10-Q 1 nn-20240331.htm QUARTERLY REPORT nn-20240331.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


 

FORM 10-Q

 


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

 

For the quarterly period ended March 31, 2024

 

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: 001-40985


 

NextNav Inc. 

(Exact name of registrant as specified in its charter)


 

Delaware 

 

87-0854654

(State or other jurisdiction of
incorporation or organization)

 

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

 

1775 Tysons Blvd., 5th Floor
McLean, VA

 

22102 

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (800) 775-0982

 

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 Stock, par value $0.0001 per share

 

NN 

 

The Nasdaq Capital Market

Warrants, each to purchase one share of Common Stock

 

NNAVW

 

The Nasdaq Capital Market

 

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

Smaller reporting company

 

Accelerated filer

Emerging growth company

 

Non-accelerated filer 

 

 

 

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


There were 120,700,334 shares of the registrant’s common stock outstanding as of May 3, 2024.

 



NEXTNAV INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2024

 


Table of Content

Page

Cautionary Note Regarding Forward-Looking Statements
ii
Part I. FINANCIAL INFORMATION
1

Item 1. Financial Statements 1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18

Item 3. Quantitative and Qualitative Disclosures About Market Risk 25

Item 4. Controls and Procedures 25
Part II. OTHER INFORMATION
26

Item 1. Legal Proceedings 26

Item 1A. Risk Factors 26

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27

Item 3. Defaults Upon Senior Securities 27

Item 4. Mine Safety Disclosures 27

Item 5. Other Information 27

Item 6. Exhibits 28
Signatures
29

 

Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to “NextNav,” the “Company,” “we,” “us,” and “our” include NextNav Inc. and its subsidiaries.

 

i



Cautionary Note Regarding Forward-Looking Statements

 

This  Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include, but are not limited to, statements regarding our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future, projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, and are not guarantees of future performance. The words “may,” “anticipate,” “believe,” “expect,” “intend,” “might,” “plan,” “possible,” “potential,” “aim,” “strive,” “predict,” “project,” “should,” “could,” “would,” “will” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These statements may relate to, but are not limited to: expectations regarding our strategies and future financial performance, including future business plans or objectives, expected functionality of our geolocation services, anticipated timing and level of deployment of our services, including our TerraPoiNT system, anticipated demand and acceptance of our services, prospective performance and commercial opportunities and competitors, the timing of obtaining regulatory approvals, ability to finance our research and development activities, commercial partnership acquisition and retention, products and services, pricing, marketing plans, operating expenses, market trends, revenue, liquidity, cash flows and uses of cash, capital expenditures, and our ability to invest in growth initiatives; our ability to evolve our technology to be compatible with 5G NR (as defined below), and realize the technical benefits of such proposed evolution; our ability to realize the anticipated technical and business benefits associated with the acquisition of NextNav France (as defined below), and any subsequent mergers, acquisitions, or other similar transactions, which may be affected by, among other things, competition, and the ability of the combined business to grow and manage growth profitably; factors relating to our future operations, projected capital resources and financial position, estimated revenue and losses, projected costs and capital expenditures, prospects and plans, including the potential increase in customers on our Pinnacle network, the expansion of our services in Japan through MetCom (as defined below), and expectations about other international markets; our belief that continuing integration of our Pinnacle service into devices and applications will support revenue growth over the coming year; projections of market growth and size, including the level of market acceptance for our services; our ability to adequately protect key intellectual property rights or proprietary technology; our ability to maintain our Location and Monitoring Service (“LMS”) licenses and obtain additional LMS licenses as necessary; our ability to maintain adequate operational financial resources or raise additional capital or generate sufficient cash flows, including the adequacy of our financial resources to meet our operational and working capital requirements for the 12-month period following the issuance of this report and our ability to meet longer term expected future cash requirements and obligations; our ability to develop and maintain effective internal controls; our success in recruiting and/or retaining officers, key employees or directors; expansion plans and opportunities; costs related to being a public company; our ability to maintain the listing of our securities on Nasdaq; macroeconomic factors and their effects on our operations; and the outcome of any known and unknown litigation and regulatory proceedings, as well as assumptions relating to the foregoing.

 

Forward-looking statements are based on information available as of the date of this quarterly report on Form 10-Q, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update or revise any forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

For additional information regarding risk factors, see Part II, Item 1A, “Risk Factors” of this quarterly report on Form 10-Q, and Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023, as well as those otherwise described or updated from time to time in our other filings with the Securities and Exchange Commission (the “SEC”).

 

ii


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

 

NextNav Inc.

CONDENSED Consolidated Balance Sheets

(IN THOUSANDS, EXCEPT SHARE DATA)

 

 

 

March 31, 2024 (unaudited)

 

 

December 31, 2023

 

Assets

 

 

 

 

 

 

Current assets: 

 

 

 

 

 

 

Cash and cash equivalents

 

$

73,317

 

 

$

81,878

 

Short term investments

5,922


3,954


Accounts receivable

 

 

1,496

 

 

 

2,332

 

Other current assets

 

 

16,053

 

 

 

3,056

 

Total current assets

 

$

96,788

 

 

$

91,220

 

Network under construction

 

 

1,693

 

 

 

1,676

 

Property and equipment, net of accumulated depreciation of $10,722 and $9,724 at March 31, 2024 and December 31, 2023, respectively

 

 

18,890

 

 

 

19,885

 

Operating lease right-of-use assets

 

 

18,744

 

 

 

19,267

 

Goodwill

17,581


17,977

Intangible assets

 

 

10,362

 

 

 

10,625

 

Other assets

 

 

1,572

 

 

 

1,508

 

Total assets 

 

$

165,630

 

 

$

162,158

 










Liabilities and stockholders’ equity 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,269

 

 

$

391

 

Accrued expenses and other current liabilities

 

 

20,161

 

 

 

6,592

 

Operating lease current liabilities 

 

 

2,423

 

 

 

2,523

 

Deferred revenue

 

 

287

 

 

 

297

 

Total current liabilities

 

$

24,140

 

 

$

9,803

 

Warrants

 

 

17,761

 

 

 

7,053

 

Operating lease noncurrent liabilities

 

 

14,974

 

 

 

15,145

 

Other long-term liabilities

 

 

1,596

 

 

 

1,614

 

Long term debt, net of debt issuance cost and discount 

49,890


48,447

Total liabilities

 

$

108,361

 

 

$

82,062

 










Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, authorized 500,000,000 shares; 112,712,136 and 111,261,434 shares issued and 112,582,924 and 111,132,222 shares outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

12

 

 

 

12

 

Additional paid-in capital

 

 

846,721

 

 

 

837,416

 

Accumulated other comprehensive income

 

 

1,676

 

 

2,198

  

Accumulated deficit

 

 

(791,837

)

 

 

(760,227

)  

Common stock in treasury, at cost; 129,212 shares at each of March 31, 2024 and December 31, 2023

 

 

(665

)

 

 

(665

)

Total stockholders’ equity

 

$

55,907

 

 

$

78,734

 

 Non-controlling interests



1,362


1,362

Total liabilities and stockholders’ equity

 

$

165,630

 

 

$

162,158

 

 

See accompanying notes. 


