Asset Purchase Agreement

9 Months Ended

Sep. 30, 2024

5. Asset Purchase Agreement

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

The consideration for the Transaction is payable as follows:

·		$2.5 million in cash consideration within 30 days of the Alameda Court Approval;
·		$7.5 million in shares of NextNav common stock on the earlier of the FCC Approval or, if no action has been taken by the FCC, November 15, 2024 (payable regardless of whether Closing occurs) (“First Noncash Consideration”); and
·		$20.0 million in shares of NextNav common stock within 30 days of the assignment of the M-LMS Licenses at Closing following the FCC Approval.

The Company subsequently received the Alameda Court Approval on March 28, 2024 and made the cash payment of $2.5 million in April 2024. The Company has recognized the cash consideration of $2.5 million within other current assets in the condensed consolidated balance sheet as of September 30, 2024. Further, the Company recorded a current liability and prepaid asset of $9.8 million as of March 31, 2024 with respect to the fair value of shares expected to be issued (based on a 20-day volume weighted average price) equivalent to the $7.5 million First Noncash Consideration, as the payment obligation is upon passage of time and is not contingent. During the three and nine months ended September 30, 2024, the Company reduced the First Noncash Consideration liability by $0.3 million and $2.2 million, respectively, and recorded the gain in other income (expenses) in the condensed consolidated statement of comprehensive loss. The reduction was due to the fair value adjustment of shares expected to be issued, based on a 20-day volume-weighted average price, equivalent to the $7.5 million First Noncash Consideration. The fair value of the shares expected to be issued was determined based on non-observable pricing inputs in the market and is categorized accordingly as Level 3 in the fair value hierarchy. The Company accrues a loss contingency liability related to the nonrefundable prepayments if it is probable that the Transaction will be terminated or cancelled. As of September 30, 2024, management expects the Transaction to successfully complete, and no loss contingency liability was recorded.

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