Anterix Inc 10-Q for FY2023 Q3
Anterix Inc. (ATEX)
10-Q
2023-02-09
For: 2022-12-31
View Original
Added on
April 11, 2026
About this 10-Q
Anterix Inc filed this 10-Q on February 9, 2023, covering the quarter ended December 31, 2022 (FY2023 Q3).
Headline figures
Quarter ended December 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $578K
- up 50.1% from $385K a year earlier
- Net loss
- $8.02M
- compared with a net loss of $12.72M a year earlier
- Diluted EPS
- -$0.42
- compared with -$0.69 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
______________________
(Mark one)
For the quarterly period ended December 31, 2022
OR
For the transition period from __________ to __________
Commission file number: 001-36827
______________________
(Exact name of registrant as specified in its charter)
______________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (Address of principal executive offices) | (Zip Code) | ||||
(973 ) 771-0300
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
______________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||||||
The (Nasdaq Capital Market) | ||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| x | Accelerated filer | o | |||||||||
| Non-accelerated filer | o | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No
At February 7, 2023, 18,868,860 shares of the registrant’s common stock were outstanding.
Anterix Inc.
FORM 10-Q
For the quarterly period ended December 31, 2022
TABLE OF CONTENTS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the “Quarterly Report”) includes statements of our expectations, intentions, plans, projections, guidance and beliefs that constitute “forward-looking statements.” These forward-looking statements are principally, but not solely, contained in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements include, but are not limited to, statements about our strategies, plans, objectives, expectations, projections, guidance, intentions, expenditures and assumptions and other statements contained herein that are not historical facts. Our forward-looking statements are generally, but not always, accompanied by words such as, but not limited to, “aim,” “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend” “may,” “might,” “ongoing,” “plan,” “possible,” “project,” “predict,” “potential,” “seek,” “should,” “strategy,” “target,” “will,” “would” and similar expressions or phrases, or the negative of those expressions or phrases, or other words that convey the uncertainty of future events or outcomes, which are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We have based these forward-looking statements on our current expectations, guidance and projections and related assumptions, about future events and financial trends. While our management considers these expectations, guidance, projections and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. There can be no assurance that actual developments will be as we anticipate. Actual results may differ materially from those expressed or implied in these statements as a result of significant risks and uncertainties, including, but not limited to:
•our ability to qualify for and obtain broadband licenses from the Federal Communications Commission (the “FCC”) in accordance with the requirements of the Report and Order approved by the FCC on May 13, 2020 (the “Report and Order”);
•our ability to successfully commercialize our spectrum assets to our targeted utility and critical infrastructure customers on a timely basis and on commercially favorable terms, including our ability to lease our spectrum on financial terms consistent with our business plan and assumptions;
•our ability to fulfill the platform initiatives of our Integrated Platform to drive industrywide 900 MHz private broadband innovations and solutions;
•our ability to correctly estimate our revenues and operating expenses and our future financial needs;
•our ability to achieve our operating and financial projections and guidance;
•our ability to support our future operations and business plans and return capital to our stockholders through our share repurchase program with our existing cash resources and the proceeds we generate from our commercial operations without the need to raise additional capital through the issuance of stock or debt securities;
•the extent and duration of the impact of the COVID-19 pandemic and negative macroeconomic pressures, including inflation, on our business and on our potential customers’ businesses, may continue to adversely affect our commercialization efforts and our results of operations;
•our ability to retune or relocate incumbent narrowband licensees in a timely manner and on commercially reasonable terms, or at all;
•our ability to satisfy our obligations, including the delivery of cleared spectrum and broadband licenses, and the other contingencies required by our commercial agreements with Ameren Corporation (“Ameren”), San Diego Gas & Electric Company, a subsidiary of Sempra Energy (“SDG&E”), Evergy, Inc. (“Evergy”), and Xcel Energy Services Inc. (“Xcel Energy”) on a timely basis and on commercially reasonable terms;
•whether federal and state agencies and commissions will support the deployment of broadband networks and services by our targeted customers;
•our ability to maintain any narrowband and broadband licenses that we own, acquire and/or obtain from the FCC;
•government regulations or actions taken by governmental bodies could adversely affect our business prospects, liquidity and results of operations, including any changes by the FCC to the Report and Order or to the FCC rules and regulations governing the 900 MHz band;
•our ability to successfully compete against the third parties who offer spectrum and communication technologies, products and solutions to our targeted customers;
•our ability to successfully manage our planned growth;
•the ability to develop and sustain a robust market for our common stock;
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•factors that may cause our common stock price to be volatile or cause the value of our common stock to decline;
•the expected timing and amount of purchases and the related impact to our common stock relating to our share repurchase program; and
•how the concentrated ownership of our common stock may limit stockholders’ ability to influence corporate matters.
The matters discussed in these forward-looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. Many of these risks, uncertainties and other factors are beyond our ability to control, influence, or predict. The most significant of these risks, uncertainties and other factors are described in “Item 1A—Risk Factors” in Part II of this Quarterly Report and in our Annual Report on Form 10-K for the year ended March 31, 2022, filed with the SEC on May 26, 2022. As a result, investors are urged not to place undue reliance on any forward-looking statements. These forward-looking statements reflect our views and assumptions only as of the date such forward-looking statements were made. Except to the limited extent required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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PART I. FINANCIAL INFORMATION
Item 1: Consolidated Financial Statements
Anterix Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
| December 31, 2022 | March 31, 2022 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Right of use assets, net | |||||||||||
| Intangible assets | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable and accrued expenses | $ | $ | |||||||||
| Due to related parties | |||||||||||
| Operating lease liabilities | |||||||||||
| Contingent liability | |||||||||||
| Deferred revenue | |||||||||||
| Total current liabilities | |||||||||||
| Operating lease liabilities | |||||||||||
| Contingent liability | |||||||||||
| Deferred revenue | |||||||||||
| Deferred income tax | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
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Anterix Inc.
Consolidated Statements of Operations
(in thousands, except share and per share data)
(Unaudited)
| Three months ended December 31, | Nine months ended December 31, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Spectrum revenues | $ | $ | $ | $ | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Direct cost of revenue (exclusive of depreciation and amortization) | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Sales and support | |||||||||||||||||||||||
| Product development | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Gain from disposal of intangible assets, net | ( | ( | ( | ||||||||||||||||||||
| (Gain) loss from disposal of long-lived assets, net | ( | ||||||||||||||||||||||
| Loss from operations | ( | ( | ( | ( | |||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Other income | |||||||||||||||||||||||
| Loss before income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Net loss per common share basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Weighted-average common shares used to compute basic and diluted net loss per share | |||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
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Anterix Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands)
(Unaudited)
| Number of Shares | |||||||||||||||||||||||||||||
| Common stock | Common stock | Additional paid-in capital | Accumulated deficit | Total | |||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| Equity based compensation | — | — | — | ||||||||||||||||||||||||||
| Restricted shares issued | — | — | — | — | |||||||||||||||||||||||||
| Shares withheld for taxes | ( | — | ( | — | ( | ||||||||||||||||||||||||
| Retirement of common stock | ( | — | — | ( | ( | ||||||||||||||||||||||||
| Net loss | — | — | — | ( | ( | ||||||||||||||||||||||||
Balance at December 31, 2022 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| Equity based compensation | — | — | — | ||||||||||||||||||||||||||
| Restricted shares issued | — | — | — | — | |||||||||||||||||||||||||
| Stock option exercises | — | — | |||||||||||||||||||||||||||
| Motorola shares | — | — | — | — | |||||||||||||||||||||||||
| Shares withheld for taxes | ( | — | ( | — | ( | ||||||||||||||||||||||||
| Retirement of common stock | ( | — | — | ( | ( | ||||||||||||||||||||||||
| Net loss | — | — | — | ( | ( | ||||||||||||||||||||||||
Balance at December 31, 2022 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
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Anterix Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands)
(Unaudited)
| Number of Shares | |||||||||||||||||||||||||||||
| Common stock | Common stock | Additional paid-in capital | Accumulated deficit | Total | |||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| Equity based compensation | — | — | — | ||||||||||||||||||||||||||
| Restricted shares issued | — | — | — | — | |||||||||||||||||||||||||
| Stock option exercises | — | — | |||||||||||||||||||||||||||
| Shares withheld for taxes | ( | — | ( | — | ( | ||||||||||||||||||||||||
| Retirement of common stock | ( | — | — | ( | ( | ||||||||||||||||||||||||
| Net loss | — | — | — | ( | ( | ||||||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Balance at March 31, 2021 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| Equity based compensation | — | — | — | ||||||||||||||||||||||||||
| Restricted shares issued | — | — | — | — | |||||||||||||||||||||||||
| Stock option exercises* | — | — | |||||||||||||||||||||||||||
| Shares withheld for taxes | ( | — | ( | — | ( | ||||||||||||||||||||||||
| Retirement of common stock* | ( | — | — | ( | ( | ||||||||||||||||||||||||
| Net loss | — | — | — | ( | ( | ||||||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
*Includes approximately $1.0 million, or 20,132 shares, received associated with a non-cash exercise of stock options and subsequent retirement. See Note 7 Stockholders’ Equity.
