Datavault AI Inc. 10-Q

Item 1. Financial Statements WISA TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 December 31, 2021 ​ (unaudited) (1) Assets ​ ​ Current Assets: ​ ​ Cash and cash equivalents ​ $ 2,644 ​ $ 13,108 Accounts receivable ​ 237 ​ 214 Inventories ​ 7,284 ​ 4,780 Prepaid expenses and other current assets ​ 1,033 ​ 1,086 Total current assets ​ 11,198 ​ 19,188 Property and equipment, net ​ 198 ​ 162 Other assets ​ 174 ​ 41 Total assets ​ $ 11,570 ​ $ 19,391 ​ ​ ​ ​ ​ ​ ​ Liabilities, Convertible Preferred Stock and Stockholders’ Equity ​ ​ ​ Current Liabilities: ​ ​ ​ Accounts payable ​ $ 2,623 ​ $ 1,549 Accrued liabilities ​ 1,239 ​ 1,416 Total current liabilities ​ 3,862 ​ 2,965 Convertible notes payable, net ​ ​ 1,277 ​ ​ — Derivative liability ​ ​ 286 ​ ​ — Warrant liability ​ ​ 719 ​ ​ 8 Other liabilities ​ ​ 74 ​ ​ 41 Total liabilities ​ 6,218 ​ 3,014 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (Note 8) ​ ​ 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 December 31, 2021(liquidation preference of $ 0 ) ​ ​ — ​ ​ — Stockholders’ Equity: ​ ​ Common stock, par value $ 0.0001 ; 200,000,000 shares authorized; 17,119,353 and 15,819,059 shares outstanding as of September 30, 2022 and December 31, 2021, respectively ​ 2 ​ 2 Additional paid-in capital ​ 230,181 ​ 228,578 Accumulated deficit ​ ( 224,831 ) ​ ( 212,203 ) Total stockholders’ equity ​ 5,352 ​ 16,377 Total liabilities, convertible preferred stock and stockholders’ equity ​ $ 11,570 ​ $ 19,391 (1) The condensed consolidated balance sheet as of December 31, 2021 was derived from the audited consolidated balance sheet as of that date. ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 3 Table of Contents WISA TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the three and nine months ended September 30, 2022 and 2021 (in thousands, except share and per share data) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2022 2021 2022 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue, net ​ $ 937 $ 1,807 $ 2,449 $ 4,541 Cost of revenue ​ 807 1,301 2,069 3,281 Gross profit ​ 130 506 380 1,260 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Expenses: ​ ​ ​ ​ ​ Research and development ​ 1,939 1,322 5,359 3,800 Sales and marketing ​ 1,539 1,021 4,165 2,870 General and administrative ​ 1,400 1,081 3,608 3,037 Total operating expenses ​ 4,878 3,424 13,132 9,707 Loss from operations ​ ( 4,748 ) ( 2,918 ) ( 12,752 ) ( 8,447 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ ( 173 ) ( 3 ) ( 174 ) ( 9 ) Change in fair value of warrant liability ​ 274 — 274 — Gain on forgiveness of Paycheck Protection Program loan ​ ​ — ​ ​ 859 ​ ​ - ​ ​ 859 Other (expense) income ​ ( 2 ) 1 ( 7 ) ( 6 ) Warrant inducement expense ​ — — — ( 1,146 ) Loss before provision for income taxes ​ ( 4,649 ) ( 2,061 ) ( 12,659 ) ( 8,749 ) Provision for income taxes ​ — — 2 2 Net loss ​ ​ ( 4,649 ) ​ ( 2,061 ) ​ ( 12,661 ) ​ ( 8,751 ) Convertible preferred stock dividend ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 34 ) Deemed dividend on exchange of convertible preferred stock for common stock ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1,192 ) Net loss attributable to common stockholders ​ $ ( 4,649 ) ​ $ ( 2,061 ) ​ $ ( 12,661 ) ​ $ ( 9,977 ) Net loss per common share - basic and diluted ​ $ ( 0.31 ) $ ( 0.15 ) $ ( 0.85 ) $ ( 0.86 ) Weighted average number of common shares used in computing net loss per common share ​ 15,070,489 13,917,295 14,975,121 11,600,875 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ ​ 4 Table of Contents WISA TECHNOLOGIES, INC. 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) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Convertible Preferred Stock ​ ​ Common Shares ​ Additional ​ Accumulated ​ Stockholders’ ​ Shares Amount Shares Amount Paid-in Capital Deficit Equity Balance as of December 31, 2021 — ​ ​ — ​ 15,819,059 ​ $ 2 ​ $ 228,578 ​ $ ( 212,203 ) ​ $ 16,377 ASC 842 adoption adjustment ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 33 ​ ​ 33 Stock-based compensation — ​ — ​ 1,067,400 ​ — ​ 480 ​ — ​ 480 Release of vested restricted common stock ​ — ​ ​ — ​ ​ 5,668 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Restricted stock awards cancelled ​ — ​ ​ — ​ ​ ( 8,663 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — Net loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 