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Executives

Barry Jenkins – CFO

Joseph Chiarelli – CEO

Dan Jorgensen – Chief Medical Officer

Peter Stegagno – VP, Operations

Iulian Cioanta – VP, Research and Development

Analysts

Brian Marckx – Zacks Investment Research, Inc

SANUWAVE Health, Inc. (OTCQB:SNWV) Q3 2013 Earnings Call November 12, 2013 10:00 AM ET

Operator

Greetings, and welcome to the SANUWAVE Health Incorporated Third Quarter 2013 Earnings Conference Call and Business Update. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instruction) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Barry Jenkins, CFO for SANUWAVE Health Incorporated. Thank you, Mr. Jenkins, you may begin.

Barry Jenkins

Thank you, Rob. Good morning. We appreciate your interest in SANUWAVE in today’s call. This morning SANUWAVE has announced our Q3, 2013 financial results. If you have not received the news release or like to be added to the company’s distribution list, please call SANUWAVE at (678)-578-0103 or go to the Investor Relations section of our website at www.sanuwave.com. Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements that involve risk and uncertainties regarding the operations and future results of SANUWAVE. We encourage you to review the company’s filings with the Securities and Exchange Commission, including without limitation our filings on Forms 10-K and 10-Q, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, November 12, 2013. SANUWAVE undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

With that said, I’d like to turn the call over to our Chief Executive Officer, Joseph Chiarelli. Joe?

Joseph Chiarelli

Thanks, Barry and good morning to all of you and we appreciate you’re joining us on this call. As you know it has been a very busy quarter for us and we’ve made some great strides in achieving our goals that we established early in 2013. I’ll briefly touch on a few of the key points while the rest of the team then expands on what we are talking about.

First, regarding our current Phase III U.S. clinical trial that uses our lead device the dermaPACE and patients with diabetic foot ulcers or DFUs. As you know, on October 8, we announced that 50% of the minimum required patients had been enrolled in the trial. The enrollment continues at the same pace and remains steady so we are on target to complete enrollment in the first quarter of 2014. And I really think it’s important to mention that we are very pleased with the enthusiasm, effort and attention the investigators are giving to our trial. Keep in mind, that while we continue to see enrollment progress, there is no guarantee that enrollment will continue at our current pace particularly with the holidays coming up. And Dan Jorgensen our CMO will discuss the trial in more depth later in our presentation.

Second, in the quarter we expanded the depth of our Board of Directors by bringing on life science industry executive Alan Rubino. Alan currently serves as the President and CEO of Emisphere Technologies and he has more than 30 years of experience at every level in the biopharmaceutical industry including physicians focused on sales, marketing and SEC matters. Alan’s appointment brings us to four board members and adds industry knowledge and a network of industry experts that can be great value to us as we advanced our products.

And third, we made great strides in introducing our technology in major worldwide markets by increasing our international distribution arrangements. We currently have more than 150 devices distributed throughout the world and continue to progress in our effort to develop and expand our network. We are actively working with our new distributors in South Korea, Australia, New Zealand and our existing distributors in Europe to increase device use. These international distributors are in the process of assembling their marketing and distribution plans for 2014 and we do expect to have more about that as we get into 2014 and as that year progresses. Keeps to Daniel will review this later in the call.

Last point before I turn the call back over to Barry and the rest of the team. From two small financing that we closed in July and October, we’ve raised an aggregate of approximately $2 million; in addition we converted the Senior Secured Notes to common stock to further strengthen our equity base. And Barry will provide more details around this as he now reviews the highlight of the financial results for the third quarter.

Barry Jenkins

Thank you, Joe. In July 2013, we strengthened our balance sheet by completing a public offering for $1.65 million and converting the outstanding $2.2 million in senior secured notes to equity. In the public offering we issued an aggregate 3 million units or $0.55 per unit with each unit consisting of one share of common stock and warrant to purchase one half share of common stock. Those five-year warrants have an exercise price of $0.80 per share. The senior secured note holders voluntarily converted all of the outstanding notes into 10.9 million shares of restricted common stock at the conversion price per the note agreements of $0.20 per share, and that was the market price at the time the subscription agreement was written earlier this year. The note holders also received warrants to purchase an aggregate total of 2 million shares of common stock. And those five-year warrants also have an exercise price of $0.80 per share. On September 30, 2013, in conjunction with the private offering, we issued 675,000 units to serve in credit and investors for aggregate total purchase price of $405,000. In addition, on October 2013 which is after the end of this third quarter, in conjunction with this private offering, we issued an additional 202,000 units for an aggregate total purchase price of $121,000. Each unit in the private offering was sold at a purchase price of $0.60 per unit with the unit consisting of share common stock and five year warrant to purchase a share of common stock at an exercise price of $0.85 per share.

