What changed in this filing

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Item 1. Financial Statements

2023-05-15 compared with 2022-11-16 · 301 added, 421 removed, 373 unchanged (66% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30, 2022

March 31, 2023

December 31, 2022

5 unchanged sentences

Property and equipment, net

Liabilities, Convertible Preferred Stock and Stockholders’ Equity

Liabilities and Stockholders’ Equity/(Deficit)

Current Liabilities:

2 unchanged sentences

Total current liabilities

Convertible notes payable, net

Convertible note payable

Warrant liabilities

Derivative liability

Warrant liability

Other liabilities

1 unchanged sentence

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:

Stockholders’ Equity/(Deficit):

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

3,058,887 and 168,835 shares issued and outstanding as of March 31, 2023 and 2022, respectively

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity

Total liabilities, convertible preferred stock and stockholders’ equity

Total stockholders’ equity/(deficit)

Total liabilities and stockholders’ equity (deficit)

(1) The condensed consolidated balance sheet as of December 31, 2022 was derived from the audited consolidated balance sheet as of that date.

Share and per share amounts have been retroactively adjusted to reflect the impact of a 1-for-100 reverse stock split effected in January 2023, as discussed in Note 1.

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

For the three months ended March 31, 2023 and 2022

(in thousands, except share and per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Cost of revenue

Gross profit (deficit)

Operating Expenses:

4 unchanged sentences

Loss from operations

Interest expense

Change in fair value of warrant liability

Gain on forgiveness of Paycheck Protection Program loan

Other (expense) income

Warrant inducement expense

Interest expense, net

Change in fair value of warrant liabilities

Other expense, net

Loss before provision for income taxes

Provision for income taxes

Convertible preferred stock dividend

Deemed dividend on exchange of convertible preferred stock for common stock

Net loss attributable to common stockholders

Net loss per common share - basic and diluted

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

Net loss - basic and diluted

Weighted average number of common shares used in computing net loss

Share and per share amounts have been retroactively adjusted to reflect the impact of a 1-for-100 reverse stock split effected in January 2023, as discussed in Note 1.

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

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

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the three months ended March 31, 2023 and 2022

(in thousands, except share and per share data)

Convertible Preferred Stock

Common Shares

1 unchanged sentence

Paid-in Capital

Equity (Deficit)

Balance as of December 31, 2022

ASC 842 adoption adjustment

Stock-based compensation

Release of vested restricted common stock

Restricted stock awards cancelled

Issuance of common stock in connection with convertible promissory note

Issuance of common stock in connection with warrant exercise

Issuance of common stock and warrants, net of offering costs

Balance as of March 31, 2023

Stock-based compensation

Release of vested restricted common stock

Restricted stock awards cancelled

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

Common Shares

1 unchanged sentence

Paid-in Capital

Equity (Deficit)

Balance as of December 31, 2021

Issuance of common stock upon warrant exercise

Warrants issued in connection with warrant exercise

Convertible preferred stock dividend

ASC842 adoption adjustment

Stock-based compensation

Release of vested restricted common stock

Restricted stock awards cancelled

Balance as of March 31, 2022

Issuance of common stock upon warrant exercise

Warrants issued in connection with warrant exercise

Convertible preferred stock dividend

Exchange of convertible preferred stock for common stock

Warrants issued upon exchange of preferred stock for common stock

Deemed dividend on exchange of convertible preferred stock

Stock-based compensation

Issuance of common stock to vendor

Balance as of June 30, 2021

Stock-based compensation

Release of vested restricted common stock

Issuance of common stock upon warrant exercise

Registered direct offering, net of issuance costs

Balance as of September 30, 2021

Share amounts have been retroactively adjusted to reflect the impact of a 1-for-100 reverse stock split effected in January 2023, as discussed in Note 1.

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2022 and 2021

(in thousands, except share and per share data)

Nine Months Ended September 30,

For the three months ended March 31, 2023 and 2022

(in thousands)

Three Months Ended March 31,

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

Expense for issuance of common stock for services

Amortization of debt discounts

11 unchanged sentences

Cash flows from financing activities:

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

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

Repayment of finance lease

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

Proceeds from exercise of warrants

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents as of beginning of period

4 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

Deemed dividend on exchange of convertible preferred stock for common stock

Issuance of warrants in connection with exchange of preferred stock

Convertible preferred stock dividend

Issuance of warrant liability in connection with February 2023 offering

Cashless exercise of warrants

Issuance of common stock in connection with convertible promissory note

Deferred offering costs reclassed from prepaid expenses

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

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

For the Three Months Ended March 31, 2023 and 2022

Business and Summary of Significant Accounting Policies

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

WiSA Technologies, Inc.

formerly known as Summit Wireless Technologies, Inc.

