What changed in this filing

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Item 1. Financial Statements

2020-11-10 compared with 2020-08-13 · 623 added, 472 removed, 1552 unchanged (41% of the section changed)

3 unchanged sentences

(in thousands, except share and per share

June 30, 2020

September 30, 2020

December 31, 2019

12 unchanged sentences

Total current liabilities

Capital lease liabilities

Derivative liability

2 unchanged sentences

Commitments and contingencies (Note 8)

Series A 8% Senior

Convertible Preferred stock, par value $0.0001;

8% Senior Convertible Preferred Stock, par value $0.0001;

1,250,000 shares authorized;

250,000 shares issued and outstanding as of

June 30, 2020 and December 31, 2019, (liquidation preference of $1,096,000 and $1,056,000)

250,000 shares issued and outstanding

as of September 30, 2020 and December 31, 2019, (liquidation preference of $1,116,000 and $1,056,000)

Stockholders' Equity:

1 unchanged sentence

shares authorized;

7,723,353 and 1,245,238 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

7,822,375 and 1,245,238 shares issued and outstanding as of September 30, 2020 and December 31, 2019,

Additional paid-in capital

4 unchanged sentences

The condensed consolidated balance sheet as of December 31, 2019 was derived from the audited consolidated balance sheet as of that date.

Share amounts have been retroactively adjusted to reflect

the impact of a 1-for-20 reverse stock split effected in April 2020, as discussed in Note 2.

The accompanying notes are an integral part

of these condensed consolidated financial statements.

Share amounts have been retroactively adjusted to reflect the impact of a 1-for-20 reverse stock split effected in April 2020,

as discussed in Note 2.

The accompanying notes are an integral part of these condensed

consolidated financial statements.

Wireless Technologies, Inc.

Consolidated Statements of Operations

For the three and six months ended June 30,

For the three and nine months ended September 30,

2020 and 2019

(in thousands, except share and per share

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenue

15 unchanged sentences

Net loss per common share - basic and diluted

Weighted average number of

common shares used in computing net loss per common share

average number of common shares used in computing net loss per common share

Share amounts have been retroactively adjusted to reflect

the impact of a 1-for-20 reverse stock split effected in April 2020, as discussed in Note 2.

accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an

integral part of these condensed consolidated financial statements.

Wireless Technologies, Inc.

Consolidated Statements of Comprehensive Loss

For the three and six months ended June 30,

For the three and nine months ended September 30,

2020 and 2019

(in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Other comprehensive loss, net of tax:

5 unchanged sentences

Consolidated Statements of Convertible Preferred Stock and Stockholders’

For the three and six months ended June 30,

Equity (Deficit)

For the three and nine months ended September

30, 2020 and 2019

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connection with convertible notes payable

Convertible preferred stock

Convertible preferred

stock dividend

Stock-based compensation

Restricted stock awards

Release of restricted common

Release of restricted

Balance as of March 31, 2020

Issuance of common stock,

prefunded warrants and warrants, net of public

prefunded warrants and warrants, net of public offering costs

Proceeds from the exercise

7 unchanged sentences

Warrant repricing

Convertible preferred stock

Convertible preferred

stock dividend

Stock-based compensation

3 unchanged sentences

Balance as of June 30, 2020

June 2020 shelf offering

- issuance costs

Convertible preferred

stock dividend

Stock-based compensation

Release of vested restricted

Balance as of September

Preferred Stock

6 unchanged sentences

as of March 31, 2019

from issuance of preferred stock and common stock warrants,

of issuance costs

from issuance of preferred stock and common stock warrants, net of issuance costs

value of derivative liability in connection with issuance of preferred stock

of warrants for common stock in connection with preferred

of warrants for common stock in connection with preferred stock offering

of preferred stock dividend

3 unchanged sentences

as of June 30 , 2019

of warrants for common stock for services

of preferred stock dividend

of common stock upon warrant exercise

of vested restricted common stock

based compensation

of common stock for services

in fair value of common stock warrants upon repricing

as of September 30, 2019

Share amounts have been retroactively adjusted to reflect

4 unchanged sentences

Consolidated Statements of Cash Flows

For the six months ended June 30,

For the nine months ended September 30,

2020 and 2019

(in thousands, except share and per share

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

7 unchanged sentences

Change in fair value of derivative liability

Expense for the issuance of consultant warrants and common stock

Gain on foreign currency translation from closure of subsidiary

Change in fair value of common stock warrants upon repricing

Changes in operating assets and liabilities:

12 unchanged sentences

Proceeds from the issuance of preferred stock and common stock warrants, net of issuance costs

Proceeds from the exercise of prefunded warrants and common stock warrants

Proceeds from the exercise of prefunded warrants and common stock warrants, net of issuance costs

Proceeds from issuance of promissory notes

4 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents as of beginning of period

7 unchanged sentences

Issuance of warrants in connection with common stock offerings

of common stock warrants in connection with preferred stock offering

Issuance of common stock warrants in connection with preferred stock offering

Issuance of warrants in connection with public offering

Fair value of derivative liability in connection with issuance of convertible preferred stock

2 unchanged sentences

Convertible preferred stock dividend

Issuance costs for public offering of common stock in accounts payable

Issuance costs for shelf offering of common stock in accounts payable

Property and equipment purchased through capital lease

The accompanying notes are an integral

part of these condensed consolidated financial statements.

SUMMIT WIRELESS TECHNOLOGIES, INC.

WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2020 and 2019

1 unchanged sentence

Summit Wireless Technologies, Inc.

(also referred to herein as “we”, “us”, “our”, or the “Company”) was originally

formed as a limited liability company in Delaware on July 23, 2010.

The Company develops wireless audio semiconductors and

modules for consumer electronics companies to enable mainstream consumers and audio enthusiasts to experience high quality audio.

(together with its subsidiaries also referred to herein as “we”, “us”, “our”, or the “Company”)

was originally formed as a limited liability company in Delaware on July 23, 2010.

The Company develops wireless audio semiconductors

and modules for consumer electronics companies to enable mainstream consumers and audio enthusiasts to experience high quality

Nasdaq Notification

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of such extension period, if we fail to evidence compliance with Nasdaq Listing Rule 5550(b) upon the filing of our periodic

report for the period ended June 30, 2020, the Nasdaq Staff will provide written notification that our common stock will

be delisted from Nasdaq;

report for the period ended June 30, 2020, the Nasdaq Staff will provide written notification that our common stock will be

delisted from Nasdaq;

however, we may appeal such delisting determination to Nasdaq’s hearing panel.

On May 11, 2020, we

filed a Form 8-K, stating that we believe we had regained compliance with the Stockholders’

Equity Requirement.

Additionally,

on August 13, 2020, we filed our quarterly report for the three months ended June 30, 2020, demonstrating stockholders’

of $11.7M, which was over the minimum equity requirement for continued listing.

On March 24, 2020, we were

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compliance with the minimum bid price requirement, and the matter is closed.

On June 24, 2020, the

Company regained audit committee compliance, in resolution of the March 24, 2020 non-compliance notification described above.

On June 24, 2020, Nasdaq

notified the Company that it has determined that the Company is in compliance with the Audit Committee Rule and the matter has

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2020 and 2019

5 unchanged sentences

The Company has incurred net operating losses each year since inception.

June 30, 2020, the Company had cash and cash equivalents of $12.1 million, an accumulated deficit of approximately $193.8

million and reported net cash used in operations of $4,832,000 during the six months ended June 30, 2020.

September 30, 2020, the Company had cash and cash equivalents of $9.1 million, an accumulated deficit of $196.7 million and

reported net cash used in operations of $7.5 million during the nine months ended September 30, 2020.

The Company expects

7 unchanged sentences

convertible notes.

The Company also obtained a loan of $847,000, pursuant to the Paycheck Protection Program under Division

A, Title I of the Coronavirus Aid, Relief, and Economic Security Act, but the use of funds from such loan, by its terms, has been

The Company also obtained a loan of $847,000, pursuant to the Paycheck Protection Program under Division A,

Title I of the Coronavirus Aid, Relief, and Economic Security Act, but the use of funds from such loan, by its terms, has been

limited to making payroll payments to our employees and other permitted purposes relating to the operation of our business.

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Payroll Protection Program Note Agreement.

Additionally, future capital requirements will depend on many factors, including the rate of revenue growth,

the selling price of the Company’s products, the expansion of sales and marketing activities, the timing and extent of spending

on research and development efforts and the continuing market acceptance of the Company’s products.

These factors raise substantial

doubt about the Company’s ability to continue as a going concern.

