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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K/A
(Amendment
No. 1)
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): August 1, 2022
THE
GLIMPSE GROUP, INC.
(Exact
name of registrant as specified in charter)
| Nevada |
|
001-40556 |
|
81-2958271 |
| (State or other jurisdiction |
|
(Commission |
|
(IRS Employer |
| of incorporation) |
|
File Number) |
|
Identification No.) |
15
West 38th St., 9th Fl
New
York, NY 10018
(Address
of principal executive offices) (Zip Code)
(917)-292-2685
(Registrant’s
telephone number, including area code)
Not
Applicable
(Former
name or former address, if changed since last report)
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under
any of the following provisions (see General Instruction A.2. below):
| ☐ |
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| |
|
| ☐ |
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| |
|
| ☐ |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| |
|
| ☐ |
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities
registered pursuant to Section 12(b) of the Act:
| Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered |
| Common Stock |
|
VRAR |
|
The
Nasdaq Stock Market LLC
(The
Nasdaq Capital Market) |
Indicate
by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging
growth company ☒
If
an emerging growth company, indicate by check mart if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
EXPLANATORY
NOTE
On
August 2, 2022, The Glimpse Group, Inc., a Nevada corporation (the “Company”), filed a Current Report on Form 8-K to report the completion of its acquisition of Brightline
Interactive, LLC, a Virginia limited liability company (“BLI”). This Current Report on Form 8-K/A is filed as an amendment
to the Current Report on Form 8-K filed by the Company on August 2, 2022, solely to include the financial information described in Item
9.01 below that was previously omitted in accordance with Item 9.01(a) and Item 9.01(b) of Form 8-K.
Item
9.01 Financial Statements and Exhibits
| (a) | Financial
Statements of business acquired. |
The
audited financial statements and accompanying notes of BLI as of and for the year ended
December 31, 2021 are filed herewith as Exhibit 99.1 and are incorporated by reference herein.
| (b) | Pro
forma financial information. |
The
unaudited pro forma condensed combined financial information of the Company for the
year ended June 30, 2022 are filed herewith as Exhibit 99.2 and incorporated by reference herein.
(d)
Exhibits
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date:
October 11, 2022
| THE GLIMPSE GROUP, INC. |
|
| |
|
|
| By: |
/s/ Lyron
Bentovim |
|
| |
Lyron Bentovim |
|
| |
Chief Executive Officer |
|
Exhibit
99.1
BRIGHTLINE
INTERACTIVE LLC
FINANCIAL
STATEMENTS
YEAR
ENDED
DECEMBER
31, 2021
BRIGHTLINE
INTERACTIVE LLC
CONTENTS
INDEPENDENT
AUDITOR’S REPORT
To
the Stockholders and Board of Directors
Brightline
Interactive LLC
Opinion
We
have audited the accompanying financial statements of Brightline Interactive LLC (a Virginia limited liability company) which comprise
the balance sheet as of December 31, 2021, and the related statements of operations, changes in members’ deficit and cash flows
for the year then ended, and the related notes to the financial statements.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Brightline
Interactive LLC as of December 31, 2021, and the results of its operations and its cash flows for the year then ended in accordance with
accounting principles generally accepted in the United States of America.
Basis
for Opinion
We
conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our
report. We are required to be independent of Brightline Interactive LLC and to meet our other ethical responsibilities in accordance
with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our audit opinion.
Responsibilities
of Management for the Financial Statements
Management
is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally
accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In
preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate,
that raise substantial doubt about Brightline Interactive LLC’s ability to continue as a going concern within one year after the
date that the financial statements are available to be issued.
Auditor’s
Responsibilities for the Audit of the Financial Statements
Our
objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level
of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted
auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or
in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In
performing an audit in accordance with generally accepted auditing standards, we:
| |
● |
Exercise
professional judgment and maintain professional skepticism throughout the audit. |
MGI
Worldwide is a network of independent audit, tax, accounting and consulting firms. MGI Worldwide
does not provide any services and its member firms are not an international partnership.
Each member firm is a separate entity and neither MGI Worldwide nor any member firm accepts
responsibility for the activities, work, opinions or services of any other member firm. For
more information visit www.mgiworld.com/legal
|
|
 |
| |
● |
Identify
and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform
audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. |
| |
|
|
| |
● |
Obtain
an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of Brightline Interactive LLC’s internal control. Accordingly,
no such opinion is expressed. |
| |
|
|
| |
● |
Evaluate
the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as
well as evaluate the overall presentation of the financial statements. |
| |
|
|
| |
● |
Conclude
whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Brightline
Interactive LLC’s ability to continue as a going concern for a reasonable period of time. |
We
are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit,
significant audit findings, and certain internal control related matters that we identified during the audit.
