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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended
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Mar. 31, 2023
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the SEC. In the opinion of management, the unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of March 31, 2023, the results of operations for the three and nine months ended March 31, 2023 and 2022, and cash flows for the nine months ended March 31, 2023 and 2022. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three and nine months ended March 31, 2023 are not necessarily indicative of the results to be expected for the entire year ending June 30, 2023 or for any subsequent periods. The consolidated balance sheet at June 30, 2022 has been derived from the audited consolidated financial statements at that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended June 30, 2022. Principles of Consolidation The accompanying consolidated financial statements include the balances of Glimpse and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Accounting Estimates The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the accompanying consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The principal estimates relate to the valuation of allowance for doubtful accounts, stock options, warrants, revenue recognition, cost of goods sold, allocation of the purchase price of assets relating to business combinations and calculation of contingent consideration for acquisitions. Cash and Cash Equivalents, Restricted Cash Cash and cash equivalents consist of cash and deposits in bank checking accounts with immediate access and cash equivalents that represent highly liquid investments. Restricted cash represents escrowed cash related to the Sector 5 Digital, LLC (“S5D”) acquisition. The components of cash, cash equivalents and restricted cash on the consolidated statements of cash flows as of March 31, 2023 and 2022 are as follows: SCHEDULE OF COMPONENTS OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|  | As of March 31, |  |  | As of March 31, |
|  | 2023 |  |  | 2022 |
Cash and cash equivalents |  | $ | 6,048,001 |  |  | $ | 18,043,040 |
Restricted cash |  |  | 2,000,000 |  |  |  | 2,000,000 |
Total |  | $ | 8,048,001 |  |  | $ | 20,043,040 |
THE GLIMPSE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2023 AND 2022 Accounts Receivable Accounts receivable consists primarily of amounts due from customers under normal trade terms. Allowances for uncollectible accounts are provided for based upon a variety of factors, including historical amounts written-off, an evaluation of current economic conditions, and assessment of customer collectability. As of March 31, 2023 and June 30, 2022 no allowance for doubtful accounts was recorded as all amounts were considered collectible. Customer Concentration and Credit Risk Two customers accounted for approximately 32% (21% and 11%, respectively) of the Company’s total gross revenues during the three months ended March 31, 2023. One of the same customers and two different customers accounted for approximately 61% (32%, 16% and 13%, respectively) of the Company’s total gross revenues during the three months ended March 31, 2022. Two customers accounted for approximately 49% (28% and 21%, respectively) of the Company’s total gross revenues during the nine months ended March 31, 2023. One of the same customers and a different customer accounted for approximately 59% (42% and 17%, respectively) of the Company’s total gross revenues during the nine months ended March 31, 2022. Two customers accounted for approximately 26% (14% and 12%, respectively) of the Company’s accounts receivable at March 31, 2023. Two different customers accounted for approximately 59% (37% and 22%, respectively) of the Company’s accounts receivable at June 30, 2022. The Company maintains cash in accounts that, at times, may be in excess of the Federal Deposit Insurance Corporation limit. The Company has not experienced any losses on such accounts. Business Combinations The results of a business acquired in a business combination are included in the Company’s consolidated financial statements from the date of the acquisition. Purchase accounting results in assets and liabilities of an acquired business generally being recorded at their estimated fair values as of the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. The Company performs valuations of assets acquired and liabilities assumed and allocates the purchase price to its respective assets and liabilities. Determining the fair value of assets acquired and liabilities assumed may require management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenues, costs and cash flows. Estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is typically one year from the acquisition date, if new information is obtained about facts and circumstances that existed as of the acquisition date, changes in the estimated values of the net assets recorded may change the amount of the purchase price allocated to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statement of operations. At times, the Company engages the assistance of valuation specialists in concluding on fair value measurements in connection with determining fair values of assets acquired and liabilities assumed in a business combination. Further, during the year ended June 30, 2022, the Company early adopted ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer to account for the related revenue contracts, acquired in the business acquisition, in accordance with ASC Topic 606 Revenue from Contracts with a Customer as if the Company had originated the contracts. THE GLIMPSE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2023 AND 2022 Intangible assets (other than Goodwill) Intangibles represent the allocation of a portion of the acquisition’s purchase price (see Note 5). Intangibles are stated at allocated cost less accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives of the related assets. The Company reviews intangibles, being amortized, for impairment when current events indicate that the fair value may be less than the carrying value. Goodwill Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations accounted for under the acquisition method. Goodwill is not amortized but instead is tested at least annually for impairment, or more frequently when events or changes in circumstances indicate that goodwill might be impaired. Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy, which is based on three levels of inputs, the first two of which are considered observable and the last unobservable, that may be used to measure fair value, is as follows: ● Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities; ● Level 2 — inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or ● Level 3 — unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company classifies its cash equivalents and investments within Level 1 of the fair value hierarchy on the basis of valuations based on quoted prices for the specific securities in an active market. The Company’s contingent consideration is categorized as Level 3 within the fair value hierarchy. Contingent consideration is recorded within contingent consideration, current, and contingent consideration, non-current, in the Company’s consolidated balance sheets as of March 31, 2023 and June 30, 2022. Contingent consideration has been recorded at its fair values using unobservable inputs and have included using the Monte Carlo simulation option pricing framework, incorporating contractual terms and assumptions regarding financial forecasts, discount rates, and volatility of forecasted revenue. 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 of a third-party valuation specialist. The Company’s other financial instruments consist primarily of accounts receivable, accounts payable, accrued liabilities and other liabilities, and approximate fair value due to the short-term nature of these instruments. THE GLIMPSE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2023 AND 2022 Revenue Recognition Nature of Revenues The Company reports its revenues in two categories:
| ● | Software Services: Virtual and Augmented Reality projects, solutions and consulting services.