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

2 unchanged sentences

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.

Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company was granted 180 calendar days from the date of the Notice, or until December 20, 2022, to regain compliance with the Minimum Bid Price Requirement.

The Company’s Common Stock failed to regain compliance with the Minimum Bid Price Requirement as of December 20, 2022.

On December 19, 2022, the Company requested an extension of an additional 180 days in which to regain compliance with the Minimum Bid Price Requirement.

On December 21, 2022, the Company received notice from Nasdaq indicating that, while the Company has not regained compliance with the Minimum Bid Price Requirement, Staff has determined that the Company is eligible for an additional 180-day period, or until June 20, 2023, to regain compliance.

On January 18, 2023, the Company received notice (the “January 18 Letter”) that Nasdaq had determined that as of January 18, 2023, the Company’s securities had a closing bid price of $ 0.10 or less for ten consecutive trading days triggering application of Listing Rule 5810(c)(3)(A)(iii) which states in part:

if during any compliance period specified in Rule 5810(c)(3)(A), a company’s security has a closing bid price of $ 0.10 or less for ten consecutive trading days, the Listing Qualifications Department shall issue a Staff Delisting Determination under Rule 5810 with respect to that security (the “Low Priced Stocks Rule”).

As a result, the Staff determined to delist the Company’s securities from Nasdaq, unless the Company timely requests an appeal of the Staff’s determination to a Hearings Panel (the “Panel”), pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series.

On February 13, 2023, the Company received notice (the “February 13 Letter”) from Nasdaq that it had determined that the Company had cured its bid price deficiency and now complies with the Minimum Bid Price Requirement, as the closing bid price of the Company’s common stock was at least $ 1.00 per share for at least a minimum of 10 consecutive business days.

On December 21, 2022, the Company received a letter from Nasdaq notifying the Company that it had determined that the Company did not comply with Listing Rule 5635(d) because the Company’s December 2022 public offering did not meet Nasdaq’s definition of a public offering under Listing Rule IM-5635-3.

Nasdaq’s determination was based on the significant discount to the “Minimum Price,” as defined in Nasdaq rules.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 and 2022

Business and Summary of Significant Accounting Policies, continued

The Company had requested a hearing before the Panel to appeal the January 18 Letter and to address all outstanding matters, including compliance with the Minimum Bid Price Requirement, the Low Priced Stocks Rule and Nasdaq Listing Rule 5635(d), which hearing was held on March 9, 2023.

As a result of the February 13 Letter, the Company was required only to address its compliance with the Nasdaq Listing Rule 5635(d) in the hearing.

The Panel determined that it could not definitively conclude that the December public offering did not comply with Listing Rule 5635(d) and therefore did not issue a public reprimand letter.

This matter is now closed.

On March 20, 2023, the Staff orally notified us that we were not in compliance with Nasdaq Listing Rule 5550(b)(1), which requires companies listed on Nasdaq to maintain a minimum of $ 2,500,000 in stockholders’ equity for continued listing (the “Stockholders’ Equity Requirement”).

We reported stockholders’ equity (deficit) of ($ 1,996,000 ) in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and, as a result, did not satisfy the Stockholders’ Equity Requirement of $ 2,500,000 pursuant to Listing Rule 5550(b)(1).

As of March, we had stockholders’ equity of $ 7,763,000 and, accordingly, we believe that we have regained compliance with the Stockholders’ Equity Requirement.

Reverse Stock Split

On January 24, 2023, the Company held a special meeting of its stockholders, at which its stockholders approved an amendment to the Company’s certificate of incorporation, as amended, to effect a reverse stock split of all of the outstanding shares of common stock at a specific ratio within a range from one -for-five to one-for-one hundred, and to grant authorization to the board of directors to determine, in its sole discretion, the specific ratio and timing of the reverse stock split.

