# Airgain Inc: Form 10-K for the period ended Dec 31, 2023 - Company: [Airgain Inc](/companies/airg.md) (CIK 1272842) - Form: 10-K - Filed: 2024-03-06 - Accepted by EDGAR: Mar 6, 2024, 17:23 ET - Period: 2023-12-31 - Accession: 0000950170-24-027341 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1272842/000095017024027341/airg-20231231.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1272842/000095017024027341/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2023-12-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 12 months, 2023-01-01 to 2023-12-31 | $56.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Cost of revenue | 12 months, 2023-01-01 to 2023-12-31 | $35.3m | us-gaap:CostOfRevenue | | Gross profit | 12 months, 2023-01-01 to 2023-12-31 | $20.8m | us-gaap:GrossProfit | | Research and development | 12 months, 2023-01-01 to 2023-12-31 | $10.5m | us-gaap:ResearchAndDevelopmentExpense | | Operating income | 12 months, 2023-01-01 to 2023-12-31 | −$12.4m | us-gaap:OperatingIncomeLoss | | Income tax | 12 months, 2023-01-01 to 2023-12-31 | $128.0k | us-gaap:IncomeTaxExpenseBenefit | | Net income | 12 months, 2023-01-01 to 2023-12-31 | −$12.4m | us-gaap:NetIncomeLoss | | Diluted EPS | 12 months, 2023-01-01 to 2023-12-31 | −$1.20 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 12 months, 2023-01-01 to 2023-12-31 | −$1.20 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 12 months, 2023-01-01 to 2023-12-31 | 10,392,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 12 months, 2023-01-01 to 2023-12-31 | −$3.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 12 months, 2023-01-01 to 2023-12-31 | $346.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Cash and equivalents | at 2023-12-31 | $7.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2023-12-31 | $19.1m | us-gaap:AssetsCurrent | | Total assets | at 2023-12-31 | $42.2m | us-gaap:Assets | | Current liabilities | at 2023-12-31 | $10.0m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2023-12-31 | $10.8m | us-gaap:Liabilities | | Shareholders' equity | at 2023-12-31 | $31.4m | us-gaap:StockholdersEquity | ## Business As filed, 28,903 characters. ### 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. 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. 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. 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. We have a rich history of providing radio frequency (RF) expertise, services, and solutions to mobile operators and major original equipment manufacturers (OEMs). With the addition of NimbeLink products in 2021, we expanded our capabilities to include embedded cellular modems, asset trackers and custom IoT systems. We are leveraging our RF and systems experience, and our Mobile Network Operator (MNO) and Multiple Service Operator (MSO) relationships to deliver new and differentiated products. In 2022, we transitioned to an outsource manufacturing model for our products while maintaining oversight for quality, test, and delivery timeline. We also maintain an intellectual property strategy that includes patent and trademark filings in multiple jurisdictions. 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. 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. 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. 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. 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. 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. 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 outdoor ATV (all-terrain vehicle), motorcycle, and off-roading applications. 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. 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. 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 LanternTM 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. 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. 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. 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. ### 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. 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. 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. 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. This selection comes amid ongoing consumer shifts away from traditional wired broadband to wireless as more major telecom providers offer broadband internet access as part of their bundled offerings. We continue to grow our relationships with MSOs and MNOs as the market evolves with both wired and wireless broadband internet offerings. ### 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. 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. We 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. 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. Fleet antennas have a five-year limited warranty, which is the longest in the industry, and we offer up to IP67 and IP69K ratings for extended use in the harshest of environments. The deployment of EZConnect cable harnesses in 2023 offers flexible cable lengths and connector types that simplify ordering, inventory management, and installation. In 2020, we introduced the AC-HPUE product, the first antenna-modem from our AirgainConnect platform. 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). The AC-Fleet solution is 5G and carrier agnostic allowing for a significantly larger target market compared to the AC-HPUE solution. AC-Fleet is one of the first low profile, roof-mounted 5G vehicle gateway, combining the latest 5G NR (New Radio) modem and a Wi-Fi 6 router all in one covert form factor. At only two inches tall, AC-Fleet provides flexibility across multiple markets including public safety, transportation, transit, public and private fleets, and vehicles. We expect our AC-Fleet platform to include hardware and a recurring revenue component including an optional annual subscription for remote access, cloud management, technical support, software updates, and extended warranty. We expect AC-Fleet to receive certification at select MNOs, and begin shipping in the second half of 2024. ### Growth Strategy As a global wireless connectivity solutions provider, Airgain solves critical connectivity challenges across the value chain. 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. Our reputation and relationships throughout the Distribution, Value-Added-Reseller (VAR), MSO, MNO, OEM, and ODM supply chain enables us to aggregate key voice-of-the-customer product needs and challenges which is critical for innovation. Our RF design and test capabilities enable our products to be differentiated on performance and to improve the end-customer experience – specifically in Wi-Fi, LTE, 5G, and GNSS integrated systems. **Expand and innovate in connectivity**: We are transitioning from being exclusively a component manufacturer to a wireless systems solution provider. This transition started with the acquisition of NimbeLink in 2021 which brought expertise in asset tracker solutions and augmented our historical RF expertise with digital systems design, firmware, and cloud capabilities. We also launched AirgainConnect AC-HPUE – an integrated antenna plus high-power LTE modem targeting first responders and utilities. AC-HPUE provided invaluable experience for launching complex systems into new markets. Our focus since then has been on forming the internal building blocks, from talent to partnerships, to expand our connectivity offerings. In 2023, we announced our Lumos 5G Fixed Wireless Access Antenna, our Lantern 5G Outdoor Fixed Wireless Access solution, and our LighthouseTM Smart Repeater platform. We recently announced our AirgainConnect Fleet (AC-Fleet) 5G Vehicle Gateway and our Smart LanternTM hybrid beam forming FWA solution. Our focus is on driving these innovative connectivity products to market and increasing our overall serviceable available market (SAM). The following graphic provides a summary of our estimated SAM within each of our three markets. 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 $3.5 billion by 2025. While we estimate the consumer SAM to be relatively flat, we project the automotive SAM to grow with the launch of the AC-Fleet vehicle gateway, and we project the enterprise SAM to continue to expand, driven by asset trackers and Lantern 5G Fixed Wireless Access devices, and the anticipated market entry and growth of the Lighthouse smart repeaters. ### Airgain Estimated SAM ($B) ### Sales and Marketing Our sales and marketing organizations work together closely to improve market awareness, build a strong sales pipeline, and cultivate ongoing customer relationships to drive sales growth. ### Sales Our global sales efforts consist of direct and indirect sales teams, and indirect channel partners. 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. 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. 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. 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. ### 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. 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. 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. ### Manufacturing and Operations We are fabless and rely on a number of contract manufacturers (CMs) located in the United States, China, Taiwan, Vietnam, and Mexico. We generally have long-term relationships with our CMs, and we work together to control global product compliance, raw materials supply and cost, production part approval processes, assembly instructions, control plans, final testing, and on time shipment to our customers. We provide the control, test and measurement plans to the CMs to help ensure that each product conforms to the Airgain specifications, and we monitor the quality performance of our CMs through quality reports and periodic audits. We maintain a close direct relationship with our CMs to help ensure that supply and quality meet our requirements. 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. 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. 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. ### 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. 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. 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. 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. 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. ### 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. 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. ### 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-Fleet, Lantern FWA (Fixed Wireless Access) and asset trackers, may compete directly with these off-the-shelf products or enhance their functionality. 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. 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. Ltd., WHA YU Industrial Co., Ltd, and 2J Antennas Group, 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 ### 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, Zyxel Communications, Inc. (MitraStar Technology), and Wistron Corporation, design, manufacture, and sell complete wireless devices, in direct competition with us. 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. ### 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. The scope of these patents encompasses our product offerings and technological advancements, with their terms of validity extending from the year 2024 until 2040. This patent collection encapsulates a diverse array of innovations pioneering antenna designs and structures, as well as the assembly and fabrication processes for a comprehensive spectrum of wireless communication technologies, including cellular, Wi-Fi, Bluetooth (BT), and Global Positioning System (GPS). In line with our strategic evolution from a component supplier to a provider of comprehensive wireless system solutions, we have systematically grown our patent repository, escalating our filings to include broader wireless system functionalities and infrastructures. Taken together, these patents with priority dates as far back as November 2003 form both a barrier to competition and a licensable asset for customers in the MIMO and antenna assembly categories. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or obtain and use information that we regard as proprietary. 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. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as the laws of the United States, and many foreign countries do not enforce these laws as diligently as government agencies and private parties in the United States. Our industry is characterized by the existence of many patents and frequent claims and related litigation regarding patent and other intellectual property rights. Leading companies in the technology industry have extensive patent portfolios. 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. 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. We consider our relationship with our employees to be good. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, and incentivizing our management team and 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. ### Available Information We file electronically with the Securities and Exchange Commission, or SEC, our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. We make available on our investor relations website at investors.airgain.com, free of charge, copies of these reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The public may read or copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. 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. Investors should monitor such website, in addition to following our press releases, SEC filings and public conference calls and webcasts. Information relating to our corporate governance is also included on our investor relations website. The information in or accessible through the SEC and our website are not incorporated into, and are not considered part of, this filing. Further, our references to the URLs for these websites are intended to be inactive textual references only. ## Risk factors As filed, 114,919 characters. *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 cannot assure you that any of the events discussed in the risk factors below will not occur. These risks could have a material and adverse impact on our business, results of operations, financial condition and growth prospects. If that were to happen, the trading price of our common stock could decline. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations or financial condition.