What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-11 compared with 2021-11-10 · 280 added, 495 removed, 344 unchanged (69% of the section changed)

Financial Statements

SUMMIT WIRELESS TECHNOLOGIES, INC.

WISA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

September 30, 2021

March 31, 2022

December 31, 2021

5 unchanged sentences

Property and equipment, net

Operating lease right-of-use asset

Liabilities, Convertible Preferred Stock and Stockholders’ Equity

2 unchanged sentences

Accrued liabilities

Borrowings, current position

Total current liabilities

Other liabilities

Borrowings, net of current position

Derivative liability

Warrant liability

3 unchanged sentences

1,250,000 shares authorized;

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 )

0 shares outstanding as of March 31, 2022 and December 31, 2021, respectively (liquidation preference of $ 0 )

Stockholders’ Equity:

1 unchanged sentence

200,000,000 shares authorized;

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

16,883,464 and 15,819,059 shares outstanding as of March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

3 unchanged sentences

(1) The condensed consolidated balance sheet as of December 31, 2021 was derived from the audited consolidated balance sheet as of that date.

Share and per 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.

WISA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

For the three months ended March 31, 2022 and 2021

(in thousands, except share and per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Cost of revenue

6 unchanged sentences

Interest expense

Change in fair value of warrant liability

Gain on forgiveness of Paycheck Protection Program loan

Other expense

3 unchanged sentences

Convertible preferred stock dividend

Deemed dividend on exchange of convertible preferred stock for common stock

Deemed dividend from warrant repricing

Net loss attributable to common stockholders

1 unchanged sentence

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

Share and per 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.

WISA 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

For the three months ended March 31, 2022 and 2021

(in thousands, except share and per share data)

4 unchanged sentences

Paid-in Capital

Equity (Deficit)

Balance as of December 31, 2021

Issuance of common stock upon warrant exercise

Warrants issued in connection with warrant exercise

Convertible preferred stock dividend

ASC 842 adoption adjustment

Stock-based compensation

Release of vested restricted common stock

Restricted stock awards cancelled

Balance as of March 31, 2022

Issuance of common stock upon warrant exercise

Warrants issued in connection with warrant exercise

Convertible preferred stock dividend

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

Stock-based compensation

Issuance of common stock to vendor

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

5 unchanged sentences

Balance as of December 31, 2020

Issuance of common stock and warrants, net of offering costs

Issuance of common stock in connection with notes payable

Issuance of warrants in connection with convertible notes payable

Issuance of common stock upon warrant exercise

Warrants issued in connection with warrant exercise

Convertible preferred stock dividend

Stock-based compensation

Restricted stock awards cancelled

Release of vested restricted common stock

Balance as of March 31, 2021

Issuance of common stock, prefunded warrants and warrants, net of public offering costs

Proceeds from the exercise of prefunded warrants and common stock warrants

Issuance of common stock, net of shelf offering costs

Issuance of common stock in connection with settlements

Deemed dividend from warrant down-round provision

Warrant repricing

Convertible preferred stock dividend

Stock-based compensation

Restricted stock awards cancelled

Gain on foreign currency translation from closure of subsidiary

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.

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

SUMMIT WIRELESS TECHNOLOGIES, INC.

WISA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2021 and 2020

For the three months ended March 31, 2022 and 2021

(in thousands, except share and per share data)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

1 unchanged sentence

Warrant inducement expense

Gain on forgiveness of Paycheck Protection Program loan

Stock-based compensation

Depreciation and amortization

Expense for issuance of common stock for services

Amortization of intangible asset

Amortization of debt discounts

Expense related to common stock issued in settlements

Change in fair value of warrant liability

Gain on foreign currency translation from closure of subsidiary

Changes in operating assets and liabilities:

3 unchanged sentences

Accrued liabilities

Other liabilities

Net cash used in operating activities

5 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

Proceeds from issuance of common stock, net of shelf offering costs

Proceeds from the exercise of prefunded warrants and common stock warrants

Proceeds from issuance of promissory notes

Proceeds from issuance of convertible notes payable, net of issuance costs

Repayment of convertible notes payable

Net cash provided by financing activities

Net increase in cash and cash equivalents

Net cash (used in) provided by financing activities

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents as of beginning of period

2 unchanged sentences

Cash paid for interest

Cash paid for income taxes

Noncash Investing and Financing Activities:

Exchange of convertible preferred stock for common stock

Deemed dividend on exchange of convertible preferred stock for common stock

Issuance of warrants in connection with exchange of preferred stock

Convertible preferred stock dividend

Issuance of warrants in connection with convertible notes payable

Issuance of common stock in connection with convertible notes payable

Issuance of warrants in connection with common stock offerings

Deemed dividend from warrant repricing

Issuance costs for shelf offering of common stock in accounts payable

Warrant repricing

Property and equipment purchased through capital lease

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

SUMMIT WIRELESS TECHNOLOGIES, INC.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

For the Three Months Ended March 31, 2022 and 2021

Business and Summary of Significant Accounting Policies

Summit Wireless Technologies, Inc.

WiSA Technologies, Inc formerly known as Summit Wireless Technologies, Inc.

(together with its subsidiaries also referred to herein as “we”, “us”, “our”, or the “Company”) was originally formed as a limited liability company in Delaware on July 23, 2010.

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

Our business is to deliver the best-in-class immersive wireless sound technology for intelligent devices and next generation home entertainment systems through the sale of module components to audio companies as well as audio products to resellers and consumers.

Basis of Presentation

12 unchanged sentences

Reclassification

Certain reclassifications have been made to prior periods’ consolidated financial statements to conform to the current period presentation.