3,904 ) ​ ​ ( 3,904 ) Balance as of March 31, 2022 ​ — ​ ​ — ​ ​ 16,883,464 ​ $ 2 ​ $ 229,058 ​ $ ( 216,074 ) ​ $ 12,986 Stock-based compensation ​ — ​ ​ — ​ ​ 30,000 ​ ​ — ​ ​ 506 ​ ​ — ​ ​ 506 Release of vested restricted common stock ​ — ​ ​ — ​ ​ 1,167 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Restricted stock awards cancelled ​ — ​ ​ — ​ ​ ( 14,809 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — Net loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 4,108 ) ​ ​ ( 4,108 ) Balance as of June 30, 2022 ​ — ​ ​ — ​ ​ 16,899,822 ​ ​ 2 ​ ​ 229,564 ​ ​ ( 220,182 ) ​ ​ 9,384 Stock-based compensation ​ — ​ ​ — ​ ​ 177,500 ​ ​ — ​ ​ 526 ​ ​ — ​ ​ 526 Release of vested restricted common stock ​ — ​ ​ — ​ ​ 59,931 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Restricted stock awards cancelled ​ — ​ ​ — ​ ​ ( 17,900 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — Issuance of warrants in connection with convertible promissory note ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 91 ​ ​ — ​ ​ 91 Net loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 4,649 ) ​ ​ ( 4,649 ) Balance as of September 30, 2022 — ​ ​ — ​ 17,119,353 ​ $ 2 ​ $ 230,181 ​ $ ( 224,831 ) ​ $ 5,352 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Convertible Preferred Stock ​ ​ Common Shares ​ Additional ​ Accumulated ​ Stockholders’ ​ Shares Amount Shares Amount Paid-in Capital Deficit Equity Balance as of December 31, 2020 ​ 250,000 ​ $ 597 ​ ​ 8,402,250 ​ $ 1 ​ $ 207,698 ​ $ ( 200,383 ) ​ $ 7,316 Issuance of common stock upon warrant exercise ​ — ​ ​ — ​ ​ 2,086,251 ​ ​ — ​ ​ 5,095 ​ ​ — ​ ​ 5,095 Warrants issued in connection with warrant exercise ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 567 ​ ​ — ​ ​ 567 Convertible preferred stock dividend ​ — ​ ​ 20 ​ ​ — ​ ​ — ​ ​ ( 20 ) ​ ​ — ​ ​ ( 20 ) Stock-based compensation ​ — ​ ​ — ​ ​ 643,700 ​ ​ — ​ ​ 254 ​ ​ — ​ ​ 254 Release of vested restricted common stock ​ — ​ ​ — ​ ​ 352 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Net loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 3,292 ) ​ ​ ( 3,292 ) Balance as of March 31, 2021 250,000 ​ ​ 617 ​ 11,132,553 ​ ​ 1 ​ ​ 213,594 ​ ​ ( 203,675 ) ​ ​ 9,920 Issuance of common stock upon warrant exercise — ​ — ​ 1,360,244 ​ — ​ 3,159 ​ — ​ 3,159 Warrants issued in connection with warrant exercise ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 579 ​ ​ — ​ ​ 579 Convertible preferred stock dividend ​ — ​ ​ 14 ​ ​ — ​ ​ — ​ ​ ( 14 ) ​ ​ — ​ ​ ( 14 ) Exchange of convertible preferred stock for common stock ​ ( 250,000 ) ​ ​ ( 631 ) ​ ​ 250,000 ​ ​ — ​ ​ 1,640 ​ ​ — ​ ​ 1,640 Warrants issued upon exchange of preferred stock for common stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 570 ​ ​ — ​ ​ 570 Deemed dividend on exchange of convertible preferred stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1,192 ) ​ ​ — ​ ​ ( 1,192 ) Stock-based compensation ​ — ​ ​ — ​ ​ 10,000 ​ ​ — ​ ​ 335 ​ ​ — ​ ​ 335 Issuance of common stock to vendor ​ — ​ ​ — ​ ​ 10,000 ​ ​ — ​ ​ 34 ​ ​ — ​ ​ 34 Net loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 3,398 ) ​ ​ ( 3,398 ) Balance as of June 30, 2021 ​ — ​ ​ — ​ ​ 12,762,797 ​ ​ 1 ​ ​ 218,705 ​ ​ ( 207,073 ) ​ ​ 11,633 Stock-based compensation ​ — ​ ​ — ​ ​ 320,800 ​ ​ — ​ ​ 349 ​ ​ — ​ ​ 349 Release of vested restricted common stock ​ — ​ ​ — ​ ​ 201,343 ​ ​ — ​ ​ - ​ ​ — ​ ​ — Issuance of common stock upon warrant exercise ​ — ​ ​ — ​ ​ 19,000 ​ ​ — ​ ​ 49 ​ ​ — ​ ​ 49 Registered direct offering, net of issuance costs ​ — ​ ​ — ​ ​ 2,500,000 ​ ​ 1 ​ ​ 9,025 ​ ​ — ​ ​ 9,026 Net loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 2,061 ) ​ ​ ( 2,061 ) Balance as of September 30, 2021 ​ — ​ $ — ​ ​ 15,803,940 ​ $ 2 ​ $ 228,128 ​ $ ( 209,134 ) ​ $ 18,996 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ ​ 5 Table of Contents WISA TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended September 30, 2022 and 2021 (in thousands, except share and per share data) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ 2022 2021 Cash flows from operating activities: ​ ​ Net loss ​ $ ( 12,661 ) ​ $ ( 8,751 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ Warrant inducement expense ​ ​ — ​ ​ 1,146 Forgiveness of Paycheck Protection Program loan ​ ​ — ​ ​ ( 859 ) Stock-based compensation ​ ​ 1,512 ​ ​ 938 Depreciation and amortization ​ ​ 91 ​ ​ 59 Expense for issuance of common stock for services ​ — ​ 34 Amortization of debt discounts ​ ​ 156 ​ ​ — Change in fair value of warrant liability ​ ​ ( 274 ) ​ ​ — Changes in operating assets and liabilities: ​ ​ ​ ​ Accounts receivable ​ ( 23 ) ​ ( 120 ) Inventories ​ ( 2,504 ) ​ ( 1,246 ) Prepaid expenses and other assets ​ 53 ​ ( 572 ) Other assets ​ ​ 79 ​ ​ — Accounts payable ​ 1,074 ​ 153 Accrued liabilities ​ ( 288 ) ​ 644 Other liabilities ​ ( 111 ) ​ — Net cash used in operating activities ​ ( 12,896 ) ​ ( 8,574 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities: ​ ​ Purchases of property and equipment ​ ( 36 ) ​ ( 86 ) Net cash used in investing activities ​ ( 36 ) ​ ( 86 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities: ​ ​ Proceeds from issuance of common stock upon warrant exercises, net of issuance costs ​ ​ — ​ ​ 8,303 Proceeds from issuance of convertible notes payable, net of issuance costs ​ ​ 2,483 ​ ​ — Repayment of capital lease ​ ​ ( 15 ) ​ ​ ( 17 ) Proceeds from issuance of common stock, in registered direct offering, net of issuance costs ​ ​ — ​ ​ 9,026 Net cash provided by financing activities ​ 2,468 ​ 17,312 ​ ​ ​ ​ ​ ​ ​ Net (decrease) increase in cash and cash equivalents ​ ( 10,464 ) ​ 8,652 Cash and cash equivalents as of beginning of period ​ 13,108 ​ 7,415 Cash and cash equivalents as of end of period ​ $ 2,644 ​ $ 16,067 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of cash flow information: ​ ​ ​ ​ ​ ​ Cash paid for interest ​ $ 17 ​ $ 3 Cash paid for income taxes ​ $ 2 ​ $ 2 ​ ​ ​ ​ ​ ​ ​ Noncash Investing and Financing Activities: ​ ​ Issuance of warrants in connection with convertible notes payable ​ $ 1,076 ​ $ — Derivative liability recorded in connection with issuance of convertible notes payable ​ $ 286 ​ ​ ​ Exchange of convertible preferred stock for common stock ​ $ — ​ $ 1,640 Deemed dividend on exchange of convertible preferred stock for common stock ​ $ — ​ $ ( 1,192 ) Issuance of warrants in connection with exchange of preferred stock ​ $ — ​ $ 570 Convertible preferred stock dividend ​ $ — ​ $ 34 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 6 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 1. Business and Summary of Significant Accounting Policies 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. 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 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.” Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company has been granted 180 calendar days from the date of the Notice, or until December 20, 2022 (the “Compliance Period”), to regain compliance with the Minimum Bid Price Requirement. 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 The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to Article 10 of Regulation S-X of the Securities Act of 1933, as amended (“Securities Act”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements include all normal and recurring adjustments that the Company believes are necessary to fairly state the Company’s financial position and the results of operations and cash flows. Interim period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period. The condensed consolidated balance sheet as of December 31, 2021 has been derived from audited consolidated financial statements at that date, but does not include all disclosures required by U.S. GAAP for complete financial statements. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. ​ 7 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 1. 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 Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents are deposited in demand and money market accounts at one financial institution. At times, such deposits may be in excess of insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents. The Company’s accounts receivable are derived from revenue earned from customers located throughout the world. 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, 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 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. The Company’s manufacturers and suppliers may encounter problems during manufacturing due to a variety of reasons, any of which could delay or impede their ability to meet demand. 