* ### Summary of Risks Related to our Business Our business is subject to numerous risks and uncertainties, including those described below. The principal risks and uncertainties affecting our business include, but are not limited to the following: - The markets for our antenna and wireless systems solutions are developing and may not develop as we expect; - Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or our guidance; - Our antenna solutions and wireless connectivity solutions are subject to intense competition, including competition from our suppliers and the customers to whom we sell; - 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; - If we are unable to manage our growth and expand our operations successfully, our business and operating results will be harmed, and our reputation may be damaged; - We have a history of losses, including an accumulated deficit of $78.5 million at December 31, 2023, and we may not be profitable in the future; - Any delays in our sales cycles could result in customers canceling purchases of our products; - We sell to customers who are price conscious, and to a limited number of customers, who represent a significant portion of our sales. If we were to lose any of these customers or devices, our sales could decrease significantly; - 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; - 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; - If we are unable to protect our intellectual property rights, our competitive position could be harmed, or we could be required to incur significant expenses to enforce our rights; - Our international sales and operations subject us to additional risks that can adversely affect our operating results and financial condition; and - Our CMs purchase some components, subassemblies and products from a single or limited number of suppliers. The loss of any of these suppliers may substantially disrupt our ability to obtain orders and fulfill sales as we design in and qualify new components. ### Risks Related to Our Business and Industry ***The markets for our antenna and wireless systems solutions are developing and may not develop as we expect.*** The wireless industry is characterized by rapidly evolving technologies, and the markets for our antenna systems and wireless connectivity solutions may not develop as we expect. It is difficult to predict customer adoption rates, customer demand for our antennas, the size and growth rate of our target markets, the entry of competitive products, or the success of existing competitive products. We have historically driven revenue growth primarily through the top North American video service providers, largely in the consumer market. Moving forward, our goal is to drive growth in the enterprise and automotive markets. These markets may develop at varying growth rates and our success in penetrating these markets will depend on various competitive factors across a number of developing industries. Any expansion in our markets depends on several 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. Further, as we continue to transition to a wireless systems solution provider, increased growth in the enterprise and automotive markets will depend on, among things, acceptance of our solutions by our customers and performance of the networks on which our products operate. For example, AirgainConnect AC-Fleet solution is dependent on the carriers’ networks that the AC-Fleet operates on and requires widespread commitments across multiple customer markets and budgets. The growth potential for AC-Fleet may be limited, and we will need to introduce new products in the AirgainConnect platform in order to continue to grow. If our wireless solutions do not achieve widespread adoption, if there is a slower rollout than we expect in certain markets or there is a reduction in demand for our wireless connectivity solutions or antennas in our markets caused by a lack of customer acceptance, technological challenges, competing technologies and products, decreases in corporate spending, weakening economic conditions, or otherwise, it could result in reduced customer orders, early order cancellations, or decreased sales, any of which would adversely affect our business, operating results and financial condition. ***Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or our guidance.*** Our quarterly and annual operating results have fluctuated in the past and may fluctuate significantly in the future, which makes it difficult for us to predict our future operating results. The timing and size of sales of our products are variable and difficult to predict and can result in fluctuations in our net sales from period to period. In addition, our budgeted expense levels depend in part on our expectations of future sales. Because any substantial adjustment to expenses to account for lower levels of sales is difficult and takes time, we may not be able to reduce our costs sufficiently to compensate for an unexpected shortfall in net sales, and even a small shortfall in net sales could disproportionately and adversely affect our operating margin and operating results for a given quarter. Our net loss increased from $8.7 million in the year ended December 31, 2022 to $12.4 million in the year ended December 31, 2023 and the increase in net loss could continue in future. Prior to 2023, our net income was $0.9 million, $1.1 million and $3.7 million for the years ended December 31, 2019, 2017 and 2016. 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. Besides 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; - 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. The cumulative effects of the factors above could result in large fluctuations and unpredictability in our quarterly and annual operating earnings. Additionally this may result in higher prices from suppliers which could negatively affect gross margins and increase operating expenses. You should not rely on our past results as an indication of future performance. In addition, the financial markets and the global economy may be adversely affected by the current or anticipated impact of military conflict, including the war between Russia and Ukraine, and the conflict related to China and Taiwan, political unrest, tensions, uncertainty in the Middle East, and global and regional, terrorism or other geopolitical events. 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. In addition, concerns or adverse developments regarding liquidity risk related to financial institutions or the broader financial services industry may lead to market-wide liquidity shortages, impair the ability of us or other companies to access near-term working capital needs, and create additional market and economic uncertainty. There can be no assurance that future credit and financial market instability and a deterioration in confidence in economic conditions will not occur. Our general business strategy and operating results may be adversely affected by any such economic downturn, liquidity shortages, volatile business environment, or continued unpredictable and unstable market conditions. In addition, there is a risk that one or more of our current service providers, financial institutions, manufacturers, suppliers or customers may be adversely affected by the foregoing risks, which could adversely affect our business and operating results be adversely affected by the foregoing risks. ***If we are unable to manage our growth and expand our operations successfully, our business and operating results will be harmed, and our reputation may be damaged.*** We have expanded our operations significantly in the last several years and anticipate that further significant expansion will be required to achieve our business objectives. The growth and expansion of our business and product offerings places a continuous and significant strain on our management, operational and financial resources. As we transition to a wireless system solutions provider, we expect these challenges to increase. Any such future growth would also add complexity to and require effective coordination throughout our organization. We use the services of third parties to perform tasks including design services and sales and marketing. Our growth strategy may entail expanding our group of contractors or consultants to implement additional functions going forward. Because we rely on consultants, effectively outsourcing key functions of our business, we will need to be able to manage these consultants to ensure that they successfully carry out their contractual obligations and meet expected deadlines. However, if we are unable to effectively manage our outsourced activities or if the quality of the services provided by consultants is compromised for any reason, our ability to provide quality products in a timely manner could be harmed, which may have a material adverse effect on our business operating results and financial condition. 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. We may not be able to successfully implement improvements to these systems and processes in a timely or efficient manner, which could result in additional operating inefficiencies and could cause our costs to increase more than planned. If we do increase our operating expenses in anticipation of the growth of our business and this growth does not meet our expectations, our operating results may be negatively impacted. 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 antenna solutions and wireless connectivity solutions are subject to intense competition, including competition from our suppliers and the customers to whom we sell.*** Antenna solutions is an established technical field with low intellectual property and technological barriers to entry. Antenna competition exists globally for all areas of our business and product lines. The markets in which we compete are rapidly evolving and intensely competitive, and we expect competition to increase in the future from established competitors and new market entrants. The markets are influenced by, among others, brand awareness and reputation, price, strength and scale of sales and marketing efforts, professional services and customer support, product features, reliability and performance, scalability of products, and breadth of product offerings. Due to the proprietary nature of some of our products, competition occurs primarily at the design stage. As a result, a design win by our competitors or by us typically limits further competition regarding that design. This competition could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses and failure to increase, or the loss of, market share, any of which would likely seriously harm our business, operating results or financial condition. In addition, some of our ODM, OEM and carrier and retail-focused end-customers that drive the use of our antenna solutions have and, in the future, may build internal antenna design teams that compete with our products. From a cost and control perspective, our products generally cost more than our competitors’ products. If our ability to design antenna solutions is deemed to be on par or of lesser value than competing solutions, we could lose our customers and prospects. Additionally, our movement into more system-based solutions may bring more competitors into our markets than we have traditionally faced. As our solutions begin to contain more system components and commensurate higher average selling prices, the resulting product categories may attract additional competitors or our customers may be more likely to begin to develop competing products. ***New entrants and the introduction of other distribution models in our markets may harm our competitive position.*** The markets for development, distribution, and sale of our products are rapidly evolving. New entrants seeking to gain market share by introducing new technology and new products may make it more difficult for us to sell our products, and could create increased pricing pressure, reduced profit margins, increased sales and marketing expenses, or the loss of market share or expected market share, any of which may significantly harm our business, operating results and financial condition. ***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. Our future success will be contingent on our ability to introduce new solutions for wireless applications, anticipate improvements and enhancements in wireless technology and wireless standards, and to develop solutions that are competitive in the rapidly evolving wireless industry. In furtherance of these efforts, we will continue to invest significantly in ongoing research and development. However such investments may not translate into material enhancements to our wireless solutions, which is important for us to compete effectively. 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. Moreover, the introduction of newly integrated wireless platforms and product and system enhancements will require coordination of our engineering efforts with those of our customers, carriers, suppliers, and manufacturers to efficiently achieve our growth objectives. 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. 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 prospects will be harmed. 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. If we fail to develop competitive solutions for customers with outstanding quality within the identified market window, our operating results may be materially and adversely impacted. As we rollout follow-on products and accessories for the AirgainConnect Fleet solution, we may not be able to successfully develop to conform to carrier PTCRB (PCS Type Certification Review Board) certifications of such products. Furthermore, the stringent customer demands for these advanced solutions requires substantial ongoing effort and investment for solution maintenance, support, and evolution. If we are unable to continually provide such effort and investment to customers, our customers’ business could be adversely impacted, or customers could switch to competitor solutions, which would have an adverse impact on our operating results. 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. Despite years of experience in meeting customer design requirements with the latest in technological solutions, we may not be successful in identifying, developing and marketing products or systems that respond to rapid technological change, evolving technical standards and systems developed by others. Our competitors may develop technology that better meets the needs of our customers. If we do not continue to develop, manufacture and market innovative technologies or applications that meet customers’ requirements, sales may suffer, and our business may not continue to grow in line with historical rates or at all. ***Any delays in our sales cycles could result in customers canceling purchases of our products.