Glimpse Group, Inc.

NOTE 1. DESCRIPTION OF BUSINESS

The Glimpse Group, Inc. (“Glimpse”, the “Company”) is an Immersive technology company, providing Virtual Reality (“VR”), Augmented Reality(“AR”) and Spatial Computing software and services. Glimpse’s operating entities are located in the United States. The Company was incorporated in the State of Nevada in June 2016.

Glimpse’s unique business model builds scale and a robust ecosystem, while simultaneously providing investors an opportunity to invest directly into this emerging industry via a diversified platform.

The Company completed an initial public offering (“IPO”) of its common stock on the Nasdaq Capital Market Exchange on July 1, 2021, under the ticker VRAR.

NOTE 2. LIQUIDITY AND CAPITAL RESOURCES

In December 2024 and January 2025, the Company completed a Securities Purchase Agreement (“SPA”) with an institutional investor selling 2.75 million shares of common stock that resulted in total net cash proceeds to the Company of $6.79 million. See Note 10.

Cash and cash equivalents as of June 30, 2025 was approximately $6.83 million, working capital as of June 30, 2025 was approximately $5.83 million and net cash used in operating activities for the year ended June 30, 2025 was approximately $0.27 million. The Company believes that it is sufficiently funded to meet its operational plan and future obligations beyond the 12-month period from the date that these financial statements were issued.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Principles of Consolidation

The accompanying consolidated financial statements include the balances of Glimpse and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Accounting Estimates

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the accompanying consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

The principal estimates relate to the valuation of allowance for doubtful accounts, stock options, 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 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 June 30, 2025 and 2024 no allowance for doubtful accounts was recorded as all amounts were considered collectible.

Customer Concentration and Credit Risk

Two customers accounted for approximately 61% (40%, and 21%, respectively) of the Company’s total gross revenues during the year ended June 30, 2025. One of the same customers and another customer accounted for approximately 38% (23% and 15%, respectively) of the Company’s total gross revenues during the year ended June 30, 2024.

One customer accounted for approximately 46% of the Company’s accounts receivable as of June 30, 2025. No other customer represented at least 10% of the Company’s accounts receivable as of June 30, 2025. One of the same customers and one different customer accounted for approximately 38% (22% and 16%, respectively) of the Company’s accounts receivable as of June 30, 2024.

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 a located 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.

Intangible Assets (excluding Goodwill)

Intangible assets include acquired customer relationships and 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 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 balance sheets as of June 30, 2025 and 2024. Contingent consideration has been recorded at its fair values using unobservable inputs that include assumptions regarding financial forecasts and discount rates. 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.

The Company’s other financial instruments consist primarily of accounts receivable, accounts payable and other liabilities, and are reported at approximate fair value due to the short-term nature of these instruments.

Equipment and Leasehold Improvements

Equipment, comprised of computer hardware, and leasehold improvements are stated at cost less accumulated depreciation and amortization. Equipment is depreciated using the straight-line method over the estimated useful life of the asset, which is primarily 3 years. Leasehold improvements are amortized over the remaining life of the respective lease. Depreciation and amortization expense for the years ended June 30, 2025 and 2024 was approximately $0.08 million and $0.12 million, respectively.

Lease Obligations

Our operating leases are primarily comprised of administrative office space. We determine if an arrangement is a lease at inception and most of our leases contain fixed components. Our lease agreements may contain variable costs and such variable lease costs are expensed as incurred on the statements of operations.

For leases with a lease term greater than 12 months, Right-of-use (“ROU”) assets and lease liabilities are recognized on our balance sheets at the commencement date based on the present value of the remaining fixed lease payments and includes only payments that are fixed and determinable at the time of commencement.

Our lease terms may include options to extend the lease When determining the probability of exercising such options, we consider contract-based and market-based factors. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured.

As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Our incremental borrowing rate is based on our understanding of what our credit rating would be in a similar economic environment.

Operating lease costs are recognized on a straight-line basis over the lease terms.

Revenue Recognition

Nature of Revenues

The Company reports its revenues in three categories:

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:

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 balance sheets. Deferred assets include cash payroll costs and may include payments to consultants and vendors.

For distinct performance obligations recognized over time, the Company records deferred costs (costs in excess of billings) when revenue is recognized prior to invoicing, or deferred revenue (billings in excess of costs) when revenue is recognized subsequent to invoicing.