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 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. ​ 8 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 1. Business and Summary of Significant Accounting Policies , continued Convertible Financial Instruments The Company bifurcates conversion options and warrants from their host instruments and accounts for them as freestanding derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable U.S. GAAP. 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. Debt discounts under these arrangements are amortized to interest expense using the interest method over the earlier of the term of the related debt or their earliest date of redemption. Warrants for Shares of Common Stock and Derivative Financial Instruments Warrants for shares of common stock and other derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) that contain reset provisions that do not qualify for the scope exception are classified as liabilities. The Company assesses classification of its warrants for shares of common stock and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required. 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. ​ 9 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 1. Business and Summary of Significant Accounting Policies , continued Revenue Recognition 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: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. The Company considers customer purchase orders to be the contracts with a customer. Revenues, net of expected discounts, are recognized when the performance obligations of the contract with the customer are satisfied and when control of the promised goods are transferred to the customer, typically when products, which have been determined to be the only distinct performance obligations, are shipped to the customer. Expected costs of assurance warranties and claims are recognized as expense. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer and deposited with the relevant government authority, are excluded from revenue. Our revenue arrangements do not contain significant financing components. 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. The Company does not provide its customers with a contractual right of return. However, the Company accepts limited returns on a case-by-case basis. These returns, adjustments and other allowances are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenue recognized. We believe that there will not be significant changes to our estimates of variable consideration. 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 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) ​ 2022 2021 ​ 2022 2021 Components ​ $ 696 ​ $ 1,632 ​ $ 1,769 ​ $ 3,949 Consumer Audio Products ​ 241 ​ 175 ​ 680 ​ 592 Total ​ $ 937 ​ $ 1,807 ​ $ 2,449 ​ $ 4,541 ​ ​ 10 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 1. Business and Summary of Significant Accounting Policies , continued Contract Balances We receive payments from customers based on a billing schedule as established in our contracts to partially offset prepayments required by our vendors on long lead time materials. Amounts collected prior to the fulfillment of the performance obligation are considered contract liabilities and classified as customer advances within accrued liabilities on the condensed consolidated balance sheets. Contract assets are recorded when we have a conditional right to consideration for our completed performance under the contracts. Accounts receivables are recorded when the right to this consideration becomes unconditional. We do not have any material contract assets as of September 30, 2022 and December 31, 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, (in thousands) 2022 2021 Contract liabilities ​ $ 32 ​ $ — ​ Revenue by Geographic Area In general, revenue disaggregated by geography (See Note 10) is aligned according to the nature and economic characteristics of our business and provides meaningful disaggregation of our results of operations. Since we operate in one segment, all financial segment and product line information can be found in the condensed consolidated financial statements. 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. Advertising Costs Advertising costs are charged to sales and marketing expenses as incurred. 