1


 NextNav INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 


Three Months Ended March 31,

 


2024


2023

Revenue


$ 1,046

$ 830

Operating expenses:









Cost of goods sold (exclusive of depreciation and amortization) 



2,761


3,023

Research and development



4,670


4,578

Selling, general and administrative



8,446



6,054

Depreciation and amortization 



1,319


1,125

Total operating expenses


$ 17,196

$ 14,780

Operating loss


$ (16,150 )
$ (13,950 )

Other income (expense):









Interest income (expense)



(2,168 )

469

Change in fair value of warrants



(13,176 )

(2,800
)

Other loss, net



(72 )

(81 )

Loss before income taxes 


$ (31,566 )
$ (16,362 )

Benefit (Provision) for income taxes



(44 )

13

Net loss


$ (31,610 )
$ (16,349 )

Foreign currency translation adjustment



(522 )

432

Comprehensive loss


$ (32,132 )
$ (15,917 )
Net loss

(31,610 )

(16,349 )

Net loss attributable to common stockholders


$ (31,610 )
$ (16,349 )

Weighted average of shares outstanding – basic and diluted



111,061



106,405
Net loss attributable to common stockholders per share - basic and diluted
$ (0.28 )
$ (0.15
)

 

See accompanying notes.

 

2


NEXTNAV INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE DATA)

 

 

 

 Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated Other Comprehensive

 

 

Treasury stock,

 

 

Stockholders’ (Deficit)

 



Non- controlling




Total


 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Income

 

 

at cost

 

 

Equity

 



interests




Equity


Balance, December 31, 2023

111,132,222

$ 12

$ 837,416

$ (760,227 )
$ 2,198
$ (665 )
$ 78,734

$ 1,362

$ 80,096
Vesting of RSUs

1,226,498























Issuance of RSAs

38,130























Exercise of common stock options

186,074





544











544





544
Reclassification of warrant liability to Common Stock warrants 2,468 2,468


2,468
Stock-based compensation expense







6,293











6,293





6,293
Net loss










(31,610 )







(31,610 )




(31,610 )
Foreign currency translation adjustment













(522 )




(522 )




(522 )
Balance, March 31, 2024

112,582,924

$ 12

$ 846,721

$ (791,837 )
$ 1,676

$ (665 )
$ 55,907

$ 1,362

$ 57,269

See accompanying notes.

3


 

NextNav INC.

CONDENSED Consolidated Statements of Changes in Stockholders’ equity

(UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE DATA)

 

 

 

Common Stock

 

 

Additional Paid-In

 

 

Accumulated

 

 

Accumulated Other Comprehensive

 


Treasury stock,

 

 

Stockholders’ (Deficit)



Non- controlling



Total

 

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

(Loss)

 


at cost

 

 

Equity

interests


Equity

 

Balance, December 31, 2022

 

 

106,417,265

 

 

$

12

 

 

$

787,130

 

 

$

(688,492

)

 

$

1,371


$

(4

)

 

$ 100,017

$ 3,847

$

103,864

 

Vesting of RSUs

619,387























Issuance of RSAs

27,744























Exercise of common stock options

91,258




25











25





25
Stock-based compensation expense







4,548










4,548




4,548
Net loss









(16,349 )






(16,349 )




(16,349 )
Foreign currency translation adjustment













432





432





432
Balance, March 31, 2023

107,155,654

$ 12

$ 791,703

$ (704,841 )
$ 1,803
$ (4 )
$ 88,673

$ 3,847

$ 92,520

See accompanying notes.

4


 NextNav INC.

CONDENSED Consolidated Statements of Cash Flows

(UNAUDITED)

(IN THOUSANDS)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(31,610

)

 

$

(16,349

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,319

 

 

 

1,125

 

Equity-based compensation

 

 

4,244

 

 

 

3,866

 

Change in fair value of warranty liability

 

 

13,176

 

 

2,800

Realized and unrealized gain on short term investments



(50 )

16

Equity method investment loss 



40


55

Asset retirement obligation accretion

 

 

16

 

 

 

15

 

Amortization of debt discount

1,442



Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

836

 

 

979

 

Other current assets

 

 

(434

)

 

 

(46

)

Other assets

 

 

(107

)

 

 

27

Accounts payable

 

 

878

 

 

(364

)

Deferred revenue

 

 

(10

)

 

 

(34

)

Accrued expenses and other liabilities

 

 

3,022

 

 

395

Operating lease right-of-use assets and liabilities 

 

 

253


 

 

88

 

Net cash used in operating activities

 

$

(6,985

)

 

$

(7,427

)









Investing activities

 

 

 

 

 

 

 

 

Capitalization of costs and purchases of network assets, property, and equipment

 

 

(32

)

 

 

(856

)
Purchase of marketable securities


(5,918 )

Sale and maturity of marketable securities

4,000


5,213

Purchase of internal use software 

 

 

(163

)

 

 

(341

)

Net cash (used in) provided by investing activities

 

$

(2,113

)

 

$

4,016










Financing activities

 

 

 

 

 

 

 

 

Payments towards debt

(28 )

(27 )

Proceeds from exercise of stock options

 

 

544

 

 

 

26

 

Net cash provided by (used in) financing activities

 

$

516

 

$

(1

Effect of exchange rates on cash and cash equivalents

 

 

21

 

 

(5

)

Net decrease in cash and cash equivalents

 

 

(8,561

)

 

 

(3,417

)

Cash and cash equivalents at beginning of period

 

 

81,878

 

 

 

47,230

 

Cash and cash equivalents at end of period

 

$

73,317

 

 

$

43,813

 










Non-cash financing information

 

 

 

 

 

 

 

 

Capital expenditure included in accounts payable

 

$

278

 

 

$

591

 

 

See accompanying notes.


