WiSA Technologies(WISA) - 2022 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) WiSA Technologies, Inc. reported a net loss of $8.0 million on $1.5 million revenue for the six months ended June 30, 2022, with cash decreasing to $4.8 million and a going concern uncertainty Condensed Consolidated Balance Sheets Total assets decreased to $12.2 million by June 30, 2022, driven by a reduction in cash, while stockholders' equity declined to $9.4 million Balance Sheet Highlights (Thousands of USD) | Balance Sheet Highlights (Thousands of USD) | June 30, 2022 (Thousands of USD) | December 31, 2021 (Thousands of USD) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $4,762 | $13,108 | | Inventories | $6,248 | $4,780 | | Total current assets | $11,780 | $19,188 | | Total assets | $12,205 | $19,391 | | Liabilities & Equity | | | | Total current liabilities | $2,702 | $2,965 | | Total liabilities | $2,821 | $3,014 | | Total stockholders' equity | $9,384 | $16,377 | Condensed Consolidated Statements of Operations Q2 2022 revenue decreased 40% to $0.95 million, with net loss widening to $4.1 million, driven by lower revenue and increased operating expenses Statement of Operations (Thousands of USD) | Statement of Operations (Thousands of USD) | Three Months Ended June 30, 2022 (Thousands of USD) | Three Months Ended June 30, 2021 (Thousands of USD) | Six Months Ended June 30, 2022 (Thousands of USD) | Six Months Ended June 30, 2021 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | Revenue, net | $946 | $1,581 | $1,512 | $2,734 | | Gross profit | $188 | $459 | $250 | $754 | | Loss from operations | $(4,103) | $(2,809) | $(8,004) | $(5,529) | | Net loss | $(4,108) | $(3,398) | $(8,012) | $(6,690) | | Net loss per share | $(0.27) | $(0.42) | $(0.54) | $(0.76) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $8.3 million for the six months ended June 30, 2022, reducing cash balance to $4.8 million Cash Flow Summary (Thousands of USD) | Cash Flow Summary (Thousands of USD) | Six Months Ended June 30, 2022 (Thousands of USD) | Six Months Ended June 30, 2021 (Thousands of USD) | | :--- | :--- | :--- | | Net cash used in operating activities | $(8,307) | $(5,328) | | Net cash used in investing activities | $(27) | $(36) | | Net cash (used in) provided by financing activities | $(12) | $8,242 | | Net (decrease) increase in cash | $(8,346) | $2,878 | | Cash and cash equivalents at end of period | $4,762 | $10,293 | Notes to Condensed Consolidated Financial Statements Notes detail revenue recognition, a going concern uncertainty, NASDAQ non-compliance, and a subsequent $3.6 million convertible note private placement - The company received a notification from Nasdaq on June 23, 2022, for non-compliance with the minimum bid price requirement, as its stock closed below $1.00 for 30 consecutive business days, with a deadline of December 20, 2022, to regain compliance[20][21] - There is substantial doubt about the company's ability to continue as a going concern due to recurring net losses and negative cash flow from operations, with management planning to raise additional funds[60][61][62] Revenue by Product (Thousands of USD) | Revenue by Product (Thousands of USD) | Three Months Ended June 30, 2022 (Thousands of USD) | Three Months Ended June 30, 2021 (Thousands of USD) | Six Months Ended June 30, 2022 (Thousands of USD) | Six Months Ended June 30, 2021 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | Components | $772 | $1,327 | $1,073 | $2,317 | | Consumer Audio Products | $174 | $254 | $439 | $417 | | Total | $946 | $1,581 | $1,512 | $2,734 | - On August 15, 2022, the company entered into an agreement to issue a senior secured convertible note of $3.6 million and warrants for gross proceeds of $3.0 million from an institutional investor[116] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Q2 2022 revenue declined 40% due to supply chain issues, gross margin fell to 19.9%, operating expenses increased, and cash significantly weakened - Revenue for Q2 2022 decreased by 40% to $946,000 from $1,581,000 in Q2 2021, primarily due to a $555,000 decrease in Component revenue from customer-side supply chain disruptions[129] - Gross margin for Q2 2022 fell to 19.9% from 29.0% in Q2 2021, mainly due to reduced sales volumes against fixed manufacturing costs[131] Operating Expense Changes (Q2 2022 vs Q2 2021, Thousands of USD) | Operating Expense Changes (Q2 2022 vs Q2 2021, Thousands of USD) | Q2 2022 (Thousands of USD) | Q2 2021 (Thousands of USD) | Change (Thousands of USD) | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $1,883 | $1,305 | +$578 | Increased salary, consulting, legal, and recruiting expenses | | Sales and marketing | $1,326 | $975 | +$351 | Increased salary, stock compensation, consulting, and advertising | | General and administrative | $1,082 | $988 | +$94 | Increased stock compensation and board fees | - The company's cash and cash equivalents dropped to $4.8 million as of June 30, 2022, from $13.1 million at year-end 2021, with management anticipating the need to raise additional capital[143][145] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exempt from providing market risk disclosures as it qualifies as a smaller reporting company - The company is not required to provide quantitative and qualitative disclosures about market risk because it qualifies as a smaller reporting company[146] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal controls - Management concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective in ensuring timely information disclosure[147] - No changes in the company's internal control over financial reporting occurred during Q2 2022 that materially affected, or are reasonably likely to materially affect, internal controls[148] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not involved in any legal proceedings expected to materially adversely affect its business or financial condition - The company is not party to any pending legal proceedings that are expected to have a material adverse effect on its financial condition or business operations[150] Item 1A. Risk Factors Sales declines in H1 2022 were due to supply chain disruptions, and any further delays could materially impact financial results - The company's sales have declined in H1 2022 due to supply chain disruptions experienced by industry partners and customers, causing delays throughout the consumer electronics industry[152] - A material delay in product introduction or delivery, or limited component allocations, could lead to reduced sales and a material adverse impact on the company's financial results[152] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period - No unregistered sales of equity securities were reported[154] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - No defaults upon senior securities were reported[155] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - This disclosure item is not applicable to the company[156] Item 5. Other Information No other material information is reported for the period - No other material information was reported[157] Item 6. Exhibits Exhibits filed with Form 10-Q include CEO and CFO certifications and Interactive Data Files - Exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, and Interactive Data Files (XBRL)[158]