Anterix Inc

Notes to Consolidated Financial Statements

1. Nature of Operations and Basis of Presentation

Anterix Inc (the “Company”) is the utility industry’s partner, empowering enhanced visibility, control and security for a modern grid. The Company’s vision is to deliver secure, scalable solutions enabled by private wireless broadband connectivity, for the benefit of utilities and the communities that they serve. As the largest holder of licensed spectrum in the 900 MHz band (896-901/935-940 MHz) throughout the contiguous United States, plus Hawaii, Alaska and Puerto Rico, the Company is uniquely positioned to deliver solutions that support secure, resilient and customer-controlled operations. The Company is focused on commercializing its spectrum assets and expanding the benefits and solutions it offers to enable the Company’s targeted utility and critical infrastructure customers to deploy private broadband networks.

Business Developments

Executive Chairman Retirement

On December 30, 2024, the Company announced Morgan O’Brien’s retirement as a director, as Executive Chairman of the Board of Directors of the Company (the “Board”), and as an executive of the Company, each effective as of December 31, 2024. In addition, the Company entered into a consulting agreement with Mr. O’Brien. See Note 5 Related Party Transactions for further discussion.

Furthermore, on December 30, 2024 the Company also announced that Thomas Kuhn, a current director and Vice Chair of the Board, was appointed as the Chairman of the Board, effective January 1, 2025. See Note 12 Subsequent Events for further discussion.

On October 8, 2024, the Company announced the appointment of Scott Lang as President and Chief Executive Officer, to succeed Robert Schwartz effective by November 1, 2024 (the “CEO Transition”). As part of the CEO Transition, the Board also designated Mr. Lang as the Company’s principal executive officer for purposes of the rules and regulations of the U.S Securities and Exchange Commission (the “SEC”). Due to his service as an executive of the Company, effective as of the date of his appointment, Mr. Lang resigned from serving on the Board’s Audit Committee and Nominating and Governance Committee.

In connection with Mr. Schwartz’s resignation, the Company negotiated a Transition and Separation Agreement (the “Transition Agreement”), which provided the following benefits (subject to effectiveness and the terms and conditions of the Transition Agreement), (i) two times the sum of his annualized salary and target bonus, for an aggregate amount of approximately $2.2 million, (ii) a pro-rata target bonus for fiscal year 2025, less amount previously paid for fiscal year 2025, for an aggregate amount of approximately $0.2 million and (iii) a subsidized COBRA continuation coverage for 18 months. Additionally, in connection with the Transition Agreement, unvested time-based awards and performance-based awards accelerated and vested on a pro-rated basis, and Mr. Schwartz received an option exercise period extension. See Note 8 Stockholders’ Equity for further discussion.

Oncor Agreement

In June 2024, the Company entered into a license purchase agreement with Oncor Electric Delivery Company LLC (“Oncor”) for total estimated consideration of $102.5 million under which Oncor will purchase 900 MHz spectrum licenses covering 95 counties to deploy a private wireless broadband network in its transmission and distribution service area (the “Oncor Agreement”). The total payment of $102.5 million comprises an initial payment of $10.0 million received in June 2024 with remaining payments due to the Company for each county, at closing. The timing and rights to milestone payments could vary as 900 MHz broadband licenses are granted by the Federal Communications Commission (the “FCC”), broadband licenses are assigned to Oncor and incumbents are cleared by the Company. Oncor operates more than 143,000 circuit miles of transmission and distribution lines in Texas, delivering electricity to more than four million homes and businesses across a service territory that has an estimated population of approximately 13 million people. See Note 10 Contingencies and Guaranty for further discussion on the Oncor Agreement.

Basis of Presentation and Use of Estimates

The consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Pursuant to the rules and regulations of the SEC, certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024, filed with the SEC on June 26, 2024 (the “2024 Annual Report”). In the Company’s opinion, all normal and recurring adjustments considered necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been included. The Company believes that the disclosures made in the unaudited consolidated interim financial statements are adequate to make the information not misleading. The results of operations for the interim periods presented are not necessarily indicative of the results for the year. The Company is also required to make certain estimates and assumptions that affect the reported amounts. These estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the financial statements in the applicable period. Accordingly, actual results could materially differ from those estimates.

