AIRGAIN INC

Previous wording

Airgain is a premier provider of wireless connectivity solutions, offering a range of embedded components, external antennas, and integrated systems worldwide. We streamline wireless connectivity across devices and markets, with a focus on solving complex connectivity challenges, expediting time to market, and optimizing wireless signals. Our mission is to connect the world through optimized, integrated wireless solutions. Our product portfolio focuses on three key markets: enterprise, consumer, and automotive.

Current wording

Airgain is a premier provider of wireless connectivity solutions, offering a range of embedded components, external antennas, and integrated systems worldwide. We streamline wireless connectivity across devices and markets, with a focus on providing solutions for complex connectivity challenges, expediting time to market, and optimizing wireless signals. Our mission is to connect the world through optimized, integrated wireless solutions. Our product portfolio focuses on three key markets: enterprise, consumer, and automotive.

Previous wording

Our current enterprise products include embedded cellular modems, antennas for access points and Internet of Things (IoT) applications, and asset trackers. We expect to expand our product offering with fixed wireless access solutions and Smart Network Controlled Cellular Repeaters (Smart NCRs). Our consumer products include embedded antennas for consumer access points, wireless gateways, smart home devices and fixed wireless access devices. Our current automotive products include aftermarket antennas that are typically connected to third-party cellular and Wi-Fi-enabled routers, digital video evidence devices, and telematics gateways. We also recently launched a second generation AirgainConnect® Fleet system solution – a low profile, roof-mounted 5G vehicle gateway, combining a cellular modem, antennas, and additional features into a single device.

Current wording

Our current enterprise products include embedded cellular modems, antennas for access points and Internet of Things (IoT) applications, asset trackers, and fixed wireless access (FWA) devices. We expect to expand our product offering with Smart Network Controlled Cellular Repeaters (Smart NCRs). Our consumer products include embedded antennas for consumer access points, wireless gateways, smart home devices and FWA devices. Our current automotive products include aftermarket antennas that are typically connected to third-party cellular and Wi-Fi-enabled routers, digital video evidence devices, and telematics gateways. We expect to expand our product offering with a second generation AirgainConnect® Fleet system solution – a low profile, roof-mounted 5G vehicle gateway, combining a cellular modem, antennas, and additional features into a single device.

Previous wording

We have a rich history of providing radio frequency (RF) expertise, services, and solutions to mobile operators and major original equipment manufacturers (OEMs). With the addition of NimbeLink products in 2021, we expanded our capabilities to include embedded cellular modems, asset trackers and custom IoT systems. We are leveraging our RF and systems experience, and our Mobile Network Operator (MNO) and Multiple Service Operator (MSO) relationships to deliver new and differentiated products.

Current wording

We have a rich history of providing radio frequency (RF) expertise, services, and solutions to mobile operators and major original equipment manufacturers (OEMs). We expanded our capabilities to include embedded cellular modems, asset trackers and custom IoT systems with our NimbeLink products. We are leveraging our RF and systems experience, and our Mobile Network Operator (MNO) and Multiple Service Operator (MSO) relationships to deliver new and differentiated products.

Previous wording

The enterprise market requires reliable wireless access across various settings, including smart cities, utilities, factories, buildings, campuses, transportation hubs, stadiums, and suburban developments. Our NimbeLink embedded modems serve numerous enterprise sectors requiring cellular connectivity such as packaging, logistics, EV charging, smart cities, smart buildings, agriculture, asset tracking, and self-service innovations. These NimbeLink cellular modems, which are both patented and end-device certified, minimize the need for additional carrier certifications. Our asset trackers are deployed across transportation, supply chain, and other specialized applications. In addition to hardware, our asset tracking offering includes a recurring revenue component, our subscription-based NLink cloud-based device enablement platform, which allows for deployment and integration with enterprise systems via open APIs. Our custom products feature joint engineering collaboration with strategic customers to develop industrial IoT products (IIoT) for specific applications while helping them reduce their time to market. Our enterprise IoT and machine-to-machine (M2M) antennas are extensively deployed in diverse systems, devices, and applications, including access points, gateways, fixed wireless access devices and utility meters. In 2023, we unveiled a new line of Fixed Wireless Access products designed to address 5G connectivity challenges, reduce deployment costs and enhance customer experiences. In 2023, we also announced our Lighthouse™ smart repeaters platform designed to reduce an operator’s capital expenses for extending range, while enhancing 5G coverage.