On January 24, 2023, the Board approved a 1-for-100 reverse stock split (the “Reverse Stock Split”) of our outstanding shares of common stock and authorized the filing of a certificate of amendment to our certificate of incorporation, as amended, with the Secretary of State of the State of Delaware (the “Certificate of Amendment”) to effect the Reverse Stock Split.

On January 26, 2023, the Reverse Stock Split was effected and the condensed consolidated financial statements have been retroactively adjusted.

All common stock share numbers, warrants to purchase common stock, prices and exercise prices have been retroactively adjusted to reflect the Reverse Stock Split.

The common stock began trading on a split-adjusted basis at the start of trading on January 27, 2023.

Unless otherwise indicated, the information presented in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (the “Report”) gives effect to the Reverse Stock Split.

Basis of Presentation

13 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

For the Three Months Ended March 31, 2023 and 2022

Business and Summary of Significant Accounting Policies, continued

9 unchanged sentences

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

As of September 30, 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 March 31, 2023 and December 31, 2022, there was no allowance for doubtful accounts.

As of March 31, 2023, the Company had one customer accounting for 86 % of accounts receivable.

As of December 31, 2022, the Company had two customers accounting for 62 % and 12 % 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 had two customers accounting for 45 % and 10 % of its net revenue for the three months ended March 31, 2023.

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

The Company’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 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

As of March 31, 2023 and December 31, 2022, the Company had capitalized $ 0 and $ 206,000 , respectively, of deferred offering costs in prepaid expenses and other current assets on the condensed consolidated balance sheet.

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 Three Months Ended March 31, 2023 and 2022

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 Three Months Ended March 31, 2023 and 2022

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

Three Months Ended September 30,

Nine Months Ended September 30,

During the three months ended March 31, 2023 and 2022, net revenue consisted of the following:

For the Three Months Ended March 31,

(in thousands)

Consumer Audio Products

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the 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 September 30, 2022 and December 31, 2021.

September 30,

We do not have any material contract assets as of March 31, 2023 and December 31, 2022.

(in thousands)

Contract Liabilities

During the three months ended March 31, 2023, the Company recognized $ 11,000 of revenue that was included in the contract balances as of December 31, 2022.

Revenue by Geographic Area

1 unchanged sentence

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

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 and 2022

Business and Summary of Significant Accounting Policies, continued

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:

In accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, we 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;

11 unchanged sentences

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.

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

Advertising costs for the three months ended March 31, 2023 and 2022 were $ 155,000 and $ 171,000 , respectively.

Comprehensive Loss

1 unchanged sentence

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

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

For the three months ended March 31, 2023 and 2022, the Company’s comprehensive loss is the same as its net loss.

Foreign Currency

5 unchanged sentences

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

dollar are recorded in the condensed consolidated statement of operations in other income (expense), net and were not material for the three and nine months ended September 30, 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 months ended March 31, 2023 and 2022.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 and 2022

Business and Summary of Significant Accounting Policies, continued

Net Loss per Common Share

1 unchanged sentence

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.

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

For the three months ended March 31, 2023, warrants to purchase 2,680,998 shares of common stock, 14,064 shares of restricted stock, 2,778 shares of restricted stock issued under an inducement grant and 5,847 shares underlying restricted stock units have been excluded from the calculation of net loss per common share because the inclusion would be antidilutive.

For the three months ended March 31, 2022, warrants to purchase 44,744 shares of common stock, 15,688 shares of restricted stock, 2,971 shares of restricted stock issued under an inducement grant and 4,274 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.

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.

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

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

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

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

Balance as of

December 31, 2021

Due to ASC 842

January 1, 2022

Operating lease right-of-use assets

Property and equipment, net

Operating lease liabilities, current

Operating lease liabilities, non-current

Deferred rent and lease incentive

Total liabilities

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

In June 2016, Financial Accounting Standards Board’s (“FASB”) issued Accounting Standards Update (“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.

The Company adopted this standard on January 1, 2023, and the adoption did not have any impact on the condensed consolidated financial statements.

Recently Issued and Not Yet Adopted Accounting Pronouncements

8 unchanged sentences

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.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

For the Three Months Ended March 31, 2023 and 2022

Going Concern

1 unchanged sentence

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.

As of March 31, 2023, the Company had cash and cash equivalents of $ 5.3 million and reported net cash used in operations of $ 4.6 million during the three months ended March 31, 2023.

