What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-03-16 compared with 2020-03-25 · 275 added, 378 removed, 146 unchanged (82% of the section changed)

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share (the “Common Stock”), is currently listed on the Nasdaq Capital Market under the symbol “WISA.”

As of March 20, 2020, there were

approximately 127 holders of record of our Common Stock.

This number does not include shares of Common Stock held by

brokerage clearing houses, depositories or others in unregistered form.

As of March 12, 2021, there were approximately

123 holders of record of our Common Stock.

This number does not include shares of Common Stock held by brokerage clearing houses,

depositories or others in unregistered form.

We have never declared or paid any cash

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Recent Sales of Unregistered Securities

Pursuant to an agreement with Michael Howse,

dated April 6, 2018, as amended effective as of December 27, 2018 (the “Howse Agreement”), in consideration for him

serving as our interim chief strategy officer and as a member of our Board, the Company issued Mr.

Howse (i) a warrant to purchase

110,000 shares of Common Stock, exercisable at a per share price of $2.00, which is currently fully vested and (ii) a warrant to

purchase 165,000 shares of Common Stock, exercisable at a per share price of $2.00, which shall vest, so long as Mr.

Howse continues

to serve as interim chief strategy officer and/or as a member of our Board, (x) as to 110,000 shares of Common Stock upon the achievement

of a significant milestone and (y) as to 55,000 shares of Common Stock upon the achievement of an additional significant milestone.

The foregoing exercise prices are subject to adjustment as provided in each warrant, including without limitation, certain anti-dilution

Pursuant to the Howse Agreement, such warrants shall fully vest on the earlier of (1) immediately prior to a Fundamental

Transaction, as defined in such agreement, (2) Mr.

Howse’s removal from our Board for any reason other than his resignation,

his intentional illegal conduct or gross misconduct, or his conviction for any felony, theft, embezzlement or violent crime.

In connection with the Howse Agreement,

the Company also granted Mr.

Howse up to 400,000 deferred shares under the 2018 Long-Term Stock Incentive Plan (the “LTIP”)

(the “Deferred Shares”) pursuant to the Deferred Shares Agreement, entered into as of January 4, 2019 (the “Deferred

Shares Agreement”).

Pursuant to such agreement, if a Fundamental Transaction (as defined in the Howse Agreement) has not

occurred within 180 days of the earlier of the date on which Mr.

Howse no longer serves (i) as the Company’s interim chief

strategy officer or (ii) on the Company’s board of directors, all of the Deferred Shares shall be forfeited and Mr.

will have no further rights to such shares.

Pursuant to such agreement, the Deferred Shares shall vest immediately prior to a Fundamental

Transaction, and the number of Deferred Shares that shall vest is based on the Consideration (as defined in the Howse Agreement)

paid for the Company in such transaction, which number of Deferred Shares that shall vest to double in the event that the Company

does not incur General Expenses (as defined in the Howse Agreement).

Pursuant to a

Securities Purchase Agreement, dated April 18, 2019 (the “Purchase Agreement”), the Company offered up to twelve tranches

(each, a “Tranche”), (i) up to 1,250,000 shares of Series A 8% Senior Convertible Preferred Stock, par value $0.0001

per share (the “Preferred Stock”), with a stated value of $4.00 (the “Stated Value”), for an aggregate

purchase price of up to $5,000,000, and (ii) in each Tranche, warrants (the “Warrants”) to purchase up to an aggregate

of such number of shares of Common Stock determined by dividing the Stated Value of the Preferred Stock for such Tranche by the

closing price of such Common Stock quoted on the Trading Market (as defined in the certificate of designations of the preferences,

rights and limitations of the Preferred Stock (the “Certificate”)) on the Trading Day (as defined in the Certificate)

prior to the closing of such Tranche, multiplied by fifty percent (50%).

In connection with the initial Tranche, the Company issued

to a significant stockholder of the Company, 250,000 shares of Series A Preferred Stock and a warrant to purchase 255,102 shares

of our Common Stock in consideration for $1,000,000, and the Company also issued to Alexander Capital, L.P., the placement agent

in connection with such offering, a warrant to purchase 40,816 shares of Common Stock.

Pursuant to the

Certificate, the shares of Preferred Stock are convertible by the holders at any time, in whole or in part, by multiplying such

shares by the ratio of the stated value by the conversion price of such shares, which is initially fixed at a price of $4.00 per

share (the “Fixed Conversion Price”), which price cannot be reduced below of $1.50, and is subject to adjustment under

the Certificate upon certain subsequent transactions and events described therein.

In the event that the closing price of our Common

Stock on a Trading Day as quoted on the Trading Market is less than the Fixed Conversion Price (subject to adjustment for reverse

and forward stock splits and the like), the Fixed Conversion Price shall be reduced to equal 95% of the average of the lowest VWAP

(as defined in the Certificate) out of the prior 10 consecutive Trading Days prior to the date on which the holder of Preferred

Stock delivers a notice of conversion to the Company to convert such holder’s Preferred Stock.

The Preferred

Stock is subject to customary adjustments for any share dividend, share split, share combination, reclassification or similar transaction.

Dividends are payable in cash or in kind to the holders of Preferred Stock at a rate of 8% per annum, payable upon conversion of

the Preferred Stock.

In addition, upon a Triggering Event (as defined in the Certificate), which includes any default by the Company

in the payment of amounts owed to a holder on the Preferred Stock and other customary events of default under the Certificate,

each holder of Preferred Stock has the right to require the Company to redeem each share of Preferred Stock held by such Holder

for a redemption price equal to 120% of the Stated Value and all accrued but unpaid dividends on such shares in addition to the

payment of all liquidated damages and other costs, expenses or amounts due in respect of the Preferred Stock.

The Warrants issued

by the Company pursuant to the Purchase Agreement will represent 50% warrant coverage of the shares of Preferred Stock issued pursuant

to each Tranche.