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. ​ 11 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 1. Business and Summary of Significant Accounting Policies , continued Comprehensive Loss Comprehensive loss represents the changes in equity of an enterprise, other than those resulting from stockholder transactions. Accordingly, comprehensive loss may include certain changes in equity that are excluded from 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 The financial position and results of operations of the Company’s foreign operations are measured using currencies other than the U.S. dollar as their functional currencies. Accordingly, for these operations all assets and liabilities are translated into U.S. dollars at the current exchange rates as of the respective balance sheet date. Expense items are translated using the weighted average exchange rates prevailing during the period. 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, 2022 and 2021. Net Loss per Common Share Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock and potentially dilutive common share equivalents outstanding for the period determined using the treasury-stock and if-converted methods. 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. 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. 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. ​ 12 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 1. 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. 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 Adjustments Balance as of ​ ​ December 31, 2021 ​ Due to ASC 842 ​ January 1, 2022 Operating lease right-of-use assets ​ $ — ​ $ 212 ​ $ 212 Property and equipment, net ​ ​ 162 ​ ​ 90 ​ ​ 252 Total assets ​ $ 19,391 ​ $ 302 ​ $ 19,693 Operating lease liabilities, current ​ $ — ​ $ 148 ​ $ 148 Operating lease liabilities, non-current ​ $ — ​ $ 179 ​ $ 179 Deferred rent and lease incentive ​ $ 58 ​ $ ( 58 ) ​ $ — Total liabilities ​ $ 3,014 ​ $ 269 ​ $ 3,283 Accumulated deficit ​ $ ( 212,203 ) ​ $ 33 ​ $ ( 212,170 ) Total stockholders’ equity ​ $ 16,377 ​ $ 33 ​ $ 16,410 Total liabilities and stockholders’ equity ​ $ 19,391 ​ $ 302 ​ $ 19,693 ​ Recently Issued and Not Yet Adopted Accounting Pronouncements 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. GAAP. 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. ​ 13 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) ​ 2. Going Concern The condensed consolidated financial statements of the Company have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business. The Company has incurred net operating losses each year since inception. As of 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 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 costs associated with efforts to increase its market share. The Company’s ability to transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure. Based on current operating levels, the Company will need to raise additional funds by selling additional equity or incurring 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. Management of the Company intends to raise additional funds through the issuance of equity securities or debt. There can be no assurance that, in the event the Company requires additional financing, such financing will be available at terms acceptable to the Company, if at all. Failure to generate sufficient cash flows from operations, raise additional capital and reduce discretionary spending could have a material adverse effect on the Company’s ability to achieve its intended business objectives. As a result, the substantial doubt about the Company’s ability to continue as a going concern has not been alleviated. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. ​ 14 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 3. Balance Sheet Components Inventories (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ Raw materials ​ $ 3,116 ​ $ 2,676 Work in progress ​ ​ 452 ​ ​ 784 Finished goods ​ 3,716 ​ 1,320 Total inventories ​ $ 7,284 ​ $ 4,780 ​ Property and equipment, net (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2022 2021 Machinery and equipment ​ $ 992 ​ $ 965 Tooling ​ 11 ​ 11 Computer software ​ — ​ 89 Furniture and fixtures ​ 15 ​ 15 Leasehold improvements ​ 127 ​ 40 ​ ​ 1,145 ​ 1,120 Less: Accumulated depreciation and amortization ​ ( 947 ) ​ ( 958 ) Property and equipment, net ​ $ 198 ​ $ 162 ​ 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2022 2021 Accrued rebate ​ $ 417 ​ $ 356 Accrued vacation ​ ​ 401 ​ ​ 385 Lease liability ​ 142 ​ — Accrued audit fees ​ ​ 140 ​ ​ 191 Customer advances ​ ​ 32 ​ ​ — Accrued compensation ​ ​ — ​ ​ 231 Accrued other ​ 107 ​ 253 Total accrued liabilities ​ $ 1,239 ​ $ 1,416 ​ ​ ​ 15 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 4. Borrowings 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. ​ 16 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 4. 