What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-16 compared with 2022-08-15 · 304 added, 177 removed, 490 unchanged (50% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

June 30, 2022

September 30, 2022

December 31, 2021

5 unchanged sentences

Property and equipment, net

Operating lease right-of-use asset

Liabilities, Convertible Preferred Stock and Stockholders’ Equity

3 unchanged sentences

Total current liabilities

Other liabilities

Convertible notes payable, net

Derivative liability

Warrant liability

Other liabilities

Total liabilities

1 unchanged sentence

Series A 8 % Senior Convertible Preferred stock, par value $ 0.0001 ;

0 shares authorized and outstanding as of September 30, 2022;

1,250,000 shares authorized;

0 shares outstanding as of June 30, 2022 and December 31, 2021, respectively (liquidation preference of $ 0 )

0 shares outstanding as of December 31, 2021(liquidation preference of $ 0 )

Stockholders’ Equity:

1 unchanged sentence

200,000,000 shares authorized;

16,899,822 and 15,819,059 shares outstanding as of June 30, 2022 and December 31, 2021, respectively

17,119,353 and 15,819,059 shares outstanding as of September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three and six months ended June 30, 2022 and 2021

For the three and nine months ended September 30, 2022 and 2021

(in thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenue

6 unchanged sentences

Interest expense

Other expense

Change in fair value of warrant liability

Gain on forgiveness of Paycheck Protection Program loan

Other (expense) income

Warrant inducement expense

8 unchanged sentences

WISA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

For the three and six months ended June 30, 2022 and 2021

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

For the three and nine months ended September 30, 2022 and 2021

(in thousands, except share and per share data)

13 unchanged sentences

Balance as of June 30, 2022

Stock-based compensation

Release of vested restricted common stock

Restricted stock awards cancelled

Issuance of warrants in connection with convertible promissory note

Balance as of September 30, 2022

Convertible Preferred Stock

13 unchanged sentences

Exchange of convertible preferred stock for common stock

Warrants issued upon exchange of convertible preferred stock for common stock

Warrants issued upon exchange of preferred stock for common stock

Deemed dividend on exchange of convertible preferred stock

2 unchanged sentences

Balance as of June 30, 2021

Stock-based compensation

Release of vested restricted common stock

Issuance of common stock upon warrant exercise

Registered direct offering, net of issuance costs

Balance as of September 30, 2021

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended June 30, 2022 and 2021

(in thousands)

Six Months Ended June 30,

For the nine months ended September 30, 2022 and 2021

(in thousands, except share and per share data)

Nine Months Ended September 30,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Warrant inducement expense

Forgiveness of Paycheck Protection Program loan

Stock-based compensation

Depreciation and amortization

Warrant inducement expense

Expense for issuance of common stock for services

Amortization of debt discounts

Change in fair value of warrant liability

Changes in operating assets and liabilities:

9 unchanged sentences

Cash flows from financing activities:

Repayment of capital lease

Proceeds from issuance of common stock upon warrant exercises, net of issuance costs

Net cash (used in) provided by financing activities

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

Repayment of capital lease

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

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

5 unchanged sentences

Noncash Investing and Financing Activities:

Issuance of warrants in connection with convertible notes payable

Derivative liability recorded in connection with issuance of convertible notes payable

Exchange of convertible preferred stock for common stock

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

For the Nine Months Ended September 30, 2022 and 2021

Business and Summary of Significant Accounting Policies

2 unchanged sentences

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.

NASDAQ Notification

On June 23, 2022, the Company received a written notification (the “Notice”) from the Listing Qualifications Department of the Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it was not in compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market, as set forth under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), because the closing bid price of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), was below $1.00 per share for the previous thirty (30) consecutive business days.

NASDAQ Notifications

On June 23, 2022, the Company received a written notification (the “Notice”) from the Listing Qualifications Department of the Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it was not in compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market, as set forth under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), because the closing bid price of the Company’s common stock was below $1.00 per share for the previous thirty (30) consecutive business days.

The Notice has no immediate effect on the listing of the common stock, which will continue to trade uninterrupted on the Nasdaq Capital Market under the ticker “WISA.”

1 unchanged sentence

If at any time during the Compliance Period, the bid price of the common stock closes at or above $1.00 per share for a minimum of ten (10) consecutive business days, Nasdaq will provide the Company with written confirmation of compliance with the Minimum Bid Price Requirement and the matter will be closed.

Strategic Advisor

During the third quarter of 2022, the Company retained a strategic advisor to explore strategic opportunities specifically involving the Company’s IP.

Potential strategic opportunities that may be explored or evaluated as part of this process include the potential for capital raising transactions, an acquisition, sale of assets, including substantially all of the Company’s assets, merger, business combination, partnership, joint venture, licensing and/or another strategic alternative.

Despite the Company’s efforts to identify and evaluate potential strategic transactions, the process may not result in any definitive offer to consummate a strategic transaction, or, if we receive such a definitive offer, the terms may not be as favorable as anticipated or may not result in the execution or approval of a definitive agreement.

