UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
|
|
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017March 31, 2024
OR
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|
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission file number: 001-37851
AIRGAIN, INC.
(Exact name of registrant as specified in its charter)
Delaware | 95-4523882 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
3611 Valley Centre Drive, Suite 150 San Diego, CA | 92130 | |
(Address of Principal Executive Offices) | (Zip Code) |
(760) (760) 579-0200
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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 |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |
Non-accelerated filer | ☒ |
| Smaller reporting company |
|
Emerging growth company |
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of November 13, 2017,May 1, 2024, the registrant had 9,578,73810,777,426 shares of Common Stockcommon stock (par value $0.0001) outstanding.
TABLE OF CONTENTSForm 10-Q
For the Quarter Ended March 31, 2024
Page | |||
PART I. FINANCIAL INFORMATION | |||
Item 1. Condensed Consolidated Financial Statements (Unaudited) |
| ||
| 3 | ||
4 | |||
5 | |||
6 | |||
7 | |||
Notes to | 8 | ||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| ||
Item 3. Quantitative and Qualitative Disclosures about Market Risk |
| ||
| |||
PART II. OTHER INFORMATION | |||
| |||
| |||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
| ||
31 | |||
31 | |||
31 | |||
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| ||
31 | |||
33 |
ITEM 1. FINANCIALFINANCIAL STATEMENTS
Airgain, Inc.
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except par value)
(Unaudited)
|
| March 31, 2024 |
|
| December 31, 2023 |
| ||
Assets |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 7,169 |
|
| $ | 7,881 |
|
Trade accounts receivable, net |
|
| 9,644 |
|
|
| 7,375 |
|
Inventories |
|
| 2,588 |
|
|
| 2,403 |
|
Prepaid expenses and other current assets |
|
| 1,419 |
|
|
| 1,422 |
|
Total current assets |
|
| 20,820 |
|
|
| 19,081 |
|
Property and equipment, net |
|
| 2,305 |
|
|
| 2,507 |
|
Leased right-of-use assets |
|
| 1,180 |
|
|
| 1,392 |
|
Goodwill |
|
| 10,845 |
|
|
| 10,845 |
|
Intangible assets, net |
|
| 7,493 |
|
|
| 8,234 |
|
Other assets |
|
| 155 |
|
|
| 170 |
|
Total assets |
| $ | 42,798 |
|
| $ | 42,229 |
|
Liabilities and stockholders’ equity |
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
|
| ||
Accounts payable |
| $ | 7,156 |
|
| $ | 6,472 |
|
Accrued compensation |
|
| 799 |
|
|
| 728 |
|
Accrued liabilities and other |
|
| 2,848 |
|
|
| 1,926 |
|
Short-term lease liabilities |
|
| 848 |
|
|
| 865 |
|
Total current liabilities |
|
| 11,651 |
|
|
| 9,991 |
|
Deferred tax liability |
|
| 158 |
|
|
| 151 |
|
Long-term lease liabilities |
|
| 476 |
|
|
| 674 |
|
Total liabilities |
|
| 12,285 |
|
|
| 10,816 |
|
Commitments and contingencies (Note 13) |
|
|
|
|
|
| ||
Stockholders’ equity: |
|
|
|
|
|
| ||
Common stock and additional paid-in capital, par value $0.0001, 200,000 shares authorized; 11,302 shares issued and 10,761 shares outstanding at March 31, 2024; and 11,010 shares issued and 10,469 shares outstanding at December 31, 2023. |
|
| 116,852 |
|
|
| 115,295 |
|
Treasury stock, at cost: 541 shares at March 31, 2024 and December 31, 2023. |
|
| (5,364 | ) |
|
| (5,364 | ) |
Accumulated deficit |
|
| (80,976 | ) |
|
| (78,521 | ) |
Accumulated other comprehensive income |
|
| 1 |
|
|
| 3 |
|
Total stockholders’ equity |
|
| 30,513 |
|
|
| 31,413 |
|
Total liabilities and stockholders’ equity |
| $ | 42,798 |
|
| $ | 42,229 |
|
|
| September 30, 2017 |
|
| December 31, 2016 |
| ||
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 18,165,647 |
|
| $ | 45,161,403 |
|
Short term investments |
|
| 18,463,148 |
|
|
| — |
|
Trade accounts receivable, net |
|
| 7,708,893 |
|
|
| 5,154,996 |
|
Inventory |
|
| 609,850 |
|
|
| 146,815 |
|
Prepaid expenses and other current assets |
|
| 749,074 |
|
|
| 349,550 |
|
Total current assets |
|
| 45,696,612 |
|
|
| 50,812,764 |
|
Property and equipment, net |
|
| 1,069,149 |
|
|
| 807,086 |
|
Goodwill |
|
| 4,080,447 |
|
|
| 1,249,956 |
|
Customer relationships, net |
|
| 3,832,501 |
|
|
| 2,822,918 |
|
Intangible assets, net |
|
| 1,100,930 |
|
|
| 286,719 |
|
Other assets |
|
| 186,042 |
|
|
| 84,060 |
|
Total assets |
| $ | 55,965,681 |
|
| $ | 56,063,503 |
|
Liabilities and stockholders’ equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 3,947,772 |
|
| $ | 3,949,005 |
|
Accrued bonus |
|
| 1,665,411 |
|
|
| 1,748,551 |
|
Accrued liabilities |
|
| 1,088,385 |
|
|
| 1,072,242 |
|
Deferred purchase price |
|
| 1,000,000 |
|
|
| 1,000,000 |
|
Current portion of long-term notes payable |
|
| 1,333,333 |
|
|
| 1,388,563 |
|
Current portion of deferred rent obligation under operating lease |
|
| 81,332 |
|
|
| 81,332 |
|
Total current liabilities |
|
| 9,116,233 |
|
|
| 9,239,693 |
|
Long-term notes payable |
|
| 333,333 |
|
|
| 1,333,333 |
|
Deferred tax liability |
|
| 73,875 |
|
|
| 6,166 |
|
Deferred rent obligation under operating lease |
|
| 359,693 |
|
|
| 451,909 |
|
Total liabilities |
|
| 9,883,134 |
|
|
| 11,031,101 |
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Common shares, par value $0.0001, 200,000,000 shares authorized at September 30, 2017 and December 31, 2016; 9,577,530 and 9,275,062 shares issued at September 30, 2017 and December 31, 2016, respectively; 9,525,330 and 9,275,062 shares outstanding at September 30, 2017 and December 31, 2016, respectively |
|
| 957 |
|
|
| 928 |
|
Additional paid in capital |
|
| 89,553,782 |
|
|
| 88,582,470 |
|
Treasury stock, at cost: 52,200 shares and no shares at September 30, 2017 and December 31, 2016, respectively |
|
| (468,823 | ) |
|
| — |
|
Accumulated other comprehensive loss |
|
| (1,696 | ) |
|
| — |
|
Accumulated deficit |
|
| (43,001,673 | ) |
|
| (43,550,996 | ) |
Total stockholders’ equity |
|
| 46,082,547 |
|
|
| 45,032,402 |
|
Commitments and contingencies (note 14) |
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
| $ | 55,965,681 |
|
| $ | 56,063,503 |
|
SeeThe accompanying notes to unauditedare an integral part of these condensed consolidated financial statements.
3
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
|
| Three months ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Sales |
| $ | 14,231 |
|
| $ | 16,444 |
|
Cost of goods sold |
|
| 8,655 |
|
|
| 10,126 |
|
Gross profit |
|
| 5,576 |
|
|
| 6,318 |
|
Operating expenses: |
|
|
|
|
|
| ||
Research and development |
|
| 3,120 |
|
|
| 2,449 |
|
Sales and marketing |
|
| 2,158 |
|
|
| 2,866 |
|
General and administrative |
|
| 2,927 |
|
|
| 3,793 |
|
Total operating expenses |
|
| 8,205 |
|
|
| 9,108 |
|
Loss from operations |
|
| (2,629 | ) |
|
| (2,790 | ) |
Other (income) expense: |
|
|
|
|
|
| ||
Interest income, net |
|
| (26 | ) |
|
| (18 | ) |
Other (income) expense |
|
| (8 | ) |
|
| 4 |
|
Total other income |
|
| (34 | ) |
|
| (14 | ) |
Loss before income taxes |
|
| (2,595 | ) |
|
| (2,776 | ) |
Income tax (benefit) expense |
|
| (140 | ) |
|
| 82 |
|
Net loss |
| $ | (2,455 | ) |
| $ | (2,858 | ) |
Net loss per share: |
|
|
|
|
|
| ||
Basic |
| $ | (0.23 | ) |
| $ | (0.28 | ) |
Diluted |
| $ | (0.23 | ) |
| $ | (0.28 | ) |
Weighted average shares used in calculating loss per share: |
|
|
|
|
|
| ||
Basic |
|
| 10,532 |
|
|
| 10,266 |
|
Diluted |
|
| 10,532 |
|
|
| 10,266 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Sales |
| $ | 12,448,436 |
|
| $ | 12,439,279 |
|
| $ | 36,713,996 |
|
| $ | 30,807,902 |
|
Cost of goods sold |
|
| 6,444,544 |
|
|
| 6,862,992 |
|
|
| 19,300,120 |
|
|
| 17,007,228 |
|
Gross profit |
|
| 6,003,892 |
|
|
| 5,576,287 |
|
|
| 17,413,876 |
|
|
| 13,800,674 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| 2,094,774 |
|
|
| 1,432,581 |
|
|
| 5,510,861 |
|
|
| 4,096,670 |
|
Sales and marketing |
|
| 1,809,037 |
|
|
| 1,453,391 |
|
|
| 5,229,188 |
|
|
| 4,078,250 |
|
General and administrative |
|
| 1,899,449 |
|
|
| 1,459,993 |
|
|
| 6,174,869 |
|
|
| 3,304,790 |
|
Total operating expenses |
|
| 5,803,260 |
|
|
| 4,345,965 |
|
|
| 16,914,918 |
|
|
| 11,479,710 |
|
Income from operations |
|
| 200,632 |
|
|
| 1,230,322 |
|
|
| 498,958 |
|
|
| 2,320,964 |
|
Other expense (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| (98,689 | ) |
|
| (1,735 | ) |
|
| (189,855 | ) |
|
| (1,735 | ) |
Interest expense |
|
| 22,762 |
|
|
| 41,735 |
|
|
| 80,239 |
|
|
| 141,505 |
|
Fair market value adjustment - warrants |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (460,289 | ) |
Total other expense (income) |
|
| (75,927 | ) |
|
| 40,000 |
|
|
| (109,616 | ) |
|
| (320,519 | ) |
Income before income taxes |
|
| 276,559 |
|
|
| 1,190,322 |
|
|
| 608,574 |
|
|
| 2,641,483 |
|
Provision for income taxes |
|
| 42,206 |
|
|
| 7,278 |
|
|
| 59,251 |
|
|
| 8,078 |
|
Net income |
|
| 234,353 |
|
|
| 1,183,044 |
|
|
| 549,323 |
|
|
| 2,633,405 |
|
Accretion of dividends on preferred convertible stock |
|
| — |
|
|
| (322,170 | ) |
|
| — |
|
|
| (1,537,021 | ) |
Net income attributable to common stockholders |
| $ | 234,353 |
|
| $ | 860,874 |
|
| $ | 549,323 |
|
| $ | 1,096,384 |
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.02 |
|
| $ | 0.21 |
|
| $ | 0.06 |
|
| $ | 0.59 |
|
Diluted |
| $ | 0.02 |
|
| $ | 0.16 |
|
| $ | 0.05 |
|
| $ | 0.25 |
|
Weighted average shares used in calculating income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 9,545,235 |
|
|
| 4,133,020 |
|
|
| 9,475,708 |
|
|
| 1,849,647 |
|
Diluted |
|
| 10,169,559 |
|
|
| 6,689,332 |
|
|
| 10,238,987 |
|
|
| 3,103,784 |
|
SeeThe accompanying notes to unauditedare an integral part of these condensed consolidated financial statements.
4
Unaudited Condensed StatementConsolidated Statements of Comprehensive IncomeLoss
(In thousands)
(Unaudited)
|
| Three months ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Net loss |
| $ | (2,455 | ) |
| $ | (2,858 | ) |
Other comprehensive income: |
|
|
|
|
|
| ||
Foreign currency translation adjustment |
|
| (2 | ) |
|
| — |
|
Comprehensive loss |
| $ | (2,457 | ) |
| $ | (2,858 | ) |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| ||||
Net income |
| $ | 234,353 |
|
| $ | 1,183,044 |
|
| $ | 549,323 |
|
| $ | 2,633,405 |
|
|
Unrealized loss on available-for-sale securities |
|
| (1,696 | ) |
|
| — |
|
|
| (1,696 | ) |
|
| — |
|
|
Total comprehensive income |
| $ | 232,657 |
|
| $ | 1,183,044 |
|
| $ | 547,627 |
|
| $ | 2,633,405 |
|
|
SeeThe accompanying notes to unauditedare an integral part of these condensed consolidated financial statements.
5
Unaudited Condensed StatementConsolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
| Common Stock And Additional Paid-In Capital |
|
| Treasury Stock |
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Accumulated |
|
| Accumulated |
|
| Total |
| |||||||
Balance at December 31, 2023 |
|
| 11,010 |
|
| $ | 115,295 |
|
|
| (541 | ) |
| $ | (5,364 | ) |
| $ | 3 |
|
| $ | (78,521 | ) |
| $ | 31,413 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,455 | ) |
|
| (2,455 | ) |
Stock-based compensation |
|
| — |
|
|
| 1,087 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,087 |
|
Common stock Issued through restricted stock awards |
|
| 169 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Common stock withheld related to net share settlement of equity awards |
|
| (24 | ) |
|
| (94 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (94 | ) |
Common stock issued under ESPP |
|
| 23 |
|
|
| 76 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 76 |
|
Foreign currency translation adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| — |
|
|
| (2 | ) |
Common stock Issued in connection with at-the-market offerings, net |
|
| 124 |
|
|
| 488 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 488 |
|
Balance at March 31, 2024 |
|
| 11,302 |
|
| $ | 116,852 |
|
|
| (541 | ) |
| $ | (5,364 | ) |
| $ | 1 |
|
| $ | (80,976 | ) |
| $ | 30,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
| Common Stock And Additional Paid-In Capital |
|
| Treasury Stock |
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Accumulated |
|
| Accumulated |
|
| Total |
| |||||||
Balance at December 31, 2022 |
|
| 10,767 |
|
| $ | 111,282 |
|
|
| (541 | ) |
| $ | (5,364 | ) |
| $ | — |
|
| $ | (66,093 | ) |
| $ | 39,825 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2,858 | ) |
|
| (2,858 | ) | |||||
Stock-based compensation |
|
| — |
|
|
| 1,874 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,874 |
|
Common stock Issued through restricted stock awards |
|
| 278 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Common stock withheld related to net share settlement of equity awards |
|
| (118 | ) |
|
| (678 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (678 | ) |
Common stock issued under ESPP |
|
| 22 |
|
|
| 137 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 137 |
|
Balance at March 31, 2023 |
| $ | 10,949 |
|
| $ | 112,615 |
|
|
| (541 | ) |
| $ | (5,364 | ) |
| $ | — |
|
| $ | (68,951 | ) |
| $ | 38,300 |
|
|
| Common Stock |
|
| Additional Paid-in |
|
| Treasury |
|
| Accumulated Other Comprehensive |
|
| Accumulated |
|
| Total Stockholders’ |
| ||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Stock |
|
| Loss |
|
| Deficit |
|
| Equity |
| |||||||
Balance at December 31, 2016 |
|
| 9,275,062 |
|
| $ | 928 |
|
| $ | 88,582,470 |
|
| $ | — |
|
| $ | — |
|
| $ | (43,550,996 | ) |
| $ | 45,032,402 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 463,856 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 463,856 |
|
Exercise of stock options |
|
| 244,993 |
|
|
| 24 |
|
|
| 506,680 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 506,704 |
|
Shares issued pursuant to stock awards |
|
| 57,475 |
|
|
| 5 |
|
|
| (5 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Common stock repurchases |
|
| (52,200 | ) |
|
| — |
|
|
| — |
|
|
| (468,823 | ) |
|
| — |
|
|
| — |
|
|
| (468,823 | ) |
Reversal of costs related to secondary offering |
|
| — |
|
|
| — |
|
|
| 781 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 781 |
|
Unrealized loss on available-for-sale securities |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,696 | ) |
|
| — |
|
|
| (1,696 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 549,323 |
|
|
| 549,323 |
|
Balance at September 30, 2017 |
|
| 9,525,330 |
|
| $ | 957 |
|
| $ | 89,553,782 |
|
| $ | (468,823 | ) |
| $ | (1,696 | ) |
| $ | (43,001,673 | ) |
| $ | 46,082,547 |
|
SeeThe accompanying notes to unauditedare an integral part of these condensed consolidated financial statements.
