Note 5. Fair Value Measurements

In October 2018, upon the acquisition of certain technology, referred to as HunchLab, from Azavea, Inc., the Company recognized a contingent consideration liability classified within Level III of the fair value hierarchy because some of the inputs used in its measurement were neither directly nor indirectly observable. In January 2020 and February 2021, based on the relevant revenues earned during the second and third year of the three-year contingent consideration period, the Company paid $0.3 million and $0.4 million respectively, to Azavea, Inc., to satisfy all its obligations under the contingent consideration arrangement.

In November 2020, upon the closing of the acquisition of Leeds, the Company recognized a contingent consideration liability of $0.2 million. The Leeds contingent consideration liability was valued using a Monte Carlo Simulation approach. The Company classified the Leeds contingent consideration liability within Level III of the fair value hierarchy. During the year ended December 31, 2021, the fair value of the contingent consideration was increased by $1.3 million based upon estimated 2022 revenue targets, representing an adjustment to the most likely outcome for the expected settlement of the liability. There have been no changes in the assumptions or fair value of the LEEDS contingent consideration liability during the year ended December 31, 2022.

In January 2022, upon the closing of the acquisition of Forensic Logic, the Company recognized a contingent consideration liability of $12.4 million. The Forensic Logic contingent consideration liability was valued using a Monte Carlo Simulation approach with asset and revenue volatility of 60.0% and 28.0%, respectively. The Company classified the Forensic Logic contingent consideration liability within Level III of the fair value hierarchy. During the year ended December 31, 2022, the fair value of the contingent consideration was decreased by $9.2 million, based upon revised estimated 2022 and 2023 revenue targets due to delays in certain expected contracts by a small number of significant potential customers, representing an adjustment to the most likely outcome for the expected settlement of the liability and using a Monte Carlo Simulation approach with asset and revenue volatility of 60.0% and 22.9%, respectively.

There were no transfers into or out of Level III during the year ended December 31, 2022 and 2021.