Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________to _______________. Commission File Number: 001-38608 Summit Wireless Technologies, Inc. (Exact name of registrant as spec ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ⌧ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 or ◻ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________to _______________. Commission File Number: 001-38608 Summit Wireless Technologies, Inc. (Exact name of registrant as specified ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________to _______________. Commission File Number: 001-38608 Summit Wireless Technologies, Inc. (Exact name of registrant as specified in its charter) ...

NASDAQ: WISA The New Industry Standard for Immersive Wireless Sound March 2021 Investor Presentation Forward Looking Statements This presentation of Summit Wireless Technologies, Inc. (NASDAQ: WISA) (the "Company" or "WISA") contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place undue reliance on these forward-looking statements. Actual results may ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission file number: 001-38608 Summit Wireless Technologies, Inc. FORM 10-K (Mark One) (Exact name of registrant as specified in its charter) (State or othe ...

PART I: FINANCIAL INFORMATION [Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Presents unaudited financial statements, showing a **$9.1 million** net loss and cash increase to **$9.1 million** from financing [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance sheet shows significant financial improvement, with cash increasing to **$9.1 million** and total assets growing to **$13.0 million** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $9,104 | $298 | | Total current assets | $12,789 | $4,016 | | **Total assets** | **$13,026** | **$4,222** | | **Liabilities & Equity** | | | | Total current liabilities | $1,956 | $2,700 | | Total liabilities | $3,164 | $3,111 | | Total stockholders' equity | $9,285 | $594 | | **Total liabilities & equity** | **$13,026** | **$4,222** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Revenue increased **45%** in Q3 and **11%** for nine months, with net loss widening to **$9.1 million** from higher costs Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Revenue, net | $607 | $419 | $1,366 | $1,236 | | Gross profit | $104 | $32 | $179 | $112 | | Loss from operations | $(2,985) | $(2,679) | $(7,654) | $(8,062) | | Net loss | $(2,990) | $(2,708) | $(9,068) | $(8,097) | | Net loss per share | $(0.39) | $(2.75) | $(2.15) | $(9.29) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash outflow improved to **$7.5 million**, with **$16.3 million** from financing, leading to **$8.8 million** net cash increase Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(7,499) | $(8,454) | | Net cash used in investing activities | $(15) | $(31) | | Net cash provided by financing activities | $16,320 | $5,564 | | **Net increase (decrease) in cash** | **$8,806** | **$(2,934)** | | **Cash at end of period** | **$9,104** | **$284** | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail business, policies, and financial condition, highlighting **$196.7 million** accumulated deficit and financing activities - The company has incurred net operating losses each year since inception and has an accumulated deficit of **$196.7 million** as of September 30, 2020, raising substantial doubt about its ability to continue as a going concern[36](index=36&type=chunk) - In April 2020, the company effected a 1-for-20 reverse stock split to regain compliance with Nasdaq's minimum bid price requirement, with all share and per-share data retroactively adjusted[63](index=63&type=chunk) - The company received an **$847,000** loan under the Paycheck Protection Program (PPP) on May 3, 2020[82](index=82&type=chunk) - A legal dispute with Alexander Capital, L.P. was settled on May 14, 2020, for a one-time cash payment of **$125,000** and the issuance of **50,000** shares of common stock, resulting in a charge of **$236,000**[139](index=139&type=chunk)[140](index=140&type=chunk) - The company regained compliance with Nasdaq's minimum bid price, stockholders' equity, and audit committee composition rules during 2020[32](index=32&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial results, noting **45%** Q3 revenue growth, expense changes, and strengthened liquidity from **$16 million** financing [Results of Operations](index=45&type=section&id=Results%20of%20Operations) Revenue increased **45%** in Q3 and **11%** for nine months, with R&D down **22%**, S&M down **4%**, and G&A up **35%** Year-over-Year Change in Revenue and Operating Expenses (Nine Months Ended Sep 30) | Item | 2020 (in thousands) | 2019 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $1,366 | $1,236 | +11% | | Research and development | $3,278 | $4,195 | -22% | | Sales and marketing | $2,043 | $2,119 | -4% | | General and administrative | $2,512 | $1,860 | +35% | [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) Cash increased to **$9.1 million** from **$0.3 million** due to **$16.2 million** in financing, though going concern doubt persists - Cash and cash equivalents increased to **$9.1 million** as of September 30, 2020, from **$298,000** as of December 31, 2019[210](index=210&type=chunk) - The