
Report Information This section provides essential identification and status details for Airgain, Inc., including its incorporation, filing type, and stock information Registrant Information This section provides key identification details for Airgain, Inc., including its incorporation state, filing type, and stock exchange listing - Registrant: AIRGAIN, INC., incorporated in Delaware, with headquarters in San Diego, CA2 - Filing Type: Quarterly Report (Form 10-Q) for the period ended March 31, 20232 Securities Registered | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common stock, par value $0.0001 per share | AIRG | Nasdaq Capital Market | Filer Status and Shares Outstanding Airgain, Inc. is categorized as a Non-accelerated filer and a Smaller reporting company, and its common stock outstanding as of May 5, 2023, is reported - Filer Status: Non-accelerated filer and Smaller reporting company4 - Shares Outstanding: 10,407,336 shares of common stock as of May 5, 20234 Table of Contents This section outlines the report's structure, detailing the main parts and included financial and other information sections - The report's table of contents outlines two main parts: Part I. Financial Information and Part II. Other Information, detailing the structure and page numbers of the included sections7 PART I. FINANCIAL INFORMATION This part encompasses the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Airgain, Inc., including the balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, and specific financial line items for the quarter ended March 31, 2023 Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity as of March 31, 2023, and December 31, 2022 Condensed Consolidated Balance Sheets (in thousands) | Item | March 31, 2023 | December 31, 2022 | Change | | :-------------------------------- | :------------- | :---------------- | :----- | | Assets | | | | | Total current assets | $24,197 | $27,154 | $(2,957) | | Total assets | $50,423 | $54,400 | $(3,977) | | Liabilities and Stockholders' Equity | | | | | Total current liabilities | $10,660 | $12,900 | $(2,240) | | Total liabilities | $12,123 | $14,575 | $(2,452) | | Total stockholders' equity | $38,300 | $39,825 | $(1,525) | Condensed Consolidated Statements of Operations This statement presents the company's revenues, expenses, and net loss for the three months ended March 31, 2023, and 2022 Condensed Consolidated Statements of Operations (Three months ended March 31, in thousands) | Item | 2023 | 2022 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Sales | $16,444 | $17,522 | $(1,078) | (6.2)% | | Cost of goods sold | $10,126 | $10,366 | $(240) | (2.3)% | | Gross profit | $6,318 | $7,156 | $(838) | (11.7)% | | Total operating expenses | $9,108 | $9,582 | $(474) | (4.9)% | | Loss from operations | $(2,790) | $(2,426) | $(364) | 15.0% | | Net loss | $(2,858) | $(2,521) | $(337) | 13.4% | | Net loss per share (Basic) | $(0.28) | $(0.25) | $(0.03) | 12.0% | Condensed Consolidated Statements of Comprehensive Loss This statement reports the company's net loss and comprehensive loss for the three months ended March 31, 2023, and 2022 Condensed Consolidated Statements of Comprehensive Loss (Three months ended March 31, in thousands) | Item | 2023 | 2022 | Change | % Change | | :----------- | :----- | :----- | :----- | :------- | | Net loss | $(2,858) | $(2,521) | $(337) | 13.4% | | Comprehensive loss | $(2,858) | $(2,521) | $(337) | 13.4% | Condensed Consolidated Statements of Stockholders' Equity This statement details changes in the company's stockholders' equity, including net loss and stock-based compensation, for the three months ended March 31, 2023, and 2022 Condensed Consolidated Statements of Stockholders' Equity (Three months ended March 31, in thousands) | Item | 2023 | 2022 | Change | | :------------------------------------ | :----- | :----- | :----- | | Total stockholders' equity, beginning balance | $39,825 | $44,173 | $(4,348) | | Stock-based compensation | $1,874 | $1,051 | $823 | | Net loss | $(2,858) | $(2,521) | $(337) | | Total stockholders' equity, ending balance | $38,300 | $42,823 | $(4,523) | Condensed Consolidated Statements of Cash Flows This statement summarizes the company's cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2023, and 2022 Condensed Consolidated Statements of Cash Flows (Three months ended March 31, in thousands) | Item | 2023 | 2022 | Change | | :------------------------------------------ | :----- | :----- | :----- | | Net cash (used in) provided by operating activities | $(1,434) | $4,152 | $(5,586) | | Net