NEXTNAV INC

Previous wording

Weare 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 5 G New Radio (“5 G NR”) technologies. We expect NextGen, the evolution of our technology platform to 5 G NR, to significantly improve the efficiency and flexibility of our operations, technically enabling the delivery of high-quality PNT based on a 5 G 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 4 MHz of Lower 900 MHz spectrum, been granted more than 180 patents related to our systems and services, and standardized our TerraPoiNT technology in 3 GPP, the global telecommunications standards-setting body.

Current wording

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 900MHz 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, and standardized our TerraPoiNT technology in 3GPP, the global telecommunications standards-setting body. As of September 30, 2024, we held approximately 161 patents related to our systems and services.

Previous wording

On April 16, 2024 we petitioned the FCC to commence a rule making to update the Lower 900 MHz band plan to allow us to utilize a 15 MHz nationwide configuration for both PNT and 5 G broadband. We believe 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 5 G mobile broadband capacity, a substantial public interest benefit. Our NextGen technology is designed to allowone or more partners to integrate our Lower 900 MHz spectrum into their 5 G networks, while we implement, operate and manage additional PNT-optimized infrastructure over the 5 G network.

Current wording

On April 16, 2024, we petitioned the FCC to commence a rule making to update the Lower 900MHz band plan to allow us to utilize a 15MHz nationwide configuration for both PNT and 5G broadband (the “Petition”). We believe that modernizing the Lower 900MHz 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. As part of the ongoing FCC regulatory process, on August 6, 2024, the FCC issued a Public Notice seeking public comments concerning the Petition. Our NextGen technology is designed to allow one or more partners to integrate our Lower 900MHz spectrum into their 5G networks, while we implement, operate and manage additional PNT-optimized infrastructure over the 5G network.

Previous wording

Asof June 2024, TerraPoiNT is deployed and available, with metro-wide service in the San Francisco Bay Area and select services available in 92 total markets nationally. In addition, NextNav supports a system deployed by the National Aeronautics and Space Administration at its Langley Research Center in Hampton, VA for drone operations research and is contracted to provide service at its Ames facility in Mountain View, CA, leveraging our network in the Bay Area

Current wording

Asof September 2024, TerraPoiNT is deployed and available, with metro-wide service in the San Francisco Bay Area and select services availablein over 90 markets nationally. In addition, NextNav supports a system deployed by the National Aeronautics and Space Administration at its Langley Research Center in Hampton, VA for drone operations research and is contracted to provide service at its Ames facility in Mountain View, CA, leveraging our network in the Bay Area.

Previous wording

Cost of goods sold (“COGS”) consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility costs for our operations and manufacturing teams. COGS also includes expenses for site leases, cost of equipment, and professional services related to the maintenance of the equipment at each leased site. We expect our operations costs to increase for the foreseeable future as we continue to invest in our Pinnacle and TerraPoiNT networks in domestic U.S. and international markets.

Current wording

Cost of goods sold (“COGS”) consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility costs for our operations and manufacturing teams. COGS also includes expenses for site leases, cost of equipment, software license costs, including cloud hosting costs, and professional services related to the maintenance of the equipment at each leased site. Our operations costs may increase for the foreseeable future as we continue to invest in our NextGen, Pinnacle and TerraPoiNT technologies in domestic U.S. and international markets.

Previous wording

Research and development expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility costs for our research and development functions. Research and development costs also include outside professional services for software and hardware development, cloud hosting costs, and software licensing costs. We expect our research and development costs to increase for the foreseeable future as we continue to invest in research and development for our current and future products.

Current wording

Research and development expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility costs for our research and development functions. Research and development costs also include outside professional services for software and hardware development, andsoftware license costs, including cloud hosting costs. We expect our research and development costs to increase for the foreseeable future as we continue to invest in research and development for our current and future products.

Previous wording

We expect our selling, general and administrative expenses to increase for the foreseeable future with the growth of our business, and as a result of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, and additional insurance expenses, investor relations activities, and other administrative and professional services. As a result, we expect our selling, general and administrative expenses will increase in absolute dollars, subject to fluctuations in the volume of stock-based compensation granted, but may fluctuate as a percentage of total revenue over time.

Current wording

We expect our selling, general and administrative expenses to increase for the foreseeable future with the growth of our business, in pursuit of regulatory and technology initiatives, and as a result of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, and additional insurance expenses, investor relations activities, and other administrative and professional services.

