What changed in this filing

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Item 1. Financial Statements

2021-11-10 compared with 2021-08-10 · 255 added, 232 removed, 584 unchanged (45% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

June 30, 2021

September 30, 2021

December 31, 2020

9 unchanged sentences

Accrued liabilities

Borrowings, current portion

Borrowings, current position

Total current liabilities

Other liabilities

Borrowings, net of current portion

Borrowings, net of current position

Derivative liability

4 unchanged sentences

1,250,000 shares authorized;

0 and 250,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020, (liquidation preference of $ 0 and $ 1,136,000 )

0 and 250,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020, (liquidation preference of $ 0 and $ 1,136,000 )

Stockholders’ Equity:

1 unchanged sentence

200,000,000 shares authorized;

12,762,797 and 8,402,250 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

15,803,940 and 8,402,250 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three and six months ended June 30, 2021 and 2020

For the three and nine months ended September 30, 2021 and 2020

(in thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenue

7 unchanged sentences

Change in fair value of warrant liability

Gain on forgiveness of Paycheck Protection Program loan

Other expense

12 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

For the three and six months ended June 30, 2021 and 2020

For the three and nine months ended September 30, 2021 and 2020

(in thousands, except share and per share data)

15 unchanged sentences

Exchange of convertible preferred stock for common stock

Warrants issued upon exchange of convertible preferred stock for common stock

Warrants issued upon exchange of preferred stock for common stock

Deemed dividend on exchange of convertible preferred stock

2 unchanged sentences

Balance as of June 30, 2021

Stock-based compensation

Release of vested restricted common stock

Issuance of common stock upon warrant exercise, net of issuance costs

Registered direct offering, net of issuance costs

Balance as of September 30, 2021

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 6.

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

SUMMIT WIRELESS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

For the three and nine months ended September 30, 2021 and 2020

(in thousands, except share and per share data)

Convertible Preferred Stock

24 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 common stock

Balance as of September 30, 2020

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 6.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended June 30, 2021 and 2020

For the nine months ended September 30, 2021 and 2020

(in thousands, except share and per share data)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

1 unchanged sentence

Warrant inducement expense

Gain on forgiveness of Paycheck Protection Program loan

Stock-based compensation

11 unchanged sentences

Accrued liabilities

Accrued interest

Net cash used in operating activities

Cash flows from investing activities:

Proceeds from sale of property and equipment

Purchases of property and equipment

3 unchanged sentences

Repayment of capital lease

Proceeds from issuance of common stock in registered direct offering, net of issuance costs

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

9 unchanged sentences

Supplemental disclosure of cash flow information:

Cash paid for income taxes

Cash paid for interest

Cash paid for income taxes

Noncash Investing and Financing Activities:

9 unchanged sentences

Warrant repricing

Issuance costs for public 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.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Business and Viability of Operations

For the Nine Months Ended September 30, 2021 and 2020

Business and Summary of Significant Accounting Policies

Summit Wireless Technologies, Inc.

1 unchanged sentence

The Company develops wireless audio semiconductors and modules for consumer electronics companies to enable mainstream consumers and audio enthusiasts to experience high quality audio.

Nasdaq Notifications

On March 24, 2020, the Company received written notification from Nasdaq that the Company did not comply with Nasdaq Listing Rule 5605 (the “Audit Committee Rule”), which requires that the audit committee of the Company’s board of directors include at least three independent directors.

On June 24, 2020, as a result of the Company’s appointment of Sri Peruvemba to such audit committee effective as of June 22, 2020, Nasdaq notified the Company that it determined that the Company regained compliance with the Audit Committee Rule and the matter was closed.

On January 6, 2021, the Company notified Nasdaq that effective January 1, 2021, Helge Kristensen, a current director of the Company and a member of the audit committee of the Company’s board of directors, may no longer be considered an independent director, as such term is defined in Nasdaq Listing Rule 5605(a)(2).

On January 14, 2021, the Company received a letter from Nasdaq confirming that the Company is not in compliance with Nasdaq’s independent director and audit committee requirements as set forth in Nasdaq Listing Rule 5605 and that consistent with Nasdaq Listing Rules 5605(b)(1)(A) and 5605(c)(4), Nasdaq provided the Company a “cure period” in order to regain compliance until the earlier of (i) the Company’s next annual stockholders’ meeting or (ii) January 1, 2022;

or if the next annual stockholders’ meeting is held before June 30, 2021, then the Company must evidence compliance with such rule no later than June 30, 2021.

Nasdaq also informed the Company that if it does not regain compliance with both of the Nasdaq Independence Requirements, within the applicable “cure period,” Nasdaq will provide written notification to the Company that its securities will be delisted from Nasdaq.

On April 19, 2021, as a result of the Company’s appointment of Robert Tobias to the audit committee effective as of March 14, 2021, Nasdaq notified the Company that it determined that the Company regained compliance with Nasdaq’s audit committee requirements and the matter was closed.

On May 12, 2021, as a result of the Company’s appointment of Wendy Wilson to the Company’s board of directors effective as of May 6, 2021, Nasdaq notified the Company that it determined that the Company regained compliance with Nasdaq’s independent director requirements and the matter was closed.

Reverse Stock Split

On March 31, 2020, the Company held a special meeting of its stockholders, at which its stockholders approved an amendment to the Company’s certificate of incorporation, as amended, to effect a reverse stock split of all of the outstanding shares of common stock at a specific ratio within a range from one-for-four to one-for-twenty, and to grant authorization to the board of directors to determine, in its sole discretion, the specific ratio and timing of the reverse stock split.