New
York, New York
July
27, 2022
BRIGHTLINE
INTERACTIVE LLC
Balance
Sheet
As
of December 31, 2021
| Assets | |
| | |
| | |
| | |
| Current
Assets | |
| | |
| Cash | |
$ | 100,860 | |
| Accounts
receivable | |
| 109,033 | |
| Prepaid
expenses and other current assets | |
| 16,524 | |
| | |
| | |
| Total
Current Assets | |
| 226,417 | |
| | |
| | |
| Property
and equipment, net | |
| 80,580 | |
| | |
| | |
| Other
Assets | |
| | |
| Security
deposits and other assets | |
| 10,000 | |
| | |
| | |
| Total
Assets | |
$ | 316,997 | |
| | |
| | |
| Liabilities
and Accumulated Deficit | |
| | |
| | |
| | |
| Current
Liabilities | |
| | |
| Accounts
payable and accrued expenses | |
$ | 424,379 | |
| Credit
card payable | |
| 52,719 | |
| Accrued
contract loss liability | |
| 33,611 | |
| Contract
liabilities, net | |
| 794,493 | |
| Due
to member | |
| 60,500 | |
| | |
| | |
| Total
Current Liabilities | |
| 1,365,702 | |
| | |
| | |
| Long-Term
Liabilities | |
| | |
| Loans
from members | |
| 1,573,770 | |
| Deferred
rent liability | |
| 45,015 | |
| | |
| | |
| Total
Long-Term Liabilities | |
| 1,618,785 | |
| | |
| | |
| Total
Liabilities | |
| 2,984,487 | |
| | |
| | |
| Commitments
and Contingencies | |
| | |
| | |
| | |
| Accumulated
Deficit | |
| (2,667,490 | ) |
| | |
| | |
| Total
Liabilities and Accumulated Deficit | |
$ | 316,997 | |
See
accompanying notes to financial statements.
BRIGHTLINE
INTERACTIVE LLC
Statement
of Operations
Year
Ended December 31, 2021
| Revenues,
net | |
$ | 5,024,011 | |
| Costs
of services | |
| (1,767,333 | ) |
| Gross
Profit | |
| 3,256,678 | |
| | |
| | |
| Operating
Expenses | |
| | |
| General
and administrative expenses | |
| 1,396,164 | |
| Sales
and marketing expense | |
| 927,527 | |
| Research
and development | |
| 593,770 | |
| Total
Operating Expenses | |
| 2,917,461 | |
| | |
| | |
| Income
from Operations Before Other Income (Expense) | |
| 339,217 | |
| | |
| | |
| Other
Income (Expense) | |
| | |
| Other
income – forgiveness of Paycheck Protection Program loan | |
| 234,930 | |
| Interest
expense and finance charges | |
| (103,485 | ) |
| Total
Other Income, net | |
| 131,445 | |
| | |
| | |
| Net
Income | |
$ | 470,662 | |
See
accompanying notes to financial statements.
BRIGHTLINE
INTERACTIVE LLC
Statement
of Changes in Members’ Deficit
Year
Ended December 31, 2021
| Members’
deficit - beginning | |
$ | (3,138,152 | ) |
| | |
| | |
| Net
income | |
| 470,662 | |
| | |
| | |
| Members’
deficit - ending | |
$ | (2,667,490 | ) |
See
accompanying notes to financial statements.
BRIGHTLINE
INTERACTIVE LLC
Statement
of Cash Flows
Year
Ended December 31, 2021
| Cash
Flows from Operating Activities | |
| | |
| Net
income | |
$ | 470,662 | |
| | |
| | |
| Adjustments
to Reconcile Net Income to Net
Cash Used in Operating Activities | |
| | |
| Depreciation | |
| 16,954 | |
| Forgiveness
of Paycheck Protection Program loan | |
| (234,930 | ) |
| Deferred
rent | |
| 45,015 | |
| Bad
debt expense | |
| 75,903 | |
| | |
| | |
| Changes
in Operating Assets and Liabilities | |
| | |
| Accounts
receivable | |
| 165,053 | |
| Prepaid
expenses and other current assets | |
| (5,752 | ) |
| Accounts
payable and accrued expenses | |
| (79,509 | ) |
| Credit
cards payable | |
| 40,155 | |
| Contract
liabilities, net | |
| (2,086,082 | ) |
| Net
Cash Used in Operating Activities | |
| (1,592,531 | ) |
| | |
| | |
| Cash
Flows from Investing Activities | |
| | |
| Security
deposits refunded | |
| 4,754 | |
| Acquisition
of property and equipment | |
| (26,246 | ) |
| Net
Cash Used in Investing Activities | |
| (21,492 | ) |
| | |
| | |
| Cash
Flows from Financing Activities | |
| | |
| Repayment
of member advances | |
| (7,828 | ) |
| Repayment
of member loans | |
| (72,193 | ) |
| Net
Cash Used in Financing Activities | |
| (80,021 | ) |
| | |
| | |
| Net
Decrease in Cash | |
| (1,694,044 | ) |
| | |
| | |
| Cash
– beginning | |
| 1,794,904 | |
| | |
| | |
| Cash
– ending | |
$ | 100,860 | |
| | |
| | |
| Supplemental
Disclosure of Cash Flows Information: | |
| | |
| Cash
Paid During the Year For: | |
| | |
| | |
| | |
| Interest | |
$ | 100,000 | |
See
accompanying notes to financial statements.