The continuation of our business is depended upon raising additional capital in the fourth quarter of 2013. And our plan is attain additional capital in the fourth quarter through the issuance of common stock and/ or debt or equity securities and we have engaged financial advisors to assist us in this process.

Now turning to the actual results for the quarter. We remained focused on keeping our cash expenses low while we press forward with a very important enrollment phase of the dermaPACE clinical study. Our revenues for the third quarter of 2013 were $148,000, a decrease of 17% from last year’s third quarter. However, our gross profit as a percentage of revenue was 80% which was up from 75% last year. The decrease in revenue for 2013 was primarily due to one-time sale in 2012 of new device applicators to a distributor in Asia.

Total operating expenses which include the clinical related expenses for the dermaPACE trial increased by 34% or $509,000 to $2 million in Q3 2013. Excluding the non-cash cost of stock based compensation and consulting services which are included in that number, operating expenses, and cash related operating expenses were $1.4 million to Q3, 2013 which was an increase of $143,000 or 11% from last year.

And of course the increase in these offering expenses for 2013 was related to the cost of dermaPACE clinical trial. Below the line in other operating expenses, we had a net expense of $2.5 million which was the result of the non-cash accounting expenses related to the common stock conversion feature included in the outstanding $2.2 million senior secured notes which I discussed earlier were converted equity in July of 2013. This one time non-cash expense included the value of the embedded conversion feature of the senior secured notes as well as the fair value of the warrants which were granted to the note holders for their voluntary conversion of their notes at the end of July.

The net loss for the third quarter of 2013 increased by $3 million to $4.3 million or $0.14 per share and it was due primarily to the $2.5 million increased in the non-cash accounting for the senior secured notes which were converted equity which I just discussed as well as the increased in research and development expenses for the clinical study related cost for the start of the enrollment phase of the dermaPACE clinical trial for treating diabetic foot ulcers during 2013.

Looking at cash flow for the nine months ended September 30, 2013, net cash used by operating activities was $3.4 million which was $171,000 or 5% less than the prior year. And this decrease in the use of cash for operating activities was due to reduction in headcount and overhead related expenses in 2013 as compared to 2012, offset by the increase in cost related to the dermaPACE clinical study in 2013.

To our monthly cash burn rate from operations was $375,000 on average per month for 2013 year-to-date. We continued to project that our cash burn rate from operations during the current enrollment phase for the dermaPACE clinical trial will increase to be approximately $575,000 to $625,000 per month.

Now let me turn the call back over to Joe Chiarelli for business update.

Joseph Chiarelli

Thanks, Barry. I just want to touch on the cash burn rate for a moment to 375 that does include some of our cost from the trial because as you know we have been saying our normal cash burn rate without regard to the trial is 350 so you got some of the difference there. Now, my preference is that each of the senior members of the management team discusses their respective areas. So now we will have Dan Jorgensen who is our Chief Medical Officer walk you through the importance and the status of the current dermaPACE trial. Dan?

Dan Jorgensen

Thank you, Joe. First, I want to emphasis the importance of treating diabetic foot ulcers. As stated during the last call, there are approximately 1.5 million diabetic foot ulcers diagnosed each year in the United States leading to over 80,000 amputations at annual cost of $3.6 billion. According the centers for disease control, the adequate treatment of foot ulcers as part of a comprehensive foot care program can reduce amputation rates by 45% to 85%. Because dermaPACE’s safe, noninvasive and convenient as well as efficacious assuming a positive results from the current trial, it can play a significant role in comprehensive foot care programs in the U.S. and worldwide.

In fact, this is why the current clinical trial has drawn the support and enthusiasm of some of the world’s experts in diabetic foot care, some of whom are investigators in this study. This is also why enrollment has been so robust. Remember, we started this trial on the second quarter of 2013, with the first patient enrolled in the middle of June. In approximately four months, we reached 50% of our minimum enrollment target. In contrast, it took approximately nine months to reach the same number of enrolled patients in the previous [stand away] trial. We remain on track to meet our goal of completing enrolment by first quarter of 2014.

