Anterix Inc. (ATEX) FY 2023 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our historical consolidated financial statements and the related notes. This management’s discussion and analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause our actual results or events to differ materially from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors” included elsewhere in this Annual Report. Except as 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 Annual Report.

This management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

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 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 monetize the broadband spectrum we secure to our targeted utility and critical infrastructure customers.

Refer to our Business Section of this 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 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 PLTE 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 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 an initial term of 20 years with 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 year ended March 31, 2023, we delivered to Evergy the 1.4 x 1.4 cleared 900 MHz Broadband Spectrum and the associated broadband licenses for 81 counties. The revenue recognized for the year ended March 31, 2023 was approximately $0.6 million.

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. In September 2022, we delivered to SDG&E 1.4 x 1.4 cleared 900 MHz Broadband Spectrum and the associated broadband license related to Imperial County and received a milestone payment of $0.2 million.

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In May 2022, we issued Motorola 500,000 shares of our common stock. Motorola received the Shares by electing to convert 500,000 Class B Units it held in our subsidiary, PDV Spectrum Holding Company, LLC. Motorola acquired the Units in September 2014 in connection with 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 was declared effective by the SEC on July 15, 2022.

Recent Developments

On April 20, 2023, we entered into a license purchase agreement with LCRA under which LCRA will purchase 900 MHz Broadband Spectrum covering 68 counties and more than 30 cities in LCRA’s wholesale electric, transmission, and water service area for total payments of $30.0 million plus the contribution of select LCRA 900 MHz narrowband spectrum. The Agreement will support LCRA’s deployment of a PLTE network which will provide a host of capabilities including grid awareness, communications and operational intelligence that will enhance resilience and spur innovation at LCRA.

Results of Operations

Comparison of the years ended March 31, 2023, 2022 and 2021

The following table sets forth our results of operations for the fiscal years ended March 31, 2023 (“Fiscal 2023”), March 31, 2022 (“Fiscal 2022”) and March 31, 2021 (“Fiscal 2021”). The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.

Operating revenues

Overall operating revenues increased by $0.8 million, or 77%, to $1.9 million in Fiscal 2023 from $1.1 million in Fiscal 2022. The increase in our spectrum lease revenue was attributable to revenue recognized in connection with our agreements with Ameren and Evergy of approximately $0.3 million and $0.6 million, respectively, for the current year. Overall operating revenues increased by $0.2 million, or 18%, to $1.1 million in Fiscal 2022 from $0.9 million in Fiscal 2021. The increase in our spectrum lease revenue was attributable to revenue recognized in connection with the Ameren Agreements of approximately $0.4 million. For a discussion of our revenue recognition policy, refer to Note 2 Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements contained within this Annual Report.

Operating expenses

Direct cost of revenue

Direct cost of revenue decreased from $5,000 for Fiscal 2022 to zero for Fiscal 2023. Direct cost of revenue decreased by $1.6 million to $5,000 for Fiscal 2022, or 100%, from $1.6 million for Fiscal 2021. The decrease is due to lower support costs related to the transfer of pdvConnect customers to the Team Connect LLC as part of our December 2018 restructuring efforts as discussed in Note 3 Revenue in the Notes to the Consolidated Financial Statements contained within this Annual Report.

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General and administrative expenses

General and administrative expenses increased by $5.7 million to $45.2 million for Fiscal 2023, or 14%, from $39.5 million for Fiscal 2022. The increase primarily resulted from $4.3 million higher stock compensation expense due to additional grants awarded during Fiscal 2023, $1.0 million higher headcount and related costs, $0.4 million higher travel and meeting costs, $0.3 million higher regulatory fees, and $0.1 million higher IT related costs, partially offset by $0.3 million lower site related costs and $0.1 million lower professional services. General and administrative expenses increased by $0.2 million to $39.5 million for Fiscal 2022, or 1%, from $39.3 million for Fiscal 2021. The increase primarily resulted from $1.5 million higher headcount and employee related costs, $0.8 million higher professional service fees due to our strategic spectrum initiatives, $0.7 million higher site rent related costs and $0.3 million recruiting costs partially offset by $2.7 million lower stock compensation expense and $0.4 million lower management fees.

Sales and support expenses

Sales and support expenses increased by $1.3 million, or 29%, to $5.7 million for Fiscal 2023 from $4.5 million for Fiscal 2022. The increase primarily resulted from $0.8 million higher headcount and employee related costs, $0.3 million higher marketing costs related to advertising, sponsorships and trade shows and $0.2 million higher travel and meeting costs. Sales and support expenses increased by $1.5 million, or 52%, to $4.5 million for Fiscal 2022 from $2.9 million for Fiscal 2021. The increase primarily resulted from $0.6 million higher headcount and employee related costs, $0.5 million higher marketing costs related to advertising, sponsorships and trade shows, $0.1 million higher contract consulting costs and $0.3 million higher stock compensation expense.