Certain reclassifications have been made to prior periods’ condensed consolidated financial statements to conform to the current period presentation.

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

6 unchanged sentences

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 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.

As of March 31, 2022 and December 31, 2021, there was no allowance for doubtful accounts.

As of March 31, 2022, the Company had four customers accounting for 34 %, 23 %, 18 % and 10 % of accounts receivable.

As of March 31, 2021, the Company had four customers accounting for 33 %, 30 %, 16 % and 11 % of accounts receivable.

As of December 31, 2021, the Company had two customers accounting for 35 %, and 27 % of accounts receivable.

The Company had three customers accounting for 36 %, 25 % and 16 % of its net revenue for the three months ended March 31, 2022.

The Company had five customers accounting for 37 %, 12 %, 12 %, 11 % and 11 % of its net revenue for the three months ended March 31, 2021.

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.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

For the Three Months Ended March 31, 2022 and 2021

Summary of Significant Accounting Policies, continued

2 unchanged sentences

The Company is heavily dependent on a single contractor in China for assembly and testing of its products, a single contractor in Japan for the production of its transmit semiconductor chip and a single contractor in China for the production of its receive semiconductor chip.

Deferred Offering Costs

Deferred offering costs, consisting of legal, accounting and filing fees relating to public offerings, are capitalized.

The deferred offering costs will be offset against public offering proceeds upon the effectiveness of an offering.

In the event that an offering is terminated, deferred offering costs will be expensed.

As of March 31, 2022 and 2021, the Company had capitalized $ 125,000 and $ 0 , respectively, of deferred offering costs in prepaid expenses and other current assets on the condensed consolidated balance sheet.

Convertible Financial Instruments

8 unchanged sentences

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.

The issuance of the convertible notes payable generated a beneficial conversion feature (“BCF”), which arises when a debt or equity security is issued with an embedded conversion option that is beneficial to the investor or in the money at inception because the conversion option has an effective strike price that is less than the market price of the underlying stock at the commitment date.

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.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

For the Three Months Ended March 31, 2022 and 2021

Summary of Significant Accounting Policies, continued

In an equity-classified freestanding financial instrument, as of the date that a down round feature is triggered, the Company measures the fair value of the instrument without the down round feature (that is, before the strike price is reduced) and the fair value of the financial instrument with a strike price that reflects the adjustment from the down round.

The incremental difference in the fair value is recorded a deemed dividend.

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

The Company increases the net loss available to common stockholders by the amount of the deemed dividend.

Product Warranty

The Company’s products are generally subject to a one-year warranty, which provides for the repair, rework, or replacement of products (at the Company’s option) that fail to perform within the stated specification.

The Company has assessed its historical claims and, to date, product warranty claims have not been significant.

The Company will continue to assess if there should be a warranty accrual going forward.

Revenue Recognition

Revenue consists primarily of the sale of the wireless modules.

The Company generates revenue primarily from two product categories which include the sale of Consumer Audio Products as well as the sale of Components.

The Company applies the following five steps:

12 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.

During the three months ended March 31, 2022 and 2021, net revenue consisted of the following:

For the Three Months Ended March 31,

(in thousands)

Consumer Audio Products

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2022 and 2021

Summary of Significant Accounting Policies, continued

Contract Balances

3 unchanged sentences

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

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

We do not have any material contract assets as of March 31, 2022 and December 31, 2021.

(in thousands)

September 30,

Contract liabilities

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.

Practical Expedients and Exemptions

As part of our adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, we elected to use the following practical expedients:

(i) not to adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to a customer and when the customer pays for that product or service will be one year or less;

(ii) to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less;

(iii) not to assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer.

In addition, we do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

Stock-Based Compensation

The Company measures and recognizes the compensation expense for restricted stock units and restricted stock awards granted to employees and directors based on the fair value of the award on the grant date.

Restricted stock units give an employee an interest in Company stock but they have no tangible value until vesting is complete.

Restricted stock units and restricted stock awards are equity classified and measured at the fair market value of the underlying stock at the grant date and recognized as expense over the related service or performance period.

The Company elected to account for forfeitures as they occur.

The fair value of stock awards is based on the quoted price of our common stock on the grant date.

Compensation cost for restricted stock units and restricted stock awards is recognized using the straight-line method over the requisite service period.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

For the Three Months Ended March 31, 2022 and 2021

Summary of Significant Accounting Policies, continued

1 unchanged sentence

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

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.

Advertising costs for the three months ended March 31, 2022 and 2021 were $ 171,000 and $ 132,000 , 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 nine months ended September 30, 2021 and 2020, the Company’s comprehensive loss is the same as its net loss.

For the three months ended March 31, 2022 and 2021, 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 nine months ended September 30, 2021 and 2020.

dollar are recorded in the condensed consolidated statement of operations in other income (expense), net and were not material for the three months ended March 31, 2022 and 2021.

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 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.

For the three months ended March 31, 2022, warrants to purchase 4,474,303 shares of common stock, 1,568,725 shares of restricted stock, 297,083 shares of restricted stock issued under an inducement grant and 427,391 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 months ended March 31, 2021, warrants to purchase 5,530,600 shares of common stock, 250,000 shares of convertible preferred stock, 730,869 shares of restricted stock awards and 643,974 shares of restricted stock units have been excluded from the calculation of net loss per common share because the inclusion would be antidilutive.

Recently Adopted Accounting Pronouncements.

Adoption of ASC 842

The Company adopted FASB’s ASU No.