While we are pleased with the number of enrolled patients, it is the quality of the patient and of the study in general that really matters to the FDA and to healthcare providers. As mentioned during the last call, this trial was carefully designed to supplement the original Phase III trial that was conducted from 2007 to 2010. It is a prospective randomized sham controlled double blinded clinical study incorporating data from the previous trial based on input and guidance from the FDA.

One major change from the last study is the number of treatment. Based on previous data from both humans and animals, we’ve doubled the number of dermaPACE applications which should increase the complete exposure of difference between the dermaPACE and sham arms of the study at the 12 week primary end point.

And I might add that it is unusual to double the number of treatments of any investigational product from one clinical trial to next without having safety concerns. However, this change was easy for us to make given the FDA’s confidence in the safety of dermaPACE technology. This trial is being conducted in a way that will avoid some of the risks in the previous trial and thereby increase our probably of success. For example, we have added top investigators in the field of diabetic foot ulcers. These investigators were chosen based not on academic reputation alone although that is important but also on a proven track record of delivering high quality data in a timely manner.

In addition, patients much quality based on vigorous study entry criteria. Not any patient with diabetic foot ulcer can be included in the trial. Only those who have diabetic foot ulcer with the size, severity and duration that makes spontaneous resolution unlikely. These are patients that truly need help in healing their ulcers.

Quality of this trial further enhanced by the refined definition of wound closure including third party review of digital photographs by medical experts which serves as a quality check on the investigator’s assessment. This controls the variability in assessing would closure across the site which was an issue in the last trial.

There are other ways in which this trial is different from the past trial. The SANUWAVE’s clinical team is very experienced in conducting clinical trials and is engaged in an ongoing process of site evaluation. This includes the replacement of poorly performing sites with high performing when necessary. Given the cap on the number of sites we are allowed to have 20 sites in this trial. It is extremely important to best sites at all times. Newly selected sites have must have highly trained personnel in a steady flow of high quality patients. As for the latter, these sites must have both an existing patient base and a demonstrated referral network. They should be located in a geographic area with a high prevalence of diabetic foot ulcers.

Of course the high volume of quality patients is not enough. Site personnel must demonstrate knowledge of the protocol and be able to execute the trial with painstaking detail. If not, there will be a high rate of protocol deviations which can affect the final outcome of the study. So far the current study has a minimum number of protocol deviations and we are working with the CRO and other sites to maintain this high performance. Sites must also understand the importance of patient retention. Without retention, that is patient returning on time for all of their study visit, even a well-designed trial could fail to meet its end point. Again, we are working with the sites to keep patient retention as high as possible.

Finally, there is constant communication between sponsors, CRO and site personnel. Recently we schedule the mid study meeting for all investigators and their staff. The main goal of this meeting was to answer questions, share ideas and brainstorm about patient recruitment and retention. These are all steps to ensure that site remains engaged and perform at a high level and maintain the current enrollment rate. I have personally visited these sites and I am impressed by their skill in managing numerous diabetic patients and by their enthusiasm and commitment to this trial.

In summary, we are pleased by both the rate of enrollment and the quality of the study.

Joseph Chiarelli

Thanks, Dan. We do want to emphasize that enrollment is in the first quarter of 2014, we would like to have meet the minimum by the first quarter of 2014 of what we have conveyed is in the first quarter of 2014. And we do believe though that our current enrollment pace is the result of the time Dan and Jennifer Peach who is our Trial Manager has taken to work with the engaged sites and the efforts being made by those sites in conducting the trial. They really have put in a lot of efforts. And now Peter Stegagno, our VP of Operations in regulatory affairs will summarize the progress that we’ve made internationally. Pete?

Peter Stegagno

Good morning, everyone. I would now like to bring you up-to-date on our progress and working with our distributors in Europe, the Far East and Australia as a potential for enhancing or initiating our market presence in these areas in 2014 is significant. Firstly, the South Korea Ministry of Food and Drug Safety which is their country’s equivalent to the U.S. FDA approved orthoPACE for sale in South Korea after performing a week long inspection of the SANUWAVE facility as well as the orthoPACE design documentation.

SANUWAVE is teamed up with KOVE Limited in South Korea as our exclusive distributor. We are looking forward to a very productive relationship with KOVE based on our first look at their plans for the upcoming years. We are also having productive discussions with our major European distributors of Italy as well as in the Belgium and Netherlands area with regard to possibilities of initiating collaborative efforts to expand their market penetration as well as supporting SANUWAVE’s ongoing needs for clinical experience.