The Company recognizes royalty income pursuant to agreements with divested entities representing a percentage of said entities collected revenue.

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 years ended June 30, 2025 and 2024 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. On rare occasions, the Company generates Software Services revenues which are custom project solutions (projects whereby, the development of the custom project leads to an identifiable asset with no alternative use to the Company, and, in which, the Company also has an enforceable right to payment under the contract) and are therefore recognized based on the percentage of completion using an input model with a master budget. The budget is reviewed periodically and percentage of completion adjusted accordingly.

Revenue for Software Services consulting services and website maintenance is recognized when the Company performs the services, typically on a monthly retainer basis.

Revenue for Software 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, 2025 and 2024 was as follows:

Remaining Performance Obligations

Timing of revenue recognition may differ from the timing of invoicing to customers. The Company generally records a unbilled receivable asset when revenue is recognized prior to invoicing, or deferred revenue when revenue is recognized subsequent to invoicing.

For certain Software Services project contracts the Company invoices customers after the project has been delivered and accepted by the customer. Software Service project contracts typically consist of designing and programming software for the customer. In most cases, there is only one distinct performance obligation, and revenue is recognized upon completion, delivery and customer acceptance. Contracts may include multiple distinct projects that can each be implemented and operated independently of subsequent projects in the contract. In such cases, the Company accounts for these projects as separate distinct performance obligations and recognizes revenue upon the completion of each project or obligation, its delivery and customer acceptance.

For contracts recognized over time, deferred revenue include billings invoiced for software projects for which the contract’s performance obligations are not complete.

In rare Software Services project contract situations, 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 deferred revenue (billings in excess of cost) and revenue recognized prior to invoicing is recorded as a deferred cost (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 June 30, 2025 and 2024, the Company had approximately $0.94 million and $5.95 million, respectively, in unfulfilled performance obligations.

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.

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, or ASC 740, also 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. 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 years ended June 30, 2025 and 2024. 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 and warrants.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Improvements to Reportable Segment Disclosures, which requires incremental disclosures about reportable segments but does not change the definition of a segment or the guidance for determining reportable segments. It is applicable to companies with a single reporting segment. See Note 4.

Recent Accounting Pronouncements Not Yet Adopted

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.

NOTE 4. SEGMENT AND RELATED INFORMATION

The Company has one reportable segment managed on a consolidated basis: Immersive technology software development and commercialization. The Company derives revenue primarily in the United States and manages all business activities on a consolidated basis. The services are deployed to customers in a similar manner.

The Company’s chief operating decision maker (“CDOM”) is the Chief Executive Officer who reviews financial information presented on a consolidated basis to allocate resources, evaluate performance and make overall operating decisions. The measure of segment profit or loss that is most consistent with the consolidated financial statements is net cash used in operating activities. The accounting policies of our single reportable segment are the same as those for the consolidated financial statements. The level of disaggregation and amounts of significant revenue and cash expenses that are regularly provided to the CDOM are the same as presented in the consolidated statement of cash flows. Likewise, the measure of segment assets is reported on the consolidated balance sheets as total assets.

NOTE 5. QREAL AND GLIMPSE TURKEY DIVESTITURE

As part of an announced strategic realignment around Spatial Core and divestiture of non-core assets, effective October 1, 2024, the Company divested the business of its wholly owned subsidiary company QReal, LLC (“QReal”) and its related operating entity GLIMPSE GROUP YAZILIM VE ARGE TİCARET ANONİM ŞİRKET (“Glimpse Turkey”) in a management buyout by the then General Manager of QReal.

The Company did not experience a material change to its revenue for the year ended June 30, 2025 and does not expect material changes to its expected revenues for year ended June 30 2026. The Company retains the revenues from QReal’s largest customer in full, until such time that the Company has collected and retained $1.35 million net cash in the aggregate, after taking into account all related operating expenses and fees (the “Milestone”). After satisfaction of the Milestone, the Company will receive a monthly cash revenue share for a period of 18 months in relation to any revenues generated from this same customer.

