Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Item 2. 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, 2024 (the "2024 Form 10-K"). Our 2024 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 2024 Form 10-K, 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 resilient, next generation, complementary positioning, navigation and timing ("PNT") solutions designed to overcome the limitations and vulnerabilities of the existing space-based Global Positioning System ("GPS") and Global Navigation Satellite Systems ("GNSS"). We are evolving our complementary PNT solutions to use 5G New Radio ("5G NR") technologies ("NextGen"). We have filed a Petition for Rulemaking with the FCC to update and reconfigure the Lower 900 MHz band to facilitate a transition to 5G for its services. We expect the evolution of our platform to NextGen capability will significantly improve the efficiency, flexibility, and scale of our operations, enabling the delivery of high-quality PNT via a 5G broadband network. Our NextGen solution is being designed to allow one or more partners to integrate our Lower 900 MHz spectrum into their 5G networks. We expect that this would result in wide-scale availability of both complementary PNT services and additional broadband capacity. We have been granted 165 patents related to our systems and services, and standardized certain of our technologies with the 3rd Generation Partnership Project (3GPP), a global telecommunications standards-setting body.

Our complementary PNT solutions are built on a deep asset base, including valuable FCC licenses. Our licenses include a contiguous 8 MHz block of 900 MHz M-LMS spectrum covering over 90% of the U.S. population, and on March 7, 2024, we signed an agreement, subject to appropriate regulatory approvals, to acquire an additional 4 MHz of M-LMS licenses covering part of the U.S. population. On June 20, 2025, the FCC issued a Memorandum and Order consenting to the assignment of these licenses. The Transaction closed on September 19, 2025. For more information, refer to Note 5 to our condensed consolidated financial statements for the three and nine months ended September 30, 2025 included in this Quarterly Report on Form 10-Q.

On April 16, 2024, we petitioned the FCC to commence a rulemaking to reconfigure and update the rules governing the Lower 900 MHz band plan to allow us to utilize a 15 MHz nationwide spectrum configuration for both PNT and 5G broadband ("Petition"). The Petition is subject to an ongoing FCC regulatory review process. We believe that modernizing the Lower 900 MHz band will simultaneously enable a high-quality terrestrial PNT network to complement and back up GPS, address a critical national security vulnerability, and add 5G broadband capacity.

The impact of GPS on the U.S. economy was nearly $1.4 trillion in the aggregate between 1984 and 2017, according to data from a National Institute of Standards and Technology ("NIST")-sponsored study conducted by RTI International ("RTI"), and the European Commission estimated the annual impact on the economy of the European Union in its 2018 budget process as EUR1.2 trillion. The usage of GPS services is also rapidly expanding, with its presence in devices in the U.S. increasing from 600 million devices to 900 million devices between 2015 and 2019, according to information presented to the National Space-Based PNT Advisory Board by the National Coordination Office for Space-Based PNT. PNT resiliency is a priority of the U.S. Federal Government and is rising in priority in the European Union, non-European Union countries in Eastern Europe and in other parts of the world due to both the demonstrated vulnerability and lack of local control of space-based signals and systems. Critical infrastructure, including communications networks and power grids, require a reliable GPS signal for accurate timing. A failure of GPS could be catastrophic, and there is no comprehensive, terrestrial backup that is widely deployed today. The Department of Homeland Security has also classified the PNT vulnerabilities from GPS as cyber security threats, and the U.S. Department of Transportation ("DoT") has also outlined a Complementary PNT Action Plan, among other key federal initiatives. Higher performance and availability will continue to expand the reach and value of PNT solutions, while terrestrial resilience is essential to protect the vast economic activity that is reliant on GPS.

Simultaneously, demand for wireless data services continues to grow. The backbone of wireless data services, electromagnetic spectrum, is a finite resource. Our spectrum licenses, which lie in the Lower 900 MHz band, are referred to as "low-band spectrum." There is a finite amount of low-band spectrum available, and low-band spectrum has favorable coverage characteristics compared to higher frequencies, including the ability to provide services indoors and over greater distances. These characteristics result in its ability to be used for coverage and to be deployed more economically, with higher-frequency spectrum often used to provide additional capacity in targeted locations. The transition to 5G NR for our PNT services will provide a technical capability to support broadband data services, which, subject to appropriate regulatory approvals, may allow the spectrum to be utilized to help meet the continued, growing demand for wireless data capacity.

