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What changed in AIRGAIN INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AIRGAIN INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+337 added−405 removedSource: 10-K (2024-03-06) vs 10-K (2023-03-20)

Top changes in AIRGAIN INC's 2023 10-K

337 paragraphs added · 405 removed · 228 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAs the original inventor of the low-profile cellular antenna, we are known for our market leading performance, quality, and long product life and our antennas connect to almost any vehicular router or modem. • Fleet Antennas – A full line of high-performance, low-profile multiple-input multiple-output (MIMO) fleet and public safety antennas that mount on the roof, trunk, windshield, or dashboard and are optimized for 5G, 4G, Wi-Fi, and GPS.
Biggest changeWe offer a full line of external fleet antennas that are designed to be rugged, reliable, and flexible to meet almost any need. We design our products for performance, quality, and long product life and our antennas connect to almost any vehicular router or modem.
The principal competitive factors in our markets include: price and total cost of ownership as a result of reliability and performance issues; brand awareness and reputation; component performance, such as reliability, range and throughput; ability to integrate with other technology infrastructures; offerings across breadth of wireless products; design and testing capabilities; lead-time and flexibility to rapidly customize solutions to individual customer requirements; relationships with semiconductor/chipset vendors; intellectual property protection; and the ability to solve many complex RF problems across the entire spectrum of broadband connectivity.
The principal competitive factors in our markets include: price and total cost of ownership as a result of reliability and performance issues; brand awareness and reputation; component performance, such as reliability, range and throughput; ability to integrate with other technology infrastructures; offerings across breadth of wireless products; design and testing capabilities; lead-time and flexibility to rapidly customize solutions to individual customer 10 requirements; relationships with semiconductor/chipset vendors; intellectual property protection; and the ability to solve many complex RF problems across the entire spectrum of broadband connectivity.
We expect to continually expand our product offerings and technology solutions over time and to continue to invest significantly in ongoing research and development efforts. 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.
We expect to continually expand our product 9 offerings and technology solutions over time and to continue to invest significantly in ongoing research and development efforts. 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.
The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that website is www.sec.gov. We use our investor relations website as a means of disclosing material non-public, information and for complying with our disclosure obligations under Regulation FD.
The SEC maintains a website that contains 11 reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that website is www.sec.gov . We use our investor relations website as a means of disclosing material non-public, information and for complying with our disclosure obligations under Regulation FD.
With our shift in business model towards solutions, many of these companies are direct competitors. 13 While some partnership opportunities do exist, most of these companies strive to solve similar problems as us with their broad portfolios and consultative sales approaches.
With our shift in business model towards solutions, many of these companies are direct competitors. While some partnership opportunities do exist, most of these companies strive to solve similar problems as us with their broad portfolios and consultative sales approaches.
The principal purposes of our equity and cash 14 incentive plans are to attract, retain and motivate personnel through the granting of stock-based and cash-based compensation awards to align our interests and the interests of our stockholders with those of our employees and consultants.
The principal purposes of our equity and cash incentive plans are to attract, retain and motivate personnel through the granting of stock-based and cash-based compensation awards to align our interests and the interests of our stockholders with those of our employees and consultants.
Marketing Our marketing strategy is focused on building a competitive advantage for our brands and products in the marketplace. We target two types of customers. For Airgain Embedded products, such as our embedded antennas and NimbeLink modems, we target design teams within OEMs and ODMs.
Marketing Our marketing strategy is focused on building a competitive advantage for our brands and products in the marketplace. We target two types of customers. For embedded products such as our NimbeLink modems and consumer antennas, we target design teams within OEMs and ODMs.
We generally enter into confidentiality agreements with our employees, consultants, vendors and customers, and generally limit access to and distribution of our proprietary information. However, we cannot assure that the steps taken by us will prevent misappropriation of our technology.
We generally enter into confidentiality agreements with our employees, consultants, vendors, and customers, and generally limit access to and distribution of our proprietary information. However, we cannot ensure that the steps taken by us will prevent misappropriation of our technology.
Direct methods include advertising, web properties, marketing collateral, email campaigns, paid and organic social media, search engine marketing, media relations, content marketing, direct mail, tradeshows and events, and general lead generation tactics. Indirect methods include co-marketing efforts together with resellers, distributors, system integrators, hardware and software partners, and carriers.
Direct methods include advertising, web properties, marketing collateral, email campaigns, paid and organic social media, search engine marketing, media relations, content marketing, direct mail, tradeshows and events, and general lead generation tactics. Indirect methods include co-marketing efforts together with resellers, distributors, system integrators, hardware and software partners, and carriers both domestically and internationally.
Our channel provides us with additional sales leverage by sourcing new prospects, providing technical support to existing customers, upselling for additional use cases, and maintaining repeat business with existing customers. These channels provide added coverage to customers and prospects we cannot reach directly.
Our channel partners provide us with additional sales leverage by sourcing new prospects, providing technical support to existing customers, upselling additional use cases, and maintaining repeat business with existing customers. These channels partners provide added coverage to customers and prospects we cannot reach directly.
This includes Adant Technologies Inc., Asian Creation Communications Factory, AVX Corporation, Baylin Technologies Inc., Blues Wireless, Fibocom, Fractus S.A., Honglin Technology Group Ltd., MobileMark, Nordic Semiconductor, Panorama Antennas, Parsec Technologies, Inc, Particle Industries Inc., PCTEL, Inc., Pinyon Technologies Inc., Quectel, Sunwave Communications Co., Ltd., Telit, Ublox, Taoglas Limited, Wanshih Electronic Co.
This includes Adant Technologies Inc., Asian Creation Communications Factory, Kyocera AVX, Baylin Technologies Inc., Blues Wireless, Fibocom, Fractus S.A., Honglin Technology Group Ltd., MobileMark, Nordic Semiconductor, Panorama Antennas, Parsec Technologies, Inc, Particle Industries Inc., PCTEL, Inc., Pinyon Technologies, Inc., Qualcomm, Quectel, Semtech, Sunwave Communications Co., Ltd., Telit, Ublox, Taoglas Limited, Wanshih Electronic Co.
Further, our references to the URLs for these websites are intended to be inactive textual references only. 15
Further, our references to the URLs for these websites are intended to be inactive textual references only. 12
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 result of general customer demand or product cycles. Competition Because of our broad product line across several categories in the value chain, our competitive landscape is diverse and rapidly evolving.
Results for any quarter may not be indicative of the results achieved for the full fiscal year, and these patterns may change due to general customer demand or product cycles. Competition Because of our broad product line across several categories in the value chain, our competitive landscape is diverse and rapidly evolving.
End-Device Manufacturers This category represents companies that manufacture off-the-shelf products that are market ready, such as routers, gateways, cellular adapters, and more. This includes suppliers of vehicle networking platforms and fixed wireless devices such as Cradlepoint, Peplink, Option NV, Assured Wireless, among others. These manufactures can act as customers, partners, or competitors to us, depending on the application and relationship.
End-Device Manufacturers This category represents companies that manufacture off-the-shelf products that are market ready, such as routers, gateways, cellular adapters, and more. This includes suppliers of vehicle networking platforms and fixed wireless devices. These manufacturers can act as customers, partners, or competitors to us, depending on the application and relationship.
An end-customer may choose to bypass the design process entirely and purchase an off-the-shelf product to deliver device connectivity rather than embedding our modems and antennas. Our integrated products, such as the AC-HPUE and asset trackers, may compete directly with these off-the-shelf products or enhance their functionality.
An end-customer may choose to bypass the design process entirely and purchase an off-the-shelf product to deliver device connectivity rather than embedding our modems and antennas. Our integrated products, such as the AC-Fleet, Lantern FWA (Fixed Wireless Access) and asset trackers, may compete directly with these off-the-shelf products or enhance their functionality.
Third parties, including certain of these leading companies, may in the future assert patent, copyright, trademark and other intellectual property rights against us, our channel partners or our customers. Human Capital As of December 31, 2022, we had a total of 141 employees and dedicated representatives, including 101 in the United States and 40 outside the United States.
Third parties, including certain of these leading companies, may in the future assert patent, copyright, trademark and other intellectual property rights against us, our channel partners, or our customers. Human Capital As of December 31, 2023, we had a total of 122 employees and dedicated representatives, including 83 in the United States and 39 outside the United States.
In the automotive market, our products are deployed in a wide range of vehicles in the fleet and aftermarket segment, supporting a variety of technologies that include Wi-Fi, LTE, 5G, Satellite and LPWAN.
Automotive In the automotive market, our products are deployed in a wide range of vehicles in the fleet and aftermarket applications, supporting a variety of technologies that include Wi-Fi, LTE, 5G, LPWAN, GNSS, and Bluetooth.
Our engineering team consists of engineers located in research, design, and test centers in California, Arizona, Texas and Florida, as well as the United Kingdom and China. Our engineering team actively participates in research and development activities to expand our capabilities and target applications for the consumer, enterprise and automotive markets.
Our engineering teams are located at research, design, and test centers in California, Arizona, Texas, Minnesota, and Florida, as well as the United Kingdom and China. Our engineering team actively participates in research and development activities to expand our capabilities and target applications for the consumer, enterprise, and automotive markets.
Our FAEs assist these managers by providing technical support to existing customers. Our indirect channel partners provide lead generation, pre-sales support, product fulfillment and, in certain circumstances, post-sales customer service and support. This channel partner network often co-sells with our inside sales and field sales teams.
Our field application engineers (FAEs) assist these programs by providing technical support to existing customers . Our indirect channel partners provide lead generation, pre-sales support, product fulfillment and, in certain circumstances, post-sales customer service and support. This channel partner network often co-sells with our direct sales team.
For our integrated products, such as our asset trackers, 5G connectivity products, and AirgainConnect AC-HPUE, we target end user markets. We use both direct and indirect promotional methods to engage our audiences.
For our integrated products, such as our asset trackers, FWA Lantern, and AirgainConnect AC-Fleet, we target end user markets. We use both direct and indirect promotional methods to engage our audiences.
Among the total 141 employees and dedicated representatives, 68 were primarily engaged in research and development, 39 were primarily engaged in sales and marketing, 28 were primarily engaged in general and administration functions and 6 were primarily engaged in manufacturing operations. None of our employees are covered by a collective bargaining agreement or represented by a labor union.
Among the total 122 employees and dedicated representatives, 63 were primarily engaged in research and development, 33 were primarily engaged in sales and marketing, 21 were primarily engaged in general and administration functions and 5 were primarily engaged in manufacturing operations. None of our employees are covered by a collective bargaining agreement or represented by a labor union.
Although 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 Lunar New Year. The broader economic impacts caused by the COVID-19 pandemic, as well as general weakening economic conditions, may contribute to slower sales.
Although 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 Lunar New Year. A general weakening of economic conditions may contribute to slower sales.
Our outside sales team is engaged in pre-sales, account management, and creating partnership opportunities with third parties such as service providers and semiconductor manufacturers. They are assigned quotas and have defined sales territories and/or accounts. The sales process includes meeting and qualifying potential programs and customers, and actively managing the planning stage of devices they plan to bring to market.
Our direct sales team is engaged in pre-sales, account management, and creating partnership opportunities with third parties such as service providers and – OEMs. The sales process includes meeting and qualifying potential customers, and actively managing the planning stage of devices they project to bring to market.
We maintain a close direct relationship with our CMs to help ensure supply and quality meet our requirements. The contract manufacturing services required to manufacture and assemble our products can be satisfied by one or more of our CMs, however it may be time consuming and costly to qualify and implement new CM relationships.
The contract manufacturing services required to manufacture our products can be satisfied by one or more of our CMs, however it may be time consuming and costly to qualify and implement new CM relationships.
The AC-HPUE integrates a high-power LTE modem with high gain antennas in one enclosure to reduce signal loss and support transmission of the maximum allowable radiated power.
The AC-HPUE integrated a high-power LTE modem with high gain antennas in one enclosure to reduce signal loss and support transmission of the maximum allowable Power Class 1 radiated power. In January 2024 we launched our next-generation product named AirgainConnect Fleet (AC-Fleet).
Since our products manufactured in China are predominantly shipped to ODMs and CMs within Asia, we have not experienced significant impact as a result of the tariffs imposed on exports from China to 12 the United States. However, the recent supply disruptions and semiconductor and module shortages have had and may continue to have a direct impact on our business.
We have full control and authority over the selection of materials, manufacturing, and inspection processes. Since our products manufactured in China are predominantly shipped to ODMs and CMs within Asia, we have not experienced a significant impact as a result of the tariffs imposed on exports from China to the United States.