5


  


NextNav INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the three months ended March 31, 2024

 

1. Organization and Business

 

Principal Business

 

NextNav Inc. and its consolidated subsidiaries (collectively “NextNav” or the “Company”) deliver next generation positioning, navigation and timing (“PNT”) solutions designed to enable a high-quality, terrestrial complement and backup to the U.S. Global Positioning System (“GPS”).  NextNav’s solutions are built on a robust asset platform, including 8 MHz of nearly nationwide wireless spectrum in the Lower 900 MHz band, intellectual property and deployed network systems.  The Company, subject to appropriate regulatory approvals, has signed an agreement to acquire licenses for an additional 4MHz of spectrum in the Lower 900MHz band.  Additionally, on April 16, 2024 NextNav filed a petition for rulemaking with the FCC to update the Lower 900MHz band plan to utilize a 15MHz nationwide configuration for both PNT and 5G broadband.  The Company’s Pinnacle system provides “floor-level” altitude service to any device with a barometric pressure sensor, including most off-the-shelf smartphones. The Company’s TerraPoiNT and NextGen systems are designed to overcome the limitations inherent in the space-based systems through a network of wide area terrestrial location transmitters that broadcast a PNT signal over the Company’s licensed spectrum, with NextGen intended to utilize standards-based 5G broadband technologies.

 

Since its inception, NextNav has incurred recurring losses and generated negative cash flows from operations and has primarily relied upon debt and equity financings to fund its cash requirementsDuring the three months ended March 31, 2024 and 2023, the Company incurred net losses of $31.6 million and $16.3 million, respectively. During the three months ended March 31, 2024 and 2023, net cash used in operating activities was $7.0 million and $7.4 million, respectively. As of March 31, 2024, cash and cash equivalents and marketable securities was $79.2 million.  The Company’s primary use of cash is to fund operations as NextNav continues to grow. The Company expects to incur additional losses and higher operating expenses for the foreseeable future, specifically as NextNav invests in ongoing research and development and our PNT networks.


Managing liquidity and the Company’s cash position is a priority of the Company. The Company continually works to optimize its expenses in light of the growth of its business and adapt to changes in the economic environment. The Company believes that the cash and cash equivalents and marketable securities as of March 31, 2024 will be sufficient to meet its working capital and capital expenditure needs, including all contractual commitments, beyond the next 12 months from the filing of this Quarterly Report on Form 10-Q. The Company believes it will meet longer term expected future cash requirements and obligations through a combination of its existing cash and cash equivalents balances and marketable securities, cash flows from operations, and issuance of equity securities or debt offerings. However, this determination is based upon internal financial projections and is subject to changes in market and business conditions.

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in these condensed consolidated financial statements.  

 

Unaudited Interim Financial Information

 

The condensed consolidated financial statements as of March 31, 2024 are unaudited. These interim financial statements of NextNav have been prepared in accordance with U.S. General Accepted Accounting Principles (“GAAP”) and SEC instructions for interim financial information and should be read in conjunction with NextNavs Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”), which the Company filed with the SEC on March 13, 2024.

 

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and reflect, in management’s opinion, all adjustments of a normal, recurring nature that are necessary for the fair statement of the Company’s financial position as of March 31, 2024, results of operations for the three months ended March 31, 2024 and 2023, and changes in stockholders’ equity and cash flows for the three months ended March 31, 2024 and 2023, but are not necessarily indicative of the results expected for the full fiscal year or any other period.

 

There have been no changes to the Company’s significant accounting policies described in the 2023 Form 10-K that have had a material impact on these condensed consolidated financial statements and related notes.


6



Use of Estimates

 

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period and accompanying notes. These estimates include those related to the useful lives and recoverability of long-lived and intangible assets, valuation of common stock warrants, income taxes and equity-based compensation, among others. NextNav bases estimates on historical experience, anticipated results and various other assumptions, including assumptions of future events, it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets, liabilities, equity, revenue and expenses, that are not readily apparent from other sources. Actual results and outcomes could differ materially from these estimates and assumptions. 


Cash and Cash Equivalents and Marketable Securities

 

Cash and cash equivalents include all cash in banks and highly liquid investments with an original maturity of three months or less when purchased. The combined account balances held on deposit at each institution typically exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Company seeks to reduce this risk by maintaining such deposits with high quality financial institutions that management believes are creditworthy. Further, the Company seeks to minimize its exposure to banking risk by limiting the amount of uninsured deposits and investing its excess cash in U.S. government and government agency bonds, and money market funds.

 

The Company invests excess cash primarily in U.S. government and government agency bonds and money market funds, and began investing in U.S. treasury bills in 2024. The Company classifies all marketable securities that have stated maturities of three months or less from the date of purchase as cash equivalents, and those that have stated maturities of over three months as short-term investments on the Condensed Consolidated Balance Sheets. The Company determines the appropriate classification of investments in marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. Marketable securities that are held for resale are classified as "trading securities" and are measured at fair value with the related gains and losses, including unrealized, recognized in interest income (expense). Marketable securities not classified as held to maturity or as trading securities are classified as "available-for-sale securities" and the fair value option (“FVO”) was elected, for which related gains and losses, including unrealized gains and losses and interest, are recognized in interest income (expense). The FVO election allows the Company to account for the marketable securities at fair value, which is consistent with the manner in which the instruments are managed. For the three months ended March 31, 2024, the Company recorded $367 thousand of gains from fair value changes from FVO available-for-sale debt securities in interest income (expense) in the Condensed Consolidated Statements of Comprehensive Loss. There were no debt securities classified as available-for-sale in 2023.


Revenue 

 

The following table presents the Company’s revenue disaggregated by category and source:

 

 


Three Months Ended March 31,

 


2024


2023

 


(in thousands)

Commercial


$ 1,041

$ 825

Government contracts



5


5

Total revenue


$ 1,046


$ 830


7


 

Contract Balances

 

Accounts receivable are billed and unbilled amounts related to the Company’s rights to consideration as performance obligations are satisfied when the rights to payment become unconditional but for the passage of time. As of March 31, 2024 and December 31, 2023, the Company’s accounts receivable balances were comprised of $1.5 million and $2.3 million, respectively. The Company estimates losses on accounts receivable based on expected losses, including its historical experience of actual losses. Receivables are considered impaired and written-off when it is probable that all contractual payments due will not be collected in accordance with the terms of the agreement. As of March 31, 2024 and December 31, 2023, all accounts receivable balances were current and no allowances for doubtful accounts were recorded. 