cash used in investing activities | $(89) | $(128) | $39 | | Net cash (used in) provided by financing activities | $(541) | $120 | $(661) | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(2,064) | $4,144 | $(6,208) | | Cash, cash equivalents, and restricted cash; end of period | $10,014 | $18,830 | $(8,816) | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering the company's business, accounting policies, and specific financial line items Note 1. Description of Business and Basis of Presentation Airgain, Inc. provides wireless connectivity solutions, including embedded components, external antennas, and integrated systems for consumer, enterprise, and automotive markets, operating as a single segment - Airgain, Inc. (with subsidiary NimbeLink Corp.) is a leading provider of connectivity solutions (embedded components, external antennas, integrated systems) for consumer, enterprise, and automotive markets24 - The company operates as a single operating segment, with its chief executive officer reviewing results on an aggregate basis27 Note 2. Summary of Significant Accounting Policies This note outlines the company's key accounting policies, including those for restricted cash, inventories, revenue recognition, and stock-based compensation, noting no material changes or impacts from recent accounting pronouncements - No material changes to significant accounting policies during the three months ended March 31, 2023, compared to the 2022 Annual Report on Form 10-K30 - The Company adopted ASU 2016-13 (Financial Instruments-Credit Losses) in Q1 2023, which did not have a material impact on financial statements52 - Revenue is primarily generated from sales of wireless connectivity solutions, recognized 'point-in-time' upon transfer of control, with minor service and data subscription revenue recognized 'over time' or monthly3941 Note 3. Net Loss Per Share This note details the computation of basic and diluted net loss per share, indicating that potentially dilutive securities were excluded from the diluted EPS calculation due to the net loss Net Loss Per Share Computation (Three months ended March 31, in thousands except per share data) | Item | 2023 | 2022 | | :------------------------------------------ | :----- | :----- | | Net loss | $(2,858) | $(2,521) | | Basic weighted average common shares outstanding | 10,266 | 10,130 | | Diluted weighted average common shares outstanding | 10,266 | 10,130 | | Net loss per share (Basic) | $(0.28) | $(0.25) | | Net loss per share (Diluted) | $(0.28) | $(0.25) | - Potentially dilutive securities (2,224 thousand in 2023 and 1,960 thousand in 2022) were excluded from diluted net loss per share calculation as their inclusion would be anti-dilutive57 Note 4. Cash and Cash Equivalents This note provides a breakdown of cash and cash equivalents, primarily consisting of cash and money market funds, showing a decrease from December 31, 2022, to March 31, 2023 Cash and Cash Equivalents (in thousands) | Item | March 31, 2023 | December 31, 2022 | Change | | :------------------ | :------------- | :---------------- | :----- | | Cash | $8,123 | $8,323 | $(200) | | Money market funds | $1,716 | $3,580 | $(1,864) | | Total | $9,839 | $11,903 | $(2,064) | Note 5. Inventory This note details the composition of inventories, including raw materials and finished goods, and also provides information on consigned inventories, noting the company's transition to a fabless model Inventories (in thousands) | Item | March 31, 2023 | December 31, 2022 | Change | | :-------------- | :------------- | :---------------- | :----- | | Raw materials | $1,130 | $1,060 | $70 | | Finished goods | $3,351 | $3,166 | $185 | | Total Inventory | $4,481 | $4,226 | $255 | Consigned Inventories (in thousands) | Item | March 31, 2023 | December 31, 2022 | Change | | :------------------ | :------------- | :---------------- | :----- | | Raw materials | $795 | $631 | $164 | | Finished goods | $2,613 | $2,272 | $341 | | Total Consigned Inventory | $3,407 | $2,903 | $504 | - The company transitioned to a fabless model in April 2022, with third parties manufacturing products33 Note 6. Property and Equipment This note provides a breakdown of property and equipment, net of accumulated depreciation, showing a slight decrease from December 31, 2022, to March 31, 2023, with consistent depreciation expense Property and Equipment, Net (in thousands) | Item | March 31, 2023 | December 31, 2022 | Change | | :-------------------------- | :------------- | :---------------- | :----- | | Property and equipment, gross | $7,242 | $7,170 | $72 | | Less accumulated depreciation | $(4,559) | $(4,405) | $(154) | | Property and equipment, net | $2,683 | $2,765 | $(82) | - Depreciation expense was $0.2 million for both three months ended March 31, 2023 and 202261 Note 7. Intangible Assets This note summarizes the company's acquired intangible assets, including market-related intangibles, customer relationships, and developed technologies, showing a decrease in net carrying amount due to amortization Intangible Assets, Net (in thousands) | Item | March 31, 2023 | December 31, 2022 | Change | | :-------------------------- | :------------- | :---------------- | :----- | | Market related intangibles | $940 | $1,025 | $(85) | | Customer relationships | $6,492 | $7,060 | $(568) | | Developed technologies | $3,028 | $3,117 | $(89) | | Covenants to non-compete | $0 | $1 | $(1) | | Total intangible assets, net | $10,460 | $11,203 | $(743) | Estimated Future Amortization of Intangible Assets (in thousands) | Year | Estimated future amortization | | :-------------------------- | :-------------------------- | | 2023 (remaining nine months) | $2,226 | | 2024 | $2,968 | | 2025 | $2,958 | | 2026 | $557 | | Thereafter | $1,751 | | Total | $10,460 | - Amortization expense was $0.7 million for Q1 2023, down from $0.8 million in Q1 202262 Note 8. Accrued Liabilities and Other This note provides a detailed breakdown of accrued liabilities and other current liabilities, showing a decrease in total from December 31, 2022, to March 31, 2023 Accrued Liabilities and Other (in thousands) | Item | March 31, 2023 | December 31, 2022 | Change | | :-------------------------------- | :------------- | :---------------- | :----- | | Accrued expenses | $1,051 | $815 | $236 | | VAT payable | $339 | $339 | $0 | | Accrued income taxes | $243 | $166 | $77 | | Advanced payments from contract manufacturers | $208 | $210 | $(2) | | Contract liabilities | $0 | $32 | $(32) | | Goods received not invoiced | $94 | $529 | $(435) | | Other current liabilities | $221 | $524 | $(303) | | Accrued liabilities and other | $2,156 | $2,615 | $(459) | Note 9. Notes Payable and Line of Credit The company's $4.0 million revolving line of credit with Silicon Valley Bank expired in February 2023, with no outstanding balance as of March 31, 2023 - The $4.0 million revolving line of credit with Silicon Valley Bank expired in February 20236566 - No balance was owed on the line of credit as of March 31, 202366 Note 10. Leases This note details the company's operating lease arrangements, primarily for office and warehouse facilities, with a weighted average remaining lease term of 2.5 years and a discount rate of 3.9% as of March 31, 2023 - Weighted average remaining lease term for operating leases was 2.5 years as of March 31, 202369 - Weighted average discount rate for operating leases was 3.9% as of March 31, 202369 - Short-term lease expense was $22,000 for the three months ended March 31, 2023, a decrease from $48,600 in the prior year period70 Estimated Future Lease Obligations (in thousands) | Year | Estimated future lease obligation | | :-------------------------- | :-------------------------- | | 2023 (remaining nine months) | $732 | | 2024 | $904 | | 2025 | $687 | | Total minimum payments | $2,323 | | Total lease liabilities | $2,210 | | Long-term lease liability | $1,321 | Note 11. Treasury Stock The company's share repurchase program, which expired in September 2021, resulted in the purchase of approximately 541,000 shares for a total cost of $5.4 million - The share repurchase program expired in September 202173 - Total shares purchased under the program: 541,000 shares for $5.4 million73 Note 12. Income Taxes The company's effective income tax rate was -2.9% for Q1 2023, primarily due to the utilization of deferred tax attributes with a full valuation allowance, a portion of which was released - Effective income tax rate: -2.9% for Q1 2023 (compared to -3.3% for Q1 2022)74 - The variance from the U.S. federal statutory rate of 21.0% is primarily due to the utilization of deferred tax attributes that had a full valuation allowance74 - A portion of the valuation allowance was released in Q1 2023 due to deferred tax liabilities associated with acquired intangible assets from the NimbeLink acquisition76 Note 13. Stockholders' Equity This note provides details on common stock reserved for future issuance under various equity incentive plans, including increases in authorized shares for the 2016 Plan and 2016 Employee Stock Purchase Plan Common Stock Reserved for Future Issuance (in