*** Sales cycles for some of our products can be lengthy, often lasting several months to a year or longer. In addition, it can take additional time before a customer commences volume production of equipment that incorporates our products. Sales cycles can be lengthy for several reasons, including: - our OEM customers and carriers usually complete a lengthy technical evaluation of our products, over which we have no control, before placing a purchase order; - the commercial introduction of our products by OEM customers and carriers is typically limited during the initial release to evaluate product performance; - the development and commercial introduction of products incorporating new technologies frequently are delayed; and - certain customers of advanced antenna systems and integrated wireless solutions require successful field trials before committing to purchase our solutions, which could delay the customer decision making process. A significant portion of our operating expense is relatively fixed and is based in large part on our forecasts of volume and timing of orders. The lengthy sales cycles make forecasting the volume and timing of product orders difficult. In addition, the delays inherent in lengthy sales cycles raise additional risks of customer decisions to cancel or change product phases. If customer cancellations or product changes were to occur, this could result in the loss of anticipated sales without sufficient time for us to reduce our operating expenses. We currently maintain significant inventories to meet forecasted future demand due to the supply chain shortages. If the forecasted demand does not materialize into purchase orders for these products, we may be required to write off our inventory balances or reduce the value of our inventory, based on a reduced sales price. A write off of the inventory, or a reduction in the inventory value due to a sales price reduction, could have an adverse effect on our financial condition and operating results. ### We have a history of losses, and we may not be profitable in the future. Before 2013 we had incurred net losses in each year since our inception. As a result, we had an accumulated deficit of $78.5 million at December 31, 2023. Airgain is transitioning to a wireless systems solutions company. Because the market for wireless systems solutions is rapidly evolving, it is difficult for us to predict our operating results. 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 incur additional significant legal, accounting, and other expenses. 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. ***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. Although our top customers that pay for our products have historically been ODMs and distributors, it is primarily the OEMs, carrier customers and retail-focused end-customers that drove the use of our antenna solutions and the purchase by the ODMs and distributors of our antenna solutions. In addition, a few end-customer devices which incorporate our antenna products comprise a significant amount of our sales, and the discontinuation or modification of such devices may materially and adversely affect our sales and results of operations. 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. Any significant loss of, or a significant reduction in purchases by, these other significant customers or customers that drive the use of our antenna solutions or a modification or discontinuation of a device which constitutes a significant portion of sales could have an adverse effect on our financial condition and operating results. ### We sell to customers who are price conscious. Our customers compete in segments of the electronics market. The electronics market is characterized by intense competition as companies strive to come to market with innovative designs that attract customers based upon design, performance, cost, ease of use, and convenience. Product lifecycles can be extremely short as companies try to gain advantage over their competitors. Because of the high design and engineering costs, companies that are customers or prospects for antenna solutions are cost conscious. As a result, our customers and prospects demand price cuts in established products and negotiate aggressively for lower pricing on new products. Because of the intense competition in the antenna solution market, we encounter situations that lead to difficult price negotiations potentially resulting in lower margins than forecast. Our products generally cost more than our competitors’ products. To address these pricing constraints and remain competitive, we must consistently design high quality antenna solutions that are deemed a better value than competing solutions, while also decreasing costs. ***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.,. We have over the past two years engaged additional CMs outside of China, including Vietnam and Mexico, to expand our capacity, and to diversify the global regions in which our products are manufactured. These CMs are relied upon to manufacture, control quality of, and ship our products. We do not have long-term contracts with these manufacturers that commit them to manufacture products for us and we have limited direct control over their activities. Furthermore, political unrest or political instability, military conflict in any country in which our CMs are located, 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 may have an adverse effect on our contract manufacturer’s ability to deliver quality products on time. 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. We expect that it would take approximately six to nine months to transition manufacturing, quality assurance, and shipping services to new providers. 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; - ensure adequate supplies of materials; - protect our intellectual property; and - deliver finished products at agreed-upon prices. 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. ***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. 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. 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. For example, throughout 2021 and 2022, we experienced a disruption in our supply chain for certain components located in Asia and made several purchases of available inventory in order to secure supply for our customers, sometimes at higher than our traditional prices. 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 cannot predict with certainty in the future whether a pandemic or epidemic will cause delays or disrupt our product shipments or impact manufacturing. If such disruption were to extend over a prolonged period, it could have a material impact on our sales and business and those of our customers. ***Our CMs purchase some components, subassemblies and products from a single or limited number of suppliers. The loss of any of these suppliers may substantially disrupt our ability to obtain orders and fulfill sales as we design in and qualify new components.*** We rely on third-party components and technology companies to provide contents of our bills of material to that ultimately configure the devices that are deployed in our integrate solutions. Thus, we rely on our CMs to obtain the components and subassemblies necessary for the manufacture of our devices. Throughout 2021 and 2022, we experienced shortages in supply of components we use in our products. In 2023 we saw relief on supply disruptions due to overcorrection. A return to such shortages or other supply disruptions are possible, as well as inflation of prices of certain components, and our ability to predict the availability and pricing of such components is limited. Over the past three years, there have been and continue to exist fluctuations between shortages of certain electronic components used in our industry and a surplus that have led to ongoing uncertainty regarding lead times for the manufacture of certain components in some of our products. 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. 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. When a component or product uses new technologies, capacity constraints may exist until the suppliers’ manufacturing capacity has increased. Many factors may affect the continued availability of these components at acceptable prices, including if those suppliers decide to concentrate on the production of common components instead of components customized to meet our requirements. There is no assurance that the supply of such components will not be delayed or constrained. If our suppliers of these components or technology were to enter into exclusive relationships with other providers of wireless networking equipment or were to discontinue providing such components and technology to us and we were unable to replace them cost effectively, or at all, our ability to provide our products would be impaired. 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. 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. ***We rely significantly on channel partners to sell and support our products, and the failure of this channel to be effective could materially reduce our sales.*** We believe that establishing and maintaining successful relationships with these channel partners is, and will continue to be, important to our financial success. Recruiting and retaining qualified channel partners and training them in our technology and product offerings require significant time and resources. To develop and expand our channel, we must continue to scale and improve our processes and procedures that support our channel partners, including investment in systems and training. Existing and future channel partners will only work with us if we are able to provide them with competitive products on terms that are commercially reasonable to them. If we fail to maintain the quality of our products or to update and enhance them, existing and future channel partners may elect to work instead with one or more of our competitors. If channel partners stop actively selling our products, we may experience further decline in sales. In addition, the terms of our arrangements with our channel partners must be commercially reasonable for both parties. If we are unable to reach agreements that are beneficial to both parties, then our channel partner relationships will not succeed. We have no minimum purchase commitments with any of our channel partners, and our contracts with channel partners do not prohibit them from offering products or services that compete with ours, including products they currently offer or may develop in the future and incorporate into their own systems. Some of our competitors may have stronger relationships with our channel partners than we do, and we have limited control, if any, as to whether those partners use our products, rather than our competitors’ products, or whether they devote resources to market and support our competitors’ products, rather than our offerings. The reduction in or loss of sales by these channel partners could materially reduce our sales. If we fail to maintain relationships with our channel partners, fail to develop new relationships with other channel partners in new markets, fail to manage, train or incentivize existing channel partners effectively, fail to provide channel partners with competitive products on terms acceptable to them, or if these channel partners are not successful in their sales efforts, our sales may decrease and our operating results could suffer. ***Defects in our products or poor design and engineering services could result in lost sales and subject us to substantial liability.*** Our advanced wireless connectivity technologies and systems are a critical element in determining the operating performance of our customers’ products. If our connectivity solutions perform poorly, whether due to design, engineering, placement, failure to properly support the products, or other reasons, we could lose sales. In certain cases, if our connectivity solutions are found to be the component that leads to failure or a failure to meet the performance specifications of our customer, we could be required to pay monetary damages to our customer. Real or perceived defects or errors in our connectivity solutions could result in claims by channel partners and customers for losses they sustain. If channel partners or customers make these types of claims, we may be required, or may choose, for customer relations or other reasons, to expend additional resources to help correct the problem, including warranty and repair costs, process management costs and costs associated with remanufacturing our inventory. Liability provisions in our standard terms and conditions of sale may not be enforceable under some circumstances or may not fully or effectively protect us from claims and related liabilities and costs. 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. 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 also may incur costs and expenses relating to a recall of one or more of our products. The process of identifying recalled products that have been widely distributed may be lengthy and require significant resources, and we may incur significant replacement costs, contract damage claims from our customers and significant harm to our reputation. The occurrence of these problems could result in the delay or loss of market acceptance of our products and could adversely affect our business, operating results and financial condition. ***The loss of key personnel or an inability to attract, retain and motivate qualified personnel may impair our ability to expand our business.