Previous wording

Revenue increased by $0.3 million, or 38.1%, to $1.1 million for thethree months ended June 30, 2024 from $0.8 million for thethree months ended June 30, 2023. The increase was driven by an increase in recurring service revenue from technology and services contracts with commercial customers, including in support of government opportunities. For thethree months ended June 30, 2024, onecustomer accounted for 71% of total revenue and another customer accounted for 14% of total revenue. For thethree months ended June 30, 2023, one customer accounted for 89% of total revenue.

Current wording

Revenue increased by $0.6 million, or 56.5%, to $1.6 million for thethree months ended September 30, 2024 from $1.0 million for thethree months ended September 30, 2023. The increase was driven by an increase in service revenue from technology and services contracts with government and commercial customers. For thethree months ended September 30, 2024, onecustomer accounted for 54% of total revenue and another customer accounted for 32% of total revenue. For thethree months ended September 30, 2023, one customer accounted for 69% of total revenue andanother customer accounted for 15% of total revenue.

Previous wording

Research and development expenses decreased by $0.9 million, or 17.7%, to $4.1 million for thethree months ended June 30, 2024 from $5.0 million for thethree months ended June 30, 2023. The decrease was primarily driven by a $0.6 million decrease instock-based compensation, a $0.3 million decrease in other operational expenses, and a $0.2 million decrease in software license expenses. The decreases were partially offset by a $0.1 million increase inpayroll-related expenses, and a $0.1 million increase in outside consulting expenses.

Current wording

Research and development expenses decreased by $1.5 million, or 29.2%, to $3.5 million for thethree months ended September 30, 2024 from $5.0 million for thethree months ended September 30, 2023. The decrease was primarily driven by a $0.8 million decrease instock-based compensation, a $0.4 million decrease in software license expenses, a $0.2 million decrease in outside consulting expenses, and a $0.2 million decrease in other operational expenses. The decreases were partially offset by a $0.1 million increase inpayroll-related expenses.

Previous wording

Selling, general and administrative expenses increased by $1.6 million, or 24.4%, to $8.1 million for thethree months ended June 30, 2024 from $6.5 million for thethree months ended June 30, 2023. The increase was primarily driven by a $0.7 million increase inpayroll-related expenses driven by headcount costs andemployment separation costs, a$0.5 million increase inprofessional services, a $0.4 million increase instock-based compensation, a $0.1 million increase in outside consulting expenses, anda$0.1 million increase in other operational expenses. The increases were partially offset by a $0.2 million decrease in directors’ and officers’ insurance.

Current wording

Selling, general and administrative expenses increased by $1.9 million, or 30.3%, to $8.0 million for thethree months ended September 30, 2024 from $6.2 million for thethree months ended September 30, 2023. The increase was primarily driven by a $1.1 million increase inprofessional services, a$0.4 million increase inpayroll-related expenses driven by headcount cost, a $0.3 million increase in marketing and recruiting cost, a $0.2 million increase in outside consulting expenses, anda$0.1 million increase instock-based compensation. The increases were partially offset by a $0.2 million decrease in directors’ and officers’ insurance.

Previous wording

Depreciation and amortization expenses increased by $0.1 million, or 10%, to $1.3 million for thethree months ended June 30, 2024 from $1.2 million for thethree months ended June 30, 2023. The increase in depreciation and amortization expense is primarily attributable to placing TerraPoiNT network assets in service after the second quarter of 2023.

Current wording

Depreciation and amortization expenses increased by $0.1 million, or 5%, to $1.3 million for thethree months ended September 30, 2024 from $1.3 million for thethree months ended September 30, 2023. The increase in depreciation and amortization expense is primarily attributable to placing the TerraPoiNT network assets in service since the third quarter of 2023.

Previous wording

Interest expense, net of interest income, increased by $2.0 million, or 576%, to $2.3 million for the three months ended June 30, 2024 from $0.3 million for the three months ended June 30, 2023. The increase in interest expense was due to interest and amortization of debt discounts on our senior secured notes issued during the second and third quarters of 2023.

Current wording

Interest expense, net of interest income, increased by $0.5 million, or 27%, to $2.2 million for the three months ended September 30, 2024 from $1.7 million for the three months ended September 30, 2023. The increase in interest expense was due to interest and amortization of debt discounts on our senior secured notes issued during the second and third quarters of 2023 and lower interest income earned from our cash and cash equivalents balance and on marketable securities.