6
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
| Three months ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net loss |
| $ | (2,455 | ) |
| $ | (2,858 | ) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
|
|
|
|
|
| ||
Depreciation |
|
| 145 |
|
|
| 157 |
|
Amortization of intangible assets |
|
| 742 |
|
|
| 743 |
|
Stock-based compensation |
|
| 1,046 |
|
|
| 981 |
|
Deferred tax liability |
|
| 7 |
|
|
| 3 |
|
Amortization of prepaid assets |
|
| 132 |
|
|
| — |
|
Accrual of property and equipment |
|
| (15 | ) |
|
| — |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
| ||
Trade accounts receivable |
|
| (2,269 | ) |
|
| 593 |
|
Inventories |
|
| (185 | ) |
|
| (255 | ) |
Prepaid expenses and other current assets |
|
| 3 |
|
|
| 555 |
|
Other assets |
|
| 15 |
|
|
| — |
|
Accounts payable |
|
| 684 |
|
|
| 250 |
|
Accrued compensation |
|
| 72 |
|
|
| (1,109 | ) |
Accrued liabilities and other |
|
| 963 |
|
|
| (459 | ) |
Lease liabilities |
|
| (4 | ) |
|
| (35 | ) |
Net cash used in operating activities |
|
| (1,119 | ) |
|
| (1,434 | ) |
Cash flows from investing activities: |
|
|
|
|
|
| ||
Purchases of property and equipment |
|
| (60 | ) |
|
| (89 | ) |
Net cash used in investing activities |
|
| (60 | ) |
|
| (89 | ) |
Cash flows from financing activities: |
|
|
|
|
|
| ||
Proceeds from at-the-market common stock offering, net of offering costs |
|
| 488 |
|
|
| — |
|
Payments for withholding taxes related to net share settlement of equity awards |
|
| (95 | ) |
|
| (678 | ) |
Proceeds from employee stock purchase and option exercises |
|
| 76 |
|
|
| 137 |
|
Net cash provided by (used in) financing activities |
|
| 469 |
|
|
| (541 | ) |
|
|
|
|
|
|
| ||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
| (2 | ) |
|
| — |
|
|
|
|
|
|
|
| ||
Net decrease in cash, cash equivalents and restricted cash |
|
| (712 | ) |
|
| (2,064 | ) |
Cash, cash equivalents, and restricted cash; beginning of period |
|
| 7,976 |
|
|
| 12,078 |
|
Cash, cash equivalents, and restricted cash; end of period |
| $ | 7,264 |
|
| $ | 10,014 |
|
|
|
|
|
|
| |||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
| ||
Income taxes paid |
| $ | 7 |
|
| $ | — |
|
Income taxes refunded |
| $ | 50 |
|
| $ | — |
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
| ||
Operating lease liabilities resulting from right-of-use assets |
| $ | — |
|
| $ | 11 |
|
Accrual of property and equipment |
| $ | — |
|
| $ | 13 |
|
Offering costs charged against proceeds from sale of common stock |
| $ | 164 |
|
| $ | — |
|
|
|
|
|
|
|
| ||
Cash, cash equivalents, and restricted cash: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 7,169 |
|
| $ | 9,839 |
|
Restricted cash included in prepaid expenses and other current assets and other assets long term |
|
| 95 |
|
|
| 175 |
|
Total cash, cash equivalents, and restricted cash |
| $ | 7,264 |
|
| $ | 10,014 |
|
|
| Nine Months Ended September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
| $ | 549,323 |
|
| $ | 2,633,405 |
|
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
| 336,817 |
|
|
| 357,425 |
|
Amortization |
|
| 396,206 |
|
|
| 276,004 |
|
Fair market value adjustment - warrants |
|
| — |
|
|
| (460,289 | ) |
Amortization of discounts on investments, net |
|
| (23,683 | ) |
|
| — |
|
Stock-based compensation |
|
| 463,856 |
|
|
| 224,039 |
|
Deferred tax liability |
|
| 67,709 |
|
|
| — |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Trade accounts receivable |
|
| (1,969,507 | ) |
|
| (2,034,467 | ) |
Inventory |
|
| (30,265 | ) |
|
| 14,714 |
|
Prepaid expenses and other assets |
|
| (501,506 | ) |
|
| (214,574 | ) |
Accounts payable |
|
| (123,112 | ) |
|
| 1,309,924 |
|
Accrued bonus |
|
| (83,140 | ) |
|
| (193,257 | ) |
Accrued liabilities |
|
| 16,143 |
|
|
| 135,046 |
|
Deferred obligation under operating lease |
|
| (92,216 | ) |
|
| (80,049 | ) |
Net cash provided by (used in) operating activities |
|
| (993,375 | ) |
|
| 1,967,921 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of available-for-sale securities |
|
| (18,441,161 | ) |
|
| — |
|
Cash paid for acquisition |
|
| (6,348,730 | ) |
|
| — |
|
Purchases of property and equipment |
|
| (195,922 | ) |
|
| (275,649 | ) |
Net cash used in investing activities |
|
| (24,985,813 | ) |
|
| (275,649 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Repayment of notes payable |
|
| (1,055,230 | ) |
|
| (1,216,928 | ) |
Proceeds from initial public offering |
|
| — |
|
|
| 13,600,800 |
|
Costs related to initial public offering |
|
| 781 |
|
|
| (2,697,853 | ) |
Common stock repurchases |
|
| (468,823 | ) |
|
| — |
|
Proceeds from exercise of stock options |
|
| 506,704 |
|
|
| 112,100 |
|
Net cash provided by (used in) financing activities |
|
| (1,016,568 | ) |
|
| 9,798,119 |
|
Net increase (decrease) in cash and cash equivalents |
|
| (26,995,756 | ) |
|
| 11,490,391 |
|
Cash and cash equivalents, beginning of period |
|
| 45,161,403 |
|
|
| 5,335,913 |
|
Cash and cash equivalents, end of period |
| $ | 18,165,647 |
|
| $ | 16,826,304 |
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
Interest paid |
| $ | 85,085 |
|
| $ | 141,505 |
|
Taxes paid |
| $ | 114,639 |
|
| $ | — |
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Accretion of Series E, F, and G preferred redeemable convertible stock to redemption amount |
| $ | — |
|
| $ | 1,356,707 |
|
Conversion of warrants |
| $ | — |
|
| $ | 249,215 |
|
Conversion of preferred stock into common stock |
| $ | — |
|
| $ | 50,432,161 |
|
Issuance of warrants to underwriters in connection with initial public offering |
| $ | — |
|
| $ | 126,218 |
|
SeeThe accompanying notes to unauditedare an integral part of these condensed consolidated financial statements.
7
Notes to Unaudited Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Description of Business and Basis of Presentation
Description of Business Description
Airgain, Inc. (the Company) was incorporated in the State of California on March 20, 1995,1995; and reincorporated in the State of Delaware on August 15,17, 2016. Airgain, Inc. together with its subsidiaries are herein referred to as the “Company,” “we,” or “our.” The Company is a leading provider of advanced antenna technologies used toconnectivity solutions including embedded components, external antennas, and integrated systems that enable high performance wireless networking across a broad range of home,in the consumer, enterprise, and industrial devices. The Company designs, develops, and engineers its antenna products for original equipment and design manufacturers worldwide. Additionally, the Company designs and manufactures antennas for cellular, Long-Term Evolution (LTE), Multiple Input Multiple Output (MIMO), Global Positioning System (GPS), Wi-Fi and most radio frequencies.automotive markets. The Company’s main officeheadquarters is in San Diego, California with office space and research facilities in San Diego, California, Rancho Santa Fe, California, Poway, California, Melbourne, Florida, Taipei, Taiwan, Shenzhen and Jiangsu, China and Cambridgeshire, United Kingdom and a design and manufacturing plant/facility in Scottsdale, Arizona.California.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed 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 interim financial reporting. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Interim financial results are not necessarily indicative of results anticipated for the full year. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2023, from which the balance sheet information herein was derived.
The condensed balance sheet asunaudited Condensed Consolidated Financial Statements include the accounts of December 31, 2016 included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP.
The condensed statements of operations for the threeCompany and nine months ended September 30, 2017its wholly owned subsidiary. All intercompany transactions and September 30, 2016, and the balance sheet data as of September 30, 2017investments have been prepared on the same basis as the audited financial statements.eliminated in consolidation.
In the opinion of management, the accompanying unaudited condensed financial statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation of results of the Company’s operations and financial position for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2017 or for any future period.
Segment Information
The Company’s operations are located primarily in the United States and most of its assets are located in San Diego, California and Scottsdale, Arizona. Plymouth, Minnesota.
The Company operates in one segment related to the sale of antenna products.providing connectivity solutions – embedded components, external antennas, and integrated systems. The Company’s chief operating decision-maker is itsour chief executive officer, who reviews operating results on an aggregate consolidated basis for purposes of regularly making operating decisions, allocation of resources and manages the Company’s opertionsassessing performance as a single operating segment.
Initial Public Offering
On August 17, 2016, the Company completed its initial public offering (IPO) in which it issued and sold 1.5 million shares of common stock at a public offering price of $8.00 per share. The Company received net proceeds of approximately $9.5 million after deducting underwriting discounts and commissions of $0.8 million and offering-related transaction costs of approximately $1.7 million. Upon the closing of the IPO, all shares of the Company’s then-outstanding preferred redeemable convertible stock and preferred convertible stock automatically converted into an aggregate of 3,080,733 shares of common stock and the Company issued 1,957,207 shares of common stock in satisfaction of accumulated dividends. Additionally, the Company reduced the number of preferred shares authorized to a total of 10,000,000 shares.
On August 29, 2016, the underwriters exercised their over-allotment option to purchase an additional 200,100 shares of common stock at the public offering price of $8.00 per share, which resulted in net proceeds to the Company of approximately $1.5 million, after deducting underwriting discounts, commissions and estimated offering-related transaction costs of approximately $0.1 million.
On December 8, 2016, the Company completed a public offering of common stock in which it issued and sold 1,352,941 shares of common stock at a public offering price of $17.00 per share and received gross proceeds of $23.0 million, which resulted in net
proceeds to the Company of approximately $20.7 million, after deducting underwriting discounts and commissions of approximately $1.5 million and offering-related transaction costs of approximately $0.8 million.
On December 14, 2016, the underwriters exercised their over-allotment option to purchase an additional 332,941 shares of common stock at the public offering price of $17.00 per share and the Company received gross proceeds of approximately $5.6 million, which resulted in net proceeds to the Company of approximately $5.3 million, after deducting underwriting discounts and commissions of approximately $0.3 million and offering-related transaction costs.
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. Significant items subject to such estimates and assumptions include valuation of the stock-based compensation expense, intangible assets and goodwill.
Fair Value Measurements
The carrying values of the Company’s financial instruments, including cash and cash equivalents, trade accounts receivable, accounts payable, accrued liabilities and debt 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:
Level 1: Quoted prices in active markets for identical assets or liabilities.
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.
Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable in active markets.
The Company’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers into or out of Level 1, Level 2, or Level 3 for the nine months ended September 30, 2017 and for the year ended December 31, 2016.
Cash Equivalents and Short-Term Investments
Cash equivalents are comprised of short-term, highly liquid investments with maturities of 90 days or less at the date of purchase.
Short-term investments consist predominantly of commercial paper, corporate debt securities, U.S. Treasury securities and asset backed securities. The Company classifies short-term investments based on the facts and circumstances surrounding the investments at the time of purchase and evaluates such classification as of each balance sheet date. All short-term investments are classified as available-for-sale securities as of September 30, 2017 and are recorded at estimated fair value. Unrealized gains and losses for available-for-sale securities are included in accumulated other comprehensive income (loss), a component of stockholders’ equity. Realized gains and losses are included in other expense (income), in the unaudited condensed statement of operations. The Company evaluates its investments to determine whether those with unrealized loss positions are other than temporarily impaired. Impairments are considered to be other than temporary if they are related to deterioration in credit risk or if it is likely that the Company will sell the securities before recovery of their cost basis.
Inventory
The majority 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 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. 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 balance sheet. With the acquisition of substantially all of the assets of Antenna Plus, LLC (“Antenna Plus”), in April 2017, the Company began manufacting products at its Scottsdale, Arizona and Shullsburg, Wisconsin locations. In July 2017, the Company relocated all of its product manufacturing produced in Shullsburg, Wisconsin to the Scottsadale, Arizona facility. See Note 6 for additional information relating to the Company’s acquisition of the Antenna Plus assets.
Inventory is stated at the lower of cost or market. For items manufactured by the Company, cost is determined using the weighted average cost method. For items manufactured by third parties, cost is determined using the first-in, first-out method (FIFO). Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period. As of September 30, 2017, the Company’s inventories consist primarily of raw materials.
Accumulated Other Comprehensive Income
Comprehensive income is comprised of net income and other comprehensive income. Accumulated other comprehensive income on the unaudited condensed balance sheet at September 30, 2017 includes unrealized gains and losses on the Company’s available-for-sale securities.
Note 2. Summary of Significant Accounting Policies
During the three and nine months ended September 30, 2017,March 31, 2024, there have been no material changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016. 2023.
Trade Accounts Receivable
Recent Accounting PronouncementsWe 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.
8
An allowance for doubtful accounts is established when, in the opinion of management, collection of the account is doubtful.
Inventories
As of April 2022, 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 January 2017,some situations, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updated (ASU) No.Company retains ownership of consigned inventories at third-party contract manufacturer (CM) locations due to actual or pending customers' orders. The Company recognized the consigned 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. In the second quarter of 2022, we closed our facility located in Scottsdale, Arizona where certain of our products were previously manufactured.
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. For items manufactured by third parties, cost is determined using the first-in, first-out method (FIFO). 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 to ten 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 expense (income) in the Company's consolidated statement of operations.
Goodwill
We account for our goodwill under the authoritative guidance ASC 250 for goodwill and other intangible assets and the provisions of ASU 2017-04,Intangibles – Goodwill and Other (Topic 350): 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 microeconomic 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.
Determining the 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.
9
Intangibles
The Company’s identifiable finite-lived intangible assets are comprised of acquired intangibles, developed technologies, customer relationships and non-compete agreements. The cost of the market-related intangible assets with finite lives is amortized on a straight-line basis over the assets’ respective estimated useful lives.
We assess potential impairments to our intangible assets in accordance with the authoritative guidance for impairment or disposal of long-lived assets (ASC 360) when events or changes in circumstances indicate that the carrying value may not be recoverable. We assess the impairment of long-lived and intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. As a first step, we consider factors, which may include the following, but are not limited to: (1) significant underperformance relative to historical or projected future operating results; (2) significant negative industry or economic trends; or (3) a significant decline in our stock price for a sustained period.
If this assessment indicates that the carrying value of the assets may not be recoverable, the Company is required to perform the second step to test the asset group for recoverability. This recoverability test compares the future undiscounted cash flows expected from the use of the asset group to its carrying value. If the carrying value is more than the undiscounted future cash flows, the Company is required perform a third step to determine the fair value of the asset group and compare fair value against the carrying value. Any excess carrying value over the fair value needs to be recognized as an impairment loss.
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 recognize 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 simplifies will require recognition of revenue over time:
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 and/or pricing credits under certain circumstances. We estimate product returns based on historical sales and return trends and record against revenue and corresponding refund liability.
10
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) to eighteen (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.
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.
Shipping and Transportation Costs
Shipping and other transportation costs expensed as incurred were $20,000 and $0.1 million for the three months ended March 31, 2024 and 2023, 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. These costs are included in sales and marketing expenses in the accompanying 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 goodwill. Forthe 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
11
stock-based awards are 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:
Fair Value Measurements
The carrying values of the Company’s financial instruments, including cash, trade accounts receivable, accounts payable, accrued liabilities and deferred purchase price obligations 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:
Recently Adopted Accounting Pronouncements
None.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” ASU No. 2023-07 require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to an entity's chief operating decision maker (CODM), amounts and descriptions of other reportable segments, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources. The ASU is applicable to entities with a single reportable segment. This ASU 2017-04 is effective for fiscal years beginning after December 15, 2019. For nonpublic entities, ASU 2017-04 is effective2023, and for fiscal years beginning after December 15, 2021. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which simplifies the way cash receipts and cash payments are presented on the statement of cash flows. For public entities, ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those annual periods. For nonpublic entities, ASU 2016-15 is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.2024. Early adoption is permitted. The ASU should be applied retrospectively to all prior periods presented in the financial statements. The Company has adopted this pronouncement.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 February 2016,December 2023, the FASB issued ASU No. 2016-02, Leases2023-09, "Income Taxes (Topic 842), which requires lessees740): Improvements to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets. For public entities, ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. For nonpublic entities, ASU 2016-02 is effective for fiscal year beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020. The Company is evaluating the effect that ASU 2016-02 will have on its financial statements and related disclosures. The Company has not yet selected a transition method, nor has it determined the effect of the standard on its ongoing financial reporting.