*** Our success depends upon the continued service and performance of our senior management team and key technical, marketing and production personnel. We have experienced management turnover in the past. The replacement of any member of our senior management team or other key employees or consultants involves significant time and costs and may significantly delay or prevent the achievement of our business objectives. Our future success also depends, in part, on our ability to continue to attract, integrate and retain highly skilled personnel. Competition for highly skilled personnel, especially our design and technical personnel is frequently intense. As the source of our technological and product innovations, our design and technical personnel represent a significant asset. Any inability to retain, attract or motivate such personnel could have a material adverse effect on our business and results of operations. Further, competition for highly skilled personnel is frequently intense. Any difficulties in obtaining or retaining human resource competencies we need to achieve our business objectives may have an adverse effect on our performance. ***Our inability to raise additional capital on acceptable terms in the future may limit our ability to develop and commercialize new solutions and technologies and expand our operations.*** If our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of lower demand for our products as a result of other risks described in this “Risk Factors” section and elsewhere in this annual report, we may seek to raise additional capital through equity offerings, debt financings, collaborations or licensing arrangements. We may also consider raising additional capital in the future due to liquidity considerations or to expand our business, pursue strategic investments, take advantage of financing opportunities, or other reasons. For example, in March 2024, we entered into an at-the-market issuance sales agreement (the Sales Agreement) with Craig-Hallum Capital Group LLC (the Agent), pursuant to which we may, from time to time, sell shares of our common stock having an aggregate offering price of up to $5 million in “at the market” offerings through or to the Agent, as sales agent or principal. However, there can be no assurance that the Agent will be successful in consummating future sales based on prevailing market conditions or in the quantities or at the prices that we deem appropriate. In addition, the Sales Agreement may be terminated by us or the Agent at any time upon specified notice to the other party, or by the Agent at any time in certain circumstances, including the occurrence of a material adverse change. Additional funding may not be available to us on acceptable terms, or at all. 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 incurrence of indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in restrictive covenants, such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability to acquire or license intellectual property rights, and other operating restrictions that could adversely affect our ability to conduct our business. In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our common stock to decline. 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). If the equity and credit markets are volatile or deteriorate, or if adverse developments are experienced by financial institutions, it may make any necessary debt or equity financing more difficult to obtain, more costly, more onerous with respect to financial and operating covenants, and more dilutive. If we do not have, or are not able to obtain, sufficient funds, we may have to delay development or commercialization of our products or license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or to grant licenses on terms that are not favorable to us. 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. Any of these actions could harm our business, operating results and financial condition. ***If we raise additional capital through credit facilities or debt financing, the terms of any new debt could further restrict our ability to operate our business.*** We may enter into credit facilities with banks or secure other debt financing that could require us to provide a security interest in our assets and/or place restrictions on our operating and financial flexibility. Any such credit facility or debt instrument could contain customary affirmative and negative covenants and events of default applicable to us and our subsidiaries. The affirmative covenants could include, among others, covenants requiring us and our subsidiaries to maintain our respective legal existence and governmental approvals, deliver certain financial reports, maintain insurance coverage, keep inventory, if any, in good and marketable condition and protect material intellectual property. The negative covenants could include, among others, restrictions on us and our subsidiaries from transferring collateral, incurring additional indebtedness, engaging in mergers or acquisitions, paying dividends or making other distributions, making investments, creating liens, selling assets and making any payment on subordinated debt, in each case subject to certain exceptions. If we default under the facility or debt instrument, the lender or debtholders may accelerate all of our repayment obligations and take control of our pledged assets, potentially requiring us to renegotiate the facility or debt on terms less favorable to us or to immediately cease operations. Further, if we are liquidated, the lender’s or debt holders’ right to repayment would be senior to the rights of the holders of our common stock to receive any proceeds from the liquidation. The lender or debt holders could declare a default upon the occurrence of any event that they interpret as a material adverse effect as defined under the applicable agreement, thereby requiring us to repay the loan or debt immediately or to attempt to reverse the declaration of default through negotiation or litigation. Any declaration by the lender or debtholders of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline. ### Our business may suffer if our strategic alliances are not successful. We enter into strategic alliances and other relationships with companies whose capabilities complement our own. The objectives and goals for a strategic alliance can include one or more of the following: technology exchange, product development, joint sales and marketing, or new-market creation. To be successful, we must first be able to define, identify and secure alliance partners which align with our growth and technological plans. We cannot be certain that our alliance partners will provide us with the support we anticipate, or that such alliance or other relationships will be successful in creating new or improved products. Our success is also highly dependent upon our ability to manage the alliances, promote the benefits to us, and to not prohibit or discourage other opportunities which may be beneficial to us in the future. Also, certain provisions of alliance agreements may include restrictions that limit our ability to independently pursue or exploit the developments under such strategic alliances. If a strategic alliance fails to perform as expected or if the relationship is terminated, we could experience delays in new product development or impairment of our relationships with customers, and our ability to develop new solutions in response to industry trends or changing technology may be impaired and our results of operations could be adversely affected. ***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.*** We have partnered, and expect to continue to partner, with certain companies to further advance or develop our wireless connectivity solutions and develop or expand on new and existing technologies. These arrangements involve the commitment by each company of various resources, including technology, and research and development. If these arrangements do not develop as expected, especially those that involve our proprietary technologies, or if the products and/or services produced by our partners do not meet the required quality standards, our ability to introduce new antenna products and wireless connectivity solutions successfully and on schedule may be limited. Further, we cannot provide any assurances that our existing partnerships will be maintained successfully or at all, the failure of which could have a material adverse effect on our business and results of operations. If existing partnership entity has any technical difficulties, if our partnership with them does not continue to develop, or if the technology developed in partnership does not develop or the partnership entity does not perform as expected or suffers market-launch delay or project-cost overrun, our sales may decrease and our operating results could suffer. ***We are subject to the risk that third-party consultants will not perform their tasks effectively and that we will be unsuccessful in operating our business as a result.*** We have in the past relied on third parties, such as sales consultants and engineering contractors, for a portion of the design and sales and marketing of our products. In the future, we may rely on third-party consultants in addition to our own employees to perform the daily tasks necessary to operate our business in certain areas, including sales and engineering, and cannot ensure that third-party consultants will be able to complete their work for us in a timely manner. The failure of any third-party consultants to perform as anticipated could result in substantial costs, divert management’s attention from other strategic activities, or create other operational or financial problems for us. 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. Accordingly, our reliance on third parties exposes us to the risk that our business will be unsuccessful if they do not design and sell our product as expected. ***Our acquisitions expose us to risks that could adversely affect our business and adversely affect our operating results, financial condition, and cash flows.*** As part of our strategy to develop and identify new products, services and technologies, we have made, and may continue to make, acquisitions of select assets and businesses. Integrating any newly acquired business could be expensive and time-consuming. Integration efforts often take a significant amount of time, place a significant strain on managerial, operational and financial resources and could prove to be more difficult or expensive than predicted. The diversion of management’s attention and any delay or difficulties encountered in connection with any future acquisitions we may consummate could result in the disruption of on-going business or inconsistencies in standards and controls that could negatively affect our ability to maintain third-party relationships. When pursuing acquisitions, we may not be able to find suitable acquisition candidates, and we may not be able to complete such acquisitions on favorable terms, if at all. Moreover, we may need to raise additional funds through public or private debt or equity financing, or issue additional shares, to acquire any businesses or products, which may result in dilution for stockholders or the incurrence of indebtedness. Any acquisitions we complete, may not ultimately strengthen our competitive position or achieve our goals, and could be viewed negatively by our end-customers, investors and financial analysts. Acquisitions involve many risks. An acquisition may negatively affect our operating results, financial condition or cash flows because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition. ***Our ability to use our net operating loss carryforwards and tax credit carryforwards to offset future taxable income or income tax liabilities for U.S. federal income tax purposes may be subject to limitations, and transfers of shares of our common stock could cause us to experience an “ownership change” that could limit our ability to utilize our net operating loss carryforward and tax credit carryforwards.*** As of December 31, 2023, we had net operating loss (NOL) carryforwards of $23.2 million for federal income tax purposes and $11.5 million for state income tax purposes, subject to limitations may be available to offset our future taxable income, if any. Our federal and state NOL carryforwards begin to expire in 2026. Federal NOLs generated in taxable years beginning after December 31, 2017, however will carryforward indefinitely and may generally only be used to offset 80% of taxable income in taxable years beginning after December 31, 2020. 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. These NOL and tax credit carryforwards could expire unused, to the extent subject to expiration, and be unavailable to offset future taxable income or income tax liabilities. In addition, in general, under Sections 382 and 383 of the U.S. 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. For these purposes, an ownership change generally occurs where the aggregate change in stock ownership of one or more stockholders or groups of stockholders owning at least 5% of a corporation’s stock exceeds 50 percentage points over a rolling three-year period. The Company’s use of federal and state NOL and tax credit carryforwards could be limited further by ownership changes. We have recorded a $14.6 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. ***If we are unable to implement and maintain effective internal control over financial reporting in the future, the accuracy and timeliness of our financial reporting may be adversely affected. In addition, because of our status as a non-accelerated filer, you will not be able to depend on any attestation from our independent registered public accounting firm as to our internal control over financial reporting for the foreseeable future.*** 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. In particular, we are required to perform system and process evaluations and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. We are required to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting which began for our fiscal year ending December 31, 2017. However, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until the time we are no longer considered a non-accelerated filer. Accordingly, you will not be able to depend on any attestation concerning our internal control over financial reporting from our independent registered public accounting firm for the foreseeable future. ***Compliance with environmental matters and worker health and safety laws could be costly, and noncompliance with these laws could have a material adverse effect on our operating results, expenses and financial condition.*** Some of our operations use substances regulated under various federal, state, local and international laws governing the environment and worker health and safety, including those governing the discharge of pollutants into the ground, air and water, the management and disposal of hazardous substances and wastes, and the cleanup of contaminated sites. 