Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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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, 2024

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

WISA Technologies, Inc.

(Exact name of registrant as specified in its charter)


Delaware		30-1135279
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

15268 NW Greenbrier Pkwy

Beaverton, OR 97006

(Address of principal executive offices) (Zip Code)

(408) 627-4716

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	WISA	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check-mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of August 13, 2024 is 5,620,610.

Table of Contents

WISA TECHNOLOGIES, INC.

QUARTERLY REPORT ON FORM 10-Q

For the quarter ended June 30, 2024

	Page Number
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets	3
Condensed Consolidated Statements of Operations	4
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)	5
Condensed Consolidated Statements of Cash Flows	6
Notes to Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3. Quantitative and Qualitative Disclosures About Market Risk	38
Item 4. Controls and Procedures	38

PART II. OTHER INFORMATION
Item 1. Legal Proceedings	39
Item 1A. Risk Factors	39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3. Defaults Upon Senior Securities	39
Item 4. Mine Safety Disclosures	39
Item 5. Other Information	39
Item 6. Exhibits	40
SIGNATURES	41

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

WISA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	June 30, 2024		December 31, 2023
	(unaudited)		(1)
Assets
Current Assets:
Cash and cash equivalents	$	6,113	$	411
Accounts receivable		117		294
Inventories		2,330		2,737
Prepaid expenses and other current assets		1,413		641
Total current assets		9,973		4,083
Property and equipment, net		65		93
Other assets		594		647
Total assets	$	10,632	$	4,823

Liabilities, Convertible Redeemable Preferred Stock and Stockholders’ Equity / (Deficit)
Current Liabilities:
Accounts payable	$	2,191	$	2,320
Accrued liabilities		1,379		1,317
Total current liabilities		3,570		3,637
Warrant liabilities		25		5,460
Other liabilities		607		636
Total liabilities		4,202		9,733

Commitments and contingencies (Note 8)

Series B Convertible Redeemable Preferred Stock, par value $0.0001; 375,000 shares authorized; 0 and 38,335 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		—		247

Stockholders’ Equity / (Deficit):
Common stock, par value $0.0001; 300,000,000 shares authorized; 4,921,434 and 222,380 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		1		1
Additional paid-in capital		293,429		241,884
Accumulated deficit		(287,000)		(247,042)
Total stockholders’ equity / (deficit)		6,430		(5,157)
Total liabilities, convertible preferred stock and stockholders’ equity / (deficit)	$	10,632	$	4,823

(1)	The condensed consolidated balance sheet as of December 31, 2023 was derived from the audited consolidated balance sheet as of that date.

Note: Share and per share amounts have been retroactively adjusted to reflect the impact of a 1-for-100 reverse stock split effected in January 2023 as well as a 1-for-150 reverse stock split effected in April 2024, as discussed in Note 1.

The accompanying notes are an integral part of these condensed consolidated financial statements

Table of Contents

WISA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three and six months ended June 30, 2024 and 2023

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

Revenue, net	$	345	$	425	$	600	$	894
Cost of revenue		334		626		672		2,348
Gross profit (deficit)		11		(201)		(72)		(1,454)
Operating Expenses:
Research and development		1,789		1,933		3,504		3,826
Sales and marketing		865		1,089		1,794		2,383
General and administrative		2,762		1,470		4,193		2,832
Total operating expenses		5,416		4,492		9,491		9,041
Loss from operations		(5,405)		(4,693)		(9,563)		(10,495)

Interest expense, net		(4)		(37)		(1,269)		(760)
Change in fair value of warrant liabilities		(37,255)		246		(29,126)		5,850
Loss on debt extinguishment		—		(837)		—		(837)
Other expense, net		(1)		(3)		—		(3)
Loss before provision for income taxes		(42,665)		(5,324)		(39,958)		(6,245)
Provision for income taxes		—		2		—		2
Net loss		(42,665)		(5,326)		(39,958)		(6,247)
Deemed dividend on conversion of Series B preferred for common stock and repurchase of Series B preferred stock		—		—		(5,842)		—
Net loss attributable to common stockholders	$	(42,665)	$	(5,326)	$	(45,800)	$	(6,247)
Net loss per common share - basic and diluted	$	(11.89)	$	(180.18)	$	(21.95)	$	(303.28)
Weighted average number of common shares used in computing net loss per common share		3,587,122		29,560		2,086,312		20,598

The accompanying notes are an integral part of these condensed consolidated financial statements.

