AIRGAIN INC

Notes to Consolidated Financial Statements

Note 1. Description of Business and Basis of Presentation

Description of Business

Airgain, Inc. was incorporated in the State of California on March 20, 1995; and reincorporated in the State of Delaware on August 17, 2016. Airgain, Inc. together with its subsidiaries are herein referred to as the “Company,” “we,” or “our.” Headquartered in San Diego, California, Airgain, Inc. (NASDAQ: AIRG) is a leading provider of advanced wireless connectivity solutions that drive cutting-edge innovation in 5G technology. We are committed to delivering high-performance, cost-effective, and energy-efficient wireless solutions that enable rapid market deployment. Our mission is to connect the world through integrated, innovative, and optimized wireless solutions. Our diverse product portfolio serves three primary markets: enterprise, automotive, and consumer.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding financial reporting. The consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. All intercompany transactions and investments have been eliminated in consolidation.

Segment Information

The Company is engaged in research and development, production, commercialization and sale of wireless connectivity solutions, offering integrated systems, embedded components, and external antennas worldwide. All of the Company’s products are manufactured by third-party contract manufacturers. Product sales for the year ended December 31, 2025 accounted for approximate 94% of the Company’s total revenue, as compared to 6% coming from service revenue. Due to similarities in its products, and methods of production, the Company has a single company-wide management team that administers operations on a consolidated basis. We concluded that we have only one operating and reportable segment: to provide wireless connectivity solutions.

The determination of a single business segment is consistent with the consolidated financial information regularly reviewed by the Chief Operating Decision Maker (CODM), the Chief Executive Officer Jacob Suen, for the purposes of assessing performance, allocating resources and planning. The CODM regularly reviews consolidated revenue, gross margin, significant expenses, operating margin, and profit and loss. The CODM compares and analyzes the underlying determinants of the current metrics with the prior performance data and forecasts.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note 2. Significant Accounting Policies

Cash Equivalents

Cash equivalents are comprised of short-term, highly liquid investments with maturities of 90 days or less at the date of purchase. The cash balances may, at times, exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $250,000.

Trade Accounts Receivable

We perform ongoing credit evaluations of our customers and assess each customer’s credit worthiness. The policy for determining when receivables are past due or delinquent is based on the contractual terms agreed upon. We monitor collections and payments from our customers and analyze for an allowance for credit losses. The allowance for credit losses is based upon applying an expected credit loss rate to receivables based on the historical loss rate and is adjusted for current conditions, including any specific customer collection issues identified, and economic conditions forecast. Delinquent account balances are written off after management has determined that the likelihood of collection is remote.

An allowance for credit losses is established when, in the opinion of management, collection of the account is doubtful.

Trade accounts receivable, net amounted to$12.8 million,$11.7 million and$7.4 million as of December 31, 2025, 2024, and 2023, respectively.

Inventories

All of the Company’s products are manufactured by third parties that retain ownership of the inventory until title is transferred to the customer at the shipping point. In some situations, the Company retains ownership of consigned inventories at third-party contract manufacturer (CM) locations due to actual or pending customers' orders. The Company also maintains certain inventories at its own locations and at third-party logistics providers (3PLs), and it retains ownership of such inventory until title transfers in accordance with the applicable shipping terms. The Company recognizes the consigned and 3PL inventory as an asset in its financial statements. In certain instances, shipping terms are delivery-at-place and the Company is responsible for arranging transportation and delivery of goods ready for unloading at the named place. In those instances, the Company bears all risk involved in bringing the goods to the named place and records the related inventory in transit to the customer as inventory on the accompanying consolidated balance sheets.

Inventory is stated at the lower of cost or net realizable value. For items manufactured by our CMs, cost is determined using the weighted average cost method. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period. Write downs for excess and obsolete inventories are estimated based on product life cycles, quality issues, and historical experience.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets, generally three toten years. The estimated useful lives for leasehold improvements are determined as either the estimated useful life of the asset or the lease term, whichever is shorter. Repairs and maintenance are expensed as incurred. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. When assets are disposed of (or otherwise sold), the cost and related accumulated depreciation are removed from the accounts and any gain or loss on the disposal of property and equipment is classified as other income (expense) in the Company's consolidated statement of operations.