increase in cash was driven by significant financing activities, including raising net proceeds of **$16.2 million** from equity offerings, **$1.4 million** from convertible notes, and **$847,000** from a PPP loan[210](index=210&type=chunk) - Due to a history of generating losses from operations, there is substantial doubt about the company's ability to continue as a going concern[212](index=212&type=chunk) [Potential Impacts of the Novel Coronavirus (COVID-19)](index=43&type=section&id=Potential%20Impacts%20of%20the%20Novel%20Coronavirus%20(COVID-19)) COVID-19 caused demand volatility, with Q2 decrease and Q3 increase, leading to expected continued sales volatility - The company observed fluctuating demand, with a decrease in Q2 2020 due to retail closures and an increase in Q3 2020 as retailers reopened[185](index=185&type=chunk) - Management expects continued sales volatility due to the unpredictable operational needs of customers during the pandemic[186](index=186&type=chunk) - The company has implemented remote work policies and other safety measures for essential on-site employees[194](index=194&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the company is exempt from providing market risk disclosures in this report - As a smaller reporting company, Summit Wireless is exempt from providing quantitative and qualitative disclosures about market risk in its Form 10-Q[214](index=214&type=chunk) [Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of September 30, 2020, with no material changes during the quarter - Management concluded that as of September 30, 2020, the company's disclosure controls and procedures were not effective[216](index=216&type=chunk) - No changes in internal control over financial reporting occurred during the third quarter of 2020 that materially affected, or are reasonably likely to materially affect, the company's internal controls[217](index=217&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) No pending or threatened legal actions are expected to have a material adverse effect on the company's business or financial condition - The company is not currently involved in any legal proceedings that could have a material adverse effect on its business[220](index=220&type=chunk) [Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, the company is exempt from providing risk factor disclosures in this quarterly report - The company is exempt from providing risk factors in this report as it qualifies as a smaller reporting company[221](index=221&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) On July 27, 2020, **237,824** Restricted Stock Units were granted to executive officers under the 2020 Stock Incentive Plan - On July 27, 2020, the company granted **237,824** RSUs to executive officers, including **145,000** to the CEO, **61,824** to the CFO, and **31,000** to the CAO[223](index=223&type=chunk) - The RSUs were issued as unregistered securities in reliance on the exemption from registration under Rule 701 of the Securities Act[223](index=223&type=chunk) [Other Information](index=50&type=section&id=Item%205.%20Other%20Information) A settlement agreement was reached on November 9, 2020, to resolve a registration rights dispute, involving warrant amendments and new share issuance - On November 9, 2020, the company settled a dispute with investors from the February 2020 private placement regarding registration rights[227](index=227&type=chunk) - As part of the settlement, the company amended the original warrants to lower the exercise price to **$2.55** and issued additional shares and warrants to the investors[227](index=227&type=chunk) [Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including warrant amendments, settlement agreements, a new lease, and SOX certifications - The report includes exhibits such as forms of warrant amendments, settlement agreements, a new lease agreement, and Sarbanes-Oxley certifications[229](index=229&type=chunk)

Financial Data and Key Metrics Changes - Q3 2020 revenues were $607,000, representing a 45% increase compared to the same quarter in the prior year [21] - Gross margin improved to just over 17 points, compared to $7.6 million in Q3 2019, reflecting a 9.5-point improvement [21] - Cash reserves exceeded $9 million at the end of the quarter, with projections for Q4 indicating over 100% growth compared to Q4 of the previous year [21] Business Line Data and Key Metrics Changes - The company added seven more companies to the WiSA Association, expanding its membership to over 60 brands, including significant players like SKYWORTH and Hisense [11] - The introduction of the WiSA SoundSend product is expected to enhance speaker sales due to its affordability and ease of installation [12][22] - Consumer response to WiSA certified products has been positive, with many customers appreciating the value and simplicity of setup for surround sound systems [16] Market Data and Key Metrics Changes - The company anticipates a strong consumer demand for WiSA products, particularly during the holiday season, with expectations of tight inventory levels at retail due to increased demand [36] - Visitor traffic to the WiSA website is projected to reach 150,000 to 175,000 this quarter, with a 22% increase in viewing time and a rise in return visitors from 