If our CMs suffer an interruption in their businesses, or experiences delays, disruptions, or quality control problems in their manufacturing operations, or we otherwise need to change or add CMs or suppliers, our ability to ship products to our customers could be delayed, and our business could be adversely affected.
If one of our CMs suffers an interruption in their business, or experiences delays, disruptions, or quality control problems in their manufacturing operations, our ability to ship products to our customers could be delayed, and our business could be adversely affected. Our qualified CMs manufacture products according to our design specification, materials specification, quality standards, and delivery requirements.
Component Manufacturers This category represents companies that manufacture a broad array of components that compete both directly and indirectly with our products.
In addition, our Antenna+ product line is designed to enhance the signal and coverage of many of these devices. Component Manufacturers This category represents companies that manufacture a broad array of components that compete both directly and indirectly with our products.
Research and Development We invest considerable time and financial resources in research and development to enhance our design and system integration capabilities and conduct quality assurance testing to improve our technology. As of December 31, 2022, we had a total of 68 employees and dedicated representatives within our research and development organization representing approximately 48% of our workforce.
Research and Development We invest considerable time and financial resources in research and development to engineer and deliver our products and solutions to market, while also enhancing our design and system integration capabilities and conducting quality assurance testing to improve our technology. As of December 31, 2023, we had a total of 63 employees engaged in research and development.
Ltd., WHA YU Industrial Co., Ltd, and 2J Antennas USA Corp., among others. While we may choose to partner with some of these manufacturers to deliver products that shorten time to market, customers may also choose to complete the more intricate design work on their own using products manufactured by these companies.
While we may choose to partner with some of these manufacturers to deliver products that shorten time to market, customers may also choose to complete the more intricate design work on their own using products manufactured by these companies In-house Design and Engineering Teams Several of our existing customers, including OEMs and ODMs which design and build complete wireless devices, also have internal resources to design, engineer, and produce antenna and modem solutions.
Our antennas are deployed in consumer access points, wireless gateways, Wi-Fi Mesh systems and extenders, smart TVs, smart home devices, and set-top boxes. Additionally, our antennas support a comprehensive array of technologies, including WLAN, Wi-Fi, LTE, 5G and LPWAN.
Consumer The consumer market represents a vast audience utilizing wireless-enabled devices. Our embedded antennas are deployed in various consumer applications including access points, wireless gateways, FWA devices, Wi-Fi routers and extenders, smart TVs, smart home devices, and set-top boxes.
ITEM 1. BUSINESS Overview Airgain is a leading provider of wireless connectivity solutions that creates and delivers embedded components, external antennas, and integrated systems across the globe. Airgain simplifies wireless connectivity across a diverse set of devices and markets, from solving complex connectivity issues to speeding time to market to enhancing wireless signals. Our product offering includes three distinct sub-brands.
ITEM 1. BUSINESS Overview Airgain is a premier provider of wireless connectivity solutions, offering a range of embedded components, external antennas, and integrated systems worldwide. We streamline wireless connectivity across devices and markets, with a focus on solving complex connectivity challenges, expediting time to market, and optimizing wireless signals.
The fleet and aftermarket segment of the automotive market typically consists of applications whereby rugged vehicular wireless routers are paired with external antenna systems to provide connectivity to fixed and mobile assets.
Fleet and aftermarket products in the automotive market typically consist of applications where vehicular wireless routers are paired with external antenna systems to provide connectivity to mobile assets. Within this market, there has been increasing demand for constant connectivity, specifically in the first responder, utility, agriculture, and service fleet markets.
In-house Design and Engineering Teams Several of our existing customers, including OEMs and ODMs which design and build complete wireless devices, also have internal resources to design, engineer, and produce antenna and modem solutions. In such cases, we compete against the captive resource of that ODM. Several ODMs, including Arcadyan Technology Corporation, Foxconn Electronics Inc., Gemtek Technology Co.
In such cases, we compete against the captive resource of that ODM. Several ODMs, including Arcadyan Technology Corporation, Foxconn Electronics Inc., Gemtek, Zyxel Communications, Inc. (MitraStar Technology), and Wistron Corporation, design, manufacture, and sell complete wireless devices, in direct competition with us.
Intellectual Property We rely on patent, trademark, copyright and trade secret laws, confidentiality procedures, and contractual provisions to protect our technology. As of December 31, 2022, we had 239 issued U.S. patents covering our products with expiration dates ranging from 2023 to 2039, and 8 pending patent applications in the United States Patent and Trademark Office.
Intellectual Property We rely on patent, trademark, copyright and trade secret laws, confidentiality procedures, and contractual provisions to protect our technology. As of December 31, 2023, our intellectual property portfolio comprised more than 280 patents that have been granted or applications that have been made public and submitted across the United States, Europe, and Asia.
Sales Our global sales effort consists of direct and indirect sales teams, and indirect channel partners. Our direct sales team consists of inside sales personnel based in the United States, China and Taiwan and our outside field sales teams based in the United States, the United Kingdom, South Korea, China, and Taiwan.
Our direct sales team consists of sales personnel based in the United States, Greater China, South Korea, and Europe, while our indirect channel partners consist of distributors, engineering design companies and outside sales representatives across North America, Asia, Europe, Australia, Middle East, and Latin America.
Growth Strategy We are in the process of transitioning from exclusively a component manufacturer to a wireless system solutions provider, targeting higher levels of integration and complexity. Climbing the value curve and expanding our presence in adjacent markets are key ingredients to our growth strategy.
We are transitioning from being exclusively a component manufacturer to a wireless system solutions provider, targeting higher levels of integration and complexity, as such, our growth strategy is focused on two key elements: Grow our established business: Our embedded modems, custom IoT solutions, and IoT antennas in the enterprise market; embedded antennas in the consumer market; and our aftermarket antennas in the automotive market together provide our foundational business.
In addition, our Antenna+ product line is designed to enhance the signal and coverage of many of these devices. Solution Providers This category represents companies that manufacture a wide variety of products across the value chain that include end-device hardware, software, components, services, and more.
Solution Providers This category represents companies that manufacture a wide variety of products across the value chain including end-device hardware, software, components, services, and more. This includes Digi International Inc., Laird Connectivity, Multi-Tech Systems Inc., Nextivity Inc., Pulse Electronics, Samsara, Semtech , TE Connectivity, and Wilson Electronics, among others.
As highlighted in the graphic below, based on publicly available market research and our internal ASP estimates, we estimate a serviceable available market (SAM), to be in excess of $16.5 billion as of the end of 2023.
Based on publicly available market research and internal estimates, we project the SAM will grow from $1.3 billion in 2023 to $2.2 billion by 2024 and to $3.5 billion by 2025.
The products within this brand include: • Asset Trackers – Our asset tracking solution leverages a cellular backbone with WiFi and GPS triangulation along with a myriad of sensors that include temperature, motion, distance, tilt, humidity, and more to track the location and condition of an asset indoors, outdoors, or in-transit.
Our asset trackers are deployed across transportation, supply chain, cold chain, and other specialized applications. Our asset tracking solution utilizes a cellular backbone with Wi-Fi and GPS triangulation, along with various sensors like temperature, motion, distance, tilt, and humidity to monitor asset location and condition in various environments.
The products within this brand include: • Embedded Antennas - We engage with chipset providers, carriers, original design manufacturers (ODMs) and OEMs to develop highly integrated and customized embedded antenna solutions.
These consumer products support a variety of technologies, products and services, including LTE, 5G, Wi-Fi, Bluetooth, LPWAN and GNSS (Global Navigation Satellite System). We collaborate closely with chipset providers, carriers, original design manufacturers (ODMs), and OEMs to develop highly integrated and tailored embedded antenna solutions.
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Airgain Embedded™ represents our embedded modems, antennas, and development kits that help design teams bring connected products to market quickly. Airgain Antenna+™ represents our external antennas, such as our fleet and Internet of things (IoT) antennas, that help enhance wireless signals in some of the harshest environments.
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Our mission is to connect the world through optimized, integrated wireless solutions. Our product portfolio focuses on three key markets: enterprise, consumer, and automotive. Our current enterprise products include embedded cellular modems, antennas for access points and Internet of Things (IoT) applications, and asset trackers.
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Airgain Integrated™ represents our fully integrated products, such as our asset trackers,5G connectivity solutions, and AirgainConnect® platform, that help solve connectivity issues in an organization’s operating environment. Our mission is to connect the world through optimized, integrated wireless solutions. Airgain’s core business primarily focuses on the following three key markets: • Enterprise.
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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.
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The enterprise market is characterized by devices that provide reliable wireless access for high-density environments such as buildings, campuses, transportation terminals and stadiums. Within this market our antennas are deployed across a wide range of systems, devices, and applications that include access points and gateways, fixed wireless access infrastructure, small cells, massive MIMO, and remote radio heads.
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Our current automotive products include aftermarket antennas that are typically connected to third-party cellular and Wi-Fi-enabled routers, digital video evidence devices, and telematics gateways. We also recently launched a second generation AirgainConnect® Fleet system solution – a low profile, roof-mounted 5G vehicle gateway, combining a cellular modem, antennas, and additional features into a single device.
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In addition, our embedded modems are deployed across various markets with high demand for connectivity, including packaging and logistics, EV charging, smart city and smart building applications, agriculture, asset tracking, and more.
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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.
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We continue to deploy our asset trackers across a variety of transportation, supply chain, cold chain, and other unique applications and we continue to develop WiFi access and other custom products for multiple commercial uses. • Consumer. The consumer market encompasses a large and growing audience of consumers using wireless-enabled devices.
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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. In 2022, we transitioned to an outsource manufacturing model for our products while maintaining oversight for quality, test, and delivery timeline.
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We plan to roll out of our new 5G connectivity product lines, improving 5G access and customer experience through fixed wireless access (FWA) and repeaters for our service provider customers. • Automotive .
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We also maintain an intellectual property strategy that includes patent and trademark filings in multiple jurisdictions. As of December 31, 2023, we had over 280 issued and pending patents worldwide. Products and Solutions Enterprise The enterprise market requires reliable wireless access across various settings, including smart cities, utilities, factories, buildings, campuses, transportation hubs, stadiums, and suburban developments.
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Within this unique market segment, there has been a rise in the number of antennas per vehicle, which is especially true in the first responder, utility, agriculture, and service fleet markets where in-vehicle equipment increasingly demands connectivity.
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Our NimbeLink embedded modems serve numerous enterprise sectors requiring cellular connectivity such as packaging, logistics, EV charging, smart cities, smart buildings, agriculture, and asset tracking. These NimbeLink cellular modems, which are both patented and end-device certified, minimize the need for additional carrier certifications. Our customers benefit from these end-device certified modems with lower development costs and faster time to market.
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As a wireless connectivity solution provider with a rich history in radio frequency (RF) technology, we are leveraging our expertise in embedded antennas and embedded modems to effectively transition from a component provider to a wireless systems provider. In 2020, we announced our patented vehicle networking flagship platform – AirgainConnect.
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Offering a wide array of LTE solutions and products with integrated GPS/GNSS radios, our NimbeLink modems are pin-compatible, facilitating seamless integration and simplifying technology transitions. We also offer embedded modems with optional recurring subscription-based cellular data plans. Our embedded modems are shipping to distribution partners and directly to OEMs.
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Our first product from this platform, the AC-HPUE™ antenna-modem offers a novel solution for our public safety and automotive fleet markets by improving vehicle networking capabilities and we are developing our next generation products directed towards a broader vehicle market size.
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In addition to hardware, our asset tracking offering includes a recurring revenue component, our subscription-based NLink cloud-based device enablement platform, which allows for deployment and integration with enterprise systems via open APIs. We also offer subscription-based dashboards for viewing asset tracker information, should a customer desire a full solution. Recurring revenue for asset trackers also includes optional cellular data plans.
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We have also designed an entire line of cellular-based, ruggedized asset trackers that deliver real-time location and condition data on assets, whether they are indoors, outdoors or in transit.
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Our asset tracker solutions are primarily shipping to OEMs. Our custom products feature joint engineering collaboration with strategic customers to develop industrial IoT products (IIoT) for specific applications while helping them reduce their time to market.
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In addition, we have a robust custom products offering where we design and build integrated products such as cellular routers, large venue WiFi access points, and external cellular modem modules for major original equipment manufacturers (OEMs).
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For example, one of our joint engineering collaboration is with a large IoT customer for a small-size and purpose-built ethernet to cellular router with custom software. Another example of our custom products is a rugged cellular modem purpose-built for 5 outdoor ATV (all-terrain vehicle), motorcycle, and off-roading applications.