Basis of Presentation

11 unchanged sentences

Actual results could differ from those estimates.

Reclassification

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.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

For the Nine Months Ended September 30, 2022 and 2021

Business and Summary of Significant Accounting Policies , continued

Reclassification

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

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

Concentration of Credit Risk and Other Risks and Uncertainties

5 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 June 30, 2022 and December 31, 2021, there was no allowance for doubtful accounts.

As of June 30, 2022, the Company had one customer accounting for 76 % of accounts receivable.

As of September 30, 2022 and December 31, 2021, there was no allowance for doubtful accounts.

As of September 30, 2022, the Company had two customers accounting for 61 %, and 12 % of accounts receivable.

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

The Company had five customers accounting for 25 %, 12 %, 12 %, 12 % and 10 % of its net revenue for the three months ended June 30, 2022.

The Company had four customers accounting for 21 %, 16 %, 13 % and 13 % of its net revenue for the six months ended June 30, 2022.

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

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

The Company had three customers accounting for 42 %, 16 % and 12 % of its net revenue for the three months ended September 30, 2022.

The Company had three customers accounting for 20 %, 18 %, and 16 % of its net revenue for the nine months ended September 30, 2022.

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’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, dependence on key individuals, and the uncertainties related to supply chain disruptions for customers and suppliers as well as the impact that inflation may have on consumer purchasing and the economy as a whole.

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

5 unchanged sentences

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

As of June 30, 2022 and December 31, 2021, the Company had capitalized $ 125,000 and $ 83,000 , respectively, of deferred offering costs in prepaid expenses and other current assets on the condensed consolidated balance sheet.

As of September 30, 2022 and December 31, 2021, the Company had capitalized $ 206,000 and $ 83,000 respectively, of deferred offering costs in prepaid expenses and other current assets on the condensed consolidated balance sheet.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

Business and Summary of Significant Accounting Policies , continued

Convertible Financial Instruments

2 unchanged sentences

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

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

Business and Summary of Significant Accounting Policies, continued

When the Company has determined that the embedded conversion options and warrants should be bifurcated from their host instruments, discounts are recorded for the intrinsic value of conversion options embedded in the instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the instrument.

12 unchanged sentences

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

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

Business and Summary of Significant Accounting Policies , continued

Revenue Recognition

7 unchanged sentences

Our revenue arrangements do not contain significant financing components.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

Business and Summary of Significant Accounting Policies, continued

Sales to certain distributors are made under arrangements which provide the distributors with price adjustments, price protection, stock rotation and other allowances under certain circumstances.

5 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 and six months ended June 30, 2022 and 2021, net revenue consisted of the following:

Three Months Ended June 30,

Six Months Ended June 30,

During the three and nine months ended September 30, 2022 and 2021, net revenue consisted of the following:

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Consumer Audio Products

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

Business and 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 June 30, 2022 and December 31, 2021.

We do not have any material contract assets as of September 30, 2022 and December 31, 2021.

September 30,

(in thousands)

8 unchanged sentences

(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.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

Business and Summary of Significant Accounting Policies, continued

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

8 unchanged sentences

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

Advertising costs for the three and six months ended June 30, 2022 were $ 231,000 and $ 404,000 , respectively.

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

Advertising costs for the three and nine months ended September 30, 2022 were $ 300,000 and $ 704,000 , respectively.

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

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

Business and Summary of Significant Accounting Policies , continued

Comprehensive Loss

1 unchanged sentence

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

For the three and six months ended June 30, 2022 and 2021, the Company’s comprehensive loss is the same as its net loss.

For the three and nine months ended September 30, 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 six months ended June 30, 2022 and 2021.

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, 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.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

Business and Summary of Significant Accounting Policies, continued

As of June 30, 2022, warrants to purchase 4,440,660 shares of common stock, 1,579,232 shares of restricted stock, 290,625 shares of restricted stock issued under an inducement grant and 421,558 shares underlying restricted stock units have been excluded from the calculation of net loss per common share because the inclusion would be antidilutive.

As of June 30, 2021, warrants to purchase 4,496,924 shares of common stock, 740,869 shares of restricted stock and 647,474 shares of underlying restricted stock units have been excluded from the calculation of net loss per common share because the inclusion would be antidilutive.

As of September 30, 2022, warrants to purchase 6,702,802 shares of common stock, 1,677,484 shares of restricted stock, 290,625 shares of restricted stock issued under an inducement grant and 731,627 shares underlying restricted stock units have been excluded from the calculation of net loss per common share because the inclusion would be antidilutive.

As of 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.

Recently Adopted Accounting Pronouncements

Adoption of Accounting Standards Codification ("ASC") 842

The Company adopted Financial Accounting Standards Board’s ("FASB") Accounting Standards Update ("ASU") No.

Adoption of Accounting Standards Codification (“ASC”) 842

The Company adopted Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No.

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

1 unchanged sentence

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, 2022 and 2021

Business and 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.