Additionally, future capital requirements will depend

on many factors, including the rate of revenue growth, the selling price of the Company’s products, the expansion of sales

and marketing activities, the timing and extent of spending on research and development efforts and the continuing market acceptance

of the Company’s products.

These factors raise substantial doubt about the Company’s ability to continue as a going

Management of the Company intends

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These unaudited condensed consolidated financial statements

include all normal and recurring adjustments that, in the opinion of management, are necessary to fairly state the Company’s financial

position and the results of operations and cash flows.

Interim period results are not necessarily indicative of results of operations

or cash flows for a full year or any subsequent interim period.

include all normal and recurring adjustments that, in the opinion of management, are necessary to fairly state the Company’s

financial position and the results of operations and cash flows.

Interim period results are not necessarily indicative of results

of operations or cash flows for a full year or any subsequent interim period.

The condensed consolidated balance sheet as of December 31,

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Actual results could differ from those estimates.

Concentration of Credit Risk

and Other Risks and Uncertainties

Financial instruments that

potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and

accounts receivable.

Cash and cash equivalents are deposited in demand and money market accounts at one financial institution.

At times, such deposits may be in excess of insured limits.

The Company has not experienced any losses on its deposits of cash

and cash equivalents.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2020 and 2019

Summary of Significant Accounting Policies, continued

Reclassification

Certain reclassifications have

been made to prior periods’

condensed consolidated financial statements to conform to the current period presentation.

reclassifications did not result in any change in previously reported net loss, total assets or stockholders’

Concentration of Credit Risk

and Other Risks and Uncertainties

Financial instruments that potentially

subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.

Cash and cash equivalents are deposited in demand and money market accounts at one financial institution.

At times, such deposits

may be in excess of insured limits.

The Company has not experienced any losses on its deposits of cash and cash equivalents.

The Company’s accounts

receivables are derived from revenue earned from customers located throughout the world.

The Company performs credit evaluations

of its customers’

When necessary, the Company performs credit

evaluations of its customers’

financial condition and sometimes requires partial payment in advance of shipping.

As of June 30,

As of September 30,

2020 and December 31, 2019, there was no allowance for doubtful accounts.

As of June 30, 2020, the Company had one customer

accounting for 80% of accounts receivable.

As of December 31, 2019, the Company had three customers accounting for 37%, 28%

and 20% of accounts receivable.

The Company had two customers accounting for 43% and 20% of its net revenue for the three months

ended June 30, 2020.

The Company had two customers accounting for 55% and 11% of its net revenue for the six months ended

June 30, 2020.

The Company had three customers accounting for 38%, 38% and 15% of its net revenue for the three months ended

June 30, 2019.

The Company had three customers accounting for 53%, 34% and 6% of its net revenue for the six months ended

June 30, 2019.

As of September 30, 2020, the Company had two

customers accounting for 79% and 14% of accounts receivable.

As of December 31, 2019, the Company had three customers accounting

for 37%, 28% and 20% of accounts receivable.

The Company had four customers accounting for 30%, 18%,15% and 11% of its net revenue

for the three months ended September 30, 2020.

The Company had one customer accounting for 44% of its net revenue for the

nine months ended September 30, 2020.

The Company had three customers accounting for 56%, 20% and 17% of its net revenue for

the three months ended September 30, 2019.

The Company had three customers accounting for 54%, 28% and 11% of its net revenue for

the nine months ended September 30, 2019.

The Company’s future results

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responses to combat it have had an increasingly negative impact on the global economy.

Although we have not experienced significant

supply interruptions to date, certain of our third party manufacturers or suppliers have prioritized and allocated more resources

and capacity to supply raw materials to other companies engaged in the study of potential treatments or vaccinations for COVID-19.

We have also restricted access to our facilities to personnel and third parties who perform critical activities that must be performed

on-site and as a result, most of our personnel currently work remotely.

Such remote working policies may negatively impact productivity

and disrupt our business operations.

In view of the rapidly changing business environment, unprecedented market volatility

and heightened degree of uncertainty resulting from COVID-19, we are currently unable to fully determine its future impact

on our business.

However, we are monitoring the progression of the pandemic and its potential effect on our financial position,

results of operations, and cash flows.

Given the fact that our products are sold

through a variety of distribution channels, we expect that our sales will experience more volatility as a result of the changing

and less predictable operational needs of many customers as a result of the COVID-19 pandemic.

We are aware that many companies,

including many of our customers and suppliers, are reporting or predicting negative impacts from COVID-19 on future operating results.

We did observe fluctuating demand for our products and technology between April and September 2020.

Although we have not experienced

significant supply interruptions to date, certain of our third party manufacturers or suppliers have prioritized and allocated

more resources and capacity to supply raw materials to other companies engaged in the study of potential treatments or vaccinations

for COVID-19.

We have also restricted access to our facilities to personnel and third parties who perform critical activities that

must be performed on-site and as a result, most of our personnel currently work remotely.

Such remote working policies may negatively

impact productivity and disrupt our business operations.

In view of the rapidly changing business environment, unprecedented

market volatility and heightened degree of uncertainty resulting from COVID-19, we are currently unable to fully determine

its future impact on our business.

We also cannot be certain how demand may shift over time, as the impacts of the COVID-19

pandemic may go through several phases of varying severity and duration.

However, we are monitoring the progression of the pandemic

and its potential effect on our financial position, results of operations, and cash flows.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Nine Months Ended September 30,

2020 and 2019

Summary of Significant Accounting Policies, continued

Convertible Financial Instruments

8 unchanged sentences

to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable U.S.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

2020 and 2019

Summary of Significant Accounting Policies, continued

When the Company has determined

26 unchanged sentences

share on the commitment date, to shares of common stock, resulting in a discount on the convertible debt.

In an equity-classified

freestanding financial instrument, as of the date that a down round feature is triggered, the Company measures the fair value

of the instrument without the down round feature (that is, before the strike price is reduced) and the fair value of the

financial instrument with a strike price that reflects the adjustment from the down round.

The incremental difference in the

fair value is recorded a deemed dividend.

As the Company has an accumulated deficit, the deemed dividend is recorded as a

reduction of additional paid-in capital in the unaudited condensed consolidated balance sheet.

The Company increases the net

loss available to common stockholders by the amount of the deemed dividend.

In an equity-classified freestanding

financial instrument, as of the date that a down round feature is triggered, the Company measures the fair value of the instrument

without the down round feature (that is, before the strike price is reduced) and the fair value of the financial instrument with

a strike price that reflects the adjustment from the down round.

The incremental difference in the fair value is recorded a deemed

As the Company has an accumulated deficit, the deemed dividend is recorded as a reduction of additional paid-in capital

in the unaudited condensed consolidated balance sheet.

The Company increases the net loss available to common stockholders by the

amount of the deemed dividend.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Nine Months Ended September 30,

2020 and 2019

Summary of Significant Accounting Policies, continued

Revenue Recognition

12 unchanged sentences

Expected costs of assurance warranties and claims are recognized as expense.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

2020 and 2019

Summary of Significant Accounting Policies, continued

Taxes assessed by a governmental

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unconditional.

We do not have any material contract assets as of June 30, 2020 or December 31, 2019.

We do not have any material contract assets as of September 30, 2020 or December 31, 2019.

(in thousands)

September 30,

Contract liabilities

During the three and six months ended June 30, 2020 the Company recognized $150,000 and $436,000, respectively, of revenue that was included in the contract balances as of December 31, 2019.

During the three and nine months ended September 30, 2020, the Company recognized $0 and $436,000, respectively, of revenue that was included in the contract balances as of December 31, 2019.

Revenue by Geographic Area

4 unchanged sentences

can be found in the condensed consolidated financial statements.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Nine Months Ended September 30,

2020 and 2019

Summary of Significant Accounting Policies, continued

Comprehensive Loss

5 unchanged sentences

and the final closure of the subsidiary.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

2020 and 2019

Summary of Significant Accounting Policies, continued

Foreign Currency

12 unchanged sentences

local currency to the U.S.

dollar are recorded in the condensed consolidated statement of operations in other expense,

net and were not material for the three and six months ended June 30, 2020 and 2019.

dollar are recorded in the condensed consolidated statement of operations in other expense, net and

were not material for the three and nine months ended September 30, 2020 and 2019.

Advertising Costs

1 unchanged sentence

to sales and marketing expenses as incurred.

Advertising costs for the three and six months ended June 30, 2020 were $3,000

Advertising costs for the three and nine months ended September 30, 2020 were

$65,000 and $81,000, respectively.

Advertising costs for the three and six months ended June 30, 2019 were not material.

Advertising costs for the three and nine months ended September 30, 2019 were not material.