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WISA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the three and six months ended June 30, 2024 and 2023

(in thousands, except share and per share data)

(unaudited)


											Total
	Convertible Preferred Stock			Common Shares			Additional		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Paid-in Capital		Deficit		Equity (Deficit)
Balance as of December 31, 2023	38,335	$	247	222,380	$	1	$	241,884	$	(247,042)	$	(5,157)
Stock-based compensation	—		—	4		—		380		—		380
Cumulative effect of ASU 2020-06 adoption	—		116	—		—		(116)		—		(116)
Issuance of Series B preferred stock in connection with warrant exercise, net of discounts	29,322		386	—		—		—		—		—
Issuance of common stock in connection with conversion of Series B preferred stock	(5,000)		(325)	8,038		—		325		—		325
Deemed dividend on conversion of Series B preferred for common stock and repurchase of Series B preferred stock	—		5,842	—		—		(5,842)		—		(5,842)
Repurchase of Series B preferred stock and Series B preferred stock warrants	(62,657)		(6,266)	—		—		824		—		824
Issuance of common stock, pre-funded units and warrants, net of offering costs	—		—	1,442,518		—		4,210		—		4,210
Issuance of common stock in connection with reverse split rounding-up for fractional shares	—		—	84,255		—		—		—		—
Net income	—		—	—		—		—		2,707		2,707
Balance as of March 31, 2024	—		—	1,757,195		1		241,665		(244,335)		(2,669)
Stock-based compensation	—		—	255,915		—		241		—		241
Issuance of common stock in connection with warrant exercise	—		—	441,822		—		556		—		556
Issuance of common stock and warrants, net of offering costs	—		—	2,466,583		—		8,756		—		8,756
Issuance of common stock to vendors	—		—	—		—		360		—		360
Restricted stock awards cancelled	—		—	(82)		—		—		—		—
Release of vested restricted common stock	—		—	1		—		—		—		—
Conversion of liability warrants to equity warrants	—		—	—		—		41,851		—		41,851
Net loss	—		—	—		—		—		(42,665)		(42,665)
Balance as of June 30, 2024	—		—	4,921,434	$	1	$	293,429	$	(287,000)	$	6,430


										Total
	Convertible Preferred Stock		Common Shares			Additional		Accumulated		Stockholders’
	Shares	Amount	Shares	Amount		Paid-in Capital		Deficit		Equity
Balance as of December 31, 2022	—	—	4,750	$	1	$	226,324	$	(228,321)	$	(1,996)
Stock-based compensation	—	—	—		—		499		—		499
Restricted stock awards cancelled	—	—	(0)		—		—		—		—
Issuance of common stock in connection with convertible promissory note	—	—	450		—		708		—		708
Issuance of common stock in connection with warrant exercise	—	—	5,723		—		8,202		—		8,202
Issuance of common stock and warrants, net of offering costs	—	—	9,470		—		1,271		—		1,271
Net loss	—	—	—		—		—		(921)		(921)
Balance as of March 31, 2023	—	—	20,393		1		237,004		(229,242)		7,763
Stock-based compensation	—	—	—		—		481		—		481
Release of vested restricted common stock	—	—	1		—		—		—		—
Restricted stock awards cancelled	—	—	(1)		—		—		—		—
Issuance of common stock and warrants, net of offering costs	—	—	5,040		—		1,048		—		1,048
Issuance of common stock in connection with warrant exercise	—	—	9,908		—		1,894		—		1,895
Net loss	—	—	—		—		—		(5,326)		(5,326)
Balance as of June 30, 2023	—	—	35,341	$	1	$	240,427	$	(234,568)	$	5,861

The accompanying notes are an integral part of these condensed consolidated financial statements.

