WISA TECHNOLOGIES INC

Previous wording

To date, our operations have been funded through sales of our common and preferred equity, proceeds from the exercise of warrants to purchase common stock, sale of debt instruments, and revenue from the sale of our products. Our condensed consolidated financial statements contemplate the continuation of our business as a going concern. However, we are subject to the risks and uncertainties associated with an emerging business, as noted above we have no established source of capital, and we have incurred recurring losses from operations since inception.

Current wording

To date, our operations have been funded through sales of our common and preferred equity, proceeds from the exercise of warrants, sale of debt instruments, and revenue from the sale of our products. Our condensed consolidated financial statements contemplate the continuation of our business as a going concern. However, we are subject to the risks and uncertainties associated with an emerging business, as noted above we have no established source of capital, and we have incurred recurring losses from operations since inception.

Previous wording

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Current wording

Comparison of the Three and Nine Months Ended September 30, 2024 and 2023

Previous wording

Gross profit for the three months ended June 30, 2024 was $11,000 compared to a gross deficit of ($201,000) for the three months ended June 30, 2023. The gross margin as a percent of sales was 3% for the three months ended June 30, 2024, compared to (47%) for the three months ended June 30, 2023. The improvement in gross profit and gross margin as a percent of sales compared to the prior period is mainly attributable to the fact that the three months ended June 30, 2023 included a $169,000 increase in inventory reserves as a result of certain excess raw materials, primarily attributable to the out of balance inventory associated with longer lead time semiconductor chips, whereas the three months ended June 30, 2024 did not have any increases to inventory reserves.

Current wording

Gross profit for the three months ended September 30, 2024 was $226,000 compared to a gross deficit of ($1,669,000) for the three months ended September 30, 2023. The gross margin (deficit) as a percent of sales was 19% for the three months ended September 30, 2024, compared to (217%) for the three months ended September 30, 2023. The improvement in gross profit and gross margin as a percent of sales compared to the prior period is mainly attributable to: (a) an increase of $403,000 in revenue between comparable periods and (b) the three months ended September 30, 2023 included a $1.4 million increase in inventory reserves as a result of certain excess raw materials, primarily attributable to the out of balance inventory associated with longer lead time semiconductor chips, whereas the three months ended September 30, 2024 included a $22,000 increase in inventory reserves.

Previous wording

Gross deficit for the six months ended June 30, 2024 was ($72,000), compared to a gross deficit of ($1,454,000) for the six months ended June 30, 2023. The improvement in gross deficit between periods is mainly attributable to lower cost of revenue of sales. The gross margin as a percent of sales was (12%) for the six months ended June 30, 2024, compared to (163%) for the six months ended June 30, 2023. The improvement in gross deficit and gross margin as a percent of sales compared to the prior period is mainly attributable to the fact that the six months ended June 30, 2023 included a $1.4 million increase in inventory reserves as a result of certain excess raw materials, primarily attributable to the out of balance inventory associated with longer lead time semiconductor chips, whereas the six months ended June 30, 2024 did not have any increases to inventory reserves.

Current wording

Gross margin for the nine months ended September 30, 2024 was $154,000, compared to a gross deficit of ($3,123,000) for the nine months ended September 30, 2023. The gross margin (deficit) as a percent of sales was 9% for the nine months ended September 30, 2024, compared to (188%) for the nine months ended September 30, 2023. The improvement in gross profit and gross margin as a percent of sales compared to the prior period is mainly attributable to the fact that the nine months ended September 30, 2023 included a $2.8 million increase in inventory reserves as a result of certain excess raw materials, primarily attributable to the out of balance inventory associated with longer lead time semiconductor chips, whereas the nine months ended September 30, 2024 included a $22,000 increase in inventory reserves.

Previous wording

Research and development expenses for the three months ended June 30, 2024 were $1,789,000, a decrease of $144,000, compared to the research and development expenses for the three months ended June 30, 2023 of $1,933,000. The decrease in research and development expenses is primarily related to decreased legal fees and consulting expenses of $77,000 and $68,000, respectively.