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Recently Issued Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board issued Accounting Standard Updates 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures. This update requires public business entities to disclose, on an annual and interim basis, disaggregated information about certain income statement expense line items in the notes to the financial statements. This update is effective for annual periods beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027. Early adoption is permitted and should be applied either prospectively or retroactively. The Company has not yet determined the impact of this pronouncement on its consolidated financial statements.

2. Revenue

The following table provides information regarding the Company’s revenue for each of the services it provides pursuant to its spectrum revenue agreements for the three and nine months ended December 31, 2024 and 2023 (in thousands):

1. Revenue recognized during the three and nine months ended December 31, 2024 and 2023 was included in deferred revenue at the beginning of the respective periods.

Spectrum Revenue Agreements

Refer to the Company’s 2024 Annual Report for a description of the Company’s spectrum revenue agreements entered into prior to March 31, 2024.

Capitalized Contract Costs

The Company capitalizes incremental costs associated with obtaining a spectrum revenue agreement with a customer, which generally includes sales commissions. The Company’s capitalized contract costs consisted of the following activity during the three and nine months ended December 31, 2024 and 2023 (in thousands):

1. Current assets are recorded as prepaid expenses and other current assets and noncurrent assets are recorded as other assets on the Company’s Consolidated Balance Sheets.

Contract Liabilities

Contract liabilities primarily relate to advanced consideration received from customers in connection with spectrum revenue agreements, for which revenue is recognized over the term of each delivered broadband lease. The Company’s contract liabilities consisted of the following activity during the three and nine months ended December 31, 2024 and 2023 (in thousands):

1. Represents milestone payments received from customer contracts pursuant to the terms of the associated spectrum revenue agreements, net of delivery delay adjustments.

2. Current liabilities and noncurrent liabilities are recorded as deferred revenue on the Company’s Consolidated Balance Sheets.

Remaining Performance Obligations

Revenue allocated to remaining performance obligations of the Company’s contracts represent contracted revenue that will be recognized in future periods. Total performance obligations include deferred revenue (i.e., contract liabilities) as well as amounts that will be invoiced and recognized in future periods. Revenue allocated to remaining performance obligations was $182.9 million as of December 31, 2024, which will be recognized over the remaining contract terms up to 30 years.

3. Escrow Deposits

Escrow deposits are considered restricted cash as the deposits are restricted from use until the terms of the escrow agreement are met. Escrow deposits classified as current assets on the Company’s Consolidated Balance Sheets are related to the portion of the obligations of the escrow agreement that are expected to be met within a twelve-month period beginning December 31, 2024. Obligations not expected to be completed within this twelve-month period are classified as non-current assets.

In connection with the Lower Colorado River Authority Agreement (the “LCRA Agreement”), the Company and Lower Colorado River Authority (“LCRA”) entered into an escrow agreement. Pursuant to the escrow agreement, the escrow funds shall be held and invested in a money market deposit account. All interest and other income earned shall be allocated to the Company, payable with the final distribution of the escrow funds. The escrow funds shall be distributed upon written request by both the Company and LCRA pursuant to the terms within the LCRA Agreement. In December 2023, the Company received $15.0 million, of which $7.5 million was deposited in an escrow account. As of December 31, 2024, the Company has classified $0.2 million and $7.4 million as short-term and long-term escrow deposit, respectively, on the Consolidated Balance Sheets, inclusive of accrued interest.

4. Intangible Assets

Wireless licenses are considered indefinite-lived intangible assets. Indefinite-lived intangible assets are not subject to amortization but instead are tested for impairment annually, or more frequently if an event indicates that the asset might be impaired. There wereno impairment charges related to the Company’s indefinite-lived intangible assets during the three and nine months ended December 31, 2024 and 2023.