The assets, as defined in the divestiture agreement, of Qreal/Glimpse Turkey, were sold in return for a $1.56 million senior secured convertible note from the purchasing (“New”) entity and a 10% equity stake in New entity. Principal payback of the note is tied directly to revenue collected by New entity (separate from the Milestone). The note converts to New entity equity upon certain equity capital raising of New entity, as defined. The Company accounts for the investment in New entity at cost ($100) because the Company does not control or have significant influence over the investment.

The Company recorded a non-cash gain on the divestiture of approximately $1.40 million which is included in general and administrative expenses on the statement of operations for the year months ended June 30, 2025. The Company has also fully reserved against the note as collectability is considered uncertain and recorded a loan loss reserve of $1.50 million in general and administrative expenses on the statement of operations for the year ended June 30, 2025. The note reserve fully offsets the gain on divestiture detailed above.

Revenue from the divested business that is not being retained going forward was approximately $0.15 million and $0.67 million, respectively, for the years ended June 30, 2025 and 2024.

Pursuant to the original acquisition of QReal by the Company in 2016, upon sale of the entity the original sellers are due 8% (“economic interest”) of the Milestone proceeds. As the achievement of the Milestone is uncertain, liability for these payments will be recorded as actual Milestone proceeds occur. The Company recorded an expense of approximately $0.04 million related to the economic interest in sales and marketing expense on the statement of operations for the year ended June 30, 2025.

As of June 30, 2025, the Company has received $0.45 million of the Milestone.

In connection with the QReal divestiture, the Company made two personal loans to the majority owner of New entity to assist in startup funding of New entity. These loans are personally guaranteed by said majority owner. The loans bear interest at a nominal rate, have monthly repayment requirements and are due in full by October 31, 2025 and April 30, 2026, respectively. The net outstanding balance on the loans is recorded on the June 30, 2025 balance sheet as notes receivable.

NOTE 6. IMPAIRMENT OF GOODWILL AND LONG-LIVED ASSETS

PulpoAR, LLC (“Pulpo”)

In December 2023 the Company divested the operations of its wholly owned subsidiary Pulpo due to poor revenue performance and non-strategic alignment.

Accordingly, the fair value of intangible assets, including goodwill, originally recorded at the time of the purchase, were determined to be to be zero. The net assets of $0.90 million (consisting of intangible assets - technology with net book value of $0.52 million and goodwill of $0.38 million) were written-off and were included in goodwill impairment and intangible asset impairment on the statement of operations for the year ended June 30, 2024.

The assets, as defined in the divestiture agreement, of Pulpo, were sold to an independent entity in return for a 10% interest in said entity and a $1.0 million note. The Company recorded a non cash $1.0 million gain on divestiture, which is included in general and administrative expenses on the statement of operations for the year ended June 30, 2024. The Company has fully reserved against the Note as collectability is considered remote and recorded a loan loss reserve against the note in general and administrative expenses on the statement of operations for the year ended June 30, 2024. This fully offsets the gain on divestiture detailed above.

Brightline Interactive, LLC (“BLI”)

As part of the BLI acquisition in August 2022, $3.31 million of the fair value purchase price was a located to intangible assets – customer relationships. This allocation was based on BLI customers as of the acquisition date. At that time, the majority of BLI’s existing customer base had engaged BLI to produce marketing focused product and was concentrated in one significant customer. During the year ended June 30, 2024, BLI commenced on a strategic shift of businesses focus to provide immersive technology solutions software and services that are primarily driven by Spatial Computing, Cloud and Artificial Intelligence aimed towards a different customer base than those existing at the acquisition date. In addition, the one significant customer at acquisition date had been a marginal revenue generator over the second half of fiscal 2024 and was not anticipated to represent material revenue going forward.

Accordingly, as of June 30, 2024, it was determined that the BLI intangible assets – customer relationships was fully impaired. This resulted in an intangible asset impairment non-cash expense of approximately $2.04 million on the statement of operations for the year ended June 30, 2024, representing the unamortized portion of this intangible asset.

NOTE 7. GOODWILL AND INTANGIBLE ASSETS

The composition of goodwill as of June 30, 2025 and 2024 is as follows:

The composition of Intangible assets, their respective amortization period, and accumulated amortization as of June 30, 2025 and 2024 are as follows:

Intangible asset amortization expense for the years ended June 30, 2025 and 2024 was approximately $0.43 million and $1.24 million, respectively.