In January 2016, the FASB issuedIncome Tax Disclosures.". ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement2023-09 requires expanded disaggregated information about a reporting entity’s effective tax rate reconciliation as well as disclosure of Financial Assets and Financial Liabilities, which enhances the reporting model for financial instruments to provide users of financial statements with more decision-useful information. For public entities,income taxes paid by jurisdiction. The amendments in ASU 2016-01 isare effective for fiscal years beginning after December 15, 2017,2024 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. As the amendments apply to income
12
tax disclosures only, the Company does not expect adoption to have a material impact on its consolidated financial statements.
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 interim periods within those years on a prospective basis. For nonpublic entities,distinguish between non-authoritative and authoritative guidance since, unlike the Codification, the concepts statements are non-authoritative. The amendments in ASU 2016-01 isare effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early2024 with early adoption is notpermitted. Retrospective application of the amendments are permitted. The Company is evaluatingwill evaluate the effect that ASU 2016-01 will haveto determine its impact on its financial statements and related disclosure. The Company has not yet selected a transition method, nor has it determined the effect of the standard on its ongoing financial reporting.
In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory. ASU 2015-11 requires companies to measure certain inventory at the lower of cost and net realizable value. For public entities, ASU 2015-11 is effective for fiscal years beginning after December 15, 2016, and interim periods within those years on a prospective basis. For nonpublic entities, ASU 2015-11 is effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted. The Company is evaluating the effect that ASU 2015-11 will have on its financial statements and related disclosure.Company’s disclosures. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In May 2014, the FASBWe have assessed all other ASUs issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance in GAAP when it becomes effective. For public entities, ASU 2014-09 is effective for reporting periods beginning after December 15, 2017, including interim periods within that reporting period. For nonpublic entities, ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those periods. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating
the effect that ASU 2014-09 will have on its financial statements and related disclosures. The Company hasbut not yet selectedadopted and concluded that those not disclosed are not relevant to the Company or are not expected to have a transition method nor has it determined the effect of the standard on the Company’s ongoing financial reporting.material impact.
Note 3. Net IncomeLoss Per Share
Basic net incomeloss per share is calculated by dividing net incomeloss available to common stockholders by the weighted average shares of common stock outstanding for the period. The per share computations reflect the one-for-ten reverse stock split that was effected in July 2016. Diluted net incomeloss per share is calculated by dividing net incomeloss 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. Preferred dividends are deducted from net income in arriving at net income attributable to common stockholders. The Company calculates diluted earningsloss per common share using the treasury stock method and the as-if-converted method, as applicable.method.
The following table presents the computation of net incomeloss per share:share (in thousands except per share data):
|
| Three months ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Numerator: |
|
|
|
|
|
| ||
Net loss |
| $ | (2,455 | ) |
| $ | (2,858 | ) |
Denominator: |
|
|
|
|
|
| ||
Basic weighted average common shares outstanding |
|
| 10,532 |
|
|
| 10,266 |
|
Plus dilutive effect of potential common shares |
|
| — |
|
|
| — |
|
Diluted weighted average common shares outstanding |
|
| 10,532 |
|
|
| 10,266 |
|
Net loss per share: |
|
|
|
|
|
| ||
Basic |
| $ | (0.23 | ) |
| $ | (0.28 | ) |
Diluted |
| $ | (0.23 | ) |
| $ | (0.28 | ) |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 234,353 |
|
| $ | 1,183,044 |
|
| $ | 549,323 |
|
| $ | 2,633,405 |
|
Accretion of dividends on preferred stock |
|
| — |
|
|
| (322,170 | ) |
|
| — |
|
|
| (1,537,021 | ) |
Net income attributable to common stockholders - basic |
| $ | 234,353 |
|
| $ | 860,874 |
|
| $ | 549,323 |
|
| $ | 1,096,384 |
|
Accretion of dividends on preferred stock |
|
| — |
|
|
| 186,868 |
|
|
| — |
|
|
| 125,205 |
|
Adjustment for change in fair value of warrant liability |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (460,289 | ) |
Net income attributable to common stockholders - diluted |
| $ | 234,353 |
|
| $ | 1,047,742 |
|
| $ | 549,323 |
|
| $ | 761,300 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 9,545,235 |
|
|
| 4,133,020 |
|
|
| 9,475,708 |
|
|
| 1,849,647 |
|
Diluted |
|
| 10,169,559 |
|
|
| 6,689,332 |
|
|
| 10,238,987 |
|
|
| 3,103,784 |
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.02 |
|
| $ | 0.21 |
|
| $ | 0.06 |
|
| $ | 0.59 |
|
Diluted |
| $ | 0.02 |
|
| $ | 0.16 |
|
| $ | 0.05 |
|
| $ | 0.25 |
|
Diluted weighted average common shares outstanding for the three months ended September 30, 2017 includes 624,324 options outstanding. Diluted weighted average common shares outstanding for the nine months ended September 30, 2017 includes 6,281 warrants and 756,998 options outstanding.
Potentially dilutive securities (in common stock equivalent shares) not included in the calculation of diluted net incomeloss per share because to do so would be anti-dilutive are as follows (in common stock equivalent shares)thousands):
|
| Three months ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Common stock equivalent shares |
|
| 2,327 |
|
|
| 2,224 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Preferred redeemable convertible stock, including accumulated dividends |
|
| — |
|
|
| 788,074 |
|
|
| — |
|
|
| 3,253,254 |
|
Employee stock options |
|
| 375,277 |
|
|
| — |
|
|
| 427,645 |
|
|
| — |
|
Warrants outstanding |
|
| 51,003 |
|
|
| 51,003 |
|
|
| — |
|
|
| 51,003 |
|
Total |
|
| 426,280 |
|
|
| 839,077 |
|
|
| 427,645 |
|
|
| 3,304,257 |
|
Note 4. Cash and Cash Equivalents and Short-Term Investments
The following table showstables show the Company’s cash and cash equivalents and short-term investments by significant investment category as(in thousands):
|
| March 31, 2024 |
|
| December 31, 2023 |
| ||
Cash |
| $ | 6,846 |
|
| $ | 7,581 |
|
Level 1: |
|
|
|
|
|
| ||
Money market funds |
|
| 323 |
|
|
| 300 |
|
Total |
| $ | 7,169 |
|
| $ | 7,881 |
|
Restricted Cash
As of September 30, 2017:March 31, 2024 and December 31, 2023, the Company had $95,000 in cash on deposit to secure certain lease commitments; $40,000 of which is short-term in nature and recorded in prepaid expenses and other current assets and
13
$55,000 of which is restricted for more than twelve months and recorded in other assets in the Company’s consolidated balance sheet.
| September 30, 2017 |
| ||||||||||||||||||
|
| Amortized Cost |
|
| Gross Unrealized Losses |
|
| Estimated Fair Value |
|
| Cash and Cash Equivalents |
|
| Short-Term Investments |
| |||||
Cash |
| $ | 1,309,876 |
|
| $ | — |
|
| $ | 1,309,876 |
|
| $ | 1,309,876 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
| 13,855,588 |
|
|
| — |
|
|
| 13,855,588 |
|
|
| 13,855,588 |
|
|
| — |
|
U.S. treasury securities |
|
| 1,234,813 |
|
|
| (88 | ) |
|
| 1,234,725 |
|
|
| — |
|
|
| 1,234,725 |
|
Subtotal |
|
| 15,090,401 |
|
|
| (88 | ) |
|
| 15,090,313 |
|
|
| 13,855,588 |
|
|
| 1,234,725 |
|
Level 2 (2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
| 10,430,502 |
|
|
| — |
|
|
| 10,430,502 |
|
|
| — |
|
|
| 10,430,502 |
|
Corporate debt obligations |
|
| 6,049,066 |
|
|
| (1,458 | ) |
|
| 6,047,608 |
|
|
| — |
|
|
| 6,047,608 |
|
Repurchase agreements |
|
| 3,000,183 |
|
|
| — |
|
|
| 3,000,183 |
|
|
| 3,000,183 |
|
|
| — |
|
Asset-backed securities |
|
| 750,463 |
|
|
| (150 | ) |
|
| 750,313 |
|
|
| — |
|
|
| 750,313 |
|
Subtotal |
|
| 20,230,214 |
|
|
| (1,608 | ) |
|
| 20,228,606 |
|
|
| 3,000,183 |
|
|
| 17,228,423 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 36,630,491 |
|
| $ | (1,696 | ) |
| $ | 36,628,795 |
|
| $ | 18,165,647 |
|
| $ | 18,463,148 |
|
Note 5. Inventory
|
|
|
|
The Company’s investments were primarily valued based upon one or more valuations reported by its investment accounting and reporting service provider. The investment service provider values the securities using a hierarchical security pricing model that relies primarily on valuations provided by a third-party pricing vendor. Such valuations may be based on trade prices in active markets for identical assets or liabilities (Level 1 inputs) or valuation models using inputs thatInventories are observable either directly or indirectly (Level 2 inputs), such as quoted prices for similar assets or liabilities, yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures. The Company performs certain procedures to corroborate the fair value of its holdings, including comparing valuations obtained from its investment service provider with other pricing sources to validate the reasonablenesscomprised of the valuations. following (in thousands):
|
| March 31, 2024 |
|
| December 31, 2023 |
| ||
Raw materials |
| $ | 819 |
|
| $ | 661 |
|
Finished goods |
|
| 1,769 |
|
|
| 1,742 |
|
Total Inventory |
| $ | 2,588 |
|
| $ | 2,403 |
|
The Company typically investsConsigned inventories, which are included in highly-rated securities, and its investment policy limits the amount of credit exposure to any one issuer. The policy requires investments in fixed income instruments denominated and payable in U.S. dollars only and requires investments to be investment grade, with a primary objective of minimizing the potential risk of principal loss.
The following table presents the Company’s short-term investments with unrealized losses by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2017:
|
| Less Than 12 Months |
| |||||
Description of Securities |
| Estimated Fair Value |
|
| Unrealized Losses |
| ||
September 30, 2017 |
|
|
|
|
|
|
|
|
U.S. treasury securities |
| $ | 1,234,725 |
|
| $ | (88 | ) |
Corporate debt obligations |
|
| 6,047,607 |
|
|
| (1,458 | ) |
Asset-backed securities |
|
| 750,313 |
|
|
| (150 | ) |
Total |
| $ | 8,032,645 |
|
| $ | (1,696 | ) |
The Company considers the declines in market value of its short-term investments to be temporary in nature. Fair values were determined for each individual security in the investment portfolio. When evaluating an investment for other-than-temporary impairment, the Company reviews factors such as length of time and extent to which fair value has been below its cost basis, the financial conditiontotal inventories, are comprised of the issuer and any changes thereto, changes in market interest rates and the Company’s intent to sell, or whether it is more likely than not it will be required to sell the investment before recovery of the investment’s cost basis. As of September 30, 2017, the Company does not consider any of its investments to be other-than temporarily impaired.following (in thousands):
|
| March 31, 2024 |
|
| December 31, 2023 |
| ||
Raw materials |
| $ | 485 |
|
| $ | 558 |
|
Finished goods |
|
| 701 |
|
|
| 598 |
|
Total Consigned Inventory |
| $ | 1,186 |
|
| $ | 1,156 |
|
Contractual maturities of short-term investments as of September 30, 2017 are as follows:
Note 5.6. 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 liveslife or the term of six to ten yearsthe lease for tenant improvements and three to ten years for all other property and equipment. Property and equipment consist of the following:following (in thousands):
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Lab equipment |
| $ | 1,851,722 |
|
| $ | 1,314,060 |
|
Computer equipment |
|
| 165,415 |
|
|
| 165,415 |
|
Computer software |
|
| 299,227 |
|
|
| 299,227 |
|
Furniture and fixtures |
|
| 202,218 |
|
|
| 184,233 |
|
Tenant improvements |
|
| 763,898 |
|
|
| 763,898 |
|
Other office equipment |
|
| 63,824 |
|
|
| 20,591 |
|
|
|
| 3,346,304 |
|
|
| 2,747,424 |
|
Less accumulated depreciation |
|
| (2,277,155 | ) |
|
| (1,940,338 | ) |
|
| $ | 1,069,149 |
|
| $ | 807,086 |
|
|
| March 31, 2024 |
|
| December 31, 2023 |
| ||
Manufacturing and testing equipment |
| $ | 5,485 |
|
| $ | 5,371 |
|
Leasehold improvements |
|
| 848 |
|
|
| 848 |
|
Computers and software |
|
| 542 |
|
|
| 811 |
|
Furniture, fixtures, and equipment |
|
| 427 |
|
|
| 427 |
|
Vehicles |
|
| 56 |
|
|
| 55 |
|
Construction in process |
|
| 6 |
|
|
| 45 |
|
Property and equipment, gross |
|
| 7,364 |
|
|
| 7,557 |
|
Less accumulated depreciation |
|
| (5,059 | ) |
|
| (5,050 | ) |
Property and equipment, net |
| $ | 2,305 |
|
| $ | 2,507 |
|
Depreciation expense was $114,358$0.1 million and $121,068$0.2 million for the three months ended September 30, 2017March 31, 2024 and 2016, respectively, and $336,817 and $357,425 for the nine months ended September 30, 2017 and 2016,2023, respectively.
Note 6. Acquisitions
Antenna Plus
On April 27, 2017, the Company completed the acquisition of substantially all of the assets of Antenna Plus. Antenna Plus is a supplier of antenna-based solutions for mobile and automotive fleet applications for government, public safety, and Industrial Internet of Things (IOT) markets. The acquisition provides leverage for the Company’s existing products into several new markets, including the fast-growing automotive fleet and industrial IOT space.
The transaction was completed pursuant to an Asset Purchase Agreement with MCA Financial Group, Ltd., acting as the court-appointed receiver for Antenna Plus. Upon the closing of the transaction, the Company paid to Antenna Plus total consideration of approximately $6.3 million in cash, net of post-closing working capital adjustments. In addition, the Company assumed certain contracts and other liabilities of Antenna Plus, as expressly set forth in the Asset Purchase Agreement.
The following table shows the allocation of the purchase price for Antenna Plus to the acquired identifiable assets, liabilities assumed and goodwill:
Consideration: |
|
|
|
|
Cash |
| $ | 6,383,500 |
|
Working capital adjustments |
|
| (34,770 | ) |
Fair value of total consideration transferred |
| $ | 6,348,730 |
|
Recognized amounts of identifiable assets acquired and liabilities assumed: |
|
|
|
|
Accounts receivable |
| $ | 584,390 |
|
Inventory |
|
| 432,770 |
|
Fixed assets |
|
| 402,958 |
|
Intangible assets |
|
| 2,220,000 |
|
Current liabilities |
|
| (121,879 | ) |
Total identifiable net assets acquired |
|
| 3,518,239 |
|
Goodwill |
|
| 2,830,491 |
|
Total |
| $ | 6,348,730 |
|
Goodwill was primarily attributable to the anticipated synergies and economies of scale expected from the operations of the combined business. The synergies include certain cost savings, operating efficiencies, and other strategic benefits projected to be achieved as a result of the acquisition. Goodwill is expected to be deductible for tax purposes.
Revenue associated with the acquired Antenna Plus assets since the date of acquisition was $1.8 million and $3.3 million for the three and nine months ended September 30, 2017, respectively. Cost of goods sold associated with the acquired Antenna Plus assets since the date of acquisition was $0.8 and $1.4 million for the three and nine months ended September 30, 2017, respectively. Net income associated with the acquired Antenna Plus assets since the date of acquisition was net income of $308,750 and $11,176 for the three and nine months ended September 30, 2017, respectively.