17 unchanged sentences

Total liabilities and stockholders’ equity

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

Business and Summary of Significant Accounting Policies, continued

Recently Issued and Not Yet Adopted Accounting Pronouncements

14 unchanged sentences

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 Nine Months Ended September 30, 2022 and 2021

Going Concern

1 unchanged sentence

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

As of June 30, 2022, the Company had cash and cash equivalents of $ 4.8 million and reported net cash used in operations of $ 8.3 million during the six months ended June 30, 2022.

In December 2021, the Company entered into an “at-the-market” (“ATM”) 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 June 30, 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.

As of September 30, 2022, the Company had cash and cash equivalents of $ 2.6 million and reported net cash used in operations of $ 12.9 million during the nine months ended September 30, 2022.

In August of 2022, the Company raised net proceeds of $ 2.5 million from the issuance of a $ 3.6 million convertible notes payable.

In September 2022, the Company entered into an “at-the-market” sales agreement with Maxim and no proceeds have yet been generated by the sales agreement.

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

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

To date, the Company has 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.

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

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”) proceeds from the exercise of warrants to purchase common stock and the sale of convertible notes and issuance of convertible notes payable.

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.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

Going Concern, continued

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.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

Balance Sheet Components

Inventories (in thousands):

September 30,

Raw materials

3 unchanged sentences

Property and equipment, net (in thousands):

September 30,

Machinery and equipment

4 unchanged sentences

Property and equipment, net

Depreciation and amortization expense for the three months ended June 30, 2022 and 2021 was $ 31,000 and $ 20,000 , respectively.

Depreciation and amortization expense for the six months ended June 30, 2022 and 2021 was $ 60,000 and $ 39,000 , respectively.

The cost and accumulated depreciation of assets acquired under finance lease included in machinery and equipment in the above table as of June 30, 2022 were $ 72,000 and $ 44,000 respectively.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

Balance Sheet Components, continued

Depreciation and amortization expense for the three months ended September 30, 2022 and 2021 was $ 31,000 and $ 20,000 , respectively.

Depreciation and amortization expense for the nine months ended September 30, 2022 and 2021 was $ 91,000 and $ 59,000 , respectively.

The cost and accumulated depreciation of assets acquired under finance lease included in machinery and equipment in the above table as of September 30, 2022 were $ 72,000 and $ 50,000 respectively.

Accrued liabilities (in thousands):

Customer advances

Accrued vacation

September 30,

Accrued rebate

Accrued vacation

Lease liability

Accrued compensation

Accrued audit fees

Customer advances

Accrued compensation

Accrued other

Total accrued liabilities

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

Convertible Promissory Note

On August 15, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”), by and between the Company and an institutional investor (the “Investor”), pursuant to which the Company agreed to issue to the Investor a senior secured convertible note in the principal amount of $ 3,600,000 (the “Convertible Note”) and a warrant (the “Warrant”) to purchase up to 2,097,022 shares of the Company’s common stock, at an exercise price of $ 0.997 per share (the “Exercise Price”), in consideration for $ 3,000,000 .

Pursuant to the Purchase Agreement, upon the closing of the private placement of the Convertible Note and Warrant, pursuant to which Maxim acted as placement agent (the “Private Placement”), the Company received gross proceeds of $ 3,000,000 .

After the deduction of banker fees, commitment fees and other expenses associated with the transaction, the Company received net proceeds of $ 2,483,000 .

The Company intends to use the net proceeds primarily for working capital and general corporate purposes.

The Convertible Note matures on August 15, 2024, does not bear interest and ranks senior to the Company’s existing and future indebtedness and is secured to the extent and as provided in the Security Agreements.

The Convertible Note is convertible in whole or in part at the option of the Investor into shares of Common stock (the “Conversion Shares”) at the Conversion Price (as defined below) at any time following the date of issuance of the Convertible Note.

The Convertible Note defines “Conversion Price” as equal to the lesser of (a) 90 % of the average of the five lowest daily VWAPs (as defined in the Convertible Note) during the previous twenty trading days prior to delivery to the Company of the Investor’s applicable notice of conversion (the “Conversion Notice”) and (b) $ 0.926 (the “Base Conversion Price”).

The Base Conversion Price is subject to full ratchet antidilution protection, subject to a floor conversion price of $ 0.25 per share (the “Floor Price”), a limitation required by the rules and regulations of Nasdaq, and certain exceptions upon any subsequent transaction at a price lower than the Base Conversion Price then in effect and standard adjustments in the event of stock dividends, stock splits, combinations or similar events;

provided that in the event the Conversion Price equals the Floor Price, the Company is required to pay the Investor a cash amount determined pursuant to a formula in the Convertible Note, and provided further that the Floor Price will not apply in the event that the Company obtains Stockholder Approval (as defined in the Purchase Agreement) in accordance with Nasdaq rules.

At any time after the closing date of the Private Placement, in the event that the Company issues or sells any shares of common stock or common stock Equivalents (as defined in the Convertible Note), subject to certain exceptions, at an effective price per share lower than the Base Conversion Price then in effect or without consideration, then the Base Conversion Price shall be reduced to the price per share paid for such shares of common stock or common stock Equivalents.