Estimated intangible asset amortization expense as of June 30, 2025 for the remaining lives are as follows:

NOTE 8. FINANCIAL INSTRUMENTS

Cash and Cash Equivalents

The Company’s money market funds are categorized as Level 1 within the fair value hierarchy. As of June 30, 2025 and 2024, the Company’s cash and cash equivalents were as follows:

Contingent Consideration

As of June 30, 2025 and 2024, the Company’s contingent consideration liabilities related to acquisitions are categorized as Level 3 within the fair value hierarchy. Contingent consideration was valued at June, 2025 and 2024 using unobservable inputs, primarily internal revenue forecasts. Contingent consideration was valued at the time of acquisitions using unobservable inputs and included using the Monte Carlo simulation model. This model incorporated revenue volatility, internal rate of return, and a risk-free rate. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management with the assistance, at times, of a third-party valuation specialist.

As of June 30, 2025, the Company’s contingent consideration liabilities, current and non-current balances were as follows:

Actual BLI revenue through June 30, 2025 resulted in additional gross consideration of $1.5 million over the remainder of the contingent consideration payout period ending on July 31, 2025, payable in cash. Actual BLI revenue through July 31, 2025 did not trigger additional consideration. Accordingly, contingent consideration remaining for the BLI acquisition as of June 30, 2025 is calculated at the present value of the remaining $1.5 million cash discounted at risk-free interest rates from the estimated payment date.

The change in fair value of contingent consideration for BLI for the year ended June 30, 2025 was a non-cash expense of approximately $0.14 million included as change in fair value of acquisition contingent consideration in the statements of operations. This reflects the change in the time value of money related to the present value of anticipated payments.

The change in fair value of contingent consideration for XR Terra, LLC (“XRT”) for the year ended June 30, 2025 was a non-cash gain of approximately $0.03 million included as change in fair value of acquisition contingent consideration in the statements of operations. This reflects the reversal of the estimated final consideration payment related to the acquisition of XRT. The contingent consideration payout period ended September 2024.

As of June 30, 2024, the Company’s contingent consideration liabilities current and non-current balances were as follows:

Revenue projections for BLI were expected to trigger potential additional gross consideration of $3.0 million over the remainder of the contingent consideration payout period ending in July 31, 2025, payable in cash (of which $1.5 million was paid in February 2025). The possibility of achieving any remaining revenue targets to trigger additional consideration was remote. Accordingly, contingent consideration remaining for the BLI acquisition as of June 30, 2024 is calculated at the present value of the estimated remaining $3.0 million cash discounted at risk-free interest rates from the estimated payment dates.

Sector 5 Digital, LLC (“S5D”) had significantly underperformed revenue expectations that were employed to determine fair value at acquisition. The possibility of achieving any remaining revenue targets to trigger additional consideration was remote and all earned consideration had been paid. Accordingly, there was no future contingent consideration recorded related to the S5D acquisition as of June 30, 2024. The contingent consideration payout period ended January 2025 with no additional consideration paid.

The contingent consideration related to XRT as of June 30, 2024 represented an accrual for anticipated achievement of an additional revenue threshold though the end of the contingent consideration period September 2024.

The change in fair value of contingent consideration for BLI and S5D for the year ended June 30, 2024 was a non-cash gain of approximately $1.87 million and $2.35 million, respectively, included as change in fair value of acquisition contingent consideration in the statement of operations. This was primarily driven by the decrease in the Company’s common stock price between the measurement dates and reduced revenue projections. In addition, a payment was made to the sellers of S5D for consideration in March 2024 in the form of Company common stock, fair valued at $0.81 million; and a $1.49 million cash payment was made to the sellers of BLI for consideration in May 2024.

The change in fair value of contingent consideration for XRT for the year ended June 30, 2024 was a non-cash gain of approximately $0.05 million, included as change in fair value of acquisition contingent consideration in the statement of operations. This reflects the decrease in the Company’s common stock price between the measurement dates partially offset by an accrual for final consideration payment. In addition, payments were made to the sellers of XRT for consideration in September 2023 and January 2024 in the form of Company common stock, fair valued at $0.17 million.