10% to 16-17% [20] Company Strategy and Development Direction - The company plans to continue adding new members, particularly in the TV and projector sectors, and expects more brands to ship WiSA certified products [22] - The focus remains on enhancing market adoption in the sound bar space, which is seen as a competitive offering with significant growth potential [44] - The company is preparing for a virtual CES event in January, where new product introductions will occur, maintaining the traditional seasonality of product announcements [37] Management's Comments on Operating Environment and Future Outlook - Management noted that the COVID-19 pandemic has altered seasonal trends, with expectations for strong sales in the fall and into Q1 2021 due to increased consumer interest in home entertainment [29] - There is confidence in the ability to meet consumer demand despite supply chain challenges, with lead times extending due to high sales [29] - The company has not publicly disclosed cash flow positive forecasts but has indicated a strong business plan moving forward [46] Other Important Information - The company highlighted the importance of the WiSA Association in ensuring a seamless consumer experience with certified products [10] - The introduction of affordable surround sound systems is expected to drive revenue growth, appealing to a broad range of consumers [14] Q&A Session Summary Question: Update on market dynamics and supply chain - Management indicated a different seasonal trend this year, with strong consumer demand expected to continue into Q1 2021 despite earlier slowdowns [29] Question: Update on wave strategy - The multi-brand advertising strategy has shown positive results, increasing consumer engagement and return visits to the WiSA website [31] Question: Module costs and pricing guidance - Management anticipates maintaining the average module cost at $9, with no expected changes in guidance [32] Question: Retail channel inventory for the holiday season - Retailers are expected to have tight inventory levels due to COVID-19 impacts, with higher-than-normal consumer demand anticipated [36] Question: CES product introductions - CES will occur virtually, and product announcements will follow the traditional timeline despite the format change [37] Question: Progress with cell phone manufacturers - The company plans to announce its first Gen 2 product later this quarter, focusing on broader market adoption in the sound bar space [40][44] Question: Cash flow positive forecasts - Management has internal forecasts but has not publicly disclosed specific revenue targets needed for cash flow positivity [46]

Financial Data and Key Metrics Changes - The company finished the June quarter with $12.1 million in cash after fully repaying a $2 million bridge loan [17] - Revenue was down slightly quarter to quarter, primarily due to retail closures, but was mostly offset by initial quantities of new product launches [18] - Operating expenses (OpEx) were reduced from a run-rate of $2.9 million in Q4 to $2 million in Q2, reflecting actions taken to decrease costs [18] Business Line Data and Key Metrics Changes - The company reported that 45% of revenue in Q2 came from new projects, indicating a strong focus on initial production runs and prototypes [8] - Speaker system projects increased threefold, with expectations of having over 20 projects by Q4, covering various territories and price points [11] Market Data and Key Metrics Changes - The company expanded its display membership with SKYWORTH, the largest Chinese TV manufacturer, and anticipates multiple product announcements in the near future [10] - The company expects to have 5 to 7 TV brands supporting WiSA in 2021, indicating growth in market presence [10] Company Strategy and Development Direction - The company aims to build an ecosystem around its technology, focusing on interoperability standards for wireless audio in smart devices and TVs [6] - A new HDMI hub, SoundSend, is set to go into production next month, which will facilitate connections between TVs and WiSA-certified speakers [12] - The company is shifting towards more aggressive marketing strategies now that it has reached critical mass in retail [13] Management's Comments on Operating Environment and Future Outlook - Management noted that while demand for speakers was slow during the COVID-19 pandemic, stronger brand customers were able to ramp up direct-to-consumer digital marketing by the end of Q2 [9] - The company expects to see continued growth in consumer visits to the WiSA site, estimating around 100,000 visitors in Q3, which indicates strong consumer interest [16] Other Important Information - The company regained compliance with NASDAQ listing requirements regarding minimum shareholder equity and share price [17] - A new board member, Sri Peruvemba, was added, bringing extensive contacts in the display industry [17] Q&A Session Summary - The call concluded without specific questions being recorded, indicating a focus on the management's prepared remarks rather than an interactive Q&A session [20][21]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________to _______________. Commission File Number: 001-38608 Summit Wireless Technologies, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION ...