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WISA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended June 30, 2024 and 2023

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(39,958)	$	(6,247)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		777		980
Depreciation and amortization		48		65
Amortization of debt discounts		1,260		738
Change in fair value of warrant liability		29,126		(5,850)
Loss on extinguishment of convertible note payable		—		837
Changes in operating assets and liabilities:
Accounts receivable		177		172
Inventories		407		1,595
Prepaid expenses and other current assets		(418)		225
Other assets		53		47
Accounts payable		(534)		(1,105)
Accrued liabilities		46		(544)
Other liabilities		(29)		(39)
Net cash used in operating activities		(9,045)		(9,126)

Cash flows from investing activities:
Issuance of note receivable		(150)		—
Purchases of property and equipment		(20)		(16)
Net cash used in investing activities		(170)		(16)

Cash flows from financing activities:
Proceeds from issuance of common stock in connection with warrant exercise		556		—
Proceeds from issuance of common stock and warrants, net of offering costs		19,980		1,927
Proceeds from issuance of short-term loan, net of issuance costs		600		7,995
Proceeds from exercise of warrants		714		—
Repurchase of Series B preferred stock warrants		(6,266)		—
Repayment of short-term loan		(667)		—
Repayment of convertible note payable		—		(1,657)
Repayment of finance lease		—		(13)
Net cash provided by financing activities		14,917		8,252

Net decrease in cash and cash equivalents		5,702		(890)
Cash and cash equivalents as of beginning of period		411		2,897
Cash and cash equivalents as of end of period	$	6,113	$	2,007

Supplemental disclosure of cash flow information:
Cash paid for interest	$	276	$	20
Cash paid for income taxes	$	—	$	2

Noncash Investing and Financing Activities:
Conversion of liability warrants to equity warrants	$	41,851	$	—
Issuance of warrant liability in connection with financing	$	8,701	$	—
Deemed dividend on conversion of Series B preferred stock and repurchase of Series B preferred stock	$	5,842	$	—
Unpaid financings issuance costs	$	421	$	—
Cashless exercise of warrants	$	587	$	8,191
Issuance of common stock to vendors	$	360	$	—
warrant exercise in connection with loan settlement	$	333	$	—
Issuance of common stock in connection with Series B preferred stock	$	325	$	—
Issuance of warrant liability in connection with February 2023 offering	$	—	$	5,600
Issuance of common stock in connection with convertible promissory note	$	—	$	708
Record Right-of-Use Assets obtained in exchange for modified operating lease liabilities	$	—	$	554
Deferred offering costs reclassed from prepaid expenses	$	—	$	(97)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2024 and 2023

(unaudited)

1.	Business and Summary of Significant Accounting Policies

WiSA Technologies, Inc. formerly known as Summit Wireless Technologies, Inc. (together with its subsidiaries also referred to herein as “we”, “us”, “our”, or the “Company”), was originally formed as a limited liability company in Delaware on July 23, 2010. Our business is to deliver the best-in-class immersive wireless sound technology for intelligent devices and next generation home entertainment systems through the sale of module components to audio companies as well as audio products to resellers and consumers.

Nasdaq Compliance

The Company is currently in compliance with the listing rules of The Nasdaq Stock Market LLC (“Nasdaq”), subject to the monitorings described below.

On April 29, 2024, Nasdaq notified the Company in a letter that the Company has regained compliance with the minimum bid price requirement under Nasdaq Listing Rule 5550 (a)(2) (the “Minimum Bid Price Requirement”) as required by a hearing panel’s decision on April 5, 2024. The Company is subject to monitoring for a period of one year from the date of the letter. If, within that one-year monitoring period, Nasdaq’s Listing Qualifications staff (the “Staff”) finds the Company again out of compliance with the Minimum Bid Price Requirement, the Company will not be permitted to provide the Staff with a plan of compliance with respect to such deficiency and the Staff will not be permitted to grant additional time for the Company to regain compliance with respect to such deficiency, nor will the Company be afforded an applicable cure or compliance period. Instead, the Staff will issue a delist determination letter and the Company will have an opportunity to request a new hearing with a hearings panel. The Company will have the opportunity to respond and present to the panel.

