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ACQUISITION AND TECHNOLGY PURCHASE
 6 Months Ended
Dec. 31, 2022
Business Combination and Asset Acquisition [Abstract]  
ACQUISITION AND TECHNOLGY PURCHASE

NOTE 4. ACQUISITION AND TECHNOLGY PURCHASE

 

Acquisition (“BLI”)

 

On May 25, 2022, Glimpse entered into an Agreement and Plan of Merger (the “Merger Agreement”), with BLI and each of the equity holders of BLI named therein (collectively, the “Members”). BLI is an immersive technology company that provides VR and AR based training scenarios and simulations for commercial and government customers. The acquisition significantly expands the Company’s operating and financial scale, introduces new tier 1 customers specifically in the communication, entertainment and government segments, and bolsters the executive management team.

 

In August 2022, BLI became a wholly-owned subsidiary of Glimpse.

 

The aggregate consideration to the Members per the Agreement consisted of: (a) $568,046 cash paid (net of working capital adjustments, as defined, of $505,787) at August 1, 2022 closing (the “Closing”); (b) $1,926,167 of cash paid at the Closing to extinguish BLI’s outstanding debt and pay down other obligations; (c) 714,286 shares of the Company’s common stock fair valued at the Closing; and (d) future purchase price considerations payable to the Members, up to a residual of $24,500,000. The $24,500,000 is based and payable on BLI’s achievement of certain revenue growth milestones at points in time and cumulatively during the three years post-Closing Date, the payment of which shall be made up to $12,000,000 in cash and the remainder in common shares of the Company, priced at the dates of the future potential share issuance subject to a common stock price floor of $7.00 per share.

 

The fair value allocation for the purchase price consideration paid at Closing (including subsequent post-closing adjustment) was recorded as follows:

 

      
Purchase price consideration:     
Cash paid to members at Closing  $2,494,213 
Post-closing working capital adjustment   (185,501)
Company common stock fair value at Closing   2,846,144 
Fair value of contingent consideration to be achieved   6,139,000 
Total purchase price  $11,293,856 
      
Fair value allocation of purchase price:     
Cash and cash equivalents  $15,560 
Accounts receivable   253,041 
Deferred costs/contract assets   552,625 
Other assets   90,000 
Equipment, net   55,580 
Accounts payable and accrued expenses   (848,079)
Deferred revenue/contract liabilities   (2,037,070)
Intangible assets - customer relationships   3,310,000 
Intangible assets - technology   880,000 
Goodwill   9,022,199 
Total fair value allocation of purchase price  $11,293,856 

 

 

THE GLIMPSE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

DECEMBER 31, 2022 AND 2021

 

The Company’s fair value estimate of the contingent consideration for the BLI acquisition was determined using a Monte Carlo simulation and other methods which account for the probabilities of various outcomes. The Company’s fair value estimate related to the identified intangible asset of customer relationships was determined using the Multi-Period Excess Earnings Method. This valuation method requires management to project revenues, customer attrition and cash flows for the reporting unit over a multiyear period, as well as determine the weighted average cost of capital to be used as a discount rate. The Company’s fair value estimate related to the identified intangible asset of technology was determined using the Relief from Royalty Method. This valuation method requires management to estimate the royalty rate based on market data for royalty arrangements involving similar technology, the obsolesce rate, and the weighted average cost of capital to be used as a discount rate.

 

The goodwill recognized in connection with the acquisition is primarily attributable to new markets access and will be deductible for tax purposes.

 

In accordance with GAAP, the fair value of the contingent consideration was remeasured at December 31, 2022, based on market conditions as of that date. The remeasurement resulted in a fair value amount at December 31, 2022 of $4.56 million, a decrease of approximately $1.58 million since Closing. The decrease in fair value of the contingent consideration is driven by revisions to BLI’s revenue projections and a decrease in the Company’s common stock price between the measurement dates. This decrease is recorded as a gain in operating expenses on the consolidated statement of operations (see Note 6).

 

Unaudited Pro Forma Results

 

The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and BLI, as if the companies were combined for the six months ended December 31, 2022. The unaudited pro forma financial information includes the business combination accounting effects resulting from this acquisition, including adjustments to reflect recognition of intangible asset amortization. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had taken place at July 1, 2022.

 

The approximate unaudited pro forma financial information if BLI was included since July 1, 2022 would be:

 

   For the Six Months Ended 
   December 31, 2022 
     
Revenue  $6,904,000 
Net Loss  $(4,225,000)

 

The pro forma net loss was adjusted to exclude approximately $0.27 million of acquisition-related costs incurred in 2022. The 2022 pro forma net loss includes a gain of approximately $1.58 million for contingent consideration fair value adjustments.

 

Costs related to the acquisition, which include legal, accounting and valuation fees, in the amount of approximately $0.27 million have been charged directly to operations and are included in general and administrative expenses on the consolidated statement of operations for the six months ended December 31, 2022.

 

 

THE GLIMPSE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

DECEMBER 31, 2022 AND 2021

 

The Company recognized approximately $2.55 million in revenue and $0.50 million (inclusive of contingent consideration fair value adjustment gain of $1.58 million) of net income related to BLI since the acquisition Closing date of August 1, 2022 through December 31, 2022 in the consolidated statement of operations.

 

The BLI acquisition above was considered a business combination in accordance with GAAP.

 

Technology Purchase

 

In November 2022, the Company entered into an assignment agreement with inciteVR (“IVR”), whereby the Company purchased the entire right, title and interest to certain VR/AR technology, as defined.

 

The Company issued 71,430 shares of the Company’s common stock valued at approximately $325,000 in full payment of the assignment, with no further consideration obligations thereto. The $325,000 was recorded as intangible assets - technology on the Company’s consolidated balance sheet as of December 31, 2022.

 

Certain IVR owners became employees of Glimpse after the assignment.