Unaudited Pro Forma Information
The following unaudited pro forma financial information presents combined results of operations for each of the periods presented, as if Antenna Plus had been acquired as of the beginning of the fiscal year 2016. The pro forma information includes adjustments to amortization and depreciation for intangible assets and property, plant and equipment acquired. The pro forma data are for informational purposes only and are not necessarily indicative of the consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2016 or of the results of future operations of the combined business. Consequently, actual results will differ from the unaudited pro forma information presented below:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Pro forma sales |
| $ | 12,448,436 |
|
| $ | 14,651,565 |
|
| $ | 38,982,040 |
|
| $ | 36,914,879 |
|
Pro forma income from operations |
| $ | 200,632 |
|
| $ | 1,869,316 |
|
| $ | 1,047,435 |
|
| $ | 3,865,061 |
|
Pro forma net income |
| $ | 234,353 |
|
| $ | 1,822,045 |
|
| $ | 1,097,806 |
|
| $ | 4,177,547 |
|
Skycross
On December 17, 2015, the Company executed and entered into an asset purchase agreement for certain North American assets of Skycross, Inc. (Skycross), a manufacturer of advanced antenna and radio-frequency solutions. In addition to the $4.0 million paid up front, the purchase price also included a contingent consideration arrangement. The $1.0 million of deferred consideration is payable upon the later of (i) the expiration of the Transition Services Agreement between the Company and Skycross which defines transition services to be provided by Skycross to the Company and (ii) the date on which the Company has received copies of third party approvals with respect to each customer and program that was purchased. The potential undiscounted amount of all future payments that could be required to be paid under the contingent consideration arrangement is between $0.0 and $1.0 million. The fair value of the contingent consideration was estimated by applying the income approach. The income approach is based on estimating the value of the present worth of future net cash flows. As of September 30, 2017, the contingent consideration was still outstanding.
Note 7. Goodwill
Changes to the Company’s goodwill balance during the nine months ended September 30, 2017 and the year ended December 31, 2016 are as follows:
Balance at December 31, 2015 |
| $ | 1,249,956 |
|
Current period adjustments |
|
| — |
|
Balance at December 31, 2016 |
| $ | 1,249,956 |
|
Acquisition of Antenna Plus Assets |
|
| 2,830,491 |
|
Balance at September 30, 2017 |
| $ | 4,080,447 |
|
Note 8. Intangible Assets and Goodwill
Other Intangible Assets
The following is a summary of the Company’s acquired other intangible assets:assets (dollars in thousands):
|
| March 31, 2024 |
| |||||||||||
|
| Weighted average amortization period (in years) |
| Gross carrying amount |
|
| Accumulated amortization |
|
| Net carrying amount |
| |||
Market related intangibles |
| 5 |
| $ | 1,820 |
|
| $ | 1,219 |
|
| $ | 601 |
|
Customer relationships |
| 7 |
|
| 13,780 |
|
|
| 9,561 |
|
|
| 4,219 |
|
Developed technologies |
| 11 |
|
| 4,380 |
|
|
| 1,707 |
|
|
| 2,673 |
|
Covenants to non-compete |
| 2 |
|
| 115 |
|
|
| 115 |
|
|
| — |
|
Total intangible assets, net |
|
|
| $ | 20,095 |
|
| $ | 12,602 |
|
| $ | 7,493 |
|
14
|
| September 30, 2017 |
| |||||||||||||
|
| Weighted Average Amortization Period (years) |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Intangibles, Net |
| ||||
Customer relationships |
|
| 10 |
|
| $ | 4,450,000 |
|
| $ | 617,499 |
|
| $ | 3,832,501 |
|
Developed technologies |
|
| 9 |
|
|
| 1,080,000 |
|
|
| 109,463 |
|
|
| 970,537 |
|
Tradename |
|
| 3 |
|
|
| 120,000 |
|
|
| 16,667 |
|
|
| 103,333 |
|
Non-compete agreement |
|
| 3 |
|
|
| 67,000 |
|
|
| 39,940 |
|
|
| 27,060 |
|
Total intangible assets, net |
|
| 10 |
|
| $ | 5,717,000 |
|
| $ | 783,569 |
|
| $ | 4,933,431 |
|
|
| December 31, 2023 |
| |||||||||||
|
| Weighted average amortization period (in years) |
| Gross carrying amount |
|
| Accumulated amortization |
|
| Net carrying amount |
| |||
Market related intangibles |
| 5 |
| $ | 1,820 |
|
| $ | 1,135 |
|
| $ | 685 |
|
Customer relationships |
| 7 |
|
| 13,780 |
|
|
| 8,993 |
|
|
| 4,787 |
|
Developed technologies |
| 11 |
|
| 4,380 |
|
|
| 1,618 |
|
|
| 2,762 |
|
Covenants to non-compete |
| 2 |
|
| 115 |
|
|
| 115 |
|
|
| — |
|
Total intangible assets, net |
|
|
| $ | 20,095 |
|
| $ | 11,861 |
|
| $ | 8,234 |
|
|
| December 31, 2016 |
| |||||||||||||
|
| Weighted Average Amortization Period (years) |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Intangibles, Net |
| ||||
Customer relationships |
|
| 10 |
|
| $ | 3,150,000 |
|
| $ | 327,082 |
|
| $ | 2,822,918 |
|
Developed technologies |
|
| 5 |
|
|
| 280,000 |
|
|
| 37,091 |
|
|
| 242,909 |
|
Non-compete agreement |
|
| 3 |
|
|
| 67,000 |
|
|
| 23,190 |
|
|
| 43,810 |
|
Total intangible assets, net |
|
| 10 |
|
| $ | 3,497,000 |
|
| $ | 387,363 |
|
| $ | 3,109,637 |
|
The estimatedEstimated annual amortization of intangible assets for the next five years and thereafter is shown in the following table. table (in thousands):
|
| Estimated future amortization |
| |
2024 (remaining nine months) |
| $ | 2,226 |
|
2025 |
|
| 2,958 |
|
2026 |
|
| 557 |
|
2027 |
|
| 356 |
|
Thereafter |
|
| 1,396 |
|
Total |
| $ | 7,493 |
|
Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures, and asset impairments, among other factors. Amortization expense was $74,402$0.7 million for each of the three months ended March 31, 2024 and $93,3382023.
No impairment losses were recorded against the other intangibles during the three months ended March 31, 2024 and 2023.
For the annual finite-lived intangible assets impairment assessment, as of December 31, 2023, the Company evaluated the impairment considerations, starting with the interim assessment as of September 30, 2023. For the interim impairment assessment, as of March 31, 2024, the Company evaluated the impairment considerations, starting with the interim assessment as of December 31, 2023.
During the fourth quarter of 2023 and first quarter of 2024, the Company determined that there were no triggering events or circumstances to indicate that the carrying value of the finite-lived asset group may not be recoverable. Based on the assessment performed, we concluded that an impairment charge to finite-lived intangible assets was not required as of December 31, 2023 and March 31, 2024 and the useful lives remain appropriate.
Goodwill
No impairment losses were recorded against the goodwill during the three months ended March 31, 2024 and 2023.
For the annual goodwill impairment assessment as of December 31, 2023, the Company evaluated the impairment considerations, starting with the interim assessment as of September 30, 2023. For the interim goodwill impairment assessment as of March 31, 2024, the Company evaluated the impairment considerations, starting with the interim assessment as of December 31, 2023.
During the fourth quarter of 2023 and first quarter of 2024, the Company's market capitalization, working capital, current and expected future cash flows and the macroeconomic industry and market conditions have remained relatively stable. After assessing the totality of events or circumstances, the Company determined that there were no events or circumstances in the fourth quarter 2023 and first quarter of 2024 that indicated that the fair value of a reporting unit is more likely than not less than its carrying amount. Since there was no indication that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the Company determined that a quantitative goodwill impairment test was not necessary as of December 31, 2023 and March 31, 2024. Based on the assessment performed, we concluded that an impairment charge to goodwill was not required as of December 31, 2023 and March 31, 2024.
Certain future events and circumstances, including adverse changes in the business and economic conditions and changes in customer behavior could result in changes to our assumptions and judgments used in the impairment tests. A downward revision of these assumptions could cause the total fair value of our goodwill and intangible assets to fall below carrying values and a non-cash impairment charge would be required. Such a charge may have a material effect on the consolidated financial statements.
15
Note 8. Accrued Liabilities and Other
Accrued liabilities and other is comprised of the following (in thousands):
|
| March 31, 2024 |
|
| December 31, 2023 |
| ||
Accrued expenses |
| $ | 1,116 |
|
| $ | 1,031 |
|
VAT payable |
|
| — |
|
|
| 339 |
|
Accrued income taxes |
|
| 47 |
|
|
| 145 |
|
Advanced payments from contract manufacturers |
|
| 11 |
|
|
| — |
|
Contract liabilities |
|
| — |
|
|
| 17 |
|
Goods received not invoiced |
|
| 1,404 |
|
|
| 185 |
|
Other current liabilities |
|
| 270 |
|
|
| 209 |
|
Accrued liabilities and other |
| $ | 2,848 |
|
| $ | 1,926 |
|
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 office, warehouse and test house leases expiring during different years through 2025. The facility leases have original lease terms of approximately one to five 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 March 31, 2024 and December 31, 2023, the weighted average discount rate for operating leases was 3.8%. As of March 31, 2024 and December 31, 2023, the weighted average remaining lease term for operating leases was 1.6 years and 1.8 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 $29,000 and $22,000, for the three months ended September 30, 2017March 31, 2024 and 2016, respectively, and $396,206 and $276,0042023, respectively. Total operating lease cost was $0.3 million for the ninethree months ended September 30, 2017March 31, 2024 and 2016,2023, respectively.
|
| Estimated Future Amortization |
| |
2017 (remaining three months) |
| $ | 159,846 |
|
2018 |
|
| 638,529 |
|
2019 |
|
| 617,052 |
|
2020 |
|
| 589,667 |
|
2021 |
|
| 560,420 |
|
Thereafter |
|
| 2,367,917 |
|
Total |
| $ | 4,933,431 |
|
Note 9. Long-term Notes Payable (including current portion) and Line of Credit
In June 2012,The table below presents aggregate future minimum payments due under leases, reconciled to lease liabilities included in the Company amended its line of credit with Silicon Valley Bank. The amended revolving line of credit facility allows for an advance up to $3.0 million. The facility bears interest at the U.S. prime rate (4.25%consolidated balance sheet as of September 30, 2017) plus 1.25%. The revolving facility is available as long as the Company maintains a liquidity ratio of cash and cash equivalents plus accounts receivable to outstanding debt under the facility of 1.25 to 1.00; otherwise, the facility reverts to its previous eligible receivables financing arrangement. The amended facility matures in April 2018. The bank has a first security interest in all the Company’s assets excluding intellectual property, for which the bank has received a negative pledge. There was no balance owed on the line of credit as of September 30, 2017 and DecemberMarch 31, 2016.2024 (in thousands):
In December 2013, the Company further amended its revolving line of credit with Silicon Valley Bank to include a growth capital term loan of up to $750,000. The growth capital term loan required interest only payments through June 30, 2014 at which point it was to be repaid in 32 equal monthly installments of interest and principal. The growth capital term loan matured on February 1, 2017, at which time $55,230 in principal and accrued interest was paid. The growth capital term loan interest rate was 6.5%. As of December 31, 2016, $55,230 was outstanding under this loan. As of September 30, 2017, there was no balance owed under this loan.
|
| Estimated future lease obligation |
| |
2024 (remaining nine months) |
| $ | 674 |
|
2025 |
|
| 687 |
|
Total minimum payments |
|
| 1,361 |
|
Less imputed interest |
|
| (40 | ) |
Less unrealized translation gain |
|
| 3 |
|
Total lease liabilities |
|
| 1,324 |
|
Less short-term lease liabilities |
|
| (848 | ) |
Long-term lease liability |
| $ | 476 |
|
In December 2015, the Company amended its loan and security agreement with Silicon Valley Bank to include a term loan in the amount of $4.0 million. The loan requires 36 monthly installments of interest and principal. The loan matures on December 1, 2018.
Effective September 2017, the Company further amended its loan and security agreement with Silicon Valley Bank to update the financial covenants. The loan agreement requires the Company to maintain, at all times, measured as of the last day of each month (unless otherwise specified) either (i) a minimum cash balance of unrestricted cash at Silicon Valley Bank or its affiliate of not less than $25.0 million dollars or (ii) a liquidity ratio of 1.25 to 1.00 and a minimum EBITDA measured as of the last day of each fiscal quarter for the previous six month period (for September 30, 2017 the minimum EBITDA is $750,000). The interest rate is fixed at 5.0%. As of September 30, 2017 and December 31, 2016, $1,666,666 and $2,666,666 was outstanding under this loan, respectively.
The remaining principal payments on the $4.0 million loan subsequent to September 30, 2017 are as follows:
Year ending: |
|
|
|
|
2017 |
| $ | 333,333 |
|
2018 |
|
| 1,333,333 |
|
|
| $ | 1,666,666 |
|
The Company was in compliance with its financial covenants in the amended and restated loan and security agreement pertaining to the revolving credit line, growth capital term loan and the additional term loan as of September 30, 2017.
Note 10. Treasury Stock
In August 2017, the Company’s Board of Directors approved a share repurchase program pursuant to which the Company may purchase up to $7 million of shares of its common stock over the following twelve months. The repurchases under the new share repurchase program are made from time to time in the open market or in privately negotiated transactions and are funded from the Company’s working capital. Repurchases will be made in compliance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended, subject to market conditions, available liquidity, cash flow, applicable legal requirements and other factors. All shares of common stock repurchased under the Company’s new share repurchase program will be returned to the status of authorized but unissued shares of common stock.
During the three and nine months ended September 30, 2017, the Company repurchased 52,200 shares of common stock under the repurchase program. These shares were repurchased at an average price per share of $8.98 per share, for a total cost of $468,823.
Note 11. Income Taxes
The Company’s effective income tax rate was 15.26%5.4% and 9.74%-2.9% for the three and nine months ended September 30, 2017,March 31, 2024 and 2023, respectively. The variance from the U.S. federal statutory tax rate of 34%21.0% for the three months ended March 31, 2024 was primarily attributable to the valuation allowance offsetting the Company’sutilization of deferred tax assets. attributes that had a full valuation allowance. The variance from the U.S. federal statutory rate of 21.0% for the three months ended March 31, 2023 was primarily attributable to the utilization of deferred tax attributes that had a full valuation allowance.
Management assesses its deferred tax assets quarterly to determine whether all or any portion of the asset is more likely than not unrealizable under Accounting Standards Codification (ASC) Topic 740. The Company is required to establish a
16
valuation allowance for any portion of the asset that management concludes is more likely than not to be unrealizable. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company’s assessment considers all evidence, both positive and negative, including the nature, frequency and severity of any current and cumulative losses, taxable income in carryback years, the scheduled reversal of deferred tax liabilities, tax planning strategies, and projected future taxable income in making this assessment. At September 30, 2017 and
As of December 31, 2016,2023, the Company hashad a full valuation allowance against net deferred tax assets excluding naked credits. Shouldof $14.6 million, however, the Company continue to achieve substantial pre-tax income during 2017 orexclusion of a deferred tax liability generated by goodwill (an indefinite lived intangible) may not be better able to forecastconsidered a future source of taxable income intoin evaluating the future, the Company may need to releasefor a substantial portion of its federal valuation allowance during 2017.allowance.
FASB ASC Topic 740, Income Taxes, prescribes a recognition threshold and a measurement criterion for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be considered more likely than not to be sustained upon examination by taxing authorities. The Company records interest and penalties related to uncertain tax positions as a component of the provision for income taxes.
Note 12.11. Stockholders’ Equity
Shares ReservedIn August 2016, the Company's Board adopted the 2016 Equity Inventive Plan (the 2016 Plan) for Future Issuanceemployees, directors and consultants. In February 2021, the Board adopted the 2021 Employment Inducement Incentive Award Plan (Inducement Plan), which provides for grants of equity-based awards.
The following table presents common stock is reserved for future issuance at September 30, 2017(1) (in thousands):
|
| March 31, 2024 |
|
| December 31, 2023 |
| ||
Stock options issued and outstanding |
|
| 2,494 |
|
|
| 2,104 |
|
Stock awards issued and outstanding |
|
| 1,080 |
|
|
| 817 |
|
Authorized for grants under the 2016 Equity Incentive Plan(2) |
|
| 55 |
|
|
| 448 |
|
Authorized for grants under the Inducement Plan(3) |
|
| 180 |
|
|
| 174 |
|
Authorized for grants under the 2016 Employee Stock Purchase Plan(4) |
|
| 517 |
|
|
| 540 |
|
|
|
| 4,326 |
|
|
| 4,083 |
|
(1) The table above excludes 541,000 treasury stock shares as of March 31, 2024 and December 31, 2016:2023.
