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.

The consolidated assets, liabilities and results of operations prior to the reverse recapitalization are those of Holdings. The outstanding shares and corresponding capital amounts, and losses per share, prior to the reverse recapitalization, have been retroactively restated in accordance with Accounting Standards Codification 805, Business Combinations.

Unaudited Interim Financial Information

The condensed consolidated financial statements as of September 30, ~~2022~~2023 are unaudited. These interim financial statements of NextNav have been prepared in accordance with U.S. GAAP and SEC instructions for interim financial information and should be read in conjunction with ~~NextNav's~~NextNav’s Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the ~~“2021~~“2022 Form 10-K”), which the Company filed with the SEC on March ~~23, 2022.~~30, 2023.

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 September 30, ~~2022,~~2023, results of operations for the three and nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, and changes in ~~stockholders'~~ stockholders’ equity and cash flows for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, 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 ~~2021~~2022 Form 10-K that have had a material impact on these condensed consolidated financial statements and related notes.

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

(in thousands)

(in thousands)
Commercial

$
488

$
190

$ 2,970

$ 395
Government contracts

7

65

24

321
Equipment sales

8

21

129

27
Total revenue

$
503

$
276

$ 3,123

$ 743
~~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 September 30, 2022 and December 31, 2021, the Company’s accounts receivable balances were comprised of $1.4 million and $1.7 million, respectively.
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 September 30, 2022 and December 31, 2021, the Company’s contract liabilities were $44 thousand and $1.6 million, respectively.
7

~~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 stock 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 September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

(in thousands)

(in thousands)

Cost of goods sold

$ 531

$ 81

$
1,714

$
134

Research and development

1,415

136

4,715

409

Selling, general and administrative

4,689

128

14,164

490

Total stock-based compensation expense

$ 6,635

$ 345

$
20,593

$
1,033

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

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

(in thousands, except per share amounts)

Numerator

Net loss

$ 18,730
$ 32,421

$
27,614

$
98,465
Less: cumulative change in redemption value of preferred units

—

—

—

13,831
Net loss attributable to common stockholders

$ 18,730
$ 32,421

$
27,614

$
112,296

Denominator

Weighted average shares – basic and diluted

101,397

7,352

98,513

7,348

Basic and diluted loss per share

$ (0.18 )
$ (4.41 )

$
(0.28
)

$
(15.28
)
8

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

Three Months Ended September 30,

Nine Months Ended September 30,

Antidilutive Shares Excluded

2022

2021

2022

2021

(in thousands)

(in thousands)

Warrants

18,750

17,667

18,750

17,667

Stock Options

2,374

2,049

2,374

2,049

Unvested Restricted Stock Units

3,294

94

3,294

94

Unvested Restricted Stock Awards

1,262

—

1,262

—

Preferred units

—

47,652

—

47,652

~~Marketable Securities~~

The Company invests excess cash primarily in U.S. government and government agency bonds, and money market funds. 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. The Company’s marketable securities are classified as trading and are measured at fair value with the related gains and losses, including unrealized, recognized in interest income (expense).
Revenue
The following table presents the Company’s revenue disaggregated by category and source:

Three Months Ended September 30,

Nine Months Ended September 30,

2023

2022

2023

2022

(in thousands)

(in thousands)

Commercial

$ 945

$ 488

$
2,565

$
2,970

Government contracts

5

7

15

24

Equipment sales

77

8

77

129

Total revenue

$ 1,027

$ 503

$
2,657

$
3,123

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 September 30, 2023 and December 31, 2022, the Company’s accounts receivable balances were comprised of $2.7 million and $2.2 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 September 30, 2023 and December 31, 2022, 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 September 30, 2023 and December 31, 2022, the Company’s contract liabilities were $71 thousand and $95 thousand, respectively.
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 stock 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 September 30,

Nine Months Ended September 30,

2023

2022

2023

2022

(in thousands)

(in thousands)
Cost of goods sold

$ 561

$ 531

$ 1,705

$ 1,714
Research and development

1,843

1,415

5,201

4,715
Selling, general and administrative

2,003

4,689

5,737

14,164
Total stock-based compensation expense

$ 4,407

$ 6,635

$ 12,643

$ 20,593
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 September 30,

Nine Months Ended September 30,

2023

2022

2023

2022

(in thousands, except per share amounts)
Numerator

Net loss attributable to common stockholders

$ (23,220
)
$ (18,730
)
$ (55,339 )
$ (27,614 )

Denominator

Weighted average shares – basic and diluted

108,045

101,397

107,504

98,513
Basic and diluted loss per share
$ (0.21 )
$ (0.18 )
$ (0.51 )
$ (0.28 )

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 September 30,

Nine Months Ended September 30,
Antidilutive Shares Excluded

2023

2022

2023

2022

(in thousands)

(in thousands)
Warrants

44,268

18,750

44,268

18,750
Stock Options

3,667

2,374

3,667

2,374
Unvested Restricted Stock Units

3,500

3,294

3,500

3,294
Unvested Restricted Stock Awards

334

1,262

334

1,262

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 space under a non-cancellable lease as well as site leases for towers and shelters under operating leases related to its ~~network under construction.~~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 account 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 assets and liabilities are included on the Condensed Consolidated Balance Sheet beginning January 1, 2022.~~ 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 nine months ended September 30, 2023 and for the year ended December 31, 2022. The following summarizes the Company's goodwill activities (in thousands):

Goodwill - January 1, 2023 $ 17,493
Changes in foreign exchange rates (159 )
Purchase price adjustment
(96 )
Goodwill - September 30, 2023 $ 17,238

Acquisitions
The Company accounts for its acquisitions using the acquisition method of accounting. The purchase price is attributed to the fair value of the assets acquired and liabilities assumed. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date. The excess of the purchase price of acquisition over the fair value of the identifiable net assets of the acquiree is recorded as goodwill. The results of businesses acquired are included in the Company’s consolidated financial statements from the date of acquisition.
When the Company issues stock-based or cash awards to an acquired company’s shareholders, the Company evaluates whether the awards are consideration or compensation for post-acquisition services. The evaluation includes, among other things, whether the vesting of the awards is contingent on the continued employment of the acquired company’s shareholders beyond the acquisition date. If continued employment is required for vesting, the awards are treated as compensation for post-acquisition services and recognized as expense over the requisite service period.
10

Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates, and selection of comparable companies. The estimates and assumptions used to determine the fair values and useful lives of identified intangible assets could change due to numerous factors, including market conditions, technological developments, economic conditions, and competition. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions, tax-related valuation allowances and pre-acquisition contingencies are initially recorded as of the acquisition date. The Company continues to collect information and reevaluates these estimates and assumptions quarterly and records any adjustments to the Company’s preliminary estimates to goodwill provided that the Company is within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the Company’s consolidated statement of operations. In connection with the determination of fair values, the Company may engage a third-party valuation specialist to assist with the valuation of intangible and certain tangible assets acquired and certain assumed obligations.
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.
Non-controlling Interests
The non-controlling interest in the Company’s condensed consolidated financial statements represents the warrants for Nestwave, SAS (“Nestwave”) shares that were owned by the selling shareholders of Nestwave. 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 and nine months ended September 30, 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 Consolidated Statements of Comprehensive Loss were immaterial for the three and nine months ended September 30, 2023 and 2022. 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.

Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires lessees to recognize lease assets and lease liabilities on the Consolidated Balance Sheet for those leases classified as operating leases under current U.S. GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the Consolidated Balance Sheet. The new guidance also requires qualitative and quantitative disclosures related to the nature, timing and uncertainty of cash flows arising from leases. In July 2018, the FASB amended the new lease standard which, among other changes, allows a company to elect to adopt ASU 2016-02 using a transition option whereby a cumulative effect adjustment is recorded to the opening balance of its retained earnings on the adoption date. The Company has elected to use this modified retrospective transition option and recorded a cumulative effect adjustment to retained earnings of $0.5 million, net of tax, as of January 1, 2022. The Company also elected certain practical expedients permitted under the transition guidance, including to retain the historical lease classification as well as relief from reviewing expired or existing contracts to determine if they contain leases. The adoption of ASU 2016-02 resulted in the recognition of operating lease right-of-use assets and liabilities of $13.4 million and $10.5 million, respectively. The standard did not have a significant effect on the Condensed Consolidated Statements of Comprehensive Loss and Cash Flows. See Note 4 for additional lease disclosures.
In December 2019, FASB issued ASU 2019-02, Simplifying the Accounting for Income Taxes (Topic 740) (“ASU 2019-12”), which is intended to improve consistency and simplify several areas of existing guidance. ASU 2019-12 removes certain exceptions to the general principles related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 is effective for the Company’s fiscal year beginning January 1, 2022. The Company adopted this ASU as of January 1, 2022. The adoption did not have a material impact on the consolidated financial statements.
~~Recent Accounting Developments Not Yet Adopted~~
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326) (“ASU 2016-13”), which requires that an entity measure and recognize expected credit losses for financial assets held at amortized cost and replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that requires consideration of a broader range of information to estimate credit losses. The guidance also modifies the impairment model for available-for-sale debt securities. ASU 2016-13 is effective for the Company’s fiscal year beginning January 1, 2023. The Company ~~is continuing to assess~~adopted this ASU as of January 1, 2023. The adoption did not have a material impact on the ~~potential impacts of ASU 2016-13 on its~~consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). The ASU requires an acquiring entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 Revenue from Contracts with Customers, rather than at fair value. The Company expects to early adopt this ASU in the fourth quarter of 2022 and expects the impact of adopting this ASU to be immaterial.

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 consolidated financial statements.

1011

3. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

	September 30, 2022		December 31, 2021		September 30, 2023		December 31, 2022
	(in thousands)				(in thousands)
Accrued salary and other employee liabilities	$	2,437	$	2,423	$	2,928	$	2,420
Accrued legal and professional services		857		1,540		299		387
Other accrued liabilities		1,400		637		4,354		2,434
Total	$	4,694	$	4,600	$	7,581	$	5,241

4. ~~Leases~~ Intangibles

~~All leases were classified as operating leases~~Intangible assets as of September 30, 2023 and December 31, 2022 ~~and September 30, 2021.~~

~~Components~~consist of ~~operating lease expense were as follows~~following (in thousands):

Three Months Ended September 30, 2022

Nine Months Ended September 30, 2022
Operating lease cost

$
1,023

$ 3,075
Variable lease cost

$
26

$ 77
Short-term lease cost

$
57

$ 171

September 30, 2023

December 31, 2022

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

6,983

1,911

5,072

6,999

1,561

5,438
Acquired Technology

575

44

531

580

8

572
Internal Use Software

2,326

1,047

1,279

1,560

640

920
Total $ 13,351

$ 3,002

$ 10,349

$ 12,606

$ 2,209

$ 10,397
~~Supplemental information related to operating leases was as follows (in thousands):~~

Three Months Ended September 30, 2022

Nine Months Ended September 30, 2022
Operating cash flows from operating leases

$
969

$ 2,914
Right-of-use assets obtained in exchange for new operating lease liabilities

$
—

$ 9,459

AsThe weighted average remaining useful lives of acquired software and acquired technology were 11.08 years as of September 30, ~~2022, the Company's operating leases had a weighted average remaining lease term of 4.0 years and a weighted average discount rate of 4.6%.~~2023.