2016-02, Leases (“Topic 842”), as of January 1, 2022, using the modified retrospective approach.

The modified retrospective approach provides a method for recording existing leases at the beginning of the period of adoption.

In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification and the Company elected the hindsight practical expedient to determine the lease term for existing leases.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

For the Three Months Ended March 31, 2022 and 2021

Summary of Significant Accounting Policies, continued

Adoption of the new standard resulted in the recording of operating lease right-of-use assets of $ 212,000 and lease liabilities of $ 327,000 , as of January 1, 2022.

In addition, the new standard resulted in the recording of an additional $ 90,000 of property and equipment and the reversal of $ 58,000 of deferred rent and lease incentive as required under the new standard.

The standard did not have an impact on our consolidated results of operations or cash flows.

The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

The effect of the changes made to our consolidated January 1, 2022 balance sheet for the adoption of the new lease standard was as follows (in thousands):

Balance as of

December 31, 2021

Due to ASC 842

January 1, 2022

Operating lease right-of-use assets

Property and equipment, net

Operating lease liabilities, current

Operating lease liabilities, non-current

Deferred rent and lease incentive

Total liabilities

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

Recently Issued and Not Yet Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases”.

The objective of the update is to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet for leases with a lease term of more than 12 months.

In addition, the update will require additional disclosures regarding key information about leasing arrangements.

Under existing guidance, operating leases are not recorded as lease assets and lease liabilities on the balance sheet.

In October 2019, the FASB decided to defer the mandatory effective date of ASU 2016-02 to fiscal years beginning after December 15, 2020 for certain entities, including private companies.

In June 2020, in response to adverse effect caused by Coronavirus Disease pandemic on private businesses, the FASB issued ASU 2020-05 which deferred the effective date for ASU 2016-02 for private businesses to annual reporting periods beginning after December 15, 2021.

As an emerging growth company, the Company is allowed to adopt accounting pronouncements at the same time as non-public business entities.

As a result, we will adopt the update for our fiscal year beginning after December 15, 2021.

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

In August 2020, the FASB issued ASU 2020-06 “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”.

This ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S.

Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features.

The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exception.

The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas.

As an emerging growth company, the Company is allowed to adopt the accounting pronouncement at the same time as non-public business entities.

As a result, the Company will adopt the update for its fiscal year beginning after December 15, 2023.

The Company is evaluating the impact of this standard on its condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, as amended, which requires the early recognition of credit losses on financing receivables and other financial assets in scope.

ASU 2016-13 requires the use of a transition model that will result in the earlier recognition of allowances for losses.

The new standard is effective for fiscal years beginning after December 15, 2022.

Management is currently evaluating the new standard and its possible impact on the Company’s condensed consolidated financial statements.

We have reviewed other recent accounting pronouncements and concluded they are either not applicable to the business, or no material effect is expected on the condensed consolidated financial statements as a result of future adoption.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2022 and 2021

Going Concern

1 unchanged sentence

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.

As of March 31, 2022, the Company had cash and cash equivalents of $ 9.1 million and reported net cash used in operations of $ 4.0 million during the three months ended March 31, 2022.

In December 2021, the Company entered into an “at-the-market” sales agreement with Maxim Group LLC (the “Agent”), pursuant to which the Company may sell from time to time, shares of its common stock having an aggregate offering price of up to $ 4.5 million through the Agent.

As of March 31, 2022, the Company has not sold any shares of common stock under the ATM Program.

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.

1 unchanged sentence

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.

To date, the Company 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.

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 for the twelve months from the date of this report.

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

3 unchanged sentences

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

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2022 and 2021

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 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.

Depreciation and amortization expense for the three months ended March 31, 2022 and 2021 was $ 29,000 and $ 19,000 , respectively.

The cost and accumulated depreciation of assets acquired under finance lease included in machinery and equipment in the above table as of March 31, 2022 were $ 72,000 and $ 38,000 respectively.

Accrued liabilities (in thousands):

September 30,

Accrued vacation

Accrued compensation

Customer advances

Accrued professional fees

Accrued rebate

Customer advances

Accrued compensation

Operating lease liabilities

Accrued audit fees

Accrued other

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

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.

Repayment of the convertible promissory note was due 45 days from execution of the Funding Agreement, or March 9, 2020, and the investor was granted a most favored nation right.

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

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

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, pursuant to which Maxim Group LLC (“Maxim”), acted as placement agent.

The March 2020 Note and March 2020 Warrant were issued pursuant to a securities purchase agreement, entered into as of March 22, 2020 (the “March 2020 Purchase Agreement”) by and between the Company and an institutional 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 such investor.

The net proceeds received by us in connection with the March 2020 Private Placement were used primarily for working capital, debt repayment and general corporate purposes.

Additionally, the Company issue a warrant to Maxim 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 Placement (the “March 2020 Maxim Warrant”).

The March 2020 Note ranked senior to the Company’s existing and future indebtedness and was secured to the extent and as provided in the security agreements entered into between the investor and each of the Company and its wholly-owned subsidiary, in connection with the March 2020 Private Placement.

The March 2020 Note was convertible in whole or in part at the option of the investor into shares of common stock at a conversion price equal to the lesser of (a) 90 % of the average of the five lowest daily VWAPs during the previous twenty trading days prior to delivery to the Company of such investor’s applicable notice of conversion and (b) $ 6.40 , subject to certain adjustments, at any time following the earlier of (i) 60 days from execution of the March 2020 Purchase Agreement and (ii) the date on which a registration statement covering the shares of common stock underlying each of the March 2020 Note and the related warrant is declared effective by the SEC;

however, if the Company entered into an underwriting agreement within 45 days of the date on which the March 2020 Note was issued in connection with an underwritten offering that closes within 45 days of the execution of the Purchase Agreement, such investor may not convert the March 2020 Note prior to the 61st day after the date on which such underwriting agreement was executed.