Similar talks have begun with researchers in Poland and Romania. In Australia, our exclusive distributor Aurora BioScience has been developing excellent relationship with key researcher for dermaPACE. Several important wound care facilities have been using dermaPACE on various wounds and have been expressing satisfaction with the device’s performance.

We are looking for these key opinion leaders to provide positive feedback to the Australian wound care community in upcoming wound care conferences in the first half of 2014.

With that, I’ll turn it back over to Joe.

Joseph Chiarelli

Thanks, Pete. Our efforts in all of these countries have really just begun and we have been – our primary focus continues to be the dermaPACE trial so maybe we haven’t spent as much time as we would like in moving all these forward. The progress has been made and it should accelerate as we proceed through 2014.

Now finally to complete a presentation, we wanted to update you on our patents particularly since we have recently received a new patent that covers a new type of applicator. Iulian?

Iulian Cioanta

Thank you, Joe. SANUWAVE has now 36 patent or patent pending in its portfolio covering a range of focused shock wave application or medical application, energy production, water and foot cleaning and blood sterilization. Of our patents, 27 are domestic and 9 are outside the U.S. The average life of our patent is about 9.5 years with a range up to 18 years. Our newest patent that was issued on October 15, 2013, covers a new type of applicator that can be used for cardiology, endovascular as well as other medical applications. The patented applicator design has its reflector opening intersecting the focal line of an ellipse at a non-perpendicular angle, which is different from existing applicators that have reflectors that intersect the focal line of an ellipse only at a perpendicular angle. This design allows the extracorporeal usage of such applicators in the elimination of cardiovascular occlusions and atherosclerosis, regardless of vessel dimension. This provides a significant advantage compared with the existing invasive catheter based devices especially for below the knee arteries that are small and getting smaller towards the foot restricting the usage of such catheter based devices that are faced with significant dimension or challenges.

The last quarter, we noted SANUWAVE had been issued a patent for blood sterilization covering the use of shock wave through sterilized blood collected for medical purposes, an unmet need of modern society. We have begun working with the major university to collect data regarding such application for treating animal blood; it is the first step in providing the feasibility of this technology for human blood.

On the same subject of future application of our technology, we are almost ready to perform a set of experiment with another major university to test the use of shock wave for breaking bacteria biofilms made of gram- positive and gram-negative bacteria without and with the presence of antibiotics which can provide important avenues for using our technology in both medical and non-medical application where bacterial films are involved.

We also indicated last quarter that we have constructed a working model for expediting the cleaning of dirty water generating during oil exploration. Since then we have begun construction of mobile small scale models that can be easily transported and made operational in any third party testing facility or directly to the field where the water cleaning process takes place.

Joseph Chiarelli

Thanks, Iulian. As you can tell, we continue to work to position ourselves after dermaPACE approval and the approval of our other medical devices to be able to expanding use of our technology and a number of different medical and non-medical areas. I really want to emphasize that all of this work has been in health and has levered our existing knowledge and patents, billions of testing have really done it outstanding job of selecting the above mentioned experiments and developing the water cleaning working model after this environmentally important area and they have done all of this while staying within a very tight budget.

So just to refresh you on what we are struggling to accomplish in 2013 and early 2014 to complete the patient enrollment of the supplemental trial, to obtain FDA approval for the use of dermaPACE device to treat diabetic foot ulcers, expand our distribution network in Europe, Asia and the Pacific with two approved devices the dermaPACE and the orthoPACE, identify opportunities for the use of our patented, shock wave technology in other areas of regenerative medicine in other areas of healthcare and in industries outside of healthcare and finally to initiate discussion with companies and individual to develop the appropriate channels and business models that can initiative our technology in those areas, and which can provide a satisfactory return to our shareholders based on the risks that we are taking.

So we all going to stop here and the team and myself are more than happy to answer any questions that you can have. So I will open it for your questions. Rob?

Question-and-Answer Session

Operator

(Operator Instructions).Thank you. Our first question is from the line of Brian Marckx of Zacks Investment Research. Please proceed with your question.

Brian Marckx – Zacks Investment Research, Inc

Hi, guys and congratulation on the progress with the trial. First, couple of questions have to do with the trial. Do you have guys enough insight to know how many patients that are enrolled to date had completed the full course of dermaPACE treatment?

Dan Jorgensen

We don’t have an exact number on that right now. There is a small –there is percentage of that work completed.

Brian Marckx – Zacks Investment Research, Inc

Okay, and have all of the 45 that are enrolled had at least the initial dermaPACE treatment?

Dan Jorgensen

Yes.

