10-Q: REMSLEEP Reports Wider Q3 Loss Amid DeltaWave Transition

REMSLEEP Holdings, Inc. reported a significantly wider net loss in Q3 2025, driven by a sharp decline in revenue during its product transition and substantial non-cash compensation expenses.

Summary

• Net loss for the three months ended September 30, 2025, was $(2,312,146), a significant increase from $(277,909) in the prior year period.
• Net loss for the nine months ended September 30, 2025, was $(2,685,406), compared to $(756,088) for the same period in 2024.
• Revenue for Q3 2025 plummeted to $7,454 from $37,260 in Q3 2024, as the company transitioned from selling its ResPlus Auto CPAP Machine to the new DeltaWave product.
• Revenue for the nine months ended September 30, 2025, was $12,278, down from $122,735 in the prior year period.
• Operating expenses for Q3 2025 surged to $2,290,695 from $172,815, primarily due to $2,160,000 in non-cash compensation expense from issuing Series C preferred stock to the CEO and his sister for services.
• Cash at September 30, 2025, decreased to $343,948 from $463,343 at December 31, 2024.
• The company received FDA 510k approval for its DeltaWave product on July 2, 2024, and began selling and adding it to inventory in Q2 2025.
• Disclosure controls and procedures were deemed ineffective as of September 30, 2025, due to a lack of segregation of duties.
• The company continues to face substantial doubt about its ability to continue as a going concern, relying on future debt and/or equity financing.

Sentiment

Score: 2

Explanation: The company reported significantly wider losses and a drastic decline in revenue during its product transition. While the new product received FDA approval and development costs decreased, the company faces substantial doubt about its going concern status, relies heavily on dilutive financing, and has ineffective internal controls. The non-cash compensation to related parties further raises concerns about capital allocation and governance.

Positives

• Gross margin improved from negative $(21,300) in Q3 2024 to positive $7,426 in Q3 2025, despite significantly lower revenue, indicating better profitability on the new DeltaWave product.
• Development expenses decreased significantly by $40,774 (100%) for Q3 and $178,095 (90.5%) for the nine months ended September 30, 2025, as the DeltaWave product development and testing are complete.
• Lease expenses decreased by $13,287 (72.8%) for Q3 and $37,720 (54.5%) for the nine months ended September 30, 2025, due to a new, less expensive lease in a new location.
• Net cash used in operating activities for the nine months ended September 30, 2025, improved to $(373,395) from $(537,686) in the prior year, largely due to non-cash expenses.
• The company received FDA 510k approval for its DeltaWave product on July 2, 2024, and commenced sales and inventory build-up in Q2 2025.

Negatives

• Net loss for the three months ended September 30, 2025, widened significantly to $(2,312,146) from $(277,909) in the prior year.
• Net loss for the nine months ended September 30, 2025, widened to $(2,685,406) from $(756,088) in the prior year.
• Revenue for Q3 2025 decreased by 80% to $7,454 from $37,260 in Q3 2024.
• Revenue for the nine months ended September 30, 2025, decreased by 90% to $12,278 from $122,735 in the prior year.
• Operating expenses for Q3 2025 increased dramatically by over 1,200% to $2,290,695, primarily due to $2,160,000 in non-cash compensation to related parties.
• The company has an accumulated deficit of $17,956,162 as of September 30, 2025.
• Cash balance decreased to $343,948 at September 30, 2025, from $463,343 at December 31, 2024.
• The company's disclosure controls and procedures were not effective due to a lack of segregation of duties.
• Significant dilution from convertible notes payable, which convert at a 25% or 30% discount to market price, and the issuance of 2,000,000 Series C preferred shares (convertible to 600,000,000 common shares) to related parties.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to recurring losses and insufficient cash flow from revenue.
• Future success and viability are dependent on obtaining additional capital financing through debt and/or equity.
• Inability to successfully commercialize its technology and generate sufficient revenues to achieve profitability in an intensely competitive industry.
• Competition from substantially larger and better capitalized competitors.
• Challenges in securing, maintaining, and enforcing a strong intellectual property portfolio.
• Difficulty in attracting additional capital sufficient to finance working capital requirements and investments in plant, property, and equipment.
• Inability to develop a robust sales and marketing infrastructure.
• Challenges in identifying and maintaining relationships with third-party suppliers for raw materials.
• Difficulty in acquiring, developing, or identifying manufacturing capability.
• Inability to attract and retain talented individuals.
• Operational continuity during periods of uncertain general economic or market conditions.
• The company's disclosure controls and procedures were not effective due to a lack of segregation of duties, which could lead to financial reporting errors.
• Highly dilutive convertible debt instruments and preferred stock conversions could significantly increase the number of outstanding common shares.