The Warrants are immediately exercisable, have a five-year life and have an exercise price equal to the closing

price of our Common Stock on the Trading Day prior to a Closing (as defined in the Purchase Agreement), plus $0.02.

issued to Alexander Capital, L.P.

in connection with the Purchase Agreement is exercisable for 110% of the exercise price of the

Warrants issued to investors pursuant to the Purchase Agreement.

The Warrants are subject to 4.99/9.99% blockers and subject to

adjustment for stock dividends and splits.

Pursuant to the

Purchase Agreement, (A) holders of the Preferred Stock have the right to require the Company to register the Preferred Stock and

the shares of our common stock underlying the Preferred Stock and Warrants within 180 days of the Closing Date (as defined in the

Purchase Agreement) on which purchasers have committed to purchase an aggregate of amount of Preferred Stock with an aggregate

Stated Value equal to or exceeding $1,000,000;

and (B) so long as (i) purchasers hold shares of Preferred Stock with an aggregate

Stated Value equal to or exceeding $250,000, holders of Preferred Stock have a right of first refusal with respect to a Subsequent

Financing (as defined in the Purchase Agreement) effected by the Company, and (ii) purchasers hold shares of Preferred Stock with

an aggregate Stated Value equal to or exceeding $500,000 and a Subsequent Financing occurs, such holders have a right to tender

such shares for the securities offered pursuant to such Subsequent Financing.

Pursuant to the Certificate, the Purchase Agreement,

and the Warrants, unless the Company obtains stockholder approval pursuant to the rules and regulations of Nasdaq.

cannot issue shares of Common Stock upon conversion of the Preferred Stock or exercise of the Warrant, as applicable, in the event

that such issuance exceeds 19.99% of the issued and outstanding shares of Common Stock as of April 18, 2019.

On November 21,

2019, as a material inducement to George Oliva’s acceptance of employment as the Company’s Chief Financial

Officer, the Company issued Mr.

Oliva 150,000 shares of restricted Common Stock of the Company (the “Stock Award”).

Stock Award was approved by the compensation committee of the Board and such shares were

issued in accordance with Nasdaq Listing Rule 5635(c)(4) outside of the LTIP.

Pursuant to an amended and restated offer letter,

dated October 4, 2019 (the “Offer Letter”), such shares will vest equally over a period of four years, with the first

tranche to vest on September 1, 2020, and in the event that Mr.

Oliva is (i) terminated without cause within one year of a change

in control of the Company (defined as over a 50% change in ownership of the Company) or (ii) his role is diminished as a result

of such change in control, all incentive equity compensation granted to him will fully accelerate and vest.

On May 30, 2019, the Company issued 11,250

fully vested shares of restricted Common Stock to a consultant pursuant to an investor relations consulting agreement, in partial

consideration for providing certain investor relations and financial media relations services to the Company for six months.

On May 30, 2019, the Company issued 5,280

fully vested shares of restricted Common Stock to a consultant pursuant to a consulting agreement in partial consideration for

providing certain marketing services to WiSA, LLC, a Delaware limited liability company and one of the Company’s wholly-owned

subsidiaries, for an initial term of six months.

On May 30, 2019, the Company issued 30,000

fully vested shares of restricted Common Stock to a consultant pursuant to a consulting agreement, as amended, in partial consideration

for providing certain investor relations services to the Company for a period of six months.

On June 26, 2019, the Company issued 100,000

shares of restricted Common Stock to a consultant pursuant to a consulting agreement in consideration for providing certain business

advisory services to the Company in connection with its Public Offering.

On July 9, 2019, the Company granted warrants

to purchase up to 40,000 shares of Common Stock to Lippert/Heilshorn Associates Inc.

The warrants have an exercise price of $1.24

per share and are fully vested.

The fair value of the warrants at issuance was $23,000.

The fair value of the warrants was estimated

using the Black-Scholes Model based on the following weighted average assumptions:

common share price on date of grant $1.16, expected

dividend yield 0%, expected volatility 58%, risk-free interest rate 1.88% and expected life of 5.0 years.

The fair value was recorded

as professional services with the offset to additional paid-in capital.

On August 14,

2019, the Company granted warrants to purchase up to 50,000 shares of Common Stock to DFC Advisory Services, LLC.

have an exercise price of $1.31 per share and are fully vested.

The fair value of the warrants at issuance was $23,000.

value of the warrants was estimated using the Black-Scholes Model based on the following weighted average assumptions:

price on date of grant $1.01, expected dividend yield 0%, expected volatility 58%, risk-free interest rate 1.51% and expected life

of 5.0 years.

The fair value was recorded as professional services with the offset to additional paid-in capital.

Between September 25, 2019 and October

8, 2019, the Company and certain holders (each a “Holder”

and collectively, the “Holders”) of the Company’s

common stock purchase warrants, with exercise prices between $3.00 and $5.40 (collectively, the “Original Warrants”),

including the Company’s Series D common stock purchase warrants, Series F common stock purchase warrants (the “Series

F Warrants”) and Series G common stock purchase warrants (the “Series G Warrants”), entered into Warrant Amendment

and Exercise Agreements (the “Warrant Amendment Agreements”), pursuant to which the Company agreed to reduce the exercise

price of each Original Warrant to $0.80 (the “Reduced Exercise Price”), and for each Original Warrant exercised by

a Holder at the Reduced Exercise Price, the Company agreed to reduce the exercise price of Original Warrants to purchase up to

an equivalent number of shares of Common Stock (the “Amended Warrants”) to $0.79 (the “Amended Exercise Price”).

The Company entered into Warrant Amendment Agreements with 32 Holders, under which Original Warrants were exercised for a total

of 1,128,381 shares of Common Stock and the Company received gross proceeds of $903,000.