~~Future lease payments under operating leases as of~~Amortization expense on intangibles assets was $0.3 million and $0.1 million for the three months ended September 30, 2023 and 2022, respectively. Amortization expense on intangibles assets was $0.8 million and $0.2 million for the nine months ended September 30, 2023 and 2022, ~~were~~respectively. Future amortization is expected as ~~follows (in thousands):~~follows:
Remainder of 2022

$
881

2023

2,765

2024

1,894

2025

1,441

2026

1,205

Thereafter

997

Total undiscounted future lease payments

$
9,183

Less imputed interest

822

Total lease liability balance

$
8,361

11
2023
$ 270
2024

1,012
2025

950
2026

712
2027 and thereafter

3,938

$ 6,882

As of September 30, 2022, the Company has entered into leases that have not yet commenced with future lease payments of $2.3 million that are not yet recorded on the Condensed Consolidated Balance Sheet. These leases will commence between the fourth quarter of 2022 and the second quarter of 2023 with non-cancelable lease terms of ~~five years~~.
~~Supplemental Information for Comparative Periods~~
~~As of December 31, 2021, prior to the adoption of ASU 2016-02, future minimum payments under operating leases were as follows (in thousands):~~
For the Twelve Months Ended December 31,

2022

$
3,335

2023

$
2,400

2024

$
1,548

2025

$
1,109

Thereafter

$
1,581

~~During the twelve months ended December 31, 2021, rent expense was $13.6 million.~~

5. Equity Method Investment

As of September 30, ~~2022,~~2023, the Company’s total ownership of MetCom Inc., a privately-owned Japanese joint stock company (kabushiki kaisha) (“MetCom”), ~~consists~~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~~Company’s equity ownership and representation on ~~MetCom's~~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. WeThe Company recognized a loss of ~~$0.2 million~~$157 thousand in the nine months ended September 30, ~~2022~~2023 that is recorded in other income (expenses). The carrying value of ~~our~~the Company’s investment in MetCom was ~~$1.0 million~~$738 thousand as of September 30, ~~2022~~2023 and is classified in other long-term assets. The Company had $46 thousand and $279 thousand in accounts receivable from MetCom as of September 30, 2023 and December 31, 2022, respectively.

The Company holds a warrant (the ~~“Warrant”~~“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 September 30, ~~2022;~~2023; therefore, the Warrant was not exercisable.

6~~. Warrants and Warrant Liability~~

As of September 30, 2022, NextNav had 18,749,990 warrants outstanding including: (a) 9,999,990 public warrants sold in connection with Spartacus’ initial public offering (the “Public Warrants”) and (b) 8,750,000 warrants issued in a private placement on the initial public offering closing date (the “Private Placement Warrants”).

Holders of the Public Warrants and Private Placement Warrants are entitled to acquire shares of common stock of NextNav. 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 five years after the completion of the Business Combination.

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.

In connection with the closing of the Business Combination, AT&T Services, Inc. and certain of its affiliates (“AT&T”) elected to exchange its outstanding warrants in Holdings for a new warrant to purchase an aggregate of ~~4,320,133~~ ~~shares of NextNav’s common stock, subject to adjustment, at an exercise price of $0.01~~ ~~(the “AT&T Warrant”). On May 23, 2022, AT&T exercised the AT&T Warrant~~ ~~using a net settlement method and received 4,308,297 shares of common stock of~~ ~~NextNav.~~

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)

September 30, 2022

Cash and Cash Equivalents - Money Market Funds
$ 116

$ —

$ —

$ 116
Cash and Cash Equivalents - U.S. Government Agency Bonds

—

53,585

—

53,585
Short term investments - U.S. Government Agency Bonds

—

8,173

—

8,173
Warrants

$
—

$
—

$
5,687

$
5,687

December 31, 2021

Warrants

$
—

$
—

$
28,875

$
28,875

Level 1

Level 2

Level 3

Total

(in thousands)

September 30, 2023

Cash and Cash Equivalents - Money Market Funds
$ 806

$ —

$ —

$ 806
Cash and Cash Equivalents - U.S. Government Agency Bonds

—

86,307

—

86,307
Short term investments - U.S. Government Agency Bonds

—

6,962

—

6,962
Private Placement Warrants

—

—

14,000

14,000

December 31, 2022

Cash and Cash Equivalents - Money Market Funds
$ 95

$ —

$ —

$ 95
Cash and Cash Equivalents - U.S. Government Agency Bonds

—

36,509

—

36,509
Short term investments - U.S. Government Agency Bonds

—

8,216

—

8,216
Private Placement Warrants

$
—

$
—

$
4,200

$
4,200

~~The Company classifies the~~ ~~U.S. government agency bonds~~, which are accounted for as trading, within Level 2 in the fair value hierarchy, because the Company uses quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value.The carrying values of cash and cash equivalents, accounts payable, accrued expenses, ~~and other current liabilities,~~ 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.

13

Level 3 Liabilities

The Company engaged a third-party valuation firm to assist with the fair value analysis of the ~~warrants.~~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 September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, NextNav used a Monte Carlo simulation model. The following table shows the assumptions used in each respective model:

September 30, 2022

December 31, 2021

September 30, 2023

December 31, 2022

Values

Values

Values

Values

Stock Price

$
2.69

$
8.76

$
5.14

$
2.93

Strike price

$
11.50

$
11.50

$
11.50

$
11.50

Holding Period/Term (years)

4.08

4.80

3.08

3.82

Volatility

72.50
%

52.90
%

72.50
%

62.00
%
Expected dividends

None

None

None

None

Risk-Free Rate

4.16
%

1.23
%

4.79
%

4.13
%
Fair value of warrants

$
0.65

$
3.30

$
1.60

$
0.48

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)

(in thousands)

Balance as of December 31, 2021

$
28,875

Balance as of December 31, 2022

$
4,200

Fair value adjustment of Private Placement Warrants

(23,188
)

9,800
Balance as of September 30, 2022

$
5,687

Balance as of September 30, 2023

$
14,000

7. Long term debt, net

On May 9, 2023 (the “Initial Closing”), pursuant to the terms of the Notes Purchase Agreement (the “NPA”) and Indenture Agreement (the “Indenture”), the Company issued $50.0 million senior secured notes (the “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”), 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 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.

In conjunction with the issuance of 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 Additional Notes on July 6, 2023, the Company issued 7,407,407 warrants (the “Additional Warrants,” 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 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 $47.1 million as of September 30, 2023 net of debt discount of $22.9 million. Net amortization of the debt discount totaled $1.8 million for the nine months ended September 30, 2023. The total estimated fair value of the Notes approximates the carrying value of the Notes as of September 30, 2023. 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 Securities and Exchange Commission, 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 at a redemption price equal to 101% of the principal amount of the Notes, plus 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 September 30, 2023, the Company was in compliance with all of the applicable debt covenants described above.

8. ~~Common Stock~~Warrants and ~~Convertible Preferred Units~~

The Condensed Consolidated Statements of Changes in Stockholders’ Equity reflect the Business Combination as of October 28, 2021. As Holdings was deemed the accounting acquirer in the Business Combination, all periods prior to the consummation date reflect the balances and activity of Holdings. The balances as of September 30, 2022 and 2021 and December 31, 2021 and 2020 from the financial statements of Holdings as of that date, share activity (redeemable preferred units, common units, additional paid in capital, and accumulated deficit) and per share amounts were retroactively adjusted, where applicable.

~~Common Stock~~Warrant Liability

As of September 30, ~~2022,~~2023, NextNav had 44,267,686 warrants outstanding including: (a) 9,999,990 public warrants sold in connection with Spartacus’ initial public offering (the “Public Warrants”); (b) 8,750,000 warrants issued in a private placement on the initial public offering closing date (the “Private Placement Warrants”); and (c) 25,517,696 the Debt Warrants, as further described in Note 7.

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.

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 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.

9. Common Stock

As of September 30, 2023, NextNav had authorized the issuance of 600,000,000 shares of capital stock, par value, ~~$0.0001~~0.0001 per share, consisting of (a) 500,000,000 shares of common stock and (b) 100,000,000 shares of undesignated preferred ~~stock.~~stock. As of September 30, ~~2022,~~2023, NextNav had ~~101,394,335~~108,977,489 shares of common stock issued and ~~101,393,158~~108,976,312 shares of common stock outstanding.

~~Holdings’ Convertible Preferred Units~~

~~Below is historical summary information of Class C Redeemable Preferred Units and Class D Redeemable Preferred Units (collectively, Preferred Units) rights of Holdings.~~

~~Cumulative Preferred Return —~~ Class C Redeemable Preferred Units and Class D Redeemable Preferred Units were entitled to cumulative preferred return whether or not declared at an annual rate of 8% and 10%, respectively. As of December 31, 2020, the Class C Preferred Units had cumulative undeclared preferred returns of $6.0 million. As of December 31, 2020, the Class D Redeemable Preferred Units had cumulative undeclared preferred returns of $146.2 million.

~~Conversion —~~ ~~Preferred Units were convertible to Class A Common Units at any time at the option of the holder based on a stated conversion ratio. The initial conversion ratio was~~ ~~one~~ ~~Preferred Unit for~~ ~~one~~ ~~Class A Common Unit.~~ The conversion ratio was subject to certain adjustments as defined in Holdings’ operating agreement. Preferred Units would automatically convert into Class A Common Units upon (i) in the case of the Class D Redeemable Preferred Units, the affirmative election of the holders of 66 2/3% of the outstanding Class D Redeemable Preferred Units or (ii) in the case of the Class C Redeemable Preferred Units, the affirmative election of the holders of 66 2/3% of the outstanding Class C Redeemable Preferred Units or (iii) a Public Offering (as defined in Holdings’ operating agreement) where gross proceeds were at least $75 million.