BRIGHTLINE INTERACTIVE LLC
Notes to Financial Statements
Year Ended December 31, 2021
| 1. |
Description
of Business |
|
Brightline
Interactive LLC (“Brightline” or the Company) designs, builds, and installs interactive and virtual reality experiences
at events, permanent display areas, and simulation environments. |
| |
|
|
| |
|
Profits,
losses and distributions are allocated to members as provided for in the member agreement. |
| |
|
|
| |
|
As
a limited liability company, the members are not liable for the debts, obligations, or liabilities of Brightline, whether arising
in contract, tort, or otherwise, unless the member has signed a specific guarantee. |
| |
|
|
|
|
| 2. |
Summary
of Significant Accounting Policies |
| |
|
| |
Use
of Accounting
Estimates |
|
|
| |
|
The
preparation of the accompanying financial statements in conformity with accounting principles generally accepted in the United States
of America (U.S. 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 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, and cost of services. |
| |
Revenue
Recognition |
|
|
| |
|
|
|
| |
Nature
of Revenues |
|
The Company reports its revenues in two categories: |
| |
|
|
|
| |
|
|
● |
Software
Services: Virtual and Augmented Reality projects, solutions and consulting services. |
| |
|
|
● |
Other
revenues (including equipment sales, consulting, hosting, support, maintenance and services) |
| |
|
|
|
|
| |
|
|
The
Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606,
Revenue from Contracts with Customers, (“ASC 606”). |
| |
|
|
|
|
| |
|
|
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 |
BRIGHTLINE INTERACTIVE LLC
Notes to Financial Statements
Year Ended December 31, 2021
| 2. |
Summary
of Significant Accounting Policies (Continued) |
| |
|
| |
Revenue
Recognition (Continued) |
| |
|
| |
Nature
of Revenues |
| |
(Continued) |
|
Revenue
is recognized when the Company satisfies its performance obligation and collection is reasonably assured. A performance obligation
is a promise in a contract to transfer a distinct product or service to a customer. Most 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. |
| |
|
|
|
| |
|
|
Any
unrecognized portion of revenue and any corresponding unrecognized expenses are presented as a contract liability (deferred revenues)
and a contract asset (deferred costs), respectively, in the accompanying balance sheet. Contract assets include payroll costs, and
may include payments to vendors. |
| |
|
|
|
| |
|
|
Total
contract assets and contract liabilities at December 31, 2021 is as follows: |
| Contract
assets | |
$ | 1,223,071 | |
| Contract
liabilities | |
| (2,017,564 | ) |
| Contract
liabilities, net | |
$ | (794,493 | ) |
| |
|
|
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. |
| |
|
|
|
| |
|
|
The
Sale of Customized Projects – Revenue for custom project solutions (projects whereby, the development of the custom project
leads to an identifiable asset but does have an alternative use to the Company), are recognized when the project is delivered to
the customer. |
| |
|
|
|
| |
|
|
For
consulting, the Company generally invoices customers monthly as the services are performed, which is when the performance obligation
is satisfied. |
| |
|
|
|
| |
|
|
Other
revenue such as support and hosting services are recognized over the term of the contract, which is when the performance obligation
is satisfied. |
| |
|
|
|
| |
Cost
of Revenue |
|
Cost
of revenue includes: direct labor, outside direct labor, and other costs directly incurred to support revenue generation. |
| |
|
|
|
| |
Unfulfilled
Performance |
| |
Obligations |
|
Unfulfilled
performance obligations represent amounts expected to be earned on executed contracts. As of December 31, 2021, the Company had approximately
$2,296,000 in unfulfilled performance obligations. The Company expects to satisfy approximately 100% of the performance obligations
within one year. |
BRIGHTLINE INTERACTIVE LLC
Notes to Financial Statements
Year Ended December 31, 2021
| 2. |
Summary
of Significant Accounting Policies (Continued) |
| |
|
| |
Revenue
Recognition (Continued) |
| |
|
| |
Significant
Judgements |
|
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 year ended December 31, 2021 principally by delivering customized project solutions, consisting
primarily of VR/AR projects, consulting services, support and hosting. |
| |
|
|
|
| |
|
|
The
following is a disaggregation of the Company’s revenue by major source for the year ended December 31, 2021: |
| Customized
project solutions | |
$ | 4,893,319 | |
| Other
revenue | |
| 130,692 | |
| | |
| | |
| Total
Revenue | |
$ | 5,024,011 | |
| |
|
|
Substantially
all customized project solution revenue is recognized at a point in time. All other revenue is substantially recognized over time. |
| |
|
|
|
| |
Accounts
Receivable |
|
Accounts
receivable consists primarily of amounts due from customers under normal trade terms (30-60 days). 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 December 31, 2021 no allowance for doubtful accounts was recorded as all amounts
were considered collectible. |
| |
|
|
|
| |
Customer
Concentration
and
Credit Risk |
|
|
| |
|
Two
customers accounted for approximately 82% of the Company’s total gross revenues during the year ended December 31, 2021, of
which one customer accounted for 71% of total gross revenues. Further, two different customers represent 84% of the Company’s
accounts receivable at December 31, 2021, of which one customer accounted for 60% of accounts receivable. |
| |
|
|
|
| |
|
|
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. |
BRIGHTLINE INTERACTIVE LLC
Notes to Financial Statements
Year Ended December 31, 2021
| 2. |
Summary
of Significant Accounting Policies (Continued) |
| |
|
|
|
|
| |
Property
and Equipment |
|