Current wording

The enterprise market requires reliable wireless access across various settings, including smart cities, utilities, factories, buildings, campuses, transportation hubs, stadiums, and suburban developments. Our NimbeLink embedded modems serve numerous enterprise sectors requiring cellular connectivity such as packaging, logistics, EV charging, smart cities, smart buildings, agriculture, asset tracking, and self-service innovations. These NimbeLink cellular modems, which are both patented and end-device certified, minimize the need for additional carrier certifications. Our asset trackers are deployed globally across transportation, supply chain, and other specialized applications. In addition to hardware, our asset tracking offering includes a recurring revenue component, our subscription-based NLink cloud-based device enablement platform, which allows for deployment and integration with enterprise systems via open application programming interfaces. Our custom products feature joint engineering collaboration with strategic customers to develop industrial IoT products (IIoT) for specific applications while helping them reduce their time to market. Our enterprise IoT and machine-to-machine (M2M) antennas are extensively deployed in diverse systems, devices, and applications, including access points, gateways, FWA devices and utility meters. In 2023, we unveiled a new line of FWA products designed to address 5G connectivity challenges, reduce deployment costs and enhance customer experiences. We started shipping our FWA devices in the second quarter of 2024. In 2023, we announced our Lighthouse™ smart repeaters platform designed to reduce an operator’s capital expenses for extending range, while enhancing 5G coverage.

Previous wording

Macroeconomic conditions continued to create demand softness industrywide, including downward pressures relating to the anticipated service provider shift from Wi-Fi 6E to Wi-Fi 7. This demand softness combined with excess inventories in our channels and those of our direct customers, drove quarter-over-quarter declines in our Enterprise, Automotive and Consumer markets. We believe that the fourth quarter of 2023 was the trough for our business. As we turn to 2024, we anticipate a year of gradual growth driven by recoveries in our end markets, investments in product innovations, and launches of our 5-G connectivity initiatives. We remain focused on the execution of our strategic product initiatives and operational efficiencies, as they lay out the foundation of our revenue and profitability growth when market conditions improve.

Current wording

Macroeconomic conditions continued to create demand softness industrywide, including downward pressures relating to the anticipated service provider shift from Wi-Fi 6E to Wi-Fi 7. This demand softness combined with excess inventories in our channels and those of our direct customers, drove quarter-over-quarter declines in our Enterprise, Automotive and Consumer markets. We believe that the fourth quarter of 2023 was the trough for our business. The first half of 2024 saw market recoveries in our Enterprise and Consumer markets. As we move into the second half of 2024, the industry wide headwinds we have faced continue to dissipate, and our indicators suggest that previously broad demand softness has become more product and customer specific, as the industry re-calibrates to optimal inventory levels. We remain focused on the execution of our strategic product initiatives and operational efficiencies, as they lay out the foundation of our revenue and profitability growth when market conditions improve.

Previous wording

We believe that our performance and future success depend upon several factors including macroeconomic and geopolitical uncertainties, epidemic diseases, impact of inflation on consumer spending, and our ability to transition from a component provider to a wireless systems provider and to develop technology leadership and expand our markets.

Current wording

We believe that our performance and future success depend upon several factors including macro-economic and geopolitical uncertainties, epidemic diseases, impact of inflation on consumer spending, and our ability to transition from a component provider to a wireless systems provider and to develop technology leadership and expand our markets.

Previous wording

In addition, inflation generally affects us by increasing our raw material and employee-related costs and other expenses. Our financial condition and results of operations may also be impacted by other factors we may not be able to control, such as uncertain global economic conditions, pandemics and epidemics, global trade disputes or political instability, as well as conflicts around the world. We do not believe that such factors had a material adverse impact on our results of operations during the three months ended March 31, 2024.