Reverse Stock Split

20 unchanged sentences

restricted stock units and shares issuable upon the conversion of convertible notes payable are considered to be potentially dilutive

For the three and six months

ended June 30, 2020, warrants to purchase 7,337,199 shares of common stock, 250,000 shares of convertible preferred stock

For the three and nine months

ended September 30, 2020, warrants to purchase 7,337,199 shares of common stock, 250,000 shares of convertible preferred stock

and 98,669 shares of restricted stock have been excluded from the calculation of net loss per common share because the inclusion

would be antidilutive.

For the three and six months ended June 30, 2019, warrants to purchase 453,000 shares of common stock,

250,000 shares of preferred stock and 24,640 shares of restricted stock have been excluded from the calculation of net loss per

common share because the inclusion would be antidilutive.

For the three and nine months ended September 30, 2019, warrants to purchase 8,906,955 shares of common

stock, 250,000 shares of preferred stock and 241,132 shares of restricted stock have been excluded from the calculation of net

loss per common share because the inclusion would be antidilutive.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2020 and 2019

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As a result, we will adopt the update for our fiscal year beginning after December 15,

The Company does not expect the adoption of this standard to significantly impact the condensed consolidated financial statements.

The Company is evaluating the impact of ASU 2016-02 on its condensed consolidated financial statements.

In August 2020, the FASB issued

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Inventories (in thousands):

September 30,

Work in progress

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2020 and 2019

1 unchanged sentence

Property and equipment, net (in thousands):

September 30,

Machinery and equipment

5 unchanged sentences

Depreciation and amortization

expense for the three months ended June 30, 2020 and 2019 was $15,000 and $14,000, respectively.

expense for the three months ended September 30, 2020 and 2019 was $17,000 and $15,000, respectively.

Depreciation and amortization

expense for the six months ended June 30, 2020 and 2019 was $29,000 and $28,000, respectively.

expense for the nine months ended September 30, 2020 and 2019 was $46,000 and $43,000, respectively.

Accrued liabilities (in thousands):

September 30,

Accrued vacation

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On March 31, 2020, the outstanding debt owed to such investor pursuant to the Funding Agreement was fully repaid.

During the three and six months

ended June 30, 2020, the Company recognized $0 and $20,000, respectively, of interest expense from amortization of debt discounts

related to the Funding Agreement.

SUMMIT WIRELESS TECHNOLOGIES, INC.

During the three and nine months

ended September 30, 2020, the Company recognized $0 and $20,000, respectively, of interest expense from amortization of debt

discounts related to the Funding Agreement.

WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2020 and 2019

53 unchanged sentences

Control (as defined in the March 2020 Purchase Agreement).

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

2020 and 2019

Borrowings, continued

At any time after the closing

3 unchanged sentences

for such shares of common stock or common stock equivalents.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Nine Months Ended September 30,

2020 and 2019

Borrowings, continued

In connection with the March 2020

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As a result of two adjustments in the

initial conversion price, the Company modified the warrant agreements and recorded a deemed dividend of $134,000 during the six

months ended June 30, 2020 (See Note 6 –

initial conversion price, the Company modified the warrant agreements and recorded a deemed dividend of $134,000 during the nine

months ended September 30, 2020 (See Note 6 –

Convertible Preferred Stock and Stockholders’

8 unchanged sentences

During the three and

six months ended June 30, 2020, the Company recognized $1,352,000 and $1,389,000 of interest expense from the amortization

of debt discounts as a result of the passage of time and the payoff of the March 2020 Note.

Payroll Protection

Program Note Agreement

nine months ended September 30, 2020, the Company recognized $0 and $1,389,000 of interest expense from the amortization of

debt discounts as a result of the passage of time and the payoff of the March 2020 Note.

Payroll Protection Program

Note Agreement

On May 3, 2020, we received

3 unchanged sentences

The PPP Loan was funded on May 7, 2020.

The PPP Loan, which

is in the form of a PPP promissory note and agreement, dated May 3, 2020 (the “PPP Note Agreement”), matures on

May 3, 2022 and bears interest at a rate of 1.00% per annum, payable monthly commencing on November 1, 2020.

Loan may be prepaid by us at any time prior to maturity with no prepayment penalties.

We intend to use the PPP Loan amount for

payroll costs, costs used to continue group health care benefits, rent, and utilities.

Under the terms of the PPP Note Agreement,

certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses, as described in the PPP Note Agreement.

The PPP Loan, which is in

the form of a PPP promissory note and agreement, dated May 3, 2020 (the “PPP Note Agreement”), matures on May 3,

2022 and bears interest at a rate of 1.00% per annum.

Pursuant to a change in guidance by the U.S.

Small Business Administration,

the initial monthly payment date of the PPP Note Agreement was deferred from November 1, 2020 to August 18, 2021.

may be prepaid by us at any time prior to maturity with no prepayment penalties.

We have used and intend to continue to use the

PPP Loan amount for payroll costs, costs used to continue group health care benefits, rent, and utilities.

Under the terms of the

PPP Note Agreement, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses, as described in the

PPP Note Agreement.

Fair Value Measurements

15 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2020 and 2019

1 unchanged sentence

The Company’s financial

assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019

assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2020 and December 31,

2019 by level within the fair value hierarchy, are as follows:

(in thousands)

June 30, 2020

September 30, 2020

Quoted prices

Significant unobservable inputs

Derivative liability

2 unchanged sentences

Quoted prices

Significant unobservable inputs

Derivative liability

1 unchanged sentence

There were no transfers between

Level 1, 2 or 3 during the three and six months ended June 30, 2020 or June 30, 2019.

Level 1, 2 or 3 during the three and nine months ended September 30, 2020 or September 30, 2019.

Warrant Liability

1 unchanged sentence

a summary of changes in fair value of the Company’s warrant liability measured at fair value using significant unobservable

inputs (Level 3) for the three and six months ended June 30, 2020 and 2019:

the three months ended

the six months ended

inputs (Level 3) for the three and nine months ended September 30, 2020 and 2019:

For the three months ended

For the nine months ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Beginning balance

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2020 and 2019

2 unchanged sentences

significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liability that is categorized within

Level 3 of the fair value hierarchy as of June 30, 2020 and December 31, 2019 is as follows:

June 30, 2020

Level 3 of the fair value hierarchy as of September 30, 2020 and December 31, 2019 is as follows:

September 30, 2020

December 31, 2019

5 unchanged sentences

a summary of changes in fair value of the Company’s derivative liability measured at fair value using significant unobservable

inputs (Level 3) for the three and six months ended June 30, 2020 and 2019:

The Three Months Ended

The Six Months Ended

in fair value

As of June 30, 2020, the

Company measured the fair value of the derivative by estimating the fair value of the Series A Preferred Stock as if conversion

occurred on June 30, 2020.

The Company calculated value of the conversion feature using the Fixed Conversion Price of the

Series A Preferred Stock, as adjusted to 95% of the volume weighted average price of the common stock for the previous ten

trading days and the specified floor price of $30.00.

There was no change in the fair value of the derivative liability for the

six months ended June 30, 2020 because the volume weighted average price of the common stock was below the specified floor

inputs (Level 3) for the three and nine months ended September 30, 2020 and 2019:

For the three months ended

For the nine months ended

(in thousands)

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Beginning balance

Change in fair value

Ending balance

As of September 30, 2020,

the Company measured the fair value of the derivative by estimating the fair value of the Series A Preferred Stock as if conversion

occurred on September 30, 2020.

The Company calculated value of the conversion feature using the Fixed Conversion Price of

the Series A Preferred Stock, as adjusted to 95% of the volume weighted average price of the common stock for the previous

ten trading days and the specified floor price of $30.00.

There was no change in the fair value of the derivative liability for

the nine months ended September 30, 2020 because the volume weighted average price of the common stock was below the specified

Convertible Preferred Stock and Stockholders’

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2020 and 2019

Convertible Preferred Stock and Stockholders’

Equity, continued

The authorized, issued and outstanding

shares of Series A Preferred Stock and liquidation preferences as of June 30, 2020, were as follows:

shares of Series A Preferred Stock and liquidation preferences as of September 30, 2020, were as follows:

Series A 8 % Senior Convertible Preferred Stock

11 unchanged sentences

The Company accrued

dividends of $20,000 and $40,000 for the three and six months ended June 30, 2020, respectively.

dividends of $20,000 and $60,000 for the three and nine months ended September 30, 2020, respectively.

Rights —

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2020 and 2019

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2020 and 2019

9 unchanged sentences

In the event an employee voluntarily resigns, the release dates of the shares will be extended such that only 16.5%

of the shares are released every nine months, until 100% are released.

of the shares are released every six months, until 100% are released.

