What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-14 compared with 2024-11-14 · 42 added, 71 removed, 32 unchanged (78% of the section changed)

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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;

These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of Datavault AI Inc,’s (the “Company”, “our”, “us” or “we”) operations;

business strategies;

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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 maintain the listing of its common stock on Nasdaq;

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

and, WiSA’s ability to achieve its financial goals.

the Company’s ability to continue as a going concern;

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

and, the Company’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.

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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.

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, sale of debt instruments, and revenue from the sale of our products.

Datavault AI is a pioneering technology licensing company that owns a portfolio of patented, secure platforms designed to redefine how data is managed, valued, and monetized in the modern era.

Leveraging our proprietary HPC capabilities and advanced software, we aim to empower customers worldwide with revolutionary data solutions.

At the heart of our offerings are our artificial intelligence (AI)-driven agents—branded as Data Vault®, DataValue®, DataScore®, and Data Vault Bank®.

These tools harness generative AI to deliver enterprise-grade data management solutions tailored for the HPC landscape and the Web 3.0 paradigm.

Our technology ensures data ownership immutability, experiential data observability, precise data asset valuation, and secure monetization—which we believe will unlock unprecedented opportunities for businesses in an increasingly data-driven world on which our executive leadership, with our engineering and software development teams, can capitalize.

Datavault AI operates through two synergistic platforms (Data Science and Acoustic Science) to optimize our revenue generation.

The operating results presented in our historical financial statements represent the audio business and may not be indicative of our results following the asset purchase from EOS Technology Holdings Inc.

We expect to derive a higher portion of revenues from the assets purchased from EOS Technology Holdings Inc.

as compared to the revenue generated by the legacy Company.

We have incurred, and expect to continue to incur, increased salaries and benefits expense due to hiring the additional employees it will take to monetize the economic benefit of the assets purchased in the Data Vault transaction.

Other corporate costs are expected to increase such as legal and research and development expenses due to increased patent activity as well as sales and marketing expenses.

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 and Nine Months Ended September 30, 2024 and 2023

Revenue for the three months ended September 30, 2024 was $1,172,000, an increase of $403,000, or 52%, compared to revenue for the three months ended September 30, 2023 of $769,000.

The increase in revenue was a result of an increase in Components sales of $726,000, partially offset by a decrease in Consumer Audio Product sales of $323,000.

Revenue for the nine months ended September 30, 2024 was $1,772,000, an increase of $109,000, or 7%, compared to the revenue for the nine months ended September 30, 2023 of $1,663,000.

The increase in revenue was a result of an increase in Component sales of $558,000, partially offset by a decrease in Consumer Audio Product sales of $449,000.

Gross Profit and Operating Expenses

Comparison of the Three Months Ended March 31, 2025 and 2024

Revenue for the three months ended March 31, 2025 was $629,000 an increase of $374,000 or 147%, compared to the revenue for the three months ended March 31, 2024 of $255,000.

The increase was a result of higher Consumer Audio Product sales and Component revenue which increased by $333,000 and $41,000, respectively compared to the three months ended March 31, 2024.

Gross Deficit and Operating Expenses

Gross Profit (Deficit)

Gross profit for the three months ended September 30, 2024 was $226,000 compared to a gross deficit of ($1,669,000) for the three months ended September 30, 2023.

The gross margin (deficit) as a percent of sales was 19% for the three months ended September 30, 2024, compared to (217%) for the three months ended September 30, 2023.

The improvement in gross profit and gross margin as a percent of sales compared to the prior period is mainly attributable to:

(a) an increase of $403,000 in revenue between comparable periods and (b) the three months ended September 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 three months ended September 30, 2024 included a $22,000 increase in inventory reserves.

Gross margin for the nine months ended September 30, 2024 was $154,000, compared to a gross deficit of ($3,123,000) for the nine months ended September 30, 2023.

The gross margin (deficit) as a percent of sales was 9% for the nine months ended September 30, 2024, compared to (188%) for the nine months ended September 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 nine months ended September 30, 2023 included a $2.8 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 nine months ended September 30, 2024 included a $22,000 increase in inventory reserves.

Gross profit for the three months ended March 31, 2025 was $69,000, an improvement of $152,000, compared to gross deficit of $83,000 for the three months ended March 31, 2024.