On April 9, 2020, a 1-for- 20 reverse stock split was effected and the condensed consolidated financial statements have been retroactively adjusted.

All common stock share numbers, warrants to purchase common stock, prices and exercise prices have been retroactively adjusted to reflect the reverse stock split.

The par value of the common stock and the Series A 8 % Senior Convertible Preferred Stock, par value $ 0.0001 per share (the “Series A Preferred Stock”) outstanding and its par value were not adjusted for the reverse stock split.

The common stock began trading on a split-adjusted basis on that day under the new CUSIP number 86633R 203.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Business and Viability of Operations , continued

In March 2020, the World Health Organization characterized the coronavirus (“COVID-19”) a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency.

The rapid spread of the pandemic and the continuously evolving responses to combat it have had an increasingly negative impact on the global economy.

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.

Although, we did observe fluctuating demand for our products between April and September 2020, and delays in certain product shipments from our suppliers after the COVID-19 pandemic was declared, including most recently, we have not experienced a material adverse impact on our operating results.

We have reduced access to our facilities to personnel and third parties who perform critical activities that must be performed on-site and as a result, many 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 or be certain supply delays or interruptions will not occur in the future, 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.

Liquidity and management plans

The condensed consolidated financial statements of the Company have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business.

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

As of June 30, 2021, the Company had cash and cash equivalents of $ 10.3 million and reported net cash used in operations of $ 5.3 million during the six months ended June 30, 2021.

The Company expects operating losses to continue in the foreseeable future because of additional costs and expenses related to research and development activities, plans to expand its product portfolio, and increase its market share.

The Company’s ability to transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure.

Based on current operating levels, the Company will need to raise additional funds by selling additional equity or incurring debt.

To date, the Company has not generated significant revenues and has funded its operations primarily through sales of its common stock in public markets, sales of common and preferred units prior to its initial public offering (“IPO”), and proceeds from the exercise of warrants to purchase common stock and the sale of 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 limited to making payroll payments to our employees and other permitted purposes relating to the operation of our business.

(See Note 4 – Borrowings – 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.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Business and Viability of Operations , continued

Management of the Company intends to raise additional funds through the issuance of equity securities or debt.

There can be no assurance that, in the event the Company requires additional financing, such financing will be available at terms acceptable to the Company, if at all.

Failure to generate sufficient cash flows from operations, raise additional capital and reduce discretionary spending could have a material adverse effect on the Company’s ability to achieve its intended business objectives.

As a result, the substantial doubt about the Company’s ability to continue as a going concern has not been alleviated.

The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Summary of Significant Accounting Policies

Basis of Presentation

19 unchanged sentences

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

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Summary of Significant Accounting Policies , continued

The Company’s accounts receivable are derived from revenue earned from customers located throughout the world.

The Company performs credit evaluations of its customers’ financial condition and sometimes requires partial payment in advance of shipping.

As of June 30, 2021 and December 31, 2020, there was no allowance for doubtful accounts.

As of June 30, 2021, the Company had two customers accounting for 48 % and 18 % of accounts receivable.

The Company performs credit evaluations of its customers’ financial condition as necessary, and sometimes requires partial payment in advance of shipping.

As of September 30, 2021 and December 31, 2020, there was no allowance for doubtful accounts.

As of September 30, 2021, the Company had one customer accounting for 63 % of accounts receivable.

As of December 31, 2020, the Company had three customers accounting for 36 %, 31 % and 15 % of accounts receivable.

The Company had two customers accounting for 44 % and 10 % of its net revenue for the three months ended June 30, 2021.

The Company had four customers accounting for 28 %, 18 %, 10 % and 10 % of its net revenue for the six months ended June 30, 2021.

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 63%, 12 % and 12 % of its net revenue for the three months ended September 30, 2021.

The Company had three customers accounting for 33 %, 17 %, and 10 % of its net revenue for the nine months ended September 30, 2021.

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 three customers accounting for 54 %, 28 % and 11 % of its net revenue for the nine months ended September 30, 2020.

The Company’s future results of operations involve a number of risks and uncertainties.

Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, continued acceptance of the Company’s products, competition from substitute products and larger companies, protection of proprietary technology, strategic relationships and dependence on key individuals.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Summary of Significant Accounting Policies, continued

The Company relies on sole-source suppliers to manufacture some of the components used in its product.

7 unchanged sentences

Debt discounts under these arrangements are amortized to interest expense using the interest method over the earlier of the term of the related debt or their earliest date of redemption.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Summary of Significant Accounting Policies , continued

Warrants for Shares of Common Stock and Derivative Financial Instruments

Warrants for shares of common stock and other derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement).

Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) that contain reset provisions that do not qualify for the scope exception are classified as equity or liabilities.

The Company assesses classification of its warrants for shares of common stock and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.

1 unchanged sentence

The Company recognized the BCF by allocating the intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by the difference between the effective conversion price per share and the fair value of common stock per share on the commitment date, to shares of common stock, resulting in a discount on the convertible debt.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Summary of Significant Accounting Policies, continued

Revenue Recognition

14 unchanged sentences

If a customer pays consideration, or the Company has a right to an amount of consideration that is unconditional before we transfer a good or service to the customer, those amounts are classified as contract liabilities which are included in other current liabilities when the payment is made or it is due, whichever is earlier.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Summary of Significant Accounting Policies , continued

Contract Balances

We receive payments from customers based on a billing schedule as established in our contracts.