On July 3, 2024, Nasdaq notified the Company in a letter that the Company has regained compliance with the equity requirement under Nasdaq Listing Rule 5550(b)(1) (the “Equity Rule”) as required by the panel’s April 5, 2024 decision. The Company is subject to monitoring for a period of one year from the date of the letter. If, within that one-year monitoring period, the Staff finds the Company again out of compliance with the Equity Rule, the Company will not be permitted to provide the Staff with a plan of compliance with respect to such deficiency and the Staff will not be permitted to grant additional time for the Company to regain compliance with respect to such deficiency, nor will the Company be afforded an applicable cure or compliance period. Instead, the Staff will issue a delist determination letter and the Company will have an opportunity to request a new hearing with a hearings panel. The Company will have the opportunity to respond and present to the panel.

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WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2024 and 2023

(unaudited)

1.	Business and Summary of Significant Accounting Policies, continued

Reverse Stock Splits

April 2024 Reverse Stock Split

On April 4, 2024, the Board approved a 1-for-150 reverse stock split (the “April 2024 Reverse Stock Split”) of our outstanding shares of common stock and authorized the filing of a certificate of amendment to our certificate of incorporation, as amended, with the Secretary of State of the State of Delaware to effect the April 2024 Reverse Stock Split. On April 12, 2024, the April 2024 Reverse Stock Split was effected and the condensed consolidated financial statements have been retroactively adjusted. All common stock share numbers, warrants to purchase common stock, prices and exercise prices have been retroactively adjusted to reflect the April 2024 Reverse Stock Split. The common stock began trading on a split-adjusted basis at the start of trading on April 15, 2024. Unless otherwise indicated, the information presented in this Quarterly Report on Form 10-Q (this “Report”) gives effect to the April 2024 Reverse Stock Split.

January 2023 Reverse Stock Split

On January 24, 2023, the Board approved a 1-for-100 reverse stock split (the “January 2023 Reverse Stock Split”) of our outstanding shares of common stock and authorized the filing of a certificate of amendment to our certificate of incorporation, as amended, with the Secretary of State of the State of Delaware to effect the January 2023 Reverse Stock Split. On January 26, 2023, the January 2023 Reverse Stock Split was effected and the condensed consolidated financial statements have been retroactively adjusted. All common stock share numbers, warrants to purchase common stock, prices and exercise prices have been retroactively adjusted to reflect the January 2023 Reverse Stock Split. The common stock began trading on a split-adjusted basis at the start of trading on January 27, 2023. Unless otherwise indicated, the information presented in this Report gives effect to the January 2023 Reverse Stock Split.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include all adjustments necessary for the fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. The condensed consolidated financial statements reflect the accounts of WISA Technologies, Inc. and its wholly-owned subsidiaries, WISA Technologies Korea, LTD, a Korean limited company, which was established in September 2022, and WiSA, LLC, a Delaware limited liability company. All intercompany balances and transactions are eliminated.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassification

Certain reclassifications have been made to prior periods’ condensed consolidated financial statements to conform to the current period presentation. These reclassifications did not result in any change in previously reported net income (loss), total assets or stockholders’ deficit.

Table of Contents

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2024 and 2023

(unaudited)

1.	Business and Summary of Significant Accounting Policies, continued

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents are deposited in demand and money market accounts at one financial institution. At times, such deposits may be in excess of insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents.

The Company’s accounts receivable are derived from revenue earned from customers located throughout the world. The Company performs credit evaluations of its customers’ financial condition and may, in certain circumstances, require full or partial payment in advance of shipping. As of June 30, 2024 and December 31, 2023, there was no allowance for credit losses. As of June 30, 2024, the Company had four customers accounting for 43%, 33%, 12%and 11% of accounts receivable. As of December 31, 2023, the Company had two customers accounting for 71% and 20% of accounts receivable.