The gross margin as a percent of sales was 11% for the three months ended March 31, 2025, compared to (33%) for the three months ended March 31, 2024.

The improvement in gross deficit and gross margin as a percent of sales compared to the prior period is mainly attributable to the sale inventory with a lower cost basis.

Research and Development

Research and development expenses for the three months ended September 30, 2024 were $2,225,000, an increase of $387,000, compared to the research and development expenses for the three months ended September 30, 2023 of $1,838,000.

The increase in research and development expenses is primarily related to increased salary and benefit expense of $225,000, and increased recruiting fees and consulting expenses of $103,000 and $40,000, respectively.

Research and development expenses for the nine months ended September 30, 2024 were $5,729,000, an increase of $65,000 compared to the research and development expenses for the nine months ended September 30, 2023 of $5,664,000.

The increase in research and development expenses is primarily related to increased salary and benefit expense of $230,000 and recruiting fees of $84,000, offset partially by reduced consulting fees, legal fees and stock-based compensation of $130,000, $89,000 and $88,000, respectively.

Research and development expenses for the three months ended March 31, 2025 were $2,361,000, an increase of $646,000 compared to research and development expenses for the three months ended March 31, 2024 of $1,715,000.

The increase in research and development expenses is primarily related to an increase in headcount resulting in increased salaries and wages, benefits and stock-based compensation of $356,000, legal expenses related to intellectual property of $104,000 and consultants expense of $25,000.

Sales and Marketing

Sales and marketing expenses for the three months ended September 30, 2024 were $983,000, a decrease of $421,000 compared to the sales and marketing expenses for the three months ended September 30, 2023 of $1,404,000.

The decrease in sales and marketing expenses is primarily related to decreased salary and benefit expense of $151,000 and decreased consulting expenses, tradeshow expenses and advertising expenses of $61,000, $44,000 and $37,000, respectively.

Sales and marketing expenses for the nine months ended September 30, 2024 were $2,777,000, a decrease of $1,010,000 compared to the sales and marketing expenses for the nine months ended September 30, 2023 of $3,787,000.

The decrease in sales and marketing expenses is primarily related to decreased salary and benefit expense of $459,000 and decreased website expenses, consulting expenses, stock-based compensation, and public relations expenses of $155,000, $117,000, $48,000 and $47,000, respectively.

Sales and marketing expenses for the three months ended March 31, 2025 were $1,495,000, an increase of $566,000, compared to the sales and marketing expenses for the three months ended March 31, 2024 of $929,000.

The increase in sales and marketing expenses is primarily related to an increase in headcount resulting in increased salaries and wages, benefits and stock-based compensation of $178,000 and consulting expenses of $311,000.

General and Administrative

General and administrative expenses for the three months ended September 30, 2024 were $2,261,000, an increase of $833,000, compared to the general and administrative expenses for the three months ended September 30, 2023 of $1,428,000.

The increase in general and administrative expenses is primarily related to increased investor relations expenses of $736,000, which includes stock-based compensation charges of $156,000, and increased legal fees of $202,000, offset partially by decreased stock-based compensation expense of $128,000.

General and administrative expenses for the nine months ended September 30, 2024 were $6,454,000, an increase of $2,194,000, compared to the general and administrative expenses for the three months ended September 30, 2023 of $4,260,000.

The increase in general and administrative expenses is primarily related to increased investor relations expenses of $1,728,000, which includes stock-based compensation charges of $312,000, and increased legal fees $336,000, offset partially by decreased stock-based compensation expense of $381,000.

Interest Income (Expense), net

Interest income, net for the three months ended September 30, 2024 was $9,000 compared to net interest expense of $52,000 for the three months ended September 30, 2023, a net change of $61,000.

Interest expense, net for the nine months ended September 30, 2024 was $1,260,000, an increase of $448,000 compared to the interest expense for the nine months ended September 30, 2023 of $812,000.

The increase in interest expense, net for the nine months ended September 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.

General and administrative expenses for the three months ended March 31, 2025 was $5,644,000, an increase of $4,213,000, compared to the general and administrative expenses for the three months ended March 31, 2024 of $1,431,000.

The increase in general and administrative expenses is primarily related to increased amortization of intangibles of $2,309,000 for the assets acquired from EOS Holdings that closed on December 31, 2024, an increase in headcount resulting in increased salaries and wages, benefits and stock-based compensation of $533,000, increase in bonus of $90,000, increased investor relations expense of $669,000, increased consulting expense of $421,000, and increased legal fees of $211,000.

