Datavault AI Inc. current report, 22 March 2020

Business Context and Reporting Period

This Form 8-K is filed by Summit Wireless Technologies, Inc. (trading symbol: WISA) on March 26, 2020, reporting events occurring on March 22, 2020. The Company is an emerging growth company incorporated in Delaware. The filing primarily addresses a material definitive agreement for a private placement of securities and ongoing compliance issues with Nasdaq listing standards.

Key Financial Metrics and Transaction Details

The filing details a private placement transaction rather than standard periodic financial results. Key metrics include:

  • Convertible Security Principal: $2,040,000.
  • Gross Proceeds: $1,700,000 (before fees and expenses).
  • Commitment Fee: $85,000 payable to the Investor.
  • Placement Agent Fees: $136,000 cash fee plus a warrant to purchase 408,000 shares.
  • Warrant Issuance: Investor warrant to purchase 4,553,571 shares at $0.32 per share.
  • Use of Proceeds: Working capital, debt repayment, and general corporate purposes.
  • Interest Rate: The Convertible Security does not bear interest.

The filing text does not provide specific revenue, profit, cash flow, or margin figures for the reporting period, referring instead to a press release (Exhibit 99.2) for Q4 2019 updates.

Material Changes and Agreements

On March 22, 2020, the Company entered into a Securities Purchase Agreement with an institutional investor. The transaction involves a senior secured convertible instrument and warrants. Key terms include:

  • Conversion Price: The lesser of 90% of the average of the five lowest daily VWAPs over the prior 20 trading days or a Base Conversion Price of $0.32.
  • Antidilution: Full ratchet protection applies to both the Convertible Security and Warrants if shares are issued at a lower price.
  • Security: The debt is secured by a senior lien on all assets, trademarks, and patents of the Company and its subsidiary, WiSA, LLC.
  • Default Provisions: Upon default, the Investor may demand repayment at 120% of the principal or convert at a discounted price (80% of the average of the three lowest daily VWAPs).

Outlook, Risks, and Contingencies

The Company faces significant risks regarding its continued listing on The Nasdaq Capital Market:

  • Stockholders' Equity Requirement (Rule 5550(b)): The Company failed to meet the $2,500,000 minimum stockholders' equity requirement. Nasdaq accepted a compliance plan on March 23, 2020, granting an extension until May 18, 2020, to complete an additional equity raise. Failure to comply by June 30, 2020, may result in delisting.
  • Audit Committee Requirement (Rule 5605): Following the resignation of director Brian Herr, the Company is non-compliant with the requirement for three independent directors on the audit committee. The Company has a cure period ending on the earlier of its next annual meeting or February 10, 2021 (or August 10, 2020, if the meeting is held sooner).
  • Market Capitalization Default: The Convertible Security defines an event of default if the Company's market capitalization falls below $2,500,000 for ten consecutive days.
  • Reverse Stock Split: The Company covenanted to call a stockholder meeting for a reverse stock split if the closing trade price falls below $1.00.

Investor Verification Checklist

  • Verify the closing of the $1.7 million private placement and the actual net proceeds received after fees.
  • Confirm the Company's progress toward the May 18, 2020, deadline to raise additional equity to satisfy Nasdaq Rule 5550(b).
  • Monitor the appointment of a new independent director to restore compliance with Nasdaq Rule 5605 regarding the audit committee.
  • Review the attached press release (Exhibit 99.2) for specific Q4 2019 revenue and operational metrics not detailed in this 8-K.
  • Assess the impact of the full ratchet antidilution provisions on existing shareholders if future equity is issued below $0.32.