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. ***Our business and prospects depend on the strength of our market efforts and our brand. Failure to maintain and enhance our brand would harm our ability to maintain and expand our base of customers.*** Maintaining and enhancing our brand is important to maintaining and expanding our base of customers who purchase our products. This will depend largely on our ability to continue to provide high-quality solutions, and we may not be able to do so effectively. While we may engage in a broader marketing campaign to further promote our brand, this effort may not succeed. Our efforts in developing our brand may be affected by the marketing efforts of our competitors. If we are unable to cost-effectively maintain and increase awareness of our brand, our business, results of operations and financial condition could be harmed. Our brand may be impaired by other factors, including product malfunctions. Any inability to effectively police our trademark rights against unauthorized uses by third parties could adversely impact the value of our trademarks and our brand recognition. If we fail to maintain and enhance our brand, or if we need to incur unanticipated expenses to establish our brand in new markets, our operating results would be negatively affected from reduced sales and increased marketing expenses. ***Our financial condition and results of operations could be adversely affected by the outbreak of contagious diseases, including pandemics and epidemics.*** Our business could be adversely affected by the effects of a widespread outbreak of contagious disease, including any pandemic or epidemic. For example, the COVID-19 pandemic in 2020 created considerable instability and disruption in the U.S. and world economies and had a material and adverse effect on our business and operations. The COVID-19 pandemic caused disruption and restrictions on our and our customers’ ability to travel, temporary closures of our office buildings and the facilities of our customers or suppliers, cancellations or modification of key industry marketing events, disruptions with our CMs and suppliers located in affected regions and overall adversely affect development of and sales for our products and solutions. Future pandemics or other public health epidemics may have material adverse effect on our business, financial condition and results of operations, and may also have the effect of heightening many of the other risks described in this “Risk Factors” section. ### Risks Relating to Intellectual Property ***If we are unable to protect our intellectual property rights, our competitive position could be harmed, or we could be required to incur significant expenses to enforce our rights.*** Our ability to compete effectively is dependent in part upon our ability to protect our proprietary technology. We rely on patents, trademarks, trade secret laws, confidentiality procedures and licensing arrangements to protect our intellectual property rights. There can be no assurance these protections will be available in all cases or will be adequate to prevent our competitors from copying, reverse engineering or otherwise obtaining and using our technology, proprietary rights or products. For example, the laws of certain countries in which our products are manufactured or licensed do not protect our proprietary rights to the same extent as the laws of the United States. In addition, third parties may seek to challenge, invalidate or circumvent our patents, trademarks, copyrights and trade secrets, or applications for any of the foregoing. There can be no assurance that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology or design around our proprietary rights. In each case, our ability to compete could be significantly impaired. To prevent substantial unauthorized use of our intellectual property rights, it may be necessary to prosecute actions for infringement and/or misappropriation of our proprietary rights against third parties. Any such action could result in significant costs and diversion of our resources and management’s attention, and there can be no assurance we will be successful in such action. Furthermore, many of our current and potential competitors have the ability to dedicate substantially greater resources to enforce their intellectual property rights than we do. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. ***Claims by others that we infringe their intellectual property rights could harm our business.*** Our industry is characterized by vigorous enforcement and pursuit of intellectual property rights, which has resulted in protracted and expensive litigation for many companies. Third parties may in the future assert claims of infringement of intellectual property rights against us or against our customers or channel partners for which we may be liable. As the number of products and competitors in our market increases and overlaps occur, infringement claims may increase. Intellectual property claims against us, and any resulting lawsuits, may result in our incurring significant expenses and could subject us to significant liability for damages and invalidate what we currently believe are our proprietary rights. 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. Any of these situations could have a material adverse effect on our business. These claims, regardless of their merits or outcome, would likely be time consuming and expensive to resolve and could divert management’s time and attention. ***We are generally obligated to indemnify our channel partners and end-customers for certain expenses and liabilities resulting from intellectual property infringement claims regarding our products, which could force us to incur substantial costs.*** We have agreed, and expect to continue to agree, to indemnify our channel partners and end-customers for certain intellectual property infringement claims regarding our products. As a result, in the case of infringement claims against these channel partners and end-customers, we could be required to indemnify them for losses resulting from such claims or to refund amounts they have paid to us. Our channel partners and other end-customers in the future may seek indemnification from us in connection with infringement claims brought against them. 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. ### Risks Related to Data Privacy Because we collect, process, use and store information about individuals, including our customers’ and our own employees, this creates data privacy compliance risks that could result in additional cost and liability to us. In the normal course of our business, we collect, process, use and disclose information about individuals. Many federal, state and foreign governmental bodies and agencies have adopted, or are considering adopting, laws and regulations that impose limits on the collection, processing, use, disclosure and security of information about individuals. In some cases, such laws and regulations can be enforced by private parties in addition to government entities. In addition, privacy advocacy and industry groups may propose new and different self-regulatory standards that either legally or contractually apply to us. These laws, regulations, and standards are complex and currently evolving, not uniform and likely to remain uncertain for the foreseeable future. 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). 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. At the state level, California enacted legislation, the California Consumer Privacy Act of 2018, or CCPA, which provides new data privacy rights for California consumers and the California Privacy Rights Act, or CPRA, which took effect on January 1, 2023 The CPRA modifies the CCPA by providing significant new data privacy rights. 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. Since the CCPA went into effect, general privacy statutes that share similarities with the CCPA are now in effect and enforceable in Virginia, Colorado, Connecticut, and Utah, and will soon be enforceable in several other states as well. Many other states are also currently reviewing or proposing the need for greater regulation of the collection, sharing, use and other processing of information related to individuals for marketing purposes or otherwise, and there remains increased interest at the federal level. 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. 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. 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. In addition to the EU, Asia has also the addition of data privacy legislation including China, Hong Kong, Japan, Singapore, and South Korea. Although we are continuing to take steps to comply with these and future laws and regulations, the scope of many of the requirements remains unclear, can be subject to significant change or interpretive or enforcement application, and may be inconsistent from one jurisdiction to another, and regulatory guidance on several topics is still forthcoming. Therefore, we cannot assure you that such steps will be sufficient. Compliance with current and future laws and regulations may require changes to our collection, use, transfer, disclosure or other processing of information about individuals and systems, and may thereby increase compliance costs. 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. ### Risks Related to Our International Operations ***We are subject to risks associated with international geopolitical and military conflicts.*** Our business has been impacted and may continue to be impacted by geopolitical conditions such as a resultant international trade wars (including between the United States and China), the military conflict in Israel, the Russia-Ukraine conflict, and increased political tensions with or related to Russia, Europe, the Middle East and Asia. Currently, significant uncertainty surrounds the future trade relationships among the United States, China, and Russia. Polices made by the U.S. government and policies made by other countries (such as China and Russia or their allies) may make significant changes in trade policies that could negatively affect our business. Global economic conditions and political tensions also have the ability to cause business disruptions. For example, sanctions remain imposed on trade with Russia and Belarus because of the war between Russia and Ukraine which has the potential to disrupt the supply of raw materials. Political tensions between China and western governments related to China and Taiwan, political unrest, tensions, and uncertainty in the Middle East, and global and regional, terrorism or other geopolitical events could have a range of negative impacts for the global economy. The price of oil which could impact transportation costs, raw materials supply chain, and the impact on central banks globally increasing interest rates significantly in an effort to combat inflation which has heightened concerns of a worsening global economic environment in the world. These situations could all lead to potential adverse impacts on a wide range of businesses and could disrupt supply chains and impact the businesses of our vendors and customers in ways that could impact our sales. ***Our international sales and operations subject us to additional risks that can adversely affect our operating results and financial condition.*** 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. In addition, we anticipate further expansion of our global presence and extending our salesforce reach internationally. Our ability to convince customers to expand their use of our antenna products is directly correlated to our direct engagement with our end-customers and our channel partners. To the extent we are unable to engage with non-U.S. customers effectively with our limited sales force capacity, we may be unable to grow sales to existing customers. Our international operations subject us to a variety of risks and challenges, including: increased management, travel, infrastructure and legal compliance costs associated with having multiple international operations; reliance on channel partners; increased financial accounting and reporting burdens and complexities; compliance with foreign laws and regulations; compliance with U.S. laws and regulations for foreign operations; and reduced protection for intellectual property rights in some countries and practical difficulties of enforcing rights abroad. Any of these risks could adversely affect our international operations, reduce our international sales or increase our operating costs, adversely affecting our business, operating results and financial condition and growth prospects. In addition, we are subject to risks related to regulation of exports, reexports and transfers of products, software or technology regulated under United States laws and regulations. From time to time, the U.S. Department of Commerce may impose licensing restrictions on certain parties with whom we conduct business, which may limit or prohibit our ability to continue these activities. For example, certain of our customers have been or are designated on the U.S. Department of Commerce’s Entity List and subject to licensing requirements in connection with exports, reexports, and transfers of US-regulated items. These designations may result in the loss or temporary loss of such customers and could have a material adverse effect on our business, financial condition and results of operations and affect our international sales strategy in China and elsewhere around the world. Although we undertake to conduct our business in compliance with applicable laws and regulations and have no knowledge of any issues of noncompliance with respect to export controls, our failure to successfully comply therewith may expose us to negative legal and business consequences, including civil or criminal penalties, government investigations, and reputational harm. ***We are subject to governmental export and import controls that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we are not in compliance with applicable laws.*** Our products are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. Exports of our products must be made in compliance with these laws and regulations. 