Property
and equipment are carried at cost. Depreciation is being provided by the straight-line method over the estimated useful lives of
the assets, generally 3 to 7 years (See Note 3). Maintenance and repairs are charged to expense as incurred, while major renewals
and betterments are capitalized. |
| |
|
|
|
| |
|
|
When
assets are retired or otherwise disposed of, the cost of assets disposed of and the related accumulated depreciation/amortization
is removed from the accounts and any resulting gain or loss is included in the statement of operations in the period of disposal. |
| |
|
|
|
| |
|
|
The
Company assesses the recoverability of property and equipment whenever events or changes in circumstances indicate that their carrying
value may not be recoverable. There was no impairment of property or equipment for the year ended December 31, 2021. |
| |
|
|
|
| |
Research
and |
|
|
| |
Development
Costs |
|
Research
and development expenses are expensed as incurred, and include payroll, and employee benefits. 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. |
| |
|
|
|
| |
Deferred
rent |
|
The
Company recognizes rent expense for operating leases on a straight-line basis over the terms of the leases and, accordingly, the
difference between cash rent payments and the recognition of rent expense is recorded as a deferred rent liability. |
| |
|
|
|
| |
Income
Taxes |
|
As
a limited liability company, the Company has elected to be treated as an “S” Corporation for federal and Virginia income
tax purposes. The members of an S Corporation include their respective shares of the corporation’s income or loss in their
individual income tax returns. Accordingly, the Company pays no federal and Virginia income taxes on income earned and receives no
income tax benefits for losses sustained. |
| |
|
|
|
| |
|
|
FASB
ASC Topic 740, Income Taxes, or ASC 740, clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest
and penalties, accounting in interim periods, disclosure and transition. Based on the Company’s evaluation, there are no significant
uncertain tax positions requiring recognition in the Company’s financial statements. |
BRIGHTLINE INTERACTIVE LLC
Notes to Financial Statements
Year Ended December 31, 2021
| 2. |
Summary
of Significant Accounting Policies (Continued) |
| |
Income
Taxes
(Continued) |
|
|
| |
|
The
Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments
that would result in material changes to its financial position. |
| |
|
|
|
| |
|
|
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 year ended December 31, 2021. Management is currently
unaware of any issues under review that could result in significant payments, accruals or material deviations from its position. |
| |
|
|
|
| |
Recently
Issued Pronouncements |
|
|
| |
|
|
|
| |
Leases |
|
In
February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (ASC 842). The amendments under this pronouncement
change the way all leases with durations of one year or more are treated. Under this guidance, lessees are required to capitalize
virtually all leases on the balance sheet as a right-of-use asset and an associated financing lease liability or capital lease liability.
The right-of-use asset represents the lessee’s right to use, or control the use of, a specified asset for the specified lease
term. The lease liability represents the lessee’s obligation to make lease payments arising from the lease, measured on a discounted
basis. Based on certain characteristics, leases are classified as financing leases or operating leases. Financing lease liabilities,
those that contain provisions similar to capitalized leases, are amortized in the same manner as capital leases are amortized under
current accounting rules, as amortization expense and interest expense in the statement of operations. Operating lease liabilities
are amortized on a straight-line basis over the life of the lease as lease expense in the statement of operations. The Company will
adopt this standard on January 1, 2022 using the retrospective method. The adoption of the new standard is not expected to have a
material impact on the Company’s financial position, results of operations or cash flows. |
| |
|
|
|
| |
Financial
Instruments –
Credit
Losses |
|
|
| |
|
In
June 2016, the FASB issued a new standard to replace the incurred loss impairment methodology under current GAAP with a methodology
that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform
credit loss estimates (ASC 326). The Company will be required to use a forward-looking expected credit loss model for accounts receivable,
loans, and other financial instruments. Credit losses relating to available-for-sale debt securities, if any, will also be recorded
through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities The Company does
not expect to adopt this standard prior to January 1, 2023. The Company is currently evaluating the impact of this standard on its
financial statements. |
BRIGHTLINE INTERACTIVE LLC
Notes to Financial Statements
Year Ended December 31, 2021
| 2. |
Summary
of Significant Accounting Policies (Continued) |
| |
Subsequent
Events |
|
Subsequent
events were evaluated through July 27, 2022, the date on which these financial statements were available to be issued. Except for
the transactions disclosed in Note 5 and 7, there were no material subsequent events that required recognition or additional disclosure
in the financial statements. |
| |
|
|
|
| 3. |
Property
and Equipment |
|
Property
and equipment consist of: |
| As
of December 31, | |
2021 | |
| Computer
and office equipment | |
$ | 91,514 | |
| Furniture
and fixtures | |
| 45,761 | |
| | |
| 137,275 | |
| Less
accumulated depreciation | |
| (56,695 | ) |
| | |
$ | 80,580 | |
Depreciation
expense was $16,954 during the year ended December 31, 2021.