 

Contract liabilities relate to amounts billed in advance, or advance consideration received from customers, for which transfer of control of the good or service occurs at a later point in time. As of March 31, 2024 and December 31, 2023, the Company’s contract liabilities were $287 thousand and $297 thousand, respectively, and are recorded in deferred revenue in the Condensed Consolidated Balance Sheets. 

 

Equity-Based Compensation

 

Measurement of equity-based compensation with employees is based on the estimated grant date fair value of the equity instruments issued. The fair value of stock options is determined using the Black-Scholes option pricing model. The fair value of restricted awards is based on the closing price of NextNav’s common stock on the date of grant. NextNav recognizes equity-based compensation on a straight-line basis over the requisite service period of the grant, which is generally equal to the vesting period. NextNav accounts for forfeitures as they occur. 

 

The following details the amount of stock-based compensation included in cost of goods sold, research and development, and selling, general and administrative expenses:

 

 


Three Months Ended March 31,

 


2024


2023

 


(in thousands)

Cost of goods sold


$ 73

$ 538

Research and development



1,508



1,600

Selling, general and administrative



2,663



1,728

Total stock-based compensation expense


$ 4,244

$ 3,866

 

Basic and Diluted Net Loss per Share

 

Basic loss per share (“EPS”) excludes dilution for common share equivalents and is computed by dividing net loss available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock outstanding during each period, adjusted for the effect of dilutive common share equivalents. 

 

Restricted shares are included in the computation of basic EPS as they vest and are included in diluted EPS, to the extent they are dilutive, determined using the treasury stock method. Outstanding options and warrants are included in the computation of diluted EPS, to the extent they are dilutive, determined using the treasury stock method.

 

8



 The determination of the diluted weighted average shares is included in the following calculation of EPS:

 

 


Three Months Ended March 31,

 


2024


2023

 


(in thousands, except per share amounts)

Numerator









Net loss attributable to common stockholders


$ (31,610
)
$ (16,349
)

 









Denominator









Weighted average shares – basic and diluted



111,061


106,405
Basic and diluted loss per share
$ (0.28 )
$ (0.15 )

 

The following details anti-dilutive unvested restricted stock units and unvested restricted stock awards, as well as the anti-dilutive effects of the outstanding warrants and stock options:

 

 


Three Months Ended March 31,

Antidilutive Shares Excluded


2024


2023

 


(in thousands)

Warrants



44,268


18,750

Stock Options



4,702


3,740

Unvested Restricted Stock Units



5,844


3,949

Unvested Restricted Stock Awards



345



208


Equity Method Investment 


The Company applies the equity method of accounting to investments when it has significant influence, but not controlling interest, in the investee. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions.


The initial carrying value of equity method investment is based on the amount paid to purchase the interest in the investee entity. Subsequently, the investment is increased or decreased by the Company’s proportionate share in the investee’s earnings or losses and decreased by cash distributions from the investee. The Company eliminates from its financial results all significant intercompany transactions to the extent of its ownership interest, including the intercompany portion of transactions with equity method investee. The Company’s share of the investee’s income or loss is recorded on a one quarter lag.  


The Company evaluates equity method investment for impairment based upon a comparison of the fair value of the equity method investment to its carrying value, when impairment indicators exist. If the Company determines a decline in the fair value of an equity method investment below its carrying value is other-than-temporary, an impairment is recorded. 


Leases

 

NextNav leases office spaces under non-cancellable leases as well as site leases for towers and shelters under operating leases related to its network. Site leases are entered into throughout the United States under which NextNav receives the rights to install equipment used to transmit its services over its licensed spectrum. The Company, at the inception of the contract, determines whether a contract is or contains a lease based on assessment of the terms and conditions of the contract. The Company classifies leases with contractual terms longer than twelve months as either operating or finance. The Company has elected not to recognize lease assets and liabilities for its short-term leases, which are defined as leases with an initial term of twelve months or less.

 

9



The Company’s leases may include options to extend or terminate the lease. The option to renew may be automatic, at the option of NextNav or mutually agreed to between the landlord and NextNav. Lease terms include the non-cancellable term and periods under options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. 

 

The Company’s lease agreements generally contain lease and non-lease components. Payments under the lease arrangements are primarily fixed. Non-lease components primarily include payments for utilities and maintenance. The Company combines fixed payments for non-lease components with lease payments and accounts for them together as a single lease component which increases the amount of the Company’s lease assets and liabilities. Certain lease agreements contain variable payments, which are expensed as incurred and not included in the lease assets and liabilities. These amounts include payments for common area maintenance.

 

Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate, because the interest rate implicit in the Company’s leases is not readily determinable. The Company’s incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Lease assets are reduced by landlord incentives, plus any direct costs from executing the leases or lease prepayments reclassified from “Other current assets” upon lease commencement. Operating lease expense is recognized on a straight-line basis over the lease term. Monthly rent expense includes any site related utility payments or other fees such as administrative or up-front fees contained in the lease agreements that are determinable upon execution of the lease agreement. 

 

Acquired finite-lived intangible assets

 
       Acquired finite-lived intangible assets primarily includes proprietary technology and software. See Note 4 — Intangibles.

 

Goodwill


Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Goodwill is not amortized but is tested for impairment annually in the fourth quarter or more frequently if events or changes in circumstances indicate that the asset may be impaired. The Company operates as one reporting unit. When testing goodwill for impairment, the Company may first perform an optional qualitative assessment. If the Company determines it is not more likely than not the reporting unit’s fair value is less than its carrying value, then no further analysis is necessary. If the Company determines that it is more likely than not that the fair value of its reporting unit is less than its carrying amount, then the quantitative impairment test will be performed. Under the quantitative impairment test, if the carrying amount of the Company’s reporting unit exceeds its fair value, the Company will recognize an impairment loss in an amount equal to that excess but limited to the total amount of goodwill. No goodwill impairment was recorded for the three months ended March 31, 2024 and for the year ended December 31, 2023The following summarizes the Company's goodwill activities (in thousands):

 

 


Three Months Ended March 31,

 


2024

2023

 


(in thousands)

Beginning Balance


$ 17,977

$ 17,493

Changes in foreign exchange rates



(396 )

328

Ending Balance


$ 17,581

$ 17,821


Long term debt

 

      In conjunction with the issuance of senior secured notes in May and July of 2023, the Company issued warrants to the lenders. The Company allocated the proceeds from its debt issuance to long term debt and equity classified warrants based on relative fair value as determined by the Discounted Cash Flow approach and Monte Carlo simulation model, respectively. The portion of proceeds allocated to equity-classified warrants and direct debt issuance costs are classified as debt discounts. The carrying value of long term debt in the Company’s condensed consolidated balance sheet consists of principal amount of debt, net of debt discounts. Debt discounts are amortized to interest expense based on the related debt agreements primarily using the effective interest method.