We receive payments from customers based on a billing schedule as established in our contracts to partially offset prepayments required by our vendors on long lead time materials.

Amounts collected prior to the fulfillment of the performance obligation are considered contract liabilities and classified as customer advances within accrued liabilities on the condensed consolidated balance sheets.

1 unchanged sentence

Accounts receivables are recorded when the right to this consideration becomes unconditional.

We do not have any material contract assets as of June 30, 2021 and December 31, 2020.

We do not have any material contract assets as of September 30, 2021 and December 31, 2020.

(in thousands)

September 30,

Contract Liabilities

During the six months ended June 30, 2021, the Company recognized $ 373,000 of revenue that was included in the contract balances as of December 31, 2020.

During the nine months ended September 30, 2021, the Company recognized $ 373,000 of revenue that was included in the contract liabilities as of December 31, 2020.

Revenue by Geographic Area

1 unchanged sentence

Since we operate in one segment, all financial segment and product line information can be found in the condensed consolidated financial statements.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Summary of Significant Accounting Policies, continued

Advertising Costs

Advertising costs are charged to sales and marketing expenses as incurred.

Advertising costs for the three and six months ended June 30, 2021 were $ 167,000 and $ 299,000 , respectively.

Advertising costs for the three and six months ended June 30, 2020 were $ 3,000 and $ 16,000 , respectively.

Advertising costs for the three and nine months ended September 30, 2021 were $ 152,000 and $ 451,000 , respectively.

Advertising costs for the three and nine months ended September 30, 2020 were $ 65,000 and $ 81,000 , respectively.

Comprehensive Loss

1 unchanged sentence

Accordingly, comprehensive loss may include certain changes in equity that are excluded from net loss.

For the three and six months ended June 30, 2021 and 2020, the Company’s comprehensive loss is the same as its net loss.

For the three and nine months ended September 30, 2021 and 2020, the Company’s comprehensive loss is the same as its net loss.

Foreign Currency

5 unchanged sentences

Cumulative gains and losses from the translation of these operations’ financial statements are reported as a separate component of stockholders’ equity, while foreign currency transaction gains or losses, resulting from re-measuring local currency to the U.S.

dollar are recorded in the condensed consolidated statement of operations in other income (expense), net and were not material for the three and six months ended June 30, 2021 and 2020.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Summary of Significant Accounting Policies , continued

dollar are recorded in the condensed consolidated statement of operations in other income (expense), net and were not material for the three and nine months ended September 30, 2021 and 2020.

Net Loss per Common Share

2 unchanged sentences

For purposes of the diluted net loss per common share calculation, Series A Preferred Stock, warrants exercisable for common stock, restricted stock units and shares issuable upon the conversion of convertible notes payable are considered to be potentially dilutive securities.

For the three and six months ended June 30, 2021, warrants to purchase 4,496,924 shares of common stock, 740,869 shares of restricted stock and 647,474 shares underlying restricted stock units 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, 2020, warrants to purchase 7,337,199 shares of common stock, 250,000 shares of Series A Preferred Stock and 46,929 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, 2021, warrants to purchase 4,475,424 shares of common stock, 711,805 shares of restricted stock, 310,000 shares of restricted stock issued under an inducement grant and 456,931 shares underlying restricted stock units 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, 2020, warrants to purchase 7,337,199 shares of common stock, 250,000 shares of Series A 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.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Summary of Significant Accounting Policies , continued

Recently Issued and Not Yet Adopted Accounting Pronouncements

8 unchanged sentences

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

Going Concern

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

As of September 30, 2021, the Company had cash and cash equivalents of $ 16.1 million and reported net cash used in operations of $ 8.6 million during the nine months ended September 30, 2021.

The Company’s ability to transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure.

Based on current operating levels, the Company will need to raise additional funds by selling additional equity or incurring debt.

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

Management of the Company intends to raise additional funds through the issuance of equity securities or debt.

There can be no assurance that, in the event the Company requires additional financing, such financing will be available at terms acceptable to the Company, if at all.

As a result, the substantial doubt about the Company’s ability to continue as a going concern has not been alleviated.

The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Balance Sheet Components

Inventories (in thousands):

September 30,

Raw materials

2 unchanged sentences

Total inventories

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Balance Sheet Components , continued

Property and equipment, net (in thousands):

September 30,

Machinery and equipment

4 unchanged sentences

Property and equipment, net

Depreciation and amortization expense for the three months ended June 30, 2021 and 2020 was $ 20,000 and $ 15,000 , respectively.

Depreciation and amortization expense for the six months ended June 30, 2021 and 2020 was $ 39,000 and $ 29,000 , respectively.

The cost and accumulated depreciation of assets acquired under capital lease included in machinery and equipment in the above table as of June 30, 2021 were $ 72,000 and $ 20,000 , respectively.

Depreciation and amortization expense for the three months ended September 30, 2021 and 2020 was $ 20,000 and $ 17,000 , respectively.

Depreciation and amortization expense for the nine months ended September 30, 2021 and 2020 was $ 59,000 and $ 46,000 , respectively.

The cost and accumulated depreciation of assets acquired under capital lease included in machinery and equipment in the above table as of September 30, 2021 were $ 72,000 and $ 26,000 , respectively.