Intangible assets consist of the following activity for the nine months ended December 31, 2024 and 2023 (in thousands):

Purchases of intangible assets, including refundable deposits, retuning costs and swaps

During the nine months ended December 31, 2024 and 2023, the Company entered into agreements with several third parties in multiple U.S. markets to acquire, retune or swap wireless licenses for cash consideration (“deals”) and made Anti-Windfall Payments to the U.S. Treasury Department. The initial deposits to incumbents are recorded as spectrum receivable on the Company’s Consolidated Balance Sheets and are refundable if the FCC does not approve the sale, retuning or swap of the spectrum. The initial deposits are transferred to deferred broadband cost or intangible assets in the Company’s Consolidated Balance Sheets, as applicable, upon meeting the relevant deal milestones. The final payments related to closed retuning or swap deals are recorded as deferred broadband costs on the Company’s Consolidated Balance Sheets. The final payments for license purchases or Anti-Windfall Payments are recorded as intangible assets on the Company’s Consolidated Balance Sheets.

Broadband License Exchanges

During the nine months ended December 31, 2024, the FCC granted the Company broadband licenses for 20 counties. The Company recorded the new broadband licenses at their estimated accounting cost basis of approximately $23.8 million. In connection with receiving the broadband licenses, the Company disposed of $3.0 million, related to the value ascribed to the narrowband licenses it relinquished to the FCC for the same 20 counties. The total carrying value of the narrowband licenses included the cost to acquire the original narrowband licenses, Anti-Windfall Payments paid to cover the shortfall in each county and the clearing costs. As a result of the exchange of narrowband licenses for broadband licenses, the Company recorded a gain on disposal of intangible assets of $20.8 million and $20.8 million for the three and nine months ended December 31, 2024, respectively.

During the nine months ended December 31, 2023, the FCC granted the Company broadband licenses for 24 counties. The Company recorded the new broadband licenses at their estimated accounting cost basis of approximately$41.3 million. In connection with receiving the broadband licenses, the Company disposed of$8.2 million, related to the value ascribed to the narrowband licenses it relinquished to the FCC for the same 24 counties. The total carrying value of narrowband licenses included the cost to acquire the original narrowband licenses, Anti-Windfall Payments paid to cover the shortfall in each county and the clearing costs. As a result of the exchange of narrowband licenses for broadband licenses, the Company recorded a gain on disposal of intangible assets of$13.7 million and$33.0 million for the three and nine months ended December 31, 2023, respectively.

Broadband License Sale

During the quarter ended September 30, 2023, the Company transferred to San Diego Gas & Electric Company, a subsidiary of Sempra Energy (“SDG&E”), the San Diego County broadband license for total cumulative payments of $44.0 million net of delivery delay adjustments of $1.1 million (the “SDG&E Agreement”). As a result, the Company recognized a reduction in intangible assets of $31.8 million and recorded a $7.3 million gain on sale of intangible assets on the Company’s Consolidated Statements of Operations.

During the quarter ended December 31, 2023, the Company transferred to SDG&E the remainder of the cleared 900 MHz Broadband Spectrum and the associated broadband license to Imperial County for total cumulative payments of $0.7 million. As a result, the Company recognized a reduction in intangible assets of $0.6 million and recorded a $32 thousand gain on sale of intangible assets on the Company’s Consolidated Statements of Operations.

As part of the SDG&E Agreement, SDG&E has an option to pursue additional spectrum with the Company. In accordance with Accounting Standards Codification 606, the Company recorded a $4.9 million deferred gain on sale of intangible assets on the Company’s Consolidated Balance Sheets as of December 31, 2024, related to this option, which expires in September 2028.

5. Related Party Transactions

Refer to the Company’s 2024 Annual Report for a more complete description of the nature of its related party transactions prior to March 31, 2024. During the three and nine months ended December 31, 2024 and 2023, the Company didnot have any related party transactions, except as noted below.

On December 30, 2024, in connection with Morgan O’Brien’s retirement, the Company entered into a consulting agreement with Mr. O’Brien under which he has agreed to provide consulting services to the Company for a minimum ofsix months and receive cash compensation of $30 thousand per month beginning on January 1, 2025 through June 30, 2025 (the “minimum term”), and continuing thereafter on a month-to month basis until terminated by either party (the “Consulting Agreement”).

Either party may terminate the Consulting Agreement at any time upon 15 days notice, for any or no reason, provided that if the Company terminates the Consulting Agreement before June 30, 2025 without cause, then the Company will be required to pay the remaining balance of the $0.2 million Mr. O’Brien would have received for the minimum term had the Company not terminated the Consulting Agreement before June 30, 2025. The Consulting Agreement contains standard confidentiality, indemnification and intellectual property assignment provisions in favor of the Company. Pursuant to the existing terms of his outstanding equity awards, Mr. O’Brien will continue to vest in his outstanding equity awards as he continues to provide services to the Company pursuant to the Consulting Agreement.

