Airship AI Holdings, Inc. Fair Value Disclosure
Note 10 – Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2022 and 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
| December 31, 2022 | ||||||||||||
| Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
| Assets: | ||||||||||||
| Investments held in Trust Account - Money market fund | $ | 328,226,432 | $ | $ | ||||||||
| Liabilities: | ||||||||||||
| Derivative warrant liabilities - Public warrants | $ | 1,294,770 | $ | $ | ||||||||
| Derivative warrant liabilities - Private placement warrants | $ | $ | 41,280 | $ | ||||||||
| December 31, 2021 | ||||||||||||
| Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
| Assets: | ||||||||||||
| Investments held in Trust Account - Money market fund | $ | 323,716,979 | $ | $ | ||||||||
| Liabilities: | ||||||||||||
| Derivative warrant liabilities - Public warrants | $ | 8,582,810 | $ | $ | ||||||||
| Derivative warrant liabilities - Private placement warrants | $ | $ | 271,760 | $ | ||||||||
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of the Public Warrants was transferred from a Level 3 measurement to a Level 1 measurement in May 2021, when the Public Warrants were separately listed and traded in an active market. The estimated fair value of the Private Placement Warrants was transferred from a Level 3 measurement to a Level 2 measurement in May 2021, as the key inputs to the valuation model became directly or indirectly observable from the Public Warrants listed price.
The initial estimated fair value of the warrants was measured using a Monte Carlo simulation. The subsequent estimated fair value of the Public Warrants is based on the listed price in an active market for such warrants while the fair value of the Private Placement Warrants continues to be measured using a Monte Carlo simulation, with level 2 inputs. For the year ended December31, 2022 and the period from January 8, 2021 (inception) through December 31, 2021, the Company recognized a gain resulting from changes in the fair value of derivative warrant liabilities of approximately $7.5 million and $6.9 million, which is presented in the accompanying statements of operations, respectively.
The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
| March 23, 2021 | April 7, 2021 | |||||||
| Exercise price | $ | 11.50 | $ | 11.50 | ||||
| Share price | $ | 9.53 | $ | 9.51 | ||||
| Volatility | 15.6 | % | 15.7 | % | ||||
| Term | 6.5 | 6.5 | ||||||
| Risk-free rate | 1.18 | % | 1.21 | % | ||||
The change in the fair value of derivative liabilities, measured using Level 3 inputs, for the period ended December 31, 2021 is summarized as follows:
| Derivative warrant liabilities at March 23, 2021 (inception) | $ | |||
| Issuance of Public and Private Warrants | 14,449,550 | |||
| Change in fair value of derivative warrant liabilities | 294,850 | |||
| Derivative warrant liabilities at March 31, 2021 | $ | 14,744,400 | ||
| Issuance of Public Warrants; over-allotment | 1,267,550 | |||
| Transfer of Public Warrants to Level 1 | (15,517,550 | ) | ||
| Transfer of Private Placement Warrants to Level 2 | (494,400 | ) | ||
| Derivative warrant liabilities at December 31, 2021 | $ |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2022 | Mar 31, 2023 | Showing above |
| 2021 | Apr 6, 2022 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.