thousands) | Item | March 31, 2023 | December 31, 2022 | | :------------------------------------------ | :------------- | :---------------- | | Stock options issued and outstanding | 2,224 | 2,065 | | Stock awards issued and outstanding | 822 | 581 | | Authorized for grants under the 2016 Equity Incentive Plan | 328 | 507 | | Authorized for grants under the Inducement Plan | 323 | 294 | | Authorized for grants under the 2016 Employee Stock Purchase Plan | 457 | 378 | | Total | 4,154 | 3,825 | - Authorized shares for the 2016 Plan increased by 431,000 shares on January 1, 2023, due to evergreen provisions78 - Authorized shares for the 2016 Employee Stock Purchase Plan increased by 100,000 shares on January 1, 2023, due to evergreen provisions79 Note 14. Stock Based Compensation This note details stock-based compensation expense, which decreased to $0.981 million in Q1 2023, and summarizes activity for stock options, restricted stock units (RSUs), and performance stock units (PSUs) Stock-Based Compensation Expense (Three months ended March 31, in thousands) | Item | 2023 | 2022 | Change | % Change | | :-------------------------------- | :----- | :----- | :----- | :------- | | Cost of goods sold | $15 | $13 | $2 | 15.4% | | Research and development | $237 | $267 | $(30) | (11.2)% | | Sales and marketing | $161 | $287 | $(126) | (43.9)% | | General and administrative | $568 | $674 | $(106) | (15.7)% | | Total stock-based compensation expense | $981 | $1,241 | $(260) | (20.9)% | - Unrecognized compensation cost for unvested stock options was $3.6 million (expected over 2.6 years) and for unvested restricted stock units was $5.1 million (expected over 3.4 years) as of March 31, 20238284 - The company settled $0.9 million of 2022 bonus awards by granting 187,200 immediately vested RSUs in Q1 202387 Note 15. Commitments and Contingencies This note discloses severance costs incurred and the general warranty reserve, also mentioning indemnification agreements with no material costs to date - Severance costs incurred and paid were $0.1 million for the three months ended March 31, 202390 - A general warranty reserve of approximately $0.1 million was recorded as of March 31, 202391 Note 16. Concentration of Credit Risk This note highlights significant customer concentrations in sales and accounts receivable and addresses the concentration of cash, noting no losses from a bank placed into FDIC receivership Concentration of Sales (Three months ended March 31) | Customer | 2023 | 2022 | | :--------- | :--- | :--- | | Customer A | 16 % | 12 % | | Customer B | 14 % | 17 % | | Customer C | 13 % | 6 % | | Customer D | 11 % | 12 % | Concentration of Trade Accounts Receivable | Customer | March 31, 2023 | December 31, 2022 | | :--------- | :------------- | :---------------- | | Customer A | 13 % | 21 % | | Customer B | 11 % | 3 % | | Customer C | 11 % | 0 % | | Customer D | 10 % | 15 % | - The bank where most of the Company's cash was held was placed into receivership with the FDIC on March 10, 2023; however, depositors had access to their funds, and the Company experienced no losses; the Company is reallocating cash deposits to mitigate concentration risk95 Note 17. Disaggregated Revenue This note disaggregates revenue by market group (Enterprise, Consumer, Automotive) and by geography (North America, China, Rest of the world), showing an overall sales decrease of 6.2% year-over-year Disaggregated Revenue by Market Group (Three months ended March 31, in thousands) | Market Group | 2023 | 2022 | Change | % Change | | :----------- | :----- | :----- | :----- | :------- | | Enterprise | $8,437 | $8,629 | $(192) | (2.2)% | | Consumer | $5,132 | $6,062 | $(930) | (15.3)% | | Automotive | $2,875 | $2,831 | $44 | 1.6% | | Total sales | $16,444 | $17,522 | $(1,078) | (6.2)% | Disaggregated Revenue by Geography (Three months ended March 31, in thousands) | Geography | 2023 | 2022 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | North America | $10,168 | $10,479 | $(311) | (3.0)% | | China (including Hong Kong and Taiwan) | $5,969 | $6,459 | $(490) | (7.6)% | | Rest of the world | $307 | $584 | $(277) | (47.4)% | | Total sales | $16,444 | $17,522 | $(1,078) | (6.2)% | Note 18. Subsequent Events No subsequent events requiring disclosure were reported - No subsequent events were reported98 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2023, covering business overview, core markets, operational processes, and financial performance Overview Airgain is a global provider of wireless connectivity solutions, including embedded components, external