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

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 issuance of equity securities, and proceeds from the exercise of warrants to purchase common stock and the sale of debt instruments.

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.

5 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

Computer software

Furniture and fixtures

Leasehold improvements

1 unchanged sentence

Property and equipment, net

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.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 and 2022

Balance Sheet Components, continued

Depreciation and amortization expense for the three months ended March 31, 2023 and 2022 was $ 33,000 and $ 29,000 , respectively.

The cost and accumulated depreciation of assets acquired under finance lease included in machinery and equipment in the above table as of March 31, 2023 were $ 72,000 and $ 62,000 , respectively.

Accrued liabilities (in thousands):

September 30,

Accrued rebate

Accrued vacation

Lease liability

Accrued rebate

Accrued audit fees

Customer advances

Accrued compensation

Accrued lease liability, current portion

Customer advance

Accrued other

Accrued compensation

Accrued legal fees

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 .

On August 15, 2022, the Company entered into a Securities Purchase Agreement (the “August Purchase Agreement”), by and between the Company and an institutional investor (the “Convertible Note 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 “August Warrant”) to purchase up to 20,970 shares of the Company’s common stock, at an exercise price of $ 99.70 per share (the “Exercise Price”), in consideration for $ 3,000,000 .

Pursuant to the August Purchase Agreement, upon the closing of the private placement, pursuant to which Maxim Group LLC (“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 Company used the net proceeds primarily for working capital and general corporate purposes.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 and 2022

Borrowings, continued

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 Convertible Note is convertible in whole or in part at the option of the Convertible Note 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 Convertible Note Investor’s applicable notice of conversion (the “Conversion Notice”) and (b) $ 92.60 (the “Base Conversion Price”).

The Base Conversion Price is subject to full ratchet antidilution protection, subject to a floor conversion price of $ 0.50 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.

provided that in the event the Conversion Price equals the Floor Price, the Company is required to pay the Convertible Note 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 August 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.

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 Convertible Note Investor in cash an amount equal to 105 % of the portion of the outstanding principal amount stated in such Conversion Notice.

Further, at the Convertible Note 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 Convertible Note 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 August Purchase Agreement are secured by a senior lien granted pursuant to security agreements between the Convertible Note 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 Convertible Note Investor and the Company;

(c) a senior lien granted pursuant to a patent security agreement between the Convertible Note 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 Convertible Note 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 August Purchase Agreement are guaranteed pursuant to a guaranty by the Company in favor of the Convertible Note Investor.

In connection with the Private Placement, the Company issued warrants to the Convertible Note Investor and Maxim to purchase common shares of 20,970 and 1,944 , 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 Convertible Note were recorded as debt discounts totaling $ 2,509,000 to be amortized to interest expense over the respective term using the effective interest method.

During the three months ended March 31, 2023, the Company recognized $ 719,000 of interest expense from the amortization of debt discounts.

As of March 31, 2023 the net unamortized debt discounts totaled $ 913,000 , and the net carrying value of the convertible note payable was $ 468,000 .

In connection with the Private Placement, the Company entered into a placement agency agreement with Maxim (the “Placement Agency Agreement”), and agreed to issue to Maxim, a warrant to purchase up to an aggregate of 1,944 shares of Common Stock (the “Maxim Warrant”) at an exercise price of $ 99.70 per share, which 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 ( 5 th ) anniversary of its date of issuance.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

For the Three Months Ended March 31, 2023 and 2022

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.

Effective August 24, 2022, the Company and the Convertible Note Investor agreed to amend Section 3.1(b) of the Convertible Note to provide that the Conversion Price could not be lower than the Floor Price until stockholder approval has been obtained, after which stockholder approval the Floor Price may be reduced to no lower than $ 0.25 , subject to adjustment pursuant to the terms of the Convertible Note.

The changes were effected by cancellation of the Convertible Note and the issuance of a replacement senior secured convertible note (the “New Convertible Note”) to the Convertible Note Investor.

The New Convertible Note contains identical terms as the Convertible Note, except for the amendment to the Section 3.1(b).

On November 21, 2022, the Company and Maxim entered into an agreement to amend the Maxim Warrant (the “Maxim Warrant Amendment”).