Current wording

In addition, inflation generally affects us by increasing our raw material and employee-related costs and other expenses. Our financial condition and results of operations may also be impacted by other factors we may not be able to control, such as uncertain global economic conditions, pandemics and epidemics, global trade disputes or political instability, as well as conflicts around the world. We do not believe that such factors had a material adverse impact on our results of operations during the six months ended June 30, 2024.

Previous wording

Comparison of the Three Months Ended March 31, 2024(dollars in thousands)

Current wording

Comparison of the Three and Six Months Ended June 30, 2024 and 2023(dollars in thousands)

Previous wording

Sales for the three months ended March 31, 2024 decreased $2.2 million or 13.5% compared to the same period in the prior year. Consumer market sales decreased $1.6 million to $3.5 million for the three months ended March 31, 2024 from $5.1 million during the same period in the prior year, primarily due to lower sales to cable operators. Automotive market sales decreased $1.1 million, to $1.8 million for the three months ended March 31, 2024, from $2.9 million during the same period in the prior year, driven by excess inventory correction impacting our Aftermarket antenna sales direct customers. Enterprise market sales increased $0.5 million to $8.9 million for the three months ended March 31, 2024 from $8.4 million during the same period in the prior year, primarily due to channel correction of excess inventory in 2023, impacting our IIoT products sales.

Current wording

Sales for the three months ended June 30, 2024 decreased $0.6 million or 4.1% compared to the same period in the prior year. Consumer market sales decreased $1.4 million to $4.8 million for the three months ended June 30, 2024 from $6.2 million during the same period in the prior year, primarily due to demand softness with our cable and broadband operators. Automotive market sales decreased $0.6 million to $1.7 million for the three months ended June 30, 2024 from $2.3 million during the same period in the prior year, driven by excess inventory correction impacting our sales to aftermarket antenna customers. Enterprise market sales increased $1.3 million to $8.6 million for the three months ended June 30, 2024 from $7.3 million during the same period in the prior year, primarily due to channel correction of excess inventory in 2023 and the launch of new product lines.

Previous wording

Cost of goods sold for the three months ended March 31, 2024 decreased $1.5 million or 14.5% compared to the same period in the prior year. The decline was primarily due to sales decline.

Current wording

Cost of goods sold for the three months ended June 30, 2024 decreased $0.5 million or 5.4% compared to the same period in the prior year. Cost of goods sold for the six months ended June 30, 2024 decreased $2.0 million or 10.1% compared to the same period in the prior year. The declines for both periods were primarily due to sales decline.

Previous wording

Gross profit for the three months ended March 31, 2024 decreased $0.7 million or 11.7%, compared to the same period in the prior year, driven by lower sales. Gross profit as a percentage of sales for the three months ended March 31, 2024 increased by 80 basis points compared to the same period in the prior year. The increase was primarily driven by higher automotive margins.

Current wording

Gross profit for the three months ended June 30, 2024 decreased $0.1 million or 2.1%, compared to the same period in the prior year, driven by lower sales. Gross profit as a percentage of sales for the three months ended June 30, 2024 increased by 80 basis points compared to the same period in the prior year. The increase was primarily driven by higher automotive and enterprise margins.

Previous wording

General and administrative expense for the three months ended March 31, 2024 decreased $0.9 million or 22.8% compared to the same period in the prior year. The decrease was driven by lower employee, marketing and professional service expenses.

Current wording

Operating expenses for the six months ended June 30, 2024 decreased $0.7 million or 4.2% compared to the same period in the prior year. The decrease was driven by lower general administration and sales and marketing expenses, partially offset by higher research and development expenses.

Previous wording

Income tax expense for the three months ended March 31, 2024 decreased $0.2 million or 270.7% compared to the same period in the prior year, primarily due to receiving a tax refund.

Current wording

Income tax expense for the three months ended June 30, 2024 increased $36,000 compared to the same period in the prior year. Income tax expense for the six months ended June 30, 2024 decreased $0.2 million or 232.5% compared to the same period in the prior year, primarily due to a decrease in the estimated income tax accrual.