antennas, and integrated systems, transitioning to a wireless systems provider with a fabless manufacturing model - Airgain provides wireless connectivity solutions (embedded components, external antennas, integrated systems) globally, simplifying connectivity and enhancing wireless signals100 - The company is transitioning from a component provider to a wireless systems provider, focusing on platforms like AirgainConnect (e.g., AC-HPUE™ antenna-modem) and cellular-based asset trackers101 - Airgain adopted a fabless manufacturing model in 2022, utilizing third parties for production while maintaining quality oversight, and holds over 281 issued and pending patents worldwide102 Core Markets Airgain focuses on three core markets: Enterprise (IIoT, smart cities, asset tracking), Consumer (Wi-Fi Mesh, smart TVs, 5G FWA), and Automotive (fleet and aftermarket segments, rugged vehicular wireless routers) - Enterprise Market: Provides reliable wireless access for high-density environments (buildings, campuses, transportation terminals, stadiums) with antennas for access points, fixed wireless access, small cells, and embedded modems for IIoT, EV charging, smart city, agriculture, and asset tracking103 - Consumer Market: Deploys antennas in consumer access points, wireless gateways, Wi-Fi Mesh systems, smart TVs, smart home devices, and supports technologies like WLAN, Wi-Fi, LTE, 5G, and LPWAN, with a focus on improving 5G access via FWA and repeaters103 - Automotive Market: Products are deployed in fleet and aftermarket vehicles, supporting Wi-Fi, LTE, 5G, Satellite, and LPWAN, with a rising demand for in-vehicle connectivity in segments like first responder, utility, agriculture, and service fleets103 Our Process Airgain's process involves partnering with customers from early design stages for internal antennas, offering custom engineering and OTA testing, and assisting with carrier certification for embedded modems - For internal antennas, Airgain partners with customers from prototyping to device throughput testing, offering design, custom engineering, integration, and over-the-air (OTA) testing to optimize performance and reduce time to market104 - For embedded modems, the company enables faster time to market by assisting with carrier certification and providing future-proofing features like remote firmware updates and module vendor flexibility105 COVID-19 Pandemic The COVID-19 pandemic caused instability and disruptions, negatively impacting sales and operating results in 2021 and 2022, though recent effects have lessened, future impacts remain uncertain - COVID-19 caused significant instability, including travel restrictions, customer/supplier facility closures, and supply chain disruptions, negatively impacting sales and operating results in 2021 and 2022106 - The negative effects from COVID-19 have recently had less impact on sales and operations, but future impacts remain highly uncertain106107 Factors Affecting Our Operating Results The company's performance is influenced by macroeconomic uncertainties, global supply shortages, inflation, technology leadership, market expansion, manufacturing costs, and product diversification - Performance and future success depend on macroeconomic uncertainties, epidemic diseases, recovery from global supply shortages, inflation's impact on consumer spending, and the ability to develop technology leadership and expand markets108 - Other factors include manufacturing costs, investments in growth, expansion into consumer, enterprise, and automotive markets, average selling prices, number of antennas per device, and product diversification109 - Inflation increases raw material and employee-related costs, and global economic conditions, trade disputes, or political instability could impact financial results, though no material adverse impact was noted for Q1 2023111 Seasonality Operating results are not historically subject to significant seasonal variations, but sales tend to be lower in the first quarter due to the Lunar New Year and broader economic conditions - Operating results historically lack significant seasonal variations, but Q1 sales tend to be lower due to the Lunar New Year113 - Broader economic impacts from COVID-19 and general weakening economic conditions may contribute to slower sales113 Key Components of Our Results of Operations and Financial Condition This section defines the key components influencing Airgain's financial results, including sales, cost of goods sold, and operating expenses, and discusses the provision for income taxes - Sales: Primarily generated from product sales, recognized at shipment, with immaterial service and subscription revenue114 - Cost of Goods Sold: Includes manufacturing costs from third-party contract manufacturers and personnel costs for service/subscription revenues115 - Operating Expenses: Classified into Research and Development, Sales and Marketing, and General and Administrative, with personnel costs (salaries, benefits, stock-based compensation) being the largest component116 - Research and Development: Expected to increase in absolute dollars with continued investment in new solutions and markets117 - Provision for Income Taxes: Realizability of deferred tax assets is assessed quarterly, with a valuation allowance established for unrealizable portions, dependent on future taxable income122 Results of Operations This section provides a detailed comparison of the company's operating results for the three months ended March 31, 2023, versus 2022, highlighting changes in sales, cost of goods sold, gross profit, operating expenses, and other income/expense, leading to an increased net loss Statement of Operations Data (Three months ended March 31, in thousands and as % of sales) | Item | 2023 (k$) | 2023 (%) | 2022 (k$) | 2022 (%) | Change (k$) | % Change | | :-------------------------- | :-------- | :------- | :-------- | :------- | :---------- | :------- | | Sales | $16,444 | 100.0% | $17,522 | 100.0% | $(1,078) | (6.2)% | | Cost of goods sold | $10,126 | 61.6% | $10,366 | 59.2% | $(240) | (2.3)% | | Gross profit | $6,318 | 38.4% | $7,156 | 40.8% | $(838) | (11.7)% | | Research and development | $2,449 | 14.9% | $3,242 | 18.4% | $(793) | (24.5)% | | Sales and marketing | $2,866 | 17.4% | $2,855 | 16.3% | $11 | 0.4% | | General and administrative | $3,793 | 23.1% | $3,485 | 19.9% | $308 | 8.8% | | Total operating expenses | $9,108 | 55.4% | $9,582 | 54.6% | $(474) | (4.9)% | | Loss from operations | $(2,790) | (17.0)% | $(2,426) | (13.8)% | $(364) | 15.0% | | Net loss | $(2,858) | (17.4)% | $(2,521) | (14.4)% | $(337) | 13.4% | Sales Performance Sales decreased by $1.1 million (6.2%) year-over-year to $16.4 million in Q1 2023, driven by lower Enterprise and Consumer market sales, partially offset by a slight increase in Automotive market sales - Total sales decreased by $1.1 million (6.2%) to $16.4 million for Q1 2023 compared to Q1 2022126 - Enterprise market sales decreased by $0.2 million due to lower IIoT product sales126 - Consumer market sales decreased by $1.0 million due to demand softness126 - Automotive market sales increased by $0.1 million126 Cost of Goods Sold and Gross Profit Cost of goods sold decreased by $0.2 million (2.3%) due to lower sales, but gross profit decreased more significantly by $0.8 million (11.7%), with gross profit margin declining to 38.4% due to an unfavorable sales mix - Cost of goods sold decreased by $0.2 million (2.3%) for Q1 2023, primarily due to sales decline127 - Gross profit decreased by $0.8 million (11.7%) to $6.3 million for Q1 2023128129 - Gross profit as a percentage of sales decreased by 240 basis points to 38.4% due to an unfavorable sales mix in the consumer and enterprise markets128129 Operating Expenses Analysis Total operating expenses decreased by $0.5 million (4.9%) in Q1 2023, driven by lower variable compensation and reduced engineering outsourced services, partially offset by increased trade show, advertising, and travel costs - Total operating expenses decreased by $0.5 million (4.9%) to $9.1 million for Q1 2023130131 - The decrease was primarily due to lower company-wide variable compensation costs and reduced engineering outsourced services131 - Research and development expenses decreased by $0.8 million (24.5%), while General and administrative expenses increased by $0.3 million (8.8%)130 Other (Income) Expense The company reported total other income of $(14) thousand in Q1 2023, a change from $10 thousand in other expense in Q1 2022, primarily driven by increased net interest income Other (Income) Expense (Three months ended March 31, in thousands) | Item | 2023 | 2022 | Change | % Change | | :------------------ | :----- | :----- | :----- | :------- | | Interest income, net | $(18) | $(5) | $(13) | 260.0% | | Other expense | $4 | $15 | $(11) | (73.3)% | | Total other income | $(14) | $10 | $(24) | (240.0)% | Liquidity and Capital Resources Airgain had $9.8 million in cash and cash equivalents as of March 31, 2023, and an accumulated deficit of $69.0 million, with management believing existing cash and operational cash flow will be sufficient for the