As we evolve our technology platform to NextGen and pursue regulatory changes to the Lower 900 MHz band and our spectrum licenses, we continue to deliver high-quality PNT services through our Pinnacle and TerraPoiNT solutions. Our Pinnacle solution, launched in partnership with AT&T Services, Inc. ("AT&T") as part of its FirstNet® initiative, can provide accurate altitude service to any device with a barometric pressure sensor and covers over 90% of commercial structures over three stories in the U.S. Our Pinnacle system is primarily used for public safety applications, including enhanced 911 ("E911") for Verizon Communications, Inc. ("Verizon"), and a growing number of devices operating on the remaining national cellular network providers.

Our TerraPoiNT system is a terrestrially based dedicated, complementary PNT network designed to overcome the limitations inherent in the space-based nature of GPS. GPS is a faint, unencrypted signal, which is often unavailable indoors, distorted in urban areas, and vulnerable to both jamming and spoofing. TerraPoiNT overcomes these limitations through a network of wide-area location transmitters that broadcast a PNT signal on our licensed Lower 900 MHz M-LMS spectrum. Unlike GPS, the TerraPoiNT signal can be reliably received indoors and in urban areas, is difficult to jam or spoof compared to GPS, and can support signal authentication (e.g., encryption). Further, the TerraPoiNT signal can embed Pinnacle information to provide a full three-dimensional PNT solution. TerraPoiNT received the highest scores in testing by the DoT reported in 2021 regarding potential PNT backup solutions, in each category tested, and was the only solution evaluated capable of providing the full set of services provided by GPS. Continuing our engagement with the DoT, in 2024 we were awarded a contract to establish performance characteristics for TerraPoiNT to allow DoT to incorporate our solutions into a clearinghouse of solutions defined in the DoT Complementary PNT Action Plan, for potential use by Federal government customers.

Macroeconomic Factors

A federal government shutdown could delay administrative processes that support certain aspects of our business. While we do not expect material impact from short-term disruptions, extended shutdowns may affect the timing of planned initiatives that depend on government action. We continue to monitor developments and adjust execution timelines as appropriate.

Key Components of Results of Operations

Revenue

We have generated limited revenue since our inception. We derive our revenue from 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, software license costs, including cloud hosting costs, and professional services related to the maintenance of the equipment at each leased site. Our COGS may increase for the foreseeable future as we continue to invest in our PNT technologies 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, and software license costs, including cloud hosting costs. We expect our research and development costs to increase for the foreseeable future as we continue to invest in research and development for our current and future products, including our NextGen platform.

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, in pursuit of regulatory and technology initiatives, and as a result of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, and additional insurance expenses, investor relations activities, and other administrative and professional services.

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 income consists of interest earned from our cash and cash equivalents 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 and Asset Purchase Agreement liability, change in fair value of derivative liability, debt extinguishment loss, 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:

Comparison of the Three Months Ended September 30, 2025 and 2024

Revenue

Revenue decreasedby $0.7million, or 44.8%, to $0.9million for the three months ended September 30, 2025from $1.6million for the three months ended September 30, 2024.The decrease was driven by a decrease in service revenue from technology and services contracts with government and commercial customers. For the three months ended September 30, 2025, one customer accounted for 89% of total revenue. For the three months ended September 30, 2024, one customer accounted for 54% of total revenue and another customer accounted for 32% of total revenue.

Operating Expense

Cost of Goods Sold (COGS)

COGS decreasedby $0.5 million, or 21.0%, to $2.0 million for the three months ended September 30, 2025from $2.6 million for the three months ended September 30, 2024. The decrease was primarily driven by a $0.3 million decrease in payroll-related expenses, a $0.1 million decrease in software license and cloud expenses, and a $0.1 million decrease in site rent expense.

Research and Development

Research and development expenses increasedby $1.6million, or 45.4%, to $5.2million for the three months ended September 30, 2025 from $3.5million for the three months ended September 30, 2024. The increase was primarily driven by a $1.1 million increase in non-recurring engineering services, a $0.2 million increase in stock-based compensation, a $0.1 million increase in payroll-related expenses, a $0.1 million increase in outside consulting expenses, and a $0.1 million increase in other operational expenses.