See accompanying notes to consolidated financial statements.
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Anterix Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| Nine months ended December 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities | |||||||||||
| Depreciation and amortization | |||||||||||
| Non-cash compensation expense attributable to stock awards | |||||||||||
| Deferred income taxes | |||||||||||
| Gain from disposal of intangible assets, net | ( | ( | |||||||||
| Loss on disposal of long-lived assets, net | |||||||||||
| Changes in operating assets and liabilities | |||||||||||
| Accounts receivable | |||||||||||
| Prepaid expenses and other assets | ( | ||||||||||
| Right of use assets | |||||||||||
| Accounts payable and accrued expenses | |||||||||||
| Due to related parties | |||||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Contingent Liability | |||||||||||
| Deferred revenue | |||||||||||
| Other liabilities | ( | ||||||||||
| Net cash (used in) provided by operating activities | ( | ||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
| Purchases of intangible assets, including refundable deposits | ( | ( | |||||||||
| Purchases of equipment | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
| Proceeds from stock option exercises | |||||||||||
| Repurchase of common stock | ( | ( | |||||||||
| Payments of withholding tax on net issuance of restricted stock | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Net change in cash and cash equivalents | ( | ||||||||||
| CASH AND CASH EQUIVALENTS | |||||||||||
| Beginning of the period | |||||||||||
| End of the period | $ | $ | |||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | |||||||||||
| Cash paid during the period: | |||||||||||
| Taxes paid | $ | $ | |||||||||
| Non-cash investing activity: | |||||||||||
| Network equipment provided in exchange for wireless licenses | $ | $ | |||||||||
| Non-cash financing activities: | |||||||||||
| Shares surrendered from stock option exercises | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
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Anterix Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. Nature of Operations and Basis of Presentation
Anterix Inc. (the “Company”) is a wireless communications company focused on commercializing its spectrum assets to enable its targeted utility and critical infrastructure customers to deploy private broadband networks and on offering innovative broadband technologies and solutions to the same target customers. The Company is the largest holder of licensed spectrum in the 900 MHz band (896 - 901 / 935 - 940 MHz) with nationwide coverage throughout the contiguous United States, Hawaii, Alaska and Puerto Rico. On May 13, 2020, the Federal Communications Commission (the “FCC”) approved the Report and Order (the “Report and Order”) to modernize and realign the 900 MHz band to increase its usability and capacity by allowing it to be utilized for the deployment of broadband networks, technologies and solutions. The Report and Order was published in the Federal Register on July 16, 2020 and became effective on August 17, 2020. The Company is now engaged in qualifying for and securing broadband licenses from the FCC. At the same time, the Company is pursuing opportunities to lease the broadband spectrum it secures to its targeted utility and critical infrastructure customers.
The Company was originally incorporated in California in 1997 and reincorporated in Delaware in 2014. In November 2015, the Company changed its name from Pacific DataVision, Inc. to pdvWireless, Inc. In August 2019, the Company changed its name from pdvWireless, Inc. to Anterix Inc. The Company maintains offices in Woodland Park, New Jersey, McLean, Virginia and Abilene, Texas.
Business Developments
On October 28, 2022, the Company entered into an agreement with Xcel Energy Services Inc. (“Xcel Energy”) providing Xcel Energy dedicated long-term usage of the Company’s 900 MHz Broadband Spectrum for a term of 20 years throughout Xcel Energy’s service territory in eight states (the “Xcel Energy Agreement”). The Xcel Energy Agreement also provides Xcel Energy an option to extend the agreement for two 10-year terms for additional payments. The Xcel Energy Agreement allows Xcel Energy to deploy a private LTE network to support its grid modernization initiatives for the benefit of its approximately 3.7 million electricity customers and 2.1 million natural gas customers. The scheduled prepayments for the 20-year initial term of the Xcel Energy Agreement total $80.0 million, of which $8.0 million was received by the Company in December 2022. See Note 2 Revenue for further discussion on the Xcel Energy Agreement.
In September 2021, the Company entered into a long-term lease agreement of 900 MHz Broadband Spectrum with Evergy, Inc. (“Evergy”) (the “Evergy Agreement”). The Evergy service territories covered by the Evergy Agreement are in Kansas and Missouri with a population of approximately 3.9 million people. The Evergy Agreement is for a term of up to 40 years, comprised of an initial term of 20 years and two 10-year renewal options for additional payments. The Company received full prepayment of $30.2 million for the initial 20-year term in October 2021. During the nine months ended December 31, 2022, the Company leased to Evergy the first deliverable of 1.4 x 1.4 cleared Broadband Spectrum and the associated broadband licenses for 70 counties. The revenue recognized for the three and nine months ended December 31, 2022 was approximately $0.2 million and $0.3 million, respectively.
In February 2021, the Company entered into an agreement with San Diego Gas & Electric Company, a subsidiary of Sempra Energy (“SDG&E”), to provide 900 MHz Broadband Spectrum throughout SDG&E’s California service territory, including San Diego and Imperial Counties and portions of Orange County for a total payment of $50.0 million. The total payment of $50.0 million is comprised of an initial payment of $20.0 million received in February 2021 and the remaining $30.0 million payment, which is due through fiscal year 2024 as the Company delivers the associated broadband licenses to SDG&E and the relevant cleared 900 MHz Broadband Spectrum. During the quarter ended September 30, 2022, the Company delivered to SDG&E 1.4 x 1.4 cleared Broadband Spectrum and the associated broadband license related to Imperial County and received a milestone payment of $0.2 million. See Note 9 Contingencies for further discussion.
In May 2022, the Company issued Motorola 500,000 shares of its common stock (the “Shares”). Motorola received the Shares by electing to convert 500,000 Class B Units (the “Units”) it held in the Company’s subsidiary, PDV Spectrum Holding Company, LLC (the “Subsidiary”). Motorola acquired the Units in September 2014 in connection with a Spectrum Lease Agreement between Motorola and the Subsidiary (the “2014 Motorola Spectrum
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Agreement”). Under the 2014 Motorola Spectrum Agreement, Motorola leased a portion of the Company’s narrowband spectrum, which was held by the Subsidiary, in consideration for an upfront, fully-paid leasing fee of $7.5 million and a $10.0 million investment in the Units. Motorola had the right at any time to convert its Units into the Shares, representing a conversion price of $20.00 per share.
Basis of Presentation and Use of Estimates
The unaudited consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.
Because certain information and footnote disclosures have been condensed or omitted, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022, filed with the SEC on May 26, 2022 (the “2022 Annual Report”). In the Company’s opinion all normal and recurring adjustments considered necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been included. The Company believes that the disclosures made in the unaudited consolidated interim financial statements are adequate to make the information not misleading. The results of operations for the interim periods presented are not necessarily indicative of the results for the year. The Company is also required to make certain estimates and assumptions that affect the report amounts. These estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the financial statements in the applicable period. Accordingly, actual results could materially differ from those estimates.
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), and has subsequently modified several areas of the Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses, in order to provide additional clarity and improvements. The new standard requires entities to use a Current Expected Credit Loss impairment model based on expected losses rather than incurred losses. Under this model, an entity would recognize an impairment allowance equal to its current estimate of all contractual cash flows that the entity does not expect to collect from financial assets measured at amortized cost within the scope of the standard. The entity’s estimate would consider relevant information about past events, current conditions and reasonable and supportable forecasts, which will result in recognition of lifetime expected credit losses. As the Company was previously a smaller reporting company, the standard updates would have been effective beginning April 2023, however, due to the transition to a large accelerated filer during the 2022 fiscal year, the updates were effective for the Company as of the fiscal year end 2022. The Company adopted the new standard effective March 31, 2022, and the adoption did not have a material impact on its consolidated financial statements and related disclosures.
Recently Issued Accounting Pronouncements
While there have been accounting standards that have been issued or proposed by the FASB or other standard-setting bodies that do not require adoption until a future date, these updates are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.