The Company had four customers accounting for 33%, 27%, 20% and 11% of its net revenue for the three months ended June 30, 2024. The Company had four customers accounting for 28%, 27%, 19% and 10% of its net revenue for the six months ended June 30, 2024. The Company had four customers accounting for 35%, 13%, 12% and 11% of its net revenue for the three months ended June 30, 2023. The Company had two customers accounting for 29% and 17% of its net revenue for the six months ended June 30, 2023.

The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, continued acceptance of the Company’s products, competition from substitute products and larger companies, protection of proprietary technology, strategic relationships and dependence on key individuals.

The Company relies on sole-source suppliers to manufacture some of the components used in its product. The Company’s manufacturers and suppliers may encounter problems during manufacturing due to a variety of reasons, any of which could delay or impede their ability to meet demand. The Company is heavily dependent on a single contractor in China for assembly and testing of its products, a single contractor in Japan for the production of its transmit semiconductor chip and a single contractor in China for the production of its receive semiconductor chip.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are recorded at the invoice amount and are generally not interest bearing. The Company reviews its trade receivables aging to identify specific customers with known disputes or collection issues. The Company exercises judgment when determining the adequacy of these reserves as it evaluates historical bad debt trends and changes to customers’ financial conditions.

Fair Value of Financial Instruments

Carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities approximate fair value due to their relatively short maturities. The carrying value of the Company’s borrowings and capital lease liabilities approximates fair value based upon borrowing rates currently available to the Company for loans and capital leases with similar terms. The Company’s Warrant liabilities are the only financial instrument that is adjusted to fair value on a recurring basis.

Table of Contents

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2024 and 2023

(unaudited)

1.	Business and Summary of Significant Accounting Policies, continued

Inventories

Inventories, principally purchased components, are stated at the lower of cost or net realizable value. Cost is determined using an average cost, which approximates actual cost on a first-in, first-out basis. Inventory in excess of salable amounts and inventory which is considered obsolete based upon changes in existing technology is written off. At the point of loss recognition, a new lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in the new cost basis.

Property and Equipment, Net

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over their estimated useful lives of two to five years. Leasehold improvements and assets acquired under capital lease are amortized on a straight-line basis over the shorter of the useful life or term of the lease. Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged to operations as incurred.

Convertible Financial Instruments

The Company bifurcates conversion options and warrants from their host instruments and accounts for them as freestanding derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable U.S. GAAP.

When the Company has determined that the embedded conversion options and warrants should be bifurcated from their host instruments, discounts are recorded for the intrinsic value of conversion options embedded in the instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the instrument.

Debt discounts under these arrangements are amortized to interest expense using the interest method over the earlier of the term of the related debt or their earliest date of redemption.

Warrants for Common Shares, Convertible Redeemable Preferred Shares, and Derivative Financial Instruments

Warrants for our common shares, convertible redeemable preferred shares, and derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) contain reset provisions that do not qualify for the scope exception are classified as equity or liabilities. The Company assesses classification of its warrants for shares of common stock and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.

Table of Contents

WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2024 and 2023

(unaudited)

1.	Business and Summary of Significant Accounting Policies, continued

Product Warranty

The Company’s products are generally subject to a one-year warranty, which provides for the repair, rework, or replacement of products (at the Company’s option) that fail to perform within the stated specification. The Company has assessed its historical claims and, to date, product warranty claims have not been significant. The Company will continue to assess if there should be a warranty accrual going forward.

Revenue Recognition

The Company generates revenue primarily from two product categories which include the sale of Consumer Audio Products as well as the sale of Components. The Company applies the following five steps: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. The Company considers customer purchase orders to be the contracts with a customer. Revenues, net of expected discounts, are recognized when the performance obligations of the contract with the customer are satisfied and when control of the promised goods are transferred to the customer, typically when products, which have been determined to be the only distinct performance obligations, are shipped to the customer. Expected costs of assurance warranties and claims are recognized as expense.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer and deposited with the relevant government authority, are excluded from revenue. Our revenue arrangements do not contain significant financing components.