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Finally, our advanced development team expect to roll out several new products this year designed to improve the 5G customer experience, further helping enable our move into a leadership position in the new wave of technologies and platforms.
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These examples highlight our dedication to partnerships and delivering high quality, fast time-to-market, and purpose-built custom products. We will continue to invest in strategic custom opportunities as they arise. Our enterprise IoT and machine-to-machine (M2M) antennas are extensively deployed in diverse systems, devices, and applications, including access points, gateways, fixed wireless access devices and utility meters.
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After a significant shift in 2022, we transitioned to a fabless model where we use third parties to manufacture our products while maintaining oversight for critical quality, test, and calibration functions. In addition, we maintain a deliberate intellectual property strategy that includes patent and trademark filings in multiple jurisdictions including the United States and other commercially significant markets.
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Our antenna systems are shipping to major enterprise OEMs and distribution partners. In 2023, we unveiled a new line of Fixed Wireless Access products designed to address 5G connectivity challenges, reduce deployment costs and enhance customer experiences.
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As of December 31, 2022, we had over 281 issued and pending patents worldwide. 5 Key Differentiators While there is significant competition in the wireless connectivity market, we believe that we are able to differentiate ourselves in three distinct areas: Simplifying Wireless The common thread throughout all of our offerings is our commitment to simplifying wireless connectivity.
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In 2023, we also announced our Lighthouse™ smart repeaters platform designed to reduce an operator’s capital expenses for extending range, while enhancing 5G coverage. Our outdoor 5G Lantern TM Fixed Wireless Access (FWA) device has integrated high-performance directional antennas, a 5G NR Sub-6 modem, and is powered through a 2.5 gigabit ethernet PoE (power over ethernet) connection.
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In engineering circles, RF design can be known as “black magic,” as it is often complex and difficult to optimize. Our foundation was built on complex antenna design, where we would solve for signal issues not only within the device, but within the environment as well.
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The Lantern 5G FWA has been ruggedized for outdoor use, includes remote management capabilities, and a Wi-Fi based easy installation web interface to help simplify the user experience. We expect Lantern to receive certification at select MNOs, and begin shipping in the first half of 2024.
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As we added new product lines, this specialty in simplifying wireless became a connecting theme. Whether this includes complex antenna design, end-device certified modems, cellular asset trackers, or signal-enhanced vehicle networking, we help you get connected quickly.
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Our Lighthouse smart repeater platform includes both a low-power small office and home office (SOHO) device targeting customers that need additional coverage in small areas, as well as a high-power outdoor network repeater for MNOs and systems integrators.
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Moving forward, our focus is to leverage this core competency to move into a leadership position in the new wave of technologies and platforms as they become increasingly integrated and complex. We believe Airgain is poised to make a significant impact in the wireless connectivity space.
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Lighthouse smart repeaters include advanced carrier aggregation (CA), low latency, software upgradeability to support network-controlled repeater (NCR) standards, optional smart antenna technology to assist with installation and maintenance, and an optional remote management system. The smart network repeater also integrates advanced automatic gain control and echo cancellation enabling single-pole installation. Lighthouse is in MNO field trials around the world.
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High Growth Technologies With a highly experienced RF engineering team on staff, Airgain has expertise in many of the high-growth wireless technologies in the industry including 5G, WiFi 6/6E/7, IoT, FWA and much more.
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Our relationships with MSOs, ODMs and OEMs are strengthened by our comprehensive and repeatable Over-the-Air test capabilities for Wi-Fi, LTE, 5G, LPWAN, and Bluetooth. Service providers are increasingly transitioning to gigabit Wi-Fi, up to and including Wi-Fi 7. We have invested in next-generation Wi-Fi 7 design and testing capabilities.
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The latest Wi-Fi 6 (802.11ax) standard is considered a true wired equivalent and can enable higher definition video streaming and services with use cases that require higher data rates. It improves the average throughput per user by a theoretical factor of at least four times over WiFi 5, which will also allow for dense IoT deployments.
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We expect the combination of Wi-Fi 7 and 5G will be a growth driver for our solutions as the number of antennas per device increases. We announced in November 2023 that Airgain was selected by a major Tier 1 MNO in North America to supply its next generation antennas for its indoor FWA devices.
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According to our research of publicly available data, global 5G connections are doubling every year and are expected to reach 5.9 billion by the end of 2027. Also, we further estimate from our research that 5G service revenue will represent 80% of global operator revenue by 2027.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeBesides the other risks in this “Risk Factors” section, factors that may affect our operating results include: • fluctuations in demand for our products and services; • the inherent complexity, length and associated unpredictability of product development windows and product lifecycles; • the timing and extent of investment in our targeted growth markets and the timing and amount of sales in such markets; • changes in customers’ budgets for technology purchases and delays in their purchasing cycles; • global supply shortage including chip shortages, supply constraints relating to other materials and potential increasing shipping costs and related limitations on our and our customers’ ability to obtain necessary components in our respective supply chains; • inflation and other increases in the cost of components, consumables and other manufacturing costs; • seasonal fluctuations around local holidays in China affecting how customers make purchasing decisions; • changing market and economic conditions and, financial institution instability. • any significant changes in the competitive dynamics of our markets, including new entrants, or further consolidation; the timing of product releases or upgrades by us or by our competitors; 17 • our ability to develop, introduce and ship in a timely manner new products and product enhancements and anticipate future market demands that meet our customers’ requirements, and provide adequate customer support for those products; • public health crises such as the COVID-19 pandemic; • increasing uncertainty of international relations and tariffs; and • terrorism, political instability or war, and the imposition of sanctions or countermeasures changing market by the U.S. and other countries in relation to such conflicts.
Biggest changeBesides the other risks in this “Risk Factors” section, factors that may affect our operating results include: • fluctuations in demand for our products and services; • the inherent complexity, length and associated unpredictability of product development windows and product lifecycles; • the timing and extent of investment in our targeted growth markets and the timing and amount of sales in such markets; • our ability to develop, introduce and ship in a timely manner new products and product enhancements and anticipate future market demands that meet our customers’ requirements, and provide adequate customer support for those products; • changes in customers’ budgets for technology purchases and delays in their purchasing cycles; 14 • global supply shortage including, but not limited to chips and modules, supply constraints relating to other materials and potential increasing shipping costs and related limitations on our ability to acquire mission critical components and our CM’s abilities to obtain sufficient human resources to meet our global demand; • inflation and other increases in the cost of components, consumables, labor and other manufacturing costs; • changing market and economic conditions and, financial institution instability. • any significant changes in the competitive dynamics of our markets, including new entrants, or further consolidation; the timing of product releases or upgrades by us or by our competitors; • uncertainty surrounding the outcome of political elections in the U.S. and its effects on international relations, sanctions and tariffs; • terrorism, political instability or war, and the imposition of sanctions or countermeasures by the U.S. and other countries in relation to such conflicts; • public health crises regionally and globally, including pandemics and epidemics; and • facility shutdowns related to local holidays in China and southeast Asia, affecting how customers make purchasing decisions.
Foreign data protection laws, including the EU General Data Protection Regulation 2016/679, or the GDPR, and the U.K. data protection regime consisting primarily of the UK General Data Protection Regulation and the UK Data Protection Act 2018, or the UK GDPR, may also apply to other personal information obtained outside of the United States.
Foreign data protection laws, including the EU General Data Protection Regulation 2016/679, (GDPR) and the U.K. data protection regime consisting primarily of the UK General Data Protection Regulation and the UK Data Protection Act 2018, or the UK GDPR, may also apply to other personal information obtained outside of the United States.
In the United States, our end-customers’ products and our products (in cases where we provide devices that are end-device certified) must comply with such regulations issued by the Federal Communications Commission before they can be marketed or sold, or imported into, the United States, and may also be required to conform to industry standards defined by industry associations or organizations, such as Underwriters Laboratories, for commercial acceptance.
In the United States, our end-customers’ products and our products (in cases where we provide devices that are end-device certified) must comply with such regulations issued by the Federal Communications Commission (FCC) before they can be marketed or sold, or imported into, the United States, and may also be required to conform to industry standards defined by industry associations or organizations, such as Underwriters Laboratories, for commercial acceptance.
Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause our stock price to decline.
Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public 32 accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause our stock price to decline.
These anti-takeover provisions and other provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors and could also delay or impede a merger, tender offer or proxy contest involving our company.
These anti-takeover provisions and other provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for stockholders or potential acquirers to obtain control of 31 our board of directors or initiate actions that are opposed by the then-current board of directors and could also delay or impede a merger, tender offer or proxy contest involving our company.
Some of our products are subject to various federal, state, local and international laws governing chemical substances in electronic products. We could be subject to increased costs, fines, civil or 26 criminal sanctions, third-party property damage or personal injury claims if we violate or become liable under environmental and/or worker health and safety laws.
Some of our products are subject to various federal, state, local and international laws governing chemical substances in electronic products. We could be subject to increased costs, fines, civil or criminal sanctions, third-party property damage or personal injury claims if we violate or become liable under environmental and/or worker health and safety laws.
We will evaluate each such request on a case-by-case basis, and we may not succeed in refuting all such claims. If a channel partner or end-customer elects to invest resources in enforcing a claim for indemnification against us, we could incur significant costs disputing it. If we do not succeed in disputing it, we could face substantial liability.
We will evaluate each such request on a case-by-case basis, and we may not succeed in refuting all such claims. If a 25 channel partner or end-customer elects to invest resources in enforcing a claim for indemnification against us, we could incur significant costs disputing it. If we do not succeed in disputing it, we could face substantial liability.
If our sales do not increase to offset these increases in our operating expenses, we may not be profitable in future periods. Our historical sales growth has been 20 inconsistent and should not be considered indicative of our future performance. Any failure to sustain or increase our profitability consistently could cause the value of our common stock to materially decline.
If our sales do not increase to offset these increases in our operating expenses, we may not be profitable in future periods. Our historical sales growth has been inconsistent and should not be considered indicative of our future performance. Any failure to sustain or increase our profitability consistently could cause the value of our common stock to materially decline.
We maintain insurance to protect against certain types of claims associated with the use of our products, but our insurance coverage may not adequately cover any such claims. In addition, even claims that ultimately are unsuccessful could result in expenditures of funds in connection with litigation and divert management’s time and other resources.
We maintain insurance to protect against certain types of claims associated with the use of our products, but our insurance coverage may not adequately cover any such claims. In addition, even claims that ultimately are unsuccessful could result in expenditures of funds in connection 20 with litigation and divert management’s time and other resources.
Our involvement in any patent dispute or other intellectual property dispute or action to protect trade secrets and know-how could have a material adverse effect on our business. Adverse determinations in any litigation could subject us to significant liabilities to third parties, require us to seek licenses from third parties and prevent us from 28 manufacturing and selling our products.
Our involvement in any patent dispute or other intellectual property dispute or action to protect trade secrets and know-how could have a material adverse effect on our business. Adverse determinations in any litigation could subject us to significant liabilities to third parties, require us to seek licenses from third parties and prevent us from manufacturing and selling our products.
If we violate these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges, fines, which may be imposed on us and responsible employees or managers, and, in extreme cases, the incarceration of responsible employees or managers.
If we violate these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import 27 privileges, fines, which may be imposed on us and responsible employees or managers, and, in extreme cases, the incarceration of responsible employees or managers.
The realization of any of the above risks or any of a broad range of other risks, including those described in this “Risk Factors” section and elsewhere in this annual report on Form 10-K could have a dramatic and material adverse impact on the market price for our common stock.
The realization of any of the above risks or any of a 30 broad range of other risks, including those described in this “Risk Factors” section and elsewhere in this annual report on Form 10-K could have a dramatic and material adverse impact on the market price for our common stock.
We are developing a number of our new products and wireless connectivity solutions in partnership with other companies. If any of these companies were to fail to perform, or our partnerships were to be unsuccessful, we may not be able to bring our product solutions to market successfully or on a timely basis.
We are developing a number of our new products and wireless connectivity solutions in partnership with other companies. If any of these companies were to fail to perform, or our partnerships were to be unsuccessful, we may not be able to bring our solutions to market successfully or on a timely basis.
Allegations or violations of anti-bribery law violations could result in costly investigations, criminal or civil penalties or other sanctions that could have a material adverse effect on our business and reputation. Risks Related to Our Common Stock The price of our common stock may be volatile.