Brian Marckx – Zacks Investment Research, Inc

Okay, how about the dropout rate? Dan, can you talk about that?

Dan Jorgensen

The dropout rate as I mentioned during earlier in the call is actually minimal. We have just a small handful of those. So we are actually competing with that rate.

Brian Marckx – Zacks Investment Research, Inc

Okay. The last one has to do with orthoPACE. You talked earlier in the year about investigating in FDA approval pathway, is that still in the cards and can you talk about the meeting that you had with the FDA earlier in the year?

Joseph Chiarelli

The answer is yes. It is still being worked on. We have discussed with them what protocol approval to use the orthoPACE as a replacement for the OssaTron. Those discussions are ongoing. We are also looking at the best way to move forward with that. And by that I mean to conduct small Phase II trials to verify which – to replace the OssaTron there are two approved conditions, tendonitis and epicondylitis so our intent is to conduct some small trials to verify which tendos we should be using. And to determine which the appropriate first condition is that we want to get approval for here in the U.S. So that is ongoing. We do have some designs drawn up, we have talked to them, we just haven’t made a decision yet because we are so focused on real make it sure we get dermaPACE where we wanted to be.

Operator

(Operator Instructions). The next question is from [indiscernible] of Private Investor. Please proceed with your question.

Unidentified Analyst

Hi, just on kudos of what Brian said. Seems like you are still making every effort possible under the go condition to satisfy the shareholders and to keep on the program and what the goals you have set. So we really appreciate that as a shareholder. Couple of things that I had – this medical taxes have been kicked around in Obama Care, is that going to affect the company at all.

Joseph Chiarelli

No point it will. And the reason number one, it is our intent, we’ve said this before to use a lease model which mitigate a lot of the issues and keep so called the current cost of any tax that might be applied quite small. So we think that’s going to work to our advantage not only from the standpoint that it makes it easier for the device to be applied and used not only in the physician or in a clinical setting but also on the facility setting then on top of the impact want to be relatively small on treatment or on current basis.

Unidentified Analyst

Okay and this tax the medical device tax, that wouldn’t have any effect on anything it’s done away from the medical community such as the model that you are constructing now for cleaning water for an oil field application.

Joseph Chiarelli

No. As a matter of fact the FDA, the only government agency we have to deal with in the cleaning water is the EPA. So we don’t have to be concerned about the FDA or any of the healthcare areas particularly for the way that we are addressing which is one cleaning the affluent from the oil well to cleaning the normal waste water issues and then three actually using dealing with some of the issues within well itself.

Unidentified Analyst

Okay, have you been able to contact and demonstrate the feasibility of this device to anybody in the oil fields yet or not?

Joseph Chiarelli

We have demonstrated the feasibility of the working model to more than one group. We are in the process of building as Iulian said a scale model so that we will be able to either take it to their facilities or take it to the field itself and use it in the field. We have discussions with a number of – with more than one group currently who are interested in using the technology and that’s kind of where we are right now.

Unidentified Analyst

Okay, now if you are able to successfully sell one of these devices to oil company, generally if it is depends on the science of the course but generally they want it right now and they want it bunch of them. Would you be able to produce them in quantity like that or not?

Joseph Chiarelli

We are – we actually have a working relationship with a company that does manufacturing and has the manufacturing capability for anything we would need to put this together. So the answer is yes. After we do that first quarter 2014, no. It would take us some ramp up time. We have not completed all of that at this point in time. We want to see how a couple of steps that we are working on right now actually are completed. But we do have a partner that has a capability of doing what is needed to produce units in quantity if and when that would occur.

Unidentified Analyst

Good, yeah because that would couple of good sales in that field would really help get launch sure for your company.

Joseph Chiarelli

The answer is yes. What we’ve also talked about is working with others and we have said this before. We are not going to take one side pits of business model for each of the vertical that we are dealing with. When we get into the hard hydrocarbon world we will absolutely retain the R&D and manufacturing process. Beyond that question becomes what is the best way to deliver value to shareholders from a business model standpoint. That is going to depend upon whom we work with in the different areas and what I mean by that is the affluent from an oil well versus the issues of putting the applicator down and oil well to enhance yield versus waste water treatment, and at this time we are talking to different people and our objective is to maximize our returns and minimize the used to cash to get up and running.

Unidentified Analyst

Sure, well, that makes sense. Dan, you talked about the dropout rate a little bit, minimal handful was the expression you used. What reason would somebody have if these tests are being successful for them, what reason would they have for dropping out? I can think of maybe they died or something of that nature but are there any reasons that would cause that?