Remaining Original Warrants for 1,381,403

shares of Common Stock had their exercise price adjusted to the Amended Exercise Price of $0.79.

Additionally, pursuant to the Warrant Amendment

Agreements, the Company agreed to prepare and file with the U.S.

Securities and Exchange Commission (the “SEC”), as

soon as practicable, but in no event later than November 4, 2019 (as extended by the Settlement Agreements (as defined below) to

November 18, 2019), a registration statement on Form S-3 to register all shares of Common Stock received by the Holders upon exercise

of any Warrant (as defined in the Warrant Amendment Agreements) and all shares of Common Stock underlying the Original Warrants

(as defined in the Warrant Amendment Agreements) (such issued and underlying shares, the “Resale Shares”).

From November 3, 2019 to November 6, 2019,

the Company entered into settlement agreements (each a “Settlement Agreement”

and collectively, the “Settlement

Agreements”) with each of the Holders (other than the Medalist Funds, whose Settlement Agreement is described below) pursuant

to which the Company agreed to issue such Holders an aggregate of 152,944 additional shares of common stock, with such shares meant

to compensate such Holders for the difference between the Amended Exercise Price and the lower priced shares that were offered

to investors in connection with the Company’s earlier registered direct offering of an aggregate of 2,500,000 shares of Common

Stock, priced at $0.70 per share, that the Company closed on October 16, 2019 (the “Registered Direct Offering”).

addition, pursuant to the Settlement Agreements, the Company and the Holders agreed to extend the date by which the Company would

file a registration statement on Form S-3 to register all of the Resale Shares from November 4, 2019 to November 18, 2019.

The sale and the

issuance of the foregoing securities were offered and sold in reliance upon exemptions from registration pursuant to Section 4(a)(2)

of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 of Regulation D promulgated under the

Securities Act (“Regulation D”).

We made this determination based on the representations of each investor, as applicable,

which included, in pertinent part, that each such investor was either (a) an “accredited investor”

within the meaning

of Rule 501 of Regulation D or (b) a “qualified institutional buyer”

within the meaning of Rule 144A under the Securities

Act and upon such further representations from each investor that (i) such investor acquired the securities for his, her or its

own account for investment and not for the account of any other person and not with a view to or for distribution, assignment or

resale in connection with any distribution within the meaning of the Securities Act, (ii) such investor agreed not to sell or otherwise

transfer the purchased securities unless they are registered under the Securities Act and any applicable state securities laws,

or an exemption or exemptions from such registration are available, (iii) such investor had knowledge and experience in financial

and business matters such that he, she or it was capable of evaluating the merits and risks of an investment in us, (iv) such investor

had access to all of our documents, records, and books pertaining to the investment and was provided the opportunity to ask questions

and receive answers regarding the terms and conditions of the offering and to obtain any additional information which we possessed

or were able to acquire without unreasonable effort and expense, and (v) such investor had no need for the liquidity in its investment

in us and could afford the complete loss of such investment.

In addition, there was no general solicitation or advertising for

such securities issued in reliance upon these exemptions.

Selected Financial Data.

We are not required to provide the information required by this

Item, as we are a smaller reporting company.

All share and

price per share information in Part II of this Report has been adjusted to reflect our one-for-twenty reverse stock split

of our outstanding Common Stock, which became effective for the trading of our Common Stock on April 9, 2020:

On January 23, 2020, we entered into

a funding agreement, as amended (the “Funding Agreement”), which provided for the issuance to an unaffiliated accredited

investor of a convertible promissory note in the principal amount of $111,100, reflecting a 10% original issue discount, 500 shares

of our Common Stock and a five-year warrant exercisable for 7,936 shares of our Common Stock at an exercise price of $9.80 per

share in consideration for $100,000, which was funded on January 24, 2020.

Additionally, pursuant to the Funding Agreement,

such investor was granted a most favored nation right.

As of December 31, 2020, the outstanding debt owed to such investor

pursuant to the Funding Agreement has been fully repaid.

On February 28, 2020, the Company

completed a private placement (the “February 2020 Private Placement”) of $835,000 of units (the “Units”),

which consisted of (i) 91,062 shares of Common Stock and (ii) five-year warrants to purchase up to an aggregate of 45,534

shares of Common Stock, which were immediately exercisable upon issuance at $9.80 per share, subject to 4.99% beneficial ownership

limitations and adjustment for stock splits and similar capital changes (the “February 2020 Warrants”).

were issued at a price per Unit of $9.17 pursuant to unit purchase agreements, dated February 4, 2020 (the “Unit Purchase

Agreements”), and subscription agreements, dated February 28, 2020 by and among the Company and the purchasers signatory

The February 2020 Private Placement, which was priced above market, resulted in gross proceeds of $835,000 before

fees and other expenses associated with the transaction.

The proceeds of such offering were used primarily for increasing stockholders’

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

On March 30, 2020, the Company completed

a private placement (the “March 2020 Private Placement”) of a senior secured convertible instrument (the “March 2020

Note”) and a warrant (the “March 2020 Warrant”) to purchase 227,679 shares of Common Stock at an exercise

price of $6.40 per share.

The March 2020 Note and March 2020 Warrant were issued pursuant to a securities purchase agreement

(the “March 2020 Purchase Agreement”), entered into as of March 22, 2020, by and between the Company and

an institutional investor (the “Investor”).

The March 2020 Private Placement resulted in gross proceeds of $1,700,000,

before fees and other expenses associated with the transaction, including but not limited to, an $85,000 commitment fee payable

to the Investor.

The net proceeds received by the Company in connection with the March 2020 Private Placement was used primarily

for working capital, debt repayment and general corporate purposes.