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 On May 3, 2020, we received a loan (the “PPP Loan”) from Wells Fargo Bank, National Association in the aggregate amount of $ 847,000 , pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act, which was enacted on March 27, 2020. The PPP Loan was funded on May 7, 2020. The PPP Loan, which is in the form of a PPP promissory note and agreement, dated May 3, 2020 (the “PPP Note Agreement”), had a maturity date of May 3, 2022 and bore interest at a rate of 1.00 % per annum. Pursuant to a change in guidance by the U.S. 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 could be prepaid by us at any time prior to maturity with no prepayment penalties. 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 in the three-month period ended September 30, 2021. ​ 5. Fair Value Measurements The Company measures the fair value of financial instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Each level of input has different levels of subjectivity and difficulty involved in determining fair value. ● Level 1 – Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date. Therefore, determining fair value for Level 1 investments generally does not require significant judgment, and the estimation is not difficult. ● Level 2 – Pricing is provided by third-party sources of market information obtained through investment advisors. The Company does not adjust for or apply any additional assumptions or estimates to the pricing information received from its advisors. ● Level 3 – Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. The determination of fair value for Level 3 instruments involves the most management judgment and subjectivity. ​ 17 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 5. Fair Value Measurements, continued 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) ​ September 30, 2022 ​ ​ ​ ​ Significant ​ ​ ​ ​ ​ Quoted prices ​ other ​ Significant ​ ​ in active ​ observable ​ unobservable ​ ​ markets ​ inputs ​ inputs ​ (Level 1) (Level 2) (Level 3) Liabilities: ​ ​ ​ ​ ​ ​ Derivative liability ​ $ — ​ $ — ​ $ 286 Warrant liability ​ ​ — ​ ​ — ​ ​ 719 ​ ​ $ — ​ $ — ​ $ 1,005 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ December 31, 2021 ​ ​ ​ ​ Significant ​ ​ ​ ​ ​ Quoted prices ​ other ​ Significant ​ ​ in active ​ observable ​ unobservable ​ ​ markets ​ inputs ​ inputs ​ (Level 1) (Level 2) (Level 3) Liabilities: ​ ​ ​ ​ ​ ​ Warrant liability ​ $ — ​ $ — ​ $ 8 ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Value at ​ ​ ​ ​ ​ ​ ​ December 31, ​ issuance ​ Change in ​ September 30, ​ 2021 date fair value 2022 Warrant Liability ​ $ 8 985 ( 274 ) ​ $ 719 ​ 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. ​ 18 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 5. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair ​ ​ ​ ​ ​ ​ ​ ​ Value at ​ ​ ​ ​ ​ ​ ​ December 31, ​ issuance ​ Change in ​ September 30, ​ 2021 date fair value 2022 Derivative liability ​ $ — 286 — ​ $ 286 ​ ​ 6. 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 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 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. 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. 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 . Common stock Carve-Out Plan 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. ​ 19 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 6. Convertible Preferred Stock and Stockholders’ Equity , continued 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 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; provided that, in any year no more than 8 % of the common stock or derivative securitization with common stock underlying 8 % of the common stock may be issued in any fiscal year. Thereafter, the 15 % evergreen provision governs the LTIP. 