Allegations or violations of anti-bribery law violations could result in costly 29 investigations, criminal or civil penalties or other sanctions that could have a material adverse effect on our business and reputation. Risks Related to Our Common Stock The price of our common stock may be volatile.
If the current equity and credit markets deteriorate, or if adverse developments are experienced by financial institutions, it may cause short-term liquidity risk and also make any necessary debt or equity financing more difficult, more costly, more onerous with respect to financial and operating covenants and more dilutive.
If the equity and credit markets deteriorate, or if adverse developments are experienced by financial institutions, it may cause short-term liquidity risk and also make any necessary debt or equity financing more difficult, more costly, more onerous with respect to financial and operating covenants and more dilutive.
Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline. 34 We have never paid cash dividends on our common stock, and we do not anticipate paying cash dividends in the foreseeable future.
Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline. We have never paid cash dividends on our common stock, and we do not anticipate paying cash dividends in the foreseeable future.
For example, the continued growth in the consumer market and any increase in demand for antenna products will depend on, among things, the cost, performance, and perceived value associated with our antennas and the ability for our antenna products to meet increased performance demands, refresh cycles and device form factors.
For example, any growth in the consumer market and any increase in demand for antenna products will depend on, among things, the cost, performance, and perceived value associated with our antennas and the ability for our antenna products to meet increased performance demands, refresh cycles and device form factors.
The costs of any compromise, breach or misuse of our systems or information could exceed our available insurance coverage, or could result in denial of coverage as to any specific claim, or a change or cessation in our insurance policies and coverages, including premium increases or the imposition of large deductible requirements.
The costs of any compromise, breach or misuse of our systems or information could exceed our available insurance coverage, or could result in denial of coverage as to any specific claim, or a change or cessation in our 33 insurance policies and coverages, including premium increases or the imposition of large deductible requirements.
Any adverse determination in any such litigation or any amounts paid to settle any such actual or threatened litigation could require that we make significant payments. 33 If securities or industry analysts issue an adverse opinion regarding our stock our stock price and trading volume could decline.
Any adverse determination in any such litigation or any amounts paid to settle any such actual or threatened litigation could require that we make significant payments. If securities or industry analysts issue an adverse opinion regarding our stock our stock price and trading volume could decline.
If we are unable to raise adequate funds, we may have to liquidate some or all of our assets, or delay, reduce the scope of or eliminate some or all of our development programs. We also may have to reduce marketing; customer support or other resources devoted to our products or cease operations.
If we are unable to raise adequate funds, we may have to liquidate some or all of our assets, or delay, reduce the scope of or eliminate some or all of our development programs. We also may have to reduce marketing; customer support or other 21 resources devoted to our products or cease operations.
In addition, regardless of the party at fault, errors of these kinds divert the attention of our engineering personnel from our 23 product development efforts, damage our reputation and the reputation of our products, cause significant customer relations problems and can result in product liability claims.
In addition, regardless of the party at fault, errors of these kinds divert the attention of our engineering personnel from our product development efforts, damage our reputation and the reputation of our products, cause significant customer relations problems and can result in product liability claims.
Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to alter our operating plans.
Failure to secure any necessary financing in a timely manner and on favorable terms 34 could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to alter our operating plans.
To manage any future growth effectively, we must continue to improve and expand our information technology and financial infrastructure, our operating and administrative systems and controls, and our ability to manage headcount, capital and processes in an efficient manner.
To manage any future growth effectively, we must continue to improve and expand our information technology and financial infrastructure, our operating and administrative systems and controls, and our ability to manage 15 headcount, capital and processes in an efficient manner.
Terminating or transitioning arrangements with key consultants could result in additional costs and a risk of 24 operational delays, potential errors and possible control issues as a result of the termination or during the transition.
Terminating or transitioning arrangements with key consultants could result in additional costs and a risk of operational delays, potential errors and possible control issues as a result of the termination or during the transition.
There are also laws regulating the use of personal data for direct marketing purposes, including the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, which establishes specific requirements for commercial email messages, and the Telephone Consumer Protection Act, and the Telemarketing Sales Rule as interpreted and implemented by the FCC and United States courts, or TCPA, which imposes significant restrictions on the use of telephone calls and text messages to residential and mobile telephone numbers.
There are also laws regulating the use of personal information for direct marketing purposes, including the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, which establishes specific requirements for commercial email messages, and the Telephone Consumer Protection Act, and the Telemarketing Sales Rule as interpreted and implemented by the FCC and United States courts, or TCPA, which imposes significant restrictions on the use of telephone calls and text messages to residential and mobile telephone numbers.
In addition, there is a risk that one or more of our current service providers, financial institutions, manufacturers, suppliers, customers and other partners may be adversely affected by the foregoing risks, which could directly affect our ability to attain our operating goals on schedule and on budget. 38 ITEM 1B. UNRESOLVE D STAFF COMMENTS None.
In addition, there is a risk that one or more of our current service providers, financial institutions, manufacturers, suppliers, customers and other partners may be adversely affected by the foregoing risks, which could directly affect our ability to attain our operating goals on schedule and on budget. 35 ITEM 1B. UNRESOLVE D STAFF COMMENTS None.
The Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, requires, among other things, that we maintain effective disclosure controls and procedures and controls over financial reporting.
The Sarbanes-Oxley Act of 2002, as amended (the Sarbanes-Oxley Act), requires, among other things, that we maintain effective disclosure controls and procedures and controls over financial reporting.
Furthermore, given the rapidly evolving nature of the wireless market, there can be no assurance our products and technology will not be rendered obsolete by alternative or competing technologies. The markets in which we operate are characterized by changing technology and evolving industry standards, which includes the introduction and implementation of Wi-Fi 6 and emerging 5G cellular standards.
Furthermore, given the rapidly evolving nature of the wireless market, there can be no assurance our products and technology will not be rendered obsolete by alternative or competing technologies. The markets in which we operate are characterized by changing technology and evolving industry standards, which includes the introduction and implementation of Wi-Fi 7 and emerging 5G cellular standards.
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.
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 CMs on a purchase order basis. Our CMs are not required to manufacture our products for any specific period or in any specific quantity.
Uyghur Forced Labor Prevention Act (“UFLPA”) went into effect, which imposes a rebuttable presumption that goods produced in the Xinjiang Uyghur Autonomous Region of China or involving certain Chinese entities were produced using forced labor and prohibits importation of such goods into the United States absent clear and convincing evidence proving otherwise.
Uyghur Forced Labor Prevention Act (UFLPA) went into effect, which imposes a rebuttable presumption that goods produced in the Xinjiang Uyghur Autonomous Region of China or involving certain Chinese entities were produced using forced labor and prohibits importation of such goods into the United States absent clear and convincing evidence proving otherwise.
Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” is subject to limitations on our ability to use pre-change NOL and tax credit carryforwards to offset future taxable income and income taxes.
Internal Revenue Code of 1986, as amended (the Code), a corporation that undergoes an “ownership change” is subject to limitations on our ability to use pre-change NOL and tax credit carryforwards to offset future taxable income and income taxes, respectively.
Our policies mandate compliance with these anti-bribery laws and we have established policies and procedures designed to promote compliance with applicable anti-bribery law requirements; however, we cannot assure that our policies and procedures will protect us from violations committed by individual employees or agents.
Our policies mandate compliance with these anti-bribery laws and we have established policies and procedures reasonably designed to promote compliance with applicable anti-bribery law requirements; however, we cannot assure that our policies and procedures will protect us from violations committed by individual employees, agents or intermediaries.
As we transition to a wireless systems solutions provider, we anticipate the need to increase our investment in research and development to stay on the leading edge of next generation development and to align ourselves with the rapidly evolving technology needs of the industry.
As we complete our transition into a wireless systems solutions provider, we anticipate the need to increase our investment in research and development to stay on the leading edge of next generation development and to align ourselves with the rapidly evolving technology needs of the industry.
Since we are no longer an emerging growth company, we will no longer be exempt from certain requirements, including, without limitation, holding non-binding stockholder votes on executive compensation arrangements and compliance with new or revised accounting standards and audit requirements.
Since we are no longer an emerging growth company, we are no longer exempt from certain requirements, including, without limitation, holding non-binding stockholder votes on executive compensation arrangements and compliance with new or revised accounting standards and audit requirements.
Our future success depends on our ability to develop and successfully introduce new and enhanced products and services for the wireless market that meet the needs of our customers. Our sales depend on our ability to anticipate our existing and prospective customers’ needs and develop products that address those needs.
Our future success depends on our ability to develop new products and successfully introduce new and enhanced products and services for the wireless market that meet the needs of our customers. Our sales depend on our ability to anticipate our existing and prospective customers’ needs and develop products and systems solutions that address those needs.
There is no assurance that the supply of such components will not be delayed or constrained.
There is no assurance that the 19 supply of such components will not be delayed or constrained.
As a result, even if available, our contract manufacturers may not be able to secure sufficient components at reasonable prices or of acceptable quality to build our products in a timely manner. Therefore, we may be unable to meet customer demand for our products, which would have a material adverse effect on our business, operating results, and financial condition.
As a result, even if available, our CMs may not be able to secure sufficient components at reasonable prices or of acceptable quality to build our products in a timely manner. Therefore, we may be unable to meet customer demand for our products, which would have a material adverse effect on our business, operating results, and financial condition.
Any perceived or actual compromise, breach, or misuse of our systems or information could cause us to incur damage to our reputation, and expose us to a risk of loss or litigation (including by our customers) and possible monetary liability, affect the manner in which we provide our services, and subject us to complaints and/or regulatory investigations, fines, penalties, regulatory enforcement, individual or class action lawsuits, public criticism, loss of customers, loss of goodwill or other additional liabilities, and could adversely affect our business, results of operations, financial condition and prospects.
Any perceived or actual compromise, breach, or misuse of our or our third party service providers’ systems or information could cause us to incur damage to our reputation, and expose us to a risk of loss or litigation (including by our customers) and possible monetary liability, affect the manner in which we provide our services, and subject us to complaints and/or regulatory investigations, fines, penalties, regulatory enforcement, individual or class action lawsuits, public criticism, loss of customers, loss of goodwill or other additional liabilities, and could adversely affect our business, results of operations, financial condition and prospects.
Any failure by us or our contract manufacturers to timely deliver 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.
Any failure by us or our CMs to timely deliver 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.
Both the GDPR and the UK GDPR impose stringent requirements for entities processing personal data including specific requirements regarding transfers of data outside of the European Economic Area, or the EEA, and restrictions regarding the use of cookies and other e-marketing activities.
Both the GDPR and the UK GDPR impose stringent requirements for entities processing personal information, including specific requirements regarding transfers of data outside of the European Economic Area (EEA), and restrictions regarding the use of cookies and other e-marketing activities.
Moving forward, as we transition to a wireless system solutions provider, we expect a shift toward external wireless solutions and antenna technologies in the automotive and enterprise markets that may result in a corresponding shift in the customer mix.
Moving forward, as we transition to a wireless systems solutions provider, we expect a shift toward external wireless solutions and antenna technologies in the automotive and enterprise markets that may result in a corresponding shift in the customer mix.
A significant natural disaster, such as an earthquake, a fire or a flood, occurring near our headquarters, or near the facilities of our contract manufacturers, could have a material adverse impact on our business, operating results and financial condition. Changes in tax law may materially adversely affect our financial condition, results of operations and cash flows.
A significant natural disaster, such as an earthquake, a fire or a flood, occurring near our headquarters, or near the facilities of our CMs, could have a material adverse impact on our business, operating results and financial condition. Changes in tax law may materially adversely affect our financial condition, results of operations and cash flows.
We expect these coordination efforts to increase substantially in the future as we work with chipset vendors and OEM partners on new proof-of-concept and reference designs earlier in the development cycle.
We expect these coordination efforts to increase substantially in the future as we work with OEM partners on new proof-of-concept and reference designs earlier in the development cycle.
We may experience delays in obtaining product from manufacturers and may not be a high priority for our manufacturers. The ability and willingness of our contract manufacturers to perform is largely outside of our control.
We may experience delays in obtaining product from manufacturers and may not be a high priority for our manufacturers. The ability and willingness of our CMs to perform is largely outside of our control.
In addition, if interest rates continue to rise or foreign exchange rates weaken for our international customers, overall demand for our products and services could decline and related capital spending may be reduced.
In addition, if interest rates rise or foreign exchange rates weaken for our international customers, overall demand for our products and services could decline and related capital spending may be reduced.
If any of our contract manufacturers suffers an interruption in its business, experiences delays, disruptions, or quality control problems in its manufacturing operations or we have to change or add additional contract manufacturers, our ability to ship products to our customers would be delayed and our sales could become volatile and our cost of sales may increase.