 

10


Non-controlling Interests 

 

The non-controlling interest in the Company’s condensed consolidated financial statements represents the warrants for Nestwave, SAS (as subsequently renamed, “NextNav France”) shares that were owned by the selling shareholders of NextNav France. Holders of the warrants do not have the right to income or obligation to losses, and the Company did not attribute any net loss to the non-controlling interests for the three months ended March 31, 2024 and 2023.

 

Foreign Currency Translation


The functional currency of NextNav’s foreign subsidiaries is generally the local currency. Assets and liabilities are translated into U.S. dollars at the exchange rate in effect at the Condensed Consolidated Balance Sheet date. Operating accounts are translated at an average rate of exchange for the respective accounting periods. Translation adjustments resulting from the process of translating foreign currency financial statements into U.S. dollars are reported as a component of accumulated other comprehensive loss. Transaction gains and losses reflected in the functional currencies are charged to income or expense at the time of the transaction.

 

Net transaction gains (losses) from foreign currency contracts recorded in the Condensed Consolidated Statements of Comprehensive Loss were immaterial for the three months ended March 31, 2024 and 2023. The only component of other comprehensive loss is currency translation adjustments for all periods presented. No income tax expense was allocated to the currency translation adjustments. 


Recent Accounting Developments Not Yet Adopted


During the fourth quarter of 2023, the Financial Accounting Standards Board issued two Accounting Standards Updates (“ASUs”) that require additional disclosures related to reportable segments under ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07) and income taxes under ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). ASU 2023-07 is effective for the Company's annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. It requires the Company to disclose information about significant expenses on an interim and annual basis for each reportable segment. ASU 2023-09 is effective for the Company's annual periods beginning January 1, 2026 with early adoption permitted, and requires the Company to disclose additional information on the rate reconciliation and income taxes paid. The Company is currently evaluating the potential effect that the updated standards will have on the financial statement disclosures.


Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed consolidated financial statements. 


3. Accrued Expenses and Other Current Liabilities


Accrued expenses and other current liabilities consisted of the following:




March 31, 2024



December 31, 2023




(in thousands)


Accrued salary and other employee liabilities


$

2,881



$

3,913


Accrued legal and professional services



828




324


Accrued interest

2,333


583
Asset purchase agreement liability(1)

12,284



Other accrued liabilities



1,835




1,772


Total


$

20,161



$

6,592



(1)Refer to Note 5 to our condensed consolidated financial statements for the three months ended March 31, 2024 included elsewhere in this Quarterly Report on Form 10-Q for more information.


11




4. Intangibles


Intangible assets as of March 31, 2024 and December 31, 2023 consist of following (in thousands):




March 31, 2024

December 31, 2023

Gross Amount


Accumulated Amortization




Net Carrying Value

Gross Amount


Accumulated Amortization




Net Carrying Value
Indefinite-Lived intangible assets
$
3,467

$

$ 3,467

$ 3,467

$

$ 3,467
Acquired Software

7,103


2,168


4,935

7,217


2,050


5,167
Acquired Technology

586


69


517

599


58


541
Internal Use Software

2,811


1,368


1,443

2,634


1,184


1,450
Total $ 13,967

$ 3,605

$ 10,362

$ 13,917

$ 3,292

$ 10,625


The weighted average remaining useful lives of acquired software and acquired technology were 10.6 years as of March 31, 2024.


Amortization expense on intangibles assets was $0.3 million for each of the three months ended March 31, 2024 and 2023. Future amortization is expected as follows:


2024
$ 901
2025

1,073
2026

891
2027

527
2028 and thereafter

3,503

$ 6,895

5. Asset Purchase Agreement

On March 7, 2024, the Company and its wholly-owned subsidiary Progeny LMS, LLC entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Telesaurus Holdings GB and Skybridge Spectrum Foundation to acquire (1) certain Multilateration Location and Monitoring Service licenses (the “M-LMS Licenses”) issued by the Federal Communications Commission (“FCC”) and (2) rights to a petition for reconsideration, dated December 20, 2017, which, if granted, may reinstate additional M-LMS Licenses owned by the sellers and terminated by the FCC in 2017 (the "Transaction"). The closing (“Closing”) of the Transaction is subject to customary conditions as well as the approval of the Superior Court of the State of California, County of Alameda (“Alameda Court Approval”) and approval of the FCC of the application seeking the transfer and assignment of the M-LMS Licenses to the Company by final order (“FCC Approval”) and will occur upon the assignment of the M-LMS Licenses following the FCC Approval.

 

The consideration for the Transaction is payable as follows:

 

·       $2.5 million in cash consideration within 30 days of the Alameda Court Approval;

·     $7.5 million in shares of NextNav common stock on the earlier of the FCC Approval or, if no action has been taken by the FCC, November 15, 2024 (payable regardless of whether Closing occurs) (“First Noncash Consideration”); and

·       $20.0 million in shares of NextNav common stock within 30 days of the assignment of the M-LMS Licenses at Closing following the FCC Approval.

 

The Company subsequently received the Alameda Court Approval on March 28, 2024 and accrued the $2.5 million cash consideration payable in April 2024 as a current liability (within accrued expenses and other current liabilities in the condensed consolidated balance sheet as of March 31, 2024) and prepaid asset (within other current assets in the condensed consolidated balance sheet as of March 31, 2024). As of March 31, 2024, the Company recorded an additional current liability and prepaid asset of $9.8 million with respect to the fair value of shares expected to be issued (based on a 20-day volume weighted average price) equivalent to the $7.5 million First Noncash Consideration, as the payment obligation is upon passage of time and is not contingent. The Company accrues a loss contingency liability related to the nonrefundable prepayments if it is probable that the Transaction will be terminated or cancelled. As of March 31, 2024, management expects the Transaction to successfully complete, and no loss contingency liability was recorded.

 

The Asset Purchase Agreement provides for contingent consideration in the amount of $20 million, payable in shares of NextNav common stock. Payment is contingent upon the Closing and the FCC granting additional flexibility in the use of M-LMS spectrum, including the M-LMS spectrum covered by the M-LMS Licenses.

