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IMPAIRMENT OF GOODWILL AND LONG-LIVED ASSETS

12 Months Ended

Jun. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

IMPAIRMENT OF GOODWILL AND LONG-LIVED ASSETS

NOTE 5. IMPAIRMENT OF GOODWILL AND LONG-LIVED ASSETS

S5D

As part of the Company’s annual review of goodwill impairment, it was determined that recent 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, and to a greater extent in recent quarters, 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. The Company believed that this trend would reverse itself based on expected significant new revenue bookings, however new revenue did not materialize and are not expected to going forward. 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:

THE GLIMPSE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023 AND 2022

SCHEDULE OF IMPAIRMENT OF GOODWILL AND LONG-LIVED ASSETS 

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 S5D business will continue to operate. For the years ended June 30, 2023 and 2022, S5D had revenue was $2.73 million and $1.40 million, respectively and net losses of $1.26 million and $0.73 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 years ended June 30, 2023 (through the cease of operations of AUGGD) and 2022, AUGGD had revenue was $0.01 million and $0.29 million, respectively and net losses of $0.33 million and $0.22 million, respectively (exclusive of the intangible asset impairment write off and change in fair value of contingent consideration), reported in the consolidated statements of operations.

THE GLIMPSE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023 AND 2022

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- Definition

The entire disclosure for the details of the charge against earnings resulting from the aggregate write down of all assets from their carrying value to their fair value. Disclosure may also include a description of the impaired asset and facts and circumstances leading to the impairment, amount of the impairment loss and where the loss is located in the income statement, method(s) for determining fair value, and the segment in which the impaired asset is reported.

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