NOTE 8. FINANCIAL INSTRUMENTS

Cash and Cash Equivalents

The Company’s money market funds are categorized as Level 1 within the fair value hierarchy. As of June 30, 2026 and, 2025, the Company’s cash and cash equivalents were as follows:

SCHEDULE OF CASH AND CASH EQUIVALENTS 

Contingent Consideration

Contingent consideration was valued at the time of the BLI Sub 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.

There is no contingent consideration as of June 30, 2026.

In July 2025 the Company finalized the contingent consideration related to the acquisition of BLI Sub which resulted in a final contingent consideration cash payout of $1.50 million in October 2025. $0.75 million of this payment was made to the current chief executive officer (effective June 1, 2026) of the Company and his immediate family. See Note 14.

The change in fair value of contingent consideration for BLI Sub for the year ended June 30, 2026 was a non-cash expense of approximately $0.02 million included as change in fair value of acquisition contingent consideration in the 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:

SCHEDULE OF FAIR VALUE OF CONTINGENT CONSIDERATION  

Actual BLI Sub 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 Sub revenue through July 31, 2025 did not trigger additional consideration. Accordingly, contingent consideration remaining for the BLI Sub 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 Sub for the year ended June 30, 2025 was a non-cash expense of approximately $0.14 million included as change in fair value of acquisition contingent consideration in the 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”, ultimately part of Learning) for the year ended June 30, 2025 was a non-cash gain of approximately $0.03 million included in loss on discontinued operations in the 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.