next 12 months - Cash and cash equivalents totaled $9.8 million at March 31, 2023133 - The company has an accumulated deficit of $69.0 million as of March 31, 2023, having incurred net losses in prior years133 - The $4.0 million revolving line of credit with Silicon Valley Bank expired in February 2023134 - Management believes existing cash and cash equivalents, combined with cash proceeds from operations, will be sufficient to meet working capital requirements for at least the next 12 months, despite planned investments in sales force, engineering, and R&D135 Summary of Cash Flow Activity (Three months ended March 31, in thousands) | Item | 2023 | 2022 | Change | | :------------------------------------------ | :----- | :----- | :----- | | Net cash (used in) provided by operating activities | $(1,434) | $4,152 | $(5,586) | | Net cash used in investing activities | $(89) | $(128) | $39 | | Net cash (used in) provided by financing activities | $(541) | $120 | $(661) | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(2,064) | $4,144 | $(6,208) | - Net cash used in operating activities was $1.4 million in Q1 2023, a significant decrease from $4.2 million provided in Q1 2022137138 - Net cash used in financing activities was $0.5 million in Q1 2023, primarily for taxes on net share settlement of restricted stock units, compared to $0.1 million provided in Q1 2022139140 Contractual Obligations and Commitments No material changes to contractual obligations were reported during the three months ended March 31, 2023, compared to the disclosures in the Annual Report on Form 10-K for 2022 - No material changes to contractual obligations and commitments were reported for Q1 2023141 Critical Accounting Estimates The preparation of financial statements requires management to make estimates and assumptions, with no material changes to critical accounting policies and estimates reported for Q1 2023 - No material changes to critical accounting policies and estimates were reported for Q1 2023143 Recent Accounting Pronouncements This section refers to Note 2 for details on recent accounting pronouncements, which indicated the adoption of ASU 2016-13 with no material impact and no other material pronouncements expected - Refer to Note 2 for details on recent accounting pronouncements144 Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Airgain, Inc. is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Airgain, Inc. is not required to provide quantitative and qualitative disclosures about market risk145 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2023, with no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2023148 - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2023149 PART II. OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings The company may be involved in legal proceedings in the ordinary course of business, but currently believes that the final outcome will not have a material adverse effect on its financial condition or business - The company believes that the final outcome of current legal proceedings will not have a material adverse effect on its financial condition or business152 Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022, were reported - No material changes to risk factors were reported compared to the Annual Report on Form 10-K for 2022153 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period - No unregistered sales of equity securities were reported154 Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - No defaults upon senior securities were reported155 Item 4. Mine Safety Disclosures No mine safety disclosures were reported during the period - No mine safety disclosures were reported156 Item 5. Other Information No other information requiring disclosure was reported under this item - No other information requiring disclosure was reported157 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate documents, certifications, and XBRL interactive data files - The section lists various exhibits, including Amended and Restated Certificate of Incorporation, Bylaws, Specimen stock certificate, Certifications of Principal Executive and Financial Officers, and Inline XBRL documents157158 SIGNATURES This section formally attests to the accuracy and completeness of the report through authorized signatures Signatures The report is duly signed on behalf of Airgain, Inc. by Jacob Suen, President and Chief Executive Officer, and Michael Elbaz, Chief Financial Officer, on May 11, 2023 - Report signed by Jacob Suen (President and CEO) and Michael Elbaz (CFO) on May 11, 2023162