The Company’s money market funds and investments (short term, investment grade corporate bonds) are categorized as Level 1 within the fair value hierarchy. As of June 30, 2023 and 2022, the Company’s cash and cash equivalents and investments were as follows:

As of June 30, 2023 and 2022, the Company’s contingent consideration liabilities related to acquisitions are categorized as Level 3 within the fair value hierarchy. Contingent consideration was valued at the time of acquisitions, at June 30, 2023 and 2022, using unobservable inputs and have included using the Monte Carlo simulation model. This model incorporates revenue volatility, internal rate of return, and 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 of a third-party valuation specialist.

As of June 30, 2023, the Company’s contingent consideration liabilities current and non-current balances were as follows:

A summary of the quantitative significant inputs used to value S5D’s contingent consideration as of June 30, 2023 was: $3.56 per share market price of the Company’s common stock, revenue projections, revenue volatility of 66.6%, weighted average cost of capital discount rate of 15.7% and risk-free rate of 5.1%.

A summary of the quantitative significant inputs used to value BLI’s contingent consideration as of June 30, 2023 was: $3.56 per share market price of the Company’s common stock, revenue projections, revenue volatility of 75.6%, weighted average cost of capital discount rate of 16.4% and risk-free rate of 4.8%.

The change in fair value of contingent consideration for S5D and BLI for the year ended June 30, 2023 was a non-cash gain of approximately $0.17 million and $1.11 million, respectively, included as change in fair value of acquisition contingent consideration in the consolidated statements of operations. This was primarily driven by changes in the Company’s common stock price between the measurement dates and revisions to revenue projections.

The change in fair value of contingent consideration also reflects the first anniversary payout to the sellers of S5D based on the achievement of certain revenue thresholds as defined in the respective purchase agreement. This payout was made in March 2023 in the form of Company common stock with a fair value of $1.36 million at date of issuance (see Note 10). In addition, the S5D Membership Interest Sale agreement was amended in May 2023 to remove the thresholds for releasing $2.0 million of cash escrowed at closing (recorded as Restricted cash on the consolidated balance sheet at June 30, 2022) and was replaced with an immediate $1.0 million payment from the escrow account to the S5D sellers, along with an immediate issuance of Company common stock fair valued at $1.05 million at date of issuance (see Note 14); simultaneously, the S5D sellers released the remaining $1.0 million in escrow to the Company. These May 2023 payments to the S5D sellers were recorded as consideration paid. The range of potential additional contingent consideration through January 2025 related to S5D (see Notes 4 and 5) at June 30, 2023 is zero to $14.0 million in the form of Company common stock.

As of June 30, 2023, the Company’s contingent consideration liability related to XR Terra, LLC (“XRT”) is categorized as Level 3 within the fair value hierarchy as it is based on contractual amounts pursuant to the acquisition agreement, of which certain inputs are unobservable. The change in fair value of contingent consideration for XRT for the year ended June 30, 2023 was a non-cash expense of approximately $0.59 million, included as change in fair value of acquisition contingent consideration in the consolidated statements of operations. This reflects the actual and anticipated achievement of certain revenue thresholds as defined in the respective purchase agreement. These amounts were not included in the contingent consideration balance as of June 30, 2022 as the attainment of the revenue thresholds were originally considered remote. The range of potential additional contingent consideration through September 2024 related to XRT (see Note 4) at June 30, 2023 is zero to $1.0 million in the form of Company common stock. The Company considers this occurrence as remote, and no provision is made for it.

The range of potential additional contingent consideration through December 2024 related to the divestiture of AUGGD assets (see Note 4) at June 30, 2023 is zero to $0.65 million in the form of Company common stock. The Company considers this occurrence as remote, and no provision is made for it.

The range of potential additional contingent consideration through April 2025 related to the PulpoAR acquisition (see Note 4) at June 30, 2023 is zero to $13.0 million ($12.5 million in Company common stock and $0.5 million cash). The Company considers this occurrence as remote, and no provision is made for it.

As of June 30, 2022, the Company’s contingent consideration liabilities current and non-current balances were as follows:


	As of June 30, 2022
	Contingent Consideration at Purchase Date		Changes in Fair Value			Fair Value		Contingent Consideration
Level 3:
Contingent consideration, current - S5D	$	2,060,300	$	(662,700	)	$	1,397,600	$	1,397,600
Contingent consideration, current - AUGGD		-		568,571			568,571		568,571
Total contingent consideration, current	$	2,060,300	$	(94,129	)	$	1,966,171	$	1,966,171

Level 3:
Contingent consideration, non-current - S5D	$	7,108,900	$	(1,768,100	)	$	5,340,800	$	5,340,800

A summary of the quantitative significant inputs used to value S5D’s contingent consideration as of June 30, 2022 was: $3.98 per share market price of the Company’s common stock, revenue projections, revenue volatility of 60.1%, weighted average cost of capital discount rate of 15.1% and risk-free rate of 3.0%.

As of June 30, 2022, the Company’s contingent consideration liability related to MotionZone, LLC (“AUGGD”) is categorized as Level 3 within the fair value hierarchy as it is based on contractual amounts pursuant to the acquisition agreement, of which certain inputs are unobservable.