IMPAIRMENT OF GOODWILL AND LONG-LIVED ASSETS

12 Months Ended

Jun. 30, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

IMPAIRMENT OF GOODWILL AND LONG-LIVED ASSETS

NOTE 5. IMPAIRMENT OF GOODWILL AND LONG-LIVED ASSETS

PulpoAR, LLC (“Pulpo”)

The assets of Pulpo were acquired by the Company in May 2022. Pulpo has not and is not expected to meet any future revenue performance milestones as defined in the asset acquisition agreement. In addition, Pulpo has generated negative cash flows and is expected to continue doing so for the foreseeable future, and its business has become less strategically aligned with the Company’s current focus. As a result, a decision was made by the Company to divest the operations of its wholly owned subsidiary Pulpo.

Accordingly, the fair value of intangible assets, including goodwill, originally recorded at the time of the purchase, were determined to be to be zero. The net assets of $0.90 million (consisting of intangible assets - technology with net book value of $0.52 million and goodwill of $0.38 million) were written-off and were included in goodwill impairment and intangible asset impairment on the consolidated statement of operations for the year ended June 30, 2024.

On December 1, 2023 the Company executed an asset purchase agreement whereby the Pulpo assets, as defined, were transferred to a new independent entity, PulpoAR, Inc., majority owned by the original sellers of Pulpo, in return for a 10% interest in PulpoAR, Inc. and a $1.0 million senior secured note (“Note”). The Company recorded a non cash $1.0 million gain on divestiture, which is included in general and administrative expenses on the consolidated statement of operations.

The Note is due November 30, 2026 and accrues interest at 1% per annum payable at maturity. Early repayment, if any, of the Note is due in the form of royalties on PulpoAR, Inc.’s revenue or if the new entity raises capital, as defined. Glimpse has no board members nor any operational involvement in the new entity. As of June 30, 2024, no revenue royalties and no capital raises have occurred, and no associated Note paydown had been made.

THE GLIMPSE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024 AND 2023

The Company has fully reserved against the Note and accrued interest as collectability is considered remote and accounts for this investment at cost ($0) because the Company does not control or have significant influence over the investment. The Company recorded a $1.0 million loan loss reserve against the Note included in general and administrative expenses on the consolidated statement of operations. This fully offsets the gain on divestiture detailed above.

For the years ended June 30, 2024 and 2023, Pulpo had revenue of $0.07 million and $0.49 million, respectively, and net losses of $0.42 million and $0.87 million, respectively (exclusive of the goodwill and intangible asset impairment write-off in 2024), reported in the consolidated statements of operations.

The divestiture did not have a material impact on the Company’s operations or financial results.

BLI

As part of the BLI acquisition in August 2022, $3.31 million of the fair value purchase price was allocated to intangible assets – customer relationships. This allocation was based on BLI customers as of the acquisition date. At that time, the majority of BLI’s existing customer base had engaged BLI to produce marketing focused product and was concentrated in one significant customer. During the year ended June 30, 2024, BLI commenced on a strategic shift of businesses focus to provide immersive technology solutions software and services that are primarily driven by Spatial Computing, Cloud and Artificial Intelligence aimed towards a different customer base than those existing at the acquisition date. In addition, the one significant customer at acquisition date has been a marginal revenue generator over the second half of fiscal 2024 and is not anticipated to represent material revenue going forward.

Accordingly, at June 30, 2024, it was determined that the BLI intangible assets – customer relationships was fully impaired. This resulted in an intangible asset impairment non-cash expense of approximately $2.04 million on the consolidated statement of operations for the year ended June 30, 2024, representing the unamortized portion of this intangible asset.

S5D

As part of the Company’s annual review of goodwill impairment, it was determined that unfavorable trends in the S5D business indicated goodwill and long-lived assets of this subsidiary were impaired as of June 30, 2023.

The Company purchased S5D in February 2022 for the initial fair value consideration of $15.47 million, of which $12.61 million was attributed to goodwill and $2.82 million was attributed to intangible assets – customer relationships. Actual revenue and financial results since acquisition have significantly underperformed the expectations that were employed to determine fair value at acquisition. Cash flow of the S5D business was negative for the year ended June 30, 2023. This negative cash flow was the result of significant declines or loss in revenue from key customers compared to previous years and occurred notwithstanding cost-cutting efforts to mitigate the negative results. Declining revenue trends indicate the S5D business may not be able to generate positive cash flow for the foreseeable future. Continued weak new order bookings have continued through the issue date of these consolidated financial statements.

Based on the expectations that the S5D business may not be able to produce positive cash flow for the foreseeable future and there is no expected market for selling the S5D business, it was determined that S5D’s long-lived assets and goodwill were fully impaired as of June 30, 2023. This determination, based on undiscounted cash flow projections, resulted in an intangible asset impairment expense of $14.87 million on the consolidated statement of operations for the year ended June 30, 2023, comprised of:

Goodwill	$	12,605,723
Intangible asset - customer relationships		2,021,000
(net of accumulated amortization)
Operating lease - right-of-use asset		209,901
(net of accumulated amortization)
Fixed assets (net of accumulated depreciation)		36,037
Total S5D intangible asset impairment expense	$	14,872,661

THE GLIMPSE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024 AND 2023

The S5D business continues to operate. For the years ended June 30, 2024 and 2023, S5D had revenue was $1.78 million and $2.73 million, respectively and net losses of $0.31 million and $1.26 million, respectively (exclusive of the intangible asset write off and change in fair value of contingent consideration).

AUGGD

In March 2023, primarily due to a lack of market traction, a decision was made by the Company to cease the operations of its wholly owned subsidiary MotionZone, LLC (dba “AUGGD”) and divest any related assets and potential liabilities. The assets of AUGGD were originally acquired by the Company in August 2021 for a fair value of $0.75 million. Based on future business projections, the assets of AUGGD were not expected to generate any measurable revenue and were deemed worthless with no future benefit. On April 1, 2023 the Company executed an amendment to the asset purchase agreement for the purchase of AUGGD whereby the assets were transferred to a new independent entity, majority owned by the original sellers of AUGGD, in return for a 19.99% interest in said new entity. Glimpse has no board members nor any operational involvement in the new entity.

The Company accounts for this investment at cost ($0) because the Company does not control or have significant influence over the investment. If the new entity achieves certain revenue goals through December 31, 2024, as defined, the majority owners will receive payments not to exceed $0.65 million in the form of Company common stock. The Company considers this occurrence as remote, and no provision is made for it.

Accordingly, the net book value of intangible assets, including goodwill, originally recorded at the time of purchase of AUGGD, were written off during the year ended June 30, 2023. The $0.48 million write off (consisting of customer relationships and technology with net book values of $0.11 million and $0.12 million, respectively, and goodwill of $0.25 million) is recorded as intangible asset impairment on the consolidated statement of operations for the year ended June 30, 2023.

For the year ended June 30, 2023 (which is the cease of operations of AUGGD), AUGGD had revenue was $0.01 million and net loss of $0.33 million (exclusive of the intangible asset impairment write off and change in fair value of contingent consideration), reported in the consolidated statements of operations.