Glimpse Group Inc

Previous wording

The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our Company as of and for the periods presented below. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto, and related disclosures, as of and for the year ended June 30, 2023, which are included in the Form 10-K filed with the SEC, including the amendment thereto (the “Annual Report on Form 10-K”). Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us,” “our” or “the Company,” refer to The Glimpse Group, Inc., a Nevada corporation and its subsidiaries.

Current wording

The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our Company as of and for the periods presented below. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and our audited financial statements and notes thereto, and related disclosures, as of and for the fiscal year ended June 30, 2024, which are included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 filed with the Securities and Exchange Commission (the “SEC”). Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us,” “our” or “the Company,” refer to The Glimpse Group, Inc., a Nevada corporation and its entities.

Previous wording

The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q, in Part I, Item 1A, “Risk Factors” in the Annual Report on Form 10-K, and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.

Current wording

The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 filed with the SEC and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.

Previous wording

We are an Immersive technology (Virtual Reality (“VR”), Augmented Reality (“AR”) and Spatial Computing) company, comprised of a diversified group of wholly-owned and operated Immersive technology companies, providing enterprise-focused software, services and solutions. We believe that we offer significant exposure to the rapidly growing and potentially transformative Immersive technology markets via our diversified model and ecosystem.

Current wording

We are an Immersive technology company, providing enterprise focused Virtual Reality (VR), Augmented Reality (AR) and Spatial Computing software and services. Glimpse’s operating entities are located primarily in the United States. We believe that we offer significant exposure to the rapidly growing and potentially transformative Immersive technology markets, while mitigating downside risk via our diversified model and ecosystem.

Previous wording

Our platform of Immersive technology subsidiary companies, collaborative environment and diversified business model aims to simplify the challenges faced by companies in the emerging Immersive technology industry, create scale, operational efficiencies and go-to-market synergies, potentially improving each subsidiary company’s ability to succeed, while simultaneously providing investors an opportunity to invest directly via a diversified infrastructure.

Current wording

Our ecosystem of Immersive technology entities, collaborative environment and diversified business model aims to simplify the challenges faced by companies in the emerging Immersive technology industry, create scale, build operational efficiencies, reduce time to market and enhance go-to-market synergies, while simultaneously providing investors an opportunity to invest directly via a diversified infrastructure.

Previous wording

The Immersive technology industry is an early-stage technology industry with nascent markets. We believe that this industry has significant growth potential across verticals, may be transformative and that our diversified platform and ecosystem create important competitive advantages. We focus primarily on the business-to-business (“B2B”) and business-to-business-to-consumer (“B2B2C”) segments industry and we are hardware agnostic. In fiscal year 2024, we commenced on a strategic shift of our businesses focus to providing immersive technology solutions software and services that are primarily driven by Spatial Computing, Cloud and Artificial Intelligence (“Strategic Shift”).

Current wording

The Immersive technology industry is an early-stage technology industry with nascent markets. We believe that this industry has significant growth potential across verticals, may be transformative, and that our diversified ecosystem create important competitive advantages. We currently target a wide array of industry verticals, including but not limited to: Corporate Training, Education, Healthcare, Government & Defense, Branding/Marketing/Advertising, Retail, Media & Entertainment, Corporate Events and Social VR support groups and therapy. We focus primarily on the business-to-business (B2B) and business-to-business-to-consumer (B2B2C) segments and we are hardware agnostic.

Previous wording

At the time of this filing, we have approximately 115 full time employees, primarily software developers, engineers and 3D artists split about evenly between the United States and Turkey.

Current wording

At the time of this filing, we have approximately 45 full time employees, primarily software developers, engineers and 3D artists.

Previous wording

Financial Highlights for the three and nine months ended March 31, 2024 compared to the three and nine months ended March 31, 2023

Current wording

Financial Highlights for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Previous wording

The following table sets forth our results of operations for the three and nine months ended March 31, 2024 and 2023:

Current wording

The following table sets forth our results of operations for the three months ended September 30, 2024 and 2023:

Previous wording

Total revenue for the three months ended March 31, 2024 was approximately $1.9 million compared to approximately $3.67 million for the three months ended March 31, 2023, a decrease of 48%. Total revenue for the nine months ended March 31, 2024 was approximately $7.08 million compared to approximately $10.57 million for the nine months ended March 31, 2023, a decrease of 33%. The decrease for both periods reflects our Strategic Shift, which has resulted in a significant turnover in our historical customer base.