Additionally, upon three days ’ written notice to the holder after receipt of a Conversion Notice, in lieu of delivering Conversion Shares, the Company has the right to pay the Investor in cash an amount equal to 105 % of the portion of the outstanding principal amount stated in such Conversion Notice.

Further, at the Investor’s option, the Convertible Note is 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 the Floor Price.

Subject to certain exceptions, commencing on the Conversion Trigger Date and for a nine-month period after such date, the Investor may convert only up to an aggregate of $ 250,000 in outstanding principal amount during any calendar month, provided, that if Stockholder Approval has been obtained, the Convertible Note is in default at the time or the Company meets certain capitalization conditions, such conversion limitation would not apply.

The obligations and performance of the Company under the Convertible Note and the Purchase Agreement are secured by:

(a) a senior lien granted pursuant to security agreements between the Investor and the Company, on (a) all of the assets of the Company (b) a senior lien granted pursuant to trademark security agreements between the Investor and the Company;

(c) a senior lien granted pursuant to a patent security agreement between the Investor and the Company on all of the patent assets of the Company;

and (d) a pledge of certain securities pursuant to a pledge agreement between the Investor, the Company (such agreements listed in (a)-(d) above, collectively, the “Security Agreements”).

The payment and performance obligations of the Company under the Convertible Note and the Purchase Agreement are guaranteed pursuant to a guaranty by the Company in favor of the Investor.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

Borrowings , continued

In connection with the August 2022 Note, the Company issued warrants to the Investor and Maxim to purchase common shares of 2,097,022 and 194,384 , respectively (see Note 6 – Fair Value Measurements).

The sum of the fair value of the warrants, the original issue discount for interest, issuance costs and the derivative liability for the embedded conversion feature for the August 2022 Notes were recorded as debt discounts totaling $ 2,479,000 to be amortized to interest expense over the respective term using the effective interest method.

During the three months ended September 30, 2022, the Company recognized $ 156,000 of interest expense from the amortization of debt discounts.

As of September 30, 2022 the net unamortized debt discounts totaled $ 2,323,000 and the net carrying value of the convertible notes payable was $ 1,277,000 .

The August 2022 Note contains several embedded conversion features.

The Company also concluded that those conversion features require bifurcation from the Convertible Note and subsequent accounting in the same manner as a freestanding derivative.

The Company recognized a derivative liability of $ 286,000 upon execution of the note agreement and that liability is unchanged at September 30, 2022.

Accordingly, subsequent changes in the fair value of these conversion features are measured at each reporting period and recognized in the condensed consolidated statement of operations.

Payroll Protection Program Note Agreement

20 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

For the Nine Months Ended September 30, 2022 and 2021

Fair Value Measurements, continued

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 by level within the fair value hierarchy, are as follows:

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 by level within the fair value hierarchy, are as follows:

(in thousands)

June 30, 2022

September 30, 2022

Quoted prices

Derivative liability

Warrant liability

3 unchanged sentences

Warrant liability

There were no transfers between Level 1 , 2 or 3 during the three and six months ended June 30, 2022 or June 30, 2021.

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 and six months ended June 30, 2022 and 2021.

The warrant liability is not significant at June 30, 2022 and there are no material changes to the significant unobservable inputs from December 31, 2021.

There were no transfers between Level 1, 2 or 3 during the three and nine months ended September 30, 2022 or September 30, 2021.

Warrant Liability

The changes in the fair value of the warrant liability for the three and nine months ended September 30, 2022 were as follows:

September 30,

Warrant Liability

The calculation of the fair value is described in Note 6 – Convertible Preferred Stock and Stockholders’ Equity.

Derivative Liability

As described above, the conversion provisions embedded in the Convertible Note requires bifurcation and measurement at fair value as a derivative.

The fair value was calculated using a Monte Carlo simulation to create a distribution of potential market capitalizations and share prices for the Company on a weekly basis over the assumed period, given the various scenarios.

The average value of the Convertible Note was discounted to the valuation date to determine a calibrated discount rate so that the fair value of the Convertible Note was $ 3 million.

The value of the Convertible Note was compared with the value of a hypothetical note with no conversion rights in order to determine the fair value of the conversion feature.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

Fair Value Measurements, continued

The changes in the fair value of the derivative liability for the three and nine months ended September 30, 2022 were as follows:

September 30,

Derivative liability

Convertible Preferred Stock and Stockholders’ Equity

Series A 8 % Senior Convertible Preferred Stock

On April 18, 2019, we entered into a Securities Purchase Agreement, dated as of April 18, 2019, with Lisa Walsh (the “Preferred SPA”), pursuant to which we issued 250,000 shares of our Series A 8 % Senior Convertible Preferred Stock, par value $ 0.0001 per share (the “Series A Preferred Stock”), which shares did have a stated value of $ 4.00 , grant holders the same voting rights as holders of our shares of common stock, and are convertible into shares of our common stock at price of $ 80.00 per share, subject to a floor price of $ 30.00 and to adjustment under our Certificate of Designations of the Preferences, Rights and Limitations of the Series A Preferred Stock, in consideration for $ 1,000,000 (the “Initial Tranche”).