(2) On January 1, 2024, the number of authorized shares in the 2016 Plan increased by 440,000 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, 2024, 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, we established an at-the-market ("ATM") offerings program to sell up to $5.0 million of the Company's common stock. During the three months ended March 31, 2024, we issued 124,600 shares of common stock for $0.7 million gross proceeds. The Company incurred $0.2 million of offering costs, which are recorded in additional paid-in capital in the consolidated balance sheet.
Note 12. Stock Based Compensation
Stock-based compensation expense
Stock-based compensation is recorded in the consolidated statements of operations as follows (in thousands):
|
| Three months ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Cost of goods sold |
| $ | 58 |
|
| $ | 15 |
|
Research and development |
|
| 328 |
|
|
| 237 |
|
Sales and marketing |
|
| 80 |
|
|
| 161 |
|
General and administrative |
|
| 580 |
|
|
| 568 |
|
Total stock-based compensation expense |
| $ | 1,046 |
|
| $ | 981 |
|
17
|
| September 30, 2017 (1) |
|
| December 31, 2016 |
| ||
Warrants issued and outstanding |
|
| 51,003 |
|
|
| 51,003 |
|
Stock option awards issued and outstanding |
|
| 1,222,089 |
|
|
| 1,040,387 |
|
Authorized for grants under the 2016 Equity Incentive Plan |
|
| 253,601 |
|
|
| 709,750 |
|
Authorized for grants under the 2016 Employee Stock Purchase Plan |
|
| 100,000 |
|
|
| 100,000 |
|
|
|
| 1,626,693 |
|
|
| 1,901,140 |
|
|
|
Note 13. Stock Options
The following table summarizes the outstanding stock option activity during the periods indicated:period indicated (shares in thousands):
|
| Number of shares |
|
| Weighted average exercise price |
|
| Weighted average remaining contractual term |
| |||
Balance at December 31, 2016 |
|
| 1,040,387 |
|
|
| 2.25 |
|
|
| 7.80 |
|
Granted |
|
| 456,144 |
|
|
| 14.89 |
|
|
| 9.37 |
|
Exercised |
|
| (244,993 | ) |
|
| 2.07 |
|
|
| 5.61 |
|
Expired/Forfeited |
|
| (29,449 | ) |
|
| 6.99 |
|
|
| 0.05 |
|
Balance at September 30, 2017 |
|
| 1,222,089 |
|
| $ | 6.89 |
|
|
| 8.25 |
|
Vested and exercisable at September 30, 2017 |
|
| 518,126 |
|
| $ | 2.07 |
|
|
| 7.03 |
|
Vested and expected to vest at September 30, 2017 |
|
| 1,222,089 |
|
| $ | 6.89 |
|
|
| 8.25 |
|
|
|
|
|
| Weighted average |
|
|
| |||||||
|
| Number of |
|
| Exercise |
|
| Remaining contractual term (in years) |
| Aggregate intrinsic value (in thousands) |
| ||||
Balance at December 31, 2023 |
|
| 2,104 |
|
| $ | 10.20 |
|
|
| 6.2 |
| $ | 329 |
|
Granted |
|
| 403 |
|
| $ | 5.07 |
|
|
|
|
|
| ||
Exercised |
|
| — |
|
| $ | — |
|
|
|
| $ | — |
| |
Expired/Forfeited |
|
| (13 | ) |
| $ | 6.80 |
|
|
|
|
|
| ||
Balance at March 31, 2024 |
|
| 2,494 |
|
| $ | 9.39 |
|
|
| 6.6 |
| $ | 1,051 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Vested and exercisable at March 31, 2024 |
|
| 1,609 |
|
| $ | 11.05 |
|
|
| 5.2 |
| $ | 552 |
|
Vested and expected to vest at March 31, 2024 |
|
| 2,494 |
|
| $ | 9.39 |
|
|
| 6.6 |
| $ | 1,051 |
|
The weighted average grant-dategrant date fair value of options granted during the ninethree months ended September 30, 2017 and forMarch 31, 2024 was $2.81. The grant-date fair value of each option award is estimated on the year ended December 31, 2016 was $6.06 and $1.23, respectively.date of grant using the Black-Scholes-Merton option-pricing model. For fully vested stock options the aggregate intrinsic value as of September 30, 2017vested and December 31, 2016 was $3,651,672 and $7,770,086, respectively. For stock options expected to vest, the aggregate intrinsic value as of September 30, 2017 and DecemberMarch 31, 20162024 was $1,722,060 and $4,569,243, respectively.$1.1 million.
During the year ended DecemberAt March 31, 2016, a total2024, there was $2.8 million of 57,475 shares of restricted commonunrecognized compensation cost related to unvested stock with a fair value of $2.00 per share were issued tooptions granted under the Company’s Chief Financial Officer and Chief Operating Officer of which 100% ofequity plans that is expected to be recognized over the shares vested six months afternext 2.7 years.
Restricted Stock
The following table summarizes the completion of an initial public offering, or February 2017. The Company recorded $53,056 and $61,894 in expense associated with these sharesCompany’s restricted stock unit (RSU) activity during the nine months ended September 30, 2017 and the year ended Decemberperiod indicated (shares in thousands):
|
| Restricted |
|
| Weighted average grant date fair value |
| ||
Balance at December 31, 2023 |
|
| 706 |
|
| $ | 6.97 |
|
Grants |
|
| 467 |
|
| $ | 5.14 |
|
Vested and released |
|
| (169 | ) |
| $ | 7.79 |
|
Forfeited |
|
| (34 | ) |
| $ | 5.65 |
|
Balance at March 31, 2024 |
|
| 970 |
|
| $ | 6.00 |
|
As of March 31, 2016, respectively.
At September 30, 2017 and December 31, 20162024, there was $2,640,992 and $522,818, respectively,$4.9 million of total unrecognized compensation cost related to unvested RSUs having a weighted average remaining contractual term of 3.0 years.
Performance Stock Units
The following table summarizes the Company’s performance stock optionsunit (PSU) activity during the period indicated (shares in thousands):
|
| Performance |
|
| Weighted average grant date fair value |
| ||
Balance at December 31, 2023 |
|
| 110 |
|
| $ | 1.79 |
|
Grants |
|
| — |
|
| $ | — |
|
Vested and released |
|
| — |
|
| $ | — |
|
Forfeited |
|
| — |
|
| $ | — |
|
Balance at March 31, 2024 |
|
| 110 |
|
| $ | 1.79 |
|
Service as well as market and restricted stock granted underperformance conditions determine the plans. These costs are expectednumber of PSUs that the holder will earn from 0% to be recognized over150% of the next three years andtarget number of shares. The percentage received is based on the Company common stock price targets
18
over a three-year service period. Additionally, the Company must achieve or exceed 75% of the year to date revenue target measured at the options were granted.end of the quarter in which the price target is achieved. As of March 31, 2024, there was $26,445 of total unrecognized compensation cost related to unvested PSUs, having a weighted average remaining contractual term of 1.1 years.
We estimate the fair value of PSUs with a market condition using a Monte Carlo simulation model as of the date of grant using historical volatility.
Share-Settled Obligation
When incurred, share-settled obligation that will be paid in restricted stock units are recorded as accrued expense liability and stock-based compensation expense.
RSU Grants that settled Obligations (in thousands) |
| Three months ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Amount |
| $ | 124 |
|
| $ | 949 |
|
Shares |
|
| 31 |
|
|
| 187 |
|
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 award exercises.
During the three months ended March 31, 2024, the Company received $0.1 million from the issuance of 22,852 shares under the ESPP.
Note 14.13. Commitments and Contingencies
Operating LeasesSeverance and Exit Costs
The following table presents details of the liability we recorded related to severance and exit costs:
|
| Severance and Exit Costs |
| |
|
| (In thousands) |
| |
Balance at December 31, 2023 |
| $ | 50 |
|
Accrued to expense |
|
| — |
|
Payments |
|
| (50 | ) |
Balance at March 31, 2024 |
| $ | — |
|
|
|
|
|
The severance liability is recorded in accrued compensation on the accompanying unaudited condensed consolidated balance sheet. The severance and exit cost were recorded in the relevant operating expense departments in the accompanying unaudited condensed consolidated statement of operations.
Potential product warranty claims
The Company has entered into lease agreements for office spacehad a general warranty accrual of approximately $0.1 million as of each of March 31, 2024 and research facilities in San Diego, California, Rancho Santa Fe, California, Poway, California, Melbourne, Florida, Taipei, Taiwan, Shenzhen and Jiangsu, China, and Cambridgeshire, United Kingdom, and for a manufacturing plant/facility in Scottsdale, Arizona. Rent expense was $223,866 and $185,654 for the three months ended September 30, 2017 and 2016, respectively, and $615,176 and $554,804 for the nine months ended September 30, 2017 and 2016, respectively. The longest lease expires in June 2020. The Company moved into its facility in San Diego, California during the year ended December 31, 2014. The San Diego facility lease agreement included a tenant improvement allowance2023.
19
Indemnification
In some agreements to which provided
for the landlord to pay for tenant improvements on behalf of the Company up to $515,000. Based on the terms of this landlord incentive and involvement ofis 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, there have been no known events or circumstances that have resulted in any material costs related to these indemnification provisions and no liabilities have been recorded in the construction process, the leasehold improvements purchased under the landlord incentive were determined to be property of the Company.accompanying consolidated financial statements.
Note 14. Concentrations
The future minimum lease payments required under operating leases in effect at September 30, 2017 were as follows:
Year ending: |
|
|
|
|
2017 (remaining three months) |
| $ | 216,714 |
|
2018 |
|
| 770,606 |
|
2019 |
|
| 555,660 |
|
2020 |
|
| 265,940 |
|
|
| $ | 1,808,920 |
|
Note 15. Concentration of Credit RiskSales and Accounts Receivable
|
|
The following represents customers that accounted for 10%10% or more of total revenue during the three and nine months ended September 30, 2017 and 2016 andrevenue:
|
| Three months ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Customer A |
|
| 23 | % |
|
| 13 | % |
Customer B |
|
| 18 | % |
|
| 9 | % |
Customer C |
|
| 15 | % |
|
| 16 | % |
The following represents customers that accounted for 10%10% or more of total trade accounts receivable at September 30, 2017receivable:
|
| March 31, 2024 |
|
| December 31, 2023 |
| ||
Customer A |
|
| 25 | % |
|
| 14 | % |
Customer B |
|
| 17 | % |
|
| 17 | % |
Customer C |
|
| 15 | % |
|
| 0 | % |
The allowance for credit losses as of March 31, 2024 and 2016.December 31, 2023 was not material.
Concentration of Purchases
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Percentage of net revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A |
|
| 24 | % |
|
| 20 | % |
|
| 22 | % |
|
| 18 | % |
Customer B |
|
| 14 |
|
|
| 30 |
|
|
| 14 |
|
|
| 31 |
|
Customer C |
|
| 11 |
|
|
| 8 |
|
|
| 11 |
|
|
| 7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As of September 30, |
|
|
|
|
|
|
|
|
| |||||
|
| 2017 |
|
| 2016 |
|
|
|
|
|
|
|
|
| ||
Percentage of gross trade accounts receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A |
|
| 22 | % |
|
| 12 | % |
|
|
|
|
|
|
|
|
Customer B |
|
| 16 |
|
|
| 12 |
|
|
|
|
|
|
|
|
|
Customer C |
|
| 10 |
|
|
| 1 |
|
|
|
|
|
|
|
|
|
Customer D |
|
| 9 |
|
|
| 24 |
|
|
|
|
|
|
|
|
|
|
|
Net revenue by geographic area are as follows. Revenue is attributed by geographic location based on the bill-to location of the Company’s customers.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Percentage of net revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China |
|
| 71 | % |
|
| 69 | % |
|
| 71 | % |
|
| 72 | % |
Other Asia |
|
| 4 |
|
|
| 14 |
|
|
| 10 |
|
|
| 12 |
|
North America |
|
| 19 |
|
|
| 12 |
|
|
| 13 |
|
|
| 11 |
|
Europe |
|
| 6 |
|
|
| 5 |
|
|
| 6 |
|
|
| 5 |
|
Although the Company ships the majority of antennas to its customers in China (primarily Original Design Manufacturers and distributors), the end-users of the Company’s products are much more geographically diverse.
During the three and nine months ended September 30, 2017 and 2016, allMarch 31, 2024, the Company’s products were primarily manufactured by two vendorssix CMs with locations in China, Mexico, Minnesota, and Vietnam.
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 deposits are in several 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):
|
| March 31, 2024 |
|
| December 31, 2023 |
| ||
North America |
| $ | 2,108 |
|
| $ | 2,295 |
|
Asia Pacific (APAC) |
|
| 78 |
|
|
| 86 |
|
Europe, Middle East and Africa (EMEA) |
|
| 119 |
|
|
| 126 |
|
Property and equipment, net |
| $ | 2,305 |
|
| $ | 2,507 |
|
20
Note 15. Revenue
Disaggregated revenues are as follows (in thousands):
|
| Three months ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
By Market Group: |
|
|
|
|
|
| ||
Enterprise |
| $ | 8,879 |
|
| $ | 8,437 |
|
Consumer |
|
| 3,511 |
|
|
| 5,132 |
|
Automotive |
|
| 1,841 |
|
|
| 2,875 |
|
Total sales |
| $ | 14,231 |
|
| $ | 16,444 |
|
|
|
|
|
|
|
| ||
By Geography: |
|
|
|
|
|
| ||
North America |
| $ | 10,024 |
|
| $ | 10,168 |
|
China (including Hong Kong and Taiwan) |
|
| 3,303 |
|
|
| 5,969 |
|
Rest of the world |
|
| 904 |
|
|
| 307 |
|
Total sales |
| $ | 14,231 |
|
| $ | 16,444 |
|
|
|
|
|
|
|
| ||
Timing of revenue recognition: |
|
|
|
|
|
| ||
Products and services transferred at a point in time |
| $ | 13,525 |
|
| $ | 15,844 |
|
Products and services transferred over time |
|
| 706 |
|
|
| 600 |
|
Total sales |
| $ | 14,231 |
|
| $ | 16,444 |
|
Revenue generated from the Company’s facilitiesUnited States was $10.0 million and $6.5 million for the three months ended March 31, 2024 and 2023, respectively.
Liability for potential rights of return was approximately $0.1 million as of March 31, 2024 and December 31, 2023 and is included within accrued liabilities in Wisconsinthe accompanying unaudited condensed consolidated balance sheets.
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 $10,600 and Arizona.$17,000 as of March 31, 2024 and December 31, 2023, respectively.
The remaining non-cancellable revenue, that will be recognized over time on a series of distinct performance obligations, amounts to $0.4 million as of March 31, 2024.
Note 16. Subsequent Events
None.
21
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis and the interim unaudited condensed consolidated financial statements included in this quarterly report on Form 10-Q should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 20162023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2023.
Forward-Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended or the(the Exchange Act.Act). All statements other than statements of historical fact contained in this quarterly report, including statements regarding our future operating results, financial position and cash flows, our business strategy and plans, and our objectives for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “would,” “could,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this quarterly report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, operating results, business strategy, short-term and long-term business operations and objectives. These forward-looking statements speak only as of the date of this quarterly report and are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A, “Risk Factors.” The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Overview
We areAirgain is a leadingpremier provider of advanced antenna technologies used to enable high performance wireless networking acrossconnectivity solutions, offering a broad range of home,embedded components, external antennas, and integrated systems worldwide. We streamline wireless connectivity across devices and markets, with a focus on solving complex connectivity challenges, expediting time to market, and optimizing wireless signals. Our mission is to connect the world through optimized, integrated wireless solutions. Our product portfolio focuses on three key markets: enterprise, consumer, and industrial devices. automotive.
Our innovative antenna systems open up exciting new possibilities in wireless services requiring high speed throughput, broad coverage footprint, and carrier grade quality. Ourcurrent enterprise products include embedded cellular modems, antennas are found in devices deployed in carrier, enterprise, and residential wireless networks and systems, including set-top boxes,for access points routers, gateways, media adapters, digital televisions and Internet of Things or IoT,(IoT) applications, and asset trackers. We expect to expand our product offering with fixed wireless access solutions and Smart Network Controlled Cellular Repeaters (Smart NCRs). Our consumer products include embedded antennas for consumer access points, wireless gateways, smart home devices and fixed wireless access devices. Through our pedigree in the design, integration,Our current automotive products include aftermarket antennas that are typically connected to third-party cellular and testing of high performance advanced antenna technology, we have become a leading provider to the residential wireless local area networking, also known as WLAN or Wi-Fi, device market, supplying to leading carriers, Original Equipment Manufacturers, or OEMs, Original Design Manufacturers, or ODMs,Wi-Fi-enabled routers, digital video evidence devices, and system designers who depend on us to achieve their wireless performance goals.telematics gateways. We also recently launched a second generation AirgainConnect® Fleet system solution – a low profile, roof-mounted 5G vehicle gateway, combining a cellular modem, antennas, and additional features into a single device.