In the event that a director voluntarily resigns, each of

the release dates will be extended nine months.

For the three and six

months ended June 30, 2020,0 and 353 shares of restricted stock were released with an intrinsic value of approximately

the release dates will be extended six months.

For the three and nine months

ended September 30, 2020, 353 and 706 shares of restricted stock were released with an intrinsic value of approximately $1,000

and $3,000, respectively.

As of June 30, 2020, there were 705 shares of restricted stock remaining under the

January 2018 Restricted Stock Grant to be released to a terminated employee in two equal tranches over the next 8

As of September 30, 2020, there were 352 shares of restricted stock remaining under the January 2018

Restricted Stock Grant to be released to a terminated employee in one tranche over the next 5 months.

On January 4, 2019, the

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In light of this performance vesting condition, the Company has not recorded any stock

compensation expense for the issuance of these shares during the three and six months ended June 30, 2020 and 2019, respectively.

compensation expense for the issuance of these shares during the three and nine months ended September 30, 2020 and 2019,

respectively.

On September 9, 2019, the

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A summary of activity related

to restricted stock awards for the six months ended June 30, 2020 is presented below:

to restricted stock awards for the nine months ended September 30, 2020 is presented below:

Weighted-Average

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Non-vested as of January 1, 2020

Non-vested as of June 30, 2020

As of June 30, 2020, the

Non-vested as of September 30, 2020

As of September 30, 2020, the

unamortized compensation costs related to the unvested restricted stock awards was approximately $210,000 which is to be amortized

on a straight-line basis over a weighted-average period of approximately 2.9 years.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Nine Months Ended September 30,

2020 and 2019

Convertible Preferred Stock and Stockholders’

Equity, continued

February 2020 Private

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equity in order to comply with Nasdaq Listing Rule 5550(b) and for general corporate purposes.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

2020 and 2019

Convertible Preferred Stock and Stockholders’

Equity, continued

The February 2020 Warrants

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as a cost of issuance and an increase to additional paid-in capital on the accompanying condensed consolidated balance sheet.

Equity Transactions in the

three months ended June 30, 2020

On April 23, 2020, the

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an exercise price of $3.90 per share and is fully vested but not exercisable until October 18, 2020.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Nine Months Ended September 30,

2020 and 2019

Convertible Preferred Stock and Stockholders’

Equity, continued

On May 14, 2020, we entered

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Alexander Settlement Shares.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

2020 and 2019

Convertible Preferred Stock and Stockholders’

Equity, continued

On May 18, 2020, we registered

for resale, pursuant to a prospectus supplement to our shelf registration statement, an aggregate of 60,250 shares of common stock,

50,000 of which shares were the Alexander Settlement Shares, and the remaining 10,250 of such shares which were issued to one

of the Company’s vendors pursuant to the Settlement Letter, dated May 12, 2020, by and between us and such vendor.

50,000 of which shares were the Alexander Settlement Shares, and the remaining 10,250 of such shares which were issued to one of

the Company’s vendors pursuant to the Settlement Letter, dated May 12, 2020, by and between us and such vendor.

On June 4, 2020, we entered

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States and internationally.

Warrants for Shares

of Common Stock

The Company has issued warrants

to purchase shares of common stock to employees and consultants as compensation for services rendered, as well as in conjunction

with the purchase of shares of common stock in equity and debt transactions.

During the three months ended

June 30, 2020, as described in more detail just below, the Company issued the following warrants on the dates as noted below.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2020 and 2019

1 unchanged sentence

Equity, continued

Equity Transactions in the

three months ended September 30, 2020

2020 Stock Incentive Plan

On July 27, 2020, the board

of directors adopted the Company’s 2020 Stock Incentive Plan (the “2020 Plan”) and the reservation of an aggregate

of 650,000 shares of the Company’s common stock authorized for issuance under the 2020 Plan, the adoption of which remains

subject to stockholder approval.

The 2020 Plan authorizes the grant of equity-based compensation to the Company’s senior

managers, employees, directors, consultants, professionals and service providers in the form of stock options, restricted stock

and restricted stock units.

On July 27, 2020, the Company also granted, subject to stockholder approval, an aggregate of 614,824

restricted stock units to senior managers, employees, directors, consultants.

Each of the awards are scheduled to vest on the first,

second, and third anniversaries of August 15, 2020, so long as such award recipient remains in service of the Company on each such

Each restricted stock unit represents the right to receive one share of the Company’s common stock under the

Notwithstanding the grants of such awards, the 2020 Plan will terminate if the Company does not obtain stockholder approval

on or before July 27, 2021, and shares of common stock may not be issued pursuant to restricted stock units until the Company’s

stockholders approve the 2020 Plan and such awards granted.

If stockholder approval of the 2020 Plan is not obtained within such

period, such restricted stock units will automatically expire and terminate.

The Company has not recorded stock based compensation

for such grants as shareholder approval has not occurred.

(See Note 11 –

Subsequent Events - Annual Meeting.)

Acceleration of Vesting of

Restricted Stock

In addition, on July 27, 2020,

the Company fully accelerated the vesting terms of 39,429 outstanding shares of restricted common stock that had been previously

awarded under the LTIP and 7,500 outstanding shares of restricted common stock that had been previously awarded outside the LTIP

Oliva as an inducement grant, such that all such stock awards are considered fully vested as of July 27, 2020.

In connection

with the acceleration of such vesting terms, the Company recorded a stock based compensation charge of $649,000 and recorded a

bonus expense of $57,000, as the Company paid the payroll taxes imposed on the holders of such awards.

Warrants for Shares of Common

The Company has issued warrants

to purchase shares of common stock to employees and consultants as compensation for services rendered, as well as in conjunction

with the purchase of shares of common stock in equity and debt transactions.

No such warrants were issued during the three months

ended September 30, 2020.

In connection with the March 2020

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condensed consolidated balance sheets.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Nine Months Ended September 30,

2020 and 2019

Convertible Preferred Stock and Stockholders’

Equity, continued

Warrants for Shares

of Common Stock, continued

Concurrent with the April 2020

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0.45% and expected life of 5.5 years.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

2020 and 2019

Convertible Preferred Stock and Stockholders’

Equity, continued

In connection with the offering

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0.32% and expected life of 5.5 years.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Nine Months Ended September 30,

2020 and 2019

Convertible Preferred Stock and Stockholders’

Equity, continued

Information regarding warrants

for common stock outstanding and exercisable as of June 30, 2020 is as follows:

for common stock outstanding and exercisable as of September 30, 2020 is as follows:

Outstanding as of

Exercisable as of

June 30, 2020

September 30, 2020

$2.32 - $3.90

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$108 - $207.00

Warrants exercisable as of June 30,

Warrants exercisable as of September 30,

2020 excludes warrants to purchase 3,750 shares of common stock issued to Alexander, which are fully vested, but are exercisable

after October 16, 2020, and 120,400 shares of common stock issued to Maxim, which are fully vested, but are exercisable in

the amounts of 20,400 and 100,000 shares, after September 19, 2020 and October 18, 2020, respectively.

Additionally,

warrants to purchase 20,722 shares of common stock which are shown above with a price of $15.80 are Pre-Funded Warrants under which

the holder must only pay $0.20 per share to complete the exercise.

after October 16, 2020, and 100,000 shares of common stock issued to Maxim, which are fully vested, but are exercisable after

October 18, 2020.

Additionally, warrants to purchase 20,722 shares of common stock which are shown above with a price of $15.80

are Pre-Funded Warrants under which the holder must only pay $0.20 per share to complete the exercise.

The Company recorded a provision

for income taxes of $3,000 for the six months ended June 30, 2020 and $7,000 for the six months

ended June 30, 2019.

The provision for income taxes recorded for the six months ended June 30, 2019 was primarily

due to state income tax expense.

for income taxes of $3,000 for the nine months ended September 30, 2020 and $7,000 for the nine

months ended September 30, 2019.

The provision for income taxes recorded for the nine months ended September 30,

2020 and 2019 primarily relates to state income tax expense.

The Company’s effective

tax rate was (0.05)% for the six months ended June 30, 2020 and was (0.13)% for the six months ended June 30,

The difference between the effective tax rate and the federal statutory tax rate for the six months ended June 30,

2020 and 2019 primarily relates to the valuation allowance on the Company’s deferred tax assets.

tax rate was (0.03)% for the nine months ended September 30, 2020 and was (0.09)% for the nine months ended

September 30, 2019.

The difference between the effective tax rate and the federal statutory tax rate for the nine months

ended September 30, 2020 and 2019 primarily relates to the valuation allowance on the Company’s deferred tax assets.