The Consulting Agreement also contains a confirmation by Mr. O’Brien that he is not entitled to any severance benefits under the Company’s Executive Severance Plan as a result of his retirement, his transition to a consultant or the eventual end of his consulting services. The Consulting Agreement also contains a confirmation by the Company that Mr. O’Brien has satisfied the retirement eligibility provisions in his outstanding stock option awards that automatically extends the exercise periods during which he may exercise his vested option shares to the full term of the applicable stock option award.

As of December 31, 2024, the Company didnot have any outstanding liabilities to Mr. O’Brien.

6. Leases

All the leases in which the Company is the lessee comprised corporate office space and tower space. The Company is obligated under certain lease agreements for office space with lease terms expiring on various dates from June 30, 2027 through January 31, 2029, which includes lease extensions for its corporate headquarters ranging from three toten years. The Company entered into multiple lease agreements for tower space. The lease expiration dates range from January 10, 2025 to September 3, 2031.

Substantially all of the Company’s leases are classified as operating leases. Operating lease agreements are required to be recognized on the Company’s Consolidated Balance Sheets as right of use (“ROU”) assets and corresponding lease liabilities. ROU assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option.

Weighted-average remaining lease term and incremental borrowing rate for the Company’s operating leases are as follows:

The following table presents total lease cost for the three and nine months ended December 31, 2024 and 2023 (in thousands):

*Total operating lease cost is included in general and administrative expenses on the Company’s Consolidated Statements of Operations.

The following table presents supplemental balance sheet information as of December 31, 2024 and March 31, 2024 (in thousands):

Future minimum payments under existing non-cancellable leases for office and tower spaces (exclusive of real estate tax, utilities, maintenance and other costs borne by the Company) for the remaining terms of the leases following the nine months ended December 31, 2024, are as follows (in thousands):

7. Income Taxes

The Company used a discrete effective tax rate method to calculate taxes for the three and nine months ended December 31, 2024 and 2023, which were a result of its inability to use some portion of its federal and state net operating losses (“NOLs”) carryforwards against the deferred tax liability created by the amortization of indefinite-lived intangible assets and the change in the state effective tax rate. The Company determined that applying an estimate of the annual effective tax rate would not provide a reasonable estimate as small changes in estimated “ordinary” loss could result in significant changes in the estimated annual effective tax rate. Accordingly, for the three and nine months ended December 31, 2024, the Company recorded a total tax benefit of $0.2 million and a total tax expense of $1.2 million, respectively. For thethree and nine months ended December 31, 2023, the Company recorded a total tax expense of$1.3 million and $1.7 million, respectively. The effective income tax rates for the three months ended December 31, 2024 and 2023 were 25.1% and 26.1%, respectively. The increase in the effective tax rate was the result of higher state effective tax rate due to taxable income related to customer milestone payments.

The Company’s NOLs generated after March 31, 2018 may be used as an indefinite-lived asset to offset its deferred tax liability but are limited to 80% of future taxable income. The deferred tax liabilities as of December 31, 2024 are approximately $3.6 million for federal and $3.2 million for state. The deferred tax liabilities as of March 31, 2024 were approximately $3.1 million for federal and $3.2 million for state.

8. Stockholders’ Equity

The Company adopted a new equity-based compensation plan known as the Anterix Inc. 2023 Stock Plan on August 8, 2023 (the “Effective Date”), which was amended on August 6, 2024 to increase the number of shares available thereunder by 1,100,000 shares (as amended, the “2023 Stock Plan”). The 2023 Stock Plan permits the Company to grant equity compensation awards to employees, consultants and non-employee directors of the Company. As of the Effective Date, no additional awards may be granted under the Anterix Inc. 2014 Stock Plan (the “2014 Stock Plan”). The 2023 Stock Plan authorizes 1,350,000 shares of common stock of the Company (the “Shares”) for grant. Additionally,388,151 shares remaining for grant under the 2014 Stock Plan immediately prior to the Effective Date, shares subject to outstanding stock awards granted under the 2014 Stock Plan that, following the Effective Date, expire or are terminated or cancelled without having been exercised or settled in full, and shares acquired pursuant to an award subject to forfeiture or repurchase that are forfeited or repurchased by the Company for an amount not greater than the recipient’s purchase price, are issuable under the 2023 Stock Plan. As of December 31, 2024, under the 2023 Stock Plan,1,040,011 Shares are available for future issuance.