Current wording

Research and development expenses for the three months ended September 30, 2024 were $2,225,000, an increase of $387,000, compared to the research and development expenses for the three months ended September 30, 2023 of $1,838,000. The increase in research and development expenses is primarily related to increased salary and benefit expense of $225,000, and increased recruiting fees and consulting expenses of $103,000 and $40,000, respectively.

Previous wording

Research and development expenses for the six months ended June 30, 2024 were $3,504,000, a decrease of $322,000 compared to the research and development expenses for the six months ended June 30, 2023 of $3,826,000. The decrease in research and development expenses is primarily related to decreased consulting expenses, which includes outside engineering, reduced legal fees and reduced stock based compensation of $165,000, $82,000 and $69,000, respectively.

Current wording

Research and development expenses for the nine months ended September 30, 2024 were $5,729,000, an increase of $65,000 compared to the research and development expenses for the nine months ended September 30, 2023 of $5,664,000. The increase in research and development expenses is primarily related to increased salary and benefit expense of $230,000 and recruiting fees of $84,000, offset partially by reduced consulting fees, legal fees and stock-based compensation of $130,000, $89,000 and $88,000, respectively.

Previous wording

Sales and marketing expenses for the three months ended June 30, 2024 were $865,000, a decrease of $224,000 compared to the sales and marketing expenses for the three months ended June 30, 2023 of $1,089,000. The decrease in sales and marketing expenses is primarily related to decreased salary and benefit expense of $134,000 and decreased website expenses of $66,000.

Current wording

Sales and marketing expenses for the three months ended September 30, 2024 were $983,000, a decrease of $421,000 compared to the sales and marketing expenses for the three months ended September 30, 2023 of $1,404,000. The decrease in sales and marketing expenses is primarily related to decreased salary and benefit expense of $151,000 and decreased consulting expenses, tradeshow expenses and advertising expenses of $61,000, $44,000 and $37,000, respectively.

Previous wording

Sales and marketing expenses for the six months ended June 30, 2024 were $1,794,000, a decrease of $589,000 compared to the sales and marketing expenses for the six months ended June 30, 2023 of $2,383,000. The decrease in sales and marketing expenses is primarily related to decreased salary and benefit expense of $308,000 and decreased website expenses, consulting expenses and public relations expenses of $138,000, $56,000 and $42,000, respectively.

Current wording

Sales and marketing expenses for the nine months ended September 30, 2024 were $2,777,000, a decrease of $1,010,000 compared to the sales and marketing expenses for the nine months ended September 30, 2023 of $3,787,000. The decrease in sales and marketing expenses is primarily related to decreased salary and benefit expense of $459,000 and decreased website expenses, consulting expenses, stock-based compensation, and public relations expenses of $155,000, $117,000, $48,000 and $47,000, respectively.

Previous wording

General and administrative expenses for the three months ended June 30, 2024 were $2,762,000, an increase of $1,292,000 compared to the general and administrative expenses for the three months ended June 30, 2023 of $1,470,000. The increase in general and administrative expenses is primarily related to increased investor relations expenses of $1,015,000, which includes stock-based compensation charges of $156,000, and increased legal fees and shareholder expenses of $244,000 and $103,000, respectively, offset partially by decreased stock-based compensation expense of $165,000.

Current wording

General and administrative expenses for the three months ended September 30, 2024 were $2,261,000, an increase of $833,000, compared to the general and administrative expenses for the three months ended September 30, 2023 of $1,428,000. The increase in general and administrative expenses is primarily related to increased investor relations expenses of $736,000, which includes stock-based compensation charges of $156,000, and increased legal fees of $202,000, offset partially by decreased stock-based compensation expense of $128,000.