NOTE 9. DEFERRED COSTS AND DEFERRED REVENUE

As of June 30, 2025 and 2024, deferred costs totaling $48,971 and $170,781, respectively, consists of costs deferred under contracts not completed and recognized at a point in time ($48,971 and $135,057, respectively), and costs in excess of billings under contracts not completed and recognized over time ($0 and $35,724, respectively). As of June 30, 2025 and 2024, deferred revenue, totaling $52,576 and $72,788, respectively, consists of revenue deferred under contracts not completed and recognized at a point in time.

The following table shows the net activity of deferred cost and deferred revenue for the years ended June 30, 2025 and 2024:

NOTE 10. EQUITY

Securities Purchase Agreements (“SPA”)

SPA 2024

In December 2024, the Company completed a SPA with an institutional investor selling 1,990,000 shares of common stock at $2.65 per share and pre-funded warrants to purchase up to 760,000 shares of common stock at $2.649 per warrant (which is convertible to one share of common stock on a one for one basis). The pre-funded warrants were exercised in full in January 2025 at the exercise price of $0.001 per share of common stock.

The Company realized total net proceeds (after underwriting and professional fees) of $6.79 million from the SPA 2024.

SPA 2023

In October 2023, the Company completed a SPA with certain institutional investors selling 1,885,715 shares of common stock for approximately $3.30 million (at $1.75 per share). The Company realized net proceeds (after underwriting, professional fees and listing expenses) of $2.97 million.

Simultaneously, the exercise price on warrants to purchase 750,000 shares of common stock originally issued pursuant to a SPA entered into in November 2021 were repriced from $14.63 per share to $1.75 per share.

Common Stock Issued

Exercise of Warrants

In December 2024, an institutional investor exercised warrants (issued in connection with a November 2021 SPA) convertible into 100,000 shares of common stock. The Company realized proceeds of $0.18 million ($1.75 per share).

In January 2025, an institutional investor exercised warrants (issued in connection with a December 2024 SPA) convertible into 760,000 shares of common stock. The Company realized de minimis proceeds (760,000 shares at $0.001 per share).

Common stock issued to Employees as Compensation

During the year ended June 30, 2025, the Company issued 37,000 unrestricted shares of common stock to an employee as compensation and recorded share-based compensation of approximately $0.05 million in sales and marketing expenses in the statement of operations.

During the year ended June 30, 2024, the Company issued approximately 399,000 unrestricted shares of common stock to various employees as compensation (including contractual bonus payments upon achievement of defined revenue milestones) and recorded share-based compensation of approximately $0.58 million in general and administrative and sales and marketing expenses in the statement of operations.

Common stock issued to Vendors

During the year ended June 30, 2025, the Company issued 2,500 unrestricted shares of common stock to a vendor for services performed and recorded share-based expense of approximately $0.01 million in sales and marketing expenses in the statement of operations.

During the year ended June 30, 2024, the Company issued approximately 44,000 unrestricted shares of common stock to various vendors for services performed and recorded share-based expense of approximately $0.10 million, primarily in sales and marketing expenses in the statement of operations.

Common stock issued for Exercise of Stock Options

During the year ended June 30, 2025, the Company issued approximately 8,000 shares of common stock in cashless transactions upon exercise of the respective option grants and realized cash proceeds ofzero.

During the year ended June 30, 2024, the Company issued approximately 9,000 shares of common stock in cashless transactions upon exercise of the respective option grants and realized cash proceeds ofzero.

Common stock issued to satisfy Contingent Acquisition Obligations

During the year ended June 30, 2024, the Company issued approximately 714,000 shares of common stock, with a fair value of approximately $0.81 million, to satisfy a contingent acquisition obligation for the achievement of a certain revenue performance milestone related to the acquisition of S5D. In addition, the Company issued approximately 71,000 shares of common stock, with a fair value of approximately $0.17 million, to satisfy a contingent acquisition obligation for the achievement of revenue performance milestones by XRT.

Common stock issued to Board of Directors

During the year ended June 30, 2024, the Company issued approximately 258,000 shares of common stock to certain board members in return for canceling 443,000 fully vested stock options, and recorded share-based board compensation of approximately $0.37 million. In addition, the Company issued 75,000 shares of common stock to certain board members as calendar year 2024 compensation and recorded share-based board compensation of approximately $0.11 million. The expense for these issuances was recorded in general and administrative expenses in the statement of operations.