Future Outlook

The company aims to capture 10% of the sleep apnea market in the next 24 months with its DeltaWave product. It plans to continue financing operations through debt and/or equity as needed and is focused on obtaining funding from new investors and implementing a plan to generate sales to address its going concern issues. Pending adequate financing, the company plans to conduct clinical trials for the DeltaWave.

Management Comments

• Our officers have 35 years of sleep-industry experience, including having been employed at sleep industry companies.
• Our officers invented our DeltaWave CPAP interface (the DeltaWave) as an innovative new device to treat patients with sleep apnea.
• We believe that our DeltaWave is designed to effectively address the stubborn issues that continue to affect a patient's ability to comply with treatment.
• Our goal is to continue to develop sleep products for the treatment of OSA and capture 10% of the market in the next 24 months.
• The Company will continue to finance its operations through debt and/or equity financing as needed.
• Management's plans with regard to these matters encompass the following actions: (i) obtaining funding from new investors to alleviate our working capital deficiency, and (ii) implementing a plan to generate sales.

Industry Context

The company operates in the sleep apnea treatment market, focusing on CPAP interfaces. Its new DeltaWave product aims to address patient compliance and comfort, which are critical issues in the industry, as evidenced by a survey indicating 89% of patients prioritize mask-interface comfort. The transition from its older ResPlus product to the DeltaWave, which received FDA approval, positions it to compete with existing solutions by offering unique airflow characteristics and improved user experience. However, the market is intensely competitive, with larger and better-capitalized players.

Comparison to Industry Standards

• The company's DeltaWave product is positioned to address a key industry challenge: patient compliance with CPAP therapy, which is often hindered by discomfort and 'work of breathing.' This aligns with industry efforts to improve user experience for better treatment adherence.
• The goal to capture 10% of the market in 24 months is ambitious for a company with current revenues of $12,278 for nine months, especially given the presence of established competitors like ResMed and Philips Respironics, which dominate the CPAP device and mask market with extensive product portfolios, distribution networks, and R&D budgets.
• The company's current financial performance, characterized by significant losses and reliance on dilutive financing, falls far short of the financial stability and growth typically seen in successful medical device companies in this sector. For example, leading companies demonstrate consistent revenue growth, positive net income, and robust cash flows from operations to fund R&D and market expansion.

Management Changes

Corporate Governance

Related Party Transactions

• CEO Thomas J. Wood's employment agreement effective January 1, 2025, with compensation of $9,000 per month. Cash payments of $82,500 for the nine months ended September 30, 2025.
• Issuance of 1,600,000 shares of Series C preferred stock to Mr. Wood for services rendered, valued at $1,728,000 (non-cash expense).
• Issuance of 400,000 shares of Series C preferred stock to Anita Michaels (sister of Mr. Wood) for services rendered, valued at $432,000 (non-cash expense).
• Payments of $32,500 to the brother of the CEO for services related to product development during the nine months ended September 30, 2025.
• Accrued compensation of $46,000 due to Russell Bird, the former Chairman, who resigned effective June 1, 2023.

Stakeholder Impact

• Shareholders face significant dilution risk from convertible debt and preferred stock conversions. The substantial net losses and going concern warning indicate high financial risk. Ineffective disclosure controls raise concerns about financial transparency and reliability.
• Employees may face job insecurity due to the company's going concern status.
• Customers could benefit from the new DeltaWave product's improved comfort and compliance features, but the company's financial instability might affect product availability or support.
• Creditors, particularly convertible note holders, face risks related to the company's ability to repay debt, potentially leading to further dilutive conversions.
• Suppliers may experience delays in payments or reduced orders due to the company's liquidity issues and reliance on external financing.

Next Steps

• Obtain funding from new investors to alleviate working capital deficiency.
• Implement a plan to generate sales for the DeltaWave product.
• Conduct clinical trials for the DeltaWave product, pending adequate financing.
• Address the ineffectiveness of disclosure controls and procedures due to lack of segregation of duties.
• Continue to finance operations through debt and/or equity financing as needed.

Key Dates

Recommendation

The company exhibits severe financial distress, with significantly widening net losses and a drastic decline in revenue during a critical product transition. The 'going concern' warning, coupled with a heavy reliance on highly dilutive convertible debt and non-cash compensation to related parties (including preferred stock with 81% voting rights), points to significant shareholder value destruction and poor corporate governance. Ineffective disclosure controls further compound the risk. While the new DeltaWave product has FDA approval, its commercial success is unproven, and the company's financial state makes sustained operations highly questionable without substantial, non-dilutive capital infusion, which is not currently evident. The current trajectory suggests a high probability of further dilution and potential insolvency.

Keywords

sleep apnea, DeltaWave, CPAP, medical device, REMSLEEP Holdings, RMSL, financial results, quarterly report, going concern, convertible debt, related party transactions, corporate governance, FDA approval, product launch