Current wording

Total revenue for the three months ended September 30, 2024 was approximately $2.44 million compared to approximately $3.10 million for the three months ended September 30, 2023, a decrease of approximately 21%. The decrease reflects our Strategic Shift, which has resulted in a significant turnover in our historical customer base and the divestiture of, and consolidation of, several of our entities.

Previous wording

For the three months ended March 31, 2024, Software Services revenue was approximately $1.47 million compared to approximately $3.12 million for the three months ended March 31, 2023, a decrease of 53%. For the nine months ended March 31, 2024, Software Services revenue was approximately $6.51 million compared to approximately $9.87 million for the nine months ended March 31, 2024, a decrease of 34%. The decrease for both periods reflects our Strategic Shift.

Current wording

For the three months ended September 30, 2024, Software Services revenue was approximately $2.23 million compared to approximately $3.01 million for the three months ended September 30, 2023, a decrease of approximately 26%. The decrease reflects our Strategic Shift and the divestiture of, and consolidation of, several of our entities.

Previous wording

Two customers accounted for approximately 40% (25% and 15%, respectively) of the Company’s total gross revenues during the three months ended March 31, 2024.The same customer and another customer accounted for approximately 39% (23% and 16%, respectively) of the Company’s total gross revenues during the nine months ended March 31, 2024. 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. The same 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.

Current wording

Two customers accounted for approximately 57% (29% and 28%, respectively) of the Company’s total gross revenues during the three months ended September 30, 2024. One of the same customers and a different customer accounted for approximately 50% (33% and 17%, respectively) of the Company’s total gross revenues during the three months ended September 30, 2023.

Previous wording

For the three months ended March 31, 2024 and 2023, internal staffing was approximately $0.39 million (69% of total cost of goods sold) and approximately $0.73 million (60% of total cost of goods sold), respectively. For the nine months ended March 31, 2024 and 2023, internal staffing was approximately $1.49 million (62% of total cost of goods sold) and approximately $1.99 million (60% of total cost of goods sold), respectively. The increase for both periods reflect Software License/SaaS and non-project Software Services representing a greater percentage of total revenue.

Current wording

For the three months ended September 30, 2024 and 2023, internal staffing was approximately $0.43 million (83% of total cost of goods sold) and approximately $0.65 million (55% of total cost of goods sold), respectively. The increase in internal staffing as a percentage of total cost of goods sold was due to our Strategic Shift.

Previous wording

Intangible asset impairment for the three months ended March 31, 2024 was zero compared to $0.48 million for the three months ended March 31, 2023. Intangible asset impairment for the nine months ended March 31, 2024 was approximately $0.90 million compared to $0.48 million for the nine months ended March 31, 2023. The 2024 expense reflects the divestiture of PulpoAR and the 2023 expense reflects the divestiture of AUGGD.

Current wording

Intangible asset impairment for the three months ended September 30, 2024 was zero compared to approximately $0.89 million for the three months ended September 30, 2023. The 2023 impairment represents the write-off of goodwill and the net intangible asset - technology attributable to the divestiture a certain entity.

Previous wording

Change in fair value of acquisition contingent consideration for the three months ended March 31, 2024 was a gain of approximately $0.29 million compared to an expense of approximately $1.95 million in the 2023 comparable period. The 2024 period gain reflects the removal of the common stock component of BLI contingent consideration based on revenue projections. The 2023 period expense is driven primarily by changes in the common stock price of Glimpse between measurement dates.

Current wording

Change in fair value of acquisition contingent consideration for the three months ended September 30, 2024 was a expense of approximately $0.03 million compared to a gain of approximately $2.76 million for the three months ended September 30, 2023. The expense for the three months ended September 30, 2024 represents the change in the present value of BLI cash contingent consideration. The gain in 2023 was driven by a decrease in the common stock price of Glimpse between measurement dates related to BLI and S5D contingent consideration measured in Company stock.

Previous wording

The following discussion and analysis includes both financial measures in accordance with GAAP, as well as non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to, net income (loss), operating income (loss), and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of the historical operating results of the Company nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP. Our management uses and relies on EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. We believe that both management and shareholders benefit from referring to the following non-GAAP financial measures in planning, forecasting and analyzing future periods.

