| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of presentation The
unaudited condensed 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 condensed 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 September 30, 2024, the results of operations for the three months ended September 30, 2024 and 2023, and cash flows
for the three months ended September 30, 2024 and 2023. The financial data and other information disclosed in these notes to the
interim condensed financial statements related to these periods are unaudited. The results for the three months ended September 30,
2024 are not necessarily indicative of the results to be expected for the entire year ending June 30, 2025 or for any subsequent
periods. The condensed consolidated balance sheet at June 30, 2024 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 condensed consolidated financial
statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended
June 30, 2024. Principles
of Consolidation The
accompanying condensed 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 condensed 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 condensed consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those estimates. THE
GLIMPSE GROUP, INC. NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The
principal estimates relate to the valuation of allowance for doubtful accounts, stock options, warrants, revenue recognition, allocation
of the purchase price of assets relating to business combinations, calculation of contingent consideration for acquisitions, fair value
of intangible assets and goodwill impairment. Cash
and Cash Equivalents Cash
and equivalents represent cash and short-term, highly liquid investments, that are both readily convertible to known amounts of cash
and so near their maturity they present insignificant risk of changes in value because of changes in interest rates, with maturities
three months or less at the date of purchase. Accounts
Receivable Accounts
receivable consists primarily of amounts due from customers under normal trade terms. We recognize accounts receivable at the amount
we expect to collect from our customers. We provide an allowance for credit losses to reflect the estimated amount of accounts
receivable that may not be collectible. We determine the allowance for credit losses through a combination of specific
identification of troubled accounts, historical loss experience, industry trends, current market conditions, and customer
creditworthiness. The allowance for credit losses is adjusted periodically to reflect changes in these factors. As of September 30
and June 30, 2024 no allowance for doubtful accounts was recorded as all amounts were considered collectible. Customer
Concentration and Credit Risk Three
customers accounted for approximately 65 28 19 17 49 21 16 12 Two
customers accounted for approximately 57 29 28 50 33 17 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. Acquisition 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 determining fair values of assets acquired and liabilities assumed in a business combination. THE
GLIMPSE GROUP, INC. NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Intangible
assets (other than Goodwill) Intangible
assets include developed technology purchased. Intangible assets are stated at allocated cost less accumulated amortization and less
impairments. 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. Impairment
of Long-Lived Assets The
Company reviews long-lived assets to be held and used, other than goodwill, whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. If an evaluation of recoverability is required, the estimated undiscounted future cashflows
directly associated with the asset are compared with the asset’s carrying amount. If the estimated future cash flows from the use
of the asset are less than the carrying value, an impairment charge would be recorded to write down the asset to its estimated fair value. 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 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
GLIMPSE GROUP, INC. NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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 condensed
consolidated balance sheets as of September 30 and June 30, 2024. Contingent consideration has been recorded at its fair values
using unobservable inputs and have included, at the time of acquisition, 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, at times, the assistance of a third-party valuation specialist. The
Company’s other financial instruments consist primarily of accounts receivable, accounts payable, and other liabilities, and approximate
fair value due to the short-term nature of these instruments. Revenue
Recognition Nature
of Revenues The
Company reports its revenues in two categories:
● Software
Services: VR, AR and Spatial Computing projects, solutions and consulting services.
● Software
License and Software-as-a-Service (“SaaS”): VR, AR or Spatial Computing 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 fulfils 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 and deferred costs, respectively, in the
accompanying condensed consolidated balance sheets. Contract assets include 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. THE
GLIMPSE GROUP, INC. NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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. Disaggregation
of Revenue The
Company generated revenue for the three months ended September 30, 2024 and 2023 by delivering: (i) Software Services, consisting primarily
of VR/AR/Spatial Computing software projects, solutions and consulting services, and (ii) Software Licenses & SaaS, consisting primarily
of VR, AR and Spatial Computing 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 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 Licenses is recognized at the point of time in which the Company delivers the software and customer accepts delivery. Software
Licenses often include third party components that are a fully integrated part of the Software License stack and are therefore considered
as one deliverable and performance obligation. 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 years ended June 30, 2024 and 2023 was as follows: SCHEDULE
OF TIMING REVENUE RECOGNITION
2024 2023
For the Three Months Ended
September 30,
2024 2023
Products and services transferred at a point in time $ 2,183,830 $ 2,475,603
Products and services transferred/recognized over time 254,539 629,277
Total Revenue $ 2,438,369 $ 3,104,880 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. THE
GLIMPSE GROUP, INC. NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For
contracts recognized over time, contract liabilities include billings invoiced for software projects for which the contract’s performance
obligations are not complete. 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 September 30, 2024 and 2023,
the Company had approximately $ 5.56 1.07 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 based upon historical volatility
for a rolling previous year’s trading days of the Company’s common stock. 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. THE
GLIMPSE GROUP, INC. NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Foreign
Currency Assets
and liabilities recorded in foreign currency are translated at the exchange rate on the balance sheet date. Revenue and expenses are
translated at average rates of exchange prevailing during the year. Translation adjustments resulting from this process, which are deminimis,
are recorded in general and administrative expenses on the consolidated statement of operations. Income
Taxes The
Company records income taxes using the asset and liability method. Deferred income tax assets and liabilities are recognized for the
future tax effects attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities
and their respective income tax bases, and operating loss and tax credit carryforwards. The Company establishes a valuation allowance
if it is more likely than not that the deferred tax assets will not be recovered based on an evaluation of objective verifiable evidence.
For tax positions that are more likely than not of being sustained upon audit, the Company recognizes the largest amount of the benefit
that is greater than 50% likely of being realized. For tax positions that are not more likely than not of being sustained upon audit,
the Company does not recognize any portion of the benefit. The
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740, Income
Taxes The
Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income
tax expense. There were no amounts accrued for penalties or interest for the three months ended September 30, 2024 and 2023. Management
is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position. 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, warrants and convertible debt. Recent
Accounting Pronouncements In
December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments
that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and
income taxes paid by jurisdiction. The amendments are effective for the Company’s annual periods beginning July 1, 2025. The Company
is currently evaluating the ASU to determine its impact on the Company’s disclosures. THE
GLIMPSE GROUP, INC. NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
