
PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Airgain's unaudited financial statements for Q3 2022 are presented, covering balance sheets, operations, comprehensive loss, equity, and cash flows, with detailed notes Condensed Consolidated Balance Sheets Total assets decreased from $66.4 million at year-end 2021 to $58.3 million by September 30, 2022, primarily due to reduced cash, while total liabilities also decreased significantly to $16.3 million | Account | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $9,190 | $14,511 | | Total current assets | $29,992 | $35,489 | | Total assets | $58,293 | $66,390 | | Liabilities & Equity | | | | Deferred purchase price liabilities | $153 | $8,726 | | Total current liabilities | $14,367 | $19,887 | | Total liabilities | $16,281 | $22,217 | Condensed Consolidated Statements of Operations Q3 2022 sales increased to $19.2 million from $15.5 million, with net loss narrowing to $1.3 million, while nine-month sales grew to $56.0 million with stable net loss | Metric (in thousands, except per share) | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Sales | $19,198 | $15,455 | $56,006 | $50,129 | | Gross Profit | $7,443 | $5,546 | $22,104 | $19,742 | | Loss from operations | $(1,264) | $(3,046) | $(5,303) | $(7,661) | | Net loss | $(1,299) | $(3,069) | $(5,439) | $(5,441) | | Net loss per share (Basic & Diluted) | $(0.13) | $(0.30) | $(0.53) | $(0.54) | Condensed Consolidated Statements of Cash Flows Net cash from operations significantly improved to $2.1 million for the nine months ended September 30, 2022, compared to a $6.9 million use in the prior year, with total cash decreasing by $5.3 million | Cash Flow Activity (in thousands) | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $2,083 | $(6,921) | | Net cash used in investing activities | $(624) | $(14,727) | | Net cash (used in) provided by financing activities | $(6,780) | $2,429 | | Net decrease in cash, cash equivalents and restricted cash | $(5,321) | $(19,219) | Notes to Condensed Consolidated Financial Statements These notes detail the company's wireless connectivity solutions business, the January 2021 NimbeLink acquisition, revenue disaggregation by market and geography, and customer concentration - The company operates as a single segment providing connectivity solutions (embedded components, external antennas, integrated systems) for consumer, enterprise, and automotive markets2123 - In January 2021, the company acquired NimbeLink Corp., an industrial IoT company, for a total purchase consideration of approximately $22.7 million, which included $7.1 million of goodwill404345 | Customer | % of Total Revenue (9 Months 2022) | % of Total Revenue (9 Months 2021) | | :--- | :--- | :--- | | Customer A | 17% | 13% | | Customer B | 12% | 3% | | Customer C | 13% | 15% | | Revenue by Market Group (in thousands) | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | | Consumer | $19,377 | $23,800 | | Enterprise | $24,496 | $19,231 | | Automotive | $12,133 | $7,098 | | Total Sales | $56,006 | $50,129 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q3 2022 financial results, highlighting a 24.2% sales increase driven by consumer and automotive markets, improved gross margin, and sufficient liquidity for the next 12 months Results of Operations Q3 2022 sales increased by $3.7 million (24.2%) year-over-year, driven by consumer and automotive markets, while gross profit margin improved to 38.8% due to favorable product mix | Metric | Q3 2022 | Q3 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Sales | $19,198 | $15,455 | $3,743 | 24.2% | | Gross Profit | $7,443 | $5,546 | $1,897 | 34.2% | | Gross Margin | 38.8% | 35.9% | - | 2.9 pts | - The increase in sales for the nine months ended Sep 30, 2022 was driven by a $5.3 million increase in the enterprise market and a $5.0 million increase in the automotive market, offset by a $4.4 million decrease in the consumer market impacted by supply shortages123 Liquidity and Capital Resources The company held $9.2 million in cash as of September 30, 2022, with operations providing $2.1 million in cash for the first nine months, and believes existing liquidity is sufficient for the next 12 months - Cash and cash equivalents were $9.2 million at September 30, 2022135 - In February 2022, the company secured a $4.0 million revolving line of credit with Silicon Valley Bank, which remained undrawn as of the quarter's end136 - Net cash provided by operating activities was $2.1 million for the nine months ended September 30, 2022, compared to net cash used of $6.9 million in the prior year period138 Item 3. Quantitative and Qualitative Disclosures about Market Risk Airgain is classified as a smaller reporting company and is therefore not required to provide detailed disclosures about market risk - As a smaller reporting company, Airgain is exempt from the requirement to provide information under this item144 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes in internal control over financial reporting - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2022145 - No changes in internal control over financial reporting occurred during the nine months ended September 30, 2022, that materially affected, or are reasonably likely to materially affect, internal controls146 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports no involvement in any legal proceedings that would have a material adverse effect on its financial condition or business - The company is not currently involved in any material legal proceedings outside the ordinary course of business148 Item 1A. Risk Factors No material changes to risk factors were reported, but the cessation of AT&T promotional service credits for the AC-HPUE product in Q3 2022 adversely affected sales - The company's success depends on its ability to develop and introduce new products for the rapidly changing wireless market, such as the AirgainConnect platform149 - A significant risk emerged in Q3 2022 when AT&T ceased special promotional service credits related to the company's AC-HPUE product, which has adversely affected and may continue to adversely affect sales of that product149 Item 5. Other Information Morad Sbahi was appointed Chief Revenue Officer effective November 7, 2022, with details of his amended employment agreement, including salary and equity awards - Effective November 7, 2022, Morad Sbahi was appointed as the company's Chief Revenue Officer, previously serving as Senior Vice President of Global Product and Marketing151 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and required certifications