 

12


6. Equity Method Investment 

 

As of March 31, 2024, the Company’s total ownership of MetCom Inc., a privately-owned Japanese joint stock company (kabushiki kaisha) (“MetCom”), consisted of 702,334 shares representing ownership of 14.8%. The Company provides licenses to its technology, infrastructure and subscriber equipment to MetCom to support MetCom’s efforts in commercializing terrestrial positioning technology (both TerraPoiNT and Pinnacle) in Japan. Due to the technological dependencies, the Company’s equity ownership and representation on MetCom’s board of directors, the Company has significant influence, but not controlling interest, over MetCom. The Company’s investment in MetCom is accounted for under the equity method. The basis difference in the Company’s cost basis and the basis reflected at the investee entity level is allocated to equity method goodwill and is not amortized. The Company recognized a loss of $40 thousand and $55 thousand in the three months ended March 31, 2024 and March 31, 2023, respectively, that is recorded in other income (expenses). The carrying value of the Company’s investment in MetCom was $665 thousand and $705 thousand as of March 31, 2024 and December 31, 2023, respectively, and is classified in other long-term assets. The Company had $28 thousand and $107 thousand in accounts receivable from MetCom as of March 31, 2024 and December 31, 2023, respectively.

 

The Company holds a warrant (the “MetCom Warrant”) issued by MetCom which entitles the Company to purchase additional shares at an exercise price of JPY10 per share, such that the Company may obtain an aggregate total of 33% of MetCom common stock on an “as-converted” basis. The MetCom Warrant is subject to certain vesting conditions which were not met as of March 31, 2024; therefore, the MetCom Warrant was not exercisable.

  

7. Fair Value

 

NextNav uses observable and unobservable inputs to determine the value of its assets and liabilities recorded at fair value. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. The three-tier hierarchy for inputs used to measure fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, where applicable, is as follows:

 

- Level 1 — Quoted prices in active markets for identical assets or liabilities

 

- Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities

 

- Level 3 — No observable pricing inputs in the market

 

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. NextNav’s assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. NextNav effectuates transfers between levels of the fair value hierarchy, if any, as of the date of the actual circumstance that caused the transfer.

 

The following table presents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(in thousands)

 

March 31, 2024

 

 

 

 

 

 

 


 

 

Cash and Cash Equivalents - Money Market Funds
$ 117

$


$

$ 117
Cash and Cash Equivalents - Available-for-sale debt securities with fair value option election




70,242





70,242
Short term investments - Available-for-sale debt securities with fair value option election




5,922





5,922

Private Placement Warrants

 


 

 


 

 


17,761

 

 


17,761

 


















December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents - Money Market Funds
$ 127

$

$

$ 127
Cash and Cash Equivalents - Trading debt securities




79,425





79,425
Short term investments - Trading debt securities




3,954





3,954

Private Placement Warrants

 

$

 

 

$

 

 

$

7,053

 

 

$

7,053

 

 

13


The carrying values of cash and cash equivalents, accounts payable, accrued expenses, amounts included in other current assets, and current liabilities that meet the definition of a financial instrument, approximate fair value due to their short-term nature.


Assets, liabilities, and equity instruments that are measured at fair value on a nonrecurring basis include fixed assets and intangible assets. The Company recognizes these items at fair value when they are considered to be impaired or upon initial recognition. The fair value of these assets and liabilities are determined with valuation techniques using the best information available and may include quoted market prices, market comparables and discounted cash flow models.

 

Level 3 Liabilities 

 

The Company engaged a third-party valuation firm to assist with the fair value analysis of the Private Placement Warrants (as defined below). The analysis used commonly accepted valuation methodologies and best practices to determine the fair value of the equity, in accordance with fair value standards and U.S. GAAP. For the Private Placement Warrants that were outstanding as of March 31, 2024 and December 31, 2023, NextNav used a Monte Carlo simulation model. The following table shows the assumptions used in each respective model:  

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

Values

 

 

Values

 

Stock Price

 

$

6.58

 

 

$

4.45

 

Strike price

 

$

11.50

 

 

$

11.50

 

Holding Period/Term (years)

 

 

2.58

 

 

 

2.82

 

Volatility

 

 

85.50

%

 

 

66.90

%

Expected dividends

 

 

None

 

 

 

None

 

Risk-Free Rate

 

 

4.48

%

 

 

4.05

%

Fair value of warrants

 

$

2.61

 

 

$

0.91

 

  

The table below provides a reconciliation of the beginning and ending balances for the liabilities measured at fair value using significant unobservable inputs (Level 3).

 

Warrants:

 

(in thousands)

 

Balance as of December 31, 2023

 

$

7,053

 

Fair value adjustment of Private Placement Warrants

 

 

13,176

Reclassification of warrant liability to Common Stock warrants

(2,468 )

Balance as of March 31, 2024

 

$

17,761

 

 

8. Long term debt, net

 

On May 9, 2023 (the “Initial Closing”), pursuant to the terms of the Note Purchase Agreement (the “NPA”) and Indenture Agreement (the “Indenture”), the Company issued $50.0 million in aggregate principal amount of senior secured notes (the “Original Notes”) with a fixed interest rate of 10% to a group of lenders (the “Lenders”) including Whitebox Advisors LLC, Susquehanna International Group, and Clutterbuck Capital Management. The Notes will mature on December 1, 2026 with interest payable semi-annually in arrears on June 1 and December 1 of each year. The Company may elect, in its sole discretion, to pay up to 50% of the accrued and unpaid interest on the Notes due with its common stock.

 

Under the NPA, the Lenders had the right, but not the obligation, to purchase additional Notes (the “Additional Notes” and, together with the Original Notes, the “Notes”), on a pro rata basis, in an aggregate principal amount of $20.0 million, to be exercisable within 30 days of the Initial Closing. Subsequent to the Initial Closing, on June 8, 2023, the note purchasers elected to purchase such Additional Notes in an aggregate principal amount of $20.0 million in senior secured notes due 2026. The Additional Notes were issued on July 6, 2023.  The terms and conditions of the Additional Notes are the same as the Original Notes.