If any of our CMs suffers an interruption in its business, experiences delays, disruptions, or quality control problems in its manufacturing operations or we have to change or add additional CMs, our ability to ship products to our customers would be delayed and our sales could become volatile and our cost of sales may increase.
ITEM 1A. RISK FACTORS You should carefully consider the following risk factors, together with the other information contained in this annual report on Form 10-K, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before making a decision to purchase or sell shares of our common stock.
ITEM 1A. RISK FACTORS You should carefully consider the following risk factors, together with the other information contained in this annual report on Form 10-K, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding to purchase or sell shares of our common stock.
Additionally, any or all of the following could either limit supply or increase costs, directly or indirectly, to us or our contract manufacturers: • labor strikes or shortages, or restrictions imposed to limit the COVID-19 pandemic or other disease epidemics; • financial problems of either contract manufacturers or component suppliers; • reservation of manufacturing capacity at our contract manufactures by other companies, inside or outside of our industry; • changes or uncertainty in tariffs, economic sanctions, and other trade barriers, political unrest, or military conflict in regions where manufacturers are located, such as recent developments in Myanmar; and potential conflicts involving other countries in Asia such as China and Taiwan; and • industry consolidation occurring within one or more component supplier markets, such as the semiconductor market.
Additionally, any or all of the following could either limit supply or increase costs, directly or indirectly, to us or our CMs: • financial problems of either CMs or component suppliers; • reservation of manufacturing capacity at our contract manufactures by other companies, inside or outside of our industry; • changes or uncertainty in tariffs, economic sanctions, and other trade barriers, political unrest, or military conflict in regions where manufacturers are located; and potential conflicts involving other countries in Asia such as China and Taiwan; • industry consolidation occurring within one or more component supplier markets, such as the semiconductor market; and • labor strikes or shortages, or restrictions imposed to limit pandemic or epidemics.
We 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 outsource the manufacturing, assembly and some of the testing of our products.
We rely on a limited number of CMs 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 outsource the manufacturing, assembly and some of the testing of our products.,.
Additionally, poor quality in any of the single or limited sourced components in our products could result in lost sales or lost sales opportunities. Our contract manufacturers generally rely on purchase orders rather than long-term contracts with these suppliers.
Additionally, poor quality in any of the single or limited sourced components in our products could result in lost sales or lost sales opportunities. Our CMs generally rely on purchase orders rather than long-term contracts with these suppliers.
Sanctions imposed by the United States and other countries in response to such conflicts, including the one in Ukraine, may also adversely impact the financial markets and the global economy, and any economic countermeasures by affected countries and others could exacerbate market and economic instability.
Sanctions imposed by the United States and other countries in response to such conflicts, may also adversely impact the financial markets and the global economy, and any economic countermeasures by affected countries and others could exacerbate market and economic instability.
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 21 • deliver finished products at agreed-upon prices.
Relying on CMs for manufacturing, quality assurance, and shipping also presents significant risks to us, including the inability of our CMs to: • qualify appropriate component suppliers; • manage capacity during periods of high demand; • meet delivery schedules; • assure the quality of our products; 18 • ensure adequate supplies of materials; • protect our intellectual property; and • deliver finished products at agreed-upon prices.
For the year ended December 31, 2022 approximately 40% of our products, based on sales, are outside of North America, and we are continuing to expand our international operations as part of our growth strategy. We have limited sales personnel and sales and support operations in the United States, Asia, and Europe.
For the year ended December 31, 2023 approximately 39% of our products, based on sales, are outside of North America, and we are continuing to expand our international operations as part of our growth strategy. We have limited sales personnel and sales and support operations in the United States, Asia, and Europe.
The enactment of the CCPA is prompting a wave of similar legislative developments in other states in the United States, which creates the potential for a patchwork of overlapping but different state laws.
The enactment of the CCPA is prompting a wave of similar legislative developments in other states in the United States, which has created the potential for a patchwork of overlapping but different state laws.
In the United States, data privacy laws and regulations are promulgated at the federal and state level, some of which are enforced by the Federal Trade Commission (FTC), and federal financial regulatory bodies.
In the United States, data privacy laws and regulations are promulgated at the federal and state level, some of which are enforced by the Federal Trade Commission (FTC).
A limited number of customers and devices represent a significant portion of our sales. If we were to lose any of these customers or devices, our sales could decrease significantly. Customers that accounted for 10% or more of our total revenue provided 57% of sales in the aggregate for the year ended December 31, 2022.
A limited number of customers and devices represent a significant portion of our sales. If we were to lose any of these customers or devices, our sales could decrease significantly. Customers that accounted for 10% or more of our total revenue provided approximately 40% of sales in the aggregate for the year ended December 31, 2023.
As of December 31, 2022, we also had federal and state research and development and other tax credit carryforwards of approximately $2.0 million and $1.7 million, respectively, available to reduce future income tax liabilities, subject to limitations. Our federal tax credit carryforwards begin to expire in 2026 and our state tax credits will carryforward indefinitely.
As of December 31, 2023, we also had federal and state research and development and other tax credit carryforwards of approximately $2.1 million and $1.8 million, respectively, available to reduce future income tax liabilities, subject to limitations. Our federal tax credit carryforwards begin to expire in 2026 and our state tax credits will carryforward indefinitely.
While components and supplies are generally available from a variety of sources, our contract manufacturers depend on a single or limited number of suppliers for several 22 components for our products. Further, certain products may utilize custom components available from only one or a limited number of sources.
While components and supplies are generally available from a variety of sources, our CMs depend on a single or limited number of suppliers for several components for our products. Further, certain products may utilize custom components available from only one or a limited number of sources.
We believe that our orders may not represent a material portion of our contract manufacturers’ total orders and, as a result, fulfilling our orders may not be a priority if our contract manufacturers are constrained in their abilities or resources to fulfill all of their customer obligations in a timely manner.
We believe that our orders may not represent a material portion of our CMs’ total orders and, as a result, fulfilling our orders may not be a priority if our CMs are constrained in their abilities or resources to fulfill all of their customer obligations in a timely manner.
The trading price of our 32 common stock depends on several factors, including those described in this “Risk Factors” section and elsewhere in this annual report, including: • price and volume fluctuations in the overall stock market from time to time; • volatility in the market prices and trading volumes of technology stocks; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • sales of shares of our common stock by us or our stockholders; • failure of financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; • announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments; • the development and sustainability of an active trading market for our common stock; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our operating results or fluctuations in our operating results; • actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • any major change in our management; • general economic conditions and slow or negative growth of our markets; and • other events or factors, including those resulting from the COVID-19 pandemic or other disease epidemics, inflation and interest rate changes, financial institution instability, war, such as the war between Russia and Ukraine, incidents of terrorism or responses to these events.
The trading price of our common stock depends on several factors, including those described in this “Risk Factors” section and elsewhere in this annual report, including: • price and volume fluctuations in the overall stock market from time to time; • volatility in the market prices and trading volumes of technology stocks; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • sales of shares of our common stock by us or our stockholders; • failure of financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; • announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments; • the development and sustainability of an active trading market for our common stock; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our operating results or fluctuations in our operating results; • actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • any major change in our management; • general economic conditions and slow or negative growth of our markets; and • other events or factors, including those resulting from outbreaks of contagious disease, inflation and interest rate changes, financial institution instability, wars, such as the war between Russia and Ukraine, and the conflict related to China and Taiwan, political unrest, tensions and uncertainty in the Middle East, and global and regional, terrorism or other geopolitical events.
If we fail to coordinate these efforts, develop product enhancements or introduce new products that meet the needs of our customers as scheduled, our operating results will be materially and adversely affected, and our business and prospects will be harmed.
If we fail to coordinate these efforts, develop product enhancements or introduce new solutions that meet the needs of our customers as scheduled, our operating results will be materially and adversely impacted, and our business and 16 prospects will be harmed.
If shortages continue or occur in the future, as they have in the past, our business, operating results and financial condition would be materially adversely affected. Unpredictable price increases of such components due to market demand may continue to occur as well.
If shortages return or occur in the future, as , our business, operating results and financial condition would be materially adversely affected. Unpredictable price increases of such components due to market demand may occur as well.
Furthermore, any increase in worldwide commodity prices may result in higher component prices for us and increased shipping costs, both of which may negatively affect our business, operating results and financial condition. More recently, the closures of SVB and Signature Bank and their placement into receivership with the FDIC created bank-specific and broader financial institution liquidity risk and concerns.
Furthermore, any increase in worldwide commodity prices may result in higher component prices for us and increased shipping costs, both of which may negatively affect our business, operating results and financial condition. In addition, the closures in 2023 of financial institutions and their placement into receivership with the FDIC created bank-specific and broader financial institution liquidity risk and concerns.
Our business is subject to the risks of earthquakes, fire, floods and other natural catastrophic events. Our corporate headquarters are located in Southern California, three of our contract manufacturers are located in eastern Asia, both regions known for seismic activity.
Our business is subject to the risks of earthquakes, fire, floods and other natural catastrophic events. Our corporate headquarters are located in Southern California, some of our CMs are located in eastern Asia, both regions known for seismic activity.
We cannot assure that product introductions will meet the anticipated release schedules or that our wireless products will be competitive in the market. The introduction of new AirgainConnect platform products, and the transition to a more expansive level of advanced product solutions, requires coordination of efforts and increased time and resources.
We cannot assure that solution introductions will meet the anticipated release schedules or that our wireless solutions will be competitive in the market. The introduction of the next generation AirgainConnect platform, and the transition to a more expansive level of advanced solutions, requires coordination of efforts and increased time and resources.
In addition, there are other existing and proposed European laws and regulations regarding ePrivacy, that apply in addition to the GDPR and UK GDPR, to cookies and similar tracking technologies, electronic communications and marketing, These and other 29 recent legal developments in Europe have created complexity and uncertainty regarding these laws and how to comply.
In addition, there are other existing and proposed European laws and regulations regarding ePrivacy, that apply in addition to the GDPR and UK GDPR, to cookies and similar tracking technologies, electronic communications and marketing, These and other recent legal developments in Europe have created complexity and uncertainty regarding these laws, the sufficiency of certain transfer mechanisms and how to comply.
To date, we have seen no material impact on our business or operations from these information technology security threats. Any future significant compromise, breach, or misuse of our data security could result in significant costs and damage to our reputation.
To date, we have seen no material impact on our business or operations from these information technology security threats. Any future significant compromise, breach, or misuse of our data security could result in significant costs and damage to our reputation, and could materially adversely affect our business, results of operations, and financial condition.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws. We operate in directly and indirectly in several foreign countries. The U.S.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws. We operate directly and indirectly in several foreign countries and are subject to anti-bribery laws in the jurisdiction in which we operate. The U.S.
If we are unsuccessful, whether actual or perceived, in our efforts to comply with these and future laws and regulations, we may incur substantial additional costs in compliance, reputational harm, affect the manner in which we provide our services, including the geographies we service, and be subject to complaints and/or regulatory investigations, significant monetary liability, fines, penalties, regulatory enforcement, individual or class action lawsuits, public criticism, loss of customers, loss of goodwill or other additional liabilities, such as claims by industry groups or other third parties, which may have a material adverse effect on our business, operating results and financial condition.
If we are unsuccessful, whether actual or perceived, in our efforts to comply with these and future laws and regulations, we may incur substantial additional costs in compliance, reputational harm, affect the manner in which we provide our services, including the geographies we service, and be subject to complaints and/or regulatory investigations (including orders to cease or change our processing of personal information), significant monetary liability, fines, penalties, regulatory enforcement, individual or class action lawsuits, public criticism, loss of customers, loss of goodwill or other additional liabilities, such as claims by industry groups or other third parties, which may have a material adverse effect on our business, operating results and financial condition. 26 Risks Related to Our International Operations We are subject to risks associated with international geopolitical and military conflicts .
If we are unable to manage future expansion, our ability to provide high quality products and services could be harmed, which could damage our reputation and brand and may have a material adverse effect on our business, operating results and financial condition. Our business and prospects depend on the strength of our market efforts and our brand.
If we are unable to manage future expansion, our ability to provide high quality products and services could be harmed, which could damage our reputation and brand and may have a material adverse effect on our business, operating results and financial condition.
Changes to United States tax, tariff and import/export regulations may have a negative effect on global economic conditions, financial markets and our business. There have been significant changes and proposed changes to United States trade policies, treaties, tariffs and taxes, including trade policies and tariffs regarding China.