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. In addition, if our channel partners, agents or consultants fail to obtain appropriate import, export or re-export licenses or authorizations, we may also be adversely affected through reputational harm and penalties. Obtaining the necessary authorizations, including any required license, for a particular sale may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities. Changes in our products or changes in applicable export or import laws and regulations may also create delays in the introduction and sale of our products in international markets, prevent our end-customers with international operations from deploying our products or, in some cases, prevent the export or import of our products to certain countries, governments or persons altogether. Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws and regulations, or change in the countries or territories, governments, persons or technologies targeted by such laws and regulations, could also result in decreased use of our products, or in our decreased ability to export or sell our products to existing or potential end-customers with international operations. Any decreased use of our products or limitation on our ability to export or sell our products would likely adversely affect our business, financial condition and operating results. Furthermore, U.S. export control laws and economic sanctions prohibit the provision of certain products and services to countries and territories, governments, and persons targeted by U.S. sanctions. U.S. sanctions that have been or may be imposed, including as a result of military conflicts in other countries may impact our ability to sell our products within regions covered by such sanctions or with or involving targeted persons. Despite our compliance efforts and activities, we cannot assure compliance by our employees or representatives for which we may be held responsible. If we fail to comply with export and import regulations and such economic sanctions, penalties could be imposed, including, for example, fines and/or denial of certain export privileges. These export and import controls and economic sanctions could also adversely affect our manufacturers, suppliers and customers. We are subject to risks generally associated with having a global supply chain, including certain laws and regulations related to forced labor and human rights. In June 2022, the U.S. 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. UFLPA or other U.S. human rights trade restrictions could affect the sourcing and availability of products, lead to our products being held for inspection by CBP and delayed or rejected for entry into the United States, result in other supply chain disruptions, or cause us to be subject to penalties, fines or sanctions. In the future, these human rights-related trade restrictions may expand in the United States or extend beyond the United States. In September 2022, the European Union announced a similar proposal targeting goods within Europe created with forced labor, without specifying particular countries or sectors. The EU proposal, if passed and implemented, could similarly impact our supply chain. Even if we were not subject to penalties, fines or sanctions or supply chain disruption under these restrictions, if products we source are linked in any way to forced labor, our reputation could be harmed. On October 7, 2022, the Bureau of Industry and Security issued new export controls related to the Chinese semiconductor manufacturing, advanced computing, and supercomputer industries. The new export controls impose broad end-use and other restrictions on facilities in China that develop or produce semiconductor chips or manufacturing equipment, may impact our ability to license or support our products to entities in or doing business with certain advanced AI or “supercomputer” design companies, foundries and manufacturers of assemblies and components in China. We are still evaluating these complex new rules and are unable to quantitatively estimate any impacts at this time, but such restrictions, and any subsequent restrictions, may have an adverse effect on our business, results of operations, or financial condition. Bureau of Industry and Security furthered restrictions on the export of certain advanced computing chips and manufacturing technology to China, focused on end-user with military, data center, or artificial intelligence applications. These export control changes of certain integrated circuits are now subject to export licensing and export control restrictions for export or reexport to China and certain other countries. Furthermore, increased restrictions on China exports may lead to regulatory retaliation by the Chinese government and possibly further escalate geopolitical tensions, and any such scenarios may adversely impact our business. The prospect of future export controls that are implemented in a similar manner may continue to have an ongoing impact on our business, results of operation, or financial conditions. ***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. For example, the United States has imposed supplemental tariffs of up to 25% on certain imports from China, as well as tariffs on steel and aluminum products imported from various other countries. The United States may maintain or increase these tariffs or impose new ones. In response, China and other countries have imposed or proposed additional tariffs on certain exports from the United States, and it is unclear what future actions countries will or will not take with respect to trade policies, treaties, and tariffs. We do a significant amount of business in China, including dealing with Chinese suppliers and customers, for the products that use imported components that are covered under these policies. We have engaged new CMs outside of China for additional supply chain diversity as well as an option of supply of components and assemblies for our wireless solutions that can be imported to the United States without the supplemental tariff. 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. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between these countries and the United States. Any of these factors could depress economic activity and restrict our access to suppliers or customers and have a material adverse effect on our business, financial condition and results of operations and affect our strategy in China and elsewhere around the world. ***New regulations or standards or changes in existing regulations or standards in the United States or internationally related to our products or our end-customer’s products may result in unanticipated costs or liabilities, which could have a material adverse effect on our business, operating results and future sales, and could place additional burdens on the operations of our business.*** Our products and our end-customers’ products are subject to governmental regulations regarding radio frequency devices in many jurisdictions. To achieve and maintain market acceptance, our products, or our end-customers’ products must continue to comply with these regulations and many industry standards designed to prevent interference with other radio services and to limit human exposure to harmful radiation. 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. We and our end-customers must also comply with similar international regulations and standards. As these regulations and standards evolve, and if new regulations or standards are implemented, we may have to modify or redesign our products or our end-customers may have to modify their products, which could increase costs. The failure of our products or their products to comply, or cause delays in compliance, with the existing and evolving industry regulations and standards could prevent or delay introduction of our products or our antennas used in third-party products, which could harm our business. End-customer uncertainty regarding future policies may also affect demand for communications products, including our products. Moreover, channel partners or customers may require us, or we may otherwise deem it necessary or advisable, to alter our products to address actual or anticipated changes in the regulatory environment. Our inability to alter our products to address these requirements and any regulatory changes may have a material adverse effect on our business, operating results 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 directly and indirectly in several foreign countries and are subject to anti-bribery laws in the jurisdiction in which we operate. The U.S. 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. 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. 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. 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. The trading price of our common stock may be volatile and may fluctuate substantially in response to various factors. This may be especially true for companies with a small public float. As a result of this volatility, investors may not be able to sell their common stock at or above the price at which they paid. 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. In addition, the stock market in general, and the market for technology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors, as well as general economic, political and market conditions such as recessions or interest rate changes, may seriously affect the market price of our common stock, regardless of our actual operating performance. 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. In addition, in the past, following periods of volatility in the overall market and the market prices of particular companies’ securities, securities class action litigations have often been instituted against these companies. Litigation of this type, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. 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.*** The trading market for our common stock is influenced by the research and reports that securities or industry analysts may publish about us, our business, our market or our competitors. We currently have limited research coverage by securities and industry analysts. If any of the analysts who may cover us change their recommendation regarding our common stock adversely, or provide more favorable relative recommendations about our competitors, the trading price of our common stock would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the trading price of our common stock or trading volume to decline. ***Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.*** Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. Some of these provisions: - authorize our board of directors to issue, without further action by the stockholders, up to 10,000,000 shares of undesignated preferred stock and up to 200,000,000 shares of authorized common stock; - require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; - specify that special meetings of our stockholders can be called only by our board of directors, the Chairman, the Chief Executive Officer or the President; - establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors; - establish that our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered terms; - provide that our directors may be removed only for cause; and - provide that vacancies on our board of directors may, except as otherwise required by law, be filled only by a majority of directors then in office, even if less than a quorum. In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us. Furthermore, our amended and restated certificate of incorporation specifies that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for most legal actions involving actions brought against us by stockholders. We believe this provision benefits us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, the provision may have the effect of discouraging lawsuits against our directors and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in such action. 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 provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing or cause us to take other corporate actions you desire. 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.*** We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future. We currently intend to retain any future earnings to fund the growth of our business. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant and subject to the restrictions contained in any loan or financing instruments. As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future. ***We are a “smaller reporting company,” and if we take advantage of certain exemptions from disclosure requirements available to smaller reporting companies, this could make our stock less attractive to investors and may make it more difficult to compare our performance with other public companies.*** We are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, reduced executive compensation disclosures and providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates equals or exceeds $250 million as of the prior June 30, or (2) our annual revenue equals or exceeds $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates equals or exceeds $700 million as of the prior June 30. To the extent we take advantage of such reduced disclosure obligations, our stockholders may not have access to certain information they may deem important. It may also make comparison of our financial statements with other public companies difficult or impossible. If investors find our common stock less attractive as a result of our reliance on these exemptions, the trading prices of our common stock may be lower than they otherwise would be, there may be a less active trading market for our common stock and the trading prices of our common stock may be more volatile. ***We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to comply with the laws and regulations affecting public companies, particularly after we are no longer a smaller reporting company or a non-accelerated filer.*** As a public company, particularly after we cease to qualify as a smaller reporting company or non-accelerated filer, we incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting and corporate governance requirements, to comply with the rules and regulations imposed by the Sarbanes-Oxley Act and the Dodd-Frank Act, as well as rules implemented by the SEC and Nasdaq. Our management and other personnel need to devote a substantial amount of time to these compliance initiatives and our legal and accounting compliance costs will increase. It is likely that we will need to hire additional staff in the areas of investor relations, legal and accounting. These new rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are evaluating and monitoring developments regarding these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. For example, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls over financial reporting and disclosure controls and procedures. In particular, as a public company, we are required to perform system and process evaluations and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. As described above, as long as we are considered a non-accelerated filer, we will not need to comply with the auditor attestation provisions of Section 404. Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 will require that we incur substantial accounting expense and management time on compliance-related issues. 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. Until December 31, 2021, we qualified for further exemptions and reduced disclosure requirements as an “emerging growth company,” as defined in the JOBS Act. 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. We expect to incur additional expenses and devote increased management effort toward ensuring compliance with these requirements, as well as when the available exemptions for a smaller reporting company or a non-accelerated filer are no longer available to us. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs. ### General Risk Factors ***Litigation or legal proceedings could expose us to significant liabilities and damage our reputation.*** We may become party to litigation claims and legal proceedings. Litigation involves significant risks, uncertainties and costs, including distraction of management attention away from our current business operations. We evaluate litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. We caution you that actual outcomes or losses may differ materially from those envisioned by our current estimates. Our policies and procedures require strict compliance by our employees and agents with all United States and local laws and regulations applicable to our business operations, including those prohibiting improper payments to government officials. Nonetheless, there can be no assurance that our policies and procedures will always ensure full compliance by our employees and agents with all applicable legal requirements. Improper conduct by our employees or agents could damage our reputation in the United States and internationally or lead to litigation or legal proceedings that could result in civil or criminal penalties, including substantial monetary fines, as well as disgorgement of profits. ***A failure in our information technology systems could negatively impact our business.*** We rely on information technology to process, transmit, and store electronic and financial information and information about individuals, to manage a variety of business processes and activities, to maintain the financial accuracy of our records, and to comply with regulatory, legal and tax requirements. We also depend on our information technology infrastructure for digital marketing and sales activities and for electronic communications among our locations, personnel, customers, and suppliers around the world. We own and manage some of these information technology systems but also rely on third parties for a range of information technology systems and related products and services, including but not limited to cloud computing services. Third party products including cloud computing services and hardware come with risks that Airgain continuously monitors to ensure industry best practices are in use and consistent with replacement cycles to mitigate these risks. These information technology systems are susceptible to damage, disruptions, or shutdowns due to failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, computer viruses, cyber-attacks, telecommunication failures, defects, errors, catastrophic events, terrorism or war, such as the conflict between Russia and Ukraine, which according to United States government sources and others has resulted in a heightened risk of cyberattacks against companies like ours. If our information technology systems suffer severe damage, disruption, or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition, and results of operations may be materially affected, and we could experience delays in reporting our financial results. 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. 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. We may also incur significant costs to notify, in particular, affected individuals, maintain our security precautions and/or to correct problems caused by the compromise, breach or misuse of our systems or information. 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. And any failure by our third party information technology providers, or any other entity in our collective supply chain, to prevent or mitigate security breaches or improper access to, or use, acquisition, disclosure, alteration, or destruction of, systems or information could have similar adverse consequences for us. 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. The ever-evolving threats mean us, and our third-party service providers must continually evaluate and adapt our respective systems and processes and overall security environment, as well as those of any companies we acquire. There is no guarantee that these measures will be adequate to safeguard against all data security compromises, breaches, or misuses. ***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. 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.*** New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, or interpreted, changed, modified or applied adversely to us, any of which could adversely affect our business operations and financial performance. The likelihood of these changes being enacted or implemented is unclear. We are currently unable to predict whether such changes will occur. If such changes are enacted or implemented, we are currently unable to predict the ultimate impact on our business. We urge our investors to consult with their legal and tax advisors with respect to any changes in tax law and the potential tax consequences of investing in our common stock. ***Our business, operating results and growth rates may be adversely affected by current or future unfavorable economic and market conditions and adverse developments with respect to financial institutions and associated liquidity risk.*** Our business depends on the economic health and general willingness of our current and prospective end- customers to make those capital commitments necessary to purchase our products. If the conditions in the U.S. and global economies become uncertain or volatile, or if they deteriorate, including as a result of the current or anticipated impact of military conflict, including 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, our business, operating results and financial condition may be materially adversely affected. Economic weakness, end-customer financial difficulties, inflation and increases in interest rates, limited availability of credit, liquidity shortages and constrained capital spending have at times in the past resulted, and may in the future result, in challenging and delayed sales cycles, slower adoption of new technologies and increased price competition, and could negatively affect our ability to forecast future periods, which could result in an inability to satisfy demand for our products and a loss of market share. 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. 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. Future adverse developments with respect to specific financial institutions or the broader financial services industry may lead to market-wide liquidity shortages, impair the ability of companies to access near-term working capital needs, and create additional market and economic uncertainty. There can be no assurance that future credit and financial market instability and a deterioration in confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, liquidity shortages, volatile business environment or continued unpredictable and unstable market conditions. 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. 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. 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. ## Cybersecurity As filed, 4,298 characters. ### Cybersecurity Risk Management and Strategy While we are in the process of fully implementing a comprehensive cybersecurity risk management program, we have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information. Our cybersecurity risk management program not only fortifies our current defense but also serve as the building blocks for adopting an internationally recognized IT standards framework, such as the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF) or the International Organization for Standardization (ISO) 27001. This does not imply that we meet any particular technical standards, specifications, or requirements, only that we intend to use the NIST CSF or ISO 27001 as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.\] Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas. Our cybersecurity risk management program includes: - risk assessments of our risk capacity, conducting pressure and gap analyses, and formalizing our risk tolerance; - a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; - the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls; - cybersecurity awareness training of our employees, incident response personnel, and senior management; and - a third-party risk management process for service providers, suppliers, and vendors, in which we assess their processes, controls, and monitor cybersecurity enhancements to safeguard our interests and mitigate potential risks. We are building on our current program towards a more comprehensive cybersecurity risk management program. Our roadmap for the future is centered on the maturation of our cybersecurity risk management program to align to international IT frameworks, such as NIST and ISO 27001 that will strengthen our defenses, enhance our threat detection capabilities, and ensure the confidentiality, integrity, and availability of our critical systems and data. We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. ### Cybersecurity Governance Our board of directors considers cybersecurity risk as part of its risk oversight function and has delegated to the audit committee of our board of directors (Audit Committee) oversight of cybersecurity and other information technology risks. The Audit Committee oversees management’s implementation of our cybersecurity risk management program. Management updates the Audit Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential. Our management team, including CTO and IT Manager, is responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. Our management team has several years of experience and have been trained for various roles in information technology and cybersecurity at numerous technology companies. Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment. ## Properties As filed, 790 characters. 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 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. We believe our facilities are suitable and sufficient to meet our current operating needs. ## Legal proceedings As filed, 503 characters. From time to time, we may be a party to legal proceedings and subject to claims incident in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we believe that the final outcome of these matters will not have a material adverse effect on our financial condition or business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. ## Management's discussion and analysis As filed, 37,208 characters. *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 cannot assure you that any of the events discussed in the risk factors below will not occur. These risks could have a material and adverse impact on our business, results of operations, financial condition and growth prospects. If that were to happen, the trading price of our common stock could decline. 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. 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. 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). 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. 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. 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. ### 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. 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. 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. 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. 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. 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. 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 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 consumer shifts away from traditional wired broadband to wireless as more major telecom providers offer broadband internet access as part of their bundled offerings. 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. 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. 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). 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. 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. These conditions worsened in the second half of 2023 and, coupled with a delay in the completion of an Enterprise project, contributed to a material sales decline in the second half of the year compared to the first half of the year. We believe that the fourth quarter of 2023 was the trough for our business after sequential declines through the year. As we turn to 2024, we anticipate a year of gradual growth driven by recoveries in our end markets, investments in product innovations, and launches of our 5-G connectivity initiatives. We remain focused on the execution of our strategic product initiatives and operational efficiencies, as they lay out the foundation of our revenue and profitability growth when market conditions improve. ### 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. 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. Our customers are price conscious, and our operating results are affected by pricing pressure which may force us to lower prices below our established list prices. In addition, a few end-customer devices which incorporate our antenna products comprise a significant amount of our sales, and the discontinuation or modification of such devices may materially and adversely affect our sales and results of operations. 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. 