We account for our goodwill under the authoritative guidance ASC 350 for goodwill and other intangible assets and the provisions of ASU 2017-04, Simplifying the Test for Goodwill Impairment, which we early adopted in fiscal year 2020. Goodwill is not amortized but is tested for impairment annually as of December 31 or more frequently if events or changes in circumstances indicate that our goodwill might be impaired. Such circumstances may include, but not limited to (1) a decline in macro-economic conditions, (2) a significant decline in our financial performance or (3) a significant decline in the price of our common stock for a sustained period of time. We consider the aggregation of the relevant qualitative factors, and conclude whether it is more likely than not that the fair value of our reporting unit is less than the carrying value.

If we conclude that it is more likely than not that the fair value of our reporting unit is less than the carrying value, we perform a quantitative impairment test. The quantitative impairment test compares the fair value of the reporting unit to its carrying amount, including goodwill. If the fair value of the reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, goodwill is not considered impaired. However, if the fair value of the reporting unit is lower than the carrying amount of the net assets assigned to the reporting unit, an impairment charge is recognized equal to the excess of the carrying amount over the fair value. The impairment charge is limited to the goodwill amount of the reporting unit.

Determiningthe fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. For the market approach of valuation, we may use the guideline public company method. Under this method we utilize information from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit to derive an indication of value. For the income approach of valuation, we use a discounted cash flow methodology to derive an indication of value, which required management to make estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, income tax rates, EBITDA, perpetual growth rates, and long-term discount rates, among others. In addition, we make certain judgments and assumptions in determining our reporting unit. We base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates.

Intangibles

The Company’s identifiable finite-lived intangible assets are comprised of acquired intangibles, developed technologies, customer relationships, noncompete agreements and licensed technology. The cost of the finite-lived intangible assets is amortized on a straight-line basis over the assets’ respective estimated useful lives.

We amortize intangible assets with finite lives over their estimated useful lives and review them for impairment whenever an impairment indicator exists. Amortization is based on the pattern in which the economic benefits of the intangible asset will be consumed or on a straight-line basis when the consumption pattern is not apparent.

Determining the recoverability of long-lived or intangible assets is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows and the future market value of our asset group. In addition, we make certain judgments and assumptions in determining our asset group. We base our recoverability estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates.

Revenue Recognition

Under ASC Topic 606 “Revenue from Contracts with Customers”, the Company recognizes revenue when, or as the control of the promised goods or services is transferred to the customers in an amount that reflects the consideration the Company expects to be entitled in exchange for those goods or services. In applying this core principle, the Company performs the following five-steps only when it is probable that substantially all of the consideration that it will be entitled in exchange for the goods or services that will be transferred to the customer:

(i) identify the contract(s) with the customer,

(ii) identify the performance obligations in the contract,

(iii) determine the transaction price,

(iv) allocate the transaction price to the performance obligation(s) in the contract, and

(v) recognize revenue when or as the entity satisfies performance obligations. A performance obligation is at a point in time, except if it meets any of the three criteria, which will require recognition of revenue over time:

• the customer simultaneously receives and consumes the benefit provided by the entity’s performance as the entity performs,

• the entity’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is created or enhanced, and

• the entity's performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.

Most of the Company's revenue is generated from product sales and the revenue is recognized at a point-in-time when control is transferred to the customer. Each purchase order, along with existing customer agreements, when applicable, represents a contract from a customer and each product sold represents a distinct performance obligation. Revenue is recognized when control is transferred to the customer at a point in time either when the product is shipped to or received by the customer, based on the terms of the specific agreement with the customer, and the Company has an enforceable right to payment for the product. The Company allocates the transaction price, which is generally the quoted price per terms of the contract and the consideration the Company expects to receive, to each performance obligation. The Company offers return rights, general sales return, and/or pricing credits under certain circumstances. We estimate product returns based on historical sales and return trends to record a refund liability allowance, and amounts against revenue and cost of goods sold.

A portion of the Company's revenue is recognized over time, including: data subscription, test services or custom design services. Revenue from data subscription plans relate to purchased asset trackers with activated data lines, through a third-party service provider. Data subscription plan revenues are recognized monthly based on the fee stated in the contract, as the customer is simultaneously receiving and consuming the benefits provided throughout the Company's monthly performance obligation. Test service revenues are recognized monthly based on the fee stated in the contract for obligations over time on assets that the customer controls. Design service fees are paid in advance; the prepayments are deferred revenues and are recorded as contract liabilities. Most of the design service fees are recognized based on the Company's achievement of milestones. The Company's performance for the design services does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed to date. We recognize from the contract liabilities as milestones are achieved over service periods ranging from three (3) toeighteen (18) months.

The Company's contracts with customers do not typically include extended payment terms. Payment terms may vary by contract and type of customer and generally range from 30 to 90 days from delivery.