The March 2020 Note contained full ratchet anti-dilution protection, subject to certain price limitations required by the rules and regulations of Nasdaq and certain exceptions, upon any subsequent transaction at a price lower than the conversion price then in effect and standard adjustments in the event of stock dividends, stock splits, combinations or similar events.

Additionally, upon three days ’ written notice to the holder after receipt of a notice of conversion, in lieu of delivering shares of common stock upon a conversion, the Company had the right to pay the investor, in cash, an amount equal to 103 % of the portion of the outstanding principal amount stated in such notice of conversion.

Further, at the investor’s option, the March 2020 Note was convertible into shares of common stock or redeemable for 103 % of the portion of the outstanding principal amount to be converted in the event that any transaction causes the conversion price to be lower than as required by Nasdaq rules and regulations.

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.

SUMMIT WIRELESS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

Borrowings, continued

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).

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.

In connection with the March 2020 Note, the Company issued the March 2020 Warrant to the investor and the March 2020 Maxim Warrant to Maxim, respectively (see Note 6 – Convertible Preferred Stock and Stockholders’ Equity for fair value computation).

The sum of the fair value of the March 2020 Warrant and the March 2020 Maxim Warrant, and the original issue discount for interest and issuance costs for the March 2020 Note were recorded as debt discounts to be amortized to interest expense over the respective term using the effective interest method.

The March 2020 Note contained several embedded conversion features.

The Company determined that there was no significant value to the embedded conversion features as the underlying events to trigger the conversion features were not likely to occur.

The Company did not record any embedded conversion liability related to the March 2020 Note.

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 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

4 unchanged sentences

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

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

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

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

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.

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

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2022 and 2021

Borrowings, continued

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

The amount of loan and interest forgiven totaling $ 859,000 , was recognized as a gain upon debt extinguishment in the three month period ended September 30, 2021.

Fair Value Measurements

8 unchanged sentences

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 September 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 March 31, 2022 and December 31, 2021 by level within the fair value hierarchy, are as follows:

(in thousands)

September 30, 2021

March 31, 2022

Quoted prices

3 unchanged sentences

Quoted prices

Derivative liability

Warrant liability

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.

There were no transfers between Level 1, 2 or 3 during the three months ended March 31, 2022 or March 31, 2021.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 and 2020

For the Three Months Ended March 31, 2022 and 2021

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 nine months ended September 30, 2021 and 2020:

For the three months ended

For the nine months ended

(in thousands)

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Beginning balance

Change in fair value

Ending balance

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 September 30, 2021 and there are no material changes to the significant unobservable inputs from December 31, 2020.

Derivative Liability

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 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 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 Nine Months Ended September 30, 2021 and 2020

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

There were no changes in fair value of the Company’s warrant liability measured at fair value using significant unobservable inputs (Level 3) for the three months ended March 31, 2022 and 2021.

The warrant liability is not significant at March 31, 2022 and there are no material changes to the significant unobservable inputs from December 31, 2021.

Convertible Preferred Stock and Stockholders’ Equity

Series A 8 % Senior Convertible Preferred Stock

5 unchanged sentences

The fair value of the derivative liability at the issuance of the Series A Preferred Stock was $ 216,000 , which was recorded as a derivative liability with the offset recorded as a discount to the Series A Preferred Stock.

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

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

On June 4, 2021, the Company and Lisa Walsh (the “Investor”) entered into an exchange agreement pursuant to which the Company exchanged with the Investor, all outstanding shares of Series A Preferred Stock, for 250,000 shares of common stock and warrants to purchase up to 187,500 shares of Common Stock.

In connection with exchange agreement the Company recorded a deemed dividend of $ 1,192,000 .

Immediately following the exchange, the Company no longer had a derivative liability or any preferred stock outstanding.

As of March 31, 2022, there are 1,250,000 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.

For the three months ended March 31, 2021, 352 shares of restricted stock issued under the Carve-Out Plan (the “Plan”), were released with an intrinsic value of approximately $ 2,000 .

No shares were subsequently issued under the Plan.

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.

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”).

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 2022, up to 1,265,525 shares of common stock are available for participants under the LTIP.

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.

WISA 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 awards (excluding the deferred shares and the inducement grant restricted stock award) for the nine months ended September 30, 2021 is presented below:

For the Three Months Ended March 31, 2022 and 2021

Convertible Preferred Stock and Stockholders’ Equity , continued

For the three months ended March 31, 2022, 218,267 shares of restricted stock issued under the LTIP, were released with an intrinsic value of approximately $ 254,000 .

No shares of restricted stock issued under the LTIP, were released in the three months ended March 31, 2021.

A summary of activity related to restricted stock awards (excluding the deferred shares) for the three months ended March 31, 2022 is presented below:

Weighted-Average

1 unchanged sentence

Non-vested as of January 1, 2022

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.

Non-vested as of March 31, 2022

As of March 31, 2022, the unamortized compensation costs related to the unvested restricted stock awards was approximately $ 2,940,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 3.0 years.

Inducement Grant

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.

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

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

As of March 31, 2022, the unamortized compensation costs related to the unvested September 2021 Inducement Grant was approximately $ 632,000 which is to be amortized on a straight-line basis over a period of approximately 2.5 years.