Additionally, the Company agreed to issue to Maxim Group LLC,

the placement agent for the March 2020 Private Placement, a warrant to purchase up to an aggregate of 20,400 shares of Common

Stock, subject to adjustment, as partial consideration for serving as placement agent in connection with the March 2020 Private

On June 8, 2020, the Company closed

a registered direct offering (the “June 8 th Offering”) for gross proceeds of approximately $5.8

million, before deducting underwriting discounts and commissions and estimated offering expenses of (i) an aggregate of 2,275,000

shares of Common Stock and (ii) the June 8 th Warrants, with a term of 5.5 years, which are exercisable

for an aggregate of up to 2,275,000 shares of Common Stock at an exercise price of $2.55 per share, subject to customary adjustments

The net proceeds from the June 8 th Offering are being used for working capital, capital expenditures,

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

internationally.

The June 8 th Offering was conducted pursuant to a securities purchase agreement, dated June 4,

2020, by and among us and each of the Selling Stockholders, as well as a placement agency agreement, dated June 4, 2020,

between us and Maxim Group LLC, the placement agent for such offering.

On June 11, 2020, the Company closed

a registered direct offering (the “June 11 th Offering”) for gross proceeds of approximately $5.3

million, before deducting underwriting discounts and commissions and estimated offering expenses of (i) an aggregate of 2,040,000

shares of Common Stock and (ii) the June 11 th Warrants, with a term of 5.5 years, which are exercisable

for 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

The net proceeds from the June 11 th Offering are being used for working capital, capital expenditures,

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

internationally.

The June 11 th Offering was conducted pursuant to a securities purchase agreement, dated June 9,

2020, by and among us and each of the Selling Stockholders, as well as a placement agency agreement, dated June 9, 2020, between

us and Maxim Group LLC, the placement agent for such offering.

On November 9, 2020, in order to resolve

a dispute between the Unit holders and the Company regarding certain registration rights in connection with the Unit Purchase Agreements,

we entered into that certain Settlement and Release Agreement (the “Unit Settlement Agreements”) with each Unit

holder, pursuant to which (i) we and the Unit holders agreed to amend the February 2020 Warrants to provide for the purchase

of one additional share of Common Stock for each share of Common Stock available under the February 2020 Warrants, (ii) we

and the Unit holders agreed to amend the February 2020 Warrants to reduce the exercise price to $2.55 (the “Amended

Warrants”), and (iii) we agreed to issue an additional 236,375 shares of Common Stock and common stock purchase warrants

to purchase up to an aggregate of 236,369 shares of Common Stock (the “New Unit Warrants”).

As consideration for the

foregoing, the Unit holders agreed to release any and all claims they may have against us, including, but not limited to, claims

arising in connection with any shares of Common Stock, February 2020 Warrants, and Amended Warrants held by the Unit holders.

On July 27, 2020, the board of directors

of the Company (the “Board”) adopted the Company’s 2020 Stock Incentive Plan (the “2020 Plan”) and

the reservation of an aggregate of 650,000 shares of Common Stock authorized for issuance under the 2020 Plan, which 2020 Plan

was approved by the Company's stockholders on October 20, 2020.

On July 27, 2020, the Company granted an aggregate of 614,824 restricted

stock units (“RSUs”) under the 2020 Plan to certain participants under the 2020 Plan (the “Participants”),

subject to stockholder approval of the 2020 Plan.

Each of the RSUs granted to the Participants are scheduled to vest on the first,

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

Each RSU represents the right to receive one share of Common Stock under the 2020 Plan.

The Company intends for the

shares of Common Stock issuable under the 2020 Plan to be registered under a Form S-8 registration statement, and for the RSUs

granted to the Participants to be registered for resale pursuant to a prospectus included in such registration statement, which

the Company filed with the SEC on February 27, 2021.

On October 5, 2020, we entered into an

agreement with a third party platform provider pursuant to which such provider agreed to host certain of our company information,

including our presentations, on its platform.

In partial consideration for such services, upon entering into such agreement, we

issued 25,000 restricted shares of Common Stock to such provider.

The sale and the issuance of the foregoing

securities were offered and sold in reliance upon exemptions from registration pursuant to Section 4(a)(2) of the Securities Act

of 1933, as amended (the “Securities Act”) and Rule 506 of Regulation D promulgated under the Securities Act (“Regulation

We made this determination based on the representations of each investor, as applicable, which included, in pertinent

part, that each such investor was either (a) an “accredited investor”

within the meaning of Rule 501 of Regulation

D or (b) a “qualified institutional buyer”

within the meaning of Rule 144A under the Securities Act and upon such further

representations from each investor that (i) such investor acquired the securities for his, her or its own account for investment

and not for the account of any other person and not with a view to or for distribution, assignment or resale in connection with

any distribution within the meaning of the Securities Act, (ii) such investor agreed not to sell or otherwise transfer the purchased

securities unless they are registered under the Securities Act and any applicable state securities laws, or an exemption or exemptions

from such registration are available, (iii) such investor had knowledge and experience in financial and business matters such that

he, she or it was capable of evaluating the merits and risks of an investment in us, (iv) such investor had access to all of our

documents, records, and books pertaining to the investment and was provided the opportunity to ask questions and receive answers

regarding the terms and conditions of the offering and to obtain any additional information which we possessed or were able to

acquire without unreasonable effort and expense, and (v) such investor had no need for the liquidity in its investment in us and

could afford the complete loss of such investment.

In addition, there was no general solicitation or advertising for such securities

issued in reliance upon these exemptions.

Management Discussion and Analysis of Financial Condition and Results of Operations.

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2017, at which time we changed our name to Summit Semiconductor, Inc.

Effective as of September 11, 2018, we changed our name to Summit

Wireless Technologies, Inc.

We run our operations through Summit Wireless Technologies, Inc., as well as through our wholly-owned

subsidiaries, Summit Wireless Japan K.K., a Japanese corporation, and WiSA, LLC, a Delaware limited liability company.

of our corporate headquarters is 6840 Via Del Oro, Ste.