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2. Revenue
The following table provides information regarding the Company’s revenue for each of the services it provides pursuant to its spectrum revenue agreements for the three and nine months ended December 31, 2022 and 2021 (in thousands):
| Three months ended December 31, | Nine months ended December 31, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Spectrum revenues | |||||||||||||||||||||||
| 900 MHz Broadband Spectrum Revenue | |||||||||||||||||||||||
| Ameren | $ | $ | $ | $ | |||||||||||||||||||
Evergy(1) | |||||||||||||||||||||||
| Narrowband Spectrum Revenue | |||||||||||||||||||||||
| Motorola | |||||||||||||||||||||||
Total spectrum revenue(2) | $ | $ | $ | $ | |||||||||||||||||||
1.The Company commenced revenue recognition in connection with the delivery of cleared 900 MHz Broadband Spectrum and the associated broadband licenses to Evergy for 70 counties.
Spectrum Revenue Agreements
Refer to the Company’s 2022 Annual Report for a description of the Company’s spectrum revenue agreements entered into prior to March 31, 2022. The following reflects agreements entered into during the nine months ended December 31, 2022.
On October 28, 2022, the Company entered into an agreement with Xcel Energy providing Xcel Energy dedicated long-term usage of the Company’s 900 MHz Broadband Spectrum for a term of 20 years throughout Xcel Energy’s service territory in eight states including Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas and Wisconsin. The Xcel Energy Agreement also provides Xcel Energy an option to extend the agreement for two 10-year terms for additional payments. The Xcel Energy Agreement allows Xcel Energy to deploy a private LTE network to support its grid modernization initiatives for the benefit of its approximately 3.7 million electricity customers and 2.1 million natural gas customers. The scheduled prepayments for the 20-year initial terms of the Xcel Energy Agreement total $80.0 million, of which $8.0 million was received by the Company in December 2022. The remaining prepayments for the 20-year initial term are due by mid-2028, per the terms of the Xcel Energy Agreement and as the Company delivers the relevant cleared 900 MHz Broadband Spectrum and the associated broadband licenses. The Company is working with incumbents to clear the 900 MHz Broadband Spectrum allocation in Xcel Energy service territories. In accordance with ASC 606 Revenue from Contracts with Customers, the payments of prepaid fees under the Xcel Energy Agreement will be accounted for as deferred revenue on the Company’s Consolidated Balance Sheets. Revenue will be recognized over time as the performance obligations of clearing the 900 MHz Broadband Spectrum and the associated broadband licenses are delivered by respective county, over the contractual term of approximately 20 years.
Contract Assets
The Company recognizes a contract asset for the incremental costs of obtaining a contract with a customer. These costs include sales commissions and stock compensation. These costs are amortized ratably using the portfolio approach over the estimated customer contract period. The Company will review the contract asset on a periodic basis to determine if an impairment exists, and subsequent to the Company’s adoption of ASU 2016-13, will review the contract assets for potential credit loss exposure. If it is determined that there is an impairment, or a potential credit loss, the Company will expense the contract asset.
For the nine months ended December 31, 2022 and 2021, the Company incurred and capitalized commission costs and stock compensation related to activities to obtain its long-term 900 MHz Broadband Spectrum lease agreements amounting to approximately $109,000 and $129,000 , respectively. These capitalized costs will be amortized over the contractual term upon the commencement of the associated agreements.
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The following table presents the activity for the Company’s contract assets (in thousands):
| Contract Assets | |||||
Balance at March 31, 2022 | $ | ||||
| Additions | |||||
| Amortization | ( | ||||
Balance at December 31, 2022 | |||||
| Less amount classified as current assets - prepaid expenses and other current assets | ( | ||||
| Noncurrent assets - included in other assets | $ | ||||
Contract liabilities
Contract liabilities primarily relate to advance consideration received from customers for spectrum services, for which revenue is recognized over time, as the services are performed. These contract liabilities are recorded as deferred revenue on the balance sheet.
For the nine months ended December 31, 2022, deferred revenue increased by $8.0 million as a result of prepayments received in connection with the Xcel Energy Agreement. For the nine months ended December 31, 2021, deferred revenue increased by $52.8 million as a result of prepayments received in connection with the Ameren Corporation (“Ameren”) and Evergy lease agreements.
The following table presents the activity for the Company’s contract liabilities (in thousands):
| Contract Liabilities | |||||
Balance at March 31, 2022 | $ | ||||
| Additions | |||||
| Revenue recognized | ( | ||||
Balance at December 31, 2022 | |||||
| Less amount classified as current liabilities | ( | ||||
| Noncurrent liabilities | $ | ||||
3. Intangible Assets
Wireless licenses are considered indefinite-lived intangible assets. Indefinite-lived intangible assets are not subject to amortization but instead are tested for impairment annually, or more frequently if an event indicates that the asset might be impaired. There were no triggering events indicating impairment during the nine months ended December 31, 2022.
During the nine months ended December 31, 2022, the Company acquired wireless licenses for cash consideration of $9.2 million, after receiving FCC approval, of which $7.0 million was spent on licenses acquired, including costs associated with license swaps, by entering into agreements with several third parties in multiple U.S. markets and $2.2 million was paid to the U.S. Treasury for Anti-Windfall payments, i.e. payments to cover any shortfall of channels needed in a given county to reach the requisite 240 channels required to be surrendered to secure a broadband license for such county. As of December 31, 2022 and March 31, 2022, the Company recorded initial deposits to incumbents amounting to approximately $13.3 million and $8.0 million, respectively, that are refundable if the FCC does not approve the sale, swap or retuning of the spectrum. Of the $13.3 million initial refundable deposit balance as of December 31, 2022, $12.7 million was included in prepaid expenses and other current assets and the remaining $0.6 million in other assets in the Consolidated Balance Sheets. Of the $8.0 million initial refundable deposit balance as of March 31, 2022, $7.6 million was included in prepaid expenses and other current assets and the remaining $0.4 million in other assets in the Consolidated Balance Sheets. As of December 31, 2022 and March 31, 2022, the Company recorded deferred charges of $8.0 million and $3.4 million, respectively, related to closed retuning deals, of which $0.6 million and $0.2 million, respectively, was recorded in prepaid expenses and other current assets and $7.4 million and $3.1 million, respectively, was recorded in other assets.
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During the nine months ended December 31, 2022, the Company applied for, and was granted by the FCC, broadband licenses for 70 counties in connection with the long-term lease agreement with Evergy. The Company recorded the new broadband licenses collectively at their estimated accounting cost basis of approximately $13.1 million. In connection with receiving the broadband licenses, the Company disposed of $3.8 million of the value ascribed to the narrowband licenses it relinquished to the FCC for the same 70 counties. The total carrying value of narrowband licenses included the cost to acquire the original narrowband licenses, Anti-Windfall payments paid to cover the shortfall in each county and the clearing costs. As a result of the exchanges of narrowband licenses for broadband licenses, the Company recorded a non-monetary gain on the disposal of intangible assets of $5.8 million and $9.3 million, for the three and nine months ended December 31, 2022, respectively.
Intangible assets consist of the following activity for the nine months ended December 31, 2022 (in thousands):
| Wireless Licenses | |||||
Balance at March 31, 2022 | $ | ||||
| Acquisitions | |||||
| Exchanges – broadband licenses received | |||||
| Exchanges – narrowband licenses surrendered | ( | ||||
Balance at December 31, 2022 | $ | ||||
4. Related Party Transactions
Refer to the Company’s 2022 Annual Report for a more complete description of the nature of its related party transactions prior to March 31, 2022. The following reflects the related party activity during the three and nine months ended December 31, 2022 and 2021.
In connection with the Service Revenue Transfer, the Company was obligated to pay a monthly service fee for a 24 -month period that ended on January 7, 2021, for its assumption of support obligations under the transfer agreements. The Company is also obligated to pay a certain portion of the billed revenue received by the Company from pdvConnect customers for a 48 -month period. For the three and nine months ended December 31, 2022 and 2021, the Company incurred payments of $15,000 45,000 not
During the nine months ended December 31, 2022, the Company purchased equipment from Motorola in the amount of $910,000 . In addition, the Company entered into a Frequency Relocation Agreement with Motorola for a total amount of $967,000 , of which the Company paid $97,000 during the quarter ended December 31, 2022. As of December 31, 2022 and March 31, 2022, the Company owed $120,000
During 2020, the Company entered into a consulting agreement with Rachelle B. Chong under which Ms. Chong serves as a Senior Advisor to the Company’s management team, subsequent to her resignation from the Company’s Board and as a member of the Board’s Nominating and Corporate Governance Committee. In July 2022, the Company extended the agreement by an additional 12 months with a new termination date of May 14, 2023. For the three and nine months ended December 31, 2022 and 2021, the Company incurred $36,000 108,000 not
During 2020, the Company entered into an annual consulting agreement with Brian D. McAuley under which Mr. McAuley serves as a Senior Advisor to the Company’s management team and provide strategic, corporate governance and Board advisory services, subsequent to his resignation as Executive Chairman of the Board. In July 2022, the Company extended the agreement by an additional 12 months with a new termination date of September 1, 2023. For the three and nine months ended December 31, 2022 and 2021, the Company incurred $10,000 30,000 not
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5. Leases
All leases in which the Company is the lessee are comprised of corporate office space and tower space. The Company is obligated under certain lease agreements for office space with lease terms expiring on various dates from October 31, 2023 through June 30, 2027, which includes lease extensions for its corporate headquarters ranging from to ten years . The Company entered into multiple lease agreements for tower space with lease expiration dates ranging from January 15, 2023 to August 31, 2029.
