Filing identity and reporting period
Important identity discrepancy: The supplied filing is Summit Wireless Technologies, Inc. (trading symbol WISA), not Datavault AI Inc. It is a Form 10-Q for the quarter and nine months ended September 30, 2021, filed November 9, 2021. The company develops wireless audio semiconductors and modules. Figures below are unaudited and in U.S. dollars.
Financial performance and position
Third-quarter revenue was $1.807 million, up 198% from $607,000; nine-month revenue was $4.541 million, up 232% from $1.366 million. Management attributed growth mainly to increased sales of modules and speaker bundles. Gross profit was $506,000 for the quarter and $1.260 million for nine months, implying gross margins of about 28.0% and 27.7%, respectively, versus 17.1% and 13.1% in the comparable 2020 periods.
Operating expenses rose to $3.424 million for the quarter and $9.707 million for nine months. Operating losses were $2.918 million and $8.447 million, respectively. Net losses were $2.061 million for the quarter and $8.751 million for nine months, versus $2.990 million and $9.068 million in 2020. Nine-month 2021 results included an $859,000 gain from forgiveness of the Paycheck Protection Program loan, $1.146 million of warrant inducement expense, and a $1.192 million deemed dividend related to exchanging preferred stock for common stock.
Cash and cash equivalents were $16.067 million at September 30, 2021, compared with $7.415 million at December 31, 2020. Nine-month operating cash use was $8.574 million, investing cash use was $86,000, and financing provided $17.312 million. Financing included $8.303 million from warrant exercises and $9.026 million net from a July registered offering. Current assets were $21.706 million and current liabilities $2.865 million. Borrowings were zero at quarter-end; other liabilities included lease obligations, and the filing reports a $8,000 warrant liability. Stockholders’ equity was $18.996 million.
Changes, outlook and material matters
- Revenue growth materially exceeded the increase in cost of revenue, improving gross margin; however, the company continued to incur substantial operating losses and cash burn.
- Common shares outstanding increased from 8.402 million at December 31, 2020 to 15.804 million at September 30, 2021, reflecting warrant exercises, the registered offering, preferred-stock exchange and other issuances.
- Management said current liquid assets were expected to fund operations through the balance of fiscal 2022, but also stated that additional equity or debt financing would be needed based on current operating levels. The filing says substantial doubt about the company’s ability to continue as a going concern was not alleviated; financing availability is not assured.
- No numeric revenue, earnings or margin guidance was provided. Management described continued product development and commercialization efforts, including lower-cost Wi-Fi-based audio solutions. It cited customer concentration, reliance on sole-source suppliers and contractors in China and Japan, technological change, competition, product acceptance, and potential COVID-related demand or supply disruption as risks.
- Disclosure controls and procedures were assessed as not effective as of September 30, 2021. Management reported no material change in internal control over financial reporting during the quarter. The filing reported no pending or threatened legal matter expected to have a material adverse effect.
- Related-party transactions included purchases and sales with Hansong Technology, whose vice president served on the company’s board. The filing also reported a 310,000-share inducement grant to the newly appointed Chief Strategist.
Key facts for investors to verify
- Confirm the issuer identity: the supplied 10-Q is for Summit Wireless Technologies, Inc., not Datavault AI Inc.
- Assess the going-concern disclosure against cash burn, management’s stated fiscal 2022 liquidity expectation, and the need for additional financing.
- Review revenue growth, margin improvement, customer concentration and whether increased sales translate into lower operating losses and cash use.
- Evaluate dilution from equity offerings, warrant exercises and outstanding warrants, as well as the terms and accounting effects of warrant inducements.
- Review the causes of ineffective disclosure controls and any remediation plans; examine supply-chain concentration, COVID exposure and related-party transactions.