For a limited number of customers, the Company elected the practical expedient provided in ASC 606-10-25-18B, whereby the Company accounts for shipping and handling as activities to fulfill the promise to transfer the good. To the extent that the Company charges its customers shipping fees, such amounts are included as a component of revenue and the corresponding costs are included as a component of cost of sales.

The Company provides assurance-type warranties on all product sales ranging from one to two years. The estimated warranty costs are accrued for at the time of sale based on historical warranty experience plus any known or expected changes in warranty exposure.

The Company has opted to not disclose the portion of revenues allocated to partially unsatisfied performance obligations, which represent products to be shipped within 12 months under open customer purchase orders, at the end of the current reporting period as allowed under ASC 606. The Company has also elected to record sales commissions when incurred, pursuant to the practical expedient under ASC 340, Other Assets and Deferred Costs, as the period over which the sales commission asset that would have been recognized is less than one year.

To the extent the Company collects and remits taxes on product sales from customers, it has elected to exclude from the measurement of transaction price taxes that are assessed by governmental authorities.

Shipping and Transportation Costs

Shipping and other transportation costs expensed as incurred were$0.2 million and$0.5 million for the years ended December 31, 2025 and 2024, respectively. These costs are included in sales and marketing expenses in the accompanying consolidated statements of operations.

Research and Development Costs

Research and development costs are expensed as incurred.

Advertising Costs

Advertising costs are expensed as incurred and were$0.1 million for each of the years ended December 31, 2025 and 2024, respectively. These costs are included in sales and marketing expenses in the accompanying consolidated statements of operations.

Refundable Tax Credits - Employer Retention Credit

In accordance with the Employer Retention Credit (ERC) program, authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, companies were eligible for payroll tax refunds if, due to the COVID-19 pandemic, there was a 50 percent decline in 2020 quarterly gross receipt or a 20 percent decline in 2021 quarterly gross receipts when compared with the same calendar quarter in 2019, or a full or partial shutdown based on a governmental order. The ERC is computed based on a percentage of qualified wages (including qualified health insurance expenses) incurred from March 13, 2020 through September 30, 2021.

The Company’s policy is to account for the ERC as a grant using guidance by analogy to International Accounting Standard (IAS) 20 Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS 20.7, for-profit entities recognize the ERC when the "reasonable assurance" threshold is met, regarding the ERC conditions and receiving the credit. ERCs are subject to IRS audit under the applicable statute of limitations. The Company recognizes ERC refunds upon receipt. Under IAS 20.29, the Company elected to record thegross ERC refund proceeds in Other income of our Consolidated Statements of Operations.

Income Taxes

The Company records income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. When applicable a valuation allowance is established to reduce any deferred tax asset when we determine that it is more likely than not that some portion of the deferred tax asset will not be realized.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties in general and administrative expenses.

Stock-Based Compensation

We recognize compensation costs related to stock options and restricted stock units granted to employees and directors based on the estimated fair value of the awards on the date of grant. We estimate the option grant fair values, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. The grant date fair value of stock-based awards is expensed on a straight-line basis over the requisite service period of the entire reward. The Company recognizes forfeitures when incurred.

The assumptions used in the Black-Scholes option-pricing model are as follows:

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Fair value of our common stock. The Company’s common stock is valued by reference to the publicly traded price of our common stock.

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Expected term. The expected term represents the period of time stock-based awards are expected to be outstanding.

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Expected weighted average volatility. We estimated expected volatility, using solely our historical share price volatilities.

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Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected term.

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Expected dividend. The expected dividend is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends.

Fair Value Measurements

The carrying values of the Company’s financial instruments, including cash, trade accounts receivable, accounts payable, and accrued liabilities approximate their fair values due to the short maturity of these instruments.

Fair value measurements are market-based measurements, not entity-specific measurements. Therefore, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. The Company follows a three-level hierarchy to prioritize the inputs used in the valuation techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below:

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Level 1: Quoted prices in active markets for identical assets or liabilities.

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Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.

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Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable in active markets.

As of December 31, 2025, the Company had$0.1 million in money market fund that was classified as Cash and cash equivalents on our consolidated balance sheets. At December 31, 2025, the fair value of the money market fund approximated its carrying amount.