All of the Company’s leases are classified as operating leases, and as such, were previously not recognized on the Company’s Consolidated Balance Sheet. With the adoption of ASC 842 Leases, operating lease agreements are required to be recognized on the Consolidated Balance Sheet as right of use (“ROU”) assets and corresponding lease liabilities.
ROU assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option.
Weighted-average remaining lease term and incremental borrowing rate for the Company’s operating leases are as follows:
| Nine months ended December 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Weighted average term - operating lease liabilities | |||||||||||
| Weighted average incremental borrowing rate - operating lease liabilities | |||||||||||
Rent expense amounted to approximately $0.5 million and $1.4 million, respectively, for the three and nine months ended December 31, 2022, which is included in general and administrative expenses in the Consolidated Statement of Operations. Rent expense amounted to approximately $0.5 million and $1.5 million, respectively, for the three and nine months ended December 31, 2021, which is included in general and administrative expenses in the Consolidated Statement of Operations.
The following table presents net lease cost for the three and nine months ended December 31, 2022 and 2021 (in thousands):
| Three months ended December 31, | Nine months ended December 31, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Lease cost | |||||||||||||||||||||||
| Operating lease cost (cost resulting from lease payments) | $ | $ | $ | $ | |||||||||||||||||||
| Short term lease cost | |||||||||||||||||||||||
| Net lease cost | $ | $ | $ | $ | |||||||||||||||||||
The following table presents supplemental cash flow and non-cash activity information for the nine months ended December 31, 2022 and 2021 (in thousands):
| Nine months ended December 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash paid activity: | |||||||||||
| Operating lease - operating cash flows (fixed payments) | $ | $ | |||||||||
| Operating lease - operating cash flows (liability reduction) | $ | $ | |||||||||
| Non-cash activity: | |||||||||||
| Right of use assets obtained in exchange for new operating lease liabilities | $ | $ | |||||||||
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The following table presents supplemental balance sheet information as of December 31, 2022 and March 31, 2022 (in thousands):
| December 31, 2022 | March 31, 2022 | ||||||||||
| Non-current assets - right of use assets, net | $ | $ | |||||||||
| Current liabilities - operating lease liabilities | $ | $ | |||||||||
| Non-current liabilities - operating lease liabilities | $ | $ | |||||||||
Future minimum payments under non-cancelable leases for office and tower spaces (exclusive of real estate tax, utilities, maintenance and other costs borne by the Company) for the remaining terms of the leases following the nine months ended December 31, 2022, are as follows (in thousands):
| Fiscal Year | Operating Leases | ||||
2023 (excluding the nine months ended December 31, 2022) | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
After 2027 | |||||
| Total future minimum lease payments | |||||
| Amount representing interest | ( | ||||
| Present value of net future minimum lease payments | $ | ||||
6. Income Taxes
The Company used a discrete effective tax rate method to calculate taxes for the three and nine months ended December 31, 2022. The Company determined that applying an estimate of the annual effective tax rate would not provide a reasonable estimate as small changes in estimated “ordinary” loss could result in significant changes in the estimated annual effective tax rate. Accordingly, for the three and nine months ended December 31, 2022, the Company recorded a total deferred tax expense of $0.2 million and $0.6 million, respectively, due to the inability to use some portion of its federal and state NOL carryforwards against the deferred tax liability created by the amortization of indefinite-lived intangibles.
The Company’s net operating losses (“NOLs”) generated after March 31, 2018 may be used as an indefinite-lived asset to offset its deferred tax liability but are limited to 80% of future taxable income. The deferred tax liabilities as of December 31, 2022 are approximately $2.6 million for federal and $2.2 million for state.
7. Stockholders’ Equity
The Company established the 2014 Stock Plan (the “2014 Stock Plan”) to attract, retain and reward individuals who contribute to the achievement of the Company’s goals and objectives. This 2014 Stock Plan superseded previous stock plans.
The Board has reserved 5,027,201 shares of common stock for issuance under the 2014 Stock Plan as of December 31, 2022, of which 490,704 shares are available for future issuance. Historically, the number of shares reserved under the 2014 Stock Plan were increased, based on Board approval, each January 1 by an amount equal to the lesser of (i) 5 % of the number of shares of common stock issued and outstanding on the immediately preceding December 31 or (ii) a lesser amount determined by the Board (the “evergreen provision”). Effective January 1, 2021, the Board elected to increase the shares authorized under the 2014 Stock Plan by 879,216 shares, which represented 5 % of the of the Company’s common stock issued and outstanding as of December 31, 2020. On June 14, 2021, the Compensation Committee of the Board approved Amendment No. 1 to 2014 Stock Plan to eliminate the evergreen provision for all future years (i.e., January 1, 2022 through January 1, 2024).
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During the nine months ended December 31, 2022 and the year ended March 31, 2022, a total of 207,231 and 979,320 shares, respectively, were issued in connection with the vesting, conversion and or exercise of grants under the Company’s 2014 Stock Plan.
Share retirement
In May 2021, the Company reacquired 20,132 shares when a participant surrendered already-owned shares of the Company’s common stock to cover the exercise price of an outstanding stock option exercised by the participant. The 20,132 shares surrendered were constructively retired by the Company as of June 30, 2021, which resulted in the non-cash reduction of approximately $1.0 million in accumulated deficit in the Consolidated Statement of Stockholders’ Equity. As discussed in Note 1 Nature of Operations and Basis of Presentation, the Company has reclassified the reduction to additional paid in capital to accumulated deficit and presented this as a correction of an error.
Share repurchase program
In September 2021, the Board authorized a share repurchase program (the “share repurchase program”) pursuant to which the Company may repurchase up to $50.0 million of the Company’s common stock on or before September 29, 2023. The manner, timing and amount of any share repurchases will be determined by the Company based on a variety of factors, including price, general business and market conditions and alternative investment opportunities. The share repurchase program authorization does not obligate the Company to acquire any specific number of shares. Under the program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.
The following table presents the share repurchase activity for the three and nine months ended December 31, 2022 and 2021 (in thousands, except per share data):
| Three months ended December 31, | Nine months ended December 31, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Number of shares repurchased and retired | |||||||||||||||||||||||
| Average price paid per share* | $ | $ | $ | $ | |||||||||||||||||||
| Total cost to repurchase | $ | $ | $ | $ | |||||||||||||||||||
As of December 31, 2022, $26.8 million is remaining under the share repurchase program.
Motorola Shares
In September 2014, Motorola invested $10.0 million to purchase 500,000 Class B Units of the Company’s Subsidiary (at a price equal to $20.00 per unit). The Company owns 100 % of the Class A Units in the Subsidiary. Motorola had the right at any time to convert its 500,000 Class B Units into 500,000 shares of the Company’s common stock and in May 2022, Motorola exercised such right to convert its 500,000 Class B Units into 500,000 shares of the Company’s common stock. In June 2022, the Company filed a Registration Statement on Form S-3 to register the 500,000 shares of the Company’s Common Stock held by Motorola for the resale or other disposition of such shares by Motorola (the “Resale Registration Statement”). The Resale Registration Statement was declared effective by the SEC on July 15, 2022.