Product development expenses

Product development expenses increased by $0.8 million, or 24%, to $4.4 million for Fiscal 2023 from $3.6 million for Fiscal 2022. The increase primarily resulted from $0.6 million higher non-recurring engineering costs, $0.5 million higher contract consulting costs and $0.1 million higher costs related to professional services, partially offset by $0.4 million lower headcount and related cost. Product development expenses decreased by $0.8 million, or 17%, to $3.6 million for Fiscal 2022 from $4.3 million for Fiscal 2021. The decrease primarily resulted from $0.4 million lower consulting fees and $0.4 million lower technology related costs.

Depreciation and amortization

Depreciation and amortization in Fiscal 2023 remained relatively flat as compared to Fiscal 2022. Depreciation and amortization expenses decreased by $2.1 million, or 59%, to $1.5 million for Fiscal 2022 from $3.5 million for Fiscal 2021. The decrease was due to the change in the useful life for our market network sites during Fiscal 2021 that resulted in higher depreciation expense. Market network site assets for our historical business were fully depreciated by December 31, 2020.

Impairment of long-lived assets

There were no impairment of long-lived assets expenses for Fiscal 2023 and Fiscal 2022. Impairment of long-lived assets expenses were $0.1 million for Fiscal 2021.

(Gain)/loss from disposal of intangible assets, net

During Fiscal 2023, we exchanged our narrowband licenses for broadband licenses in 84 counties. In connection with the exchange, we recorded an estimated accounting cost basis of $46.2 million for the new broadband licenses and disposed of $7.8 million related to the value ascribed to the narrowband licenses we relinquished to the FCC for those same 84 counties. As a result, we recorded a $38.4 million gain from disposal of the intangible assets on our Consolidated Statements of Operations. Refer to Note 5 Intangible Assets in the Notes to the Consolidated Financial Statements contained within this Annual Report for further discussion on the exchanges.

During Fiscal 2022, we exchanged our narrowband licenses for broadband licenses in 21 counties. In connection with the exchange, we recorded an estimated accounting cost basis of $15.3 million for the new broadband licenses and disposed of $4.1 million related to the value ascribed to the narrowband licenses we relinquished to the FCC for those same 21 counties. As a result, we recorded a $11.2 million gain from disposal of the intangible assets on our Consolidated Statements of Operations. Refer to Note 5 Intangible Assets in the Notes to the Consolidated Financial Statements contained within this Annual Report for further discussion on the exchanges.

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In June 2020, we cancelled licenses in the 900 MHz band in accordance with the Report and Order and our agreement with the AAR. Because we did not receive any licenses nor monetary reimbursement in exchange for the cancellation, but only credit for purposes of determining our future eligibility and payment requirements for broadband licenses under the Report and Order, we recorded a $5.0 million loss from disposal of the intangible assets on our Consolidated Statements of Operations for Fiscal 2021.

In September 2020, we closed an agreement with a third party for the exchange of 900 MHz licenses. Under the agreement, we received spectrum licenses at their estimated fair value of approximately $0.2 million and a payment of $1.2 million in cash. Under the agreement, we transferred spectrum licenses with a book value of approximately $0.3 million to the third party. We recognized a $1.1 million gain from disposal of intangible assets on our Consolidated Statements of Operations when the deal closed in September 2020.

Loss from disposal of long-lived assets, net

Loss on disposal of long-lived assets, net decreased by $0.1 million, or -91%, to $10 thousand in Fiscal 2023, as compared to $0.1 million Fiscal 2022. The decrease was primarily due to the company disposing less assets in the current year than in the prior year. Loss on disposal of long-lived assets, net in Fiscal 2022 remained relatively flat as compared to Fiscal 2021.

Interest income

Interest income increased by $1.1 million, or 1936%, to $1.1 million for Fiscal 2023 as compared to $56,000 from Fiscal 2022. The increase was primarily attributable to higher interest rates. Interest income decreased by $68,000, or 55%, to $56,000 for Fiscal 2022 as compared to $0.1 million from Fiscal 2021 due to lower interest rates.

Other income

Other income in Fiscal 2023 remained relatively flat as compared to Fiscal 2022. Other income decreased by $0.2 million, or 38%, to $0.3 million for Fiscal 2022 from $0.4 million for Fiscal 2021 due to lower payments received from our historical business.

Loss on equity method investment

We reported loss on investment for Fiscal 2021 amounting to $39,000, relating to the 19.5% ownership interest in the LLC. (See Note 7 Related Party Transactions in the Notes to the Consolidated Financial Statements contained within this Annual Report).