Current wording

The following discussion and analysis includes both financial measures in accordance with Generally Accepted Accounting Principles (“GAAP”), as well as non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to, net income (loss), operating income (loss), and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of the historical operating results of the Company nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP. Our management uses and relies on EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. We believe that both management and shareholders benefit from referring to the aforementioned non-GAAP financial measures in planning, forecasting and analyzing future periods.

Previous wording

The Company defines Adjusted EBITDA as earnings (or loss) from continuing operations before the items in the table below. Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period-to-period after removing the impact of items of a non-operational nature that affect comparability.

Current wording

The Company defines Adjusted EBITDA as income (or loss) from continuing operations before the items in the table below. Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period-to-period after removing the impact of items of a non-operational nature that affect comparability.

Previous wording

The following table presents a reconciliation of net loss to Adjusted EBITDA for the three and nine months ended March 31, 2024 and 2023:

Current wording

The following table presents a reconciliation of net loss to Adjusted EBITDA for the three months ended September 30, 2024 and 2023:

Previous wording

The Company has incurred recurring losses since its inception, including a net loss of approximately $1.5 million for the three months ended March 31, 2024. In addition, as of March 31, 2024, the Company had an accumulated deficit of $59.0 million. While the Company has been reducing its expense base, it expects to continue to generate negative cash flow for the foreseeable future. The Company expects that its cash and cash equivalents as of March 31, 2024 may not be sufficient to fund operations for at least the next twelve months from the date of issuance of these condensed consolidated financial statements and the Company will need to obtain additional funding. Accordingly, the Company has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least 12 months from the date of issuance of these condensed consolidated financial statements. Outside of potential revenue growth generated by the Company, in order to alleviate the going concern the Company may take actions which could include but are not limited to, further cost reductions, equity or debt financings and restructuring of potential future cash contingent acquisition liabilities. There is no assurance that these actions will be taken or be successful if pursued.

Current wording

The Company has incurred recurring losses since its inception, including a net loss of $1.02 million for the three months ended September 30, 2024. In addition, as of September 30, 2024, the Company had an accumulated deficit of $64.05 million. While the Company has been reducing its expense base, it expects to continue to generate negative cash flow for the foreseeable future. The Company expects that its cash and cash equivalents as of September 30, 2024 may not be sufficient to fund operations for at least the next twelve months from the date of issuance of these condensed consolidated financial statements and the Company will need to obtain additional funding. Accordingly, the Company has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least 12 months from the date of issuance of these condensed consolidated financial statements.

Previous wording

The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described.

Current wording

The condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described.

Previous wording

Potential liquidity resources may include the further sale of common stock pursuant to the unused portion of the $100 million S-3 registration statement filed with the SEC on October 28, 2022 (subject to SEC I.B.6 or “baby shelf” limitations). Such financing may not be available on terms favorable to the Company, or at all.

Current wording

Potential liquidity resources may include the further sale of common stock pursuant to the unused portion of the Company’s $100 million S-3 registration statement filed with the SEC on October 28, 2022 (subject to SEC I.B.6 or “baby shelf” limitations). Such financing may not be available on terms favorable to the Company, or at all.

Previous wording

Net cash used in investing activities for the nine months ended March 31, 2024 was negligible compared to $2.67 million during the comparative prior period. The 2023 amount primarily represents the cash portion of the BLI acquisition.

Current wording

Net cash used in investing activities for the three months ended September 30, 2024 was approximately $0.01 million, consistent compared to the 2023 period.

Previous wording

As of March 31, 2024, the Company had cash and cash equivalents of $4.29 million, plus $0.98 million of accounts receivable.

Current wording

As of September 30, 2024, the Company had cash and cash equivalents of $1.41 million, plus $0.87 million of accounts receivable.

Previous wording

As of March 31, 2024, contingent consideration for acquisition liabilities contains cash components ranging up to $4.5 million, potentially payable through July 2025 contingent on BLI achieving certain revenue milestones. In the quarter ended March 31, 2024, BLI achieved a revenue milestone triggering a $1.5 million cash payment. We anticipate making this payment in the quarter ending June 30, 2024.

Current wording

As of September 30, 2024, contingent consideration for acquisition liabilities contains cash components ranging up to $3.0 million, potentially payable through September 2025 contingent on BLI achieving certain revenue milestones.