| 4. |
SBA
Paycheck Protection Program Loan |
|
In
April 2020, the Company received a Paycheck Protection Program loan (“PPP”) from the Small Business Administration (“SBA”)
in the amount of $234,930. The Company utilized the PPP loan proceeds in full towards payroll and rent in accordance with the SBA
guidelines. Pursuant to SBA guidelines, the Company’s PPP loan was fully forgiven in April 2021. |
| |
|
|
|
| 5. |
Related
Party |
|
|
| |
Transactions |
|
Due
to member, are advances from a member for short-term purposes, do not bear interest, and are expected to be repaid within one year. |
| |
|
|
|
| |
|
|
The
loans from members have no definitive due date and bear interest at the rate of 8% per annum. Interest expense amounted to approximately
$100,000 for the year ended December 31, 2021. $200,000 of the loans are personally guaranteed by another member and repayment of
$1,538,188 of the loans are guaranteed unconditionally by a pledge of the member’s interest of the guaranteeing member. The
members have committed not to request repayment of the loans until after January 1, 2023, unless there is a change in control, as
defined. Further, subsequent to year end two members advanced the Company $160,000 to meet operating obligations. The additional
advances are unsecured, noninterest bearing and will be repaid August 1, 2022. |
| |
|
|
|
| 6. |
Commitments
and Contingencies |
| |
|
|
|
| |
Leases
|
|
The
Company’s office facility is leased under an operating lease which expires in April 2026. The lease requires the Company to
pay a pro-rated share of common area maintenance, insurance and real estate taxes. |
BRIGHTLINE INTERACTIVE LLC
Notes to Financial Statements
Year Ended December 31, 2021
| 6. |
Commitments
and Contingencies (Continued) |
| |
|
|
|
| |
Leases
(Continued) |
|
The
future approximate aggregate minimum rental commitments under the non-cancelable operating lease as of December 31, 2021, are as
follows: |
| Years
Ending December 31, | |
| |
| 2022 | |
$ | 110,500 | |
| 2023 | |
| 135,300 | |
| 2024 | |
| 139,000 | |
| 2025 | |
| 142,900 | |
| 2026 | |
| 48,000 | |
| | |
| | |
| | |
$ | 575,700 | |
| |
|
|
Rent expense amounted to approximately $123,000 for the year ended December 31, 2021. |
| |
|
|
|
| |
Employee
Retirement |
|
|
| |
Plan |
|
The
Company maintains a defined contribution plan for all eligible full-time employees. Employees may make regular contributions of their
compensation each plan year through payroll deductions, subject to the plan and Internal Revenue Code 401(K) limitations. The Company
makes matching 401(K) contributions as per the plan agreement. |
| |
|
|
|
| |
|
|
The
Company is also able to make discretionary profit-sharing contributions. During 2021 the Company did not make any profit-sharing
contributions. |
| |
|
|
|
| |
|
|
Defined
contribution plan expense was approximately $51,000 for the year ended December 31, 2021. |
| |
|
|
|
| |
Contingency |
|
The
Company is in dispute with a former employee. The Company believes the dispute has no merit, and any resolution to the matter will
not have a material adverse impact on the Company’s financial position, results of operations, and cash flows. |
| |
|
|
|
| |
Liquidity |
|
As
shown in the accompanying financial statements, the Company’s current liabilities exceed its current assets by $1,139,285.
This factor creates an uncertainty about the Company’s ability to continue as a going concern as the Company may be unable
to fund current operations. As a result of certain members of the Company committing to fund operations, if necessary, in addition
to the potential merger (See Note 7), management believes the uncertainty is alleviated. |
BRIGHTLINE
INTERACTIVE LLC
Notes
to Financial Statements
Year
Ended December 31, 2021
| 6. |
Commitments
and Contingencies (Continued) |
| |
|
|
|
| |
COVID-19 |
|
The
Company’s business and operations have been adversely affected by the COVID-19 pandemic, as have the markets in which the Company’s
customers operate. The COVID-19 pandemic has caused and continues to cause significant business and financial market disruption worldwide
and there is significant uncertainty around the duration of this disruption and its ongoing effects on the Company’s business.
This has primarily manifested itself in prolonged sales cycles. |
| |
|
|
|
| |
|
|
The
Company has allowed its employees to work remotely to minimize the risk of the virus. While working remotely has proven to be effective
to this point, it may eventually inhibit the Company’s ability to operate its business effectively. |
| |
|
|
|
| |
|
|
The
Company continues to closely monitor the situation and the effects on its business and operations. The Company does not yet know
the full extent of potential impacts on its business and operations. Given the uncertainty, the Company cannot reasonably estimate
the impact on its future results of operations, cash flows or financial condition. |
| |
|
|
|
| 7. |
Subsequent
Events |
|
|
| |
|
|
|
| |
Acquisition
of the |
|
|
| |
Company |
|
On
May 25, 2022, the Company and The Glimpse Group, Inc. (“Glimpse”), a public company traded on NASDAQ, entered into an
Agreement and Plan of Merger (the “Merger”) for Glimpse to acquire the Company on August 1, 2022, or as soon as practicable
thereafter, as defined, subject to certain terms and conditions, also as defined. The Merger may be terminated subject to certain
terms and conditions, as defined. |
| |
|
|
|
| |
|
|
The
transaction’s total potential sales price is $32.5 million, with an initial payment of $8.0 million upon closing, plus adjustments,
as defined, consisting of $3.0 million in cash and $5.0 million of Glimpse’s common stock (calculated as defined). Future potential
purchase price considerations, up to $24.5 million, are based on the Company’s achievement of revenue growth milestones in
the three years post-closing, the payment of which shall be made up in cash and common shares of Glimpse, priced at the date of the
future potential share issuance. |
Exhibit
99.2
The
Glimpse Group, Inc.