Sales to certain distributors are made under arrangements which provide the distributors with price adjustments, price protection, stock rotation and other allowances under certain circumstances. The Company does not provide its customers with a contractual right of return. However, the Company accepts limited returns on a case-by-case basis. These returns, adjustments and other allowances are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenue recognized. We believe that there will not be significant changes to our estimates of variable consideration.

If a customer pays consideration, or the Company has a right to an amount of consideration that is unconditional before we transfer a good or service to the customer, those amounts are classified as contract liabilities which are included in other current liabilities when the payment is made or it is due, whichever is earlier.

Practical Expedients and Exemptions

In accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, we use the following practical expedients: (i) not to adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to a customer and when the customer pays for that product or service will be one year or less; (ii) to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less; (iii) not to assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer. In addition, we do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

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WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2024 and 2023

(unaudited)

1.	Business and Summary of Significant Accounting Policies, continued

During the three months ended June 30, 2024 and 2023, net revenue consisted of the following:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands)	2024		2023		2024		2023
Components	$	314	$	313	$	473	$	640
Consumer Audio Products		31		112		127		254
Total	$	345	$	425	$	600	$	894

Contract Balances

The Company receives payments from customers based on a billing schedule as established in our contracts to partially offset prepayments required by our vendors on long lead time materials. Amounts collected prior to the fulfillment of the performance obligation are considered contract liabilities and classified as customer advances within accrued liabilities on the consolidated balance sheets. Contract assets are recorded when the Company has a conditional right to consideration for our completed performance under the contracts. Accounts receivables are recorded when the right to this consideration becomes unconditional. The Company does not have any material contract assets as of June 30, 2024 and December 31, 2023. During the six month ended June 30, 2024, the Company did not recognize any revenue that was included in the contract liabilities balance as of December 31, 2023.


	June 30,		December 31,
(in thousands)	2024		2023
Contract Liabilities	$	150	$	19

Revenue by Geographic Area

In general, revenue disaggregated by geography (See Note 10) is aligned according to the nature and economic characteristics of our business and provides meaningful disaggregation of our results of operations. Since we operate in one segment, all financial segment and product line information can be found in the condensed consolidated financial statements.

Stock-Based Compensation

The Company measures and recognizes the compensation expense for restricted stock units and restricted stock awards granted to employees and directors based on the fair value of the award on the grant date.

Restricted stock units give an employee an interest in Company stock but they have no tangible value until vesting is complete. Restricted stock units and restricted stock awards are equity classified and measured at the fair market value of the underlying stock at the grant date and recognized as expense over the related service or performance period. The Company elected to account for forfeitures as they occur. The fair value of stock awards is based on the quoted price of our common stock on the grant date. Compensation cost for restricted stock units and restricted stock awards is recognized using the straight-line method over the requisite service period.

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WISA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2024 and 2023

(unaudited)

1.	Business and Summary of Significant Accounting Policies, continued

Research and Development

Research and development costs are charged to operations as incurred and includes salaries, consulting expenses and an allocation of facility costs.

Advertising Costs

Advertising costs are charged to sales and marketing expenses as incurred. Advertising costs for the three and six months ended June 30, 2024 were $117,000 and $264,000, respectively. Advertising costs for the three and six months ended June 30, 2023 were $118,000 and $273,000, respectively.

Comprehensive Loss

Comprehensive loss represents the changes in equity of an enterprise, other than those resulting from stockholder transactions. Accordingly, comprehensive loss may include certain changes in equity that are excluded from net loss. For the three and six months ended June 30, 2024 and 2023, the Company’s comprehensive loss is the same as its net loss.

Foreign Currency

The financial position and results of operations of the Company’s foreign operations are measured using currencies other than the U.S. dollar as their functional currencies. Accordingly, for these operations all assets and liabilities are translated into U.S. dollars at the current exchange rates as of the respective balance sheet date. Expense items are translated using the weighted average exchang

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