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. We do not believe that such factors had a material adverse impact on our results of operations during 2023. While each of these areas presents significant opportunities for us, they also pose significant risks and challenges we must successfully address. 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. 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. 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. 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. 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. ### Key Components of Our Results of Operations and Financial Condition ### Sales We primarily generate revenue from the sales of our products. We recognize revenue to depict the transfer of control over promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled for those goods or services. 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. ### 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. 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. 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. *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. We expect research and development expenses to increase in absolute dollars in future periods as we continue to invest in the development of new solutions and markets, although our research and development expense may fluctuate as a percentage of total sales. *Sales and Marketing*. Sales and marketing expenses primarily consist of personnel and facility-related costs for our sales, marketing, and business development personnel, stock-based compensation and bonuses earned by our sales personnel, and commissions earned by our third-party sales representative firms. Sales and marketing expenses also include the costs of trade shows, advertising, marketing programs, promotional materials, 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*. 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.* 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. ### Provision for Income Taxes Provision for income taxes consists of federal and state income taxes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. It is difficult for us to project future taxable income as the timing and size of sales of our products are variable and difficult to predict. We concluded that it is not more likely than not that we will utilize our deferred tax assets other than those that are offset by reversing temporary differences. ### 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. | Statements 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) | 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. 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. Consumer market sales decreased $6.9 million to $18.9 million for 2023 from $25.8 million for 2022, primarily due to weaker demand, coupled with excess inventory, with cable operators customers. | 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. | 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. Gross profit as a percentage of sales for 2023 increased by 20 basis points compared to 2022. The increase was primarily driven by higher automotive gross margins. | 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 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. The decrease was driven by lower employee expenses and professional services. | Other (income) expense: | For the Years Ended December 31, 2023 | 2022 | $ Change | % Change | | --- | ---: | ---: | ---: | ---: | | Interest income, net | $(109) | $(63) | $(46) | 73.0% | | Other expense | 9 | 58 | (49) | (84.5) | | Total other income | $(100) | $(5) | $(95) | 1900.0% | Other expense for 2023 consists primarily of unfavorable foreign exchange remeasurement adjustments. Other expense for 2022 consists mainly of unfavorable foreign exchange remeasurement adjustments and loss on disposal of fixed assets. ### Income Tax Expense | | For the Years Ended December 31, 2023 | 2022 | $ Change | % Change | | --- | ---: | ---: | ---: | ---: | | Income tax expense | $128 | $84 | $44 | 52.4% | Income tax expense for 2023 increased $44,000 or 52.4%, compared to 2022. 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. 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. 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. 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. 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. 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. ### Net Cash Used in Financing Activities. 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. ### Employee Retention Credit On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law providing an employee retention credit (ERC), which is a refundable tax credit against certain employment taxes on qualified wages. The Taxpayer Certainty and Disaster Tax Relief Act of 2020, the American Rescue Plan Act of 2021 and the Infrastructure Investment and Jobs Act amended the qualifications for eligible employers who could apply and extended the availability of the ERC employment taxes on qualified wages paid after December 31, 2020 through September 30, 2021. We believe that we qualify for application of the ERC on qualified wages from the second quarter of 2020 through the third quarter of 2021. In August 2023, we applied for ERC refunds, totaling $2.5 million, net of professional fees. Pending the Internal Revenue Service’s (IRS) review and determination of our eligibility, we anticipate receiving the ERC refunds within the next nine months. However, there can be no assurance we will ultimately receive the amounts we currently expect, if any, or the timeframe of any such receipt, based on IRS review or otherwise. ### Liquidity and Capital Resources Assessment As of March 6, 2024, management performed the annual assessment of the Company's ability to meet its obligations as they become due within one year based on relevant conditions and events that are known and reasonably knowable. Following ASC 205-40 guidance, management considered quantitative and qualitative information to evaluate the Company's ability to meet obligations. As of December 31, 2023, the Company has $19.1 million current assets to meet its $10.0 million current liabilities. Based on the analysis of the relevant conditions and events that are known and reasonably known as of March 6, 2024, the Company concludes that it is probable that it will be able to meet all of its financial obligations as they become due in the year 2024. ### 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. 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. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported sales and expenses during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions. ### Inventory Valuation Inventory is stated at the lower of cost or net realizable value (first-in, first-out 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 write-down inventory when it has been determined that conditions exist that may not allow the inventory to be sold for at the intended price or the inventory is determined to be obsolete based on assumption about future demand and market conditions. The charge related to inventory write-downs is recorded as cost of goods sold. We evaluate inventory at least annually 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 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. We use the Black-Scholes option-pricing model to estimate the fair value of our stock-based awards including: stock options and employee stock purchase plan (ESPP). This valuation model requires the input of highly subjective assumptions, the most significant of which is our estimates of expected volatility and the forfeiture rate of the award. Starting with the first quarter of 2022, we began to determine volatility by solely using the Company’s own historical volatility measurements, since more than five years of historical data became available in the public market. Prior to the fourth quarter of 2022, the Company determined the volatility for stock awards granted based on the average historical price volatility for the Company and industry peers over a period equivalent to the expected term of the stock options grants. The forfeiture of stock awards is recognized upon the actual forfeitures date. 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. 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. 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 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. 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. 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. #### Intangible Assets and Goodwill Impairment Assessment as of September 30, 2023 During the three months ended September 30, 2023, the Company had a decline in its market capitalization due to current and near term demand softness in the wireless connectivity space, as reflected in a material decline in share price. - Intangible Assets The decline in market capitalization indicated that the carrying value of the Company's intangible assets composed of acquired intangibles, developed technologies, customer relationships and non-compete agreements may not be recoverable. Accordingly, the Company performed an interim impairment test to determine the recoverability of the assets group by comparing the future undiscounted cash flows expected from the use of the asset group to the carrying value at September 30, 2023. The recoverability test indicated that the future expected cash flows materially exceed the asset group carrying value. Therefore, the Company did not proceed with the third step to determine the fair value of the intangible assets and compare fair value against the carrying value. Based on the assessment performed, we determined that the intangible asset carrying values are not impaired as of September 30, 2023 and the useful lives remain appropriate. - Goodwill The decline in the Company's market share price during the three months ended September 30, 2023 was a triggering event that indicated that the fair value of the entity may be below its carrying amount. As a result of the triggering event, the Company performed a qualitative assessment by comparing the margin between the market capitalization and the carrying value at September 30, 2023 and at December 31, 2022. The qualitative assessment showed a significant decline in the margin between the market capitalization and the carrying value. Therefore, the Company proceeded to perform a quantitative assessment. The quantitative impairment test compares the fair value of the reporting unit to its carrying amount, including goodwill. To determine the fair value of the reporting unit, the Company engaged a valuation consulting firm to assist management for purposes of impairment testing. The Company estimated the fair value of our reporting unit using a weighting of the market and income approaches. For the market approach, we used the guideline public company method. Under this method we utilize information from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit to derive an indication of value. For the income approach, we used a discounted cash flow methodology to derive an indication of value, which required management to make estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, income tax rates, EBITDA, perpetual growth rates, and long-term discount rates, among others. Forecasts of future cash flows were based on our best estimate of future net sales and operating expenses, based primarily on customer forecasts, industry trade organization data and general economic conditions. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. Based on the analysis performed, the Company determined the fair value of the reporting unit is greater than the carrying value. Therefore, there is no goodwill impairment charge as of September 30, 2023. #### Goodwill Impairment Assessment as of December 31, 2023 For the annual goodwill impairment assessment, as of December 31, 2023, the Company evaluated the impairment considerations during the fourth quarter of 2023, starting with the interim assessment as of September 30, 2023. During the fourth quarter 2023, the Company's macroeconomic conditions, stock share, market capitalization, working capital, industry and market conditions, operating cash flow and forecasted cash flows remained stable with September 30, 2023. After assessing the totality of events or circumstances as those described in the preceding section, the Company determined that there were no events or circumstances in the fourth quarter 2023 that indicates that it is more likely than not that the fair value of a reporting unit may be less than its carrying amount. Since there was no indication that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company determined that a quantitative goodwill impairment test was not necessary as of December 31, 2023. Based on the assessment performed, we concluded that an impairment charge to goodwill was not required as of December 31, 2023. Certain future events and circumstances, including adverse changes in the business and economic conditions and changes in customer behavior could result in changes to our assumptions and judgments used in the impairment tests. A downward revision of these assumptions could cause the total fair value of our goodwill and intangible assets to fall below carrying values and a non-cash impairment charge would be required. Such a charge may have a material effect on the consolidated financial statements. ## Market risk As filed, 163 characters. 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. ## Controls and procedures As filed, 4,598 characters. ### Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this annual report. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. ### Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal controls over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal controls over financial reporting may not prevent or detect all misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. We conducted an evaluation of the effectiveness of our internal control over financial reporting. Based on our evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2023. ### Attestation Report of the Registered Public Accounting Firm This annual report does not include an attestation report of our independent registered public accounting firm due to our non-accelerated filer status. ### Changes in Internal Control Over Financial Reporting There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Filed Mar 6, 2024. Source: SEC EDGAR, the filing index for accession 0000950170-24-027341. Last ingested by Listed: Oct 26, 2026, 16:23 ET. No prices; not investment advice.