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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 September 30, 2021

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

Summit Wireless 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.)

6840 Via Del Oro, Ste. 280

San Jose, CA 95119

(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 November 9, 2021 is 15,803,940.

Table of Contents

SUMMIT WIRELESS TECHNOLOGIES, INC.

QUARTERLY REPORT ON FORM 10-Q

For the quarter ended September 30, 2021

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 Convertible Preferred Stock and Stockholders’ Equity (Deficit)

5

Condensed Consolidated Statements of Cash Flows

7

Notes to Condensed Consolidated Financial Statements

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

30

Item 3. Quantitative and Qualitative Disclosures About Market Risk

34

Item 4. Controls and Procedures

35

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

36

Item 1A. Risk Factors

36

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3. Defaults Upon Senior Securities

36

Item 4. Mine Safety Disclosures

36

Item 5. Other Information

36

Item 6. Exhibits

37

SIGNATURES

38

2

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

SUMMIT WIRELESS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

    

September 30, 2021

    

December 31, 2020

Assets

  

(unaudited)

  

(1)

 

  

 

  

Current Assets:

 

  

 

  

Cash and cash equivalents

$

16,067

$

7,415

Accounts receivable

 

205

 

85

Inventories

 

3,954

 

2,708

Prepaid expenses and other current assets

 

1,480

 

908

Total current assets

 

21,706

 

11,116

Property and equipment, net

 

169

 

142

Other assets

 

41

 

41

Total assets

$

21,916

$

11,299

Liabilities, Convertible Preferred Stock and Stockholders’ Equity

 

 

  

Current Liabilities:

 

 

  

Accounts payable

$

825

$

672

Accrued liabilities

 

2,040

 

1,433

Borrowings, current position

179

Total current liabilities

 

2,865

 

2,284

Other liabilities

47

39

Borrowings, net of current position

668

Derivative liability

387

Warrant liability

 

8

 

8

Total liabilities

 

2,920

 

3,386

Commitments and contingencies (Note 8)

 

  

 

  

Series A 8% Senior Convertible Preferred stock, par value $0.0001; 1,250,000 shares authorized; 0 and 250,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020, (liquidation preference of $0 and $1,136,000)

597

Stockholders’ Equity:

 

  

 

  

Common stock, par value $0.0001; 200,000,000 shares authorized; 15,803,940 and 8,402,250 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

 

2

 

1

Additional paid-in capital

 

228,128

 

207,698

Accumulated deficit

 

(209,134)

 

(200,383)

Total stockholders’ equity

 

18,996

 

7,316

Total liabilities, convertible preferred stock and stockholders’ equity

$

21,916

$

11,299

(1)The condensed consolidated balance sheet as of December 31, 2020 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-20 reverse stock split effected in April 2020, as discussed in Note 6.

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

3

Table of Contents

SUMMIT WIRELESS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three and nine months ended September 30, 2021 and 2020

(in thousands, except share and per share data)

(unaudited)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2021

    

2020

    

2021

    

2020

Revenue, net

$

1,807

 

$

607

 

$

4,541

 

$

1,366

Cost of revenue

 

1,301

 

 

503

 

 

3,281

 

 

1,187

Gross profit

 

506

 

 

104

 

 

1,260

 

 

179

Operating Expenses:

 

 

 

 

 

 

 

Research and development

 

1,322

 

 

1,240

 

 

3,800

 

 

3,278

Sales and marketing

 

1,021

 

 

835

 

 

2,870

 

 

2,043

General and administrative

 

1,081

 

 

1,014

 

 

3,037

 

 

2,512

Total operating expenses

 

3,424

 

 

3,089

 

 

9,707

 

 

7,833

Loss from operations

 

(2,918)

 

 

(2,985)

 

 

(8,447)

 

 

(7,654)

Interest expense

 

(3)

 

 

(5)

 

 

(9)

 

 

(1,394)

Change in fair value of warrant liability

 

 

 

 

 

 

 

24

Gain on forgiveness of Paycheck Protection Program loan

859

859

Other expense

 

1

 

 

 

 

(6)

 

 

(41)

Warrant inducement expense

 

 

 

 

 

(1,146)

 

 

Loss before provision for income taxes

 

(2,061)

 

 

(2,990)

 

 

(8,749)

 

 

(9,065)

Provision for income taxes

 

 

 

 