Warrants

In connection with the July 2021 IPO, the November 2021 SPA and the December 2024 SPA, the Company issued warrants, which are exercisable into Company common shares on a one-for-one basis, as detailed below. The warrants are not publicly traded.

Warrants exercised since issuance are 100,000 warrants from the November 2021 SPA exercised in December 2024 and 760,000 warrants from the December 2024 SPA exercised in January 2025.

The remaining outstanding warrants as of June 30, 2025 are:

Stock Option issuance to Executives

In February 2023, pursuant to the Equity Incentive Plan, the Company granted certain executive officers 2.20 million stock options as a long-term incentive. The options have an exercise price of $7.00 per share.0.22 million of these options vest ratably over four years (“Initial Options”). The remainder (“Target Options”) vest in fixed amounts based on achieving various revenue or common stock prices within seven years of grant date. Given the Company’s current stock price and revenue, the Company views the achievement of the milestones that would trigger vesting of the Target Options as remote.

Equity Incentive Plan

The Company’s 2016 Equity Incentive Plan (the “Plan”), as amended, has approximately 13.17 million common shares reserved for issuance. As of June 30, 2025, there were approximately 7.40 million shares available for issuance under the Plan. The shares available are after the granting of 1.98 million shares of executive Target Options.

The Company recognizes compensation expense relating to awards ratably over the requisite period, which is generally the vesting period.

Stock options have been recorded at their fair value. The Black-Scholes option-pricing model assumptions used to value the issuance of stock options under the Plan for the specific periods below are noted in the following table:

In February 2024, the Company offered current domestic employees the ability to cancel vested and non-vested stock options in return for a lesser amount of newly granted stock options at lower exercise prices and a new three-year vesting schedule. Pursuant to this offer, the Company cancelled approximately 828,000 employee options in February 2024 and granted approximately 578,000 new options to employees in March 2024. In addition, this offer was completed for a board member and approximately 31,000 vested options were cancelled and approximately 21,000 new options were granted. Also, in February 2024,250,000 fully vested options granted to an executive were cancelled and 250,000 new options were granted in March 2024 at a lower exercise price and a new vesting schedule of approximately four years.

The grant date fair value for options granted during the years ended June 30, 2025 and 2024 was approximately $0.75 million and $1.53 million (including the new grants detailed above), respectively.

The following is a summary of the Company’s stock option activity for the years ended June 30, 2025 and 2024, excluding the executive Target Options:

The above table excludes executive Target Options:1,980,000 granted, $7.00 exercise price,7.6 remaining term in years, no intrinsic value. Vesting of these is considered remote.

The above table excludes executive Target Options:2,100,000 granted (includes 120,000 attributable to an executive who resigned in July 2024), $7.00 exercise price,8.6 remaining term in years, no intrinsic value. Vesting of these is considered remote.

The intrinsic value of stock options activity for the years ended June 30, 2025 and 2024 was computed using a fair market value (fiscal year to date VWAP – volume weighted average price) of the common stock of $2.31 per share and $1.89 per share, respectively.

The Company’s stock option-based expense for the years ended June 30, 2025 and 2024 consisted of the following:

There is no expense included for the executive officers’ Target Options.

As of June 30, 2025 total unrecognized compensation expense to employees, board members and vendors related to stock options was approximately $1.15 million (excluding executive Target Options vested value of $8.08 million, which vesting is considered remote) and is expected to be recognized over a weighted average period of 1.56 years (which excludes the executive Target Options).

NOTE 11. EARNINGS PER SHARE

The following table presents the computation of basic and diluted net loss per common share:

Potentially dilutive securities, on a weighted average basis, that were not included in the calculation of diluted net loss per share attributable to common stockholders because their effect would be anti-dilutive are as follows (in common equivalent shares):

Stock options above include 1,980,000 and 2,100,000 executive Target Options as of June 30, 2025 and 2024, respectively. Vesting of these is considered remote.

NOTE 12. PROVISION FOR INCOME TAXES

The components of loss before provision for income taxes for the years ended June 30, 2025 and 2024 were as follows:

The Company recorded provision for foreign income taxes for the years ended June 30, 2025 and 2024 consists of the following:

There wasno current or deferred income tax provision for the years ended June 30, 2025 and 2024.