Previous wording

Other expense was $6.7 million for thethree months ended June 30, 2024 compared with other expense of $0.2 million for thethree months ended June 30, 2023. The change was primarily driven by the changes in the fair value of warrants and asset purchase agreement liability.

Current wording

Other income was $2.5 million for thethree months ended September 30, 2024 compared with other expense of $6.8 million for thethree months ended September 30, 2023. The change was primarily driven by the changes in the fair value of warrants and asset purchase agreement liability.

Previous wording

Revenue increased by $0.5 million, or 32.0%, to $2.2 million for the six months ended June 30, 2024 from $1.6 million for the six months ended June 30, 2023. The increase was driven by an increase in recurring service revenue from technology and services contracts with commercial customers, including in support of government opportunities. For the six months ended June 30, 2024, one customer accounted for 73% of total revenue and another customer accounted for 14% of total revenue. For the six months ended June 30, 2023, one customer accounted for 87% of total revenue.

Current wording

Revenue increased by $1.1 million, or 41.4%, to $3.8 million for the nine months ended September 30, 2024 from $2.7 million for the nine months ended September 30, 2023. The increase was driven by an increase in service revenue from technology and services contracts with government and commercial customers. For the nine months ended September 30, 2024, one customer accounted for 65% of total revenue, while another customer represented 14%, and a third customer contributed 12% of total revenue. For the nine months ended September 30, 2023, one customer accounted for 80% of total revenue.

Previous wording

COGS decreased by $0.2 million, or 6.9%, to $2.9 million for thethree months ended June 30, 2024 from $3.1 million for thethree months ended June 30, 2023. The decrease was primarily driven by a $0.5 million decrease in stock-based compensation, and a $0.1 million decrease in outside consulting expenses. The decreases were partially offset by a $0.2 million increase in non-recurring engineering services, anda $0.2 million increase in other operational expenses.

Current wording

COGS decreased by $1.1 million, or 12%, to $8.3 million for the nine months ended September 30, 2024 from $9.4 million for the nine months ended September 30, 2023. The decrease was primarily driven by a $1.4 million decrease instock-based compensation, a$0.2 million decrease in outside consulting expenses, and a $0.2 million decrease inother operational expenses. The decreases were partially offset bya $0.6 million increase in payroll-related expenses, and a $0.1 million increase in non-recurring engineering services.

Previous wording

Research and development expenses decreased by $0.8 million, or 8.3%, to $8.8 million for the six months ended June 30, 2024 from $9.6 million for the six months ended June 30, 2023. The decrease was primarily driven by a $0.7 million decrease instock-based compensation, a $0.6 million decrease in software license expenses, and a$0.1 million decrease in professional services. The decreases were partially offset by a $0.6 million increase in payroll-related expenses driven by headcount.

Current wording

Research and development expenses decreased by $2.3 million, or 15.5%, to $12.3 million for the nine months ended September 30, 2024 from $14.6 million for the nine months ended September 30, 2023. The decrease was primarily driven by a $1.5 million decrease instock-based compensation, a $0.5 million decrease in software license expenses, a$0.3 million decrease in outside consulting expenses, a$0.2 million decrease in other operational expenses, and a $0.1 million decrease in professional services. The decreases were partially offset bya $0.3 million increase in payroll-related expenses.

Previous wording

Selling, general and administrative expenses increased by $4.0 million, or 31.7%, to $16.6 million for the six months ended June 30, 2024 from $12.6 million for the six months ended June 30, 2023. The increase was primarily driven by a $1.8 million increase in payroll-related expenses driven byheadcount costs, executive andemployment separation costs, a$1.3 million increase in stock-based compensation, a $0.9 million increase in professional services, a $0.2 million increase in outside consulting expenses, anda$0.2 million increase in other operational expenses. The increases were partially offset by a $0.4 million decrease in directors’ and officers’ insurance.

Current wording

Selling, general and administrative expenses increased by $5.8 million, or 31.2%, to $24.6 million for the nine months ended September 30, 2024 from $18.7 million for the nine months ended September 30, 2023. The increase was primarily driven by a $2.2 million increase in payroll-related expenses driven byheadcount costs, executive andemployment separation costs, a $2.0 million increase in professional services, a$1.4 million increase in stock-based compensation, a $0.4 million increase in outside consulting expenses, a $0.3 million increase in marketing and recruiting cost, anda$0.2 million increase in other operational expenses. The increases were partially offset by a $0.7 million decrease in directors’ and officers’ insurance.

Previous wording

Depreciation and amortization expenses increased by $0.3 million, or 13%, to $2.6 million for the six months ended June 30, 2024 from $2.3 million for the six months ended June 30, 2023. The increase in depreciation and amortization expense is primarily attributable to placing TerraPoiNT network assets in service after the second quarter of 2023.

Current wording

Depreciation and amortization expenses increased by $0.4 million, or 10%, to $3.9 million for the nine months ended September 30, 2024 from $3.6 million for the nine months ended September 30, 2023. The increase in depreciation and amortization expense is primarily attributable to placing TerraPoiNT network assets in service since the third quarter of 2023.

Previous wording

Interest expense, net of interest income, for the six months ended June 30, 2024 was $4.5 million. Interest income, net of interest expense, for the six months ended June 30, 2023 was $0.1 million. The increase in interest expense was due to interest and amortization of debt discounts on our senior secured notes issued during the second and third quarters of 2023.

Current wording

Interest expense, net of interest income, for the nine months ended September 30, 2024 was $6.7 million. Interest income, net of interest expense, for the nine months ended September 30, 2023 was $1.6 million. The increase in interest expense was due to interest and amortization of debt discounts on our senior secured notes issued during the second and third quarters of 2023.

Previous wording

Other expense was $19.9 million for the six months ended June 30, 2024 compared with other expense of $3.1 million for the six months ended June 30, 2023. The change was primarily driven by the changes in the fair value of warrants and asset purchase agreement liability.

Current wording

Other expense was $17.4 million for the nine months ended September 30, 2024 compared with other expense of $10.0 million for the nine months ended September 30, 2023. The change was primarily driven by the changes in the fair value of warrants and asset purchase agreement liability.

Previous wording

We have incurred losses since our inception and to date have generated only limited revenue. We have primarily relied upon debt and equity financings to fund our cash requirements. During thesix months ended June 30, 2024 and 2023, we incurred net losses of $56.0 million and $32.1 million, respectively. During thesix months ended June 30, 2024, our net cash used in operating activities and investing activities was $19.3 million and $22.3 million, respectively. During thesix months ended June 30, 2023, our net cash used in operating activities and investing activities was $15.9 million and $26.7 million, respectively. As of June 30, 2024, we had cash and cash equivalents and marketable securities of $86.3 million and an accumulated deficit of $816.2 million. We expect to incur additional losses and higher operating expenses for the foreseeable future. Our primary use of cash is to fund our operations as we continue to grow our business. We will require a significant amount of cash for expenditures as we invest in ongoing research and development and our PNT networks.

Current wording

We have incurred losses since our inception and to date have generated only limited revenue. We have primarily relied upon debt and equity financings to fund our cash requirements. During thenine months ended September 30, 2024 and 2023, we incurred net losses of $69.6 million and $55.3 million, respectively. During thenine months ended September 30, 2024, our net cash used in operating activities and investing activities was $26.1 million and $17.7 million, respectively. During thenine months ended September 30, 2023, our net cash used in operating activities and investing activities was $24.6 million and $1.5 million, respectively. As of September 30, 2024, we had cash and cash equivalents and marketable securities of $86.8 million and an accumulated deficit of $829.8 million. We expect to incur additional losses and higher operating expenses for the foreseeable future. Our primary use of cash is to fund our operations as we continue to grow our business. We will require a significant amount of cash for expenditures as we invest in ongoing research and development and our PNT networks.

Previous wording

In 2023, we issued $70.0 million in aggregate principal amount of senior secured notes with a fixed interest rate of 10% to the lenders thereto. Such notes will mature on December 1, 2026 with interest payable semi-annually in arrears on June 1 and December 1 of each year. We may elect, at our sole discretion, to pay up to 50% of the accrued and unpaid interest on the senior secured notes due with our common stock. Refer to Note 8 to our condensed consolidated financial statements for the three and six months ended June 30, 2024 included elsewhere in this Quarterly Report on Form 10-Q. Since the end of second quarter and as of July 31, 2024,2.3 million of Debt Warrants were exercised for an aggregate of $5.0 million in cash.