The Company recorded stock-based compensation of $ 64,000 related to this grant for the three months ended March 31, 2022.

As of March 31, 2022, 297,083 shares are unvested.

2020 Stock Incentive Plan

On July 27, 2020, the board of directors adopted the Company’s 2020 Stock Incentive Plan (the “2020 Stock Plan”) and the reservation of an aggregate of 650,000 shares of the Company’s common stock authorized for issuance under the 2020 Stock Plan, subject to stockholder approval.

The 2020 Stock Plan authorizes the grant of equity-based compensation to the Company’s senior managers, employees, directors, consultants, professionals and service providers in the form of stock options, restricted stock and restricted stock units.

On July 27, 2020, the Company also granted, subject to stockholder approval, an aggregate of 614,824 restricted stock units to senior managers, employees, directors, consultants.

Each of the awards are scheduled to vest on the first, second, and third anniversaries of August 15, 2020, so long as such award recipient remains in service of the Company on each such anniversary.

Each restricted stock unit represents the right to receive one share of the Company’s common stock under the 2020 Stock Plan.

On October 20, 2020, the Company held the 2020 Annual Meeting of Stockholders and approved the adoption of the 2020 Stock Plan and the reservation of an aggregate of 650,000 shares of the Company’s common stock.

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

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:

A summary of activity related to restricted stock units under the Company’s 2020 Stock Plan for the three months ended March 31, 2022 is presented below:

Weighted-Average

1 unchanged sentence

Non-vested as of January 1, 2022

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

On February 28, 2020, the Company completed a private placement (the “February 2020 Private Placement”) of 91,062 units (the “Units”), each unit consisting of (i) one (1) share of common stock and (ii) a warrant to purchase 0.50 of a share of common stock (the “February 2020 Warrants”), at a price per Unit of $ 9.17 .

The Units were issued pursuant to a Unit Purchase Agreement, dated February 4, 2020, and a subscription agreement, dated February 28, 2020 by and among the Company and the purchasers signatory thereto.

In connection with the February 2020 Private Placement, we paid Alexander Capital, L.P.

(“Alexander”) cash fees of $ 83,000 and issued to Alexander a warrant to purchase 4,553 shares of common stock (the “February 2020 Alexander Warrant”).

Such warrant is exercisable at a per share price of $ 8.80 and is exercisable at any time during the five-year period commencing on the date of issuance.

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 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.

The February 2020 Warrants are exercisable immediately and will expire on the close of business on February 28, 2025.

The exercise of the February 2020 Warrants are subject to beneficial ownership limitations such that each holder of such February 2020 Warrant may exercise it to the extent that such exercise would result in such holder being the beneficial owner in excess of 4.99 % (or, upon election of such holder, 9.99 %), which beneficial ownership limitation may be increased or decreased up to 9.99 % upon notice to the Company, provided that any increase in such limitation will not be effective until 61 days following notice to the Company.

The grant date fair value of February 2020 Warrants was $ 103,000 , which was recorded within stockholders’ equity as a cost of issuance and an increase to additional paid-in capital on the accompanying condensed consolidated balance sheet.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumptions:

common stock price on date of grant of $ 6.00 ;

expected dividend yield of 0.0 %;

expected volatility of 59.0 %;

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

SUMMIT WIRELESS TECHNOLOGIES, INC.

Non-vested as of March 31, 2022

As of March 31, 2022, the unamortized compensation costs related to the unvested restricted stock units was approximately $ 778,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 1.4 years.

WISA 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 .

The fair value of such warrant was estimated using the Black-Scholes Model based on the following weighted average assumptions:

common share price on date of grant $ 6.00 , expected dividend yield 0 %, expected volatility 59 %, risk-free interest rate 0.89 % and expected life of 5 years .

The fair value was recorded within stockholders’ equity as a cost of issuance and an increase to additional paid-in capital on the accompanying condensed consolidated balance sheet.

April 2020 Public Offering

On April 23, 2020, the Company closed an underwritten public offering of 1,525,000 shares of its common stock, pre-funded common stock purchase warrants to purchase up to an aggregate of 475,000 shares of common stock, and common stock purchase warrants to purchase up to an aggregate of 2,000,000 shares of the Company’s common stock (the “April 2020 Public Offering”).

Each share of common stock or pre-funded common stock purchase warrant was sold together with one common stock purchase warrant to purchase one share of common stock at a combined price to the public of $ 3.25 per share and common stock purchase warrant (or $ 3.24 per pre-funded common stock purchase warrant and common stock purchase warrant).

Gross proceeds before deducting underwriting discounts, commissions and other offering expenses were approximately $ 6.5 million.

In addition, the Company granted to Maxim a 45-day option to purchase up to an additional 300,000 shares of common stock and/or common stock purchase warrants to purchase up to an aggregate of 300,000 shares of common stock, at the public offering price, less discounts and commissions, of which Maxim partially exercised its option to purchase additional common stock purchase warrants to purchase up to an aggregate of 229,100 shares of common stock.

Each common stock purchase warrant is immediately exercisable for one share of common stock at an exercise price of $ 3.25 per share and will expire five years from issuance.

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

Such warrant has an exercise price of $ 3.90 per share and is fully vested.

May 2020 Shelf Registration

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.

For the Three Months Ended March 31, 2022 and 2021

Convertible Preferred Stock and Stockholders’ Equity , continued

For the three months ended March 31, 2022, 5,668 shares of restricted stock issued under the 2020 Stock Plan, were released with an intrinsic value of approximately $ 7,000 .

No shares of restricted stock issued under the 2020 Stock Plan, were released in the three months ended March 31, 2021.