During the nine months ended December 31, 2024 and the year ended March 31, 2024, a total of 328,586 and 266,539 shares, respectively, were issued in connection with the vesting, conversion and or exercise of grants under the 2014 Stock Plan and the 2023 Stock Plan.

Cumulative Spectrum Proceeds Monetized

On December 31, 2020, the Compensation Committee awarded performance-based restricted units to Mr. Schwartz as part of the then CEO succession plan. The performance-based restricted units were to vest on a determination date of June 24, 2024 (“Determination Date”), based on the Cumulative Spectrum Proceeds Monetized (“CSPM”) metric over afour-year measurement period commencing on June 24, 2020, with 15,025 units vesting if the minimum CSPM level is achieved,30,049 units vesting if the target CSPM metric is achieved and up to 60,098 vesting if the maximum CSPM metric is achieved. Due to the timing of the execution of the Oncor Agreement, the Company entered into an amendment agreement, effectively extending the Determination Date to June 27, 2024. The amendment resulted in 15,800 shares vesting based on the CSPM level achieved.

In connection with Mr. Schwartz’s Transition Agreement,68,788 unvested time-based awards and 33,417 performance-based awards accelerated and vested on a pro-rated basis. Mr. Schwartz was also granted an option exercise period extension for each of his outstanding stock option awards equal to the lesser oftwo years from the Separation Date (as defined in the Transition Agreement) or the applicable expiration term of the stock option awards, which resulted in additional stock compensation expense of $1.1 million included in severance and other related charges expense reported on the Company’s Consolidated Statements of Operations.

Share Repurchase Program

In September 2023, the Board authorized the 2023 Share Repurchase Program (the “2023 Share Repurchase Program”) pursuant to which the Company may repurchase up to $250.0 million of the Company’s common stock on or before September 21, 2026. The Company may repurchase shares of its common stock via the open market and/or privately negotiated transactions. Repurchases will be made in accordance with applicable securities laws and may be effected pursuant to Rule 10b5-1 trading plans. The manner, timing and amount of any share repurchases will be determined by the Company based on a variety of factors, including proceeds from customer contracts, the timing of which is unpredictable, as well as general business and market conditions, the Company’s capital position, and other strategic considerations. The 2023 Share Repurchase Program does not obligate the Company to repurchase any particular amount of its common stock.

The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. Excise tax accrued for the nine months ended December 31, 2024 was approximately $23 thousand.

The following table presents the share repurchase activity for the three and nine months ended December 31, 2024 and 2023 (in thousands, except per share data):

*Average price paid per share includes costs associated with the repurchases, excluding excise taxes associated with the share repurchases.

As of December 31, 2024, $229.6 million is remaining under the 2023 Share Repurchase Program.

9. Net Income (Loss) Per Share of Common Stock

Basic net income (loss) per common share is calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. For purposes of the diluted net income (loss) per share calculation, stock options and restricted stock units and awards are considered to be potentially dilutive securities. Diluted earnings per share is computed using the treasury stock method.

The following table reconciles net income (loss) and weighted-average common shares used to compute basic and diluted net income (loss) per share:

For the three months ended December 31, 2024, there were 1,628,191 stock options and restricted stock units outstanding, excluded from the calculation of diluted weighted-average shares because the effect was anti-dilutive. For the nine months ended December 31, 2024, there were 248,383 potentially dilutive stock options and restricted stock units outstanding, excluded from the calculation of diluted weighted-average shares because the Company reported a net loss. For the three and nine months ended December 31, 2023, there were 1,129,994 and 1,048,902 stock options and restricted stock units outstanding, excluded from the calculation of diluted weighted-average shares because the effect was anti-dilutive.