Accrued liabilities (in thousands):

September 30,

Accrued vacation

1 unchanged sentence

Customer advances

Accrued audit fees

Accrued professional fees

Accrued rebate

1 unchanged sentence

Total accrued liabilities

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Funding Agreement

2 unchanged sentences

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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Borrowings , continued

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.

Convertible Promissory Note

11 unchanged sentences

Subject to certain exceptions, commencing on the Conversion Trigger Date (as such term is defined in the March 2020 Note) and for a nine-month period after such date, the investor could convert only up to an aggregate of $ 102,000 in outstanding principal amount during any calendar month.

At any time after issuance of the March 2020 Note, the Company could repay all (but not less than all) of the outstanding principal amount of the March 2020 Note upon ten days ’ written notice to the investor.

If the Company exercised its right to prepay the March 2020 Note, the investor had the right, upon five days written notice to the Company after receipt of the notice of prepayment, to convert up to 33 % of the principal amount of the March 2020 Note at the applicable conversion price.

The investor also had the right to require the Company to repay 105 % of the outstanding principal amount of the March 2020 Note in the event of a Change of Control (as defined in the March 2020 Purchase Agreement).

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

For the Nine Months Ended September 30, 2021 and 2020

Borrowings, continued

At any time after the closing date of the March 2020 Private Placement, in the event that the Company issued or sold any shares of common stock or common stock equivalents (as defined in the March 2020 Note), subject to certain exceptions, at an effective price lower than the conversion price then in effect or without consideration, then the conversion price would be reduced to the price per share paid for such shares of common stock or common stock equivalents.

5 unchanged sentences

On April 29, 2020, the outstanding debt of $ 2,040,000 , owed to the investor pursuant to the March 2020 Note, was fully repaid.

During the three months ended June 30, 2021 and 2020, the Company recognized $ 0 and $ 1,352,000 of interest expense from the amortization of debt discounts.

During the six months ended June 30, 2021 and 2020, the Company recognized $ 0 and $ 1,389,000 of interest expense from the amortization of debt discounts.

During the three months ended September 30, 2021 and 2020, the Company recognized $ 0 and $ 0 of interest expense from the amortization of debt discounts.

During the nine months ended September 30, 2021 and 2020, the Company recognized $ 0 and $ 1,389,000 of interest expense from the amortization of debt discounts.

Payroll Protection Program Note Agreement

1 unchanged sentence

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.

The PPP Loan, which is in the form of a PPP promissory note and agreement, dated May 3, 2020 (the “PPP Note Agreement”), had a maturity date of May 3, 2022 and bore interest at a rate of 1.00 % per annum.

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

3 unchanged sentences

Under the terms of the PPP Note Agreement, certain amounts of the PPP Loan may be forgiven.

Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP.

Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for qualifying expenses.

During the third quarter of 2021, the Company received full loan forgiveness for obligations related to the PPP loan.

The Company accounted for the PPP loan as debt, and the loan forgiveness was accounted for as a debt extinguishment.

The amount of loan and interest forgiven totaling $ 859,000 , was recognized as a gain upon debt extinguishment and was reported in the accompanying condensed consolidated statements of operations for the three months and nine months ended September 30, 2021.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Fair Value Measurements

5 unchanged sentences

The Company does not adjust for or apply any additional assumptions or estimates to the pricing information received from its advisors.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Fair Value Measurements , continued

● Level 3 – Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment.

1 unchanged sentence

The determination of fair value for Level 3 instruments involves the most management judgment and subjectivity.

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020 by level within the fair value hierarchy, are as follows:

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 by level within the fair value hierarchy, are as follows:

(in thousands)

June 30, 2021

September 30, 2021

Quoted prices

5 unchanged sentences

Warrant liability

There were no transfers between Level 1, 2 or 3 during the three and six months ended June 30, 2021 or June 30, 2020.

There were no transfers between Level 1, 2 or 3 during the three and nine months ended September 30, 2021 or September 30, 2020.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Fair Value Measurements, continued

Warrant Liability

The following table includes 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, 2021 and 2020:

For the three months ended

For the six months ended

For the nine months ended

(in thousands)

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Beginning balance

2 unchanged sentences

The changes in fair value of the warrant liability are recorded in change in fair value of warrant liability in the condensed consolidated statements of operations.

The warrant liability is not significant at June 30, 2021 and there are no material changes to the significant unobservable inputs from December 31, 2020.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Fair Value Measurements , continued

The warrant liability is not significant at September 30, 2021 and there are no material changes to the significant unobservable inputs from December 31, 2020.

Derivative Liability

As of June 30, 2021, the Company no longer has a derivative liability as the Series A Preferred Stock was exchanged for common stock and warrants during the three months ended June 30, 2021.

As of September 30, 2021, the Company no longer has a derivative liability.

The Series A Preferred Stock was exchanged for common stock and warrants during the three months ended June 30, 2021, thereby eliminating the conversion feature which gave rise to the derivative.

Prior to the exchange the Company had measured the fair value of the derivative by estimating the fair value of the Series A Preferred Stock as if conversion occurred at the end of the reporting period.

The Company calculated the 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 constrained by the specified floor price of $ 30.00 .

The fair value of the derivative liability as of June 30, 2021 and December 31, 2020 was $ 0 and $ 387,000 , respectively.

The fair value of the derivative liability as of September 30, 2021 and December 31, 2020 was $ 0 and $ 387,000 , respectively.

Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Reverse Stock Split

On March 31, 2020, the Company held a special meeting of its stockholders, at which its stockholders approved an amendment to the Company’s certificate of incorporation, as amended, to effect a reverse stock split of all of the outstanding shares of common stock at a specific ratio within a range from one-for- four to one-for- twenty , and to grant authorization to the board of directors to determine, in its sole discretion, the specific ratio and timing of the reverse stock split.

On April 9, 2020, a 1-for- 20 reverse stock split was effected and the condensed consolidated financial statements have been retroactively adjusted.

All common stock share numbers, warrants to purchase common stock, prices and exercise prices have been retroactively adjusted to reflect the reverse stock split.

The common stock began trading on a split-adjusted basis on that day under the new CUSIP number 86633R 203.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Convertible Preferred Stock and Stockholders’ Equity (Deficit) , continued

Series A 8 % Senior Convertible Preferred Stock

6 unchanged sentences

(See Note 5 – Fair Value Measurements for the fair value computation.)

As of June 30, 2021, the Company no longer has a derivative liability or any preferred stock outstanding, as all outstanding shares of Series A Preferred Stock were exchanged for 250,000 shares of common stock and warrants to purchase up to 187,500 shares of Common Stock during the three months ending June 30, 2021.

As of September 30, 2021, the Company no longer has a derivative liability or any preferred stock outstanding, as all outstanding shares of Series A Preferred Stock were exchanged for 250,000 shares of common stock and warrants to purchase up to 187,500 shares of Common Stock during the three months ending June 30, 2021.

On June 4, 2021, the Company and Lisa Walsh (the “Investor”) entered into an exchange agreement pursuant to which the Company effected such exchange of securities with the Investor.

As of June 30, 2021, there are 20,000,000 shares of preferred stock authorized, but there are no shares issued or outstanding .

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Convertible Preferred Stock and Stockholders’ Equity (Deficit) , continued

On January 30, 2018, the Company’s board of directors approved the establishment of the Company’s 2018 Long-Term Stock Incentive Plan (the “LTIP”) and termination of its Carve-Out Plan (the “Plan”).

As of September 30, 2021, there are 20,000,000 shares of preferred stock authorized, but there are no shares issued or outstanding .

Carve-Out Plan

For the three and nine months ended September 30, 2021, 0 and 352 shares of restricted stock issued under the Carve-Out Plan (the “Plan”), respectively, were released with an intrinsic value of approximately $ 0 and $ 2,000 , respectively.

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.

2018 Long Term Stock Incentive Plan

On January 30, 2018, the Company’s board of directors approved the establishment of the Company’s 2018 Long-Term Stock Incentive Plan (the “LTIP”) and termination of the Plan.

Under the LTIP, the aggregate maximum number of shares of common stock (including shares underlying options) that may be issued under the LTIP pursuant to awards of Restricted Shares or Options will be limited to 15 % of the outstanding shares of common stock , which calculation shall be made on the first trading day of each new fiscal year;

2 unchanged sentences

For fiscal year 2021, up to 672,180 shares of common stock are available for participants under the LTIP.

For the three and six months ended June 30, 2021, 0 and 352 shares of restricted stock, respectively, were released with an intrinsic value of approximately $ 0 and $ 2,000 , respectively.

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 $ 0 and $ 2,000 , respectively.

A summary of activity related to restricted stock awards (excluding the deferred shares) for the six months ended June 30, 2021 is presented below:

Weighted-Average

Grant Date Fair Value

Non-vested as of January 1, 2021

Non-vested as of June 30, 2021

As of June 30, 2021, the unamortized compensation costs related to the unvested restricted stock awards was approximately $ 2,208,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 2.6 years.

For the three and nine months ended September 30, 2021, 29,064 shares of restricted stock issued under the LTIP, were released with an intrinsic value of approximately $ 93,000 .

For the three and nine months ended September 30, 2020, 0 shares of restricted stock were released.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

For the Nine Months Ended September 30, 2021 and 2020

Convertible Preferred Stock and Stockholders’ Equity (Deficit) , continued

A summary of activity related to restricted stock awards (excluding the deferred shares and the inducement grant restricted stock award) for the nine months ended September 30, 2021 is presented below:

Weighted-Average

Grant Date Fair Value

Non-vested as of January 1, 2021

Non-vested as of September 30, 2021

As of September 30, 2021, the unamortized compensation costs related to the unvested restricted stock awards was approximately $ 2,028,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 2.4 years.

On September 13, 2021, the Company issued 310,000 shares of restricted common stock to Eric Almgren, the Company’s new Chief Strategist, as an inducement grant (“September 2021 Inducement Grant”).

Such shares were issued outside the Company’s LTIP and 2020 Stock Plan.

In accordance with the September 2021 Inducement Grant, 77,500 shares will vest monthly over a period of 36 months and the remaining 232,500 will vest in 77,500 increments, upon the achievement of certain company milestones related to the volume weighted average closing price per share of the Company’s common stock, as reported on NASDAQ, for the ten (10) consecutive days in which thresholds of the Company’s market capitalization of $ 75 million, $ 100 million and $ 150 million are achieved.

The September 2021 Inducement Grant has been valued with an approximate value of $ 772,000 and will be amortized over 36 months.

The Company recorded $ 10,000 of stock-based compensation for the three and nine months ended September 30, 2021.

2020 Stock Incentive Plan

6 unchanged sentences

In connection with the approval, the Company issued 614,824 restricted stock units to employees, directors and consultants.