8. Net Loss Per Share of Common Stock
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9. Contingencies and Guaranty
Contingent Liability
In February 2021, the Company entered into an agreement with SDG&E to sell 900 MHz Broadband Spectrum throughout SDG&E’s California service territory, including San Diego and Imperial Counties and portions of Orange County (the “SDG&E Agreement”), for a total payment of $50.0 million. The SDG&E Agreement will support SDG&E’s deployment of a private LTE network for its California service territory, with a population of approximately 3.6 million people. Delivery of the relevant 900 MHz Broadband Spectrum and the associated broadband licenses by county to SDG&E commenced in fiscal year 2023 and is scheduled for completion before the end of fiscal year 2024. The total payment of $50.0 million is comprised of an initial payment of $20.0 million received in February 2021 and the remaining $30.0 million payment, which is due through fiscal year 2024 as the Company delivers the relevant cleared 900 MHz Broadband Spectrum and the associated broadband licenses to SDG&E. During the quarter ended September 30, 2022, the Company delivered to SDG&E 1.4 x 1.4 cleared Broadband Spectrum and the associated broadband license related to Imperial County and received a milestone payment of $0.2 million. The SDG&E Agreement is subject to customary provisions regarding remedies, including reduced payment amounts and/or refund of amounts paid, and termination rights, if a party fails to perform its contractual obligations. A gain or loss on the sale of spectrum will be recognized for each county once the Company delivers the cleared 900 MHz Broadband Spectrum and the associated broadband licenses to SDG&E in full.
As the Company is required to refund payments it has received in the event of termination or non-delivery of the specific county’s 900 MHz Broadband Spectrum, it recorded the $20.2 million received from SDG&E as contingent liability in the Consolidated Balance Sheet. As of December 31, 2022, the Company recorded the $20.2 million payments from SDG&E as a short-term liability due to the expected timing of delivery.
Xcel Energy Guaranty
In connection with Xcel Energy Agreement, the Company entered into a guaranty agreement, under which the Company guaranteed the delivery of the relevant 900 MHz Broadband Spectrum and the associated broadband licenses in Xcel Energy’s service territory in eight states along with other commercial obligations. In the event of default or non-delivery of the specific territory’s 900 MHz Broadband Spectrum, the Company is required to refund payments it has received. In addition, to the extent it has performed its obligations, the Company’s liability and obligations under the Xcel Energy Agreement will extend only to the remaining unperformed obligations. The Company has not recorded a liability for these guarantees as delivery of the relevant cleared 900 MHz Broadband licenses or counties is expected to commence in the first quarter of Fiscal 2024 through 2028. As of December 31, 2022, the maximum potential liability of future undiscounted payments under this agreement is approximately $8.0 million.
Litigation
From time to time, the Company may be involved in litigation that arises from the ordinary operations of the business, such as contractual or employment disputes or other general actions. The Company is not involved in any material legal proceedings at this time.
COVID-19 Pandemic and Macroeconomic Conditions
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic and COVID-19 continues to cause significant disruptions throughout the world. The ultimate extent of the impact of COVID-19 on the future financial performance of the Company will depend on ongoing developments, all of which remain uncertain and cannot be predicted. The Company continues to closely monitor the risks posed by COVID-19 and adjusts its practices accordingly. Additionally, although difficult to quantify, the Company believes that the current macroeconomic environment, including inflation, may have an adverse effect on the Company’s target customers’ businesses, which may harm the Company’s commercialization efforts and negatively impact the Company’s revenues. If the Company is not able to control its higher operating costs or if the Company’s
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commercialization efforts are slowed or negatively impacted, continued periods of high inflation could have a material adverse effect on the Company’s business, operating results and financial condition.
In December 2020, the Company deferred payroll taxes under the Coronavirus Aid Relief and Economic Security Act, which was signed into law on March 27, 2020. The deferral amounted to approximately $0.3 million, which has assisted the Company in managing the financial impact caused by the pandemic. Of the total deferred, approximately $0.2 million was remitted to the IRS during Fiscal 2022, with the remaining amount remitted during the three months ended December 31, 2022.
10. Concentrations of Credit Risk
Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The cash balance at times may exceed federally insured limits, however, the Company places its cash and temporary cash investments with financial institutions for which credit loss is not anticipated.
For the three and nine months ended December 31, 2022 and 2021, the Company’s operating revenue was entirely from upfront, fully paid fees received from Motorola, Ameren and Evergy, as discussed in Note 2 Revenue.
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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion and analysis of the financial condition and results of operations of Anterix Inc. (“Anterix,” the “Company”, “we”, “us”, or “our”) should be read in conjunction with our financial statements and notes thereto included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended March 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on May 26, 2022 (the “2022 Annual Report”). In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors including, but not limited to, those identified or referenced in “Item 1A—Risk Factors” in Part II of this Quarterly Report. As a result, investors are urged not to place undue reliance on any forward-looking statements. Except to the limited extent required by applicable law, we do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.
Overview
We are a wireless communications company focused on commercializing our spectrum assets to enable our targeted utility and critical infrastructure customers to deploy private broadband networks and on offering innovative broadband technologies and solutions to the same target customers. We are the largest holder of licensed spectrum in the 900 MHz band (896 - 901 / 935 - 940 MHz) with nationwide coverage throughout the contiguous United States, Hawaii, Alaska and Puerto Rico. On May 13, 2020, the FCC approved the Report and Order to modernize and realign the 900 MHz band to increase its usability and capacity by allowing it to be utilized for the deployment of broadband networks, technologies and solutions. The Report and Order was published in the Federal Register on July 16, 2020 and became effective on August 17, 2020. We are now engaged in qualifying for and securing broadband licenses from the FCC. At the same time, we are pursuing opportunities to lease the broadband spectrum we secure to our targeted utility and critical infrastructure customers.
We were originally incorporated in California in 1997 and reincorporated in Delaware in 2014. In November 2015, we changed our name from Pacific DataVision, Inc. to pdvWireless, Inc. In August 2019, we changed our name from pdvWireless, Inc. to Anterix Inc. We maintain offices in Woodland Park, New Jersey, McLean, Virginia and Abilene, Texas.
Refer to our 2022 Annual Report for a more complete description of the nature of our business, including details regarding the process and costs to secure our broadband licenses.
Business Developments
On October 28, 2022, we entered into an agreement with Xcel Energy providing Xcel Energy dedicated long-term usage of our 900 MHz Broadband Spectrum for a term of 20 years throughout Xcel Energy’s service territory in eight states (the “Xcel Energy Agreement”). The Xcel Energy Agreement also provides Xcel Energy an option to extend the agreement for two 10-year terms for additional payments. The Xcel Energy Agreement allows Xcel Energy to deploy a private LTE network to support its grid modernization initiatives for the benefit of its approximately 3.7 million electricity customers and 2.1 million natural gas customers. The scheduled prepayments for the 20-year initial term of the Xcel Energy Agreement total $80.0 million, of which $8.0 million was received in December 2022.
In September 2021, we entered into a long-term lease agreement of 900 MHz Broadband Spectrum with Evergy (the “Evergy Agreement”). The Evergy service territories covered by the Evergy Agreement are in Kansas and Missouri with a population of approximately 3.9 million people. The Evergy Agreement is for a term of up to 40 years, comprised of an initial term of 20 years and two 10-year renewal options for additional payments. We received full prepayment of $30.2 million for the initial 20-year term in October 2021. During the nine months ended December 31, 2022, we leased to Evergy the first deliverable of 1.4 x 1.4 cleared Broadband Spectrum and the associated broadband licenses for 70 counties. The revenue recognized for the three and nine months ended December 31, 2022 was approximately $0.2 million and $0.3 million, respectively.
In February 2021, we entered into an agreement with SDG&E, to provide 900 MHz Broadband Spectrum throughout SDG&E’s California service territory, including San Diego and Imperial Counties and portions of Orange County for a total payment of $50.0 million. The total payment of $50.0 million is comprised of an initial payment of $20.0 million received in February 2021 and the remaining $30.0 million payment, which is due through fiscal year 2024 as we deliver the associated broadband licenses to SDG&E and the relevant cleared 900 MHz Broadband Spectrum. During the quarter
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ended September 30, 2022, we delivered to SDG&E 1.4 x 1.4 cleared Broadband Spectrum and the associated broadband license related to Imperial County and received a milestone payment of $0.2 million.
In May 2022, we issued Motorola 500,000 shares of our common stock (the “Shares”). Motorola received the Shares by electing to convert 500,000 Class B Units (the “Units”) it held in our subsidiary, PDV Spectrum Holding Company, LLC (the “Subsidiary”). Motorola acquired the Units in September 2014 in connection with a Spectrum Lease Agreement between Motorola and the Subsidiary (the “2014 Motorola Spectrum Agreement”). Under the 2014 Motorola Spectrum Agreement, Motorola leased a portion of our narrowband spectrum, which was held by the Subsidiary, in consideration for an upfront, fully-paid leasing fee of $7.5 million and a $10.0 million investment in the Units. Motorola had the right at any time to convert its Units into the Shares, representing a conversion price of $20.00 per share. In June 2022, we filed a Registration Statement on Form S-3 to register the 500,000 shares of our common stock held by Motorola for resale or other disposition by Motorola (the “Resale Registration Statement”). The Resale Registration Statement was declared effective by the SEC on July 15, 2022.