Purchase Agreements

On June 4, 2020, we entered into a securities purchase agreement (the “June 4, 2020 Purchase Agreement”) with several accredited investors providing for the issuance of (i) 2,275,000 shares of the Company’s common stock and (ii) warrants, with a term of 5.5 years, to purchase 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 thereunder, which warrants were immediately exercisable upon issuance and on a cashless basis if such warrants have not been registered on or before six months after the date of issuance.

Pursuant to the June 4, 2020 Purchase Agreement, the investors purchased all of the securities sold thereby for an aggregate purchase price of $ 5,801,000 .

Pursuant to the June 4, 2020 Purchase Agreement, an aggregate of 2,275,000 shares of common stock were issued to the investors in a registered direct offering pursuant to a prospectus supplement to the Company’s currently effective registration statement on Form S-3, which was declared effective on September 6, 2019.

The Company filed the prospectus supplement on June 5, 2020.

Maxim acted as the placement agent.

The warrants were issued to the investors in a concurrent private placement transaction pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.

The Company paid Maxim a fee of approximately $ 464,000 , which was equal to 8 % of the aggregate purchase price paid by investors placed by Maxim and certain expenses.

The June 4, 2020 Purchase Agreement contains customary representations, warranties and agreements of the Company and the investors and customary indemnification rights and obligations of the parties thereto.

The offering of the securities pursuant to the June 4, 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.

Pursuant to the June 9, 2020 Purchase Agreement, the investors purchased all of the securities sold thereby for an aggregate purchase price of $ 5,324,000 .

Pursuant to the June 9, 2020 Purchase Agreement, an aggregate of 2,040,000 shares of common stock were issued to the investors in a registered direct offering, pursuant to a prospectus supplement to the Company’s currently effective registration statement on Form S-3, which was declared effective on September 6, 2019.

The Company filed the prospectus supplement on June 10, 2020.

Maxim acted as the placement agent.

The Company paid Maxim a fee of approximately $ 426,000 , which was equal to 8 % of the aggregate purchase price paid by investors placed by Maxim and certain expenses.

The June 9, 2020 Purchase Agreement contains customary representations, warranties and agreements of the Company and the investors and customary indemnification rights and obligations of the parties thereto.

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

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

On May 14, 2020, we entered into a settlement agreement with Alexander (the “Alexander Settlement Agreement”), pursuant to which, in consideration for Alexander releasing us from all claims against us arising out of that certain engagement agreement, dated February 6, 2020, that we entered into with Alexander (the “Alexander Engagement Agreement”), other than indemnification for certain third-party claims, we agreed to (i) pay Alexander a one-time cash payment of $ 125,000 and (ii) issue to Alexander 50,000 shares of our common stock (the “Alexander Settlement Shares”) which had a value of approximately $ 111,000 .

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 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.

As consideration for the foregoing, the February 2020 Holders agreed to release any and all claims they may have against the Company, including, but not limited to, claims arising in connection with any securities held by the February 2020 Holders.

On December 30, 2021, the Company entered into an “at-the-market” equity distribution agreement (the “Sales Agreement”) with Maxim Group LLC (“Maxim”), pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $ 4,500,000 from time to time through Maxim.

Any sales of shares of common stock pursuant to the Sales Agreement will be made pursuant to a shelf registration statement on Form S-3.

As of March 31, 2022, no shares had been sold under the Sales Agreement.

Warrants for Shares of Common Stock

The Company has issued warrants to purchase shares of common stock to employees and consultants as compensation for services rendered, as well as in conjunction with the purchase of shares of common stock in equity and debt transactions.

In connection with the March 2020 Note, the Company issued the March 2020 Note to the investor and the March 2020 Maxim Warrant to Maxim to purchase shares of common stock of 227,679 and 20,400 , respectively (see Note 4 – Borrowings) at an exercise price of $ 6.40 per share.

The grant date fair value of such warrants was $ 625,000 , which was recorded as debt discount with the offset recorded to additional paid-in capital on the condensed consolidated balance sheets.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumptions:

common stock price on date of grant of $ 5.40 ;

expected dividend yield of 0.0 %;

expected volatility of 61.0 %;

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

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.

The common stock and common stock equivalents issued by the Company in the April 2020 Public Offering were issued at price per share of $ 3.25 , which was lower than the conversion price then in effect.

Additionally, the Alexander Settlement Shares, issued to Alexander under the Alexander Settlement Agreement, on May 14, 2020, were issued at a price per share which was lower than the conversion price then in effect.

The Company modified the exercise price of the March 2020 Warrant as a result of each of these transactions and calculated the incremental fair value related to these modifications.

The resulting deemed dividend from these down round adjustments was $ 134,000 , and this is included as an offset to additional paid-in capital in the accompanying condensed consolidated balance sheets.

Concurrent with the April 2020 Public Offering, the Company issued prefunded warrants for $ 475,000 at an exercise price of $ 0.01 per share.

These warrants were exercised immediately upon the closing of the transactions for proceeds of $ 4,750 and the investors received 475,000 shares of common stock.

Additionally, as a result of the April 2020 Public Offering, the Company issued warrants to purchase shares of common stock to the common stock investors, prefunded warrants investors, and Maxim of 1,525,000 , 475,000 and 291,000 , respectively.

The warrants have an exercise price of $ 3.25 per share and are fully vested.

The grant date fair value of those warrants was $ 2,606,000 , which was recorded within stockholders’ equity as a cost of issuance and an increase to additional paid-in capital on the accompanying condensed consolidated balance sheet.

