AIRGAIN INC Income Taxes Disclosure

Note 10. Income Taxes

Income Taxes

Tax Rate Reconciliation

Significant Components of Current and Deferred Taxes

We have established a valuation allowance against our net deferred tax assets due to the uncertainty surrounding the realization of such assets. The Company periodically evaluates the recoverability of the deferred tax assets. At such time it is determined that it is more likely than not that deferred assets are realizable, the valuation allowance will be reduced. The Company has recorded a valuation allowance of $18.5 million as of December 31, 2025 as it does not believe it is more likely than not that certain deferred tax assets will be realized due to the recent history of both pre-tax book income and losses, the lack of taxable income available in carryback periods or feasible tax-planning strategies, the limited existing taxable temporary differences, and the subjective nature of forecasting future taxable income into the future. The Company increased its valuation allowance by approximately $1.8 million during the year ended December 31, 2025.

As of December 31, 2025 the Company had federal and state net operating loss (NOL) carryforwards of approximately $26.4 million, and $14.0 million, respectively. The federal NOL generated post 2017 of $16.8 million can be carried forward indefinitely and may generally be used to offset up to 80% of future taxable income for each year. The remaining federal and state NOL carryforwards begin to expire in 2029 and 2028, respectively, if unused.

As of December 31, 2025 the Company had federal and state tax credit carryforwards of approximately $3.5 million, and $2.8 million, respectively, after reduction for uncertain tax positions. The federal tax credit carryforwards will begin to expire in 2026, if unused, and the California tax credits can be carried forward indefinitely. The other state tax credit carryforwards will begin to expire in 2032.

The above federal and state carryforwards and tax credit carryforwards may be subject to an annual limitation under section 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), and similar state provisions if we experience one or more ownership changes which would limit the amount of NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change as defined by Section 382 and 383 of the Code, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a rolling three-year period. The Company has completed an ownership change analysis through December 31, 2024 and incorporated the impact of ownership changes prior to this date by reducing the Company's NOL and tax credit carryforwards that may not be utilized due to the annual limitations associated with those ownership change dates. Our use of federal and state NOL and tax credit carryforwards could be limited further by the provisions of Section 382 of the Code, depending upon the timing and amount of additional equity securities that we have issued or will issue, subsequent to December 31, 2025. State NOL carryforwards may be similarly limited. If a change in ownership were to occur, NOL and tax credit carryforwards could be eliminated or restricted. If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by ownership changes, if any, will not impact our effective tax rate.

The unrecognized tax benefit amounts are reflected in the determination of the Company’s deferred tax assets. If recognized, none of these amounts would impact the company’s effective tax rate due to the existence of the valuation allowance against deferred tax assets. The Company does not foresee material changes to its uncertain tax benefits within the next twelve months.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax

expense. The Company has no accrual for interest or penalties on balance sheets as of December 31, 2025. The Company has no accrual for interest or penalties on balance sheets as of December 31, 2024. The Company has recognized no interest and/or penalties in the Statement of Operations for each of the years ended December 31, 2025 and 2024.

The Company is subject to taxation in the United States, various state jurisdictions, China and the United Kingdom. Due to the existence of federal, state and foreign net operating loss and credit carryovers, the Company's tax years that remain open and subject to examination by tax jurisdiction are years 2006 and forward for federal and years 2008 and forward for the state of California.

The One Big Beautiful Bill Act of 2025 (OBBBA) was signed into law on July 4, 2025. The OBBBA makes changes to the U.S. corporate income tax including reinstating the option to claim 100% accelerated depreciation deduction on qualified property and immediate expensing of domestic research and development costs while foreign expenditures will continue to be capitalized and amortized over 15 years. The enactment of the legislation did not have a material impact on our income tax rate during the year ended December 31, 2025 and is not expected to have a material impact on our income tax rate in future years.