Specifically, the Maxim Warrant Amendment sets forth certain circumstances in which the lock up restrictions to which the Maxim Warrant is subject would not apply.

The Maxim Warrant Amendment also clarifies certain limitations with respect to demand registration rights, and provides that Maxim’s piggy-back registration rights expire on the fifth ( 5 th) anniversary of the Maxim Warrant’s date of issuance.

Convertible promissory note (in thousands):

Convertible note payable

Debt discount

The New Convertible Note contains several embedded conversion features.

The Company concluded that those conversion features require bifurcation from the New 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 such amount was included in the $ 2,509,000 of debt discounts noted above.

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

The Company recognized no change in the fair value of the derivative liability during the three months ended March 31, 2023, and the balance of the derivative liability as of March 31, 2023 remained $ 333,000 .

On November 28, 2022, the Company entered into a waiver of rights (the “Waiver”) with the Convertible Note Investor, pursuant to which the Convertible Note Investor agreed to waive certain prohibitions under the August Purchase Agreement with respect to the offering of units in December 2022 in exchange for the issuance by the Company, on the closing date of such offering, of an additional number of Series A warrants to purchase shares of Common Stock (“Series A Warrants”) and an additional number of Series B warrants to purchase shares of Common Stock (“Series B Warrants”) equal to the quotient obtained by dividing $ 750,000 by the public offering price for the units sold in the offering (such Warrants, the “Waiver Warrants”).

In connection with the public offering the Company consummated on December 1, 2022 (“December 2022 Offering”), the Company issued 53,572 Series A Warrants and 53,572 Series B Warrants to the Convertible Note Investor (See Note 6).

The Company’s obligation to issue shares of common stock underlying the Waiver Warrants is expressly conditioned upon stockholder approval of all of the transactions contemplated by the August Purchase Agreement.

On February 1, 2023, the holder of the Convertible Note converted approximately $ 708,000 , a portion of the outstanding principal amount into 67,500 shares of the Company’s common stock.

In April 2023, the Company paid off the entirety of the outstanding balance of the Convertible Note - see Note 11 – Subsequent Events for additional information.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 and 2022

Fair Value Measurements

8 unchanged sentences

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

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 September 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 March 31, 2023 and December 31, 2022 by level within the fair value hierarchy, are as follows:

(in thousands)

September 30, 2022

March 31, 2023

Quoted prices

Derivative liability

Warrant liability

Warrant liabilities

(in thousands)

1 unchanged sentence

Quoted prices

Warrant liability

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.

Warrant liabilities

There were no transfers between Level 1, 2 or 3 during the three months ended March 31, 2023 or 2022.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

For the Three Months Ended March 31, 2023 and 2022

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 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 .

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.

As described previously in Note 4, the conversion provisions embedded in the Convertible Note require bifurcation and measurement at fair value as a derivative.

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.

During the three months ended March 31, 2023 and 2022, there were no changes in the fair value of the derivative liability.

For the three months ended March 31,

(in thousands)

Beginning balance

Change in fair value

Ending balance

Warrant Liabilities

The following table includes a summary of changes in fair value of the Company’s warrant liabilities measured at fair value using significant unobservable inputs (Level 3) for the three months ended March 31, 2023 and, 2022 were as follows:

(in thousands)

Beginning balance

Change in fair value

Exercise of warrant liabilities

Ending balance

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

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

For the Three Months Ended March 31, 2023 and 2022

Stockholders’ Equity

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”).

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.

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:

At a Special Meeting of Stockholders on January 24, 2023, the Stockholders approved certain amendments to the LTIP to:

(i) increase the annual share limit of Common Stock that may be issued in any single fiscal year only for the 2023 fiscal year under the LTIP from 8 % of the shares of Common Stock outstanding to 15 % of the shares of Common Stock outstanding (which amount equates to the maximum amount that may be issued in the aggregate under the LTIP), and (ii) permit immediately quarterly calculations based on the number of shares of Common Stock outstanding as of the first trading day of each fiscal quarter, rather than solely as of the first trading day of the fiscal year.

As of March 31, 2023, up to 458,833 shares of common stock are available for participants under the LTIP.

A summary of activity related to restricted stock awards for the three months ended March 31, 2023 is presented below:

Weighted-Average

1 unchanged sentence

Non-vested as of January 1, 2023

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 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.

