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 JUNE 30, 2019

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 August 5, 2019, the registrant had 9,715,245 shares of Common Stock (par value $0.0001) outstanding.

 

AIRGAIN, INC.


 

Form 10-Q

For the Quarter Ended June 30, 2019

 

 

 

 

 

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

19

Item 3. Quantitative and Qualitative Disclosures about Market Risk

26

Item 4. Controls and Procedures

26

 

 

 

 

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

27

Item 1A. Risk Factors

27

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

28

Item 3. Defaults Upon Senior Securities

28

Item 4. Mine Safety Disclosures

28

Item 5. Other Information

28

Item 6. Exhibits

29

 

 

SIGNATURES

30

 

 

 

 


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Airgain, Inc.

Condensed Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

 

 

 

June 30, 2019

 

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

13,641

 

 

$

13,621

 

Short term investments

 

 

20,572

 

 

 

20,169

 

Trade accounts receivable

 

 

9,722

 

 

 

7,013

 

Inventory

 

 

1,095

 

 

 

1,351

 

Prepaid expenses and other current assets

 

 

1,012

 

 

 

931

 

Total current assets

 

 

46,042

 

 

 

43,085

 

Property and equipment, net

 

 

1,707

 

 

 

1,401

 

Goodwill

 

 

3,700

 

 

 

3,700

 

Customer relationships, net

 

 

3,351

 

 

 

3,593

 

Intangible assets, net

 

 

773

 

 

 

859

 

Other assets

 

 

229

 

 

 

269

 

Total assets

 

$

55,802

 

 

$

52,907

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,537

 

 

$

4,137

 

Accrued bonus

 

 

908

 

 

 

2,076

 

Accrued liabilities

 

 

1,494

 

 

 

1,217

 

Current portion of deferred rent obligation under operating lease

 

 

71

 

 

 

81

 

Total current liabilities

 

 

8,010

 

 

 

7,511

 

Deferred tax liability

 

 

30

 

 

 

38

 

Deferred rent obligation under operating lease

 

 

142

 

 

 

211

 

Total liabilities

 

 

8,182

 

 

 

7,760

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common shares, par value $0.0001, 200,000,000 shares authorized at June 30, 2019 and December 31, 2018; 10,086,909 and 9,958,448 shares issued at June 30, 2019 and December 31, 2018, respectively, and 9,715,245 and 9,601,134 shares outstanding at June 30, 2019 and December 31, 2018, respectively

 

 

1

 

 

 

1

 

Additional paid in capital

 

 

95,228

 

 

 

93,583

 

Treasury stock, at cost: 371,664 shares and 357,314 shares at June 30, 2019 and December 31, 2018, respectively

 

 

(3,625

)

 

 

(3,432

)

Accumulated other comprehensive income (loss)

 

 

12

 

 

 

(11

)

Accumulated deficit

 

 

(43,996

)

 

 

(44,994

)

Total stockholders’ equity

 

 

47,620

 

 

 

45,147

 

Commitments and contingencies (note 12)

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

55,802

 

 

$

52,907

 

 

 

 

See accompanying notes.

3


 

Airgain, Inc.

Condensed Statements of Operations

(In thousands, except share and per share data)

(Unaudited)

 

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

Sales

 

$

14,462

 

 

$

14,972

 

 

$

29,570

 

 

$

28,277

 

 

Cost of goods sold

 

 

7,777

 

 

 

8,370

 

 

 

16,100

 

 

 

15,481

 

 

Gross profit

 

 

6,685

 

 

 

6,602

 

 

 

13,470

 

 

 

12,796

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

2,203

 

 

 

2,418

 

 

 

4,541

 

 

 

4,688

 

 

Sales and marketing

 

 

2,229

 

 

 

4,095

 

 

 

4,503

 

 

 

6,979

 

 

General and administrative

 

 

1,757

 

 

 

3,738

 

 

 

3,752

 

 

 

5,942

 

 

Total operating expenses

 

 

6,189

 

 

 

10,251

 

 

 

12,796

 

 

 

17,609

 

 

Income (loss) from operations

 

 

496

 

 

 

(3,649

)

 

 

674

 

 

 

(4,813

)

 

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(189

)

 

 

(129

)

 

 

(377

)

 

 

(239

)

 

Gain on deferred purchase price liability

 

 

 

 

 

(389

)

 

 

 

 

 

(389

)

 

Interest expense

 

 

 

 

 

10

 

 

 

1

 

 

 

24

 

 

Total other income

 

 

(189

)

 

 

(508

)

 

 

(376

)

 

 

(604

)

 

Income (loss) before income taxes

 

 

685

 

 

 

(3,141

)

 

 

1,050

 

 

 

(4,209

)

 

Provision for income taxes

 

 

23

 

 

 

49

 

 

 

52

 

 

 

87

 

 

Net income (loss)

 

$

662

 

 

$

(3,190

)

 

$

998

 

 

$

(4,296

)

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.07

 

 

$

(0.34

)

 

$

0.10

 

 

$

(0.45

)

 

Diluted

 

$

0.07

 

 

$

(0.34

)

 

$

0.10

 

 

$

(0.45

)

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

9,696,876

 

 

 

9,439,025

 

 

 

9,661,474

 

 

 

9,459,272

 

 

Diluted

 

 

10,127,719

 

 

 

9,439,025

 

 

 

10,071,300

 

 

 

9,459,272

 

 

 

 

See accompanying notes.