Results of Operations
Comparison of the three and nine months ended December 31, 2022 and 2021
The following tables set forth our results of operations for the three and nine months ended December 31, 2022 (“Fiscal 2023”) and 2021 (“Fiscal 2022”). The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.
Spectrum revenues
| Three months ended December 31, | Aggregate Change | Nine months ended December 31, | Aggregate Change | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 from 2021 | 2022 | 2021 | 2022 from 2021 | |||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Spectrum revenues | $ | 578 | $ | 385 | $ | 193 | 50 | % | $ | 1,311 | $ | 749 | $ | 562 | 75 | % | |||||||||||||||||||||||||||||||
Spectrum revenues increased by $0.2 million, or 50%, to $0.6 million for the three months ended December 31, 2022 from $0.4 million for the three months ended December 31, 2021. The increase for the three months ended December 31, 2022 of $0.2 million, was attributable to revenue recognized in connection with the Evergy Agreement. Spectrum revenues increased by $0.6 million, or 75%, to $1.3 million for the nine months ended December 31, 2022 from $0.7 million for the nine months ended December 31, 2021. The increase for the nine months ended December 31, 2022 of $0.6 million, was attributable to revenue recognized in connection with our agreements with Ameren and Evergy of approximately $0.3 million each.
Operating expenses
| Three months ended December 31, | Aggregate Change | Nine months ended December 31, | Aggregate Change | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 from 2021 | 2022 | 2021 | 2022 from 2021 | |||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Direct cost of revenue (exclusive of depreciation and amortization) | $ | — | $ | 5 | $ | (5) | -100 | % | $ | — | $ | 5 | $ | (5) | -100 | % | |||||||||||||||||||||||||||||||
| General and administrative | 12,085 | 10,219 | 1,866 | 18 | % | 34,871 | 29,774 | 5,097 | 17 | % | |||||||||||||||||||||||||||||||||||||
| Sales and support | 1,385 | 1,263 | 122 | 10 | % | 3,785 | 3,311 | 474 | 14 | % | |||||||||||||||||||||||||||||||||||||
| Product development | 936 | 893 | 43 | 5 | % | 3,012 | 2,826 | 186 | 7 | % | |||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 373 | 323 | 50 | 15 | % | 1,107 | 996 | 111 | 11 | % | |||||||||||||||||||||||||||||||||||||
| Operating expenses | $ | 14,779 | $ | 12,703 | $ | 2,076 | 16 | % | $ | 42,775 | $ | 36,912 | $ | 5,863 | 16 | % | |||||||||||||||||||||||||||||||
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Direct cost of revenue
Direct cost of revenue decreased a modest amount for the three and nine months ended December 31, 2022 as compared to the three and nine months ended December 31, 2021.
General and administrative expenses
General and administrative expenses increased by $1.9 million, or 18%, to $12.1 million for the three months ended December 31, 2022 from $10.2 million for three months ended December 31, 2021. The increase for the three months ended December 31, 2022 of $1.9 million, primarily resulted from $0.9 million higher stock compensation expense due to additional grants awarded during Fiscal 2023, $0.5 million higher headcount and related costs, $0.2 million higher regulatory fees, $0.1 million higher professional service costs, $0.1 million in higher recruiting costs, and $0.1 million higher travel and meeting costs. General and administrative expenses increased by $5.1 million, or 17%, to $34.9 million for the nine months ended December 31, 2022 from $29.8 million for nine months ended December 31, 2021. The increase for the nine months ended December 31, 2022 of $5.1 million, primarily resulted from $3.4 million higher stock compensation expense due to additional grants awarded during Fiscal 2023, $1.2 million higher headcount and related costs, $0.3 million higher travel and meeting costs, $0.2 million higher regulatory fees, $0.1 million higher recruiting cost and $0.1 million higher IT related costs, partially offset by $0.2 million lower site related costs.
Sales and support expenses
Sales and support expenses increased by $0.1 million, or 10%, to $1.4 million for the three months ended December 31, 2022 from $1.3 million for three months ended December 31, 2021. The increase for the three months ended December 31, 2022 of $0.1 million, primarily resulted from higher headcount and related costs. Sales and support expenses increased by $0.5 million, or 14%, to $3.8 million for the nine months ended December 31, 2022 from $3.3 million for nine months ended December 31, 2021. The increase for the nine months ended December 31, 2022 of $0.5 million, primarily resulted from a $0.3 million higher headcount and related costs, $0.2 million higher travel and meeting costs and $0.1 million higher marketing costs, partially offset by $0.1 million lower contract consulting costs.
Product development expenses
Product development expenses increased by $43 thousand, or 5%, to $0.9 million for the three months ended December 31, 2022 from $0.9 million for three months ended December 31, 2021. The increase in the three months ended December 31, 2022 of $43 thousand, primarily resulted from higher professional service costs and stock compensation expense. Product development expenses increased by $0.2 million, or 7%, to $3.0 million for the nine months ended December 31, 2022 from $2.8 million for nine months ended December 31, 2021. The increase in the nine months ended December 31, 2022 of $0.2 million, primarily resulted from $0.4 million higher IT related cost and $0.2 million higher consulting costs offset by $0.5 million lower headcount and related costs.
Depreciation and amortization
Depreciation and amortization increased by $50 thousand, or 15%, to $0.4 million for the three months ended December 31, 2022 from $0.3 million for three months ended December 31, 2021. Depreciation and amortization increased by $0.1 million, or 11%, to $1.1 million for the nine months ended December 31, 2022 from $1.0 million for nine months ended December 31, 2021. The increase for the three and nine months ended December 31, 2022 of $50 thousand and $0.1 million, respectively, was primarily as a result of assets placed in service during the periods.
Gain from disposal of intangible assets, net
| Three months ended December 31, | Aggregate Change | Nine months ended December 31, | Aggregate Change | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 from 2021 | 2022 | 2021 | 2022 from 2021 | |||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Gain from disposal of intangible assets, net | $ | (5,776) | $ | — | $ | (5,776) | 100 | % | $ | (9,329) | $ | (10,230) | $ | 901 | -9 | % | |||||||||||||||||||||||||||||||
During the three months ended December 31, 2022, we exchanged our narrowband licenses for broadband licenses in 25 counties. In connection with the exchange, we recorded an estimated accounting cost basis of $8.2 million for the new
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broadband licenses and disposed of $2.4 million related to the value ascribed to the narrowband licenses we relinquished to the FCC for those same 25 counties. As a result, we recorded a $5.8 million non-monetary gain from disposal of the intangible assets in our Consolidated Statements of Operations for the three months ended December 31, 2022. During the nine months ended December 31, 2022, we exchanged our narrowband licenses for broadband licenses in 70 counties. In connection with the exchange, we recorded an estimated accounting cost basis of $13.1 million for the new broadband licenses and disposed of $3.8 million related to the value ascribed to the narrowband licenses we relinquished to the FCC for those same 70 counties. As a result, we recorded a $9.3 million non-monetary gain from disposal of the intangible assets in our Consolidated Statements of Operations for the nine months ended December 31, 2022. Refer to Note 3 Intangibles in the Notes to the Unaudited Consolidated Financial Statements contained within this Quarterly Report for further discussion on the exchanges.
During the nine months ended December 31, 2021, we exchanged our narrowband licenses for broadband licenses in 12 counties. In connection with the exchange, we recorded an estimated accounting cost basis of $13.6 million for the new broadband licenses and disposed of $3.4 million related to the value ascribed to the narrowband licenses we relinquished to the FCC for those same 12 counties. As a result, we recorded a $10.2 million gain from disposal of the intangible assets in the Consolidated Statements of Operations for the nine ended December 31, 2021.
(Gain) loss from disposal of long-lived assets, net
| Three months ended December 31, | Aggregate Change | Nine months ended December 31, | Aggregate Change | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 from 2021 | 2022 | 2021 | 2022 from 2021 | |||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| (Gain) loss from disposal of long-lived assets, net | $ | (21) | $ | 57 | $ | (78) | -137 | % | $ | 1 | $ | 111 | $ | (110) | -99 | % | |||||||||||||||||||||||||||||||
(Gain) loss from disposal of long-lived assets, net decreased by $78 thousand, or -137%, to $21 thousand for the three months ended December 31, 2022 from $57 thousand for three months ended December 31, 2021. (Gain) loss from disposal of long-lived assets, net decreased by $0.1 million, or -99%, to $0.1 million for the nine months ended December 31, 2022 from $1 thousand for nine months ended December 31, 2021.
