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Fair Value | 9 Months Ended
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Sep. 30, 2023
Fair Value |
Fair Value | 6. 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) |
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |
Cash and Cash Equivalents - Money Market Funds |  | $ | 806 |  |  | $ | — |  |  | $ | — |  |  | $ | 806 |
Cash and Cash Equivalents - U.S. Government Agency Bonds |  |  | — |  |  |  | 86,307 |  |  |  | — |  |  |  | 86,307 |
Short term investments - U.S. Government Agency Bonds |  |  | — |  |  |  | 6,962 |  |  |  | — |  |  |  | 6,962 |
Private Placement Warrants |  |  | — |  |  |  | — |  |  |  | 14,000 |  |  |  | 14,000 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and Cash Equivalents - Money Market Funds |  | $ | 95 |  |  | $ | — |  |  | $ | — |  |  | $ | 95 |
Cash and Cash Equivalents - U.S. Government Agency Bonds |  |  | — |  |  |  | 36,509 |  |  |  | — |  |  |  | 36,509 |
Short term investments - U.S. Government Agency Bonds |  |  | — |  |  |  | 8,216 |  |  |  | — |  |  |  | 8,216 |
Private Placement Warrants |  | $ | — |  |  | $ | — |  |  | $ | 4,200 |  |  | $ | 4,200 |
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. 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 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 September 30, 2023 and December 31, 2022, NextNav used a Monte Carlo simulation model. The following table shows the assumptions used in each respective model:
|  | September 30, 2023 |  |  | December 31, 2022 |
|  | Values |  |  | Values |
Stock Price |  | $ | 5.14 |  |  | $ | 2.93 |
Strike price |  | $ | 11.50 |  |  | $ | 11.50 |
Holding Period/Term (years) |  |  | 3.08 |  |  |  | 3.82 |
Volatility |  |  | 72.50 | % |  |  | 62.00 | %
Expected dividends |  |  | None |  |  |  | None |
Risk-Free Rate |  |  | 4.79 | % |  |  | 4.13 | %
Fair value of warrants |  | $ | 1.60 |  |  | $ | 0.48 |
The table below provides a reconciliation of the beginning and ending balances for the liabilities measured at fair value using significant unobservable inputs (Level 3).
Warrants: |  | (in thousands) |
Balance as of December 31, 2022 |  | $ | 4,200 |
Fair value adjustment of Private Placement Warrants |  |  | 9,800 |
Balance as of September 30, 2023 |  | $ | 14,000 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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