PART I: FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents Summit Wireless Technologies, Inc.'s unaudited condensed consolidated financial statements and detailed notes for Q1 2020 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a slight increase in total assets and a significant increase in total liabilities from December 31, 2019, to March 31, 2020, primarily driven by an increase in borrowings and accounts payable. Stockholders' equity shifted from a positive balance to a deficit | Metric (in thousands) | March 31, 2020 (unaudited) | December 31, 2019 (audited) | | :-------------------- | :------------------------- | :-------------------------- | | Cash and cash equivalents | $755 | $298 | | Total current assets | $4,497 | $4,016 | | Total assets | $4,622 | $4,222 | | Accounts payable | $2,335 | $1,554 | | Total current liabilities | $3,677 | $2,700 | | Borrowings | $688 | $- | | Total liabilities | $4,757 | $3,111 | | Total stockholders' equity (deficit) | $(672) | $594 | - The company's stockholders' equity transitioned from a positive **$594,000** as of December 31, 2019, to a deficit of **$(672,000)** as of March 31, 2020[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company experienced a net loss of **$(2,680,000)** for the three months ended March 31, 2020, an increase from **$(2,565,000)** in the prior year period. Revenue decreased by **12%**, while gross profit slightly increased. Operating expenses remained relatively stable, but interest expense increased significantly due to new debt | Metric (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Revenue, net | $411 | $465 | | Cost of revenue | $348 | $407 | | Gross profit | $63 | $58 | | Total operating expenses | $2,723 | $2,725 | | Loss from operations | $(2,660) | $(2,667) | | Interest expense | $(37) | $- | | Net loss | $(2,680) | $(2,565) | | Net loss per common share - basic and diluted | $(2.19) | $(3.33) | - Revenue decreased by **$54,000**, or **12%**, for the three months ended March 31, 2020, compared to the same period in 2019, primarily due to lower module sales[13](index=13&type=chunk)[177](index=177&type=chunk) - Interest expense increased from **$0** in Q1 2019 to **$37,000** in Q1 2020, mainly due to the amortization of debt discounts from convertible debt incurred in March 2020[13](index=13&type=chunk)[182](index=182&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) The comprehensive loss for the three months ended March 31, 2020, was **$(2,680,000)**, slightly higher than the **$(2,576,000)** reported in the prior year, with no foreign currency translation adjustment in 2020 | Metric (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(2,680) | $(2,565) |\ | Foreign currency translation adjustment | $- | $(11) |\ | Comprehensive loss | $(2,680) | $(2,576) | [Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity%20(Deficit)) Stockholders' equity shifted from a positive balance of **$594,000** at December 31, 2019, to a deficit of **$(672,000)** by March 31, 2020, primarily due to a net loss of **$(2,680,000)** and convertible preferred stock dividends, partially offset by proceeds from common stock and warrant issuances | Item (in thousands) | Balance as of Dec 31, 2019 | Changes (Q1 2020) | Balance as of Mar 31, 2020 | | :------------------ | :------------------------- | :---------------- | :------------------------- | | Convertible Preferred Stock Amount | $517 | $20 | $537 | | Additional Paid-in Capital | $188,320 | $1,414 | $189,734 | | Accumulated Deficit | $(187,678) | $(2,680) | $(190,358) | | Total Stockholders' Equity (Deficit) | $594 | $(1,266) | $(672) | - Issuance of common stock and warrants, net of offering costs, contributed **$725,000** to additional paid-in capital during Q1 2020[20](index=20&type=chunk) - Issuance of warrants in connection with convertible notes payable added **$630,000** to additional paid-in capital[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities decreased significantly from **$(2,820,000)** in Q1 2019 to **$(1,820,000)** in Q1 2020. The company generated substantial cash from financing activities in Q1 2020 through the issuance of common stock, warrants, and convertible notes, leading to a net increase in cash and cash equivalents | Metric (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(1,820) | $(2,820) | | Net cash used in investing activities | $(2) | $- | | Net cash provided by (used in) financing activities | $2,279 | $(65) | | Net decrease in cash and cash equivalents | $457 | $(2,896) | | Cash and cash equivalents as of end of period | $755 | $322 | - Proceeds from the issuance of common stock and warrants, net of issuance costs, totaled **$725,000** in Q1 2020[23](index=23&type=chunk) - Proceeds from the issuance of convertible notes payable, net of issuance costs, amounted to **$1,665,000** in Q1 2020[23](index=23&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on the company's business, financial condition, and operations, including recent financing activities, Nasdaq compliance challenges, accounting policies, fair value measurements, equity structure, debt, income taxes, commitments, related party transactions, segment information, and subsequent events [1. Business and Viability of Operations](index=8&type=section&id=1.