AMERICAN SUPERCONDUCTOR CORP /DE/ Fair Value Disclosure

6. Fair Value Measurements

 

A valuation hierarchy for disclosure of the inputs to valuation used to measure fair value has been established. This hierarchy prioritizes the inputs into three broad levels as follows:

 

Level 1	-	Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2	-	Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3	-	Unobservable inputs that reflect the Company’s assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.

 

The Company provides a gross presentation of activity within Level 3 measurement roll-forward and details of transfers in and out of Level 1 and 2 measurements.  A change in the hierarchy of an investment from its current level is reflected in the period during which the pricing methodology of such investment changes.  Disclosure of the transfer of securities from Level 1 to Level 2 or Level 3 is made in the event that the related security is significant to total cash and investments.  The Company did not have any transfers of assets and liabilities from Level 1, Level 2 or Level 3 of the fair value measurement hierarchy during the year ended March 31, 2026.

 

A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

 

Valuation Techniques

 

Cash Equivalents

 

Cash equivalents consist of highly liquid instruments with maturities of three months or less that are regarded as high quality, low risk investments and are measured using such inputs as quoted prices, and are classified within Level 1 of the valuation hierarchy. Cash equivalents consist principally of money market accounts.

 

Short-term Cash Instruments

 

Short-term cash instruments consist of highly liquid instruments with maturities of three months or less that are regarded as high quality, low risk investments and are measured using such inputs as quoted prices in markets that are not active, and are classified within Level 2 of the valuation hierarchy. Short-term cash instruments consist principally of certificates of deposits.

 

Contingent Consideration

 

Contingent consideration relates to the earnout payment set forth in the Stock Exchange Agreement governing the acquisition of Comtrafo that provides the selling stockholders  may receive an additional sum of cash upon the achievement of certain specified earnings before interest, taxes, depreciation, and amortization ("EBITDA") objectives during the three years following the Comtrafo Acquisition Date. See Note 13, "Contingent Consideration" for further discussion. The Company relied on a Monte Carlo method to determine the fair value of the contingent consideration on the closing of the acquisition of Comtrafo and continues to revalue the fair value of the contingent consideration using the same method at each subsequent balance sheet date until the contingencies are resolved and the cash to be paid is determined, with the change in fair value recorded in the current period operating loss. For the period ended March 31, 2026, the change in fair value was $4.2 million. Contingent consideration is classified within Level 3 of the valuation hierarchy. 

 

The following table provides the assets and liabilities carried at fair value on a recurring basis, measured as of  March 31, 2026 and 2025 (in thousands):

 

		Total Carrying Value				Quoted Prices in Active Markets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
March 31, 2026:
Assets:
Cash equivalents		$	101,525			$	101,525			$	—			$	—
Short-term cash instruments		$	1,278			$	—			$	1,278			$	—
Current liabilities:
Contingent Consideration		$	12,808			$	—			$	—			$	12,808
Long-term liabilities:
Contingent Consideration		$	26,721			$	—			$	—			$	26,721

 

		Total Carrying Value				Quoted Prices in Active Markets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
March 31, 2025:
Assets:
Cash equivalents		$	51,230			$	51,230			$	—			$	—
Short-term cash instruments		$	1,404			$	—			$	1,404			$	—

 

The table below reflects the activity for the Company’s contingent consideration liability measured at fair value on a recurring basis (in thousands):

 

		Comtrafo Acquisition Contingent Consideration
Balance at March 31, 2025		$	—
Issuance of contingent consideration			34,815
Change in fair value			4,171
FX Impact			543
Balance at March 31, 2026		$	39,529