Datavault AI Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Cautionary Notice Regarding Forward Looking Statements This Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue,” negatives thereof or similar expressions. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of WiSA Technologies, Inc.’s (“WiSA”, the “Company”, “our”, “us” or “we”) operations; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cash needs, business plans and future financial results, and any other statements that are not historical facts. From time to time, forward-looking statements also are included in our other periodic reports on Form 10-K, 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, including risks related to market, economic and other conditions; WiSA’s ability to continue as a going concern; WiSA’s ability to manage costs and execute on its operational and budget plans; and, WiSA’s ability to achieve its financial goals. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise. Overview We are an emerging technology company and our primary business focus is to enable immersive, wireless sound technology for intelligent devices and next-generation home entertainment systems. Our first generation product, which we continue to sell to consumer electronics companies, is based on our proprietary wireless modules. In 2023 we introduced our second generation technology, WiSA E. WiSA E is a proprietary technology that delivers seamless integration across platforms and devices, allowing for interoperable high-quality audio. WiSA E is System-on-Chip (SoC) agnostic, compatible with a wide range of SoCs and Wi-Fi agnostic, functioning efficiently across Wi-Fi compliant chips. Designed to be embedded into various devices, including TVs, mobile devices, set-top boxes, and projectors it provides interoperability between WiSA E audio source devices and playback equipment such as speakers, soundbars, subwoofers, smart speakers, and headphones, ensuring cost-effectiveness without compromising quality or performance. To date, our operations have been funded through sales of our common and preferred equity, proceeds from the exercise of warrants to purchase common stock, sale of debt instruments, and revenue from the sale of our products. Our condensed consolidated financial statements contemplate the continuation of our business as a going concern. However, we are subject to the risks and uncertainties associated with an emerging business, as noted above we have no established source of capital, and we have incurred recurring losses from operations since inception. Comparison of the Three Months Ended March 31, 2024 and 2023 Revenue Revenue for the three months ended March 31, 2024 was $255,000 a decrease of $214,000 or 46%, compared to the revenue for the three months ended March 31, 2023 of $469,000. The decrease was a result of lower Consumer Audio Product sales and Component revenue which decreased by $46,000 and $168,000, respectively compared to the three months ended March 31, 2023. The decrease in overall sales is primarily related to a slow-down in consumer spending on consumer electronics. 35 Table of Contents Gross Deficit and Operating Expenses Gross Deficit Gross deficit for the three months ended March 31, 2024 was ($83,000), an improvement of $1,170,000, compared to ($1,253,000) gross deficit for the three months ended March 31, 2023. The gross margin as a percent of sales was (33%) for the three months ended March 31, 2024, compared to (267%) for the three months ended March 31, 2023. The improvement in gross deficit and gross margin as a percent of sales compared to the prior period is mainly attributable to the fact that the three months ended March 31, 2023 included a $1.3 million increase in inventory reserves as a result of certain excess raw materials, primarily attributable to the out of balance inventory associated with longer lead time semiconductor chips whereas the three months ended March 31, 2024 did not have any increases to inventory reserves. Research and Development Research and development expenses for the three months ended March 31, 2024 were $1,715,000, a decrease of $178,000 compared to the research and development expenses for the three months ended March 31, 2023 of $1,893,000. The decrease in research and development expenses is primarily related to decreased consulting expenses of $109,000. Sales and Marketing Sales and marketing expenses for the three months ended March 31, 2024 were $929,000, a decrease of $365,000, compared to the sales and marketing expenses for the three months ended March 31, 2023 of $1,294,000. The decrease in sales and marketing expenses is primarily related to decreased salary and benefit expense of $174,000, and decreased consulting expenses and website expenses of $90,000 and $72,000, respectively. General and Administrative General and administrative expenses for the three months ended March 31, 2024 were $1,431,000, an