Effective as of September 11, 2018, we changed

our name to Summit Wireless Technologies, Inc.

We run our operations through Summit Wireless Technologies, Inc., as well

as through our wholly-owned subsidiary WiSA, LLC, a Delaware limited liability company.

The address of our corporate headquarters

is 6840 Via Del Oro, Ste.

280, San Jose, CA 95119.

Our website address is www.summitwireless.com .

The information contained in or accessible through our website is not part of this Report and is intended for informational purposes

The information contained

in or accessible through our website is not part of this Report and is intended for informational purposes only.

We are an early stage technology company

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implementing a software licensing business segment.

Our plan also anticipates that our technology

will address some of the main issues that we perceive are hindering the growth of the home theater:

Our technology addresses some of the main

issues that we perceive are hindering the growth of the home theater:

complexity and cost.

consumers want to experience theater quality surround sound from the comfort of their homes.

However, wired home theater systems

often require expensive audio-visual (“AV”) receivers to decode the audio stream, leaving the consumer with the burden

of concealing the wires.

Hiring a professional to hide the wires into the walls or floor is invasive, complicated, costly and time

Further, people that rent as opposed to own may not be able to install these systems as the installation construction

needed may not be permitted under a lease agreement.

Our first-generation wireless technology addresses these problems by transmitting

wireless audio to each speaker at Blu-ray quality (uncompressed 24-bit audio up to 96 kHz sample rates) and emphasizing ease of

To our knowledge, our custom chip and module technology is one of the only technologies available today that can stream

up to eight separate wireless audio channels with low latency, removing lip-sync issues between the audio and video sources.

addition, every speaker within a system that utilizes our technology can be synchronized to less than one microsecond, thus eliminating

phase distortion between speakers.

Our first-generation technology shows that wireless home theater systems are viable home audio

solutions for the average consumer and audio enthusiast alike.

We believe that consumers want to experience

theater quality surround sound from the comfort of their homes.

However, wired home theater systems often require expensive audio-visual

(“AV”) receivers to decode the audio stream, leaving the consumer with the burden of concealing the wires.

professional to hide the wires into the walls or floor is invasive, complicated, costly and time consuming.

Further, people who

rent as opposed to own may not be able to install these systems as the installation construction needed may not be permitted under

a lease agreement.

Our first-generation wireless technology addresses these problems by transmitting wireless audio to each speaker

at Blu-ray quality (uncompressed 24-bit audio up to 96 kHz sample rates) and emphasizing ease of setup.

To our knowledge, our custom

chips and modules technology is one of the only technologies available today that can stream up to eight (8) separate wireless

audio channels with low latency, removing lip-sync issues between the audio and video sources.

In addition, every speaker within

a system that utilizes our technology can be synchronized to less than one microsecond, thus eliminating phase distortion between

Our first-generation technology shows that wireless home theater systems are viable home audio solutions for the average

consumer and audio enthusiast alike.

We are currently developing certain proprietary

software that we believe will provide similar functionality and quality and allow us to enable smart devices, that have Wi-Fi and

video media, to deliver surround sound audio.

We believe our software based-solution which other brands can integrate into their

devices and will (i) reduce integration costs for mass market use, (ii) utilize Wi-Fi for wireless connectivity, making the need

for complex physical wire installations unnecessary, (iii) provide a low power consumption option to allow for use in battery powered

devices, and (iv) provide compatibility with Linux, iOS or Android operating systems.

software for which patent applications have been submitted that we believe will allow us to enable smart devices that have Wi-Fi

and video media to deliver surround sound audio.

A prototype version of our software technology has been demonstrated to select

customers (pursuant to confidentiality agreements) at the Consumer Electronics Show 2020 in Las Vegas, Nevada.

Our goal is to commercialize

a software based-solution, which other brands can integrate into their devices, that will (i) reduce integration costs for

mass market use, (ii) utilize Wi-Fi for wireless connectivity, making it easy to integrate into today’s high volume,

low cost systems on a chip (“SOC”) and modules, (iii) provide a low power consumption option to allow for use

in battery powered devices, and (iv) provide compatibility with popular consumer electronic operating systems.

To date, our operations have been funded

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recurring losses from operations since inception.

On July 26, 2018, the Company closed its

initial public offering of its common stock (“IPO”).

The Company’s registration statement on Form S-1 relating

to the IPO was declared effective by the SEC on July 25, 2018.

The shares began trading on the Nasdaq Capital Market under the

ticker symbol “WISA”

on July 27, 2018.

Pursuant to the IPO, the Company issued 2,400,000 shares of Common Stock at

an offering price of $5.00 per share, raising gross proceeds of $12,000,000.

In aggregate, the shares issued in the offering generated

approximately $10,273,000 in net proceeds.

On May 24, 2019, the Company closed a public

offering of the Company’s Common Stock (“Public Offering”).

The Company’s registration statement on Form

S-1 relating to the Public Offering was declared effective by the SEC on May 21, 2019.

In connection with the Public Offering,

the Company issued an aggregate of 4,075,726 shares of common stock at a public offering price of $1.33 per share for gross

proceeds of approximately $5,420,000.

The net proceeds to the Company, after deducting underwriting discounts and commissions and

other offering expenses, were approximately $4,664,000.

On October 16, 2019, the Company closed

a registered direct offering with certain institutional investors of an aggregate of 2,500,000 shares of its Common Stock (the

“Shares”), priced at $0.70 per share (the “Registered Direct Offering”).

The Registered Direct Offering

was registered and the Shares were issued pursuant to the Company’s effective shelf registration statement on Form S-3 (File

333-233433) (the “Registration Statement”), which was initially filed with the SEC on August 23, 2019, and was

declared effective on September 6, 2019, and the related base prospectus included in the Registration Statement, as supplemented

by the preliminary prospectus supplement dated October 16, 2019 (the “Prospectus Supplement”).