For interim periods, the Company

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tax laws or rates in the interim periods in which the changes occur.

As of June 30, 2020

As of September 30,

2020 and December 31, 2019, the Company retains a full valuation allowance on its deferred tax assets.

The realization of the Company’s

deferred tax assets depends primarily on its ability to generate taxable income in future periods.

The amount of deferred tax assets

considered realizable in future periods may change as management continues to reassess the underlying factors it uses in estimating

future taxable income.

The provision for income taxes for the six months

ended June 30, 2020 and 2019 was calculated on a jurisdiction basis.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

2020 and 2019

Income Taxes , continued

The realization of

the Company’s deferred tax assets depends primarily on its ability to generate taxable income in future periods.

of deferred tax assets considered realizable in future periods may change as management continues to reassess the underlying factors

it uses in estimating future taxable income.

The provision for income taxes for the nine

months ended September 30, 2020 and 2019 was calculated on a jurisdiction basis.

On March 27, 2020, the

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have on the Company’s condensed consolidated financial statements and disclosures.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Nine Months Ended September 30,

2020 and 2019

Income Taxes, continued

On June 29, 2020, California Governor Gavin Newsom signed Assembly Bill 85 ("AB 85") into law as part of the California 2020 Budget Act,

which temporarily suspends the use of California net operating losses and imposes a cap on the amount of business incentive tax credits

that companies can utilize against their net income for tax years 2020, 2021, and 2022.

We analyzed the provisions of AB 85 and determined

there was no impact on our provision for income taxes for the current period and will continue to evaluate the impact, if any, AB 85 may

have on the Company's condensed consolidated financial statements and disclosures.

Commitments and Contingencies

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The Company rents its Beaverton,

Oregon office under an operating lease, which was set to expire in October 2018.

In July 2018, the Company extended its

lease through October 31, 2020.

Under the terms of the lease, the Company is responsible for taxes, insurance and maintenance

The Company recognizes rent expense on a straight-line basis over the lease period.

Rent expense for the three months

ended June 30, 2020 and 2019 was $86,000 and $99,000, respectively.

Rent expense for the six months ended June 30, 2020

and 2019 was $201,000 and $189,000, respectively.

Future annual minimum lease payments under the non-cancelable operating lease

as of June 30, 2020 is $121,000 for the year ending December 31, 2020.

Oregon office under an operating lease, which is set to expire October 31, 2020.

Under the terms of the lease, the Company

is responsible for taxes, insurance and maintenance expense.

The Company recognizes rent expense on a straight-line basis over

the lease period.

Rent expense for the three months ended September 30, 2020 and 2019 was $87,000 and $93,000, respectively.

Rent expense for the nine months ended September 30, 2020 and 2019 was $288,000 and $282,000, respectively.

Future annual minimum

lease payments under the non-cancelable operating lease as of September 30, 2020 is $30,000 for the year ending December 31,

On August 18, 2020, the Company

signed an operating lease that begins November 1, 2020, to rent office space in Beaverton Oregon, to replace the lease that expires

on October 31, 2020.

The lease expires on January 31, 2024.

The following are the annual minimum lease payments for the four years

ending December 31, 2021 through December 31, 2024:

$163,000, $153,000, $173,000, and $15,000.

Capital Leases

During August 2020, the Company

entered in to a lease agreement for equipment under a capital lease with a term of 36 months.

The equipment under the lease is

collateral for the agreement and is included within property and equipment, net on the condensed consolidated balance sheets.

minimum lease commitments for the capital lease as of September 30, 2020 are as follows:

(in thousands)

Payments due in:

Year ending December 31, 2020 (remaining)

Year ending December 31, 2021

Year ending December 31, 2022

Year ending December 31, 2023

Total minimum lease payments

Amounts representing interest

Present value of capital lease obligations

Current portion of capital lease obligations

lease liabilities

Obligations under the capital

lease are included in accrued liabilities and capital lease liabilities on the condensed consolidated balance sheets.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Nine Months Ended September 30,

2020 and 2019

Commitments and Contingencies, continued

Contingencies

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counsel that Alexander intended to file an action in connection with such claims.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

2020 and 2019

Commitments and Contingencies, continued

On May 14, 2020, we entered

into the Alexander Settlement Agreement.

See Note 1 –

Business and Viability of Operations - for a description of the Alexander

into a settlement agreement with Alexander (the “Alexander Settlement Agreement”), pursuant to which, in consideration

for Alexander releasing us from all claims against us arising out of that certain engagement agreement, dated February 6,

2020, that we entered into with Alexander (the “Alexander Engagement Agreement”), other than indemnification for certain

third-party claims, we agreed to (i) pay Alexander a one-time cash payment of $125,000 and (ii) issue to Alexander 50,000

shares of our common stock (the “Alexander Settlement Shares”) which had a value of approximately $111,000.

released Alexander from the same type of claims against Alexander, other than indemnification for certain third-party claims.

connection with the Alexander Settlement Agreement, on May 14, 2020, we also entered into a leak-out agreement with Alexander

(the “Alexander Leak-Out Agreement”), pursuant to which Alexander was not permitted to dispose of more than 5,000 shares

of common stock in any trading day, commencing on the date of such agreement and ending on the date on which Alexander no longer

holds any Alexander Settlement Shares.

Upon signing the Alexander Settlement

Agreement, the Company recorded a charge of $236,000 to general and administrative expense in the six months ended in June 30,

Agreement, the Company recorded a charge of $236,000 to general and administrative expense in the nine months ended on September 30,

The Company’s management

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condensed consolidated financial statements.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Nine Months Ended September 30,

2020 and 2019

Related Parties

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private financings and as an underwriter for the Company’s IPO.

As of June 30, 2020 and December 31, 2019, Mr.

owned less than 1% of the outstanding shares of the Company’s common stock.

As of September 30, 2020 and December 31, 2019,

Gazdak owned less than 1% of the outstanding shares of the Company’s common stock.

On October 7, 2019, Mr.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2020 and 2019

40 unchanged sentences

matter related to the Company’s operations, policies or practices.

As of June 30, 2020 the Medalist Funds owned less

than 5% of the outstanding shares of the Company’s common stock.

As of September 30, 2020 the Medalist Funds owned

less than 5% of the outstanding shares of the Company’s common stock.

As of December 31, 2019, the Medalist Funds owned

8.3% of the outstanding shares of the Company’s common stock.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Nine Months Ended September 30,

2020 and 2019

Related Parties, continued

Helge Kristensen

6 unchanged sentences

Inizio Capital, an investment company based in the Cayman Islands.

For the three and six months

ended June 30, 2020 and 2019, Hansong Technology purchased modules from the Company of approximately $18,000 and $3,000, respectively,

and made payments to the Company of approximately $1,000 and $6,000, respectively.

For the three months ended June 30, 2020 and

2019, Hansong Technology sold speaker products to the Company of approximately $29,000 and $4,000, respectively, and the Company

made payments to Hansong Technology of approximately $0 and $4,000, respectively.

For the six months ended June 30, 2020 and 2019,

Hansong Technology sold speaker products to the Company of approximately $29,000 and $36,000, respectively, and the Company made

payments to Hansong Technology of approximately $0 and $4,000, respectively.

As of June 30, 2020 and December 31, 2019,

Kristensen and affiliates owned less than 1.0% of the outstanding shares of the Company’s common stock.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Six Months Ended June 30,

2020 and 2019

For the three months ended September

30, 2020 and 2019, Hansong Technology purchased modules from the Company of approximately $137,000 and $44,000, respectively, and

made no material payments to the Company during that period.

For the three months ended September 30, 2020 and 2019, Hansong Technology

sold speaker products to the Company of approximately $8,000 and $9,000, respectively, and the Company made payments to Hansong

Technology of approximately $38,000 and $9,000, respectively.

For the nine months ended September 30, 2020 and 2019, Hansong Technology

purchased modules from the Company of approximately $155,000 and $47,000, respectively, and made payments to the Company of approximately

$1,000 and $6,000, respectively.

For the nine months ended September 30, 2020 and 2019, Hansong Technology sold speaker products

to the Company of approximately $8,000 and $13,000, respectively, and the Company made payments to Hansong Technology of approximately

$67,000 and $44,000, respectively.

As of September 30, 2020 and December 31, 2019, Mr.

Kristensen and affiliates

owned less than 1% of the outstanding shares of the Company’s common stock.