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

common stock price on date of grant of $ 2.50 ;

expected dividend yield of 0.0 %;

expected volatility of 64.0 %;

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.

Such warrant has an exercise price of $ 3.90 per share and is fully vested.

The fair value of such warrant at issuance was $ 106,000 .

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

common share price on date of grant $ 2.50 , expected dividend yield 0 %, expected volatility 64 %, risk-free interest rate 0.37 % and expected life of 5 years .

The fair value was recorded within stockholders’ equity as a cost of issuance and an increase to additional paid-in capital on the accompanying condensed consolidated balance sheet.

In connection with the offering pursuant to the June 4, 2020 Purchase Agreement, the Company issued warrants to the investors to purchase up to an aggregate of 2,275,000 shares of common stock.

Such warrants have an exercise price of $ 2.55 per share and are fully vested.

The grant date fair value of those warrants was $ 3,153,000 , which was recorded within stockholders’ equity as a cost of issuance and an increase to additional paid-in capital on the accompanying condensed consolidated balance sheet.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumptions:

common stock price on date of grant of $ 2.52 ;

expected dividend yield of 0.0 %;

expected volatility of 64.0 %;

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

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.

Such warrants have an exercise price of $ 2.61 per share and are fully vested.

The grant date fair value of those warrants was $ 2,375,000 , which was recorded within stockholders’ equity as a cost of issuance and an increase to additional paid-in capital on the accompanying condensed consolidated balance sheet.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumptions:

common stock price on date of grant of $ 2.25 ;

expected dividend yield of 0.0 %;

expected volatility of 64.0 %;

risk-free interest rate of 0.32 % and expected life of 5.5 years.

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.

6 unchanged sentences

risk-free interest rate of 0.45 % and expected life of 5.0 years.

On April 18, 2019, the Company entered into a Securities Purchase Agreement with an existing shareholder, Lisa Walsh (the “Investor”), pursuant to which the Company issued 250,000 shares of our Series A 8 % Convertible Preferred Stock (the “Original Securities”).

On June 4, 2021, the Company and the Investor entered into that an exchange agreement pursuant to which the Company exchanged with the Investor the Original Securities held by the investor for:

(i) 250,000 shares of common stock and (ii) warrants to purchase up to 187,500 shares of Common Stock.

The warrants will be exercisable for a period of five (5) years and four (4) months.

The exercise price with respect to the warrants is $ 3.00 per share.

The exercise price and the number of shares of common stock issuable upon exercise of the warrants are subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate change and dilutive issuances.

The grant date fair value of those warrants was $ 570,000 , which was recorded as loss on exchange of preferred stock and an increase to additional paid-in capital on the accompanying condensed consolidated balance sheet.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumptions:

common stock price on date of grant of $ 4.77 ;

expected dividend yield of 0.0 %;

expected volatility of 60.7 %;

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.

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:

In December 2021, the Company granted a warrant to purchase up to 25,000 shares of common stock to Lippert/Heilshorn Associates Inc.

The warrant has an exercise price of $ 1.52 per share and are fully vested.

The fair value of the warrant at issuance was $ 21,000 .

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

common share price on date of grant $ 1.49 , expected dividend yield 0 %, expected volatility 67 %, risk-free interest rate 1.19 % and expected life of 5.0 years.

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

In December 2021, the Company granted a warrant to purchase up to 15,000 shares of common stock to Marketing by Design LLC.

The warrant has an exercise price of $ 1.52 per share and are fully vested.

The fair value of the warrant at issuance was $ 12,000 .

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

common share price on date of grant $ 1.49 , expected dividend yield 0 %, expected volatility 67 %, risk-free interest rate 1.19 % and expected life of 5.0 years.

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

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2022 and 2021

Convertible Preferred Stock and Stockholders’ Equity , continued

Information regarding warrants for common stock outstanding and exercisable as of March 31, 2022 is as follows:

Weighted Average

1 unchanged sentence

Exercisable as of

September 30, 2021

March 31, 2022

$ 1.52 - $ 2.61

4 unchanged sentences

* Weighted average

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.

Warrants exercisable as of March 31, 2022 exclude warrants to purchase 10,000 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

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

Warrants exercisable as of December 31, 2021 exclude a warrant to purchase 10,000 shares of common stock issued to a marketing consulting firm.

Such warrant will vest upon the achievement of certain milestones.

Such warrant will vest in two tranches 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.

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.

The Company recorded a provision for income taxes of $ 0 for the three months ended March 31, 2022 and 2021.

The Company’s effective tax rate was 0.0 %for the three months ended March 31, 2022 and 2021.

The difference between the effective tax rate and the federal statutory tax rate for the three months ended March 31, 2022 and 2021 primarily relates to the valuation allowance on the Company’s deferred tax assets.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2022 and 2021

Income Taxes , continued

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

As of March 31, 2022 and December 31, 2021, 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 nine months ended September 30, 2021 and 2020 was calculated on a jurisdiction basis.

On March 27, 2020, the U.S.

enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

The CARES Act includes provisions relating to refundable payroll tax credits, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to the tax depreciation methods for qualified improvement property.

On December 21, 2020, the U.S.

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 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

The provision for income taxes for the three months ended March 31, 2022 and 2021 was calculated on a jurisdiction basis.

Commitments and Contingencies

Operating Leases

The Company rented its Beaverton, Oregon office under an operating lease, which expired on October 31, 2020 .

Under the terms of the lease, the Company was responsible for taxes, insurance and maintenance expense.