We have a rich history of providing radio frequency (RF) expertise, services, and solutions to mobile operators and major original equipment manufacturers (OEMs). With the addition of NimbeLink products in 2021, we expanded our capabilities to include embedded cellular modems, asset trackers and custom IoT systems. We are leveraging our RF and systems experience, and our Mobile Network Operator (MNO) and Multiple Service Operator (MSO) relationships to deliver new and differentiated products.
We use an outsource manufacturing model for our products while maintaining oversight for quality, test, and delivery timeline. We also maintain an intellectual property strategy that includes patent and trademark filings in multiple jurisdictions.
22
Core Markets
Airgain’s core business primarily focuses on the following three key markets:
We shipped approximately 159 million antenna products worldwide in 2016 used in approximately 54 million devices. For the nine months ended September 30, 2017,challenges, reduce deployment costs and enhance customer experiences. In 2023, we shipped approximately 122 million antenna products worldwide used in approximately 35 millionalso announced our Lighthouse™ smart repeaters platform designed to reduce an operator’s capital expenses for extending range, while enhancing 5G coverage.
Macroeconomic conditions
Macroeconomic conditions continued to create demand softness industrywide, including downward pressures relating to the products they provideanticipated service provider shift from Wi-Fi 6E to their end-user customers. Our direct sales team works directlyWi-Fi 7. This demand softness combined with customers,excess inventories in our channels and also works with indirect channel partners who pursue sales opportunities that are based in the United States, Europe, and Asia.
Our sales cycle can be short or lengthy depending upon the specific situation; however, the majoritythose of our revenues are derived from device designs with life-cycles of over 12 months. For some recurringdirect customers, we are able to design and produce antenna systems for volume production in less than one calendar quarter. In situations where we are selling to a new customer, it may take 12 to 18 months from initial meeting to achieve a design win. Competition generally lengthens the sales process, but our past
performance and ability to provide high throughput, highly reliable antenna solutions can shorten the process. We intend to continue investing for long-term growth. We have invested and expect to continue to invest heavilydrove quarter-over-quarter declines in our product development efforts to address customer needs,Enterprise, Automotive and enable solutions that can address new end markets, such as alternative wireless connectivity technologies. In addition, we expect to continue to expand our sales force and engineering organizations and to make additional capital expenditures to further penetrate markets both in the United States and internationally, and to continue to expand our research and development for new product offerings and technology solutions.
Although our sales cycle can be lengthy depending on the specific situation, the majority of our revenues are derived from device designs with life-cycles of over a year. In 2016, 43% of our product revenues were from devices in the marketplace for over two years, 37% for devices in the marketplace for one to two years and 20% for devices in the marketplace for less than one year. For the nine months ended September 30, 2017, 31% of our product revenues, excluding the revenues attributable to the acquisition of substantially all of the assets of Antenna Plus, LLC, or Antenna Plus, were from devices in the marketplace for over two years, 43% from devices in the marketplace for one to two years and 26% from devices in the marketplace for less than one year.
We believe demand is growing rapidly for our advanced antenna solutions and there is a significant market opportunity. As the ability to provide mobile internet access has grown, our solutions and expertise have become more important to prospects and customers. As a passive component, embedded antennas can be viewed as a commodity. However, our design, engineering, and research show that antenna selection, placement, and testing can have significant improvements in device performance.Consumer markets. We believe that we are chosen when performance is a more significant factor than price, and our distinctive focus on superior designs that provide increased range and throughput has allowed us to build a leadership position in the in-home WLAN device market.
Recent Developments
On April 17, 2017, we completedfourth quarter of 2023 was the acquisition of substantially all of the assets of Antenna Plus. Antenna Plus was a privately-held supplier of antenna-based solutions for mobile and automotive fleet applications for government, public safety, and Industrial IOT markets. We believe the acquisition provides leveragetrough for our existing products into several newbusiness. As we turn to 2024, we anticipate a year of gradual growth driven by recoveries in our end markets, includinginvestments in product innovations, and launches of our 5-G connectivity initiatives. We remain focused on the fast-growing automotive fleetexecution of our strategic product initiatives and industrial IOT space. operational efficiencies, as they lay out the foundation of our revenue and profitability growth when market conditions improve.
The transaction was completed pursuant to an Asset Purchase Agreement with MCA Financial Group, Ltd., acting as the court-appointed receiver for Antenna Plus. Upon the closing of the transaction, we paid to Antenna Plus total consideration of approximately $6.3 million in cash, net of post-closing working capital adjustments. In addition, we assumed certain contracts and other liabilities of Antenna Plus, as expressly set forth in the Asset Purchase Agreement.
Factors Affecting Our Operating Results
We believe that our performance and future success depend upon several factors including manufacturing costs,macroeconomic and geopolitical uncertainties, epidemic diseases, impact of inflation on consumer spending, and our ability to transition from a component provider to a wireless systems provider and to develop technology leadership and expand our markets.
Our performance and future success also depend on factors such as continued investments in our growth, our ability to expand into growing addressable markets, including theconsumer, enterprise, and automotive, fleet and industrial IOT space, the average selling priceprices of
23
our products per device, the number of antennas per device,manufacturing costs and our ability to diversify the number of devices that incorporate our antenna products. Our customers are extremely price conscious, and our operating results are affected by pricing pressure which may force us to lower prices below our established list prices. In addition, a few end customerend-customer devices which incorporate our antenna products comprise a significant amount of our sales, and the discontinuation or modification of such devices may materially and adversely affect our sales and results of operations. Excluding the Antenna Plus acquisition, we have seen the number of devices decrease 8% and number of antennas per device increase 16% for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. Our ability to maintain or increase our sales depends on, among other things:
In addition, inflation generally affects us by increasing our raw material and employee-related costs and other expenses. Our financial condition and results of operations may also be impacted by other factors we may not be able to control, such as uncertain global economic conditions, pandemics and epidemics, global trade disputes or political instability, as well as successfully integrating acquisitionsconflicts around the world. We do not believe that such as Antenna Plus. factors had a material adverse impact on our results of operations during the three months ended March 31, 2024.
While each of these areas presents significant opportunities for us, they also pose significant risks and challenges we must successfully address. SeeWe discuss many of these risks, uncertainties and other factors in greater detail in the section entitled “Risk Factors.”Factors” included in this quarterly report on Form 10-Q and in Item 1A of our Annual Report on Form 10-K.
Seasonality
Our operating results historically have not been subject to significant seasonal variations. However, our operating results are affected by how customers make purchasing decisions around local holidays in China. For example, a national holiday the first week of October in China may cause customers to purchase product in the third quarter ahead of their holiday season to account for higher volume requirements in the fourth quarter. In addition, althoughAlthough it is difficult to make broad generalizations, our sales tend to be lower in the first quarter of each year compared to other quarters due to the ChineseLunar New Year. Results for any quarter may not be
indicative of the results that may be achieved for the full fiscal year and these patterns may change as a resultbecause of general customer demand or product cycles.
Key Components of Our Results of Operations and Financial Condition
Sales
We primarily generate revenue from the sales of our products. We recognize revenue when persuasive evidenceto depict the transfer of control over promised goods or services to customers in an arrangement exists, delivery has occurred,amount that reflects the fee is fixedconsideration to which the entity expects to be entitled for those goods or determinable, and collectability is reasonably assured.services. We generally recognize product sales at the time of shipment to our customers, provided that all other revenue recognition criteria have been met. Although currently insignificant, we mayWe also generate service revenue derived from agreements to provide design, engineering, and testing for a customer.services as well as subscription revenue from the sale of data plans.
Cost of Goods Sold
The cost of goods sold reflects the cost of producing antenna, embedded modem and system solutions products that are shipped to our customers as well as costs incurred for our customers’ devices.service agreements. This primarily includes manufacturing costs of our products payable to our third-party contract manufacturers, as well as manufacturing costs incurred at our manufacturing facilities in Arizona and Wisconsin.CMs. The cost of goods sold that we generate from services provided to customersand subscription revenues primarily includes personnel costs.costs and the cost to maintain data lines.
Operating Expenses
Our operating expenses are classified into three categories: research and development, sales and marketing, and general and administrative. For each category, theThe largest component of expense is personnel costs, which includes salaries, employee benefit costs, bonuses, and stock-based compensation. Operating expenses also include allocated overhead costs for depreciation of
24
equipment, facilities and information technology. Allocated costs for facilities consist of amortization of leasehold improvements as well as rent and rent.utility expenses and taxes. Operating expenses are generally recognized as incurred.
Research and developmentDevelopment. Research and development expenses primarily consist of personnel and facility-related costs attributable to our engineering research andproject development personnel.costs. These expenses include work related to the design, engineeringdevelopment and testing of antenna designs,antennas, modems and antenna integration, validation and testing of customer devices.system solutions. These expenses include salaries, including stock-based compensation, benefits, bonuses, project development and testing, prototype material, consulting, travel, communications, and similar costs, and depreciation and allocated operating expenses such as office supplies, premises expenses, and insurance. We may also incur expenses from consultants andcosts for prototyping new antenna solutions.certain facilities. We expect research and development expenseexpenses to increase in absolute dollars in future periods as we increase our research and development headcountcontinue to further strengthen and enhance our antenna design and integration capabilities and invest in the development of new solutions and markets, although our research and development expense may fluctuate as a percentage of total sales.
Sales and marketingMarketing. Sales and marketing expenses primarily consist of personnel and facility-related costs for our sales, marketing, and business development personnel, stock-based compensation and bonuses earned by our sales personnel, and commissions earned by our third-party sales representative firms. Sales and marketing expenseexpenses also includesinclude the costs of trade shows, advertising, marketing programs, promotional materials, demonstration equipment, travel, recruiting, and allocated costs for certain facilities. We expect sales and marketing expenseexpenses to continue to increase in absolute dollars as we increase the size of our sales and marketing organizations in support of our investment in our growth opportunities, although our sales and marketing expense may fluctuate as a percentage of total sales.
General and administrativeAdministrative. General and administrative expenses primarily consist of personnel and facility-relatedfacility related costs for our executive, legal, human resource finance, and administrative personnel, including stock-based compensation, as well as legal, accounting, and other professional services fees, depreciation, and other corporate expenses. Although our general and administrative expense may fluctuate as a percentage of total sales, weWe expect general and administrative expenseexpenses to increase in absolute dollars due to additional legal fees and accounting, insurance, investor relations, and other costs associated with being a public company,fluctuate as well as, due to costs associated with growingwe grow our business.operations.
Interest and
Other (Income) Expense (Income)
Interest Income, net. Interest income consists of interest from our cash and cash equivalents offset by interest expense which consists of interest charges on credit card charges and short-term investments. certain vendor bills.
Interest Expense. InterestOther Expense. Other expense consists of interest on our outstanding debt.
Fair Market Value Adjustments - Warrants. This consiststhe loss from disposal of the change in fair value of our convertible preferred stock warrant liability. The preferred stock warrants are classified as liabilities on our balance sheetsproperty and their estimated fair value is re-measured at each balance sheet date using a combination of an option-pricing modelequipment, realized foreign exchange gains or losses, and current value model under the probability-weighted return method, with the corresponding change recorded within other expense (income). In May 2016, the warrants were amended such that they became immediately exercisable into shares of our common stock. Concurrent with such amendment, the holders of the outstanding warrants elected to net exercise the warrants,income and were granted an aggregate of 127,143 shares of our common stock. Following such net exercise, there will be no future re-measurement of the warrant liability.expenses.
Provision for Income Taxes
Provision for income taxes consists of federal and state income taxes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. It is difficult for us to project future taxable income as the timing and size of sales of our products are variable and difficult to predict. We concluded that it is not more likely than not that we will utilize our deferred tax assets other than those that are offset by reversing temporary differences.
25
Results of Operations
The following tables set forth our operating results for the periods presented and as a percentage of our total sales for those periods. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.
|
| Three months ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Statement of Operations Data (in thousands): |
|
|
|
|
|
| ||
Sales |
| $ | 14,231 |
|
| $ | 16,444 |
|
Cost of goods sold |
|
| 8,655 |
|
|
| 10,126 |
|
Gross profit |
|
| 5,576 |
|
|
| 6,318 |
|
Operating expenses: |
|
|
|
|
|
| ||
Research and development |
|
| 3,120 |
|
|
| 2,449 |
|
Sales and marketing |
|
| 2,158 |
|
|
| 2,866 |
|
General and administrative |
|
| 2,927 |
|
|
| 3,793 |
|
Total operating expenses |
|
| 8,205 |
|
|
| 9,108 |
|
Loss from operations |
|
| (2,629 | ) |
|
| (2,790 | ) |
Other (income) expense |
|
| (34 | ) |
|
| (14 | ) |
Loss before income taxes |
|
| (2,595 | ) |
|
| (2,776 | ) |
Income tax (benefit) expense |
|
| (140 | ) |
|
| 82 |
|
Net loss |
| $ | (2,455 | ) |
| $ | (2,858 | ) |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
|
| (calculated as a percentage of associated sales) |
| |||||||||||||
Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
Cost of goods sold |
|
| 51.8 | % |
|
| 55.2 | % |
|
| 52.6 | % |
|
| 55.2 | % |
Gross profit |
|
| 48.2 | % |
|
| 44.8 | % |
|
| 47.4 | % |
|
| 44.8 | % |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| 16.8 | % |
|
| 11.5 | % |
|
| 15.0 | % |
|
| 13.3 | % |
Sales and marketing |
|
| 14.5 | % |
|
| 11.7 | % |
|
| 14.2 | % |
|
| 13.2 | % |
General and administrative |
|
| 15.3 | % |
|
| 11.7 | % |
|
| 16.8 | % |
|
| 10.7 | % |
Total operating expenses |
|
| 46.6 | % |
|
| 34.9 | % |
|
| 46.0 | % |
|
| 37.2 | % |
Income from operations |
|
| 1.6 | % |
|
| 9.9 | % |
|
| 1.4 | % |
|
| 7.6 | % |
Other expense (income) |
|
| (0.6 | )% |
|
| 0.3 | % |
|
| (0.3 | )% |
|
| (1.0 | )% |
Income before income taxes |
|
| 2.2 | % |
|
| 9.6 | % |
|
| 1.7 | % |
|
| 8.6 | % |
Provision for income taxes |
|
| 0.3 | % |
|
| 0.1 | % |
|
| 0.2 | % |
|
| 0.0 | % |
Net income |
|
| 1.9 | % |
|
| 9.5 | % |
|
| 1.5 | % |
|
| 8.6 | % |
|
| Three months ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Statements of Operations Data: |
|
|
|
|
|
| ||
Sales |
|
| 100.0 | % |
|
| 100.0 | % |
Cost of goods sold |
|
| 60.8 |
|
|
| 61.6 |
|
Gross profit |
|
| 39.2 |
|
|
| 38.4 |
|
Operating expenses: |
|
|
|
|
|
| ||
Research and development |
|
| 21.9 |
|
|
| 14.9 |
|
Sales and marketing |
|
| 15.2 |
|
|
| 17.4 |
|
General and administrative |
|
| 20.6 |
|
|
| 23.1 |
|
Total operating expenses |
|
| 57.7 |
|
|
| 55.4 |
|
Loss from operations |
|
| (18.5 | ) |
|
| (17.0 | ) |
Other (income) expense |
|
| (0.3 | ) |
|
| (0.1 | ) |
Loss before income taxes |
|
| (18.2 | ) |
|
| (16.9 | ) |
Income tax (benefit) expense |
|
| (0.9 | ) |
|
| 0.5 |
|
Net loss |
|
| (17.3 | )% |
|
| (17.4 | )% |
Comparison of the three and nine months ended September 30, 2017 and 2016Three Months Ended March 31, 2024 (dollars in thousands)
Sales
|
| Three Months Ended September 30, |
| |||||||||||||
|
| 2017 |
|
| 2016 |
|
| Increase/(Decrease) |
|
| % Change |
| ||||
|
|
|
| |||||||||||||
Sales |
| $ | 12,448,436 |
|
| $ | 12,439,279 |
|
| $ | 9,157 |
|
|
| 0.1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
| |||||||||||||
|
| 2017 |
|
| 2016 |
|
| Increase/(Decrease) |
|
| % Change |
| ||||
|
|
|
| |||||||||||||
Sales |
| $ | 36,713,996 |
|
| $ | 30,807,902 |
|
| $ | 5,906,094 |
|
|
| 19.2 | % |
|
| Three months ended March 31, |
| |||||||||||||
|
| 2024 |
|
| 2023 |
|
| $ Change |
|
| % Change |
| ||||
Sales |
| $ | 14,231 |
|
| $ | 16,444 |
|
| $ | (2,213 | ) |
|
| (13.5 | )% |
Sales for the three months ended September 30, 2017 increased slightly asMarch 31, 2024 decreased $2.2 million or 13.5% compared to the three months ended September 30, 2016. Forsame period in the three months ended September 30, 2017, ourprior year. Consumer market sales included $1.8decreased $1.6 million in sales associated with the acquisition of
Antenna Plus assets. These sales were offset by a decrease in television product sales. The total number of devices within our organic business, decreased by 34.0%, or 5.6to $3.5 million devices, to 11.0 million devices for the three months ended September 30, 2017 when compared toMarch 31, 2024 from $5.1 million during the three months ended September 30, 2016. This decreasesame period in the number of devices isprior year, primarily driven by the decrease in set-top box and television devices. The average number of antennas per device increased 31.9% from 2.8 antennas per devicedue to lower sales to cable operators. Automotive market sales decreased $1.1 million, to $1.8 million for the three months ended September 30, 2016March 31, 2024, from $2.9 million during the same period in the prior year, driven by excess inventory correction impacting our Aftermarket antenna sales direct customers. Enterprise market sales increased $0.5 million to 3.8 antennas per device$8.9 million for the three months ended September 30, 2017. The average selling price per device forMarch 31, 2024 from $8.4 million during the three months ended September 30, 2017 increased 31.9%same period in the prior year, primarily due to $0.95 as compared to $0.72 for the three months ended September 30, 2016.