Income tax expense

For Fiscal 2023, Fiscal 2022 and Fiscal 2021, we recorded a total deferred tax expense of $1.3 million, $1.0 million and $0.1 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.

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Liquidity and Capital Resources

Our principal source of liquidity is our cash and cash equivalents generated from customer contract proceeds. On March 31, 2023, we had cash and cash equivalents of $43.2 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 Annual 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 deploy this 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 current negative macroeconomic environment, including any adverse effects of the health pandemics, inflation, regulatory and policy changes, and geopolitical matters, or their respective impacts on our business or our targeted customers, we cannot reasonably estimate any 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 I of this Annual 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 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 the Shelf Registration Statement on Form S-3 with the SEC that was declared effective by the SEC on April 20, 2020, which permitted 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 expired on April 20, 2023.

Cash Flows from Operating, Investing and Financing Activities

Net cash (used in) provided by operating activities

Net cash used in operating activities was approximately $27.3 million in Fiscal 2023 an increase of $45.2 million from Fiscal 2022. The net cash used in operating activities in Fiscal 2023 was due to the following:

•$16.3 million net loss, offset by the following non-cash activity:

◦increase of $1.4 million for depreciation and amortization as a result of assets placed in service during the year;

◦increase of $17.9 million in stock-based compensation expense due to additional grants awarded; and

◦decrease of $38.4 million related to the non-monetary gain on disposals of intangible assets in connection to our exchange of narrowband licenses for broadband licenses;

offset by the following:

•$6.1 million increase in deferred revenue due to $8.0 million cash proceeds from our 900 MHz Broadband Spectrum customer prepayments offset by $1.9 million in revenue recognition in connection with the delivery of cleared 900 MHz Broadband Spectrum.

Net cash used in operating activities was approximately $17.9 million in Fiscal 2022. The net cash used in operating activities in Fiscal 2022 due to the following:

•$37.5 million net loss, offset by the following non-cash activity:

◦increase of $1.5 million for depreciation and amortization as a result of assets placed in service during the year;

◦increase of $13.6 million in stock-based compensation expense due to additional grants awarded; and

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◦decrease of $11.2 million related to the non-monetary gain on disposals of intangible assets in connection to our exchange of narrowband licenses for broadband licenses;

offset by the following:

•$51.7 million increase in deferred revenue due to $52.8 million cash proceeds from our 900 MHz Broadband Spectrum customer prepayments offset by $1.1 million in revenue recognition in connection with the delivery of cleared 900 MHz Broadband Spectrum.

Net cash used in operating activities was approximately $10.0 million in Fiscal 2021. The net cash used in operating activities in Fiscal 2021 due to the following:

•$54.4 million net loss, offset by the following non-cash activity:

◦increase of $3.5 million depreciation and amortization as a result of assets placed in service during the year;

◦increase of $15.9 million in stock-based compensation expense due to additional grants awarded; and

◦increase of $3.8 million related to the non-monetary gain on disposals of intangible assets in connection to our exchange of narrowband licenses for broadband licenses;

offset by the following:

•$20.0 million increase in contingent liability relating to the upfront payment we received from SDG&E.

Net cash used in investing activities

Net cash used in investing activities was approximately $27.1 million, $27.4 million and $14.2 million in Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively. For Fiscal 2023, the net cash used in investing activities resulted from $25.0 million in wireless license acquisitions including refundable deposits and $2.1 million for purchases of equipment. For Fiscal 2022, the net cash used for investing activities resulted from $26.4 million in wireless license acquisitions including refundable deposits and $1.1 million for purchases of equipment. For Fiscal 2021, the net cash used for investing activities resulted from $13.9 million in wireless license acquisitions including refundable deposits and $0.2 million for purchases of equipment.

Net cash (used in) provided by financing activities

Net cash used in financing activities was approximately $8.1 million and $2.4 million in Fiscal 2023 and Fiscal 2022, respectively. Net cash provided by financing activities was $4.2 million in Fiscal 2021. For Fiscal 2023, net cash used in financing activities was primarily from the repurchase of common stock of $8.2 million, partially offset by the proceeds from stock option exercises of $1.7 million, net of payments of withholding tax on net issuance of restricted stock of $1.6 million. For Fiscal 2022, net cash used in financing activities was primarily from the repurchase of common stock of $15.0 million, partially offset by the proceeds from stock option exercises of $14.0 million, net of payments of withholding tax on net issuance of restricted stock of $1.5 million. For Fiscal 2021, the net cash provided by financing activities primarily resulted $4.2 million in cash received from the proceeds of stock option exercises.

Contracted cash proceeds

The following table illustrates the estimated contracted customer proceeds for Fiscal 2024 and thereafter (in thousands):

* Total cash proceeds are subject to change based on final delivery date of the broadband licenses for the associated milestone, which may include penalties associated with delayed deliveries.