 

2

 

 

3

Net loss

(2,061)

 

(2,990)

 

(8,751)

 

(9,068)

Convertible preferred stock dividend

(20)

(34)

(60)

Deemed dividend on exchange of convertible preferred stock for common stock

(1,192)

Deemed dividend from warrant repricing

(134)

Net loss attributable to common stockholders

$

(2,061)

$

(3,010)

$

(9,977)

$

(9,262)

Net loss per common share - basic and diluted

$

(0.15)

 

$

(0.39)

 

$

(0.86)

 

$

(2.15)

Weighted average number of common shares used in computing net loss per common share

 

13,917,295

 

 

7,709,692

 

 

11,600,875

 

 

4,304,721

Note: Share and per share amounts have been retroactively adjusted to reflect the impact of a 1-for-20 reverse stock split effected in April 2020, as discussed in Note 6.

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

4

Table of Contents

SUMMIT WIRELESS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

For the three and nine months ended September 30, 2021 and 2020

(in thousands, except share and per share data)

(unaudited)

  

  

  

  

Accumulated

  

Other

Total

Convertible Preferred Stock

Common Shares

Additional

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

  

  

Shares

    

Amount

    

Paid-in Capital

    

Loss

    

Deficit

    

Equity

Balance as of December 31, 2020

 

250,000

$

597

 

8,402,250

$

1

$

207,698

$

$

(200,383)

$

7,316

Issuance of common stock upon warrant exercise

2,086,251

5,095

5,095

Warrants issued in connection with warrant exercise

567

567

Convertible preferred stock dividend

20

(20)

(20)

Stock-based compensation

643,700

254

254

Release of vested restricted common stock

352

Net loss

(3,292)

(3,292)

Balance as of March 31, 2021

250,000

617

11,132,553

1

213,594

(203,675)

9,920

Issuance of common stock upon warrant exercise

1,360,244

3,159

3,159

Warrants issued in connection with warrant exercise

579

579

Convertible preferred stock dividend

14

(14)

(14)

Exchange of convertible preferred stock for common stock

(250,000)

(631)

250,000

1,640

1,640

Warrants issued upon exchange of preferred stock for common stock

570

570

Deemed dividend on exchange of convertible preferred stock

(1,192)

(1,192)

Stock-based compensation

10,000

335

335

Issuance of common stock to vendor

10,000

34

34

Net loss

(3,398)

(3,398)

Balance as of June 30, 2021

12,762,797

1

218,705

(207,073)

11,633

Stock-based compensation

320,800

349

349

Release of vested restricted common stock

201,343

Issuance of common stock upon warrant exercise, net of issuance costs

19,000

49

49

Registered direct offering, net of issuance costs

2,500,000

1

9,025

9,026

Net loss

(2,061)

(2,061)

Balance as of September 30, 2021

 

$

 

15,803,940

$

2

$

228,128

$

$

(209,134)

$

18,996

Note: Share amounts have been retroactively adjusted to reflect the impact of a 1-for-20 reverse stock split effected in April 2020, as discussed in Note 6.

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

5

Table of Contents

SUMMIT WIRELESS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

For the three and nine months ended September 30, 2021 and 2020

(in thousands, except share and per share data)

(unaudited)

  

  

  

  

Accumulated

  

Other

Total

Convertible Preferred Stock

Common Shares

Additional

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

  

  

Shares

    

Amount

    

Paid-in Capital

    

Loss

    

Deficit

    

Equity (Deficit)

Balance as of December 31, 2019

250,000

$

517

1,245,238

$

$

188,320

$

(48)

$

(187,678)

$

594

Issuance of common stock and warrants, net of offering costs

91,062

725

725

Issuance of common stock in connection with notes payable

500

4

4

Issuance of warrants in connection with convertible notes payable

630

630

Convertible preferred stock dividend

20

(20)

(20)

Stock-based compensation

2,000

75

75

Restricted stock awards cancelled

(550)

Release of vested restricted common stock

353

Net loss

(2,680)

(2,680)

Balance as of March 31, 2020

 

250,000

537

 

1,338,603

189,734

(48)

(190,358)

(672)

Issuance of common stock, prefunded warrants and warrants, net of public offering costs

 

 

 

1,525,000

 

 

5,515

 

 

 

5,515

Proceeds from the exercise of prefunded warrants and common stock warrants

 