The increasechannel correction of excess inventory in sales of $5.9 million for the nine months ended September 30, 2017, is primarily driven by $3.3 million increase in sales associated with the acquisition of Antenna Plus assets, as well as an increase in sales within the carrier gateway and set-top box markets offset by a decrease of television product2023, impacting our IIoT products sales. The total number of devices within our organic business decreased 8.4% or 3.2 million devices to 35.5 million devices for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. The average number of antennas per device increased 15.7% from 2.98 antennas per device for the nine months ended September 30, 2016 to 3.5 antennas per device for the nine months ended September 30, 2017. Our average selling price per device for the nine months ended September 30, 2017 increased 20.1% to $0.92 as compared to $0.77 for the nine months ended September 30, 2016.
26
Cost of Goods Sold
|
| Three Months Ended September 30, |
| |||||||||||||
|
| 2017 |
|
| 2016 |
|
| Increase/(Decrease) |
|
| % Change |
| ||||
|
|
|
| |||||||||||||
Cost of goods sold |
| $ | 6,444,544 |
|
| $ | 6,862,992 |
|
| $ | (418,448 | ) |
|
| -6.1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
| |||||||||||||
|
| 2017 |
|
| 2016 |
|
| Increase/(Decrease) |
|
| % Change |
| ||||
|
|
|
| |||||||||||||
Cost of goods sold |
| $ | 19,300,120 |
|
| $ | 17,007,228 |
|
| $ | 2,292,892 |
|
|
| 13.5 | % |
The decrease in cost
|
| Three months ended March 31, |
| |||||||||||||
|
| 2024 |
|
| 2023 |
|
| $ Change |
|
| % Change |
| ||||
Cost of goods sold |
| $ | 8,655 |
|
| $ | 10,126 |
|
| $ | (1,471 | ) |
|
| (14.5 | )% |
Cost of goods sold for the three months ended September 30, 2017 isMarch 31, 2024 decreased $1.5 million or 14.5% compared to the same period in the prior year. The decline was primarily due to the decrease in television product sales partially offset by the cost of goods sold of $0.8 million associated with the acquisition of Antenna Plus assetsdecline.
Gross Profit
|
| Three months ended March 31, |
| |||||||||||||
|
| 2024 |
|
| 2023 |
|
| $ Change |
|
| % Change |
| ||||
Gross profit |
| $ | 5,576 |
|
| $ | 6,318 |
|
| $ | (742 | ) |
|
| (11.7 | )% |
Gross profit (percentage of sales) |
|
| 39.2 | % |
|
| 38.4 | % |
|
|
|
|
| 0.8 | % |
Gross profit for the three months ended September 30, 2017.
The increase in cost of goods sold for the nine months ended September 30, 2017 is primarily dueMarch 31, 2024 decreased $0.7 million or 11.7%, compared to the increasesame period in sales associated with the acquisition of Antenna Plus and sales within the carrier gateway and set-top box markets offsetprior year, driven by a decline in television productlower sales. For the nine months ended September 30, 2017, our cost of goods sold included $1.4 million of costs of goods sold associated with the acquisition of Antenna Plus.
Gross Profit
|
| Three Months Ended September 30, |
| |||||||||||||
|
| 2017 |
|
| 2016 |
|
| Increase/(Decrease) |
|
| % Change |
| ||||
|
|
|
| |||||||||||||
Gross profit |
| $ | 6,003,892 |
|
| $ | 5,576,287 |
|
| $ | 427,605 |
|
|
| 7.7 | % |
Gross profit (percentage of sales) |
|
| 48.2 | % |
|
| 44.8 | % |
|
|
|
|
|
| 3.4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
| |||||||||||||
|
| 2017 |
|
| 2016 |
|
| Increase/(Decrease) |
|
| % Change |
| ||||
|
|
|
| |||||||||||||
Gross profit |
| $ | 17,413,876 |
|
| $ | 13,800,674 |
|
| $ | 3,613,202 |
|
|
| 26.2 | % |
Gross profit (percentage of sales) |
|
| 47.4 | % |
|
| 44.8 | % |
|
|
|
|
|
| 2.6 | % |
Gross profit as a percentage of sales increased 3.4% and 2.6% for the three and nine months ended September 30, 2017, respectively, as compared to the three and nine months ended September 30, 2016. The increase in gross profit percentage is primarily driven by a shift in the sales mix in the three and nine months ended September 30, 2017 as compared to the three and nine months ended September 30, 2016.
|
| Three Months Ended September 30, |
| |||||||||||||
|
| 2017 |
|
| 2016 |
|
| Increase/(Decrease) |
|
| % Change |
| ||||
|
|
| ||||||||||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
| $ | 2,094,774 |
|
| $ | 1,432,581 |
|
| $ | 662,193 |
|
|
| 46.2 | % |
Sales and marketing |
|
| 1,809,037 |
|
|
| 1,453,391 |
|
|
| 355,646 |
|
|
| 24.5 | % |
General and administrative |
|
| 1,899,449 |
|
|
| 1,459,993 |
|
|
| 439,456 |
|
|
| 30.1 | % |
Total |
| $ | 5,803,260 |
|
| $ | 4,345,965 |
|
| $ | 1,457,295 |
|
|
| 33.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
| |||||||||||||
|
| 2017 |
|
| 2016 |
|
| Increase/(Decrease) |
|
| % Change |
| ||||
|
|
| ||||||||||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
| $ | 5,510,861 |
|
| $ | 4,096,670 |
|
| $ | 1,414,191 |
|
|
| 34.5 | % |
Sales and marketing |
|
| 5,229,188 |
|
|
| 4,078,250 |
|
|
| 1,150,938 |
|
|
| 28.2 | % |
General and administrative |
|
| 6,174,869 |
|
|
| 3,304,790 |
|
|
| 2,870,079 |
|
|
| 86.8 | % |
Total |
| $ | 16,914,918 |
|
| $ | 11,479,710 |
|
| $ | 5,435,208 |
|
|
| 47.3 | % |
Research and Development
Research and development expense increased for the three months ended September 30, 2017March 31, 2024 increased by 80 basis points compared to the same period in the prior year. The increase was primarily driven by higher automotive margins.
Operating Expenses
|
| Three months ended March 31, |
| |||||||||||||
|
| 2024 |
|
| 2023 |
|
| $ Change |
|
| % Change |
| ||||
Research and development |
| $ | 3,120 |
|
| $ | 2,449 |
|
| $ | 671 |
|
|
| 27.4 | % |
Sales and marketing |
|
| 2,158 |
|
|
| 2,866 |
|
|
| (708 | ) |
|
| (24.7 | )% |
General and administrative |
|
| 2,927 |
|
|
| 3,793 |
|
|
| (866 | ) |
|
| (22.8 | )% |
Total operating expenses |
| $ | 8,205 |
|
| $ | 9,108 |
|
| $ | (903 | ) |
|
| (9.9 | )% |
Research and development expense for the three months ended September 30, 2016.March 31, 2024 increased $0.7 million or 27.4% compared to the same period in the prior year. The increase was primarily due to additional researchhigher employee expenses and project development expenses of $0.3 million associated with the acquisition of Antenna Plus. Additionally, personnel expenses increased $0.3 million due to additional headcounts. expenses.
Research and development expense increased for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increase was primarily due to additional research and development expenses of $0.5 million associated with the acquisition of Antenna Plus assets. Additionally, personnel expenses increased $0.6 million due to additional headcounts and product development expenses increased $0.3 million.
Sales and Marketing
Sales and marketing expense increased for the three months ended September 30, 2017March 31, 2024 decreased $0.7 million or 24.7% compared to the three months ended September 30, 2016,same period in the prior year. The decrease was primarily due to additional sales and marketing expenses of $0.2 million associated with the acquisition of Antenna Plus, $0.1 million increase in marketing expenses and $0.1 million increase in travel and entertainment.lower employee expenses.
Sales and marketing expense increased for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, primarily due to additional sales and marketing expenses of $0.4 million associated with the acquisition of Antenna Plus, $0.6 million increase in personnel expenses associated with headcount increases and an increase in employee travel, and $0.1 million increase in marketing efforts.
General and Administrative
General and administrative expense increased for the three months ended September 30, 2017March 31, 2024 decreased $0.9 million or 22.8% compared to the three months ended September 30, 2016 primarily due to additional generalsame period in the prior year. The decrease was driven by lower employee, marketing and administrative expenses of $0.2 million associated with the acquisition of Antenna Plus, $0.1 million increase in general and administrative expenses related to the cost of being a public company and $0.1 million increase in corporate legalprofessional service expenses.
General and administrative expense increased for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 primarily due to additional general and administrative expenses associated with the acquisition of Antenna Plus of $0.4 million, $0.8 million in acquisition expenses, $1.0 million increase in general and administrative expenses related to the cost of being a public company, $0.3 million increase in personnel expenses associated with increased headcount, $0.2 million for the completion of an R&D tax credit study and $0.2 million increase in corporate legal expenses.Other (Income) Expense
|
| Three months ended March 31, |
| |||||||||||||
|
| 2024 |
|
| 2023 |
|
| $ Change |
|
| % Change |
| ||||
Interest income, net |
| $ | (26 | ) |
| $ | (18 | ) |
| $ | (8 | ) |
|
| 44.4 | % |
Other expense |
|
| (8 | ) |
|
| 4 |
|
|
| (12 | ) |
|
| (300.0 | )% |
Total other income |
| $ | (34 | ) |
| $ | (14 | ) |
| $ | (20 | ) |
|
| 142.9 | % |
|
| Three Months Ended September 30, |
| |||||||||||||
|
| 2017 |
|
| 2016 |
|
| Increase/(Decrease) |
|
| % Change |
| ||||
Other expense (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
| $ | (98,689 | ) |
| $ | (1,735 | ) |
| $ | (96,954 | ) |
|
| 5588.1 | % |
Interest expense |
|
| 22,762 |
|
|
| 41,735 |
|
|
| (18,973 | ) |
|
| -45.5 | % |
Fair market value adjustment, warrants |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.0 | % |
Total |
| $ | (75,927 | ) |
| $ | 40,000 |
|
| $ | (115,927 | ) |
|
| -289.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Nine Months Ended September 30, |
| |||||||||||||
|
| 2017 |
|
| 2016 |
|
| Increase/(Decrease) |
|
| % Change |
| ||||
Other expense (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
| $ | (189,855 | ) |
| $ | (1,735 | ) |
| $ | (188,120 | ) |
|
| 10842.7 | % |
Interest expense |
|
| 80,239 |
|
|
| 141,505 |
|
| $ | (61,266 | ) |
|
| -43.3 | % |
Fair market value adjustment, warrants |
|
| — |
|
|
| (460,289 | ) |
| $ | 460,289 |
|
|
| -100.0 | % |
Total |
| $ | (109,616 | ) |
| $ | (320,519 | ) |
| $ | 210,903 |
|
|
| -65.8 | % |
Other expense (income) decreasedconsists primarily of foreign currency transaction remeasurement adjustments.
Income Tax Expense
|
| Three months ended March 31, |
| |||||||||||||
|
| 2024 |
|
| 2023 |
|
| $ Change |
|
| % Change |
| ||||
Income tax (benefit) expense |
| $ | (140 | ) |
| $ | 82 |
|
| $ | (222 | ) |
|
| (270.7 | )% |
27
Income tax expense for the three months ended September 30, 2017 asMarch 31, 2024 decreased $0.2 million or 270.7% compared to the three months ended September 30, 2016same period in the prior year, primarily due to the increase in interest income offsetreceiving a decrease in interest expense on our outstanding loans. tax refund.
Other expense (income) increased for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 primarily due to the increase in interest income offset by the fair market value adjustment of the warrants due to the conversion of the warrants in May 2016 and a decrease in interest expense on our outstanding loans.
Liquidity and Capital Resources
At September 30, 2017, weWe had cash and cash equivalents of $18.2$7.2 million at March 31, 2024.
Prior to 2013 and $18.5 million in short-term investments. In August 2017,for the years ended 2018, 2020, 2021 2022, and 2023, we transferred a portion of our cash into an investment account. In April 2017, we paid approximately $6.3 million in cash, net of post-closing working capital adjustment, in connection with the acquisition of the Antenna Plus assets. In August 2016, we completed our IPO and received net proceeds of approximately $11.0 million, including the sale of shares pursuant to the exercise of the underwriters’ overallotment option and after deducting underwriting discounts and commissions and estimated offering-related transaction costs. In December 2016, we completed our public offering of common stock and received net proceeds of approximately $26.0 million, including the sale of shares pursuant to the exercise of the underwriters’ over-allotment option and after deducting underwriting discounts and commissions and estimated offering-related transaction costs.
Before 2013, we hadhave incurred net losses in each year since our inception.losses. As a result, we hadhave an accumulated deficit of $43.0$81.0 million at September 30, 2017.March 31, 2024.
Since inception, we have primarily financed our operations and capital expenditures through private sales of preferred stock, convertible promissory notes, public offerings and cash flows from our operations. We have raised an aggregate of $29.5 million in net proceeds from the issuance of our preferred stock and convertible promissory notes and $37.0 million from the sale of common stock in our public offerings.
As of September 30, 2017, we had approximately $1.7 million outstanding under a term loan pursuant to our amended and restated loan and security agreement with Silicon Valley Bank. In addition, under our amended and restated loan and security agreement with Silicon Valley Bank, we have a revolving line of credit for $3.0 million. As of September 30, 2017, there was no balance owed on the line of credit.
In August 2017, the Company’s Board of Directors approved a share repurchase program pursuant to which the Company may purchase up to $7.0 million of shares of its common stock over the following twelve months. The repurchases under the new share repurchase program are made from time to time in the open market or in privately negotiated transactions and are funded from the Company’s working capital. Repurchases will be made in compliance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended, subject to market conditions, available liquidity, cash flow, applicable legal requirements and other factors. All shares of common stock repurchased under the Company’s new share repurchase program will be returned to the status of authorized but unissued shares of common stock. During the three and nine months ended September 30, 2017, the Company repurchased 52,200 shares of common stock under the repurchase program. These shares were repurchased at an average price per share of $8.98, for a total cost of $468,823.
In December 2013, we amended our amended and restated loan and security agreement with Silicon Valley Bank to provide for growth capital term loans of $750,000. The growth capital term loan required interest only payments through June 30, 2014 at which time it was to be repaid in 32 equal monthly installments of interest and principal. The growth capital term loan matured on February 1, 2017, at which time all unpaid principal and accrued and unpaid interest was paid. The growth capital term loan interest rate was 6.5%. We must maintain a liquidity ratio of cash and cash equivalents plus accounts receivable to outstanding debt under the loan and security agreement of 1.00 to 1.00 or greater. The line of credit is available as long as we maintain a liquidity ratio of cash and cash equivalents plus accounts receivable to outstanding debt under the loan and security agreement of 1.25 to 1.00. If this liquidity ratio is not met, the line of credit will only allow for maximum advances of 80% of the aggregate face amount of all eligible receivables. The line of credit bears interest at the U.S. prime rate (4.25% as of September 30, 2017) plus 1.25%, and matures in April 2018, subject to certain minimum EBITDA requirements in every quarter. The lender has a first security interest in all our assets, excluding intellectual property, for which the lender has received a negative pledge. The amended and restated loan and security agreement contains customary affirmative and negative covenants and events of default applicable to us and any subsidiaries.