Interest income
| Three months ended December 31, | Aggregate Change | Nine months ended December 31, | Aggregate Change | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 from 2021 | 2022 | 2021 | 2022 from 2021 | |||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 409 | $ | 9 | $ | 400 | 4444 | % | $ | 670 | $ | 55 | $ | 615 | 1118 | % | |||||||||||||||||||||||||||||||
Interest income increased by $0.4 million, or 4444%, to $0.4 million for the three months ended December 31, 2022 from $9 thousand for three months ended December 31, 2021. Interest income increased by $0.6 million, or 1118%, to $0.7 million for the nine months ended December 31, 2022 from $0.1 million for nine months ended December 31, 2021. The increase for the three and nine months ended December 31, 2022, was attributable to higher interest rates.
Other income
| Three months ended December 31, | Aggregate Change | Nine months ended December 31, | Aggregate Change | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 from 2021 | 2022 | 2021 | 2022 from 2021 | |||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Other income | $ | 185 | $ | 63 | $ | 122 | 194 | % | $ | 232 | $ | 197 | $ | 35 | 18 | % | |||||||||||||||||||||||||||||||
Other income increased by $0.1 million, or 194%, to $0.2 million for the three months ended December 31, 2022 from $0.1 million for three months ended December 31, 2021. Other income increased by $35 thousand, or 18%, to $0.2 million for the nine months ended December 31, 2022 from $0.2 million for nine months ended December 31, 2021.
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Income tax expense
| Three months ended December 31, | Aggregate Change | Nine months ended December 31, | Aggregate Change | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 from 2021 | 2022 | 2021 | 2022 from 2021 | |||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Income tax expense | $ | 210 | $ | 412 | $ | (202) | -49 | % | $ | 625 | $ | 710 | $ | (85) | -12 | % | |||||||||||||||||||||||||||||||
For the three and nine months ended December 31, 2022, we recorded a total deferred tax expense of $0.2 million and $0.6 million, respectively, due to the inability to use some portion of federal and state NOL carryforwards against the deferred tax liability created by amortization of indefinite-lived intangibles.
For the three and nine months ended December 31, 2021, we recorded a total deferred tax expense of $0.4 million and $0.7 million, respectively, due to the inability to use some portion of our federal and state NOL carryforwards against the deferred tax liability created by amortization of indefinite-lived intangibles.
Liquidity and Capital Resources
Our principal source of liquidity is our cash and cash equivalents generated from customer contract proceeds. At December 31, 2022, we had cash and cash equivalents of $57.5 million.
We believe our cash and cash equivalents on hand, along with contracted proceeds from customers will be sufficient to meet our financial obligations through at least 12 months from the date of this Quarterly Report. As noted above, our future capital requirements will depend on a number of factors, including among others, the costs and timing of our spectrum retuning activities, spectrum acquisitions and the Anti-Windfall Payments to the U.S. Treasury, our operating activities, any cash proceeds we generate through our commercialization activities and our ability to timely deliver broadband licenses to our customers in accordance with our contractual obligations. We will deploy capital at our determined pace based on several key ongoing factors, including customer demand, market opportunity, and offsetting income from spectrum leases. As we cannot predict the duration or scope of the COVID-19 pandemic or the current negative macroeconomic environment, including the adverse effect of inflation, or their respective impacts on our Company or our targeted customers, we cannot reasonably estimate their respective potential negative financial impact to our results of operations, commercialization efforts and financial condition. We are actively managing our business to maintain our cash flow and believe that we currently have adequate liquidity. To implement our business plans and initiatives, however, we may need to raise additional capital. We cannot predict with certainty the exact amount or timing for any future capital raises. See “Risk Factors” in Item 1A of Part II of this Quarterly Report for a reference to the risks and uncertainties that could cause our costs to be more than we currently anticipate and/or our revenue and operating results to be lower than we currently anticipate. If required, we intend to raise additional capital through debt or equity financings, including pursuant to our Shelf Registration Statement (as defined below) or through some other financing arrangement. However, we cannot be sure that additional financing will be available if and when needed, or that, if available, we can obtain financing on terms favorable to our stockholders and to us. Any failure to obtain financing when required will have a material adverse effect on our business, operating results, financial condition and liquidity.
In April 2020, we filed a shelf registration statement (the “Shelf Registration Statement”) on Form S-3 with the SEC that was declared effective by the SEC on April 20, 2020, which permits us to offer up to $150.0 million of common stock, preferred stock, warrants or units in one or more offerings and in any combination, including in units from time to time. Our Shelf Registration Statement is intended to provide us with additional flexibility to access capital markets for general corporate purposes, which may include working capital, capital expenditures, repayment of debt, other corporate expenses and acquisitions of complementary products, technologies, or businesses.
We entered into an Amended and Restated Controlled Equity Offering Sales Agreement and an Amended and Restated Sales Agreement (collectively, the “Sales Agreements”) with Cantor Fitzgerald & Co. and B. Riley FBR, Inc., respectively (collectively, the “Agents”). On April 3, 2020, we registered the sale of up to an aggregate of $50.0 million, in shares of our common stock in at the market sales transactions pursuant to the Sales Agreements under the Shelf Registration Statement. Through the date of this filing, we have not sold any shares of our common stock in at the market transactions or any securities under the Shelf Registration Statement.
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Cash Flows from Operating, Investing and Financing Activities
| Nine months ended December 31, | |||||||||||
| (in thousands) | 2022 | 2021 | |||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Net cash (used in) provided by operating activities | $ | (18,676) | $ | 27,037 | |||||||
| Net cash used in investing activities | $ | (20,612) | $ | (16,282) | |||||||
| Net cash used in financing activities | $ | (8,825) | $ | (529) | |||||||
Net cash (used in) provided by operating activities. Net cash used in operating activities was $18.7 million for the nine months ended December 31, 2022, as compared to net cash provided by operating activities of $27.0 million for the nine months ended December 31, 2021. The majority of net cash used in operating activities during the nine months ended December 31, 2022, resulted from a net loss of $31.9 million, partially offset by an increase in deferred revenue of $6.7 million and non-cash adjustments to net loss of $5.8 million (primarily attributable to stock compensation expense of $13.4 million, partially offset by the gain on disposals of intangible assets of $9.3 million). The majority of net cash provided by operating activities during the nine months ended December 31, 2021, resulted from an increase in deferred revenue of $52.0 million and non-cash adjustments to net loss of $1.6 million (primarily attributable to stock compensation expense of $10.0 million, partially offset by the gain on disposal of intangible assets of $10.2 million), partially offset by a net loss of $26.5 million. The increase in deferred revenue is mainly due to cash receipts of $8.0 million and $52.8 million in proceeds from our 900 MHz Broadband Spectrum customer prepayments during Fiscal 2023 and 2022, respectively.
Net cash used in investing activities. Net cash used in investing activities was $20.6 million for the nine months ended December 31, 2022, as compared to net cash used in investing activities of $16.3 million for the nine months ended December 31, 2021, primarily to acquire, swap or retune wireless licenses in markets across the United States.
Net cash used in financing activities. Net cash used in financing activities was $8.8 million for the nine months ended December 31, 2022, as compared to net cash used in financing activities of $0.5 million for the nine months ended December 31, 2021. For the nine months ended December 31, 2022, net cash used in financing activities was primarily from the repurchase of common stock of $8.2 million and payments of withholding tax on net issuance of restricted stock of $1.5 million, partially offset by the proceeds from stock option exercises of $0.9 million. For the nine months ended December 31, 2021, net cash used in financing activities was primarily from the repurchase of common stock of $12.0 million and payments of withholding tax on net issuance of restricted stock of $1.5 million, partially offset by the proceeds from stock option exercises of $12.9 million.
Material Cash Requirements
Our future capital requirements will depend on many factors, including: the timeline and costs to acquire broadband licenses pursuant to the Report and Order, including the costs to acquire additional spectrum, the costs related to retuning, or swapping spectrum held by 900 MHz site-based licensees in the broadband segment that is required under section 90.621(b) to be protected by a broadband licensee with a base station at any location within the county, or any 900 MHz geographic-based SMR licensee in the broadband segment whose license area completely or partially overlaps the county, and the costs of paying Anti-Windfall Payments to the U.S. Treasury; costs related to the commercializing of our spectrum assets; and our ability to sign customer contracts and generate revenues from the license or transfer of any broadband licenses we secure; and our ability to timely deliver broadband licenses to our customers in accordance with our contractual obligation.