On April 18, 2019, we entered into a Securities Purchase Agreement, dated as of April 18, 2019, with a an investor (the “Preferred Investor”) (the “Preferred SPA”), pursuant to which we issued 250,000 shares of our Series A 8 % Senior Convertible Preferred Stock, par value $ 0.0001 per share (the “Series A Preferred Stock”), which shares did have a stated value of $ 4.00 , grant holders the same voting rights as holders of our shares of common stock, and are convertible into shares of our common stock at price of $ 80.00 per share, subject to a floor price of $ 30.00 and to adjustment under our Certificate of Designations of the Preferences, Rights and Limitations of the Series A Preferred Stock, in consideration for $ 1,000,000 (the “Initial Tranche”).

The Series A Preferred Stock may be issued in tranches of at least $ 500,000 and in an aggregate of up to $ 5 million.

In connection with the Initial Tranche, the Company also issued to Ms.

Walsh a warrant to purchase 12,756 shares of our common stock.

In connection with the Initial Tranche, the Company also issued to the Preferred Investor a warrant to purchase 12,756 shares of our common stock.

The Series A Preferred Stock contained an embedded conversion feature that the Company determined is a derivative requiring bifurcation.

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.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

Convertible Preferred Stock and Stockholders’ Equity , continued

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.

On June 4, 2021, the Company and the Preferred Investor entered into an exchange agreement pursuant to which the Company exchanged with the Preferred 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 June 30, 2022, there are 1,250,000 shares of preferred stock authorized, but there are no shares issued or outstanding .

On August 31, 2022, the Company filed an Elimination of Certificate of Designations of the Preferences, Rights and Limitations of the Series A 8 % Senior Convertible Preferred Stock (the “Series A Elimination Certificate”) in order to eliminate and cancel all designations, rights, preferences and limitations of the shares of the Series A 8 % Preferred Stock.

Prior to the filing of the Series A Elimination Certificate, none of the 1,250,000 authorized shares of Series A Preferred Stock were issued and outstanding , and no shares of Series A Preferred Stock were to be issued subject to the Series A Certificate of Designations.

The Series A Elimination Certificate became effective upon its filing with the Secretary of State of the State of Delaware.

As of September 30, 2022, there are no shares of preferred stock issued or outstanding .

Carve-Out Plan

1 unchanged sentence

No shares were subsequently issued under the Plan.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

Convertible Preferred Stock and Stockholders’ Equity , continued

2018 Long Term Stock Incentive Plan

4 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 six months ended June 30, 2022, 4,684 and 222,951 shares of restricted stock issued under the LTIP, were released with an intrinsic value of approximately $ 3,000 and $ 257,000 , respectively.

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

A summary of activity related to restricted stock awards (excluding the deferred shares) for the six months ended June 30, 2022 is presented below:

For the three and nine months ended September 30, 2022, 61,348 and 284,299 shares of restricted stock issued under the LTIP, were released with an intrinsic value of approximately $ 37,000 and $ 294,000 , respectively.

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 .

A summary of activity related to restricted stock awards (excluding the deferred shares) for the nine months ended September 30, 2022 is presented below:

Weighted-Average

1 unchanged sentence

Non-vested as of January 1, 2022

Non-vested as of June 30, 2022

As of June 30, 2022, the unamortized compensation costs related to the unvested restricted stock awards was approximately $ 2,615,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 2.4 years.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

Convertible Preferred Stock and Stockholders’ Equity , continued

Non-vested as of September 30, 2022

As of September 30, 2022, the unamortized compensation cost related to the unvested restricted stock awards was approximately $ 2,374,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 2.2 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”).

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

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 additional increments of 77,500 each, 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.

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 was valued with an approximate value of $ 772,000 and will be amortized over 36 months.

As of June 30, 2022, the unamortized compensation costs related to the unvested September 2021 Inducement Grant was approximately $ 569,000 which is to be amortized on a straight-line basis over a period of approximately 2.2 years.

The Company recorded stock-based compensation of $ 64,000 and $ 128,000 , respectively, related to this grant for the three and six months ended June 30, 2022.

As of June 30, 2022, 290,625 shares are unvested.

On August 24, 2022, the September 2021 Inducement Grant’s vesting milestones related to the Company’s market capitalization were revised to $ 50 million, $ 75 million and $ 100 million.

This revision was treated as a modification of the original award and the incremental value recorded was not significant.

As of September 30, 2022, the unamortized compensation cost related to the unvested September 2021 Inducement Grant was approximately $ 504,000 which is to be amortized on a straight-line basis over a period of approximately 2.0 years.

The Company recorded stock-based compensation of $ 63,000 and $ 191,000 , respectively, related to this grant for the three and nine months ended September 30, 2022.