In December 2015, we further amended our amended and restated loan and security agreement with Silicon Valley Bank to include an additional term loan up to $4.0 million. The additional term loan requires 36 monthly installments of interest and principal and matures on December 1, 2018. Effective September 2017, we amended the loan and security agreement with Silicon Valley Bank to update the financial covenants. The amended and restated loan and security agreement requires that we maintain either (1) a minimum cash balance of unrestricted cash at Silicon Valley Bank or one of its affiliates of no less than $25.0 million; or a liquidity ratio of 1.25 to 1.00 as of the last day of each month and a minimum EBITDA, measured as the last day of each fiscal quarter for the previous six-month period (for September 30, 2017 the minimum EBITDA is $750,000). The interest rate of the additional term loan is 5.0%. As of September 30, 2017, $1.7 million was outstanding on this additional term loan. We are in compliance with all of the financial covenants in the amended and restated loan and security agreement pertaining to the revolving credit line, growth capital term loan and the additional term loan as of September 30, 2017.
We plan to continue to invest for long-term growth, including expanding our sales forceengineering and engineering organizationssales teams to execute on our product roadmap and making additional capital expenditures to further penetrate markets both in the United Statesdomestic and internationally, as well as expanding our research and development for new product offerings and technology solutions.international markets. We anticipate that these investments will continue to increase in absolute dollars. We believe that our existing cash and cash equivalents and short-term investments balances together with cash proceeds from operationsbalance will be sufficient to meet our working capital requirements for at least the next 12 months.
The following table presents a summary of our cash flow activity for the periods set forth below:below (in thousands):
|
| Nine Months Ended September 30, |
| |||||||||||||
|
| 2017 |
|
| 2016 |
|
| Three months ended March 31, |
| |||||||
Net cash provided by (used in) operating activities |
| $ | (993,375 | ) |
| $ | 1,967,921 |
| ||||||||
|
| 2024 |
|
| 2023 |
| ||||||||||
Net cash used in operating activities |
| $ | (1,119 | ) |
| $ | (1,434 | ) | ||||||||
Net cash used in investing activities |
|
| (24,985,813 | ) |
|
| (275,649 | ) |
|
| (60 | ) |
|
| (89 | ) |
Net cash provided by (used in) financing activities |
|
| (1,016,568 | ) |
|
| 9,798,119 |
|
|
| 469 |
|
|
| (541 | ) |
Net increase (decrease) in cash and cash equivalents |
| $ | (26,995,756 | ) |
| $ | 11,490,391 |
| ||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
| (2 | ) |
|
| — |
| ||||||||
Net decrease in cash, cash equivalents and restricted cash |
| $ | (712 | ) |
| $ | (2,064 | ) |
Net cash provided by (used in) operating activities. Net cash used in operating activities. Net cash used by operating activities was $1.0$1.1 million for the ninethree months ended September 30, 2017.March 31, 2024. This was primarily driven by ourthe net incomeloss of $0.6 million, net non-cash operating expenses of $1.2$2.5 million offset by $2.8$1.9 million in non-cash expenses and a $0.7 million net change in operating assets and liabilitiesliabilities.
Net cash used in investing activities. Net cash used in investing activities was $25of $0.1 million for the ninethree months ended September 30, 2017 and consisted primarily of the acquisition of the Antenna Plus assets,March 31, 2024 was for purchases of available-for-sale securities and the purchase of property and equipment.
Net cash provided by (used in) financing activities.Net cash used inprovided by financing activities was $1.0of $0.5 million for the ninethree months ended September 30, 2017 and consisted of the repayment of notes payable in the amount of $1.1 million andMarch 31, 2024 was primarily from $0.5 million of net proceeds after fees and expenses from issuing approximately 124,600 shares of common stock repurchasesvia an “at-the-market” (ATM) offering. Additionally, we received $0.1 million from the proceeds from common stock issuances under the ESPP. These proceeds were partially offset by proceeds$0.1 million tax payments for net share settlement of restricted stock units.
Employee Retention Credit
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law providing an employee retention credit (ERC), which is a refundable tax credit against certain employment taxes on qualified wages. The Taxpayer Certainty and Disaster Tax Relief Act of 2020, the American Rescue Plan Act of 2021 and the Infrastructure Investment and Jobs Act amended the qualifications for eligible employers who could apply and extended the availability of the ERC employment taxes on qualified wages paid after December 31, 2020 through September 30, 2021. We believe that we qualify for application of the ERC on qualified wages from the exercisesecond quarter of stock options2020 through the third quarter of 2021.
In August 2023, we applied for ERC refunds, totaling $2.5 million, net of professional fees. Pending the Internal Revenue Service’s (IRS) review and determination of our eligibility, we anticipate receiving the ERC refunds within the next nine months. However, there can be no assurance we will ultimately receive the amounts we currently expect, if any, or the timeframe of any such receipt, based on IRS review or otherwise.
Liquidity and Capital Resources Assessment
As of December 31, 2023, management performed the annual assessment of the Company's ability to meet its obligations as they become due within one year based on relevant conditions and events that are known and reasonably knowable. Following ASC 205-40 guidance, management considered quantitative and qualitative information to evaluate the Company's ability to meet obligations. Based on the analysis of the relevant conditions and events that are known and
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reasonably known as of December 31, 2023, the Company concluded that it is probable that it will be able to meet all of its financial obligations as they become due in the amountyear 2024.
The relevant conditions and events that are known and reasonably known as of $0.5 million. March 31, 2024 related to the Company have not significantly changed since December 31, 2023. Therefore, the resulting cash inflows along with the existing funds and the capital that is anticipated to be raised from the ATM offering are expected to be sufficient for the Company’s financial obligations as they become due in 2024.
Contractual Obligations and Commitments
The following table summarizesThere have been no material changes outside the ordinary course of our business during the three months ended March 31, 2024, to the information regarding our contractual obligations asthat was disclosed in Management’s Discussion and Analysis of September 30, 2017:Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023.
|
|
|
|
| Payments Due by Period |
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|
| Total |
|
| Less than 1 Year |
|
| 1-3 Years |
|
| 3-5 Years |
|
| More than 5 Years |
| |||||
|
| (in thousands) |
| |||||||||||||||||
Operating Leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office leases |
| $ | 1,809 |
|
| $ | 814 |
|
| $ | 995 |
|
| $ | — |
|
| $ | — |
|
Notes Payable |
|
| 1,666 |
|
|
| 1,333 |
|
|
| 333 |
|
|
| — |
|
|
| — |
|
Total |
| $ | 3,475 |
|
| $ | 2,147 |
|
| $ | 1,328 |
|
| $ | — |
|
| $ | — |
|
We haveAt the Market Sales Agreement
On March 7, 2024, the Company entered into lease agreements for office space and research facilitiesan At-the-Market Issuance Sales Agreement (the “Sales Agreement”) with Craig-Hallum Capital Group LLC (“Craig-Hallum”). Pursuant to the Sales Agreement, the Company may sell, at its option, up to an aggregate of $5.0 million in San Diego, California, Rancho Santa Fe, California, Poway, California, Melbourne, Florida, Taipei, Taiwan, Shenzhen and Jiangsu, China and Cambridgeshire, United Kingdom and for manufacturing plant/facility in Scottsdale, Arizona; under non-cancelable operating leases that expire at various datesshares of its Common Stock through 2020.
We subcontract with other companies to manufacture a portion of our products. During the normal course of business, our contract manufacturers procure components based upon orders placed by us. If we cancel all or partCraig-Hallum, as sales agent. Sales of the orders, we may still be liableCommon Stock made pursuant to the contract manufacturers forSales Agreement have been or will be made under the costCompany’s Registration Statement on Form S-3 filed on March 15, 2022 (File No. 333-263568) (the “Registration Statement”), which was declared effective by the Securities and Exchange Commission on May 9, 2022. Subject to the terms and conditions of the components purchasedSales Agreement, Craig-Hallum may sell the shares, if any, only by methods deemed to be an “at the subcontractorsmarket” offering as defined in Rule 415(a)(4) promulgated under the Securities Act. The Company has agreed to manufacture our products. We periodically reviewpay Craig-Hallum a sales commission of 3.0% of the potential liability,gross proceeds for sales under the Sales Agreement and as of September 30, 2017, we have no significant accruals recorded. Our financial positionto provide Craig-Hallum with customary indemnification and operating results could be negatively impacted if we werecontribution rights, including for liabilities under the Securities Act. In addition, the Company is required to compensatereimburse Craig-Hallum for certain specified expenses in connection with entering into the contract manufacturers for any unrecorded liabilities incurred.Sales Agreement.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements (as defined by applicable regulations of the SEC) that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and operating results is based on our unaudited condensedconsolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported sales and expenses during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions.
There have beenwere no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgments and Estimates,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, other2023.
Goodwill Impairment Assessment
For the annual goodwill impairment assessment, as of December 31, 2023, the Company determined that there were no events or circumstances that indicated that it is more likely than not that the fair value of a reporting unit may be less than its carrying amount. Based on the assessment performed, we concluded that an impairment charge to goodwill was not required as set forthof December 31, 2023.
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The Company evaluated the goodwill impairment considerations as of March 31, 2024. The Company's macroeconomic conditions, stock share, market capitalization, working capital, industry and market conditions, operating cash flow and forecasted cash flows have not significantly changed since the annual goodwill impairment assessment that was performed as of December 31, 2023. After assessing the totality of events or circumstances, the Company determined that there were no events or circumstances as of March 31, 2024 that indicates that it is more likely than not that the fair value of a reporting unit may be less than its carrying amount. Since there was no indication that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company determined that a quantitative goodwill impairment test was not necessary as of March 31, 2024. Based on the assessment performed, we concluded that an impairment charge to goodwill was not required as of March 31, 2024.
Certain future events and circumstances, including adverse changes in Note 2the business and economic conditions and changes in customer behavior could result in changes to our assumptions and judgments used in the unaudited condensedimpairment tests. A downward revision of these assumptions could cause the total fair value of our goodwill and intangible assets to fall below carrying values and a non-cash impairment charge would be required. Such a charge may have a material effect on the consolidated financial statements included in this quarterly report.statements.
Recent Accounting Pronouncements
See Note 2, “Summary of Significant Accounting Policies” within the unaudited condensed consolidated financial statements.
Interest Rate Sensitivity
Our investment portfolio is exposed to market risk from changes in interest rates. The fair market valueITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of fixed rate securities may be adversely impacted by fluctuations in interest rates while income earned on floating rate securities may decline as a result of decreases in interest rates. Under our current investment policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. We attempt to ensure the safetyExchange Act and preservation of our invested principal funds by limiting default risk, market risk, and reinvestment risk. We mitigate default risk by investing in investment grade securities. We maintain a relatively short average maturity for our investment portfolio, and we believe a hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not materially affect the fair value of our interest sensitive financial instruments.
Our long-term debt bears interest at a fixed rate and therefore has minimal exposure to changes in interest rates. Our undrawn revolving credit facility under our loan and security agreement with Silicon Valley Bank bears interest at the U.S. prime rate (4.25% as of September 30, 2017) plus 1.25%. If we draw funds from our revolving credit facility, we will be exposed to interest rate sensitivity, which is affected by changes in the U.S. prime rate.
Foreign Currency Risk
All of our sales are denominated in U.S. dollars, and therefore, our sales are not currently subjectrequired to significant foreign currency risk. To date, foreign currency transaction gains and losses have not been material to our financial statements, and we have not engaged in any foreign currency hedging transactions.provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controlcontrols may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of the end of the period covered by this quarterly report on Form 10-Q. Based10-Q.Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
No changeThere have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended September 30, 2017March 31, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
We are not currentlyITEM 1. LEGAL PROCEEDINGS
From time to time, we may be a party to anylegal proceedings and subject to claims incident in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we believe that the final outcome of these matters will not have a material legal proceedings.adverse effect on our financial condition or business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
ITEM 1A. RISK FACTORS
A description of the risk factors associated with our business is included in the Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016.2023. There have been no material changes to such risk factors as previously reported, other than as set forth below.factors. In evaluating our business, you should carefully consider the risk factors discussed in our Annual Report on Form 10-K, as updated by our subsequent filings under the Exchange Act.10-K. The occurrence of any of the risks discussed in such filings, or other events that we do not currently anticipate or that we currently deem immaterial, could harm our business, prospects, financial condition and results of operations. In that case the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Related to Our Business and Industry
We generally rely on a limited number of contract manufacturers to produce and ship our products, and the failure to manage our relationships with these parties successfully could adversely affect our ability to market and sell our products.
We have limited manufacturing capability, solely with respect to antennas deployed in the fleet market. For all of our other products, we outsource the manufacturing, assembly and testing of products. We rely on two contract manufacturers, which are both located in China, to manufacture, control quality of, and ship these products. We do not have long-term contracts with these manufacturers that commit them to manufacture products for us. Any significant change in our relationship with these manufacturers could have a material adverse effect on our business, operating results, and financial condition. We make substantially all of our purchases from our contract manufacturers on a purchase order basis. Our contract manufacturers are not required to manufacture our products for any specific period or in any specific quantity. We expect that it would take approximately six to nine months to transition manufacturing, quality assurance, and shipping services to new providers. Relying on contract manufacturers for manufacturing, quality assurance, and shipping also presents significant risks to us, including the inability of our contract manufacturers to:
qualify appropriate component suppliers;
manage capacity during periods of high demand;
meet delivery schedules;
assure the quality of our products;
ensure adequate supplies of materials;
protect our intellectual property; and
deliver finished products at agreed-upon prices.
We manufacture products for our fleet market primarily in our facilities in Scottsdale, Arizona. We may not be able to manufacture our products with consistent and satisfactory quality or in sufficient quantities to meet demand. We also may experience delays or disruptions at our manufacturing facilities, which could result in delays of product shipments to our customers. Any failure by us or our contract manufacturers to timely produce products of satisfactory quality or in sufficient quantities in compliance with applicable laws could hurt our reputation, cause customers to cancel orders or refrain from placing new orders for our products, which could have a material adverse effect on our business, operating results, and financial condition.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
There were no unregistered sales of equity securities during the period covered by this report.None.
Issuer Purchases of Equity Securities
The following table contains information relating to the repurchase of our common stock made by us in the three months ended September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fiscal Period |
| Total Number of Shares Repurchased |
|
| Average Price Paid Per Share |
|
| Total Number of Shares Purchased As Part of a Publicly Announced Program |
|
| Approximate Dollar Amount of Shares That May Yet be Purchased Under the Program (1) |
| ||||
July 1, 2017 to July 31, 2017 |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | — |
|
August 1, 2017 to August 31, 2017 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
September 1, 2017 to September 30, 2017 |
|
| 52,200 |
|
|
| 8.98 |
|
|
| 52,200 |
|
|
| 6,531,177 |
|
Total during the three months ended September 30, 2017 |
|
| 52,200 |
|
| $ | 8.98 |
|
|
| 52,200 |
|
| $ | 6,531,177 |
|
|
|
None.
None.
ITEM 5. OTHER INFORMATION
Director and Officer Trading Arrangements:
Rule 10b5-1 Trading Plans
From time to time, our officers (as defined in Rule 16a-1(f) of the Exchange Act) and directors may enter into Rule 10b5-1 or non-Rule 10b5-1 trading arrangements (as each such term is defined in Item 408 of Regulation S-K). During the three months ended March 31, 2024, none of our officers or directors adopted, modified or terminated any such trading arrangements.
ITEM 6. EXHIBITS
Number |
None.
| Description | |
3.1(1) | ||
3.2 | ||
4.1 | Specimen stock certificate evidencing the shares of common stock | |
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| ||
| ||
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31
31.2 | ||
| ||
32.1* | Certification | |
32.2* | Certification | |
101.INS | Inline XBRL | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| Cover Page Interactive Data File (formatted as inline XBRL | |
|
| |
|
| |
|
|
* These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AIRGAIN, INC. | ||
Date: | /s/ | |
President and Chief Executive Officer (principal executive officer) | ||
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| |
| ||
Date: May 8, 2024 | /s/ Michael Elbaz | |
Michael Elbaz Chief Financial Officer (principal financial and accounting officer) | ||
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