A summary of activity related to restricted stock units under the Company’s 2020 Stock Plan for the six months ended June 30, 2021 is presented below:

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Convertible Preferred Stock and Stockholders’ Equity (Deficit) , continued

A summary of activity related to restricted stock units under the Company’s 2020 Stock Plan for the nine months ended September 30, 2021 is presented below:

Weighted-Average

Grant Date Fair

Grant Date Fair Value

Non-vested as of January 1, 2021

Non-vested as of June 30, 2021

As of June 30, 2021, the unamortized compensation costs related to the unvested restricted stock units was approximately $ 1,168,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 2.2 years.

Non-vested as of September 30, 2021

As of September 30, 2021, the unamortized compensation costs related to the unvested restricted stock units was approximately $ 1,042,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 1.9 years.

For the three and nine months ended September 30, 2021, 201,343 shares of restricted stock units were released under the 2020 Stock Plan with an intrinsic value of approximately $ 646,000 .

For the three and nine months ended September 30, 2020, no shares of restricted stock units were released.

February 2020 Private Placement

5 unchanged sentences

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.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Convertible Preferred Stock and Stockholders’ Equity (Deficit) , continued

The February 2020 Warrants are exercisable to purchase up to an aggregate of 45,534 shares of common stock commencing on the date of issuance at an exercise price of $ 9.80 per share, subject to adjustment upon stock splits, reverse stock splits, and similar capital changes.

7 unchanged sentences

risk-free interest rate of 0.89 % and expected life of 5 years .

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Convertible Preferred Stock and Stockholders’ Equity (Deficit) , continued

The fair value of the February 2020 Alexander Warrant at issuance was $ 11,000 .

12 unchanged sentences

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.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Convertible Preferred Stock and Stockholders’ Equity (Deficit) , continued

Purchase Agreements

8 unchanged sentences

The offering of the securities pursuant to the June 4, 2020 Purchase Agreement was closed on June 8, 2020.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Convertible Preferred Stock and Stockholders’ Equity (Deficit) , continued

On June 9, 2020, we entered into a securities purchase agreement (the “June 9, 2020 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.

7 unchanged sentences

The offering of the securities pursuant to the June 9, 2020 Purchase Agreement was closed on June 11, 2020.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Convertible Preferred Stock and Stockholders’ Equity (Deficit) , continued

On July 22, 2021, the Company entered into a securities purchase agreement (the “July 22nd Purchase Agreement”) with several accredited investors providing for the issuance of 2,500,000 shares of the Company’s common stock.

Pursuant to the July 22nd Purchase Agreement, the investors purchased all of the securities sold thereby for an aggregate purchase price of $ 10,000,000 .

Pursuant to the July 22nd Purchase Agreement, an aggregate of 2,500,000 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 offering of the securities pursuant to the July 22nd Purchase Agreement was closed on July 27, 2021.

The Company filed the prospectus supplement on July 26, 2021.

Maxim acted as the placement agent.

The Company paid Maxim a fee of approximately $ 800,000 , which was equal to 8 % of the aggregate purchase price paid by investors placed by Maxim and certain expenses.

The July 22nd Purchase Agreement contains customary representations, warranties and agreements of the Company and the investors and customary indemnification rights and obligations of the parties thereto.

Settlement Agreements

1 unchanged sentence

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

In 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 shall not 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.

In 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 agreed not 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.

The Company recorded a settlement expense of $ 237,000 which is included in general and administrative expense for the nine months ended September 30, 2020.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Convertible Preferred Stock and Stockholders’ Equity (Deficit) , continued

On November 9, 2020, in order to resolve a dispute between certain investors (the “February 2020 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 February 2020 Holders (the “Settlement Agreement”), pursuant to which (i) the Company and the February 2020 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, totaling 45,534 additional common stock purchase warrants, (ii) the Company and the February 2020 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.

9 unchanged sentences

risk-free interest rate of 0.38 % and expected life of 5 years .

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Convertible Preferred Stock and Stockholders’ Equity (Deficit) , continued

Such warrant issued to the investor contained an adjustment provision such that if the Company issues or sells any shares of common stock or common stock equivalents (as defined in the March 2020 Note), subject to certain exceptions, at an effective price lower than the conversion price, then in effect, the conversion price shall be reduced to the price per share paid for such shares of common stock or common stock equivalents.

13 unchanged sentences

risk-free interest rate of 0.37 % and expected life of 5 years .

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Convertible Preferred Stock and Stockholders’ Equity (Deficit) , continued

The Company also issued the April 2020 Maxim Warrant to purchase up to 100,000 shares of common stock to Maxim in connection with the April 2020 Public Offering.

12 unchanged sentences

risk-free interest rate of 0.45 % and expected life of 5.5 years.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Convertible Preferred Stock and Stockholders’ Equity (Deficit) , continued

In connection with the offering pursuant to the June 9, 2020 Purchase Agreement, the Company issued warrants to the investors to purchase up to an aggregate of 2,040,000 shares of common stock.

7 unchanged sentences

In January 2021, pursuant to the Company’s solicitation of certain warrant holders, such warrant holders agreed to exercise warrants to purchase an aggregate of 1,221,675 shares of common stock for net proceeds of approximately $ 2.9 million.

In consideration for their exercise of these warrants, for cash, the exercising holders are being issued new warrants to purchase up to an aggregate of 305,419 shares of common stock, at an exercise price of $ 4.20 per share, which are exercisable for a period of five years .

