $539,000, compared with $539,000 in the corresponding 2009 period. Revenues are primarily from sales of devices and applicators in Europe of the legacy Evotron™ device for orthopedic conditions and our new orthoPACE™ device for orthopedic conditions introduced in June 2010.

Research and development costs for the nine months ended September 30, 2010 were $3.0 million, compared with $2.7 million for the same period in 2009. The increase in 2010, compared with the same period in 2009, was due to higher costs of the ongoing clinical trial of dermaPACE™ for diabetic foot ulcers, as enrollment ended during the first quarter of 2010 and new consultants were engaged to assist in the patient follow-up phase of the clinical trial.

General and administrative expenses for the nine months ended September 30, 2010 were $4.5 million, compared with $3.4 million for the same period in 2009. The increase in 2010, compared to the same period in 2009, was primarily due to increased non-cash stock compensation expense of $1.4 million for the nine months ended September 30, 2010, compared to $0.6 million in the prior-year period, due to new grants of options and restricted stock in September 2009 and January 2010 which are being expensed over the applicable vesting term. In addition, the Company had higher bonus expense accrued in 2010, as compared to the same period in 2009, offset somewhat by the additional one-time accounting and legal fees incurred with the September 2009 reverse merger transaction.

The net loss for the nine months ended September 30, 2010 was $8.4 million, or $0.67 per share, compared with a net loss of $3.5 million, or $0.31 per share, reported during the same period of 2009. The net loss for the nine months ended September 30, 2009 included income from discontinued operations, net of tax, of $3.1 million from the sale of the Company's veterinary division in June 2009.

As of September 30, 2010 the Company had cash and cash equivalents of $393,000, compared with $1.8 million as of December 31, 2009. Net cash used by operations for the nine months ended September 30, 2010 was $4.1 million, compared with $5.2 million for the same period of 2009. The reduction in the use of cash by operations in 2010, as compared to the same period in 2009, was primarily due to the timing of accounts payable payments.

On September 30, 2010, in conjunction with an offering of securities (the "Offering") of the Company pursuant to an exemption from registration under the Securities Act of 1933, as amended (the "Act"), the Company issued 150,000 Units to certain "accredited investors," as that term is defined in the Securities and Exchange Commission's (the "SEC") Rule 501 under the Act, for an aggregate total purchase price of $300,000. Subsequent to quarter end, on October 1, 2010, in conjunction with the Offering, the Company issued 250,000 Units to an "accredited investor" for $500,000. Each Unit was sold to the new investors at a purchase price of $2.00 per Unit. Each "Unit" in the Offering consists of: (i) one share of common stock, par value $0.001 per share (the "Common Stock"); (ii) a two-year common stock purchase warrant (the "Class D Warrant") to purchase one share of Common Stock, at an exercise price of $2.00; and (iii) an option (the "Option"), which expires on December 31, 2010, to purchase the same number of Units as granted pursuant to this transaction, at the purchase price of $2.00 per Unit.

For the nine months ended September 30, 2010, the Company issued ten promissory notes totaling $2,450,000. Subsequent to quarter end, on October 12, 2010, the Company amended the terms of the ten outstanding promissory notes such that the unpaid principal and interest on each note was exchanged into the number of Units equal to (i) the unpaid principal and interest on each such note, divided by (ii) 2. The unpaid principal and interest on the notes totaled $2,517,660, and this sum was exchanged into a total of 1,258,830 Units.