| ● | Software License and Software-as-a-Service (“SaaS”): Virtual and Augmented Reality software that is sold either as a license or as a SaaS subscription.
The Company applies the following steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| ● | identify the contract with a customer;
| ● | identify the performance obligations in the contract;
| ● | determine the transaction price;
| ● | allocate the transaction price to performance obligations in the contract;
| ● | recognize revenue as the performance obligation is satisfied;
| ● | determine that collection is reasonably assured.
Revenue is recognized when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer or service is performed and collection is reasonably assured. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A portion of the Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct. Other contracts can include various services and products which are at times capable of being distinct, and therefore may be accounted for as separate performance obligations. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or providing services. As such, revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales taxes and other taxes are excluded from revenues. For distinct performance obligations recognized at a point in time, any unrecognized portion of revenue and any corresponding unrecognized expenses are presented as deferred revenue/contract liability and deferred costs/contract asset, respectively, in the accompanying consolidated balance sheets. Deferred costs/contract assets include cash and equity based payroll costs, and may include payments to consultants and vendors. For distinct performance obligations recognized over time, the Company records a contract asset (costs in excess of billings) when revenue is recognized prior to invoicing, or a contract liability (billings in excess of costs) when revenue is recognized subsequent to invoicing. Significant Judgments The Company’s contracts with customers may include promises to transfer multiple products/services. Determining whether products/services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Further, judgment may be required to determine the standalone selling price for each distinct performance obligation. THE GLIMPSE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2023 AND 2022 Disaggregation of Revenue The Company generated revenue for the nine months ended March 31, 2023 and 2022 by delivering: (i) Software Services, consisting primarily of VR/AR software projects, solutions and consulting services, and (ii) Software Licenses & SaaS, consisting primarily of VR and AR software licenses or SaaS. The Company currently generates its revenues primarily from customers in the United States. Revenue for a significant portion of Software Services projects and solutions (projects whereby, the development of the project leads to an identifiable asset with an alternative use to the Company) is recognized at the point of time in which the customer obtains control of the project, customer accepts delivery and confirms completion of the project. Certain other Software Services revenues are custom project solutions (projects whereby, the development of the custom project leads to an identifiable asset with no alternative use to the Company, and, in which, the Company also has an enforceable right to payment under the contract) and are therefore recognized based on the percentage of completion using an input model with a master budget. The budget is reviewed periodically and percentage of completion adjusted accordingly. Revenue for Software Services consulting services and website maintenance is recognized when the Company performs the services, typically on a monthly retainer basis. Revenue for Software License is recognized at the point of time in which the Company delivers the software and customer accepts delivery. If there are significant contractually stated ongoing service obligations to be performed during the term of the Software License or SaaS contract, then revenues are recognized ratably over the term of the contract. Timing of Revenue The timing of revenue recognition for the three and nine months ended March 31, 2023 and 2022 was as follows: SCHEDULE OF TIMING REVENUE RECOGNITION
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | For the Three Months Ended |  |  | For the Nine Months Ended |
|  | March 31, |  |  | March 31, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Products and services transferred at a point in time |  | $ | 2,957,634 |  |  | $ | 994,650 |  |  | $ | 8,195,906 |  |  | $ | 3,585,399 |
Products and services transferred/recognized over time |  |  | 714,756 |  |  |  | 1,057,678 |  |  |  | 2,378,055 |  |  |  | 1,179,464 |
Total Revenue |  | $ | 3,672,390 |  |  | $ | 2,052,328 |  |  | $ | 10,573,961 |  |  | $ | 4,764,863 |
Remaining Performance Obligations Timing of revenue recognition may differ from the timing of invoicing to customers. The Company generally records a receivable/contract asset when revenue is recognized prior to invoicing, or deferred revenue/contract liability when revenue is recognized subsequent to invoicing. For certain Software Services project contracts the Company invoices customers after the project has been delivered and accepted by the customer. Software Service project contracts typically consist of designing and programming software for the customer. In most cases, there is only one distinct performance obligation, and revenue is recognized upon completion, delivery and customer acceptance. Contracts may include multiple distinct projects that can each be implemented and operated independently of subsequent projects in the contract. In such cases, the Company accounts for these projects as separate distinct performance obligations and recognizes revenue upon the completion of each project or obligation, its delivery and customer acceptance. For contracts recognized over time, contract liabilities include billings invoiced for software projects for which the contract’s performance obligations are not complete. THE GLIMPSE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2023 AND 2022 For certain other Software Services project contracts, the Company invoices customers for a substantial portion of the project upon entering into the contract due to their custom nature and revenue is recognized based upon percentage of completion. Revenue recognized subsequent to