In connection with the

Registered Direct Offering, the Company issued its shares of common stock for gross proceeds of approximately $1,750,000.

used the net proceeds of approximately $1,485,000 from the offering for working capital purposes.

Plan of Operation

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The coronavirus disease could significantly

disrupt our operations and could have a material adverse impact on our business.

An outbreak of a new respiratory illness

caused by coronavirus disease 2019 (“COVID-19”) has resulted in hundreds of thousands of infections and tens of thousands

of deaths worldwide, as of the date of filing of this Report, and continues to spread in China and abroad, including to the United

States and Europe, the major markets in which we operate.

The outbreak of COVID-19 or by other epidemics could materially and adversely

affect our business, financial condition and results of operations.

If the coronavirus worsens in China, or in other regions in

which we have material operations or sales, our business activities originating from affected areas, including sales, manufacturing

and supply chain related activities, could be adversely affected.

Disruptive activities could include the temporary closure of

our manufacturing facilities and those used in our supply chain processes, restrictions on the export or shipment of our products,

significant cutback of ocean container delivery from China, business closures in impacted areas, and restrictions on our employees’

and consultants’

ability to travel and to meet with customers.

The extent to which COVID-19 impacts our results will depend

on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning

the severity of the virus and the actions to contain it or treat its impact, among others.

COVID-19 could also result in social,

economic and labor instability in the countries in which we or our customers and suppliers operate.

If workers at one or more of our offices

or the offices of our suppliers or manufacturers become ill or are quarantined and in either or both events are therefore unable

to work, our operations could be subject to disruption.

Further, if our manufacturers become unable to obtain necessary raw materials

or components, we may incur higher supply costs or our manufacturers may be required to reduce production levels, either of which

may negatively affect our financial condition or results of operations.

The extent to which COVID-19 affects our results will depend

on future developments that are highly uncertain and cannot be predicted, including actions to contain COVID-19 or treat its effect,

among others.

Potential Impacts of the Novel Coronavirus

(“COVID-19”) on Our Business and Operations

The COVID-19 pandemic represents a fluid

situation that presents a wide range of potential impacts of varying durations for different global geographies, including locations

where we have offices, employees, customers, vendors and other suppliers and business partners.

Like most US-based businesses, the COVID-19 pandemic and efforts

to mitigate the same began to have impacts on our business in March 2020.

By that time, much of our first fiscal quarter was

During our second fiscal quarter, we observed decreased demand from certain of our customers due to the temporary closure

by many retailers.

Our third and fourth fiscal quarters saw improved customer demand as retailers partially reopened and demand

for an in-home immersive cinema experience increased, while public cinemas remained closed throughout many regions in the country.

However, another closure by retailers, as well as a reopening of more public cinemas, could impact customer demand in the future.

Given the fact that our products are sold through a variety

of distribution channels, we expect that our sales will experience some 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

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

To date, we have

experienced a shipment delay from one of our suppliers due to COVID-19, however we do not believe such delay will have a material

adverse impact on our operating results and we have not experienced a material supply interruption.

There can be no assurance that

we will not experience material supply delays or interruptions in the future due to COVID-19, although we do not believe supply

interruptions to be likely at this time.

To date, travel restrictions and border

closures have not materially impacted our ability to obtain inventory or manufacture or deliver products or services to customers.

However, if such restrictions become more severe, they could negatively impact those activities in a way that would harm our business

over the long term.

Travel restrictions impacting people can restrain our ability to assist our customers and distributors as well

as impact our ability to develop new distribution channels, but at present we do not expect these restrictions on personal travel

to be material to our business operations or financial results.

We have taken steps to restrain and monitor our operating expenses

and therefore we do not expect any such impacts to materially change the relationship between costs and revenues.

Like most companies, we have taken a range

of actions with respect to how we operate to assure that we comply with government restrictions and guidelines as well as best

practices to protect the health and well-being of our employees and our ability to continue operating our business effectively.

To date, we have been able to operate our business effectively using these measures and to maintain all internal controls.

have not experienced challenges in maintaining business continuity and do not expect to incur material expenditures to do so.

the impacts of COVID-19 and efforts to mitigate the same have remained unpredictable and it remains possible that challenges may

arise in the future.

The actions that we have taken so far during

the pandemic include, but are not limited to:

requiring all employees who can work from home to work from home;

increasing our IT networking capability to best assure that employees can work effectively outside the office;

for employees who must perform essential functions in one of our offices:

having employees maintain a distance of at least six feet from other employees whenever possible;

having employees stay segregated from other employees in the office with whom they require no interaction;

requiring employees to wear masks while they are in the office whenever possible.

We continue to monitor the impacts of COVID-19

on our operations closely and this situation could change based on a significant number of factors that are not entirely within

our control and are discussed in this and other sections of this Report.

As of the date of this Report, we do not expect there

to be material changes to our assets on our balance sheet or our ability to timely account for those assets.

If business interruptions

resulting from COVID-19 were to be prolonged or expanded in scope, our business, financial condition, results of operations and

cash flows would be negatively impacted.

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

to maintain business continuity.

Critical Accounting Policies

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We utilize the extended transition period

provided in Securities Act Section 7(a)(2)(B) as allowed by Section 107(b)(1) of the JOBS Act for the adoption of new or revised

accounting standards as applicable to emerging growth companies.

As part of the election, we will not be required to comply with

any new or revised financial accounting standard until such time that a company that does not qualify as an “issuer”

(as defined under Section 2(a) of the Sarbanes-Oxley Act of 2002) is required to comply with such new or revised accounting standards.

provided in Securities Act Section 7(a)(2)(B) as allowed by Section 107(b)(1) of the JOBS Act for the adoption

of new or revised accounting standards as applicable to emerging growth companies.