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard is effective for the Company beginning in fiscal year 2025. The Company applied the amendments prospectively for the year ended December 31, 2025 and the impact of the adoption of the amendments in this update was not material to the Company’s consolidated financial position and results of operations for the year ended December 31, 2025, since the amendments require only enhancement of existing income tax disclosures in the footnotes to the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2024, the FASB issued ASU 2024-02, "Codification Improvements—Amendments to Remove References to the Concepts Statements." ASU No. 2024-02 removes various references to concepts statements from the FASB Accounting Standards Codification. The ASU indicates that the goal of the amendments is to simplify the Codification and distinguish between non-authoritative and authoritative guidance since, unlike the Codification, the concepts statements are non-authoritative. The amendments in ASU are effective for fiscal years beginning after December 15, 2024 with early adoption permitted. Retrospective application of the amendments are permitted. The Company will evaluate the ASU to determine its impact on the Company’s disclosures. The Company does not expect adoption to have a material impact on its consolidated financial statements

In November 2024, the FASB issued ASU No. 2024-03, "Expense Disaggregation Disclosures (Subtopic 220-40)." The ASU requires public entities to disaggregate, in a tabular presentation, certain relevant income statement expenses into different categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization in commonly presented expense captions such as cost of sales, selling, general and administrative expense, and research and development. The guidance is effective for all public business entities in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted, and may be applied retrospectively. The Company intends to adopt the amendments in this update. The impact of the adoption of the amendments in this update is not expected to be material to the Company’s consolidated financial position and results of operations, as the requirements only require more detailed disclosures in the footnotes to the Company’s consolidated financial statements.

In January 2025, the FASB issued ASU 2025-01 to revise the effective date of ASU 2024-03 on disclosures of disaggregation of income statement expense. This guidance clarifies that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company intends to adopt the amendments in this update. The impact of the adoption of the amendments in this update is not expected to be material to the Company’s consolidated financial position and results of operations, as the requirements only require more detailed disclosures in the footnotes to the Company’s consolidated financial statements.

In July 2025, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments provide a practical expedient that allows all entities to assume that conditions at the balance-sheet date will remain unchanged for an asset’s remaining life when estimating credit losses on current accounts receivable and current contract assets arising from transactions under ASC 606. Entities electing this expedient will therefore adjust historical loss experience only to reflect current conditions, without the need to incorporate forward‑looking forecasts. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods. The Company is currently evaluating the impact of adopting ASU 2025-05 and believes that the adoption will not have a material impact on the consolidated financial statements and related disclosures.

In September, 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software. The amendments in this update require an entity to begin capitalizing internal-use software costs when management has authorized and committed to funding the software project and it is probable that the project will be completed and the software will be used to perform the function intended. These amendments are effective for the Company for annual and interim periods in 2028, applied either prospectively, retrospectively, or by a modified approach, with early adoption permitted. As the Company does not currently have a material amount of software developed for internal use, the impact of the adoption of the amendments in this update is not expected to be material to the Company’s consolidated financial position and results of operations.

In December 2025, the FASB issued ASU No. 2025-11, "Interim Reporting (Topic 270): Narrow-Scope Improvements", which updates and clarifies certain interim reporting requirements in Accounting Standards Codification ("ASC") 270, including interim disclosure guidance and the reporting of material events and changes occurring after the most recent annual reporting period. The guidance is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this guidance on our consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU No. 2025-12, "Codification Improvements", which amends various topics in the FASB ASC to correct technical errors, clarify guidance, and make other narrow-scope improvements to generally accepted accounting principles. The amendments in ASU 2025-12 address multiple areas of the Codification and are not expected to materially change current accounting practices. The guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual periods, with early adoption permitted. The Company is currently evaluatingthe impact of this guidance on our consolidated financial statements and related disclosures.

Note 3. Net Loss Per Share

Basic net loss per share is calculated by dividing net loss available to common stockholders by the weighted average shares of common stock outstanding for the period. Diluted net loss per share is calculated by dividing net loss by the weighted average shares of common stock outstanding for the period plus amounts representing the dilutive effect of securities that are convertible into common stock. The Company calculates diluted loss per common share using the treasury stock method.

The following table presents the computation of net loss per share (in thousands except per share data):

Potentially dilutive securities (in common stock equivalent shares) not included in the calculation of diluted net loss per share because to do so would be anti-dilutive are as follows (in thousands):

Note 4. Cash and Cash Equivalents

The following tables show the Company’s cash and cash equivalents by significant investment category (in thousands):

Restricted Cash

As of December 31, 2025 and 2024, the Company had$55,000 at both year ends in cash on deposit to secure certain lease commitments, which is restricted for more than twelve months and recorded in long-term other assets in the Company’s consolidated balance sheet.