increase of $69,000, compared to the general and administrative expenses for the three months ended March 31, 2023 of $1,362,000. The increase in general and administrative expenses is primarily related to increased investor relations expenses of $290,000, offset partially by deceased salary and benefit expense of $89,000 and legal fees of $110,000. Interest Expense, net Interest expense, net for the three months ended March 31, 2024 was $1,265,000 an increase of $542,000, compared to the interest expense for the three months ended March 31, 2023 of $723,000. The increase for the three months ended March 31, 2024, was primarily due to the amortization of debt discounts associated with the January 2024 Promissory Note in the principal amount of $1,000,000 that the Company incurred in January 2024 and repaid in full in January 2024. Change in Fair Value of Warrant Liability Change in fair value of warrant liability for the three months ended March 31, 2024 was $8,129,000, compared to $5,604,000 for the three months ended March 31, 2023. The change in fair value of the warrant liability for the three months ended March 31, 2024 was due to the issuance of warrants in January 2024 associated with our short term note and the issuance of warrants in connection with our February Public Offering and March 2024 Offering, offset partially by the subsequent decrease in the price of our common stock price at March 31, 2024 compared to the price of our stock on the date of the warrant issuance as well as the decline in our stock price from December 31, 2023, related to existing warrant liabilities. Liquidity and Capital Resources Cash and cash equivalents as of March 31, 2024 were $2,763,000, compared to $411,000, as of December 31, 2023. We recorded net income of $2,707,000 for the three months ended March 31, 2024 and used net cash in operating activities of $3,540,000. We incurred a net loss of $921,000 for the three months ended March 31, 2023 and used net cash in operating activities of $4,618,000. Excluding non-cash adjustments, the primary reasons for the decrease in the use of net cash from operating activities during the three months ended March 31, 2024, was related to a decrease in inventories and prepaid expenses and an increase in accounts payable, partially offset by a decrease in accrued liabilities. 36 Table of Contents We have financed our operations to date primarily through the issuance of equity securities, proceeds from the exercise of warrants to purchase common stock and sale of debt instruments. In February 2023, we received net proceeds of approximately $5.3 million from the issuance of 3,889 shares of common stock (includes the exercise of 2,545 pre-funded warrants) and the issuance of 5,833 warrants to purchase common stock. In March 2023, we received net proceeds of approximately $1.6 million from the issuance of 5,581 shares of common stock and the issuance of 11,163 warrants to purchase common stock. In April 2023, we received net proceeds of approximately $1.0 million through the issuance of common stock and warrants. In May 2023, we received net proceeds of approximately $1.9 million in connection with a warrant inducement. In July 2023, we received net proceeds of approximately $0.6 million in connection with a warrant inducement. In September 2023, we secured a term loan in the principal amount of $650,000 from a related party. In October 2023, we received gross proceeds of approximately $4.8 million, prior to underwriting discounts, commissions, and offering expenses, from the issuance of 580 shares of preferred stock and the issuance of 1,160 warrants to purchase preferred stock. In December 2023, we received gross proceeds of approximately $2.1 million in connection with the Warrant Inducement Transaction. In January 2024, we received gross proceeds of $600,000 from the issuance of promissory notes and common stock purchase warrants to certain accredited investors. In February 2024, we received gross proceeds of approximately $10.0 million from the public offering of 1,025,600 units, with each unit consisting of one share of common stock (or pre-funded warrant in lieu thereof) and one warrant, each to purchase one (1) share of common stock. In March 2024 we received net proceeds of approximately $2.3 million from the issuance of 417,833 shares of common stock, 93,342 pre-funded common stock warrants and the issuance of 511,175 warrants to purchase common stock. We will need to raise additional proceeds via the issuance of equity securities and/or the sale of debt instruments in the second quarter of 2024 to fund operations for the third and fourth quarters of fiscal year 2024 (See Note 11 – Subsequent Events in Notes to Condensed Consolidated Financial Statements). Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. ​ Item 3. Quantitative and Qualitative Disclosures About Market Risk. As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item. ​