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On
May 25, 2022, The Glimpse Group, Inc. (the “Company”) entered into an Agreement and Plan of Merger (“Merger Agreement”)
with Glimpse Merger Sub, LLC, a Nevada limited liability company and wholly-owned subsidiary of the Company (“Merger Sub”)
and Erik Muendel, the Bradley S. Nierenberg Trust, Bruce Gates, Joyce Gates, Barton Gates and Tyler Gates (each a “Seller”
and, collectively, the “Sellers”), Bruce Gates, solely in his capacity as representative of Sellers, and Brightline Interactive,
LLC, a Virginia limited liability company (“BLI”). The Merger Agreement provided that, subject to the terms and conditions
set forth in the Merger Agreement, BLI will merge with and into Merger Sub (the “Merger”), with Merger Sub surviving the
Merger and continuing as a wholly owned subsidiary of the Company. Under the terms of the Merger Agreement, at the effective time of
the Merger, the total issued and outstanding membership interests of BLI will be converted into the right to receive the following merger
consideration of up to a total potential purchase price of $32,500,000: (i) initial cash consideration payment at closing consisting
of $3,000,000, (ii) initial stock consideration payment at closing consisting of up to $5,000,000 in shares of common stock of the Company,
and (iii) of the potential purchase price, $24,500,000, or approximately 75%, is dependent on the achievement of BLI’s revenue
growth milestones over the next three years, as defined. Of the total purchase price, up to $15,000,000, or approximately 46%, is in
cash and the remaining $17,500,000, or approximately 54%, is in shares of common stock of the Company, All issuances of our common stock
related to this transaction have a $7.00 per share floor price.
On
August 1, 2022 (the “Closing Date”), the Company completed its acquisition of BLI and paid the following: (i) initial cash
consideration of $568,046 (net of working capital adjustments, as defined, of $505,787), (ii) $1,926,167 cash payment for extinguishment
of BLI’s outstanding debt and pay down of other BLI obligations, and (iii) an aggregate issuance of 714,286 shares of the Company’s
common stock (the “Shares”) to the Sellers with a twelve-month lock up restriction from the Closing Date.
The
unaudited pro forma condensed combined financial information was derived from the historical financial statements of Glimpse and BLI.
The following unaudited pro forma condensed combined balance sheet as of June 30, 2022, is presented as if the acquisition had occurred
on June 30, 2022. The unaudited pro forma combined condensed statement of operations for the year ended June 30, 2022 are presented as
if the acquisition had occurred on July 1, 2021.
The
unaudited pro forma condensed combined financial statements reflect pro forma adjustments that are based upon available information and
certain assumptions that management believes are reasonable. The unaudited pro forma condensed combined financial statements do not reflect
any operating efficiencies and/or cost savings that Glimpse may achieve, or any additional expenses that it may incur, with respect to
the combined companies. The unaudited pro forma condensed combined financial statements do not purport to represent Glimpse’s results
of operations or financial position that would have resulted had the transactions, to which pro forma effects are given, been consummated
as of the date or for the periods indicated.
The
acquisition has been accounted for in accordance with ASC Topic 805, “Business Combinations”. Accordingly, the total purchase
price has been allocated on a preliminary basis to assets acquired, liabilities assumed, identified intangible assets and goodwill based
upon their estimated fair values as of the date of the acquisition. These allocations reflect various preliminary estimates that were
available at the time of the preparation of this Current Report on Form 8-K, and are subject to change during the measurement period,
as valuations are finalized.
There
were no material differences between the accounting policies of Glimpse and BLI. No adjustments were necessary to eliminate intercompany
transactions and balances in the unaudited pro forma condensed combined financial statements, as there were no transactions or balances
between Glimpse and BLI.
The
unaudited pro forma condensed combined financial statements and accompanying notes should be read in conjunction with the historical
audited financial statements of Glimpse contained in its Annual Report on Form 10-K for the fiscal year ended June 30, 2022, as filed
with the Securities and Exchange Commission (“SEC”) on September 28, 2022 and the audited historical financial statements
of BLI filed with this Current Report on Form 8-K/A.
THE
GLIMPSE GROUP, INC.