As of September 30, 2022, 290,625 shares are unvested.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

Convertible Preferred Stock and Stockholders’ Equity , continued

2020 Stock Incentive Plan

A summary of activity related to restricted stock units under the Company’s 2020 Stock Plan for the six months ended June 30, 2022 is presented below:

A summary of activity related to restricted stock units under the Company’s 2020 Stock Plan for the nine months ended September 30, 2022 is presented below:

Weighted-Average

1 unchanged sentence

Non-vested as of January 1, 2022

Non-vested as of June 30, 2022

As of June 30, 2022, the unamortized compensation costs related to the unvested restricted stock units was approximately $ 575,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 1.2 years.

For the three and six months ended June 30, 2022, 1,167 and 6,835 shares of restricted stock issued under the 2020 Stock Plan, were released with an intrinsic value of approximately $ 400 and $ 7,400 , respectively.

No shares of restricted stock issued under the 2020 Stock Plan, were released in the three and six months ended June 30, 2021.

Purchase Agreements

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 June 30, 2022, no shares had been sold under the Sales Agreement.

Non-vested as of September 30, 2022

As of September 30, 2022, the unamortized compensation cost related to the unvested restricted stock units was approximately $ 451,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 0.9 years.

For the three and nine months ended September 30, 2022, 59,931 and 66,766 shares of restricted stock issued under the 2020 Stock Plan were released with an intrinsic value of approximately $ 43,000 and $ 50,000 , respectively.

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 .

On June 21, 2022, the board of directors adopted the Company’s Technical Team Retention Plan of 2022 (the “2022 Plan”) and the reservation of an aggregate of 500,000 shares of the Company’s common stock authorized for issuance under the 2022 Plan, subject to stockholder approval.

The 2022 Plan authorizes the grant of equity-based compensation, to the Company’s key managers, employees, consultants who provide technical and engineering and related services to the Company, in the form of restricted stock and restricted stock units.

On August 19, 2022, the Company held the 2022 Annual Meeting of Stockholders and approved the adoption of the 2022 Plan and the reservation of an aggregate of 500,000 shares of the Company’s common stock.

On September 19, 2022, the Company granted, an aggregate of 370,000 restricted stock units to managers, employees, consultants.

Each restricted stock unit represents the right to receive one share of the Company’s common stock under the 2022 Plan.

A summary of activity related to restricted stock units under the Company’s 2022 Plan for the nine months ended September 30, 2022 is presented below:

Weighted-Average

Non-vested as of January 1, 2022

Non-vested as of September 30, 2022

As of September 30, 2022, the unamortized compensation cost related to the unvested restricted stock units was approximately $ 191,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 3.7 years.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

For the Nine Months Ended September 30, 2022 and 2021

Convertible Preferred Stock and Stockholders’ Equity , continued

Purchase Agreements

On December 30, 2021, the Company entered into a Sales Agreement with 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.

The Company terminated this agreement on September 13, 2022.

No shares of common stock were sold under the Sales Agreement.

On September 13, 2022, the Company entered into a 2022 Sales Agreement with Maxim, pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $ 4,000,000 from time to time through Maxim.

No shares of common stock had been sold under the 2022 Sales Agreement as of September 30, 2022.

Warrants for Shares of Common stock

27 unchanged sentences

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

Information regarding warrants for common stock outstanding and exercisable as of June 30, 2022 is as follows:

In connection with the Convertible Note, the Company issued a warrant to the investor to purchase up to 2,097,022 shares of the Company’s common stock, at an exercise price of $ 0.997 per share (see Note 4 – Borrowings).

The grant date fair value of such warrants was $ 985,000 , which was recorded as debt discount with the offset recorded to warrant liability on the condensed consolidated balance sheets.

The warrant was recorded as a liability due to the potential variability of its exercise price.

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 $ 0.77 ;

expected dividend yield of 0.0 %;

expected volatility of 80.3 %;

risk-free interest rate of 2.91 % and expected life of 5 years .

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

Convertible Preferred Stock and Stockholders’ Equity , continued

At September 30, 2022, the fair value of the warrant was $ 719,000 .

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

common stock price on revaluation date of $ 0.56 ;

expected dividend yield of 0.0 %;

expected volatility of 88.3 %;

risk-free interest rate of 4.06 % and expected life of 4.87 years.

The corresponding change in the fair value of the warrant liability of $ 274,000 was recorded to other income on the condensed consolidated statements of operations.

The Warrant is exercisable immediately and will expire on the fifth (5th) anniversary of its date of issuance and may be exercised on a cashless basis in the event of a fundamental transaction involving the Company or if the resale of the shares of common stock underlying the Warrant is not covered by a registration statement.

The Exercise Price is subject to full ratchet antidilution protection, subject to certain price limitations required by Nasdaq rules and regulations and certain exceptions, upon any subsequent transaction at a price lower than the Exercise Price then in effect and standard adjustments in the event of certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate changes.

In connection with the Convertible Note, the Company issued a warrant to Maxim to purchase up to 194,384 shares of the Company’s common stock, at an exercise price of $ 0.997 per share (see Note 4 – Borrowings).