Selling, General and Administrative

Selling, general and administrative expenses increasedby $2.0million, or 24.9%, to $10.0million for the three months ended September 30, 2025 from $8.0million for the three months ended September 30, 2024. The increase was primarily driven by a $1.2 million increase in stock-based compensation, a $0.9 million increase in payroll-related expenses, a $0.4 million increase in outside consulting expenses, and a $0.1 million increase in other operational expenses. The increases were partially offset by a $0.4 million decrease in professional services, and a $0.2 million decrease in marketing and recruiting costs.

Depreciation and Amortization

Depreciation and amortization expenses increasedby $2.2million, or 170.1%, to $3.5million for the three months ended September 30, 2025from $1.3million for the three months ended September 30, 2024. The increase in depreciation and amortization expense was primarily driven by accelerated depreciation related to retired network assets.

Interest Expense, Net

Interest expense, net of interest income, increased by $1.0 million, or 43.4%, to $3.2 million for the three months ended September 30, 2025 from $2.2 million for the three months ended September 30, 2024. The increase in interest expense was primarily driven by higher interest and amortization of debt discounts expense.

Other Income

Other income was $23.6million for the three months ended September 30, 2025 compared with other income of $2.5million for the three months ended September 30, 2024. The change was primarily driven by a gain due to the change in fair value of the derivative liability and private warrants.

Comparison of the Nine Months ended September 30, 2025 and 2024

Revenue

Revenue decreased by $0.1 million, or 3.5%, to $3.6 million for the nine months ended September 30, 2025 from $3.8 million for the nine months ended September 30, 2024. The decrease was driven by a decrease in service revenue from technology and services contracts with government and commercial customers. For the nine months ended September 30, 2025, one customer accounted for 66% of total revenue and another customer accounted for 22% of total revenue. For the nine months ended September 30, 2024, one customer accounted for 65% of total revenue, while another customer accounted for 14%, and third customer contributed 12% of total revenue.

Operating Expense

Cost of Goods Sold (COGS)

COGS decreased by $1.7 million, or 20.1%, to $6.6 million for the nine months ended September 30, 2025 from $8.3 million for the nine months ended September 30, 2024. The decrease was primarily driven by a $0.6 million decrease in payroll-related expenses, a $0.5 million decrease in software license and cloud expenses, a $0.2 million decrease in non-recurring engineering services, a $0.2 million decrease in outside consulting expenses, and a $0.2 million decrease in site rent expense.

Research and Development

Research and development expenses increased by $1.7 million, or 13.7%, to $14.0 million for the nine months ended September 30, 2025 from $12.3 million for the nine months ended September 30, 2024. The increase was primarily driven by a $2.1 million increase in non-recurring engineering services, a $0.2 million increase in outside consulting expenses, and a $0.1 million increase in other operational expenses. The increases were partially offset by a $0.5 million decrease in software license and cloud expenses, and a $0.2 million decrease in payroll-related expenses.

Selling, General and Administrative

Selling, general and administrative expenses increased by $6.2 million, or 25.2%, to $30.8 million for the nine months ended September 30, 2025 from $24.6 million for the nine months ended September 30, 2024. The increase was primarily driven by a $1.5 million increase in payroll-related expenses, a $1.5 million increase in stock-based compensation, a $1.4 million increase in professional services, a $1.4 million increase in outside consulting expenses, a $0.4 million increase in marketing and recruiting cost, and a $0.1 million increase in other operational expenses. The increases were partially offset by a $0.1 million decrease in directors' and officers' insurance.

Depreciation and Amortization

Depreciation and amortization expenses increased by $2.4 million, or 61.7%, to $6.3 million for the nine months ended September 30, 2025 from $3.9 million for the nine months ended September 30, 2024. The increase in depreciation and amortization expense was primarily driven by accelerated depreciation related to retired network assets.

Interest Expense, Net

Interest expense, net of interest income, for the nine months ended September 30, 2025 was $8.9 million. Interest expense, net of interest income, for the nine months ended September 30, 2024 was $6.7 million. The increase in interest expense was primarily driven by higher interest and amortization of debt discounts expense.