In consideration for their exercise of these warrants, for cash, the exercising holders were issued new warrants to purchase up to an aggregate of 305,419 shares of common stock, at an exercise price of $ 4.20 per share, which are exercisable for a period of five years .

The grant date fair value of those warrants was $ 567,000 , which was recorded as warrant inducement expense and an increase to additional paid-in capital on the accompanying condensed consolidated balance sheet.

16 unchanged sentences

risk-free interest rate of 0.78 % and expected life of 5.4 years.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Convertible Preferred Stock and Stockholders’ Equity (Deficit) , continued

In June 2021, pursuant to the Company’s solicitation of certain warrant holders, such warrant holders agreed to exercise warrants to purchase an aggregate of 1,000,000 shares of common stock for net proceeds of approximately $ 2.3 million.

6 unchanged sentences

risk-free interest rate of 0.77 % and expected life of 5.0 years.

The Company had an additional 281,000 warrants exercised during the three months ended June 30, 2021, for proceeds of approximately $ 889,000 .

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Convertible Preferred Stock and Stockholders’ Equity (Deficit) , continued

Information regarding warrants for common stock outstanding and exercisable as of June 30, 2021 is as follows:

During the three months ended September 30, 2021, warrant holders exercised 19,000 warrants to purchase common stock, for proceeds of approximately $ 62,000 .

Information regarding warrants for common stock outstanding and exercisable as of September 30, 2021 is as follows:

Weighted Average

1 unchanged sentence

Exercisable as of

June 30, 2021

September 30, 2021

$ 2.32 - $ 4.46

4 unchanged sentences

* Weighted average

Warrants exercisable as of June 30, 2021 excludes warrants to purchase 15,000 shares of common stock issued to a marketing firm, which vest upon the achievement of certain milestones.

Warrants exercisable as of September 30, 2021 excludes warrants to purchase 15,000 shares of common stock issued to a marketing firm, which vest upon the achievement of certain milestones.

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.

11 unchanged sentences

* Weighted average

Warrants exercisable as of December 31, 2020 exclude a warrant to purchase 15,000 shares of common stock issued to a marketing consulting firm.

Such warrant will vest in three tranches upon the achievement of certain milestones.

The Company recorded a provision for income taxes of $ 2,000 and $ 3,000 for the three and six months ended June 30, 2021 and 2020, respectively.

The Company’s effective tax rate was ( 0.03 %) and ( 0.05 %) for the six months ended June 30, 2021 and 2020, respectively.

The difference between the effective tax rate and the federal statutory tax rate for the six months ended June 30, 2021 and 2020 primarily relates to the valuation allowance on the Company’s deferred tax assets.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Income Taxes , continued

For the Nine Months Ended September 30, 2021 and 2020

Convertible Preferred Stock and Stockholders’ Equity (Deficit) , continued

Warrants exercisable as of December 31, 2020 exclude a warrant to purchase 15,000 shares of common stock issued to a marketing consulting firm.

Such warrant will vest upon the achievement of certain milestones.

The Company recorded a provision for income taxes of $ 0 and $ 2,000 for the three and nine months ended September 30, 2021, respectively.

The Company recorded a provision for income taxes of $ 0 and $ 3,000 for the three and nine months ended September 30, 2020, respectively.

The Company’s effective tax rate was ( 0.02 %) and ( 0.03 %) for the nine months ended September 30, 2021 and 2020, respectively.

The difference between the effective tax rate and the federal statutory tax rate for the nine months ended September 30, 2021 and 2020 primarily relates to the valuation allowance on the Company’s deferred tax assets.

For interim periods, the Company estimates its annual effective income tax rate and applies the estimated rate to the year-to-date income or loss before income taxes.

1 unchanged sentence

The Company also recognizes the effect of changes in enacted tax laws or rates in the interim periods in which the changes occur.

As of June 30, 2021 and December 31, 2020, the Company retains a full valuation allowance on its deferred tax assets.

As of September 30, 2021 and December 31, 2020, 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, 2021 and 2020 was calculated on a jurisdiction basis.

The provision for income taxes for the nine months ended September 30, 2021 and 2020 was calculated on a jurisdiction basis.

On March 27, 2020, the U.S.

3 unchanged sentences

Congress passed the Consolidation Appropriations Act, 2021 (the “CAA Act”).

The tax provisions under the CARES Act and CAA Act, do not have a material impact on the condensed consolidated financial statements for the six months ended June 30, 2021, given the existence of a full valuation allowance.

The tax provisions under the CARES Act and CAA Act, do not have a material impact on the condensed consolidated financial statements for the nine months ended September 30, 2021, given the existence of a full valuation allowance.

On June 29, 2020, California Assembly Bill 85 (“AB 85”) was signed into law, which suspends the use of California net operating losses and limits the use of California research tax credits for tax years beginning in 2020 and before 2023.

The Company does not expect the suspension of net operating losses to have a significant impact on the condensed consolidated financial statements.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Commitments and Contingencies

5 unchanged sentences

The new lease expires on January 31, 2024.

The following are the annual minimum lease payments for the years ending December 31, 2021 through December 31, 2024:

The following are the future minimum lease payments for the years ending December 31, 2021 through December 31, 2024:

$ 41,000 , $ 153,000 , $ 173,000 , and $ 15,000 .

Rent expense for the three months ended June 30, 2021 and 2020 was $ 67,000 and $ 86,000 , respectively.