The grant date fair value of such warrants was $ 91,000 , 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 $ 0.77 ;

expected dividend yield of 0.0 %;

expected volatility of 80.3 %;

risk-free interest rate of 2.91 % and expected life of 5 years .

The Warrant is exercisable at any time on or after the six-month anniversary of the closing date of the Private Placement and will expire on the fifth (5th) anniversary of its date of issuance and may be exercised on a cashless basis in the event that the shares of common stock underlying the warrant are not covered by a registration statement.

In addition, the warrant includes a registration rights provision granting Maxim the same registration rights granted to the Convertible Note investor pursuant to the Purchase Agreement.

The exercise price is subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate changes.

Information regarding warrants for common stock outstanding and exercisable as of September 30, 2022 is as follows:

Weighted Average

1 unchanged sentence

Exercisable as of

June 30, 2022

September 30, 2022

$ 1.00 - $ 2.61

4 unchanged sentences

* Weighted average

Warrants exercisable as of September 30, 2022 exclude warrants to purchase 10,000 shares of common stock issued to a marketing firm, which vest upon the achievement of certain milestones and 204,384 shares of common stock issued to Maxim which will become exercisable on February 15, 2023.

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.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

For the Nine Months Ended September 30, 2022 and 2021

Convertible Preferred Stock and Stockholders’ Equity , continued

Warrants exercisable as of June 30, 2022 exclude warrants to purchase 10,000 shares of common stock issued to a marketing firm, which vest upon the achievement of certain milestones.

Information regarding warrants for common stock outstanding and exercisable as of December 31, 2021 is as follows:

13 unchanged sentences

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 $ 2,000 and $ 2,000 for the three and six months ended June 30, 2022, respectively, and $ 2,000 and $ 2,000 for the three and six months ended June 30, 2021, respectively.

The Company’s effective tax rate was ( 0.02 )% and ( 0.03 %) for the six months ended June 30, 2022 and 2021, respectively.

The difference between the effective tax rate and the federal statutory tax rate for the six months ended June 30, 2022 and 2021 primarily relates to the valuation allowance on the Company’s deferred tax assets.

The Company recorded a provision for income taxes of $ 0 and $ 2,000 for the three and nine months ended September 30, 2022 and $ 0 and $ 2,000 for the three and nine months ended September 30, 2021, respectively.

The Company’s effective tax rate was 0 % and ( 0.02 %) for the nine months ended September 30, 2022 and 2021, respectively.

The difference between the effective tax rate and the federal statutory tax primarily relates to the valuation allowance on the Company’s deferred tax assets.

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

1 unchanged sentence

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

As of June 30, 2022 and December 31, 2021, the Company retains a full valuation allowance on its deferred tax assets.

As of September 30, 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 three and six months ended June 30, 2022 and 2021 was calculated on a jurisdiction basis.

The provision for income taxes for the nine months ended September 30, 2022 and 2021 was calculated on a jurisdiction basis.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

For the Nine Months Ended September 30, 2022 and 2021

Commitments and Contingencies

8 unchanged sentences

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 June 30, 2022 (in thousands).

The following table reflects our lease assets and our lease liabilities at September 30, 2022 (in thousands):

September 30,

Operating lease right-of-use assets

1 unchanged sentence

Operating lease liabilities, non-current

Operating lease liabilities, current, is included in Accrued Liabilities.

Operating lease liabilities, non-current, is included in Other Liabilities.

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

Three Months Ended

Six Months Ended

June 30, 2022

Nine Months Ended

September 30, 2022

Operating lease cost

1 unchanged sentence

Total lease cost

As of June 30, 2022, the maturity of operating lease liabilities was as follows (in thousands):

As of September 30, 2022, the maturity of operating lease liabilities was as follows (in thousands):

2022 (remaining 3 months)

1 unchanged sentence

Present value of lease liabilities

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

Commitments and Contingencies , continued

Lease Term and Discount Rate:

June 30, 2022

September 30, 2022

Weighted-average remaining lease term (in years)

Weighted-average discount rate

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

Commitments and Contingencies , continued

Other Information:

1 unchanged sentence

Three Months Ended

Six Months Ended

June 30, 2022

Nine Months Ended

September 30, 2022

Operating cash outflows from operating leases

2 unchanged sentences

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 finance lease as of June 30, 2022 are as follows:

(in thousands)

Future minimum lease commitments for the finance lease as of September 30, 2022 are as follows (in thousands):

Payments due in:

7 unchanged sentences

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

Management Team Retention Bonus

On September 1, 2022, the “Company adopted its Management Team Retention Bonus Plan (the “Retention Plan”), to incentivize certain management level employees (the “Managers”) to remain intact through and shortly following a potential “Change of Control” (as defined in the Retention Plan).

The aggregate Retention Plan bonus amounts for all Managers is $ 1,250,000 .

The Retention Plan provides that each Manager is eligible to receive a lump sum cash amount under the Retention Plan, on the earlier of the six-month anniversary of the date of a Change of Control or at the time of such Manager’s involuntary termination other than for “Cause” (as defined in the Retention Plan) or termination for “Good Reason” (as defined in the Retention Plan).