Previous wording

General and administrative expenses for the six months ended June 30, 2024 were $4,193,000, an increase of $1,361,000, compared to the general and administrative expenses for the three months ended June 30, 2023 of $2,832,000. The increase in general and administrative expenses is primarily related to increased investor relations expenses of $1,304,000, which includes stock-based compensation charges of $156,000, and increased legal fees and shareholder expenses of $134,000 and $131,000, respectively, offset partially by decreased stock-based compensation expense of $253,000.

Current wording

General and administrative expenses for the nine months ended September 30, 2024 were $6,454,000, an increase of $2,194,000, compared to the general and administrative expenses for the three months ended September 30, 2023 of $4,260,000. The increase in general and administrative expenses is primarily related to increased investor relations expenses of $1,728,000, which includes stock-based compensation charges of $312,000, and increased legal fees $336,000, offset partially by decreased stock-based compensation expense of $381,000.

Previous wording

Interest expense, net for the three months ended June 30, 2024 was $4,000, a decrease of $33,000 compared to the interest expense for the three months ended June 30, 2023 of $37,000. Interest expense, net for the six months ended June 30, 2024 was $1,269,000, an increase of $509,000 compared to the interest expense for the six months ended June 30, 2023 of $760,000.

Current wording

Interest income, net for the three months ended September 30, 2024 was $9,000 compared to net interest expense of $52,000 for the three months ended September 30, 2023, a net change of $61,000. Interest expense, net for the nine months ended September 30, 2024 was $1,260,000, an increase of $448,000 compared to the interest expense for the nine months ended September 30, 2023 of $812,000.

Previous wording

The increase in interest expense, net for the six months ended June 30, 2024, was primarily due to the amortization of debt discounts associated with the January 2024 Promissory Note in the principal amount of $1,000,000 that the Company incurred in January 2024 and repaid in full in January 2024.

Current wording

The increase in interest expense, net for the nine months ended September 30, 2024, was primarily due to the amortization of debt discounts associated with the January 2024 Promissory Note in the principal amount of $1,000,000 that the Company incurred in January 2024 and repaid in full in January 2024.

Previous wording

Change in fair value of warrant liability for the three months ended June 30, 2024 was a loss of $37,255,000, compared to a gain of $246,000 for the three months ended June 30, 2023. The change in fair value of the warrant liability for the three months ended June 30, 2024 was due to the issuance of additional warrants to purchase 5,602,693 shares of common stock and the subsequent valuing of such warrants. The additional warrants were issued as a result of provision in certain of the warrant agreements that was triggered following the Company’s reverse stock split that occurred in April 2024.

Current wording

Change in fair value of warrant liability for the nine months ended September 30, 2024 was a loss of $29,120,000 compared to a gain of $6,134,000 for the nine months ended September 30, 2023. The change in fair value of the warrant liability for the nine months ended September 30, 2024 was due to the issuance of additional warrants to purchase 5,602,693 shares of common stock and the subsequent valuing of such warrants. The additional warrants were issued as a result of provision in certain of the warrant agreements that was triggered following the Company’s reverse stock split that occurred in April 2024. The change in fair value of the warrant liabilities for the nine months ended September 30, 2023 was due to the issuance of warrants in February 2023 and the subsequent decrease in the price of our common stock at September 30, 2023 compared to the price of our common stock on the date of the warrant issuance as well as the decline in our common stock price from December 31, 2022, related to existing warrant liabilities.

Previous wording

Cash and cash equivalents as of June 30, 2024 were $6,113,000 compared to $411,000, as of December 31, 2023.

Current wording

Cash and cash equivalents as of September 30, 2024 were $3,921,000 compared to $411,000, as of December 31, 2023.

Previous wording

We recorded a net loss of $39,958,000 for the six months ended June 30, 2024 and used net cash in operating activities of $9,045,000. We incurred a net loss of $6,247,000 for the six months ended June 30, 2023 and used net cash in operating activities of $9,126,000. Excluding non-cash adjustments, the primary reasons for the increase in the use of net cash from operating activities during the six months ended June 30, 2024, was related to an increase in prepaid expenses and decrease in accounts payable, partially offset by a decrease in inventories.