~~Voting —~~ The holders of Preferred Units were entitled to the number of votes equal to the number of common units into which the shares of Preferred Units held by each holder were then convertible. In addition, certain actions required the affirmative approval of 66 2/3% of Class C Redeemable Preferred Units and Class D Redeemable Preferred Units (each voting as a separate class), including liquidation or dissolution of Holdings, creation of a senior class of units, payment of preferred return, increasing the authorized number of Common or Preferred Units, or amendment of Holdings’ operating agreement.

~~Redemption~~ — The Class C Redeemable Preferred Units were redeemable by Holdings, at the request of the majority of the then-outstanding Class C Redeemable Preferred Unit holders, over a three-year period commencing on or after the date upon which no Class D Redeemable Preferred Units were outstanding, at a per unit price of $0.44, plus any accrued and unpaid preferred return, whether or not declared. The Class D Redeemable Preferred Units were redeemable by Holdings, at the request of the holders of 66 2/3% of the then-outstanding Class D Redeemable Preferred Unit holders, over a three-year period commencing on or after the later of September 1, 2021 and the date that was 91 days after the earlier of December 27, 2026 and the date upon which Holdings’ obligations under the senior secured loan facility (the “Financing Agreement”), which Holdings entered into in December 2019 and amended in June 2021 with Fortress Credit Corporation, were satisfied in full, provided that in either case neither a qualified offering or a capital transaction had occurred prior to such request, at a per unit price of $2.13 for units issued in 2012, $2.56 for units issued in 2014, $2.89 for units issued in September 2016, and $5.78 and $11.56 for units issued in December 2019, plus any accrued and unpaid preferred return, whether or not declared.

In connection with the Business Combination on October 28, 2021, all outstanding units of Holdings’ Class C Redeemable Preferred Units and Class D Redeemable Preferred Units converted into 5,365,566 and 42,286,068 shares of common stock of NextNav, respectively.

9.10. Commitments and Contingencies

~~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 September 30, ~~2022,~~2023, 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.

1011. 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 September 30, ~~2022~~,2023, the Company recorded an income tax ~~benefit~~provision of $~~0.02~~$24 thousand related to foreign tax activity on a pretax loss of $23.2 million, resulting in an effective tax rate of (0.10)%. For the three months ended September 30, 2022, the Company recorded an income tax provision of $15 thousand related to foreign tax activity on a pretax income of $~~18.7~~$18.7 million, resulting in an effective tax rate of ~~0.08%~~(0.08)%. For the ~~three~~nine months ended September 30, ~~2021~~,2023, the Company recorded an income tax provision of $~~0.01~~ ~~million~~$159 thousand related to foreign tax activity on a pretax loss of $~~32.4~~$55.2 million, resulting in an effective tax rate of ~~0.03%~~(0.3)%. For the nine months ended September 30, 2022, the Company recorded an income tax provision of ~~$0.04 million~~ ~~related to foreign tax activity~~ ~~on a pretax loss of $27.6~~ ~~million, resulting in an effective tax rate of~~ ~~0.15%~~. ~~For the nine months ended September 30, 2021, the Company recorded an income tax provision of $0.04~~ ~~million~~$41 thousand related to foreign tax activity on a pretax loss of $~~98.4~~$27.6 million, resulting in an effective tax rate of ~~0.04%~~(0.1)%. 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.

~~11.~~12. 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 ~~this filing includes~~these financial statements include appropriate disclosure of events both recognized in the financial statements and events which occurred ~~subsequently~~ but were not recognized in the ~~unaudited condensed consolidated~~ financial statements. The Company ~~notes the following:~~has concluded that no subsequent events have occurred that require disclosure.

~~Nestwave Acquisition~~

On ~~October 31, 2022~~ (“Closing Date”), the Company acquired all outstanding equity in Nestwave, SAS (“Nestwave”), a privately held French company that is a global leader in low-power geolocation. Total consideration paid was $19.3 million, consisting of $4.3 million in cash, which is subject to customary adjustments in accordance with the share transfer agreement; and $15.0 million by issuance of 5.1 million shares of NextNav’s common stock, comprised of 4.0 million shares of common stock that were issued on the Closing Date and 1.1 million shares of common stock to be issued post-closing. The acquisition is expected to significantly accelerate the availability of resilient 3D position, navigation and timing, release the underlying spectrum’s capacity for additional data-oriented services and enables broader penetration of NextNav’s applications and technology across the handset and device ecosystem for all of its products and target markets.

~~The acquisition will be accounted for using the acquisition method of accounting. The Company is in the process of determining the fair values of assets acquired and liabilities assumed.~~

1516

Item2. 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, ~~2021 (the “2021 Form 10-K”).~~2022. Our ~~2021~~2022 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 ~~2021~~2022 Form 10-K and Part II, Item 1A, “Risk Factors” of our Quarterly Report on Form 10-Q for the quartered ended March 31, 2023, 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 next generation ~~positioning, navigation and timing (“PNT”)~~PNT solutions that overcome the limitations of existing space-based GPS. Our solutions are built on a robust asset platform including 8MHz of nearly nationwide wireless spectrum in the 900MHz band, intellectual property and deployed network systems. The world increasingly requires more accurate and resilient PNT capabilities. Public safety, autonomous vehicles, electric vertical takeoff and landing vehicles (“eVTOLs”), unmanned aerial vehicles (“UAVs”), and the app economy all require precise 3D location solutions. Paramedics need to know which apartment a 911 call originated from, ride hailing and delivery apps need to know precisely where you are standing and game developers need precise 3D location data to deliver a next generation augmented reality experience.

In early 2021, we launched the first element of our next generation GPS service, through initial commercial ~~service on~~availability of our nationwide Pinnacle network, ~~that was~~ deployed in partnership with AT&T Services, Inc. (“AT&T”). The Pinnacle network provides “floor-level” altitude ~~detection~~data to over 90% of commercial structures over three stories in the U.S. ~~and~~Pinnacle is being utilized by FirstNet® for public ~~safety,~~safety. We are currently providing services to Verizon Communications, Inc. (“Verizon”) as ~~well as~~a customer for enhanced 911 (“E911”) services, using our Pinnacle 911 solution, and service is being provided to handsets operating on other national wireless carrier networks. Pinnacle has also been adopted by a growing number of public safety apps, commercial apps and app development platforms, including ~~Atlas Earth, Unity Engine, Eco3d,~~ CRG, GeoComm, Rapid Deploy, Central Square, NGA 911, ~~Qualcomm,~~ and ~~the Unreal Engine. In December 2021, we entered into an agreement with one of the nation’s largest wireless carriers to deliver vertical location for enhanced 911 (~~“~~E911~~”~~), using our Pinnacle 911 solution for all its customers.~~Qualcomm. We believe that ramp up of ~~services~~customers using our existing ~~deployed~~Pinnacle network will support ~~significant~~ revenue growth over the coming years.~~We entered into a services~~ ~~agreement with AT&T for distribution of our services to FirstNet® customers, and on~~ ~~October 7, 2022, we amended the agreement for an additional term of three months, expiring in January 2023.~~

We will be extending our capabilities by expanding the deployment of our TerraPoiNT system, which is a nationwide network that is designed to overcome the inherent limitations of traditional GPS. TerraPoiNT ~~utilizes~~includes a network of specialized wide area location transmitters that broadcast an encrypted PNT signal on our licensed 900MHz LMS spectrum with a signal that is 100,000 times stronger than GPS. TerraPoiNT is well suited for urban and indoor environments where existing GPS signals are either distorted or blocked all together. In addition, TerraPoiNT provides redundancy for GPS, which is vulnerable to spoofing and jamming. GPS redundancy is increasingly a U.S. national security priority and is a rising priority in the other parts of the world. Critical infrastructure, including communications networks and power grids, require a reliable GPS signal for accurate timing. A failure of GPS would be catastrophic, and there ~~currently~~ is no ~~comprehensive, terrestrial backup that is widely deployed.~~ back-up system today.

As of September 2022, TerraPoiNT is deployed and available, with metro-wide service in San Francisco and select services available in 51 total markets nationally. It is also in use by the National Aeronautics and Space Administration (“NASA”) at its Langley Research Center in Hampton, VA for drone operations research.

Since the inception of NextNav, LLC in 2007, we have secured valuable FCC licenses covering over 90% of the U.S. population for a continuous 8MHz band of nearly nationwide 900MHz spectrum, filed ~~over 135~~more than 175 patents related to our systems and services, deployed the nationwide Pinnacle network and ~~standardized our TerraPoiNT technology in 3GPP, the global telecommunications standards-setting body.~~

launched commercial service. In addition, we have ~~secured valuable Federal Communications Commission~~deployed our TerraPoiNT solution in 88 markets, and TerraPoiNT received the highest scores in testing by the U.S. Department of Transportation of potential PNT back-up solutions.

In October 2022, we acquired Nestwave SAS (“~~FCC”~~Nestwave”) ~~licenses for a contiguous 8 MHz band of 900 MHz spectrum covering approximately 93%~~. We expect the integration of the ~~U.S. population. Spectrum is~~Nestwave technology to significantly reduce the capital and operating expenditures associated with a ~~limited resource, and less spectrum is available at lower frequencies. We believe our lower-frequency spectrum offers better building penetration and propagation, improving~~national deployment of a TerraPoiNT network. In addition, Nestwave’s technology could result in a significant improvement in the ~~effectiveness~~spectral efficiency of our ~~TerraPoiNT service especially in metropolitan areas. Others have used nearby spectrum for LTE, electric grid resiliency~~radio transmissions, which may allow us to offer an expanded suite of PNT and ~~other~~data services.

1617

~~Public Company Costs~~

AsMacroeconomic Factors

We are aware that network deployment projects are experiencing delays in schedules and potential cost increases due to a ~~publicly traded company,~~tight labor supply in the field services market. While the impact of this supply constraint is not material to our network projects at this time, we ~~will~~ continue to ~~hire additional personnel~~carefully manage labor and ~~implement procedures~~materials supply matters. Additionally, there is an increased risk of financial market disruption. Management continues to actively monitor our financial condition, liquidity, operations, suppliers, industry and ~~processes to address public company regulatory requirements and customary practices.~~workforce. We expect these macroeconomic factors and their effects on our operations to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees that Holdings has not previously incurred.continue through the remainder of 2023.