Previous wording

We had cash and cash equivalents of $7.2 million at March 31, 2024.

Current wording

We had cash and cash equivalents of $8.4 million at June 30, 2024.

Previous wording

Prior to 2013 and for the years ended 2018, 2020, 2021 2022, and 2023, we have incurred net losses. As a result, we have an accumulated deficit of $81.0 million at March 31, 2024.

Current wording

Prior to 2013 and for the years ended 2018, 2020, 2021 2022, and 2023, we have incurred net losses. As a result, we have an accumulated deficit of $83.5 million at June 30, 2024.

Previous wording

We plan to continue to invest for long-term growth, including expanding our sales engineering and sales teams to execute on our product roadmap and further penetrate domestic and international markets. We anticipate that these investments will continue to increase in absolute dollars. We believe that our existing cash and cash equivalents balance will be sufficient to meet our working capital requirements for at least the next 12 months.

Current wording

We plan to continue to invest for long-term growth, including expanding our engineering and sales teams to execute on our product roadmap and further penetrate domestic and international markets. We anticipate that these investments will continue to increase in absolute dollars. We believe that our existing cash and cash equivalents balance will be sufficient to meet our working capital requirements for at least the next 12 months.

Previous wording

Net cash used in operating activities. Net cash used by operating activities was $1.1 million for the three months ended March 31, 2024. This was primarily driven by the net loss of $2.5 million offset by $1.9 million in non-cash expenses and a $0.7 million net change in operating assets and liabilities.

Current wording

Net cash used in operating activities. Net cash used by operating activities was $2.3 million for the six months ended June 30, 2024. This was primarily driven by the net loss of $5.0 million and a $1.4 million net change in operating assets and liabilities, offset by $4.1 million in non-cash expenses.

Previous wording

Net cash used in investing activities. Net cash used in investing activities of $0.1 million for the three months ended March 31, 2024 was for purchases of property and equipment.

Current wording

Net cash used in investing activities. Net cash used in investing activities of $0.2 million for the six months ended June 30, 2024 was for purchases of property and equipment.

Previous wording

Net cash provided by financing activities. Net cash provided by financing activities of $0.5 million for the three months ended March 31, 2024 was primarily from $0.5 million of net proceeds after fees and expenses from issuing approximately 124,600 shares of common stock via an “at-the-market” (ATM) offering. Additionally, we received $0.1 million from the proceeds from common stock issuances under the ESPP. These proceeds were partially offset by $0.1 million tax payments for net share settlement of restricted stock units.

Current wording

Net cash provided by financing activities. Net cash provided by financing activities of $3.0 million for the six months ended June 30, 2024 was primarily from $3.0 million of net proceeds after fees and expenses from the issuance of approximately 629,000 shares of common stock via our ATM offering program. Additionally, we received $0.1 million from the proceeds of common stock issuances under the ESPP. These proceeds were partially offset by $0.1 million tax payments for net share settlement of restricted stock units.

Previous wording

In August 2023, we applied for ERC refunds, totaling $2.5 million, net of professional fees. Pending the Internal Revenue Service’s (IRS) review and determination of our eligibility, we anticipate receiving the ERC refunds within the next nine months. However, there can be no assurance we will ultimately receive the amounts we currently expect, if any, or the timeframe of any such receipt, based on IRS review or otherwise.

Current wording

In August 2023, we applied for ERC refunds, totaling $2.5 million, net of professional fees. Pending the Internal Revenue Service’s (IRS) review and determination of our eligibility, we are uncertain as to the timeframe of credit receipts. There is no assurance we will ultimately receive the amounts that we currently expect, if any, or the timeframe of any such receipt, based on IRS review or otherwise. As of June 30, 2024, we have not recognized the ERC in our financial statements.

Previous wording

The relevant conditions and events that are known and reasonably known as of March 31, 2024 related to the Company have not significantly changed since December 31, 2023. Therefore, the resulting cash inflows along with the existing funds and the capital that is anticipated to be raised from the ATM offering are expected to be sufficient for the Company’s financial obligations as they become due in 2024.