4


 

Airgain, Inc.

Condensed Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

Net income (loss)

 

$

662

 

 

$

(3,190

)

 

$

998

 

 

$

(4,296

)

 

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

 

 

13

 

 

 

11

 

 

 

23

 

 

 

7

 

 

Total comprehensive income (loss)

 

$

675

 

 

$

(3,179

)

 

$

1,021

 

 

$

(4,289

)

 

 

 

 

See accompanying notes.

5


 

Airgain, Inc.

Condensed Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Total stockholders' equity, beginning balance

$

46,045

 

 

$

44,798

 

 

$

45,147

 

 

$

46,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Balance at beginning of period

 

1

 

 

 

1

 

 

 

1

 

 

 

1

 

    Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

    Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

  Balance at end of period

 

1

 

 

 

1

 

 

 

1

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional paid-in capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Balance at beginning of period

 

94,328

 

 

 

90,370

 

 

 

93,583

 

 

 

89,907

 

    Stock-based compensation

 

542

 

 

 

1,769

 

 

 

1,056

 

 

 

2,128

 

    Exercise of stock options

 

358

 

 

 

196

 

 

 

589

 

 

 

300

 

  Balance at end of period

 

95,228

 

 

 

92,335

 

 

 

95,228

 

 

 

92,335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Balance at beginning of period

 

(3,625

)

 

 

(2,037

)

 

 

(3,432

)

 

 

(1,257

)

    Common stock repurchases

 

-

 

 

 

(543

)

 

 

(193

)

 

 

(1,323

)

  Balance at end of period

 

(3,625

)

 

 

(2,580

)

 

 

(3,625

)

 

 

(2,580

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Balance at beginning of period

 

(1

)

 

 

(21

)

 

 

(11

)

 

 

(17

)

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

 

13

 

 

 

11

 

 

 

23

 

 

 

7

 

  Balance at end of period

 

12

 

 

 

(10

)

 

 

12

 

 

 

(10

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated deficit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Balance at beginning of period

 

(44,658

)

 

 

(43,515

)

 

 

(44,994

)

 

 

(42,409

)

    Net income (loss)

 

662

 

 

 

(3,190

)

 

 

998

 

 

 

(4,296

)

  Balance at end of period

 

(43,996

)

 

 

(46,705

)

 

 

(43,996

)

 

 

(46,705

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders' equity, ending balance

$

47,620

 

 

$

43,041

 

 

$

47,620

 

 

$

43,041

 

 

 

See accompanying notes.

6


 

Airgain, Inc.

Condensed Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

998

 

 

$

(4,296

)

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

 

 

 

 

 

 

 

 

Depreciation

 

 

268

 

 

 

266

 

Amortization

 

 

328

 

 

 

338

 

Amortization of discounts on investments, net

 

 

(185

)

 

 

(53

)

Stock-based compensation

 

 

1,056

 

 

 

2,128

 

Deferred tax liability

 

 

(8

)

 

 

19

 

Gain on deferred purchase price liability

 

 

 

 

 

(389

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

(2,709

)

 

 

1,201

 

Inventory

 

 

256

 

 

 

(52

)

Prepaid expenses and other assets

 

 

(41

)

 

 

(17

)

Accounts payable

 

 

1,231

 

 

 

132

 

Accrued bonus

 

 

(1,168

)

 

 

(726

)

Accrued liabilities

 

 

277

 

 

 

(78

)

Deferred obligation under operating lease

 

 

(79

)

 

 

(52

)

Net cash provided by (used in) operating activities

 

 

224

 

 

 

(1,579

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of available-for-sale securities

 

 

(21,065

)

 

 

(12,650

)

Maturities of available-for-sale securities

 

 

20,870

 

 

 

15,180

 

Purchases of property and equipment

 

 

(405

)

 

 

(653

)

Net cash provided by (used in) investing activities

 

 

(600

)

 

 

1,877

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Repayment of notes payable

 

 

 

 

 

(667

)

Payment on deferred purchase price liability

 

 

 

 

 

(375

)

Common stock repurchases

 

 

(193

)

 

 

(1,323

)

Proceeds from exercise of stock options

 

 

589

 

 

 

300

 

Net cash provided by (used in) financing activities

 

 

396

 

 

 

(2,065

)

Net increase (decrease) in cash and cash equivalents

 

 

20

 

 

 

(1,767

)

Cash and cash equivalents, beginning of period

 

 

13,621

 

 

 

15,026

 

Cash and cash equivalents, end of period

 

$

13,641

 

 

$

13,259

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

 

 

$

27

 

Taxes paid

 

$

46

 

 

$

18

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Accrual of property and equipment

 

$

169

 

 

$

 

 

 

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, and China.