Xcel Energy Guaranty
In connection with Xcel Energy Agreement, we entered into a guaranty agreement, under which we guaranteed the delivery of the relevant 900 MHz Broadband Spectrum and the associated broadband licenses in Xcel Energy’s service territory in eight states along with other commercial obligations. In the event of default or non-delivery of the specific territory’s 900 MHz Broadband Spectrum, we are required to refund payments we have received. In addition, to the extent it has performed its obligations, our liability and obligations under the Xcel Energy Agreement will extend only to the remaining unperformed obligations. We have not recorded a liability for these guarantees as delivery of the relevant cleared 900 MHz Broadband licenses or counties is expected to commence in the first quarter of Fiscal 2024 through 2028. As of December 31, 2022, the maximum potential liability of future undiscounted payments under this agreement is approximately $8.0 million.
25
Share Repurchase Program
In September 2021, our Board authorized a share repurchase program pursuant to which we may repurchase up to $50.0 million of our common stock on or before September 29, 2023. The manner, timing and amount of any share repurchases will be determined by us based on a variety of factors, including price, general business and market conditions and alternative investment opportunities. The share repurchase program authorization does not obligate us to acquire any specific number of shares. Under the program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We currently anticipate the cash used for the share repurchase program will come primarily from our prepaid customer agreements.
The following table presents the share repurchase activity for the three and nine months ended December 31, 2022 and 2021 (in thousands, except per share data):
| Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Number of shares repurchased and retired | 106 | 200 | 216 | 200 | |||||||||||||||||||
| Average price paid per share* | $ | 33.11 | $ | 60.02 | $ | 47.05 | $ | 60.02 | |||||||||||||||
| Total cost to repurchase | $ | 3,498 | $ | 11,993 | $ | 8,223 | $ | 11,993 | |||||||||||||||
*Average price paid per share includes costs associated with the repurchases.
As of December 31, 2022, $26.8 million is remaining under the share repurchase program.
Off-balance sheet arrangements
As of December 31, 2022 and March 31, 2022, we did not have and do not have any relationships with unconsolidated entities or financial partnerships that were established for the purpose of facilitating off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
Our financial instruments consist of cash, cash equivalents, trade accounts receivable and accounts payable. We consider investments in highly liquid instruments purchased with original maturities of 90 days or less to be cash equivalents. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term nature of the highly liquid instruments in our portfolio, a 10% change in market interest rates would not be expected to have a material impact on our financial condition and/or results of operations.
Foreign Currency Exchange Rate Fluctuations
Our operations are based in the United States and, accordingly, all of our transactions are denominated in U.S. dollars. We are currently not exposed to market risk from changes in foreign currency.
Inflation Risk
Inflationary factors may adversely affect our operating results. As a result of recent increases in inflation, certain of our operating expenses have increased. Additionally, although difficult to quantify, we believe that the current macroeconomic environment, including inflation, may have an adverse effect on our target customers’ businesses, which may harm our commercialization efforts and negatively impact our revenues. If we are not able to control our higher operating costs or if our commercialization efforts are slowed or negatively impacted, continued periods of high inflation could have a material adverse effect on our business, operating results and financial condition.
We continue to monitor our market risk exposure, including any adverse impacts related to COVID-19 pandemic or the current macroeconomic environment, which has resulted in significant market volatility.
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Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our management, with the participation of our President and Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on that evaluation, our management, including our President and Chief Executive Officer and our Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of the end of such period.
Changes in Internal Control over Financial Reporting
In connection with the evaluation required by Exchange Act Rule 13a-15(d), our management, including our President and Chief Executive Officer and our Chief Financial Officer, concluded that no changes in our internal control over financial reporting occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our President and Chief Executive Officer and our Chief Financial Officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
We are not involved in any material legal proceedings.
Item 1A. Risk Factors.
In evaluating us and our common stock, we urge you to carefully consider the risks and other information in this Quarterly Report as well as the risk factors disclosed in our 2022 Annual Report. There have been no material changes from the risk factors as previously disclosed in our 2022 Annual Report. Any of the risks discussed in this Quarterly Report, if any, and in our 2022 Annual Report, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers.
The following table provides information with respect to purchases of our common stock by the Company or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Exchange Act, during the three months ended December 31, 2022.
Issuer Purchases of Equity Securities (1)
(in thousands except for share and per share data)
| Period | Total Number of Shares Purchased | Average Price Paid per Share (2) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Value of Shares that May Yet be Purchased Under Publicly Announced Plans or Programs | ||||||||||
| October 1, 2022 through October 31, 2022 | ||||||||||||||
| Open market and privately negotiated purchases | — | $ | — | — | $ | 30,313 | ||||||||
| November 1, 2022 through November 30, 2022 | ||||||||||||||
| Open market and privately negotiated purchases | — | — | — | 30,313 | ||||||||||
| December 1, 2022 through December 31, 2022 | ||||||||||||||
| Open market and privately negotiated purchases | 105,688 | 33.11 | 105,688 | 26,815 | ||||||||||
| Total | 105,688 | $ | 33.11 | 105,688 | $ | 26,815 | ||||||||
(1)On September 29, 2021, our Board authorized a share repurchase program pursuant to which we may repurchase up to $50.0 million of our outstanding shares of common stock on or before September 29, 2023. The manner, timing and amount of any share repurchases may fluctuate and will be determined by us based on a variety of factors, including the market price of our common stock, our priorities for the use of cash to support our business operations and plans, general business and market conditions and alternative investment opportunities. The share repurchase program authorization does not obligate us to acquire any specific number or dollar value of shares. Under the share repurchase program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.
(2)Average price paid per share includes cost associated with the repurchases.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
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Item 5. Other Information.
None.
29
Item 6. Exhibits.
| Exhibit No. | Description of Exhibit | ||||
3.1(1) | |||||
3.2(2) | |||||
3.3(3) | |||||
3.4(4) | |||||
3.5(5) | |||||
4.1(6) | |||||
| 31.1# | |||||
| 31.2# | |||||
| 32.1#* | |||||
| 32.2#* | |||||
| 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 (Embedded within the Inline XBRL document and included in Exhibit 101) | ||||
____________
(1)Incorporated by reference to Exhibit 3.1 of the Registrant’s Registration Statement on Form S-1 (File No. 333-201156), filed with the SEC on December 19, 2014.
(2)Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36827), filed with the SEC on November 5, 2015.
(3)Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36827), filed with the SEC on August 6, 2019.
(4)Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36827), filed with the SEC on June 27, 2017.
(5)Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36827), filed with the SEC on May 8, 2020.
(6)Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-1 (File No. 333-201156), filed with the SEC on December 19, 2014.
# Filed herewith.
*The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
| Anterix Inc. | |||||
Date: February 9, 2023 | /s/ Robert H. Schwartz | ||||
| Robert H. Schwartz | |||||
| President and Chief Executive Officer | |||||
| (Principal Executive Officer) | |||||
Date: February 9, 2023 | /s/ Timothy A. Gray | ||||
| Timothy A. Gray | |||||
| Chief Financial Officer | |||||
| (Principal Financial Officer and Principal Accounting Officer) | |||||
31
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Robert H. Schwartz, certify that:
1.I have reviewed this quarterly report on Form 10-Q for the quarter ended December 31, 2022 of Anterix Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 9, 2023 | By: | /s/ Robert H. Schwartz | ||||||
| Robert H. Schwartz | ||||||||
| President and Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Timothy A. Gray, certify that:
1.I have reviewed this quarterly report on Form 10-Q for the quarter ended December 31, 2022 of Anterix Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 9, 2023 | By: | /s/ Timothy A. Gray | ||||||
| Timothy A. Gray | ||||||||
| Chief Financial Officer | ||||||||
| (Principal Financial and Principal Accounting Officer) | ||||||||
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Anterix Inc. (the “Company”) on Form 10-Q for the period ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert H. Schwartz, President and Chief Executive Officer of the Company, certify, solely for purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 9, 2023 | By: | /s/ Robert H. Schwartz | ||||||
| Robert H. Schwartz | ||||||||
| President and Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
A signed original of this written statement required by Section 906 has been provided to Anterix Inc. and will be retained by Anterix Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
This certification that accompanies the Report to which it relates, is not deemed filed with the Securities and Exchange Commission, and is not to be incorporated by reference into any filing of Anterix Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Anterix Inc. (the “Company”) on Form 10-Q for the period ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Timothy A. Gray, Chief Financial Officer of the Company, certify, solely for purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 9, 2023 | By: | /s/ Timothy A. Gray | ||||||
| Timothy A. Gray | ||||||||
| Chief Financial Officer | ||||||||
| (Principal Financial and Principal Accounting Officer) | ||||||||
A signed original of this written statement required by Section 906 has been provided to Anterix Inc. and will be retained by Anterix Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
This certification that accompanies the Report to which it relates, is not deemed filed with the Securities and Exchange Commission, and is not to be incorporated by reference into any filing of Anterix Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.