%20Business%20and%20Viability%20of%20Operations) Summit Wireless develops wireless audio products, secured Q1 2020 financing, but faces Nasdaq compliance and going concern issues - The company received **$100,000** from a convertible promissory note funding agreement in January 2020, which was fully repaid by March 31, 2020[25](index=25&type=chunk)[69](index=69&type=chunk) - A February 2020 private placement of **91,062** units (common stock + warrants) generated gross proceeds of **$835,000**[26](index=26&type=chunk)[101](index=101&type=chunk) - A March 2020 private placement of a senior secured convertible note and warrant resulted in gross proceeds of **$1,700,000**[28](index=28&type=chunk)[70](index=70&type=chunk) - The company received Nasdaq notifications for non-compliance with minimum bid price (**$1.00**), minimum stockholders' equity (**$2,500,000**), and audit committee independence rules[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - As of March 31, 2020, the company had an accumulated deficit of approximately **$190.4 million** and has not generated positive cash flows from operations, raising substantial doubt about its ability to continue as a going concern[34](index=34&type=chunk) [2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section details the company's significant accounting policies, including revenue recognition, financial instruments, and COVID-19 impacts - The company capitalizes deferred offering costs, which amounted to **$154,000** as of March 31, 2020[39](index=39&type=chunk) - As of March 31, 2020, two customers accounted for **79%** and **11%** of accounts receivable, and one customer accounted for **66%** of net revenue for the three months ended March 31, 2020[41](index=41&type=chunk) - The company bifurcates conversion options and warrants from host instruments, accounting for them as freestanding derivative financial instruments if certain criteria are met[45](index=45&type=chunk) - Revenue is recognized when control of promised goods (wireless modules) is transferred to the customer, typically upon shipment[50](index=50&type=chunk) - The company adopted ASU **2018-07** (nonemployee share-based payment accounting) and ASU **2018-13** (fair value measurement) as of January 1, 2019, and January 1, 2020, respectively, with no significant impact[62](index=62&type=chunk)[63](index=63&type=chunk) [3. Balance Sheet Components](index=16&type=section&id=3.%20Balance%20Sheet%20Components) This note provides a breakdown of key balance sheet components, including inventories, property and equipment, and accrued liabilities, showing minor changes in inventory and property, but notable shifts in accrued liabilities such as a new contingency accrual | Inventories (in thousands) | March 31, 2020 | December 31, 2019 | | :------------------------- | :------------- | :---------------- | | Work in progress | $322 | $301 | | Finished goods | $2,328 | $2,365 | | Total inventories | $2,650 | $2,666 | | Accrued Liabilities (in thousands) | March 31, 2020 | December 31, 2019 | | :--------------------------------- | :------------- | :---------------- | | Accrued vacation | $290 | $263 | | Accrued rebate | $297 | $204 | | Contingency accrual | $250 | $- | | Accrued compensation | $129 | $38 | | Customer advances | $232 | $451 | | Accrued audit fees | $88 | $140 | | Accrued other | $56 | $50 | | Total accrued liabilities | $1,342 | $1,146 | - A new contingency accrual of **$250,000** was recorded as of March 31, 2020, related to threatened litigation from Alexander Capital, L.P[68](index=68&type=chunk)[117](index=117&type=chunk) [4. Borrowings](index=17&type=section&id=4.%20Borrowings) This note details the company's borrowing activities, including a short-term funding agreement that was repaid and a significant senior secured convertible promissory note issued in March 2020. The convertible note includes complex conversion features, anti-dilution protection, and warrants, with associated debt discounts amortized to interest expense - A convertible promissory note of **$111,100** was issued on January 23, 2020, for **$100,000** cash, including a **10%** original issue discount, **500** common shares, and a warrant for **7,936** shares. This note was fully repaid by March 31, 2020[69](index=69&type=chunk) - A senior secured convertible note (March 2020 Note) with a principal of **$2,040,000** was issued on March 30, 2020, generating gross proceeds of **$1,700,000**, along with warrants to purchase **227,679** common shares for the investor and **20,400** for the placement agent[70](index=70&type=chunk)[76](index=76&type=chunk) - The March 2020 Note's conversion price is the lesser of **90%** of the average of the five lowest daily VWAPs over twenty trading days or **$6.40**, subject to full ratchet anti-dilution protection[73](index=73&type=chunk) - The company recognized **$17,000** of interest expense from the amortization of debt discounts related to the March 2020 Note during Q1 2020[76](index=76&type=chunk) [5. Fair Value Measurements](index=19&type=section&id=5.