Business context and reporting period
This is WiSA Technologies, Inc.’s unaudited Form 10-Q for the three months ended March 31, 2023—not a Datavault AI Inc. filing, despite the request metadata. WiSA sells wireless-audio components and consumer audio products and is developing software-based wireless-audio solutions. Financial amounts below are in U.S. dollars; unless stated otherwise, figures are in millions.
Financial results and position
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | $0.469 | $0.566; down 17% |
| Gross profit (loss) | $(1.253) | $0.062 |
| Gross margin | (267%) | 11% |
| Operating expenses | $4.549 | $3.963 |
| Loss from operations | $(5.802) | $(3.901) |
| Net loss | $(0.921), or $(0.53) per share | $(3.904), or $(26.33) per share |
| Cash used in operating activities | $(4.618) | $(4.034) |
The much smaller reported net loss in 2023 reflects a $5.604 million noncash gain from the change in fair value of warrant liabilities, partly offset by $0.723 million of net interest expense. It does not indicate improved operating profitability. The gross loss primarily reflected a $1.3 million inventory reserve for excess raw materials, as well as lower consumer-product sales and pricing.
At March 31, cash was $5.259 million, versus $2.897 million at year-end. Total assets were $12.577 million and current liabilities were $3.242 million. Stockholders’ equity was $7.763 million, compared with a deficit of $1.996 million at December 31, 2022. The convertible note’s net carrying value was $0.468 million; the filing reports its payoff in April for $1.657 million, including principal, interest and a prepayment premium. No income-tax provision was recorded.
Financing activities provided $6.994 million in Q1, chiefly from the February and March offerings. The company had no off-balance-sheet arrangements. Revenue comprised $0.327 million of components and $0.142 million of consumer audio products.
Material changes and capital actions
- Revenue declined $0.097 million year over year: consumer audio products fell $0.123 million, partly offset by a $0.026 million increase in components.
- Research and development expense increased $0.356 million to $1.893 million; general and administrative expense increased $0.236 million to $1.362 million. Sales and marketing expense was approximately flat at $1.294 million.
- WiSA completed offerings in February and March, receiving net proceeds of approximately $5.3 million and $1.6 million, respectively. The related share and warrant issuances increased potential dilution.
- A 1-for-100 reverse stock split took effect in January 2023. Share and per-share data in the filing are retroactively adjusted for the split.
- Warrant liabilities fell from $8.945 million at year-end to $0.771 million at March 31, reflecting fair-value changes and warrant exercises; the fair-value movement materially affected reported earnings.
Outlook, risks and unusual items
- Going concern: Management states that substantial doubt about WiSA’s ability to continue as a going concern for the twelve months from the report date remains. The company expects continued operating losses and says it needs additional equity or debt financing. It stated that additional proceeds would be needed by Q3 2023 to fund operations through December 31, 2023; financing availability and terms are not assured.
- Business outlook: Management intends to continue selling wireless modules and develop lower-cost software solutions using commercial Wi-Fi modules. It also retained a strategic advisor to explore options including financing, licensing, a partnership, asset sale, merger or other transaction; no outcome is assured.
- Operating risks: Management cited weaker consumer-electronics spending and partner supply-chain disruptions. WiSA depends on sole-source suppliers and contractors in China and Japan for product assembly, testing and semiconductor production. Customer and receivables concentration is significant: two customers generated 45% and 10% of Q1 revenue, and one customer represented 86% of receivables at quarter-end.
- Listing status: WiSA reported regaining Nasdaq’s minimum bid-price compliance in February and said the December offering matter under Nasdaq Rule 5635(d) was closed. Nasdaq staff had notified the company in March of a stockholders’ equity deficiency; WiSA reported March-quarter equity of $7.763 million and believed it had regained compliance with the equity requirement.
- Subsequent events: In April, WiSA paid off the convertible note and raised approximately $1.2 million gross through another stock-and-warrant offering. On May 15, it agreed to issue new warrants to holders exercising existing warrants for cash. These events occurred after quarter-end and are not reflected in March 31 cash.
- Management concluded disclosure controls and procedures were effective as of March 31, 2023. It reported no material change in internal control over financial reporting during the quarter. Management said ordinary-course legal matters were not expected to have a material adverse effect.
Important facts for investors to verify
- Confirm the issuer: this filing is for WiSA Technologies, Inc., not Datavault AI Inc.
- Review cash burn, financing needs and the explicit going-concern warning, including whether subsequent financing provides sufficient runway.
- Assess the quality of Q1 earnings: the reported net loss was substantially affected by a noncash warrant-liability gain, while operating loss and operating cash use remained high.
- Examine the inventory reserve, excess materials and supplier concentration, and whether inventory levels and gross margins improve.
- Evaluate dilution and warrant terms from the February, March and subsequent offerings, including the May warrant-inducement transaction.
- Check the company’s latest Nasdaq listing compliance status and the outcome of its strategic review.