What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-14 compared with 2024-05-20 · 48 added, 32 removed, 45 unchanged (64% of the section changed)

14 unchanged sentences

WiSA’s ability to continue as a going concern;

WiSA’s ability to maintain the listing of its common stock on Nasdaq;

WiSA’s ability to manage costs and execute on its operational and budget plans;

14 unchanged sentences

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 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.

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.

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Revenue for the three months ended June 30, 2024 was $345,000 a decrease of $80,000 or 19% compared to the revenue for the three months ended June 30, 2023 of $425,000.

The decrease was a result of lower Consumer Audio Product sales which decreased by $81,000 compared to the three months ended June 30, 2023.

The decrease in sales is primarily related to fewer products sold (due in part to a slowdown in spending on consumer electronics.)

Revenue for the six months ended June 30, 2024 was $600,000 a decrease of $294,000 or 33% compared to the revenue for the six months ended June 30, 2023 of $894,000.

The decrease was a result of lower Component revenue which decreased by $167,000 compared to the six months ended June 30, 2023, and lower Consumer Audio Product sales, which decreased by $127,000, compared to the six months ended June 30, 2023.

The decrease in overall sales is primarily related to fewer products sold (due in part to a slowdown in spending on consumer electronics.)

Gross Profit and Operating Expenses

Gross Profit (Deficit)

Gross profit for the three months ended June 30, 2024 was $11,000 compared to a gross deficit of ($201,000) for the three months ended June 30, 2023.

The gross margin as a percent of sales was 3% for the three months ended June 30, 2024, compared to (47%) for the three months ended June 30, 2023.

The improvement in gross profit and gross margin as a percent of sales compared to the prior period is mainly attributable to the fact that the three months ended June 30, 2023 included a $169,000 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 June 30, 2024 did not have any increases to inventory reserves.

Gross deficit for the six months ended June 30, 2024 was ($72,000), compared to a gross deficit of ($1,454,000) for the six months ended June 30, 2023.

The improvement in gross deficit between periods is mainly attributable to lower cost of revenue of sales.

The gross margin as a percent of sales was (12%) for the six months ended June 30, 2024, compared to (163%) for the six months ended June 30, 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 six months ended June 30, 2023 included a $1.4 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 six months ended June 30, 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.

Research and development expenses for the three months ended June 30, 2024 were $1,789,000, a decrease of $144,000, compared to the research and development expenses for the three months ended June 30, 2023 of $1,933,000.

The decrease in research and development expenses is primarily related to decreased legal fees and consulting expenses of $77,000 and $68,000, respectively.

Research and development expenses for the six months ended June 30, 2024 were $3,504,000, a decrease of $322,000 compared to the research and development expenses for the six months ended June 30, 2023 of $3,826,000.

The decrease in research and development expenses is primarily related to decreased consulting expenses, which includes outside engineering, reduced legal fees and reduced stock based compensation of $165,000, $82,000 and $69,000, respectively.

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.

Sales and marketing expenses for the three months ended June 30, 2024 were $865,000, a decrease of $224,000 compared to the sales and marketing expenses for the three months ended June 30, 2023 of $1,089,000.

The decrease in sales and marketing expenses is primarily related to decreased salary and benefit expense of $134,000 and decreased website expenses of $66,000.

Sales and marketing expenses for the six months ended June 30, 2024 were $1,794,000, a decrease of $589,000 compared to the sales and marketing expenses for the six months ended June 30, 2023 of $2,383,000.

The decrease in sales and marketing expenses is primarily related to decreased salary and benefit expense of $308,000 and decreased website expenses, consulting expenses and public relations expenses of $138,000, $56,000 and $42,000, 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.

General and administrative expenses for the three months ended June 30, 2024 were $2,762,000, an increase of $1,292,000 compared to the general and administrative expenses for the three months ended June 30, 2023 of $1,470,000.

The increase in general and administrative expenses is primarily related to increased investor relations expenses of $1,015,000, which includes stock-based compensation charges of $156,000, and increased legal fees and shareholder expenses of $244,000 and $103,000, respectively, offset partially by decreased stock-based compensation expense of $165,000.

General and administrative expenses for the six months ended June 30, 2024 were $4,193,000, an increase of $1,361,000, compared to the general and administrative expenses for the three months ended June 30, 2023 of $2,832,000.

The increase in general and administrative expenses is primarily related to increased investor relations expenses of $1,304,000, which includes stock-based compensation charges of $156,000, and increased legal fees and shareholder expenses of $134,000 and $131,000, respectively, offset partially by decreased stock-based compensation expense of $253,000.

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.

Interest expense, net for the three months ended June 30, 2024 was $4,000, a decrease of $33,000 compared to the interest expense for the three months ended June 30, 2023 of $37,000.

Interest expense, net for the six months ended June 30, 2024 was $1,269,000, an increase of $509,000 compared to the interest expense for the six months ended June 30, 2023 of $760,000.

The increase in interest expense, net for the six months ended June 30, 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.

Change in fair value of warrant liability for the three months ended June 30, 2024 was a loss of $37,255,000, compared to a gain of $246,000 for the three months ended June 30, 2023.

The change in fair value of the warrant liability for the three months ended June 30, 2024 was due to the issuance of additional warrants to purchase 5,602,693 shares of common stock and the subsequent valuing of such warrants.

The additional warrants were issued as a result of provision in certain of the warrant agreements that was triggered following the Company’s reverse stock split that occurred in April 2024.

Change in fair value of warrant liability for the six months ended June 30, 2024 was a loss of $29,126,000 compared to a gain of $5,850,000 for the six months ended June 30, 2023.

The change in fair value of the warrant liability for the six months ended June 30, 2024 was due to the issuance of additional warrants to purchase 5,602,693 shares of common stock and the subsequent valuing of such warrants.

The additional warrants were issued as a result of provision in certain of the warrant agreements that was triggered following the Company’s reverse stock split that occurred in April 2024.

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.

Cash and cash equivalents as of June 30, 2024 were $6,113,000 compared to $411,000, as of December 31, 2023.

We recorded a net loss of $39,958,000 for the six months ended June 30, 2024 and used net cash in operating activities of $9,045,000.

We incurred a net loss of $6,247,000 for the six months ended June 30, 2023 and used net cash in operating activities of $9,126,000.

Excluding non-cash adjustments, the primary reasons for the increase in the use of net cash from operating activities during the six months ended June 30, 2024, was related to an increase in prepaid expenses and decrease in accounts payable, partially offset by a decrease in inventories.

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.

1 unchanged sentence

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).

On April 19, 2024, we received net proceeds of approximately $591,000 from the issuance of 225,834 shares of common stock and the issuance of 225,834 warrants to purchase common stock.

On April 23, 2024, we received net proceeds of approximately $1.6 million from the issuance of 361,904 shares of common stock and the issuance of 542,856 warrants to purchase common stock.

On April 30, 2024, we received net proceeds of approximately $2.1 million from the issuance of 418,845 shares of common stock and the issuance of 418,845 warrants to purchase common stock.

On May 15, 2024, we received net proceeds of approximately $2.3 million from the issuance of 785,000 shares of common stock and the issuance of 785,000 warrants to purchase common stock.

On May 17, 2024, we received net proceeds of approximately $2.1 million from the issuance of 675,000 shares of common stock and the issuance of 675,000 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 fourth quarter of 2024 to fund operations for fiscal year 2025.

Off-Balance Sheet Arrangements

3 unchanged sentences

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 2. Management’s Discussion and Analysis