The reconciliation of taxes at the U.S. federal statutory rate to our provision for income taxes for the years ended June 30, 2025 and 2024 were as follows:

The Company had deferred tax assets as of June 30, 2025 and 2024 as follows:

The Company has established a valuation allowance against the net U.S. deferred tax assets due to uncertainty regarding the ability to utilize these deferred tax assets in the future. As of June 30, 2025, the Company had Federal net operating loss carryforwards (“NOLs”) for the years ending June 30, 2018 and prior of approximately $2.88 million that begin to expire in 2037 and NOLs for the years ending June 30, 2019 through 2025 of approximately $34.99 million that have no expiration date. New York State / New York City NOLs as of June 30, 2025 of approximately $13.39 million and $13.37 million, respectively, have no expiration date. California and Virginia State NOLs as of June 30, 2025 of $12.0 million and $1.72 million, respectively, have no expiration date.

Section 382 of the U.S. Internal Revenue Code imposes an annual limitation on the amount of net operating loss carryforwards that may be used to offset taxable income when a corporation has undergone significant changes in stock ownership. The Company has not completed a Section 382 analysis of stock ownership and its effect upon federal and state NOL carryforwards. Consequently, the Company’s NOL carryforwards may be subject to annual limitations under Section 382.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and taxing strategies in making this assessment. As a result of the uncertainty in the realization of the Company’s deferred tax assets, the Company has provided a valuation allowance for the full amount of the deferred tax assets as of June 30, 2025 and 2024.

Upon completion of its 2024 (for fiscal year ending June 30, 2025) U.S. income tax return, the Company may identify additional remeasurement adjustments. The Company will continue to assess its provision for income taxes as future guidance is issued, but does not currently anticipate significant revisions will be necessary.

Uncertain Tax Positions

The following table summarizes the activity related to unrecognized tax benefits for the years ended June 30, 2025 and 2024:

The beginning balance of unrecognized tax benefits of $38,588 was reversed in the current year as the Company divested Glimpse Turkey.

No interest and penalties were incurred or accrued for the years ended June 30, 2025 and 2024.

The Company files U.S., state and foreign tax returns with varying statutes of limitations. No examinations by U.S., state or foreign authorities are currently under way.

NOTE 13. COMMITMENTS AND CONTINGENCIES

Lease Costs

The Company made cash payments for all operating leases for the years ended June 30, 2025 and 2024, of approximately $0.41 million and $0.58 million, respectively, which were included in cash flows from operating activities within the consolidated statements of cash flows. As of June 30, 2025, the Company’s operating leases have a weighted average remaining lease term of 0.60 years and weighted average discount rate of 8.20%.

The total rent expense for all operating leases for the years ended June 30, 2025 and 2024, was approximately $0.33 million and $0.46 million, respectively.

Lease Commitments

The Company has various operating leases for its offices. These existing leases have remaining lease terms ranging from approximately 0.5 to 1.5 years. Certain lease agreements contain options to renew, with renewal terms that generally extend the lease terms by 1 to 3 years for each option. The Company determined that none of its current leases are expected to be renewed except one. That remaining lease will not be renewed under its current terms and will be renegotiated. Therefore, said lease does not have a measurable term or rate to calculate future lease payments beyond its current term.

Future approximate undiscounted lease payments for the Company’s operating lease liabilities and a reconciliation of these payments to its operating lease liabilities as of June 30, 2025 are as follows:

Contingent Consideration for Acquisitions

Contingent consideration for acquisitions consists of the following as of June 30, 2025 and 2024, respectively (see Note 8):

In addition, as a result of actual revenue not achieving targets, there is no future contingent consideration recorded related to the S5D acquisition as of June 30, 2024. The contingent consideration payout period ended in January 2025 with no further consideration payments being made.

NOTE 14. SUBSEQUENT EVENTS

In August 2025, the Company closed on an agreement to sell its Pose With the Pros business for an initial consideration of $0.25 million in cash and potential future revenue royalties. In connection therewith, the Company received a $0.05 million nonrefundable prepayment of the consideration in June 2025, which is recorded in accrued liabilities in the balance sheet as of June 30, 2025. This divestiture is not expected to have a material effect on the Company’s revenue and expense. It is anticipated the Company will record a gain at the time of the sale of no more than the initial consideration.