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Summary of Significant Accounting Policies (Policies) | 6 Months Ended
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Jun. 30, 2022
Summary of Significant Accounting Policies |
Basis of Presentation | 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 | Unaudited Interim Financial Information The condensed consolidated financial statements as of June 30, 2022 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 Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”), which the Company filed with the SEC on March 23, 2022. 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 balance sheets, results of operations, and cash flows for the three-month periods, 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 Form 10-K that have had a material impact on these condensed consolidated financial statements and related notes.
Use of Estimates | 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.
Revenue | Revenue The following table presents the Company’s revenue disaggregated by category and source:
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
|  | (in thousands) |  |  | (in thousands) |
Commercial |  | $ | 1,302 |  |  | $ | 205 |  |  | $ | 2,482 |  |  | $ | 205 |
Government contracts |  |  | 7 |  |  |  | 5 |  |  |  | 17 |  |  |  | 256 |
Equipment sales |  |  | 112 |  |  |  | 6 |  |  |  | 121 |  |  |  | 6 |
Total revenue |  | $ | 1,421 |  |  | $ | 216 |  |  | $ | 2,620 |  |  | $ | 467 |
Contract Balances | 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 June 30, 2022 and December 31, 2021, the Company’s accounts receivable balances were comprised of $1.0 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 June 30, 2022 and December 31, 2021, the Company’s contract liabilities were $10 thousand and $1.6 million, respectively.
Equity-Based Compensation | 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 June 30, |  |  | Six Months Ended June 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
|  | (in thousands) |  |  | (in thousands) |
Cost of goods sold |  | $ | 539 |  |  | $ | 54 |  |  | $ | 1,183 |  |  | $ | 54 |
Research and development |  |  | 1,506 |  |  |  | 128 |  |  |  | 3,300 |  |  |  | 272 |
Selling, general and administrative |  |  | 4,718 |  |  |  | 143 |  |  |  | 9,475 |  |  |  | 362 |
Total stock-based compensation expense |  | $ | 6,763 |  |  | $ | 325 |  |  | $ | 13,958 |  |  | $ | 688 |
Basic and Diluted Net Loss per Share | 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 June 30, |  |  | Six Months Ended June 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
|  | (in thousands, except per share amounts) |
Numerator |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss (income) |  | $ | (827 | ) |  | $ | 38,975 |  |  | $ | 8,884 |  |  | $ | 66,043 |
Less: cumulative change in redemption value of preferred units |  |  | — |  |  |  | 5,643 |  |  |  | — |  |  |  | 13,831 |
Net loss (income) attributable to common stockholders |  | $ | (827 | ) |  | $ | 44,618 |  |  | $ | 8,884 |  |  | $ | 79,874 |
Denominator |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average shares – basic |  |  | 101,071 |  |  |  | 7,346 |  |  |  | 99,886 |  |  |  | 7,346 |
Weighted average shares – diluted |  |  | 102,381 |  |  |  | 7,346 |  |  |  | 99,886 |  |  |  | 7,346 |
Basic (earning) loss per share |  | $ | (0.01 | ) |  | $ | 6.07 |  |  | $ | 0.09 |  |  | $ | 10.87 |
Diluted (earning) loss per share |  | $ | (0.01 | ) |  | $ | 6.07 |  |  | $ | 0.09 |  |  | $ | 10.87 |
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 June 30, |  |  | Six Months Ended June 30, |
Antidilutive Shares Excluded |  |  | 2022 |  |  |  | 2021 |  |  | 2022 |  |  | 2021 |
|  | (in thousands) |  |  | (in thousands) |
Warrants |  |  | 18,750 |  |  |  | 17,667 |  |  |  | 18,750 |  |  |  | 17,667 |
Stock Options |  |  | 616 |  |  |  | 2,061 |  |  |  | 2,399 |  |  |  | 2,061 |
Unvested Restricted Stock Units |  |  | 3,207 |  |  |  | 112 |  |  |  | 3,251 |  |  |  | 112 |
Unvested Restricted Stock Awards |  |  | — |  |  |  | — |  |  |  | 1,276 |  |  |  | — |
Preferred units |  |  | — |  |  |  | 47,652 |  |  |  | — |  |  |  | 47,652 |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company invests excess cash primarily in U.S. 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 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).
Leases | 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. 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. 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.
Adopted Accounting Pronouncements | 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 | Recent Accounting Developments Not Yet Adopted In June 2016, 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 the potential impacts of ASU 2016-13 on its financial statements.

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