WiSA Technologies(WISA) - 2019 Q3 - Quarterly Report

PART I: FINANCIAL INFORMATION Financial Statements The company reported an $8.1 million net loss on $1.2 million revenue for nine months, with cash declining and going concern doubts Condensed Consolidated Balance Sheets Total assets decreased to $3.5 million, driven by cash reduction to $0.3 million, while liabilities rose and equity fell Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2019 (unaudited) | Dec 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $284 | $3,218 | | Inventories | $2,036 | $1,383 | | Total current assets | $3,313 | $5,141 | | Total assets | $3,541 | $5,406 | | Liabilities & Equity | | | | Total current liabilities | $1,729 | $1,378 | | Derivative liability | $387 | $- | | Total liabilities | $2,137 | $1,588 | | Total stockholders' equity | $907 | $3,818 | | Total liabilities, preferred stock and stockholders' equity | $3,541 | $5,406 | Condensed Consolidated Statements of Operations Revenue increased for Q3 and nine-month periods, with net loss narrowing significantly due to reduced non-cash expenses Statement of Operations Highlights (in thousands, except per share data) | Metric | Q3 2019 | Q3 2018 | 9 Months 2019 | 9 Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Revenue, net | $419 | $385 | $1,236 | $1,046 | | Gross profit (loss) | $32 | $(28) | $112 | $(198) | | Loss from operations | $(2,679) | $(2,962) | $(8,062) | $(8,759) | | Net loss | $(2,708) | $(31,852) | $(8,097) | $(64,617) | | Net loss per common share | $(0.14) | $(2.89) | $(0.46) | $(16.60) | Condensed Consolidated Statements of Cash Flows Net cash used in operations increased to $8.5 million, with financing providing $5.6 million, resulting in a $2.9 million net cash decrease Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(8,454) | $(7,086) | | Net cash used in investing activities | $(31) | $(70) | | Net cash provided by financing activities | $5,564 | $13,011 | | Net decrease in cash and cash equivalents | $(2,934) | $5,853 | | Cash and cash equivalents at end of period | $284 | $6,102 | - Financing activities in the first nine months of 2019 included $4.7 million net proceeds from a common stock issuance and $0.9 million from a preferred stock issuance[24] Notes to Condensed Consolidated Financial Statements Notes detail the company's history of losses, going concern doubts, customer concentration, and subsequent financing and Nasdaq non-compliance - The company has incurred net operating losses each year since inception and had an accumulated deficit of approximately $183.7 million as of September 30, 2019 These factors raise substantial doubt about the Company's ability to continue as a going concern[34] - In April 2019, the company issued 250,000 shares of Series A 8% Senior Convertible Preferred Stock for $1.0 million These shares have a stated value of $4.00, are convertible, and contain an embedded derivative feature that was bifurcated and recorded as a liability[30][128][130] - The company has significant customer concentration, with three customers accounting for 56%, 20%, and 17% of net revenue for Q3 2019[42] - Subsequent to the quarter end, the company conducted warrant amendment and exercise agreements, raising gross proceeds of $836,000, and closed a registered direct offering for gross proceeds of approximately $1.8 million It also received a non-compliance notice from Nasdaq for its stock price falling below the $1.00 minimum bid price requirement[215][222][223] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses 18% revenue growth, mixed operating expenses, and critical liquidity issues, acknowledging recurring losses and need for additional financing Results of Operations Revenue increased for Q3 and nine-month periods, gross profit improved, R&D expenses rose, G&A expenses decreased, and interest expense was zero Revenue Change | Period | Revenue 2019 | Revenue 2018 | Change (%) | | :--- | :--- | :--- | :--- | | Three months ended Sep 30 | $419,000 | $385,000 | +9% | | Nine months ended Sep 30 | $1,236,000 | $1,046,000 | +18% | - Research and development expenses for the nine months ended September 30, 2019 increased by $555,000 compared to 2018, driven by higher salaries, consulting fees, and prototype expenses, though partially offset by a $657,000 decrease in stock compensation charges[240] - General and administrative expenses for the nine months ended September 30, 2019 decreased by $1.0 million compared to 2018, primarily due to a decrease in stock compensation charges of approximately $809,000 and lower investor relations stock compensation charges of $266,000[245] - Interest expense was $0 for the nine months ended September 30, 2019, compared to $33.5 million for the same period in 2018 The 2018 expense was due to amortization of debt discounts and interest on convertible debt that was converted to equity during the July 2018 IPO[247] Liquidity and Capital Resources Cash and cash equivalents fell to $284,000, with $8.5 million used in operations, necessitating additional capital due to recurring losses - Cash and cash equivalents decreased to $284,000 as of September 30, 2019, from $3,218,000 as of December 31, 2018[252] - The company incurred a net loss of $8.1 million and used $8.5 million in cash from operating activities for the nine months ended September 30, 2019[253] - The company is an early-stage company with a history of losses, and these conditions raise substantial doubt about its ability to continue as a going concern[254] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Summit Wireless Technologies, Inc. is not required to provide the information for this item - The company is a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and is not required to provide the information required by this Item[257] Controls and Procedures Management concluded disclosure controls were not effective as of September 30, 2019, with no material changes in internal control during Q3 2019 - Management concluded that as of September 30, 2019, the company's disclosure controls and procedures were not effective to provide reasonable assurance that required information is recorded, processed, summarized, and reported within the specified time periods[258] - No changes in internal control over financial reporting occurred during the three months ended September 30, 2019, that have materially affected or are reasonably likely to materially affect internal control[259] PART II. OTHER INFORMATION Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial condition - There are no pending or threatened legal actions against the company that could have a material adverse effect on its business, operating results, or financial condition[262] Risk Factors As a smaller reporting company, the company is not required to provide the information required by this Item - As a smaller reporting company, the company is not required to provide the information required by this Item[263] Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2019, the company issued unregistered securities, including warrants for services and restricted stock to the new CFO - On July 9, 2019, the company granted warrants to purchase 40,000 shares of common stock to Lippert/Heishorn Associates Inc. for services[264] - On August 14, 2019, the company granted warrants to purchase 50,000 shares of common stock to DFC Advisory Services, LLC for services[265] - On September 9, 2019, the company issued 150,000 shares of restricted stock to its new CFO, George Oliva, as a material inducement to employment, outside of the company's stock incentive plan[266] Other Information Subsequent events include warrant amendments and exercises generating $836,000, a registered direct offering raising $1.8 million, and a Nasdaq non-compliance notice - In October 2019, the company entered into Warrant Amendment and Exercise Agreements, reducing the exercise price on certain warrants This led to the exercise of warrants for 1,044,861 common shares, generating gross proceeds of $836,000[270] - On October 16, 2019, the company closed a registered direct offering of 2,500,000 common shares at $0.70 per share, for gross proceeds of approximately $1.8 million[275][276] - On October 16, 2019, Nasdaq notified the company of non-compliance with the minimum bid price requirement of $1.00 per share The company has a 180-day period, until April 13, 2020, to regain compliance[277] Exhibits This section lists the exhibits filed with the Form 10-Q, including warrant agreements, certifications, and XBRL data files