Dan Jorgensen

I mean yes dropout can occur from a variety of different reasons. Sometimes it has nothing to do with any of the treatments that are administered in the context of trial. For example, someone may just decide just don’t want to be in the trial any more.

Unidentified Analyst

Okay

Joseph Chiarelli

And I was actually talking to a site yesterday and they talked about some of the transportation issues that people will have. That’s what the answer described.

Unidentified Analyst

I suppose if there are – I know my wife’s father, he doesn’t have diabetes but he has other issues and transportation for old people is a big issue.

Joseph Chiarelli

Well, yes, I want to address that. It’s one of the reasons why brought it up because we have been talking to the sites and if there are individuals who do have those kind of issues, we are working with the sites to make sure that transportation is provided to keep that type of dropout at a minimum. But you could have someone who warns up having a heart attack or stroke and that causes other type – that causes issues which pulls them out of the trial.

Unidentified Analyst

Sure, okay, but you are satisfied from your standpoint of view that the dropout rate is not abnormal by any means and perhaps compared to the first series of test; it’s not abnormal compared to them.

Dan Jorgensen

Yes, correct. I am very satisfied actually with the minimal dropout rate that we have.

Unidentified Analyst

Okay, well, that’s certainly a people are benefiting from it if they are not going to dropout if they don’t have to. Well I can’t think of the European market now. That’s been there for a quite a while and I think the last time we had the conference call, there were some thought it hadn’t done that well because of just the economic problems they were having in Europe. Is that still same situation or is there anything changed there?

Joseph Chiarelli

You have reimbursement issues in Europe. Let’s put it this way. Europe is 5 to 10 years ahead of the United States in their methodology for reimbursement in government programs. And most of the countries follow a single tier system where Obama Care is ultimately going. So in those instances you got constrains on what they are willing to pay and they – in many instances you take percentage of GDP or percentage of budget as to what they are willing to spend in healthcare. So next to endpoint the answer is yes because they continue to have those kinds of headwinds and impediment for reimbursement and for bringing on new methods to treat existing conditions. The devices have mostly been used in Europe except for one particular country, Italy; have been mostly used in the private sector. Well, we have been giving during the quarter collecting information to identify the way to penetrate not on further penetrate the private sector but then also to how we – what procedures we must follow to penetrate the government markets in each different country because the reimbursement policies are different. And that is ongoing and it’s a bit of slow process, we have not allowing that to distract us from getting the dermaPACE device approved in the U.S.

Unidentified Analyst

Okay, yes, because that’s going to become a robot care, probably going to become quite model for all kinds of situations here that reimbursement and so on.

Joseph Chiarelli

Actually it is a good point because if you could, our capability in the cost of using the device in the context of current treatments, we actually will benefit from the approach once we are approved because it is noninvasive, it is far less expensive than any other current treatments that are approved during – actually because of the whole concept of bundling the payment be it on queue based or post queue basis, it really working outpatient basis so that manner, it really works to our advantage because of the methodologies that we follow and the speed with which a patient, I call it repaired on a longer term basis, what I mean by that is not having a reopening the wound itself. So it is not repeat, there is no need to if you will repeat performance.

Operator

(Operator Instructions). The next question comes from the line of J R McGrath, McGrath Software [ph] Please proceed with your question.

Unidentified Analyst

Dan, number one, thank you for just clarifying my first question because I wondered – I see that there is not so affordable care act could have significant impact on the future of the medical profession and it sounds like you’ve already addressed one of the key competitive opportunities for SANUWAVE, if you do see anything else that represents an impact or an opportunity I certainly like to hear that because we are sitting at the other end and it does just sound like those – I don’t know what are they doing and it certainly can turn everything upside down but it could create an opportunity for us.

Joseph Chiarelli

We have been working some methods to detect source before they are actually up so hopefully once we get through the process that we are going through right now of getting approval for DFU we will then be able to do something from the standpoint of source before they are up to provide to I call it move chronic condition to an acute condition and hopefully at some point get to prevent a situation, if you look at the presentation we have on our website, we do show our intent and our strategy for lower extremities as to how we would like to address those issues. Instead of crawl walk alone we will reach not exceed our grasp approach; again I guess as I have been emphasizing we are just focused on getting through this first hurdle.

Unidentified Analyst

Now once that first hurdle is approved does those other types of moving more and more to the preventive as opposed to heal it, does those just you get to do that automatically or does that each one have to go to another approval process?

