_{^{Cedar Grove Capital Management (“CGCM”) is proud to offer its advisory management services through its separately managed account structure. CGCM specializes in a multi-strategy investment approach with an emphasis on small caps and below companies, as well as managing an opportunistic short book and other special situations. If you’re interested in learning more, please visit www.cedargrovecm.com or view our public research www.cedargroveresearch.com.}}

_{^{All information provided herein by Cedar Grove Capital Management, LLC (“CGCM”) is for informational purposes only and does not constitute investment advice or an offer or solicitation to buy or sell an interest in a private fund or any other security. CGCM may change its views about or its investment positions in any of the securities mentioned in this document at any time, for any reason or no reason. CGCM may buy, sell, or otherwise change the form or substance of any of its investments. CGCM disclaims any obligation to notify the market of any such changes.}}

Hello everyone,

Just like we did last year, we’re sending out our high-level notes on 12 companies that we met with. If you need a refresher on who those were and what the format looked like, please see the link here. It’s a little different this year, but it still follows a similar conversation summary.

This year, we were able to meet with the following companies:

Remember, these were just quick 30-minute conversations, so it was more of an introductory capacity and being able to get to know the company and management. These are not meant to be in-depth notes but high-level takeaways.

With that, let’s get into it.

Our conversation with Sanuwave was largely used to try to understand what the situation in the industry actually is, given that Morgan sent out the 8-K the morning of the event that reduced guidance. In the filing, he emphasized a sharp slowdown in system sales in May and June from the rebound in March/April due to used systems being sold online - illegally, mind you.

The amount of “missed” system sales is estimated to be between 50 and 150, which, at ~$30k a unit at 100 (as an example), that’s ~$3 million in missed sales. This negatively affected the Q2 guide dramatically from the ~$11.3 million for Q2 at the midpoint.

While it is illegal to sell the UltraMist through non-approved channels (written in the contract’s terms of service), people are still doing it. Morgan suggested that they will be looking to do two things to control more of this.

It seems to us that Morgan knows the product really well and the opportunities it can offer, which is why we got involved in the first place, but there really is a disconnect between what’s happening on the ground and how Morgan has been communicating it.

The industry just still seems to be very lumpy and sorting itself out, and the problem with that is that we just don’t know where the bottom is. After Q1, we figured the bottom was in, given Morgan’s commentary, and that stabilization could occur before the eventual market rebound. Evidently, that does not seem to be the case.

The product is good and serves a real-world purpose, but there’s too much noise to figure out what’s going on in the near-term, and Morgan has done a pretty terrible job at communicating what’s going on. This has led us to believe that he doesn’t have a good grip/understanding of what the market is currently going through, and thus, we have decided to move on.

Additionally, the rumor that CMS might potentially roll back the harsh cuts to reimbursement just still seems to be a rumor.

Below is the investor presentation that he used for the event in case anyone wants to reference it.

Disclaimer: We do not hold a position in SANUWAVE Health (SNWV).

Playboy was an interesting conversation and presentation for many reasons. However, the primary reason we were even remotely interested was due to the stock’s persistent lackluster performance over the years and the potential for a much-needed turnaround. At first glance, it looked like operationally, it was making some headway by shifting away from negative business practices (heavy discounting, etc) in an effort to boost margins, and thus, operating income.