Note 5. Inventory

Inventory is comprised ofthe following (in thousands):

Consigned Inventory (which is included in Total Inventory) is comprised of the following (in thousands):

Excess and obsolete inventory reserves were$0.9 million and$0.7 million as of December 31, 2025 and 2024, respectively.

Note 6. Property and Equipment

Depreciation and amortization of property and equipment is calculated on the straight-line method based on the shorter of the estimated useful life or the term of the lease for tenant improvements and three toten years for all other property and equipment. Property and equipment consist of the following (in thousands):

Depreciation expense was$0.5 million for each of the years ended December 31, 2025 and 2024.

Note 7. Intangible Assets and Goodwill

Other Intangible Assets

The following is a summary of the Company’s acquired intangible assets (dollars in thousands):

Amortization expense was$3.2 million and$3.0 million for the year ended December 31, 2025 and 2024, respectively.

Estimated annual amortization of intangible assets for the next five years and thereafter is shown in the following table (in thousands):

The Company regularly reviews the carrying amount of its long-lived assets subject to depreciation and amortization, as well as the related useful lives, to determine whether indicators of impairment may exist that warrant adjustments to carrying values or estimated useful lives. An impairment loss is recognized when the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset. Should impairment exist, the impairment loss is measured based on the excess of the carrying amount of the asset over the asset’s fair value.

No impairment losses were recorded for intangible assetsfor the years ended December 31, 2025 and 2024, respectively.

There wereno changes in the carrying amount of goodwill for the years ended December 31,2025 and 2024.

The Company performs a qualitative assessment on goodwill at least annually on December 31, or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. If it is determined in the qualitative assessment that the fair value of a reporting unit is more likely than not below its carrying amount, then the Company will perform a quantitative impairment test. The quantitative goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. Any excess in the carrying value of a reporting unit's goodwill over its fair value is recognized as an impairment loss, limited to the total amount of goodwill allocated to that reporting unit. For purposes of goodwill impairment testing, the Company has one reporting unit. As a result of the Company’s impairment assessment, no goodwill impairment was recognized as of December 31, 2025 and 2024.

Note 8. Accrued Liabilities and Other

Accrued liabilities and other is comprised of the following (in thousands):

Note 9. Leases

Operating Leases

The Company has made certain assumptions and judgments when applying ASC 842, the Company elected not to recognize right-of-use assets and lease liabilities for short-term leases (lease terms of twelve months or less).

Operating lease arrangements primarily consist of vehicle, office, warehouse and test house leases expiring during different years through 2031. The facility leases have original lease terms of approximatelyone toseven years and may contain options to extend up to 5 years and/or terminate early. Options to extend are included in leased right-of-use assets and lease liabilities in the consolidated balance sheet when we are reasonably certain to renew a lease. Since the implicit rate of such leases is unknown and we may not be reasonably certain to renew leases, the Company has elected to apply a collateralized incremental borrowing rate to facility leases on the original lease term in calculating the present value of future lease payments. As of December 31, 2025 and 2024, the weighted average discount rate for operating leases was 6.8% and 6.5%, respectively, and the weighted average remaining lease term for operating leases was 5.2 years and 6.3 years, respectively.

The Company has entered into various short-term operating leases, primarily for test houses and office equipment with initial terms of 12 months or less. These short-term leases are not recorded on the Company's consolidated balance sheet and the related short-term lease expense was$0.2 million for each of the year ended December 31, 2025 and 2024. Total operating lease cost were$1.1 million$0.8 million for year ended December 31, 2025 and 2024, respectively.

Capital area maintenance, property taxes and non-lease costs are excluded from lease expense.

The table below presents aggregate future minimum payments due under leases, reconciled to lease liabilities included in the consolidated balance sheet as of December 31, 2025 (in thousands):

Note 10. Income Taxes

Income Taxes

The components of the pretax loss from operations for the years ended December 31 are as follows (in thousands):

The income tax expense (benefit) is as follows (in thousands):

Income taxes paid, net of refunds received, for the year ended December 31,2025 consists of the following (in thousands):

For the year ended December 31, 2024, the Company had$17.0 thousand income taxes received, net of income taxes paid.

Tax Rate Reconciliation

Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, the reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended December 31, 2025 was as follows (in thousands, except for percentages):

*State taxes in California for 2025 made up the majority (greater than 50%) of the tax effect in this category.

The reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:

Significant Components of Current and Deferred Taxes

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2025 and 2024 are as follows (in thousands):

We have established a valuation allowance against our net deferred tax assets due to the uncertainty surrounding the realization of such assets. The Company periodically evaluates the recoverability of the deferred tax assets. At such time it is determined that it is more likely than not that deferred assets are realizable, the valuation allowance will be reduced. The Company has recorded a valuation allowance of $18.5 million as of December 31, 2025 as it does not believe it is more likely than not that certain deferred tax assets will be realized due to the recent history of both pre-tax book income and losses, the lack of taxable income available in carryback periods or feasible tax-planning strategies, the limited existing taxable temporary differences, and the subjective nature of forecasting future taxable income into the future. The Company increased its valuation allowance by approximately $1.8 million during the year ended December 31, 2025.

As of December 31, 2025 the Company had federal and state net operating loss (NOL) carryforwards of approximately $26.4 million, and $14.0 million, respectively. The federal NOL generated post 2017 of$16.8 million can be carried forward indefinitely and may generally be used to offset up to 80% of future taxable income for each year. The remaining federal and state NOL carryforwards begin to expire in 2029 and 2028, respectively, if unused.

As of December 31, 2025 the Company had federal and state tax credit carryforwards of approximately $3.5 million, and $2.8 million, respectively, after reduction for uncertain tax positions. The federal tax credit carryforwards will begin to expire in 2026, if unused, and the California tax credits can be carried forward indefinitely. The other state tax credit carryforwards will begin to expire in 2032.

The above federal and state carryforwards and tax credit carryforwards may be subject to an annual limitation under section 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), and similar state provisions if we experience one or more ownership changes which would limit the amount of NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change as defined by Section 382 and 383 of the Code, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a rolling three-year period. The Company has completed an ownership change analysis through December 31, 2024 and incorporated the impact of ownership changes prior to this date by reducing the Company's NOL and tax credit carryforwards that may not be utilized due to the annual limitations associated with those ownership change dates. Our use of federal and state NOL and tax credit carryforwards could be limited further by the provisions of Section 382 of the Code, depending upon the timing and amount of additional equity securities that we have issued or will issue, subsequent to December 31, 2025. State NOL carryforwards may be similarly limited. If a change in ownership were to occur, NOL and tax credit carryforwards could be eliminated or restricted. If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by ownership changes, if any, will not impact our effective tax rate.

The following table summarizes the reconciliation of the unrecognized tax benefits activity during the years ended December 31 (in thousands):

The unrecognized tax benefit amounts are reflected in the determination of the Company’s deferred tax assets. If recognized, none of these amounts would impact the company’s effective tax rate due to the existence of the valuation allowance against deferred tax assets. The Company does not foresee material changes to its uncertain tax benefits within the next twelve months.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company hasno accrual for interest or penalties on balance sheets as of December 31, 2025. The Company hasno accrual for interest or penalties on balance sheets as of December 31, 2024. The Company has recognized no interest and/or penalties in the Statement of Operations for each of the years ended December 31, 2025 and 2024.

The Company is subject to taxation in the United States, various state jurisdictions, China and the United Kingdom. Due to the existence of federal, state and foreign net operating loss and credit carryovers, the Company's tax years that remain open and subject to examination by tax jurisdiction are years 2006 and forward for federal and years 2008 and forward for the state of California.

The One Big Beautiful Bill Act of 2025 (OBBBA) was signed into law on July 4, 2025. The OBBBA makes changes to the U.S. corporate income tax including reinstating the option to claim 100% accelerated depreciation deduction on qualified property and immediate expensing of domestic research and development costs while foreign expenditures will continue to be capitalized and amortized over 15 years. The enactment of the legislation did not have a material impact on our income tax rate during the year ended December 31, 2025 and is not expected to have a material impact on our income tax rate in future years.

Note 11. Stockholders’ Equity

In August 2016, the Company's Board adopted the 2016 Equity Incentive Plan (the 2016 Plan) for employees, directors and consultants. In February 2021, the Board adopted the 2021 Employment Inducement Incentive Award Plan (the Inducement Plan), which provides for grants of equity-based awards.

The following table presents common stock reserved for future issuance(1) (in thousands):

(1)

Treasury stock of 541,000 shares as of December 31, 2025 and 2024 are excluded from the table above.

(2)

On January 1,2025, the number of authorized shares in the 2016 Plan increased by 461,000 shares pursuant to the evergreen provisions of the 2016 Plan.

(3)

On February 5, 2021,300,000 shares were authorized pursuant to the terms of the Inducement Plan.

(4)

On January 1,2025, the number of authorized shares in the 2016 Employee Stock Purchase Plan increased by 100,000 shares pursuant to the evergreen provisions of the 2016 Employee Stock Purchase Plan.