%20Fair%20Value%20Measurements) This note details the fair value measurements of financial instruments, specifically derivative and warrant liabilities, categorized under Level 3 of the fair value hierarchy due to significant unobservable inputs. The warrant liability decreased in fair value, resulting in a gain, while the derivative liability remained stable | Liability (in thousands) | March 31, 2020 | December 31, 2019 | | :----------------------- | :------------- | :---------------- | | Derivative liability | $387 | $387 | | Warrant liability | $5 | $24 | - The warrant liability decreased in fair value by **$19,000** for the three months ended March 31, 2020, resulting in a gain, primarily due to a decrease in the common stock price[81](index=81&type=chunk)[183](index=183&type=chunk) | Weighted Average Unobservable Inputs (Level 3) | March 31, 2020 | December 31, 2019 | | :--------------------------------------------- | :------------- | :---------------- | | Common Stock Price | $6.80 | $12.20 | | Term (Years) | 3.01 | 3.26 | | Volatility | 65% | 62% | | Risk-free rate of interest | 0.29% | 1.62% | | Dividend Yield | 0.0% | 0.0% | [6. Convertible Preferred Stock and Stockholders' Equity (Deficit)](index=21&type=section&id=6.%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity%20(Deficit)) This note details Series A Preferred Stock features and common stock activities, including the February 2020 Private Placement - **250,000** shares of Series A **8%** Senior Convertible Preferred Stock were issued in April 2019 for **$1,000,000**, with a stated value of **$4.00** per share and a conversion price of **$80.00** (subject to adjustment, not less than **$30.00**)[84](index=84&type=chunk)[86](index=86&type=chunk) - The Series A Preferred Stock has an embedded conversion feature classified as a derivative, with a fair value of **$216,000** at issuance[85](index=85&type=chunk) - The company accrued **$20,000** in dividends for the Series A Preferred Stock for the three months ended March 31, 2020[86](index=86&type=chunk) - The February 2020 Private Placement involved the issuance of **91,062** units (common stock and warrants) at **$9.17** per unit, with warrants exercisable for **45,534** shares at **$9.80** per share[101](index=101&type=chunk)[102](index=102&type=chunk) | Warrants for Common Stock Outstanding (as of March 31, 2020) | | :----------------------------------------------------------- | | **Exercise Price Range** | **Number Outstanding** | **Remaining Life (years)** | **Number Exercisable** | | $6.40 - $9.80 | 306,102 | 4.92 | 285,702 | | $15.80 - $17.50 | 93,562 | 2.64 | 89,812 | | $24.80 - $99.00 | 230,571 | 1.75 | 224,457 | | $108 - $207.00 | 72,864 | 2.35 | 72,864 | | $35.82 | 703,099 | 3.72 | 672,835 | [7. Income Taxes](index=25&type=section&id=7.%20Income%20Taxes) The company recorded no income tax provision for the three months ended March 31, 2020, maintaining a full valuation allowance on its deferred tax assets due to historical operating losses. The impact of the CARES Act is currently being analyzed - The company recorded a provision for income taxes of **$0** for Q1 2020, compared to **$6,000** for Q1 2019 (primarily state income tax)[106](index=106&type=chunk) - The effective tax rate was **0.0%** for Q1 2020 and **(0.2%)** for Q1 2019, primarily due to a full valuation allowance on deferred tax assets[107](index=107&type=chunk)[109](index=109&type=chunk) - The company is currently analyzing the impact of the Coronavirus Aid, Relief and Economic Security (CARES) Act on its income taxes[111](index=111&type=chunk) [8. Commitments and Contingencies](index=26&type=section&id=8.%20Commitments%20and%20Contingencies) The company has an operating lease for its Beaverton, Oregon office, with future minimum payments of **$213,000** for 2020. A significant contingency arose from threatened litigation by Alexander Capital, L.P. regarding alleged breach of an engagement agreement, leading to a **$250,000** accrual - Future annual minimum lease payments under the non-cancelable operating lease as of March 31, 2020, are **$213,000** for the year ending December 31, 2020[113](index=113&type=chunk) - The company received letters from Alexander Capital, L.P. alleging breach of an engagement agreement due to the March 2020 Private Placement, claiming **$170,000** and warrants for **22,768** shares[115](index=115&type=chunk) - A contingency reserve of **$250,000** was recorded for the three months ended March 31, 2020, in connection with Alexander's threatened litigation[117](index=117&type=chunk) [9. Related Parties](index=27&type=section&id=9.%20Related%20Parties) This note details transactions and relationships with key executives, directors, and significant shareholders - Brett Moyer (CEO) owned **1.8%** of outstanding common stock as of March 31, 2020[120](index=120&type=chunk) - Alexander Capital, L.P., where Jonathan Gazdak is Managing Director, received cash fees of **$83,000** and a warrant for **4,553** common shares in connection with the February 2020 Private Placement[128](index=128&type=chunk) - The Medalist Funds, associated with former director Brian Herr, were issued Pre-Funded Warrants to purchase **20,719** common shares, generating approximately **$327,000** in proceeds[132](index=132&type=chunk) - Michael Howse (interim chief strategy officer/director) has vested warrants to purchase **13,750** common shares and is eligible for a cash bonus upon capital raises or acquisition[135](index=135&type=chunk)[137](index=137&type=chunk) - Lisa Walsh, a significant shareholder, owned **100%** of Series A Preferred Stock and **21.2%** of outstanding common stock as of March 31, 2020, and participated in various equity transactions[144](index=144&type=chunk) [10. Segment Information](index=31&type=section&id=10.