Segment Information

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Net revenue by geographic region for the three and

six months ended June 30, 2020 and 2019 was as follows:

nine months ended September 30, 2020 and 2019 was as follows:

(in thousands)

For the three months ended

For the six months ended

For the nine months ended

September 30,

United States

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assets are located in the United States.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

For the Nine Months Ended September 30,

2020 and 2019

Subsequent Events

Adoption of 2020 Stock Incentive Plan

On July 27, 2020, the board

of directors adopted the Company’s 2020 Stock Incentive Plan (the “2020 Plan”) and the reservation of an aggregate

of 650,000 shares of the Company’s common stock authorized for issuance under the 2020 Plan, the adoption of which remains

subject to stockholder approval.

The 2020 Plan authorizes the grant of equity-based compensation to the Company’s senior

managers, employees, directors, consultants, professionals and service providers in the form of stock options, restricted stock

and restricted stock units.

On July 27, 2020, the Company also granted, subject to stockholder approval, an aggregate of 614,824

restricted stock units to senior managers, employees, directors, consultants.

Each of the awards are scheduled to vest on the first,

second, and third anniversaries of August 15, 2020, so long as such award recipient remains in service of the Company on each such

Each restricted stock unit represents the right to receive one share of the Company’s common stock under the

Notwithstanding the grants of such awards, the 2020 Plan will terminate if the Company does not obtain stockholder approval

on or before July 27, 2021, and shares of common stock may not be issued pursuant to restricted stock units until the Company’s

stockholders approve the 2020 Plan and such awards granted.

If stockholder approval of the 2020 Plan is not obtained within such

period, such restricted stock units will automatically expire and terminate.

Acceleration of Vesting of Restricted

In addition, on July 27, 2020,

the Company fully accelerated the vesting terms of 39,429 outstanding shares of restricted common stock that had been previously

awarded under the LTIP and 7,500 outstanding shares of restricted common stock that had been previously awarded outside the LTIP

Oliva as an inducement grant, such that all such stock awards are considered fully vested as of July 27, 2020.

will pay all taxes imposed on the holders of such awards in connection with the acceleration of such vesting terms.

Annual Meeting

On October 20, 2020, the Company

held the 2020 Annual Meeting of Stockholders and approved the adoption of the Company’s 2020 Incentive Stock Plan and the

reservation of an aggregate of 650,000 shares of the Company’s common stock.

In connection with the approval, the Company

issued 614,824 restricted stock units to employees, directors and consultants.

2020 Private Placement Settlement

On November 9, 2020, in order to resolve a dispute between

certain investors (the “Holders”) and the Company regarding certain registration rights in connection with the February

2020 Private Placement, the Company entered into a settlement and release agreement with each of the Holders (the “Settlement

Agreement”), pursuant to which (i) the Company and the Holders agreed to amend the original warrants issued in February

2020 (the “Original Warrants”) to provide for the purchase of one additional share of common stock for each share

of common stock available under the Original Warrants, (ii) the Company and the Holders agreed to amend the Original Warrants

to reduce the exercise price to $2.55, and (iii) the Company agreed to issue an additional 236,375 shares of common stock and

236,369 common stock purchase warrants to purchase up to 236,369 shares of common stock.

As consideration for the foregoing, the

Holders agreed to release any and all claims they may have against the Company, including, but not limited to, claims arising

in connection with any securities held by the Holders.

Management’s Discussion and Analysis of

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The units were issued pursuant to a Unit Purchase Agreement, dated February 4, 2020, and a subscription agreement, dated February 28,

2020 by and among us and the purchasers signatory thereto.

In connection with the February 2020 Private Placement, we paid

Alexander Capital, L.P.

(“Alexander”) cash fees of $83,000 and issued to Alexander a warrant to purchase 4,553 shares

of common stock.

2020 by and among us and the purchasers’

signatory thereto.

In connection with the February 2020 Private Placement,

we paid Alexander Capital, L.P.

(“Alexander”) cash fees of $83,000 and issued to Alexander a warrant to purchase 4,553

shares of common stock.

Such warrant is exercisable at a per share price of $8.80 and is exercisable at any time during the five-year

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The PPP Loan was funded on May 7, 2020.

The PPP Loan, which is in the

form of a PPP promissory note and agreement, dated May 3, 2020 (the “PPP Note Agreement”), matures on May 3,

2022 and bears interest at a rate of 1.00% per annum, payable monthly commencing on November 1, 2020.

The PPP Loan may be

prepaid by us at any time prior to maturity with no prepayment penalties.

We intend to use the PPP Loan amount for payroll costs,

costs used to continue group health care benefits, rent, and utilities.

Under the terms of the PPP Note Agreement, certain amounts

of the PPP Loan may be forgiven if they are used for qualifying expenses, as described in the PPP Note Agreement.

The PPP Loan, which is in the form of a

PPP promissory note and agreement, dated May 3, 2020 (the “PPP Note Agreement”), matures on May 3, 2022 and

bears interest at a rate of 1.00% per annum.

Pursuant to a change in guidance by the U.S.

Small Business Administration, the initial

monthly payment date of the PPP Note Agreement was deferred from November 1, 2020 to August 18, 2021.

The PPP Loan may be prepaid

by us at any time prior to maturity with no prepayment penalties.

We have used and intend to continue to use the PPP Loan amount

for payroll costs, costs used to continue group health care benefits, rent, and utilities.

Under the terms of the PPP Note Agreement,

certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses, as described in the PPP Note Agreement.

On May 14, 2020, we entered into a

27 unchanged sentences

all of the expenses incurred in connection with the registration of the Shares.

On June 4, 2020, we entered into

a securities purchase agreement (the “June 4 th Purchase Agreement”) with several accredited investors

On June 4, 2020, we entered into a

securities purchase agreement (the “June 4 th Purchase Agreement”) with several accredited investors

providing for the issuance of (i) 2,275,000 shares of the Company’s common stock and (ii) warrants, with a term

4 unchanged sentences

Purchase Agreement, the investors purchased all of the securities sold thereby for an aggregate purchase price of $5,801,000.

Pursuant to the June 4 th Purchase Agreement, an aggregate of 2,275,000 shares of common stock were issued to the

investors in a registered direct offering pursuant to a prospectus supplement to the Company’s currently effective registration

statement on Form S-3, which was declared effective on September 6, 2019.

The Company filed the prospectus supplement

on June 5, 2020.

to the June 4 th Purchase Agreement, an aggregate of 2,275,000 shares of common stock were issued to the investors

in a registered direct offering pursuant to a prospectus supplement to the Company’s currently effective registration statement

on Form S-3, which was declared effective on September 6, 2019.

The Company filed the prospectus supplement on June 5,

Maxim acted as the placement agent.

The warrants were issued to the investors in a concurrent private placement

transaction pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of

the Securities Act and/or Regulation D promulgated thereunder.

The Company paid Maxim a fee of approximately $464,000, which was

equal to 8% of the aggregate purchase price paid by investors placed by Maxim and certain expenses.

The June 4 th

Purchase Agreement contains customary representations, warranties and agreements of the Company and the investors and customary

indemnification rights and obligations of the parties thereto.

The offering of the securities pursuant to the June 4 th

Purchase Agreement was closed on June 8, 2020.

The Company will use the net proceeds from this Offering for working

capital, capital expenditures, product development, and other general corporate purposes, including investments in sales and marketing

in the United States and internationally.

On June 9, 2020, we entered into

a securities purchase agreement (the “June 9 th Purchase Agreement”) with several accredited investors

The warrants were issued to the investors in a concurrent private placement transaction

pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the

Securities Act and/or Regulation D promulgated thereunder.

The Company paid Maxim a fee of approximately $464,000, which was equal

to 8% of the aggregate purchase price paid by investors placed by Maxim and certain expenses.

The June 4 th Purchase

Agreement contains customary representations, warranties and agreements of the Company and the investors and customary indemnification

rights and obligations of the parties thereto.

The offering of the securities pursuant to the June 4 th Purchase

Agreement was closed on June 8, 2020.

The Company will use the net proceeds from this Offering for working capital, capital

expenditures, product development, and other general corporate purposes, including investments in sales and marketing in the United

States and internationally.

On June 9, 2020, we entered into a

securities purchase agreement (the “June 9 th Purchase Agreement”) with several accredited investors

providing for the issuance of (i) 2,040,000 shares of the Company’s common stock and (ii) warrants, with a term

of 5.5 years, to purchase an aggregate of up to 2,040,000 shares of common stock at an exercise price of $2.61 per share, subject

to customary adjustments thereunder, which warrants were immediately exercisable upon issuance and on a cashless basis if the

Warrants have not been registered on or before six months after the date of issuance.

Pursuant to the June 9 th

Purchase Agreement, the investors purchased all of the securities sold thereby for an aggregate purchase price of $5,324,000.