Dan Jorgensen

Yes, you basically do have to go through another approval process, but it should be a more facilitated and expedited process.

Unidentified Analyst

Okay, cool and speaking to the one that’s currently underway. I’ve heard some of the other companies and I am going to get their names wrongly Osiris or Derma Sciences or whatever, they did to this something called peak at the data and then tends have positive or negative reactions. And I understand that we have to reach I guess it’s full enrollment and the patients have to be treated to a certain degree before we can look at the data. Do we have sort of – first of all, correct me if I am wrong in those statements, and then second do we have an idea of when that might start happening or we might have a chance to look at the data.

Joseph Chiarelli

Okay from the peak standpoint the answer is yes, once you get to certain point depending upon the way you are structured to trial, you can do that and Dan will explain that better. I’ll just give you the timeframe. Once we have 90 patients and 12 weeks then the data can be revealed and then depending upon what the independent group sees they can recommend that they could tell us we no longer need to enroll. As we maintained our current rate of enrollment in the first quarter of 2014, we will achieve minimum enrollment. We may go beyond minimum enrollment to protect ourselves against dropouts in the follow up period or dropout for any other reasons. We have not made that decision yet. But assume that 12 that starts to 12 week counting point which puts us into the second quarter of 2014 when we would be able to get peak and Dan you can explain all that far better than I can.

Dan Jorgensen

I think it’s very well explained. So any other part of that you still have a question on?

Unidentified Analyst

No, actually I was about to say thank you when he passed it you to give a little more detail. And the other piece of that is whenever that date is that you get the peak is that also then give you an idea of how much longer to FDA approval or is that a total wild card?

Peter Stegagno

It’s not so much of wild card. The first part is hitting the success criteria at that work. And once that success criteria is met it is a matter of completing the trial running in all into last patient through its efficacy look and or the follow up work which is an additional 12 weeks. So once that last patient has gone through with final follow up is when we truly close the books on the trial and then put together the submission to FDA and then which is the PMA itself and then follow with the OPMA process with FDA.

Joseph Chiarelli

What we are trying to do we had these conversations internally is can we accelerate all right this whole process, and there are some ways that we can speed either the post-trial or call it active portion of the trial or follow up portion of the trial as well as maybe be able to speed up even when we get to that on blinding point but we had not yet come to a decision on any of that. We are just looking to see can we do a better job to shorten the timeframe. In the current scenario, we would by the end of 2014 have submitted our PMA and then be waiting for FDA approval however one might take.

Unidentified Analyst

Okay and then the last question are based on that statement. And does that mean that the actual selling of the dermaPACE in the U.S. would follow that meaning early 2015?

Joseph Chiarelli

Yes. Now again our business plan has been, one, to partner with other people and we do have conversations going on with others. So that we are in parallel to put all these pieces in place for once we are approved. And two, we do have our existing manufacturer , we are in conversations with them about what timeframes are required to ramp up manufacturing and we are also would starting conversations to identify those people that would be appropriate to bring on once we have the relationship and we are in ramp up phase. So the answer is yes that our intent is to and we’ve actually started talking to some facilities and part of the selection of wound care sites or these are sites that actually do want to use devices prospectively. So all that is being a corporate foundation or being laid now so that is we progress through 2014, we will have those pieces in place so that once we do get approval, there is as little down time as possible to move forward with having the device in the market place. We are very sensitive to our cohort the gap of let say, oh, we have got FDA approval now what. And we are working all that simultaneously.

Unidentified Analyst

That’s excellent, I would like to hear that brings my last question and that is between now and when those revenues will be flowing from selling those devices. Do you guys have an idea of the remaining funding required and how are you going to go to the market and garner those funds?

Joseph Chiarelli

Yes, as we have indicated we know that we have to raise funds in the fourth quarter. We are in the process that talking to different groups; we have different opportunities available to us which provide funding in different ways and to different points. We have not made decision, we are against stepping and looking at what’s the best way to do this for our shareholders not only today but over the course of, our core 2014 so that we maximize shareholder value and at the same time maximize our ability to deliver revenues quickly as possible. As soon as we get all that, I will call it into a harder strategy, we will do at least press release if not a conference call.

Unidentified Analyst

But individual shareholders may or may not be aware or even have an opportunity to participate in and helping the company raise those funds?

Joseph Chiarelli

We would be more than happy to have individual shareholders do that, talk to Barry.

Unidentified Analyst

That’s sounds great, I appreciate all these answers, thank you very much.