invoicing is recorded as a deferred revenue/contract liability (billings in excess of cost) and revenue recognized prior to invoicing is recorded as a deferred cost/contract asset (cost in excess of billings). For Software Services consulting or retainer contracts, the Company generally invoices customers monthly at the beginning of each month in advance for services to be performed in the following month. The sole performance obligation is satisfied when the services are performed. Software Services consulting or retainer contracts typically consist of ongoing support for a customer’s software or specified business practices. For Software License contracts, the Company generally invoices customers when the software has been delivered to and accepted by the customer, which is also when the performance obligation is satisfied. For SaaS contracts, the Company generally invoices customers in advance at the beginning of the service term. For multi-period Software License contracts, the Company generally invoices customers annually at the beginning of each annual coverage period. Software License contracts consist of providing clients with software designed by the Company. For Software License contracts, there are generally no ongoing support obligations unless specified in the contract (becoming a Software Service). Unfulfilled performance obligations represent amounts expected to be earned by the Company on executed contracts. As of March 31, 2023, the Company had approximately $1.62 million in unfulfilled performance obligations. Employee Stock-Based Compensation The Company recognizes stock-based compensation expense related to grants to employees or service providers based on grant date fair values of common stock or the stock options, which are amortized over the requisite period, as well as forfeitures as they occur. The Company values the options using the Black-Scholes Merton (“Black Scholes”) method utilizing various inputs such as expected term, expected volatility and the risk-free rate. The expected term reflects the application of the simplified method, which is the weighted average of the contractual term of the grant and the vesting period for each tranche. Expected volatility is derived from a weighted average of volatility inputs for the Company. The risk-free rate is based on the implied yield of U.S. Treasury notes as of the grant date with a remaining term approximately equal to the expected life of the award. Research and Development Costs Research and development expenses are expensed as incurred, and include payroll, employee benefits and stock-based compensation expense. Research and development expenses also include third-party development and programming costs. Given the emerging industry and uncertain market environment the Company operates in, research and development costs are not capitalized. Earnings Per Share Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential shares of common stock outstanding during the period using the treasury stock method. Dilutive potential common shares include the issuance of potential shares of common stock for outstanding stock options and warrants. THE GLIMPSE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2023 AND 2022 Reclassifications Certain accounts in the prior period financial statements have been reclassified for comparative purposes to conform with the presentation in the current period financial statements. Recently Adopted Accounting Pronouncements Leases Adoption of the New Lease Accounting Standard On July 1, 2022, the Company adopted ASU No. 2016-02, Leases (Topic 842), using the modified retrospective transition method applied at the adoption date of the standard. Results for reporting periods beginning after July 1, 2022 are presented under the new leasing standard, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting. The Company has elected to utilize the package of practical expedients at the time of adoption, which allows the Company to (1) not reassess whether any expired or existing contracts are or contain leases, (2) not reassess the lease classification of any expired or existing leases, and (3) not reassess initial direct costs for any existing leases. The Company also has elected to utilize the short-term lease recognition exemption and, for those leases that qualified, the Company did not recognize right-of-use (“ROU”) assets or lease liabilities. As a result of adoption, the Company recorded ROU assets related to office facility leases which are recognized on the consolidated balance sheet and the associated lease liabilities are recognized on the consolidated balance sheet. The present value of the Company’s remaining lease payments, which comprise the lease liabilities, was estimated using an estimated incremental borrowing rate as of the adoption date. The adoption resulted in no adjustment to July 1, 2022 accumulated deficit on the consolidated balance sheet. As of July 1, 2022, the Company recorded right-of-use assets of $0.79 million, lease liabilities, current portion of $0.34 million and lease liabilities, net of current portion of $0.45 million. With the purchase of Brightline Interactive, LLC (“BLI”), on August 1, 2022, the Company added right-of-use assets of $0.43 million, lease liabilities, current portion of $0.09 million and lease liabilities, net of current portion of $0.34 million. New Lease Accounting Policies The Company determines if an arrangement is a lease at inception and determines the classification of the lease, as either operating or finance, at commencement. For short-term leases with expected terms of less than one year, the Company does not recognize ROU assets or lease liabilities. The Company does not have any finance leases. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the rate implicit in the Company’s leases is not readily determinable, the Company uses an estimated incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The Company estimates the incremental borrowing rate to reflect the profile of secured borrowing over the expected term of the leases based on the information available at the later of the initial date of adoption or the lease commencement date. THE GLIMPSE GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2023 AND 2022 Recent Accounting Pronouncements Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the Company’s financial statements.

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