Changes to United States tax, tariff and import/export regulations may have a negative effect on global economic conditions, financial markets and our business. There have been significant changes and proposed changes to United States trade policies, treaties, tariffs and taxes, including trade policies and tariffs regarding China, Russia, eastern Europe, the middle east, and Asia.
Information technology security threats are increasing in frequency, persistence, intensity and sophistication. We may also experience information technology security threats that may remain undetected for an extended period.
Information technology security threats are increasing in frequency, persistence, intensity and sophistication. We and our third party service providers may also experience information technology security threats that may remain undetected for an extended period.
Our operating results may also fluctuate due to a variety of other factors, many of which are outside of our control, including the changing and volatile U.S., European, Asian and global economic environments, and any of which may cause our stock price to fluctuate.
Our operating results may also fluctuate due to a variety of other factors, many of which are outside of our control, including any change or volatility in U.S., European, Asian and global economic environments, and any of which may cause our stock price to fluctuate.
However, these and other proposed policy changes have created significant uncertainty about the future relationship between the United States and China, as well as other countries, including with respect to the trade policies, treaties, government regulations and tariffs that could apply to trade with those countries.
However, these contribute to significant uncertainty about the future relationship between the United States, China, and Taiwan as well as other countries, including with respect to the trade policies, treaties, government regulations and tariffs that could apply to trade with those countries.
Practices in the local business communities of many countries in which we do business have a heightened level of corruption. In addition, we are subject to the FCPA's recordkeeping and internal controls requirements. As part of our business, we may have direct or indirect sales to, and other interactions with, non-U.S. government agencies.
Practices in the local business communities of many countries in which we do business have a heightened level of corruption. As part of our business, we may have direct or indirect sales to, and other interactions with, non-U.S. government agencies.
We expect our operating expenses to increase over the next several years as we hire additional personnel, particularly in engineering, sales, and marketing, and continue to develop new antenna products to address new and evolving markets. In addition, as a public company we will incur additional significant legal, accounting, and other expenses.
We expect our operating expenses to increase over the next several years as we hire additional personnel, particularly in engineering, sales support, customer service and experience, and marketing, and continue to develop new wireless ecosystems to address new and evolving markets. In addition, as a public company we will 17 incur additional significant legal, accounting, and other expenses.
We have recorded $11.9 million valuation allowance related to our NOL carryforwards and other deferred tax assets due to the uncertainty of the ultimate realization of the future tax benefits of such assets.
We have recorded a $14.6 million valuation allowance related to our NOL 23 carryforwards and other deferred tax assets due to the uncertainty of the ultimate realization of the future tax benefits of such assets.
Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business or an unfair business advantage; many anti-bribery laws also prohibit commercial bribery.
Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business or an unfair business advantage; many anti-bribery laws also prohibit commercial bribery. In addition, we are subject to the FCPA’s recordkeeping and internal controls requirements.
Any equity securities issued also may provide for rights, preferences or privileges senior to those of holders of our common stock. The terms of debt securities issued, or borrowings could impose significant restrictions on our operations.
If we raise funds by issuing equity securities, dilution to our stockholders could result. Any equity securities issued also may provide for rights, preferences or privileges senior to those of holders of our common stock. The terms of debt securities issued, or borrowings could impose significant restrictions on our operations.
The global credit and financial markets have experienced extreme volatility and disruptions (including as a result of the ongoing COVID-19 pandemic, the war between Russia and Ukraine and liquidity concerns regarding financial institutions and others in the financial services industry).
The global credit and financial markets have in the past experienced extreme volatility and disruptions (including as a result of pandemic, war and conflict and liquidity concerns regarding financial institutions and others in the financial services industry).

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PR OPERTIES Our corporate headquarters occupy approximately 10,700 square feet in San Diego, California, under a lease that expires in November 2025. Our NimbeLink facility, located in Plymouth, Minnesota, occupies 9,000 square feet under a lease that expires in July 2025. We lease a 2,100 square foot research, development and test facility in Scottsdale, Arizona.
Biggest changeITEM 2. PR OPERTIES Our corporate headquarters occupy approximately 10,300 square feet in San Diego, California, under a lease that expires in November 2025. Our NimbeLink facility, located in Plymouth, Minnesota, occupies 9,000 square feet under a lease that expires in July 2025. We lease a 5,200 square foot research, development and test facility in Scottsdale, Arizona.
We also lease a 3,800 square foot property in St. Cloud, Florida, and a 3,500 square foot property in Jonestown, Texas, which are used for testing services. We lease an office space in four locations outside of the United States including leases in Shenzhen, China; Jiangsu Province, China; Shulin City, Taiwan; and Cambridge, United Kingdom.
We also lease a 2,000 square foot property in St. Cloud, Florida, and a 3,500 square foot property in Jonestown, Texas, which are used for testing services. We lease an office space in four locations outside of the United States including leases in Shenzhen, China; Jiangsu Province, China; Shulin City, Taiwan; and Cambridge, United Kingdom.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 4. MINE SAF ETY DISCLOSURES Not applicable. 39 PAR T II
Biggest changeITEM 4. MINE SAF ETY DISCLOSURES Not applicable. 37 PAR T II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 39 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 40 Item 6. [Reserved] 40 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 41 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 49 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 37 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 38 Item 6. [Reserved] 38 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 39 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 47 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders of Common Stock As of March 6, 2023, there were 10,264,850 shares of our common stock outstanding held by approximately 31 holders of record of our common stock.
Biggest changeHolders of Common Stock As of February 27, 2023, there were 10,504,597 shares of our common stock outstanding held by approximately 30 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeStatements of Operations Data (dollars in thousands) For the Years Ended December 31, 2022 2021 2022 2021 Sales $ 75,895 $ 64,273 100.0 % 100.0 % Cost of goods sold 47,923 39,666 63.1 61.7 Gross profit 27,972 24,607 36.9 38.3 Operating expenses: Research and development 11,345 10,920 14.9 17.0 Sales and marketing 11,174 10,209 14.7 15.9 General and administrative 14,033 13,562 18.5 21.1 Change in fair value of contingent consideration — 2,040 — 3.1 Total operating expenses 36,552 36,731 48.2 57.1 Loss from operations (8,580 ) (12,124 ) (11.3 ) (18.9 ) Other expense (income) (5 ) 12 (0.0 ) (0.0 ) Loss before income taxes (8,575 ) (12,136 ) (11.3 ) (18.9 ) Provision for income taxes 84 (2,049 ) 0.1 (3.2 ) Net loss $ (8,659 ) $ (10,087 ) (11.4 )% (15.7 )% Comparison of the Years Ended December 31, 2022 and 2021 (all tables—dollars in thousands) Sales For the Years Ended December 31, 2022 2021 $ Change % Change Sales $ 75,895 $ 64,273 $ 11,622 18.1 % Sales for 2022 increased $11.6 million, or 18.1% compared to 2021.
Biggest changeStatements of Operations Data (dollars in thousands) For the Years Ended December 31, 2023 2022 2023 2022 Sales $ 56,040 $ 75,895 100.0 % 100.0 % Cost of goods sold 35,277 47,923 62.9 63.1 Gross profit 20,763 27,972 37.1 36.9 Operating expenses: Research and development 10,505 11,345 18.7 15.0 Sales and marketing 9,126 11,174 16.3 14.7 General and administrative 13,532 14,033 24.2 18.5 Total operating expenses 33,163 36,552 59.2 48.2 Loss from operations (12,400 ) (8,580 ) (22.1 ) (11.3 ) Other income (100 ) (5 ) (0.2 ) 0.0 Loss before income taxes (12,300 ) (8,575 ) (21.9 ) (11.3 ) Income tax expense 128 84 0.3 0.1 Net loss $ (12,428 ) $ (8,659 ) (22.2 )% (11.4 )% Comparison of the Years Ended December 31, 2023 and 2022 (all tables—dollars in thousands) 42 Sales For the Years Ended December 31, 2023 2022 $ Change % Change Sales $ 56,040 $ 75,895 $ (19,855 ) (26.2 )% Sales for 2023 decreased $19.9 million, or 26.2% compared to 2022.
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 certain vendor bills. Other Expense. Other expense consists of the loss from disposal of property and equipment, realized foreign exchange gains or losses, and other expenses.
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 certain vendor bills. Other Expense. Other expense consists of the loss from disposal of property and equipment, realized foreign exchange gains or losses, and other income and expenses.
Our performance and future success also depend on factors such as manufacturing costs, continued investments in our growth, our ability to expand into growing addressable markets, including consumer, enterprise, and automotive, the average selling prices of our products per device, the number of antennas per device, and our ability to diversify the number of devices that incorporate our antenna products.
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 consumer, enterprise, and automotive, the average selling prices of our products per device, manufacturing costs and our ability to diversify the number of devices that incorporate our antenna products.
It is difficult for us to project future taxable income as the timing and size of sales of our products are variable and 44 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.
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.
Results of Operations The following tables set forth our operating results for the periods presented 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.
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.
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, global trade disputes or political instability, as well as conflicts around the world.
In addition, inflation generally affects us by increasing our raw material and employee-related costs and other expenses. Our financial condition and results of operations may also be impacted by other factors we may not be able to control, such as uncertain global economic conditions, pandemics and epidemics, global trade disputes or political instability, as well as conflicts around the world.
Our ability to maintain or increase our sales depends on, among other things: 42 • New and existing end customers selecting our solutions for their wireless devices and networks; • The proliferation of Wi-Fi connected home devices and data intensive applications; • Investments in our growth to address customer needs; • The impact of the global supply shortage on our business and that of our end customers; • Our ability to target new end markets; • Development of our product offerings and technology solutions; • International expansion in light of continuing global tensions; • Ability to successfully integrate past and any future acquisitions.
Our ability to maintain or increase our sales depends on, among other things: • new and existing end customers selecting our solutions for their wireless devices and networks; • investments in our growth to address customer needs; • development of our product offerings and technology solutions; • our ability to target new end markets; • the proliferation of Wi-Fi connected home devices and data intensive applications; • the impact of global supply shortages on our business and that of our end customers; • international expansion in light of continuing global tensions; and • the ability to successfully integrate past and any future acquisitions.
General and administrative expenses primarily consist of personnel and facility related costs for our executives, 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. We expect general and administrative expenses to fluctuate as we grow our operations. Other Expense (Income) Interest Income, net.
General and administrative expenses primarily consist of personnel and facility related costs for our executive, legal, human resource finance, and administrative personnel, including stock-based compensation, as well as legal, accounting, other professional services fees, depreciation, and other corporate expenses. We expect general and administrative expenses to fluctuate as we grow our operations. Other (Income) Expense Interest Income, net.
Sales and marketing expenses also include 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 expenses to fluctuate as a percentage of total sales. General and Administrative .
Sales and marketing expenses also include the costs of trade shows, advertising, marketing programs, promotional materials, 41 demonstration equipment, travel, and allocated costs for certain facilities. We expect sales and marketing expenses to fluctuate as a percentage of total sales. General and Administrative .
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 immaterial, we also generate service revenue from agreements to provide design, engineering, and testing services as well as subscription revenue from the sale of data plans.
We generally recognize product sales at the time of shipment to our customers, provided that all other revenue recognition criteria have been met. We also generate service revenue from agreements to provide design, engineering, and testing services as well as subscription revenue from the sale of data plans.
We do not believe that such factors had a material adverse impact on our results of operations during 2022. While each of these areas presents significant opportunities for us, they also pose significant risks and challenges we must successfully address.
We do not believe that such factors had a material adverse impact on our results of operations during 2023. 40 While each of these areas presents significant opportunities for us, they also pose significant risks and challenges we must successfully address.
MANAGEMENT’S DISCUSSION AND ANA LYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should carefully consider the following risk factors, together with the other information contained in this annual report on Form 10-K, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before making a decision to purchase or sell shares of our common stock.
MANAGEMENT’S DISCUSSION AND ANA LYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should carefully consider the following risk factors, together with the other information contained in this annual report on Form 10-K, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding to purchase or sell shares of our common stock.
We estimate the fair value of PSUs with a market condition using a Monte Carlo simulation model as of the date of grant to forecast performance achievement of market price and revenue targets. Key inputs in the valuation include cost of capital, market price volatility and discount rate.
We estimate the fair value of Performance Stock Units (PSU) with a market condition using a Monte Carlo simulation model as of the date of grant to forecast performance achievement of market price and revenue targets. Key inputs in the valuation include cost of capital, market price volatility and discount rate.