As part of the election, we will not be required

to comply with any new or revised financial accounting standard until such time that a company that does not qualify as an “issuer”

(as defined under Section 2(a) of the Sarbanes-Oxley Act of 2002) is required to comply with such new or revised accounting

As an emerging growth company within the

meaning of the rules under the Securities Act, and we will utilize certain exemptions from various reporting requirements that

are applicable to public companies that are not emerging growth companies.

meaning of the rules under the Securities Act, and we will utilize certain exemptions from various reporting requirements

that are applicable to public companies that are not emerging growth companies.

For example, we will not have to provide an auditor’s

attestation report on our internal control in future annual reports on Form 10-K as otherwise required by Section 404(b) of the

Sarbanes-Oxley Act.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can utilize the extended

transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.

Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply

to private companies.

attestation report on our internal control in future annual reports on Form 10-K as otherwise required by Section 404(b) of

the Sarbanes-Oxley Act.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can utilize the

extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting

Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would

otherwise apply to private companies.

We have elected to utilize this extended transition period.

Our consolidated financial statements may therefore

not be comparable to those of companies that comply with such new or revised accounting standards as they become applicable to

public companies.

Comparison of the Year Ended December

Our consolidated financial statements

may therefore not be comparable to those of companies that comply with such new or revised accounting standards as they become

applicable to public companies.

Comparison of the Years Ended December 31,

2020 and 2019

Revenue for the year ended December 31,

2019 was $1,666,000, an increase of $292,000 or 21%, compared to the same period of 2018.

The increase in revenue was attributable

to higher module sales.

2020 was $2,404,000, an increase of $738,000, or 44%, compared to the revenue of $1,666,000 for the year ended December 31,

The increase was primarily due to increased volumes.

Cost of Revenue and Operating Expenses

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Cost of revenue for the year ended December 31,

31, 2019 was $1,737,000, an increase of $125,000, compared to the same period of 2018.

The increase is partially related to a $168,000

cost of revenue increase as a direct result of the increased revenue between the comparable time periods and $246,000 of additional

inventory obsolescence charges partially offset by decreased salary and benefit expenses of $158,000, as two employees transferred

to our research and development department, increased overhead capitalization of $80,000, reduced facility allocation charges of

$45,000 and reduced stock compensation charges of approximately $24,000.

2020 was $1,977,000, an increase of $240,000, compared to cost of revenue of $1,737,000 for the year ended December 31, 2019.

was primarily attributable to the direct material costs associated with higher sales volumes, partially offset by $251,000 of reduced

inventory obsolescence charges.

Research and Development

Research and development expenses for

the year ended December 31, 2019 were $5,427,000, an increase of $554,000, compared to the same period of 2018.

The increase in

research and development expenses is primarily related to increased salary and benefit expenses of $328,000, as we increased our

average headcount by one employee and converted two interns to fulltime employees, increased consulting expenses of $451,000,

increased facility allocation charges of $218,000 due to the additional headcount, increased direct material and prototype expenses

of $88,000, increased legal fees of $32,000 and additional recruiting fees of $51,000, partially offset by decreased stock compensation

charges of approximately $640,000.

Research and development expenses for the

year ended December 31, 2020 were $4,572,000, a decrease of $855,000, compared to expenses of $5,427,000 for the year ended December 31, 2019.

The decrease in research and development expenses is primarily related to decreased salary and benefit expenses of $408,000,

reduced consulting fees, direct materials, travel expenses and recruiting fees of $564,000, $77,000, $33,000 and $68,000, respectively,

partially offset by increased stock compensation of $170,000.

Sales and Marketing

Sales and marketing expenses for the year

ended December 31, 2019 were $2,834,000, an increase of $31,000, compared to the same period of 2018.

The increase in sales and

marketing expenses is primarily related to increased, salary and benefit expenses of $639,000, as we increased our average headcount

by three employees, increased travel, tradeshow advertising and public relation expenses of $65,000, $19,000, $29,000 and $54,000,

respectively, partially offset by decreased stock compensation charges of approximately $509,000 and decreased consulting

expenses of $347,000, which includes decreased stock compensation expenses.

ended December 31, 2020 were $2,974,000, an increase of $140,000, compared to expenses of $2,834,000 for the year ended December 31,

The increase in sales and marketing expenses is primarily related to increased stock compensation and advertising of $179,000

and $314,000, respectively, offset partially by reduced consulting fees, travel and public relation charges of $160,000, $107,000

and $91,000, respectively.

General and Administrative

General and administrative expenses for

the year ended December 31, 2019 were $2,829,000, a decrease of $828,000, compared to the same period of 2018.

The decrease in

general and administrative expenses is primarily related to decreased stock compensation charges of approximately $852,000, decreased

investor relation stock compensation charges of $370,000, partially offset by increased salary and benefit expenses of $78,000,

settlement charges of $159,000 related to amended and repriced warrants and increased investor relations fees, legal fees and franchise

taxes of $122,000, $27,000 and $48,000, respectively.

Interest Expense

Interest expense for the year ended December

31, 2019 was $0, compared to $33,502,000 for the same period of 2018.

Interest expense for the year ended December 31, 2018 was

due to the amortization of debt discount charges and interest expense associated with the convertible debt outstanding as of July

25, 2018, the date of the Company’s initial public offering.

No interest expense was booked in the year ended December 31,

2019, as the Company had no outstanding debt.

the year ended December 31, 2020 were $4,168,000, an increase of $1,339,000, compared to expenses of $2,829,000 for the year ended December 31, 2019.

The increase in general and administrative expenses is primarily related to increased salary and benefit expenses

of $176,000, as the Company added a senior financial executive in September 2019, increased stock compensation and legal expenses

of $396,000 and $191,000, respectively, and settlement expenses of $879,000, which is discussed in Note 8 of the Company’s

consolidated financial statements (Contingencies).