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, 2018, from which the balance sheet information herein was derived.

The unaudited condensed balance sheet as of December 31, 2018 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 and six months ended June 30, 2019 and 2018, and the balance sheet data as of June 30, 2019 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, 2019 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 and goodwill.

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, 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-

8


Airgain, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

 

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

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

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

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

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 June 30, 2019 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 June 30, 2019, 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 June 30, 2019, 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 June 30, 2019 includes unrealized gains and losses on the Company’s available-for-sale securities.  

Note 2. Summary of Significant Accounting Policies

During the three and six months ended June 30, 2019, 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, 2018.  

 

 

 

9


Airgain, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

 

Recent Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-15, Intangibles – Goodwill and Other – Internal-Use Software, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted this pronouncement during the year ended December 31, 2018 on a prospective basis.  The impact on the financial statements are immaterial.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods and services to customers.  The standard will replace most existing revenue recognition guidance in GAAP when it becomes effective.  ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2018, and interim periods in fiscal years beginning after December 15, 2019. The Company will adopt the new guidance for the annual period ended December 31, 2019, using the modified retrospective approach. The Company is in the process of finalizing the new accounting policies, processes, and internal controls necessary to support the requirements of Topic 606 and is still evaluating the full impact the standard will have on its financial reporting.

In February 2016, the FASB issued 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, 2019 and interim periods within fiscal years beginning after December 15, 2020.  The Company is evaluating the effect that ASU 2016-02 will have on its financial statements and related disclosures.  The Company has not yet selected a transition method, nor has it determined the effect of the standard on its ongoing financial reporting.

In January 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 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 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 consolidated financial statements.

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.

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.

10


Airgain, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

 

The following table presents the computation of net income (loss) per share:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) (in thousands)

 

$

662

 

 

$

(3,190

)

 

$

998

 

 

$

(4,296

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

 

9,696,876

 

 

 

9,439,025

 

 

 

9,661,474

 

 

 

9,459,272

 

Plus dilutive effect of potential common shares

 

 

430,843

 

 

 

 

 

 

409,826

 

 

 

 

Weighted average common shares outstanding - diluted

 

 

10,127,719

 

 

 

9,439,025

 

 

 

10,071,300

 

 

 

9,459,272

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.07

 

 

$

(0.34

)

 

$

0.10

 

 

$

(0.45

)

Diluted

 

$

0.07

 

 

$

(0.34

)

 

$

0.10

 

 

$

(0.45

)

 

Diluted weighted average common shares outstanding for the three months ended June 30, 2019 includes 8,528 warrants and 422,315 options outstanding. Diluted weighted average common shares outstanding for the six months ended June 30, 2019 includes 4,614 warrants and 405,212 options outstanding.

 

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

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Employee stock options

 

 

67,104

 

 

 

1,152,520

 

 

 

257,981

 

 

 

1,349,833

 

Warrants outstanding

 

 

 

 

 

51,003

 

 

 

 

 

 

51,003

 

Total

 

 

67,104

 

 

 

1,203,523

 

 

 

257,981

 

 

 

1,400,836

 

 

 

 

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 June 30, 2019 and December 31, 2018 (in thousands):

 

 

June 30, 2019

 

 

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

Gross Unrealized Losses

 

 

Estimated Fair Value

 

 

Cash and Cash Equivalents

 

 

Short-Term Investments

 

Cash

 

$

2,564

 

 

$

 

 

$

 

 

$

2,564

 

 

$

2,564

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 1 (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

 

6,528

 

 

 

 

 

 

 

 

 

6,528

 

 

 

6,528

 

 

 

 

U.S. treasury securities

 

 

4,990

 

 

 

6

 

 

 

 

 

 

4,996

 

 

 

 

 

 

4,996

 

Subtotal

 

 

11,518

 

 

 

6

 

 

 

 

 

 

11,524

 

 

 

6,528

 

 

 

4,996

 

Level 2 (2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

9,678

 

 

 

 

 

 

 

 

 

9,678

 

 

 

1,548

 

 

 

8,130

 

Corporate debt obligations

 

 

3,038

 

 

 

4

 

 

 

 

 

 

3,042

 

 

 

 

 

 

3,042

 

Repurchase agreements

 

 

3,001

 

 

 

 

 

 

 

 

 

3,001

 

 

 

3,001

 

 

 

 

Asset-backed securities

 

 

4,401

 

 

 

3

 

 

 

 

 

 

4,404

 

 

 

 

 

 

4,404

 

Subtotal

 

 

20,118

 

 

 

7

 

 

 

 

 

 

20,125

 

 

 

4,549

 

 

 

15,576

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

34,200

 

 

$

13

 

 

 

 

 

$

34,213

 

 

$

13,641

 

 

$

20,572

 

 

11


Airgain, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

 

 

 

December 31, 2018

 

 

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

Gross Unrealized Losses

 

 

Estimated Fair Value

 

 

Cash and Cash Equivalents

 

 

Short-Term Investments

 

Cash

 

$

3,044

 

 

$

 

 

$

 

 

$

3,044

 

 

$

3,044

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 1 (1):