WiSA Technologies(WISA) - 2023 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for WiSA Technologies, Inc. as of June 30, 2023, reporting a net loss of $6.2 million and a cash balance of $2.0 million, with recurring losses raising substantial doubt about going concern Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $2,007 | $2,897 | | Inventories | $5,475 | $7,070 | | Total Assets | $8,931 | $11,452 | | Liabilities & Equity | | | | Total current liabilities | $1,909 | $3,674 | | Warrant liabilities | $504 | $8,945 | | Total Liabilities | $3,070 | $13,448 | | Total stockholders' equity/(deficit) | $5,861 | ($1,996) | Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue, net | $425 | $946 | $894 | $1,512 | | Gross profit (deficit) | ($201) | $188 | ($1,454) | $250 | | Loss from operations | ($4,693) | ($4,103) | ($10,495) | ($8,004) | | Net loss | ($5,326) | ($4,108) | ($6,247) | ($8,012) | | Net loss per share | ($1.20) | ($27.34) | ($2.02) | ($53.68) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($9,126) | ($8,307) | | Net cash used in investing activities | ($16) | ($27) | | Net cash provided by financing activities | $8,252 | ($12) | | Net decrease in cash | ($890) | ($8,346) | | Cash at end of period | $2,007 | $4,762 | - The company has incurred net operating losses since inception and expects them to continue, raising substantial doubt about its ability to continue as a going concern for the next twelve months, with management intending to raise additional funds through equity or debt offerings[68][69][70] Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, including revenue recognition and stock-based compensation, and discuss key events such as a 1-for-100 reverse stock split, multiple equity offerings, convertible note repayment, and warrant inducement, alongside operating lease commitments and related party transactions - A 1-for-100 reverse stock split was effected on January 26, 2023, to regain compliance with Nasdaq's minimum bid price requirement, with all share and per-share amounts retroactively adjusted[32] Revenue by Product Category (in thousands) | Product Category | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Components | $640 | $1,073 | | Consumer Audio Products | $254 | $439 | | Total | $894 | $1,512 | - In April 2023, the company fully repaid its senior secured convertible note for $1.66 million, including a $276,000 pre-payment premium, resulting in a total loss on debt extinguishment of $837,000 for the quarter[86][170] - The company conducted multiple offerings in 2023 to raise capital: $5.3 million net proceeds in February, $1.6 million in March, $1.0 million in April, and $1.9 million from a May warrant inducement[102][106][108] - In July 2023, the company entered into another warrant exercise inducement offer, receiving aggregate gross proceeds of approximately $678,000 from the exercise of 510,000 warrants[145] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) The MD&A details the company's financial performance for the three and six months ended June 30, 2023, attributing a 55% revenue decline to consumer electronics slowdown, negative gross margin due to inventory reserves, and discusses strategic focus on Wi-Fi compatible IP software and the need for additional financing - The company's strategic focus is on developing Wi-Fi compatible IP software for multichannel wireless audio and exploring strategic alternatives, including a potential acquisition of Comhear, Inc., an AI-enabled audio technology developer[152][155][156] Financial Performance Comparison (in thousands) | Metric | Q2 2023 | Q2 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $425 | $946 | ($521) | -55% | | Gross Profit (Deficit) | ($201) | $188 | ($389) | -207% | | R&D Expenses | $1,933 | $1,883 | $50 | +3% | | S&M Expenses | $1,089 | $1,326 | ($237) | -18% | | G&A Expenses | $1,470 | $1,082 | $388 | +36% | - The decrease in gross profit and margin was mainly due to a $169,000 increase in inventory reserves for Consumer Audio Products, lower sales volumes, and lower product pricing[159] - The company had $2.0 million in cash as of June 30, 2023, and will need to raise additional funds via equity or debt in the third quarter of 2023 to fund operations through December 31, 2023[171][175] Quantitative and Qualitative Disclosures About Market Risk The company, as a smaller reporting company, is not required to provide the information for this item - As a smaller reporting company, WiSA Technologies is not required to provide disclosures about market risk[176] Controls and Procedures Management, including the CEO and Principal Financial Officer, concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[177] - There were no changes in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[178] PART II: OTHER INFORMATION Legal Proceedings The company reports no pending legal proceedings that are expected to have a material adverse effect on its business, operating results, or financial condition - The company is not currently involved in any legal proceedings that would have a material adverse effect on its financial condition or operations[180] Risk Factors As a smaller reporting company, WiSA Technologies is not required to provide the disclosure required under this item - The company is not required to provide risk factor disclosures in this report as it qualifies as a smaller reporting company[181] Unregistered Sales of Equity Securities and Use of Proceeds This section discloses the issuance of unregistered securities, including the sale of unregistered warrants in April 2023 to purchase up to 1,486,132 shares in a private placement, and the issuance of new unregistered inducement warrants in May 2023 to purchase up to 2,972,264 shares to incentivize cash exercise of the April Warrants, both relying on Securities Act exemptions - In April 2023, the company sold unregistered warrants (the "April Warrants") to purchase an aggregate of up to 1,486,132 shares of common stock in a private placement[182] - In May 2023, the company issued new unregistered 'May Inducement Warrants' to purchase up to 2,972,264 shares to incentivize the cash exercise of the April Warrants[183] Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[184] Mine Safety Disclosures This item is not applicable to the company - Not applicable[185] Other Information The company reports no other information for this item - None[186] Exhibits This section lists the exhibits filed with the 10-Q report, including forms of warrants, securities purchase agreements, inducement letters, and officer certifications required by the Sarbanes-Oxley Act - Lists various agreements and certifications filed as exhibits, including forms of warrants, securities purchase agreements, and Sarbanes-Oxley certifications[188]