The Retention Plan will terminate upon the earlier of June 30, 2023 if a Change of Control has not occurred by such date or upon the payment of all Retention Bonus Amounts.

As of September 30, 2022, no accrual has been made under the Retention Plan.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

Commitments and Contingencies , continued

Contingencies

5 unchanged sentences

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.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2022 and 2021

Related Parties

3 unchanged sentences

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

For the three months ended June 30, 2022 and 2021, Hansong Technology purchased modules from the Company of approximately $ 108,000 and $ 151,000 , respectively, and made payments to the Company of approximately $ 0 and $ 0 , respectively.

For the three months ended June 30, 2022 and 2021, Hansong Technology sold speaker products to the Company of approximately $ 2,000 and $ 132,000 , respectively, and the Company made payments to Hansong Technology of approximately $ 492,000 and $ 443,000 , respectively.

For the six months ended June 30, 2022 and 2021, Hansong Technology purchased modules from the Company of approximately $ 191,000 and $ 233,000 , respectively, and made payments to the Company of approximately $ 0 and $ 48,000 , respectively.

For the six months ended June 30, 2022 and 2021, Hansong Technology sold speaker products to the Company of approximately $ 459,000 and $ 757,000 , respectively, and the Company made payments to Hansong Technology of approximately $ 790,000 and $ 653,000 , respectively.

At June 30, 2022 and 2021, the Company owed Hansong Technology approximately $ 459,000 and $ 309,000 , respectively.

At June 30, 2022 and 2021, Hansong Technology owed the Company approximately $ 191,000 and $ 199,000 , respectively.

As of June 30, 2022 and December 31, 2021, Mr.

For the three months ended September 30, 2022 and 2021, Hansong Technology purchased modules from the Company of approximately $ 146,000 and $ 263,000 , respectively, and made payments to the Company of approximately $ 191,000 and $ 333,000 , respectively.

For the three months ended September 30, 2022 and 2021, Hansong Technology sold speaker products to the Company of approximately $ 908,000 and $ 96,000 , respectively, and the Company made payments to Hansong Technology of approximately $ 516,000 and $ 309,000 , respectively.

For the nine months ended September 30, 2022 and 2021, Hansong Technology purchased modules from the Company of approximately $ 337,000 and $ 496,000 , respectively, and made payments to the Company of approximately $ 191,000 and $ 380,000 , respectively.

For the nine months ended September 30, 2022 and 2021, Hansong Technology sold speaker products to the Company of approximately $ 1,367,000 and $ 854,000 , respectively, and the Company made payments to Hansong Technology of approximately $ 1,306,000 and $ 962,000 , respectively.

At September 30, 2022 and 2021, the Company owed Hansong Technology approximately $ 851,000 and $ 96,000 , respectively.

At September 30, 2022 and 2021, Hansong Technology owed the Company approximately $ 146,000 and $ 129,000 , respectively.

As of September 30, 2022 and December 31, 2021, Mr.

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

2 unchanged sentences

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 and six months ended June 30, 2022, the Company has paid Meriwether Accelerators $ 23,000 and $ 38,000 , respectively.

As of June 30, 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 June 30, 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 Six Months Ended June 30, 2022 and 2021

For the Nine Months Ended September 30, 2022 and 2021

Related Parties , continued

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 and nine months ended September 30, 2022, the Company paid Meriwether Accelerators $ 8,000 and $ 45,000 , respectively.

As of September 30, 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 September 30, 2022 and December 31, 2021, Mr.

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

Segment Information

2 unchanged sentences

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

Net revenue by geographic region for the three and six months ended June 30, 2022 and 2021 was as follows:

Net revenue by geographic region for the three and nine months ended September 30, 2022 and 2021 was as follows:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

(in thousands)

1 unchanged sentence

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

Subsequent Event

On August 15, 2022, WiSA Technologies, Inc.

(the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”), by and between the Company and an institutional investor (the “Investor”), pursuant to which the Company agreed to issue to the Investor a senior secured convertible note in the principal amount of $ 3,600,000 (the “Convertible Note”) and a warrant (the “Warrant”) to purchase up to 2,097,022 shares of the Company’s common stock, $ 0.0001 par value per share (the “Common Stock”), in consideration for $ 3,000,000 .

Pursuant to the Purchase Agreement, upon the closing of the private placement of such Convertible Note and Warrant, pursuant to which Maxim Group LLC (“Maxim”), acted as placement agent (the “Private Placement”), the Company will receive gross proceeds of $ 3,000,000 , before fees and other expenses associated with the transaction, including but not limited to, an $ 105,000 commitment fee payable to the Investor.

The Company intends to use the net proceeds received by it in connection with the Private Placement primarily for working capital and general corporate purposes.

Additionally, the Company agreed to issue to Maxim a warrant to purchase up to an aggregate of 194,384 shares of Common Stock, subject to adjustment, as partial consideration for serving as Placement Agent in connection with the Private Placement.

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