Interest Expense, net

Interest expense, net for the three months ended March 31, 2025 was $120,000, a decrease of $1,145,000, compared to the interest expense for the three months ended March 31, 2024 of $1,265,000.

The decrease, was primarily due to the Company’s debt balance declining in the three months ended March 31, 2025.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability for the three months ended September 30, 2024 was a gain of $6,000, compared to a gain of $284,000 for the three months ended September 30, 2023.

The change in fair value of the warrant liabilities for the three months ended September 30, 2024 was primarily due to the decrease in the price of our common stock at September 30, 2024 compared to the price of our common stock on the date of the warrant issuance as well as the decline in our common stock price from June 30, 2024, related to existing warrant liabilities.

Change in fair value of warrant liability for the nine months ended September 30, 2024 was a loss of $29,120,000 compared to a gain of $6,134,000 for the nine months ended September 30, 2023.

The change in fair value of the warrant liability for the nine months ended September 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.

The change in fair value of the warrant liabilities for the nine months ended September 30, 2023 was due to the issuance of warrants in February 2023 and the subsequent decrease in the price of our common stock at September 30, 2023 compared to the price of our common stock on the date of the warrant issuance as well as the decline in our common stock price from December 31, 2022, related to existing warrant liabilities.

Loss on Debt Extinguishment

During the three and nine months ended September 30, 2024, the Company recorded a loss on debt extinguishment of $0.

During the three and nine months ended September 30, 2023, the Company recorded a loss on debt extinguishment of $0 and $837,000.

The loss is directly related to the Company’s April 2023 repayment of the Convertible Note in the amount of $1,656,744.

The repayment of the entirety of the outstanding balance of such note, included the unpaid principal, interest through the payoff date, and a pre-payment premium of $276,000.

The loss also includes the expensing of the related unamortized debt discounts totaling $894,000, offset partially by a $333,000 gain on termination of a derivative liability that was established in connection with the Convertible Note.

Other Income (Expense), net

Other income, net for the three months ended September 30, 2024 was $136,000 compared to net interest expense of $4,000 for the three months ended September 30, 2023, a net change of $140,000.

Other income, net for the nine months ended September 30, 2024 was $136,000, an increase of $143,000 compared to the other expense, net for the nine months ended September 30, 2023 of $7,000.

The increase in other income, net for the three and nine months ended September 30, 2024, was due to the receipt of an Employee Retention Credit (“ERC”) refund of $141,000, net of fees.

The ERC refund was for the three month period ended June 30, 2020.

Change in fair value of warrant liability for the three months ended March 31, 2025 was $17,000, compared to $8,129,000 for the three months ended March 31, 2024.

The change in fair value of warrant liability for the three months ended March 31, 2025 was due to our minimal number of warrants classified as liabilities outstanding.

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 September 30, 2024 were $3,921,000 compared to $411,000, as of December 31, 2023.

We recorded a net loss of $45,050,000 for the nine months ended September 30, 2024 and used net cash in operating activities of $13,276,000.

We incurred a net loss of $12,358,000 for the nine months ended September 30, 2023 and used net cash in operating activities of $12,101,000.

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

We have financed our operations to date primarily through the issuance of equity securities, proceeds from the exercise of warrants, sale of debt instruments and revenue from the sale of our products.

Cash and cash equivalents as of March 31, 2025 was $171,000, compared to $3,330,000, as of December 31, 2024.

We recorded net loss of $9,563,000 for the three months ended March 31, 2025 and used net cash in operating activities of $6,024,000.

We incurred a 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.

The primary reasons for the increase in the use of net cash from operating activities during the three months ended March 31, 2025, was related to a net loss of $9,563,000 offset by the non-cash add back of depreciation and amortization of $2,321,000 in the three months ended March 31, 2025 compared to net income of $2,707,000 in the prior year offset by net non-cash add backs of $6,469,000.

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 2025, we received aggregate gross proceeds of approximately $5.4 million in our registered direct offering.

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.

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.

In September 2024, we received net proceeds of approximately $2.4 million from the exercise of 1,193,721 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.

In March 2024 we received gross 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.

Off-Balance Sheet Arrangements

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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