Key Components of Results of Operations

Revenue

We have generated limited revenue since our inception. We derive our revenue from “floor-level” altitude location data, and related products and services as well as from other PNT products and services. Our revenue includes revenue generated through services contracts with wireless carriers, services with applications developers, technology demonstration, assessment and support contracts with government customers, sales of equipment, and licensing of proprietary technology. We recognize revenue when an arrangement exists, services, equipment or access to licensed technology are delivered, the transaction price is determined, the arrangement has commercial substance, and collection of consideration is probable.

Operating Expense

Cost of Goods Sold

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 the expansion of our Pinnacle and TerraPoiNT networks in domestic U.S. and international markets.

Research and Development

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 products and future products.

Selling, General and Administrative

Selling, general and administrative expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility costs for our business development, marketing, corporate, executive, finance, legal, human resources, IT and other administrative functions. Selling, general and administrative expenses also include expenses for outside professional services, including legal, auditing and accounting services, recruitment expenses, travel expenses and certain non-income taxes, insurance and other administrative expenses.

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 underlying variability in stock-based compensation, but may fluctuate as a percentage of total revenue over time.

1718

Depreciation and Amortization

Depreciation and amortization expense results from depreciation and amortization of our property and equipment and intangible assets that is recognized over their estimated useful lives.

Interest Income (Expense)

Interest ~~expense relates to interest on our senior secured loan facility, which was fully repaid in connection with closing of the Business Combination. Interest~~ income consists of interest earned from our cash and cash equivalents ~~balance.~~balance and on marketable securities. Interest expense relates to interest and amortization of debt discounts on our senior secured notes.

Other Income (Expense)

Other income (expense) consists of miscellaneous non-operating items, such as change in fair value of warrants, equity method income (loss), and foreign currency gains (losses).

Results of Operations

The following table sets forth our statements of operations for the periods indicated:

Three months ended
September 30,

Nine months ended
September 30,

2022

2021

2022

2021

(in thousands)

(in thousands)
Revenue

$
503

$
276

$ 3,123

$ 743
Operating expense:

Cost of goods sold ⁽¹⁾

2,830

2,068

8,868

11,668
Research and development ⁽¹⁾

4,567

1,980

12,725

6,894
Selling, general and administrative ⁽¹⁾

10,152

2,856

29,874

9,385
Depreciation and amortization

891

398

2,657

1,069
Total operating expenses

18,440

7,302

54,124

29,016
Operating loss

(17,937
)

(7,026
)

(51,001 )

(28,273 )
Interest income (expense)

336

(3,041
)

445

(8,899 )
Other income (expense)

(1,114
)

(22,343
)

22,983

(61,253 )
Loss before income taxes

(18,715
)

(32,410
)

(27,573 )

(98,425 )
Provision for income taxes

(15
)

(11
)

(41 )

(40 )
Net loss

$
(18,730
)

$
(32,421
)
$ (27,614 )
$ (98,465 )

Three months ended September 30,

Nine months ended September 30,

2023

2022

2023

2022

(in thousands)

(in thousands)
Revenue

$
1,027

$
503

$ 2,657

$ 3,123
Operating expense:

Cost of goods sold ⁽¹⁾

3,232

2,830

9,397

8,868
Research and development ⁽¹⁾

5,007

4,567

14,579

12,725
Selling, general and administrative ⁽¹⁾

6,152

10,152

18,722

29,874
Depreciation and amortization

1,256

891

3,559

2,657
Total operating expenses

15,647

18,440

46,257

54,124
Operating loss

(14,620
)

(17,937
)

(43,600 )

(51,001 )
Interest income (expense)

(1,740
)

336

(1,614 )

445
Other income (expense)

(6,836
)

(1,114
)

(9,966 )

22,983
Loss before income taxes

(23,196
)

(18,715
)

(55,180 )

(27,573 )
Provision for income taxes

24

15

159

41
Net loss

$
(23,220
)

$
(18,730
)
$ (55,339 )
$ (27,614 )

(1)	Cost of goods sold, research and development, and selling, general and administrative expense for the periods do not include depreciation and amortization, which is presented separately in the Condensed Consolidated Statements of Comprehensive Loss, but include stock-based compensation as follows:

	Three months ended September 30,				Nine months ended September 30,				Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021		2023		2022		2023		2022
	(in thousands)				(in thousands)				(in thousands)				(in thousands)
Cost of goods sold	$	531	$	81	$	1,714	$	134	$	561	$	531	$	1,705	$	1,714
Research and development		1,415		136		4,715		409		1,843		1,415		5,201		4,715
Selling, general and administrative		4,689		128		14,164		490		2,003		4,689		5,737		14,164
Total stock-based compensation expense	$	6,635	$	345	$	20,593	$	1,033	$	4,407	$	6,635	$	12,643	$	20,593

1819

Comparison of the Three Months Ended September 30, ~~2022~~2023 and ~~2021~~2022

Revenue

Three months ended
September 30,

2022

2021

$ Change

% Change

(in thousands)

Revenue

$
503

$
276

$
227

82.2
%

Three months ended September 30,

2023

2022

$ Change

% Change

(in thousands)

Revenue

$
1,027

$
503

$
524

104.2
%

Revenue increased by ~~$0.2~~$0.5 million, or ~~82%~~104.2%, to $1.0 million for the three months ended September 30, 2023 from $0.5 million for the three months ended September 30, ~~2022 from $0.3 million for the three months ended September 30, 2021.~~2022. The increase was driven by ~~increased~~an increase in recurring service revenue from technology and services contracts with commercial customers. For the three months ended September 30, ~~2022,~~ 2023 o~~one~~ne customer accounted for ~~95%~~69% of total revenue, another customer accounted for 15% of total revenue, and a third customer accounted for 11% of total revenue. For the three months ended September 30, ~~2021, three~~2022, one customer accounted for ~~86%~~95% of total revenue.

Operating Expense

Cost of Goods Sold (COGS)

Three months ended
September 30,

2022

2021

$ Change

% Change

(in thousands)

COGS

$
2,830

$
2,068

$
762

36.8
%

Three months ended September 30,

2023

2022

$ Change

% Change

(in thousands)

COGS

$
3,232

$
2,830

$
402

14.2
%

COGS increased by ~~$0.8~~$0.4 million, or ~~37%~~ 14.2%, to $3.2 million for the three months ended September 30, 2023 from $2.8 million for the three months ended September 30, ~~2022 from $2.1~~2022. The increase was primarily driven by increase in site rent expense due to deployment of new sites in 2023 and related maintenance cost.

Research and Development

Three months ended September 30,

2023

2022

$ Change

% Change

(in thousands)

Research and development

$
5,007

$
4,567

$
440

9.6
%

Research and development expenses increased by $0.4 million, or 9.6%, to $5.0 million for the three months ended September 30, ~~2021.~~ 2023 from $4.6 million for the three months ended September 30, 2022. The increase was primarily driven by a $0.4 million increase in stock-based compensation and ~~an increase of $0.4 million in maintenance and operational cost.~~

~~Research and Development~~

Three months ended
September 30,

2022

2021

$ Change

% Change

(in thousands)

Research and development

$
4,567

$
1,980

$
2,587

130.7
%

Research and development expenses increased by $2.6 million, or 131%, to $4.6 million for the three months ended September 30, 2022 from $2.0 million for the three months ended September 30, 2021. The increase was primarily driven by a ~~$1.3~~$0.2 million increase in ~~stock-based compensation,~~operational and maintenance cost. The increases were partially offset by a $~~0.7~~0.2 million ~~increase in payroll-related expenses driven by headcount, an increase of $0.5 million~~decrease in software license ~~expenses, and an increase of $0.2 million in maintenance and operational cost.~~expenses.

1920

Selling, General and Administrative

Three months ended
September 30,

2022

2021

$ Change

% Change

(in thousands)

Selling, general and administrative

$
10,152

$
2,856

$
7,296

255.5
%

Three months ended September 30,

2023

2022

$ Change

% Change

(in thousands)

Selling, general and administrative

$
6,152

$
10,152

$
(4,000
)

(39.4
)%

Selling, general and administrative expenses ~~increased~~decreased by ~~$7.3~~$4.0 million, or ~~255%~~39.4%, to $6.2 million for the three months ended September 30, 2023 from $10.2 million for the three months ended September 30, ~~2022 from $2.9 million for the three months ended September 30, 2021.~~2022. The ~~increase~~decrease was primarily driven by a $$2.7~~4.6~~million ~~increase~~decrease in stock-based compensation, a $0.6 million decrease in professional services,a $~~1.6~~ ~~million increase in professional services, a $0.8~~0.3~~million increase in directors’ and officers’ insurance,~~ ~~a $0.7million increase in payroll-related expenses driven by headcount,~~ ~~and a $0.3 million increase in marketing and recruiting cost. The increases were partially offset by a $0.6~~ million decrease in outside consulting expenses, ~~and~~ a ~~$0.1~~$0.2 million decrease in ~~other operational expenses.~~marketing and recruiting cost and a $0.2 million decrease in directors’ and officers’ insurance.

Depreciation and Amortization

Three months ended
September 30,

2022

2021

$ Change

% Change

(in thousands)

Depreciation and amortization

$
891

$
398

$
493

123.9
%

Three months ended September 30,

2023

2022

$ Change

% Change

(in thousands)

Depreciation and amortization

$
1,256

$
891

$
365

41.0
%

Depreciation and amortization expenses increased by ~~$0.5~~$0.4 million, or ~~124%~~41%, to $1.3 million for the three months ended September 30, 2023 from $0.9 million for the three months ended September 30, ~~2022 from $0.4 million for the three months ended September 30, 2021.~~2022. The increase in depreciation and amortization expense is primarily attributable to placing ~~the~~ Pinnacle and TerraPoiNT network assets in service since the ~~first~~third quarter of ~~2021.~~2022 and amortization related to acquired intangibles in fourth quarter of 2022.

Interest Income (Expense)

Three months ended
September 30,

2022

2021

$ Change

% Change

(in thousands)

Interest income (expense)

$
336

$
(3,041
)

$
3,377

(111.0
)%

Three months ended September 30,

2023

2022

$ Change

% Change

(in thousands)

Interest income (expense)

$
(1,740
)

$
336

$
(2,076
)

(617.9
)%

Interest expense for the three months ended September 30, 2023 was $2.9 million whereas interest income was$1.2million resulting in net interest expense of $1.7 million for the three months ended September 30, 2023compared with interest income of $0.3 million for the three months ended September 30, ~~2022 compared with~~2022. The increase in interest expense was due to interest and amortization of ~~$3.0~~debt discounts on our senior secured notes issued during 2023.