Our intangible assets were obtained from business combinations, such as goodwill, customer relationships, developed technologies, market related intangibles and non-compete covenants. The intangible assets were initially recorded at estimated fair value. We amortize the non-goodwill intangibles over an estimated life of 2 to 11 years, using the straight-line method. Our goodwill and intangibles are assessed for impairment annually.
Our intangible assets were obtained from business combinations, such as goodwill, customer relationships, developed technologies, market related intangibles and non-compete covenants. The intangible assets were initially recorded at estimated fair value. We amortize the non-goodwill intangibles over an estimated life of 2 to 11 years, using the straight-line method.
These assets are carried at the estimated fair value at the time of acquisition and assets. However, if their estimated fair value is less than the carrying amount, we recognize an impairment charge for the amount by which the carrying amount of these assets exceeds their estimated fair value. We perform an annual impairment assessment of goodwill.
These assets are carried at the estimated fair value at the time of acquisition and assets. However, if their estimated fair value is less than the carrying amount, we recognize an impairment charge for the amount by which the carrying amount of these assets exceeds their estimated fair value.
For items manufactured by third parties, cost is determined using the first-in, first-out method (FIFO). For items that are 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). For items that are manufactured by the Company's CMs, cost is determined using the weighted average cost method.
We believe that our existing cash and cash equivalents balance together with cash proceeds from operations will be sufficient to meet our working capital requirements for at least the next 12 months.
We believe that our existing cash and cash equivalents balance will be sufficient to meet our working capital requirements for at least the next 12 months.
If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. Stock-based compensation expense is measured and recognized in the consolidated financial statements based on the fair value of the awards granted.
These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. Stock-based compensation expense is measured and recognized in the consolidated financial statements based on the fair value of the awards granted.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations or financial condition. Business Overview Airgain is a leading provider of wireless connectivity solutions that creates and delivers embedded components, external antennas, and integrated systems across the globe.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations or financial condition. Business Overview Airgain is a premier provider of wireless connectivity solutions, offering a range of embedded components, external antennas, and integrated systems worldwide.
The number of PSUs that will ultimately be awarded are contingent on our actual level of achievement compared to the corporate financial target performance targets. 48 Goodwill and Other Intangible Assets We have significant amount of goodwill and finite-lived intangible assets. At December 31, 2022, goodwill and intangible assets totaled $22.0 million, or 41%, of our total assets.
The number of PSUs that will ultimately be awarded are contingent on our actual level of achievement compared to the corporate financial target performance targets. Intangible Assets and Goodwill We have a significant amount of goodwill and finite-lived intangible assets. At December 31, 2023, goodwill and intangible assets totaled $19.1 million, or 45% of our total assets.
Net cash used in investing activities of $0.8 million for the year ended December 31, 2022 was primarily for purchases of property and equipment.
Net cash used in investing activities of $0.3 million for the year ended December 31, 2023 was primarily for purchases of property and equipment. 44 Net Cash Used in Financing Activities.
We perform an annual review of intangible assets to determine whether facts and circumstances indicate that the carrying amount may not be recoverable. These reviews can be affected by various factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our forecasts for product lines.
We perform an intangible assets impairment assessment annually and during the interim when facts and circumstances indicate that the carrying amount may not be recoverable. These reviews can be affected by various factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our forecasts for product lines.
During the normal course of business, our contract manufacturers procure components based upon orders placed by us. If we cancel all or part of the orders, we may still be liable to the contract manufacturers for the cost of the components purchased by the subcontractors 47 to manufacture our products.
Contractual Obligations and Commitments We subcontract with other companies to manufacture our products. During the normal course of business, our CMs procure components based upon orders placed by us. If we cancel all or part of the orders, we may still be liable to the CMs for the cost of the components purchased by the subcontractors to manufacture our products.
The following table presents a summary of our cash flow activity for the periods set forth below (in thousands): Twelve months ended December 31, 2022 2021 Net cash provided by (used in) operating activities $ 4,446 $ (11,170 ) Net cash used in investing activities (750 ) (14,921 ) Net cash (used in) provided by financing activities (6,304 ) 2,429 Net decrease in cash, cash equivalents and restricted cash $ (2,608 ) $ (23,662 ) Net Cash Provided by (Used in) Operating Activities.
The following table presents a summary of our cash flow activity for the periods set forth below (in thousands): Twelve months ended December 31, 2023 2022 Net cash (used in) provided by operating activities $ (3,301 ) $ 4,446 Net cash used in investing activities (346 ) (750 ) Net cash used in financing activities (458 ) (6,304 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 3 — Net decrease in cash, cash equivalents and restricted cash $ (4,102 ) $ (2,608 ) Net Cash (Used in) Provided by Operating Activities.
The decrease was primarily due to an increase of $3.4 million in gross profit and a decrease of $0.1 million in operating expenses. • Our effective tax rate was -1% in 2022 compared to 17% in 2021. • We ended 2022 with cash and cash equivalents and restricted cash totaling $12.1 million.
The increase was due to a decrease of $7.2 million in gross profit, partially offset by a decrease of $3.4 million in operating expenses. • Our effective tax rate for each year was -1% in 2023 and in 2022. • We ended 2023 with cash and cash equivalents and restricted cash totaling $8.0 million.
Critical Accounting Estimates Our management’s discussion and analysis of financial condition and operating results is based on our consolidated financial statements, which have been prepared in accordance with GAAP.
We periodically review the potential liability, and as of December 31, 2023 we have no significant accruals recorded. Critical Accounting Estimates Our management’s discussion and analysis of financial condition and operating results is based on our consolidated financial statements, which have been prepared in accordance with GAAP.
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 because of general customer demand or product cycles.
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 because of general customer demand or product cycles. Our financial highlights for 2023 include the following: • Sales decreased by 26.2% in 2023 compared to 2022.
Factors Affecting Our Operating Results We believe that our performance and future success depend upon several factors including macroeconomic uncertainties, continuing effects of COVID-19 pandemic, continued recovery from global supply shortages, impact of inflation on consumer spending, and our ability to develop technology leadership and expand our markets.
Factors Affecting Our Operating Results We believe that our performance and future success depend upon several factors including macroeconomic and geopolitical uncertainties, epidemic diseases, impact of inflation on consumer spending, and our ability to transition from a component provider to a wireless systems provider and to develop technology leadership and expand our markets.
Gross Profit For the Years Ended December 31, 2022 2021 $ Change % Change Gross profit $ 27,972 $ 24,607 $ 3,365 13.7 % Gross profit (percentage of sales) 36.9 % 38.3 % (1.4 )% Gross profit for 2022 increased $3.4 million, or 13.7%, compared to 2021, driven by higher sales partially offset by a lower 2022 gross margin.
Gross Profit For the Years Ended December 31, 2023 2022 $ Change % Change Gross profit $ 20,763 $ 27,972 $ (7,209 ) (25.8 )% Gross profit (percentage of sales) 37.1 % 36.9 % 0.2 % Gross profit for 2023 decreased $7.2 million, or 25.8%, compared to 2022, driven by lower sales partially offset by a higher 2023 gross margin.
Cost of Goods Sold The cost of goods sold reflects the cost of producing antenna, embedded modem and asset tracking products that are shipped for our customers’ devices as well as costs incurred for service agreements.
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 service agreements. This primarily includes manufacturing costs of our products payable to our third-party CMs.
Net cash used in financing activities of $6.3 million for the year ended December 31, 2022 was primarily to pay the contingent consideration and holdback deferral for the 2021 business acquisition, partially offset by proceeds from common stock issuances under the ESPP and offset by taxes paid from the net restricted shares issued upon vesting.
Net cash used in financing activities of $0.5 million for the year ended December 31, 2023 was primarily to pay taxes for net share settlement of restricted stock units, partially offset by proceeds from common stock issuances under the ESPP.
Our antennas are deployed in consumer access points, wireless gateways, Wi-Fi Mesh systems and extenders, smart TVs, smart home devices, and set-top boxes. Additionally, our antennas support a comprehensive array of coveted technologies, including WLAN, Wi-Fi, LTE, 5G and LPWAN.
Our embedded antennas are deployed in various consumer applications including access points, wireless gateways, FWA devices, Wi-Fi routers and extenders, smart TVs, smart home devices, and set-top boxes. These consumer products support a variety of technologies, products and services, including LTE, 5G, Wi-Fi, Bluetooth, LPWAN and GNSS (Global Navigation Satellite System).
We discuss many of these risks, uncertainties and other factors in greater detail in the section entitled “Risk Factors” included in Item 1A of this annual report on Form 10-K. Our financial highlights for 2022 include the following: • Sales increased by 18.1% in 2022 compared to 2021.
We discuss many of these risks, uncertainties and other factors in greater detail in the section entitled “Risk Factors” included in Item 1A of this annual report on Form 10-K. Our operating results historically have not been subject to significant seasonal variations.
In the automotive market, our products are deployed in a wide range of vehicles to support a variety of wireless connectivity solutions in the fleet and aftermarket segment, supporting a variety of technologies that include Wi-Fi, 3G, LTE, 5G, Satellite and LPWAN.
We continue to grow our relationships with MSOs and MNOs as the market evolves with both wired and wireless broadband internet offerings. In the automotive market, our products are deployed in a wide range of vehicles in the fleet and aftermarket applications, supporting a variety of technologies that include Wi-Fi, LTE, 5G, LPWAN, GNSS, and Bluetooth.
Operating Expenses Our operating expenses are classified into three categories: research and development, sales and marketing, general and administrative and subscription revenues. The largest component of expense is personnel costs, which 43 includes salaries, employee benefit costs, bonuses, and stock-based compensation. Operating expenses also include allocated overhead costs for depreciation of equipment, facilities and information technology.
The 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 equipment, facilities and information technology. Allocated costs for facilities consist of amortization of leasehold improvements as well as rent and utility expenses and taxes. Operating expenses are generally recognized as incurred.
Operating Expenses For the Years Ended December 31, 2022 2021 $ Change % Change Research and development $ 11,345 $ 10,920 $ 425 3.9 % Sales and marketing 11,174 10,209 965 9.5 % General and administrative 14,033 13,562 471 3.5 % Change in fair value of contingent consideration — 2,040 (2,040 ) (100.0 )% Total operating expenses $ 36,552 $ 36,731 $ (179 ) (0.5 )% Research and Development Research and development expense for 2022 increased $0.4 million or 3.9% compared to 2021.
Operating Expenses For the Years Ended December 31, 2023 2022 $ Change % Change Research and development $ 10,505 $ 11,345 $ (840 ) (7.4 )% Sales and marketing 9,126 11,174 (2,048 ) (18.3 )% General and administrative 13,532 14,033 (501 ) (3.6 )% Total operating expenses $ 33,163 $ 36,552 $ (3,389 ) (9.3 )% Research and Development Research and development expense for 2023 decreased $0.8 million or 7.4% compared to 2022.
The analysis may include both qualitative and quantitative factors to assess the likelihood of an impairment. Qualitative factors include industry and market considerations, overall financial performance, and other relevant events. Our quantitative impairment test may consider both the income approach and the market approach to estimate a reporting unit's fair value.
We perform a goodwill impairment assessment annually and during the interim when events or circumstances indicates that the fair value of a reporting unit might be below its carrying amount. The analysis may include both qualitative and quantitative factors to assess the likelihood of an impairment. Qualitative factors include industry and market considerations, overall financial performance, and other relevant events.
The increase was primarily due to higher product development and engineering service expenses. Sales and Marketing Sales and marketing expense for 2022 increased $1.0 million or 9.5%, compared to 2021. The increase was primarily due to higher people costs, travel, advertising, and tradeshows. General and Administrative General and administrative expense for 2022 increased $0.5 million or 3.5% compared to 2021.
The decrease was primarily due to lower employee expenses and engineering service expenses. Sales and Marketing Sales and marketing expense for 2023 decreased $2.0 million or 18.3%, compared to 2022. The decrease was primarily due to lower employee expenses. General and Administrative General and administrative expense for 2023 decreased $0.5 million or 3.6% compared to 2022.
Net cash used in operating activities was $11.2 million for the year ended December 31, 2021. This was primarily driven by non-cash operating expenses of $7.4 million, including depreciation, amortization of intangible assets, the change in fair value of the contingent consideration, and deferred tax liabilities.
Net cash used in operating activities was $3.3 million for the year ended December 31, 2023. The decrease was primarily driven by the net loss of $12.4 million, offset by $7.3 million in non-cash expenses and a $1.8 million net decrease of operating assets and liabilities. Net Cash Used in Investing Activities.