Pursuant to the June 9 th Purchase Agreement, an aggregate of 2,040,000 shares of common stock were issued to the

investors in a registered direct offering, pursuant to a prospectus supplement to the Company’s currently effective registration

statement on Form S-3, which was declared effective on September 6, 2019.

The Company filed the prospectus supplement

on June 10, 2020.

to customary adjustments thereunder, which warrants were immediately exercisable upon issuance and on a cashless basis if the Warrants

have not been registered on or before six months after the date of issuance.

Pursuant to the June 9 th Purchase

Agreement, the investors purchased all of the securities sold thereby for an aggregate purchase price of $5,324,000.

the June 9 th Purchase Agreement, an aggregate of 2,040,000 shares of common stock were issued to the investors

in a registered direct offering, pursuant to a prospectus supplement to the Company’s currently effective registration statement

on Form S-3, which was declared effective on September 6, 2019.

The Company filed the prospectus supplement on June 10,

Maxim acted as the placement agent.

The warrants were issued to the investors in a concurrent private placement

transaction pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of

the Securities Act and/or Regulation D promulgated thereunder.

The Company paid the Maxim a fee of approximately $426,000, which

was equal to 8% of the aggregate purchase price paid by investors placed by Maxim and certain expenses.

The June 9 th

Purchase Agreement contains customary representations, warranties and agreements of the Company and the investors and customary

indemnification rights and obligations of the parties thereto.

The offering of the securities pursuant to the June 9 th

Purchase Agreement was closed on June 11, 2020.

The Company will use the net proceeds from this Offering for working

capital, capital expenditures, product development, and other general corporate purposes, including investments in sales and marketing

in the United States and internationally.

On June 19, 2020, Sam Runco notified

the Company of his decision to resign from the Company’s board of directors (the “Board”), effective June 19,

Runco served on the Nominating and Corporate Governance Committee of the Board.

Runco did not resign due

to any disagreement between the Company and Mr.

Runco, or any matter related to the Company’s operations, policies or

On June 22, 2020, the Board, pursuant to its powers under the Company’s bylaws, appointed Sri Peruvemba as

a member of the Board to replace Mr.

The warrants were issued to the investors in a concurrent private placement transaction

pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the

Securities Act and/or Regulation D promulgated thereunder.

The Company paid the Maxim a fee of approximately $426,000, which was

equal to 8% of the aggregate purchase price paid by investors placed by Maxim and certain expenses.

The June 9 th Purchase

Agreement contains customary representations, warranties and agreements of the Company and the investors and customary indemnification

rights and obligations of the parties thereto.

The offering of the securities pursuant to the June 9 th Purchase

Agreement was closed on June 11, 2020.

The Company will use the net proceeds from this Offering for working capital, capital

expenditures, product development, and other general corporate purposes, including investments in sales and marketing in the United

States and internationally.

On June 19, 2020, Sam Runco notified the Company of his

decision to resign from the Company’s board of directors (the “Board”), effective June 19, 2020.

served on the Nominating and Corporate Governance Committee of the Board.

Runco did not resign due to any disagreement

between the Company and Mr.

Runco, or any matter related to the Company’s operations, policies or practices.

2020, the Board, pursuant to its powers under the Company’s bylaws, appointed Sriram Peruvemba as a member of the Board to

Runco, effective June 22, 2020.

Peruvemba will serve as a director until

the next annual meeting of the Company’s stockholders, at which time he will stand for election until the annual meeting

of the Company’s stockholders following his election, or his earlier resignation, retirement, or other termination of service.

Peruvemba serves as a director until the next annual meeting of

the Company’s stockholders, at which time he will stand for election until the annual meeting of the Company’s stockholders

following his election, or his earlier resignation, retirement, or other termination of service.

Potential Impacts of the Novel Coronavirus

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fiscal quarter was completed.

Since late March 2020, we have observed recent decreases in demand from certain customers.

During our second fiscal quarter, we observed decreased demand from certain of our customers due

to the temporary closure by many retailers.

Our third fiscal quarter saw increased customer demand as retailers reopened.

another closure by retailers could impact customer demand in the future.

Given the fact that our products are sold

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including many of our suppliers and customers, are reporting or predicting negative impacts from COVID-19 on future operating results.

Although we observed significant declines in demand for our products and services from certain customers during April 2020,

we believe that it remains too early for us to know the exact impact that COVID-19 will have on overall demand for such products,

technology, and services.

We also cannot be certain how demand may shift over time, as the impacts of the COVID-19 pandemic may

go through several phases of varying severity and duration.

Although we observed fluctuating demand for our products and technology between April and September 2020, we are unable to accurately

predict the ultimate impact that the COVID-19 pandemic will have on our business, operations, financial condition, financial

results or prospects.

We also cannot be certain how demand may shift over time, as the impacts of the COVID-19 pandemic may go

through several phases of varying severity and duration.

In light of broader macro-economic risks

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We will continue to actively monitor this situation and will implement actions necessary to maintain business

Comparison of the Three and Six Months

Ended June 30, 2020 and 2019

Revenue for the three months ended June 30,

2020 was $348,000, and comparable to the revenue for the three months ended June 30, 2019 of $352,000.

Revenue for the six months ended June 30,

2020 was $759,000, a decrease of $58,000, or 7%, compared to the revenue for the six months ended June 30, 2019 of $817,000.

The decrease in revenue was attributable to lower module sales.

Comparison of the Three and Nine

Months Ended September 30, 2020 and 2019

Revenue for the three months ended September 30,

2020 was $607,000, an increase of $188,000 or 45%, compared to the same period of 2019.

The increase was primarily due to increased

Revenue for the nine months ended September 30,

2020 was $1,366,000, an increase of $130,000, or 11%, compared to the same period of 2019.

The increase was primarily due to increased

volumes associated with new customer design wins which offset the decreased sales volume earlier in the year associated with the

Covid-19 purchasing slowdown in the second quarter of 2020.

Cost of Revenue and Operating Expenses

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Cost of revenue for the three months ended

June 30, 2020 was $336,000, and comparable to the cost of revenue for the three months ended June 30, 2019 of $330,000.

Cost of revenue for the six months ended

June 30, 2020 was $684,000, a decrease of $53,000, or 7%, compared to the cost of revenue for the six months ended June 30,

September 30, 2020 was $503,000 an increase of $116,000 or 30% compared to the revenue for the three months ended September 30,

2019 of $387,000.

Cost of revenue decreased primarily as a result of decreased module sales between comparable time periods.

The increase was primarily attributable to the direct material costs associated with higher sales volumes.

Cost of revenue for the nine months ended

September 30, 2020 was $1,187,000 an increase of $63,000 or 6%, compared to the revenue for the nine months ended September 30,

2019 of $1,124,000.

The increase was primarily attributable to the direct material costs associated with higher sales volumes.

Research and Development

Research and development expenses for the

three months ended June 30, 2020 were $904,000, a decrease of $501,000, compared to the research and development expenses

for the three months ended June 30, 2019 of $1,405,000.

The decrease in research and development expenses is primarily related

to decreased salary and benefit expenses of $266,000 as well as decreased consulting and facility allocation fees of $194,000 and

$39,000, respectively.

three months ended September 30, 2020 were $1,240,000, a decrease of $189,000 or 13%, compared to the research and development

expenses for the three months ended September 30, 2019 of $1,429,000.

The decrease in research and development expenses is

primarily related to decreased salary and benefit expenses of $112,000 as well as decreased consulting and direct material usage

of $134,000 and $74,000, respectively, partially offset by increased stock compensation of $134,000.

Research and development expenses for the

six months ended June 30, 2020 were $2,038,000, a decrease of $728,000 compared to the research and development expenses for

the six months ended June 30, 2019 of $2,766,000.

The decrease in research and development expenses is primarily related to

decreased salary and benefit expenses of $284,000, consulting fees of $404,000, and recruiting fees $29,000, partially offset by

increased stock compensation of $32,000.

nine months ended September 30, 2020 were $3,278,000, a decrease of $917,000 or 22%, compared to the research and development

expenses for the nine months ended September 30, 2019 of $4,195,000.

The decrease in research and development expenses is

primarily related to decreased salary and benefit expenses of $396,000, reduced consulting fees, direct materials, travel expenses

and recruiting fees of $538,000, $82,000, $36,000 and $29,000, respectively, partially offset by increased stock compensation of

Sales and Marketing

Sales and marketing expenses for the three

months ended June 30, 2020 were $510,000, a decrease of $166,000, compared to the sales and marketing expenses for the three

months ended June 30, 2019 of $676,000.