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

Non-vested as of March 31, 2023

As of March 31, 2023, the unamortized compensation costs related to the unvested restricted stock awards was approximately $ 1,720,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 1.8 years.

For the three months ended March 31, 2023, no shares of restricted stock, issued under the LTIP, were released.

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

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:

A summary of activity related to restricted stock units under the Company’s 2020 Stock Incentive Plan for the three months ended March 31, 2023 is presented below:

Weighted-Average

1 unchanged sentence

Non-vested as of January 1, 2023

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:

Non-vested as of March 31, 2023

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 and 2022

Stockholders’ Equity , continued

As of March 31, 2023, the unamortized compensation costs related to the unvested restricted stock units was approximately $ 200,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 0.5 years.

For the three months ended March 31, 2023, no shares of restricted stock, issued under the 2020 Stock Incentive Plan, were released.

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

Inducement Grant

On September 13, 2021, the Company issued 3,100 shares of restricted common stock to Eric Almgren, the Company’s Chief Strategist, as an inducement grant (“September 2021 Inducement Grant”).

As of March 31, 2023, the unamortized compensation cost related to the unvested September 2021 Inducement Grant was approximately $ 377,000 which is being amortized on a straight-line basis over a period of approximately 1.5 years.

As of March 31, 2023, 2,778 shares are unvested.

During the months ended March 31, 2022, no shares of restricted stock were released under the September 2021 Inducement Grant.

For the three months ended March 31, 2022, 65 shares of restricted common stock issued under the September 2021 Inducement Grant, were released with an intrinsic value of approximately $ 8,000 .

A summary of activity related to restricted stock units under the Company’s Technical Team Retention Plan of 2022 (the “2022 Plan”) for the three months ended March 31, 2023 is presented below:

Weighted-Average

Grant Date Fair Value

Non-vested as of January 1, 2023

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.

Non-vested as of March 31, 2023

As of March 31, 2023, the unamortized compensation cost related to the unvested restricted stock units was approximately $ 165,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 3.2 years.

For the three months ended March 31, 2023 and 2022, no shares of restricted stock, issued under the 2022 Plan, were released.

February 2023 Offering

On January 31, 2023, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to issue and sell to such investors (i) in a registered direct offering, 201,544 shares of common stock and pre-funded warrants (the “February 2023 Pre-Funded Warrants”) to purchase up to 381,762 shares of common stock, at an exercise price of $ 0.0001 per share of common stock, and (ii) in a concurrent private placement, common stock purchase warrants, exercisable for an aggregate of up to 874,959 shares of common stock, at an exercise price of $ 10.49 per share of common stock (the “February 2023 Offering”).

In February and March of 2023, all of the February 2023 Pre-Funded Warrants were exercised for cash.

On February 3, 2023, the Company closed the February 2023 Offering, and received net proceeds of approximately $ 5.3 million after deducting placement agent fees and other offering expenses payable by the Company.

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

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.

For the Three Months Ended March 31, 2023 and 2022

Stockholders’ Equity , continued

Also in connection with the February 2023 Offering, on January 31, 2023, the Company entered into a placement agency agreement with Maxim, pursuant to which Maxim agreed to act as placement agent on a “best efforts” basis in connection with the offering and (ii) the Company agreed to pay Maxim an aggregate fee equal to 8.0 % of the gross proceeds raised in the offering.

Also in connection with the offering, the Company entered into an amendment (the “Amendment”) to the securities purchase agreement, dated as of November 29, 2022, by and between the Company and certain institutional investors (the “November Purchase Agreement”) approved by a certain investor (the “November Investor”) who purchased at least 50.1 % in interest of the shares of Common Stock and the pre-funded warrants to purchase shares of Common Stock, if any, based on the initial subscription amounts under the November Purchase Agreement, pursuant to Section 5.5 of the November Purchase Agreement.

Pursuant to the Amendment, Section 4.11 of the November Purchase Agreement, which prohibits the Company’s ability to issue shares of Common Stock or Common Stock Equivalents (as defined in the November Purchase Agreement) or filing any registration statement or amendment or supplement thereto under the Securities Act, until ninety (90) days after the closing date of the transactions contemplated by the November Purchase Agreement, was amended to permit the offering discussed above and the issuance and sale of the securities offered and sold in such offering.