Other Expense

Three months ended September 30,

2023

2022

$ Change

% Change

(in thousands)

Other expense

$
(6,836
)

$
(1,114
)

$
(5,722
)

513.6
%

Other expense was $6.8 million for the three months ended September 30, ~~2021.The decrease in interest~~2023 compared with other expense ~~was driven by full repayment~~ of ~~debt as a part of the Business Combination in the fourth quarter of~~ ~~2021.~~ ~~Interest~~ ~~income consists of interest earned on marketable securities~~.

~~Other Income (Expense)~~

Three months ended
September 30,

2022

2021

$ Change

% Change

(in thousands)

Other income (expense)

$
(1,114)

$
(22,343
)

$
21,229

(95.0
)%

~~Other expense was~~ $1.1 million for the three months ended September 30, ~~2022 compared with other expenses of $22.3 million for the three months ended September 30, 2021.~~2022. The change ~~in other expense~~ was primarily driven by the change in the fair value of warrants.

2021

Comparison of the Nine Months Ended September 30, ~~2022~~2023 and 2022~~2021~~

Revenue

Nine months ended
September 30,

2022

2021

$ Change

% Change

(in thousands)

Revenue

$
3,123

$
743

$
2,380

320.3
%

Nine months ended September 30,

2023

2022

$ Change

% Change

(in thousands)

Revenue

$
2,657

$
3,123

$
(466
)

(14.9
)%

Revenue ~~increased~~decreased by ~~$2.4~~$0.5 million, or 14.9~~320%~~%, to ~~$3.1~~$2.7 million for the nine months ended September 30, 2023 from $3.1 million for thenine months ended September 30, 2022~~from $0.7million for thenine months ended September 30, 2021.~~. The ~~increase~~decrease was driven by decreased integration revenue, partially offset by increased recurring service revenue from technology and services contracts with commercial customers. For the nine months ended September 30, 2023 and 2022, one customer accounted for 80 91% and ~~% of total revenue. For thenine months ended September 30, 2021,~~ ~~three~~ ~~customers accounted for~~ ~~92%~~91% of total ~~revenue.~~revenue, respectively.

Operating Expense

Cost of Goods Sold (COGS)

Nine months ended
September 30,

2022

2021

$ Change

% Change

(in thousands)

COGS

$
8,868

$
11,668

$
(2,800
)

(24.0
)%

Nine months ended September 30,

2023

2022

$ Change

% Change

(in thousands)

COGS

$
9,397

$
8,868

$
529

6.0
%

COGS ~~decreased~~increased by ~~$2.8~~$0.5 million, or 6~~24%~~%, to ~~$8.9~~$9.4 million for the nine months ended September 30, 2023 from $8.9 million for thenine months ended September 30, 2022. ~~from $11.7million for thenine months ended September 30, 2021.~~ The ~~decrease~~increase was primarily driven by a ~~$5.3~~$0.6million ~~decrease~~related to increase in site rent expense ~~related~~due to ~~contingent rent recorded for warrants vested during the first half~~deployment of~~2021~~ new sites in 2023 and a ~~$0.3~~$0.2 million ~~decrease~~increase in ~~outside consulting~~software license expenses. The ~~decreases~~increases were partially offset by ~~an increase of $1.6~~a $0.3 million ~~in stock-based compensation,~~ ~~an increase of $0.6 million in software license cost,~~ ~~an increase of $0.5million in maintenance and operational cost, and an increase of $0.3~~ ~~million~~decrease in payroll-related expenses, ~~driven by headcount.~~outside consulting expenses and operational and maintenance cost.

Research and Development

Nine months ended
September 30,

2022

2021

$ Change

% Change

(in thousands)

Research and development

$
12,725

$
6,894

$
5,831

84.6
%

Nine months ended September 30,

2023

2022

$ Change

% Change

(in thousands)

Research and development

$
14,579

$
12,725

$
1,854

14.6
%

Research and development expenses increased by ~~$5.8~~$1.9 million, or 14.6~~85%~~%, to ~~$12.7~~$14.6 million for the nine months ended September 30, 2023 from $12.7 million for thenine months ended September 30, 2022 ~~from $6.9million for thenine months ended September 30, 2021.~~. The increase was primarily driven by a ~~$4.3~~ $0.9~~million increase in stock-based compensation and a $1.5~~ million increase in payroll-related expenses, ~~driven by headcount, an~~a $0.5 million increase ~~of $0.2~~in stock-based compensation, a $0.4 million ~~in software license cost, and an~~ increase ~~of $0.1 million~~ in operational and maintenance ~~cost.~~cost, $0.2 million increase in software license fee and a $0.1 million increase in professional services. The increases were partially offset by a ~~$0.3~~$0.2million decrease in outside consulting expenses.

2122

Selling, General and Administrative

Nine months ended
September 30,

2022

2021

$ Change

% Change

(in thousands)

Selling, general and administrative

$
29,874

$
9,385

$
20,489

218.3
%

Nine months ended September 30,

2023

2022

$ Change

% Change

(in thousands)

Selling, general and administrative

$
18,722

$
29,874

$
(11,152
)

(37.3
)%

Selling, general and administrative expenses ~~increased~~decreased by ~~$20.5~~$11.2 million, or 37.3~~218%~~%, to ~~$29.9~~$18.7 million for the nine months ended September 30, ~~2022~~2023 from ~~$9.4~~$29.9 million for the nine months ended September 30, ~~2021~~.2022. The ~~increase~~decrease was primarily driven by ~~a $13.7~~an $8.4 million ~~increase~~decrease in stock-based compensation, a $0.8~~2.8~~million ~~increase in professional services,~~ ~~a $2.6~~ ~~million increase~~decrease in directors’ and officers’ insurance,~~a $2.3~~ ~~million increase in payroll-related expenses driven by headcount,~~ ~~and a $0.7~~ ~~million increase in marketing and recruiting cost. The increases were partially offset by a $0.9million decrease in other operational expenses, and~~ a $0.7 million decrease in outside consulting expenses, a $0.7 million decrease in professional services, and a $0.4 million decrease in marketing and recruiting cost, and a $0.3 million decrease in payroll-related expenses. The decreases were partially offset by a $0.2 million increase in operational and maintenance cost.

Depreciation and Amortization

Nine months ended
September 30,

2022

2021

$ Change

% Change

(in thousands)

Depreciation and amortization

$
2,657

$
1,069

$
1,588

148.6
%

Nine months ended September 30,

2023

2022

$ Change

% Change

(in thousands)

Depreciation and amortization

$
3,559

$
2,657

$
902

33.9
%

Depreciation and amortization expenses increased by ~~$1.6~~$0.9 million, or 33.9~~149%~~%, to ~~$2.7~~$3.6 million for the nine months ended September 30, 2023 from $2.7 million for thenine months ended September 30, 2022. ~~from $1.1million for thenine months ended September 30, 2021.~~ The increase in depreciation and amortization expense was primarily attributable to placing ~~the~~ Pinnacle and TerraPoiNT network assets in service since the ~~first~~third quarter of2022 and amortization related to acquired intangibles in fourth quarter of 2022.~~2021.~~

Interest Income (Expense)

Nine months ended
September 30,

2022

2021

$ Change

% Change

(in thousands)

Interest income (expense)

$
445

$
(8,899
)

$
9,344

(105.0
)%

Nine months ended September 30,

2023

2022

$ Change

% Change

(in thousands)

Interest income (expense)

$
(1,614
)

$
445

$
(2,059
)

(462.7
)%

Interest ~~income was~~ $~~0.4~~ ~~million~~ expense for thenine months ended September 30, ~~2022, compared with~~2023 was $4.2 million whereas interest income was $2.6 million resulting in net interest expense of ~~$8.9~~$1.6 million for thenine months ended September 30, ~~2021.~~2023 compared with interest income of $0.4 million for the nine months ended September 30, 2022. The ~~decrease~~increase in interest expense was ~~driven by full repayment~~due to interest and amortization of debt ~~as a part of the Business Combination in the fourth quarter of2021.~~ ~~Interest income consists of interest earned~~discounts on ~~marketable securities.~~our senior secured notes issued during 2023.

Other Income (Expense)

Nine months ended
September 30,

2022

2021

$ Change

% Change

(in thousands)

Other income (expense)

$
22,983

$
(61,253
)

$
84,236

(137.5
)

Nine months ended September 30,

2023

2022

$ Change

% Change

(in thousands)

Other income (expense)

$
(9,966
)

$
22,983

$
(32,949
)

(143.4
)%

Other ~~income~~expense was ~~$23.0~~$10.0 million for the nine months ended September 30, 2023 compared with other income of $23.0 million for thenine months ended September 30, 2022~~compared with other expenses of $61.3million for thenine months ended September 30, 2021.~~. The change in other income was primarily driven by the change in the fair value of warrants.

2223

Liquidity and Capital Resources

We have incurred losses since our inception and to date have generated only limited revenue. ~~Prior~~We have primarily relied upon debt and equity financings to ~~the closing of the Business Combination, we had funded~~fund our operations primarily through the issuances of convertible preferred units and through borrowing under an existing senior secured loan facility (the “Financing Agreement”), which Holdings entered into in December 2019 and amended in June 2021 with Fortress Credit Corporation (“Fortress Facility”).cash requirements.

In connection with the consummation of the Business Combination (See Note 1 to our condensed consolidated financial statements for the nine months ended September 30, 2022 included elsewhere in this Quarterly Report on Form 10-Q for additional information), all amounts outstanding under the Financing Agreement were repaid and the Financing Agreement was terminated. As a result, we had no debt outstanding as of September 30, 2022 and December 31, 2021.

During the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, we incurred net losses of ~~$27.6~~$55.3 million and ~~$98.5~~$27.6 million, respectively. During the nine months ended September 30, 2023, our net cash used in operating activities and investing activities was $24.6 million and $1.5 million, respectively. During the nine months ended September 30, 2022, our net cash used in operating activities and investing activities was $25.2 million and $11.3 million, respectively. ~~During the~~ ~~nine months ended September 30, 2021, our net cash used in operating activities and investing activities was $29.4 million and $1.1 million, respectively.~~ As of September 30, ~~2022,~~2023, we had cash and cash equivalents and marketable securities of ~~$71.8~~$97.1 million and an accumulated deficit of ~~$676.0~~$743.8 million. We expect to incur additional losses and higher operating expenses for the foreseeable future. Our primary ~~uses~~use of cash ~~are~~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 the expansion of theTerraPoiNTnetwork.