The decrease in sales and marketing expenses is primarily related to decreased salary

and benefit expenses of $46,000, reduced consulting fees of approximately $77,000, which includes $22,000 of decreased stock compensation

charges, decreased travel and public relation charges of $30,000 and $45,000, respectively.

Sales and marketing expenses for the six

months ended June 30, 2020 were $1,208,000, a decrease of $217,000 compared to the sales and marketing expenses for the six

months ended June 30, 2019 of $1,425,000.

The decrease in sales and marketing expenses is primarily related to reduced consulting

fees of approximately $197,000, which includes $27,000 of decreased stock compensation charges, decreased travel and public relation

charges of $49,000 and $54,000, respectively, offset partially by increased advertising, product management fees and employee stock compensation charges of $16,000, $20,000 and $36,000, respectively.

months ended September 30, 2020 were $835,000, an increase of $141,000 or 20%, compared to the sales and marketing expenses

for the three months ended September 30, 2019 of $694,000.

The increase in sales and marketing expenses is primarily related

to increased stock compensation and advertising of $162,000 and $65,000, respectively, offset partially by reduced consulting fees

and public relation charges of $26,000 and $33,000, respectively.

Sales and marketing expenses for the nine

months ended September 30, 2020 were $2,043,000, a decrease of $76,000 or 4%, compared to the sales and marketing expenses

for the nine months ended September 30, 2019 of $2,119,000.

The decrease in sales and marketing expenses is primarily related

to reduced consulting fees of approximately $218,000, which includes $22,000 of decreased stock compensation charges, decreased

travel and public relation charges of $75,000 and $89,000, respectively, offset partially by increased advertising, product management

fees and employee stock compensation charges of $80,000, $35,000 and $197,000, respectively.

General and Administrative

General and administrative expenses for

the three months ended June 30, 2020 were $607,000, a decrease of $50,000, compared to the general and administrative expenses

for the three months ended June 30, 2019 of $657,000.

The decrease in general and administrative expenses is primarily related

to decreased investor relation expenses of $248,000, partially offset by increased consulting and legal expenses of $41,000 and

$165,000, respectively.

the three months ended September 30, 2020 were $1,014,000, an increase of $426,000 or 72%, compared to the general and administrative

expenses for the three months ended September 30, 2019 of $588,000.

The increase in general and administrative expenses is

primarily related to increased salary and benefit expenses of $70,000, as the Company added a senior financial executive in September 2019,

increased stock compensation and legal expenses of $324,000 and $85,000, respectively, offset partially by decreased investor relations

and travel expenses of $23,000 and $16,000, respectively.

General and administrative expenses for

the six months ended June 30, 2020 were $1,498,000, an increase of $226,000 compared to the general and administrative expenses

for the six months ended June 30, 2019 of $1,272,000.

The increase in general and administrative expenses is primarily related

to increased salary and benefit expenses of $71,000, as the Company added a senior financial executive in September 2019,

the nine months ended September 30, 2020 were $2,512,000, an increase of $652,000 or 35%, compared to the general and administrative

expenses for the nine months ended September 30, 2019 of $1,860,000.

The increase in general and administrative expenses is

primarily related to increased salary and benefit expenses of $149,000, as the Company added a senior financial executive in September 2019,

increased stock compensation and legal expenses of $397,000 and $223,000, respectively, and a contingency accrual of $237,000 related

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The increase was partially offset by decreased investor

relation expenses of $313,000.

relations and travel expenses of $336,000 and $46,000, respectively.

Interest Expense

Interest expense for the three months ended

June 30, 2020 was $1,352,000, an increase of $1,352,000 compared to the interest expense for the three months ended June 30,

No interest expense was booked in the three months ended June 30, 2019 as the Company had no outstanding debt.

Interest expense for the three months ended June 30, 2020 was due to the full amortization of debt discounts associated with

the convertible debt that the Company incurred in March 2020, as such convertible debt was fully repaid in April 2020.

No interest expense was booked in the three months ended June 30, 2019, as the Company had no outstanding debt.

Interest expense for the six months ended

June 30, 2020 was $1,389,000, an increase of $1,389,000 compared to the interest expense for the six months ended June 30,

Interest expense for the six months ended June 30, 2020 was due to the full amortization of debt discounts associated

with the convertible debt that the Company incurred in March 2020, as such convertible debt was fully repaid in April 2020.

No interest expense was booked in the six months ended June 30, 2019, as the Company had no outstanding debt.

September 30, 2020 was $5,000, an increase of $5,000, compared to the interest expense for the three months ended September 30,

Interest expense is primarily related to interest accrued on the PPP Loan.

Interest expense for the nine months ended

September 30, 2020 was $1,394,000, an increase of $1,394,000 compared to the interest expense for the nine months ended September 30,

Interest expense for the nine months ended September 30, 2020 was primarily due to the full amortization of debt

discounts associated with the convertible debt that the Company incurred in March 2020, as such convertible debt was fully

repaid in April 2020.

No interest expense was booked in the nine months ended September 30, 2019, as the Company had

no outstanding debt.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability

for the three months ended June 30, 2020 resulted in a gain of $5,000, compared to a gain of $64,000 due to the change in

fair value of warrant liability for the three months ended June 30, 2019.

The gain for the three months ended June 30,

2020 and 2019 is due to the decrease in our common stock price during the period.

for the three months ended September 30, 2020 was $0, compared to a gain of $18,000 due to the change in fair value of warrant

liability for the three months ended September 30, 2019.

The gain for the three months ended September 30, 2019 is due

to the decrease in our common stock price during the period.

Change in fair value of warrant liability

for the six months ended June 30, 2020 resulted in a gain of $24,000, compared to a gain of $175,000 due to the change in

fair value of warrant liability for the six months ended June 30, 2019.

The gain for the six months ended June 30, 2020

and 2019 is due to the decrease in our common stock price during the period.

for the nine months ended September 30, 2020 resulted in a gain of $24,000, compared to a gain of $193,000 due to the change

in fair value of warrant liability for the nine months ended September 30, 2019.

The gains for the nine months ended September 30,

2020 and 2019 is due to the decrease in our common stock price during both the respective periods.

Change in Fair Value of Derivative Liability

There was no change in fair value of derivative

liability for the three months ended June 30, 2020 and 2019.

liability for the three months ended September 30, 2020 and 2019.

Change in fair value of derivative liability

for the six months ended June 30, 2020 was $0, compared to an expense of $171,000 for the six months ended June 30, 2019.

The $171,000 expense recorded in the six months ended June 30, 2019 was related to the change in fair value of the embedded

conversion feature included in the Company’s Series A Preferred Stock as of June 30, 2019.

for the nine months ended September 30, 2020 was $0, compared to an expense of $171,000 for the nine months ended September 30,

The $171,000 expense recorded in the nine months ended September 30, 2019 was related to the change in fair value of

the embedded conversion feature included in the Company’s Series A Preferred Stock as of September 30, 2019.

Liquidity and Capital Resources

Cash and cash equivalents as of June 30,

Cash and cash equivalents as of September 30,

2020 were $9,104,000, compared to $298,000 as of December 31, 2019.

The increase in cash and cash equivalents during the

six months ended June 30, 2020 was directly related to the issuance of common stock, prefunded warrants and related warrants

The increase in cash and cash equivalents during the nine

months ended September 30, 2020 was directly related to the issuance of common stock, prefunded warrants and related warrants

whereby the Company raised net proceeds of $16,191,000, the issuance of convertible notes, under which the Company raised net proceeds

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We incurred a net loss of $9,068,000 for

the six months ended June 30, 2020 and used net cash in operating activities of $4,832,000.

For the six months ended June 30,

2019, we incurred a net loss of $5,389,000 and used net cash in operating activities of $5,377,000.

Excluding non-cash adjustments,

the primary reasons for the use of net cash from operating activities during the six months ended June 30, 2020 is related

to the decrease in accounts payable and accrued liabilities of $353,000 and $491,000, respectively offset by the decrease in prepaid

expenses and other assets of $359,000, compared to the increase in inventories of $699,000 offset partially by an increase in accounts

payable of $486,000 during the six months ended June 30, 2019.

the nine months ended September 30, 2020 and used net cash in operating activities of $7,499,000.

For the nine months ended

September 30, 2019, we incurred a net loss of $8,097,000 and used net cash in operating activities of $8,454,000.

non-cash adjustments, the primary reasons for the use of net cash from operating activities during the nine months ended September 30,

2020 is related to the decrease in accounts payable and accrued liabilities of $643,000 and $234,000, respectively, compared to

the increase in inventories and prepaid expenses and other assets of $653,000 and $481,000, respectively, during the nine months

ended September 30, 2019.

We are an early stage company and have

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements