UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM       TO       

Commission file number: 001-37851

 

AIRGAIN, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

95-4523882

(State or Other Jurisdiction of Incorporation or Organization)

 

(I.R.S. Employer Identification No.)

 

 

 

3611 Valley Centre Drive, Suite 150

San Diego, CA

 

92130

(Address of Principal Executive Offices)

 

(Zip Code)

(760) 579-0200

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common shares, par value $0.0001 per share

AIRG

Nasdaq

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    No

 

As of May 04, 2020, the registrant had 9,696,556 shares of Common Stock (par value $0.0001) outstanding.

 

 


 

AIRGAIN, INC.

Form 10-Q

For the Quarter Ended March 31, 2020

 

 

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

Item 1. Condensed Financial Statements (Unaudited)

 

Condensed Balance Sheets

3

Condensed Statements of Operations

4

Condensed Statements of Comprehensive Income (Loss)

5

Condensed Statements of Stockholders’ Equity

6

Condensed Statements of Cash Flows

7

Notes to Condensed Financial Statements

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3. Quantitative and Qualitative Disclosures about Market Risk

23

Item 4. Controls and Procedures

23

 

 

 

 

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

24

Item 1A. Risk Factors

24

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

24

Item 3. Defaults Upon Senior Securities

25

Item 4. Mine Safety Disclosures

25

Item 5. Other Information

25

Item 6. Exhibits

25

 

 

SIGNATURES

26

 

 

 

 

 


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Airgain, Inc.

Condensed Balance Sheets

(In thousands, except per share data)

(Unaudited)

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,533

 

 

$

13,197

 

Short term investments

 

 

11,016

 

 

 

21,686

 

Trade accounts receivable

 

 

7,016

 

 

 

7,656

 

Inventory

 

 

996

 

 

 

1,193

 

Prepaid expenses and other current assets

 

 

1,090

 

 

 

1,361

 

Total current assets

 

 

42,651

 

 

 

45,093

 

Property and equipment, net

 

 

2,140

 

 

 

2,126

 

Goodwill

 

 

3,700

 

 

 

3,700

 

Customer relationships, net

 

 

2,989

 

 

 

3,110

 

Intangible assets, net

 

 

644

 

 

 

687

 

Other assets

 

 

218

 

 

 

10

 

Total assets

 

$

52,342

 

 

$

54,726

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,568

 

 

$

3,838

 

Accrued bonus

 

 

411

 

 

 

1,385

 

Accrued liabilities

 

 

1,025

 

 

 

1,451

 

Current portion of deferred rent obligation under operating lease

 

 

42

 

 

 

85

 

Total current liabilities

 

 

5,046

 

 

 

6,759

 

Deferred tax liability

 

 

52

 

 

 

52

 

Deferred rent obligation under operating lease

 

 

9

 

 

 

11

 

Total liabilities

 

 

5,107

 

 

 

6,822

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common shares, par value $0.0001, 200,000 shares authorized; 10,185 shares issued and 9,697 shares outstanding at March 31, 2020; and 10,146 shares issued and 9,681 shares outstanding at December 31, 2019

 

 

1

 

 

 

1

 

Additional paid in capital

 

 

97,360

 

 

 

96,622

 

Treasury stock, at cost: 489 shares and 465 shares at March 31, 2020, and December 31, 2019, respectively

 

 

(4,849

)

 

 

(4,659

)

Accumulated other comprehensive income (loss)

 

 

(7

)

 

 

8

 

Accumulated deficit

 

 

(45,270

)

 

 

(44,068

)

Total stockholders’ equity

 

 

47,235

 

 

 

47,904

 

Commitments and contingencies (note 12)

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

52,342

 

 

$

54,726

 

 

 

 

See accompanying notes.

3


 

Airgain, Inc.

Condensed Statements of Operations

(In thousands, except per share data)

(Unaudited)

 

 

 

 

 

Three months ended March 31,

 

 

 

2020

 

 

2019

 

Sales

 

$

11,216

 

 

$

15,108

 

Cost of goods sold

 

 

5,891

 

 

 

8,322

 

Gross profit

 

 

5,325

 

 

 

6,786

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

2,418

 

 

 

2,338

 

Sales and marketing

 

 

1,539

 

 

 

2,274

 

General and administrative

 

 

2,678

 

 

 

1,995

 

Total operating expenses

 

 

6,635

 

 

 

6,607

 

Income (loss) from operations

 

 

(1,310

)

 

 

179

 

Other expense (income):

 

 

 

 

 

 

 

 

Interest income

 

 

(124

)

 

 

(188

)

Interest expense

 

 

 

 

 

1

 

Total other income

 

 

(124

)

 

 

(187

)

Income (loss) before income taxes

 

 

(1,186

)

 

 

366

 

Provision for income taxes

 

 

16

 

 

 

29

 

Net income (loss)

 

$

(1,202

)

 

$

337

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.12

)

 

$

0.03

 

Diluted

 

$

(0.12

)

 

$

0.03

 

Weighted average shares used in calculating income (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

 

9,690

 

 

 

9,626

 

Diluted

 

 

9,690

 

 

 

9,961

 

 

 

See accompanying notes.

4


 

Airgain, Inc.

Condensed Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

 

 

 

Three months ended March 31,

 

 

 

2020

 

 

2019

 

Net income (loss)

 

$

(1,202

)

 

$

337

 

Unrealized gain (loss) on available-for-sale securities, net of deferred taxes

 

 

(15

)

 

 

10

 

Total comprehensive income (loss)

 

$

(1,217

)

 

$

347

 

 

 

 

See accompanying notes.

5


 

Airgain, Inc.

Condensed Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

 

 

 

Three months ended March 31,

 

 

 

2020

 

 

2019

 

Total stockholders' equity, beginning balance

 

$

47,904

 

 

$

45,147

 

 

 

 

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

 

 

  Balance at beginning of period

 

 

1

 

 

 

1

 

    Stock-based compensation

 

 

 

 

 

 

    Issuance of shares for stock purchase plans

 

 

 

 

 

 

  Balance at end of period

 

 

1

 

 

 

1

 

 

 

 

 

 

 

 

 

 

Additional paid-in capital:

 

 

 

 

 

 

 

 

  Balance at beginning of period

 

 

96,622

 

 

 

93,583

 

    Stock-based compensation

 

 

668

 

 

 

514

 

    Issuance of shares for stock purchase plans

 

 

70

 

 

 

231

 

  Balance at end of period

 

 

97,360

 

 

 

94,328

 

 

 

 

 

 

 

 

 

 

Treasury stock:

 

 

 

 

 

 

 

 

  Balance at beginning of period

 

 

(4,659

)

 

 

(3,432

)

    Repurchases of common stock

 

 

(190

)

 

 

(193

)

  Balance at end of period

 

 

(4,849

)

 

 

(3,625

)

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income (loss):

 

 

 

 

 

 

 

 

  Balance at beginning of period

 

 

8

 

 

 

(11

)

    Unrealized gain (loss) on available-for-sale securities, net of deferred taxes

 

 

(15

)

 

 

10

 

  Balance at end of period

 

 

(7

)

 

 

(1

)

 

 

 

 

 

 

 

 

 

Accumulated deficit:

 

 

 

 

 

 

 

 

  Balance at beginning of period

 

 

(44,068

)

 

 

(44,994

)

    Net income (loss)

 

 

(1,202

)

 

 

337

 

  Balance at end of period

 

 

(45,270

)

 

 

(44,657

)

 

 

 

 

 

 

 

 

 

Total stockholders' equity, ending balance

 

$

47,235

 

 

$

46,046

 

 

 

See accompanying notes.

6


 

Airgain, Inc.

Condensed Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

 

 

Three months ended March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(1,202

)

 

$

337

 

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

122

 

 

 

177

 

Amortization

 

 

164

 

 

 

164

 

Amortization of premium (discounts) on investments, net

 

 

7

 

 

 

(82

)

Stock-based compensation

 

 

668

 

 

 

514

 

Deferred tax liability

 

 

 

 

 

5

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

640

 

 

 

(967

)

Inventory

 

 

197

 

 

 

68

 

Prepaid expenses and other assets

 

 

238

 

 

 

77

 

Accounts payable

 

 

(291

)

 

 

504

 

Accrued bonus

 

 

(974

)

 

 

(1,612

)

Accrued liabilities

 

 

(426

)

 

 

(19

)

Deferred obligation under operating lease

 

 

(45

)

 

 

(41

)

Net cash used in operating activities

 

 

(902

)

 

 

(875

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of available-for-sale securities

 

 

(752

)

 

 

(10,462

)

Maturities of available-for-sale securities

 

 

11,400

 

 

 

9,585

 

Purchases of property and equipment

 

 

(115

)

 

 

(159

)

Net cash provided by (used in) investing activities

 

 

10,533

 

 

 

(1,036

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Repurchases of common stock

 

 

(190

)

 

 

(193

)

Proceeds from issuance of common stock, net

 

 

70

 

 

 

231

 

Net cash provided by (used in) financing activities

 

 

(120

)

 

 

38

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

9,511

 

 

 

(1,873

)

Cash, cash equivalents, and restricted cash; beginning of period

 

 

13,197

 

 

 

13,621

 

Cash, cash equivalents, and restricted cash; end of period

 

$

22,708

 

 

$

11,748

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

 

 

$

1

 

Taxes paid

 

$

22

 

 

$

21

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Accrual of property and equipment

 

$

21

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,533

 

 

$

11,748

 

Restricted cash included in other assets

 

175

 

 

 

 

Total cash, cash equivalents, and restricted cash

 

$

22,708

 

 

$

11,748

 

 

 

See accompanying notes.

7


Airgain, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

Note 1. Basis of Presentation

Business Description

Airgain, Inc. (the Company) was incorporated in the State of California on March 20, 1995; and reincorporated in the State of Delaware on August 15, 2016. The Company is a leading provider of advanced antenna technologies used to enable high performance wireless networking across a broad range of markets, including consumer, enterprise and automotive. The Company designs, develops, and engineers its antenna products for original equipment and design manufacturers worldwide. The Company’s headquarters is in San Diego, California with office space and research, design and test facilities in the United States, United Kingdom, China, and Taiwan.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Interim financial results are not necessarily indicative of results anticipated for the full year. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, from which the balance sheet information herein was derived.

The unaudited condensed balance sheet as of December 31, 2019, included herein was derived from the audited financial statements as of that date but does not include all disclosures including notes required by GAAP.

The unaudited condensed statements of operations for the three months ended March 31, 2020 and 2019, and the balance sheet data as of March 31, 2020, have been prepared on the same basis as the audited financial statements.

In the opinion of management, the accompanying unaudited condensed financial statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation of results of the Company’s operations and financial position for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2020, or for any future period.

 

Segment Information

The Company’s operations are located primarily in the United States and most of its assets are located in San Diego, California and Scottsdale, Arizona. The Company operates in one segment related to the sale of antenna products. The Company’s chief operating decision-maker is its chief executive officer, who reviews operating results on an aggregate basis and manages the Company’s operations as a single operating segment.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include valuation of intangible assets.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements.

Fair Value Measurements

The carrying values of the Company’s financial instruments, including cash and cash equivalents, restricted cash, trade accounts receivable, accounts payable, and accrued liabilities approximate their fair values due to the short maturity of these instruments.

Fair value measurements are market-based measurements, not entity-specific measurements. Therefore, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. The Company follows a three-level

8


Airgain, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

hierarchy to prioritize the inputs used in the valuation techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.

Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable in active markets.

Cash Equivalents and Short-Term Investments

Cash equivalents are comprised of short-term, highly liquid investments with maturities of 90 days or less at the date of purchase. Short-term investments consist predominantly of commercial paper, corporate debt securities, U.S. Treasury securities and asset backed securities. The Company classifies short-term investments based on the facts and circumstances surrounding the investments at the time of purchase and evaluates such classification as of each balance sheet date. All short-term investments are classified as available-for-sale securities as of March 31, 2020, and are recorded at estimated fair value. Unrealized gains and losses for available-for-sale securities are included in accumulated other comprehensive income (loss), a component of stockholders’ equity. Realized gains and losses are included in other income, in the unaudited condensed statements of operations. The Company evaluates its investments to determine whether those with unrealized loss positions are other than temporarily impaired. Impairments are considered to be other than temporary if they are related to deterioration in credit risk or if it is likely that the Company will sell the securities before recovery of their cost basis.

Inventory

The majority of the Company’s products are manufactured by third parties that retain ownership of the inventory until title is transferred to the customer at the shipping point. In certain instances, shipping terms are delivery at place and the Company is responsible for arranging transportation and delivery of goods ready for unloading at the named place. The Company bears all risk involved in bringing the goods to the named place and records the related inventory in transit to the customer as inventory on the accompanying balance sheet. The Company also manufactures certain of its products at its facility located in Scottsdale, Arizona.

Inventory is stated at the lower of cost or net realizable value. For items manufactured by the Company, cost is determined using the weighted average cost method. For items manufactured by third parties, cost is determined using the first-in, first-out (FIFO) method. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period. As of March 31, 2020, the Company’s inventories consist primarily of raw materials. Provisions for excess and obsolete inventories are estimated based on product life cycles, quality issues, and historical experience. As of March 31, 2020, there is no provision for excess and obsolete inventories.

Accumulated Other Comprehensive Income (Loss)

Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). Accumulated other comprehensive income (loss) on the unaudited condensed balance sheet at March 31, 2020, includes unrealized gains and losses on the Company’s available-for-sale securities.

Note 2. Summary of Significant Accounting Policies

During the three months ended March 31, 2020, there have been no material changes to the Company’s significant accounting policies as described in the Annual Report on Form 10-K for the fiscal year ended December 31, 2019, except as follows. For interim financial reporting purposes, income taxes are recorded based upon estimated annual effective income tax rates; however, for the current period the provision for income taxes has been determined on the basis of year to date results, as COVID-19 related closures impacted our ability to reasonably forecast full year results by jurisdiction.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB)issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), which requires lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets. ASU 2016-02 is effective for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. The Company is evaluating the effect that ASU 2016-02 will have on its financial statements and related disclosures. The Company has not yet selected a transition method, nor has it determined the effect of the standard on its ongoing financial reporting.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. This standard changes the methodology for measuring credit losses on financial instruments and the timing of when such losses

9


Airgain, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

are recorded. ASU 2016-13 is effective for fiscal years beginning after December 15, 2020, and interim periods within the fiscal year beginning after December 15, 2021, using a modified retrospective adoption method. The Company continues to evaluate the impact of the standard on its financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the test for goodwill impairment by removing Step 2 which requires a hypothetical purchase price allocation and may require the services of valuation experts. An entity will, therefore, perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, recognizing an impairment charge for the amount by which the carrying amount exceeds the fair value, not to exceed the total amount of goodwill allocated to the reporting unit. An entity still has the option to perform a qualitative assessment to determine if the quantitative impairment test is necessary. ASU 2017-04 will be effective for the Company in annual periods beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has not yet determined whether it will early adopt ASU 2017-04 and is evaluating the impact the standard will have on its ongoing financial reporting.

In May 2019, the FASB issued ASU 2019-05, Financial Instruments-Credit Losses (Topic 326), Targeted Transition Relief, which provides entities that have certain instruments within the scope of ASC 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost, with an option to irrevocably elect the fair value option for eligible instruments. The effective date and transition methodology for this standard are the same as in ASU 2016-13. The Company continues to evaluate the impact of the standard on its financial statements.

Note 3. Net Income (Loss) Per Share

Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average shares of common stock outstanding for the period. Diluted net income (loss) per share is calculated by dividing net income (loss) by the weighted average shares of common stock outstanding for the period plus amounts representing the dilutive effect of securities that are convertible into common stock. The Company calculates diluted income (loss) per common share using the treasury stock method and the as-if-converted method, as applicable.

The following table presents the computation of net income (loss) per share (in thousands except per share data):

 

 

 

Three months ended March 31,

 

 

 

2020

 

 

2019

 

Numerator:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(1,202

)

 

$

337

 

Denominator:

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

 

9,690

 

 

 

9,626

 

Plus dilutive effect of potential common shares

 

 

 

 

 

335

 

Weighted average common shares outstanding - diluted

 

 

9,690

 

 

 

9,961

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.12

)

 

$

0.03

 

Diluted

 

$

(0.12

)

 

$

0.03

 

 

Diluted weighted average common shares outstanding for the three months ended March 31, 2019, includes 335,000 options outstanding.

 

Potentially dilutive securities (in common stock equivalent shares) not included in the calculation of diluted net income (loss) per share because to do so would be anti-dilutive are as follows (in thousands):

 

 

Three months ended March 31,

 

 

 

2020

 

 

2019

 

Stock options and restricted stock

 

 

1,211

 

 

 

468

 

Warrants outstanding

 

 

51

 

 

 

51

 

Total

 

 

1,262

 

 

 

519

 

 

 

 

Note 4. Cash, Cash Equivalents and Short-Term Investments

The following tables show the Company’s cash and cash equivalents and short-term investments by significant investment category as of March 31, 2020, and December 31, 2019 (in thousands):

10


Airgain, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

 

 

March 31, 2020

 

 

 

Amortized cost

 

 

Gross unrealized gains

 

 

Gross unrealized losses

 

 

Estimated fair value

 

 

Cash and cash equivalents

 

 

Short term investments

 

Cash

 

$

2,048

 

 

$

 

 

$

 

 

$

2,048

 

 

$

2,048

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 1(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

 

20,485

 

 

 

 

 

 

 

 

 

20,485

 

 

 

20,485

 

 

 

 

U.S. treasury securities

 

 

2,058

 

 

 

14

 

 

 

 

 

 

2,072

 

 

 

 

 

 

2,072

 

Subtotal

 

 

22,543

 

 

 

14

 

 

 

 

 

 

22,557

 

 

 

20,485

 

 

 

2,072

 

Level 2(2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

1,498

 

 

 

 

 

 

 

 

 

1,498

 

 

 

 

 

 

1,498

 

Corporate debt obligations

 

 

4,456

 

 

 

 

 

 

(8

)

 

 

4,448

 

 

 

 

 

 

4,448

 

Repurchase agreements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-backed securities

 

 

3,011

 

 

 

 

 

 

(13

)

 

 

2,998

 

 

 

 

 

 

2,998

 

Subtotal

 

 

8,965

 

 

 

 

 

 

(21

)

 

 

8,944

 

 

 

 

 

 

8,944

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

33,556

 

 

$

14

 

 

$

(21

)

 

$

33,549

 

 

$

22,533

 

 

$

11,016

 

 

 

 

December 31, 2019

 

 

 

Amortized cost

 

 

Gross unrealized gains

 

 

Gross unrealized losses

 

 

Estimated fair value

 

 

Cash and cash equivalents

 

 

Short term investments

 

Cash

 

$

3,950

 

 

$

 

 

$

 

 

$

3,950

 

 

$

3,950

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 1(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

 

5,500

 

 

 

 

 

 

 

 

 

5,500

 

 

 

5,500

 

 

 

 

U.S. treasury securities

 

 

3,078

 

 

 

2

 

 

 

(1

)

 

 

3,079

 

 

 

 

 

 

3,079

 

Subtotal

 

 

8,578

 

 

 

2

 

 

 

(1

)

 

 

8,579

 

 

 

5,500

 

 

 

3,079

 

Level 2(2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

8,920

 

 

 

 

 

 

 

 

 

8,920

 

 

 

747

 

 

 

8,173

 

Corporate debt obligations

 

 

5,922

 

 

 

5

 

 

 

(1

)

 

 

5,926

 

 

 

 

 

 

5,926

 

Repurchase agreements

 

 

3,000

 

 

 

 

 

 

 

 

 

3,000

 

 

 

3,000

 

 

 

 

Asset-backed securities

 

 

4,505

 

 

 

3

 

 

 

 

 

 

4,508

 

 

 

 

 

 

4,508

 

Subtotal

 

 

22,347

 

 

 

8

 

 

 

(1

)

 

 

22,354

 

 

 

3,747

 

 

 

18,607

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

34,875

 

 

$

10

 

 

$

(2

)

 

$

34,883

 

 

$

13,197

 

 

$

21,686

 

 

(1)

Level 1 fair value estimates are based on quoted prices in active markets for identical assets or liabilities.

 

(2)

Level 2 fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

The Company’s investments were primarily valued based upon one or more valuations reported by its investment accounting and reporting service provider. The investment service provider values the securities using a hierarchical security pricing model that relies primarily on valuations provided by a third-party pricing vendor. Such valuations may be based on trade prices in active markets for identical assets or liabilities (Level 1 inputs) or valuation models using inputs that are observable either directly or indirectly (Level 2 inputs), such as quoted prices for similar assets or liabilities, yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures. The Company performs certain procedures to corroborate the fair value of its holdings, including comparing valuations obtained from its investment service provider with other pricing sources to validate the reasonableness of the valuations.

 

The Company typically invests in highly rated securities, and its investment policy limits the amount of credit exposure to any one issuer. The policy requires investments in fixed income instruments denominated and payable in U.S. dollars only and requires investments to be investment grade, with a primary objective of minimizing the potential risk of principal loss.

 

 

The following table presents the Company's short-term investments with unrealized losses by investment category and length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2020 (in thousands):

 

 

 

Less than 12 months

 

Description of securities

 

Amortized cost

 

 

Unrealized losses

 

 

 

 

 

 

 

 

 

 

Corporate debt obligations

 

$

3,699

 

 

$

(8

)

Asset-backed securities

 

 

3,011

 

 

 

(13

)

Total

 

$

6,710

 

 

$

(21

)

 

11


Airgain, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

The Company considers the declines in market value of its short-term investments to be temporary in nature. Fair values were determined for each individual security in the investment portfolio. When evaluating an investment for other-than-temporary impairment, the Company reviews factors such as length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, changes in market interest rates and the Company’s intent to sell, or whether it is more likely than not it will be required to sell the investment before recovery of the investment’s cost basis. As of March 31, 2020, the Company does not consider any of its investments to be other-than temporarily impaired.

 

The estimated fair value of contractual maturities of short-term investments as of March 31, 2020, is $11.0 million.

 

Note 5. Property and Equipment

Depreciation and amortization of property and equipment is calculated on the straight-line method based on estimated useful lives of six to ten years for tenant improvements and three to fifteen years for all other property and equipment. Property and equipment consist of the following (in thousands):

 

 

March 31, 2020

 

 

December 31, 2019

 

Computers, software, and equipment

 

$

572

 

 

$

572

 

Furniture, fixtures, and equipment

 

 

299

 

 

 

299

 

Manufacturing and testing equipment

 

 

3,462

 

 

 

3,444

 

Equipment construction in process

 

 

136

 

 

 

18

 

Leasehold improvements

 

 

911

 

 

 

911

 

 

 

 

5,380

 

 

 

5,244

 

Less accumulated depreciation

 

 

(3,240

)

 

 

(3,118

)

 

 

$

2,140

 

 

$

2,126

 

 

Depreciation expense was $122,000 and $177,000 for the three months ended March 31, 2020 and 2019, respectively.

Note 6. Intangible Assets

The following is a summary of the Company’s acquired intangible assets (dollars in thousands):

 

 

Weighted

average

amortization

period (years)

 

 

Gross

carrying

amount

 

 

Accumulated

amortization

 

 

Intangibles, net

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

 

10

 

 

$

4,830

 

 

$

1,841

 

 

$

2,989

 

Developed technologies

 

 

9

 

 

 

1,080

 

 

 

439