March 2023 Offering

On March 27, 2023, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to issue and sell to such investors (i) in a registered direct offering, 837,207 shares of common stock of the Company and (ii) in a concurrent private placement, common stock purchase warrants, exercisable for an aggregate of up to 1,674,414 shares of common stock, at an exercise price of $ 1.91 per share (the March 2023 Offering”).

On March 29, 2023, the Company closed the March 2023 Offering and received net proceeds of approximately $ 1.6 million, after deducting fees payable to the financial advisor and other offering expenses.

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 %;

A summary of the warrant activity and related information for the three months ended March 31, 2023 and 2022 is provided as follows.

In connection with February 2023 Offering, the Company issued Common Stock Purchase Warrants to investors to purchase up to 874,959 shares of the Company’s common stock, at an exercise price of $ 10.49 per share.

The grant date fair value of such warrants was $ 5,600,000 , which was recorded as a liability 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 assumption:

common stock price on the date of grant of $ 8.90 ;

expected yield of 0.0 %;

expected volatility of 96 %;

risk-free interest rate of 3.67 % and expected life of 5 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 %;

In connection with March 2023 Offering, the Company issued Common Stock Purchase Warrants to investors to purchase up to 1,674,414 shares of the Company’s common stock, at an exercise price of $ 1.91 per share.

The grant date fair value of such warrant was $ 2,113,000 , which was recorded as equity.

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

common stock price on the date of grant of $ 1.66 ;

expected yield of 0.0 %;

expected volatility of 104 %;

risk-free interest rate of 3.67 % and expected life of 5 years.

During the three months ended March 31, 2023, 2,715 warrants to purchase common stock were exercised for cash, resulting in proceeds of approximately $ 32,000 .

In addition, during the three months ended March 31, 2023, 1,118,152 warrants were exercised using an alternative cashless exercise provision, resulting in the issuance 855,637 shares of common stock.

There were no exercises of warrants to purchase common stock in the three months ended March 31, 2022.

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:

For the Three Months Ended March 31, 2023 and 2022

Stockholders’ Equity , continued

Information regarding warrants for common stock outstanding and exercisable as of March 31, 2023 is as follows:

Weighted Average

1 unchanged sentence

Exercisable as of

September 30, 2022

$ 1.00 - $ 2.61

$ 3.00 - $ 4.46

$ 6.40 - $ 9.80

March 31, 2023

$ 0.10 - $ 1.91

1 unchanged sentence

* 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 Nine Months Ended September 30, 2022 and 2021

Convertible Preferred Stock and Stockholders’ Equity , continued

Warrants exercisable as of March 31, 2023 exclude warrants to purchase 100 shares of common stock issued to a marketing firm, which vest upon the achievement of certain milestones.

Additionally, warrants to purchase 154 shares of common stock which are shown above with a price of $ 1,580.00 are pre-funded warrants under which the holder shall pay $ 20.00 per share to complete the exercise.

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

7 unchanged sentences

$ 1,580.00 - $ 12,500.00

$ 24.80 - $ 99.00

$ 108.00 - $ 125.00

* 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.

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.

Warrants exercisable as of December 31, 2022 exclude warrants to purchase 100 shares of common stock issued to a marketing firm, which vest upon the achievement of certain milestones, warrants to purchase 1,944 shares of common stock issued to Maxim which became exercisable on February 15, 2023, and warrants to purchase 107,144 shares of common stock issued to a Convertible Note Investor that require shareholder approval prior to being exercisable, which was received at a special meeting of our stockholders held on January 24, 2023.

Additionally, warrants to purchase 207 shares of common stock which are shown above with a price of $ 1,580.00 are pre-funded warrants under which the holder shall pay $ 20.00 per share to complete the exercise.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 and 2022

The Company recorded a provision for income taxes of $ 0 for the three months ended March 31, 2023 and 2022.

The Company’s effective tax rate was 0.0 % for the three months ended March 31, 2023 and 2022.

The difference between the effective tax rate and the federal statutory tax rate for the three months ended March 31, 2023 and 2022 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 September 30, 2022 and December 31, 2021, the Company retains a full valuation allowance on its deferred tax assets.

As of March 31, 2023 and December 31, 2022, 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.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

The provision for income taxes for the three months ended March 31, 2023 and 2022 was calculated on a jurisdiction basis.