 

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In conjunction with the issuance of Original Notes, the Company issued 18,518,520 warrants (the “Initial Warrants”) at an exercise price of $2.16 per share and with the issuance of the Additional Notes on July 6, 2023, the Company issued 7,407,407 warrants (the Additional Warrants,” and, together with the Initial Warrants, the “Debt Warrants”) at an exercise price of $2.16 per share to purchase Company’s common stock to the Lenders. The Company has the right to redeem for cash the applicable pro rata portion of any Debt Warrant on each of May 1, 2025, September 1, 2025 and December 1, 2025, in each case, at a redemption price of $0.01 per share of underlying common stock, where there exists both a Funding Shortfall (as defined in the Debt Warrants) and the market price of the underlying common stock, calculated in accordance with the provisions of the Debt Warrants, exceeds 130% of the exercise price of the Debt Warrants. The fair value of the Initial Warrants and the Additional Warrants was $14.6 million and $8.2 million, respectively, on the respective issuance date and was classified as debt discount. The fair value was determined based on no observable pricing inputs in the market and is categorized accordingly as Level 3 in the fair value hierarchy. The Company agreed to file a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), registering the resale of the Debt Warrants and the shares of common stock underlying the Debt Warrants within 35 business days of the Initial Closing. The Company filed such registration statement with the SEC on June 23, 2023, which the SEC declared effective on June 29, 2023.

 

The carrying value of the Notes was $49.9 million as of March 31, 2024 net of debt discount of $20.1 million. Net amortization of the debt discount totaled $1.4 million for the three months ended March 31, 2024. The total estimated fair value of the Notes approximates the carrying value of the Notes as of March 31, 2024. The fair value was determined based on no observable pricing inputs in the market and is categorized accordingly as Level 3 in the fair value hierarchy.


Additional Interests

 

The Notes are subject to additional interest of up to 0.50% per annum if (i) the Company fails to timely make certain required filings with the SEC, until such filings are made, or (ii) the Notes are not otherwise freely tradeable under Rule 144 under the Securities Act.

 

Redemption and Early Repayment 

 

The Company may redeem the Notes, in whole or in part, at any time on or after May 9, 2024 (the one year anniversary of the Initial Closing) at a redemption price equal to 101% of the principal amount of the Notes, plus any accrued and unpaid interest.

 

In the event of certain non-ordinary course asset sales, including sales of certain intellectual property or spectrum licensed by the FCC to the Company or its subsidiaries, the Company must make a mandatory repurchase offer for a portion of the Notes outstanding with the proceeds of such sale, at a price equal to 100% of the aggregate principal amount of the Notes with accrued and unpaid interest, subject to certain thresholds and limitations set forth in the Indenture.

 

In the event of a change of control, each holder has the right, at such holder’s option and subject to the limitations set forth in the Indenture, to require the Company to repurchase for cash all or any portion of such holder’s Notes at a price equal to 101% of the aggregate principal amount with accrued and unpaid interest.

 

Debt Covenant Compliance

 

The Notes are guaranteed on a first lien senior secured basis by NextNav’s domestic subsidiaries and secured by substantially all of the assets of the Company and its domestic subsidiaries. 

 

The Indenture contains customary covenants limiting the ability of the Company and its subsidiaries to incur or guarantee additional indebtedness; pay dividends or distributions on, or redeem or repurchase, capital stock; make certain investments or other restricted payments; sell assets; enter into transactions with affiliates; and merge or consolidate or sell all or substantially all of its assets. These covenants are subject to a number of important and significant limitations, qualifications and exceptions. The Indenture also contains customary events of default. Failure to comply with such covenants could result in an acceleration of the maturity of indebtedness outstanding and additional interest of up to 2.00% per annum under the Indenture.

 

As of March 31, 2024, the Company was in compliance with all of the applicable debt covenants described above.

  

15


9. Warrants and Warrant Liability

 

As of March 31, 2024NextNav had 44,267,686 warrants outstanding, which includes: (a) 11,944,896 public warrants associated with Spartacus Acquisition Corp.’s (“Spartacus”) initial public offering (the “Public Warrants”), (b) 6,805,094 warrants issued to Spartacus in a private placement on the initial public offering closing date (the “Private Placement Warrants”) and (c) 25,517,696 warrants issued in connection with the Notes (the Debt Warrants, as further described in Note 8).


The Private Placement Warrants are classified as a liability on the Company’s Condensed Consolidated Balance Sheet as of March 31, 2024. During the three months ended March 31, 2024, 945,436 Private Placement Warrants were reclassified from liability to equity (Public Warrants). The terms included in the Private Warrants that initially precluded equity classification were no longer applicable. Accordingly, NextNav reclassified $2.5 million from warrant liability to additional paid-in capital in its Condensed Consolidated Balance Sheet.


Holders of the Public Warrants, Private Placement Warrants and Debt Warrants are entitled to acquire shares of common stock of NextNav. With respect to the Public Warrants and Private Placement Warrants, each whole warrant entitles the registered holder to purchase one share at an exercise price of $11.50 per share. The Public Warrants and Private Placement Warrants expire on October 28, 2026. With respect to the Debt Warrants, each warrant entitles the registered holder to purchase one share at an exercise price of $2.16 per share. The Debt Warrants expire on June 1, 2027.


NextNav has the right to redeem the outstanding Public Warrants in whole and not in part at a price of $0.01 per warrant upon a minimum of 30 days’ prior written notice of redemption, if and only if the last sales price of the Company’s common stock matched or exceeded $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which NextNav sends the notice of redemption to the warrant holders. 

The Private Placement Warrants are identical in all respects to the Public Warrants except that, so long as they are held by the current holder or its permitted transferees: (i) they will not be redeemable by NextNav; (ii) they may be exercised by the holders on a cashless basis; and (iii) they are subject to registration rights.


The Company has the right to redeem for cash the applicable pro rata portion of any Debt Warrant on each of May 1, 2025, September 1, 2025 and December 1, 2025, in each case, at a redemption price of $0.01 per share of underlying common stock, where there exists both a Funding Shortfall (as defined in the Debt Warrant) and the market price of the underlying common stock, calculated in accordance with the provisions of the Debt Warrants, exceeds 130% of the exercise price of the Debt Warrants. The fair value of the Debt Warrants was $22.8 million on the issuance date and was classified as debt discount. The fair value was determined based on no observable pricing inputs in the market and is categorized accordingly as Level 3 in the fair value hierarchy. The Company agreed to file a registration statement under the Securities Act, registering the resale of the Debt Warrants and the shares of common stock underlying the Debt Warrants within 35 business days of the Initial Closing. The Company filed such registration statement with the SEC on June 23, 2023, which the SEC declared effective on June 29, 2023.

  

16


10. Common Stock

 

As of March 31, 2024, NextNav had authorized the issuance of 600,000,000 shares of capital stock, par value, 0.0001 per share, consisting of (a) 500,000,000 shares of common stock and (b) 100,000,000 shares of undesignated preferred stock. As of March 31, 2024, NextNav had 112,712,136 shares of common stock issued and 112,582,924 shares of common stock outstanding.