10. Contingencies and Guaranty

Contingent Liabilities

SDG&E Refund Obligations

In February 2021, the Company entered into the SDG&E Agreement with SDG&E, to sell 900 MHz Broadband Spectrum throughout SDG&E’s California service territory, including San Diego and Imperial Counties and portions of Orange County, for a total payment of $50.0 million. The total payment of $50.0 million is comprised of an initial payment of $20.0 million received in February 2021 and the remaining payments which are due as the Company delivers the relevant cleared 900 MHz Broadband Spectrum and the associated broadband licenses to SDG&E. As the Company is required to refund payments it has received from SDG&E in the event of termination or non-delivery of the specific county’s full 900 MHz Broadband Spectrum, it recorded the initial payments as contingent liability on the Company’s Consolidated Balance Sheets. A reduction in the contingent liability and a gain or loss on the sale of spectrum will be recognized for each county once the Company delivers the full cleared 900 MHz Broadband Spectrum and the associated broadband licenses to SDG&E.

In September 2022, the Company transferred to SDG&E 1.4 x 1.4 cleared 900 MHz Broadband Spectrum and the associated broadband license related to Imperial County and received a milestone payment of $0.2 million. In September 2023, the Company transferred to SDG&E the San Diego County broadband license and received a milestone payment of $25.2 million net of delivery delay adjustments of $1.1 million. In December 2023, the Company transferred to SDG&E the remainder of the cleared 900 MHz Broadband Spectrum and the associated broadband license related to Imperial County and received a milestone payment of $0.2 million. This resulted in the recognition of a gain on the sale of spectrum and derecognition of the contingent liability associated with San Diego County and Imperial County. See Note 4 Intangible Assets for further discussion on the sale of intangible assets.

Subsequent to the derecognition of the contingent liability related to the delivery of San Diego County and Imperial County licenses, the remaining contingent liability related to SDG&E of $1.0 million for Orange County is classified as a short-term liability due to the expected timing of delivery.

LCRA Refund Obligation

In April 2023, the Company entered into the LCRA Agreement for a total payment of $30.0 million, to be paid through fiscal year 2026 pursuant to the terms of the agreement. In December 2023, the Company received $15.0 million in milestone payments, of which $7.5 million was deposited in an escrow account. The remaining payments are due as the Company delivers the relevant cleared 900 MHz Broadband Spectrum and the associated broadband licenses to LCRA. As the Company is required to refund the deposit it has received from LCRA in the event of termination or non-delivery of the specific county’s full cleared 900 MHz Broadband Spectrum, it recorded the initial payments as contingent liability on the Company’s Consolidated Balance Sheets. A reduction in the contingent liability and a gain or loss on the sale of spectrum will be recognized for each county once the Company delivers the full cleared 900 MHz Broadband Spectrum and the associated broadband licenses to LCRA. See Note 3 Escrow Deposits for further discussion on the escrow deposit.

In November 2024, the Company received the agreed upon narrowband spectrum licenses from LCRA with a fair value of $1.4 million, these licenses are recorded as contingent liability on the Company’s Consolidated Balance Sheets.

As of December 31, 2024, the Company has classified $0.4 million and $14.6 million as short-term and long-term contingent liability, respectively, based on the estimated timing of license delivery associated with the LCRA Agreement.

Oncor Refund Obligation

In June 2024, the Company entered into the Oncor Agreement for a total payment of $102.5 million, to be paid through fiscal year 2026 pursuant to the terms of the agreement. In June 2024, the Company received an initial payment of $10.0 million with remaining payments due to the Company for each county, at closing. The timing and rights to milestone payments could vary as 900 MHz broadband licenses are granted by the FCC, broadband licenses are assigned to Oncor and incumbents are cleared by the Company. As the Company is required to refund the deposit it has received from Oncor in the event of termination or non-delivery of the specific county’s full cleared 900 MHz Broadband Spectrum, it recorded the initial payment as contingent liability on the Company’s Consolidated Balance Sheets. A reduction in the contingent liability and a gain or loss on the sale of spectrum will be recognized for each county once the Company delivers the full cleared 900 MHz Broadband Spectrum and the associated broadband licenses to Oncor.

As of December 31, 2024, the Company has classified $4.0 million and $6.0 million as short-term and long-term contingent liability, respectively, based on the estimated timing of license delivery associated with the Oncor Agreement.