Issuance of Common Stock

In March 2024, the Company established an at-the-market (ATM) offering program (the 2024 ATM Program) to sell up to$5.0 million of the Company's common stock. Under the 2024 ATM Program, the Company issued 760,242 shares of common stock for gross proceeds of approximately $4.5 million. Net proceeds totaled approximately $4.1 million after deducting the underwriting commissions and other costs associated with the offering. On May 15, 2025, the Company terminated the 2024 ATM Program upon the expiration of the associated Form S-3 Registration Statement, in connection with the effectiveness of the Form S-3 Registration Statement related to the 2025 ATM Program.

In May 2025, the Company established an ATM offering program (the 2025 ATM Program) to sell up to$5.0 million of the Company's common stock. During 2025, the Company issued 109,167 shares of common stock under the 2025 ATM Program for net proceeds of$0.2 million after deducting commissions and other costs associated with the offering. As of December 31, 2025, the Company had$4.6 million available under the offering program for future sales of our common stock.

The Company recorded the ATM gross sales proceeds and offering costs in additional paid-in capital of the consolidated balance sheet. The following table summarizes the Company’s ATM sales activity during the period indicated (in thousands):

Note 12. Stock-Based Compensation

Stock-Based Compensation Expense

Stock-based compensation is recorded in the consolidated statements of operations as follows (in thousands):

Stock Options

The vesting period for stock options granted to employees is generallyone tofour years. All stock options granted under the 2016 Plan have a maximum contractual term of ten years.

Commencing in 2019, on the first trading day in February, each non-employee member of the board of directors will receive an annual award of stock options with a grant date fair value of $30,000 (or $45,000 for the chairperson of the board of directors), calculated as of the date of grant in accordance with the Black-Scholes-Merton option-pricing model.

The grant-date fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The weighted average assumptions for grants during the years ended December 31, 2025 and 2024 are provided in the following table:

A summary of the Company’s stock option activity is as follows (shares in thousands):

During the years ended December 31, 2025 and 2024, the Company received proceeds of$0.2 million and$0.1 million respectively from the exercise of options.

The weighted average grant-date fair values of options granted during the years ended December 31, 2025 and 2024 were$2.50 and$2.90 per share, respectively. The grant-date fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The grant date fair value of shares vested during the years ended December 31, 2025 and 2024 was$1.2 million and$1.4 million, respectively. For stock options vested and expected to vest, the aggregate intrinsic value as of December 31, 2025 and 2024 was$0.2 million and$2.4 million, respectively.

As of December 31, 2025, there was$1.1 million of unrecognized compensation cost related to unvested stock options granted under the Company’s equity plans that is expected to be recognized over the next 1.8 years.

Restricted Stock Units

The following table summarizes the Company’s restricted stock unit activity (shares in thousands):

Commencing in 2019, on the first trading day in February of each year, each non-employee member of the board of directors receives a number of restricted stock unit as is determined by dividing $30,000 (or $45,000 for the chairperson of the board of directors) by the 30-trading-day trailing average closing share price of the Company's common stock preceding the date of grant.

As of December 31, 2025, there was$2.5 million of total unrecognized stock-based compensation expense related to non-vested restricted stock units which is expected to be recognized over a remaining weighted-average vesting period of 2.1 years.

The Company currently uses authorized and unissued shares to satisfy share award exercises.

Performance Stock Units

The following table summarizes the Company's PSU activity during the period indicated (shares in thousands):

Service as well as market and performance conditions determine the number of PSUs that the holder will earn from 0% to 150% of the target number of shares. The percentage received is based on the Company common stock price targets over a three-year service period. Additionally, the Company must achieve or exceed 75% of the year to date revenue target measured at the end of the quarter in which the price target is achieved. The market conditions have not currently been met. As of December 31, 2025, there were no PSU grants outstanding.

Share-Settled Obligation

Share-settled compensation to the Board of Directors and consultants were incurred and recognized as stock-based compensation expense and recorded in accrued expenses. Within ninety days after the calendar year-end, the liabilities are settled in RSU grants and vest on the grant date. The share-settled obligations were$0.1 million and$0.8 million as of December 31, 2025 and 2024, respectively.

Employee Stock Purchase Plan (ESPP)

The Company maintains the 2016 Employee Stock Purchase Plan (ESPP) that provides employees an opportunity to purchase common stock through payroll deductions. The ESPP is implemented through consecutive 6-month offering periods commencing on March 1 and September 1 of each year. The purchase price is set at 85% of the fair market value of the Company's common stock on either the first or last trading day of the offering period, whichever is lower. Annual contributions are limited to the lower of 20% of an employee's eligible compensation or such other limits as apply under Section 423 of the Internal Revenue Code. The ESPP is intended to qualify as an employee stock purchase plan for purposes of Section 423 of the Internal Revenue Code.