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, 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 Stock Awards ​ Shares ​ Grant Date Fair Value Non-vested as of January 1, 2022 ​ 728,255 ​ $ 3.43 Granted 1,274,900 ​ $ 1.18 Vested ( 284,299 ) ​ $ 3.07 Forfeited ( 41,372 ) ​ $ 1.92 Non-vested as of September 30, 2022 1,677,484 ​ $ 1.82 ​ 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 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 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. 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. ​ 20 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 6. 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 nine months ended September 30, 2022 is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average Stock Units Shares Grant Date Fair Value Non-vested as of January 1, 2022 438,462 ​ $ 2.36 Granted — ​ $ — Vested ( 66,766 ) ​ $ 2.43 Forfeited ( 10,069 ) ​ $ 2.27 Non-vested as of September 30, 2022 361,627 ​ $ 2.35 ​ 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 . 2022 Plan 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 ​ ​ ​ ​ Grant Date Stock Units Shares Fair Value Non-vested as of January 1, 2022 — ​ $ — Granted 370,000 ​ $ 0.52 Vested — ​ $ — Forfeited — ​ $ — Non-vested as of September 30, 2022 370,000 ​ $ 0.52 ​ 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. ​ 21 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 6. 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 In January 2021, pursuant to the Company’s solicitation of certain warrant holders, such warrant holders agreed to exercise warrants to purchase an aggregate of 1,221,675 shares of common stock for net proceeds of approximately $ 2.9 million. In consideration for their exercise of these warrants, for cash, the exercising holders were issued new warrants to purchase up to an aggregate of 305,419 shares of common stock, at an exercise price of $ 4.20 per share, which are exercisable for a period of five years . The grant date fair value of those warrants was $ 567,000 , which was recorded as warrant inducement expense and an increase to additional paid-in capital on the accompanying condensed consolidated balance sheet. 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 $ 3.85 ; expected dividend yield of 0.0 %; expected volatility of 60.1 %; risk-free interest rate of 0.45 % and expected life of 5.0 years. 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. In consideration for their exercise of these warrants, for cash, the exercising holders were issued new warrants to purchase up to an aggregate of 250,000 shares of common stock, at an exercise price of $ 4.46 per share, which are exercisable for a period of five years . The grant date fair value of those warrants was $ 579,000 , which was recorded as warrant inducement expense 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 $ 4.50 ; expected dividend yield of 0.0 %; expected volatility of 60.7 %; risk-free interest rate of 0.77 % and expected life of 5.0 years. 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. 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 . 22 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 6. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Warrants ​ Weighted Average ​ Warrants Exercise ​ Outstanding as of ​ Remaining ​ Exercisable as of Price September 30, 2022 Life (years) September 30, 2022 $ 1.00 - $ 2.61 3,938,571 2.92 3,734,187 $ 3.00 - $ 4.46 2,446,219 2.88 2,446,219 $ 6.40 - $ 9.80 32,889 2.41 32,889 $ 15.80 - $ 17.50 92,940 0.50 92,940 $ 24.80 - $ 125.00 192,183 0.51 192,183 4.39 * 6,702,802 3.47 6,498,418 * 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. ​ 23 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 6. Convertible Preferred Stock and Stockholders’ Equity , continued Information regarding warrants for common stock outstanding and exercisable as of December 31, 2021 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Warrants Weighted Average Warrants Exercise ​ Outstanding as of ​ Remaining ​ Exercisable as of Price ​ December 31, 2021 ​ Life (years) ​ December 31, 2021 ​ ​ ​ ​ ​ ​ ​ $ 1.52 - $ 3.90 3,537,965 3.56 3,527,965 $ 4.20 - $ 9.80 588,308 4.01 588,308 $ 15.80 - $ 17.50 92,963 1.06 92,963 $ 24.80 - $ 99.00 222,807 1.13 222,807 $ 108.00 - $ 125.00 47,678 0.90 47,678 $ 7.26 * 4,489,721 3.44 4,479,721 * Weighted Average 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 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. ​ 7. Income Taxes 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. The Company also computes the tax provision or benefit related to items reported separately and recognizes the items net of their related tax effect in the interim periods in which they occur. 