 

 

485,000

 

 

37

 

 

 

37

Issuance of common stock, net of shelf offering costs

 

 

 

4,315,000

 

1

 

9,957

 

 

 

9,958

Issuance of common stock in connection with settlements

60,250

135

135

Deemed dividend from warrant down-round provision

(134)

(134)

Warrant repricing

134

134

Convertible preferred stock dividend

20

(20)

(20)

Stock-based compensation

2,000

72

72

Restricted stock awards cancelled

(2,500)

Gain on foreign currency translation from closure of subsidiary

48

48

Net loss

(3,398)

(3,398)

Balance as of June 30, 2020

250,000

557

7,723,353

1

205,430

(193,756)

11,675

June 2020 shelf offering - issuance costs

(42)

(42)

Convertible preferred stock dividend

20

(20)

(20)

Stock-based compensation

98,669

662

662

Release of vested restricted common stock

353

Net loss

(2,990)

(2,990)

Balance as of September 30, 2020

250,000

$

577

7,822,375

$

1

$

206,030

$

$

(196,746)

$

9,285

Note: Share amounts have been retroactively adjusted to reflect the impact of a 1-for-20 reverse stock split effected in April 2020, as discussed in Note 6.

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

6

Table of Contents

SUMMIT WIRELESS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2021 and 2020

(in thousands, except share and per share data)

(unaudited)

Nine Months Ended September 30, 

    

2021

    

2020

Cash flows from operating activities:

 

  

 

  

Net loss

$

(8,751)

$

(9,068)

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

 

  

Warrant inducement expense

1,146

Gain on forgiveness of Paycheck Protection Program loan

(859)

Stock-based compensation

 

938

 

809

Depreciation and amortization

59

46

Expense for issuance of common stock for services

 

34

 

Amortization of intangible asset

 

 

25

Amortization of debt discounts

 

 

1,389

Expense related to common stock issued in settlements

 

 

135

Change in fair value of warrant liability

 

 

(24)

Gain on foreign currency translation from closure of subsidiary

48

Changes in operating assets and liabilities:

 

 

Accounts receivable

 

(120)

 

(138)

Inventories

 

(1,246)

 

90

Prepaid expenses and other assets

 

(572)

 

66

Accounts payable

 

153

 

(643)

Accrued liabilities

 

644

 

(234)

Net cash used in operating activities

 

(8,574)

 

(7,499)

Cash flows from investing activities:

 

  

 

  

Purchases of property and equipment

 

(86)

 

(15)

Net cash used in investing activities

 

(86)

 

(15)

Cash flows from financing activities:

 

  

 

  

Proceeds from issuance of common stock upon warrant exercises, net of issuance costs

8,303

Repayment of capital lease

(17)

Proceeds from issuance of common stock in registered direct offering, net of issuance costs

9,026

Proceeds from issuance of common stock, prefunded warrants and warrants, net of issuance costs

6,240

Proceeds from issuance of common stock, net of shelf offering costs

9,951

Proceeds from the exercise of prefunded warrants and common stock warrants

37

Proceeds from issuance of promissory notes

 

 

847

Proceeds from issuance of convertible notes payable, net of issuance costs

1,396

Repayment of convertible notes payable

 

 

(2,151)

Net cash provided by financing activities

 

17,312

 

16,320

Net increase in cash and cash equivalents

 

8,652

 

8,806

Cash and cash equivalents as of beginning of period

 

7,415

 

298

Cash and cash equivalents as of end of period

$

16,067

$

9,104

Supplemental disclosure of cash flow information:

Cash paid for interest

$

3

$

352

Cash paid for income taxes

$

2

$

3

Noncash Investing and Financing Activities:

 

  

 

  

Exchange of convertible preferred stock for common stock

$

1,640

$

Deemed dividend on exchange of convertible preferred stock for common stock

$

(1,192)

$

Issuance of warrants in connection with exchange of preferred stock

$

570

$

Convertible preferred stock dividend

$

34

$

60

Issuance of warrants in connection with convertible notes payable

$

$

630

Issuance of common stock in connection with convertible notes payable

$

$

4

Issuance of warrants in connection with common stock offerings

$

$

8,354

Deemed dividend from warrant repricing

$

$

(134)

Issuance costs for shelf offering of common stock in accounts payable

$

$

35

Warrant repricing

$

$