Other Expense

Other expense was $58.1 million for the nine months ended September 30, 2025 compared with other expense of $17.4 million for the nine months ended September 30, 2024. The change was primarily driven by a loss resulting from the change in the fair value of the derivative liability, a debt extinguishment loss, and a non-cash expense related to warrants issued in connection with the March 2025 debt financing, partially offset by gain from the change in the fair value of the warrant liability.

Liquidity and Capital Resources

We have incurred losses since our inception and to date have generated only limited revenue. We have primarily relied upon debt and equity financings to fund our cash requirements. During the nine months ended September 30, 2025and 2024, we incurred net losses of $121.3million and $69.6million, respectively. During the nine months ended September 30, 2025, our net cash used in operating activities and investing activities was $34.7 million and $35.0million, respectively. During the nine months ended September 30, 2024, our net cash used in operating activities and investing activities was $26.1million and $17.7million, respectively. As of September 30, 2025, we had cash and cash equivalents and marketable securities of $167.6million and an accumulated deficit of $983.4million. We expect to incur additional losses and higher operating expenses for the foreseeable future. Our primary use of cash is to fund our operations as we continue to grow our business. We will require a significant amount of cash for expenditures as we invest in ongoing research and development and our PNT networks.

Managing liquidity and our cash position is a priority of 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, 2025will be sufficient to meet our working capital and capital expenditure needs, including all contractual commitments, beyond the next 12 months from the filing of this Quarterly Report on Form 10-Q. 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 financial projections and is subject to changes in market and business conditions.

On March 12, 2025, we entered into a Note Purchase Agreement to sell to a group of lenders in a private placement (the "Private Placement") $190.0 million in aggregate principal amount of 5% Senior Secured Convertible Notes due in 2028 (the "2028 Notes") at par. The 2028 Notes will mature on June 30, 2028 with interest payable in cash semi-annually in arrears on June 1 and December 1 of each year at 5% per annum. Upon the closing of the Private Placement, the Company used a portion of the net proceeds from the Private Placement to redeem all of its $70.0 million 2026 Notes, at a redemption price of 101% of the principal amount of the 2026 Notes, plus accrued and unpaid interest. Refer to Note 8 to our condensed consolidated financial statements for the three and nine months ended September 30, 2025included elsewhere in this Quarterly Report on Form 10-Q for more information.

Cash Flows

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

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, 2025was $34.7million, resulting primarily from a net loss of $121.3million adjusted for non-cash charges of $36.4 million for change in the fair value of derivative liability, $13.7million loss on the early extinguishment of the 2026 Notes, $12.5million for stock-based compensation, $9.0million related to warrants issued in connection with 2028 Notes, $6.9 million for amortization of debt discount, $6.3million for depreciation and amortization, a $0.1million equity method investment loss, $0.1 million asset retirement obligation accretion and a net increase in operating liabilities of $5.7 million. These changes were partially offset by a $2.2million realized and unrealized gain on marketable securities and non-cash expense of 2.0million for change in the fair value of warrant liability.

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

Cash Flows from Investing Activities

Net cash used in investing activities during the nine months ended September 30, 2025was $35.0million, representing net purchase of marketable securities of $34.6million, and cash used for property and equipment, including internal use software, of $0.4million.

Net cash used in investing activities during the nine months ended September 30, 2024 was $17.7 million, representing net purchase of marketable securities of $14.4million, and cash used for asset purchase agreement of $2.7million and cash used for property and equipment, including internal use software of $0.6million.

Cash Flows from Financing Activities

Net cash provided by financing activities during the nine months ended September 30, 2025 was $120.1million, primarily reflecting cash proceeds from the issuance of the 2028 Notes, net of repayment of the 2026 Notes (refer to Note 8 to our condensed consolidated financial statements for the three and nine months ended September 30, 2025 included elsewhere in this Quarterly Report on Form 10-Q for more information) and cash proceeds the from exercise of common stock options and warrants.

Net cash provided by financing activities during the nine months ended September 30, 2024 was $29.7 million, primarily reflecting cash proceeds from the 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 2024Form 10-K and Note 2 to our condensed consolidated financial statements for the three and nine months ended September 30, 2025included elsewhere in this Quarterly Report on Form 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, 2025included elsewhere in this Quarterly Report on Form 10-Q.