Current wording

The relevant conditions and events that are known and reasonably known as of June 30, 2024 related to the Company have not significantly changed since December 31, 2023. Therefore, the resulting cash inflows along with the existing funds are expected to be sufficient for the Company’s financial obligations as they become due in 2024.

Previous wording

There have been no material changes outside the ordinary course of our business during the three months ended March 31, 2024, to the information regarding our contractual obligations that was disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

There have been no material changes outside the ordinary course of our business during the six months ended June 30, 2024, to the information regarding our contractual obligations that was disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

On March 7, 2024, the Company entered into an At-the-Market Issuance Sales Agreement (the “Sales Agreement”) with Craig-Hallum Capital Group LLC (“Craig-Hallum”). Pursuant to the Sales Agreement, the Company may sell, at its option, up to an aggregate of $5.0 million in shares of its Common Stock through Craig-Hallum, as sales agent. Sales of the Common Stock made pursuant to the Sales Agreement have been or will be made under the Company’s Registration Statement on Form S-3 filed on March 15, 2022 (File No. 333-263568) (the “Registration Statement”), which was declared effective by the Securities and Exchange Commission on May 9, 2022. Subject to the terms and conditions of the Sales Agreement, Craig-Hallum may sell the shares, if any, only by methods deemed to be an “at the market” offering as defined in Rule 415(a)(4) promulgated under the Securities Act. The Company has agreed to pay Craig-Hallum a sales commission of 3.0% of the gross proceeds for sales under the Sales Agreement and to provide Craig-Hallum with customary indemnification and contribution rights, including for liabilities under the Securities Act. In addition, the Company is required to reimburse Craig-Hallum for certain specified expenses in connection with entering into the Sales Agreement.

Current wording

On March 7, 2024, the Company entered into an At-the-Market Issuance Sales Agreement (the Sales Agreement) with Craig-Hallum Capital Group LLC (Craig-Hallum). Pursuant to the Sales Agreement, the Company may sell, at its option, up to an aggregate of $5.0 million in shares of its common stock through Craig-Hallum, as sales agent. Subject to the terms and conditions of the Sales Agreement, Craig-Hallum may sell the shares, if any, only by methods deemed to be an “at the market” offering as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the Securities Act). The Company has agreed to pay Craig-Hallum a sales commission of 3.0% of the gross proceeds for sales under the Sales Agreement and to provide Craig-Hallum with customary indemnification and contribution rights, including for liabilities under the Securities Act. In addition, the Company is required to reimburse Craig-Hallum for certain specified expenses in connection with entering into the Sales Agreement.

Previous wording

The Company evaluated the goodwill impairment considerations as of March 31, 2024. The Company's macroeconomic conditions, stock share, market capitalization, working capital, industry and market conditions, operating cash flow and forecasted cash flows have not significantly changed since the annual goodwill impairment assessment that was performed as of December 31, 2023. After assessing the totality of events or circumstances, the Company determined that there were no events or circumstances as of March 31, 2024 that indicates that it is more likely than not that the fair value of a reporting unit may be less than its carrying amount. Since there was no indication that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company determined that a quantitative goodwill impairment test was not necessary as of March 31, 2024. Based on the assessment performed, we concluded that an impairment charge to goodwill was not required as of March 31, 2024.

Current wording

The Company evaluated the goodwill impairment considerations as of June 30, 2024. The Company's current and expected cash flows, and the macro-economic and industry conditions have not significantly changed since the annual goodwill impairment assessment that was performed as of December 31, 2023, while the Company’s market capitalization materially increased since December 31, 2023. After assessing the totality of events or circumstances, the Company determined that there were no events or circumstances as of June 30, 2024 that indicate that it is more likely than not that the fair value of a reporting unit may be less than its carrying amount. Since there was no indication that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company determined that a quantitative goodwill impairment test was not necessary as of June 30, 2024. Based on the assessment performed, we concluded that an impairment charge to goodwill was not required as of June 30, 2024.