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

On August 18, 2020, the Company signed a new operating lease that began on November 1, 2020, to rent office space in Beaverton, Oregon, to replace the lease that expired on October 31, 2020.

The new lease expires on January 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 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

The Company leases office space under a non-cancellable operating lease that expires in January 2024 and has an option to renew this lease, with renewal rates to be negotiated.

Operating lease rentals are expensed on a straight-line basis over the life of the lease beginning on the date we take possession of the property.

At lease inception, we determine the lease term by assuming the exercise of those renewal options that are reasonably assured.

The exercise of lease renewal options is at our sole discretion.

The lease term is used to determine whether a lease is financing or operating and is used to calculate straight-line rent expense.

Additionally, the depreciable life of leasehold improvements is limited by the expected lease term.

Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheet;

we recognize lease expense for these leases on a straight-line basis over the lease term.

The following table reflects our lease assets and our lease liabilities at March 31, 2022 (in thousands).

Operating lease right-of-use assets

Operating lease liabilities, current

Operating lease liabilities, non-current

The components of lease costs were as follows (in thousands):

Three Months Ended

March 31, 2022

Operating lease cost

Short term lease cost

Total lease cost

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2022 and 2021

Commitments and Contingencies , continued

As of March 31, 2022, the maturity of operating lease liabilities was as follows (in thousands):

2022 (remaining 9 months)

Total lease payments

Present value of lease liabilities

Lease Term and Discount Rate:

March 31, 2022

Weighted-average remaining lease term (in years)

Weighted-average discount rate

Other Information:

Supplemental cash flow information related to leases was as follows (in thousands):

Three Months Ended

March 31, 2022

Operating cash outflows from operating leases

Finance Lease

During August 2020, the Company entered into a lease agreement for equipment under a capital lease with a term of 36 months .

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

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

Future minimum lease commitments for the finance lease as of March 31, 2022 are as follows:

(in thousands)

2 unchanged sentences

Year ending December 31, 2023

Total minimum lease payments

Amounts representing interest

Present value of capital lease obligations

Current portion of capital lease liabilities

Present value of finance lease obligations

Current portion of finance lease liabilities

Other liabilities

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

Obligations under the finance lease are included in accrued liabilities and other liabilities on the condensed consolidated balance sheets.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2022 and 2021

Commitments and Contingencies, continued

Contingencies

4 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

Jonathan Gazdak

Gazdak is Managing Director – Head of Investment Banking for Alexander Capital, L.P., an investment banking firm based in New York.

Gazdak was a member of the board of directors from June 2015 to May 10, 2021, and is no longer considered a related party as of May 10, 2021.

Alexander Capital, L.P.

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

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

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

in connection with an offering by the Company of up to an aggregate of $ 835,000 of the Company’s securities, pursuant to which Alexander Capital, L.P.

was paid cash fees of $ 83,000 and pursuant to which the Company agreed to issue to Alexander Capital, L.P.

a warrant to purchase 4,553 shares of common stock.

Such warrant is exercisable at a per share price of $ 8.80 and is exercisable at any time during the five-year period commencing on the date of issuance.

The Company also entered into the Alexander Settlement Agreement with Alexander Capital, L.P.

on May 14, 2020.

(See Note 6 – Convertible Preferred Stock and Stockholders’ Equity (Deficit)).

Helge Kristensen

2 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.

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.

For the three months ended March 31, 2022 and 2021, Hansong Technology purchased modules from the Company of approximately $ 83,000 and $ 82,000 , respectively, and made payments to the Company of approximately $ 0 and $ 48,000 , respectively.

For the three months ended March 31, 2022 and 2021, Hansong Technology sold speaker products to the Company of approximately $ 457,000 and $ 626,000 , respectively, and the Company made payments to Hansong Technology of approximately $ 299,000 and $ 210,000 , respectively.

At March 31, 2022 and 2021, the Company owed Hansong Technology approximately $ 949,000 and $ 621,000 , respectively.

As of March 31, 2022 and December 31, 2021, Mr.

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

Howitt has served as a member of the Company’s board of directors since December 2021.

Howitt is founder and CEO of Meriwether Group LLC, (“Meriwether”), a strategic consulting firm that works with disruptive consumer brands.

Meriwether is the manager of Meriwether Accelerators LLC (“Meriwether Accelerators”).

The Company is a party to a professional services agreement with Meriwether Accelerators, dated as of January 15, 2022, pursuant to which, the Company has agreed to pay Meriwether Accelerators (i) $ 7,500 per month;

and (ii) issue 10,000 shares of common stock for each partnership brought to fruition as a result of Meriwether Accelerators’ services and introduction, for up to 40,000 shares of Common Stock, which shares will have piggyback registration rights, in consideration for certain licensing services and strategic partnership collaborations to be provided by Meriwether Accelerators as set forth in such agreement.

For the three months ended March 31, 2022, the Company has paid Meriwether Accelerators $ 15,000 .

As of March 31, 2022, the Company has not issued any shares of common stock to Meriwether Accelerators under this agreement nor has it recorded any compensation expense related to the issuance of common stock.

As of March 31, 2022 and December 31, 2021, Mr.

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

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2022 and 2021

Segment Information

The Company operates in one business segment, wireless audio products.

The Company operates in one business segment.

Our chief decision-maker, the President and Chief Executive Officer, evaluates our performance based on company-wide consolidated results.

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 nine months ended September 30, 2021 and 2020 was as follows:

(in thousands)

Net revenue by geographic region for the three months ended March 31, 2022 and 2021 was as follows:

For the Three Months Ended

For the nine months ended

September 30,

United States

(in thousands)

North America

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

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