Managing liquidity and our cash position is a priority of ~~the Company.~~ours. We continually work to optimize our expenses in light of the growth of our business, and adapt to changes in the economic environment. We believe that our cash and cash equivalents and marketable securities as of September 30, ~~2022~~2023 will be sufficient to meet our working capital and capital expenditure needs ~~for~~, including all contractual commitments, beyond the next 12 ~~months.~~months. We believe we will meet longer term expected future cash requirements and obligations through a combination of our 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 projections and is subject to changes in market and business conditions.

~~Pandemic Impact~~

In 2023, we issued $70.0 million senior secured notes with a fixed interest rate of 10% to the Lenders. The ~~full impact~~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, in its sole discretion, to pay up to 50% of the ~~COVID-19 pandemic continues~~accrued and unpaid interest on the senior secured notes due with its common stock. Refer to ~~evolve as of~~Note 7 to our condensed consolidated financial statements for the ~~date of~~three and nine months ended September 30, 2023 included elsewhere in this Quarterly Report on Form 10-Q. As such, it is not possible to determine the duration and scope of the pandemic, the scale and rate of economic recovery from the pandemic, supply chain disruptions, and labor availability and costs, or the impact of other indirect factors that may be attributable to the pandemic, and the extent to which these or other currently unanticipated consequences of the pandemic are reasonably likely to materially affect our results of operations. In addition, these direct and indirect factors can make it difficult to isolate and quantify the portion of our costs that are a direct result of inflation, the pandemic and costs arising from factors that may have been influenced by the pandemic, including increased wage rates and incentives resulting from constrained labor markets and global supply chain constraints. Management continues to actively monitor our financial condition, liquidity, operations, suppliers, industry and workforce. We expect these factors and their effects on our operations to continue through the remainder of 2022.

~~Macroeconomic factors~~

We are aware that network deployment projects are experiencing delays in schedules and potential cost increases due to a tight labor supply in the field services market. While the impact of this supply constraint is not material to the Company's network projects at this time, we continue to carefully manage labor and materials supply matters.

Cash Flows

The following table summarizes our cash flows for the period indicated:

	Nine Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2023			2022
	(in thousands)						(in thousands)
Net cash (used in) operating activities	$	(25,185	)	$	(29,429	)	$	(24,607	)	$	(25,185	)
Net cash (used in) investing activities		(11,297	)		(1,054	)		(1,494	)		(11,297	)
Net cash provided by financing activities		44			18,469			69,005			44

2324

Cash Flows from Operating Activities

Our cash flows used in operating activities are significantly affected by the growth of our business and are primarily related to research and development, sales and marketing, and selling, general and administrative activities. Our operating cash flows are also affected by our working capital needs to support growth in personnel-related expenditures and fluctuations in accounts payable and other current assets and liabilities.

Net cash used in operating activities during the nine 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 $9.8million 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, $0.2 million for equity method investment loss, and $0.1 million in asset retirement obligation accretion expense. Additionally, there was a net increase in operating liabilities of $3.3 million.

Net cash used in operating activities during the nine months ended September 30, 2022 was $25.2 million, resulting primarily from a net loss of $27.6 million adjusted for non-cash charges of $20.6 million for stock-based compensation, $2.7 million for depreciation and amortization, and non-cash income of $23.2 million for change in the fair value of warrant liability. Additionally, there was a net increase in operating assets and liabilities of $2.2 million.

~~Net cash used in operating activities during the nine months ended September 30, 2021 was~~ ~~$29.4 million~~, resulting primarily from a net loss of $98.5 million, adjusted for non-cash charges of $61.2 million for change in the fair value of warrant liability, $5.5 million for contingent rent expense, $4.2 million for interest expense, $1.1 million for depreciation and amortization, $0.7 million for amortization of debt issuances costs, $1.0 million for stock-based compensation, and a decrease of $4.8 million in operating assets and liabilities.

Cash Flows from Investing Activities

Net cash used inby investing activities during the nine months ended September 30, ~~2022~~2023 was ~~$11.3~~$1.5 million, representing ~~additions to short term investment, equity method investments,~~sale and maturity of marketable securities, net of purchase of marketable securities, and cash used for property and equipment primarily related to the deployment of the Pinnacle and TerraPoiNT network and internal use software.

Net cash used in investing activities during the nine months ended September 30, ~~2021~~ 2022 was ~~$1.1~~$11.3 million, representing additions to property, equipment and related installation costs primarily related to the deployment of the Pinnacle Network.

Cash Flows from Financing Activities

Net cash provided by financing activities during the nine months ended September 30, ~~2022~~ 2023 was ~~$44 thousand,~~$69.0 million, primarily reflecting cash proceeds from ~~exercise~~issuance of ~~common stock options.~~senior secured notes, net of debt issuance cost.

Net cash provided by financing activities during the nine months ended September 30, ~~2021~~ 2022 was ~~$18.5 million,~~$44 thousands primarily reflecting ~~borrowing~~cash proceeds from ~~the Fortress Facility.~~exercise of common stock options.

Critical Accounting Policies and Significant Management Estimates

For a discussion of our critical accounting policies and estimates, please refer to Item 7 under Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2021~~2022 Form ~~10-K. There have been no material changes~~10-K and Note 2 to our condensed consolidated financial statements for the ~~critical accounting policies~~three and ~~estimates as of~~ nine months ended September 30, ~~2022 as outlined~~2023 included elsewhere in ~~our 2021~~this Quarterly Report on Form ~~10-K, filed with the SEC on March 23, 2022.~~10-Q .

Recently Issued and Adopted Accounting Standards

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 the three and nine months ended September 30, ~~2022~~2023 included elsewhere in this Quarterly Report on Form 10-Q.

2425

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our market risks from those disclosed in Part II, Item 7A of the ~~2021~~2022 Form 10-K.

Item 4. Controls And Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, ~~2022.~~2023. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of September 30, ~~2022.~~2023.

Changes in Internal Control over Financial Reporting

As ~~discussed in Part II, Item 9A~~a result of the ~~2021 Form 10-K,~~acquisition of Nestwave, we have incorporated internal controls over significant processes specific to the acquisition that we believe to be appropriate and necessary in ~~accordance~~consideration of the level of related integration. As the post-closing integration continues, we will continue to review such internal controls and processes and may take further steps to integrate such controls and processes with ~~a transition period set for newly public companies established by~~those of the ~~SEC, the design and ongoing development of~~Company.

There were no changes in our ~~framework for implementation and evaluation of~~ internal control over financial reporting ~~is ongoing. Accordingly, this Quarterly Report on Form 10-Q does not include disclosure related~~during the fiscal quarter ended September 30, 2023 that have materially affected, or are reasonably likely to ~~any changes in~~materially affect, our internal control over financial reporting.

2526

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

In the course of our business, we are involved in litigation and legal matters from time to time. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. We accrue liabilities for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. We do not believe that any such matters, individually or in the aggregate, will have a material adverse effect on our business, financial condition, results of operations, or cash flows.

Item 1A. Risk Factors

You should carefully consider all of the information included in this Quarterly Report on Form 10-Q before you decide whether to invest in our securities. Our business is subject to ri~~sks~~risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022 filed with SEC on March 30, 2023, and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023, as ~~supplemented~~well as those otherwise described or updated from time to time in our other filings with the SEC. You should consult your own financial and legal advisors as to the risks entailed by an investment in our securities and the ~~following updated risk factors.~~suitability of investing in our securities in light of your particular circumstances.

We have and may in the future acquire other businesses, which could require significant management attention, disrupt our business, dilute stockholder value and harm our business, revenue and financial results.

As part of our business strategy, we have made and intend to make acquisitions. Our previous and future acquisitions may not achieve our goals, and we may not realize benefits from acquisitions we make in the future. Any integration process will require significant time and resources, and we may not be able to manage the process successfully. If we fail to successfully integrate acquisitions, or the personnel or technologies associated with those acquisitions, the business, revenue and financial results of the combined company could be harmed. Our acquisition strategy may change over time and future acquisitions we complete could be viewed negatively by our stockholders or other parties with whom we do business. We may not successfully evaluate or utilize the acquired technology and accurately forecast the financial impact of an acquisition, including accounting charges. We may also incur unanticipated liabilities that we assume as a result of acquiring companies. We may have to pay cash, incur debt or issue equity securities to pay for any such acquisition, each of which could affect our financial condition or the value of our securities. In the future, we may not be able to find suitable acquisition candidates, and we may not be able to complete acquisitions on favorable terms, if at all.

~~We rely, in part, on AT&T for distribution of our services to FirstNet~~^® ~~customers.~~

~~We entered into a services agreement with AT&T, that was to expire in October 2022, with no renewal terms.~~
On October 7, 2022, we amended the agreement, to extend it for an additional term of three months, expiring in January 2023.This AT&T agreement, as amended, continues our relationship in which AT&T purchases, markets and sells our services to its FirstNet^® subscribers. We have no contractual right to require AT&T to continue its relationship with us, and AT&T may decide not to renew our services contract prior to the end of the extended term. If we are not able to secure a further renewal or extension of our services agreement with AT&T, our ability to sell or market products to FirstNet^® ~~and other public safety customers may be impacted, and our business, financial and results of operations may be harmed.~~

~~We face intense competition in our market, especially from competitors that offer their location services for free, which could make it difficult for us to acquire and retain customers and end users.~~

The market for development, distribution and sale of location services is highly competitive. Many of our competitors have strong name recognition, sizable customer bases and significantly greater financial, technical, marketing, public relations, sales, distribution and other resources than we do. These competitors often offer competing services for free and have the financial capabilities to continue to improve upon their location services offering without charging a fee. Certain of our competitors are already vying for market share in the 3D location space through their participation in a federal regulatory proceeding involving the FCC in which wireless mobile telephony providers are being required to enter into relationships with 3D location vendors in order to enable accurate 3D location information to be conveyed to E911 emergency dispatchers with each wireless call made to E911 emergency services. In June of 2022, the CTIA, ~~a trade association representing the wireless communications industry in the United States,~~ ~~filed a statement with the FCC that solutions provided by these competitors meet these FCC’s requirements.If the FCC accepts this statement, then the market for our services for E911 may be reduced.~~Also, although our services currently offer an improved functionality over the services offered for free, there is no certainty that we will be able to achieve broad market appeal for our 3D location services. In addition, there is no guarantee that our services will be as reliable and with the same geographic coverage as the currently available geolocation services, which may impact our ability to attract customers to utilize our products over the free services offered by our competitors. The performance of our services may vary based on ambient conditions, both physical and environmental which may impact the timing and location accuracy of the system. If our services are not meaningfully superior to those available at lower or no cost, we may have difficulty selling our services, achieving widespread adoption of our services and our business, financial position and results of operations may be harmed.

