7. Fair Value

NextNav uses observable and unobservable inputs to determine the value of its assets and liabilities recorded at fair value. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. The three-tier hierarchy for inputs used to measure fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, where applicable, is as follows:

- Level 1 — Quoted prices in active markets for identical assets or liabilities

- Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities

- Level 3 — No observable pricing inputs in the market

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. NextNav’s assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. NextNav effectuates transfers between levels of the fair value hierarchy, if any, as of the date of the actual circumstance that caused the transfer.

The following table presents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis:

	Level 1		Level 2		Level 3		Total
	(in thousands)
March 31, 2025
Cash and Cash Equivalents - Money Market Funds	$	552	$	—	$	—	$	552
Cash and Cash Equivalents - Available-for-sale debt securities with fair value option election		—		146,910		—		146,910
Short term investments - Available-for-sale debt securities with fair value option election		—		37,986		—		37,986
Private Placement Warrants		—		—		21,425		21,425
Derivative Liability - Conversion Option		—		—		56,522		56,522

December 31, 2024
Cash and Cash Equivalents - Money Market Funds	$	151	$	—	$	—	$	151
Cash and Cash Equivalents - Available-for-sale debt securities with fair value option election		—		34,485		—		34,485
Short term investments - Available-for-sale debt securities with fair value option election		—		40,785		—		40,785
Private Placement Warrants	$	—	$	—	$	28,707	$	28,707

The carrying values of cash and cash equivalents, accounts payable, accrued expenses, amounts included in other current assets, and current liabilities that meet the definition of a financial instrument, approximate fair value due to their short-term nature. The total estimated fair value of the 2028 Notes was $148.5 million as of March 31, 2025.

Assets, liabilities, and equity instruments that are measured at fair value on a nonrecurring basis include fixed assets and intangible assets. The Company recognizes these items at fair value when they are considered to be impaired or upon initial recognition. The fair value of these assets and liabilities are determined with valuation techniques using the best information available and may include quoted market prices, market comparables and discounted cash flow models.

Level 3 Liabilities

Private Placement Warrants

The Company engaged a third-party valuation firm to assist with the fair value analysis of the Private Placement Warrants (as defined below). The analysis used commonly accepted valuation methodologies and best practices to determine the fair value of the equity, in accordance with fair value standards and U.S. GAAP. For the Private Placement Warrants that were outstanding as of March 31, 2025 and December 31, 2024, NextNav used a Monte Carlo simulation model. The following table shows the assumptions used in each respective model:

	March 31, 2025			December 31, 2024
	Values			Values
Stock Price	$	12.17		$	15.56
Strike price	$	11.50		$	11.50
Holding Period/Term (years)		1.58			1.82
Volatility		82.30	%		55.90	%
Expected dividends		None			None
Risk-Free Rate		3.95	%		4.23	%
Fair value of Private Placement Warrants	$	5.31		$	6.77

The significant unobservable input used in the fair value measurement of the Private Placement Warrants is expected volatility. Holding other inputs constant, an increase (decrease) in expected volatility would have resulted in a higher (lower) fair value measurement, respectively.

The table below provides a reconciliation of the beginning and ending balances for the Private Placement Warrants measured at fair value using significant unobservable inputs (Level 3).

	(in thousands)
Balance as of December 31, 2024	$	28,707
Fair value adjustment of Private Placement Warrants		(6,041	)
Reclassification of warrant liability to common stock warrants		(1,241	)
Balance as of March 31, 2025	$	21,425

Derivative Liability-Conversion Option

The 2028 Notes (as defined below) contain an embedded conversion feature that is required to be bifurcated and accounted for separately from the 2028 Notes as a derivative liability. The fair value of the conversion option was determined using a binomial lattice valuation model and a “with-and-without” valuation methodology. The derivative liability related to the 2028 Notes conversion option was measured at March 12, 2025 (agreement date of 2028 Notes, see Note 8 - Long term debt) and March 31, 2025 and contained the following assumptions:

	March 12,			March 31,
	2025			2025
Stock price volatility (transaction-calibrated)		20.4	%		20.4	%
Expected terms		3.3	years		3.2	years
Stock price	$	10.27		$	12.17
Risk-free interest rate		4.0	%		3.9	%
Credit rate		CCC-			CCC-
Debt yield (transaction-calibrated)		12.7	%		13.6	%

The significant unobservable input used in the fair value measurement of the Conversion Option is expected volatility. Holding other inputs constant, an increase (decrease) in expected volatility would have resulted in a higher (lower) fair value measurement, respectively.

The table below provides a summary of the changes in fair value of the Company's 2028 Notes conversion option derivative liability accounted for as liabilities using significant unobservable inputs (Level 3):

	(in thousands)
Balance as of December 31, 2024	$	-
Initial recognition of derivative liability		31,999
Loss (gain) in fair value		24,523
Balance as of March 31, 2025	$	56,522

The sensitivity of the fair value calculation to these methods, assumptions, and estimates included could create materially different results under different conditions or using different assumptions.