%20Segment%20Information) The company operates in a single business segment: wireless audio products. Revenue is disaggregated by geographic region, with Asia Pacific being the largest contributor - The company operates in one business segment: wireless audio products[145](index=145&type=chunk) | Net Revenue by Geographic Region (in thousands) | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | | **Region** | **Three Months Ended March 31, 2020** | **Three Months Ended March 31, 2019** | | United States | $38 | $3 | | Europe | $24 | $149 | | Asia Pacific | $349 | $313 | | Total | $411 | $465 | - Asia Pacific was the largest revenue contributor, increasing from **$313,000** in Q1 2019 to **$349,000** in Q1 2020, while Europe saw a significant decrease[145](index=145&type=chunk) [11. Subsequent Events](index=32&type=section&id=11.%20Subsequent%20Events) Subsequent events include a reverse stock split, public offering, Nasdaq compliance, debt repayment, PPP loan, and a settlement - A **1-for-20** reverse stock split became effective on April 9, 2020[146](index=146&type=chunk) - A public offering closed on April 23, 2020, raising approximately **$6.5 million** in gross proceeds from the sale of common stock, pre-funded warrants, and common stock purchase warrants[147](index=147&type=chunk) - The company regained compliance with Nasdaq's minimum bid price requirement on April 24, 2020[148](index=148&type=chunk) - The **$2,040,000** outstanding debt from the March 2020 Note was fully repaid on April 29, 2020[149](index=149&type=chunk) - The company received an **$846,636** loan under the Paycheck Protection Program (PPP) on May 7, 2020[151](index=151&type=chunk) - A settlement agreement with Alexander Capital, L.P. was reached on May 14, 2020, involving a **$125,000** cash payment and the issuance of **50,000** common shares[153](index=153&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2020 financial condition, operations, COVID-19 impact, liquidity, and ongoing need for additional funding [Overview](index=34&type=section&id=Overview) Summit Wireless is an early-stage wireless audio company, with Q1 2020 financing for working capital and general corporate purposes - The company's primary business focus is to enable high-quality wireless audio through semiconductors and modules, with plans to increase focus on a software licensing business segment[159](index=159&type=chunk) - Current wireless module technology transmits Blu-ray quality (uncompressed **24-bit** audio up to **96 kHz**) and supports up to eight separate wireless audio channels for immersive surround sound[167](index=167&type=chunk) - The February 2020 Private Placement generated gross proceeds of **$835,000**, with net proceeds of approximately **$725,000** used for working capital and to comply with Nasdaq listing rules[164](index=164&type=chunk) - The March 2020 Private Placement generated gross proceeds of **$1,700,000**, intended for working capital, debt repayment, and general corporate purposes[166](index=166&type=chunk) [Potential Impacts of the Novel Coronavirus ("COVID-19") on Our Business and Operations](index=37&type=section&id=Potential%20Impacts%20of%20the%20Novel%20Coronavirus%20(%22COVID-19%22)%20on%20Our%20Business%20and%20Operations) The COVID-19 pandemic began impacting the company's business in March 2020, leading to decreased demand from certain customers and expected significant year-over-year revenue decline for Q2 2020. The company has implemented measures to lower operating expenses and ensure business continuity, but the full impact remains uncertain - The COVID-19 pandemic began impacting the company's business in March 2020, leading to recent decreases in demand from certain customers[170](index=170&type=chunk) - The company expects revenue for the three months ending June 30, 2020, to decline significantly year over year due to COVID-19 conditions[176](index=176&type=chunk) - Measures taken include requiring remote work, increasing IT networking capability, and implementing social distancing and mask-wearing for essential on-site employees[175](index=175&type=chunk) [Comparison of the Three Ended March 31, 2020 and 2019](index=38&type=section&id=Comparison%20of%20the%20Three%20Ended%20March%2031,%202020%20and%202019) Q1 2020 revenue decreased **12%**, gross profit slightly increased, operating expenses shifted, and interest expense rose due to new debt - Revenue decreased by **$54,000** (**12%**) to **$411,000** in Q1 2020, compared to **$465,000** in Q1 2019, primarily due to lower module sales[177](index=177&type=chunk) - Research and development expenses decreased by **$227,000**, mainly due to reduced consulting and recruiting fees[179](index=179&type=chunk) - General and administrative expenses increased by **$276,000**, driven by higher salary and benefit expenses (**$73,000**), increased stock compensation and accounting expenses (**$38,000** and **$36,000**, respectively), and a **$250,000** contingency accrual[181](index=181&type=chunk) - Interest expense was **$37,000** in Q1 2020, up from **$0** in Q1 2019, due to amortization of debt discounts from convertible debt[182](index=182&type=chunk) - A gain from the change in fair value of warrant liability was **$19,000** in Q1 2020, compared to **$111,000** in Q1 2019, both due to decreases in common stock price[183](index=183&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) Cash increased to **$755,000** by March 31, 2020, driven by financing, but ongoing losses necessitate further funding, raising going concern doubts - Cash and cash equivalents increased to **$755,000** as of March 31, 2020, from **$298,000** as of December 31, 2019[184](index=184&type=chunk) - The increase in cash was driven by **$725,000** from the February 2020 Private Placement and **$1,665,000** from the sale of convertible notes[184](index=184&type=chunk) - Net cash used in operating activities decreased to **$1,820,000** in Q1 2020 from **$2,820,000** in Q1 2019, mainly due to increases in accounts payable and accrued liabilities[186](index=186&type=chunk) - The company has generated losses since inception and requires additional funds through equity or debt financing to continue operations, raising substantial doubt about its ability to continue as a going concern[187](index=187&type=chunk) [Off-Balance Sheet Arrangements](index=40&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has no off-balance sheet arrangements - The company has no off-balance sheet arrangements[188](index=188&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Summit Wireless Technologies, Inc. is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, the registrant is not required to provide information on quantitative and qualitative disclosures about market risk[189](index=189&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of March 31, 2020, with no material changes in internal control - As of March 31, 2020, management concluded that the company's disclosure controls and procedures were not effective to provide reasonable assurance for timely and accurate reporting[190](index=190&type=chunk) - No material changes in the company's internal control over financial reporting occurred during the three months ended March 31, 2020[191](index=191&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal actions that are expected to have a material adverse effect on its business, operating results, or financial condition - There are no pending or threatened legal actions that, to the knowledge of executive officers, could have a material adverse effect on the company's business, operating results, or financial condition[193](index=193&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, Summit Wireless Technologies, Inc. is not required to provide risk factor disclosures in this report - As a smaller reporting company, the registrant is not required to provide risk factor information[194](index=194&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details unregistered sales of equity securities, including convertible notes and private placements, relying on registration exemptions - A convertible promissory note for **$111,100** was issued on January 23, 2020, for **$100,000** cash, along with **500** common shares and a warrant for **7,936** shares. Proceeds were used for general corporate purposes[195](index=195&type=chunk) - The February 2020 Private Placement of **91,062** units (common stock and warrants) generated gross proceeds of **$835,000**, used primarily to increase stockholders' equity for Nasdaq compliance and general corporate purposes[196](index=196&type=chunk) - The March 2020 Private Placement of a senior secured convertible note and warrant generated gross proceeds of **$1,700,000**, used for working capital, debt repayment, and general corporate purposes[197](index=197&type=chunk) - These sales relied on exemptions from registration pursuant to Section **4(a)(2)** of the Securities Act and/or Rule **506** of Regulation D[198](index=198&type=chunk) [Item 3. Defaults Upon Senior Securities](index=42&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - There were no defaults upon senior securities[199](index=199&type=chunk) [Item 4. Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[200](index=200&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item - No other information is reported under this item[201](index=201&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including settlement agreements, leak-out agreements, and certifications - Exhibits include a Settlement Agreement and Release and a Leak-Out Agreement, both dated May 14, 2020, with Alexander Capital, L.P[203](index=203&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sections **302** and **906** of the Sarbanes-Oxley Act of **2002** are included[203](index=203&type=chunk) SIGNATURES The report is duly signed on behalf of Summit Wireless Technologies, Inc. by its Chief Executive Officer, Brett Moyer, and Principal Financial Officer, George Oliva, on May 27, 2020 - The report was signed by Brett Moyer, Chief Executive Officer, and George Oliva, Principal Financial Officer, on May 27, 2020[208](index=208&type=chunk)