2627

~~Our services may not be adopted by additional wireless carriers for E911.~~

We have expended significant resources developing, testing and licensing software and solutions targeted towards E911 services, the primary customers for which are wireless carriers. Certain of these wireless carriers were the subject of an enforcement action by the FCC regarding their lack of compliance with rules requiring the provision of vertical location services in the top 25 cellular market areas (“CMAs”) by April 3, 2021. On June 3, 2021, the FCC adopted consent decrees with each of the named wireless carriers that effectively provided an extension of one year to the April 3, 2021 compliance date in the top 25 CMAs, but also required the carriers to begin delivering any z-axis information that was available to them and to provide interim reports on their ongoing testing and deployment efforts. While we have successfully signed one national wireless carrier as a customer for E911 services, our ability to sell our Pinnacle service to additional wireless carriers for E911, a service we believe to exceed the current FCC accuracy requirement, is dependent upon the willingness of these carriers to use our service to comply with the FCC mandate, which has been impacted by the FCC’s one year extension and may be impacted by the development and testing of competing solutions to the our technology.~~In June~~ ~~of 2022, the CTIA filed a statement with the FCC that solutions provided by certain competitors meet these FCC’s requirements.If the FCC accepts this statement, then the market for our services for E911 may be reduced.~~

~~Our ability to offer our service for E911~~ is also influenced by the willingness of wireless device manufacturers to incorporate our software or services into their device platforms. Apple and Google exert significant market power over services on their respective platforms, and there is no assurance that they will approve or adopt our software or services in connection with their respective platforms. If Apple and/or Google do not provide such approval, there could be a material adverse impact to our business, financial condition and results of operations.

Military action in Ukraine, including the resulting geopolitical effects beyond Ukraine, may directly or indirectly increase our risks from supply chain, cybersecurity, foreign currency fluctuations, or other factors.

The Russian invasion and resulting military action in Ukraine has resulted in worldwide geopolitical and macroeconomic uncertainty. The United States and others have imposed financial and economic sanctions on certain industry sectors and parties in and associated with Russia and Belarus, and additional sanctions continue to be proposed and adopted. The military action in Ukraine and the sanctions against Russia resulting from such conflict may increase the likelihood of supply chain interruptions, cybersecurity incidents, disruptions to our information systems, foreign currency fluctuations, or other risks. While we do not currently expect the conflict to have a direct material impact on our business, it is not possible to predict the broader consequences, which could include additional sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on the global economy or on our business and operations, as well as those of our customers, partners and third-party service providers. Further, the effects of the ongoing conflict could serve to heighten many of the known risks we described in Part I, Item 1A. “Risk Factors” of the 2021 Form 10-K.

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

(a) Unregistered Sales of Equity Securities

None.

(b) Use of Proceeds from Sale of Registered Equity Securities

None.

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The shares we repurchased in connection with the payment of minimum statutory withholding taxes due upon the vesting of certain restricted stock unit awards were repurchased at the then current fair market value of the shares. For the three months ended September 30, 2022, these shares consisted of the following:None.

Total Number of
Shares Purchased

Average Price Paid
Per Share

July 1 - July 31, 2022

—

$
—

August 1 - August 31, 2022

1,004

$
3.17

September 1 - September 30, 2022

—

$
—

Total

1,004

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

2728

Item 6. Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.

Exhibit Number		Description
3.1*		Amended and Restated Certificate of Incorporation of NextNav Inc. (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 filed by NextNav Inc. on November 2, 2021).
3.2*		Bylaws of NextNav Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed by NextNav Inc. on October 28, 2021).
31.1		Certification of the Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002
31.2		Certification of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
~~10.1+~~		Share Transfer Agreement, dated October 28, 2022, by and among NextNav Inc. and the Sellers party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by NextNav Inc. on November 2, 2022).
32.1**		Certification of the Chief Executive Officer & Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Filed previously.

	**	Furnished herewith.

	+	Certain exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K, and, in accordance with Item 601(b)(10)(iv) of Regulation S-K, certain provisions of the Agreement have been redacted. The Company will provide such omitted exhibits and schedules, or an unredacted copy of the exhibit, as the case may be, on a supplemental basis to the Securities and Exchange Commission or its staff upon request.

2829

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NEXTNAV INC.

Date: November ~~10, 2022~~8, 2023	By:	/s/ Christian D. Gates
	Name:	Christian D. Gates
	Title:	Chief Financial Officer and Principal Financial Officer

Date: November ~~10, 2022~~8, 2023	By:	/s/ Sammaad R. Shams
	Name:	Sammaad R. Shams
	Title:	Corporate Accounting Officer and Principal Accounting Officer

2930

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Delaware		87-0854654
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1775 Tysons Blvd., 5^th Floor McLean, VA		22102
(Address of principal executive offices)		(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 ~~par value~~ per share	NN	The Nasdaq Capital Market
Warrants, each to purchase one share of Common Stock	NNAVW	The Nasdaq Capital Market

Large accelerated filer	☐	Smaller reporting company	☒
Accelerated filer	☐	Emerging growth company	☒
Non-accelerated filer	☒

	September 30, 2022 (unaudited)			December 31, 2021			September 30, 2023 (unaudited)			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	63,588		$	100,076		$	90,132		$	47,230
Short term investment		8,173			—
Short term investments								6,962			8,216
Accounts receivable		1,442			1,740			2,738			2,168
Other current assets		1,693			4,516			2,323			3,576
Total current assets	$	74,896		$	106,332		$	102,155		$	61,190
Network under construction		2,641			494			1,730			3,574
Property and equipment, net of accumulated depreciation of $5,144 and $2,714 at September 30, 2022 and December 31, 2021, respectively		19,458			21,757
Property and equipment, net of accumulated depreciation of $8,727 and $5,971 at September 30, 2023 and December 31, 2022, respectively								20,524			19,180
Operating lease right-of-use assets		10,817			—			19,556			10,143
Goodwill								17,238			17,493
Intangible assets		4,149			4,095			10,349			10,397
Other assets		1,915			4,145			1,569			1,811
Total assets	$	113,876		$	136,823		$	173,121		$	123,788

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,516		$	448		$	916		$	1,019
Accrued expenses and other current liabilities		4,694			4,600			7,581			5,241
Operating lease current liabilities		2,755			—			2,634			2,532
Deferred revenue		44			1,632			71			95
Total current liabilities	$	9,009		$	6,680		$	11,202		$	8,887
Warrants		5,687			28,875			14,000			4,200
Operating lease noncurrent liabilities		5,606			—			15,076			5,290
Other long-term liabilities		1,133			1,311			1,671			1,547
Long term debt, net of debt issuance cost and discount								47,067			—
Total liabilities	$	21,435		$	36,866		$	89,016		$	19,924

Stockholders’ equity:
Common stock, authorized 500,000,000 shares; 101,394,335 and 96,546,611 shares issued and 101,393,158 and 96,546,611 shares outstanding at September 30, 2022 and December 31, 2021, respectively		11			11
Common stock, authorized 500,000,000 shares; 108,977,489 and 106,418,442 shares issued and 108,976,312 and 106,417,265 shares outstanding at September 30, 2023 and December 31, 2022, respectively								12			12
Additional paid-in capital		768,569			747,928			822,928			787,130
Accumulated other comprehensive loss		(145	)		(121	)
Accumulated other comprehensive income								1,153			1,371
Accumulated deficit		(675,990	)		(647,861	)		(743,831	)		(688,492	)
Common stock in treasury, at cost; 1,177 and zero shares at September 30, 2022 and December 31, 2021, respectively		(4	)		—
Common stock in treasury, at cost; 1,177 shares at September 30, 2023 and December 31, 2022								(4	)		(4	)
Total stockholders’ equity	$	92,441		$	99,957		$	80,258		$	100,017
Non-controlling interests								3,847			3,847
Total liabilities and stockholders’ equity	$	113,876		$	136,823		$	173,121		$	123,788

	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	1617
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	2526
	Item 4. Controls and Procedures	2526
Part II. OTHER INFORMATION		2627
	Item 1. Legal Proceedings	2627
	Item 1A. Risk Factors	2627
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2728
	Item 3. Defaults Upon Senior Securities	2728
	Item 4. Mine Safety Disclosures	2728
	Item 5. Other Information	2728
	Item 6. Exhibits	2829
Signatures		2930