Unaudited
Pro Forma Condensed Balance Sheet
At
June 30, 2022
| | |
Glimpse | | |
Brightline | | |
Pro Forma Adjustments | | |
Pro Forma Combined | |
| ASSETS | |
| | |
| | |
| | |
| |
| Cash and cash equivalents | |
$ | 16,249,666 | | |
$ | 20,228 | | |
$ | (2,494,213 | )(A) | | $ | 13,775,681 | |
| Accounts receivable | |
| 1,332,922 | | |
| 288,378 | | |
| - | | |
| 1,621,300 | |
| Deferred costs/contract assets | |
| 39,484 | | |
| - | | |
| - | | |
| 39,484 | |
| Other current assets | |
| 718,797 | | |
| - | | |
| - | | |
| 718,797 | |
| Total current assets | |
| 18,340,869 | | |
| 308,606 | | |
| (2,494,213 | ) | |
| 16,155,262 | |
| | |
| | | |
| | | |
| | | |
| | |
| Property and equipment, net | |
| 245,970 | | |
| 55,580 | | |
| - | | |
| 301,550 | |
| Intangible assets, net | |
| 4,063,485 | | |
| - | | |
| 4,190,000 | (B) | | | 8,253,485 | |
| Goodwill | |
| 13,464,760 | | |
| - | | |
| 8,974,703 | (B) | | | 22,439,463 | |
| Other assets | |
| 282,000 | | |
| 10,540 | | |
| - | | |
| 292,540 | |
| Restricted cash | |
| 2,000,000 | | |
| - | | |
| - | | |
| 2,000,000 | |
| Total assets | |
$ | 38,397,084 | | |
$ | 374,726 | | |
$ | 10,670,490 | | |
$ | 49,442,300 | |
| | |
| | | |
| | | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | | |
| | | |
| | |
| Accounts payable and accrued expenses | |
$ | 697,818 | | |
$ | 787,247 | | |
$ | (78,567 | )(B) | |
$ | 1,406,498 | |
| Deferred revenue/contract liabilities, net | |
| 841,389 | | |
| 1,351,392 | | |
| - | | |
| 2,192,781 | |
| Asset purchase payable | |
| 734,037 | | |
| | | |
| - | | |
| 734,037 | |
| Contingent consideration for acquisitions, current portion | |
| 1,966,171 | | |
| | | |
| 1,841,100 | (C) | |
| 3,807,271 | |
| Total current liabilities | |
| 4,239,415 | | |
| 2,138,639 | | |
| 1,762,533 | | |
| 8,140,587 | |
| | |
| | | |
| | | |
| | | |
| | |
| Long term liabilities | |
| | | |
| | | |
| | | |
| | |
| Loans from members | |
| - | | |
| 1,738,031 | | |
| (1,738,031 | )(D) | |
| - | |
| Contingent consideration for acquisitions, net of current portion | |
| 5,340,800 | | |
| - | | |
| 4,297,900 | (C) | |
| 9,638,700 | |
| Total liabilities | |
| 9,580,215 | | |
| 3,876,670 | | |
| 4,322,402 | | |
| 17,779,287 | |
| | |
| | | |
| | | |
| | | |
| | |
| Stockholders’ Equity | |
| | | |
| | | |
| | | |
| | |
| Members’ deficit | |
| - | | |
| (3,501,944 | ) | |
| 3,501,944 | (B) | |
| - | |
| Preferred Stock | |
| - | | |
| - | | |
| - | | |
| - | |
| Common Stock | |
| 12,749 | | |
| - | | |
| 714 | (E) | |
| 13,463 | |
| Additional paid-in capital | |
| 56,885,815 | | |
| - | | |
| 2,845,430 | (E) | |
| 59,731,245 | |
| Accumulated deficit | |
| (28,081,695 | ) | |
| - | | |
| - | | |
| (28,081,695 | ) |
| Total stockholders’ equity | |
| 28,816,869 | | |
| (3,501,944 | ) | |
| 6,348,088 | | |
| 31,663,013 | |
| Total liabilities and stockholders’ equity | |
$ | 38,397,084 | | |
$ | 374,726 | | |
$ | 10,670,490 | | |
$ | 49,442,300 | |
THE
GLIMPSE GROUP, INC.
Unaudited
Pro Forma Condensed Combined Statement of Operations
For
the Year Ended June 30, 2022
| | |
Glimpse | | |
Brightline | | |
Pro Forma Adjustments | | |
Pro Forma Combined | |
| Revenue | |
$ | 7,267,613 | | |
$ | 6,912,344 | | |
$ | - | | |
$ | 14,179,957 | |
| | |
| | | |
| | | |
| | | |
| | |
| Cost of goods sold | |
| 1,241,149 | | |
| 3,248,189 | | |
| - | | |
| 4,489,338 | |
| | |
| | | |
| | | |
| | | |
| | |
| Gross profit | |
| 6,026,464 | | |
| 3,664,155 | | |
| - | | |
| 9,690,619 | |
| | |
| | | |
| | | |
| | | |
| | |
| Operating expenses | |
| 12,369,076 | | |
| 3,088,683 | | |
| 1,205,333 | (F) | |
| 16,663,092 | |
| Net income (loss) from operations before other income (expense) | |
| (6,342,612 | ) | |
| 575,472 | | |
| (1,205,333 | ) | |
| (6,972,473 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Other income (expense) | |
| 376,325 | | |
| (102,345 | ) | |
| - | | |
| 273,980 | |
| | |
| | | |
| | | |
| | | |
| | |
| Net income (loss) | |
$ | (5,966,287 | ) | |
$ | 473,127 | | |
$ | (1,205,333 | ) | |
$ | (6,698,493 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Basic and diluted net loss per share | |
$ | (0.51 | ) | |
| | | |
| | | |
$ | (0.54 | ) |
Weighted-average shares used to compute basic and
diluted net loss per share | |
| 11,731,383 | | |
| | | |
| 714,286 | (G) | |
| 12,445,669 | |
THE
GLIMPSE GROUP, INC.