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 September 30, 2022 (in thousands):

September 30,

The following table reflects our lease assets and our lease liabilities at March 31, 2023 and December 31, 2022 (in thousands):

Operating lease right-of-use assets

1 unchanged sentence

Operating lease liabilities, non-current

Operating lease right-of-use assets are included in other assets.

Operating lease liabilities, current, are included in accrued liabilities and Operating lease liabilities, non-current, are include in other liabilities on the condensed consolidated balance sheets.

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 and 2022

Commitments and Contingencies, continued

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

Three Months Ended

Nine Months Ended

September 30, 2022

March 31, 2023

Operating lease cost

1 unchanged sentence

Total lease cost

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

As of March 31, 2023, the maturity of operating lease liabilities was as follows (in thousands):

2023 (remaining 9 months)

2 unchanged sentences

Lease Term and Discount Rate:

September 30, 2022

March 31, 2023

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

Nine Months Ended

September 30, 2022

March 31, 2023

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 September 30, 2022 are as follows (in thousands):

Future minimum lease commitments for the finance lease as of March 31, 2023 are as follows (in thousands):

Payments due in:

Year ending December 31, 2023 (remaining 9 months)

Year ending December 31, 2023

Total minimum lease payments

Amounts representing interest

Present value of finance lease obligations

Current portion of finance lease liabilities

Present value of capital lease obligations

Other liabilities

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

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

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 and 2022

Commitments and Contingencies, continued

Management Team Retention Bonus

3 unchanged sentences

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

As of March 31, 2023, no accrual has been made under the Retention Plan.

Contingencies

8 unchanged sentences

Kristensen has served as a member of the Company’s board of directors since 2010.

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 serves as vice president of Hansong Technology, an original device manufacturer of audio products based in China, president of Platin Gate Aps, a company with focus on service-branding in lifestyle products as well as pro line products based in Denmark and co-founder and director of Inizio Capital, an investment company based in the Cayman Islands.

For the three months ended March 31, 2023 and 2022, Hansong Technology purchased modules from the Company of approximately $ 24,000 and $ 83,000 , respectively, and made no payments to the Company during those same periods.

At March 31, 2023 and 2022, Hansong Technology owed the Company approximately $ 190,000 and $ 83,000 , respectively.

For the three months ended March 31, 2023 and 2022, Hansong Technology sold speaker products to the Company of approximately $ 36,000 and $ 458,000 , respectively, and the Company made payments to Hansong Technology of approximately $ 256,000 and $ 299,000 respectively.

At March 31, 2023 and 2022, the Company owed Hansong Technology approximately $ 1,118,000 and $ 949,000 , respectively.

As of March 31, 2023 and December 31, 2022, Mr.

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

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

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

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

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

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.

For the Three Months Ended March 31, 2023 and 2022

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 nine months ended September 30, 2022 and 2021 was as follows:

Net revenue by geographic region for the three months ended March 31, 2023 and 2022 was as follows:

For the Three 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 Events

On April 11, 2023, the Company paid off the entirety of the outstanding balance of the Convertible Note in the amount of $ 1,656,744 , which includes the unpaid principal, interest through the payoff date, and a pre-payment premium.

On April 12, 2023, the Company consummated an offering with certain institutional investors, in which the Company issued and sold to such investors (i) in a registered direct offering, 743,066 shares of common stock, par value $ 0.0001 per share, of the Company and (ii) in a concurrent private placement, common stock purchase warrants, exercisable for an aggregate of up to 1,486,132 shares of common stock, at an exercise price of $ 1.41 per share of common stock.

The Company received gross proceeds of approximately $ 1.2 million before deducting fees and other offering expenses payable by the Company.

On May 15, 2023, the Company entered into warrant exercise inducement offer letters (“Inducement Letters”) with holders of the Existing Warrants (collectively, the “Exercising Holders”) pursuant to which the Exercising Holders agreed to exercise for cash Existing Warrants, in full or in part, in exchange for the Company’s agreement to issue new warrants (the “Inducement Warrants”) to purchase up to a quantity of shares of Common Stock equal to 200 % of the number of shares of Common Stock issued pursuant to the exercise of the Existing Warrants, such Inducement Warrants are to be issued on substantially the same terms as the Existing Warrants, except with respect to the exercise price, which was set at $ 1.33 per share.

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