Material Cash Requirements

Our future capital requirements will depend on many factors, including: costs and time related to the commercialization 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 and clear spectrum to our customers in accordance with our contractual obligation; 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

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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.

We are 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 a three to ten-year lease extension for our corporate headquarters. We have also entered into multiple lease agreements for tower space related to our historical TeamConnect business and in connection with obtaining spectrum licenses. The lease expiration dates range from May 31, 2023 to August 31 2029. Total estimated payments for these lease agreements are approximately $5.5 million (exclusive of real estate taxes, utilities, maintenance and other costs borne by us). In addition to the lease payments for our tower space, we also have an obligation to clear the tower site locations, for which we recorded an asset retirement obligation (the “ARO”). Total estimated payments as a result of the ARO is approximately $0.6 million. See Note 2 Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements contained within this Annual Report for further information on the AROs.

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 Anterix has performed any obligations, our liability and remaining obligations under the Xcel Energy Agreement will extend only to the remaining unperformed obligations. We recorded $8.0 million in deferred revenue in connection with the prepayment received as delivery of the relevant cleared 900 MHz Broadband licenses or counties is expected to commence in the first quarter of Fiscal 2024 through 2029. As of March 31, 2023, the maximum potential liability of future undiscounted payments under this agreement is approximately $8.0 million.

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 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 Fiscal 2023, Fiscal 2022 and Fiscal 2021 (in thousands, except per share data):

* Average price paid per share includes costs associated with the repurchases.

As of March 31, 2023, $26.8 million is remaining under the share repurchase program.

Critical Accounting Estimates

The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, our actual results could differ from those based on such estimates and assumptions. Further, to the extent that there are differences between our estimates and our actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical performance, as these policies relate to the more significant areas involving our judgments and estimates.

We believe that the areas described below are the most critical to aid in fully understanding and evaluating our reported financial results, as they require management’s significant judgments in the application of accounting policy or in making estimates and assumptions that are inherently uncertain and that may change in subsequent periods. Our significant

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accounting policies are set forth in Note 2 Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements contained within this Annual Report. Of those policies, we believe that the policy discussed below may involve a higher degree of judgment and may be more critical to an accurate reflection of our financial condition and results of operations.

Evaluation of Indefinite-Lived Intangible Assets for Impairment

Unit of accounting of wireless licenses not associated with closed deals is based on geographic markets. Unit of accounting of wireless licenses associated with closed deals is based on the deal markets. Our wireless licenses not associated with closed deals are tested for impairment based on the geographic markets, as we will be utilizing the existing wireless narrowband licenses, or broadband licenses if applicable, as part of facilitating broadband spectrum networks at a geographic market level. Our wireless licenses associated with closed deals are tested for impairment based at the deal market level. We use a market-based approach to estimate fair value for impairment testing purposes.

The valuation approach used to estimate fair value for the purpose of impairment testing requires management to use complex assumptions and estimates such as population, discount rates, industry and market considerations, long-term market equity risk, as well as other factors. These assumptions and estimates depend on our ability to accurately predict forward looking assumptions including successfully applying for broadband licenses, commercializing our 900 MHz Broadband Spectrum and properly estimating favorable deal terms over the life of the contract. For impairment testing, estimated fair value is determined using a market-based approach primarily using the 600 MHz auction price. As noted in the Report and Order, the FCC will use the spectrum price based on the average price paid in the FCC’s 600 MHz auction to calculate the Anti-Windfall Payments. In addition, we performed a sensitivity analysis to recent auctions and transactions noting that while in some cases the value was lower than the 600 MHz auction price, the values were well above our carrying value. Furthermore, if management determines that for impairment testing purposes, the 600 MHz auction price is not the appropriate market-based fair value, and the new estimated fair value is lower by over 50%, our intangible assets would still not be impaired as the current estimated fair value for impairment testing purposes exceeds book value by more than 50%.

During Fiscal 2023, we shifted from a probability analysis approach to a more detailed approach with measurable qualitative metrics. The new approach, Demonstrated Intent (“DI”), determines how likely a deal is to close based on certain qualitative factors, like applying for an experimental license, entering into a request for proposal, joining certain utility board or publicly backing 900 MHz Broadband Spectrum and its application. As a result, we will utilize the DI scores on a go-forward basis for our impairment analysis. We performed a step one quantitative approach impairment test as of January 1, 2023, to determine if the fair value of the combined licenses by the associated geographical or deal market exceeds the carrying value for each geographical or deal market. Based on the results of the impairment test, there were no impairment charges recorded during the year ended March 31, 2023.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements, including those recently adopted, is provided in Note 2 Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements contained within this Annual Report.