NOTES
TO UNAUDITED PROFORMA CONDENSED COMBINED FINANCIAL INFORMATION
As
of and for the year ended June 30, 2022
NOTE
1. BASIS OF PRESENTATION
The
unaudited pro forma condensed combined financial information set forth herein is based upon the consolidated financial statements of
The Glimpse Group, Inc. (“Glimpse” or the “Company”) and Brightline Interactive, LLC, a Virginia limited liability
company (“BLI”). The unaudited proforma condensed combined financial information is presented as if the transaction had been
completed on June 30, 2022 in respect of the unaudited pro forma condensed combined balance sheet; and July 1, 2021 with respect to the
unaudited pro forma condensed combined statements of operations for the year ended June 30, 2022.
The
unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative
of the combined financial position or results of operations had the transaction occurred as of the dates indicated, nor is it meant to
be indicative of any anticipated combined financial position or future results of operations that the combined company will experience
after the completion of the transactions.
Glimpse
has accounted for the acquisition in this unaudited pro forma condensed combined financial information using the acquisition method of
accounting, in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805 “Business Combinations”
(“ASC 805’’). In accordance with ASC 805, Glimpse uses its best estimates and assumptions to assign fair value to the
tangible and intangible assets acquired and liabilities assumed at the acquisition date.
Goodwill
as of the acquisition date is measured as the excess of purchase consideration over the fair value of net tangible and identifiable intangible
assets acquired.
Pro
forma adjustments reflected in the unaudited pro forma condensed combined balance sheet are based on items that are factually supportable
and directly attributable to the transaction. Pro forma adjustments reflected in the pro forma condensed combined statement of operations
are based on items that are factually supportable, directly attributable to the transaction and expected to have a continuing impact
on the combined results. The unaudited proforma condensed combined financial information does not reflect the cost of any integration
activities or benefits from the transaction, including potential synergies that may be generated in future periods.
NOTE
2. DESCRIPTION OF THE TRANSACTION
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”). On August 1, 2022, Glimpse consummated the transaction contemplated
by the Merger Agreement.
Acquisition
of BLI; Purchase Consideration
Subject
to the terms and conditions set forth in the Merger Agreement, 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 Date”); (b) $1,926,167 of cash paid at the Closing Date to
extinguish BLI’s outstanding debt and paid down other obligations; (c) 714,286 shares of the Company’s common stock fair
valued at the Closing Date; 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
proforma statement of operations includes $500,000 of investment banking fees related to this transaction.
NOTE
3. FAIR VALUE ESTIMATES OF PURCHASE PRICE ALLOCATION
The
preliminary fair value allocation for the purchase price consideration paid at close, under the assumption that the acquisition was consummated
on June 30, 2022, is as follows:
| Purchase price consideration: | |
| |
| Initial cash payment due at closing | |
$ | 3,000,000 | |
| Working capital adjustment, net | |
| (505,787 | ) |
| Net cash paid to members at Closing Date | |
$ | 2,494,213 | |
| Company common stock, fair valued at Closing Date | |
| 2,846,144 | |
| Fair value of contingent consideration to be achieved | |
| 6,139,000 | |
| Total purchase price | |
$ | 11,479,357 | |
| | |
| | |
| Fair value allocation of purchase price: | |
| | |
| Cash and cash equivalents | |
$ | 20,228 | |
| Accounts receivable | |
| 288,378 | |
| Property and equipment, net | |
| 55,580 | |
| Other assets | |
| 10,540 | |
| Accounts payable and accrued expenses | |
| (708,680 | ) |
| Deferred revenue/contract liabilities, net | |
| (1,351,392 | ) |
| Intangible assets - customer relationships | |
| 3,310,000 | |
| Intangible assets - technology | |
| 880,000 | |
| Goodwill | |
| 8,974,703 | |
| Total fair value allocation of purchase price | |
$ | 11,479,357 | |
The
estimated fair value allocation for the purchase price consideration paid at the actual Closing Date of August 1, 2022 approximates
the amounts above, except for Goodwill which is greater by approximately $300,000 and liabilities which are greater by approximately
$300,000. Any further subsequent adjustments to the initial fair value estimates occurring during the measurement period will result
in an adjustment to the carrying value of goodwill.
The
Company’s fair value estimate of the contingent consideration for the BLI acquisition was determined using a Monte Carlo simulation
method which accounts 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
Company amortizes its intangible assets assuming no residual value over the estimated period in which the economic benefit of these assets
is consumed (customer relationships - five years and technology – three years).
NOTE
4. PRO FORMA ADJUSTMENTS
The
following pro forma adjustments were applied to Glimpse’s historical financial statements and those of BLI to arrive at the pro
forma condensed combined financial statement information:
A
- Cash consideration, net of working capital adjustment, paid to Members at the Closing Date.
B
- To record the estimated fair value of tangible net assets, identified intangible assets and residual goodwill.
C
- To record the estimated contingent consideration for the BLI acquisition.
D
– To record repayment of loans from members from cash consideration paid to Members at the Closing Date.
E
– 714,286 shares of Company common stock issued at the Closing Date to Members.
F
- To record additional investment banking fees and the estimated identified intangible asset amortization expense for the year ended
June 30, 2022.
G
– To record the issuance of common stock to the Members as of July 1, 2021.