Xcel Energy Guaranty

In October 2022, the Company entered into an agreement with Xcel Energy Services Inc. (“Xcel Energy”) providing Xcel Energy dedicated long-term usage of the Company’s 900 MHz Broadband Spectrum for a term of 20 years throughout Xcel Energy’s service territory in eight states (the “Xcel Energy Agreement”). In connection with the Xcel Energy Agreement, the Company entered into a guaranty agreement, under which the Company guaranteed the delivery of the relevant 900 MHz Broadband Spectrum and the associated broadband licenses in Xcel Energy’s service territory in eight states along with other commercial obligations. In the event of default or non-delivery of the specific territory’s 900 MHz Broadband Spectrum, the Company is required to refund payments it has received. In addition, to the extent the Company has performed any obligations, the Company’s liability and remaining obligations under the Xcel Energy Agreement will extend only to the remaining unperformed obligations. The Company recorded $67.1 million in deferred revenue in connection with the prepayments received as of December 31, 2024. The Company commenced delivery of the relevant cleared 900 MHz Broadband Spectrum and the associated broadband leases in the first quarter of fiscal year 2024 and will continue through 2029. As of December 31, 2024, the maximum potential liability of future undiscounted payments under this agreement is approximately $62.8 million, reflecting a reduction in liability due to the obligations it has performed to date.

Litigation

From time to time, the Company may be involved in litigation that arises from the ordinary operations of the business, such as contractual or employment disputes or other general actions. The Company is not involved in any material legal proceedings at this time.

Macroeconomic Conditions

Recent macroeconomic events, inflation and geopolitical matters, have increased operating costs or resulted in delays in customer contracting or impacted the availability of equipment necessary for the deployment of the Company’s target customers’ planned PLTE projects. The Company continues to closely monitor these risks. Although difficult to quantify, the Company believes the current macroeconomic environment, including inflation, may have an adverse effect on the Company’s target customers’ businesses, which may harm the Company’s commercialization efforts and negatively impact the Company’s revenues and liquidity. If the Company is not able to control its operating costs or if the Company’s commercialization efforts are slowed or negatively impacted, continued periods of high inflation could have a material adverse effect on the Company’s business, operating results and financial condition.

11. Concentrations of Credit Risk and Significant Customers

Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with financial institutions for which credit loss is not anticipated. As of December 31, 2024 and March 31, 2024, substantially all of the Company’s cash balance exceeded the federally insured limits. For the nine months ended December 31, 2024 each of the Company’s customers accounted for greater than 10% of total revenue.

As of December 31, 2024 and March 31, 2024, the Company doesnot have an outstanding accounts receivable balance.

12. Subsequent Events

LCRA Expansion Agreement

On January 9, 2025, the Company entered into the second license purchase agreement with LCRA for total estimated consideration of $13.5 million under which LCRA agreed to purchase additional 900 MHz spectrum licenses covering 34 additional counties in its service area, building upon the 68 counties covered by the earlier agreement.

Employment Agreement with Thomas Kuhn

On December 26, 2024, the Company appointed Thomas R. Kuhn, a current director and Vice Chair of the Board, as the Chairman of the Board (the “Board Chair”), effective January 1, 2025. The Board also established the Utility Engagement Committee, a new Board committee responsible for overseeing the Company’s relationships within the utility industry and assisting the Company in strengthening its relationships and commercialization efforts within the utility industry, and appointed Mr. Kuhn as Chair of this new Board committee (the “Committee Chair”). For his service as Board Chair and Committee Chair, the Board, based on the recommendation of the Compensation Committee, awarded Mr. Kuhn a one-time stock option award of 7,108 stock options. The stock option award will cliff vest in full on December 26, 2027, subject to Mr. Kuhn’s continued service to the Company through such date.

On January 22, 2025, the Company entered into an employment agreement with Mr. Kuhn naming him as Executive Chairman (the “Employment Agreement”). Pursuant to the Employment Agreement, Mr. Kuhn was granted an additional 56,803 additional stock options under the 2023 Stock Plan. The stock option award will cliff vest in full on January 22, 2028, subject to Mr. Kuhn’s continued service to the Company through such date.