Current wording

In 2023, we issued $70.0 million in aggregate principal amount of senior secured notes with a fixed interest rate of 10% to the lenders thereto. Such notes will mature on December 1, 2026 with interest payable semi-annually in arrears on June 1 and December 1 of each year. We may elect, at our sole discretion, to pay up to 50% of the accrued and unpaid interest on the senior secured notes due with our common stock. Refer to Note 8 to our condensed consolidated financial statements for the three and nine months ended September 30, 2024 included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

Net cash used in operating activities during thesix months ended June 30, 2024 was $19.3 million, resulting primarily from a net loss of $56.0 million adjusted for non-cash charges of $7.9 million for stock-based compensation, non-cash expense of $21.7 million for change in the fair value of warrant liability,$2.6 million for depreciation and amortization, and $3.0 million for amortization of debt discount. These changes were partially offset by a net increase in operating liabilities of$3.6 million, non-cash income of$1.9 million for change in fair value of asset purchase agreement liability and $0.3 million realized and unrealized gain on marketable securities.

Current wording

Net cash used in operating activities during thenine months ended September 30, 2024 was $26.1 million, resulting primarily from a net loss of $69.6 million adjusted for non-cash charges of $11.2 million for stock-based compensation, non-cash expense of $19.5 million for change in the fair value of warrant liability,$3.9 million for depreciation and amortization, and $4.5 million for amortization of debt discount. These changes were partially offset by a net increase in operating liabilities of$7.0 million, non-cash income of$2.2 million for change in fair value of asset purchase agreement liability and $0.5 million realized and unrealized gain on marketable securities.

Previous wording

Net cash used in operating activities during thesix months ended June 30, 2023 was $15.9 million, resulting primarily from a net loss of $32.1 million adjusted for non-cash charges of $8.2 million for stock-based compensation, non-cash expense of $3.1 million for change in the fair value of warrant liability,$2.3 million for depreciation and amortization,$0.5 million for amortization of debt discount, $(0.2) million realized and unrealized gain on marketable securities, and $0.1 million for equity method investment loss. Additionally, there was a net decrease in operating assets of $2.2 million.

Current wording

Net cash used in operating activities during thenine months ended September 30, 2023 was $24.6 million, resulting primarily from a net loss of $55.3 million adjusted for non-cash charges of $12.6 million for stock-based compensation, non-cash expense of $9.8 million for change in the fair value of warrant liability,$3.6 million for depreciation and amortization,$1.8 million for amortization of debt discount, $0.5 million realized and unrealized gain on marketable securities, and $0.2 million for equity method investment loss. Additionally, there was a net decrease in operating assets of $3.3 million.

Previous wording

Net cash used in investing activities during thesix months ended June 30, 2024 was $22.3 million, representing thepurchase ofmarketable securities, net of sale and maturity ofmarketable securities, and cash used for asset purchase agreement and internal use software.

Current wording

Net cash used in investing activities during thenine months ended September 30, 2024 was $17.7 million, representing netpurchase ofmarketable securitiesof $14.4 million, and cash used for asset purchase agreement of $2.7 million and cash used for property and equipment, including internal use software of $0.6 million.

Previous wording

Net cash used in investing activities during the six months ended June 30, 2023 was $26.7 million, representing proceeds from the sale and maturity of marketable securities, partially offset by cash used for property and equipment primarily related to the deployment of the Pinnacle and TerraPoiNT network and internal use software.

Current wording

Net cash used in investing activities during the nine months ended September 30, 2023 was $1.5 million, representing proceeds from the sale and maturity of marketable securities, partially offset by cash used for property and equipment primarily related to the deployment of the Pinnacle and TerraPoiNT network and internal use software.

Previous wording

Net cash provided by financing activities during thesix months ended June 30, 2024 was $22.7 million, primarily reflecting cash proceeds from exercise of warrants and stock options.

Current wording

Net cash provided by financing activities during thenine months ended September 30, 2024 was $29.7 million, primarily reflecting cash proceeds from exercise of warrants and stock options.

Previous wording

Net cash provided by financing activities during thesix months ended June 30, 2023 was $48.1 million, primarily reflecting cash proceeds from senior secured loans and partially offset by debt issuance cost.

Current wording

Net cash provided by financing activities during thenine months ended September 30, 2023 was $69.0 million, primarily reflecting cash proceeds from senior secured loans and partially offset by debt issuance cost.

Previous wording

For information regarding new accounting pronouncements, and the impact of these pronouncements on our condensed consolidated financial statements, refer to Note 2 to our condensed consolidated financial statements for thesix months ended June 30, 2024 included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

For information regarding new accounting pronouncements, and the impact of these pronouncements on our condensed consolidated financial statements, refer to Note 2 to our condensed consolidated financial statements for thenine months ended September 30, 2024 included elsewhere in this Quarterly Report on Form 10-Q.