Operator

(Operator Instructions). We have a follow up question from the line of [indiscernible], Private Investor. Please proceed with your question.

Unidentified Analyst

Hi, sorry, somehow I got cut off, when we were talking before so I didn’t get all the answers and everything but in fact I got cut off four different times from this – from the 800 number. But that’s just one of the kind of say sorry for that we got cut off and express again, the appreciation that I had as an individual investor towards what you are doing and how also I think what any of us on the conference call can appreciate is how you are very up front with answering the questions. That we are something that you are going to see exactly right or you’re not having that, and because things aren’t always going go right so we really appreciate that and the attitude and just the gradual progress that you are making.

Joseph Chiarelli

We all appreciate that but it’s really good team of people who have a lot of experience, who have knowledge of the company as well as knowledge from outside in industry or in other situations. It is a challenging situation across the board because of all the changes that are going on within healthcare as well as outside of healthcare there is a lot of pressure on the industry as well as on the international GDP growth I will call it to constrain the spending on healthcare, your healthcare is $2.8 trillion industry that grows about 6% per year globally. So people are looking at how to do this and I got to say that everyone Barry, Peter Stegagno, Iulian, Dan Jorgensen, Jennifer, the entire team has a done great job and not only adhering to sit up crawl walk alone but let’s not let our reach exceed our grasp, and at the same time basically to do everything we can to lay the ground work to the future which you are right. First, not everything is gone well so far. We have our glitches, we have managed to keep those glitches controlled and small, our focal point on this trial is to manage the understand all of our risks and manage those risks to the best possible way we can. We can’t eliminate all the risks but we can manage them down as far as possible. And Dan and Jennifer and the site themselves have done a super job in that. With input and contribution from Barry and Iulian and Pete and it’s truly been great team effort and we intend to do our best to make this move forward.

Unidentified Analyst

We can see that. Your handling of shareholder money and you are doing the best that you can. I think we should send Obama and government over there to take lesson from you guys.

Joseph Chiarelli

I could talk a long time about that, I wrote some white papers on how could you fix systems. I don’t want to fit into that.

Unidentified Analyst

I think there are a lot of people up enjoying that conversation.

Joseph Chiarelli

Okay and actually if you ever wanted you could probably have an off the record white paper conversation as to how to deal with all of these. Opinions are bit different and what’s stream going on.

Unidentified Analyst

It’s just incredible.

Joseph Chiarelli

One is I want to be very straight forward. As we have said we are talking to groups for funding, funding, yes is a constrained for us, we’ve said that publicly we will not allow ourselves to do more than what we can recently do given the funding that we have. And we are making every effort to balance existing shareholder issues if you will or to ensure it continue to support existing shareholders value with bringing additional funds to help us achieve what we all want which is success and to grow this in the best way we possibly can.

Unidentified Analyst

Well, that’s all we can ask for. I mean we appreciate it very much. I am sure many of the shareholders appreciate that to a great deal. It’s obvious if they do because apparently a lot of the funding has come from existing shareholders, so they have a backed off in joining in your effort, and that’s one reason we stuck with you is because we can see that whoever is behind the scene that we don’t know about has confidence in what’s going on and that’s extremely important.

Joseph Chiarelli

Well, yes, the shareholder group has been superb. The board, Kevin Richardson, John Nemelka, Alan Rubino who is now come on to help us particularly with his industry knowledge and contact. And it’s a joint effort and we appreciate really the existing shareholders who have stepped up particularly over the last year before I joined the company, as well as since I joined the company. We just asked the people to continue to work with us and help us get to where we need to go. And in the timeframe that we need to be there. And I think Rob we probably want to wrap it since we have slight better than they are.

Operator

Thank you. I will turn the floor back to Mr. Chiarelli for any further closing comments.

Joseph Chiarelli

Well, I want to thank all of you for participating and for supporting the company and supporting us as to how we move this forward. It is our intention to do everything we can to maintain shareholder value and push this forward. If we make it bumps, we can hit glitches, we make get issuance, probably if you say we will hit everyone those but we will do everything we can as an organization to overcome then to support our existing shareholder base to bring new shareholders in here and to get our devices into the market place, yielding the benefit to the industry as well to our shareholders, and we truly be thank you for everything you done for us. And if you do have any questions, really don’t hesitate to contact myself or Barry or any of other members of the team. Thank you.

Operator

Thank you. This concludes today’s teleconference. You may disconnect your line this time. And thank you for your participation.

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