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, 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, 2022 and 2021 was calculated on a jurisdiction basis. ​ 24 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 8. Commitments and Contingencies Operating 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 September 30, 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, January 1, ​ ​ 2022 ​ 2022 Assets: ​ ​ ​ ​ ​ ​ Operating lease right-of-use assets ​ $ 143 ​ $ 212 ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ Operating lease liabilities, current ​ $ 142 ​ $ 148 Operating lease liabilities, non-current ​ $ 74 ​ $ 179 ​ Lease Costs: The components of lease costs were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ ​ September 30, 2022 ​ September 30, 2022 Operating lease cost ​ $ 28 ​ $ 74 Short-term lease cost ​ ​ 9 ​ ​ 38 Total lease cost ​ $ 37 ​ $ 112 ​ As of September 30, 2022, the maturity of operating lease liabilities was as follows (in thousands): ​ ​ ​ ​ ​ 2022 (remaining 3 months) $ 28 2023 ​ 173 2024 ​ 29 Total lease payments ​ 230 Less: Interest ​ ( 14 ) Present value of lease liabilities ​ $ 216 ​ Lease Term and Discount Rate: ​ ​ ​ ​ ​ ​ September 30, 2022 ​ Weighted-average remaining lease term (in years) 1.4 ​ Weighted-average discount rate 8.0 % ​ ​ 25 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 8. Commitments and Contingencies , continued Other Information: Supplemental cash flow information related to leases was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ ​ September 30, 2022 ​ September 30, 2022 Operating cash outflows from operating leases ​ $ 42 ​ $ 125 ​ 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 finance lease as of September 30, 2022 are as follows (in thousands): ​ ​ ​ ​ ​ Payments due in: ​ Year ending December 31, 2022 (remaining 3 months) ​ $ 7 Year ending December 31, 2023 ​ 15 Total minimum lease payments ​ 22 Less: Amounts representing interest ​ ( 1 ) Present value of finance lease obligations ​ 21 Less: Current portion of finance lease liabilities ​ 21 Other liabilities ​ $ — ​ 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. ​ 26 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 8. Commitments and Contingencies , continued Contingencies In the normal course of business, the Company may become involved in legal proceedings. The Company will accrue a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of a possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. 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. 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. ​ 9. Related Parties Helge Kristensen Mr. Kristensen has served as a member of the Company’s board of directors since 2010. Mr. Kristensen serves as vice president of Hansong Technology, an original device manufacturer of audio products based in China, president of Platin Gate Technology (Nanjing) Co. 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 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. David Howitt Mr. Howitt has served as a member of the Company’s board of directors since December 2021. Mr. 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”). ​ 27 Table of Contents WISA TECHNOLOGIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2022 and 2021 (unaudited) 9. Related Parties , continued 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 for a period of six months; 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. ​ 10. Segment Information 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, 2022 and 2021 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ For the Nine Months Ended ​ ​ September 30, ​ September 30, (in thousands) 2022 2021 2022 2021 North America ​ $ 244 ​ $ 166 ​ $ 681 ​ $ 710 Europe ​ 62 ​ 162 ​ 411 ​ 403 Asia Pacific ​ 631 ​ 1,479 ​ 1,357 ​ 3,428 Total ​ $ 937 ​ $ 1,807 ​ $ 2,449 ​ $ 4,541 ​ Substantially all of our long-lived assets are located in the United States. ​ ​ ​ 28 Table of Contents