WiSA Technologies(WISA) - 2021 Q4 - Annual Report

PART I Business The company develops and sells wireless audio technology for home entertainment, centered on its semiconductor chips, modules, and the promotion of the WiSA interoperability standard - The company's primary business is selling proprietary wireless modules and custom semiconductor chips for immersive, multi-channel audio systems[17][19] - A major strategic focus is the development of a licensable software solution that ports their technology onto standard Wi-Fi IoT modules, aiming for lower cost and broader market adoption[19][23][52] - The company founded and operates the WiSA Association to promote an interoperability standard for wireless audio products, which currently requires members to use Summit's modules for certification[18][24][26] - Key customers include major consumer electronics brands such as Bang & Olufsen, Harman International (a division of Samsung), LG Electronics, and Skyworth[47][59] - As of December 31, 2021, the company held 12 issued and 4 pending U.S. patents covering its technology[63] - As of March 9, 2022, the company had 46 employees, with 28 dedicated to research and development[53][71] Risk Factors As a smaller reporting company, Summit Wireless Technologies is not required to provide extensive risk factor disclosures - The company is not required to include disclosure under this item as it qualifies as a smaller reporting company[72] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - This item is not applicable as there are no unresolved staff comments[73] Properties The company leases all its facilities, including its principal executive office in Oregon and smaller offices in California - The principal executive office is a leased 10,500 sq. ft. facility in Beaverton, Oregon, with a lease expiring in January 2024[74] - The company also maintains smaller, month-to-month office leases in San Jose and Campbell, California[74] Legal Proceedings The company is not currently involved in any material litigation - As of the report date, the company is not involved in any material legal proceedings[76] Mine Safety Disclosures This section is not applicable to the company's business operations - This item is not applicable to the company[78] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under "WISA", and the company has not paid and does not intend to pay cash dividends - Common stock is traded on the Nasdaq Capital Market under the ticker "WISA"[81] - The company has never paid cash dividends and does not anticipate doing so in the foreseeable future, retaining earnings for business development[82] - In December 2021, the company granted warrants to purchase a total of 40,000 shares of common stock to two service providers at an exercise price of $1.52 per share[84][85] Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue grew 172% in FY2021, but recurring net losses and negative operating cash flow resulted in a "going concern" warning Key Financial Metrics (FY 2021 vs. FY 2020) | Financial Metric | FY 2021 | FY 2020 | Change | | :--- | :--- | :--- | :--- | | Revenue | $6,541,000 | $2,404,000 | +172% | | Gross Profit | $1,864,000 | $427,000 | +336.5% | | Gross Margin | 28.5% | 17.8% | +10.7 pts | | R&D Expense | $5,236,000 | $4,572,000 | +14.5% | | Sales & Marketing Expense | $4,123,000 | $2,974,000 | +38.6% | | G&A Expense | $4,016,000 | $4,168,000 | -3.6% | | Net Loss | ($11,820,000) | ($12,705,000) | N/A | - The company's financial statements include a "going concern" warning, indicating substantial doubt about its ability to continue operations due to recurring net operating losses and the need to raise additional funds[125][128][353] - Cash and cash equivalents increased to $13.1 million at year-end 2021 from $7.4 million at year-end 2020, primarily due to financing activities[122] - Key financing activities in 2021 included raising approximately $9.0 million in a registered direct offering in July and approximately $8.3 million from the exercise of warrants[99][124] - The company received forgiveness for its $859,000 Paycheck Protection Program (PPP) loan in the third quarter of 2021, which was recorded as a gain[119][372] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Summit Wireless is not required to provide disclosures for this item - The company is exempt from this disclosure requirement due to its status as a smaller reporting company[130] Financial Statements and Supplementary Data This section references the company's consolidated financial statements, notes, and auditor's report, which begin on page F-1 - This item directs readers to the full consolidated financial statements and the report of the independent registered public accounting firm, which begin on page F-1[131] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with its accountants on accounting or financial disclosure matters - There were no disagreements with accountants on accounting and financial disclosure[132] Controls and Procedures Management concluded that disclosure controls were effective and a previously reported material weakness was remediated in Q4 2021 - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021[138] - During Q4 2021, the company remediated a previously identified material weakness concerning insufficient written policies for accounting and financial reporting[139] PART III Directors, Executive Officers and Corporate Governance This section details the company's leadership, board structure, and corporate governance policies - The key executive officers are Brett Moyer (President, CEO, Chairman), George Oliva (CFO), and Gary Williams (CAO)[144] - The Board of Directors consists of eight members, with a majority (five