NOTE 6. FINANCIAL INSTRUMENTS

Cash and Cash Equivalents

The Company’s money market funds are categorized as Level 1 within the fair value hierarchy. As of December 31 and June 30, 2025, the Company’s cash and cash equivalents were as follows:

SCHEDULE OF CASH AND CASH EQUIVALENTS AND INVESTMENTS 

Contingent Consideration

Contingent consideration was valued at the time of acquisition using unobservable inputs and included using a Monte Carlo simulation model, which model incorporated revenue volatility, internal rate of return, and a risk-free rate. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management with the assistance, at times, of a third-party valuation specialist.

During the six months ended December 31, 2025 the Company finalized the contingent consideration related to the acquisition of Brightline Interactive, Inc. (“BLI”, formerly Brightline Interactive, LLC) which resulted in a final contingent consideration cash payout of $1.50 million in October 2025.

The change in fair value of contingent consideration for BLI for the six months ended December 31, 2025 was a non-cash expense of approximately $0.02 million included as change in fair value of acquisition contingent consideration in the condensed consolidated statement of operations. This reflects the change in the time value of money related to the present value of anticipated payment.

As of June 30, 2025, the Company’s contingent consideration liability balance was as follows:

Actual BLI revenue through June 30, 2025 resulted in additional gross consideration of $1.50 million over the remainder of the contingent consideration payout period ending on July 31, 2025, payable in cash. Actual BLI revenue through July 31, 2025 did not trigger additional consideration. Accordingly, contingent consideration remaining for the BLI acquisition as of June 30, 2025 is calculated at the present value of the remaining $1.50 million cash discounted at risk-free interest rates from the estimated payment date.

The change in fair value of contingent consideration for BLI for the three and six months ended December 31, 2024 was a non-cash expense of approximately $0.03 and $0.09 million, respectively, included as change in fair value of acquisition contingent consideration in the condensed consolidated statement of operations. This reflects the change in the time value of money related to the present value of anticipated payments.

The change in fair value of contingent consideration for XR Terra, LLC (“XRT”) for the six months ended December 31, 2024 was a non-cash gain of approximately $0.03 million included as change in fair value of acquisition contingent consideration in the condensed consolidated statement of operations. This reflects the reversal of the estimated final consideration payment related to the acquisition of XRT. The contingent consideration payout period ended September 2024.