The increase was partially offset by decreased investor relations expenses of

Interest Expense, net

Interest expense, net for the year ended December 31,

2020 was $1,397,000, compared to $0 for the year ended December 31, 2019.

Interest expense, net for the year ended December 31, 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.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability

for the year ended December 31, 2019 resulted in a gain of $204,000, compared to an expense of $8,051,000 during the same period

The gain for the year ended December 31, 2019 was due to the decrease in our common stock price during the period.

expense for the year ended December 31, 2018 was due to the increase in our common stock price as we prepared for and then concluded

an initial public offering on July 25, 2018, which led to an increase in the fair value of the warrants.

for the year ended December 31, 2020 resulted in a gain of $16,000, compared to a gain of $204,000 for the year ended December 31,

The gain for the year ended December 31, 2019 was due to the decrease in our Common Stock price during both the respective

Change in Fair Value of Derivative Liability

Change in fair value of derivative liability

for the year ended December 31, 2019 resulted in an expense of $171,000, compared to an expense of $14,294,000 in the same period

The $171,000 expense recorded in the year ended December 31, 2019 was related to the change in fair value of the embedded

conversion feature included in the Company’s Series A 8% Senior Convertible Preferred Stock, par value $0.0001 per share

(the “Series A Preferred Stock”) as of December 31, 2019.

The $14,294,000 expense recorded in the year ended December

31, 2018 was related to the fair value of the embedded conversion feature included in nearly all of the Company’s outstanding

convertible notes as of July 25, 2018, the date of our initial public offering.

Other Income (Expense)

Other income (expense) for the year ended

December 31, 2019 was an expense of $902,000, compared to income of $69,000 during the same period of 2018.

Other expense for the

year ended December 31, 2019 was primarily comprised of an $892,000 change in fair value of common stock warrants upon repricing.

for the year ended December 31, 2020 was $0, compared to an expense of $171,000 for the year ended December 31, 2019.

expense recorded in the year ended December 31, 2019 was related to the change in fair value of the embedded conversion feature

included in the Company’s 8% Senior Convertible Series A Preferred Stock, par value $0.0001 per share (the “Series

A Preferred Stock”), as of December 31, 2019.

Other Expense, net

Other expense, net for the year ended

December 31, 2020 was $34,000, compared to other expense of $902,000 during the same period of 2019.

Other expense, net for

the year ended December 31, 2019 was primarily comprised of an $892,000 change in fair value of common stock warrants

upon repricing.

Liquidity and Capital Resources

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2020 were $7,415,000, compared to $298,000 as of December 31, 2019.

The decrease in cash and cash equivalents during the year

ended December 31, 2019 was directly related to the use of cash to fund operations and working capital requirements, partially

offset by (i) the April 2019 offering and sale of Series A Preferred Stock, whereby the Company raised net proceeds of $920,000,

(ii) the May 2019 public offering, under which the Company raised net proceeds of $4,664,000 (iii) the October 2019 registered

direct offering under which the Company raised net proceeds of $1,485,000 and (iv) the issuance of pre-funded warrants and exercise

of common stock warrants under which the Company raised net proceeds of $1,167,000.

We incurred a net loss of $12,038,000

for the year ended December 31, 2019 and used net cash in operating activities of $11,032,000.

The increase in cash and cash equivalents during the year

ended December 31, 2020 was directly related to the issuance of Common Stock, prefunded warrants and related warrants whereby

the Company raised net proceeds of $16,156,000, the issuance of convertible notes for net proceeds of $1,396,000, and the issuance

of a note payable, under which the Company raised $847,000.

The cash provided by these financing activities was offset by the use

of cash to fund operations and repayment of convertible notes payable totaling $2,151,000.

We incurred a net loss of $12,705,000 for

the year ended December 31, 2020 and used net cash in operating activities of $9,859,000.

For the year ended December 31,

2019, we incurred a net loss of $12,038,000 and used net cash in operating activities of $11,032,000.

Excluding non-cash adjustments,

the primary reasons for the use of net cash from operating activities during the year ended December 31, 2019 was related to the

increase in inventories and prepaid expenses and other assets of $1,283,000 and $516,000, respectively, offset partially by the

increase in accounts payable and accrued liabilities of $1,022,000 and $300,000, respectively.

Excluding non-cash adjustments,

the primary reasons for the use of net cash from operating activities during the year ended December 31, 2018 is related to the

decrease in accounts payable $752,000, the increase in inventories and prepaid expenses of $691,000 and $221,000 respectively,

partially offset by an increase in accrued interest of $6,316,000.

Excluding non-cash adjustments, the primary

reasons for the use of net cash from operating activities during the year ended December 31, 2020 is related to the decrease

in accounts payable of $882,000, offset partially by the increase in accrued liabilities of $263,000.

We are an early stage company and have

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These conditions raise substantial doubt about our ability to continue as a going concern.

During the year ended December 31, 2019,

the Company did not borrow any funds.

During the year ended December 31, 2018, the Company borrowed an additional $3,770,000 from

secured lenders receiving net proceeds of $3,437,000 after issuance costs.

In addition, in July 2018, the Company completed its

IPO where it received net proceeds of $10,273,000.

Upon completion of the IPO the Company repaid $200,000 of its convertible notes

payable and the remainder of the convertible notes payable along with all related accrued interest converted into a total of 9,527,144

shares of common stock.

Going Concern

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Based on current operating levels, the

Company will need to raise additional funds in the first half of 2020.

Company may need to raise additional funds in the second half of 2021.

Management of the Company intends to raise additional funds

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required by this Item as we are a smaller reporting company.

Financial Statements and Supplementary Data.

The financial statements, notes to the

financial statements and the respective reports of the Company’s independent registered accountants required to be filed

in response to this Item 8 begin on page F-1.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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-K

Item 5. Market for Registrant’s Common Equity