	Redeemable Class C Convertible				Redeemable Class D Convertible				Total Preferred		Class A				Additional						Accumulated Other			Class A Common Stock				Stockholders’			Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Treasury stock,			Stockholders’ (Deficit)				Non- controlling		Total
	Preferred Units				Preferred Units				Interests		Common Stock				Paid-In			Accumulated			Comprehensive			in Treasury				(Deficit)			Shares		Value		Capital		Deficit			Income			at cost			Equity				interests		Equity
	Units		Value		Units		Value		Value		Units		Value		Capital			Deficit			(Loss)			Units		Value		Equity
Balance, December 31, 2020		5,365,566	$	11,879		42,286,068	$	357,725	$	369,604		7,345,733	$	2	$	—		$	(490,284	)	$	(96	)		—	$	—	$	(490,378	)
Equity-based compensation expense		—		—		—		—		—		—		—		363			—			—			—		—		363
Issuance of common warrants		—		—		—		—		—		—		—		232			—			—			—		—		232
Change in redemption value		—		—		—		8,188		8,188		—		—		(595	)		(7,593	)		—			—		—		(8,188	)
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		—		—		—		—		—		—		—		—			(27,068	)		—			—		—		(27,068	)		—		—		—		(16,349	)		—			—			(16,349	)		—		(16,349	)
Foreign currency translation adjustment		—		—		—		—		—		—		—		—			—			(1	)		—		—		(1	)		—		—		—		—			432			—			432			—		432
Balance, March 31, 2021		5,365,566	$	11,879		42,286,068	$	365,913	$	377,792		7,345,733	$	2	$	—		$	(524,945	)	$	(97	)		—	$	—	$	(525,040	)
Equity-based compensation expense		—		—		—		—		—		—		—		325			—			—			—		—		325
Balance, March 31, 2023																																107,155,654	$	12	$	791,703	$	(704,841	)	$	1,803		$	(4	)	$	88,673		$	3,847	$	92,520
Vesting of RSUs																																605,975		—		—		—			—			—			—			—		—
Issuance of RSAs																																376,325		—		—		—			—			—			—			—		—
Exercise of common stock options																																46,583		—		13		—			—			—			13			—		13
Stock-based compensation expense																																—		—		3,697		—			—			—			3,697			—		3,697
Issuance of common warrants		—		—		—		—		—		—		—		—			—			—			—		—		—			—		—		14,598		—			—			—			14,598			—		14,598
Change in redemption value		—		—		—		5,643		5,643		—		—		(325	)		(5,318	)		—			—		—		(5,643	)
Net loss		—		—		—		—		—		—		—		—			(38,975	)		—			—		—		(38,975	)		—		—		—		(15,770	)		—			—			(15,770	)		—		(15,770	)
Foreign currency translation adjustment		—		—		—		—		—		—		—		—			—			1			—		—		1			—		—		—		—			20			—			20			—		20
Balance, June 30, 2021		5,365,566	$	11,879		42,286,068	$	371,556	$	383,435		7,345,733	$	2	$	—		$	(569,238	)	$	(96	)		—	$	—	$	(569,332	)
Equity-based compensation expense		—		—		—		—		—		—		—		345			—			—			—		—		345
Balance, June 30, 2023																																108,184,537	$	12	$	810,011	$	(720,611	)	$	1,823		$	(4	)	$	91,231		$	3,847	$	95,078
Vesting of RSUs																																260,215		—		—		—			—			—			—			—		—
Issuance of RSAs																																24,500		—		—		—			—			—			—			—		—
Exercise of common stock options		—		—		—		—		—		13,229		—		2			—			—			—		—		2			98,829		—		28		—			—			—			28			—		28
Exercise of common warrants																																408,231		—		882		—			—			—			882			—		882
Stock-based compensation expense																																—		—		3,762		—			—			—			3,762			—		3,762
Issuance of common warrants																																—		—		8,245		—			—			—			8,245			—		8,245
Net loss		—		—		—		—		—		—		—		—			(32,421	)		—			—		—		(32,421	)		—		—		—		(23,220	)		—			—			(23,220	)		—		(23,220	)
Foreign currency translation adjustment		—		—		—		—		—		—		—		—			—			(19	)		—		—		(19	)		—		—		—		—			(670	)		—			(670	)		—		(670	)
Balance, September 30, 2021		5,365,566	$	11,879		42,286,068	$	371,556	$	383,435		7,358,962	$	2	$	347		$	(601,659	)	$	(115	)		—	$	—	$	(601,425	)
Balance, September 30, 2023																																108,976,312	$	12	$	822,928	$	(743,831	)	$	1,153		$	(4	)	$	80,258		$	3,847	$	84,105

	Redeemable Class C Convertible Preferred Units				Redeemable Class D Convertible Preferred Units				Total Preferred Interests		Class A Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Class A Common Stock in Treasury						Stockholders’ (Deficit)			Common Stock					Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Treasury stock,			Stockholders’ (Deficit)			Non- controlling		Total
	Units		Value		Units		Value		Value		Units		Value		Capital		Deficit			(Loss)			Units			Value			Equity			Shares			Value		Capital		Deficit			(Loss)			at cost			Equity			interests		Equity
Balance, December 31, 2021		—	$	—		—	$	—	$	—		96,546,611	$	11	$	747,928	$	(647,861	)	$	(121	)		—		$	—		$	99,957			96,546,611		$	11	$	747,928	$	(648,376	)	$	(121	)	$	—		$	99,442		$	—	$	99,442
Impact from adoption of new accounting standards		—		—		—		—		—		—		—		—		(515	)		—			—			—			(515	)
Balance, January 1, 2022		—		—		—		—		—		96,546,611		11		747,928		(648,376	)		(121	)		—			—			99,442
Exercise of common stock options		—		—		—		—		—		7,325		—		26		—			—			—			—			26			7,325			—		26		—			—			—			26			—		26
Exercise of common warrants		—		—		—		—		—		10		—		—		—			—			—			—			—			10			—		—		—			—			—			—			—		—
Stock-based compensation expense		—		—		—		—		—		—		—		7,195		—			—			—			—			7,195			—			—		7,195		—			—			—			7,195			—		7,195
Net loss		—		—		—		—		—		—		—		—		(9,711	)		—			—			—			(9,711	)		—			—		—		(9,711	)		—			—			(9,711	)		—		(9,711	)
Foreign currency translation adjustment		—		—		—		—		—		—		—		—		—			(13	)		—			—			(13	)		—			—		—		—			(13	)		—			(13	)		—		(13	)
Common stock received for tax withholding		—		—		—		—		—		—		—		—		—			—			(173	)		(1	)		(1	)		(173	)		—		—		—			—			(1	)		(1	)		—		(1	)
Balance, March 31, 2022		—	$	—		—	$	—	$	—		96,553,946	$	11	$	755,149	$	(658,087	)	$	(134	)		(173	)	$	(1	)	$	96,938			96,553,773		$	11	$	755,149	$	(658,087	)	$	(134	)	$	(1	)	$	96,938		$	—	$	96,938
Vesting of RSUs		—		—		—		—		—		239,266		—		—		—			—			—			—			—			239,266			—		—		—			—			—			—			—		—
Issuance of RSAs		—		—		—		—		—		205,850		—		—		—			—			—			—			—			205,850			—		—		—			—			—			—			—		—
Exercise of common stock options		—		—		—		—		—		79,614		—		22		—			—			—			—			22			79,614			—		22		—			—			—			22			—		22
Exercise of common warrants		—		—		—		—		—		4,308,297		—		—		—			—			—			—			—			4,308,297			—		—		—			—			—			—			—		—
Stock-based compensation expense		—		—		—		—		—		—		—		6,763		—			—			—			—			6,763			—			—		6,763		—			—			—			6,763			—		6,763
Net income		—		—		—		—		—		—		—		—		827			—			—			—			827			—			—		—		827			—			—			827			—		827
Foreign currency translation adjustment		—		—		—		—		—		—		—		—		—			(9	)		—			—			(9	)		—			—		—		—			(9	)		—			(9	)		—		(9	)
Balance, June 30, 2022		—	$	—		—	$	—	$	—		101,386,973	$	11	$	761,934	$	(657,260	)	$	(143	)		(173	)	$	(1	)	$	104,541			101,386,800		$	11	$	761,934	$	(657,260	)	$	(143	)	$	(1	)	$	104,541		$	—	$	104,541
Vesting of RSUs		—		—		—		—		—		21,214		—		—		—			—			—			—			—
Vesting of RSUs																																	21,214			—		—		—			—			—			—			—		—
Issuance of RSAs		—		—		—		—		—		43,430		—		—		—			—			—			—			—			43,430			—		—		—			—			—			—			—		—
Cancellation of RSAs		—		—		—		—		—		(57,282)		—		—		—			—			—			—			—			(57,282	)		—		—		—			—			—			—			—		—
Stock-based compensation expense		—		—		—		—		—		—		—		6,635		—			—			—			—			6,635			—			—		6,635		—			—			—			6,635			—		6,635
Net loss		—		—		—		—		—		—		—		—		(18,730	)		—			—			—			(18,730	)		—			—		—		(18,730	)		—			—			(18,730	)		—		(18,730	)
Foreign currency translation adjustment		—		—		—		—		—		—		—		—		—			(2	)		—			—			(2	)		—			—		—		—			(2	)		—			(2	)		—		(2	)
Common stock received for tax withholding		—		—		—		—		—		—		—		—		—			—			(1,004	)		(3	)		(3	)		(1,004	)		—		—		—			—			(3	)		(3	)		—		(3	)
Balance, September 30, 2022		—	$	—		—	$	—	$	—		101,394,335	$	11	$	768,569	$	(675,990	)	$	(145	)		(1,177	)	$	(4	)	$	92,441			101,393,158		$	11	$	768,569	$	(675,990	)	$	(145	)	$	(4	)	$	92,441		$	—	$	92,441

	Three Months Ended September 30,			Nine Months Ended September 30,
Antidilutive Shares Excluded		2022	2021	2022		2021
	(in thousands)			(in thousands)
Warrants		18,750	17,667		18,750		17,667
Stock Options		2,374	2,049		2,374		2,049
Unvested Restricted Stock Units		3,294	94		3,294		94
Unvested Restricted Stock Awards		1,262	—		1,262		—
Preferred units		—	47,652		—		47,652

Goodwill - January 1, 2023	$	17,493
Changes in foreign exchange rates		(159	)
Purchase price adjustment		(96	)
Goodwill - September 30, 2023	$	17,238

	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
Operating lease cost	$	1,023	$	3,075
Variable lease cost	$	26	$	77
Short-term lease cost	$	57	$	171

		September 30, 2023						December 31, 2022
		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		6,983		1,911		5,072		6,999		1,561		5,438
Acquired Technology		575		44		531		580		8		572
Internal Use Software		2,326		1,047		1,279		1,560		640		920
Total	$	13,351	$	3,002	$	10,349	$	12,606	$	2,209	$	10,397

	Three Months Ended September 30, 2022			Nine Months Ended September 30, 2022
Operating cash flows from operating leases	$	969	$	2,914
Right-of-use assets obtained in exchange for new operating lease liabilities	$	—	$	9,459

Remainder of 2022	$	881
2023		2,765
2024		1,894
2025		1,441
2026		1,205
Thereafter		997
Total undiscounted future lease payments	$	9,183
Less imputed interest		822
Total lease liability balance	$	8,361

2023	$	270
2024		1,012
2025		950
2026		712
2027 and thereafter		3,938
	$	6,882

For the Twelve Months Ended December 31,
2022	$	3,335
2023	$	2,400
2024	$	1,548
2025	$	1,109
Thereafter	$	1,581

	Level 1		Level 2		Level 3		Total
	(in thousands)
September 30, 2022
Cash and Cash Equivalents - Money Market Funds	$	116	$	—	$	—	$	116
Cash and Cash Equivalents - U.S. Government Agency Bonds		—		53,585		—		53,585
Short term investments - U.S. Government Agency Bonds		—		8,173		—		8,173
Warrants	$	—	$	—	$	5,687	$	5,687
December 31, 2021
Warrants	$	—	$	—	$	28,875	$	28,875

Warrants:	(in thousands)			(in thousands)
Balance as of December 31, 2021	$	28,875
Balance as of December 31, 2022				$	4,200
Fair value adjustment of Private Placement Warrants		(23,188	)		9,800
Balance as of September 30, 2022	$	5,687
Balance as of September 30, 2023				$	14,000

	Total Number of Shares Purchased		Average Price Paid Per Share
July 1 - July 31, 2022		—	$	—
August 1 - August 31, 2022		1,004	$	3.17
September 1 - September 30, 2022		—	$	—
Total		1,004

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