Other expense for 2021 consists mainly of unfavorable foreign exchange remeasurement adjustments and loss on disposal of fixed assets. Liquidity and Capital Resources We had cash, cash equivalents and restricted cash of $12.1 million at December 31, 2022. Prior to 2013, and for the years ended 2018, 2020, 2021 and 2022, we have incurred net losses.
The primary reason for income tax expense in a net loss position is due to the cost-plus rules in foreign jurisdictions. statutory rate. Liquidity and Capital Resources We had cash and cash equivalents of $7.9 million at December 31, 2023. Prior to 2013, and for the years ended 2018, 2020, 2021, 2022 and 2023, we have incurred net losses.
We evaluate inventory at least annually and at other times during the year. We have incurred and may in the future incur charges to write-down inventory. Stock-Based Compensation The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment.
We evaluate inventory at least annually 45 and at other times during the year. Charges to cost of goods sold for excess, obsolete, and lower of cost or net realizable inventories totaled $1.2 million and $0.9 million in 2023 and 2022, respectively. Stock-Based Compensation The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates.
These expenses include work related to the design, engineering and testing of antenna and modem designs and antenna integration, validation and testing of customer devices. These expenses include salaries, including stock-based compensation, benefits, bonuses, travel, communications, and similar costs, and depreciation and allocated costs for certain facilities. We may also incur expenses from consultants and for prototyping new antenna solutions.
Research and Development . Research and development expenses primarily consist of personnel and project development costs. These expenses include work related to the design, development and testing of antennas, modems and system solutions. These expenses include salaries, stock-based compensation, benefits, bonuses, project development and testing, prototype material, consulting, travel, and similar costs, and depreciation and allocated costs for certain facilities.
The fleet and aftermarket segment of the automotive market consists of applications whereby rugged vehicular wireless routers are paired with external antenna systems to provide connectivity to fixed and mobile assets. Within this unique market segment, there has been a rise in the number of antennas per vehicle.
Fleet and aftermarket products in the automotive market typically consist of applications where vehicular wireless routers are paired with external antenna systems to provide connectivity to mobile assets. We offer a full line of external fleet antennas that are designed to be rugged, reliable, and flexible to meet almost any need.
Cost of Goods Sold For the Years Ended December 31, 2022 2021 $ Change % Change Cost of goods sold $ 47,923 $ 39,666 $ 8,257 20.8 % Cost of goods sold for 2022 increased $8.3 million or 20.8% compared to 2021.
Cost of Goods Sold For the Years Ended December 31, 2023 2022 $ Change % Change Cost of goods sold $ 35,277 $ 47,923 $ (12,646 ) (26.4 )% Cost of goods sold for 2023 decreased $12.6 million or 26.4% compared to 2022. The decrease was due to sales decline.
We plan to continue to invest for long-term growth, including expanding our sales force and engineering and making additional capital expenditures to further penetrate markets both in the United States and internationally, as well as expanding our research and development for new product offerings and technology solutions. We anticipate that these investments will continue to increase in absolute dollars.
As a result, we have an accumulated deficit of $78.5 million at December 31, 2023. We plan to continue to invest for long-term growth, including expanding our sales engineering and sales teams to execute on our product roadmap and further penetrate domestic and international markets. We anticipate that these investments will continue to increase in absolute dollars.
Significant estimates include market segment growth rates, our assumed market segment share, estimated costs, and discount rates on the cost of capital. In the current year, the fair value of Airgain substantially exceeds their carrying value, and our annual qualitative assessment did not indicate that a more detailed quantitative analysis was necessary.
Our quantitative impairment test may consider both the income approach and the market approach to estimate a reporting unit's fair value. Significant estimates include market segment growth rates, our assumed market segment share, estimated costs, and discount rates on the cost of capital.
Enterprise market sales increased $7.1 million, to $34.5 million for 2022 from $27.4 million for 2021, driven by higher sales of IIoT products and enterprise Wi-Fi access point products. Automotive market sales increased $5.0 million to $15.6 million for 2022, from $10.6 million for 2021, due to higher aftermarket sales.
Enterprise market sales decreased $7.3 million, to $27.2 million for 2023 from $34.5 million for 2022, primarily due to channel excess inventory correction impacting our IIoT products sales. Automotive market sales decreased $5.7 million to $9.9 million for 2023, from $15.6 million for 2022, driven by the discontinued HPUE product line and excess inventory correction impacting our Aftermarket antenna sales.
The increase in sales was driven by growth in the enterprise and automotive markets, offset by a slight sales decline in the consumer market. • Gross profit as a percentage of sales decreased to 36.9% in 2022 compared to 38.3% in 2021.
The decrease in sales was primarily driven by excess inventory correction across all markets. • Gross profit as a percentage of sales increased to 37.1% in 2023 compared to 36.9% in 2022. The increase was primarily due to higher automotive margins. • Loss from operations increased by $3.8 million in 2023 compared to 2022.
This primarily includes manufacturing costs of our products payable to our third-party contract manufacturers, as well as manufacturing costs incurred at our facility in Arizona, prior to closure in March 2022. The cost of goods sold that we generate from services and subscription revenues primarily includes personnel costs and the cost to maintain data lines.
The cost of goods sold that we generate from services and subscription revenues primarily includes personnel costs and the cost to maintain data lines. Operating Expenses Our operating expenses are classified into three categories: research and development, sales and marketing, general and administrative.
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Airgain simplifies wireless connectivity across a diverse set of devices and markets, from solving complex connectivity issues to speeding time to market to enhancing wireless signals. Our product offering includes three, distinct sub-brands. Airgain Embedded represents our embedded modems, antennas, and development kits that are designed to help design teams bring connected products to market quickly.
Added
We streamline wireless connectivity across devices and markets, with a focus on solving complex connectivity challenges, expediting time to market, and optimizing wireless signals. Our mission is to connect the world through optimized, integrated wireless solutions. Our product portfolio focuses on three key markets: enterprise, consumer, and automotive.
Removed
Airgain Integrated represents our fully integrated, off the- shelf products, such as our asset trackers and AirgainConnect® platform, that help solve connectivity issues in an organization’s operating environment. Airgain Antenna+ represents our external antennas, such as our fleet and internet of things (IoT) antennas, that help enhance wireless signals in some of the harshest environments.
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Our current enterprise products include embedded cellular modems, antennas for access points and Internet of Things (IoT) applications, and asset trackers. We expect to expand our product offering with fixed wireless access solutions and Smart Network Controlled Cellular Repeaters (Smart NCRs).
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Our mission is to connect the world through optimized integrated wireless solutions. As a wireless connectivity solution provider with a rich history in radio frequency (RF) technology, we are leveraging our expertise in embedded antennas and embedded modems to effectively transition from a components provider to a wireless systems provider.
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Our consumer products include embedded antennas for consumer access points, wireless gateways, smart home devices and fixed wireless access devices. Our current automotive products include aftermarket antennas that are typically connected to third-party cellular and Wi-Fi-enabled routers, digital video evidence devices, and telematics gateways.
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In 2020, we announced our patented new flagship platform – AirgainConnect. Our first product from this platform, the AC-HPUE™ antenna-modem offers a novel solution for our public safety and automotive fleet markets by vastly improving vehicle networking capabilities.
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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 OEMs.
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We are currently designing the next generation of products for the AirgainConnect platform, leveraging our learnings from the AC-HPUE deployment, where such products are intended to target broader domestic vehicle markets beyond first responders and will also target international markets.
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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.
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After a significant shift in 2022, we transitioned to a fabless model where we use third parties to manufacture our products while maintaining oversight for critical quality, test, and calibration functions. Core Markets The enterprise market is characterized by devices that provide reliable wireless access for high-density environments such as buildings, campuses, transportation terminals and stadiums.
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Core Markets The enterprise market requires reliable wireless access across various settings, including smart cities, utilities, factories, buildings, campuses, transportation hubs, stadiums, and suburban developments. Our NimbeLink embedded modems serve numerous enterprise sectors requiring cellular connectivity such as packaging, logistics, EV charging, smart cities, smart buildings, agriculture, and asset tracking.
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Within this market our antennas are deployed across a wide range of systems, devices, and applications that include access points and gateways, fixed wireless access infrastructure, small cells, and remote radio heads.
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These NimbeLink cellular modems, which are both patented and end-device certified, minimize the need for additional carrier certifications. Our asset trackers are deployed across transportation, supply chain, cold chain, and other specialized applications.
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In addition, our embedded modems are deployed across various markets with high demand for connectivity, including packaging and logistics, EV charging, smart city and smart building applications, agriculture, and more. Our products are intentionally positioned to significantly increase our growth in this specialized market. The consumer market encompasses a large and growing audience of consumers using wireless-enabled devices.
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Our asset tracking solution utilizes a cellular backbone with Wi-Fi and GPS triangulation, along with various sensors like temperature, motion, distance, tilt, and humidity to monitor asset location and condition in various environments.
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Currently, most of our revenues are derived from fleet and aftermarket sales and going 41 forward, our strategy is to augment our current sales in the automotive aftermarket with design wins and sales, including follow-on products in the AirgainConnect family that are designed to address broader market segments in the automotive aftermarket both domestically and internationally.
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In addition to hardware, our asset tracking offering includes a recurring revenue component, our subscription-based NLink cloud-based device enablement platform, which allows for deployment and integration with enterprise systems via open APIs. Our custom products feature joint engineering collaboration with strategic customers to develop IIoT for specific applications while helping them reduce their time to market.
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Our Process With our internal antennas, our design team partner with customers from the early stages of antenna prototyping to device throughput testing in order to facilitate optimal performance and a significant reduction in time to market. Our capabilities include design, custom engineering support, integration, and over-the-air (OTA) testing.
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Our enterprise IoT and M2M antennas are extensively deployed in diverse systems, devices, and applications, including access points, gateways, fixed wireless access devices and utility meters. In 2023, we unveiled a new line of Fixed Wireless Access products designed to address 5G connectivity challenges, reduce deployment costs and enhance customer experiences.
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Leveraged in combination, these capabilities have resulted in a strong reputation across the OEM, ODM and chipset manufacturer ecosystem.
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In 2023, we also announced our Lighthouse™ smart repeaters platform designed to reduce an operator’s capital expenses for extending range, while enhancing 5G coverage. The consumer market represents a vast audience utilizing wireless-enabled devices.
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Our competencies and strengths have helped us secure design wins used in multiple reference designs from leading Wi-Fi chipset vendors, OEMs, ODMs, chipset manufacturers and service providers who rely on these reference designs and our engineering skills to deliver superior throughput performance.
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We announced in November 2023 that Airgain was selected by a major Tier 1 MNO in North America to supply its next generation antennas for its indoor FWA devices. This selection comes amid ongoing 39 consumer shifts away from traditional wired broadband to wireless as more major telecom providers offer broadband internet access as part of their bundled offerings.
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We view our relationship with OEM, ODM, chipset manufacturers and service providers as an important attribute to our long-term strategy and success. With our embedded modems, we offer customer design teams the ability to speed time to market by avoiding the cost and time delays of carrier certification.
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We design our products for performance, quality, and long product life and our antennas connect to almost any vehicular router or modem. These antennas include high-performance and low-profile versions that mount on the roof, trunk, windshield, or dashboard and are optimized for 5G, 4G, Wi-Fi, and GNSS. In January 2024 we launched our next-generation product named AirgainConnect Fleet (AC-Fleet).
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We combine cellular modules with the electronics and firmware to achieve end-device certification with major carriers. In addition, we offer the ability to futureproof their designs with the ability to update firmware remotely and swap module vendors, all without changing the pin design.
Added
The AC-Fleet solution is 5G and carrier agnostic allowing for a significantly larger target market compared our first generation AC-HPUE solution. Macroeconomic conditions Macroeconomic conditions have continued to create demand softness industrywide, including downward pressures relating to the anticipated service provider shift from Wi-Fi 6E to Wi-Fi 7.
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By leveraging our embedded modems, customers designing cellular-connected products remove complexity from the design process, reducing the need for large RF engineering teams and launching products much quicker to take advantage of market opportunities.
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This demand softness combined with excess inventories in our channels and those of our direct customers, drove year-over-year declines in our Enterprise, Automotive and Consumer markets.
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COVID-19 Pandemic The United States and other countries around the world have been experiencing a major health pandemic related to COVID-19, which has created considerable instability and disruption in the U.S. and world economies. The continued spread of COVID-19 and its related effects on our business have had a material and adverse effect on our business operations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUAN TITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. 49
Biggest changeITEM 7A. QUAN TITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. 47

Other AIRG 10-K year-over-year comparisons