members) determined to be independent under Nasdaq rules[164][167] - The Board maintains an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, each with a formal charter[174] Executive Compensation This section details compensation for Named Executive Officers (NEOs), which primarily consists of salary and stock awards Summary Compensation Table (2021 vs. 2020) | Name and Principal Position | Year | Salary ($) | Stock Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | Brett Moyer | 2021 | 385,000 | 552,500 | 942,575 | | President and CEO | 2020 | 302,792 | 362,485 | 673,339 | | George Oliva | 2021 | 275,000 | 66,300 | 343,452 | | CFO, Secretary | 2020 | 230,765 | 168,419 | 408,267 | | Gary Williams | 2021 | 249,995 | 44,200 | 295,212 | | CAO, VP of Finance | 2020 | 230,766 | 81,670 | 316,809 | - The company maintains a 2018 Long-Term Stock Incentive Plan (LTIP) and a 2020 Stock Incentive Plan to grant equity-based compensation to employees, directors, and consultants[214][216] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section discloses that Lind Global Macro Fund, LP is the only beneficial owner of more than 5% of common stock - Lind Global Macro Fund, LP is the only stockholder beneficially owning more than 5% of the common stock, with a reported ownership of 9.99%[231][233] - All directors and executive officers as a group beneficially owned 1,033,085 shares, representing 6.11% of the outstanding common stock as of March 9, 2022[231] Certain Relationships and Related Transactions, and Director Independence The company discloses related party transactions with entities connected to a former and a current director, overseen by the Audit Committee - The company had transactions with Alexander Capital, L.P., an investment bank where former director Jonathan Gazdak is a Managing Director, including underwriting and a settlement agreement in 2020[244][246] - Director Helge Kristensen is the vice president of Hansong Technology; in 2021, Hansong purchased approximately $497,000 in modules from the company, and the company purchased approximately $1,645,000 in speaker products from Hansong[247][448][449] - The Audit Committee is responsible for reviewing and approving all related party transactions to ensure they are on terms comparable to arm's-length dealings[252][256] Principal Accountant Fees and Services This section details fees billed by the independent accounting firm BPM LLP, which are pre-approved by the Audit Committee Principal Accountant Fees | Fee Category | 2021 | 2020 | | :--- | :--- | :--- | | Audit fees | $330,860 | $383,170 | | Tax fees | $23,300 | $21,400 | | All other fees | $0 | $0 | | Total | $354,160 | $404,570 | PART IV Exhibits and Financial Statement Schedules This section lists all documents filed as part of the Form 10-K, including financial statements and material contracts - This item provides a list of the financial statements filed with the report and an index of all exhibits, including material agreements and corporate documents[261][262] Financial Statements Consolidated Balance Sheets The balance sheet shows a significant increase in total assets and stockholders' equity as of December 31, 2021, driven by a rise in cash from financing activities Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item (in thousands) | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $13,108 | $7,415 | | Total current assets | $19,188 | $11,116 | | Total assets | $19,391 | $11,299 | | Total current liabilities | $2,965 | $2,284 | | Total liabilities | $3,014 | $3,386 | | Total stockholders' equity | $16,377 | $7,316 | Consolidated Statements of Operations The company reported a 172% revenue increase in 2021 but continued to post a significant net loss due to high operating expenses Consolidated Statement of Operations Highlights (in thousands) | Income Statement Item (in thousands) | FY 2021 | FY 2020 | | :--- | :--- | :--- | | Revenue, net | $6,541 | $2,404 | | Gross profit | $1,864 | $427 | | Total operating expenses | $13,375 | $11,714 | | Loss from operations | ($11,511) | ($11,287) | | Net loss | ($11,820) | ($12,705) | | Net loss attributable to common stockholders | ($13,046) | ($12,919) | | Net loss per common share - basic and diluted | ($1.05) | ($2.47) | Consolidated Statements of Cash Flows The company used $11.5 million in cash for operations but generated $17.3 million from financing activities, resulting in a net cash increase for the year Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Item (in thousands) | FY 2021 | FY 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($11,508) | ($9,859) | | Net cash used in investing activities | ($99) | ($52) | | Net cash provided by financing activities | $17,300 | $17,028 | | Net increase in cash and cash equivalents | $5,693 | $7,117 | | Cash and cash equivalents at end of period | $13,108 | $7,415 | Notes to Consolidated Financial Statements The notes detail accounting policies and reiterate the substantial doubt about the company's ability to continue as a going concern - Note 2 explicitly states that recurring losses from operations and cash used in operations raise substantial doubt about the company's ability to continue as a going concern[286][353] - Revenue is generated from two categories: Components ($5.5M in 2021) and Consumer Audio Products ($1.0M in 2021), recognized upon transfer of control[327][331] - The company relies on sole-source suppliers for certain components and a single contractor in China for assembly and testing, representing a concentration risk[310] - As of December 31, 2021, the company had federal net operating loss carryforwards of approximately $49.7 million to offset future taxable income, subject to limitations[430]