 

11. Commitments and Contingencies

 

Litigation and Legal Matters


From time to time, the Company is party to litigation and other legal matters incidental to the conduct of its business. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. The Company accrues liabilities for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. As of March 31, 2024, the Company was not involved in any such matters, individually or in the aggregate, which management believes would have a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows. 

12. Income Taxes

 

The Company computes its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pretax income or loss and adjusts the provision for discrete tax items recorded in the period. A valuation allowance has been established against the Company’s U.S. federal and state deferred tax assets, which results in an annualized effective tax rate for the Company’s U.S. operations of 0.0%. During Q2 of 2023 a valuation allowance was established against the Company’s French deferred tax asset. For the three months ended March 31, 2024, the Company recorded an income tax provision of $44 thousand related to foreign tax activity in India on a pretax loss of $31.6 million, resulting in an effective tax rate of (0.14)%. For the three months ended March 31, 2023, the Company recorded an income tax benefit of $13 thousand related to foreign tax activity on a pretax loss of $16.4 million, resulting in an effective tax rate of 0.08%. These effective tax rates differ from the U.S. federal statutory rate primarily due to the valuation allowance against the Company’s domestic and French deferred tax assets.

 

13. Subsequent Events

 

The Company has completed an evaluation of all subsequent events through the date of this Quarterly Report on Form 10-Q to ensure that these financial statements include appropriate disclosure of events both recognized in the financial statements and events which occurred but were not recognized in the financial statements. The Company has concluded that no subsequent events have occurred that require disclosure.

 

17



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

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying quarterly unaudited condensed consolidated financial statements and our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). Our 2023 Form 10-K includes additional information about our significant accounting policies, practices, and the transactions that underlie our financial results, as well as a detailed discussion of the most significant risks and uncertainties associated with our financial condition and operating results. In addition to historical financial information, some of the information contained in the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Actual results and outcomes could differ materially for a variety of reasons. You should review “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Quarterly Report on Form 10-Q, as well as Item 1A, “Risk Factors” in our 2023 Form 10-K, as well as those otherwise described or updated from time to time in our other filings with the SEC, for a discussion of important factors that could cause our actual results to differ materially from the results described or implied by the forward-looking statements contained in the following discussion and analysis.

 

Overview

 

We are the market leader in delivering resilient, next generation positioning, navigation and timing (“PNT”) solutions designed to complement and back up existing Global Positioning System (“GPS”) and Global Navigation Satellite Systems (“GNSS”) by addressing the limitations and vulnerabilities inherent in space-based systems. Our complementary PNT solutions are built on a deep asset base, which we are evolving to utilize 5G New Radio (“5G NR”) technologies. We expect NextGen, the evolution of our technology platform to 5G NR, to significantly improve the efficiency and flexibility of our operations, technically enabling the delivery of high-quality PNT based on a 5G broadband deployment.  Since the inception of NextNav, LLC in 2007, we have secured valuable Federal Communications Commission (“FCC”) licenses for a contiguous 8 MHz band of Lower 900 MHz spectrum covering over 90% of the U.S. population, subject to appropriate regulatory approvals have signed an agreement to acquire licenses for an additional 4MHz of Lower 900MHz spectrum, been granted more than 190 patents related to our systems and services, and standardized our TerraPoiNT technology in 3GPP, the global telecommunications standards-setting body.


 On April 16, 2024 we petitioned the Federal Communications Commission (the “FCC”) to commence a rule making to update the Lower 900MHz band plan to allow the Company to utilize a 15MHz nationwide configuration for both PNT and 5G broadbandThe Company believes that modernizing the Lower 900 MHz Band will simultaneously enable a high-performing terrestrial PNT network to complement and back up GPS, a critical national security imperative, and add 5G mobile broadband capacity, a substantial public interest benefit.  NextNav’s NextGen technology will allow one or more partners to integrate our Lower 900MHz spectrum into their 5G networks, while NextNav implements, operates and manages additional PNT-optimized infrastructure over the 5G network.

 

We currently deliver differentiated PNT solutions through our network-based Pinnacle and TerraPoiNT solutions. Our Pinnacle service provides accurate altitude to any device with a barometric pressure sensor, including most off-the-shelf smartphones., We launched our Pinnacle network in partnership with AT&T Services, Inc. (“AT&T”) for FirstNet®, the nationwide, interoperable public safety broadband network, and our network covers over 90% of commercial structures over three stories in the U.S. In addition to public safety applications and FirstNet®, our network is being used for enhanced 911 (“E911”) by Verizon Communications, Inc. (“Verizon”), and a growing set of devices operating on the remaining national cellular network providers.  Our Pinnacle network is also an important component of our PNT resiliency services, and is being evaluated as a persistent PNT characterization platform. 

 

Our TerraPoiNT systems is a terrestrially-based network designed to address the limitations and vulnerabilities inherent in space-based PNT systems, and our NextGen technology, through the adoption of 5G NR, will simultaneously support both PNT and 5G broadband capabilities.  Space-based PNT systems transmit a faint, unencrypted signal, which is often unavailable indoors, distorted in urban areas, and vulnerable to both jamming and spoofing. TerraPoiNT and its NextGen evolution overcome these limitations through the terrestrial transmission of a PNT signal on licensed Lower 900 MHz spectrum. Unlike space-based signals, the TerraPoiNT and NextGen signals can be reliably received indoors and in urban areas, are difficult to jam or spoof, and can support robust authentication. TerraPoiNT and NextGen signals can embed Pinnacle information to provide a full 3D PNT solution, and can be configured to provide NIST timing distribution services. Because our NextGen technology will be built on 5G NR, we expect significantly increased geographic coverage, more rapid network availability and expanded device availability for PNT services when combined with one or more 5G broadband partners’ networks.  We believe that these capabilities are an essential complement and backup in the event of GPS disruptions, and are a critical need due to the economy’s reliance on GPS for location and precision timing. GPS resiliency is increasingly a U.S. national security priority, and is rising in priority in the European Union, non-European Union countries in Eastern Europe and in other parts of the world due to both the demonstrated vulnerability and lack of local control of space-based signals and systems, highlighted by recent events in Ukraine, the Middle East and elsewhere. Critical infrastructure, including communications networks and power grids, require a reliable GPS signal for accurate timing. A failure of GPS could be catastrophic, and there is no comprehensive, terrestrial backup that is widely deployed today.

 

18



Simultaneously, demand for wireless data services continues to grow. The backbone of wireless data services, electromagnetic spectrum, is a finite resource. Our spectrum