Rent expense for the six months ended June 30, 2021 and 2020 was $ 112,000 and $ 201,000 , respectively.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Commitments and Contingencies , continued

Rent expense for the three months ended September 30, 2021 and 2020 was $ 56,000 and $ 87,000 , respectively.

Rent expense for the nine months ended September 30, 2021 and 2020 was $ 168,000 and $ 288,000 , respectively.

Capital Leases

1 unchanged sentence

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

Future minimum lease commitments for the capital lease as of June 30, 2021 are as follows:

Future minimum lease commitments for the capital lease as of September 30, 2021 are as follows:

(in thousands)

15 unchanged sentences

The accrual for a litigation loss contingency might include, for example, estimates of potential damages, outside legal fees and other directly related costs expected to be incurred.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Commitments and Contingencies, continued

The Company’s management does not believe that any such matters, individually or in the aggregate, will have a materially adverse effect on the Company’s condensed consolidated financial statements.

Coronavirus – COVID-19

On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic.

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 impact on our business in March 2020.

By that time, much of our first fiscal quarter of 2020 was completed.

During our second fiscal quarter of 2020, we observed decreased demand from certain of our customers due to the temporary closure by many retailers.

Our third and fourth fiscal quarters of 2020 and our first three fiscal quarters of 2021 saw sustained improved customer demand as retailers slowly reopened and demand for an in-home immersive cinema experience increased, following the initial closure of many public cinemas due to COVID-19.

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

The Company believes the extent of the COVID-19 pandemic’s impact on its operating results and financial condition has been and will continue to be driven by many factors, most of which are beyond the Company’s control and ability to forecast.

Although the Company has experienced some positive trends during the first nine months of 2021, because of these uncertainties, the Company cannot estimate how long or to what extent the pandemic will impact its operations.

Related Parties

4 unchanged sentences

acted as the lead investment bank in a number of the Company’s private financings and as an underwriter for the Company’s IPO.

As of June 30, 2021 and December 31, 2020, Mr.

As of September 30, 2021 and December 31, 2020, Mr.

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

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Related Parties , continued

On February 6, 2020, the Company entered into a placement agency agreement with Alexander Capital, L.P.

10 unchanged sentences

Ltd, a company with focus on service-branding in lifestyle products as well as pro line products based in China and co-founder and director of Inizio Capital, an investment company based in the Cayman Islands.

For the three months ended June 30, 2021 and 2020, Hansong Technology purchased modules from the Company of approximately $ 151,000 and $ 18,000 , respectively, and made payments to the Company of approximately $ 0 and $ 1,000 , respectively.

For the three months ended June 30, 2021 and 2020, Hansong Technology sold speaker products to the Company of approximately $ 132,000 and $ 29,000 , respectively, and the Company made payments to Hansong Technology of approximately $ 443,000 and $ 0 , respectively.

For the six months ended June 30, 2021 and 2020, Hansong Technology purchased modules from the Company of approximately $ 233,000 and $ 18,000 , respectively, and made payments to the Company of approximately $ 48,000 and $ 1,000 , respectively.

For the six months ended June 30, 2021 and 2020, Hansong Technology sold speaker products to the Company of approximately $ 757,000 and $ 29,000 , respectively, and the Company made payments to Hansong Technology of approximately $ 653,000 and $ 0 , respectively.

As of June 30, 2021 and December 31, 2020, Mr.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Related Parties, continued

For the three months ended September 30, 2021 and 2020, Hansong Technology purchased modules from the Company of approximately $ 263,000 and $ 137,000 , respectively, and made payments to the Company of approximately $ 333,000 and $ 0 , respectively.

For the three months ended September 30, 2021 and 2020, Hansong Technology sold speaker products to the Company of approximately $ 96,000 and $ 8,000 , respectively, and the Company made payments to Hansong Technology of approximately $ 309,000 and $ 38,000 , respectively.

For the nine months ended September 30, 2021 and 2020, Hansong Technology purchased modules from the Company of approximately $ 496,000 and $ 155,000 , respectively, and made payments to the Company of approximately $ 380,000 and $ 1,000 , respectively.

For the nine months ended September 30, 2021 and 2020, Hansong Technology sold speaker products to the Company of approximately $ 854,000 and $ 8,000 , respectively, and the Company made payments to Hansong Technology of approximately $ 962,000 and $ 67,000 , respectively.

As of September 30, 2021 and December 31, 2020, Mr.

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

4 unchanged sentences

Net revenue from customers is designated based on the geographic region to which the product is delivered.

Net revenue by geographic region for the three and six months ended June 30, 2021 and 2020 was as follows:

Net revenue by geographic region for the three and nine months ended September 30, 2021 and 2020 was as follows:

(in thousands)

For the three months ended

For the six months ended

For the nine months ended

September 30,

United States

Substantially all of our long-lived assets are located in the United States.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2021 and 2020

Subsequent Events

Sale of Common Shares

On July 22, 2021, the Company entered into a securities purchase agreement (the “July 22 nd Purchase Agreement”) with several accredited investors providing for the issuance of 2,500,000 shares of the Company’s common stock.

Pursuant to the July 22 nd Purchase Agreement, the investors purchased all of the securities sold thereby for an aggregate purchase price of $ 10,000,000 .

Pursuant to the July 22 nd Purchase Agreement, an aggregate of 2,500,000 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 offering of the securities pursuant to the July 22 nd Purchase Agreement was closed on July 27, 2021.

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