Current wording

We recorded a net loss of $45,050,000 for the nine months ended September 30, 2024 and used net cash in operating activities of $13,276,000. We incurred a net loss of $12,358,000 for the nine months ended September 30, 2023 and used net cash in operating activities of $12,101,000. Excluding non-cash adjustments, the primary reasons for the increase in the use of net cash from operating activities during the nine months ended September 30, 2024, was related to an increase in prepaid expenses and inventories, which was partially offset by a decrease in accounts payable.

Previous wording

We have financed our operations to date primarily through the issuance of equity securities, proceeds from the exercise of warrants to purchase common stock and sale of debt instruments. In January 2024, we received gross proceeds of $600,000 from the issuance of promissory notes and common stock purchase warrants to certain accredited investors. In February 2024, we received gross proceeds of approximately $10.0 million from the public offering of 1,025,600 units, with each unit consisting of one share of common stock (or pre-funded warrant in lieu thereof) and one warrant, each to purchase one (1) share of common stock. In March 2024 we received net proceeds of approximately $2.3 million from the issuance of 417,833 shares of common stock, 93,342 pre-funded common stock warrants and the issuance of 511,175 warrants to purchase common stock. On April 19, 2024, we received net proceeds of approximately $591,000 from the issuance of 225,834 shares of common stock and the issuance of 225,834 warrants to purchase common stock. On April 23, 2024, we received net proceeds of approximately $1.6 million from the issuance of 361,904 shares of common stock and the issuance of 542,856 warrants to purchase common stock. On April 30, 2024, we received net proceeds of approximately $2.1 million from the issuance of 418,845 shares of common stock and the issuance of 418,845 warrants to purchase common stock. On May 15, 2024, we received net proceeds of approximately $2.3 million from the issuance of 785,000 shares of common stock and the issuance of 785,000 warrants to purchase common stock. On May 17, 2024, we received net proceeds of approximately $2.1 million from the issuance of 675,000 shares of common stock and the issuance of 675,000 warrants to purchase common stock. We will need to raise additional proceeds via the issuance of equity securities and/or the sale of debt instruments in the fourth quarter of 2024 to fund operations for fiscal year 2025.

Current wording

We have financed our operations to date primarily through the issuance of equity securities, proceeds from the exercise of warrants, sale of debt instruments and revenue from the sale of our products. In January 2024, we received gross proceeds of $600,000 from the issuance of promissory notes and common stock purchase warrants to certain accredited investors. In February 2024, we received gross proceeds of approximately $10.0 million from the public offering of 1,025,600 units, with each unit consisting of one share of common stock (or pre-funded warrant in lieu thereof) and one warrant, each to purchase one (1) share of common stock. In March 2024 we received net proceeds of approximately $2.3 million from the issuance of 417,833 shares of common stock, 93,342 pre-funded common stock warrants and the issuance of 511,175 warrants to purchase common stock. On April 19, 2024, we received net proceeds of approximately $591,000 from the issuance of 225,834 shares of common stock and the issuance of 225,834 warrants to purchase common stock. On April 23, 2024, we received net proceeds of approximately $1.6 million from the issuance of 361,904 shares of common stock and the issuance of 542,856 warrants to purchase common stock. On April 30, 2024, we received net proceeds of approximately $2.1 million from the issuance of 418,845 shares of common stock and the issuance of 418,845 warrants to purchase common stock. On May 15, 2024, we received net proceeds of approximately $2.3 million from the issuance of 785,000 shares of common stock and the issuance of 785,000 warrants to purchase common stock. On May 17, 2024, we received net proceeds of approximately $2.1 million from the issuance of 675,000 shares of common stock and the issuance of 675,000 warrants to purchase common stock. In September 2024, we received net proceeds of approximately $2.4 million from the exercise of 1,193,721 warrants to purchase common stock. We will need to raise additional proceeds via the issuance of equity securities and/or the sale of debt instruments in the fourth quarter of 2024 to fund operations for fiscal year 2025.