Based on the 15% discount and the fair value of the option feature of the ESPP, it is considered compensatory. Compensation expense is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model. The Company currently uses authorized and unissued shares to satisfy share purchases under the ESPP.

During the year ended December 31, 2025, the Company received$0.2 million from the issuance of 43,562 shares under the ESPP, as compared to$0.2 million from the issuance of 45,809 shares during the year end December 31, 2024.

Note 13. Commitments and Contingencies

Potential Product Warranty Claims

The Company had a general warranty accrual of less than$0.1 million as of each year ending December 31, 2025 and 2024.

Indemnification

In some agreements to which the Company is a party, the Company has agreed to indemnify the other party for certain matters, including, but not limited to product liability and intellectual property. To date, we have not recorded any material liabilities in the accompanying consolidated financial statements.

Note 14. Concentrations

Concentration of Sales and Accounts Receivable

The following represents customers that accounted for 10% or more of total revenue:

The following represents customers that accounted for 10% or more of total trade accounts receivable:

The allowance for credit losses was$0.2 million as of December 31, 2025 and was less than $0.1 million as of December 31, 2024.

Concentration of Purchases

During the year ended December 31, 2025, the Company’s products were manufactured by CMs with locations in China, Taiwan, Vietnam, Mexico and the United States.

Concentration of Cash

The Company’s cash deposits exceeded the Federal Deposit Insurance Corporation’s insured limits. The Company has not experienced losses on these accounts. Most of the Company's cash deposits are held in multiple accounts at a large institutional bank.

Concentration of Property and Equipment

The Company’s property and equipment, net by geographic region, are as follows (in thousands):

Note 15. Revenues

Disaggregated revenues are as follows (in thousands):

Revenue generated from the United States was$23.9 million and$35.9 million for the year ended December 31, 2025 and 2024, respectively.

Contract liabilities are deferred revenues that were recorded when advance payment were received for remaining performance obligations that are recognized over time. The contract liabilities were$0.1 million for each of the years ended December 31, 2025 and 2024.

The Company has recorded sales return reserves based on analysis of historical return trends. As of December 31, 2025, the Company had$0.2 million sales return reserves included in accrued liabilities and other on the consolidated balance sheets. As of December 31, 2024, the amount was less than $0.1 million.

The Company has stock rotation return rights arrangements with certain customers to return a limited percentage of product. As of December 31, 2025 and 2024, the estimated allowance for stock rotation was$0.1 million and$0.3 million, respectively, and are included in accrued liabilities in the accompanying consolidated balance sheets. The expected product returns under the stock rotation arrangement was$0.1 million for each of the years ended December 31, 2025 and 2024, and areincluded in inventory in the accompanying consolidated balance sheets.

Note 16. Employee Benefit Plan

The Company’s 401(k) plan covers all U.S. employees beginning the first day of the month that follows the first 90 days of their employment. Under this plan, employees may elect to contribute up to 20% of their annual compensation to the 401(k) plan up to the statutorily prescribed annual limit. The Company matches 100% of the employee’s elective deferrals up to 4% of their annual compensation. The Company may make discretionary contributions to the 401(k) plan, but there wereno discretionary contributions during the year ended December 31, 2025 and 2024. The Company’s contribution expense was$0.4 million for each of the years ended December 31, 2025 and 2024.

Note 17. Segment Information

Due to similarities of its products, methods of production and it's management and administrative structure, the Company operates as a single operating and reportable segment.

The following table presents segment revenue, gross profit, net loss and certain operating financial results of the Company’s single operating segment for the periods presented, as viewed by the CODM:

(1)Other segment expenses are primarily foreign currency transaction remeasurements and franchise taxes.

The CODM reviews the segment assets that are reported in the Consolidated Balance Sheets.

Note 18. Subsequent Events

On February 20, 2026, the Company acquired the HPUE product line assets from Nextivity. The transaction hasno cash consideration, and Airgain assumes the obligation to support the current HPUE customers. Airgain and Nextivity also entered into a reseller agreement pursuant to which Airgain will support specific Nextivity’s international customers once design wins are secured. The transaction was not recognized in the accompanying consolidated financial statements, and the Company is currently evaluating the accounting and financial statement impact of the transaction.